<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 MARCH 30, 1997
OR
[ ] 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 001-13956
PERSONNEL GROUP OF AMERICA, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<C> <C>
Delaware 56-1930691
- -------------------------------------------------------- ------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
6302 Fairview Road, Suite 201, Charlotte, North Carolina 28210
- -------------------------------------------------------- ------------------------
(Address of principal executive officer) (Zip Code)
</TABLE>
(704) 442-5100
--------------
(Registrant's telephone number including area code)
None
----
(Former name, former address and former fiscal year, if changed since last
report)
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.
[X] Yes [ ] No
As of April 30, 1997, the registrant had outstanding 12,077,155 shares of common
stock, par value $.01 per share.
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PERSONNEL GROUP OF AMERICA, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
Page
----
<S> <C>
Item 1. Financial Statements (unaudited)
Consolidated Statements of Income ........................... 3
Consolidated Balance Sheets ................................. 4
Consolidated Statements of Cash Flows ....................... 5
Notes to Consolidated Financial Statements .................. 6
Item 2.Management's Discussion and Analysis of
Financial Condition and Results of Operations ............... 7
PART II - OTHER INFORMATION
Item 6.Exhibits and Reports on Form 8-K .................................. 12
SIGNATURES ............................................................... 13
</TABLE>
2
<PAGE> 3
PERSONNEL GROUP OF AMERICA, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended
March 30, March 31,
1997 1996
-------- -------
<S> <C> <C>
Revenues:
Commercial staffing $ 51,171 $38,252
Information technology services 42,990 --
Health care services 33,232 28,621
-------- -------
Total revenues 127,393 66,873
-------- -------
Operating expenses:
Direct costs of services 91,702 48,851
Selling, general and administrative 23,344 13,071
Depreciation and amortization 2,539 880
License fees 2,101 1,480
-------- -------
Total operating expenses 119,686 64,282
-------- -------
Operating income 7,707 2,591
Interest expense 1,739 --
-------- -------
Income before income taxes 5,968 2,591
Provision for income taxes 2,506 1,101
-------- -------
Net income $ 3,462 $ 1,490
======== =======
Net income per share $ 0.29 $ 0.19
======== =======
Weighted average number of shares outstanding 12,067 8,000
======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
PERSONNEL GROUP OF AMERICA, INC.
UNAUDITED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
March 30, December 29,
1997 1996
-------- --------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 960 $ 6,087
Accounts receivable, net 73,138 67,849
Prepaid expenses and other current assets 3,703 3,359
Deferred income taxes 3,575 3,512
-------- --------
Total current assets 81,376 80,807
Property and equipment, net 8,010 7,845
Excess of cost over fair value of net assets acquired, net 232,133 219,928
Other intangibles, net 3,894 3,815
Other assets 1,871 1,932
-------- --------
Total assets $327,284 $314,327
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 7,861 $ 6,847
Accounts payable 2,470 2,877
Accrued liabilities 31,229 33,593
Income taxes payable 1,549 778
-------- --------
Total current liabilities 43,109 44,095
Long-term debt 88,831 78,875
Deferred income taxes 8,032 8,100
-------- --------
Total liabilities 139,972 131,070
-------- --------
Commitments and contingencies
Shareholders' equity:
Preferred stock, $.01 par value per share; shares
authorized 5,000; no shares issued and outstanding -- --
Common stock, $.01 par value per share; shares authorized
20,000; 12,077 and 12,034 shares issued and outstanding
in 1997 and 1996, respectively 121 120
Additional paid-in capital 169,865 169,273
Retained earnings 17,326 13,864
-------- --------
Total shareholders' equity 187,312 183,257
-------- --------
Total liabilities and shareholders' equity $327,284 $314,327
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE> 5
PERSONNEL GROUP OF AMERICA, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended
March 30, March 31,
1997 1996
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,461 $ 1,490
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 2,539 880
Deferred income taxes, net (130) (157)
Changes in assets and liabilities
Accounts receivable (4,449) 1,075
Prepaid expenses and other current assets (300) (1,349)
Accounts payable and accrued liabilities 2,646 1,287
Income taxes payable 771 (1,009)
Other 61 (33)
-------- --------
Net cash provided by operating activities 4,599 2,184
-------- --------
Cash flows provided in investing activities:
Purchases of property and equipment, net (843) (919)
Cash used in acquisitions, net of cash acquired (17,946) (10,663)
-------- --------
Net cash used in investing activities (18,789) (11,582)
-------- --------
Cash flows provided by (used in) financing activities:
Repayments under credit facility (7,025) (1,475)
Borrowings under credit facility 15,800 8,500
Proceeds from exercise of stock options 593 --
Repayments of seller notes and acquired indebtedness (305) --
-------- --------
Net cash provided by financing activities 9,063 7,025
-------- --------
Net decrease in cash and cash equivalents (5,127) (2,373)
Cash and cash equivalents at beginning of period 6,087 5,273
-------- --------
Cash and cash equivalents at end of period $ 960 $ 2,900
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
PERSONNEL GROUP OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(in thousands, except share and per share data)
(1) GENERAL
The unaudited consolidated financial statements included herein have been
prepared in accordance with the instructions to Form 10-Q and do not include all
the information and footnotes required by generally accepted accounting
principles; however, they do include all adjustments of a normal recurring
nature which, in the opinion of management, are necessary to present fairly the
results of operations of the Company for the interim periods presented. These
interim financial statements should be read in conjunction with the Company's
audited consolidated financial statements and related notes for the year ended
December 29, 1996 included in the Company's Annual Report on Form 10-K for the
year ended December 29, 1996. The results of operations for the interim periods
presented are not necessarily indicative of the results to be expected for the
entire year.
(2) ACQUISITIONS
During the first quarter, the Company completed the acquisitions of Word
Processing Professionals, Inc. ("Word Processing Professionals") in New York,
New York, and Energetix, Inc. ("Energetix") in Chicago, Illinois. Word
Processing Professionals provides word processing and desktop publishing
services to professional services firms and financial institutions in mid-town
Manhattan. Energetix provides information technology staffing services to a
variety of clients in the Chicago area. Since March 30, 1997, the Company has
completed the acquisition of Lloyd Ritter Consulting, Inc., and The Lipson
Conroy Services Corporation (collectively, the "Lloyd Ritter Companies") . The
Lloyd Ritter Companies are headquartered in Mountain View and San Jose,
California, respectively, and provide software engineering, systems design and
development, network administration and technical publication development
staffing services to a variety of technology companies in California's Silicon
Valley. The acquired businesses are collectively referred to hereinafter as the
"Acquired Companies." The Acquired Companies had combined revenues in 1996 of
approximately $35,000.
The purchase price for the Acquired Companies aggregated approximately
$33,000 including seller notes and direct acquisition costs but excluding
certain contingent earnout payments. The acquisitions of Energetix and the
Lloyd-Ritter Companies provide for additional payments, contingent upon
attainment of certain earnings targets for various periods during the next
three years. Any such contingent payments will be recorded as additional
purchase price when paid and will increase the amount of excess cost over fair
value of net assets acquired. The acquisitions of the Acquired Companies have
been accounted for using the purchase method of accounting. Accordingly, the
assets and liabilities of the entities acquired were recorded at their
estimated fair values at the dates of the acquisitions and the results of
operations of the Acquired Companies have been included in the Company's
consolidated results of operations from the date of the respective
acquisitions. The excess purchase price over the estimated fair value of the
net assets acquired is being amortized on a straight-line basis over 40 years.
All of the acquisitions were funded through borrowings under the Company's
revolving credit facility. The following table presents the Company's proforma
consolidated results of operations for the three month periods then ended, as
if the acquisitions of the Acquired Companies and the nine other companies
acquired during 1996 and the conversion of six franchises during 1996 had
occurred on January 1, 1996:
<TABLE>
<CAPTION>
March 30, 1997 March 31, 1996
-------------- --------------
<S> <C> <C>
Revenues 133,465 117,621
Net income 3,578 2,394
Net income per share $ 0.30 $ 0.30
Weighted average shares outstanding 12,067 8,000
</TABLE>
(3) NET INCOME PER SHARE
The Company will adopt Statement of Financial Accounting Standards No. 128,
"Earnings Per Share," for the year ending December 28, 1997. For the quarter
ended March 30, 1997, the Company is required to continue following the
computation requirements of Accounting Principles Board Opinion No. 15, "Earning
Per Share." The adoption of the new statement would not have had a material
effect on the Company's net income per share for the quarter ended March 30,
1997.
6
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
INTRODUCTION
The following discussion and analysis should be read in conjunction with
the Company's unaudited consolidated financial statements and notes thereto
included elsewhere in this document. The Company's fiscal year ends on the
Sunday nearest to December 31 and each fiscal quarter ends on the Sunday nearest
to the end of the respective calendar quarter.
The Company operates within one industry segment and is organized into
three Divisions: the Information Technology Division, which provides information
technology staffing and consulting services in a range of computer-related
disciplines; the Commercial Staffing Division, which provides a wide variety of
temporary office and clerical staffing services; and the Health Care Services
Division, which, through Company operated, franchised and licensed offices,
provides home health care services and supplemental staffing for health care
facilities. At April 14, 1997, the Information Technology Division was comprised
of eight companies, the Commercial Staffing Division was comprised of 13
companies and the Health Care Services Division operated under the Nursefinders
brand.
The following table sets forth the number and nature of the Company's
offices at the end of the years indicated and at April 14, 1997:
<TABLE>
<CAPTION>
APRIL 14,
1997 1996 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Information technology offices 21 18 -- --
Commercial staffing offices 72 74 58 57
Nursefinders offices -
Company operated 46 50 48 47
Licensed 17 17 10 4
Franchised 37 33 40 48
--- --- --- ---
Total offices 193 192 156 156
</TABLE>
The Company recognizes as revenues the amounts billed to clients of licensed
Nursefinders offices. In these cases, the temporary workers are the Company's
employees and all costs of employing the temporary workers are the
responsibility of the Company and are included in direct cost of services. The
Company remits monthly to its licensees the gross profits of each licensed
office less 7% of gross revenues, uncollectable receivables and certain other
expenses of the licensed office. The Company does not recognize revenues from
its franchised Nursefinders offices other than a 5% royalty on the gross
revenues of each franchised office.
The Company has not actively marketed new licenses or franchises in recent
periods and, accordingly, franchise and license fees have not been material.
However, the Company views its franchises and licenses as an important part of
the health care services business, because the program allows Nursefinders to
operate in areas that might not otherwise meet the Company's criteria for a
Company operated office, allows a further spreading of fixed costs over
additional revenues, and is believed to yield a fair profit for the Company
services provided to the licensees and franchisees.
The Company completed its initial public offering (the "IPO") in September
1995. Prior to the IPO, the Company was a division of an international staffing
services company. The Company was organized by its former parent to facilitate
the IPO. As a result of the IPO, in which the former parent sold its entire
ownership interest in the Company, the Company became an independent public
company. The Company did not receive any of the proceeds of the sale of its
shares by the former parent in the IPO.
7
<PAGE> 8
In June 1996, the Company issued 4,025,000 shares of its common stock in an
underwritten public offering (the "1996 Equity Offering"), which raised
approximately $95.6 million of net proceeds for the Company. The net proceeds of
the 1996 Equity Offering were used to repay outstanding borrowings under the
Company's revolving credit facility and fund several acquisitions.
Since the IPO in 1995, the Company has acquired eight information
technology companies and five commercial staffing companies as follows:
<TABLE>
<CAPTION>
Headquarters 1996 Pro Forma
Information Technology Location Revenues (in millions)
- ---------------------- -------- ----------------------
<S> <C> <C>
Computer Resources Group San Francisco $ 36.7
Command Technologies Denver 7.2
Broughton Systems Richmond 15.5
BEST Consulting Seattle 66.5
Software Service Corp. Atlanta 12.7
Energetix (1997) Chicago 7.0
Lloyd Ritter Consulting (1997) Silicon Valley 15.7
Lipson Conroy Services (1997) Silicon Valley 6.6
Commercial Staffing
- -------------------
Profile Temporary Services Chicago (Loop Area) 6.4
Allegheny Personnel Pittsburgh 15.1
Judith Fox Staffing Companies Richmond 16.8
Denver Temporaries Denver 3.0
Word Processing Professionals (1997) New York City 6.0
------
Total $215.2
======
</TABLE>
Additionally, in 1996 the Company converted six former Nursefinders franchised
offices, which had combined 1996 revenues of approximately $16.8 million, to
Company operated offices by acquiring the applicable franchises. Had the Company
owned each of these 13 acquired companies and six converted franchises at
January 1, 1996, the Company's pro forma 1996 revenues would have been
approximately $500.1 million and 41%, 34% and 25% of such revenues would have
come from Commercial Staffing, Information Technology and Health Care Services,
respectively.
Each of the Company's acquisitions to date has been accounted for using the
purchase method of accounting, and has been included in the following discussion
as applicable since the respective date of acquisition. In the future, the
Company's revenues and expenses may be significantly affected by the number and
timing of the opening or acquisition of additional offices or businesses. The
timing of such expansion activities also can affect period-to-period comparisons
of the Company's results of operations.
8
<PAGE> 9
OVERVIEW
The following table summarizes certain income statement information for the
Company for the quarters ended March 30, 1997 and March 31, 1996:
<TABLE>
<CAPTION>
First Quarter Percent of First Quarter Percent of
1997 revenues 1996 revenues
---- -------- ---- --------
(dollars in thousands)
<S> <C> <C> <C> <C>
Revenues:
Commercial staffing $ 51,171 40.2% $38,252 57.2%
Information technology services 42,990 33.7 -- --
Health care services (including
franchise fees) 33,232 26.1 28,621 42.8
-------- ----- ------- -----
Total revenues 127,393 100.0 66,873 100.0
-------- ----- ------- -----
Direct costs of services 91,702 71.9 48,851 73.1
Selling, general and administrative 23,344 18.3 13,071 19.5
Depreciation and amortization 2,539 2.0 880 1.3
License fees 2,101 1.6 1,480 2.2
-------- ----- ------- -----
Total expenses 119,686 94.0 64,282 96.1
-------- ----- ------- -----
Operating income 7,707 6.0 2,591 3.9
Interest expense 1,739 1.4 -- --
-------- ----- ------- -----
Income before income taxes 5,968 4.7 2,591 3.9
Income tax expense 2,506 2.0 1,101 1.6
-------- ----- ------- -----
Net income $ 3,462 2.7% $ 1,490 2.2%
======== ===== ======= =====
</TABLE>
The staffing business is subject to the seasonal impact of summer and
holiday employment trends. Typically, the second six months of each calendar
year is more heavily affected as companies tend to increase their use of
temporary personnel during this period. While the staffing industry is cyclical,
the Company believes that the broad geographic coverage of its operations, its
emphasis on high-end clerical staffing in the Commercial Staffing Division and
its rapid expansion into the information technology staffing and consulting
sector, mitigate the adverse effects of economic cycles in a single industry or
geographic region.
9
<PAGE> 10
RESULTS OF OPERATIONS
QUARTER ENDED MARCH 30, 1997 VERSUS QUARTER ENDED MARCH 31, 1996
REVENUES
Total revenues increased 90.5% to $127.4 million in the first quarter of
1997 from $66.9 million in 1996. Commercial Staffing Division revenue grew 33.8%
as the result of the contribution of revenues from the five commercial staffing
companies acquired by the Company since the IPO and continuing internal growth
attributable to increases in billable hours and an improved service mix. During
this period, the Health Care Services Division experienced a 16.1% increase in
revenues (including franchise fees), primarily as a result of the revenues added
by the Division from the six franchised office conversions completed in 1996 and
increases in home health care visits and billable hours. All of the Information
Technology Division's revenues have been acquired since May 1996, but on a pro
forma basis Information Technology Division revenues increased 31.4% in the
first quarter of 1997 over 1996.
DIRECT COSTS OF SERVICES
Direct costs, consisting of payroll and related expenses of temporary
workers, increased 87.7% to $91.7 million from $48.9 million in the first
quarter of 1996 primarily as the result of the addition of the acquired
companies, but declined as a percentage of revenue to 71.9% from 73.1% during
1996 as the Company continued its expansion into the higher margin information
technology staffing and consulting sectors.
OTHER OPERATING EXPENSES
Other operating expenses, consisting of selling, general and administrative
expenses, depreciation and amortization expense and license fees, increased
81.3% to $28.0 million in the first quarter of 1997 from $15.4 million in 1996.
As a percentage of revenues, selling, general and administrative expenses
decreased to 18.3% in the first quarter of 1997 from 19.5% for 1996 primarily as
the result of the spreading of these expenses over a larger revenue base.
Depreciation and amortization expense recognized during the first quarter of
1997 increased to 2.0% of revenues from 1.3% of revenues for 1996 primarily due
to increased amortization expense arising from the acquisitions completed by
the Company since the IPO. License fees increased by 42.0% to $2.1 million due
primarily to an increase in the number of licensed offices in the first quarter
of 1997 over the same period of 1996.
INTEREST EXPENSE
Interest expense increased to $1.7 million in the first quarter of 1997 as
the Company continued to borrow funds under its revolving credit facility and
from certain owner-sellers at various times primarily to finance acquisitions.
See "Liquidity and Capital Resources." Prior to March 1996, the Company had not
borrowed any funds under the revolving credit facility.
INCOME TAX EXPENSE
The effective tax rate decreased to 42.0% in the first quarter of 1997 from
42.5% for 1996. This decrease was due to reductions in nondeductible
amortization expense in relation to pretax income and in state income taxes
attributable to changes in the Company's business mix geographically among the
states. The Company's effective tax rate has historically been higher than the
U.S. federal statutory rate of 35.0% primarily due to nondeductible amortization
expense.
10
<PAGE> 11
NET INCOME
Net income increased 132.3% to $3.5 million in the first quarter of 1997
(or 2.7% of revenue) from $1.5 million (2.2% of revenue) in 1996 due to the
factors discussed above.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal uses of cash are to finance receivables and fund
acquisitions and capital expenditures. As of March 30, 1997, receivables for the
Information Technology Division, the Commercial Staffing Division and the Health
Care Services Division remained outstanding an average of 49, 45 and 59 days,
respectively, after billing. Health care receivables are generally paid by
insurance companies and governmental agencies and therefore tend to be
outstanding longer than commercial receivables. In the aggregate, days sales
outstanding were 52 at March 30, 1997.
The Company's primary capital expenditure requirements relate to
acquisitions. Since the IPO, the Company has made cash payments and issued
notes aggregating approximately $190.3 million for acquisitions of existing
businesses and for the conversion of six franchised Nursefinders offices to
Company operated offices. In addition, during the first quarter of 1997, the
Company made postclosing payments to former owners of acquired companies of
$5.9 million. The Company is also obligated under certain acquisition
agreements to repay seller notes during the next three years of $20.6 million
and to make contingent earnout payments to former owners of acquired companies.
Contingent earnout payments are based on the future performance of such
acquired companies and thus the actual amount cannot be determined until such
date. The Company estimates, based on certain assumptions as to future
performance of such acquired companies, that aggregate earnout payments may be
in the range of $19.0 million to $33.0 million in 1998, $6.0 million to
$15.0 million in 1999 and $18.0 million to $21.0 million in 2000. There can be
no assurance, however, that the future performance of the acquired companies
will be consistent with the assumptions used in establishing the foregoing
estimates, or that the actual amounts of any earnout payments will not
materially differ from the estimates set forth herein.
The Company is selectively seeking acquisition opportunities and
management believes that the Company will continue to make acquisitions, which
may involve additional contingent payments, as attractive opportunities become
available. The Company intends to seek additional capital as necessary to fund
other potential acquisitions through one or more funding sources that may
include borrowings under the Credit Facility described below or offerings of
debt or equity securities of the Company. In addition, the Company regularly
evaluates its asset base and business mix and could elect to make changes in
order to take advantage of attractive market or acquisition opportunities. Cash
flow from operations, to the extent available, may also be used to fund a
portion of any acquisition expenditures. The Company also expects to spend
approximately one percent (1%) of its revenues during 1997 on field automation
systems and other capital expenditures not directly related to acquisitions.
Cash flow provided by operating activities increased to $4.6 million in
1997 from $2.2 million for 1996, primarily as the result of increasing income.
Cash used for investing activities increased to $18.8 million in 1997, from
$11.6 million in 1996, reflecting the Company's acquisitions in the first
quarter, earnout payments and post closing payments to companies acquired in
1996. Cash flows from financing activities during the same period approximated
$9.1 million, primarily as a result of increased borrowings under the Credit
Facility to fund acquisitions.
The Company has a bank loan agreement providing for a three-year $125.0
million revolving line of credit (the "Credit Facility"). As of March 30, 1997,
approximately $76.1 million of borrowings (approximately $98.1 million as of
April 14, 1997) were outstanding under the Credit Facility and approximately
$2.5 million had been used for the issuance of undrawn letters of credit to
secure the Company's workers' compensation programs. Borrowings under the
Credit Facility bear interest, payable quarterly, at a rate equal to LIBOR plus
a percentage corresponding to the Company's consolidated leverage ratio, as
defined, or the agents' base rate, as defined, at the Company's option. At
March 30, 1997, the majority of the Company's borrowings under this facility
bore interest at approximately 6.9% (or LIBOR plus 1.35%). The Credit Facility
is secured by pledges of the stock of the Company's subsidiaries and contains
customary covenants such as the maintenance of certain financial ratios,
minimum net worth and working capital requirements and a restriction on the
payment of cash dividends on common stock. The Credit Facility also limits
borrowing availability for acquisition-related purposes.
The Company has received a commitment from the agent under the Credit
Facility to provide a $10.0 million additional line of credit to finance
additional acquisitions and for general corporate purposes. Indebtedness under
the additional line of credit will bear interest at the agent's prime rate, will
rank pari passu with indebtedness under the Credit Facility and will share the
11
<PAGE> 12
same collateral securing debt under the Credit Facility. Indebtedness under the
additional line of credit will be due and payable in full upon the earlier of
July 31, 1997 or the closing of any offering of debt or equity securities of
the Company. Establishment of the additional line of credit requires the
unanimous consent of the lenders under the Credit Agreement, which consent has
not yet been obtained.
The Company believes that cash flow from operations, the current borrowing
capacity under the Credit Facility as amended and the additional line of
credit and other available financing alternatives, including offerings of debt
or equity securities of the Company, will be adequate to meet its presently
anticipated needs for working capital, acquisitions, and capital expenditures.
There can be no assurance, however, that the Credit Facility will be amended
or that other alternative sources of capital will be available in the future.
FORWARD-LOOKING INFORMATION
This Report on Form 10-Q, including "Management's Discussion and Analysis
of Financial Condition and Results of Operations," may contain various
"forward-looking statements," within the meaning of Section 21E of the Exchange
Act, that are based on management's belief and assumptions, as well as
information currently available to management. When used in this document, the
words "anticipate," "estimate," "expect," and similar expressions may identify
forward-looking statements. Although the Company believes that the expectations
reflected in any such forward-looking statements are reasonable, it can give no
assurance that such expectations will prove to be correct. Any such statements
are subject to certain risks, uncertainties and assumptions. Should one or more
of these risks or uncertainties materialize, or should underlying assumptions
prove incorrect, the Company's actual results, performance or financial
condition may vary materially from those anticipated, estimated or expected.
Among the key factors that may have a direct bearing on the Company's actual
results, performance or financial condition are fluctuations in the economy,
the degree and nature of competition, demand for the Company's services,
changes in laws and regulations affecting the Company's business, the Company's
ability to complete acquisitions and integrate the operations of acquired
businesses, to recruit and place temporary professionals, to expand into new
markets, and to maintain profit margins in the face of pricing pressures and
other matters discussed in this Report and the Company's other filings with the
Securities and Exchange Commission.
PART II - OTHER INFORMATION
ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - The exhibits filed with this Form 10-Q are detailed in the
Exhibit Index, which immediately precedes the exhibits to this report.
(b) Reports on Form 8-K.
One report on Form 8-K was filed during the quarter for which this report is
filed:
On March 21, 1997, the Company filed a report on Form 8-K (the "Report")
stating that the Company had received a letter dated March 17, 1997 from Arthur
Andersen LLP, to the effect that Arthur Andersen would decline to stand for
reappointment as the Company's independent public accountants for 1997. Arthur
Andersen's decision was the result of the Company's hiring a new chief financial
officer, who has a family relationship with a partner in the Greensboro, North
Carolina office of Arthur Andersen. The Report also stated that the Company had
engaged Price Waterhouse LLP as of March 17, 1997 as the Company's independent
public accountants for 1997.
12
<PAGE> 13
SIGNATURES
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 GROUP OF AMERICA, INC.
Date: May 13, 1997 By: /s/ Edward P. Drudge, Jr.
----------------------------
Edward P. Drudge, Jr.
Chief Executive Officer
Date: May 13, 1997 By: /s/ James C. Hunt
----------------------------
James C. Hunt
Senior Vice President,
Chief Financial
Officer and Treasurer
13
<PAGE> 14
EXHIBIT INDEX
<TABLE>
<CAPTION>
FILED HEREWITH (*),
NON-APPLICABLE (NA)
OR INCORPORATED BY
REFERENCE FROM
PREVIOUS COMPANY REG. NO.
EXHIBIT EXHIBIT OR
NUMBER DESCRIPTION NUMBER REPORT
- --------------- ------------------------------ -------------------- --------------------
<S> <C> <C> <C>
3.1 Amended and Restated 3.1 33-95228
Certificate of Incorporation
of the Company
3.2 Amended and Restated Bylaws 3.2 33-95228
of the Company
4.0 Specimen Stock Certificate 4.0 33-95228
4.1 Rights Agreement between the 1 0-27792
Company and The First
National Bank of Boston
10.1+ 1995 Equity Participation Plan 10.1 10-Q for quarter
ended 9/30/95
10.2+ Management Incentive 10.2 10-Q for quarter
Compensation Plan ended 9/30/95
10.3+# Director and Officer 10.3 10-K for year ended
Indemnification Agreement of 12/31/95
James V. Napier
10.4 Administrative Services 10.6 10-Q for quarter
Agreement between the Company ended 9/30/95
and Adia California
10.5 Paybill Services Agreement 10.7 10-Q for quarter
between the Company and Adia ended 9/30/95
California
10.6 Software License Agreement 10.8 10-Q for quarter
between the Company and Adia ended 9/30/95
California
10.7+ Employment Agreement between 10.9 10-Q for quarter
the Company and Edward P. ended 9/30/95
Drudge, Jr.
</TABLE>
14
<PAGE> 15
<TABLE>
<S> <C> <C> <C>
10.8+ Employment Agreement between 10.10 10-K for year
the Company and James C. Hunt ended 12/29/96
10.9+ Employment Agreement between 10.13 33-95228
Adia Delaware, PFI Corp. and
Richard L. Peranton
10.10+ Employment Agreement between 10.13 10-K for year
the Company and Ken R. ended 12/29/96
Bramlett, Jr.
10.11 Indemnification Agreement 10.14 10-Q for quarter
between the Company, Adia ended 9/30/95
Delaware and Adia California
10.12 Tax-Sharing Agreement between 10.15 10-Q for quarter
the Company, Adia Delaware and ended 9/30/95
Adia California
10.13 Amended and Restated 10.16 10-K for year
Non-Qualified Profit-Sharing ended 12/29/96
Plan
10.14 Loan Agreement between the 10.17 10-Q for quarter
Company and NationsBank, N.A., ended 9/29/96
as agent
10.15 Amendment No. 1 to Loan 10.18 10-K for year
Agreement between the Company ended 12/29/96
and NationsBank, N.A., as
agent
10.16 Amendment No. 2 to Loan *
Agreement between the Company
and NationsBank, as agent
10.17 Amendment No. 3 to Loan *
Agreement between the Company
and NationsBank, as agent
10.18 Asset Purchase Agreement 10.2 333-04573
between the Company and
Computer Resources Group
10.19 Asset Purchase Agreement 2 8-K dated 9/30/96
between the Company and
Business Enterprise Systems
and Technology, Inc. (BEST
Consulting)
27.01 Financial data schedule (for *
SEC filing purposes only)
</TABLE>
+Management contract or compensatory plan required to be filed under Item 601 of
Regulation S-K of the Securities and Exchange Commission.
#This Exhibit is substantially identical to Director and Officer
Indemnification Agreements of the same date between the Company and the
following individuals: Edward P. Drudge, Jr., Richard L. Peranton, Kevin P.
Egan, J. Roger King, and William Simione, Jr.
15
<PAGE> 1
EXHIBIT 10.16
AMENDMENT NO. 2 TO CREDIT AGREEMENT
THIS AMENDMENT NO. 2 TO CREDIT AGREEMENT (this "Amendment No. 2"), dated as
of February 28, 1997, is entered into by and among PERSONNEL GROUP OF AMERICA,
INC. (the "Borrower"), CERTAIN SUBSIDIARIES OF THE BORROWER IDENTIFIED ON THE
SIGNATURES PAGES HERETO (the "Guarantors"), CERTAIN LENDERS IDENTIFIED ON THE
SIGNATURE PAGES HERETO (the "Lenders") and NATIONSBANK, N.A., as agent for the
Lenders (in such capacity, the "Agent").
RECITALS
WHEREAS, the Borrower, the Guarantors, the Lenders and the Agent are party
to that certain Credit Agreement dated as of September 30, 1996, as amended by
that certain Amendment No. 1 dated as of December 13, 1996 (as amended, the
"Existing Credit Agreement");
WHEREAS, the parties hereto have agreed to amend the Existing Credit
Agreement as set forth herein;
NOW, THEREFORE, in consideration of the agreements herein contained, the
parties hereby agree as follows:
PART I
DEFINITIONS
SUBPART 1.1. Certain Definitions. Unless otherwise defined herein or the
context otherwise requires, the following terms used in this Amendment No. 2,
including its preamble and recitals, have the following meanings:
"Amended Credit Agreement" means the Existing Credit
Agreement as amended hereby.
"Amendment No. 2 Effective Date" is defined in Subpart 3.1.
SUBPART 1.2. Other Definitions. Unless otherwise defined herein or the
context otherwise requires, terms used in this Amendment No. 2, including its
preamble and recitals, have the meanings provided in the Amended Credit
Agreement.
1
<PAGE> 2
PART II
AMENDMENTS TO EXISTING CREDIT AGREEMENT
Effective on (and subject to the occurrence of) the Amendment No. 2
Effective Date, the Existing Credit Agreement is hereby amended in accordance
with this Part II. Except as so amended, the Existing Credit Agreement and all
other Credit Documents shall continue in full force and effect.
SUBPART 2.1. Amendment to Section 1.1. The definition of "Permitted
Acquisitions" set forth in Section 1.1 of the Existing Credit Agreement is
amended in its entirety to read as follows:
"Permitted Acquisitions" means:
(i) acquisitions by the Borrower or its Subsidiaries of all or any
portion of the capital stock or securities or all, substantially all or
any portion of the assets of any Person engaged in a business or
businesses substantially similar to any business currently conducted by
the Borrower or any of its Subsidiaries, provided that (A) the cost
(including, without duplication, the non-contingent purchase price, all
acquired liabilities, all non-compete payments and the principal amount
of any seller financing, but excluding the contingent purchase price and
all fees and expenses) of any such acquisition individually does not
exceed 10% of Consolidated Net Worth, (B) such acquisition is approved by
the board of directors of such Person (if applicable or required), and
(C) after giving effect on a Pro Forma Basis to any such acquisition
(including but not limited to any Indebtedness to be incurred by the
Borrower or any of its Subsidiaries in connection therewith), no Default
or Event of Default would exist hereunder; and
(ii) any merger or consolidation permitted by Section 8.4(b).
PART III
CONDITIONS TO EFFECTIVENESS
SUBPART 3.1. Amendment No. 2 Effective Date. This Amendment No. 2 shall
be and become effective as of the date hereof (the "Amendment No. 2 Effective
Date") when all of the conditions set forth in this Subpart 3.1 shall have been
satisfied, and thereafter this Amendment No. 2 shall be known, and may be
referred to, as "Amendment No. 2."
SUBPART 3.1.1. Execution of Counterparts of Amendment. The Agent shall
have received executed counterparts (or other evidence of execution, including
facsimile signatures, satisfactory to the Agent) of this Amendment No. 2, which
collectively shall have been duly executed on behalf of each of the Borrower,
the Guarantors, the Required Lenders and the Agent.
SUBPART 3.1.2. Other Documents. The Agent shall have received such
other documents as the Agent, any Lender or counsel to the Agent may reasonably
request.
2
<PAGE> 3
PART IV
MISCELLANEOUS
SUBPART 4.1. Cross-References. References in this Amendment No. 2 to any
Part or Subpart are, unless otherwise specified, to such Part or Subpart of
this Amendment No. 2.
SUBPART 4.2. Instrument Pursuant to Existing Credit Agreement. This
Amendment No. 2 is a Credit Document executed pursuant to the Existing Credit
Agreement and shall (unless otherwise expressly indicated therein) be
construed, administered and applied in accordance with the terms and provisions
of the Existing Credit Agreement.
SUBPART 4.3. References in Other Credit Documents. At such time as this
Amendment No. 2 shall become effective pursuant to the terms of Subpart 3.1,
all references in the Credit Documents to the "Credit Agreement" shall be
deemed to refer to the Amended Credit Agreement.
SUBPART 4.4. Representations and Warranties. Each Credit Party hereby
represents and warrants that (i) each Credit Party that is party to this
Amendment No. 2: (a) has the requisite corporate power and authority to
execute, deliver and perform this Amendment No. 2, as applicable and (b) is
duly authorized to, and has been authorized by all necessary corporate action,
to execute, deliver and perform this Amendment No. 2, (ii) the Borrower has no
claims, counterclaims, offsets, or defenses to the Credit Documents and the
performance of its obligations thereunder, or if the Borrower has any such
claims, counterclaims, offsets, or defenses to the Credit Documents or any
transaction related to the Credit Documents, the same are hereby waived,
relinquished and released in consideration of the Lenders' execution and
delivery of this Amendment No. 2, (iii) the representations and warranties
contained in Section 6 of the Existing Credit Agreement are, subject to the
limitations set forth therein, true and correct in all material respects on and
as of the date hereof as though made on and as of such date (except for those
which expressly relate to an earlier date) and (iv) no Default or Event of
Default exists under the Existing Credit Agreement on and as of the date hereof
or will occur as a result of the transactions contemplated hereby.
SUBPART 4.5. Liens. The Borrower and the Guarantors, as applicable,
affirm the liens and security interests created and granted in the Credit
Documents and agree that this Amendment No. 2 shall in no manner adversely
effect or impair such liens and security interest.
SUBPART 4.6. Acknowledgment of Guarantors. The Guarantors acknowledge
and consent to all of the terms and conditions of this Amendment No. 2 and
agree that this Amendment No. 2 and all documents executed in connection
herewith do not operate to reduce or discharge the Guarantors' obligations
under the Amended Credit Agreement or the other Credit Documents. The
Guarantors further acknowledge and agree that the Guarantors have no claims,
counterclaims, offsets, or defenses to the Credit Documents and the performance
of the Guarantors' obligations thereunder or if the Guarantors did have any
such claims, counterclaims, offsets or defenses to the
3
<PAGE> 4
Credit Documents or any transaction related to the Credit Documents, the same
are hereby waived, relinquished and released in consideration of the Lenders'
execution and delivery of this Amendment No. 2.
SUBPART 4.7. No Other Changes. Except as expressly modified and amended
in this Amendment No. 2, all the terms, provisions and conditions of the
Credit Documents shall remain unchanged.
SUBPART 4.8. Counterparts. This Amendment No. 2 may be executed by the
parties hereto in several counterparts, each of which shall be deemed to be an
original and all of which shall constitute together but one and the same
agreement.
SUBPART 4.9. Entirety. This Amendment No. 2, the Amended Credit
Agreement and the other Credit Documents embody the entire agreement between
the parties and supersede all prior agreements and understandings, if any,
relating to the subject matter hereof. These Credit Documents represent the
final agreement between the parties and may not be contradicted by evidence of
prior, contemporaneous or subsequent oral agreements of the parties.
SUBPART 4.10. Governing Law. THIS AMENDMENT NO. 2 AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA.
SUBPART 4.11. Successors and Assigns. This Amendment No. 2 shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns.
[Signatures to Follow]
4
<PAGE> 5
This Amendment No. 2 is executed as of the day and year first written above.
BORROWER: PERSONNEL GROUP OF AMERICA, INC.,
a Delaware corporation
By: /s/ Ken R. Bramlett, Jr.
------------------------------
Name: Ken R. Bramlett, Jr.
----------------------------
Title: Senior Vice President
---------------------------
GUARANTORS: STAFFPLUS, INC.,
a Delaware corporation
By: /s/ Ken R. Bramlett, Jr.
------------------------------
Name: Ken R. Bramlett, Jr.
----------------------------
Title: Vice President
---------------------------
THOMAS STAFFING SERVICES, INC.,
a California corporation
By: /s/ Ken R. Bramlett, Jr.
------------------------------
Name: Ken R. Bramlett, Jr.
----------------------------
Title: Vice President
---------------------------
PFI CORP.,
a Delaware corporation
By: /s/ Ken R. Bramlett, Jr.
------------------------------
Name: Ken R. Bramlett, Jr.
----------------------------
Title: Vice President
---------------------------
NURSEFINDERS, INC.,
a Texas corporation
By: /s/ Ken R. Bramlett, Jr.
------------------------------
Name: Ken R. Bramlett, Jr.
----------------------------
Title: Vice President
---------------------------
[Guarantor Signatures Continue]
1
<PAGE> 6
NF SERVICES, INC.,
a New York corporation
By: /s/ Ken R. Bramlett, Jr.
------------------------------
Name: Ken R. Bramlett, Jr.
----------------------------
Title: Vice President
---------------------------
B.C.P., INC.,
a Hawaii corporation
By: /s/ Ken R. Bramlett, Jr.
------------------------------
Name: Ken R. Bramlett, Jr.
----------------------------
Title: Vice President
---------------------------
PROFILE TEMPORARY SERVICES, INC.,
an Illinois corporation
By: /s/ Ken R. Bramlett, Jr.
------------------------------
Name: Ken R. Bramlett, Jr.
----------------------------
Title: Vice President
---------------------------
INFOTECH SERVICES, INC.,
a North Carolina corporation
By: /s/ Ken R. Bramlett, Jr.
------------------------------
Name: Ken R. Bramlett, Jr.
----------------------------
Title: Vice President
---------------------------
BROUGHTON SYSTEMS, INC.,
a Virginia corporation
By: /s/ Ken R. Bramlett, Jr.
------------------------------
Name: Ken R. Bramlett, Jr.
----------------------------
Title: Vice President
---------------------------
WORD PROCESSING PROFESSIONALS, INC.,
a New York corporation
By: /s/ Ken R. Bramlett, Jr.
------------------------------
Name: Ken R. Bramlett, Jr.
----------------------------
Title: Vice President
---------------------------
2
<PAGE> 7
LENDERS: NATIONSBANK, N.A.,
individually in its capacity as a Lender and in
its capacity as Agent
By: /s/ Mark D. Halmrast
-----------------------------
Name: Mark D. Halmrast
---------------------------
Title: Vice President
--------------------------
BANK OF AMERICA ILLINOIS
By: /s/ Michael J. McKenney
-----------------------------
Name: Michael J. McKenney
---------------------------
Title: Vice President
--------------------------
BANQUE PARIBAS
By: /s/ Duane P. Helkowski
----------------------------
Name: Duane P. Helkowski
--------------------------
Title: Vice President
-------------------------
By: /s/ Mary T. Finnegan
----------------------------
Name: Mary T. Finnegan
-------------------------
Title: Group Vice President
-------------------------
COMERICA BANK
By: /s/ Tamara J. Gurne
---------------------------
Name: Tamara J. Gurne
-------------------------
Title: Account Officer
------------------------
CREDIT LYONNAIS ATLANTA AGENCY
By: /s/ David M. Carrie
---------------------------
Name: David M. Carrie
-------------------------
Title:
------------------------
[Lender Signatures Continue]
3
<PAGE> 8
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ Jennifer R. St. Amand
---------------------------
Name: Jennifer R. St. Amand
-------------------------
Title: Assistant Vice President
------------------------
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Robert J. Mitchell, Jr.
---------------------------
Name: Robert J. Mitchell, Jr.
-------------------------
Title: Vice President
------------------------
UNITED STATES NATIONAL BANK OF OREGON
By: /s/ Chris J. Karlin
---------------------------
Name: Chris J. Karlin
-------------------------
Title: Vice President
------------------------
4
<PAGE> 1
EXHIBIT 10.17
AMENDMENT NO. 3 TO CREDIT AGREEMENT
THIS AMENDMENT NO. 3 TO CREDIT AGREEMENT (this "Amendment No. 3"), dated
as of April 14, 1997, is entered into by and among PERSONNEL GROUP OF AMERICA,
INC. (the "Borrower"), CERTAIN SUBSIDIARIES OF THE BORROWER IDENTIFIED ON THE
SIGNATURES PAGES HERETO (the "Guarantors"), CERTAIN LENDERS IDENTIFIED ON THE
SIGNATURE PAGES HERETO (the "Lenders") and NATIONSBANK, N.A., as agent for the
Lenders (in such capacity, the "Agent").
RECITALS
WHEREAS, the Borrower, the Guarantors, the Lenders and the Agent are party
to that certain Credit Agreement dated as of September 30, 1996, as amended by
that certain Amendment No. 1 dated as of December 13, 1996 and that certain
Amendment No. 2 dated as of February 28, 1997 (as amended, the "Existing Credit
Agreement");
WHEREAS, the parties hereto have agreed to amend the Existing Credit
Agreement as set forth herein; and
WHEREAS, the Borrower desires to merge with Thomas Staffing Services,
Inc., a wholly-owned subsidiary of the Borrower ("Thomas Staffing");
NOW, THEREFORE, in consideration of the agreements herein contained, the
parties hereby agree as follows:
PART I
DEFINITIONS
SUBPART 1.1. Certain Definitions. Unless otherwise defined herein or the
context otherwise requires, the following terms used in this Amendment No. 3,
including its preamble and recitals, have the following meanings:
"Amended Credit Agreement" means the Existing Credit
Agreement as amended hereby.
"Amendment No. 3 Effective Date" is defined in Subpart 4.1.
SUBPART 1.2. Other Definitions. Unless otherwise defined herein or the
context otherwise requires, terms used in this Amendment No. 3, including its
preamble and recitals, have the meanings provided in the Amended Credit
Agreement.
1
<PAGE> 2
PART II
AMENDMENTS TO EXISTING CREDIT AGREEMENT
Effective on (and subject to the occurrence of) the Amendment No. 3
Effective Date, the Existing Credit Agreement is hereby amended in accordance
with this Part II. Except as so amended, the Existing Credit Agreement and all
other Credit Documents shall continue in full force and effect.
SUBPART 2.1. Amendment to Section 7.11(b). Section 7.11(b) of the
Existing Credit Agreement is amended in its entirety to read as follows:
7.11 FINANCIAL COVENANTS.
* * * * *
(b) Consolidated Leverage Ratio. The Consolidated Leverage Ratio as
of the last day of each fiscal quarter shall be no greater than:
From December 31, 1996 to June 30, 1997 3.25 : 1.00
From July 1, 1997 and thereafter 3.00 : 1.00
PART III
CONSENT TO MERGER
SUBPART 3.1. Merger. Each Lender hereby consents to the merger of the
Borrower and Thomas Staffing; provided that the Borrower shall be the surviving
entity thereof. Upon consummation of such merger, Thomas Staffing shall
automatically be released as a Guarantor under the Credit Agreement.
PART IV
CONDITIONS TO EFFECTIVENESS
SUBPART 4.1. Amendment No. 3 Effective Date. This Amendment No. 3 shall
be and become effective as of the date hereof (the "Amendment No. 3 Effective
Date") when all of the conditions set forth in this Subpart 4.1 shall have been
satisfied, and thereafter this Amendment No. 3 shall be known, and may be
referred to, as "Amendment No. 3."
SUBPART 4.1.1. Execution of Counterparts of Amendment. The Agent shall
have received executed counterparts (or other evidence of execution, including
facsimile signatures, satisfactory to the Agent) of this Amendment No. 3, which
collectively shall have been duly executed on behalf of each of the Borrower,
the Guarantors and the Required Lenders.
2
<PAGE> 3
SUBPART 4.1.2. Other Documents. The Agent shall have received such other
documents as the Agent, any Lender or counsel to the Agent may reasonably
request.
PART V
MISCELLANEOUS
SUBPART 5.1. Cross-References. References in this Amendment No. 3 to any
Part or Subpart are, unless otherwise specified, to such Part or Subpart of
this Amendment No. 3.
SUBPART 5.2. Instrument Pursuant to Existing Credit Agreement. This
Amendment No. 3 is a Credit Document executed pursuant to the Existing Credit
Agreement and shall (unless otherwise expressly indicated therein) be
construed, administered and applied in accordance with the terms and provisions
of the Existing Credit Agreement.
SUBPART 5.3. References in Other Credit Documents. At such time as this
Amendment No. 3 shall become effective pursuant to the terms of Subpart 4.1,
all references in the Credit Documents to the "Credit Agreement" shall be
deemed to refer to the Amended Credit Agreement.
SUBPART 5.4. Representations and Warranties. Each Credit Party hereby
represents and warrants that (i) each Credit Party that is party to this
Amendment No. 3: (a) has the requisite corporate power and authority to
execute, deliver and perform this Amendment No. 3, as applicable and (b) is
duly authorized to, and has been authorized by all necessary corporate action,
to execute, deliver and perform this Amendment No. 3, (ii) the Borrower has no
claims, counterclaims, offsets, or defenses to the Credit Documents and the
performance of its obligations thereunder, or if the Borrower has any such
claims, counterclaims, offsets, or defenses to the Credit Documents or any
transaction related to the Credit Documents, the same are hereby waived,
relinquished and released in consideration of the Lenders' execution and
delivery of this Amendment No. 3, (iii) the representations and warranties
contained in Section 6 of the Existing Credit Agreement are, subject to the
limitations set forth therein, true and correct in all material respects on and
as of the date hereof as though made on and as of such date (except for those
which expressly relate to an earlier date) and (iv) no Default or Event of
Default exists under the Existing Credit Agreement on and as of the date hereof
or will occur as a result of the transactions contemplated hereby.
SUBPART 5.5. Liens. The Borrower and the Guarantors, as applicable,
affirm the liens and security interests created and granted in the Credit
Documents and agree that this Amendment No. 3 shall in no manner adversely
effect or impair such liens and security interest.
SUBPART 5.6. Acknowledgment of Guarantors. The Guarantors
acknowledge and consent to all of the terms and conditions of this Amendment
No. 3 and agree that this Amendment No. 3 and all documents executed in
connection herewith do not operate to reduce or discharge the Guarantors'
obligations under the Amended Credit Agreement or the other Credit Documents.
The Guarantors further acknowledge and agree that the Guarantors have no
claims, counterclaims,
3
<PAGE> 4
offsets, or defenses to the Credit Documents and the performance of the
Guarantors' obligations thereunder or if the Guarantors did have any such
claims, counterclaims, offsets or defenses to the Credit Documents or any
transaction related to the Credit Documents, the same are hereby waived,
relinquished and released in consideration of the Lenders' execution and
delivery of this Amendment No. 3.
SUBPART 5.7. No Other Changes. Except as expressly modified and amended
in this Amendment No. 3, all the terms, provisions and conditions of the
Credit Documents shall remain unchanged.
SUBPART 5.8. Counterparts. This Amendment No. 3 may be executed by the
parties hereto in several counterparts, each of which shall be deemed to be an
original and all of which shall constitute together but one and the same
agreement.
SUBPART 5.9. Entirety. This Amendment No. 3, the Amended Credit
Agreement and the other Credit Documents embody the entire agreement between
the parties and supersede all prior agreements and understandings, if any,
relating to the subject matter hereof. These Credit Documents represent the
final agreement between the parties and may not be contradicted by evidence of
prior, contemporaneous or subsequent oral agreements of the parties.
SUBPART 5.10. Governing Law. THIS AMENDMENT NO. 3 AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA.
SUBPART 5.11. Successors and Assigns. This Amendment No. 3 shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns.
[Signatures to Follow]
4
<PAGE> 5
This Amendment No. 3 is executed as of the day and year first written above.
BORROWER: PERSONNEL GROUP OF AMERICA, INC.,
a Delaware corporation
By: /s/ James C. Hunt
----------------------------------
Name: James C. Hunt
--------------------------------
Title: Vice President
-------------------------------
GUARANTORS: STAFFPLUS, INC.,
a Delaware corporation
By: /s/ James C. Hunt
----------------------------------
Name: James C. Hunt
--------------------------------
Title: Vice President
-------------------------------
THOMAS STAFFING SERVICES, INC.,
a California corporation
By: /s/ James C. Hunt
----------------------------------
Name: James C. Hunt
--------------------------------
Title: Vice President
-------------------------------
PFI CORP.,
a Delaware corporation
By: /s/ James C. Hunt
----------------------------------
Name: James C. Hunt
--------------------------------
Title: Vice President
-------------------------------
NURSEFINDERS, INC.,
a Texas corporation
By: /s/ James C. Hunt
----------------------------------
Name: James C. Hunt
--------------------------------
Title: Vice President
-------------------------------
[Guarantor Signatures Continue]
1
<PAGE> 6
NF SERVICES, INC.,
a New York corporation
By: /s/ James C. Hunt
------------------------------
Name: James C. Hunt
----------------------------
Title: Vice President
---------------------------
B.C.P., INC.,
a Hawaii corporation
By: /s/ James C. Hunt
------------------------------
Name: James C. Hunt
----------------------------
Title: Vice President
---------------------------
INFOTECH SERVICES, INC.,
a North Carolina corporation
By: /s/ James C. Hunt
------------------------------
Name: James C. Hunt
----------------------------
Title: Vice President
---------------------------
BROUGHTON SYSTEMS, INC.,
a Virginia corporation
By: /s/ James C. Hunt
------------------------------
Name: James C. Hunt
----------------------------
Title: Vice President
---------------------------
WORD PROCESSING PROFESSIONALS, INC.,
a New York corporation
By: /s/ James C. Hunt
------------------------------
Name: James C. Hunt
----------------------------
Title: Vice President
---------------------------
LLOYD RITTER CONSULTING, INC.,
a California corporation
By: /s/ James C. Hunt
------------------------------
Name: James C. Hunt
----------------------------
Title: Vice President
---------------------------
2
<PAGE> 7
LENDERS: NATIONSBANK, N.A.,
individually in its capacity as a Lender and in
its capacity as Agent
By: /s/ Mark Halmrast
-----------------------------------
Name: Mark Halmrast
---------------------------------
Title: Vice President
--------------------------------
BANK OF AMERICA ILLINOIS
By: /s/ Michael J. McKenney
-----------------------------------
Name: Michael J. McKenney
---------------------------------
Title: Vice President
--------------------------------
BANQUE PARIBAS
By: /s/ Duane P. Helkowski
-----------------------------------
Name: Duane P. Helkowski
---------------------------------
Title: Vice President
--------------------------------
By: /s/ Mary T. Finnegan
-----------------------------------
Name: Mary T. Finnegan
---------------------------------
Title: Group Vice President
--------------------------------
COMERICA BANK
By: /s/ Tamara J. Gurne
-----------------------------------
Name: Tamara J. Gurne
---------------------------------
Title: Account Officer
--------------------------------
CREDIT LYONNAIS ATLANTA AGENCY
By: /s/ David M. Cawrse
-----------------------------------
Name: David M. Cawrse
---------------------------------
Title: First Vice President & Manager
--------------------------------
[Lender Signatures Continue]
3
<PAGE> 8
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ James O. Heinz
------------------------------
Name: James O. Heinz
----------------------------
Title: Authorized Agent
---------------------------
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Robert J. Mitchell, Jr.
------------------------------
Name: Robert J. Mitchell, Jr.
----------------------------
Title: Vice President
---------------------------
UNITED STATES NATIONAL BANK OF OREGON
By: /s/ David Wynde
------------------------------
Name: David Wynde
----------------------------
Title: Senior Vice President
---------------------------
4
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF PERSONNEL GROUP OF AMERICA, INC.
FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 1996 AND MARCH 30, 1997 AND THE
CONSOLIDATED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED DECEMBER 29, 1996,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-START> DEC-30-1996
<PERIOD-END> MAR-30-1997
<CASH> 960
<SECURITIES> 0
<RECEIVABLES> 73,967
<ALLOWANCES> (829)
<INVENTORY> 0
<CURRENT-ASSETS> 81,376
<PP&E> 16,119
<DEPRECIATION> (8,109)
<TOTAL-ASSETS> 327,284
<CURRENT-LIABILITIES> 43,109
<BONDS> 88,831
0
0
<COMMON> 121
<OTHER-SE> 187,191
<TOTAL-LIABILITY-AND-EQUITY> 327,284
<SALES> 127,393
<TOTAL-REVENUES> 127,393
<CGS> 91,702
<TOTAL-COSTS> 93,803
<OTHER-EXPENSES> 2,539
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,739
<INCOME-PRETAX> 5,968
<INCOME-TAX> 2,506
<INCOME-CONTINUING> 3,462
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,462
<EPS-PRIMARY> 0.29
<EPS-DILUTED> 0.29
</TABLE>
