PERSONNEL GROUP OF AMERICA INC, 424B4, 1998-05-14

PERSONNEL GROUP OF AMERICA INC
424B4, 1998-05-14
HELP SUPPLY SERVICES

Previous: AIRTRAN HOLDINGS INC, 10-Q, 1998-05-14

Next: GENDELL JEFFREY LET AL, SC 13D/A, 1998-05-14

<PAGE> 1

Filed Pursuant to Rule 424(b)(4)
Registration No. 333-49815

PROSPECTUS

7,000,000 SHARES

[PGA LOGO]

PERSONNEL GROUP OF AMERICA, INC.
COMMON STOCK
------------------

All of the shares of Common Stock offered hereby (the "Offering") are being
sold by Personnel Group of America, Inc. ("PGA" or the "Company").

The Company's Common Stock is traded on the New York Stock Exchange under
the symbol "PGA." On May 13, 1998, the last reported sale price of the Company's
Common Stock on the New York Stock Exchange was $20 per share.
------------------

SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK
OFFERED HEREBY.
------------------

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.
------------------

<TABLE>
<CAPTION>
================================================================================================================
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share $20.00 $0.85 $19.15
- ----------------------------------------------------------------------------------------------------------------
Total(3) $140,000,000 $5,950,000 $134,050,000
================================================================================================================
</TABLE>

(1) The Company has agreed to indemnify the Underwriters against certain
liabilities under the Securities Act of 1933, as amended. See
"Underwriting."
(2) Before deducting expenses payable by the Company estimated at $700,000.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
1,050,000 additional shares of Common Stock on the same terms as set forth
above solely to cover over-allotments, if any. See "Underwriting." If such
option is exercised in full, the total Price to Public, Underwriting
Discounts and Commissions and Proceeds to Company will be $161,000,000,
$6,842,500 and $154,157,500, respectively.
------------------

The shares of Common Stock are being offered by the several Underwriters
named herein, subject to prior sale, when, as and if accepted by them and
subject to certain conditions. It is expected that certificates for the shares
of Common Stock offered hereby will be available for delivery on or about May
19, 1998 at the office of Smith Barney Inc., 333 West 34th Street, New York, New
York 10001.

------------------

SALOMON SMITH BARNEY
NATIONSBANC MONTGOMERY SECURITIES LLC
J.C. BRADFORD & CO.
THE ROBINSON-HUMPHREY COMPANY
CLEARY GULL REILAND & MCDEVITT INC.
May 13, 1998
<PAGE> 2

[A map of the United States showing the
Company's Service locations appears here.]

------------------

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING BY OVER-ALLOTMENT, ENTERING STABILIZING BIDS, EFFECTING SYNDICATE
COVERING TRANSACTIONS OR IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
2
<PAGE> 3

PROSPECTUS SUMMARY

The following summary does not purport to be complete and is qualified in
its entirety by the more detailed information and consolidated financial
statements, including the notes thereto, appearing elsewhere in this Prospectus
or incorporated by reference herein. All references to the "Company" or "PGA"
refer to Personnel Group of America, Inc. and, where appropriate, its
subsidiaries and their respective operations, and include the Company's
predecessors. The Company's fiscal year ends on the Sunday nearest December 31
and fiscal quarters end on the Sunday nearest to the end of the respective
calendar quarter. Unless otherwise indicated, all information presented for any
period on a pro forma basis reflects all acquisitions occurring during or
subsequent to such period as if such transactions had occurred on the first day
of such period, and all pro forma information presented as of a specific date
reflects all subsequent acquisitions as if they had occurred as of such date.
Unless otherwise indicated, the information in this Prospectus (i) assumes that
the Underwriters' over-allotment option will not be exercised and (ii) has been
adjusted to give effect to a two-for-one stock split of the Common Stock
effected as a stock dividend on March 30, 1998.

THE COMPANY

Personnel Group of America, Inc. is a leading provider of information
technology and commercial staffing services. 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. At May 11, 1998, the Company operated
through a network of 138 offices in 25 states and the District of Columbia. For
the year ended December 28, 1997, on a pro forma basis, the Company had revenues
of approximately $690.5 million.

The Company has grown by increasing revenues of existing operations and by
making selected acquisitions. Since its initial public offering in September
1995, PGA has acquired 31 operating companies. With the sale of its healthcare
division on December 26, 1997, the Company exited the highly regulated, low
growth healthcare staffing sector and completed a transformation begun in May
1996 when the Company committed to enter the high growth, high margin
information technology services business. For the year ended December 28, 1997,
on a pro forma basis, the Information Technology Division accounted for
approximately 53% of the Company's revenues. Through strategic acquisitions, the
Company has (i) become a leading provider of information technology staffing
services in selected markets, (ii) strengthened and broadened the market
coverage of its commercial staffing services, (iii) developed multiple
cross-selling opportunities between the Company's Information Technology and
Commercial Staffing Divisions in several target geographic markets, (iv)
established a significant presence in certain key geographic regions of the
country and (v) diversified its operations both geographically and
operationally. By reallocating to the Information Technology and Commercial
Staffing Divisions economic and other resources previously committed to the
healthcare division, PGA intends to accelerate its growth, both internally and
through acquisitions.

The Information Technology Division is comprised of 14 companies that offer
information technology professionals and consulting services in a range of
computer-related disciplines. The Information Technology Division provides
skilled personnel, such as programmers, systems designers, LAN administrators,
systems integrators, helpdesk staff and other technology specialists to a wide
variety of clients, typically on an as-needed time and materials basis. The
Commercial Staffing Division is comprised of 25 companies that offer a wide
variety of temporary office and clerical services to more than 10,000
organizations nationwide. The Commercial Staffing Division provides temporary
personnel who perform general office and administrative services, word
processing and desktop publishing, office automation, records management,
telemarketing and other staffing services. The Commercial Staffing Division also
provides light technical and light industrial services to its customers, but
these services account for a small portion of the division's total revenues.

Industry Overview

The staffing services industry has grown rapidly over the past decade.
According to the National Association of Temporary Staffing Services ("NATSS"),
the U.S. market for temporary staffing services grew

3
<PAGE> 4

at a compound annual rate of approximately 16.3% from approximately $20.5
billion in 1991 to approximately $43.6 billion in 1996. According to NATSS,
studies have shown that more than 90% of all businesses use temporary staffing
services. The use of temporary personnel has become widely accepted as a
valuable tool for managing personnel costs, supplementing permanent workforces
and meeting specialized or fluctuating employment requirements. In addition to
the general trends affecting the staffing services industry, the information
technology sector in particular has experienced strong growth as businesses have
become increasingly dependent on the use of computer information technology and
increasingly willing to outsource the related staffing needs to implement and
operate information systems on a variable-cost basis. According to INPUT,
revenue from information technology professional services has grown from $27.2
billion in 1995 to an estimated $37.1 billion in 1997, representing a compound
annual growth rate of 16.8%.

Business Strategy

The Company's objective is to be a premier provider of information
technology and commercial staffing services and the employer of choice in all of
its markets. The Company's strategy includes the following key elements:

- Enhance Internal Growth. The Company plans to expand its existing
businesses by maintaining its decentralized management structure,
focusing on local and regional markets, attracting and retaining
qualified management and other personnel and emphasizing customer
service. Each of the Company's offices does business under established
local brand names, most of which have been continuously in use for
more than 16 years. The Company intends to continue building on the
strong reputations of these local brand names in their markets while
leveraging the sophisticated support services and lower cost
structures of a national provider. The Company's clients are primarily
local and regional, including substantial accounts with local and
regional offices of Fortune 500 companies. The Company generally does
not seek or compete for national contracts, which typically yield
lower gross margins than locally awarded contracts. The Company
believes that well-established local providers in many cases have a
competitive marketing advantage over national providers because they
have developed a strong presence in their markets and have tailored
their operations to meet local client needs. As a result of its
established community presence, quality-oriented culture, positive
work environment and its management and personnel selection and
recruiting processes, the Company has generally experienced long-term
tenure of local management and continuity in client relationships,
with the average tenure of local management at the operating companies
being greater than 13 years. The Company strives to provide the
highest quality customer services in part through information systems
designed to match a candidate's work history, skills and personal
attributes with customer requirements and through extensive quality
assurance programs.

- Leverage Existing Infrastructure. The Company's organizational
structure allows the Company to leverage the costs associated with
centralized billing and payroll functions, workers' compensation
liability and technology development, as well as the costs of
analyzing and complying with state and federal regulations, over a
large number of temporary employees and clients. The clustering of
offices in key markets also permits common regional management and
facilitates cross-marketing opportunities.

- Make Selected Acquisitions. The Company seeks acquisitions of market
leading companies that will expand the geographic scope of its
Information Technology and Commercial Staffing Divisions, strengthen
its professional services and introduce new specialty services to its
business mix. Management believes that the Company's strong reputation
and decentralized management philosophy, as well as its emphasis on
preserving local brand identity, facilitate its efforts to acquire
independent staffing businesses seeking an alliance with a national
company. PGA has demonstrated its ability to increase the revenues and
cash flow of an acquired company by providing many of the
sophisticated systems, marketing programs and the immediate benefits
of purchasing power of a national company while, at the same time,
capitalizing on the acquired firm's significant brand identity and
established customer relationships in specific local market
4
<PAGE> 5

areas. The Company uses an acquisition profile in selecting attractive
acquisition candidates and applies a disciplined approach to the
acquisition process.

RECENT DEVELOPMENTS

Recent Acquisitions

Since December 28, 1997, the Company has completed the acquisition of three
information technology companies and five commercial staffing businesses. The
1997 revenues of the information technology companies acquired in 1998 were
$65.4 million, and the 1997 revenues of the commercial staffing companies
acquired in 1998 were $79.1 million. Although PGA regularly evaluates
acquisition opportunities, the Company currently has no definitive agreements
with respect to any future material acquisitions.

Expansion of Credit Facility

On March 17, 1998, the Company's revolving credit facility (the "Credit
Facility") was increased from $125.0 million to $200.0 million.

Two-for-one Stock Split

On March 30, 1998, the Company completed a two-for-one split of its Common
Stock effected as a stock dividend.

THE OFFERING

Common Stock offered hereby......... 7,000,000 shares

Common Stock to be outstanding after
the Offering........................ 31,946,096 shares(1)

Use of Proceeds..................... To repay indebtedness

New York Stock Exchange Symbol...... PGA
- ---------------

(1) Based on the number of shares of Common Stock outstanding as of May 11,
1998. Excludes, as of that date, (i) 2,326,190 shares of Common Stock
issuable upon exercise of outstanding options at a weighted average exercise
price of $12.80 per share, (ii) approximately 2,415,724 additional shares
reserved for issuance under the Company's 1995 Equity Participation Plan and
1997 Employee Stock Purchase Plan and (iii) 6,456,140 shares of Common Stock
reserved for issuance upon conversion of the Company's outstanding
convertible subordinated notes at a conversion price of $17.81 per share.
See "Description of Capital Stock -- Stock Option Plan," "-- Employee Stock
Purchase Plan" and Notes 10 and 11 of Notes to Consolidated Financial
Statements.

5
<PAGE> 6

SUMMARY CONSOLIDATED HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
FISCAL YEAR
-------------------------------------------------------------------
1997
-----------------------
1993 1994 1995 1996 ACTUAL PRO FORMA(1)
-------- -------- -------- -------- -------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues........................ $107,386 $125,822 $143,243 $243,608 $475,620 $690,529
Direct cost of services......... 84,310 99,948 109,755 186,338 349,616 497,285
-------- -------- -------- -------- -------- --------
Gross profit.................... 23,076 25,874 33,488 57,270 126,004 193,244
Selling, general and
administrative................ 17,642 19,426 24,568 38,454 79,216 119,744
Depreciation and amortization... 1,528 1,498 1,149 3,362 9,037 14,904
-------- -------- -------- -------- -------- --------
Operating income................ 3,906 4,950 7,771 15,454 37,751 58,596
Interest expense................ -- -- 159 1,155 6,951 10,747
-------- -------- -------- -------- -------- --------
Income from continuing
operations before income
taxes......................... 3,906 4,950 7,612 14,299 30,800 47,849
Provision for income taxes...... 1,716 2,181 3,282 5,995 13,010 20,222
-------- -------- -------- -------- -------- --------
Income from continuing
operations.................... 2,190 2,769 4,330 8,304 17,790 27,627
Income from discontinued
operations, net of taxes...... 346 1,130 2,779 3,213 2,412 --
-------- -------- -------- -------- -------- --------
Net income...................... $ 2,536 $ 3,899 $ 7,109 $ 11,517 $ 20,202 $ 27,627
======== ======== ======== ======== ======== ========
Income from continuing
operations per diluted
share......................... $ -- $ -- $ 0.27 $ 0.41 $ 0.71 $ 0.84
Income from discontinued
operations per diluted share,
net of taxes.................. -- -- 0.17 0.16 0.09 --
-------- -------- -------- -------- -------- --------
Net income per diluted share.... $ -- $ -- $ 0.44 $ 0.56 $ 0.80 $ 0.84
======== ======== ======== ======== ======== ========
Weighted average diluted shares
outstanding................... -- -- 16,000 20,432 28,078 35,680
OTHER DATA:
EBITDA(2)....................... $ 5,434 $ 6,448 $ 8,920 $ 18,816 $ 46,788 $ 73,500
EBITDA margin(2)................ 5.1% 5.1% 6.2% 7.7% 9.8% 10.6%
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 28, 1997
-------------------------------------------
PRO FORMA
ACTUAL PRO FORMA(3) AS ADJUSTED(3)(4)
-------- ------------ -----------------
(UNAUDITED)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital........................................ $ 69,090 $ 79,840 $ 79,840
Intangible assets, net................................. 316,413 451,462 451,462
Total assets........................................... 451,309 609,643 609,643
Convertible subordinated notes......................... 115,000 115,000 115,000
Other short-term and long-term debt.................... 37,540 176,814 43,464
Shareholders' equity................................... 205,076 214,038 347,388
</TABLE>

- ---------------

(1) Reflects (i) the acquisition of the 13 companies acquired in 1997 and the
eight companies acquired in 1998, (ii) the sale of the healthcare division
and the application of the net proceeds therefrom to reduce indebtedness and
(iii) the Offering and the application of the net proceeds therefrom as
described under "Use of Proceeds" (assuming a public offering price of
$20.00 per share and after deducting underwriting discounts and commissions
and offering expenses), in each case as if such transactions had occurred on
December 30, 1996.
(2) EBITDA represents earnings from continuing operations before interest
expense, taxes and depreciation and amortization. EBITDA margin represents
EBITDA as a percentage of revenues. EBITDA and EBITDA margin are included
herein because management believes that such data are used by certain
investors. However, EBITDA does not represent cash flow from operations, as
defined by generally accepted accounting principles, should not be
considered as a substitute for net earnings as an indicator of the Company's
operating performance or cash flow as a measure of liquidity, and should be
examined in conjunction with the Consolidated Financial Statements of the
Company and notes thereto included elsewhere in this Prospectus.
(3) Reflects the acquisition of the eight companies acquired in 1998 and the
related increases in borrowings under the Company's Credit Facility, as if
such transactions had been completed on such date.
(4) Reflects the Offering and the application of the net proceeds therefrom as
described under "Use of Proceeds" (assuming a public offering price of
$20.00 per share and after deducting underwriting discounts and commissions
and offering expenses).

6
<PAGE> 7

RISK FACTORS

Prospective purchasers of the Common Stock should carefully consider the
risk factors set forth below, as well as the other information contained in this
Prospectus. Certain of the matters discussed under the captions "Prospectus
Summary," "Risk Factors," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Business" and elsewhere in this
Prospectus and information incorporated herein by reference may constitute
forward-looking statements for purposes of the Securities Act of 1933, as
amended, and the Securities Exchange Act of 1934, as amended, and as such may
involve known and unknown risks, uncertainties and other factors which may cause
the actual results, performance or 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 (the "Cautionary Statements"), including without limitation those
statements made in conjunction with any such forward-looking statements in this
"Risk Factors" section and otherwise herein. Any such forward-looking statements
are expressly qualified in their entirety by the Cautionary Statements.

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. During the most
recent recession, the Company's operations were adversely affected. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

ABILITY TO ATTRACT AND RETAIN THE SERVICES OF QUALIFIED EMPLOYEES

The Company's operations depend upon its ability to attract and retain the
services of qualified employees who possess the technical skills and experience
necessary to meet clients' specific needs. The Company must continually
evaluate, upgrade and supplement its staff in each of its markets to keep pace
with changing client needs and technologies and to fill new positions. The
information technology staffing industry in particular has high turnover rates,
and the demand for information technology professionals continues to
substantially exceed supply. This trend has resulted in intense competition for
information technology professionals, and the Company expects such competition
to continue. Certain of the Company's information technology operations recruit
internationally under the H-1B visa program, and U.S. immigration policy
currently restricts the number of H-1B visas that may be granted in each fiscal
year. Certain legislative proposals have been introduced that could have the
effect of imposing further restrictions on the H-1B visa program. There can be
no assurance that the Company will be able to attract and retain the services of
the personnel it requires to conduct its operations successfully or engage
additional qualified personnel as it expands its operations. Failure to attract
and retain the services of such personnel, or an increase in the Company's
turnover rate among its employees, could have a material adverse effect on the
Company's business, operating results or financial condition. There can be no
assurance that qualified employees, particularly information technology
professionals, will continue to be available to the Company in sufficient
numbers or on economic terms that are, or will continue to be, acceptable to the
Company.

7
<PAGE> 8

IMPACT OF PRICING PRESSURE AND EMPLOYEE COSTS ON GROSS MARGINS

Price competition in the staffing services industry is intense in each of
the Company's divisions. Pricing pressures from competitors and customers are
increasing. In addition, competition for qualified employees has resulted in
recent wage increases in certain markets. Although to date the Company generally
has been able to pass wage increases on to its customers through higher bill
rates, there can be no assurance that the Company will be able to maintain or
increase its current gross margins, the reduction of which could have a material
adverse effect on the Company's financial condition and results of operations.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations."

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. The Company competes in national, regional and local
markets with full-service and specialized temporary service agencies. While the
majority of the Company's competitors are significantly smaller than the
Company, a number of large 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.

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 acquired 31 companies since its
initial public offering in September 1995 (the "IPO") and is seeking new
acquisition opportunities. 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 additional borrowings and
resulting leverage, 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 and delays related to the integration of
the 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 by the Company to complete additional acquisitions or integrate
acquired businesses into its operations could have a material adverse effect on
the Company's financial condition and results of operations. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and "Business -- Business
Strategy -- Make Selected Acquisitions."

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. 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 have increased as
a result of increased unemployment and the extension of periods for which
benefits are available. 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, however, that the
Company will be able to increase the fees charged to its clients if expenses
continue to rise. Any such inability could have a material adverse effect on the
Company's financial condition and results of operations. See Notes 7, 8 and 15
of Notes to Consolidated Financial Statements.
8
<PAGE> 9

INCREASED COSTS FROM GOVERNMENT REGULATION

The Company is required to pay a number of federal, state and local payroll
and related costs, including unemployment taxes and insurance, workers'
compensation, FICA and Medicare, for its employees and personnel. Significant
increases in the effective rates of any payroll related costs likely would have
a material adverse effect upon the Company. The Company's costs could also
increase as a result of health care reforms or the possible imposition of
additional requirements and restrictions related to the placement of personnel.
Federal and state legislative proposals have included provisions extending
health insurance benefits to personnel who currently do not receive such
benefits. There can be no assurance that the Company will be able to increase
the fees charged to its clients in a timely manner and in a sufficient amount to
cover increased costs, if any such proposals are adopted. There is also no
assurance that the Company will be able to adapt to future regulatory changes
made by the Internal Revenue Service, the Department of Labor or other state and
federal regulatory agencies. The Company's inability to increase its fees or
adapt to future regulatory changes could have a material adverse effect upon the
Company's business, operating results and financial condition. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

INDUSTRY RISKS

Temporary staffing services providers employ and place people generally in
the workplaces of other businesses. Attendant risks of such activity include
possible claims of discrimination and harassment, employment of illegal aliens,
violations of wage and hour requirements, errors and omissions of its temporary
employees and, particularly of professionals (e.g., accountants), misuse of
client proprietary information, misappropriation of funds, other criminal
activity or torts and other similar claims. In some instances the Company,
pursuant to written services contracts, has agreed to indemnify clients against
some or all of the foregoing matters. Moreover, in certain circumstances the
Company may be held responsible for the actions at a workplace of persons not
under the Company's direct control. Although the Company historically has not
had any significant problems in this area, there can be no assurance that the
Company will not experience such problems in the future or that the Company's
insurance, if any, will be sufficient in amount or scope to cover any such
liability. The failure of any Company employee or personnel to observe the
Company's policies and guidelines, relevant client policies and guidelines, or
applicable federal, state or local laws, rules and regulations, or other
circumstances that cannot be predicted, could have a material adverse effect
upon the Company's business, operating results and financial condition.

Temporary staffing services providers are also affected by fluctuations and
interruptions in the business of their clients. For example, inclement weather
or work stoppages, which may require clients to close or reduce their hours of
operation, could have a material adverse effect on the Company's business,
operating results and financial condition.

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 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. See "Business -- Business Strategy" and
"Management."

SUBSTANTIAL INTANGIBLE ASSETS

As of December 28, 1997, the Company had intangible assets of $316.4
million, net of accumulated amortization relating to the purchase of certain of
its subsidiaries and divisions ($451.5 million on a pro forma basis as if the
acquisitions completed after December 28, 1997 through the date of this
Prospectus had been completed on that date). Such intangible assets approximated
70.1% of the Company's total assets and

9
<PAGE> 10

154.3% of its total shareholders' equity as of December 28, 1997 (74.0% of total
assets and 130.0% of total shareholders' equity on a pro forma basis, giving
effect to acquisitions completed after December 28, 1997 and related borrowings
under the Credit Facility and this Offering). Such intangible assets may
increase if additional acquisitions are completed and will increase upon payment
of contingent earnout amounts with respect to completed acquisitions. These
intangible assets result in significant recurring amortization expense. In
addition, 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. See Note 2 of Notes to Consolidated Financial Statements.

POSSIBLE INTERNATIONAL OPERATIONS

Although all of the Company's operations are currently in the United
States, the Company's growth plans contemplate possible international
operations. Operations in international markets are subject to risks inherent in
international business activities, including varying economic and political
conditions, cultures and business practices in different countries or regions,
overlapping or differing tax structures and compliance with a variety of
accounting and reporting requirements and complex or ambiguous foreign laws and
regulations. Fluctuations in the exchange rates between the U.S. dollar and the
currencies of the other countries in which the Company may operate could affect
the results of the Company's international operations and the value of such
operations' net assets that are reported in U.S. dollars.

INDEMNIFICATION OBLIGATIONS

Pursuant to the agreement to sell its healthcare division, the Company
agreed to indemnify the purchaser against certain specified expenses or losses
incurred by the purchaser. Although to date no claims have been asserted against
the Company pursuant to this indemnification provision, there can be no
assurance that indemnification claims will not be made or that such claims, if
made, would not have a material adverse effect on the Company's financial
condition or results of operations.

STOCK PRICE VOLATILITY

From time to time, there may be significant volatility in the market price
of the Common Stock. Factors such as announcements of fluctuations in the
Company's or its competitors' operating results, market conditions for growth
stocks or staffing services industry stocks in general, changes in general
conditions in the economy or financial markets, natural disasters or other
developments could cause the market price of the Common Stock to fluctuate
substantially. In addition, the stock market in recent years has experienced
extreme price and volume fluctuations that often have been unrelated or
disproportionate to the operating performance of companies. These broad
fluctuations may adversely affect the market price of the Common Stock. See
"Price Range of Common Stock."

CERTAIN PROVISIONS RELATING TO CHANGES IN CONTROL

The Company's Certificate of Incorporation and Bylaws, as well as a
stockholder rights plan adopted by the Board of Directors, contain provisions
which may have the effect of discouraging, delaying or preventing a change in
control of the Company, including transactions in which the stockholders might
otherwise receive a premium for their shares over then current market prices,
and may limit the ability of the stockholders 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 stockholder 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 and to determine the price, rights,
preferences and privileges of those shares without any further vote or action by
the stockholders. 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 pre-approved the terms of a series of Preferred Stock that may be issued
under the Company's stockholder rights plan upon the occurrence
10
<PAGE> 11

of certain triggering events. In general, the stockholder rights plan 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 -- Stockholder
Rights Agreement."

NO CASH DIVIDENDS

The Company presently intends to retain future earnings to support the
growth of its business and does not anticipate paying cash dividends in the
foreseeable future. Additionally, the Company's Credit Facility currently
prohibits the payment of cash dividends on the Common Stock. See "Dividend
Policy."

11
<PAGE> 12

RECENT DEVELOPMENTS

RECENT ACQUISITIONS

SALE OF HEALTHCARE DIVISION

On December 26, 1997, the Company completed the sale of its healthcare
division for $65.3 million. Of such amount, $34.6 million was initially paid by
delivery by the purchaser of a promissory note at closing and the balance was
paid in cash. The note was paid in full in January 1998. The Company's financial
statements include financial results of the healthcare division as a
discontinued operation. For the fiscal year ended December 28, 1997, income from
discontinued operations, net of taxes, was $2.4 million. See Note 4 of Notes to
Consolidated Financial Statements.

EXPANSION OF CREDIT FACILITY

On March 17, 1998, the Company closed an amendment to its Credit Facility
that increased the maximum availability thereunder from $125.0 million to $200.0
million and effected certain minor amendments to the Credit Facility. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

TWO-FOR-ONE STOCK SPLIT

On March 30, 1998, the Company completed a two-for-one split of its Common
Stock effected as a stock dividend.

USE OF PROCEEDS

The net proceeds from the sale of the 7,000,000 shares of Common Stock
offered by the Company hereby are estimated to be $133.4 million ($153.5 million
if the Underwriters' over-allotment option is exercised in full) based on a
public offering price of $20.00 per share and after deducting underwriting
discounts and commissions and offering expenses. The Company intends to use the
net proceeds of this Offering to repay debt outstanding under its Credit
Facility. At May 11, 1998, the Company had $169.0 million of borrowings
outstanding under the Credit Facility. The Company's Credit Facility currently
bears interest at LIBOR plus 1.35 percentage points and is scheduled to mature
in June 2002. At May 11, 1998, the weighted average interest rate for
outstanding borrowings under the Credit Facility was 7.3%. Borrowings under the
Credit Facility have been used to finance acquisitions and for general corporate
purposes. See "Recent Developments."

The Company intends to continue to selectively pursue opportunities to
acquire businesses offering products similar or complementary to those offered
by the Company. Although the Company regularly evaluates acquisition
opportunities, the Company currently has no definitive agreements with respect
to any future material acquisitions.

12
<PAGE> 13

CAPITALIZATION

The following table sets forth (i) the actual capitalization of the Company
at December 28, 1997, (ii) the pro forma capitalization of the Company at
December 28, 1997, giving effect to the acquisitions completed by the Company
after that date and the increased borrowings under the amended Credit Facility
and (iii) the pro forma capitalization of the Company at December 28, 1997, as
adjusted to reflect the sale of the 7,000,000 shares of Common Stock offered by
the Company hereby (at an assumed public offering price of $20.00 per share),
after deduction of the estimated underwriting discounts and commissions and
offering expenses, and the application of the net proceeds therefrom as
described in "Use of Proceeds." The information in the table below is qualified
in its entirety by, and should be read in conjunction with, the Consolidated
Financial Statements of the Company and notes thereto included elsewhere in this
Prospectus.

<TABLE>
<CAPTION>
DECEMBER 28, 1997
------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
Cash and cash equivalents................................. $ 642 $ 3,600 $ 3,600
======== ======== ========
Total debt:
Credit Facility......................................... $ 24,000 $163,274 $ 29,924
5 3/4% convertible subordinated notes................... 115,000 115,000 115,000
Other debt.............................................. 13,540 13,540 13,540
-------- -------- --------
Total debt...................................... 152,540 291,814 158,464
-------- -------- --------
Shareholders' equity:
Preferred stock, $0.01 par value; 5,000 shares
authorized, no shares issued and outstanding......... -- -- --
Common stock, $0.01 par value; 95,000 shares authorized,
24,278 shares issued and outstanding, actual; 24,880
shares issued and outstanding, pro forma; and 31,880
shares issued and outstanding, pro forma as
adjusted(1).......................................... 242 249 319
Additional paid-in capital.............................. 171,038 179,993 313,273
Retained earnings....................................... 34,066 34,066 34,066
Deferred compensation................................... (270) (270) (270)
-------- -------- --------
Total shareholders' equity...................... 205,076 214,038 347,388
-------- -------- --------
Total capitalization.......................... $357,616 $505,852 $505,852
======== ======== ========
</TABLE>

- ---------------

(1) Excludes (i) 2,195,552 shares of Common Stock issuable upon exercise of
outstanding options at a weighted average exercise price of $12.20 per
share, (ii) approximately 2,446,148 additional shares reserved for issuance
under the Company's 1995 Equity Participation Plan and Employee Stock
Purchase Plan and (iii) 6,456,140 shares of Common Stock reserved for
issuance upon conversion of the Company's outstanding convertible
subordinated notes at a conversion price of $17.81 per share. See
"Description of Capital Stock -- Stock Option Plan," "-- Employee Stock
Purchase Plan" and Notes 10 and 11 of Notes to Consolidated Financial
Statements.

13
<PAGE> 14

DIVIDEND POLICY

The Company has paid no cash dividends on its Common Stock with respect to
earnings since the IPO and does not anticipate paying cash dividends in the
foreseeable future. The Company presently intends to retain future earnings to
support the growth of its business. Any determination regarding the future
payment of cash dividends, as well as the amount thereof, is subject to the
discretion of the Board of Directors of the Company and will depend upon, among
other things, the Company's financial condition, results of operations, current
and anticipated capital requirements, plans for expansion, future prospects and
other factors deemed relevant by the Board of Directors. Further, the Company's
Credit Facility currently prohibits the Company from paying cash dividends on
the Common Stock.

PRICE RANGE OF COMMON STOCK

The Company's Common Stock is listed on the New York Stock Exchange under
the symbol "PGA." The following table sets forth the high and low sales prices
of the Common Stock as reported on the New York Stock Exchange for the periods
indicated.

<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
Fiscal 1996:
First Quarter............................................. $10 $ 6 1/2
Second Quarter............................................ 13 1/8 9 3/16
Third Quarter............................................. 13 9 15/16
Fourth Quarter............................................ 14 3/8 9 11/16
Fiscal 1997:
First Quarter............................................. 13 5/8 9 13/16
Second Quarter............................................ 15 7/8 8 5/8
Third Quarter............................................. 18 1/32 14 1/2
Fourth Quarter............................................ 19 3/32 14 5/8
Fiscal 1998:
First Quarter............................................. 24 14 25/32
Second Quarter (through May 13, 1998)..................... 23 1/2 18 7/16
</TABLE>

On May 13, 1998, the last reported sale price of the Common Stock on the
New York Stock Exchange was $20 per share. As of February 27, 1998, the Company
had approximately 6,500 stockholders based on the number of holders of record
and an estimate of the number of individual participants represented by
securities position listings.

14
<PAGE> 15

SELECTED FINANCIAL DATA

The selected consolidated financial data for each of the fiscal years in
the four-year period ended December 29, 1996 are derived from, and are qualified
by reference to, the consolidated financial statements of the Company, which
have been audited by Arthur Andersen LLP, independent public accountants. The
selected consolidated financial data as of December 28, 1997 and for the fiscal
year then ended are derived from, and are qualified by reference to, the
consolidated financial statements of the Company, which have been audited by
Price Waterhouse LLP, independent public accountants. The consolidated financial
statements as of December 29, 1996 and December 28, 1997 and for each of the
years in the three-year period ended December 28, 1997, and the reports thereon,
are included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
FISCAL YEAR
--------------------------------------------------------
1993 1994 1995 1996 1997
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues............................ $107,386 $125,822 $143,243 $243,608 $475,620
Direct cost of services............. 84,310 99,948 109,755 186,338 349,616
-------- -------- -------- -------- --------
Gross profit........................ 23,076 25,874 33,488 57,270 126,004
Selling, general and
administrative.................... 17,642 19,426 24,568 38,454 79,216
Depreciation and amortization....... 1,528 1,498 1,149 3,362 9,037
-------- -------- -------- -------- --------
Operating income.................... 3,906 4,950 7,771 15,454 37,751
Interest expense.................... -- -- 159 1,155 6,951
-------- -------- -------- -------- --------
Income from continuing operations
before income taxes............... 3,906 4,950 7,612 14,299 30,800
Provision for income taxes.......... 1,716 2,181 3,282 5,995 13,010
-------- -------- -------- -------- --------
Income from continuing operations... 2,190 2,769 4,330 8,304 17,790
Income from discontinued operations,
net of taxes...................... 346 1,130 2,779 3,213 2,412
-------- -------- -------- -------- --------
Net income.......................... $ 2,536 $ 3,899 $ 7,109 $ 11,517 $ 20,202
======== ======== ======== ======== ========
Income from continuing operations
per diluted share................. $ -- $ -- $ 0.27 $ 0.41 $ 0.71
Income from discontinued operations
per diluted share, net of taxes... -- -- 0.17 0.16 0.09
-------- -------- -------- -------- --------
Net income per diluted share........ $ -- $ -- $ 0.44 $ 0.56 $ 0.80
======== ======== ======== ======== ========
Weighted average diluted shares
outstanding....................... -- -- 16,000 20,432 28,078
BALANCE SHEET DATA -- AT PERIOD END:
Working capital..................... $ 11,396 $ 11,792 $ 17,719 $ 26,558 $ 69,090
Intangible assets, net.............. 13,264 12,249 11,604 178,943 316,413
Total assets........................ 69,434 74,584 83,441 293,575 451,309
Convertible subordinated notes...... -- -- -- -- 115,000
Other short-term and long-term
debt.............................. -- -- -- 85,147 37,540
Shareholders' equity................ 64,257 68,438 75,986 183,257 205,076
</TABLE>

15
<PAGE> 16

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

INTRODUCTION

The following discussion and analysis should be read in conjunction with
the Company's Consolidated Financial Statements and related notes included
elsewhere in this Prospectus. The Company's fiscal year ends on the Sunday
nearest to December 31 and the fiscal quarters end on the Sunday nearest to the
end of the respective calendar quarters.

The Company is organized into two divisions: the Information Technology
Division, which provides information technology staffing and consulting services
in a range of computer-related disciplines; and the Commercial Staffing
Division, which provides a wide variety of temporary office, clerical, light
technical and light industrial staffing services. Substantially all of the
Company's services are performed on a time and materials basis. At May 11, 1998,
the Information Technology Division was comprised of 14 companies and the
Commercial Staffing Division was comprised of 25 companies.

The following table sets forth the number and nature of the Company's
offices at the end of the years indicated and at May 11, 1998:

<TABLE>
<CAPTION>
FISCAL YEAR ENDING
MAY 11, ------------------
1998 1997 1996 1995
------- ---- ---- ----
<S> <C> <C> <C> <C>
Information technology services........................... 37 30 18 --
Commercial staffing....................................... 101 82 74 58
--- --- -- --
Total offices................................... 138 112 92 58
</TABLE>

The Company completed its IPO in September 1995. Prior to the IPO, the
Company was an indirect wholly owned subsidiary of an international staffing
company (the "Former Parent"). The Company was organized to facilitate the IPO.
As a result of the IPO, in which the Former Parent sold its entire ownership
interest in the Company, the Company became an independent public company. The
Company did not receive any of the proceeds of the sale of shares in the IPO.

In June 1996, the Company issued 8,050,000 shares of its common stock in a
second underwritten public offering (the "1996 Equity Offering"), which raised
approximately $95.6 million of net proceeds for the Company. The net proceeds of
the 1996 Equity Offering were used to repay outstanding borrowings under the
Credit Facility and to fund several acquisitions.

In June and July 1997, the Company completed a private placement of $115.0
million of 5 3/4% Convertible Subordinated Notes (the "Notes"). The net proceeds
of the Notes were approximately $111.8 million and were used to repay
indebtedness under the Credit Facility and to retire a separate $10.0 million
line of credit.

In 1997, the Company acquired six information technology services companies
and seven commercial staffing companies in seven separate transactions. The
combined pro forma revenues of these 13 companies were approximately $151.0
million in 1997. At May 11, 1998, the Company had completed eight acquisitions
subsequent to fiscal year end: Ann Wells Personnel in Silicon Valley,
California; Creative Temporaries in Charlotte, North Carolina; Corporate
Staffing Consultants in Charlotte, North Carolina; Advanced Business Consultants
in Kansas City, Missouri; IMA Plus in Jacksonville, Florida; The Temporary
Connection in Houston, Texas; Trilogy Consulting in Chicago, Illinois; and Sloan
Staffing Services in New York, New York. Ann Wells Personnel, Creative
Temporaries, Corporate Staffing Consultants, The Temporary Connection and Sloan
Staffing Services are leading providers of commercial staffing services in their
respective markets. Advanced Business Consultants, IMA Plus and Trilogy
Consulting are leading providers of information technology services in their
respective markets. These companies had combined revenues of $144.5 million in
1997. Had the Company owned each of the acquired companies discussed above at
the beginning of 1997, the Company's pro forma 1997 revenues would have been
approximately $690.5 million, and 53% and 47% of such revenues would have come
from the Information Technology and Commercial Staffing Divisions, respectively.

16
<PAGE> 17

On December 26, 1997, the Company completed the sale of its healthcare
division for approximately $65.3 million. Of such amount, $34.6 million was
initially paid by delivery by the purchaser of a promissory note at closing and
the balance was paid in cash. The note was paid in full in January 1998. With
the sale of the healthcare division, the Company completed a transformation that
began in 1996 when the Company made a strategic commitment to enter the high
growth, high margin information technology services business. The gain on the
sale of the healthcare division was not material. As a result of the sale, the
healthcare division has been reflected as a discontinued operation in the
Company's financial statements for all periods presented.

Each of the Company's acquisitions has been accounted for using the
purchase method of accounting and has been included in the following discussions
as applicable since the respective dates of acquisition. The Company allocates
the excess of cost over the fair value of the net tangible assets first to
identifiable intangible assets, if any, and then to goodwill. The Company
believes that buying market-leading companies and then allowing them to maintain
their separate identities and independence preserves the goodwill for an
unlimited period. Although the Company believes that goodwill has an unlimited
life, the Company amortizes such costs on a straight-line basis over 40 years.
Intangible assets represented 75.6% of total assets and 172.5% of total
shareholders' equity at March 29, 1998. The Company evaluates the recoverability
of its investment in goodwill and other intangibles in relation to anticipated
future cash flows on an undiscounted basis. Based on this assessment, the
Company expects its investments in intangible assets to be fully recovered.

In the future, the Company's revenues and expenses may be significantly
affected by the number and timing of the opening or acquisition of additional
offices or businesses. The timing of such expansion activities also can affect
period-to-period comparisons of the Company's results of operations.

OVERVIEW

The following table summarizes certain income statement information for the
Company for the years ended December 1997, 1996 and 1995:

<TABLE>
<CAPTION>
1997 1996 1995
---------------- ---------------- ----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Information technology
services................... $249,749 52.5% $ 55,472 22.8% $ -- 0.0%
Commercial staffing........... 225,871 47.5 188,136 77.2 143,243 100.0
-------- ----- -------- ----- -------- -----
Total revenues........ 475,620 100.0 243,608 100.0 143,243 100.0
Direct cost of services......... 349,616 73.5 186,338 76.5 109,755 76.6
-------- ----- -------- ----- -------- -----
Gross profit.......... 126,004 26.5 57,270 23.5 33,488 23.4
Selling, general and
administrative................ 79,216 16.7 38,454 15.8 24,568 17.2
Depreciation and amortization... 9,037 1.9 3,362 1.4 1,149 0.8
-------- ----- -------- ----- -------- -----
Operating income...... 37,751 7.9 15,454 6.3 7,771 5.4
Interest expense................ 6,951 1.5 1,155 0.5 159 0.1
-------- ----- -------- ----- -------- -----
Income from continuing
operations before income
taxes......................... 30,800 6.5 14,299 5.9 7,612 5.3
Provision for income taxes...... 13,010 2.7 5,995 2.5 3,282 2.3
-------- ----- -------- ----- -------- -----
Income from continuing
operations.................... 17,790 3.7 8,304 3.4 4,330 3.0
Total income from discontinued
operations, net of taxes...... 2,412 0.5 3,213 1.3 2,779 1.9
-------- ----- -------- ----- -------- -----
Net income...................... $ 20,202 4.2% $ 11,517 4.7% $ 7,109 5.0%
======== ===== ======== ===== ======== =====
</TABLE>

The commercial staffing business is subject to the seasonal impact of
summer and holiday employment trends. Typically, the second six months of each
calendar year is more heavily affected as companies tend to increase their use
of temporary personnel during this period. While the commercial staffing
business is cyclical, the Company believes that the broad geographic coverage of
its operations, its emphasis on high-end

17
<PAGE> 18

clerical staffing and its rapid expansion into the less cyclical information
technology services sector, mitigate the adverse effects of economic cycles in a
single industry or geographic region.

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 28, 1997 VERSUS YEAR ENDED DECEMBER 29, 1996

Revenues. Total revenues increased 95.2% to $475.6 million in 1997 from
$243.6 million in 1996. Information technology services revenue grew 350.2% as
the Company continued its aggressive acquisition program with six information
technology acquisitions in 1997. In addition, the Company experienced strong
internal growth as information technology services revenues on a pro forma
basis, giving effect to 1997 acquisitions only, grew 34.7% in 1997 over 1996.
Commercial staffing revenue grew 20.1% as the result of the contribution of
revenues from the seven commercial staffing companies acquired by the Company in
1997 and as a result of pro forma internal growth, giving effect to 1997
acquisitions only, of 9.0% in 1997 over 1996. High internal growth rates in 1997
were due to the continued strong demand for information technology services and
the increasing acceptance by businesses and other organizations in the use of a
contingent workforce.

Direct Cost of Services and Gross Profit. Direct costs, consisting of
payroll and related expenses of consultants and temporary workers, increased
87.6% to $349.6 million from $186.3 million in 1996. Gross margin as a
percentage of revenue increased 300 basis points to 26.5% from 23.5% during
1996. This increase reflected the Company's continued expansion into the higher
margin information technology staffing and consulting sectors. Information
technology services revenues represented 52.5% of total revenues in 1997, up
from 22.8% in 1996. Gross profit margins in the Information Technology and
Commercial Staffing Divisions remained consistent with 1996 margins as pay rate
pressures were generally passed on to the Company's customers through higher
bill rates.

Operating Expenses. Operating expenses, consisting of selling, general and
administrative expenses and depreciation and amortization expense, increased
111.1% to $88.3 million in 1997 from $41.8 million in 1996. As a percentage of
revenues, selling, general and administrative expenses increased to 16.7% in
1997 from 15.8% for 1996. The increase is primarily due to a shift in the
business mix to information technology, which has higher selling, general and
administrative costs as a percentage of revenues in relation to the Commercial
Staffing Division. Depreciation and amortization expense during 1997 increased
to 1.9% of revenues from 1.4% of revenues for 1996 primarily due to the
acquisitions completed in 1997 and 1996.

Interest Expense. Interest expense increased to $7.0 million in 1997 as
the Company borrowed funds to continue its aggressive acquisition strategy. The
Company completed a private placement of $115.0 million of 5 3/4% Convertible
Subordinated Notes due 2004 in June and July 1997. In addition, the Company
continued to borrow funds under its Credit Facility and from certain sellers of
acquired businesses to finance acquisitions. Lower interest expense of $1.2
million in 1996 reflected the application of the proceeds received from the 1996
Equity Offering to finance certain 1996 acquisitions. See "-- Liquidity and
Capital Resources."

Income Tax Expense. The effective tax rate increased slightly to 42.2% in
1997 from 41.9% for 1996. This increase was due to additional nondeductible
amortization expense in 1997 in relation to pretax income, as well as an
increase in state income taxes attributable to changes in the Company's business
mix geographically among the states. The Company's effective tax rate has
historically been higher than the U.S. federal statutory rate of 35.0% primarily
due to state income taxes and nondeductible amortization expense.

Income from Continuing Operations. Income from continuing operations
increased 114.2% to $17.8 million in 1997 (or 3.7% of revenue) from $8.3 million
(3.4% of revenue) in 1996 due to the factors discussed above.

YEAR ENDED DECEMBER 28, 1996 VERSUS YEAR ENDED DECEMBER 31, 1995

Revenues. Total revenues increased 70.1% to $243.6 million in 1996 from
$143.2 million in 1995. Commercial Staffing Division revenue grew 31.3%,
primarily as the result of the contribution of revenues from

18
<PAGE> 19

the four commercial staffing companies acquired by the Company in 1996, internal
growth attributable to increases in billable hours and billing rates and an
improved service mix. All of the Information Technology Division's revenues
resulted from acquisitions completed in 1996.

Direct Cost of Services and Gross Profit. Direct costs, consisting of
payroll and related expenses of consultants and temporary workers, increased
69.8% to $186.3 million from $109.8 million in 1995. Gross margin as a
percentage of revenue increased slightly to 23.5% from 23.4% during 1995. This
increase reflected the Company's entry into the higher margin information
technology services sector in 1996.

Operating Expenses. Operating expenses, consisting of selling, general,
and administrative expenses and depreciation and amortization expenses,
increased 62.6% to $41.8 million in 1996 from $25.7 million in 1995. As a
percentage of revenues, selling, general and administrative expenses decreased
to 15.8% in 1996 from 17.2% for 1995 primarily as the result of the spreading of
these expenses over a larger revenue base. Depreciation and amortization expense
recognized during 1996 increased to 1.4% of revenues from 0.8% of revenues for
1995 primarily due to the acquisitions completed during 1996.

Interest Expense. Interest expense increased to $1.2 million in 1996 as
the Company borrowed funds under its Credit Facility and from certain sellers at
various times during the year primarily to finance acquisitions. See
"-- Liquidity and Capital Resources." Prior to March 1996, the Company had not
borrowed any funds under its Credit Facility, and interest expense had been
immaterial.

Income Tax Expense. The effective tax rate decreased to 41.9% in 1996 from
43.1% for 1995. This decrease was due to reductions in nondeductible
amortization expense related to pretax income and in state income taxes
attributable to changes in the Company's business mix geographically among the
states. The Company's effective tax rate has historically been higher than the
U.S. federal statutory rate of 35.0% primarily due to state income taxes and
nondeductible amortization expense.

Income from Continuing Operations. Income from continuing operations
increased 91.8% to $8.3 million in 1996 (or 3.4% of revenue) from $4.3 million
(or 3.0% of revenue) in 1995 due to the factors discussed above.

LIQUIDITY AND CAPITAL RESOURCES

Changes in liquidity during the year ended December 28, 1997, represented
the net effect of cash generated by operations, financing activities and from
the sale of the Company's healthcare division, offset by the Company's principal
uses of cash to finance receivables due to the growth in business, fund
acquisitions and make capital expenditures. For the year ended December 28,
1997, cash provided by operating activities increased to $23.4 million, up from
$7.5 million for 1996, primarily as the result of higher earnings before
depreciation and amortization in 1997. Cash used for investing activities
decreased to $91.0 million in 1997 from $164.6 million in 1996. This decrease
reflected the reduction in cash used for acquisitions of $115.7 million in 1997
versus $155.8 million in 1996, as well as the cash received in connection with
the sale of the healthcare division. Cash flows from financing activities
decreased to $63.1 million in 1997 from $157.6 million in 1996. This decrease is
primarily due to net repayments under the Credit Facility in 1997 versus net
borrowings under the Credit Facility in 1996, offset by the $111.8 million net
proceeds from the issuance of the Notes.

As of December 28, 1997, receivables for the Information Technology
Division and the Commercial Staffing Division remained outstanding an average of
53 and 44 days, respectively, after billing. In the aggregate, days sales
outstanding were 48 and 51 days at December 28, 1997, and December 29, 1996,
respectively.

The Company's primary capital expenditure requirements relate to
acquisitions. As of the date of this Prospectus, the Company has made cash
payments, including contingent earnout and post-closing payments, and issued
notes aggregating $466.4 million for acquisitions of existing businesses. As of
March 29, 1998, the Company was obligated under certain acquisition agreements
to repay notes during the next two years of $16.9 million in the aggregate and
to make contingent earnout payments to former owners of acquired businesses.
Earnout payments based on 1998 earnings and beyond are contingent on the future
performance of such
19
<PAGE> 20

acquired businesses, and thus the actual amount cannot be determined until such
date. The Company estimates, based on certain assumptions as to future
performance of such acquired businesses, that aggregate earnout payments may be
in the range of $17.0 million to $26.0 million in 1999, $18.0 million to $28.0
million in 2000, and $7.0 million to $10.0 million in 2001. There can be no
assurance, however, that the future performance of the acquired businesses will
be consistent with the assumptions used in establishing the foregoing estimates,
or that the actual amounts of any earnout payments will not differ materially
from the estimates set forth herein.

The Company selectively seeks acquisition opportunities in the ordinary
course of business, and management believes that the Company will continue to
make acquisitions as attractive opportunities become available. The Company
intends to seek additional capital as necessary to fund other potential
acquisitions through one or more funding sources that may include borrowings
under the Credit Facility described below or offerings of debt or equity
securities of the Company. Cash flow from operations, to the extent available,
may also be used to fund a portion of any acquisition expenditures. The Company
also expects to spend approximately one percent of its revenues during 1998 on
field automation systems, management information systems and other capital
expenditures not directly related to acquisitions.

The Company's Credit Facility is a five-year $200.0 million revolving line
of credit due June 2002. As of May 11, 1998, $169.0 million of borrowings were
outstanding under the Credit Facility and approximately $4.0 million had been
used for the issuance of undrawn letters of credit to secure the Company's
workers' compensation programs. Borrowings under the Credit Facility bear
interest at a rate equal to LIBOR plus a percentage corresponding to the
Company's consolidated leverage ratio, as defined, or the agent's base rate, as
defined, at the Company's option. In 1997, the daily weighted average interest
rate under the Credit Facility was 7.2%.

At May 11, 1998, the amount available for borrowing under the Credit
Facility was approximately $27.0 million. The Credit Facility is secured by
pledges of the stock of the Company's subsidiaries and contains customary
covenants such as the maintenance of certain financial ratios, minimum net worth
and working capital requirements, and a restriction on the payment of cash
dividends on the Common Stock. The Credit Facility also limits borrowing
availability for acquisition-related purposes.

In June and July 1997, the Company completed the private placement of
$115.0 million of Notes. The net proceeds of approximately $111.8 million from
this offering were used to repay a substantial portion of outstanding
indebtedness under the Company's Credit Facility and permanently repay
outstanding indebtedness under a separate $10.0 million line of credit. The
Notes are subordinated to all present and future senior indebtedness of the
Company, including indebtedness under the Credit Facility. Interest on the Notes
is payable semi-annually, commencing January 1998. The Notes are convertible
into Common Stock of the Company at any time before maturity at a conversion
price of $17.81 per share. The Notes are not redeemable prior to July 2000.
Thereafter, the Company may redeem the Notes initially at 103.29% and at
decreasing prices thereafter to 100% at maturity, in each case together with
accrued interest.

The Company believes that cash flow from operations, borrowing capacity
under the Credit Facility, the proceeds from this Offering and other available
financing alternatives, including offerings of debt or equity securities of the
Company, will be adequate to meet its presently anticipated needs for working
capital, acquisitions, and capital expenditures. There can be no assurance,
however, that the Company will not require capital from additional sources or
that other alternative sources of capital will be available in the future or, if
available, that any such alternative sources will be available on favorable
terms.

New Accounting Pronouncements

In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131, "Disclosure about Segments of an Enterprise and Related Information,"
("FAS 131") which changes the way that public companies report information about
operating segments in annual and interim financial statements. FAS 131 will be
effective in years beginning after December 15, 1997. The Company will be
required to adopt FAS 131 beginning with its 1998 annual financial statements.
Management has not yet completed its analysis of the impact that this standard
will have on the financial statements of the Company.
20
<PAGE> 21

Year 2000 Compliance

Management believes that the Company's operational and financial reporting
systems are substantially Year 2000 compliant. Future Year 2000 compliance costs
are not expected to have a material impact on the financial position, results of
operations or cash flows of the Company. Management does not know at this time
what, if any, impact Year 2000 compliance may have on its payor and vendor
sources and the impact, if any, on the Company if such payors or vendors are not
fully compliant. Management is attempting to determine when its significant
payors and vendors will be Year 2000 compliant.

Inflation

The effects of inflation on the Company's operation were not material in
1997. Inflationary increases in payroll costs were generally passed on to the
Company's customers through higher bill rates.

Forward-Looking Information

This Prospectus, including "Management's Discussion and Analysis of
Financial Condition and Results of Operations," may contain various
"forward-looking statements," within the meaning of Section 21E of the
Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933,
which are based on management's belief and assumptions, as well as information
currently available to management. When used in this Prospectus, the words
"anticipate," "estimate," "expect" and similar expressions may identify forward-
looking statements. Although the Company believes that the expectations
reflected in any such forward-looking statements are reasonable, it can give no
assurance that such expectations will prove to be correct. Any such statements
are subject to certain risks, uncertainties and assumptions. Should one or more
of these risks or uncertainties materialize, or should underlying assumptions
prove incorrect, the Company's actual results, performance or financial
conditions may vary materially from those anticipated, estimated or expected.
Among the key factors that may have a direct bearing on the Company's actual
results, performance or financial condition are fluctuations in the economy,
general employment trends, including wage trends, the degree and nature of
competition, demand for the Company's services, changes in laws and regulations
affecting the Company's business, the Company's ability to complete acquisitions
and integrate the operations of acquired businesses, to recruit and place
temporary professionals, to expand into new markets, and to maintain profit
margins in the face of pricing pressures and wage inflation and other matters
discussed in this Prospectus and the Company's other filings with the Securities
and Exchange Commission.

21
<PAGE> 22

BUSINESS

The Company has grown by increasing revenues of existing operations and by
making selected acquisitions. Since its IPO in September 1995, PGA has acquired
31 operating companies. With the sale of its healthcare division on December 26,
1997, the Company exited the highly regulated, low growth healthcare staffing
sector and completed a transformation begun in May 1996 when the Company
committed to enter the high growth, high margin information technology services
business. For the year ended December 28, 1997, on a pro forma basis, the
Information Technology Division accounted for approximately 53% of the Company's
revenues. Through strategic acquisitions, the Company has (i) become a leading
provider of information technology staffing services in selected markets, (ii)
strengthened and broadened the market coverage of its commercial staffing
services, (iii) developed multiple cross-selling opportunities between the
Company's Information Technology and Commercial Staffing Divisions in several
target geographic markets, (iv) established a significant presence in certain
key geographic regions of the country and (v) diversified its operations both
geographically and operationally. By reallocating to the Information Technology
and Commercial Staffing Divisions economic and other resources previously
committed to the healthcare division, PGA intends to accelerate its growth, both
internally and through acquisitions.

The Information Technology Division is comprised of 14 companies that offer
information technology professionals and consulting services in a range of
computer-related disciplines. The Information Technology Division provides
skilled personnel, such as programmers, systems designers, LAN administrators,
systems integrators, helpdesk staff and other technology specialists to a wide
variety of clients, typically on an as-needed, time and materials basis. The
Commercial Staffing Division is comprised of 25 companies that offer a wide
variety of temporary office and clerical services to more than 10,000
organizations nationwide. The Commercial Staffing Division provides temporary
personnel who perform general office and administrative services, word
processing and desktop publishing, office automation, records management,
telemarketing and other staffing services. The Commercial Staffing Division also
provides light technical and light industrial services to its customers, but
these services account for a small portion of the division's total revenues.

INDUSTRY OVERVIEW

The staffing services industry has grown rapidly over the past decade.
According to NATSS, the U.S. market for temporary staffing services grew at a
compound annual rate of approximately 16.3% from approximately $20.5 billion in
1991 to approximately $43.6 billion in 1996. According to NATSS, studies have
shown that more than 90% of all businesses use temporary staffing services. The
use of temporary personnel has become widely accepted as a valuable tool for
managing personnel costs, supplementing permanent workforces and meeting
specialized or fluctuating employment requirements. Vacations, illnesses,
resignations, seasonal increases in work volume, marketing promotions and
month-end requirements have historically created demand for temporary staffing.
More recently, the growing cost and difficulty of hiring, laying off and
terminating full-time workers has also encouraged a greater use of temporary
workers. Advances in technology have also created a need for temporary staffing
of workers skilled in using the new technology. In addition, entrants into the
labor force increasingly look to temporary assignments as a way to build
experience, make contacts, gain valuable exposure to a variety of work settings,
and as a vehicle to obtain full-time employment.

Organizations have also begun using flexible staffing to reduce
administrative overhead by strategically outsourcing operations that are not
part of their core business activities, such as recruiting, training and benefit
administration. By utilizing temporary employees, businesses are able to avoid
the management and administrative costs incurred if full-time personnel are
employed. An ancillary benefit, particularly for smaller businesses, is that
such use shifts certain employment costs and risks (e.g., workers' compensation
and

22
<PAGE> 23

unemployment insurance) to the temporary personnel provider, which can spread
the costs and risks over a larger pool of employees. Businesses are also
utilizing staffing services as a method of screening and selectively hiring
employees that ultimately may be added to their full-time staff.

In addition to the general trends affecting the staffing services industry,
specific factors are contributing to the strong growth in the information
technology sector. In recent years, businesses have become increasingly
dependent on the use of computer information technology to manage operations
more efficiently and remain competitive. Faced with the challenge of
implementing and operating more complex information systems without enlarging
their corporate staffs, businesses are increasingly turning to information
technology staffing companies as a variable-cost solution. According to INPUT,
revenue from information technology professional services has grown from $27.2
billion in 1995 to an estimated $37.1 billion in 1997, representing a compound
annual growth rate of 16.8%. Management believes that, even during economic
downturns, rapid and continual changes in information technology increase the
demand for staffing services.

BUSINESS STRATEGY

The Company's objective is to be a premier provider of information
technology services and commercial staffing services and the employer of choice
in selected markets in which the Company expects growth in the demand for such
services. The Company's strategy includes the following key elements:

Enhance Internal Growth. The Company plans to expand its existing
businesses by maintaining its decentralized management structure and pursuing
the following objectives:

- Focus on Local and Regional Markets. Each of the Company's offices
does business under established local brand names, most of which have
been continuously in use for more than 16 years. The Company intends
to continue building on the strong reputations of these local brand
names in their markets while leveraging the sophisticated support
services and low cost structures of a national provider. The Company's
clients are primarily local and regional, including substantial
accounts with local and regional offices of Fortune 500 companies. The
Company generally does not seek or compete for national contracts,
which typically yield lower gross margins than locally awarded
contracts. The Company believes that well-established local providers
in many cases have a competitive marketing advantage over national
providers because they have developed a strong presence in their
markets and have tailored their operations to meet local client needs.
Decentralization of staff selection, pricing and decisions regarding
business mix and advertising allows for significant local autonomy.
This permits each local and regional operator to be extremely flexible
and responsive to the specific needs of its local clientele.

- Attract and Retain Qualified Management and Personnel. The Company
believes that high quality management and branch office personnel with
strong ties to the local community are key competitive factors given
the importance of long-term relationships in determining local
staffing decisions. As a result of its established community presence,
quality-oriented culture, positive work environment and its management
and personnel selection and recruiting processes, the Company
generally has experienced long-term tenure of local management and
continuity in client relationships, with the average tenure of local
management at the operating companies being greater than 13 years. In
addition, the Company's decentralized structure gives regional and
local management significant autonomy and attracts high quality,
entrepreneurial managers.

- Focus on Customer Service. The Company is dedicated to providing the
highest quality customer service. Its quality assurance programs
include confirmation calls, employee performance appraisals, job
opinion questionnaires, reference requests and service evaluations.
The Company uses the automated systems, ProficiencyPLUS and QuestPLUS,
to match a candidate's work history, skills and personal attributes
with customer requirements. Through SourcePLUS, the Company's
customized on-site temporary personnel management system, the Company
provides a high level of on-site service to major staffing clients.

23
<PAGE> 24

Leverage Existing Infrastructure. The Company seeks to increase revenues
and profitability by adding offices and employees without proportionately
increasing overhead expenses. The Company's organizational structure allows the
Company to leverage the costs associated with centralized billing and payroll
functions, workers' compensation liability, technology development and
malpractice risks, as well as the costs of analyzing and complying with state
and federal regulations, over a large number of temporary employees and clients.
The clustering of offices in key markets results in economies of scale through
common regional management and the spreading of recruiting, training,
advertising, administrative and branch office costs over a larger revenue base.
In addition, office clustering facilitates cross-marketing opportunities between
the Information Technology Division and the Commercial Staffing Division.

Make Selected Acquisitions. The Company seeks acquisitions of market
leading companies that will expand the geographic scope of its Information
Technology and Commercial Staffing Divisions, strengthen its professional
services and introduce new specialty services to its business mix. Management
believes that the Company's strong reputation and decentralized management
style, as well as its emphasis on preserving local brand identity, facilitate
its efforts to acquire independent staffing businesses seeking an alliance with
a national company. PGA has demonstrated its ability to increase the revenues
and cash flow of an acquired company by providing many of the sophisticated
systems, marketing programs, and the immediate benefits of purchasing power of a
national company while, at the same time, capitalizing on the acquired firm's
significant brand identity and established customer relationships in specific
local market areas. The Company uses an acquisition profile in selecting
attractive acquisition candidates, and applies a disciplined approach to the
acquisition process. Management believes that acquired businesses can be
integrated into the Company at low incremental cost and will enable the Company
to continue to spread fixed costs over a larger revenue base. The Company
further believes that acquisition risk is minimized by the Company's strategy of
acquiring market leaders in its target markets and retaining local management.
The Company avoids acquiring companies that require significant operational
improvements.

INFORMATION TECHNOLOGY DIVISION

The Information Technology Division provided information technology
professionals and consulting services through 37 offices in 19 states and the
District of Columbia at May 11, 1998. The Information Technology Division had
approximately 3,250 consultants on assignment at May 11, 1998, of which
approximately 50% were salaried employees and 50% were hourly (including
independent contractors).

The Information Technology Division was created in 1996 following the
acquisition by the Company of five companies in the information technology
services business. The Information Technology Division provides skilled
personnel, such as programmers, systems designers, software engineers, LAN
administrators, systems integrators, helpdesk staff and other technology
specialists, to a wide variety of clients, typically on an as-needed time and
materials basis. The Information Technology Division's staffing services include
providing individuals or teams of computer professionals to corporations and
other organizations that need assistance with project management, analysis,
systems design, programming, maintenance, testing and special technologies for
short-term and long-term information technology projects. A number of the
division's operating companies also provide Year 2000 staffing services. The
division's service offerings encompass a wide variety of tasks, ranging from
management of all aspects of a project or the implementation of turnkey systems
to the fulfillment of temporary staffing needs for technology projects.

Selected offices in the Information Technology Division also provide
complementary or stand-alone consulting services in the information technology
area, typically on an as-needed, time and materials basis. For example, BEST
Consulting's Enterprise Division works with clients, chief executive officers
and other executives interested in alternatives to outsourcing their internal
information technology organization, as well as implementing complex systems
integration solutions, and offers a broad range of consulting services,
including systems development projects and client/server networks that span
mainframe, mid-range and desktop systems. These services are provided at the
client's site or at Enterprise's off-site development center. The Company
intends to continue expanding the consulting services component of the
Information Technology Division as part of its strategy to offer a full range of
information technology services to its clients. Other

24
<PAGE> 25

Information Technology Division companies also provide information technology
consulting services to supplement their staffing services offerings.

Operations

The Information Technology Division markets its services to regional and
local accounts on a decentralized basis. The following table sets forth
information at May 11, 1998, on the names, markets, numbers of offices, dates
founded and dates acquired of the Information Technology Division companies:

<TABLE>
<CAPTION>
NUMBER OF DATE DATE
NAME MARKETS OFFICES FOUNDED ACQUIRED
- ---- ------- --------- ------- --------
<S> <C> <C> <C> <C>
Advanced Business Kansas City, MO 1 1986 Feb. 1998
Consultants
BAL Associates Los Altos, CA 2 1989 Dec. 1997
Orlando, FL
BEST Consulting Seattle and Olympic, WA 11 1990 Sept. 1996
Portland, OR
Salt Lake City, UT
Boise, ID
Sacramento, CA
Phoenix, AZ
Minneapolis, MN
Las Vegas and Reno, NV
Broughton Systems Richmond, VA 2 1981 July 1996
Research Triangle Park, NC
Command Technologies Denver, CO 1 1978 July 1996
Computer Resources San Francisco, 4 1972 June 1996
Group Sacramento and Santa Clara, CA
Salt Lake City, UT
DRACS Consulting Group Atlanta, GA 1 1989 Sept. 1997
Energetix Chicago, IL 1 1988 Feb. 1997
IMA Plus Jacksonville, FL 1 1984 March 1998
Lipson Conroy Services Silicon Valley, CA 1 1992 Apr. 1997
Lloyd-Ritter Consulting Silicon Valley, CA 1 1980 Apr. 1997
Software Service Corp. Atlanta, GA 2 1990 Sept. 1996
Birmingham, AL
Trilogy Consulting Chicago, IL 5 1982 Apr. 1998
Kalamazoo, MI
San Mateo, CA
Princeton, NJ
Research Triangle Park, NC
Vital Computer Services New York, NY 4 1970 June 1997
Livingston, NJ
Washington, DC
Miami, FL
</TABLE>

Sales and Marketing

The Information Technology Division has developed a sales and marketing
strategy that focuses on both regional and local accounts, and is implemented in
a decentralized manner through its various branch

25
<PAGE> 26

locations. At the regional level, the Information Technology Division has
attained preferred vendor status under multiple local brand names at a variety
of large clients. These accounts are typically targeted by a local Information
Technology Division company with a presence in a specific market, and then are
sold on the basis of the strength of the Information Technology Division's
geographic presence in multiple markets.

Local accounts are targeted and sold by account managers at the branch
offices, permitting the Information Technology Division to capitalize on the
brand names of the companies in the Information Technology Division and the
local expertise and established relationships of its branch office employees.
Such accounts are solicited through personal sales presentations, telephone
marketing, direct mail solicitation, referrals from clients and other companies
in the Information Technology and Commercial Staffing Divisions and advertising
in a variety of local and national media. These advertisements appear in the
Yellow Pages, newspapers and trade publications. Local employees are also
encouraged to be active in civic organizations and industry trade groups to
facilitate the development of new customer relationships.

COMMERCIAL STAFFING DIVISION

At May 11, 1998, the Commercial Staffing Division operated through 101
offices in 13 states and the District of Columbia. The Commercial Staffing
Division provides temporary personnel who perform general office and
administrative services, word processing and desktop publishing, office
automation, records management, production/assembly/distribution, telemarketing,
finance, accounting and other staffing services, typically on an as-needed, time
and materials basis. Certain of the Commercial Staffing Division's offices also
provide full-time placement and payrolling services. Payrolling services entail
employment by the Commercial Staffing Division of individuals recruited by a
customer for which the Commercial Staffing Division is compensated on a fee
basis.

26
<PAGE> 27

Operations

The Commercial Staffing Division markets its staffing services to local and
regional clients through its network of offices across the United States. The
following table sets forth information at May 11, 1998, on the names, markets,
numbers of offices and dates founded of the Commercial Staffing Division's
companies:

<TABLE>
<CAPTION>
NUMBER OF DATE
NAME MARKETS OFFICES(1) FOUNDED
- ---- ------- ---------- -------
<S> <C> <C> <C>
Abar Staffing San Francisco Bay Area, CA 5 1954
Allegheny Personnel Pittsburgh, PA 4 1972
Ann Wells Personnel(2) Silicon Valley, CA 1 1980
Corporate Staffing Consultants(2) Charlotte, NC 5 1975
Creative Temporaries(2) Charlotte, NC 6 1972
Denver Temporaries Denver, CO 2 1978
FirstWord Staffing Services Dallas, TX 7 1978
Jeffrey Staffing Group Boston, MA 11 1971
(Franklin-Pierce Associates,
Franklin-Pierce Temporaries,
Scott-Wayne Associates,
Scott-Wayne Staffing, Scott-Wayne
Temporaries and Integrity
Technical Services)
Judith Fox Staffing Companies Richmond and Charlottesville, 3 1978
(Judith Fox Staffing and Rosemary VA
Scott Temporaries) New York, NY
Profile Temporaries Loop Area of Chicago, IL 1 1979
Sloan Staffing Services(2) New York, NY 1 1962
Staffinders Personnel Houston, TX 3 1983
Temp Connection New York and Long Island, NY 2 1982
TempWorld Atlanta, GA 14 1980
Birmingham, AL
Washington, DC
The Temporary Connection(2) Houston, TX 6 1984
Austin, TX
Dallas, TX
Thomas Staffing Los Angeles/Orange County, CA 20 1969
Riverside/San Bernardino, CA
San Diego, CA
West Personnel Service North and West 7 1954
Suburban Chicago, IL
Word Processing Professionals New York, NY 1 1982
Word Processors Personnel Services Atlanta, GA 2 1978
</TABLE>

- ---------------

(1) Does not include SourcePLUS vendor-on-premises locations at customer sites.
(2) Ann Wells Personnel, Creative Temporaries and Corporate Staffing were
acquired by the Company in January 1998; The Temporary Connection was
acquired in March 1998; and Sloan Staffing Services was acquired in May
1998.

The Commercial Staffing Division strives to satisfy the needs of its
customers by providing customized services, such as on-site workforce management
and full-time placement services. The flexibility of the Commercial Staffing
Division's decentralized organization allows it to tailor its operations to meet
local client requirements. For example, certain clients are provided with
customized billings, utilization reports and safety awareness and training
programs.

27
<PAGE> 28

To meet the growing demand in the staffing services business for on-site
management capability, the Commercial Staffing Division offers SourcePLUS, its
customized on-site temporary personnel management system. SourcePLUS places an
experienced staffing services manager at the client facility to provide complete
staffing support, customized to meet client-specific needs. This program
facilitates client use of temporary personnel and allows the client to outsource
a portion of its personnel responsibility to the Commercial Staffing Division's
on-site representative, who gathers and records requests for temporary jobs from
client department heads and then fulfills client requirements. These
representatives can also access the Commercial Staffing Division's systems
through on-site personal computers.

The Commercial Staffing Division's full-time placement services provide
traditional staff selection and recruiting services to its clients. In addition
to recruiting employees through referrals, the Commercial Staffing Division
places advertisements in local newspapers to recruit employees for specific
positions at client companies. The Commercial Staffing Division utilizes its
expertise and selection methods to evaluate the applicant's credentials. If the
applicant receives and accepts a full-time position at the client, the
Commercial Staffing Division charges the employer a one-time fee, generally
based on the annual salary of the employee.

In order to maintain a consistent quality standard for all its temporary
employees, the Commercial Staffing Division uses a comprehensive automated
system, the QuestPLUS System, to screen and evaluate potential temporary
personnel, make proper assignments and review a temporary employee's
performance. The QuestPLUS System integrates the results of skills testing with
personal attributes and work history and automatically matches available
candidates with customer requirements. The Commercial Staffing Division also
provides uniform training to all of its employees in sales, customer service and
leadership skills.

Sales and Marketing

The Commercial Staffing Division has implemented a business development
program to target potential customers with temporary staffing needs and to
maintain and expand existing customer relationships. The marketing efforts of
the Commercial Staffing Division are decentralized and capitalize on
long-standing business relationships with the clients of the Commercial Staffing
Division's companies and their established brand names, most of which have been
in use for more than 20 years. The Commercial Staffing Division obtains new
clients primarily through personal sales presentations and referrals from other
clients of the Information Technology and Commercial Staffing Divisions and
supports its sales efforts with telemarketing, direct mail solicitation and
advertising in a variety of local and national media, including the Yellow
Pages, newspapers, magazines and trade publications.

The Commercial Staffing Division devotes the majority of its selling
efforts to the local and regional operations of a wide variety of businesses
(including a number of Fortune 500 companies) that it has identified as
consistent users of temporary staffing services. Local and regional accounts are
characterized by shorter sales cycles and higher gross margins. The Commercial
Staffing Division generally does not seek any national account agreements, but
does provide services to a wide variety of customers with national and
international businesses. Bids for large user accounts and the provision of
services to clients with multiple location requirements are coordinated at the
Company's headquarters.

The commercial staffing business is subject to the seasonal impact of
summer and holiday employment trends. Typically, the second half of the calendar
year is more heavily affected, as companies tend to increase their use of
temporary personnel during this period. While the commercial staffing industry
is cyclical, the Company believes that the broad geographic coverage of its
operations and the diversity of the services it provides (including its emphasis
on high-end white collar clerical workers) generally mitigate the adverse
effects of economic cycles in a single industry or geographic region.

RECRUITING AND RETENTION OF TEMPORARY EMPLOYEES

The Company recruits its temporary employees and Information Technology
Division consultants through a recruiting program that primarily utilizes local
and national advertisements and the Internet. In addition, the Company has
succeeded in recruiting qualified employees through referrals from its existing
labor force. To encourage further referrals, certain of the companies in the
Information Technology and
28
<PAGE> 29

Commercial Staffing Divisions have initiated policies whereby they pay referral
fees to employees responsible for attracting new recruits. The Company
interviews, tests, checks references and evaluates the skills of applicants for
temporary employment, utilizing systems and procedures developed and enhanced
over the years. The Commercial Staffing Division employs temporary employees on
an as-needed, time and materials basis dependent upon client demand. These
temporary employees are paid only for time they actually work.

In the Information Technology Division, the demand for technology
consultants significantly exceeds supply. In an effort to attract a broad
spectrum of employees, the Company offers a wide variety of employment options
and training programs. The Company emphasizes the utilization of salaried
full-time status for its consultants with the payment of annual salaries
irrespective of assignment. In addition, the Information Technology Division
operates a number of formal and informal training programs to provide its
consultants with access to and training in new software applications and a
diverse mix of mainframe, client/server and personal computer technologies. The
Company believes that these training initiatives have improved employee
recruitment and retention, increased the technical skills of the Information
Technology Division's personnel and resulted in better service for the
Information Technology Division's clients.

The Company provides competitive compensation packages and benefits for all
of its temporary employees. Most of the temporary employees are also eligible
for the Company's 401(k) matching plans and employee stock purchase plan.

ORGANIZATIONAL STRUCTURE

The Company operates through a network of decentralized Company-operated
offices. Each office reports to a manager who is responsible for day-to-day
operations and the profitability of the office. Depending on, among other
things, the number of offices in a region, branch managers may report to
regional managers, division vice presidents or, in the Commercial Staffing
Division, a division president. Branch and regional managers are given a high
level of autonomy in making decisions about the operation of their principal
region. The compensation of branch and regional managers includes bonuses
generally based on the incremental year-to-year increase in profitability of
their operations and is designed to motivate them to maximize the growth and
profitability of their offices.

AUTOMATED OPERATING SYSTEMS

The Commercial Staffing Division uses a number of automated systems to
allow it to quickly and effectively measure the skills of temporary employee
candidates and to match skills with client requests. The ProficiencyPLUS program
is designed to test specific computer-related skills by allowing the candidate
to operate in the actual software program environment. The QuestPLUS system
integrates the results of the Company's skills testing with personal attributes
and work history and automatically matches available candidates with customer
requirements. This system also allows the Company to track the performance of
its temporary employees and provide quality reports to customers that document
the level of the Company's performance.

The Company utilizes branch paybill systems for the Commercial Staffing
Division. The paybill processing system provides payroll processing and customer
invoicing. Installation of this system began in the second quarter of 1996 and
has been completed in all of the Division companies that were part of the
Company in September 1995, when the Company went public. Installation of this
system in subsequently acquired companies is continuing.

In the Information Technology Division, the Company has entered into an
agreement with a software company for a new branch operating system for the
existing information technology companies. Installation of this new system began
in the first quarter of 1997 and has been completed in over 50% of the
Division's existing offices. The Company expects that additional acquired
companies will install this system during 1998.

The Company has also recently entered into an agreement with a software
company to install human resources and financial systems for its information
technology companies. Installation of these systems is expected to begin in the
second quarter of 1998 and continue through the year 2000.

29
<PAGE> 30

There can be no assurance, however, that there will not be unanticipated
costs or delays associated with these installations or that the systems will
operate as expected.

COMPETITION

The United States staffing services market is highly competitive and highly
fragmented, with more than 15,000 offices competing in the industry, and has
limited barriers to entry. However, the commercial staffing and information
technology staffing industries have been undergoing significant consolidation.
The largest publicly owned companies specializing in personnel staffing services
in the United States are Manpower Inc., Kelly Services, Inc., Adecco, Inc., The
Olsten Corporation, AccuStaff, Incorporated, Interim Services Inc. and Norrell
Corporation, all of which have greater marketing, financial and other resources
than the Company.

In the temporary staffing industry, competition generally is limited to
firms with offices located within a customer's particular local market. In most
major markets, commercial staffing competitors generally include many of the
publicly traded companies and, in addition, numerous regional and local
full-service and specialized temporary service agencies, some of which may
operate only in a single market. Competitors for information technology services
include local information technology staffing firms, large, multi-purpose
staffing firms and accounting firms.

Since many clients contract for their staffing services locally,
competition varies from market to market. In most areas, no single company has a
dominant share of the market. Many client companies use more than one staffing
services company, and it is common for large clients to use several staffing
services companies at the same time. However, in recent years, there has been a
significant increase in the number of large customers consolidating their
temporary staffing purchases with a single supplier or with a small number of
firms. The trend to consolidate temporary staffing purchases has in some cases
made it more difficult for the Company to gain business from potential customers
who have already contracted to fill their staffing needs with competitors of the
Company. In other cases, the Company has been able to increase the volume of
business with certain customers who choose to purchase staffing primarily from
the Company.

The competitive factors in obtaining and retaining clients include an
understanding of clients' specific job requirements, the ability to provide
appropriately skilled temporary personnel at the local level in a timely manner,
the monitoring of quality of job performance and the price of services. The
primary competitive factors in obtaining qualified candidates for temporary
employment assignments are wages and responsiveness to work schedules and the
number of hours of work available. Management believes that it is highly
competitive in these areas due to its focus on local markets and the autonomy
given to its local management.

REGULATION

The Company, like other temporary employment service firms, is generally
subject to the following types of government regulation: (i) regulation of the
employer/employee relationship between a firm and its temporary employees; (ii)
registration, licensing, record keeping and reporting requirements; and (iii)
substantive limitations on its operations. The Company is the legal employer of
its temporary workers. Therefore, it is governed by laws regulating the
employer/employee relationship, such as tax withholding or reporting, social
security or retirement, anti-discrimination and workers' compensation.

TRADEMARKS

The Company maintains a number of trademarks, tradenames, service marks and
other intangible rights. The Company is not currently aware of any infringing
uses or other conditions that would materially and adversely affect its use of
its proprietary rights.

30
<PAGE> 31

EMPLOYEES

At May 11, 1998, the Company had approximately 1,025 permanent
administrative employees. None of the Company's employees are covered by
collective bargaining agreements. The Company believes that its relationships
with its employees are good.

PROPERTIES

Generally, the Company's offices are leased under leases of relatively
moderate duration (typically three to five years, with options to extend)
containing customary terms and conditions. The Information Technology and
Commercial Staffing Divisions' offices are typically in high quality office or
industrial buildings, and occasionally in retail buildings, and the Company's
headquarters facilities and regional offices are in similar facilities.

LEGAL PROCEEDINGS

From time to time the Company is involved in certain disputes and
litigation relating to claims arising out of its operations in the ordinary
course of business. Further, the Company periodically is subject to government
audits and inspections. In the opinion of the Company's management, matters
presently pending will not in the aggregate have a material adverse effect on
the Company's financial condition or results of operations.

31
<PAGE> 32

MANAGEMENT

EXECUTIVE OFFICERS, DIVISION OFFICERS AND DIRECTORS

The following table sets forth certain information with respect to the
Company's current executive officers, division officers and directors:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Edward P. Drudge, Jr...................... 59 Chairman of the Board and Chief Executive Officer
James C. Hunt............................. 41 Chief Financial Officer, Treasurer and Director
Ken R. Bramlett, Jr....................... 38 Senior Vice President, General Counsel, Secretary
and Director
Michael H. Barker......................... 43 President -- Commercial Staffing Division
Rosemary Payne-Harris..................... 46 Senior Vice President -- Atlantic Operations,
Commercial Staffing Division
Ann S. Fleming............................ 55 Senior Vice President -- Central Operations,
Commercial Staffing Division
Craig E. Newbold.......................... 49 Senior Vice President -- Western Operations,
Information Technology Division
Kevin P. Egan(1).......................... 55 Director
J. Roger King(1).......................... 58 Director
James V. Napier(1)(2)..................... 61 Director
William J. Simione, Jr.(2)................ 56 Director
</TABLE>

- ---------------

(1) Member of the Compensation Committee of the Board of Directors.
(2) Member of the Audit Committee of the Board of Directors.

Edward P. Drudge, Jr.: Mr. Drudge is the Chairman of the Board and Chief
Executive Officer of the Company and has served as such since the formation of
the Company in July 1995. Prior to that time, Mr. Drudge was President of the
Personnel Group of America Division of Adia, S.A., a Swiss corporation ("Adia"),
and Senior Vice President of Adia Services, Inc., a California corporation and
wholly owned subsidiary of Adia, having joined Adia in April 1989. Prior to
joining Adia, Mr. Drudge held senior management positions with Manpower Inc., a
provider of personnel services, for 16 years, and prior to that, sales and
marketing positions with Proctor & Gamble.

James C. Hunt: Mr. Hunt joined the Company as a Senior Vice President on
January 2, 1997, and has served as Chief Financial Officer and Treasurer and as
a director of the Company since March 1, 1997. Prior to joining the Company, Mr.
Hunt spent 18 years with Arthur Andersen LLP, a worldwide accounting and
consulting firm, the last six years as a partner.

Ken R. Bramlett, Jr.: Mr. Bramlett has served as Senior Vice President,
General Counsel and Secretary of the Company since October 1996 and as a
director of the Company since August 13, 1997. Prior to joining the Company, Mr.
Bramlett spent 12 years with Robinson, Bradshaw & Hinson, P.A., a Charlotte,
North Carolina law firm, the last six years as a partner. Mr. Bramlett serves on
the board of directors of World Acceptance Corporation, a small loan consumer
finance company headquartered in Greenville, South Carolina.

Michael H. Barker: Mr. Barker has served as President of the Commercial
Staffing Division since January 1998. Prior to joining the Company, Mr. Barker
served as the Chief Operations Officer for the Computer Group Division of IKON
Technology Services, a diversified technology company, for three years. Prior to
that, Mr. Barker served as a regional vice president for Control Data, Inc., a
systems integration company, for three years.

32
<PAGE> 33

Rosemary Payne-Harris: Ms. Payne-Harris has served as a Senior Vice
President of the Company since the formation of the Company in July 1995 and as
Senior Vice President of Atlantic Operations of the Commercial Staffing Division
since October 1996. Prior to that time, Ms. Payne-Harris was Vice President of
Field Operations for the Personnel Group of America Division of Adia Services,
Inc., having joined Adia in July 1990. Prior to joining Adia, Ms. Payne-Harris
was with Manpower, Inc. for a total of eight years.

Ann S. Fleming: Ms. Fleming has served as Senior Vice President of Central
Operations of the Commercial Staffing Division since October 1996 and as
President of FirstWord Temporary Services since September 1991. Prior to joining
the Company, Ms. Fleming spent nine years in the temporary help business with
Manpower, Inc. and Volt Information Services.

Craig E. Newbold: Mr. Newbold has served as Senior Vice President of
Western Operations of the Information Technology Division since January 1, 1998.
Mr. Newbold also has served as President of BEST Consulting for the past seven
years. The Company acquired BEST Consulting in September 1996.

Kevin P. Egan: Mr. Egan has served as a director of the Company since
September 1995. Since October 1995, Mr. Egan has been the President of Tamarack
Holdings, an investment company. From 1983 to September 1995, Mr. Egan served as
President and Chief Operating Officer of PrimeNet DataSystems, St. Paul,
Minnesota. PrimeNet provides database and integrated marketing services. Prior
to forming PrimeNet in 1983, Mr. Egan was senior vice president of Manpower
Temporary Services from 1975 to 1983. Mr. Egan also previously held marketing
and management positions with the Graphic Services Division of 3M Company and
Transamerica Computer Co., London, England.

J. Roger King: Mr. King has served as a director of the Company since
September 1995. Mr. King retired on February 1, 1998, after a 28-year career
with PepsiCo, Inc. and its affiliates. Mr. King joined the Frito-Lay Division of
PepsiCo in 1969 and served in various personnel and employee relations positions
for PepsiCo, including Senior Vice President of Personnel of PepsiCo, from 1984
to 1995. Mr. King served as Senior Vice President of Human Resources of
Frito-Lay from June 1995 until his retirement.

James V. Napier: Mr. Napier has served as a director of the Company since
September 1995. Since November 1992, Mr. Napier has been the Chairman of
Scientific-Atlanta, Inc., a telecommunications company. Between 1988 and 1992,
Mr. Napier served as Chairman and Chief Executive Officer of The Commercial
Telephone Group, a telecommunications engineering and design company, and
between 1985 and 1986, as Chief Executive Officer and President of HBO &
Company, Inc., a health care information services company. In addition to
serving on the Board of Directors of Scientific-Atlanta, Mr. Napier is a
director of Engelhard Corporation, Vulcan Materials Company, HBO & Company,
Inc., Intelligent Systems Corporation and Westinghouse Air Brake Company.

William J. Simione, Jr.: Mr. Simione has served as a director of the
Company since September 1995. Mr. Simione has served as Vice Chairman and
Executive Vice President of Simione Central Holdings, Inc., which provides
consulting services and information services to the home health care industry,
since October 1996, and served with its predecessors prior to that time. He is a
member of the Prospective Payment Task Force, a Regulatory Affairs Subcommittee
for the National Association for Home Care, and is one of the Subcommittee's
National Reimbursement Consultants. Mr. Simione is also a member of many state
and federal committees involving home care issues.

33
<PAGE> 34

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 addition, the Company's Credit Facility currently
prohibits the Company from paying cash dividends on the Common Stock. 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 validly issued, fully paid and
nonassessable.

The Transfer Agent and Registrar for the Common Stock is First Union
National Bank.

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 stockholder 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 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.

EMPLOYEE STOCK PURCHASE PLAN

The Company's 1997 Employee Stock Purchase Plan currently has reserved for
issuance approximately 1,000,000 shares of Common Stock.

STOCKHOLDER 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 First Union National Bank, as
successor Rights Agent. Each

34
<PAGE> 35

Right entitles the holder to purchase from the Company one one-hundredth of a
share of Series A Junior Participating Preferred Stock (the "Junior
Participating Preferred") for an exercise price of $95.00, subject to
adjustment. Each 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 to occur 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 AND CHARTER AND BYLAW PROVISIONS

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

35
<PAGE> 36

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.

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
stockholders 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 stockholders must be effected at a duly called annual
or special meeting of stockholders and may not be effected by written consent.
The Company's Bylaws set forth an advance notice procedure with regard to
stockholder nominations and business to be brought before a meeting of
stockholders.

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 stockholders 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 stockholders, (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 stockholders
(through stockholders' 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
stockholder 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 stockholders 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.

36
<PAGE> 37

UNDERWRITING

Upon the terms and subject to the conditions stated in the Underwriting
Agreement dated the date hereof, each Underwriter named below has severally
agreed to purchase from the Company, and the Company has agreed to sell to such
Underwriter, the number of shares of Common Stock set forth below opposite the
name of such Underwriter.

<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
- ----------- ---------
<S> <C>
Smith Barney Inc. .......................................... 1,984,500
NationsBanc Montgomery Securities LLC....................... 1,129,000
J.C. Bradford & Co. ........................................ 992,250
The Robinson-Humphrey Company, LLC.......................... 992,250
Cleary Gull Reiland & McDevitt Inc. ........................ 572,000
BT Alex. Brown Incorporated................................. 120,000
Donaldson, Lufkin & Jenrette Securities Corporation......... 120,000
A. G. Edwards & Sons, Inc. ................................. 120,000
Lehman Brothers Inc. ....................................... 120,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated.......... 120,000
PaineWebber Incorporated.................................... 120,000
SBC Warburg Dillon Read Inc. ............................... 120,000
Robert W. Baird & Co. Incorporated.......................... 70,000
George K. Baum & Company.................................... 70,000
Dain Rauscher Wessels, A Division of Dain Rauscher
Incorporated.............................................. 70,000
Gerard Klauer Mattison & Co., Inc. ......................... 70,000
Interstate/Johnson Lane Corporation......................... 70,000
Ladenburg, Thalmann & Co. Inc. ............................. 70,000
Scott & Stringfellow, Inc. ................................. 70,000
---------
Total............................................. 7,000,000
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares are subject to
approval of certain legal matters by counsel and to certain other conditions.
The Underwriters are obligated to take and pay for all shares of Common Stock
offered hereby (other than those covered by the over-allotment option described
below) if any such shares are taken.

The Underwriters, for whom Smith Barney Inc., NationsBanc Montgomery
Securities LLC, J.C. Bradford & Co., The Robinson-Humphrey Company, LLC and
Cleary Gull Reiland & McDevitt Inc. are acting as the Representatives, propose
to offer part of the shares directly to the public at the public offering price
set forth on the cover page of this Prospectus and part of the shares to certain
dealers at a price which represents a concession not in excess of $0.51 per
share under the public offering price. The Underwriters may allow, and such
dealers may reallow, a concession not in excess of $0.10 per share to certain
other dealers. After the offering of the shares to the public, the public
offering price and such concessions may be changed by the Representatives.

The Company has granted to the Underwriters an option, exercisable for 30
days from the date of this Prospectus, to purchase up to 1,050,000 additional
shares of Common Stock at the price to public set forth on the cover page of
this Prospectus minus the underwriting discounts and commissions. The
Underwriters may exercise such option solely for the purpose of covering
over-allotments, if any, in connection with the Offering of the shares offered
hereby. To the extent such option is exercised, each Underwriter will be
obligated, subject to certain conditions, to purchase approximately the same
percentage of such additional shares as the number of shares set forth opposite
each Underwriter's name in the preceding table bears to the total number of
shares listed in such table.

37
<PAGE> 38

The Company and the Company's executive officers and directors have agreed
that, subject to certain customary exceptions, for a period of 90 days from the
date of this Prospectus, they will not, without the prior written consent of
Smith Barney Inc., offer, sell, contract to sell, or otherwise dispose of, any
shares of Common Stock of the Company or any securities convertible into, or
exercisable or exchangeable for, Common Stock of the Company.

In connection with this Offering and in compliance with applicable law, the
Underwriters may overallot (i.e., sell more Common Stock than the total amount
shown on the list of Underwriters and participations which appears above) and
may effect transactions which stabilize, maintain or otherwise affect the market
price of the Common Stock at levels above those which might otherwise prevail in
the open market. Such transactions may include placing bids for the Common Stock
or effecting purchases of the Common Stock for the purpose of pegging, fixing or
maintaining the price of the Common Stock or for the purpose of reducing a
syndicate short position created in connection with the Offering. A syndicate
short position may be covered by exercise of the option described above in lieu
of or in addition to open market purchases. In addition, the contractual
arrangements among the Underwriters include a provision whereby if the
Representatives purchase Common Stock in the open market for the account of the
underwriting syndicate and the securities purchased can be traced to a
particular Underwriter or member of the selling group, the underwriting
syndicate may require the Underwriter or selling group member in question to
purchase the Common Stock in question at the cost price to the syndicate or may
recover from (or decline to pay to) the Underwriter or selling group member in
question the selling concession applicable to the securities in question. The
Underwriters are not required to engage in any of these activities and any such
activities, if commenced, may be discontinued at any time.

The Representatives and certain of their affiliates have engaged and may in
the future engage in investment banking and commercial banking transactions with
the Company in the ordinary course of business. Each of Smith Barney Inc.,
NationsBanc Capital Markets, Inc. (an affiliate of NationsBanc Montgomery
Securities LLC), J.C. Bradford & Co. and The Robinson-Humphrey Company, Inc.
served as initial purchasers (the "Initial Purchasers") of, and received
customary discounts and commissions in connection with, the Company's 5 3/4%
Convertible Subordinated Notes issued in June and July 1997. In addition, Smith
Barney Inc. acted as a manager of, and received customary discounts and
commissions in connection with, the Company's IPO and the Company's 1996 equity
offering. The Company agreed to indemnify each of the Initial Purchasers and
Smith Barney Inc. and their controlling persons against certain liabilities,
including liabilities under the Securities Act, in connection with such
offerings, or to contribute to payments the Initial Purchasers or Smith Barney
Inc. may be required to make in respect thereof.

The Company and the Underwriters have agreed to indemnify each other
against certain liabilities, including liabilities under the Securities Act.

LEGAL MATTERS

The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Robinson, Bradshaw & Hinson, P.A., Charlotte, North
Carolina. Certain legal matters in connection with the Offering will be passed
upon for the Underwriters by Dewey Ballantine LLP, New York, New York.

38
<PAGE> 39

EXPERTS

The consolidated financial statements of the Company for the year ended
December 28, 1997, included herein and in the Registration Statement of which
this Prospectus is a part have been so included in reliance upon the report of
Price Waterhouse LLP, independent accountants, appearing elsewhere herein, given
on the authority of said firm as experts in auditing and accounting.

The consolidated financial statements of the Company as of December 29,
1996 and for each of the two years in the period ended December 29, 1996,
included herein and in the Registration Statement of which this Prospectus is a
part have been audited by Arthur Andersen LLP, independent public accountants,
as indicated in their report with respect thereto and are included herein in
reliance upon the authority of said firm as experts in accounting and auditing
in giving said reports.

ADDITIONAL INFORMATION

The Company is subject to the informational requirements of the Securities
and Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities of the Commission, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549 as well as at the Commission's
regional offices located at Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511 and at Seven World Trade Center, 13th Floor,
New York, New York 10048. Copies can be obtained from the Commission by mail at
prescribed rates. Requests should be directed to the Commission's Public
Reference Branch, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549. Such material may also be accessed electronically by means of the
Commission's home page on the Internet (http://www.sec.gov).

The Common Stock is listed on the New York Stock Exchange, and such
reports, proxy statements and other information may be inspected at the offices
of the New York Stock Exchange, 20 Broad Street, New York, New York 10005.

This Prospectus constitutes a part of a registration statement on Form S-3
(herein, together with all exhibits thereto, referred to as the "Registration
Statement") filed by the Company with the Commission under the Securities Act,
with respect to the securities offered hereby. This Prospectus does not contain
all the information set forth in the Registration Statement, certain parts of
which are omitted in accordance with the rules and regulations of the
Commission. Reference is hereby made to the Registration Statement, and to the
exhibits thereto for further information with respect to the Company and the
securities offered hereby. Copies of the Registration Statement and the exhibits
thereto are on file at the offices of the Commission and may be obtained upon
payment of the prescribed fee or may be examined without charge at the public
reference facilities of the Commission described above. Statements contained
herein concerning the provisions of documents are necessarily summaries of such
documents, and each statement is qualified in its entirety by reference to the
copy of the applicable document filed with the Commission.

39
<PAGE> 40

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents filed by the Company with the Commission (File No.
1-13956) are incorporated by reference in this Prospectus:

(1) Annual Report on Form 10-K for the fiscal year ended December 28,
1997;

(2) Quarterly Report on Form 10-Q for the quarter ended March 29,
1998;

(3) Current Report on Form 8-K filed on December 29, 1997, Amendment
No. 1 to Current Report on Form 8-K/A filed on January 12, 1998, Current
Report on Form 8-K filed on March 9, 1998, Current Report on Form 8-K filed
on April 9, 1998, Current Report on Form 8-K filed on April 10, 1998 and
Current Report on Form 8-K filed on May 8, 1998; and

(4) The description of the Company's Common Stock contained in its
Form 8-A filed with the Commission on September 19, 1995, including any
amendment or reports filed for the purpose of updating such description.

All 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 shall be deemed to be incorporated by reference
into this Prospectus.

Any statement contained herein or in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.

This Prospectus incorporates documents by reference which are not presented
herein or delivered herewith. These documents (not including exhibits to the
documents incorporated by reference unless such exhibits are specifically
incorporated by reference into the information that the Prospectus incorporates)
are available without charge to each person to whom a Prospectus is delivered
upon written or oral request. Requests should be directed to Personnel Group of
America, Inc., 6302 Fairview Road, Suite 201, Charlotte, North Carolina 28210,
Attention: Corporate Secretary (telephone number (704) 442-5100).

40
<PAGE> 41

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Reports of Independent Accountants.......................... F-2

Consolidated Balance Sheets as of December 28, 1997 and
December 29, 1996......................................... F-4

Consolidated Statements of Income for the years ended
December 28, 1997, December 29, 1996 and December 31,
1995...................................................... F-5

Consolidated Statements of Shareholders' Equity for the
years ended December 28, 1997, December 29, 1996 and
December 31, 1995......................................... F-6

Consolidated Statements of Cash Flows for the years ended
December 28, 1997, December 29, 1996 and December 31,
1995...................................................... F-7

Notes to Consolidated Financial Statements.................. F-8
</TABLE>

F-1
<PAGE> 42

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of
Personnel Group of America, Inc.:

In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, shareholders' equity and cash flows present
fairly, in all material respects, the financial position of Personnel Group of
America, Inc. (the "Company") and its subsidiaries at December 28, 1997, and the
results of their operations and their cash flows for the year then ended, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above. The financial statements of the Company for the two years ended December
29, 1996 were audited by other independent accountants whose report dated
February 7, 1997, except for Note 4, for which the date is December 26, 1997 and
except for Note 10, for which the date is March 5, 1998, expressed an
unqualified opinion on those statements.

/s/ PRICE WATERHOUSE LLP

Charlotte, North Carolina
February 3, 1998, except for Note 10,
for which the date is March 5, 1998.

F-2
<PAGE> 43

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Shareholders of
Personnel Group of America, Inc.

We have audited the consolidated balance sheet of Personnel Group of
America, Inc. and subsidiaries (a Delaware corporation) as of December 29, 1996,
and the related consolidated statements of income, shareholders' equity and cash
flows for each of the two years in the period ended December 29, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Personnel Group of America, Inc. and subsidiaries as of December 29, 1996, and
the results of their operations and their cash flows for each of the two years
in the period ended December 29, 1996, in conformity with generally accepted
accounting principles.

/s/ ARTHUR ANDERSEN LLP

Charlotte, North Carolina
February 7, 1997 (except with
respect to the matter discussed
in Note 4, as to which the date
is December 26, 1997, and
except with respect to the
matter discussed in Note 10, as
to which the date is March 5,
1998).

F-3
<PAGE> 44

CONSOLIDATED BALANCE SHEETS
DECEMBER 28, 1997 AND DECEMBER 29, 1996

<TABLE>
<CAPTION>
1997 1996
--------- ---------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 642 $ 5,111
Accounts receivable, net of allowance for doubtful
accounts of $1,063 and $519 in 1997 and 1996,
respectively........................................... 77,869 46,219
Prepaid expenses and other current assets................. 1,674 1,075
Deferred income taxes..................................... 4,165 1,701
Notes receivable from sale of discontinued operations..... 36,276 --
-------- --------
Total current assets.............................. 120,626 54,106
Property and equipment, net................................. 9,162 5,746
Intangible assets, net...................................... 316,413 178,943
Other assets................................................ 5,108 1,815
Net assets of discontinued operations....................... -- 52,965
-------- --------
Total assets...................................... $451,309 $293,575
======== ========

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt......................... $ 7,490 $ 6,670
Accounts payable.......................................... 2,200 2,596
Accrued wages and benefits................................ 19,544 11,514
Other accrued liabilities................................. 12,777 5,990
Income taxes payable...................................... 9,525 778
-------- --------
Total current liabilities......................... 51,536 27,548
Long-term debt.............................................. 145,050 78,477
Other long-term liabilities................................. 49,647 4,293
-------- --------
Total liabilities................................. 246,233 110,318
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock, $.01 par value; shares authorized 5,000;
no shares issued and outstanding....................... -- --
Common stock, $.01 par value; shares authorized 95,000;
24,278 and 12,034 shares issued and outstanding in 1997
and 1996, respectively................................. 242 120
Additional paid-in capital................................ 171,038 169,273
Retained earnings......................................... 34,066 13,864
Deferred compensation..................................... (270) --
-------- --------
Total shareholders' equity........................ 205,076 183,257
-------- --------
Total liabilities and shareholders' equity........ $451,309 $293,575
======== ========
</TABLE>

The accompanying notes are an integral part of these balance sheets.

F-4
<PAGE> 45

CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 28, 1997, DECEMBER 29, 1996, AND DECEMBER 31, 1995

<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
(IN THOUSANDS, EXCEPT PER
SHARE DATA)
<S> <C> <C> <C>
REVENUES.................................................... $475,620 $243,608 $143,243
DIRECT COST OF SERVICES..................................... 349,616 186,338 109,755
-------- -------- --------
GROSS PROFIT................................................ 126,004 57,270 33,488
SELLING, GENERAL AND ADMINISTRATIVE......................... 79,216 38,454 24,568
DEPRECIATION AND AMORTIZATION............................... 9,037 3,362 1,149
-------- -------- --------
OPERATING INCOME............................................ 37,751 15,454 7,771
INTEREST EXPENSE............................................ 6,951 1,155 159
-------- -------- --------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES....... 30,800 14,299 7,612
PROVISION FOR INCOME TAXES.................................. 13,010 5,995 3,282
-------- -------- --------
INCOME FROM CONTINUING OPERATIONS........................... 17,790 8,304 4,330
-------- -------- --------
DISCONTINUED OPERATIONS:
Income from discontinued operations, net of taxes......... 2,323 3,213 2,779
Gain on disposal of discontinued operations, net of
taxes.................................................. 89 -- --
-------- -------- --------
Total discontinued operations..................... 2,412 3,213 2,779
-------- -------- --------
NET INCOME.................................................. $ 20,202 $ 11,517 $ 7,109
======== ======== ========
NET INCOME PER BASIC SHARE:
Income from continuing operations......................... $ 0.74 $ 0.41 $ 0.27
-------- -------- --------
Discontinued operations:
Income from discontinued operations, net of taxes...... 0.10 0.16 0.17
Gain on disposal of discontinued operations, net of
taxes................................................ -- -- --
-------- -------- --------
Total discontinued operations..................... 0.10 0.16 0.17
-------- -------- --------
NET INCOME PER BASIC SHARE........................ $ 0.83 $ 0.56 $ 0.44
-------- -------- --------
NET INCOME PER DILUTED SHARE:
Income from continuing operations......................... $ 0.71 $ 0.41 $ 0.27
-------- -------- --------
Discontinued operations:
Income from discontinued operations, net of taxes...... 0.09 0.16 0.17
Gain on disposal of discontinued operations, net of
taxes................................................ -- -- --
-------- -------- --------
Total discontinued operations..................... 0.09 0.16 0.17
-------- -------- --------
NET INCOME PER DILUTED SHARE...................... $ 0.80 $ 0.56 $ 0.44
======== ======== ========
WEIGHTED AVERAGE BASIC SHARES OUTSTANDING................... 24,204 20,432 16,000
WEIGHTED AVERAGE DILUTED SHARES OUTSTANDING................. 28,078 20,432 16,000
</TABLE>

The accompanying notes are an integral part of these statements.

F-5
<PAGE> 46

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 28, 1997, DECEMBER 29, 1996, AND DECEMBER 31, 1995

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
--------------- PAID-IN RETAINED DEFERRED SHAREHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS COMPENSATION NET ASSETS EQUITY
------ ------ ---------- -------- ------------ ---------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, January 1,
1995.................... -- $ -- $ -- $ -- $ -- $ 68,438 $ 68,438
====== ==== ======== ======= ===== ======== ========
Cash distributions........ -- -- -- -- -- (7,351) (7,351)
Contributions of assets... -- -- -- -- -- 7,790 7,790
Net income................ -- -- -- 2,347 -- 4,762 7,109
Reclassification of net
assets as of September
30, 1995................ 8,000 80 73,559 -- -- (73,639) --
------ ---- -------- ------- ----- -------- --------
BALANCE, December 31,
1995.................... 8,000 $ 80 $ 73,559 $ 2,347 $ -- $ -- $ 75,986
====== ==== ======== ======= ===== ======== ========
Issuance of common
stock................... 4,025 40 95,589 -- -- -- 95,629
Exercises of stock
options................. 9 -- 125 -- -- -- 125
Net income................ -- -- -- 11,517 -- -- 11,517
------ ---- -------- ------- ----- -------- --------
BALANCE, December 29,
1996.................... 12,034 $120 $169,273 $13,864 $ -- $ -- $183,257
====== ==== ======== ======= ===== ======== ========
Exercises of stock
options................. 95 1 1,570 -- -- -- 1,571
Issuance of restricted
stock................... 10 -- 316 -- (316) -- --
Amortization of deferred
compensation............ -- -- -- -- 46 -- 46
Net income................ -- -- -- 20,202 -- -- 20,202
Two-for-one stock split... 12,139 121 (121) -- -- -- --
------ ---- -------- ------- ----- -------- --------
BALANCE, December 28,
1997.................... 24,278 $242 $171,038 $34,066 $(270) $ -- $205,076
====== ==== ======== ======= ===== ======== ========
</TABLE>

The accompanying notes are an integral part of these statements.

F-6
<PAGE> 47

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 28, 1997, DECEMBER 29, 1996, AND DECEMBER 31, 1995

<TABLE>
<CAPTION>
1997 1996 1995
--------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income from continuing operations..................... $ 17,790 $ 8,304 $ 4,330
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 9,037 3,362 1,149
Deferred income taxes, net............................. 3,083 (286) 73
Changes in assets and liabilities:
Accounts receivable.................................. (14,684) (8,890) (3,201)
Prepaid expenses and other current assets............ (490) 1,319 (395)
Other assets......................................... 60 (1,402) (136)
Accounts payable and accrued liabilities............. 9,238 6,091 (467)
Income taxes payable................................. (597) (1,026) 1,776
--------- -------- -------
Net cash provided by operating activities......... 23,437 7,472 3,129
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash used in acquisitions, net of cash acquired........... (115,663) (155,837) --
Net cash provided (used) by discontinued operations....... 29,812 (5,535) 7,956
Purchase of property and equipment, net................... (5,162) (3,239) (21)
--------- -------- -------
Net cash (used in) provided by investing
activities...................................... (91,013) (164,611) 7,935
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from convertible subordinated notes issuance,
net.................................................... 111,750 -- --
Proceeds from issuance of common stock, net............... -- 95,629 --
Repayments under Credit Facility.......................... (190,632) (30,775) --
Borrowings under Credit Facility.......................... 147,307 98,100 --
Proceeds from exercise of stock options................... 1,617 125 --
Repayments of seller notes and acquired indebtedness...... (6,935) (5,524) --
Distributions to the Former Parent, net................... -- -- (7,351)
--------- -------- -------
Net cash provided by (used in) financing
activities...................................... 63,107 157,555 (7,351)
--------- -------- -------
Net (decrease) increase in cash and cash equivalents........ (4,469) 416 3,713
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR.............. 5,111 4,695 982
--------- -------- -------
CASH AND CASH EQUIVALENTS AT END OF YEAR.................... $ 642 $ 5,111 $ 4,695
========= ======== =======
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash payments during the period for:
Income taxes........................................... $ 10,888 $ 9,617 $ 3,737
Interest............................................... $ 5,042 $ 1,307 $ --
</TABLE>

The accompanying notes are an integral part of these statements.

F-7
<PAGE> 48

PERSONNEL GROUP OF AMERICA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 28, 1997, DECEMBER 29, 1996, AND DECEMBER 31, 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

1. ORGANIZATION AND NATURE OF OPERATIONS

Basis of Presentation

Personnel Group of America, Inc. and its subsidiaries (collectively, the
"Company") completed its initial public offering (the "IPO") in September 1995.
Prior to the IPO, the Company was an indirect wholly owned subsidiary of an
international staffing company (the "Former Parent"). The operations of the
Company are presented on an historical cost basis, and all significant
intercompany transactions have been eliminated.

As a result of the IPO, in which the Former Parent sold its entire
ownership interest in the Company, the Company became an independent public
company. The Company did not receive any of the proceeds of the sale of its
shares in the IPO.

Nature of Operations

The Company operates through a network of Company-operated offices. The
Company is organized into two Divisions: Information Technology Services, which
provides information technology staffing and consulting services in a range of
computer-related disciplines; and Commercial Staffing, which provides temporary
office, clerical and light industrial and light technical services. At December
28, 1997, the Information Technology Division was comprised of 11 companies and
the Commercial Staffing Division was comprised of 20 companies.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Revenue Recognition

The Company recognizes revenue at the time services are performed.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash on hand and highly liquid
investments with original maturities of three months or less.

Property and Equipment

Property and equipment are carried at cost and depreciated on a
straight-line basis over their estimated useful lives (generally three to seven
years). Leasehold improvements are stated at cost and amortized over the shorter
of the lease term or the useful life of the improvements.

Intangible Assets

The Company's businesses were acquired from unrelated third parties in
exchange for cash and other consideration. The Company allocates the excess of
cost over the fair value of net tangible assets first to identifiable intangible
assets, if any, and then to goodwill. Although the Company believes that
goodwill has an unlimited life, the Company amortizes such costs on a
straight-line basis over 40 years. Gross amounts and accumulated amortization of
excess of cost over fair value of net assets acquired amounted to $323,952 and
$10,295 at December 28, 1997, respectively, and $181,179 and $4,508 at December
29, 1996, respectively.

Other intangible assets consist primarily of covenants not to compete and
other, and are amortized over three to five years. Gross amounts and accumulated
amortization of such other intangible assets amounted to $3,807 and $1,051 at
December 28, 1997, respectively, and $2,718 and $446 at December 29, 1996,
respectively.

F-8
<PAGE> 49
PERSONNEL GROUP OF AMERICA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company evaluates the recoverability of its investment in excess of
cost over fair value of net assets acquired and other intangibles in relation to
anticipated future cash flows on an undiscounted basis. Based on this
assessment, the Company expects its investment in excess of cost over fair value
of net assets acquired and other intangibles to be fully recovered.

Income Taxes

Deferred tax assets and liabilities are recorded for the expected tax
consequences of temporary differences arising between the tax bases of assets
and liabilities and their reported amounts in accordance with the provisions of
Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes."

The Company's operating results through September 29, 1995, were included
in the Former Parent's consolidated federal income tax return and combined state
tax returns filed in various states. The Company has filed its own consolidated
federal income tax return and various state returns for the periods ending after
September 29, 1995.

Net Income Per Share

The computation of net income per basic share was based on the weighted
average number of shares of common stock outstanding. The computation of net
income per diluted share was based on the weighted average number of common
stock and common stock equivalents outstanding and also assumed the conversion
of the Company's Convertible Notes in 1997. In 1996 and 1995, the computation of
both basic and diluted net income per share have been retroactively restated in
accordance with FAS 128.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates and
assumptions. These affect the reported amounts of assets, liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual amounts could differ from those estimates.

3. ACQUISITIONS

During 1997, the Company acquired the following businesses in seven
separate transactions:

<TABLE>
<CAPTION>
NAME OF BUSINESS TYPE OF BUSINESS DATE ACQUIRED
- ---------------- ---------------- -------------
<S> <C> <C>
Word Processing
Professionals Commercial Staffing January 1997
Energetix Information Technology February 1997
Lipson Conroy Services Information Technology April 1997
Lloyd-Ritter Consulting Information Technology April 1997
Vital Computer Services Information Technology June 1997
DRACS Consulting Group Information Technology September 1997
Jeffrey Staffing Group* Commercial Staffing September 1997
BAL Associates Information Technology December 1997
</TABLE>

- ---------------

* Includes Franklin-Pierce Companies, Scott-Wayne Companies and Integrity
Technical Services

F-9
<PAGE> 50
PERSONNEL GROUP OF AMERICA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

During 1996, the Company acquired the following businesses in eight
separate transactions:

<TABLE>
<CAPTION>
NAME OF BUSINESS TYPE OF BUSINESS DATE ACQUIRED
- ---------------- ---------------- -------------
<S> <C> <C>
Profile Temporary Services Commercial Staffing March 1996
Allegheny Personnel Services Commercial Staffing March 1996
Judith Fox Staffing
Companies Commercial Staffing May 1996
Computer Resources Group Information Technology June 1996
Broughton Systems Information Technology July 1996
Denver Temporary Services Commercial Staffing July 1996
Command Technologies Information Technology July 1996
BEST Consulting Information Technology September 1996
Software Service Corporation Information Technology September 1996
</TABLE>

The acquisitions are collectively referred to hereinafter as the
"Transactions," and the acquired businesses are collectively referred to
hereinafter as the "Acquired Companies." The companies acquired in 1997 had pro
forma 1997 revenues of approximately $151,000.

In 1997 and 1996, the Company paid approximately $112,500 and $176,900,
respectively, in cash and notes to consummate the Transactions (which included
direct acquisition costs but excluded contingent earnout payments associated
with certain of the Transactions). Certain of the acquisitions provide for
additional purchase price consideration upon attainment of certain earnings
targets for various periods during the next three years. The Company paid $3,421
in contingent consideration in 1997. The Company has recorded $34,079 and $2,375
of contingent consideration to be paid in 1998 and 1999, respectively, relating
to 1997 earnings. In addition, the Company has recorded $4,630 of post-closing
payments due to former owners of acquired businesses. Contingent earnout
payments based on 1998 earnings and beyond are contingent on the future
performance of such acquired businesses, and thus the actual amount cannot be
determined until such date. Any additional consideration will be recorded as
additional purchase price when earned and will increase the amount of excess of
cost over fair value of net assets acquired. All of the Transactions have been
accounted for using the purchase method of accounting. Accordingly, the assets
and liabilities of the entities acquired, based on preliminary allocations, were
recorded at their estimated fair values at the dates of the acquisitions, and
the results of operations of the Acquired Companies have been included in the
Company's consolidated results of operations from the dates of the respective
acquisitions. Final allocation of the purchase price may result in adjustments
to the amounts previously recorded as excess of cost over fair market value of
net assets acquired.

Since December 28, 1997, the Company has completed the acquisitions of Ann
Wells Personnel ("Ann Wells") in Silicon Valley, California; Creative
Temporaries ("Creative") in Charlotte, North Carolina; and Corporate Staffing
Consultants ("Corporate") in Charlotte, North Carolina. Ann Wells, acquired in
January 1998, provides word processing and desktop publishing services to
professional services firms and financial institutions in the Silicon Valley.
Creative and Corporate, acquired in January 1998, provide commercial staffing
services in the Charlotte area. These companies had combined revenues in excess
of $40,000 in 1997. The Company funded the acquisitions of Ann Wells, Creative
and Corporate primarily through borrowings under the Credit Facility (see Note
11).

The following table presents the Company's unaudited pro forma consolidated
results of operations for 1997 and 1996 as if the Transactions and the
acquisitions subsequent to year-end 1997 discussed above had occurred on January
1, 1996:

<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Revenues.................................................... $585,906 $482,834
Income from continuing operations........................... 21,007 11,416
Income from continuing operations per diluted share......... $ 0.81 $ 0.54
Weighted average diluted shares outstanding................. 28,678 21,032
</TABLE>

F-10
<PAGE> 51
PERSONNEL GROUP OF AMERICA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. DISCONTINUED OPERATIONS

On December 26, 1997, the Company completed the sale of its healthcare
division for $65,250. Of such amount, $34,600 was paid by delivery of a
promissory note from the purchaser. The assets, liabilities, results of
operations and cash flows of the healthcare division have been segregated and
reported as discontinued operations for all periods presented, and previously
reported results have been restated. The sale of the healthcare division
resulted in a gain of $89.

In January 1998, the $34,600 note was collected in full. The total proceeds
received in connection with the sale were used to repay outstanding borrowings
under the Credit Facility (see Note 11).

During 1997 and 1996, the Company allocated interest expense to the
discontinued operations based on the ratio of net assets of the discontinued
operations to the total net assets of the consolidated Company. Interest expense
allocated in 1997 and 1996 was $2,217 and $445, respectively. No other corporate
overhead expenses have been allocated to the discontinued operations.

Summary operating results of the discontinued operations were as follows:

<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Revenues............................................... $133,442 $122,937 $107,812
Total expenses......................................... 129,438 117,387 103,010
-------- -------- --------
Income before income taxes............................. 4,004 5,550 4,802
Provision for income taxes............................. 1,681 2,337 2,023
-------- -------- --------
Net income............................................. $ 2,323 $ 3,213 $ 2,779
======== ======== ========
</TABLE>

5. ACCOUNTS RECEIVABLE

Accounts receivable consisted of the following at December 28, 1997, and
December 29, 1996:

<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Trade accounts receivable................................... $78,932 $46,738
Less -- Allowance for doubtful accounts..................... (1,063) (519)
------- -------
$77,869 $46,219
======= =======
</TABLE>

The following table sets forth further information on the Company's
allowance for doubtful accounts:

<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND AT END
YEAR ENDED OF PERIOD EXPENSES DEDUCTIONS OF PERIOD
- ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
December 28, 1997.............................. $519 $1,138 $(594) $1,063
December 29, 1996.............................. 332 899 (712) 519
December 31, 1995.............................. 295 243 (206) 332
</TABLE>

F-11
<PAGE> 52
PERSONNEL GROUP OF AMERICA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6. PROPERTY AND EQUIPMENT, NET

Property and equipment, net, consisted of the following at December 28,
1997, and December 29, 1996:

<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Computer equipment and software............................. $ 9,504 $ 6,669
Furniture and other equipment............................... 3,145 3,663
Leasehold improvements...................................... 589 590
------- -------
13,238 10,922
Less -- Accumulated depreciation............................ (4,076) (5,176)
------- -------
$ 9,162 $ 5,746
======= =======
</TABLE>

7. OTHER ACCRUED LIABILITIES

Accrued liabilities consisted of the following at December 28, 1997, and
December 29, 1996:

<TABLE>
<CAPTION>
1997 1996
------- ------
<S> <C> <C>
Accrued interest............................................ $ 4,073 $ --
Workers' compensation reserves.............................. 1,616 1,605
Other....................................................... 7,089 4,385
------- ------
$12,777 $5,990
======= ======
</TABLE>

8. OTHER LONG-TERM LIABILITIES

Other long-term liabilities consisted of the following at December 28,
1997, and December 29, 1996:

<TABLE>
<CAPTION>
1997 1996
------- ------
<S> <C> <C>
Amounts due sellers of acquired businesses.................. $41,084 $2,792
Deferred tax liabilities.................................... 4,428 --
Workers' compensation reserves and other.................... 4,135 1,501
------- ------
$49,647 $4,293
======= ======
</TABLE>

The amounts due sellers of acquired business are for additional purchase
price consideration and for post-closing payments based upon the operating
results of 1997. Of the amounts due at December 28, 1997, $37,659 is due in 1998
and will be paid with borrowings under the Company's Credit Facility (see Note
11).

9. EMPLOYEE BENEFIT PLANS

The Company has 401(k) profit sharing and nonqualified profit sharing
plans, which cover substantially all of its employees. Company contributions or
allocations are made on a discretionary basis for these plans (except for
matching contributions made to certain 401(k) profit sharing plans as required
by the terms of such plans). Contributions charged to operating expenses were
$523, $492 and $383 for the years ended December 28, 1997, December 29, 1996,
and December 31, 1995, respectively.

The Company does not provide postretirement healthcare and life insurance
benefits to retired employees or postemployment benefits to terminated
employees.

10. CAPITAL STOCK AND STOCK OPTIONS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE
DATA):

On March 5, 1998, the Board of Directors authorized a two-for-one split of
common stock to be effected in the form of a 100% stock dividend payable to
shareholders of record on March 16, 1998. The par value

F-12
<PAGE> 53
PERSONNEL GROUP OF AMERICA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

remained at $0.01 per share. Shareholders' equity has been restated by
reclassifying from additional paid-in capital to common stock the par value of
the additional shares arising from the split. All references in the accompanying
consolidated financial statements to the number of common shares, except shares
authorized, and to per share amounts have been restated to reflect the stock
split.

In June 1996, the Company issued 8,050,000 shares of its common stock in an
underwritten public offering (the "1996 Equity Offering"), which raised $95,629
for the Company, net of offering expenses. The proceeds from the 1996 Equity
Offering were used to repay outstanding borrowings under the Company's Credit
Facility and fund several acquisitions.

The Company's Board of Directors adopted its 1995 Equity Participation Plan
(the "Incentive Plan") to attract and retain officers, key employees,
consultants and directors. The Incentive Plan has reserved for issuance 15% of
the Company's issued and outstanding common stock from time to time. The
Incentive Plan allows for the issuance of options, stock appreciation rights,
and other awards, or restricted or other deferred stock awards. Incentive stock
options may be granted only to employees and, when granted, have an exercise
price equal to at least 100% of the fair market value of the common stock on the
grant date and a term not longer than 10 years.

In addition, nonemployee directors (including the directors who administer
the plan) are eligible to receive nondiscretionary grants of nonqualified stock
options ("NQSOs") under the Incentive Plan pursuant to a formula. The NQSOs
granted to nonemployee directors are fully vested and exercisable upon grant and
the term of each such option is 10 years. NQSOs may also be granted to an
employee or consultant for any term specified by the compensation committee of
the Board and will provide for the right to purchase common stock at a specified
price which, except with respect to NQSOs intended to qualify as
performance-based compensation, may be less than fair market value on the date
of grant (but not less than par value), and may become exercisable (at the
discretion of the compensation committee) in one or more installments after the
grant date.

In 1997, the Company issued each outside member of the Board of Directors a
restricted share grant of 5,000 shares, for a total of 20,000 shares. These
shares will vest ratably over a three-year period. The non-vested portion of the
restricted share grant is included as deferred compensation on the Company's
Statement of Shareholders' Equity.

F-13
<PAGE> 54
PERSONNEL GROUP OF AMERICA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

A summary of stock option activity follows:

<TABLE>
<CAPTION>
WEIGHTED
SHARES AVERAGE
UNDER PRICE PER
OPTION SHARE
--------- ---------
<S> <C> <C>
Outstanding, January 1, 1995................................ -- $ --
Granted in 1995........................................... 865,410 6.93
Outstanding, December 31, 1995.............................. 865,410 6.93
Granted in 1996........................................... 841,296 12.66
Exercised.............................................. 18,620 6.69
Canceled............................................... 48,180 7.31
--------- ------
Outstanding, December 29, 1996.............................. 1,639,906 $10.15
========= ======
Granted in 1997........................................... 867,792 15.50
Exercised.............................................. 190,196 8.26
Canceled............................................... 121,950 10.32
========= ======
Outstanding, December 28, 1997.............................. 2,195,552 $12.20
========= ======
Exercisable, December 31, 1995............................ 223,082 $ 6.93
========= ======
Exercisable, December 29, 1996............................ 527,112 $ 8.93
========= ======
Exercisable, December 28, 1997............................ 870,982 $ 9.98
========= ======
</TABLE>

Pursuant to the requirements of SFAS No. 123, Accounting for Stock-Based
Compensation ("SFAS 123"), the following disclosures are presented to reflect
the Company's pro forma net income for the three years ended December 28, 1997,
December 29, 1996, and December 31, 1995, as if the fair value method of
accounting prescribed by SFAS 123 had been used. In preparing these disclosures,
the Company has determined the value of all options granted using the minimum
value method, as discussed in SFAS 123, and based on the following weighted
average assumptions used for grants:

<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Risk-free interest rate..................................... 6.1% 6.9% 6.7%
Expected dividend yield..................................... 0.0% 0.0% 0.0%
Expected life............................................... 5 years 5 years 5 years
</TABLE>

Using these assumptions, the fair value of the stock options granted in
1997, 1996 and 1995 was approximately $5,976, $4,920 and $2,744, respectively.
Had compensation expense been determined consistent with SFAS 123, utilizing the
assumptions above and the straight-line amortization method over the vesting
period, the Company's net income would have been reduced to the following pro
forma amounts:

<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Net income, as reported................................... $20,202 $11,517 $ 7,109
Net income per diluted share, as reported................. 0.80 0.56 0.44
Pro forma net income...................................... 18,720 9,922 6,400
Pro forma net income per diluted share.................... 0.75 0.49 0.40
</TABLE>

On February 6, 1996, the Board of Directors of the Company declared a
dividend of one nonvoting preferred share purchase right (a "Right") for each
outstanding share of common stock. The dividend was paid on February 27, 1996,
to the shareholders of record on that date. In the event of an acquisition, or
the announcement of an acquisition, by a party of a beneficial interest of at
least 15% of the Company's common stock, each right would become exercisable
(the "Distribution Date"). Each Right entitles the registered holder to purchase
from the Company one one-hundredth of a share of Series A Junior Participating
Preferred

F-14
<PAGE> 55
PERSONNEL GROUP OF AMERICA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Stock, par value $0.01 per share, of the Company at a price of $95.00 per one
one-hundredth of a share of Preferred Stock, subject to adjustment. In addition,
each Right entitles the right holder to certain other rights as specified in the
Company's rights agreement. The Rights are not exercisable until Distribution
Date. The Rights will expire on February 6, 2006 (the "Final Expiration Date"),
unless the Final Expiration Date is extended or unless the Rights are earlier
redeemed or exchanged by the Company.

11. LONG-TERM DEBT

Long-term debt consisted of the following at December 28, 1997, and
December 29, 1996:

<TABLE>
<CAPTION>
1997 1996
-------- -------
<S> <C> <C>
5 3/4% Convertible Subordinated Notes due July 2004......... $115,000 $ --
$125,000 revolving Credit Facility due June 2002............ 24,000 67,325
Notes payable to sellers of acquired companies and other.... 13,540 17,822
-------- -------
152,540 85,147
Less current portion........................................ (7,490) (6,670)
-------- -------
$145,050 $78,477
======== =======
</TABLE>

In June and July 1997, the Company completed a private placement of
$115,000 of 5 3/4% Convertible Subordinated Notes due July 2004 (the "Notes").
The net proceeds of approximately $111,750 were used to repay a substantial
portion of outstanding indebtedness under the Company's $125,000 Revolving
Credit Facility (the "Credit Facility") and permanently repay outstanding
indebtedness under a separate $10,000 line of credit. Interest on the Notes is
payable semi-annually, commencing January 1998. The Notes are convertible into
Common Stock of the Company at any time before maturity at an initial conversion
price of $17.81 per share. The Notes are not redeemable prior to July 2000.
Thereafter, the Company may redeem the Notes initially at 103.29% and at
decreasing prices thereafter to 100% at maturity, in each case together with
accrued interest. The Notes are subordinated to all present and future senior
indebtedness of the Company (as defined), including indebtedness under the
Credit Facility.

Concurrent with the issuance of the Notes, the Credit Facility was amended
and restated. The term of the Credit Facility was extended to June 2002.
Borrowings under the Credit Facility bear interest, at a rate equal to LIBOR
plus a percentage corresponding to the Company's consolidated leverage ratio, as
defined, or the agent's base rate, as defined, at the Company's option. The
Credit Facility is secured by pledges of stock of the Company's subsidiaries and
contains customary covenants such as the maintenance of certain financial
ratios, minimum net worth and working capital requirements and a restriction on
the payment of cash dividends on common stock. The Credit Facility also limits
borrowing availability for acquisition-related purposes. At December 28, 1997,
the Company was in compliance with the covenants contained in the Credit
Facility.

During 1997, the maximum aggregate outstanding borrowing under the Credit
Facility was $125,000 and the average outstanding balance during the year was
$55,900. In addition, approximately $4,000 of the Credit Facility has been used
for the issuance of undrawn letters of credit to secure the Company's workers'
compensation program. The daily weighted average interest rate under the Credit
Facility was 7.2% during 1997. The Company's borrowings under the Credit
Facility bore interest at the agent's base rate of 8.5% at December 28, 1997. At
February 3, 1998, the amount available for borrowing under the Credit Facility
was approximately $118,500.

The Company has also issued notes payable in connection with certain
acquisitions. These notes are due in varying installments and carry variable
interest rates ranging from 6.8% to 7.0% at December 28, 1997.

F-15
<PAGE> 56
PERSONNEL GROUP OF AMERICA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Scheduled maturities of long-term debt at December 28, 1997, are as
follows:

<TABLE>
<S> <C>
1998........................................................ $ 7,490
1999........................................................ 6,050
2000........................................................ --
2001........................................................ --
2002 and thereafter......................................... 139,000
--------
$152,540
========
</TABLE>

12. INCOME TAXES

The provision for income taxes for the years ended December 28, 1997,
December 29, 1996, and December 31, 1995, consisted of the following:

<TABLE>
<CAPTION>
1997 1996 1995
------- ------ ------
<S> <C> <C> <C>
Current provision
Federal................................................... $ 8,863 $5,119 $2,666
State..................................................... 2,183 1,162 543
------- ------ ------
Total current provision........................... 11,046 6,281 3,209
Deferred provision (benefit)
Federal................................................... 1,576 (233) 61
State..................................................... 388 (53) 12
------- ------ ------
Total deferred provision (benefit)................ 1,964 (286) 73
------- ------ ------
Total............................................. $13,010 $5,995 $3,282
======= ====== ======
</TABLE>

The reconciliation of the effective tax rate is as follows:

<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Federal statutory rate...................................... 35.0% 35.0% 35.0%
State taxes, net of federal benefit......................... 5.4 5.0 4.7
Effect of nondeductible amortization and other.............. 1.8 1.9 3.4
---- ---- ----
Total............................................. 42.2% 41.9% 43.1%
==== ==== ====
</TABLE>

The components of the Company's net deferred tax assets and liabilities
were as follows at December 28, 1997, and December 29, 1996:

<TABLE>
<CAPTION>
1997 1996
------ -------
<S> <C> <C>
Deferred tax liability -- Excess of cost over fair value of
net assets acquired....................................... $3,883 $ --
Other deferred tax liabilities.............................. 545 --
------ -------
4,428 --
Deferred tax assets:
Accrued workers' compensation and other................... 2,698 961
Allowance for doubtful accounts........................... 425 208
Other..................................................... 1,042 532
------ -------
4,165 1,701
------ -------
Net deferred tax liability (asset)................ $ 263 $(1,701)
====== =======
</TABLE>

F-16
<PAGE> 57
PERSONNEL GROUP OF AMERICA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Tax-Sharing Agreement

Generally, the Former Parent is liable for income taxes of the Company for
any taxable period that ends on or before September 29, 1995, and the Company is
liable for income taxes for any period beginning after September 29, 1995.

13. NET INCOME PER SHARE

In the fourth quarter of 1997, the Company adopted Statement of Financial
Accounting Standards No. 128, "Earnings Per Share" ("FAS 128"). FAS 128
simplifies the calculation of earnings per share ("EPS") primarily by removing
common stock equivalents from consideration in calculating basic EPS.

In accordance with FAS 128, the following tables reconcile net income and
weighted average shares outstanding to the amounts used to calculate basic and
diluted earnings per share for each of the three years ended December 28, 1997,
December 29, 1996, and December 31, 1995:

<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
(SHARE AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
EARNINGS PER BASIC SHARE:
Net income.............................................. $20,202 $11,517 $ 7,109
======= ======= =======
Weighted average shares outstanding....................... 24,204 20,432 16,000(1)
Earnings per basic share.................................. $ 0.83 $ 0.56 $ 0.44
======= ======= =======
EARNINGS PER DILUTED SHARE:
Net income.............................................. $20,202 $11,517 $ 7,109
Add: Interest expense on Convertible Notes, net of
tax................................................ 2,217 -- --
------- ------- -------
Diluted net income...................................... 22,419 11,517 7,109
Weighted average shares outstanding..................... 24,204 20,432 16,000(1)
Add: Dilutive employee stock options.................... 502 -- --
Add: Assumed conversion of Convertible Notes............ 3,372 -- --
------- ------- -------
Weighted average diluted shares outstanding............. 28,078 20,432 16,000
Earnings per diluted share................................ $ 0.80 $ 0.56 $ 0.44
======= ======= =======
</TABLE>

- ---------------

(1) Assumes that the weighted average common shares outstanding equals the
16,000 shares sold by the Former Parent in the IPO.

14. FINANCIAL INSTRUMENTS

Fair Value of Financial Instruments

The fair value of the Company's cash and cash equivalents, accounts
receivable, accounts payable and accrued liabilities approximates the book value
at December 28, 1997, due to the short-term nature of these instruments. The
fair value of the Company's borrowings under the Credit Facility and the notes
payable to sellers of acquired businesses approximate the book value at December
28, 1997, because of the variable rate associated with these borrowings. The
Convertible Notes had a fair value of $129,231 at December 28, 1997, as compared
to the carrying value of $115,000.

Concentration of Credit Risk

The Company maintains cash and cash equivalents with various financial
institutions.

F-17
<PAGE> 58
PERSONNEL GROUP OF AMERICA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Credit risk with respect to accounts receivable is dispersed due to the
nature of the business, the large number of customers and the diversity of
industries serviced. The Company performs credit evaluations of its customers.

15. COMMITMENTS AND CONTINGENCIES

Operating Leases

The Company leases facilities under operating leases, certain of which
require it to pay property taxes, insurance and maintenance costs. Operating
leases for facilities are usually renewable at the Company's option and include
escalation clauses linked to inflation.

Future minimum annual rentals for the next five years are as follows:

<TABLE>
<S> <C>
1998........................................................ $ 4,682
1999........................................................ 4,021
2000........................................................ 3,201
2001........................................................ 2,522
2002 and thereafter......................................... 2,594
-------
$17,020
=======
</TABLE>

Total rent expense under operating leases amounted to $4,078, $2,461 and
$1,652 for the years ended December 28, 1997, December 29, 1996, and December
31, 1995, respectively.

Insurance

The Company maintains a self-insurance program for workers' compensation
and medical and dental claims. The Company accrues liabilities under the
workers' compensation program based on the loss and loss adjustment expenses as
estimated by an outside administrator. At December 28, 1997, the Company had
standby letters of credit with a bank in connection with a portion of its
workers' compensation program.

The Company is subject to claims and legal actions by customers in the
ordinary course of business. The Company maintains professional liability
insurance for losses.

Employment Agreements

The Company has agreements with several executive officers providing for
cash compensation and other benefits in the event that a change in control of
the Company occurs.

Legal Proceedings

The Company is involved in various legal actions and claims. In the opinion
of management, after considering appropriate legal advice, the future
resolutions of all actions and claims will not have a material adverse effect on
the Company's consolidated financial position or results of operations.

Indemnification Obligation

Pursuant to the agreement to sell the healthcare division, the Company
agreed to indemnify the purchaser against certain specified expenses or losses
incurred by the purchaser. Management believes that future indemnification
claims, if any, made by the purchaser should not have a material impact on the
Company's financial position or results of operations.

F-18
<PAGE> 59
PERSONNEL GROUP OF AMERICA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

16. SUMMARY OF QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

The following table sets forth quarterly financial information for each
quarter in the years ended December 28, 1997, and December 29, 1996:

<TABLE>
<CAPTION>
1997
----------------------------------------
FIRST SECOND THIRD FOURTH
------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues....................................... $94,161 $113,205 $128,994 $139,261
Operating income............................... 6,081 8,410 10,698 12,562
Net income from continuing operations.......... 2,769 3,854 5,130 6,037
Net income..................................... 3,461 4,449 5,764 6,528
Net income per diluted share
Income from continuing operations............ $ 0.11 $ 0.15 $ 0.20 $ 0.23
Total discontinued operations................ 0.03 0.02 0.02 0.01
------- -------- -------- --------
Net income................................... $ 0.14 $ 0.18 $ 0.22 $ 0.24
======= ======== ======== ========
</TABLE>

<TABLE>
<CAPTION>
1996
-------------------------------------
FIRST SECOND THIRD FOURTH
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues.......................................... $38,251 $47,572 $67,327 $90,458
Operating income.................................. 859 2,865 4,916 6,814
Net income from continuing operations............. 476 1,495 2,952 3,381
Net income........................................ 1,490 2,250 3,575 4,202
Net income per diluted share
Income from continuing operations............... $ 0.03 $ 0.08 $ 0.12 $ 0.14
Total discontinued operations................... 0.06 0.04 0.03 0.03
------- ------- ------- -------
Net income...................................... $ 0.09 $ 0.13 $ 0.15 $ 0.17
======= ======= ======= =======
</TABLE>

F-19
<PAGE> 60

PROSPECTUS

-- INSIDE BACK COVER--

[The Company's operating company logos appear here.]

<PAGE> 61

======================================================

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY
SECURITIES OTHER THAN THOSE TO WHICH IT RELATES OR AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION WHERE SUCH AN
OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE.

------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 7
Recent Developments................... 12
Use of Proceeds....................... 12
Capitalization........................ 13
Dividend Policy....................... 14
Price Range of Common Stock........... 14
Selected Financial Data............... 15
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 16
Business.............................. 22
Management............................ 32
Description of Capital Stock.......... 34
Underwriting.......................... 37
Legal Matters......................... 38
Experts............................... 39
Additional Information................ 39
Incorporation of Certain Documents by
Reference........................... 40
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>

======================================================
======================================================

7,000,000 SHARES

(PGA LOGO)

PERSONNEL GROUP OF
AMERICA, INC.

COMMON STOCK
------------

PROSPECTUS

MAY 13, 1998

------------

SALOMON SMITH BARNEY

NATIONSBANC MONTGOMERY
SECURITIES LLC

J.C. BRADFORD & CO.

THE ROBINSON-HUMPHREY
COMPANY

CLEARY GULL REILAND
& MCDEVITT INC.

======================================================