<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 20, 1997
REGISTRATION NO. 333-31863
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
PERSONNEL GROUP OF AMERICA, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 7363 56-1930691
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
6302 FAIRVIEW ROAD, SUITE 201
CHARLOTTE, NORTH CAROLINA 28210
TEL: (704) 442-5100
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
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KEN R. BRAMLETT, JR.
SENIOR VICE PRESIDENT
6302 FAIRVIEW ROAD, SUITE 201
CHARLOTTE, NORTH CAROLINA 28210
TEL: (704) 442-5100
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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COPIES TO:
PATRICK S. BRYANT
ROBINSON, BRADSHAW & HINSON, P.A.
1900 INDEPENDENCE CENTER
101 NORTH TRYON STREET
CHARLOTTE, NORTH CAROLINA 28246
TEL: (704) 377-2536
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
promptly as practicable after the effective date of this registration statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 (the "Securities Act") other than securities offered only in connection
with dividend or interest reinvestment plans, check the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==========================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE AGGREGATE OFFERING AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PRICE PER NOTE(2) PRICE(2) REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
5 3/4% Convertible Subordinated
Notes due 2004.................... $115,000,000 100% $115,000,000 $34,848.49(3)
- --------------------------------------------------------------------------------------------------------------------------
Common Stock, $.01 par value........ 3,228,070 shares(1) N/A N/A N/A(4)
========================================================================================================================
</TABLE>
(1) Represents shares originally issuable upon conversion of the Notes being
registered under this Registration Statement plus an additional
indeterminate number of shares as may become issuable upon conversion of the
Notes being registered hereunder by means of adjustment in the conversion
price thereof.
(2) Estimated solely for purpose of calculating the registration fee.
(3) Such amount was paid in connection with the initial filing on July 23, 1997.
(4) Pursuant to Rule 457(i), there is no filing fee with respect to the shares
of Common Stock being registered hereunder because no additional
consideration will be received in connection with the exercise of the
conversion privilege.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
PROSPECTUS
$115,000,000
PERSONNEL GROUP OF AMERICA, INC. [PGA LOGO]
5 3/4% CONVERTIBLE SUBORDINATED NOTES DUE 2004
(INTEREST PAYABLE JULY 1 AND JANUARY 1)
3,228,070 SHARES OF COMMON STOCK
---------------------
This Prospectus relates to (i) $115,000,000 aggregate principal amount of
5 3/4% Convertible Subordinated Notes due 2004 (the "Notes") of Personnel Group
of America, Inc., a Delaware corporation ("PGA" or the "Company"), and (ii)
3,228,070 shares of the Common Stock, par value $.01 per share (the "Common
Stock"), of the Company, which are initially issuable upon conversion of the
Notes, plus such additional indeterminate number of shares of Common Stock as
may become issuable upon conversion of the Notes as a result of adjustments to
the conversion price thereunder (collectively, the "Shares"). The Notes and the
Shares that are being registered hereby are to be offered for the account of the
holders thereof (the "Selling Securityholders"). The Notes were acquired from
the Company by Smith Barney Inc., PaineWebber Incorporated, J.C. Bradford & Co.,
The Robinson-Humphrey Company, Inc., and NationsBanc Capital Markets, Inc. (the
"Initial Purchasers") in June and July 1997 in connection with a private
offering. See "Description of Notes."
The Notes are convertible into Common Stock at any time at or before
maturity, unless previously redeemed, at a conversion price of $35.625 per
share, subject to adjustment in certain events. The Common Stock of the Company
is traded on the New York Stock Exchange (the "NYSE") under the symbol "PGA." On
October 17, 1997, the closing price of the Common Stock as reported by the NYSE
was $35.75 per share.
The Notes do not provide for a sinking fund. The Notes are not redeemable by
the Company prior to July 7, 2000. Thereafter, the Notes are redeemable at the
option of the Company, in whole or in part, at the redemption prices set forth
in this Prospectus, together with accrued interest. Upon a Repurchase Event (as
defined herein), each holder of Notes shall have the right, at the holder's
option, to require the Company to repurchase such holder's Notes at a purchase
price equal to 100% of the principal amount thereof, plus accrued interest. See
"Description of Notes -- Certain Rights to Require Repurchase of Notes."
The Notes are unsecured obligations of the Company and are subordinate to
all present and future Senior Indebtedness (as defined herein) of the Company
and will be effectively subordinated to all indebtedness and liabilities of
subsidiaries of the Company. The Indenture (as defined herein) does not restrict
the incurrence of any other indebtedness or liabilities by the Company or its
subsidiaries. See "Description of Notes -- Subordination."
For a description of certain income tax consequences to holders of the
Notes, see "Certain United States Federal Income Tax Consequences."
There is no existing public market for the Notes and there can be no
assurance as to the liquidity of any markets that may develop for the Notes, the
ability of the holders to sell their Notes or what price holders of the Notes
will be able to sell their Notes. The Initial Purchasers have informed the
Company that they are making and currently intend to continue making a market in
the Notes. The Initial Purchasers, however, are not obligated to do so and any
such market making may be discontinued at any time without notice, in the sole
discretion of the Initial Purchasers. Prior to the resale of the Notes pursuant
to this Prospectus, each of the Notes was eligible for trading in the Private
Offerings, Resales and Trading through Automated Linkages Market (the "PORTAL
Market"). Notes sold pursuant to this Prospectus will no longer be eligible for
trading in the PORTAL Market. The Company does not intend to apply for listing
of the Notes on any securities exchange.
The Notes and the Shares are being registered to permit public secondary
trading of the Notes and, upon conversion, the underlying Common Stock, by the
holders thereof from time to time after the date of this Prospectus. The Company
has agreed, among other things, to bear all expenses (other than underwriting
discounts, selling commissions and fees and the expenses of counsel and other
advisors to the holders of the Notes or the underlying Common Stock) in
connection with the registration and sale of the Notes and the Shares covered by
this Prospectus.
The Company will not receive any of the proceeds from the sales of the Notes
or the Shares by the Selling Securityholders. The Notes and the Shares may be
offered in negotiated transactions or otherwise, at market prices prevailing at
the time of sale or at negotiated prices. In addition, the Shares may be offered
from time to time through ordinary brokerage transactions on the NYSE. See "Plan
of Distribution." The Selling Securityholders may be deemed to be "Underwriters"
as defined in the Securities Act of 1933, as amended (the "Securities Act"). If
any broker-dealers are used by the Selling Securityholders, any commissions paid
to broker-dealers and, if broker-dealers purchase any Notes or Shares as
principals, any profits received by such broker-dealers on the resale of the
Notes or Shares may be deemed to be underwriting discounts or commissions under
the Securities Act. In addition, any profits realized by the Selling
Securityholders may be deemed to be underwriting commissions.
SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE
CONSIDERED IN EVALUATING AN INVESTMENT IN THE NOTES.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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The date of this Prospectus is October 20, 1997
<PAGE> 3
THIS PROSPECTUS CONTAINS SUMMARIES, BELIEVED TO BE ACCURATE, OF CERTAIN
TERMS OF CERTAIN DOCUMENTS, BUT REFERENCE IS MADE TO THE ACTUAL DOCUMENTS,
COPIES OF WHICH WILL BE MADE AVAILABLE UPON REQUEST, FOR THE COMPLETE
INFORMATION CONTAINED THEREIN. ALL SUCH SUMMARIES ARE QUALIFIED IN THEIR
ENTIRETY BY THIS REFERENCE.
---------------------
SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
CERTAIN OF THE MATTERS DISCUSSED UNDER THE CAPTIONS "RISK FACTORS" AND
ELSEWHERE IN THIS PROSPECTUS MAY CONSTITUTE FORWARD-LOOKING STATEMENTS FOR
PURPOSES OF THE SECURITIES ACT AND THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED (THE "EXCHANGE ACT"), AND AS SUCH MAY INVOLVE KNOWN AND UNKNOWN RISKS,
UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE
OR FINANCIAL CONDITION OF THE COMPANY TO BE MATERIALLY DIFFERENT FROM FUTURE
RESULTS, PERFORMANCE OR FINANCIAL CONDITION EXPRESSED OR IMPLIED BY ANY SUCH
FORWARD-LOOKING STATEMENTS. IMPORTANT FACTORS THAT COULD CAUSE THE ACTUAL
RESULTS, PERFORMANCE OR FINANCIAL CONDITION OF THE COMPANY TO DIFFER MATERIALLY
FROM THE COMPANY'S EXPECTATIONS ARE DISCLOSED IN THIS PROSPECTUS AND THE
DOCUMENTS INCORPORATED BY REFERENCE HEREIN ("CAUTIONARY STATEMENTS"), INCLUDING,
WITHOUT LIMITATION, THOSE STATEMENTS MADE IN CONJUNCTION WITH ANY SUCH
FORWARD-LOOKING STATEMENTS, THOSE INCLUDED UNDER "RISK FACTORS" AND OTHERWISE
HEREIN AND THEREIN. ANY SUCH FORWARD-LOOKING STATEMENTS ARE EXPRESSLY QUALIFIED
IN THEIR ENTIRETY BY THE CAUTIONARY STATEMENTS.
---------------------
THE COMPANY ENDEAVORS TO PROTECT ITS INTELLECTUAL PROPERTY RIGHTS AND HAS
OBTAINED REGISTRATIONS IN THE UNITED STATES OF CERTAIN SERVICEMARKS AND
TRADENAMES THAT APPEAR IN THIS PROSPECTUS.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act and in accordance therewith files reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission").
These materials can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the Commission's regional offices at Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center,
New York, New York 10048. Copies of these materials can also be obtained from
the Commission at prescribed rates by writing to the Public Reference Section of
the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission
maintains a Web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission and that is located at http://www.sec.gov. In addition, the Common
Stock of the Company is listed on the NYSE, and such reports, proxy statements
and other information may be inspected at the offices of the New York Stock
Exchange, Inc., 20 Broad Street, New York, New York 10005.
This Prospectus, which constitutes part of a registration statement filed
by the Company with the Commission under the Securities Act (the "Registration
Statement"), omits certain of the information contained in the Registration
Statement. Reference is made to the Registration Statement and to the exhibits
thereto for further information with respect to the Company and the Notes and
Shares offered hereby. Copies of such Registration Statement are available from
the Commission. Statements contained herein concerning the provisions of
documents filed herewith as exhibits are necessarily summaries of such
documents, and each such statement is qualified in its entirety by reference to
the copy of the applicable document filed with the Commission.
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INCORPORATION BY REFERENCE
This Prospectus incorporates by reference the Company's: (i) Annual Report
on Form 10-K for the year ended December 29, 1996; (ii) Proxy Statement dated
April 10, 1997, relating to the Annual Meeting of Shareholders held on May 21,
1997; (iii) Current Report on Form 8-K dated March 17, 1997; (iv) Quarterly
Reports on Form 10-Q for the periods ended March 30, 1997 and June 29, 1997; (v)
Current Report on Form 8-K dated May 22, 1997; (vi) Current Report on Form 8-K
dated June 6, 1997; (vii) Current Report on Form 8-K dated June 18, 1997; (viii)
the description of the Common Stock contained in the Company's registration
statements on Form 8-A filed pursuant to Section 12 of the Exchange Act,
including any amendment or report filed for the purpose of updating such
description; and (ix) all other documents filed by the Company pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of
this Prospectus and prior to the termination of the offering to be made
hereunder.
Any statement contained in this Prospectus or in a document incorporated by
reference in this Prospectus will be deemed to be modified or superseded for
purposes of this Prospectus to the extent that a statement contained in this
Prospectus or in any other subsequently filed document which is also
incorporated by reference in this Prospectus modifies or supersedes such
statement. Any statement so modified or superseded will not be deemed, except as
modified or superseded, to constitute a part of this Prospectus.
The Company will provide, without charge, to each person, including a
beneficial owner, to whom a Prospectus is delivered, upon written or oral
request of such person, a copy of any and all of the information that has been
incorporated by reference in the Prospectus, excluding exhibits to such
documents, unless such exhibits are specifically incorporated by reference into
the documents so incorporated. Requests for copies of such documents should be
addressed to the Company at its principal executive offices listed below,
attention: Corporate Secretary.
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THE COMPANY
Personnel Group of America, Inc. is a leading information technology and
personnel staffing services company. The Company is organized into three
divisions, Information Technology, Commercial Staffing, and Health Care
Services, and operates in strategic markets throughout the United States. The
Company's staffing services include temporary staffing, placement of full time
employees, on-site management of temporary employees, training and testing of
temporary and permanent workers and information technology consulting.
The Information Technology Division offers information technology staffing
and consulting services in a range of computer-related disciplines. The
Commercial Staffing Division offers a wide variety of temporary office and
clerical services to more than 10,000 organizations nationwide. The Commercial
Staffing Division also provides light technical and light industrial services to
its customers, but these services typically account for a small portion of the
division's total revenues. The Health Care Services Division operates
exclusively under the "Nursefinders" brand name and provides health care
personnel to patients receiving home health care services and to supplement the
staffing needs of hospitals, nursing homes and other health care facilities.
The Company's principal executive offices are located at 6302 Fairview
Road, Suite 201, Charlotte, North Carolina 28210, and its telephone number at
such address is (704) 442-5100.
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RISK FACTORS
In addition to the other information contained or incorporated by reference
in this Prospectus, prospective investors should consider carefully the factors
listed below before purchasing the Notes and Shares offered hereby.
POSSIBLE ADVERSE EFFECT OF FLUCTUATIONS IN THE GENERAL ECONOMY
Demand for information technology and commercial staffing services is
significantly affected by the general level of economic activity in the country.
Companies use temporary staffing services to manage personnel costs and staffing
needs due to business fluctuations. When economic activity increases, temporary
employees are often added before full-time employees are hired. As economic
activity slows, many companies reduce their usage of temporary employees before
undertaking layoffs of their regular employees. During expansions, there is
intense competition among temporary services firms for qualified temporary
personnel. In addition, the Company may experience increased competitive pricing
pressures during such periods. There can be no assurance that during periods of
increased economic activity and higher general employment levels the Company
will be able to recruit and retain sufficient temporary personnel to meet the
needs of its clients, or that pricing pressures will not adversely affect the
Company's results of operations. Similarly, a slowdown in the economy may result
in decreased demand for temporary personnel, which may have an adverse effect on
the Company's financial condition and results of operations, including cash
flow. During the most recent recession, the Company's operations were adversely
affected.
Demand for the Company's health care services is influenced by trends in
public and private funding of health care, but is less directly affected by the
general level of economic activity. Changes in these funding arrangements and in
the health care industry generally could have an adverse effect on the Company's
financial condition and results of operations, including cash flow. See
"-- Government Regulation."
HIGHLY COMPETITIVE MARKET; LIMITED BARRIERS TO ENTRY
The U.S. staffing services market is highly competitive and highly
fragmented, with limited barriers to entry and more than 15,000 offices
competing in the industry as of the date of this Prospectus. Management believes
that no one firm currently has more than 11% of the national market, as measured
by revenue, although the staffing and health care staffing services industries
have been undergoing significant consolidation. The Company competes in
national, regional and local markets with full-service and specialized temporary
service agencies and health care providers. While the majority of the Company's
competitors are significantly smaller than the Company, a number of competitors
have greater marketing and financial resources than those of the Company. The
Company expects that the level of competition will remain high in the future,
which could limit the Company's ability to maintain or increase its market share
or maintain or increase gross margins, either of which could have a material
adverse effect on the Company's financial condition and results of operations,
including cash flow.
IMPACT OF PRICING PRESSURE ON MARGINS
Price competition in the staffing services industry is intense in all three
of the Company's divisions. Pricing pressure from competitors, customers and
payors is increasing. There can be no assurance that the Company will be able to
maintain or increase its current margins, the reduction of which could have a
material adverse effect on the Company's financial condition and results of
operations, including cash flow.
ABILITY TO CONTROL GROWTH; ACQUISITION RISKS
The ability of the Company to continue to execute its business strategy
will depend on a number of factors, including the availability of working
capital, existing and emerging competition and the availability of attractive
acquisition opportunities. The Company has consummated a number of acquisitions
since its initial public offering in 1995. Once integrated, acquisitions may not
achieve levels of revenue, profitability or productivity comparable to those of
the Company's existing locations or may not otherwise perform as expected.
Acquisitions also involve special risks, including risks associated with
unanticipated liabilities and contingencies, diversion of management attention
and possible adverse effects on earnings resulting from increased goodwill
amortization, increased interest costs, the issuance of additional securities
and difficulties related to the integration of the
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acquired business. There can be no assurance that the Company will be able to
successfully identify additional suitable acquisition candidates, complete
additional acquisitions or integrate acquired businesses into its operations.
The failure to integrate acquired businesses into its operations could have a
material adverse effect on the Company's financial condition and results of
operations, including cash flow.
INCREASED EMPLOYEE COSTS; WORKERS' COMPENSATION
Businesses use temporary staffing in part to shift certain employment costs
and risks (e.g., workers' compensation and unemployment insurance) to temporary
personnel services companies. Accordingly, the Company is responsible for and
pays unemployment insurance premiums, workers' compensation and medical and
other employer costs for job-related injuries for its temporary employees. The
Company's workers' compensation and medical costs are based on the loss and loss
adjustment expenses as estimated by an outside administrator. Workers'
compensation costs have increased as various states have raised benefit levels
and liberalized allowable claims. Unemployment insurance premiums are set
annually by the states in which employees perform services and are subject to
increases as a result of increased unemployment and the extension of periods for
which benefits are available. The Company currently pays health insurance
premiums for all of its permanent employees but none of its temporary employees.
Historically, the Company has increased fees charged to its clients to absorb
increases in unemployment, workers' compensation, medical and other direct costs
of services. There can be no assurance that the Company will be able to continue
to increase the fees charged to its clients if expenses related to workers'
compensation or unemployment insurance increase or if employer-paid health
insurance is extended to temporary employees. Any such inability could have a
material adverse effect on the Company's financial condition and results of
operations, including cash flow.
INDUSTRY RISK OF LITIGATION AND CLAIMS
The Company is subject to litigation and claims by its employees,
customers, franchisees and other third parties. The Company is in the business
of employing people and placing them in the work place of other businesses or
the homes of persons requiring health care. Attendant risks of such activities
include possible claims by customers or patients of employee misconduct or
negligence, including malpractice, claims by employees of discrimination or
harassment (including claims relating to actions of the Company's clients),
claims related to the inadvertent employment of illegal aliens or unlicensed
personnel, payment of workers' compensation claims and other similar claims. The
Company has policies and guidelines in place to reduce its exposure to these
risks, and has insurance against certain risks in amounts which it believes to
be adequate. There can be no assurance that the Company will not experience
litigation and claims in the future which are not covered by or which exceed its
insurance, or that the Company will not incur damages, fines or other losses or
negative publicity with respect to such matters, any of which could have a
material adverse effect on the Company's business.
DEPENDENCE ON KEY PERSONNEL
The Company's operations are dependent on the continued efforts of its
executive officers and senior management. In addition, the Company is dependent
on the performance and productivity of its local branch managers and field
personnel. The loss of some of the Company's executive officers or other key
managers could have an adverse effect on the Company's operations, including the
Company's ability to establish and maintain customer relationships. The
Company's ability to attract and retain business is significantly affected by
local relationships and the quality of service rendered by branch managerial
personnel. If the Company is unable to attract and retain key employees to
perform these services, the Company's business could be adversely affected.
DEPENDENCE ON AVAILABILITY OF QUALIFIED TEMPORARY PERSONNEL
The Company depends upon its ability to attract qualified temporary
personnel who possess the skills and experience necessary to meet the staffing
requirements of its clients. The Company must continually evaluate and upgrade
its base of available qualified personnel to keep pace with changing client
needs and emerging technologies. Competition for individuals with proven
professional skills, particularly information technology consultants, home
health care providers and technologically skilled administrative employees is
intense, and demand for such individuals is expected to remain very strong for
the foreseeable future. There can be no
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assurance that qualified personnel will continue to be available to the Company
in sufficient numbers in the future.
GOVERNMENT REGULATION
The Company's Health Care Services Division is subject to extensive
government regulation under federal, state and local law, including but not
limited to, licensing requirements, certificate of need requirements, periodic
examinations by government agencies, federal and state anti-fraud, anti-abuse
and anti-kickback statutes and regulations, and federal and state laws
prohibiting physician ownership or compensation arrangements in entities,
including home health agencies, to which they refer patients for health care
services. Congress and various state legislatures have periodically proposed
legislation affecting the regulation of the health care industry. Changes in
government support of health care services, the methods by which such services
are delivered, the prices for such services, the reimbursement for such
services, or the regulations governing such services, may all have a material
adverse effect on the Company's financial condition and results of operations.
The Company's revenues are derived in part from the Medicare and Medicaid
programs, which are subject to statutory and regulatory changes, retroactive and
prospective rate adjustments and administrative rulings and funding
restrictions, all of which could have the effect of limiting or reducing
reimbursement levels for the Company's services. New instructions introduced by
the Health Care Financing Administration and implemented in 1996 relating to the
allocation of administrative costs could restrict the allocation of certain
previously reimbursable shared costs under the program going forward.
Additionally, the President's proposed fiscal year 1998 federal budget submitted
to Congress in February 1997 could have the effect of further lowering
reimbursable cost limits for home health agencies that are Medicare providers.
These and other regulations could affect the ability of the Company to collect
its fees for services provided. Any significant decrease in Medicare or Medicaid
reimbursement levels, or the imposition of significant restrictions on
participation in the Medicare and Medicaid programs, could have a material
adverse effect on the Company. In addition, certificate of need laws, which
restrict the types of care that may be provided and can limit or eliminate a
company's ability to provide certain services (including home health care
services), to establish or expand operations, and to act as a Medicare or
Medicaid provider in certain jurisdictions, may render it more difficult for the
Company to, or preclude the Company from, expanding the scope of its home health
care services. There can be no assurance that the Company will be able to
continue to obtain or maintain the required government approvals, licenses or
certificates of need, obtain reimbursement for its services or avoid compliance
or other problems under applicable laws and regulations.
FRANCHISING AND LICENSING RISKS
The Company derives a portion of its net income from franchised and
licensed operations in its Health Care Services Division. Franchisees and
licensees may terminate their agreements, resulting in a loss of revenues and
corresponding profitability. The ownership of the Company's franchises and
licenses is relatively concentrated, and the loss of one or more of those
relationships could have an adverse effect on the Company's results of
operations. Further, while the Company's agreements contain non-competition
covenants, former franchisees and licensees may nevertheless seek to compete
with the Company. The Company must comply with federal and state laws and
regulations governing the sale of franchises and licenses, and state laws
concerning the ongoing relationship with franchisees and licensees (including
the termination and non-renewal of such relationships). The Company is subject
to the risk of franchisee and licensee litigation pursuant to such laws or
otherwise.
SUBSTANTIAL INTANGIBLE ASSETS
In recent years the Company has recorded substantial excess cost over fair
value of net assets acquired in connection with the purchase of certain of its
subsidiaries and divisions. Such intangible assets may increase if additional
acquisitions are completed and will increase upon payment of contingent earnout
amounts with respect to completed acquisitions. Any impairment of such assets,
with resultant write offs, could have a material adverse effect on the Company's
financial condition and results of operations.
CERTAIN PROVISIONS RELATING TO CHANGES IN CONTROL
The Company's Certificate of Incorporation and Bylaws, as well as a
shareholder rights agreement, contain provisions that may have the effect of
discouraging, delaying or preventing a change in control of the Company,
including transactions in which the shareholders might otherwise receive a
premium for their shares over then
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current market prices, and may limit the ability of the shareholders to approve
transactions that they may deem to be in their best interests. Such provisions
in the Certificate of Incorporation and Bylaws include a classified Board of
Directors and a prohibition on shareholder action by written consent. In
addition, the Certificate of Incorporation permits the Company's Board of
Directors to issue up to 5,000,000 shares of preferred stock, $.01 par value per
share ("Preferred Stock"), and to determine the price, rights, preferences and
privileges of those shares without any further vote or action by the
shareholders. The rights of the holders of Common Stock will be subject to, and
may be adversely affected by, the rights of the holders of any Preferred Stock
that may be issued in the future. The issuance of Preferred Stock could have the
effect of making it more difficult for a third party to acquire a majority of
the outstanding voting stock of the Company. Although the Company has no present
plans to issue shares of Preferred Stock, the Board of Directors has preapproved
the terms of a series of Preferred Stock that may be issued pursuant to the
shareholder rights agreement upon the occurrence of certain triggering events.
In general, the shareholder rights agreement provides a mechanism by which the
Board of Directors and shareholders may act to substantially dilute the share
position of any takeover bidder who acquires 15% or more of the Common Stock.
See "Description of Capital Stock."
SIGNIFICANT LEVERAGE AND DEBT SERVICE
With its issuance of the Notes, the Company continued to be significantly
leveraged. In addition, subject to the restrictions in its current $125.0
million revolving credit agreement (the "Credit Agreement") and the Indenture,
the Company and its subsidiaries may incur additional indebtedness (including
additional Senior Indebtedness (as defined herein)) from time-to-time to finance
acquisitions, capital expenditures or for general corporate purposes.
The level of the Company's indebtedness could have important consequences
to holders of the Notes, including: (i) a substantial portion of the Company's
cash flow from operations must be dedicated to debt service and contingent
earnout payments and will not be available for other purposes; (ii) the
Company's ability to obtain additional debt financing in the future for other
acquisitions and for working capital may be limited; and (iii) the Company's
level of indebtedness could limit its flexibility in reacting to changes in its
industry or economic conditions generally.
The Company's ability to pay interest on the Notes and to satisfy its other
debt obligations will depend upon its future operating performance, which will
be affected by prevailing economic conditions and financial, business and other
factors, certain of which are beyond its control, as well as the availability of
borrowing under the Credit Agreement (or any successor credit agreement). The
Company will require substantial amounts of cash to fund scheduled payments of
principal and interest on its outstanding indebtedness, contingent earnout
payments with respect to certain acquisitions, as well as future capital
expenditures and any increased working capital requirements. If the Company is
unable to meet its cash requirements out of cash flow from operations and its
available borrowings, there can be no assurance that it will be able to obtain
alternative financing or that it will be permitted to do so under the terms of
the Credit Agreement (or any successor credit agreement) or other debt
instruments. In the absence of such financing, the Company's ability to respond
to changing business and economic conditions, to make future acquisitions, to
absorb adverse operating results or to fund capital expenditures or increased
working capital requirements may be adversely affected. If the Company does not
generate sufficient increases in cash flow from operations to repay the Notes at
maturity, it could attempt to refinance the Notes; however, no assurance can be
given that such a refinancing would be available on terms acceptable to the
Company, if at all. Any failure by the Company to satisfy its obligations with
respect to the Notes at maturity (with respect to payments of principal) or
prior thereto (with respect to payments of interest or required repurchases)
would constitute a default under the Indenture and could cause a default under
agreements governing other indebtedness, if any, of the Company. In addition,
there can be no assurance that the Company will have available the financial
resources necessary to repurchase any or all Notes tendered upon a Change in
Control (as defined herein).
SUBORDINATION OF NOTES
The Notes are subordinate in right of payment to all current and future
Senior Indebtedness of the Company. Senior Indebtedness includes all secured
indebtedness of the Company for money borrowed (including any secured
indebtedness under the Company's Credit Agreement and any predecessor or
successor thereto), whether
9
<PAGE> 10
existing on or created or incurred after the date of the issuance of the Notes,
that is not made subordinate to or pari passu with the Notes by the instrument
creating the indebtedness. The Indenture does not limit the amount of additional
indebtedness, including Senior Indebtedness, which the Company can create,
incur, assume or guarantee. By reason of such subordination of the Notes, in the
event of insolvency, bankruptcy, liquidation, reorganization, dissolution or
winding up of the business of the Company or upon default in payment with
respect to any Senior Indebtedness of the Company or an event of default with
respect to such indebtedness permitting the acceleration thereof, the assets of
the Company will be available to pay the amounts due on the Notes only after all
Senior Indebtedness of the Company has been paid in full. In addition, holders
of the Notes are effectively subordinated to the claims of creditors of the
Company's subsidiaries. In the event of the insolvency, bankruptcy, liquidation,
reorganization, dissolution or winding up of the business of any subsidiary of
the Company, creditors of such subsidiary generally will have the right to be
paid in full before any distribution is made to the Company or the holders of
the Notes. See "Description of Notes."
LIMITATIONS ON REPURCHASE UPON A REPURCHASE EVENT
In the event of a Repurchase Event, which includes a Change in Control and
a Termination of Trading (as defined herein), each holder of the Notes will have
the right, at the holder's option, to require the Company to repurchase all or a
portion of such holder's Notes at a purchase price equal to 100% of the
principal amount thereof plus accrued interest to the repurchase date. The
Company's ability to repurchase the Notes upon a Repurchase Event may be limited
by the terms of the Company's Senior Indebtedness and the subordination
provisions of the Indenture. Further, the ability of the Company to repurchase
Notes upon a Repurchase Event will be dependent on the availability of
sufficient funds and compliance with applicable securities laws. Accordingly,
there can be no assurance that the Company will be able to repurchase the Notes
upon a Repurchase Event. The term "Repurchase Event" is limited to certain
specified transactions and may not include other events that might adversely
affect the financial condition of the Company or result in a downgrade of the
credit rating (if any) of the Notes nor would the requirement that the Company
offer to repurchase the Notes upon a Repurchase Event necessarily afford holders
of the Notes protection in the event of a highly leveraged reorganization,
merger or similar transaction involving the Company. See "Description of Notes."
ABSENCE OF PUBLIC MARKET
There is no existing public market for the Notes and there can be no
assurance as to the liquidity of any markets that may develop for the Notes, the
ability of the holders to sell their Notes or the price at which holders of the
Notes may be able to sell their Notes. Future trading prices of the Notes will
depend on many factors, including, among other things, prevailing interest
rates, the Company's operating results, the price of the Common Stock and the
market for similar securities. The Initial Purchasers have informed the Company
that the Initial Purchasers are making and currently intend to continue making a
market in the Notes; however, the Initial Purchasers are not obligated to do so,
and any such market making activity may be terminated at any time without notice
to the holders of the Notes, in the sole discretion of the Initial Purchasers.
Prior to the resale thereof pursuant to this Prospectus, each of the Notes was
eligible for trading in the PORTAL Market. Notes sold pursuant to this
Prospectus will no longer be eligible for trading in the PORTAL Market. The
Company does not intend to apply for listing of the Notes on any securities
exchange.
POSSIBLE VOLATILITY OF THE NOTES AND STOCK PRICE
The market price of the Notes and Common Stock could be subject to
significant fluctuations in response to various factors and events, including
variations in the Company's earnings results, changes in earnings estimates by
securities analysts, publicity regarding the Company, its competitors, the
staffing services industry or the health care industry generally, new statutes
or regulations or changes in the interpretation of existing statutes or
regulations affecting the staffing services industry in general or the health
care industry specifically, changes in the reimbursement practices or policies
of third party payors, sales of substantial amounts of Common Stock in the
public market or the perception that such sales could occur and other factors.
In addition, in recent years, the stock market has experienced broad price and
volume fluctuations that often have been unrelated to the operating performance
of particular companies. These market fluctuations also may adversely affect the
market price of the Notes and Common Stock. Volatility in the price of the
Company's Common Stock, changes in prevailing interest rates, and changes in
perception of the Company's creditworthiness may in the future adversely affect
the price of the Notes.
10
<PAGE> 11
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Notes or the
Shares offered hereby.
RATIO OF EARNINGS TO FIXED CHARGES
The Company's ratio of earnings to fixed charges for each of the periods
indicated is as follows:
<TABLE>
<CAPTION>
FISCAL YEAR(1) SIX MONTHS ENDED
-------------------------------------------- ----------------------
JUNE 30, JUNE 29,
1992 1993 1994 1995 1996 1996 1997
---- ---- ---- ---- ---- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1.5x 5.8x 8.0x 12.8x 7.9x 8.9x 3.7x
</TABLE>
- ---------------
(1) The Company's fiscal year ends on the Sunday nearest December 31 and
quarters end on the Sunday nearest the end of the respective calendar
quarter. Accordingly, as used herein, Fiscal Year 1992, 1993, 1994, 1995 and
1996 refer to the fiscal years ended January 3, 1993, January 2, 1994,
January 1, 1995, December 31, 1995 and December 29, 1996, respectively.
The ratio of earnings to fixed charges is computed by dividing fixed
charges into income before income taxes plus fixed charges. Fixed charges
include interest expense, amortization of debt issuance costs and the estimated
interest component of rent expense.
11
<PAGE> 12
DESCRIPTION OF NOTES
The Notes were issued under an indenture dated as of June 23, 1997 (the
"Indenture") between the Company and First Union National Bank, as trustee (the
"Trustee"). The following summaries of certain provisions of the Indenture do
not purport to be complete and are subject to, and are qualified in their
entirety by reference to, all of the provisions of the Indenture, including the
definition therein of certain terms. Wherever particular sections or defined
terms of the Indenture are referred to, such sections or defined terms are
incorporated herein by reference. Copies of the Indenture are available from the
Company or the Initial Purchasers upon request.
GENERAL
The Notes are unsecured obligations of the Company, are limited to $115.0
million in aggregate principal amount (including the Initial Purchasers'
over-allotment option) and mature on July 1, 2004. The Notes bear interest at
the rate per annum shown on the front cover of this Prospectus from the date of
original issuance of Notes pursuant to the Indenture, or from the most recent
Interest Payment Date to which interest has been paid or provided for, payable
semi-annually on July 1 and January 1 of each year, commencing January 1, 1998,
to the Person in whose name the Note (or any predecessor Note) is registered at
the close of business on the preceding June 15 or December 15, as the case may
be. Interest on the Notes is paid on the basis of a 360-day year of 12 30-day
months.
Principal of, and premium, if any, and interest on, the Notes is payable
(i) in respect of Notes held of record by the Depository Trust Company ("DTC")
or its nominee in same day funds on or prior to the payment dates with respect
to such amounts and (ii) in respect of Notes held of record by holders other
than DTC or its nominee at the drop office of the Trustee in New York, New York,
and the Notes may be surrendered for transfer, exchange or conversion at the
drop office of the Trustee in New York, New York. In addition, with respect to
Notes held of record by holders other than DTC or its nominee, payment of
interest may be made at the option of the Company by check mailed to the address
of the persons entitled thereto as it appears in the Security Register for the
Notes on the Regular Record Date for such interest.
The Notes have been issued only in registered form, without coupons and in
denominations of $1,000 or any integral multiple thereof. No service charge will
be made for any transfer or exchange of the Notes, but the Company may require
payment of a sum sufficient to cover any tax or other governmental charge and
any other expenses (including the fees and expenses of the Trustee) payable in
connection therewith. The Company is not required (i) to issue, register the
transfer of or exchange any Notes during a period beginning at the opening of
business 15 days before the day of the mailing of a notice of redemption and
ending at the close of business on the day of such mailing, (ii) to register the
transfer of or exchange any Note selected for redemption in whole or in part,
except the unredeemed portion of Notes being redeemed in part or (iii) to
register the transfer or exchange of any Notes surrendered for conversion or
repurchase upon the occurrence of a Repurchase Event.
All monies paid by the Company to the Trustee or any Paying Agent for the
payment of principal of and premium and interest on any Note which remain
unclaimed for two years after such principal, premium or interest become due and
payable may be repaid to the Company. Thereafter, the Holder of such Note may,
as an unsecured general creditor, look only to the Company for payment thereof.
The Indenture does not contain any provisions that would provide protection
to Holders of the Notes against a sudden and dramatic decline in credit quality
of the Company resulting from any takeover, recapitalization or similar
restructuring, except as described below under "-- Certain Rights to Require
Repurchase of Notes."
CONVERSION RIGHTS
The Notes are convertible into Common Stock at any time prior to redemption
or final maturity, initially at the conversion price of $35.625 per share. The
right to convert Notes that have been called for redemption terminates at the
close of business on the second business day preceding the Redemption Date. See
"-- Optional Redemption" below. The right to convert Notes that have been
submitted for repurchase terminates when such Notes are submitted for
repurchase.
The conversion price is subject to adjustment upon the occurrence of any of
the following events: (i) the subdivision, combination or reclassification of
outstanding shares of Common Stock; (ii) the payment in shares of
12
<PAGE> 13
Common Stock of a dividend or distribution on any class of capital stock of the
Company; (iii) the issuance of rights or warrants to all holders of Common Stock
entitling them to acquire shares of Common Stock or securities convertible into
Common Stock at a price per share less than the Current Market Price; (iv) the
distribution to holders of Common Stock of shares of capital stock other than
Common Stock, evidences of indebtedness, cash or assets (including securities,
but excluding dividends or distributions paid exclusively in cash and dividends,
distributions, rights and warrants referred to above); (v) a distribution
consisting exclusively of cash (excluding any cash distributions referred to in
(iv) above) to all holders of Common Stock in an aggregate amount that, together
with (A) all other cash distributions (excluding any cash distributions referred
to in (iv) above) made within the 12 months preceding such distribution and (B)
any cash and the fair market value of other consideration payable in respect of
any tender offer by the Company or a subsidiary of the Company for the Common
Stock consummated within the 12 months preceding such distribution, exceeds
12.5% of the Company's market capitalization (being the product of the Current
Market Price times the number of shares of Common Stock then outstanding) on the
date fixed for determining the shareholders entitled to such distribution; and
(vi) the consummation of a tender offer made by the Company or any subsidiary of
the Company for the Common Stock which involves an aggregate consideration that,
together with (X) any cash and other consideration payable in respect of any
tender offer by the Company or a subsidiary of the Company for the Common Stock
consummated within the 12 months preceding the consummation of such tender offer
and (Y) the aggregate amount of all cash distributions (excluding any cash
distributions referred to in (iv) above) to all holders of the Common Stock
within the 12 months preceding the consummation of such tender offer, exceeds
12.5% of the Company's market capitalization at the date of consummation of such
tender offer. No adjustment of the conversion price is required to be made until
cumulative adjustments amount to at least one percent of the conversion price,
as last adjusted. Any adjustment that would otherwise be required to be made
shall be carried forward and taken into account in any subsequent adjustment.
In addition to the foregoing adjustments, the Company is permitted to
reduce the conversion price as it considers to be advisable in order that any
event treated for federal income tax purposes as a dividend of stock or stock
rights will not be taxable to the holders of the Common Stock or, if that is not
possible, to diminish any income taxes that are otherwise payable because of
such event. In the case of any consolidation or merger of the Company with any
other corporation (other than one in which no change is made in the Common
Stock), or any sale or transfer of all or substantially all of the assets of the
Company, the Holder of any Note then outstanding will, with certain exceptions,
have the right thereafter to convert such Note only into the kind and amount of
securities, cash and other property receivable upon such consolidation, merger,
sale or transfer by a holder of the number of shares of Common Stock into which
such Note might have been converted immediately prior to such consolidation,
merger, sale or transfer; and adjustments will be provided for events subsequent
thereto that are as nearly equivalent as practical to the conversion price
adjustments described above.
Fractional shares of Common Stock will not be issued upon conversion, but,
in lieu thereof, the Company will pay a cash adjustment based upon the then
Closing Price at the close of business on the day of conversion. If any Notes
are surrendered for conversion during the period from the close of business on
any Regular Record Date through and including the next succeeding Interest
Payment Date (except any such Notes called for redemption), such Notes when
surrendered for conversion must be accompanied by payment in New York Clearing
House Funds or other funds acceptable to the Company, of an amount equal to the
interest thereon which the registered Holder on such Regular Date is to receive.
Except as described in the preceding sentence, no interest will be payable by
the Company on converted Notes with respect to any Interest Payment Date
subsequent to the date of conversion. No other payment or adjustment for
interest or dividends is to be made upon conversion.
The Rights Agreement (as defined below) provides that upon conversion of
the Notes the Holders will receive, in addition to the Common Stock issuable
upon such conversion, the Rights (as defined below) which would have attached to
such shares of Common Stock if the Rights had not become separated from the
Common Stock pursuant to the provisions of the Rights Agreement. See
"Description of Capital Stock -- Shareholder Rights Agreement."
SUBORDINATION
The payment of the principal of and premium, if any, and interest on the
Notes will, to the extent set forth in the Indenture, be subordinated in right
of payment to the prior payment in full of all Senior Indebtedness. If there is
a payment or distribution of assets to creditors upon any liquidation,
dissolution, winding up, reorganization,
13
<PAGE> 14
assignment for the benefit of creditors, marshalling of assets or any
bankruptcy, insolvency or similar proceedings of the Company, the holders of all
Senior Indebtedness will be entitled to receive payment in full of all amounts
due or to become due thereon or provision for such payment in money or money's
worth before the Holders of the Notes will be entitled to receive any payment in
respect of the principal of or premium, if any, or interest on the Notes. In the
event of the acceleration of the Maturity of the Notes, the holders of all
Senior Indebtedness will first be entitled to receive payment in full in cash of
all amounts due or to become due thereon or provision for such payment in money
or money's worth before the Holders of the Notes will be entitled to receive any
payment for the principal of or premium, if any, or interest on the Notes. No
payments on account of principal of or premium, if any, or interest on the Notes
or on account of the purchase or acquisition of Notes may be made if there has
occurred and is continuing a default in any payment with respect to Senior
Indebtedness, any default permitting acceleration of the maturity of any Senior
Indebtedness has occurred and is continuing or would occur upon such payment or
if any judicial proceeding is pending with respect to any such default.
Senior Indebtedness is defined in the Indenture as the principal of and
premium, if any, and interest on (i) all secured indebtedness of the Company for
money borrowed (including any secured indebtedness under the Company's Credit
Agreement and any predecessor or successor thereto), whether outstanding on the
date of execution of the Indenture or thereafter created, incurred or assumed,
except any such other indebtedness that by the terms of the instrument or
instruments by which such indebtedness was created or incurred expressly
provides that it (a) is junior in right of payment to the Notes or (b) ranks
pari passu in right of payment with the Notes, and (ii) any amendments,
renewals, extensions, modifications, refinancings and refundings of any of the
foregoing, provided that the indebtedness continues to be secured indebtedness.
For the purposes of this definition, "indebtedness for money borrowed" when used
with respect to the Company means (i) any obligation of, or any obligation
guaranteed by, the Company for the repayment of borrowed money (including
without limitation fees, penalties and other obligations in respect thereof),
whether or not evidenced by bonds, debentures, notes or other written
instruments, (ii) any deferred payment obligation of, or any such obligation
guaranteed by, the Company for the payment of the purchase price of property or
assets evidenced by a note or similar instrument and (iii) any obligation of, or
any such obligation guaranteed by, the Company for the payment of rent or other
amounts under a lease of property or assets which obligation is required to be
classified and accounted for as a capitalized lease on the balance sheet of the
Company under generally accepted accounting principles.
The Notes are obligations exclusively of the Company. The operations of the
Company are currently conducted principally through subsidiaries, which are
separate and distinct legal entities, and have no obligation, contingent or
otherwise, to pay any amounts due pursuant to the Notes or to make any funds
available therefor, whether by dividends, loans or other payments. In addition,
the payment of dividends and certain loans and advances to the Company by such
subsidiaries may be subject to certain statutory or contractual restrictions,
are contingent upon the earnings of such subsidiaries and are subject to various
business considerations.
The Notes are effectively subordinated to all indebtedness and other
liabilities and commitments (including trade payables and lease obligations) of
the Company's subsidiaries. Any right of the Company to receive assets of any
such subsidiary upon the liquidation or reorganization of any such subsidiary
(and the consequent right of the Holders of the Notes to participate in those
assets) is effectively subordinated to the claims of that subsidiary's
creditors, except to the extent that the Company is itself recognized as a
creditor of such subsidiary, in which case the claims of the Company would still
be subordinate to any security in the assets of such subsidiary and any
indebtedness of such subsidiary senior to that held by the Company.
The Indenture does not limit or prohibit the incurrence of Senior
Indebtedness or the incurrence of indebtedness, liabilities and commitments of
the Company's subsidiaries. The Company may incur Senior Indebtedness from time
to time in the future.
OPTIONAL REDEMPTION
The Notes are redeemable, at the Company's option, in whole or from time to
time in part, at any time on or after July 7, 2000, upon not less than 15 nor
more than 60 days' notice mailed to each Holder of Notes to be redeemed at its
address appearing in the Security Register and prior to Maturity at the
following Redemption Prices (expressed as percentages of the principal amount)
plus accrued interest to the Redemption Date (subject
14
<PAGE> 15
to the right of Holders of record on the relevant Regular Record Date to receive
interest due on an Interest Payment Date that is on or prior to the Redemption
Date).
If redeemed during the 12-month period beginning July 1, in the year
indicated (July 7, in the case of 2000), the redemption price shall be:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ---- ----------
<S> <C>
2000........................................................ 103.29%
2001........................................................ 102.46
2002........................................................ 101.64
2003........................................................ 100.82
2004........................................................ 100.00
</TABLE>
No sinking fund is provided for the Notes.
If fewer than all the Notes are to be redeemed, the Trustee will select the
Notes to be redeemed by lot or, in its discretion, on a pro rata basis. If any
Note is to be redeemed in part only, a new Note or Notes in principal amount
equal to the unredeemed principal portion thereof will be issued. If a portion
of a Holder's Notes are selected for partial redemption and such Holder converts
a portion of such Notes, such converted portion shall be deemed to be taken from
the portion selected for redemption.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company will not consolidate with or merge into any other Person or
convey, transfer or lease its properties and assets substantially as an entirety
to any Person, or permit any Person to consolidate with or merge into the
Company or convey, transfer or lease its properties substantially as an entirety
to the Company, unless (i) if applicable, the Person formed by such
consolidation or into which the Company is merged or the Person or corporation
which acquires the properties and assets of the Company substantially as an
entirety is a corporation, partnership or trust organized and validly existing
under the laws of the United States or any state thereof or the District of
Columbia and expressly assumes payment of the principal of and premium, if any,
and interest on the Notes and performance and observance of each obligation of
the Company under the Indenture, (ii) after consummating such consolidation,
merger, transfer or lease, no Default or Event of Default will occur and be
continuing, (iii) such consolidation, merger or acquisition does not adversely
affect the validity or enforceability of the Notes and (iv) the Company has
delivered to the Trustee an Officer's Certificate and an Opinion of Counsel,
each stating that such consolidation, merger, conveyance, transfer or lease
complies with the provisions of the Indenture.
CERTAIN RIGHTS TO REQUIRE REPURCHASE OF NOTES
In the event of any Repurchase Event (as defined below) occurring after the
date of issuance of the Notes and on or prior to Maturity, each Holder of Notes
will have the right, at the Holder's option, to require the Company to
repurchase all or any part of the Holder's Notes on the date (the "Repurchase
Date") that is 30 days after the date the Company gives notice of the Repurchase
Event as described below at a price (the "Repurchase Price") equal to 100% of
the principal amount thereof, together with accrued and unpaid interest to the
Repurchase Date. On or prior to the Repurchase Date, the Company shall deposit
with the Trustee or a Paying Agent an amount of money sufficient to pay the
Repurchase Price of the Notes which are to be repaid on or promptly following
the Repurchase Date.
Failure by the Company to provide timely notice of a Repurchase Event, as
provided for below, or to repurchase the Notes when required under the preceding
paragraph will result in an Event of Default under the Indenture whether or not
such repurchase is permitted by the subordination provisions of the Indenture.
On or before the 15th day after the occurrence of a Repurchase Event, the
Company is obligated to mail to all Holders of Notes a notice of the occurrence
of such Repurchase Event and identifying the Repurchase Date, the date by which
the repurchase right must be exercised, the Repurchase Price for Notes and the
procedures which the Holder must follow to exercise this right. To exercise the
repurchase right, the Holder of a Note must deliver, on or before the close of
business on the Repurchase Date, written notice to the Company (or an agent
designated by the Company for such purpose) and to the Trustee of the Holder's
exercise of such right, together
15
<PAGE> 16
with the certificates evidencing the Notes with respect to which the right is
being exercised, duly endorsed for transfer.
A "Repurchase Event" shall have occurred upon the occurrence of a Change in
Control or a Termination of Trading (each as defined below).
A "Change in Control" shall occur when (i) all or substantially all of the
Company's assets are sold as an entirety to any person or related group of
persons; (ii) there shall be consummated any consolidation or merger of the
Company (a) in which the Company is not the continuing or surviving corporation
(other than a consolidation or merger with a wholly owned subsidiary of the
Company in which all shares of Common Stock outstanding immediately prior to the
effectiveness thereof are changed into or exchanged for the same consideration)
or (b) pursuant to which the Common Stock would be converted into cash,
securities or other property, in each case other than a consolidation or merger
of the Company in which the holders of the Common Stock immediately prior to the
consolidation or merger have, directly or indirectly, at least a majority of the
total voting power of all classes of capital stock entitled to vote generally in
the election of directors of the continuing or surviving corporation immediately
after such consolidation or merger in substantially the same proportion as their
ownership of Common Stock immediately before such transaction; (iii) any person,
or any persons acting together which would constitute a "group" for purposes of
Section 13(d) of the Exchange Act, together with any affiliates thereof, shall
beneficially own (as defined in Rule 13d-3 under the Exchange Act) at least 50%
of the total voting power of all classes of capital stock of the Company
entitled to vote generally in the election of directors of the Company; (iv) at
any time during any consecutive two-year period, individuals who at the
beginning of such period constituted the Board of Directors of the Company
(together with any new directors whose election by such Board of Directors or
whose nomination for election by the shareholders of the Company was approved by
a vote of 66 2/3% of the directors then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors of the Company then in office; or (v) the
Company is liquidated or dissolved or adopts a plan of liquidation or
dissolution.
A "Termination of Trading" shall occur if the Common Stock (or other common
stock into which the Notes are then convertible) is neither listed for trading
on a U.S. national securities exchange nor approved for trading on an
established automated over-the-counter trading market in the United States.
The definition of Change in Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Company and its Subsidiaries taken as a whole. Although
there is a developing body of case law interpreting the phrase "substantially
all," there is no precise established definition of the phrase under applicable
law. Accordingly, the ability of a Holder of Notes to require the Company to
repurchase such Notes as a result of a sale, lease, transfer, conveyance or
other disposition of less than all of the assets of the Company and its
Subsidiaries taken as a whole to another Person or group may be uncertain.
The Credit Agreement prohibits the Company from purchasing Notes upon the
occurrence of a Repurchase Event and provides that certain change in control
events with respect to the Company would constitute a default thereunder. Any
future credit agreements or other agreements relating to Senior Indebtedness to
which the Company becomes a party may contain similar restrictions and
provisions.
The right to require the Company to repurchase Notes as a result of the
occurrence of Repurchase Event could create an event of default under Senior
Indebtedness of the Company, as a result of which any repurchase could, absent a
waiver, be blocked by the subordination provisions of the Notes. See
"-- Subordination." Failure by the Company to repurchase the Notes when required
will result in an Event of Default with respect to the Notes whether or not such
repurchase is permitted by the subordination provisions. The Company's ability
to pay cash to the Holders of Notes upon a repurchase may be limited by certain
financial covenants contained in the Company's Senior Indebtedness.
In the event a Repurchase Event occurs and the Holders exercise their
rights to require the Company to repurchase Notes, the Company intends to comply
with applicable tender offer rules under the Exchange Act, including Rules 13e-4
and 14e-1, as then in effect, with respect to any such purchase.
16
<PAGE> 17
The foregoing provisions would not necessarily afford Holders of the Notes
protection in the event of highly leveraged or other transactions involving the
Company that may adversely affect Holders. In addition, the foregoing provisions
may discourage open market purchases of the Common Stock or a non-negotiated
tender or exchange offer for such stock and, accordingly, may limit a
shareholder's ability to realize a premium over the market price of the Common
Stock in connection with any such transaction.
EVENTS OF DEFAULT
The following are Events of Default under the Indenture with respect to the
Notes: (i) default in the payment of principal of or any premium on any Note
when due (even if such payment is prohibited by the subordination provisions of
the Indenture); (ii) default in the payment of any interest on any Note when
due, which default continues for 30 days (even if such payment is prohibited by
the subordination provisions of the Indenture); (iii) failure to provide timely
notice of a Repurchase Event as required by the Indenture; (iv) default in the
payment of the Repurchase Price in respect of any Note on the Repurchase Date
therefor (even if such payment is prohibited by the subordination provisions of
the Indenture); (v) default in the performance of any other covenant of the
Company in the Indenture which continues for 60 days after written notice as
provided in the Indenture; (vi) default, under one or more bonds, debentures,
notes or other evidences of indebtedness for money borrowed by the Company or
any subsidiary of the Company or under one or more mortgages, indentures or
instruments under which there may be issued or by which there may be secured or
evidenced any indebtedness for money borrowed by the Company or any subsidiary
of the Company, whether such indebtedness now exists or shall hereafter be
created, which default individually or in the aggregate shall constitute a
failure to pay the principal of indebtedness in excess of $7.5 million when due
and payable after the expiration of any applicable grace period with respect
thereto or shall have resulted in indebtedness in excess of $7.5 million
becoming or being declared due and payable prior to the date on which it would
otherwise have become due and payable, without such indebtedness having been
discharged, or such acceleration having been rescinded or annulled, within a
period of 30 days after there shall have been given to the Company by the
Trustee or to the Company and the Trustee by the Holders of at least 25% in
aggregate principal amount of the Outstanding Notes a written notice specifying
such default and requiring the Company to cause such indebtedness to be
discharged or cause such acceleration to be rescinded or annulled; and (vii)
certain events of bankruptcy, insolvency or reorganization of the Company or any
subsidiary of the Company.
If an Event of Default with respect to the Notes shall occur and be
continuing, the Trustee or the Holders of not less than 25% in aggregate
principal amount of the Outstanding Notes then outstanding may declare the
principal of and premium, if any, on all such Notes to be due and payable
immediately, but if the Company cures all Events of Default (except the
nonpayment of interest on, premium, if any, and principal of any Notes) and
certain other conditions are met, such declaration may be canceled and past
defaults may be waived by the holders of a majority in principal amount of
Outstanding Notes. If an Event of Default shall occur as a result of an event of
bankruptcy, insolvency or reorganization of the Company or any subsidiary of the
Company, the aggregate principal amount of the Notes shall automatically become
due and payable. The Company is required to furnish to the Trustee annually a
statement as to the performance by the Company of certain of its obligations
under the Indenture and as to any default in such performance. The Indenture
provides that the Trustee may withhold notice to the Holders of the Notes of any
continuing default (except in the payment of the principal of or premium, if
any, or interest on any Notes) if the Trustee considers it in the interests of
Holders of the Notes to do so.
MODIFICATION, AMENDMENTS AND WAIVERS
Modifications and amendments of the Indenture may be made by the Company
and the Trustee without the consent of the Holders to: (i) cause the Indenture
to be qualified under the Trust Indenture Act; (ii) evidence the succession of
another Person to the Company and the assumption by any such successor of the
covenants of the Company herein and in the Notes; (iii) add to the covenants of
the Company for the benefit of the Holders or an additional Event of Default, or
surrender any right or power conferred upon the Company; (iv) secure the Notes;
(v) make provision with respect to the conversion rights of Holders in the event
of a consolidation, merger or sale of assets involving the Company, as required
by the Indenture; (vi) evidence and provide for the acceptance of appointment by
a successor Trustee with respect to the Notes; or (vii) cure any ambiguity,
correct or supplement any provision which may be defective or inconsistent with
any other provision, or make any other provisions with
17
<PAGE> 18
respect to matters or questions arising under the Indenture which shall not be
inconsistent with the provisions of the Indenture; provided, however, that no
such modifications or amendment may adversely affect the interests of Holders in
any material respect. The Credit Agreement requires the consent of the lenders
thereunder to any modification or amendment of the Indenture.
SATISFACTION AND DISCHARGE
The Company may discharge its obligations under the Indenture while Notes
remain Outstanding if (i) all Outstanding Notes will become due and payable at
their scheduled maturity within one year or (ii) all Outstanding Notes are
scheduled for redemption within one year, and in either case the Company has
deposited with the Trustee an amount sufficient to pay and discharge all
Outstanding Notes on the date of their scheduled maturity or the scheduled date
of redemption.
FORM, DENOMINATION AND REGISTRATION
The Notes were originally issued in fully registered form, without coupons,
in denominations of $1,000 in principal amount and integral multiples thereof.
FORM
Global Notes, Book-Entry Form. The Notes have been issued in fully
registered form, without coupons, in denominations of $1,000 principal amount
and multiples thereof. Notes sold by the Selling Securityholders pursuant to the
Registration Statement of which this Prospectus forms a part are represented by
two Global Notes (one of which represents Notes initially held by "qualified
institutional buyers," as defined in Rule 144A under the Securities Act, and one
of which represents Notes initially held by persons who acquired such Notes in
compliance with Regulation S under the Securities Act), (the "Global Notes"),
except as set forth below under "Certificated Notes." The Global Notes are
deposited with, or on behalf of, DTC and registered in the name of Cede & Co.
("Cede") as DTC's nominee. Beneficial interests in the Global Notes are
exchangeable for definitive certificated Notes only in accordance with the terms
of the Indenture.
Purchasers of the Notes offered hereby may hold their interests in the
Global Notes directly through DTC or indirectly through organizations that are
participants in DTC (the "Participants"). Transfers between Participants will be
effected in the ordinary way in accordance with DTC rules and will be settled in
same day funds.
Persons who are not Participants may beneficially own interests in the
Global Notes held by DTC only through Participants or certain banks, brokers,
dealers, trust companies and other parties that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly
("Indirect Participants"). So long as Cede, as the nominee of DTC, is the
registered owner of the Global Notes, Cede for all purposes will be considered
the sole holder of the Global Notes. Except as provided below, owners of
beneficial interests in the Global Notes will not be entitled to have
certificates registered in their names, will not receive or be entitled to
receive physical delivery of certificates in definitive form, and will not be
considered the holders thereof.
Payment of interest on and the redemption price (upon redemption at the
option of the Company or at the option of the Holder upon a Repurchase Event) of
the Global Notes will be made to Cede, the nominee for DTC, as the registered
owner of the Global Notes by wire transfer of immediately available funds on
each interest payment date or the redemption date, as the case may be. Neither
the Company, the Trustee nor any payment agent will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests in the Global Notes or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
The Company has been informed by DTC that, with respect to any payment of
interest on and the redemption price of (upon redemption at the option of the
Company or at the option of the Holder upon a Repurchase Event) the Global
Notes, DTC's practice is to credit Participants' accounts on the payment date
therefor with payments in amounts proportionate to their respective beneficial
interests in the Notes represented by the Global Notes as shown on the records
of DTC, unless DTC has reason to believe that it will not receive payment on
such payment date. Payments by Participants to owners of beneficial interests in
the Notes represented by the Global Notes held through such Participants will be
the responsibility of such Participants, as is now the case with securities held
for the accounts of customers registered in "street name."
18
<PAGE> 19
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a person
having a beneficial interest in the Notes represented by the Global Notes to
pledge such interest to persons or entities that do not participate in the DTC
system, or otherwise take actions in respect of such interest, may be affected
by the lack of a physical certificate evidencing such interest.
Neither the Company nor the Trustee (or any registrar, paying agent or
conversion agent under the Indenture) will have any responsibility for the
performance by DTC or its Participants or Indirect Participants of their
respective obligations under the rules and procedures governing their
operations. DTC has advised the Company that it will take any action permitted
to be taken by a holder of Notes (including, without limitation, the
presentation of Notes for exchange as described below), only at the direction of
one or more Participants to whose account with DTC interests in the Global Notes
are credited, and only in respect of the principal amount of the Notes
represented by the Global Notes as to which such Participant or Participants has
or have given such direction.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its Participants and to facilitate the clearance and settlement
of securities transactions between Participants through electronic book-entry
changes to the accounts of its Participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, bank, trust companies and clearing corporations and may include certain
other organizations such as the Initial Purchasers. Certain of such Participants
(or their representatives), together with other entities, own DTC. Indirect
access to the DTC system is available to others such as banks, brokers, dealers
and trust companies that clear through, or maintain a custodial relationship
with, a Participant, either directly or indirectly.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Notes among Participants, it is under no
obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time. If DTC is at any time unwilling or
unable to continue as depositary and a successor depositary is not appointed by
the Company within 90 days, the Company will cause Notes to be issued in
definitive form in exchange for the Global Notes.
Certificated Notes. Holders of Notes may request that certificated Notes
be issued in lieu of, or in exchange for, Notes represented by the Global Notes.
Furthermore, certificated Notes may be issued in exchange for Notes represented
by the Global Notes if no successor depositary is appointed by the Company as
set forth above under "Global Notes, Book-Entry Form."
PAYMENTS OF PRINCIPAL AND INTEREST
The Indenture requires that payments in respect of the Notes (including
principal, premium, if any, and interest) held of record by DTC (including Notes
represented by the Global Notes) be made in same day funds. Payments in respect
of the Notes held of record by holders other than DTC may, at the option of the
Company, be made by check and mailed to such holders of record as shown on the
register for the Notes.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
Pursuant to the Registration Rights Agreement between the Company and the
Initial Purchasers, the Company has filed with the Commission a registration
statement (the "Shelf Registration Statement") on Form S-3, of which this
Prospectus forms a part, to cover resales of Transfer Restricted Securities (as
defined below) by the holders thereof who satisfied certain conditions relating
to the provision of information in connection with the Shelf Registration
Statement. Notwithstanding the foregoing, the Company will be permitted to
prohibit offers and sales of Transfer Restricted Securities pursuant to the
Shelf Registration Statement under certain circumstances and subject to certain
conditions (any period during which offers and sales are prohibited being
referred to as a "Suspension Period"). "Transfer Restricted Securities" means
each Note and any underlying share of Common Stock until the date on which such
Note or underlying share of Common Stock has been effectively registered under
the Securities Act and disposed of in accordance with the Shelf Registration
Statement, the date on which such Note or underlying share of Common Stock is
distributed to the public
19
<PAGE> 20
pursuant to Rule 144 under the Securities Act or the date on which such Note or
share of Common Stock may be sold or transferred pursuant to Rule 144(k) (or any
similar provisions then in force).
Holders of the Notes will be required to deliver information to be used in
connection with, and to be named as selling securityholders in, the Shelf
Registration Statement. Any Holder who elects not to include such securities in
the Shelf Registration Statement could be deemed to be less liquid than if such
securities were included herein. In addition, there can be no assurance that the
Company will be able to maintain an effective and current registration statement
as required. The absence of such a registration statement may limit the Holder's
ability to sell the Notes or adversely affect the price at which such Notes can
be sold.
The Registration Rights Agreement provides that if the Shelf Registration
Statement shall cease to be effective (without being succeeded immediately by an
additional registration statement filed and declared effective) or usable for
the offer and sale of Transfer Restricted Securities for a period of time
(including any Suspension Period) which shall exceed 60 days in the aggregate in
any of the one-year periods ending on the first and second anniversaries of the
Closing Date (30 days in the case of the one year period ending on the first
anniversary of the Closing Date), or which shall exceed 30 days in any calendar
quarter within any of such one-year periods (each such event, a "Registration
Default"), the Company will pay liquidated damages to each Holder of Transfer
Restricted Securities. The amount of liquidated damages payable during any
period during which a Registration Default shall have occurred and be continuing
is that amount which is equal to one-quarter of one percent (25 basis points)
per annum per $1,000 principal amount or $2.50 per annum per 28.0702 shares of
Common Stock (subject to adjustment in the event of stock splits, stock
recombinations, stock dividends and the like) constituting Transfer Restricted
Securities for each 90-day period or part thereof until the applicable
registration statement is filed and the applicable registration statement is
declared effective, or the Shelf Registration Statement again becomes effective
or usable, as the case may be, up to a maximum amount of liquidated damages of
$0.25 per week per $1,000 principal amount of Notes or $12.50 per annum per
28.0702 shares of Common Stock (subject to adjustment as set forth above)
constituting Transfer Restricted Securities. All accrued liquidated damages
shall be paid to holders of Notes by wire transfer of immediately available
funds or by federal funds check by the Company on each Damages Payment Date (as
defined in the Registration Rights Agreement). Following the cure of a
Registration Default, liquidated damages will cease to accrue with respect to
such Registration Default.
The Company shall cause the Shelf Registration Statement to be effective
for a period of two years from the effective date thereof or such shorter period
that will terminate when each of the Transfer Restricted Securities covered by
the Registration Statement ceases to be a Transfer Restricted Security.
The foregoing summary of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, the provisions of the Registration Rights
Agreement. Copies of the Registration Rights Agreement are available from the
Company or the Initial Purchasers upon request.
GOVERNING LAW
The Indenture and Notes are governed by and construed in accordance with
the laws of the State of New York, without giving effect to such state's
conflicts of laws principles.
INFORMATION CONCERNING THE TRUSTEE
The Company and its subsidiaries may maintain deposit accounts and conduct
other banking transactions with the Trustee in the ordinary course of business.
ABSENCE OF PUBLIC MARKET
There is no existing public market for the Notes and there can be no
assurance as to the liquidity of any markets that may develop for the Notes, the
ability of the holders to sell their Notes or at what price holders of the Notes
will be able to sell their Notes. Future trading prices of the Notes will depend
upon many factors including, among other things, prevailing interest rates, the
Company's operating results, the price of the Common Stock and the market for
similar securities. The Initial Purchasers have informed the Company that they
are making and currently intend to continue making a market in the Notes;
however, the Initial Purchasers are not obligated to do
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<PAGE> 21
so and any such market making activity may be terminated at any time without
notice to the holders of the Notes, in the sole discretion of the Initial
Purchasers. Prior to the resale of the Notes pursuant to this Prospectus, each
of the Notes was eligible for trading in the PORTAL Market. Notes sold pursuant
to this Prospectus will no longer be eligible for trading in the PORTAL Market.
The Company does not intend to apply for listing of the Notes on any securities
exchange.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company currently consists of
95,000,000 shares of Common Stock, par value $.01 per share, and 5,000,000
shares of Preferred Stock, par value $.01 per share.
COMMON STOCK
Holders of the Common Stock are entitled to one vote per share on all
matters to be voted upon by the shareholders. Holders of Common Stock do not
have cumulative voting rights, and therefore holders of a majority of the shares
voting for the election of directors can elect all of the directors. In such
event, the holders of the remaining shares will not be able to elect any
directors.
Holders of the Common Stock are entitled to receive such dividends as may
be declared from time to time by the Board of Directors out of funds legally
available therefor. The Company does not anticipate paying cash dividends in the
foreseeable future. In the event of the liquidation, dissolution or winding up
of the Company, the holders of Common Stock are entitled to share ratably in all
assets remaining after payment of liabilities.
Holders of Common Stock have no preemptive, conversion or redemption rights
and are not subject to further calls or assessments by the Company. All of the
outstanding shares of Common Stock are, and the Shares issued by the Company
upon conversion of the Notes will be, if issued, validly issued, fully paid and
nonassessable.
The Transfer Agent and Registrar for the Common Stock is The First National
Bank of Boston.
PREFERRED STOCK
The Company's Board of Directors is authorized to issue from time to time,
without shareholder authorization, in one or more designated series, any or all
of the authorized but unissued shares of Preferred Stock with such dividend,
redemption, conversion and exchange provisions as may be provided in the
particular series. Any series of Preferred Stock may possess voting, dividend,
liquidation and redemption rights superior to that of the Common Stock. The
rights of the holders of Common Stock will be subject to and may be adversely
affected by the rights of the holders of any Preferred Stock that may be issued
in the future. Issuance of a new series of Preferred Stock, while providing
desirable flexibility in connection with possible acquisitions and other
corporate purposes, could have the effect of entrenching the Company's Board of
Directors and making it more difficult for a third party to acquire, or
discouraging a third party from acquiring, a majority of the outstanding voting
stock of the Company. Although the Company has no present plans to issue any
series of Preferred Stock, the Company's Board of Directors, in connection with
the adoption of the shareholder rights agreement described below, has pre-
approved the terms of a series of Preferred Stock which may be issued upon the
occurrence of certain triggering events.
STOCK OPTION PLAN
The Company's 1995 Equity Participation Plan (the "1995 Plan") currently
has reserved for issuance at all times thereunder a number of shares equal to
15% of the Common Stock issued and outstanding from time to time.
SHAREHOLDER RIGHTS AGREEMENT
On February 6, 1996, the Company's Board of Directors declared a dividend,
payable February 27, 1996, of one right (a "Right") for each outstanding share
of the Company's Common Stock held of record at the close of business on
February 27, 1996. The Rights were issued pursuant to a Rights Agreement, dated
as of February 6, 1996, between the Company and The First National Bank of
Boston, as Rights Agent. Each Right entitles the holder to purchase from the
Company one one-hundredth of a share of Series A Junior Participating Preferred
21
<PAGE> 22
Stock (the "Junior Participating Preferred") for an exercise price of $95.00,
subject to adjustment. Each one one-hundredth of a share of Junior Participating
Preferred, which will be created upon the occurrence of certain triggering
events, is designed to have economic and voting terms similar to those of one
share of Common Stock. The Rights will expire on the earliest of (i) the
declaration by the Board of Directors of an exchange of Rights for Common Stock,
as described below, (ii) the close of business on February 6, 2006 or (iii) the
date on which the Rights are redeemed or terminated, as described below.
The Rights will be evidenced by the Company's Common Stock certificates,
and no separate certificates representing the Rights will be distributed until
such time as the Rights separate from the Common Stock. In general, the Rights
will separate from the Common Stock and become exercisable upon the date (the
"Distribution Date") that is the earlier of (i) the tenth day (the "Flip-in
Date") following a public announcement that any person or group of affiliated or
associated persons other than the Company and certain Company-related entities
(an "Acquiring Person"), with certain exceptions, has acquired beneficial
ownership of 15% or more of the outstanding Common Stock or (ii) the tenth
business day (or such later date as may be determined by the Board of Directors
prior to the Distribution Date that otherwise would have occurred) following the
date on which an Acquiring Person commences a tender or exchange offer that, if
consummated, would result in such Acquiring Person becoming the beneficial owner
of 15% or more of the Company's outstanding Common Stock.
After the Distribution Date, each holder of a Right, other than Rights
beneficially owned by the Acquiring Person (which thereupon become void), will
have the right to receive upon exercise of a Right, at the then current exercise
price of the Right, that number of shares of Common Stock having a market value
of two times the exercise price of the Right.
In addition, the Board of Directors has certain rights to redeem, terminate
or exchange the Rights for Common Stock. At any time prior to the close of
business on a Flip-in Date, the Board of Directors may, at its option, redeem
all of the then outstanding Rights at a price of $.01 per Right. The Board may
generally amend the Rights in any respect prior to a Flip-in Date, and may
thereafter amend Rights in any respect not materially adverse to the Rights
holders generally. At any time after a Flip-in Date and prior to the time an
Acquiring Person becomes the beneficial owner of more than 50% of the
outstanding Common Stock, the Board may elect to exchange all Rights for Common
Stock at the rate of one share of Common Stock (or one one-hundredth of a share
of the Junior Participating Preferred, or shares of a class or series of the
Company's Preferred Stock having equivalent rights, preferences and privileges)
per Right.
Until a Right is exercised, the holder of the Right, as such, will have no
rights as a shareholder of the Company, including without limitation the right
to vote or receive dividends. The issuance of the Rights could have the effect
of making it more difficult for a third party to acquire, or discourage a third
party from acquiring, a majority or substantial minority interest in the Common
Stock of the Company.
CERTAIN PROVISIONS OF DELAWARE LAW
The Company is a Delaware corporation and is subject to Section 203 of the
Delaware General Corporation Law (the "Delaware Law"). In general, Section 203
currently prevents an "interested stockholder" (defined generally as a person
owning 15% or more of a corporation's outstanding voting stock) from engaging in
a "business combination" (as defined) with a Delaware corporation for three
years following the date such person became an interested stockholder unless (i)
before such person became an interested stockholder, the board of directors of
the corporation approved the transaction in which the interested stockholder
became an interested stockholder or approved the business combination, (ii) upon
consummation of the transaction that resulted in the interested stockholder
becoming an interested stockholder, the interested stockholder owns at least 85%
of the voting stock of the corporation outstanding at the time the transaction
commenced (excluding shares owned by persons who are both officers and directors
of the corporation and shares held by certain employee stock ownership plans),
or (iii) following the transaction in which such person became an interested
stockholder, the business combination is approved by the board of directors of
the corporation and authorized at a meeting of stockholders by the affirmative
vote of the holders of at least two-thirds of the outstanding voting stock of
the corporation not owned by the interested stockholder.
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<PAGE> 23
CERTAIN PROVISIONS OF CERTIFICATE OF INCORPORATION AND BYLAWS AFFECTING
SHAREHOLDERS
The Company's Certificate of Incorporation provides for a classified Board
of Directors consisting of three classes as nearly equal in size as practicable.
Each class will hold office until the third annual meeting for election of
directors following the election of such class. A majority vote of the
shareholders is required to alter, amend or repeal the foregoing provisions. The
classification of the Board of Directors may discourage a third party from
making a tender offer or otherwise attempting to gain control of the Company and
may maintain the incumbency of the Board of Directors.
The Company's Certificate of Incorporation also requires that any action
required or permitted by shareholders must be effected at a duly called annual
or special meeting of shareholders and may not be effected by written consent.
The Company's Bylaws set forth an advance notice procedure with regard to
shareholder nominations and business to be brought before a meeting of
shareholders.
LIMITATION OF LIABILITY AND INDEMNIFICATION AGREEMENTS
The Company's Certificate of Incorporation provides that to the fullest
extent permitted by Delaware law, a director of the Company shall not be liable
to the Company or its shareholders for monetary damages for breach of fiduciary
duty as a director. Under current Delaware law, liability of a director may not
be limited (i) for any breach of the director's duty of loyalty to the Company
or its shareholders, (ii) for acts or omissions not in good faith or that
involve intentional misconduct or a knowing violation of law, (iii) in respect
of certain unlawful dividend payments or stock redemptions or repurchases, and
(iv) for any transaction from which the director derives an improper personal
benefit. The effect of this provision of the Company's Certificate of
Incorporation is to eliminate the rights of the Company and its shareholders
(through shareholders' derivative suits on behalf of the Company) to recover
monetary damages against a director for breach of the fiduciary duty of care as
a director (including breaches resulting from negligent or grossly negligent
behavior), except in the situations described in clauses (i) through (iv) above.
This provision does not limit or eliminate the rights of the Company or any
shareholder to seek nonmonetary relief such as an injunction or rescission in
the event of a breach of a director's duty of care. In addition, the Company's
Bylaws provide that the Company shall indemnify its directors and officers, and
may indemnify employees and agents, against losses incurred by any such person
by reason of the fact that such person was acting in such capacity.
The Company has entered into agreements (the "Indemnification Agreements")
with certain of the directors and officers of the Company pursuant to which the
Company has agreed to indemnify such director or officer for any damages,
judgments, fines, expenses, costs, penalties or amounts paid in settlement in
connection with any claim, action, suit or proceeding in which such director or
officer is involved as a party or otherwise by reason of the fact that he is or
was a director or officer of the Company or any other corporation or other
entity of which he served as a director or officer at the request of the Company
to the maximum extent permitted by applicable law. In addition, such director or
officer is entitled to an advance of expenses to the maximum extent authorized
or permitted by law.
To the extent that the Board of Directors or the shareholders of the
Company may in the future wish to limit or repeal the ability of the Company to
provide indemnification as set forth in the Company's Bylaws, such repeal or
limitation may not be effective as to directors and officers who are parties to
the Indemnification Agreements, because their rights to full protection would be
contractually assured by the Indemnification Agreements. It is anticipated that
similar contracts may be entered into, from time to time, with future directors
and officers of the Company.
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<PAGE> 24
SELLING SECURITYHOLDERS
The Notes were originally issued by the Company to and sold by the Initial
Purchasers in a transaction exempt from the registration requirements of the
Securities Act to persons reasonably believed by such Initial Purchasers to be
"qualified institutional buyers" (as defined in Rule 144A under the Securities
Act), other institutional "accredited investors" (as defined in Rule 501(a)(1),
(2), (3) or (7) under the Securities Act) or in transactions complying with the
provisions of Regulation S under the Securities Act. The Selling Securityholders
(which term includes their transferees, pledgees, donees or successors) may from
time to time offer and sell pursuant to this Prospectus any or all of the Notes
and Shares.
Set forth below are the names of each Selling Securityholder, the nature of
any position, office, or other material relationship that the Selling
Securityholder has had within the past three years with the Company or any of
its predecessors or affiliates, the principal amount of Notes that may be
offered and sold by such Selling Securityholder pursuant to this Prospectus and
(if one percent or more) the percentage of such Notes owned as of October 7,
1997, the number of Shares that may be offered and sold by such Selling
Securityholder pursuant to this Prospectus and (if one percent or more) the
percentage of Common Stock represented by the Shares owned by each Selling
Securityholder after conversion of the Notes.
Any or all of the Notes or Shares of Common Stock listed below may be
offered for sale pursuant to this Prospectus by the Selling Securityholders from
time to time. Accordingly, no estimate can be given as to the amount of the
Notes or Shares that will be held by the Selling Securityholders upon
consummation of any such sales. In addition, the Selling Securityholders
identified below may have sold, transferred or otherwise disposed of all or a
portion of their Notes since the date on which the information regarding their
Notes was provided, in transactions exempt from the registration requirements of
the Securities Act.
<TABLE>
<CAPTION>
NUMBER OF
PERCENTAGE SHARES INTO PERCENTAGE OF
PRINCIPAL OF WHICH THE COMMON STOCK
AMOUNT NOTES NOTES ARE AFTER CONVERSION OF
NAME OF NOTES OUTSTANDING CONVERTIBLE(1) THE NOTES(2)
- ---- ----------- ----------- ---------------- -------------------
<S> <C> <C> <C> <C>
BancAmerica Robertson Stephens....................... $ 20,000 * 561 *
Bank of New York (The)............................... $10,252,000 8.91 287,775 2.37
Bankers Trust Company................................ $11,848,000 10.30 332,575 2.74
Bear, Stearns Securities Corp........................ $ 4,850,000 4.22 136,140 1.12
Bank of America Personal Trust....................... $ 375,000 * 10,526 *
Boston Safe Deposit and Trust Company................ $15,800,000 13.74 443,508 3.66
Brown Brothers Harriman & Co......................... $ 675,000 * 18,947 *
BT/Corp. Clearance - BTI............................. $ 3,000,000 2.61 84,210 *
Chase Manhattan Bank................................. $ 8,690,000 7.56 243,929 2.01
Chase Manhattan Bank/Chemical........................ $ 790,000 * 22,175 *
Citibank, N.A........................................ $ 1,045,000 * 29,333 *
Custodial Trust Company.............................. $ 3,150,000 2.74 88,421 *
Deutsche Morgan Grenfell Inc......................... $ 500,000 * 14,035 *
Fidelity Financial Trust: Fidelity Convertible
Securities Fund.................................... $ 4,000,000 3.48 112,280 *
Fiduciary Trust Company International................ $ 210,000 * 5,894 *
First Tennessee Bank N.A. Memphis.................... $ 365,000 * 10,245 *
Firstar Trust Company................................ $ 500,000 * 14,035 *
First National Bank of Maryland...................... $ 165,000 * 4,631 *
First National Bank of Omaha......................... $ 150,000 * 4,210 *
Investors Bank & Trust/M.F. Custody.................. $ 390,000 * 10,947 *
Julius Baer Securities Inc........................... $ 500,000 * 14,035 *
Lehman Brothers International (Europe) - Prime Broker
(LBI).............................................. $ 5,500,000 4.78 154,385 1.27
Mercantile Safe Deposit & Trust...................... $ 1,765,000 1.53 49,543 *
Merrill Lynch, Pierce, Fenner & Smith,
Incorporated....................................... $ 1,000,000 * 28,070 *
Merrill Lynch Professional Clearing Corp............. $ 300,000 * 8,421 *
Merrill Lynch, Pierce, Fenner & Smith Safekeeping.... $ 5,000,000 4.35 140,350 1.16
Merrill Lynch, Pierce, Fenner & Smith, Inc.-Debt
Securities......................................... $ 355,000 * 9,964 *
Morgan Stanley & Co. Incorporated.................... $ 1,650,000 1.43 46,315 *
Nomura International Trust Company................... $ 1,100,000 * 30,877 *
Norwest Bank Minnesota N.A........................... $ 140,000 * 3,929 *
Northern Trust Company............................... $ 1,120,000 * 31,438 *
Paine Webber Incorporated............................ $ 175,000 * 4,912 *
PNC Bank, National Association....................... $ 225,000 * 6,315 *
Sanwa Bank California................................ $ 385,000 * 10,807 *
SBC Warburg Dillon Read Inc.......................... $ 2,000,000 1.74 56,140 *
Societe Generale Securities Corp..................... $ 1,000,000 * 28,070 *
SSB - Custodian...................................... $19,530,000 16.98 548,210 4.52
SunTrust Bank, Atlanta............................... $ 250,000 * 7,017 *
UBS Securities Inc................................... $ 5,850,000 5.09 164,210 1.35
Wachovia Bank of North Carolina, N.A................. $ 380,000 * 10,666 *
</TABLE>
24
<PAGE> 25
- ---------------
* Less than one percent.
(1) Assumes conversion of the full amount of Notes held by such Selling
Securityholder at the initial conversion price of $35.625 per share; such
conversion price is subject to adjustment as described under "Description of
Notes -- Conversion Rights." Accordingly, the number of Shares issuable upon
conversion of the Notes may increase or decrease from time to time.
Fractional shares will not be issued upon conversion of the Notes; cash will
be paid in lieu of fractional shares, if any.
(2) The percentage of Common Stock after conversion of the Notes represents the
percentage of the Common Stock each Selling Securityholder will have after
treating as outstanding the number of Shares of Common Stock shown as being
issuable upon the assumed conversion by the named Selling Securityholder of
the full amount of such holder's Notes but not assuming the conversion of
the Notes of any other Selling Securityholder. These percentages are based
on 12,133,745 shares of Common Stock that were issued and outstanding as of
October 7, 1997 before taking into account any of the assumed conversions.
PLAN OF DISTRIBUTION
The Notes and the Shares are being registered to permit public secondary
trading of such securities by the holders thereof from time to time after the
date of this Prospectus. The Company has agreed, among other things, to bear all
expenses (other than underwriting discounts, selling commissions and fees and
expenses of counsel and other advisors to holders of the Notes and the Shares)
in connection with the registration and sale of the Notes and the Shares covered
by this Prospectus.
The Company will not receive any of the proceeds from the offering of the
Notes and the Shares by the Selling Securityholders. The Company has been
advised by the Selling Securityholders that the Selling Securityholders may sell
all or a portion of the Notes and Shares beneficially owned by them and offered
hereby from time to time on any exchange on which the securities are listed on
terms to be determined at the times of such sales. The Selling Securityholders
may also make private sales directly or through a broker or brokers.
Alternatively, any of the Selling Securityholders may from time to time offer
the Notes or Shares beneficially owned by them through underwriters, dealers or
agents, who may receive compensation in the form of underwriting discounts,
commissions or concessions from the Selling Securityholders and the purchasers
of the Notes or Shares for whom they may act as agent. The aggregate proceeds to
the Selling Securityholders from the sale of the Notes or Shares offered by them
hereby will be the purchase price of such Notes or Shares less discounts and
commissions, if any.
The Notes and Shares may be sold from time to time in one or more
transactions at fixed offering prices, which may be changed, or at varying
prices determined at the time of sale or at negotiated prices. Such prices will
be determined by the holders of such securities or by agreement between such
holders and underwriters or dealers who may receive fees or commissions in
connection therewith.
The outstanding Common Stock is listed for trading on the NYSE and the
Shares have been approved for listing on the NYSE upon notice of issuance. The
Initial Purchasers have advised the Company that they are making and currently
intend to continue making a market in the Notes; however, they are not obligated
to do so and any such market-making may be discontinued at any time without
notice, in the sole discretion of the Initial Purchasers. The Company does not
intend to apply for listing of the Notes on any securities exchange.
Accordingly, no assurance can be given that any market for the Notes will be
developed or maintained. See "Risk Factors -- Absence of Public Market."
In order to comply with the securities laws of certain states, if
applicable, the Notes and Shares will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
Notes and Shares may not be sold unless they have been registered or qualified
for sale in the applicable state or they comply with an available exemption from
the applicable registration or qualification requirement.
The Selling Securityholders and any broker and any broker-dealers, agents
or underwriters that participate with the Selling Securityholders in the
distribution of the Notes or Shares may be deemed to be "underwriters" within
the meaning of the Securities Act, in which event any commissions received by
such broker-dealers, agents or underwriters and any profit on the resale of the
Notes or the Shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.
25
<PAGE> 26
In addition, any securities covered by this Prospectus that qualify for
sale pursuant to Rule 144 or Rule 144A of the Securities Act may be sold under
Rule 144 or Rule 144A rather than pursuant to this Prospectus. There is no
assurance that any Selling Securityholder will sell any or all of the Notes or
Shares described herein, and any Selling Securityholder may transfer, devise or
gift such securities by other means not described herein.
The Notes were originally sold to Smith Barney Inc., PaineWebber
Incorporated, J.C. Bradford & Co., The Robinson-Humphrey Company, Inc. and
NationsBanc Capital Markets, Inc., as the Initial Purchasers, in June and July
1997 in a private placement. The Company agreed to indemnify and hold the
Initial Purchasers harmless against certain liabilities under the Securities Act
that could arise in connection with the sale of the Notes by the Initial
Purchasers. The Company and the Selling Securityholders are obligated to
indemnify each other against certain liabilities arising under the Securities
Act related to the offer and sale of the Notes and Shares under this Prospectus.
The Company will use its best efforts to cause the Registration Statement
to which this Prospectus relates to remain effective for a period of two years
from the effective date thereof, or until it is no longer required for transfer
of the Notes or the underlying Shares. The Company is permitted to suspend the
use of this Prospectus in connection with the sales of Notes and Shares by
holders upon the happening of an event or if there exists any fact that makes
any statement of material fact made in this Prospectus untrue or that requires
the making of additions to or changes in the Prospectus in order to make the
statements herein not misleading until such time as the Company advises the
Selling Securityholders that use of the Prospectus may be resumed, in which case
the period of time during which the Company is required to maintain the
effectiveness of this Registration Statement shall be extended. Expenses of
preparing and filing the Registration Statement and all post-effective
amendments will be borne by the Company.
26
<PAGE> 27
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following summarizes certain income tax considerations relevant to
holders of the Notes. The summary is based on current provisions of the Internal
Revenue Code of 1986 (the "Code"), Treasury regulations thereunder,
administrative rulings and court decisions, all of which are subject to change
(possibly retroactively). The summary does not address state, local, or foreign
tax consequences, nor does it discuss federal income tax consequences to
categories of purchasers subject to special rules, such as tax-exempt
organizations, insurance companies, financial institutions, dealers in stocks
and securities or persons who hold the Notes or Common Stock in connection with
a straddle. The summary assumes that the holders will hold the Notes, or the
shares of Common Stock received upon conversion of the Notes, for investment
purposes only. The Company does not intend to request a ruling from the Internal
Revenue Service (the "IRS") regarding any of the federal income tax matters
discussed in this summary. Accordingly, before making an investment decision,
prospective purchasers are urged to consult their own tax advisors as to the
federal income and other tax consequences of the purchase, ownership and
disposition of the Notes (including the conversion of Notes into Common Stock)
and the Common Stock.
For the purpose of this discussion, a "Non-U.S. Holder" refers to any
holder who is not a U.S. Holder. The term "U.S. Holder" means a citizen or
resident of the United States, a corporation or partnership created or organized
in the United States or any state thereof, or an estate or trust, the income of
which is includible in income for United States income tax purposes regardless
of its source.
OWNERSHIP OF THE NOTES AND COMMON STOCK BY U.S. HOLDERS
Interest on Notes. The stated interest on a Note will be taxable to a
holder as ordinary income at the time interest is paid or accrued in accordance
with the holder's method of accounting for federal income tax purposes. The
Company expects that the Notes will not be issued with original issue discount
("OID") within the meaning of the Code.
Constructive Dividend. Certain corporate transactions, such as
distributions of assets to holders of Common Stock, may cause a deemed
distribution to the holders of the Notes if the conversion price or conversion
ratio of the Notes is adjusted to reflect such corporate transaction. Any such
deemed distributions to the holders of the Notes may be taxable as a dividend to
the extent of the Company's earnings and profits, a return of capital or capital
gain. See "Dividends on Shares of Common Stock" below.
Sale or Exchange of Notes or Shares of Common Stock. A holder of Notes
will generally recognize gain or loss on the sale, redemption, retirement or
other disposition of the Notes. The gain or loss will generally be equal to the
difference between (i) the amount of cash and the fair market value of any other
property received by the holder (excluding any amount that represents accrued
interest, which will be taxable as such) and (ii) the holder's adjusted tax
basis in the Notes. Generally, a holder's adjusted tax basis in the Notes will
equal (i) the holder's cost of the Notes, plus (ii) the amount of market
discount taken into income, if any, less (iii) the amount of bond premium
amortized by the holder, if any. A holder of Common Stock will generally
recognize gain or loss upon the sale, exchange, redemption or other disposition
of the Common Stock. The gain or loss will generally be equal to the difference
between (i) the amount of cash and the fair market value of any other property
received by the holder of Common Stock and (ii) the holder's adjusted tax basis
in the Common Stock. Subject to the market discount rules discussed below and
certain special rules that apply to redemptions of Common Stock, gain or loss
recognized by a holder will generally be long-term capital gain or loss if the
Notes or Common Stock are held as capital assets for a period in excess of one
year.
Conversion of Notes. A holder of Notes will not recognize gain or loss
upon the conversion of the Notes into shares of Common Stock of the Company. The
holder's adjusted tax basis in the shares of Common Stock will be equal to the
holder's adjusted tax basis in the Notes at the time of the conversion, less any
portion of such basis allocable to cash received in lieu of a fractional share.
Generally, the holding period of the shares of Common Stock received by the
holder upon conversion of Notes includes the period of time the Notes were held
prior to the conversion by the holder. Generally, gain or loss recognized on the
receipt of cash paid in lieu of such fractional shares will equal the difference
between the amount of cash received and the holder's adjusted tax basis
allocable to the fractional shares.
27
<PAGE> 28
Market Discount. If a Note is acquired by a subsequent purchaser at a
"market discount," some or all of the gain realized upon a disposition or
payment upon the Note's maturity may be treated as ordinary income. Subject to a
de minimis exception, "market discount" with respect to a Note will be equal to
the excess of (i) the stated redemption price at maturity of the Note over (ii)
the holder's tax basis in the Note immediately after acquisition. The amount of
market discount treated as having accrued will be determined either on a ratable
basis, or, if the holder so elects, on a constant interest method. Upon any
subsequent disposition of the Note (other than in connection with certain
nonrecognition transactions, e.g., the conversion to Common Stock), the lesser
of (i) gain on the disposition or (ii) the market discount that accrued while
the Note was held by the subsequent holder will be treated as ordinary income at
the time of the disposition. A holder may elect to include market discount in
income currently in lieu of including accrued market discount in income at the
time of disposition. A holder of a Note acquired at a market discount may be
required to defer the deduction of a portion of the interest expense on any
indebtedness incurred or maintained to purchase or carry the Note until the Note
is disposed of in a taxable transaction, unless the holder elects to include
accrued market discount in income currently. If a holder acquires a Note at a
market discount and receives Common Stock upon conversion of the Note, the
amount of accrued market discount with respect to the converted Note through the
date of conversion will be treated as ordinary income upon the disposition of
the Common Stock.
Amortizable Bond Premium. If a subsequent purchaser of a Note purchases it
at a cost that is in excess of the amount payable on maturity, the excess cost
may be treated as "amortizable bond premium" that is allocated among the
interest payments on the Note using a constant interest rate method over the
Note's remaining term. The amount allocated to each interest payment would be
applied against and offset a portion of the income from such interest payment,
with a corresponding reduction in the holder's basis. The interest offset would
be available only if an election under Section 171 of the Code is made or is in
effect and if the acquired Note is held as a capital asset. The election would
apply to all debt instruments held or subsequently acquired by the electing
holder on or after the first day of the first taxable year to which the election
applies and may not be revoked without the consent of the IRS. The amount of the
premium attributable to the conversion feature of the Note must be eliminated in
determining the amount of any amortizable bond premium.
Dividends on Shares of Common Stock. Distributions on shares of Common
Stock will constitute dividends for federal income tax purposes to the extent of
current or accumulated earnings and profits of the Company. To the extent that a
holder receives a distribution on Common Stock that would otherwise constitute a
dividend but exceeds current and accumulated earnings and profits of the
Company, such distribution will be treated first as a non-taxable return of
capital reducing the holder's adjusted tax basis in the Common Stock. Any
distribution in excess of the holder's adjusted tax basis in the Common Stock
will be treated as capital gain. Dividends paid to holders that are United
States corporations may qualify for the dividends-received deduction.
OWNERSHIP OF THE NOTES BY NON-U.S. HOLDERS
Interest on Notes. Generally, interest paid on the Notes to a Non-U.S.
Holder will not be subject to federal income tax if (i) such interest is not
effectively connected with the conduct of a trade or business within the United
States by the Non-U.S. Holder; (ii) the Non-U.S. Holder does not actually or
constructively own 10% or more of the total voting power of all classes of stock
of the Company entitled to vote and is not a controlled foreign corporation with
respect to which the Company is a "related person" within the meaning of the
Code, and (iii) the beneficial owner, under penalty of perjury, certifies that
the owner is not a U.S. Holder and provides the owner's name and address. If
certain requirements are satisfied, the certification described in paragraph
(iii) above may be provided by a securities clearing organization, a bank, or
other financial institution that holds customers' securities in the ordinary
course of its trade or business. For this purpose, the holder of Notes would be
deemed to own the Common Stock into which it could be converted. A holder that
is not exempt from tax under these rules will be subject to federal income tax
withholding at a rate of 30% unless the interest is effectively connected with
the conduct of a United States trade or business, in which case the interest
will be subject to the federal income tax on net income that applies to U.S.
Holders generally. Non-U.S. Holders should consult applicable income tax
treaties, which may provide different rules.
Sales or Exchanges of Notes or Shares of Common Stock. A Non-U.S. Holder
generally will not be subject to federal income tax on gain recognized upon the
sale or other disposition of Notes or Common Stock received upon conversion
thereof unless (i) the gain is effectively connected with the conduct of a trade
or business within
28
<PAGE> 29
the United States by the Non-U.S. Holder, or (ii) in the case of a Non-U.S.
Holder who is a nonresident alien individual and holds Notes or Common Stock as
a capital asset, such holder is present in the United States for 183 or more
days in the taxable year and certain other circumstances are present. If the
Company were a "United States real property holding corporation" (which the
Company currently is not and does not expect to be) a Non-U.S. Holder may be
subject to federal income tax with respect to gain on such disposition as if it
were effectively connected with a United States trade or business and the amount
realized may be subject to withholding at the rate of 10%. The amount withheld
pursuant to these rules will be creditable against such Non-U.S. Holder's
federal income tax liability and may entitle the Non-U.S. Holder to a refund
upon furnishing the required information to the IRS. Non-U.S. Holders should
consult applicable income tax treaties, which may provide different rules.
Conversion of Notes. A Non-U.S. Holder generally will not be subject to
federal income tax on the conversion of a Note into shares of Common Stock. To
the extent a Non-U.S. Holder receives cash in lieu of a fractional share on
conversion, such cash may give rise to gain that would be subject to the
foregoing rules with respect to the sale or exchange of a Note or Common Stock.
Dividends on Shares of Common Stock. Generally, any distribution on shares
of Common Stock to a Non-U.S. Holder will be subject to federal income tax
withholding at a rate of 30% unless the dividend is effectively connected with
the conduct of trade or business within the United States by the Non-U.S.
Holder, in which case the dividend will be subject to the federal income tax on
net income that applies to U.S. Holders generally (and, with respect to
corporate holders under certain circumstances, the branch profits tax). Non-U.S.
Holders should consult any applicable income tax treaties, which may provide for
a lower withholding or other rules different from those described above. A
Non-U.S. Holder may be required to satisfy certain certification requirements in
order to claim a reduction of or exemption from withholding under the foregoing
rules.
INFORMATION REPORTING AND BACKUP WITHHOLDING
U.S. Holders. Information reporting and backup withholding may apply to
payments of interest or dividends on or the proceeds from the sale or other
disposition of the Notes or shares of Common Stock with respect to certain
non-corporate U.S. Holders. Such U.S. Holders generally will be subject to
backup withholding at a rate of 31% unless the recipient of such payment
supplies a taxpayer identification number, certified under penalty of perjury,
as well as certain other information, or otherwise establishes, in the manner
prescribed by law, an exemption from back-up withholding. Any amount withheld
under the backup withholding rules is allowable as a credit against the U.S.
Holder's federal income tax, upon furnishing the required information.
Non-U.S. Holders. Generally, information reporting and backup withholding
of federal income tax at a rate of 31% may apply to payments of principal,
interest and premium (if any) to Non-U.S. Holders if the payee fails to certify
that the holder is a Non-U.S. Holder. The 31% backup withholding tax generally
will not apply to dividends paid to Non-U.S. Holders outside the United States
that are subject to 30% withholding discussed above or that are subject to a tax
treaty that reduces such withholding.
The payment of the proceeds on the disposition of Notes or shares of Common
Stock to or through the United States office of a United States or foreign
broker will be subject to information reporting and backup withholding, unless
the owner provides the certification described above or otherwise establishes an
exemption. The proceeds of the disposition by a Non-U.S. Holder of Notes or
shares of Common Stock to or through a foreign office of a broker will not be
subject to backup withholding. However, if such broker is a U.S. person, a
controlled foreign corporation for federal income tax purposes or a foreign
person 50% or more of whose gross income from all sources for certain periods is
from activities that are effectively connected with a United States trade or
business, information reporting will apply unless such broker has documentary
evidence in its files of the owner's foreign status and has no actual knowledge
to the contrary or unless the owner otherwise establishes an exemption. Both
backup withholding and information reporting will apply to the proceeds from
such dispositions if the broker has actual knowledge that the payee is a U.S.
Holder.
29
<PAGE> 30
LEGAL MATTERS
Certain legal matters with respect to the legality of the Notes and the
validity of the Shares offered hereby will be passed upon for the Company by
Robinson, Bradshaw & Hinson, P.A., Charlotte, North Carolina.
EXPERTS
The consolidated financial statements of the Company as of December 31,
1995 and December 29, 1996 and for each of the three years in the period ended
December 29, 1996, incorporated by reference in this Prospectus, have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their report with respect thereto, and are incorporated herein by reference in
reliance upon the authority of said firm as experts in accounting and auditing
in giving said reports.
30
<PAGE> 31
======================================================
NO DEALER, SALESPERSON, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THAT DATE.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. 3
Incorporation by Reference............ 4
The Company........................... 5
Risk Factors.......................... 6
Use of Proceeds....................... 11
Ratio of Earnings to Fixed Charges.... 11
Description of Notes.................. 12
Description of Capital Stock.......... 21
Selling Securityholders............... 24
Plan of Distribution.................. 25
Certain United States Federal Income
Tax Consequences.................... 27
Legal Matters......................... 30
Experts............................... 30
</TABLE>
======================================================
======================================================
[PGA LOGO]
PERSONNEL GROUP OF
AMERICA, INC.
5 3/4% CONVERTIBLE
SUBORDINATED NOTES
DUE 2004
AND
3,228,070 SHARES
OF
COMMON STOCK
-------------
PROSPECTUS
OCTOBER 20, 1997
-------------
======================================================
<PAGE> 32
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemized statement of the estimated expenses, other
than underwriting discounts and commissions, all of which were or will be borne
by the Company.
<TABLE>
<S> <C>
Registration fee............................................ $34,848
New York Stock Exchange listing fee......................... 11,300
Accounting fees and expenses................................ 10,000
Printing and engraving expenses............................. 15,000
Legal fees and expenses..................................... 10,000
Miscellaneous fees and expenses............................. 3,852
-------
Total............................................. $85,000
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145(a) of the General Corporation Law of the State of Delaware
provides that a Delaware corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
cause to believe his conduct was unlawful.
Section 145(b) provides that a Delaware corporation may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted
under similar standards, except that no indemnification may be made in respect
of any claim, issue or matter as to which such person shall have been adjudged
to be liable to the corporation unless and only to the extent that the court in
which such action or suit was brought shall determine that despite the
adjudication of liability, such person is fairly and reasonably entitled to be
indemnified for such expenses which the court shall deem proper.
Section 145 further provides that to the extent a director, officer,
employee or agent of a corporation has been successful in the defense of any
action, suit or proceeding referred to in subsections (a) and (b) or in the
defense of any claim, issue, or matter therein, he shall be indemnified against
expenses actually and reasonably incurred by him in connection therewith; that
indemnification provided for by Section 145 shall not be deemed exclusive of any
other rights to which the indemnified party may be entitled; and that the
corporation may purchase and maintain insurance on behalf of a director,
officer, employee or agent of the corporation against any liability asserted
against him or incurred by him in any such capacity or arising out of his status
as such, whether or not the corporation would have the power to indemnify him
against such liabilities under Section 145.
Section 102(b)(7) of the General Corporation Law provides that a
corporation in its original certificate of incorporation or an amendment thereto
validly approved by stockholders may eliminate or limit personal liability of
members of its board of directors or governing body for breach of a director's
fiduciary duty. However, no such provision may eliminate or limit the liability
of a director for breaching his duty of loyalty, failing to act in good faith,
engaging in intentional misconduct or knowingly violating a law, paying a
dividend or approving a stock repurchase that was illegal, or obtaining an
improper personal benefit. A provision of this type has no effect on the
availability of equitable remedies, such as injunction or rescission, for breach
of fiduciary duty.
II-1
<PAGE> 33
The Company's Certificate of Incorporation provides that, to the extent
permitted by Delaware law, each director shall not be liable for monetary
damages for breach of such director's fiduciary duty as a director to the
Company and its stockholders. In addition, the Company's bylaws provide that the
Company will indemnify, to the full extent permitted by law, its directors and
officers, and may indemnify, at the discretion of the Board of Directors,
employees and agents, against losses incurred by any such person by reason of
the fact that such person was acting in such capacity.
The Company maintains insurance for the benefit of its directors and
officers insuring against certain liabilities and expenses that may be incurred
by such director or officer in or arising out of his capacity as such, and
insuring the Company, under certain circumstances, in the event that
indemnification payments are made by the Company to such officers and directors.
The Company has also entered into individual indemnification agreements
with its officers and directors, pursuant to which the Company has agreed to
indemnify its officers and directors, and to advance expenses to such persons,
to the maximum extent permitted by applicable law.
The Purchase Agreement dated as of June 17, 1997 between the Company and
the Initial Purchasers provides that the Initial Purchasers shall indemnify each
director of the Company, each officer of the Company who signed this
Registration Statement and each person who controls the Company for certain
liabilities, including certain liabilities under the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
The following documents are filed as exhibits to this Registration
Statement:
<TABLE>
<CAPTION>
FILED PREVIOUSLY (*),
FILED HEREWITH (**),
NON-APPLICABLE (NA)
OR INCORPORATED BY
REFERENCE FROM
EXHIBIT PREVIOUS EXHIBIT COMPANY REG. NO.
NUMBER DESCRIPTION NUMBER OR REPORT
- ------- ----------- --------------------- ----------------
<C> <C> <S> <C> <C>
3.1 -- Restated Certificate of Incorporation of the
Company, as amended................................ *
3.2 -- Amended and Restated Bylaws of the Company......... 3.2 33-95228
4.0 -- Specimen Stock Certificate......................... 4.0 33-95228
4.1 -- Rights Agreement between the Company and The First
National Bank of Boston............................ 1 0-27792
4.2 -- Indenture between the Company and First Union
National Bank, as Trustee.......................... *
4.3 -- Form of Note Certificate for 5 3/4% Convertible
Subordinated Notes................................. *
5.1 -- Opinion of Robinson, Bradshaw & Hinson, P.A........ *
10.1 -- 1995 Equity Participation Plan, as amended......... *
10.2 -- Management Incentive Compensation Plan............. 10.2 10-Q for quarter
ended 9/30/95
10.3 -- Employee Stock Purchase Plan....................... *
10.4# -- Director and Officer Indemnification Agreement of
James V. Napier.................................... 10.3 10-K for year
ended 12/31/95
10.5 -- Administrative Services Agreement between the
Company and Adia California........................ 10.6 10-Q for quarter
ended 9/30/95
</TABLE>
II-2
<PAGE> 34
<TABLE>
<CAPTION>
FILED PREVIOUSLY (*),
FILED HEREWITH (**),
NON-APPLICABLE (NA)
OR INCORPORATED BY
REFERENCE FROM
EXHIBIT PREVIOUS EXHIBIT COMPANY REG. NO.
NUMBER DESCRIPTION NUMBER OR REPORT
- ------- ----------- --------------------- ----------------
<C> <C> <S> <C> <C>
10.6 -- Paybill Services Agreement between the Company and
Adia California.................................... 10.7 10-Q for quarter
ended 9/30/95
10.7 -- Software License Agreement between the Company and
Adia California.................................... 10.8 10-Q for quarter
ended 9/30/95
10.8 -- Employment Agreement between the Company and Edward
P. Drudge, Jr...................................... 10.9 10-Q for quarter
ended 9/30/95
10.9 -- Employment Agreement between the Company and James
C. Hunt............................................ 10.10 10-K for year
ended 12/29/96
10.10 -- Employment Agreement between Adia Delaware, PFI
Corp. and Richard L. Peranton...................... 10.13 33-95228
10.11 -- Employment Agreement between the Company and Ken R.
Bramlett, Jr....................................... 10.13 10-K for year
ended 12/29/96
10.12 -- Indemnification Agreement between the Company and
Adia Delaware...................................... 10.14 10-Q for quarter
ended 9/30/95
10.13 -- Tax-Sharing Agreement between the Company, Adia
Delaware and Adia California....................... 10.15 10-Q for quarter
ended 9/30/95
10.14 -- Amended and Restated Non-Qualified Profit-Sharing
Plan............................................... 10.16 10-K for year
ended 12/29/96
10.15 -- Amended and Restated Credit Agreement among the
Company and its subsidiaries, the Lenders party
thereto and NationsBank, N.A., as agent............ *
10.16 -- Asset Purchase Agreement between the Company and
Business Enterprise Systems and Technology, Inc.
(BEST Consulting).................................. 2 8-K dated
9/30/96
10.17 -- Registration Rights Agreement between the Company
and the Initial Purchasers......................... *
12.1 -- Statement regarding computation of ratio of
earnings to fixed charges.......................... **
21.1 -- Subsidiaries of the Company........................ **
23.1 -- Consent of Arthur Andersen LLP..................... **
</TABLE>
II-3
<PAGE> 35
<TABLE>
<CAPTION>
FILED PREVIOUSLY (*),
FILED HEREWITH (**),
NON-APPLICABLE (NA)
OR INCORPORATED BY
REFERENCE FROM
EXHIBIT PREVIOUS EXHIBIT COMPANY REG. NO.
NUMBER DESCRIPTION NUMBER OR REPORT
- ------- ----------- --------------------- ----------------
<C> <C> <S> <C> <C>
23.2 -- Consent of Robinson, Bradshaw & Hinson, P.A.
(included in Exhibit 5.1).......................... *
24.1 -- Power of Attorney (included in the signature pages
to this Registration Statement as initially
filed)............................................. *
25.1 -- Statement of eligibility of trustee................ *
</TABLE>
- ---------------
# 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 J. Simione, Jr.
(b) Financial Statement Schedules
Not Applicable.
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant
pursuant to Section 13 or Section 15(d) of the Exchange Act that are
incorporated by reference in the Registration Statement.
(2) That, for purposes of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference in the Registration Statement
shall be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 36
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions or otherwise, the registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-5
<PAGE> 37
SIGNATURES
Pursuant to the requirements of the Securities Act, Personnel Group of
America, Inc. certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in Charlotte, North Carolina, on October 20, 1997.
PERSONNEL GROUP OF AMERICA, INC.
By: /s/ EDWARD P. DRUDGE, JR.
------------------------------------
Edward P. Drudge, Jr.
Chief Executive Officer
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities indicated
on October 20, 1997.
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<C> <S>
/s/ EDWARD P. DRUDGE, JR. Chairman, Chief Executive Officer and Director
- ----------------------------------------------------- (Principal Executive Officer)
Edward P. Drudge, Jr.
/s/ JAMES C. HUNT Chief Financial Officer, Treasurer and
- ----------------------------------------------------- Director (Principal Financial Officer and
James C. Hunt Accounting Officer)
KEVIN P. EGAN* Director
- -----------------------------------------------------
Kevin P. Egan
J. ROGER KING* Director
- -----------------------------------------------------
J. Roger King
JAMES V. NAPIER* Director
- -----------------------------------------------------
James V. Napier
WILLIAM J. SIMIONE, JR.* Director
- -----------------------------------------------------
William J. Simione, Jr.
/s/ KEN R. BRAMLETT, JR. Director
- -----------------------------------------------------
Ken R. Bramlett, Jr.
*By: /s/ KEN R. BRAMLETT, JR.
------------------------------------------------
(Ken R. Bramlett, Jr., Attorney-in-fact)
</TABLE>
II-6
<PAGE> 1
Exhibit 12.1
Ratio of Earnings to Fixed Charges
<TABLE>
<CAPTION>
June 30, June 29,
1992 1993 1994 1995 1996 1996 1997
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed Charges:
Interest Expense including
amortization of debt
issuance costs -- -- -- -- 1,432 227 4,036
Interest on Rent
Expense (1/3 of Rent Expense) 1,087 959 997 1,050 1,427 592 958
---------------------------------------------------------------------------------------------
Total Fixed Charges 1,087 959 997 1,050 2,859 819 4,994
=============================================================================================
Income before Taxes 552 4,616 6,960 12,414 19,849 6,503 13,678
Fixed Charges 1,087 959 997 1,050 2,859 819 4,994
---------------------------------------------------------------------------------------------
Income before Fixed Charges 1,639 5,575 7,957 13,464 22,708 7,322 18,672
=============================================================================================
Ratio of Earnings to
Fixed Charges 1.5 5.8 8.0 12.8 7.9 8.9 3.7
</TABLE>
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF PERSONNEL GROUP OF AMERICA, INC.
State of
Subsidiary Incorporation Does Business As
- ---------- ------------- ----------------
B.C.P., Inc. Hawaii Nursefinders of Hawaii, Inc.
PFI Corp. Delaware Nursefinders
Nursefinders, Inc. Texas Nursefinders
NF Services, Inc. New York Nursefinders
StaffPLUS, Inc. Delaware Abar Staffing, Allegheny Personnel
Services, Denver Temp, FirstWord
Staffing Services, Judith Fox
Staffing, Profile Temporary
Staffing, Staffinders Personnel,
Temp Connection, TempWorld, West
Personnel Service, WPPS Software
Staffing Specialists
InfoTech Services, Inc. North Carolina InfoStaff (Utah and California),
Best Consulting, Command
Technologies, Computer
Resources Group, Energetix,
Software Service Corporation,
Lipson Conroy Services,
Vital Computer Services
International
Broughton Systems, Inc. Virginia Broughton Systems
Lloyd-Ritter California Lloyd-Ritter Consulting
Consulting, Inc.
Word Processing New York Word Processing Professionals
Professionals, Inc.
Franklin Pierce Massachusetts Franklin Pierce Associates
Associates, Inc.
Scott Wayne Massachusetts Scott Wayne Associates
Associates, Inc.
<PAGE> 1
EXHIBIT 23.1
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement of our report dated February 7,
1997, included in Personnel Group of America, Inc.'s Form 10-K for the year
ended December 29, 1996, and to all references to our firm included in or made
a part of this registration statement.
/s/ Arthur Andersen LLP
Charlotte, North Carolina,
October 20, 1997.
