<PAGE>1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
JULY 31, 1996.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
___ TO ___.
Commission file number 0-23144
PERSONNEL MANAGEMENT, INC.
(Exact name of registrant as specified in its charter)
INDIANA 35-1671569
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1499 Windhorst Way, Suite 100
Greenwood, Indiana 46143
(Address of principal executive offices) (Zip Code)
(317) 888-4400
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1994 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 each of the issuer's
classes of common stock, as of the latest practicable date:
Class Outstanding at September 11, 1996
Common Stock, without par value 2,020,156 shares.<PAGE>
<PAGE>2
PERSONNEL MANAGEMENT, INC.
INDEX
PART I - FINANCIAL INFORMATION
Item 1 - Consolidated Financial Statements
(Unaudited)
Condensed Consolidated Balance Sheets
at July 31, 1996 and October 31, 1995 3
Condensed Consolidated Statements of
Income for the three months ended
July 31, 1996 and 1995 4
Condensed Consolidated Statements of
Income for the nine months ended
July 31, 1996 and 1995 5
Condensed Consolidated Statements of
Cash Flows for the nine months ended
July 31, 1996 and 1995 6
Notes to Condensed Consolidated
Financial Statements 7
Item 2 - Management's Discussion and Analysis
of Financial Condition and Results
of Operations 9
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K 12
SIGNATURE 13
EXHIBIT INDEX 14
<PAGE>
<PAGE>3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
PERSONNEL MANAGEMENT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
July 31, 1996 October 31, 1995
(unaudited) (audited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 293,520 $ 171,848
Accounts receivable, net 6,324,125 6,175,233
Current portion of notes
receivable, other 122,037 144,968
Income taxes receivable 25,474 42,622
Prepaid expenses 165,387 286,607
Other current assets 46,678 25,747
Deferred tax asset 241,500 241,500
Total Current Assets 7,218,721 7,088,525
Property and equipment, net 1,199,618 1,265,484
Notes receivable, shareholder 497,843 468,664
Notes receivable, other - 76,571
Goodwill, net 6,559,568 5,519,592
Other 108,042 166,885
Total Assets $15,583,792 $14,585,721
LIABILITIES AND SHAREHOLDERS'
EQUITY
CURRENT LIABILITIES
Cash overdraft $ 246,672 $ 121,031
Bank credit facility 3,143,000 -
Accounts payable 371,455 229,923
Accrued compensation and benefits 1,744,097 1,480,418
Accrued workers compensation claims 721,750 508,422
Income taxes payable - 60,828
Other current liabilities 92,055 32,254
Current portion of notes payable 122,944 116,436
Total Current Liabilities 6,441,973 2,549,312
Note payable and bank credit
facility 64,874 3,737,933
Deferred tax liability 76,200 76,200
SHAREHOLDERS' EQUITY
Common stock 7,846,105 7,683,156
Retained earnings 1,154,640 539,120
Total Shareholders' Equity 9,000,745 8,222,276
Total Liabilities and Shareholders'
Equity $15,583,792 $14,585,721
See accompanying notes.
/TABLE
<PAGE>
<PAGE>4
PERSONNEL MANAGEMENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JULY 31,
1996 1995
<S> <C> <C>
Revenues $17,144,732 $14,775,088
Expenses
Cost of services 13,669,668 11,767,743
General and
administrative 2,690,193 2,443,791
Selling 95,123 114,895
Amortization of
goodwill 89,425 68,928
Total expenses 16,544,409 14,395,357
Income from operations 600,323 379,731
Interest expense, net (60,799) (73,777)
Net income before
income taxes 539,524 305,954
Income taxes 287,100 146,966
Net income $ 252,424 $ 158,988
Net income per share $ 0.12 $ 0.08
See accompanying notes.
/TABLE
<PAGE>
<PAGE>5
<TABLE>
PERSONNEL MANAGEMENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
<CAPTION>
NINE MONTHS ENDED JULY 31,
1996 1995
<S> <C> <C>
Revenues $47,563,110 $45,452,443
Expenses
Cost of services 37,879,325 36,536,933
General and administrative 7,721,362 7,308,326
Selling 321,235 319,786
Amortization of goodwill 256,623 206,783
Total expenses 46,178,545 44,371,828
Income from operations 1,384,565 1,080,615
Interest expense, net (196,641) (231,718)
Income before income taxes 1,187,924 848,897
Income taxes 572,400 407,771
Net income $ 615,524 $ 441,126
Net income per share $ 0.30 $ 0.22
See accompanying notes.
/TABLE
<PAGE>
<PAGE>6
PERSONNEL MANAGEMENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED JULY 31,
1996 1995
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 615,524 $ 441,126
Adjustments to reconcile net income to
net cash provided by operating activities:
Amortization and depreciation 517,095 415,806
Deferred income taxes - (112,000)
Interest earned on shareholder loan (29,179) (15,759)
Changes in operating assets and
liabilities:
Accounts receivable (148,892) 801,103
Prepaid expenses and other assets 275,782 (310,502)
Accounts payable 141,522 (163,189)
Accrued liabilities and other payables 475,987 (127,410)
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,847,839 929,175
INVESTING ACTIVITIES
Purchases of businesses and additions to
goodwill (1,348,082) (468,212)
Purchases of property and equipment, net (143,124) (404,588)
NET CASH USED BY INVESTING ACTIVITIES (1,491,206) (872,800)
FINANCING ACTIVITIES
Proceeds from exercise of common stock
options 224,625 -
Loan to officer, net of repayment (61,676) -
Cash dividends - (71)
Tax benefit resulting from exercise of
stock options - 152,500
Payments on notes payable (28,297) (575,066)
Net borrowings (payments) on bank credit
facility (495,254) 135,000
NET CASH USED BY FINANCING ACTIVITIES (360,602) (287,637)
Decrease in cash (3,969) (231,262)
Cash at beginning of year 50,817 133,019
CASH AT END OF PERIOD $ 46,848 $ (98,243)
See accompanying notes.
/TABLE
<PAGE>
<PAGE>7
PERSONNEL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1996
(unaudited)
1. Basis of Presentation
The accompanying 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 financial statements and notes
thereto for the year ended October 31, 1995, included in the
Company's 1995 Annual Report to Shareholders, and the Company's
filings for the two previous quarters of fiscal year 1996. Certain
information and footnote disclosures that 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 that, 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 three months and nine months
ended July 31, 1996, are not necessarily indicative of the results
to be expected for the full year. The financial statements include
the consolidated financial position, operations and cash flows for
Personnel Management, Inc. and its wholly-owned subsidiaries,
hereafter referred as "the Company". The Company reported in its
1995 Annual Report to Shareholders restated results of operations
for each of its 1995 quarterly periods. The results for the three
and nine month periods ended July 31, 1995 in this report are
restated on the basis of the results that have been included in an
amendment on Form 10-QSB\A previously filed with the SEC.
2. Per Share Disclosures
Per share amounts are based on the weighted average number of common
shares outstanding during the respective periods (retroactively
adjusted to give effect to subsequent stock dividends). Stock
options and warrants are considered common stock equivalents and are
included in the computation of the number of outstanding shares
using the treasury stock method, unless anti-dilutive.
3. Shareholders' Equity
On November 1, 1995, options to purchase 29,069 shares with an
exercise price of $7.73 per share were exercised. Proceeds of
$224,625 were received by the Company.
On April 15, 1996, the Company extended a loan to an officer of the
Company in the amount of $123,352 for the purpose of paying income
taxes in connection with the officer's December 29, 1994 exercise of
non-qualified stock options to purchase 49,486 shares of common
stock of the Company. The loan bears interest at the prime rate
which was 8.5% as of the date of the loan, and is secured by 24,670
shares of common stock of the Company. The loan is reflected as a
deduction from common stock and interest is credited to income as it
accrues. On June 6, 1996, $61,676 of the loan was repaid by the
officer.
4. Acquisitions
The Company acquired the assets of a temporary services firm in
Atlanta, Georgia, with one office and annual revenues of
approximately $2,000,000 on November 13, 1995. The business was
acquired for approximately $600,000, plus 42% of future income
before taxes and other adjustments derived from the areas served by
the business through October 2000. The business operations acquired
in Georgia provide mostly temporary clerical services.<PAGE>
<PAGE>8
On February 5, 1996, the Company acquired the assets of a temporary
services firm in northeastern Florida with annual revenues of
approximately $4,700,000. The business was acquired for
approximately $250,000, plus 71% of future income before taxes and
other adjustments derived from one significant customer served by
the business through January 2001. The business in northeastern
Florida provides temporary clerical and warehousing services to its
customers.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" included in the Company's 1995 Annual Report to
Shareholders and the comparable discussion and analysis included in
the Company's quarterly reports on Form 10-Q for the first and
second quarters of the 1996 fiscal year.
SELECTED INCOME STATEMENT COMPARISONS
REVENUES. For the three months ended July 31, 1996, revenues
increased by $2,369,644 or 16.0% compared to the 1995 period, to
$17,144,732. The increase was a result of sales growth in the
Tampa, Florida area, and the acquisition of temporary staffing
companies in Atlanta, Georgia during November 1995, and
Jacksonville, Florida during February 1996. Revenues from the
Company's Indiana customer base for the third quarter, which
accounted for approximately 72% of consolidated revenues, remained
constant compared to the previous year period.
For the nine months ended July 31, 1996, revenues increased
$2,110,667 or 4.6% compared to the 1995 period, to $47,563,110.
This increase was due entirely to revenues from the Company's
southeastern U.S. operations, which accounted for approximately 27%
of consolidated revenues for the nine month period. As noted above,
the Company acquired two temporary staffing companies in the
southeastern U.S. in the current fiscal year and experienced a 17%
increase in revenues from its Tampa, Florida operations. Revenues
from the Company's Indiana customer base for the nine months
decreased 10.1% compared to the previous year period as a result of
reduced demand and competitive pressures. This decrease in revenue
from the Company's Indiana customer base is more thoroughly
discussed in the Company's previous 10-Q and 10-KSB filings.
COST OF SERVICES. Cost of services for the three months ended July
31, 1996 increased $1,901,925 or 16.2% compared to the 1995 period,
to $13,669,668. This increase was a result of increased volume of
services to clients. Cost of services as a percentage of revenues
for the quarter was 79.7% compared to 79.6% in the prior year
period.
Cost of services for the nine months ended July 31, 1996 increased
$1,342,392 or 3.7% compared to the 1995 period, to $37,879,325.
This increase was a result of increased volume of services to
clients. As a percentage of revenues, cost of services improved
from 80.4% in 1995 to 79.6% in 1996 due primarily to reduced
workers' compensation costs.
<PAGE>
<PAGE> 9
SELLING EXPENSES. Selling expenses for the three months ended July
31, 1996 decreased $19,772 or 17.2% compared to the previous year
period due primarily to a smaller sales force in the Company's
Indiana operations during the current fiscal year. Selling expenses
as a percentage of revenues decreased from 0.8% in the prior year
quarter to 0.6% in the current year quarter.
Selling expenses for the nine months ended July 31, 1996 increased
$1,449 or 0.5% compared to the previous year period. Selling
expenses for the nine months as a percentage of revenues were 0.7%
in both the current and prior year periods.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses for the three months ended July 31, 1996 increased $246,402
or 10.1% compared to the 1995 period, to $2,690,193. This increase
was due primarily to the G&A expenses associated with the temporary
staffing companies in Atlanta and Jacksonville purchased by the
Company in the current fiscal year. Excluding increased bad debt
expenses over the previous year period of $175,800, G&A expenses
related to the Indiana and Tampa operations decreased $161,800.
This decrease was a result of the Company's ongoing expense
reduction program. Credit policies and procedures have been
strengthened to address the credit problems experienced by the
Company in the current fiscal year. As a percentage of revenues,
G&A expenses for the quarter decreased from 16.5% in the 1995 fiscal
year to 15.7% in the current fiscal year.
G&A expenses for the nine months ended July 31, 1996 increased
$413,036 or 5.7% compared to the prior year period due entirely to
the expenses associated with the new businesses acquired by the
Company in the current fiscal year. G&A expenses for the Indiana
and Tampa operations decreased approximately $139,000 primarily as
a result of the Company's ongoing expense reduction program.
Partially offsetting this decrease in G&A expenses for the Indiana
and Tampa operations were higher professional fees and bad debt
expense of approximately $88,000 and $333,000, respectively,
compared to the prior year period. Additional professional fees
were incurred for nonrecurring services related to the previous
year-end financial disclosures. As a percentage of revenues, G&A
expenses for the nine months increased from 16.1% in the 1995 fiscal
year to 16.2% in the current fiscal year.
AMORTIZATION OF GOODWILL. Goodwill represents the unamortized cost
in excess of fair value of net assets acquired and is being
amortized on a straight-line basis over 20 years. Goodwill
amortization for the three and nine month periods ended July 31,
1996 increased 29.7% and 24.1%, respectively, compared to the 1995
periods. These increases were a result of the amortization of
goodwill related to the two businesses acquired in the current
fiscal year and the amortization of payments of additional purchase
price to the prior owners of acquired businesses under the earnout
provisions of the acquisition agreements.
INTEREST EXPENSE, NET. Interest expense, net for the three and nine
months ended July 31, 1996 compared to the prior year periods
decreased $12,978 or 17.6% and $35,077 or 15.1%, respectively, due
to increased interest income on outstanding notes receivable.
<PAGE>
<PAGE> 10
INCOME TAXES. Income tax expense for the three and nine months
ended July 31, 1996 increased 95.4% and 40.4%, respectively,
compared to the prior year period as a result of the increases in
net income before income taxes and an increase in the Company's
effective income tax rate. The effective income tax rate increased
from 44% to approximately 48% for the current fiscal year.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities for the nine months ended
July 31, 1996 was $1,847,839 which resulted primarily from net
income before depreciation and amortization, and an increase in
accounts payable and accrued liabilities outstanding.
Net cash used by investing activities during the nine months ended
July 31, 1996 was $1,491,206 due to the acquisitions of Temporaries
of Atlanta, Inc. in November 1995 and Progressive Personnel II, Inc.
in February 1996, and payments of additional purchase price to
owners of previously acquired businesses under the earnout
provisions of the acquisition agreements.
Net cash used by financing activities for the nine months ended July
31, 1996 was $360,602 due primarily to repayments on the outstanding
bank credit facility.
Management believes that cash provided by operations, augmented by
borrowings for working capital purposes under the bank credit
facility, will be adequate to satisfy the Company's operating cash
requirements during fiscal 1996. Due to the relatively short
maturity of the Company's bank credit facility in February 1997, the
Company is considering seeking a new credit facility during fiscal
1996 or prior to the maturity of the existing credit facility. The
Company is engaged in discussions with banks and financial
intermediaries looking toward such a financing transaction. There
is no assurance that such financing would be available to the
Company, if sought, or that such financing, even if available, would
carry terms that the shareholders of the Company would find
attractive. Since the existing bank credit facility will mature
within a twelve month period, the amount outstanding as of July 31,
1996 has been reclassed on the balance sheet from a noncurrent to a
current liability.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The exhibits listed in the Exhibit Index on page 14 (which Exhibit
Index is incorporated herein by reference) are filed as part of this
report.
(b) Reports on Form 8-K
There were no current reports on Form 8-K filed by the Company
during the three months ended July 31, 1996.<PAGE>
<PAGE>11
SIGNATURE
Pursuant to the requirements 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.
PERSONNEL MANAGEMENT, INC.
Dated: September 12, 1996 By: /s/ Robert R. Millard
Robert R. Millard, Vice
President of Finance and
Administration (Principal
Financial Officer and
Authorized Signatory)<PAGE>
<PAGE>12
EXHIBIT INDEX
Exhibit No. Description of Exhibit
10.1 Amended Schedule of Options
Granted Under 1994 Director
Stock Option Plan
10.2 Employment Agreement between
the Company and Gary F. Hentschel,
dated July 15, 1996
10.3 Change of Control Severance
Benefits Agreement between the
Company and Gary F. Hentschel,
dated July 15, 1996
10.4 Incentive Stock Option Agreement
between the Company and Gary F.
Hentschel, dated July 15, 1996
10.5 Incentive Stock Option Agreement
between the Company and Elizabeth
McFarland, dated June 10, 1996
11.1 Statement Re: Computation of
Earnings Per Share for the Three
Months Ended July 31, 1996
11.2 Statement Re: Computation of
Earnings Per Share for the Nine
Months Ended July 31, 1996
27 Financial Data Schedule
0669\EDGAR\10Q.731
C:\<PAGE>1
<TABLE>
AMENDED SCHEDULE OF OPTIONS GRANTED
UNDER 1994 DIRECTOR STOCK OPTION PLAN
<CAPTION>
Number of Date of Option Option
Grantee Options Granted* Grant Price* Period
<S> <C> <C> <C> <C>
Joseph C. Cook, Jr.** 550 1/31/95 $12.09 1/30/2000
1,100 4/30/95 16.73 4/29/2000
550 7/31/95 13.75 7/30/2000
1,100 10/31/95 9.08 10/30/2000
825 01/31/96 5.90 1/30/2001
550 04/30/96 8.75 04/29/2001
550 07/31/96 6.98 07/30/2001
David L. Swider 825 1/31/95 $9.95 1/30/2000
(for the quarter
ended 10/31/94)
1,100 1/31/95 12.09 1/30/2000
1,100 4/30/95 16.73 4/29/2000
550 7/31/95 13.75 7/30/2000
1,100 10/31/95 9.08 10/30/2000
1,100 01/31/96 5.90 01/30/2001
1,100 04/30/96 8.75 04/29/2001
825 07/31/96 6.98 07/30/2001
* All numbers retroactively adjusted for ten percent stock dividend paid on
April 24, 1995.
**In Exhibit 10.2 of the Company's Quarterly Report on Form 10-QSB for the
quarter ended April 30, 1995, the Company reported that Mr. Cook had been granted
550 options for the quarter ended October 31, 1994, which report was incorrect
and is hereby amended.<PAGE>
<PAGE>2
Richard L. VonDerHaar 825 1/31/95 $9.95 1/30/2000
(for the quarter
ended 10/31/94)
1,100 1/31/95 12.09 1/30/2000
1,100 4/30/95 16.73 4/29/2000
550 7/31/95 13.75 7/30/2000
1,100 10/31/95 9.08 10/30/2000
1,100 01/31/96 5.90 01/30/2001
550 04/30/96 8.75 04/29/2001
825 07/31/96 6.98 07/30/2001
Max K. DeJonge 550 10/31/95 $9.08 10/30/2000
550 01/31/96 5.90 01/30/2001
550 04/30/96 8.75 04/29/2001
550 07/31/96 6.98 07/30/2001
</TABLE>
0669\EDGAR\EXH10.1
EXHIBIT 10.2
<PAGE>1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made
and entered into the 15th day of July, 1996, by and
between PERSONNEL MANAGEMENT, INC., an Indiana
corporation (the "Corporation"), and GARY F. HENTSCHEL
(the "Executive").
WITNESSETH:
WHEREAS, the Executive is being employed as the
Chief Operating Officer of the Corporation and will be an
integral part of its management; and
WHEREAS, concurrently herewith the Corporation and
the Executive are executing in separate instruments a
Noncompetition and Confidentiality Agreement and a Change
of Control Severance Benefits Agreement;
NOW, THEREFORE, in consideration of the mutual
covenants and promises contained herein and other
valuable consideration, including services to be
performed by the Executive and compensation and benefits
to be paid and provided by the Corporation, the parties
hereby agree as follows:
1. Effective Date. This Agreement shall be
effective July 15, 1996 (the "Effective Date"). Prior to
the Effective Date either party shall have the option to
terminate and cancel without obligation this Agreement
and the Noncompetition and Confidentiality Agreement and
Change of Control Severance Benefits Agreement, both of
even date herewith.
2. Employment. The Corporation hereby agrees to
employ the Executive, and the Executive hereby agrees to
be employed by the Corporation, on a full-time basis upon
and subject to the terms and conditions set forth herein.
3. Term and Termination. The Executive's
employment hereunder shall be on an at-will basis,
terminable at any time with or without cause by either
party. In the event the Executive terminates the
Executive's employment with the Corporation, the
Executive agrees to give notice of such termination to
the Corporation as far in advance of such termination as
is reasonably possible under the circumstances (up to 60
days' advance notice).
<PAGE>
<PAGE>2
4. Compensation. For all services rendered by the
Executive in any capacity to or for the Corporation
during the Executive's employment by the Corporation,
including, without limitation, services as an executive
officer, director, employee or member of any committee of
the Corporation or of any subsidiary, division or
affiliate of the Corporation (including the Corporation,
all such subsidiaries, divisions and affiliates are
referred to individually as a "PMI Company" and
collectively as the "PMI Companies"), the Executive shall
be paid as compensation (including compensation paid by
any of the PMI Companies):
(a) a base salary, payable not less often
than monthly, and such increases or decreases in
such salary, if any, in an amount as shall be
determined from time to time by the Board of
Directors of the Corporation (the "Board") or any
authorized committee of the Board and communicated
to the Executive;
(b) such bonuses and other cash incentive
awards as shall be awarded from time to time by the
Board or any authorized committee of the Board; and
(c) such other compensation and/or benefits
as the Board or any authorized committee of the
Board may grant or make available to the Executive
from time to time.
If the Executive's employment with the Corporation is
terminated, the Executive's monthly (or other payroll
period) salary shall be prorated to reflect the
percentage of the payroll period for which the Executive
was employed by the Corporation.
5. Duties of Loyalty. The Executive shall perform
such duties and responsibilities as may from time to time
be assigned or delegated to him by the President of the
Corporation, the Board or any authorized committee of the
Board. The Executive shall not engage during the
Executive's employment with the Corporation in any
activity, employment or business venture, directly or
indirectly, whether or not for remuneration, that might
reasonably be expected to be detrimental to any of the
PMI Companies, conflict with the Executive's commitment
and loyalty to the PMI Companies, compete with any of the
PMI Companies, result in a conflict of interest with any
of the PMI Companies, or adversely affect the proper
discharge of the Executive's duties or responsibilities
to any of the PMI Companies.
<PAGE>
<PAGE>3
6. Severance Benefits.
(a) Upon termination of the Executive's
employment with the Corporation for any reason or
under any circumstance other than on account of the
death or "misconduct" (as defined in Section 6(d)
hereof) of the Executive, the Corporation shall pay
the Executive in cash an amount equal to one
month's base salary then in effect for the
Executive. Except for the additional severance
compensation and/or benefits, if any, granted by
the Corporation pursuant to Section 6(b) hereof,
the severance benefits provided for by this Section
6(a) shall constitute the entire obligation of the
Corporation for the payment of severance
compensation or benefits to the Executive under
this Agreement.
(b) Upon termination of the Executive's
employment with the Corporation for any reason or
under any circumstance other than on account of the
death or "misconduct" (as defined in Section 6(d)
hereof) of the Executive, the Board, or an
authorized committee of the Board, shall consider
and make a determination as to whether, under the
circumstances, severance compensation and/or
benefits in addition to the severance benefits
granted in Section 6(a) should be awarded to the
Executive. The Corporation shall be under no
obligation to award any such additional severance
compensation and/or benefits and the determination
of whether to award such additional severance
compensation and/or benefits shall be in the sole
discretion of the Board or such committee.
(c) Nothing in this Agreement shall be
construed as affecting the Executive's right to
severance compensation or benefits under any other
agreements between the Corporation and the
Executive.
(d) For purposes of this Agreement,
"misconduct" means:
(i) the failure of the Executive to
substantially perform any of the Executive's
significant duties or responsibilities in
connection with the Executive's employment
(other than any such failure resulting from
the Executive's incapacity due to physical or
mental illness); or
<PAGE>
<PAGE>4
(ii) any act that constitutes on the part
of the Executive common law fraud or
dishonesty regardless of whether such fraud or
dishonesty resulted in, or was intended to
result in, a benefit to the Executive at the
expense of the Corporation; or
(iii) the conviction of the Executive
of, or the plea by the Executive of nolo
contendere to, a felony or a crime involving
moral turpitude; or
(iv) any violation by the Executive in
any material respect of any of the
Corporation's policies or of any term or
provision of any employment or other agreement
between the Executive and the Corporation; or
(v) the Executive's unexcused total
abandonment or neglect of the Executive's
duties and responsibilities in connection with
the Executive's employment with the
Corporation (other than absences due to
illness, physical or mental incapacity,
vacations, or other excused absences) for a
continuous period of ten working days.
(e) The Corporation shall withhold from the
severance benefits granted in Section 6(a) (and any
discretionary severance compensation and/or
benefits otherwise paid to the Executive) all
federal, state, city, county or other taxes as
shall be required pursuant to any law or
governmental regulation or ruling.
7. Notices. Any notice, request, demand and other
communication to be given hereunder shall be in writing
and personally delivered or mailed in the continental
United States by registered or certified mail, postage
prepaid, at the address stated below or to such changed
address as the addressee may have given by a similar
notice:
To the Corporation: Personnel Management, Inc.
1499 Windhorst Way
Suite 100
Greenwood, Indiana 46143
To the Executive: Gary F. Hentschel
5760 Ravine Road
Indianapolis, Indiana 46220
<PAGE>
<PAGE>5
8. Succession. All of the terms and provisions of
this Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective heirs,
executors, administrators, legal representatives,
successors and assigns of the parties hereto, except that
the duties and responsibilities of the Executive
hereunder are of a personal nature and shall not be
assignable or delegable in whole or in part by the
Executive.
9. Governing Law. The validity, interpretation,
construction and performance of this Agreement shall be
governed by the laws of the State of Indiana.
10. Headings; Pronouns. The titles to sections in
this Agreement are intended solely for convenience and no
provision of this Agreement is to be construed by
reference to the title of any section. All pronouns in
this Agreement and any variations thereof shall be deemed
to refer to the masculine, feminine, neuter, singular or
plural as the identity of the person or persons may
require.
11. Amendment or Modification; Waiver. No
provision of this Agreement may be amended, modified or
waived unless such amendment, modification or waiver
shall be authorized by the Board or any authorized
committee of the Board and shall be agreed to in writing,
signed by the Executive and by an officer of the
Corporation thereunto duly authorized. Except as
otherwise specifically provided in this Agreement, no
waiver by either party hereto of any breach by the other
party hereto of any condition or provision of this
Agreement to be performed by such other party shall be
deemed a waiver of a subsequent breach of such condition
or provision or a waiver of a similar or dissimilar
provision or condition at the same or at any prior or
subsequent time.
12. Severability. In the event that any term,
provision or portion of this Agreement shall be
determined to be invalid or unenforceable for any reason,
such unenforceability or invalidity shall not affect the
enforceability or validity of the remaining terms,
provisions and portions of this Agreement.
13. Counterparts. This Agreement may be executed
in one or more counterparts, each of which shall be
deemed to be an original, but all of which together will
constitute the same instrument.
<PAGE>
<PAGE>6
IN WITNESS WHEREOF, the Corporation and the
Executive have executed this Agreement as of the date and
year first above written.
"CORPORATION"
ATTEST: PERSONNEL MANAGEMENT, INC.
/s/ Robert R. Millard By /s/ Don R. Taylor
Robert R. Millard Don R. Taylor
Secretary President
"EXECUTIVE"
/s/ Gary F. Hentschel
Gary F. Hentschel
0669\EDGAR\EMPL-AGR.GFH
EXHIBIT 10.3
<PAGE>1
CHANGE OF CONTROL
SEVERANCE BENEFITS AGREEMENT
THIS CHANGE OF CONTROL SEVERANCE BENEFITS AGREEMENT
(this "Agreement") is made and entered into as of the
15th day of July 1996, by and between PERSONNEL
MANAGEMENT, INC., an Indiana corporation (the
"Corporation"), and GARY F. HENTSCHEL (the "Executive").
WITNESSETH:
WHEREAS, the Executive and the Corporation have
entered into an Employment Agreement dated of even date
herewith; and
WHEREAS, the Executive and the Corporation have
agreed for their mutual benefit to provide certain
severance benefits to the Executive that will be payable
by the Corporation if the Executive's employment with the
Corporation is terminated under certain circumstances;
NOW, THEREFORE, in consideration of the foregoing,
the mutual covenants and promises contained herein and
other valuable consideration, including services to be
performed by the Executive, it is hereby agreed by and
between the parties as follows:
Section 1. Effect; Effective Date. This
Agreement shall be effective July 15, 1996. Anything in
this Agreement to the contrary notwithstanding, neither
this Agreement nor any provision hereof shall be
operative unless and until there has been a Change of
Control of the Corporation (as "Change of Control of the
Corporation" is defined in Section 7 of this Agreement).
Upon a Change of Control of the Corporation this
Agreement shall become operative immediately.
Section 2. Employment. This Agreement shall not
be construed as creating a contract of employment between
the Executive and the Corporation. The Executive is,
however, employed by the Corporation at the time this
Agreement is executed, and the Executive and the
Corporation have executed an Employment Agreement of even
date herewith with respect to such employment.
Section 3. Obligation to Provide Severance
Entitlement. If the Executive's employment with the
Corporation is terminated under any circumstances other
than a Disqualifying Termination (as defined in Section
8 of this Agreement) and if such termination of
employment occurs concurrently with or within three
months immediately preceding or twenty-four months<PAGE>
<PAGE>2
immediately following a Change of Control of the
Corporation, then the Corporation shall provide to the
Executive a severance benefit in the manner and amount as
provided in Section 4 of this Agreement (the "Severance
Entitlement").
Section 4. Manner and Amount of Severance
Entitlement. If the Corporation is obligated to provide
a Severance Entitlement to the Executive pursuant to
Section 3 of this Agreement, the manner in which the
Corporation shall provide such Severance Entitlement and
the amount thereof shall be as follows:
(a) The Corporation shall cancel all
indebtedness of the Executive to the Corporation
(if any) up to, but not in excess of, the amount of
the Severance Entitlement (as provided in Section
4(c) below).
(b) If the amount of indebtedness of the
Executive to the Corporation cancelled pursuant to
Section 4(a) above is less than the amount of the
Severance Entitlement to be provided to the
Executive by the Corporation, the Corporation shall
pay to the Executive, by check, an amount of money
equal to the difference between the amount of the
Executive's indebtedness that is cancelled and the
amount of the Severance Entitlement to be provided
to the Executive.
(c) The Severance Entitlement to be provided
by the Corporation to the Executive shall consist
of the cancellation of indebtedness and/or the
payment of money as provided in Sections 4(a) and
4(b) above. The aggregate dollar amount of the
Severance Entitlement, whether in debt cancellation
or money or both, shall be equal to two times the
greater of (i) the current (as of the time
Executive becomes entitled to the Severance
Entitlement) amount of base salary being paid by
the Corporation to the Executive on an annualized
basis, or (ii) the highest amount of base salary
paid by the Corporation to the Executive for any
full calendar year during which the Executive was
employed by the Corporation; provided, however,
that if such Severance Entitlement, either alone or
together with other payments which the Executive
has the right to receive from any PMI Company,
would constitute an "excess parachute payment"
within the meaning of Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code"), then
the Corporation shall pay an additional amount of
money to the Executive that will equal (based upon<PAGE>
<PAGE>3
the Executive's good faith representations of the
Executive's income tax position for the year(s) of
payment(s)) the sum of (i) all excise tax imposed
upon the Executive by Section 4999 of the Code and
(ii) all additional state and federal income taxes
attributable to the additional payments to the
Executive pursuant to this proviso clause
(including all state and federal taxes on the
additional income tax payments). The determination
of the amounts of such payments pursuant to the
immediately preceding proviso shall be made by the
Corporation in good faith, and such determination
shall be conclusive and binding.
Section 5. Provision of Severance Entitlement.
With respect to a Severance Entitlement to be provided to
the Executive hereunder,the Corporation shall provide to
the Executive satisfactory written evidence of the amount
of any debt cancellation, and/or shall pay to the
Executive any money, to which the Executive is entitled
as a Severance Entitlement not later than 30 days after
the later of (i) the occurrence of the Change of Control
of the Corporation or (ii) the termination of the
Executive's employment.
Section 6. Withholding. The Corporation may
withhold or otherwise deduct from any Severance
Entitlement to be provided hereunder all federal, state,
city, county or other taxes as shall be required pursuant
to any law or governmental regulation or ruling.
Section 7. Change of Control of the Corporation.
For purposes of this Agreement, a "Change of Control of
the Corporation" shall be deemed to have occurred if,
after the date hereof either:
(a) there shall have been consummated (i) any
reorganization, consolidation or merger of the
Corporation in which the Corporation is not the
continuing or surviving corporation or pursuant to
which shares of the Corporation's common stock
shall have been converted into cash, securities or
other property, or (ii) any sale, lease, exchange
or other transfer, directly or indirectly, (in one
transaction or a series of related transactions) of
all, or substantially all, of the assets of the
Corporation and its consolidated subsidiaries
unless, following such reorganization, merger,
consolidation, or transfer of assets,
<PAGE>
<PAGE>4
(A) more than 60 percent of the
then outstanding shares of common stock
of the corporation resulting from such
reorganization, merger or consolidation
(or of the corporation receiving the
transferred assets) (the "Continuing
Corporation") and of the then outstanding
voting securities of the Continuing
Corporation entitled to vote generally in
the election of Directors are then
beneficially owned, directly or
indirectly, by all or substantially all
of the individuals and entities who were
the beneficial owners, respectively, of
the outstanding shares of common stock of
the Corporation and of the outstanding
voting securities of the Corporation
entitled to vote generally in the
election of Directors immediately prior
to such reorganization, merger,
consolidation or transfer of assets in
substantially the same proportions as
their ownership, immediately prior to
such reorganization, merger,
consolidation or transfer of assets, of
the outstanding shares of common stock of
the Corporation and of the outstanding
voting securities of the Corporation,
(B) no "person" (as that term is
used in Sections 13(d) and 14(d)(2) of
the Securities Exchange Act of 1934, as
amended) (excluding (aa) the Corporation,
(bb) any employee benefit plan (or
related trust) sponsored or maintained by
the Corporation or any entity controlled,
directly or indirectly, by the
Corporation or the Continuing Corporation
and (cc) any "person" beneficially
owning, immediately prior to such
reorganization, merger, consolidation or
transfer of assets, directly or
indirectly, 20 percent or more of the
outstanding shares of common stock of the
Corporation or the outstanding voting
securities of the Corporation)
beneficially owns, directly or
indirectly, 20 percent or more of,
respectively, the then outstanding shares
of common stock of the Continuing
Corporation or of the combined voting
power of the then outstanding voting<PAGE>
<PAGE>5
securities of the Continuing Corporation
entitled to vote generally in the
election of Directors, and
(C) at least a majority of the
members of the Board of Directors of the
Continuing Corporation were members of
the Board of Directors of the Corporation
at the time of the execution of the
initial agreement providing for such
reorganization, merger, consolidation or
transfer of assets;
(b) any "person" or "group" of persons
(as those terms are used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and
Regulations 13D-G and 14D thereunder) shall
have become the "beneficial owner" (within the
meaning of Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the
Corporation representing 20 percent or more of
the combined voting power of the Corporation's
then outstanding voting securities entitled to
vote generally in the election of Directors
(excluding (i) the Corporation, (ii) any
employee benefit plan (or related trust)
sponsored or maintained by the Corporation or
any entity controlled, directly or indirectly,
by the Corporation, (iii) any "person" who, on
the date of this Agreement, is the "beneficial
owner", directly or indirectly, of 20 percent
or more of the Corporation's outstanding
common stock, and (iv) any "group" of persons
that includes Don R. Taylor); or
(c) during any period of two consecutive
years, individuals who constitute the Board of
Directors of the Corporation at the beginning
of such period cease for any reason to
constitute at least a majority thereof,
excluding individuals whose election, or
nomination for election by the Corporation's
shareholders was approved by a vote of at
least two-thirds of the Directors then still
in office who were Directors at the beginning
of such period, unless, for this purpose, any
such new Director's initial assumption of
office occurs as a result of either an actual
or threatened election contest (as such terms
are used in Rule 14a-11 or Regulation 14A
promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies<PAGE>
<PAGE>6
or consents by or on behalf of a person other
than the Board of Directors of the
Corporation.
Section 8. Disqualifying Termination. For
purposes of this Agreement, a "Disqualifying Termination"
of the Executive's employment with the Corporation shall
mean a termination of the Executive's employment under
any of the following circumstances:
(a) termination of the Executive's employment
by the Corporation for Cause (as defined in Section
9); or
(b) termination of the Executive's employment
by the Corporation for Disability (as defined in
Section 10); or
(c) termination of the Executive's employment
by the Executive without Good Reason (as defined in
Section 11) to do so; or
(d) termination of the Executive's employment
as a result of the death of the Executive.
(As provided in Section 3, the Executive shall not be
entitled to a Severance Entitlement under this Agreement
if the Executive's employment with the Corporation was
terminated under circumstances constituting a
Disqualifying Termination.)
Section 9. Termination by the Corporation for
Cause. For purposes of this Agreement, the Corporation
shall be deemed to have terminated the Executive's
employment with the Corporation for "Cause" only if the
Corporation terminated the Executive's employment with
the Corporation for any of the following reasons:
(a) the continued failure of the Executive to
substantially perform any of the Executive's
significant duties or responsibilities in
connection with the Executive's employment (other
than any such failure resulting from the
Executive's incapacity due to physical or mental
illness) if such failure is not corrected or cured
within 30 days after demand for substantial
performance is made in writing upon the Executive
by the Corporation specifically identifying the
manner in which the Corporation believes the
Executive has failed to substantially perform one
or more of the Executive's significant duties or
responsibilities (repetition of the same failure as
previously described in any such written demand<PAGE>
<PAGE>7
after the 30-day cure period following such written
demand shall be deemed to be "continued failure" to
substantially perform by the Executive); or
(b) any act that constitutes on the part of
the Executive common law fraud or dishonesty
regardless of whether such fraud or dishonesty
resulted in, or was intended to result in, a
benefit to the Executive at the expense of the
Corporation; or
(c) the conviction of the Executive of, or
the plea by the Executive of nolo contendere to, a
felony or a crime involving moral turpitude; or
(d) any continuing violation by the Executive
in any material respect of any of the Corporation's
policies or of any term or provision of any
employment or other agreement between the Executive
and the Corporation which, in any such case, is not
corrected or abated by the Executive within 30 days
after written notice of such violation is given by
the Corporation to the Executive (repetition of the
same violation as previously described in any such
written notice after the 30 day correction period
following such written notice shall be deemed to be
a "continuing violation" by the Executive); or
(e) the Executive's unexcused total
abandonment or neglect of the Executive's duties
and responsibilities in connection with the
Executive's employment with the Corporation (other
than absences due to illness, physical or mental
incapacity, vacations, or other excused absences)
for a continuous period of ten working days.
Section 10. Termination by the Corporation for
Disability. For purposes of this Agreement, the
Executive shall be considered to have suffered a
"Disability" and the Corporation shall be deemed to have
terminated the Executive's employment with the
Corporation for Disability if such termination is made
after (and is identified by the Corporation as being on
account of the occurrence of) either of the following:
(a) the actual receipt by the Executive of
income continuation benefits or similar benefits
pursuant to a disability insurance policy as a
result of a determination under such policy that
the Executive is disabled, or
<PAGE>
<PAGE 8>
(b) the Executive's inability by reason of
physical and/or mental incapacity to substantially
perform the essential functions of the Executive's
duties and responsibilities to the Corporation on a
full-time basis for a period of 26 consecutive
weeks.
Section 11. Termination by the Executive for Good
Reason. For purposes of this Agreement, the Executive
shall be deemed to have terminated the Executive's
employment with the Corporation for "Good Reason" only if
the Executive terminated his employment with the
Corporation within 90 days after the Executive's base
salary was either (a) reduced to an amount that was less
than 95 percent of the Executive's base salary as of the
date of this Agreement, or (b) reduced by more than 5
percent for any calendar year from the amount paid in the
prior calendar year.
Section 12. No Mitigation. The Executive is not
required to mitigate the amount of the Severance
Entitlement to be provided by the Corporation pursuant to
this Agreement by seeking other employment or otherwise,
nor shall the amount of the Severance Entitlement payable
pursuant to this Agreement be reduced by any compensation
earned by the Executive as the result of employment by
another employer, or which might have been earned by the
Executive had the Executive sought other employment,
after the date of termination of the Executive's
employment with the Corporation.
Section 13. Notices. Any notice, request, demand
and other communication to be given hereunder shall be in
writing and personally delivered or mailed in the
continental United States by registered or certified
mail, postage prepaid, at the address stated below or to
such changed address as the addressee may have given by
a similar notice:
To the Company: Personnel Management, Inc.
1499 Windhorst Way
Suite 100
Greenwood, Indiana 46143
To the Executive: Gary F. Hentschel
5760 Ravine Road
Indianapolis, Indiana 46220
Section 14. Legal Expenses. In the event that
either of the parties institutes any legal action to
enforce its rights under, or to recover damages for
breach of, this Agreement, the prevailing party shall be
entitled to recover from the other party any actual<PAGE>
<PAGE 9>
expenses for attorney's fees, costs, expenses and
disbursements incurred by the prevailing party.
Section 15. Successors to the Executive. This
Agreement shall be binding upon and shall inure to the
benefit of the Executive, the Executive's heirs,
beneficiaries, devisees, successors and legal
representatives. No right or interest to or in any
payments hereunder shall be assignable by the Executive
except assignments to the Corporation in accordance with
applicable law; provided, however, that this provision
shall not preclude the Executive from designating one or
more beneficiaries to receive any amount that may be
payable after the Executive's death and shall not
preclude the legal representative of the Executive's
estate from assigning any right hereunder to the person
or persons entitled thereto under the Executive's will
or, in the case of intestacy, to the person or persons
entitled thereto under the laws of intestacy applicable
to the Executive's estate. The term "beneficiaries" as
used in this Agreement shall mean a beneficiary or
beneficiaries so designated to receive any such amount,
or, if no beneficiary has been so designated, the legal
representative of the Executive's estate. In the event
of the Executive's death, reference in this Agreement to
the Executive shall be deemed, where appropriate, to
refer to the Executive's legal representative or, where
appropriate, to the Executive's beneficiary or
beneficiaries.
Section 16. Successors to the Corporation. This
Agreement shall be binding upon and inure to the benefit
of the Corporation and any successor of the Corporation,
including, without limitation, any corporation or
corporations acquiring directly or indirectly all or
substantially all of the assets of the Corporation
whether by merger, consolidation, sale or otherwise (and
such successor shall thereafter be deemed the
"Corporation" for the purposes of this Agreement).
Section 17. Headings; Pronouns. The titles to
sections in this Agreement are intended solely for
convenience and no provision of this Agreement is to be
construed by reference to the title of any section. All
pronouns in this Agreement and any variations thereof
shall be deemed to refer to the masculine, feminine,
neuter, singular or plural as the identity of the person
or persons may require.
Section 18. Governing Law. The validity,
interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of
Indiana.<PAGE>
<PAGE>10
Section 19. Amendment or Modification; Waiver. No
provision of this Agreement may be amended, modified or
waived unless such amendment, modification or waiver
shall be authorized by the Board of Directors of the
Corporation or any authorized committee of the Board of
Directors of the Corporation and shall be agreed to in
writing, signed by the Executive and by an officer of the
Corporation thereunto duly authorized. Except as
otherwise specifically provided in this Agreement, no
waiver by either party hereto of any breach by the other
party hereto of any condition or provision of this
Agreement to be performed by such other party shall be
deemed a waiver of a subsequent breach of such condition
or provision or a waiver of a similar or dissimilar
provision or condition at the same or at any prior or
subsequent time.
Section 20. Severability. The invalidity or
unenforceability of any provision of this Agreement shall
not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full
force and effect to the fullest extent permitted by law.
Section 21. Counterparts. This Agreement may be
executed in one or more counterparts, each of which shall
be deemed to be an original, but all of which together
will constitute the same instrument.
Section 22. PMI Companies. Although the
Corporation is the only one of the PMI Companies formally
executing this Agreement, the Executive understands,
acknowledges and agrees that this Agreement is made for
the benefit of all of the PMI Companies, as applicable,
each of whom shall be entitled to enforce this Agreement
as their respective interests may appear.
<PAGE>
<PAGE>11
IN WITNESS WHEREOF, the Corporation and the
Executive have executed this Agreement as of the date and
year first above written.
"CORPORATION"
ATTEST: PERSONNEL MANAGEMENT, INC.
/s/ Robert R. Millard By /s/ Don R. Taylor
Robert R. Millard Don R. Taylor
Secretary President
"EXECUTIVE"
/s/ Gary F. Hentschel
Gary F. Hentschel
0669\EDGAR\SEV-BEN.HEN
EXHIBIT 10.4
<PAGE>1
July 15, 1996
Mr. Gary F. Hentschel
5760 Ravine Road
Indianapolis, Indiana 46220
Re: Incentive Stock Option Agreement
Dear Mr. Hentschel:
Personnel Management, Inc. (the "Corporation"),
pursuant to the Personnel Management, Inc. 1994 Stock
Option Plan (the "Plan"), hereby grants to you as of July
15, 1996 (the "Effective Date"), an incentive stock
option (the "Option"), which Option shall have the
following terms and conditions, in addition to those
provided in the Plan:
1. Number of Shares: The Option is for 50,000
shares of the Corporation's common stock, no
par value (the "Common Shares"), subject to
adjustment as provided in the Plan.
2. Exercise Price: The per share exercise price
shall be $8.61 (the average of the closing bid
and asked prices for the five trading days
immediately preceding the Effective Date of
the Option), subject to adjustment as provided
in the Plan.
3. Exercisability. The Option shall become
immediately exercisable with respect to 10,000
shares covered by the Option, and the
remaining 40,000 shares covered by the Option
shall vest and first become exercisable,
subject to your continued employment, in four
installments of 10,000 shares each on each of
the first four anniversaries of the Effective
Date. Notwithstanding the preceding sentence,
the Option shall become immediately
exercisable with respect to all shares covered
by the Option upon (a) your death, (b) your
"Permanent and Total Disability", as defined
in the Plan, (c) your becoming entitled to the
Severance Entitlement pursuant to and as
defined in Section 3 of the Change of Control
Severance Benefits Agreement dated July 15,
1996, between you and the Corporation, (d) the
dissolution or liquidation of the Corporation,
(e) a reorganization, merger or consolidation
of the Corporation as a result of which the<PAGE>
<PAGE>2
outstanding securities of the class then
subject to the Option hereunder are changed
into or exchanged for cash or property or
securities not of the Corporation's issue, or
(f) a sale of substantially all the property
of the Corporation to another corporation or
person.
The Option will expire with respect to all unpurchased
shares at 5:00 p.m., E.S.T. on July 14, 2006.
The Option, which is intended to qualify as an
"incentive stock option" within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended,
shall be in all respects limited and conditioned as
provided in the Plan. You should consult with your
personal tax advisor regarding the tax consequences of
exercising "incentive stock options" in connection with
any future decision by you to exercise the Option in
whole or in part. Under Sections 6 and 8 of the Plan,
the Option generally cannot be voluntarily transferred by
you and the Option generally cannot be exercised by
anyone other than you during your lifetime. A copy of
the Plan is enclosed with this letter. Exercise of the
Option shall be subject to your making of the
representations set forth below and any representations
to such other matters as the Corporation's Stock Option
Committee, in its discretion, may determine to be
necessary or advisable to evidence compliance with
requirements under the Securities Act of 1933, as
amended, or state securities laws for registering or
exempting from registration any offer or sale of the
Corporation's securities pursuant to the Plan.
Neither this letter nor the Plan shall be construed
as giving you any right to be retained in the employ of
the Corporation and neither shall be construed as
limiting in any way the Corporation's right to terminate
or change the terms of your employment. The Option and
your right to purchase or receive shares pursuant to the
Option shall terminate within the time periods specified
by Section 8 of the Plan in the event your employment
with the Corporation is terminated.
<PAGE>
<PAGE>3
This letter, upon your delivery of an executed copy
to the Corporation, shall constitute a binding incentive
stock option agreement between you and the Corporation.
Very truly yours,
PERSONNEL MANAGEMENT, INC.
By /s/ Don R. Taylor
Don R. Taylor, President
<PAGE>
<PAGE>4
ACKNOWLEDGMENT AND AGREEMENT
I hereby acknowledge receipt of this letter granting
me the above Option as well as receipt of a copy of the
Plan, and I acknowledge and agree to be bound by the
following:
1. I have received a copy of this letter and the
Plan (and the Company's Memorandum dated October 31, 1994
addressed to Participants in the Plan, which Memorandum
constitutes part of the Prospectus covering securities
that have been registered under the Securities Act of
1933) and agree to be bound by the terms and conditions
set forth herein and therein.
2. I agree to be responsible for, and to cooperate
with the Corporation in connection with, the satisfaction
of all applicable federal, state or local income tax
withholding requirements and other like requirements
arising therefrom.
EXECUTED this 15th day of July, 1996.
/s/ Gary F. Hentschel
Gary F. Hentschel
0669\EDGAR\STK-OPT.GFH
<PAGE>1
EXHIBIT 10.5
June 10, 1996
Elizabeth McFarland
Personnel Management, Inc.
1499 Windhorst Way, Suite 100
Greenwood, Indiana 46143
Re: Incentive Stock Option Agreement
Dear Ms. McFarland:
Personnel Management, Inc. (the "Corporation"),
pursuant to the Personnel Management, Inc. 1994 Stock
Option Plan (the "Plan"), hereby grants to you as of June
10, 1996 (the "Effective Date"), an incentive stock
option (the "Option"), which Option shall have the
following terms and conditions, in addition to those
provided in the Plan:
1. Number of Shares: The Option is for 10,000
shares of the Corporation's common stock, no
par value (the "Common Shares"), subject to
adjustment as provided in the Plan.
2. Exercise Price: The per share exercise price
shall be $8.73 (the average of the closing bid
and asked prices for the five trading days
immediately preceding the Effective Date of
the Option), subject to adjustment as provided
in the Plan.
3. Exercisability. The Option shall become
immediately exercisable with respect to 2,000
shares covered by the Option, and the
remaining 8,000 shares covered by the Option
shall vest and first become exercisable,
subject to your continued employment, in four
installments of 2,000 shares each on each of
the first four anniversaries of the Effective
Date. Notwithstanding the preceding sentence,
the Option shall become immediately
exercisable with respect to all shares covered
by the Option upon (a) your death, (b) your
"Permanent and Total Disability", as defined
in the Plan, (c) your becoming entitled to the
Severance Entitlement pursuant to and as
defined in Section 3 of the Change of Control
Severance Benefits Agreement dated November 8,
1995, between you and the Corporation, (d) the
dissolution or liquidation of the Corporation,
(e) a reorganization, merger or consolidation<PAGE>
<PAGE 2>
of the Corporation as a result of which the
outstanding securities of the class then
subject to the Option hereunder are changed
into or exchanged for cash or property or
securities not of the Corporation's issue, or
(f) a sale of substantially all the property
of the Corporation to another corporation or
person.
The Option will expire with respect to all unpurchased
shares at 5:00 p.m., E.S.T. on June 9, 2006.
The Option, which is intended to qualify as an
"incentive stock option" within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended,
shall be in all respects limited and conditioned as
provided in the Plan. You should consult with your
personal tax advisor regarding the tax consequences of
exercising "incentive stock options" in connection with
any future decision by you to exercise the Option in
whole or in part. Under Sections 6 and 8 of the Plan,
the Option generally cannot be voluntarily transferred by
you and the Option generally cannot be exercised by
anyone other than you during your lifetime. A copy of
the Plan is enclosed with this letter. Exercise of the
Option shall be subject to your making of the
representations set forth below and any representations
to such other matters as the Corporation's Stock Option
Committee, in its discretion, may determine to be
necessary or advisable to evidence compliance with
requirements under the Securities Act of 1933, as
amended, or state securities laws for registering or
exempting from registration any offer or sale of the
Corporation's securities pursuant to the Plan.
Neither this letter nor the Plan shall be construed
as giving you any right to be retained in the employ of
the Corporation and neither shall be construed as
limiting in any way the Corporation's right to terminate
or change the terms of your employment. The Option and
your right to purchase or receive shares pursuant to the
Option shall terminate within the time periods specified
by Section 8 of the Plan in the event your employment
with the Corporation is terminated.
<PAGE>
<PAGE 3>
This letter, upon your delivery of an executed copy
to the Corporation, shall constitute a binding incentive
stock option agreement between you and the Corporation.
Very truly yours,
PERSONNEL MANAGEMENT, INC.
By /s/ Don R. Taylor
Don R. Taylor, President
<PAGE>
<PAGE 4>
ACKNOWLEDGMENT AND AGREEMENT
I hereby acknowledge receipt of this letter granting
me the above Option as well as receipt of a copy of the
Plan, and I acknowledge and agree to be bound by the
following:
1. I have received a copy of this letter and the
Plan (and the Company's Memorandum dated October 31, 1994
addressed to Participants in the Plan, which Memorandum
constitutes part of the Prospectus covering securities
that have been registered under the Securities Act of
1933) and agree to be bound by the terms and conditions
set forth herein and therein.
2. I agree to be responsible for, and to cooperate
with the Corporation in connection with, the satisfaction
of all applicable federal, state or local income tax
withholding requirements and other like requirements
arising therefrom.
EXECUTED this 10th day of June, 1996.
/s/ Elizabeth McFarland
Elizabeth McFarland
0669\EDGAR\STK-OPT.EM2
EXHIBIT 11.1
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED JULY 31,
1996 1995
<S> <C> <C>
Weighted average shares outstanding 2,020,156 1,982,255
Net effect of dilutive stock options -
based on the treasury stock method
using average market price 18,109 70,183
2,038,265 2,052,438
Net income $ 252,424 $ 158,988
Net income per share $ 0.12 $ 0.08
</TABLE>
EXHIBIT 11.2
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
NINE MONTHS ENDED JULY 31,
1996 1995
<S> <C> <C>
Weighted average shares outstanding 2,020,156 1,973,017
Net effect of dilutive stock options -
based on the treasury stock method using
average market price 11,143 74,244
2,031,299 2,047,261
Net income $ 615,524 $ 441,126
Net income per share $ 0.30 $ 0.22
</TABLE>
0669\EDGAR\10Q11.2
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS CONTAINED IN THE FILER'S FORM 10-Q FOR THE QUARTER ENDED
JULY 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS
</LEGEND>
<CIK> 0000916606
<NAME> PERSONNEL MANAGEMENT, INC.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> JUL-31-1996
<CASH> 293,520
<SECURITIES> 0
<RECEIVABLES> 6,591,113
<ALLOWANCES> 266,988
<INVENTORY> 0
<CURRENT-ASSETS> 7,218,721
<PP&E> 2,089,222
<DEPRECIATION> 889,604
<TOTAL-ASSETS> 15,583,792
<CURRENT-LIABILITIES> 6,441,973
<BONDS> 64,874
0
0
<COMMON> 7,846,105
<OTHER-SE> 1,154,640
<TOTAL-LIABILITY-AND-EQUITY> 15,583,792
<SALES> 17,144,732
<TOTAL-REVENUES> 17,144,732
<CGS> 13,669,668
<TOTAL-COSTS> 13,764,791
<OTHER-EXPENSES> 2,580,278
<LOSS-PROVISION> 199,340
<INTEREST-EXPENSE> 78,014
<INCOME-PRETAX> 539,524
<INCOME-TAX> 287,100
<INCOME-CONTINUING> 252,424
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 252,424
<EPS-PRIMARY> 0.12
<EPS-DILUTED> 0.12
</TABLE>
