-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, L542xRKS02oSa2EAFxQ+hXmeNTaH6jAsJSH1IEYXgitYvFdeYUSNE+Ecy0dmTpuJ IaY5yCGqrl+rZD+VKfPtSg== 0000700841-97-000011.txt : 19970616 0000700841-97-000011.hdr.sgml : 19970616 ACCESSION NUMBER: 0000700841-97-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970430 FILED AS OF DATE: 19970613 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: RCM TECHNOLOGIES INC CENTRAL INDEX KEY: 0000700841 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-HELP SUPPLY SERVICES [7363] IRS NUMBER: 951480559 STATE OF INCORPORATION: NV FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10245 FILM NUMBER: 97623986 BUSINESS ADDRESS: STREET 1: 2500 MCCLELLAN AVE STE 350 CITY: PENNSAUKEN STATE: NJ ZIP: 08109 BUSINESS PHONE: 6094861777 MAIL ADDRESS: STREET 1: 2500 MCCLELLAN AVENUE STREET 2: STE 350 CITY: PENNSAUKEN STATE: NJ ZIP: 08109-4613 10-Q 1 SECOND QUARTER FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended April 30 , 1997 Commission file number: 1-10245 RCM TECHNOLOGIES, INC. (Exact name of Registrant as specified in its charter) Nevada 95-1480559 (State of Incorporation) (IRS Employer Identification No.) 2500 McClellan Avenue, Suite 350, Pennsauken, New Jersey 08109-4613 (Address of principal executive offices) (609) 486-1777 (Registrant's telephone number, including area code) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO Indicate the number of shares outstanding of the Registrant's classes of common stock, as of the latest practicable date. CLASS 7,691,676 Common Stock, $.05 par value Outstanding as of June 13, 1997 1 RCM TECHNOLOGIES, INC. AND SUBSIDIARIES PART I - FINANCIAL INFORMATION Item 1 - Consolidated Financial Statements Page Consolidated Balance Sheets as of April 30, 1997 (Unaudited) and October 31, 1996 (Audited) 3 Unaudited Consolidated Statements of Income for the Six Month Periods Ended April 30, 1997 and 1996 5 Unaudited Consolidated Statements of Income for the Three Month Periods Ended April 30, 1997 and 1996 6 Unaudited Consolidated Statement of Changes in Shareholders' Equity for the Six Month Period Ended April 30, 1997 7 Unaudited Consolidated Statements of Cash Flows for the Six Month Periods Ended April 30, 1997 and 1996 8 Notes to Unaudited Consolidated Financial Statements 10 ITEM 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 12 PART II - OTHER INFORMATION ITEM 1 - Legal Proceedings 18 ITEM 4 - Submission of Matters to a Vote of Security Holders 18 ITEM 5 - Other Information 18 ITEM 6 - Exhibits and Reports on Form 8-K 19 SIGNATURES 20 2 RCM TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS April 30, 1997 and October 31, 1996 ASSETS
1997 1996 ------------ --------- (Unaudited) (Audited) Current assets Cash and cash equivalents $ 34,974 $ 5,989 Accounts receivable, net of allowance for doubtful accounts of $196,000 in 1997 and $76,000 in 1996 18,900,804 13,985,445 Prepaid expenses and other current assets 540,857 404,198 ------- ------- Total current assets 19,476,635 14,395,632 ---------- ---------- Property and equipment, at cost Equipment and leasehold improvements 2,119,582 1,644,831 Less: accumulated depreciation and amortization 1,229,678 1,142,740 --------- --------- 889,904 502,091 ------- ------- Other assets Deposits 84,907 88,039 Intangible assets (net of accumulated amortization of $568,335 and $366,337 in 1997 and 1996, respectively) 14,297,347 9,420,858 ---------- --------- 14,382,254 9,508,897 ---------- --------- Total assets $ 34,748,793 $ 24,406,620 = ========== = ==========
The accompanying notes are an integral part of these financial statements. 3 RCM TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS - CONTINUED April 30, 1997 and October 31, 1996 LIABILITIES AND SHAREHOLDERS' EQUITY
1997 1996 ---- ---- (Unaudited) (Audited) Current liabilities Note payable - bank $ 9,990,520 $ 2,746,636 Accounts payable and accrued expenses 634,088 734,791 Accrued payroll 3,106,620 2,789,725 Taxes other than income taxes 1,152,803 432,607 Income taxes payable 1,603,720 920,439 --------- ------- Total current liabilities 16,487,751 7,624,198 ---------- --------- Income taxes payable 341,518 562,312 Shareholders' equity Preferred stock, $1.00 par value; 5,000,000 shares authorized; no shares issued or outstanding Common stock, $0.05 par value; 40,000,000 shares authorized; 4,816,676 and 4,878,476 shares issued in 1997 and 1996, respectively 240,834 243,924 Additional paid-in capital 17,102,468 17,161,105 Treasury stock, at cost 62,800 shares ( 62,821 ) Retained earnings (accumulated deficit) 576,222 ( 1,122,098 ) ------- --------- 17,919,524 16,220,110 ---------- ---------- Total liabilities and shareholders' equity $ 34,748,793 $ 24,406,620 = ========== = ==========
The accompanying notes are an integral part of these financial statements. 4 RCM TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
Six Months Ended April 30, 1997 1996 ---- ---- (Unaudited) (Unaudited) Revenues $ 48,530,700 $ 23,562,110 Cost of services 37,185,185 19,298,075 ---------- ---------- Gross profit 11,345,515 4,264,035 ---------- --------- Operating costs and expenses Selling, general and administrative 7,943,838 3,082,700 Depreciation and amortization 238,081 132,470 ------- ------- 8,181,919 3,215,170 --------- --------- Operating income 3,163,596 1,048,865 Interest expense 262,667 51,089 ------- ------ Income before income taxes 2,900,929 997,776 Income taxes 1,202,609 109,177 --------- ------- Net income $ 1,698,320 $ 888,599 = ========= = ======= Net earnings per share $.34 $.24 ==== ====
The accompanying notes are an integral part of these financial statements. 5 RCM TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended April 30, 1997 1996 ---- ---- (Unaudited) (Unaudited) Revenues $ 27,379,979 $ 13,785,626 Cost of services 21,133,868 11,312,200 ---------- ---------- Gross profit 6,246,111 2,473,426 --------- --------- Operating costs and expenses Selling, general and administrative 4,323,573 1,931,739 Depreciation and amortization 119,452 80,453 ------- ------ 4,443,025 2,012,192 --------- --------- Operating income 1,803,086 461,234 Interest expense 172,478 26,249 ------- ------ Income before income taxes 1,630,608 434,985 Income taxes 713,275 48,249 ------- ------ Net income $ 917,333 $ 386,736 = ======= = ======= Net earnings per share $.18 $.09 ==== ====
The accompanying notes are an integral part of these financial statements. 6 RCM TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY Six Months Ended April 30, 1997 (Unaudited)
Retained Additional Earnings Common Stock Paid-in (Accumulated Treasury Shares Amount Capital Deficit) Stock Balance, October 31, 1996 4,878,476 $ 243,924 $17,161,105 ($1,122,098) ($ 62,821) Exercise of Stock Options 1,000 50 1,044 Retirement of Treasury Stock ( 62,800) ( 3,140) ( 59,681) 62,821 Net Income 1,698,320 --------- Balance, April 30, 1997 4,816,676 $ 240,834 $17,102,468 $ 576,222 $ ========= ========== =========== ============ =
The accompanying notes are an integral part of these financial statements. 7 RCM TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended April 30, 1997 1996 ---- ---- (Unaudited) (Unaudited) Cash flows from operating activities: Net income $ 1,698,320 $ 888,599 - --------- - ------- Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 238,081 132,470 Provision for losses on accounts receivable 120,000 20,000 Changes in assets and liabilities: Accounts receivable ( 3,911,491) ( 1,222,227 ) Prepaid expenses and other current assets ( 115,569) 178,503 Accounts payable and accrued expenses ( 303,457) ( 192,456 ) Accrued payroll ( 58,687) ( 9,283 ) Taxes other than income taxes 668,701 268,855 Income taxes payable 462,486 ( 431,314 ) ------- ------- Total adjustments ( 2,899,936) ( 1,255,452 ) --------- --------- Net cash used in operating activities ( 1,201,616) ( 366,853 ) --------- -------
The accompanying notes are an integral part of these financial statements. 8 RCM TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
Six Months Ended April 30, 1997 1996 ---- ---- (Unaudited) (Unaudited) Cash flows from investing activities: Increase in intangible assets ($ 198,890) ($ 587,337 ) Property and equipment acquired ( 224,279) ( 46,835 ) Decrease (Increase) in deposits 3,132 ( 30,546 ) Cash paid for acquisitions, net of cash acquired ( 5,594,339) ( 621,500 ) --------- ------- Net cash used in investing activities ( 6,014,376) ( 1,286,218 ) --------- --------- Cash flows from financing activities: Sale of common stock 1,000,000 Exercise of stock options 1,094 4,813 Net borrowings under short term debt arrangements 7,243,883 460,966 Repayments of long term debt ( 40,180 ) ------ Net cash provided by financing activities 7,244,977 1,425,599 --------- --------- Net increase (decrease) in cash and cash equivalents 28,985 ( 227,472 ) Cash and cash equivalents at beginning of period 5,989 297,550 ----- ------- Cash and cash equivalents at April 30, $ 34,974 $ 70,078 = ====== = ====== Supplemental cash flow information: Cash paid for: Interest expense $ 262,667 $ 51,089 Income taxes $ 740,122 $ 135,000 Acquisitions Fair value of assets acquired $ 6,223,325 $ 1,720,498 Liabilities assumed 628,986 1,098,998 ------- --------- Cash paid, net of cash acquired $ 5,594,339 $ 621,500 = ========= = =======
The accompanying notes are an integral part of these financial statements. 9 RCM TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 1. General The accompanying consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). This Report on Form 10-Q should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended October 31, 1996. Certain information and footnote disclosures which are normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to SEC rules and regulations. The information reflects all normal and recurring adjustments which, in the opinion of management, are necessary for a fair presentation of the financial position of the Company and its results of operations for the interim periods set forth herein. The results for the six months ended April 30, 1997 are not necessarily indicative of the results to be expected for the full year. 2. Sale of Common Stock On June 13, 1997, the Company completed a public offering of 2,875,000 shares of Common Stock, of which, 2,698,187 shares were offerred and sold by the Company and 176,813 shares were offered by certain selling stockholders. The public offering was was undertaken pursuant to the terms of a Registration Statment on Form S-1 originally filed with the Securities and Exchange Commission on March 21, 1997 and a final Prospectus dated June 10, 1997. The net proceeds to the Company after estimated offering costs was approximately $23,486,882. The Company did not receive any of the proceeds from the sale of the shares by by the selling stockholders. 3. Acquisition On January 7, 1997, the Company acquired Programming Alternatives of Minnesota, Inc. ("PAMI"), a Minneapolis, Minnesota-based specialty provider of information technology personnel, particularly those with high demand client-server skills. The acquisition was completed effective as of November 4, 1996 through a stock purchase transaction (the "Purchase") pursuant to which PAMI became a wholly-owned subsidiary of the Company. The Purchase consideration paid to the former shareholders of PAMI consisted of $4,500,000 cash and a $1,625,000 three year promissory note payable contingent upon PAMI achieving certain base levels of operating income for each twelve month period following the Purchase during the term of the note. An additional earn-out payment may be made to the former shareholders of PAMI at the end of the third anniversary of the Purchase to the extent that operating income during this period exceeds these base levels. The acquisition has been accounted for under the purchase method of accounting. The cost in excess of net assets acquired of $4,483,331 is included in the Company's Consolidated Balance Sheet as "Intangible Assets" and is being amortized over a 40 year period. On April 1, 1997, the Company acquired certain operating assets of Programming Resources ("PRU") for $600,000 cash plus $300,000 of consideration in the form of a three year promissory note payable upon attaining certain earnings targets within the three-year period. The Company also agreed to pay additional consideration to the shareholders of PRU in the event that during the three-year period the performance of PRU exceeds the established earnings targets. PRU generated revenues of approximately $2.4 million during its fiscal year ended December 31, 1996. Through this transaction, the Company acquired one branch office which provides information technology staffing services. The cost in excess of net assets acquired of $582,000 is included in the Company's Consolidated Balance Sheet as "Intangible Assets" and is being amortized over a 40 year period. The following unaudited results of operations have been prepared assuming that all acquisitions which have occurred since November 1, 1995 had occurred at the beginning of the periods presented. Those results are not necessarily indicative of results of future operations nor of results that would have occurred had the acquisition been consummated as of the beginning of the periods presented. 10 RCM TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 3. Acquisition - (Continued)
Six Months Ended Three Months Ended April 30, April 30, 1997 1996 1997 1996 ---------------- ---------------- ---------------- ---------- Revenues $ 49,521,000 $ 40,639,000 $ 27,776,000 $ 20,972,000 Net income $ 1,741,000 $ 1,143,000 $ 934,000 $ 615,000 Earnings per common share $.35 $.24 $.19 $.13
4. Income Taxes The net income for the six and three months ended April 30, 1996, has been calculated after taking into account the effect of the then available net operating loss tax carryforward (NOL). Without giving effect to the NOL, the Company's earnings per share, on a fully taxed basis, for the six and three months ended April 30, 1996 would have been $.16 and $.06 per share, respectively. 5. Stock Options On August 15, 1996, the Board of Directors approved the RCM Technologies, Inc. 1996 Executive Stock Plan ("1996 Plan") which authorizes the issuance not later than August 15, 2006 of up to 1,250,000 (effective January 15, 1997) shares of Common Stock to officers and key employees of the Company and its subsidiaries. Effective November 21, 1996, the Chief Executive Officer, Mr. Kopyt, was granted 500,000 options pursuant to the 1996 Plan, of which 250,000 options were not exercisable as of April 30, 1997.
Transactions related to all stock options during the six months ended April 30, 1997 are as follows: Outstanding options, beginning of period......................................... 214,400 Granted.......................................................................... 500,000 Forfeited........................................................................( 4,400) Exercised........................................................................( 1,000) ---------- Outstanding options, end of period............................................... 709,000 ======= Exercisable options ............................................................. 459,000 ======= Option grant price per share..................................................... $1.25 to $8.13
6. Earnings Per Share Earnings per share is based on the weighted average number of common shares outstanding during the periods presented. For the six months ended April 30, 1997 and 1996, the weighted average number of shares outstanding was 4,962,129 and 3,776,035, respectively. For the three months ended April 30, 1997 and 1996, the weighted average number of shares outstanding was 4,962,420 and 4,193,281, respectively. 11 RCM TECHNOLOGIES, INC. AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations Private Securities Litigation Reform Act Safe Harbor Statement When used in or incorporated by reference into this Report, the words "estimate," "project," "intend," "expect" and similar expressions are intended to identify forward-looking statements regarding events and financial trends which may affect the Company's future operating results and financial position. Such statements are subject to risks and uncertainties that could cause the Company's actual results and financial position to differ materially. Such factors are set forth in the Company's Annual Report on Form 10-K for the year ended October 31, 1996, under the heading "Business-Risk Factors." Overview The Company provides contract and temporary personnel in the information technology, professional engineering and technical, specialty healthcare and general support sectors of the staffing industry to a diversified base of national, regional and local customers. The Company's business and strategy have changed dramatically since its inception in 1971. Through 1981, the Company's business focused on the development of environmental technologies and the operation of related environmental businesses. In 1981, the Company diversified its operations through the acquisition of Intertec Design, Inc., a staffing company that provided technical, clerical and light industrial personnel. Under current management in 1992, the Company chose to discontinue its environmental business and from 1992 through 1994 repositioned its core staffing business to improve profitability and to take advantage of consolidating market dynamics. Significant revenue growth was experienced beginning in fiscal 1995 as the Company implemented a growth strategy that resulted in the acquisition of six businesses in the staffing industry. This resulted in an increase in the Company's gross margins and net income as the mix of the Company's business shifted towards the higher margin information technology and specialty healthcare sectors and as the Company elected to discontinue providing certain lower margin general support services. General support services, which from fiscal 1992 to 1994 accounted for approximately 51% of the Company's revenues, decreased as a percentage of the Company's revenues to approximately 20% during the six months ended April 30, 1997. Corresponding increases were experienced in the Company's newly acquired information technology and specialty healthcare groups, accounting for approximately 41% and 6%, respectively, of the Company's revenues during the six months ended April 30, 1997. The Company realizes revenues from the placement of contract and temporary staffing personnel. These services are normally provided to the customer on a time and material basis at fixed hourly rates that are established for each of the Company's staffing personnel, based upon their skill level, experience and type of work performed. Billable hourly rates range from an average of approximately $55 - $75 within the information technology group, $30 - $60 in the professional engineering group, $35 - $65 within the specialty healthcare group and $8 - $15 in the Company's general support group. Approximately 90% of the Company's revenues are currently realized on the basis of agreed upon hourly billing rates. In some instances, billing rates can be adjusted based upon increases in workmen's compensation, taxes and other agreed upon costs. A small percentage of the Company's business is presently derived from fixed-bid projects. In view of the diversification of the Company's service offerings, and by drawing upon the skills developed within the Company's engineering and technical group, management intends to develop project management skills within its information technology and other groups and believes that an additional percentage of its business may be derived in the future from larger-scale consulting projects. 12 RCM TECHNOLOGIES, INC. AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations - (Continued) Overview - (Continued) Approximately 40% of the Company's services are provided under contract. The remainder are provided under purchase orders. Contracts are utilized on certain of the more complex assignments where the engagements are for longer terms or where precise documentation of the nature and scope of the assignment is necessary. Contracts, although they normally relate to longer-term and more complex engagements, generally do not obligate the customer to purchase a minimum level of services and are generally terminable by the customer on 60 - 90 days notice. The average length of engagement varies from three months to one year within the information technology and engineering sectors, three months to six months within the specialty healthcare sector and one week to three weeks within the general support sector. Approximately 70% of the Company's services are billed to customers on a weekly basis. The remainder are billed on a bi-weekly and monthly basis based upon the type of project and arrangement with the customer. Revenues are recognized when the services are provided. Costs of services consist primarily of salaries and compensation related expenses for billable staffing personnel, including payroll taxes, employee benefits, worker's compensation and other insurance. Principally all of the billable personnel are treated by the Company as employees, although approximately 5% of information technology personnel are treated as independent contractors. Selling, general and administrative expenses consist primarily of salaries and benefits of personnel responsible for operating activities, including certain administrative, marketing and reporting responsibilities, including legal, accounting and corporate office overhead. The Company records these expenses when incurred. Depreciation relates primarily to the fixed assets of the Company. Amortization relates principally to the goodwill resulting from the Company's acquisitions. These acquisitions have been accounted for under the purchase method of accounting for financial reporting purposes and have created goodwill estimated at $14.6 million which is being amortized over a 40 year period currently resulting in amortization expense aggregating approximately $365,000 annually. The Company's net income for each of the three fiscal years in period ended October 31, 1996, has been determined after giving effect to the utilization of a net operating loss carryforward. This effectively reduced to a minimal amount federal tax accruals during those periods and subjected the Company to composite tax rates of between 9.9% and 16.1%, principally as a result of state income taxes. During and through fiscal 1996, the Company had utilized principally all of its net operating loss carryforward and, accordingly, expects that for the foreseeable future its net income will be subject to taxation at full federal and state rates of approximately 40.5%. Liquidity and Capital Resources The Company has historically funded its capital requirements with cash generated from operations and advances under its outstanding credit facility. In addition, during fiscal 1996, the Company secured $1 million through a private placement of its Common Stock. The Company typically maintains minimal cash balances, and at April 30, 1997, had approximately $35,000 in cash. During the six months ended April 30, 1997, operating activities used $1.2 million of cash compared to $.4 million during the comparable period in fiscal 1996. The increased use of cash used in operating activities of $.8 million was primarily attributable to an increase in accounts receivable of $3.9 million for October 31, 1996. The increase was partially offset by increased levels of profitability along with an increase in depreciation and amortization during the comparable period in fiscal 1996. 13 RCM TECHNOLOGIES, INC. AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations - (Continued) Liquidity and Capital Resources - (Continued) Cash used in investing activities was $6.0 million for the six months ended April 30, 1997. In January 1997, the Company purchased PAMI for $4.5 million in cash and a three year contingent promissory note. In addition, the acquisition of PAMI required the use of $660,000 in working capital funds. In April 1997, the Company acquired PRU for $600,000 in cash and a three year contingent promissory note. During fiscal 1996, the Company purchased three staffing companies which required $1.0 million of cash as part of the purchase price. During fiscal 1995, the Company purchased two staffing companies which required $2.3 million in cash as part of the purchase price. The Company financed the cash portion of the acquisitions with internal funds and bank borrowings. These acquisitions collectively resulted in goodwill estimated at $14.6 million which is being amortized at approximately $365,000 per year. Net cash provided by financing activities was $7.2 million and $1.4 million for the six months ended April 30, 1997. Cash was primarily provided under the Company's Revolving Credit Facility during the six months ended April 30, 1997. On December 19, 1996, the Company and its subsidiaries entered into an amended and restated loan agreement with Mellon Bank, N.A. providing for a credit facility of up to $20,000,000 (the "Revolving Credit Facility") which expires on June 30, 1999. The Revolving Credit Facility is collateralized by accounts receivable, contract rights and furniture and fixtures together with unlimited guarantees from the Company. The Revolving Credit Facility requires the Company and its subsidiaries to meet certain financial objectives and maintain certain financial covenants with respect to net income, effective net worth, working capital, senior indebtedness to effective net worth ratios, capital expenditures, current assets to current liabilities ratios, consolidated working capital and consolidated tangible net worth. At October 31, 1996, and April 30, 1997, the Company and its subsidiaries were in compliance with all financial covenants contained within the Revolving Credit Facility. Advances under the Revolving Credit Facility are to be used to meet cash flow requirements for the subsidiaries as well as operating expenses for the Company. Borrowing under the Revolving Credit Facility is based on 85% of accounts receivable on which not more than ninety days have elapsed since the date of invoicing. The interest rate charged by the bank, under the revoling credit facility is based on the London Interbank Offered Rate ("LIBOR") plus 2.25%. The Company anticipates that its primary uses of capital in future periods will be for acquisitions and the funding of increases in accounts receivables. The Company believes that the net proceeds from its recent public offerring of Common Stock on June 13, 1997, (See Note 2) and borrowings under the Revolving Credit Facility and any net cash flow from operations will be sufficient to meet the Company's capital needs for at least the next twelve months. Prior to 1977, the Company operated a facility located in Fontana, California (the "Facility") at which it processed certain materials to recover aluminum. The property on which the Facility was located (the "Property") was owned by a former shareholder and officer ("Former Officer") of the Company. In 1977, the Company sold certain assets (the "1977 Transaction") utilized in its operation to a company (the "Purchaser") that continued processing similar materials at the Facility until 1982. As part of the 1977 Transaction, the Company was permitted to store on the Property an existing stockpile of aluminum oxide materials (the "Stockpile") which was available for consumption in the Purchaser's operations. From 1977 to 1980, the Purchaser utilized a significant amount of material from the Stockpile in its operations. Material generated by the Purchaser's operations were also added to the Stockpile. The Purchaser acquired the Property in 1985 from the Former Officer. Purportedly in response to an order from a state environmental agency (which, along with a subsequent order, is referred to herein as the "Order") relating to potential ground water degradation, the Purchaser performed a number of actions, including, in 1992, disposal of the then existing Stockpile at an approximate cost of $5.6 million. The Purchaser has sought 14 RCM TECHNOLOGIES, INC. AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations - (Continued) Liquidity and Capital Resources - (Continued) contribution from the Company for its proportionate share of the disposal costs, as well as anticipated maintenance costs of approximately $700,000, on common law grounds and pursuant to certain federal and state environmental laws. Based upon, among other things, an analysis of environmental studies performed before and after the 1977 Transaction as well as a review of the compliance records of the state environmental agency, the Company has concluded that: (i) the Facility was in material compliance with all applicable federal and state environmental laws at the time of the 1977 Transaction; (ii) the Purchaser was cited for numerous violations of applicable environmental laws after the 1977 Transaction, thus, any violations of laws after 1977, including any consequent remediation and disposal obligations, were likely the responsibility of the Purchaser; (iii) neither the costs incurred by the Purchaser, nor the events leading up to the incurrence of these costs, appear to support a claim under federal environmental laws; (iv) certain actions taken and costs incurred by the Purchaser may not have been necessary or required to comply with the Order; (v) liability, if any, would only apply to the minority percentage of the Stockpile attributable to the Company's operations; and (vi) the Purchaser's contribution claims for costs incurred in 1992 and earlier in response to the Order may be barred under the statute of limitations relating to the state law claims. The Company believes it has meritorious defenses to the Purchaser's claims and, in management's opinion, the Company's exposure under the claims is not likely to have a materially adverse impact on the Company's overall financial condition. There can be no assurance, however, that the Company will not incur material expenses and costs in connection with the defense and resolution of any claims brought by the Purchaser or that the Company will not ultimately be responsible for certain of the costs incurred by the Purchaser, which may include pre- and post-judgment interest, in an amount that may be material to the Company. Furthermore, since the Company has not established any reserves in connection with such claims, any such liability, if at all, would be recorded as an expense in the period incurred or estimated. This amount, even if not material to the Company's overall financial condition, could adversely affect the Company's results of operations in the period recorded. Management intends to vigorously oppose any such claims.
Results of Operations - Six Months Ended April 30, 1997, Compared to Six Months Ended April 30, 1996 Six Months Ended April 30, 1997 1996 ---- ---- Revenues $ 48,530,700 $ 23,562,110 Cost of services $ 37,185,185 $ 19,298,075 Gross profit $ 11,345,515 $ 4,264,035 Selling, general and administrative $ 7,943,838 $ 3,082,700 Depreciation and amortization $ 238,081 $ 132,470 Operating income $ 3,163,596 $ 1,048,865 Interest expense $ 262,667 $ 51,089 Income before income taxes $ 2,900,929 $ 997,776 Income taxes $ 1,202,609 $ 109,177 Net income $ 1,698,320 $ 888,599 Earnings per share $.34 $.24
Revenues. Revenues increased 106.0%, or $25.0 million, for the six months ended April 30, 1997, as compared to the comparable prior year period. Of this increase, approximately $17.1 million was attributable to revenue growth through acquisitions that occurred after the first quarter of fiscal 1996 and approximately $7.9 million was from internal growth. Internal growth was experienced in the information technology and healthcare sectors and was offset by discontinued business in the general support sector due to unacceptable margins and workers' compensation rates. 15 RCM TECHNOLOGIES, INC. AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations - (Continued) Six Months Ended April 30, 1997, Compared to Six Months Ended April 30, 1996 - (Continued) COST OF SERVICES. Cost of services increased 92.7% , or $17.9 million, for the six months ended April 30, 1997 as compared to the equivalent prior year period. This increase was primarily due to increased salaries and compensation associated with the increased revenues experienced during this period. Cost of services as a percentage of revenues decreased to 76.6% for the six months ended April 30, 1997, from 81.9% for the comparable prior year period. This decline was primarily attributable to a greater percentage of the Company's revenues being derived from specialty staffing services. SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative expenses increased 157.7%, or $4.9 million, for the six months ended April 30, 1997, as compared to the comparable prior year period. This increase resulted from the change in the mix of the business during the six months ended April 30, 1997, which required higher marketing, sales, recruiting and administrative expenses than the comparable prior year period. Selling, general and administrative expenses as a percentage of revenues increased to 16.4% for the six months ended April 30, 1997, from 13.1% in the comparable prior year period, primarily attributable to the increased sales, recruiting and administrative expenses necessary to support the Company's continued growth within the information technology sector. DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased 79.7%, or $105,600, for the six months ended April 30, 1997, as compared to the comparable prior year period. This increase was primarily due to the amortization of intangible assets incurred in connection with the acquisitions that occurred after the first quarter of fiscal 1996. INTEREST EXPENSE. Interest expense increased 414.1%, or $212,000, for the six months ended April 30, 1997, as compared to the comparable prior year period. This increase was due to the increased borrowings necessary to provide the funds required for certain of the Company's acquisitions as well as to refinance the working capital debt of some of the acquired companies. INCOME TAX. Income tax expense increased 1002.0%, or $1,093,000 for the six months ended April 30, 1997, as compared to the comparable prior year period. This increase was due to an increase in the effective tax rate from 10.9% to 41.5% and increased levels of net income. The increase in the effective tax rate was primarily due to the utilization of principally all of the remaining net operating loss carryforward which offset net income in prior periods.
Three Months Ended April 30, 1997 Compared to Three Months Ended April 30, 1996 Three Months Ended April 30, 1997 1996 Revenues $ 27,379,979 $ 13,785,626 Cost of services $ 21,133,868 $ 11,312,200 Gross profit $ 6,246,111 $ 2,473,426 Selling, general and administrative $ 4,323,573 $ 1,931,739 Depreciation and amortization $ 119,452 $ 80,453 Operating income $ 1,803,086 $ 461,234 Interest expense $ 172,478 $ 26,249 Income before income taxes $ 1,630,608 $ 434,985 Income taxes $ 713,275 $ 48,249 Net income $ 917,333 $ 386,736 Earnings per share $.18 $.09
16 RCM TECHNOLOGIES, INC. AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations - (Continued) Three Months Ended April 30, 1997 Compared to Three Months Ended April 30, 1996 - (Continued) Revenues. Revenues increased 98.6%, or $13.6 million, for the three months ended April 30, 1997, as compared to the comparable prior year period. Of this increase, approximately $7.2 million was attributable to revenue growth through acquisitions that occurred after the first quarter of fiscal 1996 and approximately $6.4 million was from internal growth. Internal growth was experienced in the information technology and healthcare sectors and was offset by discontinued business in the general support sector due to unacceptable margins and workers' compensation rates. Cost of Services. Cost of services increased 86.8% , or $9.8 million, for the three months ended April 30, 1997 as compared to the equivalent prior year period. This increase was primarily due to increased salaries and compensation associated with the increased revenues experienced during this period. Cost of services as a percentage of revenues decreased to 77.2% for the three months ended April 30, 1997, from 82.1% for the comparable prior year period. This decline was primarily attributable to a greater percentage of the Company's revenues being derived from specialty staffing services. Selling, General and Administrative. Selling, general and administrative expenses increased 123.8%, or $2.4 million, for the three months ended April 30, 1997, as compared to the comparable prior year period. This increase resulted from the change in the mix of the business during the three months ended April 30, 1997, which required higher marketing, sales, recruiting and administrative expenses than the comparable prior year period. Selling, general and administrative expenses as a percentage of revenues increased to 15.8% for the three months ended April 30, 1997, from 14.0% in the comparable prior year period, primarily attributable to the increased sales, recruiting and administrative expenses necessary to support the Company's continued growth within the information technology sector. Depreciation and Amortization. Depreciation and amortization increased 48.5%, or $38,999, for the three months ended April 30, 1997, as compared to the comparable prior year period. This increase was primarily due to the amortization of intangible assets incurred in connection with the acquisitions that occurred after the first quarter of fiscal 1996. Interest Expense. Interest expense increased 557.0%, or $146,200, for the three months ended April 30, 1997, as compared to the comparable prior year period. This increase was due to the increased borrowings necessary to provide the funds required for certain of the Company's acquisitions as well as to refinance the working capital debt of some of the acquired companies. Income Tax. Income tax expense increased 1378.3%, or $665,000 for the three months ended April 30, 1997, as compared to the comparable prior year period. This increase was due to an increase in the effective tax rate from 11.1% to 43.7% and increased levels of net income. The increase in the effective tax rate was primarily due to the utilization of principally all of the remaining net operating loss carryforward which offset net income in prior periods. 17 PART II OTHER INFORMATION Item 1. Legal Proceedings The Company is not a party to any material legal proceedings. The Company has been named in orders relating to the storgae of certain materials at aformer Company facility located in Fontana, California. For additional information with regard to this matter, see Management's Discussion and Analysis. Item 4. Submission of Matters to a Vote of Security Holders The Company held its Annual Meeting of Shareholders on April 25, 1997. The following actions were taken:
1.) The following directors were elected to serve on the Board of Directors until the expiration of their respective terms and until their respective successors shall be elected and qualified. Tabulated voting results were as follows: Norman S. Berson (Class A) (For 4,460,959; Withheld 17,855) Barry S. Meyers (Class A) (For 4,461,499; Withheld 17,315)
Each nominee as a Class A director was elected to serve a term expiring at the Company's Annual Meeting in 2000, or until his successor has been elected and qualified. 2.) Approval of Grant Thornton, LLP as the independent auditing firm for the Company for the fiscal year ending October 31, 1997. Votes For - 4,359,318; Votes Against - 18,340 Item 5. Other Information None. 17 PART II OTHER INFORMATION - CONTINUED Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits (2) Stock Purchase Agreement, dated March 31, 1997, between RCM Technologies, Inc., Programming Resources Unlimited, Inc. and Hamson/Ginn, Inc. (3) Amended and Restated Bylaws, Dated June 6, 1997 (11) Computation of earnings per share. (27) Financial Data Schedule. (b) Reports on Form 8-K
19 RCM TECHNOLOGIES, INC. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. RCM Technologies, Inc. (Registrant) Date: June 13, 1997 By:/s/ Leon Kopyt -------------- Leon Kopyt Chairman, President, Chief Executive Officer and Director Date: June 13, 1997 By:/s/ Stanton Remer ----------------- Stanton Remer Chief Financial Officer, Treasurer, Secretary and Director 20 EXHIBIT 11 RCM TECHNOLOGIES, INC. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE Six Months Ended April 30, 1997 and 1996
Six Months Ended April 30, 1997 1996 ---- ---- Fully diluted earnings Net income applicable to common stock $ 1,698,320 $ 888,599 = ========= = ======= Shares Weighted average number of shares outstanding 4,815,947 3,708,221 Common stock equivalents 146,182 67,814 ------- ------ Total 4,962,129 3,776,035 ========= ========= Fully diluted earnings per common share $.34 $.24 ==== ==== Primary earnings Net income applicable to common stock $ 1,698,320 $ 888,599 = ========= = ======= Shares Weighted average number of shares outstanding 4,815,947 3,708,221 Common stock equivalents 94,871 67,814 ------ ------ Total 4,910,818 3,776,035 ========= ========= Primary earnings per common share $.35 $.24 ==== ====
22 EX-10 2 PURCHASE AGREEMENT ASSET PURCHASE AGREEMENT AGREEMENT made this day of , 1997 by and between RCM TECHNOLOGIES, INC. ("Buyer") a Nevada corporation, on the one hand and PROGRAMMING RESOURCES UNLIMITED, INC., a Pennsylvania corporation and HAMSON/GINN ASSOCIATES, INC., a Pennsylvania corporation (individually a "Seller" and collectively the "Sellers") and the shareholder of Sellers identified in paragraph 1 below (the "Seller Shareholder") on the other. RECITALS A. Sellers desire to sell and Buyer desires to purchase certain of the assets of Sellers as more particularly described herein, upon the terms and subject to the conditions herein set forth. B. The Board of Directors of Buyer, and of each Seller have approved this Agreement by resolutions duly adopted. NOW, THEREFORE, in consideration of the mutual promises herein contained and intending to be legally bound hereby the parties agree as follows: ARTICLE I DEFINITIONS 1.1 Definitions. When used in this Agreement, the following words or phrases have the meanings set forth below: "Affiliate" shall mean a Person that directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with another Person or beneficially owns or has the power to vote or direct the vote of 10% or more of any class of voting stock or of any form of voting equity interest of such other Person in the case of a Person that is not a corporation. For purposes of this definition, "control", including the terms "controlling" and "controlled", means the power to direct or cause the direction of the management and policies of a Person, directly or indirectly, whether through the ownership of securities or partnership or other ownership interests, by contract or otherwise. "Agreement" shall have the meaning ascribed to it in the preamble hereto. "Assets" shall have the meaning ascribed to it in Section 2.1 hereof. "Buyer" shall have the meaning ascribed to it in the preamble hereto. "Closing" and "Closing Date" shall have the respective meanings set forth in Article V hereof. "Code" shall mean the Internal Revenue Code of 1986, as amended. "Condition: shall mean, as to a Person, the financial condition, business, results of operations, prospects and/or properties or other Assets of such Person. "Consent or Filing" shall have the meaning set forth in Section 6.3 hereof. "Contract" shall mean a contract, indenture, bond, note, mortgage, deed of trust, lease, agreement or commitment, whether written or oral, including, without limitation, an insurance contract. "Environmental Claim" shall mean any written notice by a Person alleging actual or potential Liability, including, without limitation, potential Liability for any investigatory cost, cleanup cost, governmental response cost, natural resources damage, property damage, personal injury or penalty, arising out of, based on or resulting from (a) the presence, transport, disposal, discharge or release of any Material of Environmental Concern at any location, whether or not owned by Seller, as the case may be, or (b) circumstances forming the basis of any violation or alleged violation of any Environmental Law. "Environmental Law" shall mean all federal, state, local and foreign Laws relating to pollution or protection of human health or the environment, including, without limitation, ambient air, surface water, ground water, land surface or subsurface strata, including, without limitation, Laws relating to emissions, discharges, releases or threatened releases, or the presence of Materials of Environmental Concern, or otherwise relating to the manufacture, processing, distribution, use, existence, treatment, storage, disposal, transport, recycling, reporting or handling of Materials of Environmental Concern. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated hereunder. "ERISA Affiliate" shall mean, with respect to a Seller, any trade or business that together with a Seller would be deemed a "single employer" within the meaning of Section 4001(a)(14) of ERISA. "Financial Statements" shall mean statements of financial condition and statements of operations and changes in stockholders' 2 equity, and the footnotes, schedules, exhibits and other attachments thereto. "GAAP" shall mean generally accepted accounting principles. "Governmental Entity" shall mean a court, legislature, governmental agency, commission or administrative or regulatory authority or instrumentality, domestic or foreign. "Hamson" shall mean Michael J. Hamson, individually owning all (100%) of the capital stock of Programming Resources Unlimited, Inc. and Michael J. Hamson and Sharon Hamson, collectively owning 100% of the capital stock of Hamson/Ginn Associates, Inc. "IRS" shall mean the Internal Revenue Service. "Insurance" shall have the meaning set forth in Section 2.1.5 hereof. "Intellectual Property" shall mean marks, names, trademarks, service marks, patents, patent rights, assumed names, logos, copyrights, trade names, inventions, protected formulae, computer software, as well as related documentation and manuals, policy forms, training materials and underwriting manuals and all applications for registration of such items with any Governmental Entity, licenses and research and development relating thereto. "Knowledge" shall mean the knowledge of the relevant Person, after due inquiry by the appropriate officer or officers. "Law" shall mean a law, ordinance, rule or regulation enacted or promulgated, or an Order issued or rendered, by any Governmental Entity. "Liability" shall mean a liability, obligation, claim or cause of action of any kind or nature whatsoever, whether absolute, accrued, contingent or other and whether known or unknown. "License" shall mean a license, certificate of authority, permit or other authorization to transact an activity or business issued or granted by a Governmental Entity. "Lien" shall mean a lien, mortgage, deed to secure debt, pledge, security interest, lease, sublease, charge, levy or other encumbrance of any kind. "Losses" shall mean losses, claims, damages, costs, expenses, Liabilities and judgments, including, without limitation, court costs and attorneys' fees. 3 "Materials of Environmental Concern" shall mean chemicals, pollutants, contaminants, wastes, toxic or hazardous substances or petroleum and petroleum products. "Net Operating Income" (NOI) shall mean subsequent to the Closing Date and with respect to the ongoing business formerly conducted by Sellers, gross revenue (billed services at invoice value reduced by customer discounts, returns and allowances) minus cost of services and sales and general administrative expenses including all compensation and benefits of Michael Hamson but excluding only RCM corporate cost, Taxes and the salaries of new sales and recruiting personnel as determined in accordance with generally accepted accounting principles. "Officers' Certificate" shall mean, with respect to any Person, a certificate executed by the President or an appropriate Vice President of such Person, as attested by the Secretary or an Assistant Secretary of such Person. "Order" shall mean an order, writ, ruling, judgment, injunction or decree of, or any stipulation to or agreement with, any arbitrator, mediator or Governmental Entity. "Permitted Liens" shall mean as to each Seller, (i) all Liens approved in writing by the Buyer, (ii) statutory Liens arising out of operation of Law with respect to a Liability incurred in the ordinary course of business of each Seller and which is not delinquent and can be paid without interest or penalty, or (iii) such Liens and other imperfections of title as do not materially detract from the value or impair the use of the property subject thereto. "Person" shall mean an individual, corporation, partnership, association, joint stock company, Governmental Entity, business trust, unincorporated organization or other legal entity. "Proceedings" shall mean actions, suits, hearings, claims and other similar proceedings. "Reorganization Proposal" shall have the meaning set forth in Section 8.8 hereof. "Required Filings and Approvals" shall mean the filing of such applications, registrations, declarations, filings, authorizations, Orders, consents and approvals as may be required to be made or obtained prior to consummation of the transactions contemplated hereby under the insurance Laws of any jurisdiction. "Seller" and "Sellers" shall have the meaning ascribed to them in the preamble hereto. 4 "Seller Adverse Effect" shall mean a material adverse effect on the Condition of either Seller, taken as a whole, other than resulting from general economic or financial conditions which do not affect Sellers uniquely. "Sellers Benefit Plans" shall have the meaning set forth in Section 6.13(b) hereof. "Sellers' Unaudited Financial Statements" shall mean the unaudited Financial Statements of each Seller for the year ended December 31, 1996. "Sellers' Property" shall mean any property on which either Seller holds a Lien or any facility which is owned or leased by either Seller or in the management of which either Seller actively participates. "Seller Shareholder" shall mean Michael J. Hamson. "SEC" shall mean the Securities and Exchange Commission. "Subsidiary" of a Person means any Person with respect to whom such specified Person, directly or indirectly, beneficially owns 50% or more of the equity interests in, or holds the voting control of 50% or more of the equity interests in, such Person. "Tax" or "Taxes" shall mean all income, gross income, gross receipts, premium, sales, use, transfer, franchise, profits, withholding, payroll, employment, excise, severance, property and windfall profit taxes, and all other taxes, assessments or similar charges of any kind whatsoever thereon or applicable thereto, together with any interest and any penalties, additions to tax or additional amounts, in each case imposed by any taxing authority, domestic or foreign, upon Sellers, including, without limitation, all such amounts imposed as a result of being a member of an affiliated or combined group. "Tax Returns" or "Returns" shall mean all Tax returns, declarations, reports, estimates, information returns and statements required to be filed under federal, state, local or foreign Laws. "Treasury Regulations" shall mean the regulations promulgated by the Secretary of the Treasury pursuant to the Code and any statute predecessor and successor thereto. ARTICLE II PURCHASE AND SALE OF ASSETS 2.1 Assets To Be Purchased. Upon the terms and subject to the conditions set forth in this Agreement, Sellers shall sell, 5 transfer, convey and assign to the Buyer, and the Buyer shall purchase and acquire from Sellers, at the Closing on the Closing Date, the temporary staffing business of each Seller as a going concern, including, without limitation by reason of specification, the following assets of Seller: 2.1.1 the right, title and interest of Sellers in and to all fixed assets set forth on Schedule 2.1.1 hereto, including all computer equipment, software, office equipment and furniture used by Seller in the conduct of their business (collectively, the "Fixed Assets"); 2.1.2 All of Sellers' right, title and interest in and to the names "Programming Resources Unlimited, Inc." and "Hamson/Ginn Associates, Inc." and all variations thereof, and all trademarks, servicemarks, trade names, service names and logos incorporating the names "Programming Resources Unlimited, Inc." and "Hamson/Ginn Associates, Inc." or any variation thereof and all goodwill related thereto (collectively, the "Trade Names"); 2.1.3 all of Sellers' books and records, including, without limitation by reason of specification, all client and customer lists, all employee lists, all applicant data bases, all files, all books of accounts and ledgers and all other instruments and documents relating to the assets and businesses being acquired by the Buyer pursuant to this Agreement (collectively, the "Customer Material") but excluding their corporate records, provided the Buyer shall preserve Sellers' books and records for a period of five (5) years and will allow Sellers or their authorized representative access to them during regular business hours; 2.1.4 all of Sellers' leases and rental agreements, all unperformed commitments and obligations owing to Sellers, and all other instruments, contracts and agreements of Sellers (collectively the "Contracts"); 2.1.5 all policies of insurance maintained by Sellers and the proceeds thereof (collectively, the "Insurance")' 2.1.6 all prepayments on behalf of Seller including all prepaid payroll and other statutory taxes except as provided in Section 2.2.3 hereof; and 2.1.7 all intangible property rights and proprietary information of Sellers relating to Sellers' operation of the temporary staffing businesses being acquired by the Buyer pursuant to this Agreement (collectively, the "Proprietary Information"). All of the above described assets are hereinafter sometimes collectively referred to as the "Assets". 6 2.2 Excluded Assets. Notwithstanding anything contained in this Agreement to the contrary, the following assets of Sellers are excluded from the Assets and are not being purchased and sold hereunder: 2.2.1 all cash, cash equivalents and bank accounts of Sellers; 2.2.2 all accounts receivable of Sellers earned by Sellers prior to the Closing Date; 2.2.3 all prepaid income or other taxes of Sellers and any income or other tax refunds to which Sellers may be or may become entitled for all periods prior to the Closing Date; 2.2.4 all claims and causes of action of Sellers arising prior to the Closing Date against third parties and all payments or other sums of money payable or which may become payable with respect thereto. ARTICLE III PURCHASE PRICE; PAYMENT; ALLOCATION 3.1 Purchase Price. The purchase price for the Assets (the "Purchase Price") is $900,000.00 subject to the following adjustment: if the aggregate Net Operating Income of Sellers for the period January 1, 1996 through December 31, 1996, after deduction of $120,000.00 for Hamson's compensation, but excluding factoring, adjusted interest, penalties, accounting, depreciation, legal fees and permanent placement commissions earned by Hamson, does not equal $170,000.00, then the Purchase Price shall be reduced by $5.00 for each one dollar that the Net Operating Income is less than $170,000.00. 3.2 Payment. Subject to the terms and conditions of this Agreement, on the Closing Date Buyer shall pay to Sellers the Purchase Price as follows: $600,000.00 by wire transfer of immediately available funds to a bank account designated by Sellers; $300,000.00 in three (3) annual installments of $100,000.00 each payable within sixty (60) days of the first, second and third anniversaries of the Closing Date, provided the Net Operating Income of Sellers' ongoing operations is not less 7 than $170,000 for any such twelve (12) month period. (a) In the event the aggregate Net Operating Income of Sellers is less than $170,000.00 (the "Baseline Amount") for any year (as hereafter defined) in which a payment is due (the "Shortfall") then the amount payable to Sellers for such period shall be reduced by $5.00 for each one dollar of Shortfall. (b) As used in this Section 3.2 the term "year" shall mean the period commencing on the Closing Date and ending twelve (12) months thereafter, provided that if the twelve (12) month period ends during a current pay period then the ending date shall be extended to coincide with the end of the then current pay period. 3.3 Earn Out Payments. For the three (3) year period immediately following the Closing Date, if the aggregate NOI of Sellers for any year (as defined in Section 3.2(b) hereof) exceeds $170,000.00 then twenty five percent (25%) of the amount over and above and in excess of $170,000.00 shall be accrued as additional consideration (the "Earn Out") and within sixty (60) days following the first, second and third anniversaries of the Closing Date such accrued amount shall be paid to Sellers, provided that if any such anniversary shall occur during a current pay period then the anniversary date shall be extended to the close of such current pay period. 3.4 Change of Control. Following a Change of Control as defined in paragraph 8 of the Employment Agreement bearing even date herewith between Buyer and Seller Shareholder: (a) all sums payable pursuant to Section 3.2 hereof to the extent not already paid shall be immediately due and payable to Sellers free of any requirement that the Net Operating Income exceed the Baseline Amount; and (b) all sums payable pursuant to Section 3.3 hereof shall be immediately due and payable in an amount equal to that payable for the year immediately preceding the year the Change of Control occurred multiplied by the number of years remaining in the Earn Out period. ARTICLE IV ASSUMPTION OF OBLIGATIONS AND LIABILITIES 4.1 Liabilities and Obligations Assumed. As of the Closing, the Buyer shall assume and timely pay, perform and discharge only 8 those obligations and liabilities of Sellers relating to the temporary staffing businesses being acquired by the Buyer pursuant to this Agreement identified in Schedule 4.1, (the "Assumed Liabilities") but excluding therefrom the debts, obligations and liabilities being retained by Sellers (the "Excluded Liabilities") as provided in Section 4.2 hereof. 4.2 Excluded Liabilities and Obligations. Except for the Assumed Liabilities as provided in Section 4.1 hereof, Sellers shall retain and timely pay, perform and discharge all debts, liabilities and obligations of Sellers relating to the Assets and the temporary staffing businesses conducted by Sellers, including, without limitation by reason of specification, the following: 4.2.1 all liabilities and obligations to all employees of Sellers other than vacation and sick pay accrued since January 1, 1997 for the full time non-billable office employees; 4.2.2 all liabilities and obligations of Sellers with respect to any claim, demand, cause of action, suit, proceeding, judgment, loss, liability, damage or expense against Sellers; 4.2.3 all obligations and liabilities of Sellers to third parties under the leases, rental agreements, licenses, registrations, and other contracts set forth on Schedule 4.2.3 hereto to the extent such obligations and liabilities first became accrued and payable prior to the Closing Date and are not reflected in Sellers' Financial Statements; 4.2.4 all accounts payable of Sellers; 4.2.5 any other debt, liability or obligation of Sellers; 4.2.6 all income taxes, payroll taxes, statutory federal, state and local taxes and any taxes which may become due by virtue of a change in Sellers' accounting method or as a result of the sale contemplated by this Agreement. ARTICLE V THE CLOSING 5.1 Time and Place. The closing of the transactions contemplated by this Agreement (the "Closing") shall be at 11.30 a.m. on March 21, 1997 (the "Closing Date") at the offices of Fineman & Bach, P.C., 1608 Walnut Street, 19th Floor, Philadelphia, PA. 5.2 Deliveries by Sellers. At the Closing and against the deliveries to be made by the Buyer pursuant to Section 5.3 hereof, Sellers shall deliver the following to the Buyer: 9 5.2.1 a certified copy of resolutions of the Board of Directors and stockholders of each Seller authorizing the making, execution and delivery of this Agreement and each of the agreements and instruments executed in connection herewith or delivered pursuant hereto and the consummation of the transactions contemplated hereby certified as true, correct and complete as of the Closing Date by the Secretaries of Sellers; 5.2.2 the opinion of Klehr, Harrison, Harvey, Branzburg & Ellers, counsel to Sellers, in substantially the form of Schedule 5.2.2 hereto; 5.2.3 one or more instruments of assignment, acceptance, consent and release pursuant to which Sellers shall assign to the Buyer all of Sellers' right, title and interest in, to and under the Trade Name, the Customer Material, the Contracts, the Insurance and the Proprietary Information; 5.2.4 a bill of sale pursuant to which Sellers transfer to the Buyer all of Sellers' right, title and interest in and to the Fixed Assets; 5.2.5 one or more instruments of assignment and acceptance pursuant to which Sellers assign to the Buyer the Assumed Liabilities; 5.2.6 executed consents to assignment from each of the parties to each of the Contracts other than Sellers to the extent a consent to the assignment of such Contract by Sellers to the Buyer is required by the terms of such Contract or is otherwise required by Law; 5.2.7 the Employment Agreement between the Buyer and Hamson in substantially the form of Appendix A hereto duly executed by Hamson; 5.2.8 a copy duly executed by Seller of any Officers' Certificate specified in Section 9.1 hereof; 5.2.9 a good standing certificate with respect to each Seller issued by the Secretary of State of Pennsylvania within ten (10) days prior to the Closing Date; and 5.2.10 such other documents as are reasonably requested by the Buyer in connection with the consummation of the transactions contemplated hereto. 5.3 Deliveries by the Buyer. At the Closing and against the deliveries to be made by Sellers pursuant to Section 5.2 hereof, the Buyer shall deliver to Sellers the following: 10 5.3.1 the Purchase Price as provided in Section 3.1 hereof; 5.3.2 a certified copy of resolutions of the Board of Directors of the Buyer authorizing the making, execution and delivery of this Agreement and each of the agreements executed in connection herewith or delivered pursuant hereto and the consummation of the transactions contemplated hereto certified as true, correct and complete as of the Closing Date by the Secretary of the Buyer; 5.3.3 the opinion of Fineman & Bach, P.C., counsel to the Buyer, in substantially the form of Schedule 5.3.3 hereto; 5.3.4 fully executed counterparts to any of the instruments to be delivered by Seller pursuant to Section 5.2 hereof that require execution by the Buyer; 5.3.5 a copy duly executed by the Buyer of any Officers' Certificate specified in Section 9.2 hereof; 5.3.6 the Employment Agreement between the Buyer and Hamson in substantially the form of Appendix A hereto duly executed by the Buyer; and 5.3.7 such other documents as are reasonably requested by Seller in connection with the consummation of the transactions contemplated hereby. ARTICLE VI REPRESENTATIONS AND WARRANTIES OF SELLERS Sellers and Hamson jointly and severally represent and warrant to the Buyer, subject only to the exceptions that are set forth in the schedules hereto, as follows: 6.1 Organization and Qualification. (a) Each Seller is a corporation duly organized, validly existing and in good standing under the Laws of the State of Pennsylvania and has the requisite corporate power and authority to conduct its business as it is currently being conducted. Each Seller is duly qualified to do business, and is in good standing, in the respective jurisdictions where the character of its assets owned or leased or the nature of its business makes such qualification necessary, except for failures to be so qualified or in good standing which would not have a Seller Adverse Effect. (b) Copies of the Charter and Bylaws of each Seller have heretofore been delivered to the Buyer, and all such copies are accurate and complete as of the date hereof. 11 6.2 Authorization. Each Seller has the requisite corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly approved and authorized by the Board of Directors and stockholders of each Seller. No other corporate proceedings on the part of either Seller are necessary to authorize this Agreement and the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by each Seller and, assuming this Agreement is a legal, valid and binding obligation of the Buyer, constitutes a legal, valid and binding agreement of each Seller enforceable against each Seller in accordance with its terms, except that (i) such enforcement may be subject to bankruptcy, rehabilitation, liquidation, conservation, dissolution, insolvency, reorganization, moratorium or other similar Laws now or hereafter in effect relating to creditors' rights generally, and (ii) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any Proceeding therefor may be brought. 6.3 Consents and Approvals of Government Agencies. No consent, approval, Order or authorization of, or registration, application, declaration or filing with any person is required with respect to either Seller in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby. 6.4 No Violation. The execution, delivery and performance of this Agreement by each Seller and the consummation of the transactions contemplated hereby will not (i) violate any provision of the Charter or the Bylaws or similar organizational documents of either Seller, (ii) violate, conflict with, result in a breach of any provision of, constitute a default or an event which, with notice or lapse of time or both, would constitute a default under, result in the termination of or accelerate the performance required by, result in a right of termination or acceleration under, or result in the creation of any Lien upon any of the Assets of either Seller under any of the terms, conditions or provisions of any Contract to which either Seller is a party or to which it or any of the Assets may be subject. 6.5 Financial Statements. Sellers have previously delivered to the Buyer true and complete copies of each Seller's Unaudited Financial Statements. Each of Seller's Unaudited Financial Statements, including those Financial Statements to be delivered by Sellers pursuant to Section 8.10 hereof, was and, as to Financial Statements of Sellers not yet provided, will be prepared in accordance with GAAP, and each presents and, as to each Seller's Unaudited Financial Statements not yet provided, will present, fairly in all material respects the financial condition, results of operations and changes in stockholders' equity of each Seller as of 12 the dates or for the periods covered thereby, in conformity with GAAP. 6.6 Conduct of Business. Schedule 6.6 hereof lists all claims which are pending, or to the Knowledge of Sellers threatened against either Seller and correctly sets forth the circumstances thereof. No insurance carrier listed therein has denied coverage of any claim listed opposite its name or accepted investigation of any such loss or defense of any such claim under a reservation of rights. The reserves established by Seller as of December 31, 1996 are adequate to cover Sellers' liability, net of insurance coverage, for all such claims. 6.7 Absence of Certain Changes or Events. Since December 31, 1996 Sellers have conducted their businesses only in the ordinary course, consistent with past practice, and there has not been, occurred or arisen (i) any event, change or development which individually or in the aggregate would have a Seller Adverse Effect, (ii) any amendment or termination of any agreement or waiver or relinquishment of any right of material value to either Seller, (iii) any changes in the Articles of Incorporation or Bylaws of either Seller, and (iv) any damage, destruction or loss whether covered by insurance or not which would have a Seller Adverse Effect. 6.8 No Undisclosed Liabilities. Since December 31, 1996, Seller has not incurred any Liabilities other than (i) Liabilities incurred in the ordinary course of business consistent with past practice, or (ii) Liabilities that, individually or in the aggregate, would not be material to either Seller taken as a whole. Neither Seller has any Liabilities of any nature fixed or contingent that will not be shown or otherwise provided for in each Seller's Financial Statements. 6.9 Taxes and Tax Returns. All Tax Returns (i) required to be filed by each Seller have been timely filed taking into account any extensions of time for filing such Tax Returns; (ii) at the time filed were and, as to Tax Returns not yet filed, will be, true, complete and, to the Knowledge of each Seller, correct and each Seller has timely paid all Taxes due and payable for periods covered by such Tax Returns, except to the extent, if any, that adequate provisions has been made and adequate reserves have been made as reflected in each Seller's Unaudited Financial Statements for the payment of Taxes due and payable for periods covered by such Tax Returns; (iii) the accruals and reserves reflected in each Seller's Unaudited Financial Statements are adequate in all material respects to cover all Taxes accrued through the dates therein for those and any prior periods in accordance with GAAP; (iv) there are no Liens for Taxes upon the assets of either Seller except for Liens for Taxes not yet due; (v) to the Knowledge of Sellers, there are no outstanding deficiencies, assessments or written proposals for the assessment of Taxes proposed, asserted or 13 assessed against either Seller; (vi) all tax years for which Tax Returns were required to be filed by each Seller are closed by the applicable statute of limitations for all periods through December 31, 1992; (vii) neither Seller has executed any power of attorney with respect to Taxes that is currently in effect; (viii) neither Seller has made, is not obligated to make, or is not a party to any contract that could obligate it to make, any payments that would not be deductible under Section 280G of the Code; and (ix) all monies required to be collected or withheld by Sellers for income taxes, social security and other payroll taxes have been collected or withheld and either paid to the appropriate governmental agencies or will, at Closing, be paid to such agencies. 6.10 Litigation. There are no Proceedings or investigations pending nor, to the Knowledge of each Seller, threatened, against, relating to, involving or otherwise affecting either Seller that individually or in the aggregate would reasonably be expected to have a Seller Adverse Effect. Neither Seller is subject to any Order, except for Orders which, individually or in the aggregate, would not have a Seller Adverse Effect. 6.11 Compliance with Law. (a) Neither Seller is in violation in any material respect or, with notice or lapse of time or both, would be in violation in any material respect of any term or provision of any Law applicable to them or any of their assets except for violations which would not have a Seller Adverse Effect. Without limiting the generality of the foregoing, Sellers have filed or caused to be filed all reports, statements, documents, registrations, filings or submissions which were required by any such Law to be filed by them and all such filings complied with all such Laws when filed except for failures to file or to comply which would not have a Seller Adverse Effect. Sellers hold all permits, Licenses, variances, exemptions and orders which are required to be held by them to operate their businesses substantially in the manner in which they operated as of the date hereof. (b) Sellers are not parties to any Contract with or other undertaking to, or subject to any Order by, or a recipient of any supervisory letter or other oral or written communication of any kind from, any Governmental Entity which (i) materially and adversely affects or would reasonably be expected to affect materially and adversely the conduct of their businesses, including without limitation, their sales or trade practices and policies, or its management; or (ii) would have a Seller Adverse Effect; nor, to the Knowledge of Sellers, have Sellers been advised by any Governmental Entity that it is contemplating issuing or requesting any such Order, Contract or other communication. 6.12 Employee Agreements. Schedule 6.12 lists all plans, contracts and arrangements, oral or written, including but not 14 limited to employee benefit plans, whereunder Sellers have any obligations, other than obligations to make current wage or salary payments terminable on notice of 30 days or less, to or on behalf of their officers, employees or their beneficiaries or whereunder any of such persons owes money to Sellers. 6.13 Employee Benefit Plans' ERISA. (a) Sellers have not entered into any collective bargaining agreement; there is no labor strike, dispute, slowdown or work stoppage or lockout pending, or, to the Knowledge of Sellers, threatened against or affecting Sellers; to the Knowledge of Sellers, no union organizational campaign is in progress with respect to the employees of Sellers; there is no unfair labor practice, charge or complaint pending or, to the Knowledge of Sellers, threatened, before the National Labor Relations Board against Sellers and no charges with respect to or relating to Sellers are pending before the Equal Employment Opportunity Commission. (b) Schedule 6.13 contains a true and complete list of each "employee benefit plan" as defined in Section 3(3) of ERISA, and each other employee benefit plan, welfare plan, program, agreement, policy or arrangement, sponsored, maintained or contributed to or required to be contributed to by Sellers or by any ERISA Affiliate that, together with Sellers would be deemed a "single employer" within the meaning of Section 4001(a)(14) of ERISA, within six years prior to the Closing Date (the "Sellers Benefit Plans"). (c) With respect to each Seller Benefit Plans, Sellers have heretofore delivered to the Buyer true and complete copies of (i) the Plan documents, if any, including all amendments thereto, as currently constituted on the date hereof, (ii) the annual reports and actuarial reports for the last three most recently completed plan years, (iii) the most recent Summary Plan Description and Summary of Material Modifications, if applicable, and all material employee communications for each plan, (iv) any trust or other fund agreement, including all amendments thereto, relating thereto as in effect on the date hereof and the latest financial statements thereof, (v) all Contracts relating to any Seller Benefit Plan with respect to which Sellers or any ERISA Affiliate may have any liability, and (vi) with respect to each Seller Benefit Plans that is intended to be qualified under Section 401 of the Code, the most recent determination letter received from the IRS. (d) Neither Sellers nor any ERISA Affiliate has any formal plan or commitment, whether legally binding or not, to create any additional Seller Benefit Plans or modify or change any 15 existing Seller Benefit Plans, other than as required by the Code, ERISA or regulations or other requirements of the IRS or the Department of Labor issued thereunder. (e) Except as set forth in Schedule 6.13, neither Seller nor any ERISA Affiliate maintains or contributes to or has ever maintained or contributed to any Seller Benefit Plan which is subject to Title IV of ERISA or Section 412 of the Code. (f) Neither Seller nor any ERISA Affiliate is, or ever has been, obligated to make contributions to or is, or has ever been, other subject to a "multiemployer pension plan" as defined in Section 3(37) of ERISA. (g) To the Knowledge of Sellers, there has been no prohibited transaction, as described in Section 406 of ERISA or Section 4975 of the Code, with respect to any Seller Benefit Plan, and Sellers have not incurred any liability for any excise tax pursuant to Section 4975 of the Code and, to the Knowledge of Sellers, no fact or event exists that would give rise to such liability with respect to the filing of reports with respect to any Seller Benefit Plan. (h) Full payment has been made of amounts which Sellers or any ERISA Affiliate is required to pay to each Seller Benefit Plan through the date hereof, and all amounts properly accrued through the Closing Date with respect to any Seller Benefit Plan have been properly recorded in the Sellers' Unaudited Financial Statements and will be properly recorded on any Financial Statements of Seller delivered pursuant to Section 8.8 hereof. (i) To the Knowledge of Sellers, each Seller Benefit Plan has been operated and administered in all material respects in accordance with its terms and applicable Laws. There are no pending and to the Knowledge of Sellers threatened or anticipated, claims with respect to any Seller Benefit Plan other than claims for benefits made in the ordinary course. To the Knowledge of Sellers, each Seller Benefit Plan which is intended to be qualified within the meaning of Section 401(a) of the Code is so qualified and Sellers are not aware of any facts or circumstances to the contrary, other than as set forth in Schedule 6.13. (j) No Seller Benefit Plan provides benefits with respect to current or former employees of Sellers or any ERISA Affiliate beyond their retirement or other termination of service, except as otherwise required by Law, other than agreements with current or former employees as in effect prior to December 31, 1996 consistent with past practice which in the aggregate are not material to the Condition of Sellers taken as a whole. (k) With respect to each Seller Benefit Plan that is funded wholly or partially through an insurance policy, to the 16 Knowledge of Sellers, there will be no material liability of Sellers or any ERISA Affiliate, as of the Closing Date, under any such insurance policy or ancillary agreement with respect to such insurance policy in the nature of a retroactive rate adjustment, loss sharing arrangement or other actual or contingent liability arising wholly or partially out of events occurring prior to the Closing Date. (l) The consummation of the transactions contemplated by this Agreement will not (i) entitle any current or former employee or officer of Sellers to severance pay, unemployment compensation (except for unemployment insurance benefits) or any other similar payment, (ii) accelerate the time of payment or vesting or increase the amount of compensation due any such employee or officer, (iii) result in any employment-related expense or liabilities, or (iv) result in any prohibited transaction described in Section 406 of ERISA or Section 4975 of the Code for which an exemption is not available. 6.14 Assets. Except for Assets disposed of since December 31, 1996 in arms' length transactions at prices reasonably believed to be fair market value in the ordinary course of business and consistent with past practice: (i) Sellers have good title to all Assets that are disclosed or otherwise reflected in the Sellers' Unaudited Financial Statements, and all such Assets are owned by Seller, free and clear of all Liens other than Permitted Liens; (ii) Sellers own good and indefeasible title to, or has a valid leasehold interest in or have a valid right under contract to use, all personal property that is material to the Permitted Liens; and, in the aggregate, all such personal property is, in all material respects, suitable and adequate for its current uses; and (iii) Sellers have the right to use, free and clear of any royalty or other payment obligations, claims of infringement or alleged infringement or other Liens other than Permitted Liens and other than with respect to licensing and maintenance fees; all Intellectual Property that is material to the conduct of their businesses, all of which is listed in Schedule 6.14; and are not in material conflict with or violation or infringement of, nor have Sellers received any notice of any such conflict with or violation or infringement of, any asserted rights of any other Person with respect to any Intellectual Property. 6.15 Environmental Matters. (a) Sellers are, and, to the Knowledge of Sellers, all Properties of Seller including, with respect to any Sellers' Property, all owners or operators thereof, are in substantial compliance with all applicable Environmental Laws. Sellers have not received any communication, written or oral, that alleges that Seller or any Seller Property including, with respect to any Sellers' Property, any owner or operator thereof, is not in such compliance, and, to the Knowledge of Sellers, there are no 17 circumstances that may prevent or interfere with such compliance in the future. (b) There is no Environmental Claim pending against Sellers or any Seller Property or, to the Knowledge of Sellers, threatened against Sellers or any Sellers' Property, or any Person whose Liability for any Environmental Claims Sellers have or may have retained or assumed either contractually or by operation of Law, except for Environmental Claims which, individually or in the aggregate, would not have a Seller Adverse Effect. (c) There are no past or present actions, activities, circumstances, conditions, events or incidents, including, without limitation, the release, emission, discharge, disposal or presence of any Material of Environmental Concern, that, to the Knowledge of Sellers, could form the basis of any Environmental Claim against Sellers, any Sellers' Property or any Person whose Liability for many Environmental Claim Sellers have or may have retained or assumed either contractually or by operation of Law. (d) Without in any way limiting the generality of the foregoing, to the Knowledge of Sellers, (i) Schedule 6.15 identifies all underground storage tanks and the capacity and contents of such tanks currently or formerly located on property owned or leased by Sellers; (ii) there is no friable asbestos contained in or forming part of any building or structure owned or leased by Sellers; and (iii) no polychlorinated biphenyls are used or stored at any Sellers' Property. 6.16 Contracts. (a) Except as set forth in Schedule 6.16, neither Seller is a party to or bound by: (i) any contract for the sale or purchase of real property to or from any third party; (ii) any contract for the lease or sublease of real or personal property from or to any third party which provides for annual rentals in excess of $1,000, or any group of contracts for the lease or sublease of real or personal property from or to third parties which provides in the aggregate for annual rentals in excess of $1,000; (iii) any contract or group of contracts for the purchase or sale or lease of equipment, computer software, lists of clients, customers or similar information, merchandise, supplies, other materials or personal property or for the furnishing or receipt of services which calls for performance over a period of more than 60 days and involves more than the sum individually or in the aggregate of $1,000; (iv) any license agreement involving the use of copyrights, franchises, licenses, trademarks, servicemarks or other information owned by Sellers or others; (v) any broker's representative, sales, agency or advertising contract which is not terminable on notice of 30 days or less; (vi) any contract involving the borrowing or lending of money or the guarantee of the obligations of officers, directors, stockholders or employees of 18 Sellers or others; (vii) any Contracts with the stockholders of Sellers; or (viii) any other Contract, whether or not made in the ordinary course of business, which is material to the business or assets of Sellers. No outstanding purchase commitment by Sellers is in excess of its ordinary business requirements or at a price in excess of market price. Copies of all Contracts and agreements listed in Schedule 6.16 have been made available by Sellers to the Buyer. (b) Except as set forth in Schedule 6.16, none of such Contracts and agreements will expire or be terminated or be subject to modification of terms or conditions by reason of the consummation of the transactions contemplated by this Agreement. Sellers are not in default in any material respect under the terms of any such contract nor are they in default in the payment of any insurance premiums due to insurance carriers nor any principal of or interest on any indebtedness for borrowed money nor has any event occurred which with the passage of time or giving of notice would constitute such a default by Sellers and, to the Knowledge of Sellers, no other party to any such contract is in default in any material respect thereunder nor has any such event occurred with respect to such party. Without the prior written consent of the Buyer, Sellers will not make any changes or modifications in any of the foregoing, nor incur any further obligations or commitments, nor make any further additions to its properties, except in each case in the ordinary course of business and as contemplated by this Agreement. 6.17 Insurance. Schedule 6.17 contains a true and complete list as of the date hereof all liability, property, workers compensation, directors and officers liability and other Insurance Contracts that insure the business, affairs or properties, or the officers, directors, employees or agents, of Sellers or affect or relate to the ownership, use, or operations of Sellers' assets and that have been issued to Sellers including, without limitation, the names and addresses of the insurers, the expiration dates thereof, any deductible amounts in respect thereof and the annual premiums and payments terms thereof and a description of all claims thereunder in excess of $5,000 per incident since January 1, 1995 through the date of this Agreement. All such insurance is in full force and effect on the date of this Agreement. All notices of reportable incidents with respect to such insurance occurring since January 1, 1995 have been given in writing to the appropriate carriers except where the failure to give such notice would not prevent recovery under such insurance. 6.18 Conflicts; Sensitive Payments. There are (i) no material situations involving the interests of the stockholders of Sellers, except as listed in Schedules 6.16 or 6.18, or, to the Knowledge of the President of Sellers, any officer or director of Sellers which may be generally characterized as a "conflict of Interest", including, but not limited to, the leasing of property to or from 19 Sellers or direct or indirect interests in the business of competitors, suppliers or customers of Sellers; and (ii) no situations involving illegal payments or payments of doubtful legality from corporate funds of Sellers to governmental officials or others which may be generally characterized as a "sensitive payment". 6.19 Corporate Name. Sellers own and possess, to the exclusion of the stockholders of Sellers and their affiliates, all rights to the use of the name "Programming Resources Unlimited, Inc." and "Hamson/Ginn Associates, Inc." and any name confusingly similar thereto in the operation of Sellers' present business or any other business similar to or competitive with that being conducted by Sellers, including, but not limited to, the right to use such name in advertising. 6.20 Trademarks and Proprietary Rights. All Intellectual Property owned or used or registered in the name of or licensed to Sellers are listed and briefly described in Schedule 6.20. Other than as disclosed in Schedule 6.20, no proceedings have been instituted or are pending or threatened or, to the Knowledge of the President of Sellers, contemplated which challenge the validity of the ownership by Sellers of any of such Intellectual Property. Sellers have not licensed anyone to use any of the foregoing Intellectual Property or any other technical know-how or other proprietary rights of Sellers and the President of Sellers has no Knowledge of the infringing use of any of such Intellectual Property or the infringement of any such copyrights by any person. Sellers own all Intellectual Property and other technical know-how and other proprietary rights now used in the conduct of their businesses and have not received any notice of conflict with the asserted rights of others. 6.21 Brokers and Finders. Sellers have not employed any broker, finder, consultant or intermediary who would be entitled to a broker's finder's or similar fee or commission in connection with or upon the consummation of the transactions contemplated by this Agreement. 6.22 Certain Information. The representations and warranties of Sellers and Hamson contained herein and the information provided by Sellers and Hamson herein and in the Schedules and in the future pursuant hereto, and any certificates executed and delivered by an officer of Sellers pursuant hereto, do not and will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements herein or therein not misleading in light of the circumstances under which they were made. The information provided by Sellers and Hamson contained herein and in the Schedules fairly presents and will fairly present the information purported to be shown herein and therein and is and will be accurate in all material respects. 20 6.23 Transfer of Assets. All Assets necessary to conduct Seller's temporary staffing business are being transferred hereunder. ARTICLE VII REPRESENTATIONS AND WARRANTIES OF THE BUYER The Buyer represents and warrants to Sellers as follows: 7.1 Organization and Standing. (a) Buyer is a corporation duly organized, validly existing and in good standing under the Laws of the State of New Jersey, and has the requisite corporate power and authority to conduct its business as it is currently being conducted. Buyer is duly qualified to do business and is in good standing in the respective jurisdictions where the character of its assets owned or leased or the nature of its business makes such qualification necessary. (b) Copies of the Articles of Incorporation and Bylaws of the Buyer have heretofore been delivered or made available to Sellers, and all such copies are accurate and complete as of the date hereof. 7.2 Authorization. Buyer has the requisite corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly approved and authorized by the Board of Directors of the Buyer. No other corporate proceedings on the part of Buyer are necessary to authorize this Agreement and the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by the Buyer and, assuming this Agreement is a legal, valid and binding obligation of Sellers, constitutes a legal, valid and binding agreement of the Buyer enforceable against it in accordance with its terms, except that (i) such enforcement may be subject to bankruptcy, rehabilitation, liquidation, conservation, dissolution, insolvency, reorganization, moratorium or other similar Laws now or hereafter in effect relating to creditors' rights generally; and (ii) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any Proceeding therefor may be brought. 7.3 Consents and Approvals of Government Agencies. No consent, approval, Order or authorization of, or registration, application, declaration or filing with any Person is required with respect to the Buyer in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby. 21 7.4 No Violation. The execution, delivery and performance of this Agreement by the Buyer and the consummation of the transactions contemplated hereby will not (i) violate any provision of the Articles of Incorporation or the Bylaws or similar organizational documents of the Buyer; (ii) violate, conflict with, result in a breach of any provision of, constitute a default or an event which, with notice or lapse of time or both, would constitute a default under, result in the termination of or accelerate the performance required by, result in a right of termination or acceleration under, or result in the creation of any Lien upon any of the assets of the Buyer under any of the terms, conditions or provisions of an Contract to which the Buyer is a party or to which it or any of its assets may be subject; or (iii) constitute a breach or violation of or default under any License that is material to the business of the Buyer or Law to which the Buyer is subject. ARTICLE VIII CERTAIN COVENANTS 8.1 Conduct of Business Pending the Closing. Sellers covenant and agree that, prior to the Closing Date, unless the Buyer shall otherwise agree in writing or as otherwise expressly permitted or contemplated by this Agreement or required by Law: (a) Sellers' businesses shall be conducted only in the ordinary course in substantially the same manner as heretofore conducted, and, except as otherwise provided herein, Sellers shall use all reasonable efforts to preserve intact their present business organizations, keep available the services of their present officers and employees and preserve relationships with customers, agents, brokers, suppliers and others having business dealings with them to the end that their goodwill and ongoing businesses shall not be impaired in any material respect; (b) Sellers shall not open any new, or expand the amount of space of any existing, office in or from which any sales or other business activities are conducted, or close any such office, which in any case would be material to the Condition of Sellers. (c) Sellers shall not (i) amend their Articles of Incorporation or Bylaws; (ii) incur any indebtedness for borrowed money; (iii) make any material change in any method of accounting or accounting practice or policy; (iv) agree to any merger, consolidation, sale of all or substantially all of its assets or any similar reorganization, arrangement or business combination; (v) enter into any Contract that might materially and adversely affect Sellers' ability to perform their obligations under this Agreement; (v) enter into any Contract limiting the ability of Sellers to engage in any business, to compete with any Person, to do business with any Person or in any location or to employ any 22 Person; (vii) directly or indirectly guarantee or agree to guarantee, other than the endorsement of negotiable instruments for collection in the ordinary course of business and consistent with past practice, any obligation of any Person in respect of indebtedness for borrowed money or other financial obligations of any Person; or (viii) modify any Contract in existence as of the date hereof with respect to any of the foregoing; (d) Sellers shall not (i) increase in any manner the compensation of any director, officer or employee, except in the ordinary course of business and consistent with past practice or pursuant to the terms of agreements or plans as currently in effect; (ii) pay or agree to pay any pension, severance, retirement allowance or other employee benefit not required by any existing Seller Benefit Plan, agreement or arrangement as currently in effect to any director, officer or employee, whether past or present, which payments in the aggregate would be material to the Condition of Seller; (iii) except as required by the terms of any plan or Contract as currently in effect, adopt or commit itself to enter into any additional pension, profit-sharing, bonus, incentive, deferred compensation, group insurance, severance pay, retirement or other employee benefit plan or Contract, or any employment or consulting agreement with or for the benefit of any Person which cannot be terminated by Sellers upon notice of 30 days or less without penalty or premium; (iv) enter into, adopt or increase any indemnification or hold harmless arrangements with any director, officer or other employee or agent of any Person; (v) enter into any Contract with any officer or director of Sellers having terms less favorable to Sellers than could have been obtained from an unaffiliated Person in an arm's length transaction' or (vi) amend any plan or Contract referred to in clause (iii) hereof; (e) other than in the ordinary course of business and consistent with past practice, Sellers shall not make any capital expenditures or commitments for capital expenditures which individually exceed $2,000 or which in the aggregate exceed $5,000 or make any expenditures or commitments for expenditures for the purchase of any products or services which in one or a series of related transactions exceed $2,000 or which in the aggregate exceeds $5,000; (f) other than in the ordinary course of business and consistent with past practice, Sellers shall not waive any rights with a value in excess of $2,000 or make any payment, direct or indirect, of any liability in excess of $5,000 before the same comes due in accordance with its terms; (g) Sellers shall not sell, lease, mortgage, encumber or otherwise grant any interest in any of its assets which are material to the Condition of Seller except for Permitted Liens and Liens securing obligations that are not individually in excess of 23 $2,000 or which in the aggregate are not in excess of $5,000 and do not materially detract from the value or impair the use of the Assets subject thereto; (h) Sellers shall not purchase, or otherwise acquire (i) any equity interest in any Person which interest represents more than 10% of the outstanding equity in such Person; or (ii) any Assets of any other Person other than acquisitions in the ordinary course of business for a purchase price not in excess of $2,000, individually, or $5,000 in the aggregate; (i) Sellers shall at all times up to and including the Closing Date maintain their existing insurance coverage of all types in effect or procure substantially similar substitute insurance policies with financially sound and reputable insurance companies in at least such amounts and against such risks as are currently covered by such policy, provided such policies are available at commercially reasonable rates; and (j) Sellers shall not agree in writing or otherwise to take any of the actions prohibited by the foregoing clauses (a) through (i). 8.2 Reasonable Efforts. Upon the terms and subject to the conditions herein provided, each of the parties hereto agrees to use all reasonable efforts to take, or cause to be taken, all action and do, or cause to be done, and to assist and cooperate with the other party hereto in doing, all things necessary, proper or advisable under applicable Laws to consummate and make effective, in the most expeditious manner practicable, the transactions contemplated by this Agreement. 8.3 Access and Information; Non-Disclosure. (a) Sellers shall afford to the Buyer and the Buyer's accountants, counsel and other representatives full access during normal business hours from the date hereof through the period immediately prior to the Closing Date to all of Sellers' assets, books, contracts, commitments and records, including, without limitation, Tax Returns and accountants' work papers, and, during such period, Sellers shall furnish promptly to the Buyer (i) a copy of each material report, schedule and other document filed or received by Sellers pursuant to the requirements of Law, including, without limitation, (i) Financial Statements; (ii) material correspondence with Governmental Entities; and (iii) all such other information concerning Sellers' business, assets and personnel as the Buyer may reasonably request. (b) To the extent that an examination of such books and records establishes that the aggregate NOI of both Sellers for the period January 1, 1996 to December 31, 1996 is less than $170,000.00 the Purchase Price described in Section 3.1 hereof 24 shall be reduced by the amount of $5.00 for each one dollar that the NOI for that period is less than $170,000.00. (c) Each of Sellers and the Buyer agree that it shall not use for any purpose other than in connection with the transactions contemplated by this Agreement or disclose to any third party, except with the prior written consent of the other party, any material confidential trade secrets, proprietary information or other information provided in connection with this Agreement or the consummation of the transactions contemplated hereby; provided, however, that this provision shall not preclude such entities from (i) the disclosure of such information which presently is known generally to the public or which subsequently has come into the public domain, other than by way of disclosure in violation of this Agreement; or (ii) the disclosure of such information required by Law or court order, provided that, to the extent practicable, prior to such disclosure required by Law or court order, the disclosing party will give the other party prior written notice of the nature of the Law or order requiring disclosing and the disclosure to be made in accordance therewith. If for any reason whatsoever the transactions contemplated by this Agreement are not consummated, each party shall, upon request from the other party, promptly return to the other party all books, records and documents, including all copies, if any, thereof furnished by or on behalf of such other party. 8.4 Independent Contractors. If, with respect to any period prior to the Closing, any governmental authority (i) challenges the status as independent contractors of any of Seller's contractors; or (ii) asserts the applicability to Sellers' employees or contractors of statutes, ordinances or regulations regulating to wages, working conditions and hours of employment, then after any final determination (with Sellers having an opportunity to participate in any agency examindation or determination) any payroll or other taxes and any interest or penalties attributable thereto and any liability for additional employee compensation and any fines or penalties connected therewith shall be the obligation of Sellers and the Seller Shareholder. 8.5 Permanent Placements. Schedule 8.5 contains the names of not more than forty (40) persons who are clients of Sellers eligible for permanent placement. If, within the thirty (30) day period following the Closing, any of the persons whose names appear on Schedule 8.5 are placed for permanent employment then Hamson/Ginn Associates, Inc. shall receive all compensation arising from or connected with such permanent placement provided, however, that during such thirty (30) day period Buyer shall not be obligated to pay the draw of Jack Daly. 8.6 Notification of Certain Other Matters. Sellers shall promptly notify the Buyer of and provide the Buyer with all information relating to: (i) any Proceedings or investigations 25 commenced or, to Seller's Knowledge, threatened against, relating to or involving or otherwise affecting Sellers, which, if pending on the date hereof, would have been required to have been disclosed in writing pursuant to Section 6.10 hereof or which relate to the execution of this Agreement or the consummation of the transactions contemplated hereby; (ii) any notice of, or other communication relating to, a default or event which, with notice or lapse of time or both, would become a default, received by Sellers subsequent to the date of this Agreement and prior to the Closing Date, under any Contract of a type required to be disclosed pursuant to Section 6.16 hereof to which Sellers are a party or to which Sellers or any of their Assets may be subject or bound; (iii) any notice or other communication from or to any Person alleging that the consent of such Person is or may be required in connection with the execution of this Agreement or the consummation of the transactions contemplated hereby; (iv) any notice or other communication from or to any Governmental Entity in connection with this Agreement or the transactions contemplated hereby; and (v) any change or other event which may have a material adverse effect on the Condition of Seller, or the occurrence of any event or development which, so far as reasonably can be foreseen at the time of its occurrence, could result in any such change other than general economic or financial conditions which do not affect Sellers uniquely. 8.7 Supplemental Disclosure. Sellers shall have the continuing obligation promptly to notify the Buyer with respect to any matter hereafter arising or discovered which, if existing or known at the date hereof, would have caused a representation or warranty not to be true or would otherwise have been required to be disclosed in the Schedules. 8.8 No Solicitations. Sellers shall not nor shall it authorize or permit any of their officers, directors or employees or any investment banker, financial advisor, attorney, accountant, actuary or other Person retained by them or on their behalf to: (a) solicit or encourage, including, without limitation, by way of furnishing information, or take any action to facilitate or pursue, any inquiries or the making of any proposal which constitutes, or may reasonably be expected to lead to, any Reorganization Proposal; or (b) agree to, approve or endorse any Reorganization Proposal. As used in this Agreement, "Reorganization Proposal" shall mean any proposal for, or to discuss, a merger, consolidation, sale of all or substantially all of the Assets, arrangement or other reorganization, arrangement or business combination involving Seller or any proposal or offer for, or to discuss, the acquisition in any manner of a substantial equity interest in, or a substantial portion of the Assets or temporary staffing business of, Sellers other than the transactions contemplated by this Agreement. 8.9 Publicity. So long as this Agreement is in effect, the parties hereto shall not, and shall use their best efforts to cause their Affiliates not to, issue or cause the publication of any 26 press release or other public announcement with respect to this Agreement or the transactions contemplated hereby without the prior consent of the other party, which consent shall not be unreasonable withheld or delayed. So long as this Agreement is in effect, each of the parties hereto shall promptly notify the other party of any announcements which are made and any communications received from non-Affiliated Persons, in either case, with respect to this Agreement or the transactions contemplated hereby. Each party agrees to consult with the other regarding communications with respect to this Agreement or the transactions contemplated hereby. 8.10 Taxes and Closing Costs. Document recording fees and other taxes arising from or relating to the sale and transfer of the Assets shall be shared equally by Sellers and the Buyer, provided, however, that Sellers shall be responsible for the payment of all local, state and federal income taxes with respect to the sale and transfer of the Assets to the Buyer. Personal property and ad valorem taxes paid or payable with respect to the Assets for the taxable year or period which includes the Closing Date shall be prorated between Sellers and the Buyer at the Closing as of the Closing Date. Sellers shall, as soon as reasonably practicable, prepare for the Buyer's review and approval of all tax reports required to be filed by Sellers with respect to taxes to be paid in whole or in part by the Buyer pursuant to this Section 8.11, shall file all such tax reports with the appropriate taxing authorities and shall remit all sums received from the Buyer for taxes to be paid by the Buyer to the appropriate taxing authorities. 8.11 Further Assurances. On and after the Closing, each party hereby shall take such other actions and execute such other documents as may be reasonably requested by the other party hereto from time to time to effectuate or confirm the transfer of the Assets to the Buyer in accordance with the terms of this Agreement and to effectuate or confirm the assumption of the Assumed Liabilities by the Buyer in accordance with the terms of this Agreement. ARTICLE IX CONDITIONS 9.1 Conditions to Obligation of the Buyer to Purchase the Assets and Assume the Assumed Liabilities. The obligation of the Buyer to purchase the Assets and assume the Assumed Liabilities shall be subject to the fulfillment at or prior to the Closing Date of the following additional conditions: (a) Sellers shall have performed and complied in all material respects with all obligations and agreements required to be performed and complied with by them under this Agreement at or prior to the Closing Date, and the Buyer shall have received 27 Officers' Certificates from each of the Sellers as to the satisfaction of this condition; (b) The representations and warrants of Sellers and the Seller Shareholder contained in this Agreement shall be true and correct in all material respect at and as of the date of this Agreement and at and as of the Closing Date as if made at and as of such date and time, except as otherwise contemplated or permitted by this Agreement, it being understood that the truth and correctness of any such representations and warranties made as of a specified date shall be determined only as of such specified date, and the Buyer shall have received an Officers' Certificate from each of the Sellers and a certificate from the Seller Shareholder as to the satisfaction of this condition; (c) Buyer shall have obtained the approval of its principal lender to this Agreement and the transactions contemplated hereby; (d) From the date of this Agreement through the Closing Date, there shall not have occurred any Seller Adverse Effect or any event that would reasonably be expected to result in a Seller Adverse Effect; (e) Not later than the Closing Date, Sellers shall have changed their fictitious corporate names so that, as changed, such name shall not include the words "Programming", "Resources", "Hamson" or "Ginn"; (f) There shall be no pending or threatened litigation initiated by a private party seeking to restrain, prevent, rescind or change the terms of this Agreement or the purchase of the Assets and the assumption of the Assumed Liabilities or to obtain damages in connection with this Agreement or the consummation hereof, which, in the reasonable opinion of the Buyer, makes it inadvisable to proceed with this Agreement or with the purchase of the Assets and the assumption of the Assumed Liabilities or, which, in the reasonable opinion of the Buyer, might materially and adversely affect the condition (financial or otherwise), Assets, liabilities earnings or business of Sellers; (g) At the Closing Sellers shall have tendered to the Buyer the documents specified in Section 5.2 hereof. 9.2 Conditions to Obligation of Sellers to Sell the Assets. The obligation of Sellers to sell the Assets shall be subject to the fulfillment at or prior to the Closing Date of the following additional conditions: (a) The Buyer shall have performed and complied in all material respects with all obligations and agreements required to be performed and complied with by it under this Agreement at or 28 prior to the Closing Date, and Sellers shall have received an Officers' Certificate from the Buyer as to the satisfaction of this condition; (b) The representations and warranties of the Buyer contained in this Agreement shall be true and correct in all material respects at and as of the date of this Agreement and at and as of the Closing Date as if made at and as of such date and time, except as otherwise contemplated or permitted by this Agreement, it being understood that the truth and correctness of any such representations and warranties made as of a specified date shall be determined only as of such specified date, and Sellers shall have received an Officers' Certificate from the Buyer as to the satisfaction of this condition; (c) There shall be no pending or threatened litigation initiated by a private party seeking to restrain, prevent, rescind or change the terms of this Agreement or the sale of the Assets or to obtain damages in connection with this Agreement or the consummation thereof or with the sale of the Assets, which, in the reasonable opinion of Sellers, makes it inadvisable to proceed with this Agreement or with the sale of the Assets; (d) At Closing, Buyer shall have to tendered to Sellers payment of the Purchase Price as specified in Section 3.1 hereof; and (e) At the Closing, the Buyer shall have tendered to Sellers the documents specified in Section 5.3 hereof. ARTICLE X TERMINATION 10.1 Termination. This Agreement may be terminated and the purchase and sale of the Assets abandoned at any time prior to the Closing Date: (a) by mutual consent of Seller and the Buyer; or (b) by either of the Sellers or the Buyer by one day's written notice to the Buyer or Sellers, as the case may be, if the Closing shall not have been consummated on or before May 1, 1997; provided that the right to terminate this Agreement under this Section 10.1(b) shall not be available to any party whose failure to fulfill any obligation under this Agreement has been the cause of, or resulted in, the failure of the purchase and sale of the Assets to have been consummated on or before such date. 10.2 Effect of Termination. In the event of the termination of this Agreement by either of the Sellers or the Buyer, as provided in Section 10.1 hereof, this Agreement shall thereafter 29 become void and there shall be no Liability on the part of any party hereto against any other party hereto, or their respective directors, officers of agents, except that (i) any such termination shall be without prejudice to the rights of any party hereto arising out of the willful breach by any other party of any covenant or agreement contained in this Agreement; (ii) Sections 8.3(c), 12.1, 12.2 and 12.3 shall continue in full force and effect notwithstanding such termination; and (iii) each of the parties hereto shall provide the other party hereto with a copy of any proposed public announcement regarding the occurrence of such termination and an opportunity to comment thereon prior to its dissemination. ARTICLE XI AMENDMENT, WAIVER AND INDEMNIFICATION 11.1 Amendment. This Agreement may be amended or modified in whole or in part any time by an agreement in writing executed in the same manner as this Agreement. 11.2 Extension; Waiver. At any time prior to the Closing Date, either party hereto may: (a) extend the time for the performance of any of the obligations or other acts of the other party hereto; (b) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto; and (c) waive compliance with any of the agreements or conditions contained herein. Any agreement on the part of a party to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party by its President. The failure of any party hereto to enforce at any time any provision of this Agreement shall not be construed to be a waiver of such provision, nor in any way to affect the validity of this Agreement or any part hereof or the right of such party hereafter to enforce each and every such provision. No waiver of any breach of this Agreement shall be held to constitute a waiver of any other or subsequent breach. 11.3 Survival of Obligations. All certifications, representations and warranties made hereby by Sellers and the Buyer and their obligations to be performed pursuant to the terms hereof, shall survive the Closing Date hereunder, notwithstanding any notice of any inaccuracy, breach or failure to perform not waived in writing and notwithstanding the consummation of the transactions contemplated herein with knowledge of such inaccuracy, breach or 30 failure. All representations and warranties contained herein shall terminate upon the first anniversary of the Closing Date except that the representations and warranties contained in Sections 6.9 and 8.4 hereof shall expire four years after the Closing Date or with respect to any dispute with the IRS upon the earlier to occur of (x) such dispute's final resolution and the payment of all taxes, interests and penalties arising therefrom and (y) the expiration of the applicable statute of limitations. 11.4 Indemnification. (a) If the Closing occurs then, commencing with the Closing Date and continuing until the first anniversary of the Closing Date, Sellers and Seller Shareholder jointly and severally agree to indemnify and hold harmless Buyer and its respective successors and assigns (collectively, the "Indemnified Persons") from and against any and all (x) liabilities, losses, costs, deficiencies or damages ("Loss") and (y) reasonable attorneys' and accountants' fees and expenses, court costs and all other reasonable out-of-pocket expenses ("Expense") incurred by any Indemnified Person, in each case net of any insurance proceeds received and retained by such Indemnified Person, in connection with or arising from (i) any claim that Sellers did not convey to the Buyer good and marketable title to the Assets pursuant to this Agreement; (ii) any breach by Sellers of any of their covenants in, or any failure of Sellers to perform any of their obligations under, this Agreement; (iii) any Liability of Sellers not assumed by the Buyer; or (iv) any material breach of any warranty or the material inaccuracy of any representation of Sellers contained or referred to in this Agreement or in any certificate delivered by or on behalf of Sellers pursuant hereto. Notwithstanding the foregoing Sellers and Seller Shareholder shall not be liable to Buyer for any Loss or Expense except to the extent such Loss and/or Expense exceeds in the aggregate the sum of $9,000.00. (b) If an Indemnified Person believes that any Indemnified Person has suffered or incurred any Loss or incurred any Expense, the Indemnified Person shall so notify Sellers promptly in writing describing such Loss or Expense, the amount thereof, if known, and the method of computation of such Loss or Expense, all with reasonable particularity and containing a reference to the provision of this Agreement or any certificate delivered pursuant hereto in respect of which such Loss or Expense shall have occurred. If any action at law or suit in equity is instituted by or against a third party with respect to which any Indemnified Person intends to claim any liability or expense as Loss or Expense under this Section 11.4, such Indemnified Person shall promptly notify Sellers of such action or suit. 31 (c) The Indemnified Persons shall have the right to conduct and control, through counsel of their choosing, any third party claim, action or suit and may compromise or settle the same, provided that any of the Indemnified Persons shall give Sellers advance notice of any proposed compromise or settlement. The Indemnified Persons shall permit Sellers to participate in the defense of any such action or suit through counsel chosen by them, provided that the fees and expenses of such counsel shall be borne by Sellers. Any compromise or settlement with respect to a claim for money damages effected after Sellers, by notice to the Indemnified Persons, shall have disapproved such compromise or settlement, shall discharge Sellers from liability with respect to the subject matter thereof, and no amount in respect thereof shall be claimed as Loss or Expense under this Section 11.4. (d) Subject to the limitations set forth in subsection (a), the amount of any Loss or Expense for which Buyer is entitled to indemnification hereunder may be set off by Buyer against first the annual installments described in Section 3.2 hereof and then against the Earn Out described in Section 3.3 hereof, but if such amounts are less than the amount of the Loss and/or Expenses then the Sellers and Seller Shareholder shall remain liable for any such deficiency. (e) Buyer agrees to indemnify and hold harmless Sellers and Seller Shareholder and their heirs, administrators, successors and assigns, from and against any Loss and/or Expense incurred by Sellers or Seller Shareholder arising out of (i) any material breach of any warranty or the material inaccuracy of any representation of Buyer contained or referred to in this Agreement or in any certificate delivered by or on behalf of Buyer pursuant hereto; or (ii) any claim asserted against Sellers or Seller Shareholder arising out of a transaction or occurrence subsequent to the Closing Date with respect to the ongoing business formerly conducted by Sellers. 11.5 Indemnification For Individual Guarantees. Schedule 11.5 contains a complete list of all office leases, equipment leases and auto leases, the performance of which have been guaranteed by Hamson (the "Guarantees"). Buyer agrees to indemnify and hold harmless Hamson of and from any Loss or Expense with respect to or arising out of the Guarantees. (a) The procedures described in Section 11.4(b) and (c) shall control the method of indemnification pursuant to this Section 11.5. 32 ARTICLE XII MISCELLANEOUS 12.1 Notices. All notices or other communications required or permitted hereunder shall be in writing and shall be given by confirmed telex or telecopy or registered mail or overnight courier, postage prepaid, addressed as follows: If to the Buyer, to: RCM Technologies, Inc. 2500 McClellan Avenue Pennsauken, NJ 08109 Attention: Leon Kopyt, President with a copy to: Fineman & Bach, P.C. 1608 Walnut Street - 19th Floor Philadelphia, PA 19103 Attention: Norman S. Berson, Esquire If to Sellers, to: Programming Resources Unlimited, Inc. Hamson/Ginn Associates, Inc. One Devon Square, Suite 206 Wayne, PA 19087 Attention: Michael J. Hamson with a copy to: Klehr, Harrison, Harvey, Branzburg & Ellers 1401 Walnut Street Philadelphia, PA 19102 Attention: Lawrence J. Arem, Esquire If to Hamson, to: Michael J. Hamson or to such other address as the Person to whom notice is to be given may have previously furnished to the other party in writing in accordance herewith. 33 12.2 Expenses. Except as otherwise provided herein, each party hereto shall pay its own expenses including, without limitation, legal and accounting fees and expenses incident to its negotiation and preparation of this Agreement and to its performance and compliance with the provisions contained herein. 12.3 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New Jersey without regard to its rules on conflicts of law. 12.4 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, provided that the rights of Sellers herein may not be assigned and the rights of the Buyer may be assigned only (a) to such other business organization which shall succeed to substantially all of the assets, liabilities and business of the Buyer; or (b) to a wholly owned subsidiary of the Buyer, in which event such assignment shall not relieve the Buyer, of any of its respective obligations to Sellers under this Agreement. Nothing in this Agreement, expressed or implied, is intended to confer upon any other Person any rights or remedies of any nature under or by reason of this Agreement. 12.5 Partial Invalidity. In case any one or more of the provisions contained herein shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Agreement but this Agreement shall be construed as if such invalid, illegal or unenforceable provisions or provisions had never been contained herein unless the deletion of such provision or provisions would result in such a material change as to cause completion of the transactions contemplated herein to be unreasonable or materially and adversely frustrate the objectives of the parties as expressed in this Agreement. 12.6 Execution in Counterparts. This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement, and shall become a binding agreement when one or more counterparts have been signed by each of the parties and delivered to each of the other parties. 12.7 Titles and Headings. Titles and headings to Articles and Sections herein are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. 12.8 Entire Agreement; Statements as Representations. This Agreement, together with the Employment Agreement, the Schedules and the exhibits hereto and any documents delivered pursuant to Articles V and IX hereof, contains the entire understanding of the parties hereto with regard to the subject matter contained herein. All statements contained in this Agreement or in any schedule, 34 certificate, list or other document delivered pursuant to this Agreement shall be deemed representations and warranties as such terms are used in this Agreement. 12.9 Specific Performance. Each of the parties hereto acknowledges and agrees that the other party hereto would be irreparably damaged in the event any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. Accordingly, each of the parties hereto agrees that they each shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically this Agreement and the terms and provisions hereof in any action instituted in any court of the United States or any state thereof having subject matter jurisdiction, in addition to any other remedy to which Seller or the Buyer may be entitled, at law or in equity. IN WITNESS WHEREOF, each party hereto has caused this Agreement to be executed on its behalf all as of the date first above written. RCM TECHNOLOGIES, INC. By: LEON KOPYT, President PROGRAMMING RESOURCES UNLIMITED, INC. By: MICHAEL J. HAMSON, President HAMSON/GINN ASSOCIATES, INC. By: MICHAEL J. HAMSON, President MICHAEL J. HAMSON [NSB\04257HAM.AGR] 35 SCHEDULE 2.1.1 [Schedule of Fixed Assets] 36 SCHEDULE 4.1 [Schedule of Liabilities assumed by Buyer] 37 SCHEDULE 4.2.3 [Schedule of Sellers' Obligations to Third Parties] 38 SCHEDULE 5.2.2 [Opinion of Seller's Counsel] 39 SCHEDULE 5.3.3 [Opinion of Buyer's Counsel] 40 SCHEDULE 6.6 Schedule of claims pending or threatened against Sellers and any insurance applicable thereto] 41 SCHEDULE 6.12 [Schedule of all Employee contracts] 42 SCHEDULE 6.13 [Schedule of Employee Benefit Plans] 43 SCHEDULE 6.14 [Schedule of Intellectual Property] 44 SCHEDULE 6.15 [Schedule of underground storage tanks] 45 SCHEDULE 6.17 [Schedule of all insurance policies] 46 SCHEDULE 6.18 [Schedule of Sensitive Payments] 47 SCHEDULE 6.20 [Schedule of trade marks] 48 SCHEDULE 8.5 [Permanent Placements] 49 EX-3.(II) 3 AMENDED & RESTATED BY LAWS AMENDED AND RESTATED BYLAWS OF RCM TECHNOLOGIES, INC. ARTICLE I Offices and Fiscal Year Section 1.01. Registered Office. The Registered Office of the Company shall be at Bank of America Plaza, Suite 800, 50 West Liberty Street, Reno, Nevada 89501 until otherwise established by the board of directors and a record of such change is filed with the Department of State in the manner provided by law. Section 1.02. Other Offices. The Company may have offices at such other places within or without the State of Nevada as the board of directors may from time to time appoint or the business of the Company may require. Section 1.03. Fiscal Year. The fiscal year of the Company shall begin on the 1st day of ----------- November in each year. ARTICLE II Notice - Waivers - Meetings Generally Section 2.01. Manner of Giving Notice. (a) General Rule. Whenever written notice is required to be given to any person under the provisions of the Articles of Incorporation or these Bylaws, it may be given to the person either personally or by sending a copy thereof by first class or express mail, postage prepaid, or by telegram (with messenger service specified), telex or TWX (with answer back received), courier service, (charges prepaid), or by telecopier, to the address (or to the telex, TWX, telecopier or telephone number) of the person appearing on the records of the Company or, in the case of directors, supplied by the director to the Company for the purpose of notice. If the notice is sent by mail, telegraph or courier service, it shall be deemed to have been given to the person entitled thereto when deposited in the United States mail or with a telegraph office or courier service for delivery to that person or, in the case of telex or TWX, when dispatched or, in the case of telecopier, when received. A notice of meeting shall specify the place, day and hour of the meeting and any other information required by any other provision of the Articles of Incorporation or these Bylaws. Notwithstanding the foregoing, notice to the shareholders of every meeting of shareholders shall be personally delivered or mailed postage prepaid. (b) Adjourned Shareholder Meetings. When a meeting of shareholders is adjourned it shall not be necessary to give any notice of the adjourned meeting or of the business to be transacted at an adjourned meeting, other than by announcement at the meeting at which the adjournment is taken, unless the board of directors fixes a new record date for the adjourned meeting. Section 2.02. Notice of Meetings of Board of Directors. Notice of a regular meeting of the board of directors need not be given. Notice of every special meeting of the board of directors shall be given to each director by telephone or in writing at least 24 hours (in the case of notice by telephone, telex, TWX or telecopier) or 48 hours (in the case of notice by telegraph, courier service or express mail) or five days (in the case of notice by first class mail) before the time at which the meeting is to be held. Every such notice shall state the time and place of the meeting. Neither the business to be transacted at, nor the purpose of any regular or special meeting of the board of directors need be specified in a notice of the meeting. Section 2.03. Notice of Meeting of Shareholders. (a) General Rule. Written notice of every meeting of shareholders shall be given and signed by, or at the direction of, the Secretary to each shareholder of record entitled to vote at the meeting at least ten days and not more than 60 days prior to the day named for a meeting. If the Secretary neglects or refuses to give notice of a meeting, the person or persons calling the meeting may do so. In the case of a special meeting of shareholders, the notice shall specify the purpose of the meeting and the general nature of the business to be transacted. Section 2.04. Waiver of Notice. (a) Written Waiver. Whenever any written notice is required to be given under the provisions of the Articles of Incorporation or these Bylaws, a waiver thereof in writing signed by the person or persons entitled to the notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of the notice. Except as otherwise required by this subsection, neither the business to be transacted at, nor the purpose of a meeting need be specified in the waiver of notice of the meeting. In the case of a special meeting of shareholders the waiver of notice shall specify the general nature of the business to be transacted. (b) Waiver by Attendance. Attendance of a person at any meeting shall constitute a waiver of notice of the meeting except where a person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting was not lawfully called or convened. Section 2.05. Modification of Proposal Contained in Notice. Whenever the language of a proposed resolution is included in a written notice of a meeting required to be given under the provisions of the Articles of Incorporation or these Bylaws, the meeting considering the resolution may without further notice adopt it with such clarifying or other amendments as do not enlarge its original purpose. Section 2.06. Exception to Requirement of Notice. (a) General Rule. Whenever any notice or communication is required to be given to any person under the provisions of the Articles of Incorporation or these Bylaws or by the terms of any agreement or other instrument or as a condition precedent to taking any corporate action and communication with that person is then unlawful, the giving of the notice or communication to that person shall not be required. (b) Shareholders Without Forwarding Addresses. Notice or other communications shall not be sent to any shareholders with whom the Company has been unable to communicate for more than 24 consecutive months because communications to the shareholder are returned unclaimed or the shareholder has otherwise failed to provide the Company with a current address. Whenever the shareholder provides the Company with a current address, the Company shall commence sending notices and other communications to the shareholder in the same manner as to other shareholders. Section 2.07. Use of Conference Telephone and Similar Equipment. Any director may participate in any meeting of the board of directors, and the board of directors may provide by resolution with respect to a specific meeting or with respect to a class of meetings that one or more persons may participate in a meeting of the shareholders of the Company, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other. Participation in a meeting pursuant to this Section shall constitute presence in person at the meeting. ARTICLE III Shareholders Section 3.01. Place of Meeting. All meetings of the shareholders of the Company shall be held at the Registered Office of the Company unless another place is designated by the board of directors in the notice of the meeting. Section 3.02. Annual Meeting. The board of directors may fix and designate the date and time of the annual meeting of shareholders, notice of which shall be given not less than ten days nor more than 60 days prior to the date named for the meeting. Section 3.03. Special Meetings. (a) Call of Special Meetings. Special meetings of the shareholders may be called at any time: (1) by the board of directors; or (2) unless otherwise provided in the Articles of Incorporation, by shareholders entitled to cast at least eighty percent of the votes that all shareholders are entitled to cast at the particular meeting. (b) Fixing of Time for Meeting. At any time, upon the written request of any person who has called a special meeting, it shall be the duty of the Secretary to fix the time of the meeting which shall be held not more than 60 days after the receipt of the request. If the Secretary neglects or refuses to fix the time of the meeting, the person or persons calling the meeting may do so. Section 3.04. Quorum and Adjournment. (a) General Rule. A meeting of shareholders of the Company duly called shall not be organized for the transaction of business unless a quorum is present. The presence of shareholders entitled to cast a majority of the votes all shareholders are entitled to cast on a particular matter to be acted upon at the meeting shall constitute a quorum for the purposes of consideration and action on the matter. (b) Withdrawal of a Quorum. The shareholders present at a duly organized meeting can continue to do business until adjournment notwithstanding the withdrawal of enough shareholders to leave less than a quorum. (c) Adjournments Generally. Any regular or special meeting of the shareholders, including one at which directors are to be elected and one which cannot be organized because a quorum has not attended, may be adjourned for such period and to such place as the shareholders present and entitled to vote shall direct. (d) Electing Directors at Adjourned Meeting. Those shareholders entitled to vote who attend a meeting called for the election of directors that has been previously adjourned for lack of a quorum, although less than a quorum as fixed in this section, shall nevertheless constitute a quorum for the purpose of electing directors. (e) Other Action in Absence of Quorum. Those shareholders entitled to vote who attend a meeting of shareholders that has been previously adjourned for one or more periods aggregating at least fifteen days because of an absence of a quorum, although less than a quorum as fixed in this Section, shall nevertheless constitute a quorum for the purpose of acting upon any matter set forth in the notice of the meeting if the notice states that those shareholders who attend the adjourned meeting shall nevertheless constitute a quorum for the purpose of acting upon the matter. Section 3.05. Action by Shareholders. Except as otherwise provided in the Articles of Incorporation or these Bylaws, whenever any corporate action is to be taken by vote of the shareholders of the Company, it shall be authorized by a majority of the votes cast at a duly organized meeting of shareholders by the holders of shares entitled to vote thereon. Section 3.06. Organization. At every meeting of the shareholders, the Chairman of the Board, if there be one, or in the case of vacancy in office or absence of the Chairman of the Board, one of the following officers present in the order stated: the Vice Chairman of the Board, if there be one, the President, the Vice Presidents in their order of rank and seniority, or a person chosen by vote of the shareholders present, shall act as chairman of the meeting. The Secretary, or, in the absence of the Secretary, an Assistant Secretary, or in the absence of both the Secretary and Assistant Secretaries, a person appointed by the Chairman, shall act as secretary of the meeting. Section 3.07. Voting Rights of Shareholders. Unless otherwise provided in the Articles of Incorporation, every shareholder of the Company shall be entitled to one vote for every share standing in the name of the shareholder in the books of the Company. Section 3.08. Voting and Other Action by Proxy. (a) General Rule. (1) Every shareholder entitled to vote at a meeting of shareholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person to act for the shareholder by proxy. (2) The presence of, or vote or other action at a meeting of shareholders, or the expression of consent or dissent to corporate action in writing, by a proxy of a shareholder shall constitute the presence of, or vote or action by, or written consent or dissent of, the shareholder. (3) Where two or more proxies of a shareholder are present, the Company shall, unless otherwise expressly provided in the proxy, accept as the vote of all shares represented thereby the vote cast by a majority of them and, if a majority of the proxies cannot agree whether the shares represented shall be voted or upon the manner of voting the shares, the voting of the shares shall be divided equally among those persons. (b) Minimum Requirements. Every proxy shall be executed in writing by the shareholder or by the duly authorized attorney-in-fact of the shareholder and filed with the Secretary of the Company. A proxy, unless coupled with an interest, shall be revocable at will, notwithstanding any other agreement or any provision in the proxy to the contrary, but the revocation of a proxy shall not be effective unless written notice thereof has been given to the Secretary. An unrevoked proxy shall not be valid after three years from the date of its execution unless a longer time is expressly provided therein. A proxy shall not be revoked by the death or incapacity of the maker unless, before the vote is counted or the authority is exercised, written notice of the death or incapacity is given to the Secretary of the Company. (c) Expenses. The Company shall pay the reasonable expenses of solicitation of votes, proxies or consents of shareholders by or on behalf of the board of directors or its nominees for election to the board, including solicitation by professional proxy solicitors and otherwise. Section 3.09. Voting by Fiduciaries and Pledgees. Shares of the Company standing in the name of a trustee or other fiduciary and shares held by an assignee for the benefit of creditors or by a receiver may be voted by the trustee, fiduciary, assignee or receiver. A shareholder whose shares are pledged shall be entitled to vote the shares unless the shares have been transferred into the name of the pledgee, or a nominee of the pledgee, but nothing in this section shall affect the validity of a proxy given to a pledgee or nominee. Section 3.10. Voting by Joint Holders of Shares. (a) General Rule. Where shares of the Company are held jointly or as tenants in common by two or more persons, as fiduciaries or otherwise: (1) if only one or more of such persons is present in person or by proxy, all of the shares standing in the names of such persons shall be deemed to be represented for the purpose of determining a quorum and the Company shall accept as the vote of all the shares the vote cast by a joint owner or a majority of them; and (2) If the persons are equally divided upon whether the shares held by them shall be voted or upon the manner of voting the shares, the voting of the shares shall be divided equally among the persons without prejudice to the rights of the joint owners or the beneficial owners thereof among themselves. (b) Exception. If there has been filed with the Secretary of the Company a copy, certified by an attorney at law to be correct, of the relevant portions of the agreement under which the shares are held or the instrument by which the trust or estate was created or the order of court appointing them or of an order of court directing the voting of the shares, the persons specified as having such voting power in the document latest in date of operative effect so filed, and only those persons shall be entitled to vote the shares but only in accordance therewith. Section 3.11. Voting by Corporations. (a) Voting by Corporate Shareholders. Any corporation that is a shareholder of this Company may vote at meetings of shareholders of this Company by any of its officers or agents, or by proxy appointed by any officer or agent, unless some other person, by resolution of the board of directors of the other corporation or a provision of its Articles of Incorporation or Bylaws, a copy of which resolution or provision certified to be correct by one of its officers has been filed with the Secretary of this Company, is appointed its general or special proxy in which case that person shall be entitled to vote the shares. Section 3.12. Determination of Shareholders of Record. (a) Fixing Record Date. The board of directors may fix a time prior to the date of any meeting of shareholders as a record date for the determination of the shareholders entitled to notice of, or to vote at, the meeting, which time, except in the case of an adjourned meeting, shall be not more than 60 days prior to the date of the meeting of shareholders. Only shareholders of record on the date fixed shall be so entitled notwithstanding any transfer of shares on the books of the Company after any record date fixed as provided in this subsection. The board of directors may similarly fix a record date for the determination of shareholders of record for any other purpose. When a determination of shareholders of record has been made as provided in this section for purposes of a meeting, the determination shall apply to any adjournment thereof unless the board fixes a new record date for the adjourned meeting. (b) Determination When No Record Date Fixed. If a record date is not fixed: (1) The record date for determining shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the day next preceding the day on which notice is given or, if notice is waived, at the close of business on the day immediately preceding the day on which the meeting is held. (2) The record date for determining those shareholders entitled to express consent or dissent to corporate action in writing without a meeting, when prior action by the board of directors is not necessary, shall be the close of business on the day on which the first written consent or dissent is filed with the Secretary of the Company. (3) The record date for determining shareholders for any other purpose shall be at the close of business on the day on which the board of directors adopts the resolution relating thereto. Section 3.13. Voting Lists. (a) General Rule. The officer or agent having charge of the transfer books for shares of the Company shall make a complete list of the shareholders entitled to vote at any meeting of shareholders, arranged in alphabetical order, with the address of and number of shares held by each. The list shall be produced and kept open at the time and place of the meeting and be subject to the inspection of any shareholder during the meeting for the purposes thereof. (b) Effect of List. Failure to comply with the requirements of this Section shall not affect the validity of any action taken at a meeting prior to a demand at the meeting by any shareholder entitled to vote thereat to examine the list. The original share register or transfer book, or a duplicate thereof kept at the Registered Office of the Company, or at such other place as determined by the board of directors, shall be prima facie evidence as to who are the shareholders entitled to examine the list or share register or transfer book or to vote at any meeting of shareholders. Section 3.14. Judges of Election. (a) Appointment. In advance of or at any meeting of shareholders of the Company, the board of directors may appoint judges of election, who need not be shareholders, to act at the meeting or any adjournment thereof. If judges of election are not so appointed, the presiding officer of the meeting may, and on the request of any shareholder shall, appoint judges of election at the meeting. The number of judges shall be two. A person who is a candidate for an office to be filled at a meeting shall not act as a judge. (b) Vacancies. In case any person appointed as a judge fails to appear or refuses to act, the vacancy may be filled by appointment made by the board of directors in advance of the convening of the meeting or at the meeting by the presiding officer. (c) Duties. The judges of election shall determine the number of shares outstanding and voting power of each, the shares represented at the meeting, the existence of a quorum, and the authenticity, validity and effect of proxies, receive votes or ballots, hear and determine all challenges and questions in any way arising in connection with nominations by shareholders and the right to vote, count and tabulate all votes, determine the result and do such acts as may be proper to conduct the election or vote with fairness to all shareholders. The judges of election shall perform their duties impartially, in good faith, to the best of their ability and as expeditiously as is practical, the decision, act or certificate of a majority shall be effective in all respects as the decision, act or certificate of all. (d) Report. On request of the presiding officer of the meeting or any shareholder, the judges shall make a report in writing of any challenge, question or matter determined by them and execute a certificate of any fact found by them. Any such report or certificate shall be prima facie evidence of the facts stated therein. Section 3.15. Consent of Shareholders in Lieu of Meeting. Any action required or permitted to be taken at a meeting of the shareholders or of a class of shareholders may be taken without a meeting if, prior or subsequent to the action, a consent or consents thereto signed by all the shareholders who would be entitled to vote at a meeting for such purpose shall be filed with the minutes of the proceedings of the shareholders of the Company. Section 3.16. Minors as Securityholders. The company may treat a minor who holds shares or obligations of the Company as having capacity to receive and empower others to receive dividends, interest, principal and other payments or distributions, to vote or express consent or dissent and to make elections and exercise rights relating to such shares or obligations unless, in the case of payments or distributions on shares, the corporate officer responsible for maintaining the list of shareholders or the transfer agent of the Company or, in the case of payments or distributions on obligations, the Treasurer or paying officer or agent has received written notice that the holder is a minor. ARTICLE IV Board of Directors Section 4.01. Powers; Personal Liability. (a) General Rule. Unless otherwise provided by statute all powers vested by law in the Company shall be exercised by or under the authority of, and the business and affairs of the Company shall be managed under the direction of the board of directors. (b) Notation of Dissent. A director who is present at a meeting of the board of directors, or of a committee of the board of directors, at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless his or her dissent is entered in the minutes of the meeting or unless the director files a written dissent to the action with the secretary of the meeting before the adjournment thereof or transmits the dissent in writing to the Secretary of the Company immediately after the adjournment of the meeting. The right to dissent shall not apply to a director who voted in favor of the action. Nothing in this Section shall bar a director from asserting that the minutes of the meeting incorrectly omitted his or her dissent if, promptly upon receipt of a copy of such minutes, the director notifies the Secretary, in writing, of the asserted omission or inaccuracy. Section 4.02. Qualifications and Selection of Directors. (a) Qualifications. Each director of the Company shall be a natural person of full age who need not be a resident of the State of Nevada or a shareholder of the Company. (b) Power to Select Directors. Except as otherwise provided in these Bylaws, directors of the Company shall be elected by the shareholders. (c) Nomination of Candidates. Subject to the rights of any class or series of stock having a preference over the common stock as to dividends or upon dissolution to elect directors under specified circumstances, nominations for election of directors may be made by any shareholder entitled to vote for the election of directors only if notice of such shareholder's intent to nominate a director at the meeting is given by the shareholder and received by the Secretary of the Corporation in the manner and within the time specified herein. Notice must be received by the Secretary of the Corporation not less than 150 days prior to the date fixed for the Annual Meeting of shareholders pursuant to these Bylaws; provided, however, that if directors are to be elected by the shareholders at any other time, notice must be received by the Secretary of the Corporation not later than the seventh day following the day on which notice of the meeting was first mailed to shareholders. The notice may either be delivered or may be mailed to the Secretary of the Corporation by certified or registered mail, return receipt requested. The notice shall be in writing and shall contain: (i) the name and residence of such shareholder; (ii) a representation that the shareholder is a holder of voting stock of the Corporation and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (iii) such information regarding each nominee as would have been required to be included in a proxy statement filed pursuant to Regulation 14A of the rules and regulations established by the Securities and Exchange Commission under the Securities Exchange Act of 1934 (or pursuant to any successor act or regulation) had proxies been solicited with respect to such nominee by the management or Board of Directors of the Corporation; and (iv) the consent of each nominee to serve as director of the Corporation if so elected. The Chairman of the meeting may, if the facts warrant, determine and declare to the meeting that any nomination made at the meeting was not made in accordance with the foregoing procedures and, in such event, the nomination shall be disregarded. (d) Election of Directors. In elections for directors, the candidates receiving the highest number of votes from each class or group of classes, if any, entitled to elect directors separately up to the number of directors to be elected by the class or group of classes shall be elected. If at any meeting of shareholders, directors of more than one class are to be elected, each class of directors shall be elected in a separate election. Section 4.03. Number and Term of Office. (a) Number. The board of directors shall consist of such number of directors, not less than three nor more than nine, as may be determined from time to time by resolution of the board of directors. The Board of Directors shall be divided into three classes, each class of which shall be as nearly equal in number as possible, the term of office of at least one class shall expire in each year, and the members of a class shall not be elected for a shorter period than one year, or for a longer period than three years. One-third (or the nearest approximation thereto) of the number of the Board of Directors, determined as aforesaid, shall be elected at each Annual Meeting of the shareholders by a meeting plurality vote, for terms to expire at the third subsequent meeting of shareholders at which directors are elected. (b) Term of Office. Each director shall hold office until the expiration of the term for which he or she was selected and until a successor has been elected and qualified or until his or her earlier death, resignation or removal. A decrease in the number of directors shall not have the effect of shortening the term of any incumbent director. (c) Resignation. Any director may resign at any time upon written notice to the Company. The resignation shall be effective upon receipt thereof by the Company or at such subsequent time as shall be specified in the notice of resignation. Section 4.04. Vacancies. (a) General Rule. All vacancies in the board of directors, whether caused by resignation, death, or otherwise, may be filled by the remaining director or a majority of the remaining directors attending a stated special meeting called for that purpose even though less than a quorum be present; provided, however, in the event of a change in control of the Company, all vacancies in the Board of Directors shall be filled by the directors who where directors prior to the change in control (the "Continuing Directors"). A director thus elected to fill any vacancy shall hold office for the unexpired term of his predecessor and until his successor is elected and qualifies. For purposes of these Bylaws, a "change in control of the Company" shall mean a change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934 (the "Exchange Act"). Such a change in control shall be deemed to have occurred if (a) any "person" as such term is used in Sections 13(d) and 14(d) of the Exchange Act, other than the Company or any "person" who is a director or officer of the Company, is or becomes the "beneficial owner" as defined in Rule 13d-3 under the Exchange Act, directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities, or (b) during any twelve month period individuals who at the beginning of such period constitute the Board of Directors of the Company cease, for any reason, to constitute at least a majority, unless the election of each director who was not a director at the beginning of the period has been approved in advance by directors representing at least two-thirds of the directors then in office who were directors at the beginning of the period. (b) Action by Resigned Directors. When a director resigns from the board of directors effective at a future date, the directors then in office, including those who have so resigned, shall have power by applicable vote to fill the vacancies, the vote thereon to take effect when the resignations become effective. Section 4.05. Removal of Directors. (a) Removal by the Shareholders. The entire board of directors, or any class of the board of directors, or any individual director may be removed from office by a vote of two-thirds of the shareholders entitled to vote thereon without assigning any cause. In case the board of directors of a class thereof or any one or more directors are so removed, new directors may be elected at the same meeting. Section 4.06. Place of Meetings. Meetings of the board of directors may be held at the Registered Office of the Company, or at such place as the board of directors may from time to time appoint or as may be designated in the notice of the meeting. Section 4.07. Organization of Meetings. At every meeting of the board of directors, the Chairman, if there be one, or, in the case of a vacancy in the office or absence of the Chairman of the board, one of the following officers present in the order stated: the Vice Chairman, if there be one, the President, the Vice Presidents in their order of rank and seniority, or a person chosen by a majority of the directors present, shall act as chairman of the meeting. The Secretary, or, in the absence of the Secretary, an Assistant Secretary, or in the absence of the Secretary and the Assistant Secretaries, any person appointed by the chairman of the meeting, shall act as secretary of the meeting. Section 4.08. Regular Meetings. Regular meetings of the board of directors shall be held at such time and place as shall be designated from time to time by resolution of the board of directors. Section 4.09. Special Meetings. Special meetings of the board of directors shall be held whenever called by the Chairman or by a majority of directors in office. Section 4.10. Quorum of and Action by Directors. (a) General Rule. A majority of the directors in office shall be necessary to constitute a quorum for the transaction of business and the acts of a majority of the directors present and voting at a meeting where a quorum is present shall be the acts of the board of directors. (b) Action by Written Consent. Any action required or permitted to be taken at a meeting of the directors may be taken without a meeting if, prior or subsequent to the action, a consent or consents thereto signed by all of the directors in office is filed with the minutes of the proceedings of the board of directors. Section 4.11. Executive and Other Committees. (a) Establishment and Powers. The board of directors may, by resolution adopted by a majority of the directors in office, establish one or more committees to consist of one or more directors of the Company. Any committee, to the extent provided in the resolution of the board of directors, shall have and may exercise all of the powers and authority of the board of directors except that a committee shall not have any power or authority as to the following: (1) the submission to shareholders of any action requiring approval of shareholders under the laws of the State of Nevada; (2) the creation or filling of vacancies in the board of directors; (3) the adoption, amendment or repeal of these Bylaws; (4) the amendment or repeal of any resolution of the board of directors that by its terms is amendable or repealable only by the board of directors; and (5) action or matters committed by a resolution of the board of directors to another committee of the board of directors. (b) Alternate Committee Members. The board of directors may designate one or more directors as alternate members of any committee who may replace any absent or disqualified member at any meeting of the committee or for the purposes of any written action by the committee. In the absence or disqualification of a member and alternate member or members of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not constituting a quorum, may unanimously appoint another director to act at the meeting in the place of the absent or disqualified member. (c) Term. Each committee of the board of directors shall serve at the pleasure of the board of directors. (d) Committee Procedures. The term "board of directors" when used in any provision of these Bylaws relating to the organization or procedures of or the manner of taking action by the board of directors, shall be construed to include and refer to any executive or other committee of the board of directors. Section 4.12. Compensation. The board of directors shall have the authority to fix the compensation of directors for their services as directors and a director may be a salaried officer of the Company. ARTICLE V Officers Section 5.01. Officers Generally. (a) Number, Qualifications and Designation. The officers of the Company shall be the, President one or more Vice Presidents, Secretary, Treasurer and such other officers as may be elected in accordance with the provisions of Section 5.03. Officers may but need not be directors or shareholders of the Company. The President, Treasurer, Secretary and all other officers of the Company shall be natural persons of full age. The board of directors may elect from among its members a Chairman and Vice Chairman who shall be officers of the Company. Any number of offices may be held by the same person. (b) Bonding. The Company may secure the fidelity of any or all of its officers by bond or otherwise. (c) Standard of Care. Except as otherwise provided in the Articles of Incorporation, an officer shall perform his or her duties as an officer in good faith, in a manner he or she reasonably believes to be in the best interests of the Company and with such care, including reasonable inquiry, skill and diligence, as a person of ordinary prudence would use under similar circumstances. A person who so performs his or her duties shall not be liable by reason of having been an officer of the Company. Section 5.02. Election, Term of Office and Resignations. (a) Election and Term of Office. The officers of the Company, except those elected by delegated authority pursuant to Section 5.03, shall be elected annually by the board of directors and each such officer shall hold office for a term of one year and until a successor has been selected and qualified or until his or her earlier death, resignation or removal. The board of directors, as soon as may be done after each annual meeting of stockholders and election, shall choose a President, Secretary and Treasurer and from time to time one or more Vice Presidents, Assistant Secretaries and Assistant Treasurers, and may appoint such other officers, agents and employees as it may deem proper. Any two or more offices may be held by the same person. (b) Resignations. Any officer may resign at any time upon written notice to the Company. The resignation shall be effective upon its receipt by the Company or at such subsequent time as may be specified in the notice of resignation. Section 5.03. Other Officers, Committees and Agents. The board of directors may from time to time elect such other officers and appoint such committees, employees or other agents as the business of the Company may require, including a Chief Financial Officer, an Executive Vice President, a Chief Operating Officer and one or more Assistant Secretaries, each of whom shall hold office for such period, have such authority and perform such duties as are provided in these Bylaws, or as the board of directors may from time to time determine. The board of directors may delegate to any officer or committee the power to elect subordinate officers and to retain or appoint employees or other agents, or committees thereof, and to prescribe the authority and duties of such subordinate officers, committees, employees or other agents. Section 5.04. Removal of Officers and Agents. Any officer or agent of the Company may be removed by the board of directors with or without cause. The removal shall be without prejudice to the contract rights, if any, of any person so removed. Election or appointment of an officer or agent shall not of itself create contract rights. Section 5.05. Vacancies. A vacancy in any office because of death, resignation, removal, disqualification, or any other cause may be filled by the board of directors or by the officer or committee to which the power to fill such office has been delegated pursuant to Section 5.03, as the case may be, and if the office is one for which these Bylaws prescribe a term, shall be filled for the unexpired portion of the term. Section 5.06. Authority. All officers of the Company, as between themselves and the Company, shall have such authority and perform such duties in the management of the Company as may be provided by or pursuant to resolutions or orders of the board of directors or, in the absence of controlling provisions in the resolutions or orders of the board of directors, as may be determined by or pursuant to these Bylaws. Section 5.07. Chairman and Vice Chairman of the Board. The Chairman, or in the absence of the Chairman, the Vice Chairman, shall preside at all meetings of the shareholders and of the board of directors, and shall perform such other duties as may from time to time be requested by the board of directors. Section 5.08. President. The President shall be the chief executive officer of the Company and shall have general supervision over its business and subject however, to the control of the board of directors. The President shall sign, execute, and acknowledge, in the name of the Company, deeds, mortgages, bonds, contracts or other instruments authorized by the board of directors, except in cases where the signing and execution thereof shall be expressly delegated by the board of directors, these Bylaws or law to some other officer or agent of the Company and in general shall perform all duties incident to the office of President and such other duties as from time to time may be assigned by the board of directors. Section 5.09. Vice Presidents. The Vice Presidents shall perform the duties of the President in the absence of the President and such other duties as may from time to time be assigned to them by the board of directors or the President. The Vice Presidents may sign, execute, and acknowledge, in the name of the Company, deeds, mortgages, bonds, contracts or other instruments authorized by the board of directors, except in cases where the signing and execution thereof shall be expressly delegated by the board of directors, these Bylaws or law to some other officer or agent of the Company. Section 5.10. Secretary. The Secretary or an Assistant Secretary shall attend all meetings of the shareholders and board of directors and record the votes of shareholders and directors, the minutes of the meetings of shareholders, board of directors and of committees of the board of directors in a book or books to be kept for that purpose; ensure notices are given and records and reports properly kept and filed by the Company as required by law; serve as custodian of the seal of the Company and ensure it is affixed to all documents to be executed on behalf of the Company under seal; and, in general, perform all duties incident to the office of Secretary and such other duties as may from time to time be assigned by the board of directors or the President . Section 5.11. Treasurer. The Treasurer shall have or provide for the custody of the funds or other property of the Company; collect and receive or provide for the collection and receipt of moneys earned by or in any manner due to or received by the Company; deposit all funds in his or her custody as Treasurer in such banks or other places of deposit as the board of directors may from time to time designate; whenever so required by the board of directors, render an account showing all transactions as Treasurer, and the financial condition of the Company; and, in general, discharge such other duties as may from time to time be assigned by the board of directors or the President. The Treasurer may sign, execute and acknowledge in the name of the Company deeds, mortgages, bonds, contracts or other instruments authorized by the board of directors, except in cases where the signing and execution thereof shall be expressly delegated by the board of directors, these Bylaws or law to some other officer or agent of the Company. Section 5.12. Salaries. The salaries of the officers elected by the board of directors shall be fixed from time to time by the board of directors or by such officer as may be designated by resolution of the board of directors. The salaries or other compensation of any other officers, employees and other agents shall be fixed from time to time by the officer or committee to which the power to elect such officers or to retain or appoint such employees or other agents has been delegated pursuant to Section 5.03. No officer shall be prevented from receiving a salary or other compensation by reason of the fact the officer is also a director of the Company. ARTICLE VI Certificates of Stock Transfer, Etc. Section 6.01 Share Certificates. (a) Form of Certificates. Certificates for shares of the Company shall be in the form as approved by the board of directors and state the Company is incorporated under the laws of the State of Nevada, the name of the person to whom issued and the number and class of shares and the designation of the series (if any) the certificate represents. If the Company is authorized to issue shares of more than one class or series, certificates for shares of the Company shall set forth upon the face or back of the certificate (or shall state on the face or back of the certificate that the Company will furnish to any shareholder upon request and without charge), a full or summary statement of the designations, voting rights, preferences, limitations and special rights of the shares of each class or series authorized to be issued so far as they have been fixed and determined and the authority of the board of directors to fix and determine the designations, voting rights, preferences, limitations and special rights of the classes and series of shares of the Company. (b) Share Register. The share register or transfer books and blank share certificates shall be kept by the Secretary or by any transfer agent or registrar designated by the board of directors for that purpose. Section 6.02. Issuance. The share certificates of the Company shall be numbered and registered in the share register or transfer books of the Company as they are issued. They shall be executed in such manner as the board of directors shall determine. Section 6.03. Transfer. Transfers of shares shall be made on the share register or transfer books of the Company upon surrender of the certificate therefor, endorsed by the person named in the certificate or by an attorney lawfully constituted in writing. No transfers shall be made inconsistent with the provisions of the Uniform Commercial Code, its amendments and supplements. Section 6.04. Record Holder of Shares. The Company shall be entitled to treat the person in whose name any share or shares of the Company stand on its books as the absolute owner thereof, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person. Section 6.05. Lost, Destroyed or Mutilated Certificates. The holder of any shares of the Company shall immediately notify the Company of any loss, destruction or mutilation of the certificate therefor, and the board of directors may, in its discretion, cause a new certificate or certificates to be issued to such holder, in case of mutilation of the certificate, upon the surrender of the mutilated certificate or in case of loss or destruction of the certificate, upon satisfactory proof of such loss or destruction, and if the board of directors shall so determine, the deposit of a bond in such form and in such sum, and with such surety or sureties, as it may direct. ARTICLE VII Miscellaneous Section 7.01. Corporate Seal. The Company shall have a corporate seal in the form of a circle containing the name of the Company, the year of its incorporation and such other details as may be approved by the board of directors. Section 7.02. Checks. All checks, notes, bills of exchange or other orders in writing shall be signed by such person or persons as the board of directors or any person authorized by resolution of the board of directors may from time to time designate. Section 7.03. Contracts. Except as otherwise provided in the case of transactions which require action by the shareholders, the board of directors may authorize any officer or agent to enter into any contract or to execute or deliver any instrument on behalf of the Company, and such authority may be general or confined to specific instances. Section 7.04. Interested Directors or Officers; Quorum. (a) General Rule. A contract or transaction between the Company and one or more of its directors or officers or between the Company and another corporation, partnership, joint venture, trust or other enterprise in which one or more of its directors or officers are directors or officers or have a financial or other interest shall not be void or voidable solely for that reason, or solely because the director or officer is present at or participates in the meeting of the board of directors that authorizes the contract or transaction, or solely because his, her or their votes are counted for that purpose, if: (1) the material facts as to the relationship or interest and as to the contract or transaction are disclosed or are known to the board of directors and it authorizes the contract or transaction by the affirmative vote of a majority of the disinterested directors even though the disinterested directors are less than a quorum; or (2) the material facts as to his or her relationship or interest and as to the contract or transactions are disclosed or are known to the shareholders entitled to vote thereon and the contract or transaction is specifically approved in good faith by vote of those shareholders; or (3) the contract or transaction is fair as to the Company as of the time it is authorized, approved or ratified by the board of directors or the shareholders. (b) Quorum. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the board of directors which authorizes a contract or transaction specified in subsection (a) above. Section 7.05. Deposits. All funds of the Company shall be deposited from time to time to the credit of the Company in such banks, trust companies or other depositaries as the board of directors may approve or designate, and all such funds shall be withdrawn only upon checks signed by such one or more officers or employees as the board of directors shall from time to time determine. Section 7.06. Corporate Records. The Company shall keep complete and accurate books and records of account, minutes of the proceedings of the incorporators, shareholders and directors and a share register giving the names and addresses of all shareholders and the number and class of shares held by each. The share register or a copy thereof shall be kept at the Registered Office of the Company, and its principal place of business wherever situated or at the office of its registrar or transfer agent. Any books, minutes or other records may be in written form or any other form capable of being converted into written form within a reasonable time. Section 7.07. Amendment of Bylaws. These Bylaws may be amended or repealed, or new Bylaws adopted, either (i) by vote of the shareholders at any duly organized annual or special meeting of shareholders, but subject to the provisions of the Articles of Incorporation, or (ii) by vote of a majority of the board of directors of the Company in office at any regular or special meeting of directors. Any change in these Bylaws shall take effect when adopted unless otherwise provided in the resolution effecting the change. EX-27 4 FDS --
5 THIS SCHEDULE SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED APRIL 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH STATEMENTS. 0000700841 RCM TECHNOLOGIES, INC. 1 U,S. Dollars 6-MOS OCT-31-1997 NOV-01-1996 APR-30-1997 1 34,974 0 19,096,804 196,000 0 19,476,635 2,119,582 1,229,678 34,748,793 16,487,751 0 0 0 240,834 17,678,690 34,748,793 48,530,700 48,530,700 37,185,185 45,367,104 0 0 262,667 2,900,929 1,202,609 1,698,320 0 0 0 1,698,320 .35 .34
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