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
<PAGE>
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
<PAGE>
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
April 30, 1997 and October 31, 1996
ASSETS
<TABLE>
<CAPTION>
1997 1996
------------ ---------
(Unaudited) (Audited)
Current assets
<S> <C> <C>
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
= ========== = ==========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
3
<PAGE>
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - CONTINUED
April 30, 1997 and October 31, 1996
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
1997 1996
---- ----
(Unaudited) (Audited)
Current liabilities
<S> <C> <C>
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
= ========== = ==========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
4
<PAGE>
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Six Months Ended April 30,
1997 1996
---- ----
(Unaudited) (Unaudited)
<S> <C> <C>
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
==== ====
</TABLE>
The accompanying notes are an integral part of these
financial statements.
5
<PAGE>
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended April 30,
1997 1996
---- ----
(Unaudited) (Unaudited)
<S> <C> <C>
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
==== ====
</TABLE>
The accompanying notes are an integral part of these
financial statements.
6
<PAGE>
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Six Months Ended April 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Retained
Additional Earnings
Common Stock Paid-in (Accumulated Treasury
Shares Amount Capital Deficit) Stock
<S> <C> <C> <C> <C> <C> <C> <C>
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 $
========= ========== =========== ============ =
</TABLE>
The accompanying notes are an integral part of these
financial statements.
7
<PAGE>
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended April 30,
1997 1996
---- ----
(Unaudited) (Unaudited)
Cash flows from operating activities:
<S> <C> <C>
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 )
--------- -------
</TABLE>
The accompanying notes are an integral part of these
financial statements.
8
<PAGE>
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
<TABLE>
<CAPTION>
Six Months Ended April 30,
1997 1996
---- ----
(Unaudited) (Unaudited)
Cash flows from investing activities:
<S> <C> <C>
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
= ========= = =======
</TABLE>
The accompanying notes are an integral part of these
financial statements.
9
<PAGE>
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
<PAGE>
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
3. Acquisition - (Continued)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
April 30, April 30,
1997 1996 1997 1996
---------------- ---------------- ---------------- ----------
<S> <C> <C> <C> <C>
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
</TABLE>
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.
<TABLE>
<CAPTION>
Transactions related to all stock options during the six months ended April
30, 1997 are as follows:
<S> <C>
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
</TABLE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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.
<TABLE>
<CAPTION>
Results of Operations - Six Months Ended April 30, 1997, Compared to Six Months Ended April 30, 1996
Six Months Ended April 30,
1997 1996
---- ----
<S> <C> <C>
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
</TABLE>
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
<PAGE>
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.
<TABLE>
<CAPTION>
Three Months Ended April 30, 1997 Compared to Three Months Ended April 30, 1996
Three Months Ended April 30,
1997 1996
<S> <C> <C>
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
</TABLE>
16
<PAGE>
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
<PAGE>
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:
<TABLE>
<CAPTION>
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:
<S> <C> <C> <C>
Norman S. Berson (Class A) (For 4,460,959; Withheld 17,855)
Barry S. Meyers (Class A) (For 4,461,499; Withheld 17,315)
</TABLE>
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
<PAGE>
PART II
OTHER INFORMATION - CONTINUED
Item 6. Exhibits and Reports on Form 8-K
<TABLE>
<CAPTION>
(a) Exhibits
<S> <C> <C> <C>
(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
</TABLE>
19
<PAGE>
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
<PAGE>
EXHIBIT 11
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
Six Months Ended April 30, 1997 and 1996
<TABLE>
<CAPTION>
Six Months Ended April 30,
1997 1996
---- ----
Fully diluted earnings
<S> <C> <C>
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
==== ====
</TABLE>
22
<PAGE>
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.
<PAGE>
"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
<PAGE>
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
<PAGE>
"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
<PAGE>
"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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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:
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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:
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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.
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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
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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
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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
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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
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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
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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
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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
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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
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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.
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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.
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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
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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
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$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
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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
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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
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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
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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
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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
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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
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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.
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(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.
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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.
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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
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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
<PAGE>
SCHEDULE 2.1.1
[Schedule of Fixed Assets]
36
<PAGE>
SCHEDULE 4.1
[Schedule of Liabilities assumed by Buyer]
37
<PAGE>
SCHEDULE 4.2.3
[Schedule of Sellers' Obligations to Third Parties]
38
<PAGE>
SCHEDULE 5.2.2
[Opinion of Seller's Counsel]
39
<PAGE>
SCHEDULE 5.3.3
[Opinion of Buyer's Counsel]
40
<PAGE>
SCHEDULE 6.6
Schedule of claims pending or threatened against
Sellers and any insurance applicable thereto]
41
<PAGE>
SCHEDULE 6.12
[Schedule of all Employee contracts]
42
<PAGE>
SCHEDULE 6.13
[Schedule of Employee Benefit Plans]
43
<PAGE>
SCHEDULE 6.14
[Schedule of Intellectual Property]
44
<PAGE>
SCHEDULE 6.15
[Schedule of underground storage tanks]
45
<PAGE>
SCHEDULE 6.17
[Schedule of all insurance policies]
46
<PAGE>
SCHEDULE 6.18
[Schedule of Sensitive Payments]
47
<PAGE>
SCHEDULE 6.20
[Schedule of trade marks]
48
<PAGE>
SCHEDULE 8.5
[Permanent Placements]
49
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
(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.
<PAGE>
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.
<PAGE>
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
<PAGE>
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.
<PAGE>
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
<PAGE>
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.
<PAGE>
(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.
<PAGE>
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.
<PAGE>
(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.
<PAGE>
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.
<PAGE>
(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.
<PAGE>
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
<PAGE>
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.
<PAGE>
(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.
<PAGE>
<PAGE>
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.
<PAGE>
(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.
<PAGE>
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.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
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.
</LEGEND>
<CIK> 0000700841
<NAME> RCM TECHNOLOGIES, INC.
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<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> APR-30-1997
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<CASH> 34,974
<SECURITIES> 0
<RECEIVABLES> 19,096,804
<ALLOWANCES> 196,000
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<CURRENT-ASSETS> 19,476,635
<PP&E> 2,119,582
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<TOTAL-ASSETS> 34,748,793
<CURRENT-LIABILITIES> 16,487,751
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0
0
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<OTHER-SE> 17,678,690
<TOTAL-LIABILITY-AND-EQUITY> 34,748,793
<SALES> 48,530,700
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<CGS> 37,185,185
<TOTAL-COSTS> 45,367,104
<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 262,667
<INCOME-PRETAX> 2,900,929
<INCOME-TAX> 1,202,609
<INCOME-CONTINUING> 1,698,320
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<NET-INCOME> 1,698,320
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