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A shareholder group involved in a proxy battle at RCM Technologies Inc. (NASD: RCMT) responded to a lawsuit by the company in a press release issued today.
The Pennsauken, N.J.-based staffing firm had announced Monday it filed suit against the shareholder group that includes Legion Partners Asset Management LLC, IRS Partners No. 19 and others. RCM said it’s alleging the group hasn’t provided complete and materially accurate information in filings it has made with the U.S. Securities and Exchange Commission.
In its response, the shareholder group said the lawsuit had no merit and reported it is “deeply troubled by the board’s tactics to attempt to divert stockholders’ attention away from the real issues facing RCM.”
The group says the company is underperforming the Russell 2000 and its peers and it says the company approved “outrageous” compensation arrangements for its top three executives despite underperformance. A $6.1 million “parachute payment” to the chairman and CEO can be triggered if even one of the shareholder group’s nominees is elected to the board, according to the group.
Other concerns cited by the group include a delay of the shareholder meeting by six months, and the adoption of a stockholder rights plan, or poison pill, without shareholder approval.
The group also alleged the company ignored the fact its chairman and CEO misrepresented academic credentials.
The misrepresentation of academic credentials apparently happened in proxy statement from 1998, and the company responded to the allegation, separately, earlier this month, according to a filing with the U.S. Securities and Exchange Commission.
RCM board member Robert Kerr responded to the allegations in a letter filed earlier this month with the SEC saying an investigation found a disclosure of academic credentials in the 1998 filing statement were inaccurate, but the inaccuracy was not repeated in other proxy statements.
“We believe the error was immaterial and note that, subsequent to 1998, like many other public companies, RCM enhanced its internal disclosure controls to reduce the risk of future errors in our public disclosures,” Kerr wrote in the Nov. 5 letter.
“It is also extremely ironic that you would raise a concern about an error that was contained in a proxy statement that RCM filed 15 years ago when the proxy statement that you and the other members of your dissident stockholder group, including Mr. Ballou, Michael F. O’Connell and Christopher S. Kiper, filed with the U.S. Securities and Exchange Commission only a week ago contained what we strongly believe to be numerous false and misleading statements,” Kerr also wrote in the letter.
The proxy battle is taking place prior to the firm’s annual meeting on Dec. 5. The shareholder group has made two nominations to the board: Roger Ballou and Bradley Vizi. Both are also named in RCM’s lawsuit. Ballou is the former CEO of CDI Corp. (NYSE: CDI) and he is presently a director of Fox Chase Bancorp Inc. and Alliance Data Systems Corp. Vizi is founder and managing director of Legion Partners Asset Management.
The group also seeks shareholder approval of a nonbinding advisory vote requiring the board chairman be an independent director — a move opposed by the company. Presently, the chairman and CEO positions are both held by Leon Kopyt.
RCM’s nominees to the board include Kerr and Michael Frankel. Kerr has been a director since 1994, and he was founding partner of Everingham & Kerr Inc., an M&A consulting firm. Frankel is director of a firm called Onvia and CFO of Iconology Inc.