<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended April 2, 2000
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from __________to____________
Commission File Number 001-13956
PERSONNEL GROUP OF AMERICA, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 56-1930691
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
5605 Carnegie Blvd., Suite 500, Charlotte, North Carolina 28209
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(Address of principal executive offices) (Zip Code)
(704) 442-5100
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(Registrant's telephone number including area code)
None
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[X] Yes [ ] No
As of May 12, 2000, there were 23,942,667 shares of outstanding common stock,
par value $.01 per share.
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PERSONNEL GROUP OF AMERICA, INC.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Page
----
Item 1. Financial Statements (unaudited)
Consolidated Statements of Income......................... 3
Consolidated Balance Sheets............................... 4
Consolidated Statements of Cash Flows..................... 5
Notes to Consolidated Financial Statements................ 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............. 9
Item 3. Quantitative and Qualitative Disclosures
About Market Risk......................................... 13
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................... 13
Signatures................................................................ 14
Exhibit Index ............................................................ 15
2
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PERSONNEL GROUP OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE PERIODS ENDED APRIL 2, 2000 AND APRIL 4, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three months ended
April 2, April 4,
2000 1999
-------- --------
<S> <C> <C>
REVENUES $216,856 $229,638
DIRECT COSTS OF SERVICES 155,875 165,602
-------- --------
Gross profit 60,981 64,036
OPERATING EXPENSES
Selling, general and administrative 42,198 42,935
Depreciation and amortization 5,781 5,070
-------- --------
Total operating expenses 47,979 48,005
OPERATING INCOME BEFORE NONRECURRING COSTS 13,002 16,031
NONRECURRING COSTS 1,452 --
-------- --------
OPERATING INCOME 11,550 16,031
INTEREST EXPENSE 4,434 3,733
-------- --------
INCOME BEFORE INCOME TAXES 7,116 12,298
PROVISION FOR INCOME TAXES 3,074 5,165
-------- --------
NET INCOME $ 4,042 $ 7,133
======== ========
NET INCOME PER BASIC SHARE $ 0.16 $ 0.22
NET INCOME PER DILUTED SHARE $ 0.16 $ 0.21
</TABLE>
The accompanying notes are an integral part of these statements.
3
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PERSONNEL GROUP OF AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
APRIL 2, 2000 AND JANUARY 2, 2000
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
April 2, Jan. 2,
ASSETS 2000 2000
--------- ---------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 576 $ 5,752
Accounts receivable, net 126,719 125,968
Prepaid expenses and other current assets 6,971 5,690
Deferred income taxes 6,594 6,594
Notes receivable from sale of discontinued operations 885 885
--------- ---------
Total current assets 141,745 144,889
Property and equipment, net 25,972 25,776
Intangible assets, net 557,448 560,113
Other assets 4,662 4,572
--------- ---------
Total assets $ 729,827 $ 735,350
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 693 $ 956
Accounts payable 8,518 8,535
Accrued wages, benefits and other 46,444 47,859
Income taxes payable 2,379 752
--------- ---------
Total current liabilities 58,034 58,102
Long-term debt 271,284 253,395
Other long-term liabilities 32,292 54,010
--------- ---------
Total liabilities 361,610 365,507
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;
33,065 shares issued at April 2, 2000 and January 2, 2000 331 331
Additional paid-in capital 329,970 330,237
Retained earnings 98,878 94,836
Deferred compensation (35) (61)
--------- ---------
429,144 425,343
Less common stock held in treasury at cost -
8,371 shares at April 2, 2000 and 7,587 shares at (60,927) (55,500)
January 2, 2000 --------- ---------
Total shareholders' equity 368,217 369,843
--------- ---------
Total liabilities and shareholders' equity $ 729,827 $ 735,350
========= =========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
4
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PERSONNEL GROUP OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIODS ENDED APRIL 2, 2000 AND APRIL 4, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three months ended
April 2, April 4,
2000 1999
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,042 $ 7,133
Adjustments to reconcile net income from continuing
operations to net cash provided by operating activities:
Depreciation and amortization 5,781 5,070
Deferred income taxes, net -- 1,133
Changes in assets and liabilities:
Accounts receivable (751) (2,753)
Accounts payable and accrued liabilities 453 4,348
Income taxes payable 1,627 1,496
Other, net (1,345) (1,134)
-------- --------
Net cash provided by operating activities 9,807 15,293
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash used in acquisitions, net of cash acquired (25,438) (10,095)
Purchases of property and equipment, net (1,958) (3,321)
-------- --------
Net cash used in investing activities (27,396) (13,416)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments under credit facility (11,000) (10,500)
Borrowings under credit facility 29,000 34,500
Repurchases of common stock (5,874) (26,469)
Repayments of seller notes and other borrowings (374) (1,344)
Proceeds from employee stock purchase plan and exercise
of stock options 661 1,968
-------- --------
Net cash provided by (used in) financing activities 12,413 (1,845)
Net (decrease) increase in cash and cash equivalents (5,176) 32
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 5,752 962
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 576 $ 994
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 6
PERSONNEL GROUP OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(1) GENERAL
The unaudited consolidated financial statements included herein have
been prepared in accordance with the instructions to Form 10-Q and do not
include all the information and footnotes required by generally accepted
accounting principles; however, they do include all adjustments of a normal
recurring nature that, in the opinion of management, are necessary to present
fairly the results of operations of the Company for the interim periods
presented. These interim financial statements should be read in conjunction with
the Company's audited consolidated financial statements and related notes
included in the Company's Annual Report on Form 10-K for the year ended January
2, 2000. The results of operations for the interim periods presented are not
necessarily indicative of the results to be expected for the entire year.
(2) INTANGIBLE ASSETS
Intangible assets primarily consist of goodwill associated with the
acquired businesses. 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. Other intangibles consist primarily of covenants not to compete.
Accumulated amortization of intangible assets amounted to $42,709 and $38,690 at
April 2, 2000 and January 2, 2000, respectively. Amortization expense for the
quarters ended April 2, 2000 and April 4, 1999 was $4,019 and $3,808,
respectively.
The Company periodically evaluates the recoverability of its investment
in intangible assets 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 and other intangibles to be
fully recovered.
(3) LONG-TERM DEBT
Long-term debt consisted of the following at April 2, 2000 and January
2, 2000:
<TABLE>
<CAPTION>
April 2, January 2,
2000 2000
--------- ---------
<S> <C> <C>
5-3/4% Convertible Subordinated Notes due July 2004 $ 115,000 $ 115,000
$200,000 revolving credit facility due June 2002 156,000 138,000
Notes payable to sellers of acquired companies
and other 977 1,351
--------- ---------
271,977 254,351
Less current portion (693) (956)
--------- ---------
$ 271,284 $ 253,395
========= =========
</TABLE>
6
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(4) NET INCOME PER SHARE
In accordance with FAS 128, the following tables reconcile net income
and weighted average diluted shares outstanding to the amounts used to calculate
basic and diluted earnings per share for each of the quarters ended April 2,
2000 and April 4, 1999:
<TABLE>
<CAPTION>
April 2, April 4,
2000 1999
------- -------
<S> <C> <C>
BASIC EARNINGS PER SHARE:
Net income $ 4,042 $ 7,133
======= =======
Weighted average shares outstanding 25,194 32,310
Basic earnings per share $ 0.16 $ 0.22
======= =======
DILUTED EARNINGS PER SHARE:
Net income $ 4,042 $ 7,133
Add: Interest expense on Convertible Notes, net of tax 1,064 1,064
------- -------
Diluted net income 5,106 8,197
Weighted average shares outstanding 25,194 32,310
Add: Dilutive employee stock options 173 229
Add: Assumed conversion of Convertible Notes 6,456 6,456
------- -------
Diluted weighted average shares outstanding 31,823 38,995
Diluted earnings per share $ 0.16 $ 0.21
======= =======
</TABLE>
Stock options to purchase 2,703,660 and 1,546,612 shares of Common Stock were
outstanding during the three months ended April 2, 2000, and April 4, 1999,
respectively, but were excluded from the computation of net income per diluted
share because their effect was antidilutive.
(5) SEGMENT INFORMATION
The Company is organized in two segments: Information Technology
Services ("IT Services") and Commercial Staffing Services ("Commercial
Staffing"). IT Services provides technical staffing, training and information
technology consulting services. Commercial Staffing provides temporary staffing
services, placement of full-time employees and on-site management of temporary
employees. The Company evaluates segment performance based on income from
operations before corporate expenses, amortization of intangible assets,
interest and income taxes. Because of the Company's substantial intangible
assets, management does not consider total assets by segment an important
management tool and, accordingly, the Company does not report this information
separately.
7
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The table below presents segment information for the quarters ended
April 2, 2000 and April 4, 1999:
April 2, April 4,
2000 1999
-------- --------
Revenues
IT Services $132,699 $146,600
Commercial Staffing 84,157 83,038
-------- --------
Total revenues 216,856 229,638
-------- --------
Operating income
IT Services 11,754 15,410
Commercial Staffing 8,139 6,960
-------- --------
Total operating income 19,893 22,370
Corporate expenses 2,872 2,531
Amortization of intangible assets 4,019 3,808
Nonrecurring costs 1,452 --
Interest expense 4,434 3,733
-------- --------
Income before income taxes $ 7,116 $ 12,298
======== ========
The following table sets forth identifiable assets by segment at April
2, 2000 and January 2, 2000:
April 2, Jan. 2,
2000 2000
-------- --------
Accounts receivable, net
IT Services $ 85,025 $ 81,990
Commercial Staffing 41,292 43,602
Corporate 402 376
-------- --------
Total accounts receivable, net $126,719 $125,968
======== ========
(6) NONRECURRING COSTS
In connection with the retirement of the Company's Chief Executive
Officer in February 2000, the Company agreed to provide certain severance,
retirement and other benefits to such officer. The total pre-tax cost to the
Company of this arrangement (reduced by amounts that the Company had previously
accrued for retirement benefits for this officer) is approximately $1.5 million
and was recorded in the quarter ended April 2, 2000.
8
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
INTRODUCTION
The following discussion and analysis should be read in conjunction
with the Company's unaudited consolidated financial statements and related notes
appearing elsewhere in this report. The Company's fiscal year ends on the Sunday
nearest to December 31.
The Company has two business lines: Information Technology Services
("IT Services") and Commercial Staffing Services ("Commercial Staffing"). IT
Services provides technical staffing, training and information technology
consulting services. Commercial Staffing provides temporary staffing services,
placement of full-time employees and on-site management of temporary employees.
Approximately 61% of the Company's first quarter 2000 revenues came from IT
Services and 39% came from Commercial Staffing.
The following table sets forth the number of the Company's offices by
business line at the end of the years indicated and at April 2, 2000:
Fiscal Year End
April 2, ----------------------------
2000 1999 1998 1997
-------- ---- ---- ----
IT Services 43 43 47 30
Commercial Staffing 101 101 100 82
--- --- --- ---
Total offices 144 144 147 112
=== === === ===
During the first quarter of 2000, the Company's Chief Executive Officer
retired from his positions as an officer, employee and director of the Company.
The Company incurred a nonrecurring pre-tax expense of approximately $1.5
million in the first quarter relating to severance and other benefits for the
departed executive.
The Company made a number of acquisitions of IT Services and Commercial
Staffing companies in 1996, 1997 and 1998. Each of the Company's acquisitions
has been accounted for using the purchase method of accounting. 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. 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
76.4% of total assets and 151.4% of total shareholders' equity at April 2, 2000.
The Company periodically 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 intangible assets to be
fully recovered.
Although the Company's acquisition program has been much less active
since 1998, the Company intends to continue evaluating acquisition opportunities
in the normal course of its business. 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.
9
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The information technology services business is affected by the timing
of holidays and seasonal vacation patterns, generally resulting in lower IT
revenues and lower operating margins in the fourth quarter of each year. 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 are 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, its emphasis on high-end clerical staffing, and its rapid expansion
into the less cyclical information technology staffing and consulting sectors,
may partially mitigate the adverse effects of economic cycles in a single
industry or geographic region.
RESULTS OF OPERATIONS
QUARTER ENDED APRIL 2, 2000 VERSUS QUARTER ENDED APRIL 4, 1999
Revenues. Total revenues declined 5.6% to $216.9 million in the first
quarter of 2000 from $229.6 million in 1999. IT Services revenues declined 9.5%
to $132.7 million in the first quarter of 2000 primarily as the result of the
residual impact of Y2K issues on customer demand and slower than expected
project starts at two of the Company's largest IT Services operations.
Commercial Staffing revenues were up 1.3% to $84.2 million in the first quarter
of 2000 primarily due to growth in permanent placement revenues and the retail
component of the Company's temporary staffing business.
Direct Costs of Service and Gross Profit. Direct costs, consisting of
payroll and related expenses of consultants and temporary workers, decreased
5.9% to $155.9 million in the first quarter of 2000 on the lower revenue. Gross
margin as a percentage of revenues increased 20 basis points to 28.1% for the
first quarter of 2000 from 27.9% during 1999. This increase primarily was the
result of the continued strength of the Company's higher margin permanent
placement business. Although pay rate increases during the first quarter were
generally passed on to the Company's customers through higher bill rates, there
can be no assurance that the Company will be able to pass on pay rate increases
to its customers in the future.
Operating Expenses. Operating expenses, consisting of selling, general
and administrative expenses, before nonrecurring charges, and depreciation and
amortization expense, were $48.0 million in the first quarter of 2000, unchanged
from the first quarter last year. As a percentage of revenues, selling, general
and administrative expenses, before nonrecurring charges, increased to 19.5% in
the first quarter, up 80 basis points from last year. This increase was caused
by continuing investments in management personnel and information systems and
the continued strength of the Company's permanent placement business (which
typically carries higher gross margins and higher operating expenses than
Commercial Staffing's temporary staffing business). In addition, depreciation
and amortization expense increased to 2.7% of revenues in the first quarter of
2000 from 2.2% last year primarily due to increased amortization expense
resulting from earn-out payments related to prior acquisitions and continuing
investments in management information systems.
Interest Expense. Interest expense increased to $4.4 million in the
first quarter of 2000 from $3.7 million in 1999 as the Company borrowed
additional funds to make earn-out payments and finance its share repurchase
programs. Additionally, average interest on borrowings was 7.4%, up 120 basis
points over the first quarter last year. See "Liquidity and Capital Resources."
10
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Income Tax Expense. The effective tax rate increased to 43.2% in the
first quarter of 2000 from 42.0% in 1999 primarily because nondeductible
amortization expense related to acquisitions increased during 1999 as a
percentage of the Company's pretax income. 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.
Net Income. Net income decreased 43.3% to $4.0 million in the first
quarter of 2000 from $7.1 million in 1999 due to the factors discussed above.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of cash are from operations and
borrowings under the Company's $200.0 million revolving credit facility (the
"Credit Facility"). The Company's principal uses of cash are to fund working
capital, capital expenditures and share repurchases under the Company's share
repurchase programs. Prior to 1999, the Company had also used substantial cash
to fund its acquisition program. The Company's acquisition activity declined
significantly in 1999, however, and the use of cash for acquisitions declined
accordingly.
For the quarter ended April 2, 2000, cash provided by operating activities
decreased to $9.8 million from $15.3 million for the quarter ended April 4,
1999, primarily as a result of lower earnings before depreciation and
amortization in the quarter. In the aggregate, days sales outstanding were 52
days at April 2, 2000, unchanged from April 4, 1999. Cash used for investing
activities increased to $27.4 million in the quarter from $13.4 million in 1999
primarily as a result of contingent earn-out payments relating to acquisitions.
As of April 2, 2000, the Company was obligated to make certain contingent
earnout payments to former owners of acquired businesses. Earnout payments made
during the first quarter of 2000 were approximately $25.3 million in the
aggregate (including $16.6 million in payments made on January 3, 2000). Earnout
payments based on earnings for periods ending after April 2, 2000 and beyond are
contingent on the future performance of such acquired businesses, and thus the
actual amount cannot be determined at this date. The Company estimates, based on
certain assumptions as to the future performance of such acquired businesses,
that aggregate earnout payments may be in the range of $7.0 million to $9.0
million during the balance of 2000. 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 began a project in 1998 to replace the financial and human
resource systems for its IT Services companies. Installation of these systems
for the remaining companies is expected to continue through the end of the year
2000. The Company expects to spend one to one and one-half percent of its 2000
revenues on management information systems and other capital expenditures not
directly related to acquisitions, including the project to replace the financial
and human resource systems discussed above. There can be no assurance that there
will not be unanticipated costs or delays associated with these installations or
that the systems will operate as expected.
The Company repurchased .9 million shares of its Common Stock during the
first quarter of 2000 at an aggregate purchase price of $6.4 million. Between
April 2, 2000, and May 12, 2000, the Company repurchased an additional .8
million shares of Common Stock for an aggregate purchase price of
11
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approximately $4.2 million. As of May 12, 2000, the Company had authorization
from its Board of Directors to repurchase an additional $11.3 million of Common
Stock. These share repurchases were made from time to time in accordance with
applicable securities regulations in open market or privately negotiated
transactions. All share repurchases were financed with cash from operations and
borrowings under the Credit Facility and all repurchased shares have been held
in the Company's treasury and are available for resale and for general corporate
purposes.
The Credit Facility is a five-year, $200.0 million revolving line of
credit due June 2002. As of May 12, 2000, $165 million of borrowings were
outstanding under the Credit Facility and approximately $6.6 million had been
used for the issuance of undrawn letters of credit to secure the Company's
workers' compensation programs. In the first quarter of 2000, the weighted
average interest rate under the Credit Facility was 7.4%.
The Company believes that cash flow from operations and borrowing
capacity under the Credit Facility will be adequate to meet its presently
anticipated needs for working capital, capital expenditures and share
repurchases. In the event that significant acquisition activity resumed
short-term, the Company would likely be required to seek alternative sources of
capital, such as an expansion of the Credit Facility or one or more offerings of
additional debt or equity securities of the Company. There can be no assurance,
however, that other alternative sources will be available, if and when needed,
on favorable terms.
YEAR 2000 COMPLIANCE
The Company uses software and related information technologies and
systems throughout its business that could be affected by the failure to
correctly interpret and process dates after 1999. Accordingly, the Company
attempted to identify and assess its areas of risk related to the year 2000
issue. The Company experienced no disruptions to its business as the result of
the changes to calendar year 2000 and believes, based on its experience and upon
representations from certain of its software vendors, that its key computer
systems and related software are substantially year 2000 compliant.
IT Services has performed work for clients to assist them in modifying
their computer systems and software to make them year 2000 compliant, although
this type of work did not represent a significant portion of IT Services'
services. Generally, this work is preformed under the direction and supervision
of the client, and the Company seeks to limit its liability contractually.
Additionally, the Company maintains errors and omissions insurance to protect
against these risks. Although to date the Company is unaware of any claims from
its clients based on its work on year 2000 projects, there can be no assurance
that the Company will not incur liabilities or experience other problems in the
future related to the year 2000 issue or that any such liabilities or problems
will not be material.
12
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FORWARD-LOOKING INFORMATION
This report, 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, that are based on management's belief and assumptions, as well as
information currently available to management. When used in this document, the
words "anticipate," "estimate," "expect" and similar expressions may identify
forward-looking statements. Although the Company believes that the expectations
reflected in any such forward-looking statements are reasonable, it can give no
assurance that such expectations will prove to be correct. Any such statements
are subject to certain risks, uncertainties and assumptions. Should one or more
of these risks or uncertainties materialize, or should underlying assumptions
prove incorrect, the Company's actual results, performance or financial
condition may vary materially from those anticipated, estimated or expected.
Among the key factors that may have a direct bearing on the Company's actual
results, performance or financial condition are fluctuations in the economy, the
degree and nature of competition, demand for the Company's services, including
the impact of changes in utilization rates, 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 professions, 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 report and the Company's other filings with the Securities and
Exchange Commission.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company's outstanding debt under the Credit Facility at April 2, 2000,
was $156.0 million. Interest on borrowings under the Credit Facility is based on
LIBOR plus a variable margin. Based on the outstanding balance at April 2, 2000,
a change of 1% in the interest rate would cause a change in interest expense of
approximately $1.6 million on an annual basis.
PART II - OTHER INFORMATION
ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - The exhibits filed with or incorporated by reference into
this Form 10-Q are set forth in the Exhibit Index, which immediately
precedes the exhibits to this report.
(b) Reports on Form 8-K -The Company filed one current report on Form 8-K,
dated February 10, 2000, during the quarter ended April 2, 2000. This
report incorporated by reference the contents of a Company press
release issued on February 10, 2000, announcing the retirement of the
Company's Chief Executive Officer, the appointment of Kevin Egan as
Chairman and the formation of an interim Office of the President.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PERSONNEL GROUP OF AMERICA, INC.
(Registrant)
Date: May 17, 2000 By: /s/ James C. Hunt
-------------------------------------
James C. Hunt
President and Chief Operating Officer
Date: May 17, 2000 By: /s/ Ken R. Bramlett, Jr.
-------------------------------------
Ken R. Bramlett, Jr.
Senior Vice President,
Chief Financial Officer and Treasurer
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EXHIBIT INDEX
<TABLE>
<CAPTION>
FILED HEREWITH(*),OR
INCORPORATED BY
REFERENCE FROM PREVIOUS
EXHIBIT
EXHIBIT COMPANY REG. NO.
NUMBER DESCRIPTION NUMBER OR REPORT
------- ----------- ------ ----------------
<S> <C> <C> <C>
3.1 Restated Certificate of Incorporation of the 3.1 333-31863
Company, as amended
3.2 Amended and Restated Bylaws of the Company 3.2 33-95228
4.0 Specimen Stock Certificate 4.0 33-95228
4.1 Rights Agreement between the Company and 1 0-27792
First Union National Bank (as successor
trustee)
4.2 Indenture between the Company and First Union 4.2 333-31863
National Bank, as Trustee
4.3 Form of Note Certificate for 5-3/4% 4.3 333-31863
Convertible Subordinated Notes
10.1+ 1995 Equity Participation Plan, as amended 10.1 333-31863
10.2+ Amended and Restated Management Incentive 10.2 10-K for year
Compensation Plan ended 1/3/99
10.3+ Employee Stock Purchase Plan, as amended 10.3 10-K for year
ended 1/2/00
10.4#+ Director and Officer Indemnification 10.3 10-K for year
Agreement of James V. Napier ended 12/31/95
10.5+ Employment Agreement between the Company and 10.10 10-K for year
James C. Hunt ended 12/29/96
</TABLE>
15
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<TABLE>
<S> <C> <C> <C>
10.6+ Employment Agreement between the Company and 10.13 10-K for year
Ken R. Bramlett, Jr. ended 12/29/96
10.7+ Employment Agreement between the Company and 10.9 10-K for year ended
Michael H. Barker 1/3/99
10.8+ Supplemental Retirement Plan for Edward P. 10.7 10-K for year ended
Drudge, Jr. 1/2/00
10.9+ Retirement Agreement between the Company and *
Edward P. Drudge, Jr.
10.10 Amended and Restated Non-Qualified 10.16 10-K for year
Profit-Sharing Plan ended 12/29/96
10.11+ Director's Non-Qualified Deferred Fee Plan 10.12 10-K for year ended
12/28/97
10.12 Amended and Restated Credit Agreement between 10.15 333-31863
the Company and its subsidiaries, the Lenders
party thereto and NationsBank N.A., as Agent
10.13 Amendment No. 1 to Amended and Restated 10.14 10-Q for quarter ended
Credit Agreement among the Company and its 3/29/98
Subsidiaries, The Lenders party thereto and
NationsBank, N.A., as agent
10.14 Stock Purchase Agreement for the sale of 1 8-K dated 12/26/97
Nursefinders between PFI Corp., Nursefinders,
Inc., and Nursefinder Acquisition Corp.
10.15 Registration Rights Agreement between the 10.17 333-31863
Company and the Initial Purchasers
27.1 Financial Data Schedule *
(For SEC Purposes Only)
</TABLE>
# This Exhibit is substantially identical to Director and Officer
Indemnification Agreements (i) of the same date between the Company and
the following individuals: Kevin P. Egan, J. Roger King and William
Simione, Jr.; (ii) dated April 17, 1998 between the Company and each of
James C. Hunt and Ken R. Bramlett, Jr.; and (iii) dated August 9, 1999
between the Company and Janice L. Scites.
+ Management contract or compensatory plan required to be filed under
Item 14(c) of this report and Item 601 of Regulation S-K of the
Securities and Exchange Commission.
16
<PAGE> 1
EXHIBIT 10.9
RETIREMENT AGREEMENT
This RETIREMENT AGREEMENT (this "Agreement or this "Retirement
Agreement") is made and entered into as of the 13th day of February 2000, by and
between PERSONNEL GROUP OF AMERICA, INC., a Delaware corporation with its
principal place of business in Charlotte, North Carolina, ("the Company"), and
EDWARD P. DRUDGE, JR.
("Employee").
STATEMENT OF PURPOSE
Employee has served as an officer, director and employee of the
Company. Employee desires to retire and resign from all of his current positions
with the Company, and Company has agreed to accept Employee's retirement and
resignation, on the terms and conditions set forth below.
AGREEMENT
NOW THEREFORE, in consideration of the mutual covenants and agreements
contained herein and other good and valuable consideration, the Company and
Employee hereby agree as follows:
1. Date of Termination. Employee hereby retires and resigns from all
executive positions and capacities with the Company and/or the Company's
subsidiaries, including without limitation as an officer and director of the
Company and the Company's subsidiaries, and the Company hereby accepts all such
resignations, and all such resignations are deemed to be effective, as of
February 13, 2000 (the "Retirement Date"). From the Retirement Date through
April 13, 2000 (the "Employment Termination Date"), Employee shall be deemed,
for purposes of salary and certain other benefits expressly provided herein, a
non-executive employee of the Company, entitled to certain benefits expressly
provided herein. Employee hereby resigns his employment with the Company and the
Company's subsidiaries in all capacities, effective as of the Employment
Termination Date.
2. Consulting; Term; Duties. For the period beginning as of the
Employment Termination Date and continuing through April 13, 2002 (the
"Consulting Period"), Employee will act as a consultant and general advisor to
the Company and its subsidiaries on all matters pertaining to the business
conducted by the Company and to the retention of selected employees and the
goodwill and business of the customers and suppliers of the Company and its
subsidiaries. Employee will use his best efforts to maintain the goodwill of the
customers and suppliers of the Company and its subsidiaries and to provide for a
smooth and orderly transition of power and responsibility to Employee's
successor as selected by the Company. Employee will be available to perform
services hereunder on an as needed basis upon the reasonable request of the
Company.
3. Retirement Payments and Other Benefits. Subject to Employee's full
compliance with the terms of this Agreement, including the conditions set forth
below, Employee shall be entitled to the following benefits:
<PAGE> 2
(a) Salary Continuation. The Company shall continue to pay the
current base salary of Employee ($385,000 per year) from the Retirement Date
through the end of the Consulting Period. These salary continuation payments
shall be payable at times and in accord with the regular payroll practices of
the Company with respect to its executive officers. All such payments shall be
subject to, and reduced by, any applicable federal and state withholding taxes
and other charges for health and other benefits as applicable.
(b) Stock Options. All outstanding options to purchase the
Company's common stock that have been granted to Employee prior to the
Retirement Date and are summarized on Exhibit A attached hereto (collectively,
the "Options") shall continue to be outstanding and shall continue to vest and
become exercisable in accordance with their respective stated vesting schedules
from the Retirement Date throughout the Consulting Period. Employee shall be
entitled to exercise such Options, according to the terms thereof, to the extent
then vested as of the end of the Consulting Period, at any time prior to the
90th day following the end of the Consulting Period (the "Option Expiration
Date"). After the Option Expiration Date, all unexercised Options held by
Employee shall expire.
(c) SERP Benefit. Effective on the last day of the Consulting
Period, Employee shall be entitled to an annual benefit under that certain
Supplemental Retirement Plan for Edward P. Drudge, Jr., effective as of January
1, 1999 (the "SERP"), as if Employee's retirement had occurred on the last day
of the Consulting Period, which benefit would be $150,000 annually, payable in
accordance with the terms of the SERP, for a period of 15 years following the
end of the Consulting Period; provided, however, that notwithstanding the terms
of the SERP, Employee and the Company agree as follows: (1) in no event will the
maximum benefit payable to Employee under the SERP exceed $150,000 per year; (2)
in the event Employee becomes entitled to a benefit under the SERP because of,
or upon the occurrence of, a Change of Control (as defined in the SERP), the
amount of such benefit will be $150,000 per year (irrespective of when such
Change of Control occurs); and (3) the term "employment agreement" in subsection
(a) of Section 2.02 of the SERP, which provides that Employee's benefit may be
forfeited in the event Employee engages in competition with the Company in
violation of his employment agreement, shall be deemed to mean and include this
Agreement. The Company and Employee agree that the SERP is hereby amended if,
and to the extent, necessary to give effect to this Agreement.
(d) Company Property. Employee agrees that, on or prior to
April 13, 2000, he will purchase from the Company, at book value as set forth on
Exhibit B, attached hereto (or exchange, in the manner set forth in Exhibit B),
all Company property set forth on Exhibit B hereto. Employee may continue to use
his Company-issued cellular phone for business-related purposes through April
13, 2000, and shall return such phone to the Company immediately after April 13,
2000.
(e) Company Car. From the Retirement Date through May 9, 2000,
Employee shall be entitled to receive a $1,200 monthly car allowance, which will
be payable towards existing lease payments on the Employee's leased Mercedes
S500 Sedan. As of May 9, 2000, Employee shall either (i) return such vehicle to
the Company for surrender in accordance with the terms of
2
<PAGE> 3
such lease or (ii) purchase such vehicle upon payment by Employee of the
residual value and all other fees and expenses required for purchase and payoff
under the terms of such lease.
(f) Health Care Benefits. From and after the Retirement Date,
Employee and his spouse and dependents shall be entitled to continue to be
covered by the Company's group health, dental and life insurance provided to the
Company's executive employees, at the same coverage level and on the same terms
and conditions as in effect on the Retirement Date or as available upon any
amendment of such insurance plans applicable to all executive employees of the
Company (including without limitation, Employee's payment of his portion of
applicable premiums), until the earlier of (i) such time as Employee obtains
alternative comparable coverage under another group plan, which coverage does
not contain any pre-existing condition exclusions or limitations, or (ii) the
end of the Consulting Period. Upon the termination of the benefits coverage
under the preceding sentence, Employee and his spouse and dependents shall be
entitled to obtain, at Employee's sole cost and expense, continuation coverage
under the Company's health insurance plan pursuant to Section 4980B of the
Internal Revenue Code of 1986, as amended, and under any other applicable law,
to the extent required by such laws, as if Employee had terminated employment
with the Company on the date such benefits coverage terminates. Employee agrees
to cooperate with the Company in discharging its obligations hereunder and, in
that connection, to execute any required forms or applications, and to submit
required underwriting information, should they be required by any insurer
hereunder.
(g) Other Benefits. Except as expressly set forth herein,
after the Retirement Date, Employee shall not have the right to participate in
or receive any other benefit under any employee benefit plan of the Company, any
fringe benefit plan of the Company, or any other plan, policy or arrangement of
the Company providing benefits or perquisites to employees of the Company
generally or individually. Specifically, without limitation, Employee shall not
be entitled to payment of any cash bonus, any payment for accrued but unused
vacation time or paid time off or any continuation of Company-paid country club
or dining club membership fees or dues, and Employee shall not be allowed to
continue to participate in the Company's Employee Stock Purchase Plan; provided,
however, that the following benefits will continue from the Retirement Date
through, and terminate effective as of, April 13, 2000: the Company will
continue payment of Employee's existing Carmel Country Club dues and Tower Club
dues (including a pro-rated amount of such dues for April 2000).
EMPLOYEE ACKNOWLEDGES AND AGREES THAT THE COMPANY'S OBLIGATION TO
PROVIDE ALL BENEFITS AND PAYMENTS TO EMPLOYEE PURSUANT TO THIS AGREEMENT IS
EXPRESSLY CONDITIONED UPON EMPLOYEE'S COMPLIANCE IN FULL WITH ALL OF EMPLOYEE'S
OBLIGATIONS HEREUNDER, AND THAT ANY FAILURE OF EMPLOYEE TO COMPLY IN FULL WITH
ALL SUCH OBLIGATIONS WILL CONSTITUTE A MATERIAL BREACH OF THIS AGREEMENT, WILL
RELEASE THE COMPANY FROM ANY FURTHER OBLIGATION TO PROVIDE ANY SUCH BENEFITS AND
PAYMENTS.
4. Return of Company Property. All records, files, lists, including
computer generated lists, drawings, notes, notebooks, letters, handbooks,
blueprints, manuals, sketches,
3
<PAGE> 4
specifications, formulas, financial documents, sales and business plans,
customer lists, lists of customer contacts, pricing information, computers,
software, cellular phones, credit cards, keys, equipment and similar items
relating to the Company's business, together with any other property of the
Company or property which the Employee received in the course of Employee's
employment with the Company (except as may be purchased by Employee pursuant to
Section 3 hereof), shall be returned to the Company immediately after the
Retirement Date (or, in the case of Company property with respect to which
Employee's usage or benefit has been extended under the terms of Section 3,
hereof, immediately upon the termination of such benefit continuation period).
Employee further represents that Employee will not copy or cause to be copied,
print out or cause to be printed out any software, documents or other materials
originating with or belonging to the Company. Employee will cease usage of all
Company credit cards as of the Retirement Date, and the Company may deactivate
or cancel all such account or access numbers pertaining to any Company credit
cards in Employee's possession as of the Retirement Date.
5. Confidentiality and Nondisparagement. Employee agrees not to make
any statement, written or oral (including but not limited to any media source),
regarding any of the following subjects without the prior approval of the Board
of Directors of the Company: (a) any of the circumstances leading up to or
surrounding Employee's retirement or resignation from the Company; or (b) the
terms of this Agreement. Furthermore, Employee, for the good and valuable
consideration furnished herein, agrees not to disparage, bring into disrepute or
make any negative statement concerning the Company or any of its employees,
officers or directors or make any other statement that would disrupt, impair or
affect adversely the reputation, business interests, or profitability of the
Company, or its employees, officers or directors, or place the Company or such
individuals in any negative light. Any breach of this Agreement by Employee
shall constitute a material breach of this Agreement, and shall permit the
Company to cease all payments to Employee hereunder.
6. Release. As consideration for the payments to be made by the Company
to Employee pursuant to Section 3 hereof, Employee agrees for Employee and for
Employee's heirs, executors, administrators and assigns, to release and forever
discharge the Company and all of its parent and subsidiary corporations,
together with each of their respective agents, officers, employees, directors
and attorneys, from and to waive any and all rights with respect to all manner
of claims, actions, causes of action, suits, judgments, rights, demands, debts,
damages, or accountings of whatever nature, legal, equitable or administrative,
whether the same are now known or unknown, which Employee ever had, now has or
may claim to have, upon or by reason of the occurrence of any matter, cause or
thing whatsoever up to the date of this Agreement, including without limitation:
(i) any claim whatsoever (whether under federal or state statutory or common
law) arising from or relating to Employee's employment or changes in Employee's
employment relationship with the Company, including Employee's retirement,
separation, termination or resignation therefrom, (ii) all claims and rights for
additional compensation or benefits of whatever nature; (iii) any claim for
breach of contract, implied or express, impairment of economic opportunity,
intentional or negligent infliction of emotional distress, wage or benefit
claim, prima facie tort, defamation, libel, slander, negligent termination,
wrongful discharge, or any other tort, whether intentional or negligent; (iv)
all claims and rights under Title VII of the Civil Rights Act of
4
<PAGE> 5
1964, the Civil Rights Acts of 1866, 1871, or 1991, the Age Discrimination in
Employment Act, the Employee Retirement Income Security Act, the Americans With
Disabilities Act of 1993, the Family and Medical Leave Act, all as amended, or
any other federal, state, county or municipal statute or ordinance relating to
any condition of employment or employment discrimination; and (v) all claims
under any employment agreement between Employee and the Company; provided,
however, that this release shall not (i) include any claims relating to the
obligations of the Company under this Agreement or (ii) operate to release
Employee's ownership of any common stock or, to the extent provided herein,
options to acquire common stock of the Company.
7. Acknowledgement of Waiver of Rights. Employee acknowledges that
Employee's waiver of rights and claims under this Agreement includes a waiver of
rights and claims under the Federal Age Discrimination in Employment Act of
1967, as amended, and that such waiver and the waiver and release of all other
rights and claims contemplated by the release set forth in Section 6 above are
made knowingly and voluntarily. Employee acknowledges that he has been given a
period of at least twenty-one (21) days to consider the provisions of the
release stated above, and to consult with Employee's attorney, accountant, tax
advisor, spouse or other persons prior to making a decision to sign this
Agreement. Employee further acknowledges that the Company has not pressured or
coerced Employee to execute this Agreement prior to the expiration of 21 days
from the date it was furnished to Employee and that any decision to execute this
Agreement prior to such time has been made freely and voluntarily. Employee
certifies that the Company has advised Employee in writing to consult with an
attorney regarding the legal consequences of the execution of this Agreement.
8. Governing Law and Forum Selection. Employee agrees that any claim
against the Company or any of its affiliates or their employees arising out of
or relating in any way to this Agreement or to Employee's employment with the
Company shall be brought exclusively in the Superior Court of Mecklenburg
County, North Carolina, or the United States District Court for the Western
District of North Carolina, and in no other forum. Employee hereby irrevocably
consents to the personal and subject matter jurisdiction of these courts for the
purpose of adjudicating any claims subject to this forum selection clause.
Employee also agrees that any dispute of any kind arising out of or relating to
this Agreement or to Employee's employment (including without limitation any
claim released herein by Employee) shall at the Company's sole election or
demand be submitted to final, conclusive and binding arbitration before and
according to the rules then prevailing of the American Arbitration Association
in Mecklenburg County, North Carolina, which election or demand may be made by
the Company at any time prior to the last day to answer and/or respond to a
summons and/or complaint or counterclaim made by Employee. The results of any
such arbitration proceeding shall be final and binding both upon the Company and
upon Employee, and shall be subject to judicial confirmation as provided by the
Federal Arbitration Act and/or the terms of Chapter 1, Article 45A of the North
Carolina General Statutes, which are incorporated herein by reference.
9. Entire Agreement. This Agreement contains the entire agreement
between the Company and Employee and supersedes all prior agreements relating to
the subject matter hereof or otherwise, specifically including, without
limitation, that certain Employment Agreement dated as of September 29, 1995 (as
amended), between the Company and Employee and any stock option
5
<PAGE> 6
agreements relating to the Options between Employee and the Company, all of
which are hereby expressly terminated, and may be changed only by a writing
signed by the parties hereto. Any and all prior representations, statements and
discussions regarding the subject matter of this Retirement Agreement have been
merged into and replaced by the terms of this Retirement Agreement.
10. Further Conditions. The obligations of the Company set forth in
this Agreement, including specifically in Section 3 hereof, are conditional upon
Employee's execution and full ratification of this Agreement, including the
release set forth herein, no later than twenty-one (21) days following the date
on which this Agreement is submitted to Employee, as well as upon Employee's
failure to revoke the same following the expiration of seven days following such
execution. In the event that Employee fails to execute this Agreement within
such 21-day period or revokes the execution thereof within seven days following
such execution thereof, the Company's obligations hereunder shall be null and
void.
11. Severability. If any of the provisions set forth in this Agreement
shall be held invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement, but this Agreement shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein; provided, however, that
this provision shall not affect Employee's ability to ratify any provision of
this Agreement.
12. Confidential Information, Non-Solicitation and Non-Competition.
(a) From the date hereof through and including February 13,
2004, Employee shall not, except as may be required to perform his duties
hereunder or as required by applicable law, disclose to others or use, whether
directly or indirectly, any Confidential Information regarding the Company.
"Confidential Information" shall mean information about the Company, its
subsidiaries and affiliates, and their respective clients and customers that is
not available to the general public and that was learned by Employee in the
course of his employment by the Company, including (without limitation) any
proprietary knowledge, trade secrets, data, formulae, information, and client
and customer lists and all papers, resumes, records (including computer records)
and the documents containing such Confidential Information. Employee
acknowledges that such Confidential Information is specialized, unique in nature
and of great value to the Company, and that such information gives the Company a
competitive advantage.
(b) From the date hereof through and including February 13,
2004, Employee shall not, directly or indirectly (e.g., as an advisor,
principal, agent, partner, officer, director, shareholder, employee, member of
any association or otherwise) engage in, work for, consult, provide advice or
assistance or otherwise participate in a business that provides commercial
staffing, commercial permanent placement, information technology consulting,
information technology staffing or information technology permanent placement
services in the following geographic areas: (i) each and every city in which the
Company (which, for purposes of this Section 12, shall mean and include the
Company and its subsidiaries and affiliates) has an office or place of business
as of the Retirement Date; (ii) each and every county in which each of the
cities described in Section 12(b)(i) above is located; (iii) a 50-mile radius
outside the boundary limits of each city described in Section 12(b)(i) above;
and (iv) a 50-mile radius outside the boundary limits
6
<PAGE> 7
of each county described in Section 12(b)(ii) above. Employee further agrees
that during such period he will not assist or encourage any other person in
carrying out any activity that would be prohibited by the foregoing provisions
of this Section 12 if such activity were carried out by Employee and, in
particular, Employee agrees that he will not induce any employee of the Company
to carry out any such activity; provided, however, that the "beneficial
ownership" by Employee, either individually or as a member of a "group," as such
terms are used in Rule 13d of the General Rules and Regulations under the
Securities Exchange Act of 1934, of not more than five percent (5%) of the
voting stock of any publicly held corporation shall not be a violation of this
Agreement. It is further expressly agreed that the Company will or would suffer
irreparable injury if Employee were to compete with the Company or any
subsidiary or affiliate of the Company in violation of this Agreement and that
the Company would by reason of such competition be entitled to injunctive relief
in a court of appropriate jurisdiction, and Employee further consents and
stipulates to the entry of such injunctive relief in such a court prohibiting
Employee from competing with the Company or any subsidiary or affiliate of the
Company in violation of this Agreement.
(c) From the date hereof through and including February 13,
2004, Employee shall not, directly or indirectly, influence or attempt to
influence customers or suppliers of the Company or any of its subsidiaries or
affiliates, to divert their business to any competitor of the Company.
(d) Employee recognizes that he will possess confidential
information about other employees of the Company relating to their education,
experience, skills, abilities, compensation and benefits, and interpersonal
relationships with customers of the Company. Employee recognizes that the
information he will possess about these other employees is not generally known,
is of substantial value to the Company in developing its business and in
securing and retaining customers, and was acquired by him because of his
business position with the Company. Employee agrees that, from the date hereof
through and including February 13, 2004, he will not, directly or indirectly,
solicit or recruit any employee of the Company for the purpose of being employed
by him or by any competitor of the Company on whose behalf he is acting as an
agent, representative or employee and that he will not convey any such
confidential information or trade secrets about other employees of the Company
to any other person.
(e) If it is determined by a court of competent jurisdiction
in any state that any restriction in this Section 12 is excessive in duration or
scope or is unreasonable or unenforceable under the laws of that state, it is
the intention of the parties that such restriction may be modified or amended by
the court to render it enforceable to the maximum extent permitted by the law of
that state.
(f) Employee acknowledges that he has been informed of the
time, territory, scope and other essential requirements of the restrictions in
this Section 12 in connection with this Agreement, and Employee further
acknowledges that he has received sufficient and valuable consideration for his
agreement to such restrictions.
7
<PAGE> 8
13. Voluntary Agreement. Employee hereby represents that Employee has
carefully read and completely understands the provisions of this Agreement and
that Employee has entered into this Agreement voluntarily and without any
coercion whatsoever, and in order to receive certain benefits not otherwise owed
to Employee by the Company. Employee represents that he has been advised of his
right to secure counsel to assist in his reviewing this Agreement, that he has
retained counsel so to advise him, that he has had sufficient time to review
carefully each of the provisions hereto with his counsel, and that his execution
hereof is the product of his own free will and volition.
14. Assistance and Cooperation. Employee agrees to cooperate with and
provide assistance to the Company and its legal counsel in connection with any
litigation (including arbitration or administrative hearings) or investigation
affecting the Company, in which, in the reasonable judgment of the Company's
counsel, Employee's assistance or cooperation is needed. Employee shall, when
requested by the Company, provide testimony or other assistance and shall travel
at the Company's request in order to fulfill this obligation; provided, however,
that, in connection with such litigation or investigation, the Company shall
attempt to accommodate Employee's schedule, shall provide him with reasonable
notice in advance of the times in which his cooperation or assistance is needed,
and shall reimburse Employee for any reasonable expenses incurred in connection
with such matters. In addition, during the time he is receiving the payments set
forth in Section 3 herein, Employee agrees to cooperate fully with the Company
on all matters relating to his employment and the conduct of the Company's
business. This obligation to cooperate, however, shall not be considered to
prohibit or restrict other employment by the Employee, except as is set forth in
Section 12 herein.
[Signatures on Following Page]
8
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement, or caused this Agreement to be duly executed by their authorized
representatives as of the day and year first above written.
COMPANY:
[CORPORATE SEAL] PERSONNEL GROUP OF AMERICA, INC.
Attest:
By: /s/ James C. Hunt
-----------------------------
Position: President
---------------------------
/s/ Ken R. Bramlett, Jr.
- ------------------------
Secretary
EMPLOYEE:
/s/ Edward P. Drudge, Jr. (SEAL)
--------------------------------
WITNESS: Edward P. Drudge, Jr.
/s/ Bettyann Hale
- -------------------------
9
<PAGE> 10
EXHIBIT A
OPTIONEE STATEMENT PERSONNEL GROUP OF AMERICA, INC.
EXERCISABLE AS OF 3/27/2000
EDWARD P. DRUDGE
6717 WYNFAIRE LANE
CHARLOTTE, NC 28210
SSN ###-##-####
<TABLE>
<CAPTION>
GRANT EXPIRATION PLAN ID GRANT OPTIONS OPTION OPTIONS OPTIONS
DATE DATE TYPE GRANTED PRICE OUTSTANDING VESTED
<S> <C> <C> <C> <C> <C> <C> <C>
9/25/1995 9/25/2005 Non-Qualified 357,144 $7.0000 357,144 357,144 CURRENT
9/26/1996 9/26/2006 Non-Qualified 440,000 $12.4700 440,000 352,000 CURRENT
88,000 ON 9/26/2000
1/2/1997 1/2/2007 Non-Qualified 103,634 $11.5900 103,634 103,634 CURRENT
9/26/1997 9/26/2007 Incentive 23,696 $16.8750 23,696 11,848 CURRENT
5,924 ON 9/26/2000
5,924 ON 9/26/2001
9/26/1997 9/26/2007 Non-Qualified 76,304 $16.8750 76,304 38,152 CURRENT
19,076 ON 9/26/2000
19,076 ON 9/26/2001
12/31/1997 12/31/2007 Incentive 6,236 $16.0313 6,236 6,236 CURRENT
12/31/1997 12/31/2007 Non-Qualified 72,680 $16.0313 72,680 72,680 CURRENT
9/28/1998 9/28/2008 Incentive 100,000 $12.2500 100,000 25,000 CURRENT
25,000 ON 9/28/2000
25,000 ON 9/28/2001
25,000 ON 9/28/2002
12/31/1998 12/31/2008 Incentive 17,114 $17.5313 17,114 17,114 CURRENT
9/28/1999 9/28/2009 Incentive 25,000 $5.3100 25,000 0 CURRENT
6,250 ON 9/28/2000
6,250 ON 9/28/2001
6,250 ON 9/28/2002
6,250 ON 9/28/2003
12/8/1999 12/8/2009 Incentive 25,000 $9.0000 25,000 0 CURRENT
6,250 ON 12/8/2000
6,250 ON 12/8/2001
6,250 ON 12/8/2002
6,250 ON 12/8/2003
TOTALS 1,246,808 1,246,808 983,808
</TABLE>
<PAGE> 11
EXHIBIT B
COMPANY PROPERTY
Property Book Value
-------- ----------
*IBM 600 laptop computer $ 3,198.00
*Battery $ 216.00
*A/C Adaptor $ 65.00
*Docking Station $ 868.00
*Mouse and Keyboard $ 108.00
*Laser Printer $ 659.00
*Monitor $ 1,074.00
*Chair $ 818.00
*Employee and the Company agree that these items may, collectively, be exchanged
by Employee in an even exchange with the Company for Employee's existing
membership and all related rights in the Charlotte Motor Speedway's Speedway
Club.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-03-2000
<PERIOD-END> APR-02-2000
<CASH> 576
<SECURITIES> 0
<RECEIVABLES> 129,351
<ALLOWANCES> (2,632)
<INVENTORY> 0
<CURRENT-ASSETS> 141,745
<PP&E> 40,722
<DEPRECIATION> (14,750)
<TOTAL-ASSETS> 729,827
<CURRENT-LIABILITIES> 58,034
<BONDS> 0
0
0
<COMMON> 331
<OTHER-SE> 367,886
<TOTAL-LIABILITY-AND-EQUITY> 729,827
<SALES> 216,856
<TOTAL-REVENUES> 216,856
<CGS> 155,875
<TOTAL-COSTS> 199,525
<OTHER-EXPENSES> 5,781
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,434
<INCOME-PRETAX> 7,116
<INCOME-TAX> 3,074
<INCOME-CONTINUING> 4,042
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,042
<EPS-BASIC> 0.16
<EPS-DILUTED> 0.16
</TABLE>
