-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Tl4XL2Fsnx+bArlaU4sqWotMpWu6MaHDJXOE+UuP7erMI1jgsKLgivPdMsAtWtda N+iDuR3k1JdREMpCyUyEog== 0000950144-97-003960.txt : 19970411 0000950144-97-003960.hdr.sgml : 19970411 ACCESSION NUMBER: 0000950144-97-003960 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970521 FILED AS OF DATE: 19970410 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PERSONNEL GROUP OF AMERICA INC CENTRAL INDEX KEY: 0000948850 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-HELP SUPPLY SERVICES [7363] IRS NUMBER: 561930691 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: 1934 Act SEC FILE NUMBER: 001-13956 FILM NUMBER: 97577748 BUSINESS ADDRESS: STREET 1: 6302 FAIRVIEW RAOD STREET 2: SUITE 201 CITY: CHARLOTTE STATE: NC ZIP: 28210-3236 BUSINESS PHONE: 7044425100 DEF 14A 1 PERSONNEL GROUP OF AMERICA DEFINITIVE PROXY 1 SCHEDULE 14A (RULE 14A-101) INFORMATION REQUIRED IN PROXY STATEMENT SCHEDULE 14A INFORMATION PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. ) Filed by the Registrant [X] Filed by a Party other than the Registrant [ ] Check the appropriate box: [ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) [X] Definitive Proxy Statement [ ] Definitive Additional Materials [ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Personnel Group of America, Inc. - -------------------------------------------------------------------------------- (Name of Registrant as Specified In Its Charter) - -------------------------------------------------------------------------------- (Name of Person(s) Filing Proxy Statement, if other than the Registrant) Payment of Filing Fee (Check the appropriate box): [X] No fee required. [ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. (1) Title of each class of securities to which transaction applies: (2) Aggregate number of securities to which transaction applies: (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): (4) Proposed maximum aggregate value of transaction: (5) Total fee paid: [ ] Fee paid previously with preliminary materials: [ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. (1) Amount Previously Paid: (2) Form, Schedule or Registration Statement No.: (3) Filing Party: (4) Date Filed: 2 [LOGO] PERSONNEL GROUP OF AMERICA, INC. 6302 FAIRVIEW ROAD, SUITE 201 CHARLOTTE, NORTH CAROLINA 28210 April 10, 1997 Dear Shareholder: You are cordially invited to attend the 1997 Annual Meeting of Shareholders to be held at The Park Hotel, 2200 Rexford Road, Charlotte, North Carolina, on Thursday, May 21, 1997, at 9:30 a.m., local time. The Notice of Annual Meeting of Shareholders and Proxy Statement are attached hereto. The matters to be acted upon by our shareholders are set forth in the Notice of Annual Meeting and discussed in the Proxy Statement. We would appreciate your signing, dating and returning the enclosed proxy card in the envelope provided at your earliest convenience. If you choose to attend the meeting, you may revoke your proxy and personally cast your votes. Also enclosed herewith is a copy of the Company's 1996 Annual Report to Shareholders. We look forward to seeing you at the Annual Meeting. Sincerely yours, /s/ Edward P. Drudge, Jr. Edward P. Drudge, Jr. Chairman and Chief Executive Officer 1 3 PERSONNEL GROUP OF AMERICA, INC. NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 21, 1997 --------------- TO THE SHAREHOLDERS OF PERSONNEL GROUP of AMERICA, INC. NOTICE IS HEREBY GIVEN that the 1997 Annual Meeting of Shareholders of Personnel Group of America, Inc., a Delaware corporation (the "Company"), will be held at 9:30 a.m., local time, on May 21, 1997, at The Park Hotel, 2200 Rexford Road, Charlotte, North Carolina, for the following purposes: (1) To elect two members to the Company's Board of Directors to hold office until the Annual Meeting of Shareholders in 2000 or until their successors are duly elected and qualified; (2) To consider and act upon a proposal to amend the Company's Certificate of Incorporation to increase the Company's authorized Common Stock; (3) To consider and act upon a proposal to amend the Company's 1995 Equity Participation Plan; (4) To consider and act upon a proposal to approve the Company's 1997 Employee Stock Purchase Plan; (5) To consider and act upon a proposal to ratify the selection of Price Waterhouse LLP as the Company's independent public accountants for 1997; and (6) To transact such other business as may properly come before the Annual Meeting and any adjournments or postponements thereof. The Board of Directors has fixed the close of business on March 28, 1997 as the record date for determining those shareholders entitled to notice of, and to vote at, the Annual Meeting and any adjournments or postponements thereof. A list of those shareholders may be examined at the principal executive office of the Company, 6302 Fairview Road, Suite 201, Charlotte, North Carolina, during the 10-day period preceding the meeting. Whether or not you expect to be present, please sign, date and return the enclosed proxy card in the enclosed pre-addressed envelope as promptly as possible. No postage is required if mailed in the United States. By Order of the Board of Directors, /s/ Edward P. Drudge, Jr. Edward P. Drudge, Jr. Chairman and Chief Executive Officer Charlotte, North Carolina April 10, 1997 ALL SHAREHOLDERS ARE INVITED TO ATTEND THE MEETING IN PERSON. THOSE SHAREHOLDERS WHO ARE UNABLE TO ATTEND ARE URGED TO EXECUTE AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE. SHAREHOLDERS WHO EXECUTE A PROXY CARD MAY NEVERTHELESS ATTEND THE MEETING, REVOKE THEIR PROXY AND VOTE THEIR SHARES IN PERSON. 2 4 1997 ANNUAL MEETING OF SHAREHOLDERS OF PERSONNEL GROUP OF AMERICA, INC. --------------------- PROXY STATEMENT --------------------- This Proxy Statement is furnished in connection with the solicitation by the Board of Directors of Personnel Group of America, Inc., a Delaware corporation ("PGA" or the "Company"), of proxies from the holders of the Company's Common Stock, par value $.01 per share (the "Common Stock"), for use at the 1997 Annual Meeting of Shareholders of the Company to be held at The Park Hotel, 2200 Rexford Road, Charlotte, North Carolina, at 9:30 a.m., local time, on May 21, 1997, or at any adjournments or postponements thereof (the "Annual Meeting"), pursuant to the enclosed Notice of Annual Meeting of Shareholders. The approximate date that this Proxy Statement and the enclosed form of proxy are first being sent or given to holders of Common Stock is April 10, 1997. The Company's principal executive offices are located at 6302 Fairview Road, Suite 201, Charlotte, North Carolina 28210, and its telephone number is (704) 442-5100. INFORMATION CONCERNING PROXY The enclosed proxy is solicited on behalf of the Company's Board of Directors. The giving of a proxy does not preclude the right to vote in person should any shareholder giving the proxy so desire. Shareholders have a right to revoke their proxy at any time prior to the exercise thereof, either in person at the Annual Meeting or by filing with the Company's Secretary at the Company's headquarters a written revocation or duly executed proxy bearing a later date. The cost of preparing, assembling and mailing this Proxy Statement, the Notice of Annual Meeting of Shareholders and the enclosed proxy is to be borne by the Company. In addition to the use of mail, employees of the Company may solicit proxies personally and by telephone. The Company's employees will receive no compensation for soliciting proxies other than their regular salaries. The Company may request banks, brokers and other custodians, nominees and fiduciaries to forward copies of the proxy material to their principals and to request authority for the execution of proxies. The Company has retained Corporate Communications, Inc. to aid in the proxy solicitation at an estimated cost of $5,000. PURPOSES OF THE MEETING At the Annual Meeting, the Company's shareholders will consider and vote upon the following matters: (1) A proposal to elect two members to the Company's Board of Directors to serve until the Annual Meeting of Shareholders in 2000 or until their successors are duly elected and qualified; (2) A proposal to amend the Company's Certificate of Incorporation to increase the Company's authorized Common Stock; (3) A proposal to amend the Company's 1995 Equity Participation Plan; (4) A proposal to approve the Company's 1997 Employee Stock Purchase Plan; (5) A proposal to ratify the selection of Price Waterhouse LLP as the Company's independent public accountants for 1997; and (6) Such other business as may properly come before the Annual Meeting, including any adjournments or postponements thereof. Unless contrary instructions are indicated on the enclosed proxy, all shares represented by valid proxies received pursuant to this solicitation (and which have not been revoked in accordance with the procedures set forth above) will be voted (a) in favor of the election of the two nominees for directors named below and (b) in favor of each of the other proposals in clauses (2) through (5) above. In the event a shareholder specifies a different choice by means of the enclosed proxy, his or her shares will be voted in accordance with the specification so made. 3 5 OUTSTANDING VOTING SECURITIES AND VOTING RIGHTS The Board of Directors has set the close of business on March 28, 1997 as the record date (the "Record Date") for determining shareholders of the Company entitled to notice of and to vote at the Annual Meeting. As of the Record Date, there were 12,076,755 shares of Common Stock issued and outstanding, all of which are entitled to one vote on all matters to be acted upon at the Annual Meeting. Neither the Company's Certificate of Incorporation nor Bylaws provides for cumulative voting rights. The representation in person or by proxy of a majority of the issued and outstanding shares of Common Stock entitled to vote will constitute a quorum at the Annual Meeting. Directors of the Company are elected by a plurality vote, and votes may either be cast in favor of nominees or withheld. Withheld votes will be excluded entirely from the vote and will have no effect on the outcome of the election. Approval of the remaining proposals (other than the proposed amendment to the Certificate of Incorporation) requires the affirmative vote of the holders of a majority of the shares of Common Stock present in person or represented by proxy and entitled to vote. On any such proposal, an abstention will have the same effect as a negative vote but, because shares held by brokers will not be considered entitled to vote on matters as to which the brokers withhold authority, a broker non-vote will have no effect on the vote. The proposed amendment to the Certificate of Incorporation will require the affirmative vote of a majority of the issued and outstanding Common Stock; accordingly, abstentions and broker non-votes will have the same effect as negative votes on this proposal. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth, as of March 28, 1997, the number and percentage of outstanding shares beneficially owned by each person known by the Company to own beneficially more than 5% of the Company's Common Stock, by each director and nominee for director of the Company, by each officer named in the Summary Compensation Table under the heading "Executive Compensation" and each current executive officer and by all directors and current executive officers of the Company as a group. Except as otherwise indicated, each shareholder named has sole voting and investment power with respect to such shareholder's shares.
AMOUNT AND NATURE OF SHARES Percent of Common NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED (1) Stock Outstanding - ------------------------------------ ---------------------- ----------------- RCM Capital Management, L.L.C. RCM Limited L.P. RCM General Corporation..................................... 694,500 (2) 5.8% Four Embarcadero Center, Suite 3000 San Francisco, California 94111-4189 Edward P. Drudge, Jr........................................ 197,807 (3) 1.6 Peter R. Sollenne........................................... 24,842 * Rosemary Payne-Harris....................................... 16,815 * James C. Hunt .............................................. 16,060 (4) * Kevin P. Egan .............................................. 15,375 * Gene C. Wilson.............................................. 14,715 * Ken R. Bramlett, Jr. ....................................... 13,432 (5) * Richard L. Peranton......................................... 12,715 * James V. Napier............................................. 12,575 * J. Roger King............................................... 10,375 * William J. Simione, Jr. .................................... 10,375 * All directors and current executive officers as a group (9 persons).................................... 313,556 2.5%
* Less than one percent (1) Includes the following shares subject to stock options exercisable within 60 days after March 28, 1997: Mr. Drudge--167,245; Mr. Sollenne- -23,842; Ms. Payne-Harris--12,715; Mr. Hunt--14,000; Mr. Egan--9,375; Mr. Wilson--12,715; Mr. Bramlett--9,182; Mr. Peranton--10,715; Mr. Napier--9,375; Mr. King--9,375; Mr. Simione--9.375; Directors and current executive officers as a group--262,484. (2) The amount and nature of the shares beneficially owned are as of December 29, 1996 and are based on the most recent Schedule 13G, or amendment thereto, on file with the Company. Of the total shares reported, sole voting power is reported with respect to only 597,500 shares and shared dispositive power is reported with respect to 44,000 shares. (3) Includes 2,500 shares held in the names of Mr. Drudge's spouse and children. (4) Includes 560 shares held in the names of Mr. Hunt's spouse and children. (5) Includes 250 shares held in the name of Mr. Bramlett's spouse. 4 6 PROPOSAL 1 ELECTION OF DIRECTORS NOMINEES The Company's Certificate of Incorporation and Bylaws provide for seven directors who are divided into three classes. The terms of the directors in the initial classes are being phased in over a three-year period, and after the expiration of the terms of these directors, newly elected directors will serve for a three-year term or until their successors are elected and qualify. Messrs. Drudge, Napier and Simione were appointed to Class III to serve until the Annual Meeting of Shareholders in 1998. Messrs. Egan and King were appointed to Class II to serve until this Annual Meeting. Mr. Hunt, who replaced Michael P. Bernard as the Company's Chief Financial Officer, has been appointed to Class I to serve the remainder of Mr. Bernard's term, which would have expired at the Annual Meeting of Shareholders in 1999. The Board of Directors is seeking a director candidate to fill the Class I vacancy created by Ms. Joyce Mazero's resignation in April 1996, but has yet to fill the vacancy. Messrs. Egan and King are the sole nominees standing for election at the Annual Meeting and, if elected, will serve for a term expiring at the Annual Meeting of Shareholders in 2000, expected to be held in May 2000, or until their successors have been duly elected and qualified. Any director appointed after this Annual Meeting to fill the vacancy on the Board will be designated a Class I director and will serve a term expiring at the Annual Meeting of Shareholders in 1999, expected to be held in May 1999, or until a successor has been duly elected and qualified. The Board of Directors makes nominations for director candidates as permitted by the Company's Bylaws. Section 14 of Article II of the Company's Bylaws prescribes the procedure a shareholder must follow to make nominations for director candidates. Shareholder nominations for director will be considered at an annual meeting or a special meeting of shareholders if the shareholder (who must be, at the time of delivery of notice, a shareholder of record) delivers to the Secretary of the Company a timely notice setting forth the information specified in Section 14 of Article II of the Company's Bylaws. In the case of an annual meeting, such notice shall be considered timely if delivered not earlier than the close of business on the 90th day, nor later than the close of business on the 60th day, prior to the first anniversary of the preceding year's annual meeting. If, however, the annual meeting date is more than 30 days before or 60 days after the anniversary date of the preceding year's annual meeting, the notice will be considered timely if delivered not earlier than the close of business on the 90th day prior to such meeting nor later than the close of business on the later of (i) the 60th day prior to such meeting or (ii) the 10th day following the day on which the public announcement of the date of such meeting is first made by the Company. In the case of a special meeting, such notice shall be considered timely if delivered not earlier than the close of business on the 90th day prior to such meeting nor later than the close of business on the later of (i) the 60th day prior to such meeting or (ii) the 10th day following the day on which public announcement is first made of the special meeting date and the nominees proposed by the Board of Directors. Any shareholder desiring a copy of the Company's Bylaws will be furnished one without charge upon written request to the Secretary. The Board of Directors has no reason to believe that the nominees will refuse to act or be unable to accept election; however, in the event that a nominee for a directorship is unable to accept election or if any unforeseen contingencies should arise, it is intended that proxies will be voted for such other person as may be designated by the Board of Directors, unless it is directed by a proxy to do otherwise. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF MESSRS. EGAN AND KING FOR ELECTION AS CLASS II DIRECTORS. 5 7 DIRECTORS AND EXECUTIVE OFFICERS The following table sets forth information as to the Company's current executive officers and directors:
NAME Age Position ---- --- -------- Edward P. Drudge, Jr. 57 Chairman of the Board and Chief Executive Officer James C. Hunt 40 Senior Vice President, Chief Financial Officer, Treasurer and Director Ken R. Bramlett, Jr. 37 Senior Vice President, General Counsel and Secretary Peter R. Sollenne 47 President-Commercial Staffing Division Richard L. Peranton 46 President-Nursefinders Kevin P. Egan (1) 53 Director J. Roger King (1) 56 Director James V. Napier(1)(2) 60 Director William J. Simione, Jr.(2) 55 Director
(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 ("Adia California"), 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 Procter & 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. 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 also serves on the board of directors of World Acceptance Corporation, a small loan consumer finance company headquartered in Greenville, South Carolina. Peter R. Sollenne: Mr. Sollenne has served as President of the Commercial Staffing Division since October 1996. Mr. Sollenne served as President of the Commercial Staffing Division's Abar Staffing Company in San Francisco from July 1995 through October 1996. Prior to joining PGA, Mr. Sollenne spent six years as Senior Vice President of Sales, Marketing and Customer Services with USL Capital Fleet Services, a division of Ford Financial Services, Inc., and prior to that was President of PHH Financial Services, and held other senior management positions with PHH Corporation, Commercial Union Assurance Companies and Bank of Boston. Richard L. Peranton: Mr. Peranton has served as President of the Health Care Services Division since April 1994 and has 15 years experience in the home health care industry. From 1982 until April 1994, he held several executive positions with Kimberly Quality Care, a provider of home health care services, including President of that company's Southeastern Division. 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. 6 8 J. Roger King: Mr. King has served as a director of the Company since September 1995. Mr. King joined the Frito-Lay Division of PepsiCo, Inc. in 1969 and has served in various personnel and employee relations positions for PepsiCo since that time, including Senior Vice President of Personnel of PepsiCo from 1984 to 1995 and Senior Vice President of Human Resources of Frito-Lay from June 1995 to the present. 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, served 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., Rhodes, 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 is Vice Chairman and Executive Vice President of Simione Central Holdings, Inc., which provides consulting services and information systems to the home health care industry. 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. During the fiscal year ended December 29, 1996, the Board of Directors held four meetings and took certain actions by unanimous written consent. During 1996, all incumbent directors had perfect attendance at (a) all meetings of the Board of Directors held during the period, and (b) all meetings of committees of the Board of Directors held during the period any such directors served on such committees. Messrs. Napier and Simione served as members of the Audit Committee of the Board of Directors (the "Audit Committee") during 1996. The principal functions of the Audit Committee are to meet with appropriate financial and legal personnel and independent public accountants of the Company and review the internal controls of the Company and the objectivity of its financial reporting. This Committee makes recommendations to the Board of Directors with respect to the appointment of the independent public accountants to serve as auditors in examining the corporate accounts of the Company. The Company's independent public accountants periodically meet privately with the Audit Committee and have access to the Audit Committee at any time. The Audit Committee met twice during 1996. Messrs. King, Egan and Napier served as members of the Compensation Committee of the Board of Directors (the "Compensation Committee") during 1996. The principal functions of the Compensation Committee are to review proposals regarding the establishment or change of benefit plans, salaries and compensation of the executive officers and other employees of the Company and advise management and make recommendations to the Board of Directors with respect thereto and administer the Company's 1995 Equity Participation Plan and the Company's Management Incentive Compensation Plan. The Compensation Committee met once during 1996 and took a number of actions by written consent. SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Securities Exchange Act of 1934 requires the Company's directors and executive officers, and persons who own more than 10% of a registered class of the Company's equity securities, to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of Common Stock and other equity securities of the Company. Executive officers, directors and greater than 10% shareholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file. To the Company's knowledge, based solely on a review of the copies of such reports furnished to the Company during the fiscal year ended December 29, 1996, all Section 16(a) filing requirements applicable to its executive officers and directors and any greater than 10% beneficial owners (the Company is aware of none) were complied with. 7 9 DIRECTOR COMPENSATION During 1996, each non-employee director received an annual retainer of $7,500, and each such director who chaired a committee received an annual retainer of $1,000. In addition, non-employee directors received meeting fees of $1,000 per board meeting attended and $500 per committee meeting attended, plus reimbursement of expenses. Each non-employee director receives, upon joining the Board, an initial option grant to purchase 6,250 shares of Common Stock at the then fair market value, an additional option grant to purchase 3,125 shares of Common Stock at the then fair market value in each of the succeeding two years, and an annual option grant to purchase 1,500 shares of Common Stock at the then fair market value in each year thereafter that such director remains on the Board. All of such options will be granted under the Company's 1995 Equity Participation Plan. Officers of the Company who are also directors are not paid any director fees. EXECUTIVE COMPENSATION The following table sets forth information concerning the compensation for the fiscal years ended December 29, 1996, December 31, 1995 and January 1, 1995 for those persons who were, at December 29, 1996, the Chief Executive Officer and the Company's four other most highly compensated officers: SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION AWARDS -------------- Annual Compensation SECURITIES --------------------- UNDERLYING ALL OTHER SALARY BONUS OPTIONS(#)(1) COMPENSATION(2) ------ ----- ------------- --------------- Name and Principal Position - --------------------------- Edward P. Drudge, Jr ................. 1996 $307,500 $ -- 271,817(3) $ 500(4) Chairman and Chief Executive Officer 1995 269,994 302,535 178,572 30,993(5) 1994 243,750 296,535 -- 30,575(6) Peter R. Sollenne .................... 1996 $154,826 $ -- 36,642(3) $ -- President-Commercial Staffing ...... 1995 58,872 36,795 8,000 -- 1994 -- -- -- -- Richard L. Peranton .................. 1996 $211,762 $105,144 -- $ -- President-Nursefinders .............. 1995 205,691 191,394 26,786 20,609(7) 1994 133,333 133,333 -- -- Gene C. Wilson ....................... 1996 $170,500 $ 85,108 10,000 $ -- Senior Vice President .............. 1995 162,500 149,894 26,786 9,555(7) 1994 155,173 70,873 -- 14,605(6) Rosemary Payne-Harris ................ 1996 $124,000 $ 49,394 10,000 $ 500(4) Senior Vice President .............. 1995 106,750 102,352 26,786 10,729(8) 1994 92,175 61,331 -- 8,219(6)
- ---------- (1) Except as set forth below, amounts shown for each of the named officers are 20% vested, and will vest an additional 20% on each successive anniversary of the grant date through the year 2000. (2) Each of the named officers are eligible to participate in the Company's non-qualified profit-sharing plan, but non-qualified profit-sharing allocations for 1996 are not currently available. (3) Includes 51,817 options and 16,642 options granted to Mr. Drudge and Mr. Sollenne, respectively, on January 2, 1997 in lieu of 1996 bonuses. See "Compensation Committee Report on Executive Compensation." These options were vested 100% on the date of grant. (4) Amounts represent employer matching contributions to individual retirement accounts. (5) Amount includes $30,493 in non-qualified profit-sharing allocations for 1995 and $500 in employer matching contributions to individual retirement account. (6) Amounts represent non-qualified profit-sharing allocations for 1994. (7) Amount represents non-qualified profit-sharing allocation for 1995. (8) Amount includes $10,246 in non-qualified profit-sharing allocations for 1995 and $483 in employer matching contributions to individual retirement account. Option Grants Table. The following table sets forth certain information concerning grants of stock options to the named officers during the fiscal year ended December 29, 1996: 8 10 OPTION GRANTS IN LAST FISCAL YEAR INDIVIDUAL GRANTS
Number of % of Total Potential Realizable Value at Securities Options Assumed Annual Rates of Underlying Granted to Exercise Stock Price Appreciation for Options Employees or Base Option Term Granted in Fiscal Price Expiration ---------------------------- Name (#)(1) Year ($/Sh) Date 5% ($) 10% ($) ---- -------- ---- ------ ------ --------- ------- Edward P. Drudge, Jr.(2) .. 220,000 52.3% $24.94 9/25/06 $3,449,600 $8,745,000 Peter R. Sollenne(2) ...... 20,000 4.8% $27.00 11/5/06 $ 339,600 $ 860,800 Gene C. Wilson ............ 10,000 2.4% $24.94 9/25/06 $ 156,800 $ 397,500 Rosemary Payne-Harris ..... 10,000 2.4% $24.94 9/25/06 $ 156,800 $ 397,500
(1) Amounts shown for each of the named officers are 20% vested, and will vest an additional 20% on each successive anniversary of the grant date through the year 2000. (2) Amounts shown exclude 51,817 and 16,642 options granted to Mr. Drudge and Mr. Sollenne, respectively, on January 2, 1997, in lieu of 1996 bonuses. See "Compensation Committee Report on Executive Compensation." These options were granted at an exercise price of $23.18 and vested 100% on the date of grant. Option Year-End Value Table. The following table sets forth certain information concerning unexercised options held as of December 29, 1996: FISCAL YEAR-ENDED OPTION VALUE
Number of Securities Underlying Value Of Unexercised In-the-Money Unexercised Options at FY-End (#) Options At FY-End ($) ------------------------------------ -------------------------------------- Name Exercisable Unexercisable Exercisable Unexercisable ---- ----------- ------------- ----------- ------------- Edward P. Drudge, Jr.(1)... 115,428 283,144 $732,137 $1,098,226 Peter R. Sollenne(1)....... 7,200 20,800 $ 34,784 $ 51,936 Richard L. Peranton........ 10,715 16,071 $109,829 $ 164,727 Gene C. Wilson............. 12,715 24,071 $109,829 $ 164,727 Rosemary Payne-Harris...... 12,715 24,071 $109,829 $ 164,727
(1) Amounts shown exclude 51,817 and 16,642 options granted to Mr. Drudge and Mr. Sollenne, respectively, on January 2, 1997, in lieu of 1996 bonuses. See "Compensation Committee Report on Executive Compensation." These options were granted at an exercise price of $23.18 and vested 100% on the date of grant. 9 11 EMPLOYMENT AGREEMENTS Edward P. Drudge, Jr. is employed pursuant to the terms of an employment agreement, dated as of September 29, 1995, which provides for his employment as Chief Executive Officer of the Company until September 30, 1998, subject to automatic renewal for successive one-year periods unless either the Company or Mr. Drudge has given notice of non-renewal six months prior to expiration. The employment agreement currently provides for (i) an annual base salary of $330,000 (subject to annual adjustment as determined by the Compensation Committee) and (ii) the right to earn bonuses under the Company's Management Incentive Compensation Plan. If the employment agreement is terminated by the Company other than for cause or by Mr. Drudge upon a change in terms and conditions of employment or following a change in control of the Company, the Company must pay Mr. Drudge severance equal to 24 months' salary and any unpaid bonus to which he would otherwise have been entitled, and all unvested options to purchase Common Stock then held by Mr. Drudge become immediately exercisable. The employment agreement contains a provision prohibiting Mr. Drudge from competing with the Company or soliciting employees and customers of the Company for a period of two years from the date Mr. Drudge's employment with the Company ceases. Peter R. Sollenne is employed pursuant to an employment agreement, dated as of October 1, 1996, which provides for his employment as President of the Commercial Staffing Division of the Company until September 30, 1997, subject to automatic renewal for successive one-year periods unless either the Company or Mr. Sollenne has given notice of non-renewal six months prior to expiration. The employment agreement currently provides for (i) an annual base salary of $200,000 (subject to annual adjustment as determined by the Compensation Committee) and (ii) the right to earn bonuses under the Company's Management Incentive Compensation Plan. If the employment agreement is terminated by the Company other than for cause or by Mr. Sollenne upon a change in terms and conditions of employment or following a change in control of the Company, the Company must pay Mr. Sollenne severance equal to 12 months' salary and any unpaid bonus to which he would otherwise have been entitled, and all unvested options to purchase Common Stock then held by Mr. Sollenne become immediately exercisable. The employment agreement contains a provision prohibiting Mr. Sollenne from competing with the Company or soliciting employees and customers of the Company for a period of two years from the date Mr. Sollenne's employment with the Company ceases. The Company assumed the obligations of Nursefinders, Inc. under an employment agreement with Richard L. Peranton, dated April 1, 1994, which provides for his employment as President of Nursefinders, Inc. The employment agreement currently provides for (i) an annual base salary of $212,000 (subject to annual adjustment as determined by the Compensation Committee), and (ii) the right to earn bonuses of up to 100% of this base salary based on the performance of Nursefinders. Under the employment agreement, Mr. Peranton must be given six months notice of termination. In addition, if Nursefinders is sold during the first three years of Mr. Peranton's employment and Mr. Peranton elects not to be an employee of the acquiring company, the Company must pay Mr. Peranton severance equal to 12 months' salary (not including bonus or benefits). The employment agreement contains a provision prohibiting Mr. Peranton from competing with the Company or soliciting employees and customers of the Company for a period of one year from the date Mr. Peranton's employment with the Company ceases. 10 12 Gene C. Wilson is employed under an employment agreement dated October 1, 1996, which provides for his employment as President of Thomas Staffing Services, Inc. The employment agreement currently provides for (i) an annual base salary of $173,350 (subject to annual adjustment as determined by the Compensation Committee) and (ii) the right to earn bonuses under the Company's Management Incentive Compensation Plan. If the employment agreement is terminated by the Company other than for cause or by Mr. Wilson upon a change in terms and conditions of employment or following a change in control of the Company, the Company must pay Mr. Wilson severance equal to 12 months' salary and any unpaid bonus to which he would otherwise have been entitled, and all unvested options to purchase Common Stock then held by Mr. Wilson become immediately exercisable. The employment agreement contains a provision prohibiting Mr. Wilson from competing with the Company or soliciting employees and customers of the Company for a period of two years from the date Mr. Wilson's employment with the Company ceases. The Company entered into an employment agreement with Rosemary Payne-Harris, dated October 19, 1995, which has been renewed and provides for her employment as Senior Vice President of the Company until October 31, 1997, subject to automatic renewal for further successive one-year periods unless the Company or Ms. Payne-Harris has given notice of non-renewal six months prior to expiration. The employment agreement currently provides for (i) an annual base salary of $144,000 (subject to annual adjustment as determined by the Compensation Committee) and (ii) the right to earn bonuses under the Company's Management Incentive Compensation Plan. If the employment agreement is terminated by the Company other than for cause or by Ms. Payne-Harris upon a change in terms and conditions of employment or following a change in control of the Company, the Company must pay Ms. Payne-Harris severance equal to 12 months' salary and any unpaid bonus to which she would otherwise be entitled, and all unvested options to purchase Common Stock then held by Ms. Payne-Harris become immediately exercisable. The employment agreement contains a provision prohibiting Ms. Payne-Harris from competing with the Company or soliciting employees and customers of the Company for a period of two years from the date Ms. Payne-Harris' employment with the Company ceases. COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION GENERAL It is the Compensation Committee's responsibility to review and recommend to the Board for approval the compensation of the Company's senior executives. The goals of the Company's compensation program for executive officers are to base compensation on the attainment of performance objectives, to establish compensation levels that will enable the Company to attract and retain talented individuals and to motivate them to achieve the Company's business objectives, including increasing shareholder value. To achieve these goals, the Company has established a compensation program consisting of three principal components. The components are base salary, incentive bonus awards and discretionary bonuses in the form of equity-based compensation consisting primarily of qualified (i.e., incentive) and non-qualified stock options. The Company strives to structure its compensation program to enable it to attract, retain and reward executive officers whose contributions are critical to the long-term success of the Company. BASE SALARY The Company considers the sustained performance of its executives in establishing base salaries. Among the factors considered are length of service with the Company, individual performance, scope of responsibilities and successful management of administrative or financial functions or operating subsidiaries or divisions. The assessment of management performance focuses on both qualitative (leadership qualities) and quantitative (growth of revenues and operating earnings, as well as management of expenses) factors. 11 13 The Chief Executive Officer evaluates the overall performance of the other executive officers, including the executive officers and former executive officers named in the Summary Compensation Table. Financial and business goals and objectives are discussed with key executives and periodic meetings of key executives are held to discuss business strategies, financial and business performance, budgeting matters and strategic planning matters. An executive's overall evaluation is a combination of a qualitative review by fellow executives and the Chief Executive Officer and a review of the extent to which pre-established business and financial objectives have been obtained. Base salaries for fiscal 1996 for all officers named in the Summary Compensation Table were determined in accordance with the terms of employment agreements in effect with such executives, as adjusted annually by the Compensation Committee based on the factors mentioned above. The recommendation for a particular base salary adjustment was determined primarily by the Chief Executive Officer, based on the above factors, with no specified weight being given to any particular performance factor, business or financial objective. The recommendations were presented to the Compensation Committee, together with data compiled by outside consultants engaged by the Company to obtain competitive compensation data. For fiscal 1996, financial goals established for determining adjustments to base salary were met or exceeded in most cases and, in such cases, appropriate adjustments to base salary were made. INCENTIVE BONUS AWARDS Early in the fiscal year, the Compensation Committee establishes a range of incentive bonus compensation that may be earned as part of each executive's annual compensation. Incentive bonus compensation is based on the achievement of pre-established annual financial goals relating to increases in earnings growth, relative to budget and prior year, before interest and taxes of the business unit or operating subsidiary for which such executive is responsible. The financial goals established for fiscal 1996 for the payment of incentive compensation to the Company's key executive officers were met or exceeded in most cases, and bonuses were paid where appropriate. For Messrs. Drudge, Sollenne and Bramlett, the Compensation Committee determined that it would be in the Company's best interests to pay corporate executives' 1996 bonuses in the form of stock options granted under the 1995 Equity Participation Plan and, accordingly, granted 51,817, 16,642 and 5,182 options to these individuals, respectively, on January 2, 1997, in lieu of 1996 cash bonuses. These options vested 100% on the date of grant. The Compensation Committee's determination was based on two factors (in addition to the other factors considered below in the granting of stock options generally). First, distributing bonuses in the form of stock options to these executives enabled the Company to conserve cash for investment. Second, paying bonuses in stock options was consistent with one of the Compensation Committee's stated goals of increasing the equity portion of senior executive compensation generally. DISCRETIONARY BONUS AWARDS/EQUITY BASED COMPENSATION The Company also rewards its executives with discretionary compensation awards, generally in the form of incentive stock options and non-qualified stock options. Through the granting of stock options, the Company seeks to align the interests of key employees more closely with those of the Company's shareholders by motivating and rewarding actions which lead to long-term value creation for shareholders, and one of the Compensation Committee's stated goals is to increase the equity portion of senior executive compensation generally. In addition, the Company recognizes that stock options are a necessary part of its competitive compensation program which, as discussed above, is designed to attract and retain qualified executives. Historically, options granted to executives and other employees have vested over a four to five-year period in order to encourage executives and other key employees to remain in the employ of the Company and to foster a long-term perspective. In fiscal 1996, the Company used non-qualified stock options to achieve the competitive compensation levels it determined to be necessary for the executive officers and former executive officers named in the Summary Compensation Table. In addition, the Company granted incentive options in fiscal 1996 to a group of other key employees, consisting of approximately 185 individuals. The 1996 options vest over a four-year period and, accordingly, are a form of long-term compensation. All options were granted by the Compensation Committee, acting as the stock option committee under the Company's 1995 Equity Participation Plan. In determining the employees to whom options would be awarded and the size of the option awards, the Committee received a recommended list of key employees that was compiled primarily by the Chief Executive Officer and the operating subsidiary/division presidents with a view toward a fair and equitable distribution of options among the employee pool. 12 14 CHIEF EXECUTIVE OFFICER'S COMPENSATION The compensation of Edward P. Drudge, Jr., the Company's Chief Executive Officer, is determined pursuant to the terms of his employment agreement with the Company, as adjusted annually by the Compensation Committee based on the factors described above. See "Executive Compensation -- Employment Agreements." In fiscal 1996, Mr. Drudge's employment agreement provided for a base annual salary, adjusted based on 1995 performance, and an incentive bonus based on 1996 earnings growth, relative to budget and prior year, before interest and taxes. For the year, revenues, earnings before interest and taxes and net income increased 46.0%, 71.4% and 62.0%, respectively, over 1995, and over the same period the Company's selling, general and administrative expenses declined as a percentage of revenues from 20.6% to 18.6%. Because these financial results met or exceeded the financial goals established for determining the payment of incentive compensation, Mr. Drudge was granted 51,817 stock options under the 1995 Equity Participation Plan in January 2, 1997, in lieu of a cash bonus as described above. Also in 1996, the Compensation Committee granted 220,000 stock options to Mr. Drudge on September 26, 1996. Of this total, 70,000 options comprised Mr. Drudge's long-term compensation award for 1996 and the balance of the grant represented a special, one-time long-term compensation award. The 1996 award was made by the Compensation Committee on the basis of the factors set forth above under the heading "Discretionary Bonus Awards/Equity Based Compensation." The special award was made by the Compensation Committee on the basis of several additional factors, including contributions made by Mr. Drudge since the Company's initial public offering in September 1995 that the Committee deemed to be extraordinary and an acknowledgment by the Committee that Mr. Drudge's equity based compensation was lower than that generally paid to a number of similarly situated executives at comparable companies. SECTION 162(M) OF THE INTERNAL REVENUE CODE It is the Company's policy generally to design the Company's compensation programs to comply with Section 162(m) of the Code, so that total compensation paid to any employee will not exceed $1 million in any one year, except for compensation payments in excess of $1 million which qualify as "performance-based." The Company intends to comply with other requirements of the performance-based compensation exclusion under Section 162(m), including option pricing requirements and requirements governing the administration of the 1995 Equity Participation Plan, so that the deductibility of compensation paid to top executives thereunder is not expected to be disallowed. Compensation Committee: Kevin P. Egan J. Roger King James V. Napier 13 15 CORPORATE PERFORMANCE GRAPH The following graph compares the cumulative total return on the Company's Common Stock from the effective date of the Company's initial public offering, September 25, 1995, to December 29, 1996, with the cumulative total return of (a) the S&P 400 Index and (b) a peer group index selected by the Company (the "Peer Group Index"), consisting of nine public companies that specialize in providing personnel staffing services in the United States. All cumulative returns assume the investment of $100 in each of the Company's Common Stock, the S&P 400 Index and the Peer Group Index on September 25, 1995, and assume the reinvestment of dividends. [GRAPH HERE]
- ---------------------------------------------------------------------------------------------- SEPTEMBER 25, 1995 December 31, 1995 December 29, 1996 - ---------------------------------------------------------------------------------------------- Personnel Group of America, Inc. 100 104.5 149.1 - ---------------------------------------------------------------------------------------------- S&P 400 100 100.3 119.6 - ---------------------------------------------------------------------------------------------- Peer Group* 100 118.8 144.7 - ----------------------------------------------------------------------------------------------
*The Peer Group Index consists of the following companies: Interim Services Inc., The Olsten Corporation, AccuStaff Incorporated, Barrett Business Services Inc., Robert Half International Inc., Kelly Services, Inc., Manpower, Inc., Norrell Corporation and Staff Builders Inc. Career Horizons, Inc., which was included in the Peer Group Index in the proxy statement relating to last year's annual meeting of shareholders, was omitted from this year's Peer Group Index because it was acquired by AccuStaff Incorporated during 1996. 14 16 PROPOSAL 2 AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION The shareholders are being asked to adopt an amendment to the Company's Certificate of Incorporation to increase the number of authorized shares of Common Stock from 20,000,000 to 95,000,000. The Company currently has 20,000,000 authorized shares of Common Stock, of which 12,076,755 shares were issued and outstanding as of March 28, 1997, and 5,000,000 authorized shares of Preferred Stock, no par value (the "Preferred Stock"), none of which has been issued. The Company also currently has reserved 1,200,000 shares for issuance pursuant to the 1995 Equity Participation Plan (of which options with respect to 968,399 shares are currently outstanding), and the Board of Directors has proposed for shareholder approval at the Annual Meeting an amendment to the 1995 Equity Participation Plan to reserve at all times for issuance pursuant to that plan a number of shares equal to 15% of the then outstanding Common Stock. See "Amendment to the Company's 1995 Equity Participation Plan." The Board also has proposed for shareholder approval at the Annual Meeting the 1997 Employee Stock Purchase Plan, under which 500,000 shares of Common Stock would be reserved for issuance. See "Approval of The 1997 Employee Stock Purchase Plan." The proposed amendment to the Certificate of Incorporation would increase by 75,000,000 the number of authorized shares of Common Stock and would not affect the number of authorized shares of Preferred Stock. Adoption of the amendment requires the affirmative vote of a majority of the outstanding shares of Common Stock. If adopted by the shareholders, the proposed amendment will become effective upon filing with the Secretary of State of Delaware of articles of amendment certifying and setting forth the amendment. If the amendment to the Certificate of Incorporation is adopted, the Company would have approximately 81,723,245 authorized shares of Common Stock (or approximately 80,611,732 shares, assuming approval of the proposed amendment to the 1995 Equity Participation Plan and approval of the 1997 Employee Stock Purchase Plan) that are neither issued nor reserved for issuance pursuant to stock plans. Such additional authorized shares of Common Stock would be available for issuance from time to time without shareholder approval upon such terms and for such purposes as determined by the Board of Directors, including issuances which could have a dilutive effect on existing shareholders and issuances for antitakeover or other defensive purposes. The Board of Directors believes that it is advisable to have such additional shares of Common Stock authorized in order to provide an added element of flexibility in the Company's capital structure. Although the Company has no present plans for the issuance of additional shares, the Board of Directors of the Company believes that having additional Common Stock available for issuance as the need may arise will enable the Company to take advantage of business opportunities such as acquisitions without the delay and expense of calling a meeting of shareholders to authorize such shares. The proposed text of the amendment to the Certificate of Incorporation is set forth in its entirety as Exhibit A attached hereto. FOR THE REASONS SET FORTH ABOVE, THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR ADOPTION OF THE AMENDMENT TO THE CERTIFICATE OF INCORPORATION. PROPOSAL 3 AMENDMENT TO THE COMPANY'S 1995 EQUITY PARTICIPATION PLAN On February 26, 1997, the Board of Directors, subject to the approval of the shareholders, amended the 1995 Equity Participation Plan (the "1995 Plan") to change the methodology of reserving shares of Common Stock available for issuance under the 1995 Plan. Prior to the amendment, the 1995 Plan simply reserved a fixed number of shares, 1,200,000 shares, for issuance under the plan. The amendment changes the 1995 Plan to provide that at any time and from time to time the number of shares reserved under the plan will equal 15% of the Company's issued and outstanding Common Stock at such time. Based on the outstanding Common Stock as of March 28, 1997, the number of shares reserved under the amended 1995 Plan using this formula would be 1,811,513 shares. The amendment will be effective as of February 26, 1997 if approved by the shareholders. Approval of the amendment requires the affirmative vote of a majority of the outstanding shares present or represented by proxy and entitled to vote at the Annual Meeting. The amendment to the 1995 Plan changes the methodology of reserving shares of Common Stock that may be issued under the 1995 Plan by tying the shares reserved at any time to the size of the outstanding share base at that time. The Board of Directors believes this change is needed to permit the 1995 Plan to continue as an important means of attracting, holding and motivating key employees. Without the amendment, the 1995 Plan by its terms would have only 255,691 shares left for issuance as of March 28, 1997, and the Board believes that a change is necessary to allocate more shares to the 1995 Plan. The amendment would have the short-term effect of achieving that goal, and long-term would link further increases to growth in the Company's outstanding share base. The 1995 Plan requires any amendment to increase the number of shares issuable under the 1995 Plan (other than increases triggered by certain anti-dilution provisions of the 1995 Plan) to be approved by the shareholders. 15 17 SUMMARY OF THE 1995 PLAN The following summary of the 1995 Plan is qualified in its entirety by reference to the text of the 1995 Plan, a copy of which may be obtained, without charge, by written request to the Company, 6302 Fairview Road, Suite 201, Charlotte, North Carolina 28210, Attention: Corporate Secretary. The 1995 Plan was adopted to attract and retain officers, key employees, consultants and directors. Prior to the proposed amendment, an aggregate of 1,200,000 shares of Common Stock (or their equivalent in other equity securities), subject to adjustment for stock splits, stock dividends and certain other types of recapitalizations, was authorized for issuance upon exercise of options, stock appreciation rights ("SARs"), and other awards, or as restricted or deferred stock awards under the 1995 Plan. The Compensation Committee administers the 1995 Plan and determines the persons to whom options, SARs, restricted stock and other awards are to be granted and the terms and conditions, including the number of shares and the period of exercisability, thereof; provided, however, that the Board, acting by a majority, generally administers the 1995 Plan with respect to options granted to non-employee directors. Options, SARs, restricted stock and other awards under the 1995 Plan may be granted to individuals who are then officers or other employees of the Company or any of its present or future subsidiaries and who are determined by the Compensation Committee to be key employees. Such awards also may be granted to consultants of the Company selected by the Compensation Committee for participation in the 1995 Plan. Approximately 225 officers and other employees are eligible to participate in the 1995 Plan. The 1995 Plan authorizes the grant or issuance of various options and other awards to employees and consultants, and the terms of each such option or award will be set forth in separate agreements. In addition, non-employee directors (including the directors who administer the plan) are eligible to receive non-discretionary grants of non-qualified stock options ("NQSOs") under the 1995 Plan pursuant to a formula. Pursuant to such formula, each of the Company's non-employee directors received in September 1995 a grant of NQSOs to purchase 6,250 shares of the Company's Common Stock at the initial public offering price. Additionally, each non-employee director received or will receive annual grants of options to purchase 3,125 shares of Common Stock in 1996 and 1997 and thereafter an annual grant of options to purchase 1,500 shares, in each case on the date of the Company's shareholders' meeting at which such non-employee director was reelected and with an exercise price equal to the fair market value of the Common Stock on the date of the grant. NQSOs may be granted to an employee or consultant for any term specified by the Compensation Committee 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 under Section 162(m) of the Internal Revenue Code, may be less than fair market value on the date of grant (but not less than par value), and may become exercisable (in the discretion of the Compensation Committee) in one or more installments after the grant date. Of the NQSOs granted to non-employee directors, 100% are fully vested and exercisable upon grant, and the term of each such option shall be 10 years, subject to expiration 90 days after the director ceases to serve as a director, except upon the director's retirement in accordance with the Company's retirement policy applicable to directors. Incentive stock options may be granted only to employees and, if granted, will be designed to comply with the provisions of the Code and will be subject to restrictions contained in the Code, including a required exercise price equal to at least 100% of fair market value of Common Stock on the grant date and a 10-year restriction on their term, but may be subsequently modified to disqualify them from treatment as an incentive stock option. SARs may be granted to employees and consultants and may be granted in connection and simultaneously with the grant of an option, with respect to a previously granted option or independent of an option. Participants may receive dividend equivalents representing the value of the dividends per share paid by the Company, calculated with reference to the number of shares covered by the stock options, SARs or performance awards held by the participant. Performance awards may be granted by the Compensation Committee to employees and consultants and may include bonus or "phantom" stock awards that provide for payments based upon increases in the price of the Company's Common Stock over a predetermined period. Restricted stock may be sold to employees and consultants at various prices (but not below par value) and made subject to such restrictions as may be determined by the Compensation Committee. Deferred stock may be awarded to employees and consultants, typically without payment of consideration, but subject to vesting conditions based on continued employment or on performance criteria established by the Compensation Committee. Whereas purchasers of restricted stock will have voting rights and will receive dividends prior to the time when the restrictions lapse, recipients of deferred stock generally will have no voting or dividend rights prior to the time when vesting conditions are satisfied. Stock awards may be made to employees and consultants and the number of shares shall be determined by the Compensation Committee and may be based upon the fair market value, book value, net profits or other measure of the value of Common Stock or other specific performance criteria. 16 18 The exercise or purchase price for all options, SARs, restricted stock and other rights to acquire Common Stock, together with any applicable tax required to be withheld, may be paid in cash or at the discretion of the Compensation Committee (or the Board, in the case of NQSOs granted to non-employee directors), in shares of Common Stock owned by the optionee (or issuable upon exercise of the option) or in other lawful consideration, including services rendered. The dates on which options or other awards under the 1995 Plan first become exercisable and on which they expire will be set forth in individual stock options or other agreements setting forth the terms of the awards. Such agreements generally will provide that options and other awards expire upon termination of the optionee's status as an employee or consultant, although the Committee may provide that such options continue to be exercisable following a termination without cause, or following a change in control of the Company, or because of the grantee's retirement, death, disability or otherwise. Similarly, restricted stock granted under the 1995 Plan which has not vested generally will be subject to repurchase by the Company in the event of the grantee's termination of employment or consultancy, although the Committee may make exceptions, based on the reason for termination or on other factors, in the terms of an individual restricted stock agreement. No restricted stock, deferred stock, option, SAR or other right to acquire Common Stock granted under the 1995 Plan may be assigned or transferred by the grantee, except by will or the laws of intestate succession, although such shares or the shares underlying such rights may be transferred if all applicable restrictions have lapsed. During the lifetime of the holder of any option or right, the option or right may be exercised only by the holder. The shares subject to stock options, SARs or other awards which have terminated or lapsed unexercised or which have been canceled upon grant of a new option, SAR or other award, and shares which are withheld by the Company upon the exercise of stock options or other awards in payment of the exercise price thereof, will continue to be available for issuance under the 1995 Plan. The Compensation Committee has the right to accelerate, in whole or in part, from time to time, conditionally or unconditionally, the right to exercise any option or other award granted under the 1995 Plan other than NQSOs granted to non- employee directors. All amendments of the 1995 Plan to increase the number of shares as to which options, SARs, restricted stock and other awards may be granted (except for adjustments resulting from stock splits and the like) require the approval of the Company's shareholders. The 1995 Plan generally may be amended, modified, suspended or terminated by the Compensation Committee, unless such action would otherwise require shareholder approval as a matter of applicable law, regulation or rule. Amendments of the 1995 Plan will not, without the consent of the participant, affect such person's rights under an award previously granted, unless the award itself otherwise expressly so provides. The 1995 Plan terminates 10 years from the date it was adopted by the Company's Board of Directors. Federal Income Tax Consequences. Certain tax consequences of the 1995 Plan under current federal law are summarized in the following discussion, which deals with the general tax principles applicable to the 1995 Plan and is intended for general information only. Alternative minimum tax and state and local income taxes are not discussed, and may vary depending on individual circumstances and from locality to locality. 17 19 For Federal income tax purposes, the recipient of NQSOs granted under the 1995 Plan will not have taxable income upon the grant of the option, nor will the Company then be entitled to any deduction. Generally, upon exercise of NQSOs the optionee will realize ordinary income, and the Company will be entitled to a deduction, in an amount equal to the difference between the option exercise price and the fair market value of the stock at the date of exercise. An optionee's basis for the stock for purposes of determining his gain or loss on his subsequent disposition of the shares generally will be the fair market value of the stock on the date of exercise of the NQSO. There is no taxable income to an employee when an ISO is granted to him or when that option is exercised; however, the amount by which the fair market value of the shares at the time of exercise exceeds the option price will be an "item of tax preference" for the optionee. Gain realized by an optionee upon sale of stock issued on exercise of an ISO is taxable at capital gains rates, and no tax deduction is available to the Company, unless the optionee disposes of the shares within two years after the date of grant of the option or within one year of the date the shares were transferred to the optionee. In such event the difference between the option exercise price and the fair market value of the shares on the date of the option's exercise will be taxed at ordinary income rates, and the Company will be entitled to a deduction to the extent the employee must recognize ordinary income. An ISO exercised more than three months after an optionee's retirement from employment, other than by reason of death or disability, will be taxed as an NQSO, with the optionee deemed to have received income upon such exercise taxable at ordinary income rates. The Company will be entitled to a tax deduction equal to the ordinary income, if any, realized by the optionee. No taxable income is realized upon the receipt of an SAR, but upon exercise of the SAR the fair market value of the shares (or cash in lieu of shares) received must be treated as compensation taxable as ordinary income to the recipient in the year of such exercise. The Company will be entitled to a deduction for compensation paid in the same amount which the recipient realized as ordinary income. An employee or consultant to whom restricted or deferred stock is issued will not have taxable income upon issuance and the Company will not then be entitled to a deduction, unless in the case of restricted stock an election is made under Section 83(b) of the Code. However, when restrictions on shares of restricted stock lapse, such that the shares are no longer subject to repurchase by the Company, the employee will realize ordinary income and the Company will be entitled to a deduction in an amount equal to the fair market value of the shares at the date such restrictions lapse, less the purchase price therefor. Similarly, when deferred stock vests and is issued to the employee or consultant, the employee or consultant will realize ordinary income and the Company will be entitled to a deduction in an amount equal to the fair market value of the shares at the date of issuance. If an election is made under Section 83(b) with respect to restricted stock, the employee will realize ordinary income at the date of issuance equal to the difference between the fair market value of the shares at that date less the purchase price therefor and the Company will be entitled to a deduction in the same amount. The Code does not permit a Section 83(b) election to be made with respect to deferred stock. Under Section 162(m) of the Code, income tax deductions of publicly-traded companies may be limited to the extent total compensation (including base salary, annual bonus, stock option exercises and non-qualified benefits) for certain executive officers exceeds $1 million (less the amount of any "excess parachute payments" as defined in Section 280G of the Code) in any one year. However, under Section 162(m), the deduction limit does not apply to certain "performance-based" compensation established by a compensation committee of outside directors and adequately disclosed to, and approved by, shareholders. In particular, stock options and SARs will satisfy the performance-based exception if the awards are made by a qualifying compensation committee, the plan sets the maximum number of shares that can be granted to any particular employee within a specified period and the compensation is based solely on an increase in the stock price after the grant date (i.e. the option exercise price is equal to or greater than the fair market value of the stock subject to the award on the grant date). 18 20 The table below sets forth certain information concerning grants under the 1995 Plan during the fiscal year ended December 29, 1996 to (i) each officer of the Company named in the Summary Compensation Table, (ii) all current executive officers of the Company as a group, (iii) all non-employee directors as a group and (iv) all employees other than the current executive officers as a group. PLAN BENEFITS UNDER 1995 EQUITY PARTICIPATION PLAN
NAME AND POSITION DOLLAR VALUE (1) NUMBER OF UNITS (#)(2) - ----------------- ---------------- ---------------------- Edward P. Drudge, Jr...................................... $151,800 220,000 Chairman and Chief Executive Officer Peter R. Sollenne......................................... -- 20,000 President-Commercial Staffing Division Gene C. Wilson............................................ 6,900 10,000 Senior Vice President Rosemary Payne-Harris..................................... 6,900 10,000 Senior Vice President All current executive officers as a group (5 persons)..... 209,400 260,000 All non-employee directors as a group (4 persons)......... 39,125 12,500 All employees other than current executive officers as a group (182 persons)................................ 13,800 148,148
- ------------------------------ (1) Dollar value is based on the difference between grant prices of stock options and $25.63, the closing price of the Company's Common Stock on March 10, 1997. (2) All amounts shown are awards of options to purchase Common Stock. Except for options granted to non-employee directors, which vested 100% on the date of grant, these options are currently 20% vested, and will continue vesting an additional 20% on each successive anniversary of the grant date through the year 2000. The proposed text of the amendment to the 1995 Plan is set forth in its entirety as Exhibit B attached hereto. FOR THE REASONS SET FORTH ABOVE, THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF THE AMENDMENT TO THE 1995 PLAN. 19 21 PROPOSAL 4 APPROVAL OF THE 1997 EMPLOYEE STOCK PURCHASE PLAN On February 26, 1997, the Board of Directors of the Company adopted the 1997 Employee Stock Purchase Plan (the "Stock Purchase Plan"), effective July 1, 1997, for the purpose of encouraging employee participation in the ownership of the Company by offering eligible employees of the Company and its subsidiaries an opportunity to purchase Common Stock of the Company at a discount through payroll deductions. The Board of Directors believes that employee participation in ownership is to the combined benefit of the employee, the Company, its subsidiaries and the Company's shareholders. Accordingly, the Board of Directors unanimously adopted, and proposes that the shareholders approve, the Stock Purchase Plan. Shareholder approval is required to qualify the Stock Purchase Plan for treatment as an "employee stock purchase plan" under Section 423 of the Internal Revenue Code, and the Stock Purchase Plan will not be effective unless shareholder approval is obtained. The Stock Purchase Plan is set forth as Exhibit C attached hereto and the description of the Stock Purchase Plan contained herein is qualified in its entirety by reference to such Exhibit C. Under the Stock Purchase Plan, eligible employees of the Company and its subsidiaries may participate by electing to have payroll deductions made in an amount of not less than 1% nor more than 7% of the employee's compensation, provided that the Market Value (defined generally as the last reported sales price of the Common Stock on a specified date) of Common Stock (determined at the beginning of each three-month "Purchase Period") purchased in any year may not exceed $25,000. All employees who meet specified criteria for hours worked and months worked within a calendar year will be eligible to participate upon completion of 180 days of continuing employment. However, any beneficial owner of 5% or more of the Common Stock shall not be eligible to participate. Eligible employees may elect to participate by delivering a completed purchase agreement prior to the beginning of each Purchase Period. At the end of each Purchase Period, each participant's payroll deductions are applied to acquire Common Stock at a price equal to 85% of the Market Value of the Common Stock on either the first day or the last day of the Purchase Period, whichever is lower (the "Exercise Price"). Shares acquired under the Stock Purchase Plan may not, except in the case of death or disability, be sold or otherwise disposed of for at least six months after the last day of the Purchase Period in which such shares were acquired. Employees may voluntarily withdraw from participation in the Stock Purchase Plan by notifying the Company at such time in advance as the Compensation Committee shall determine. An employee's participation shall cease upon termination of employment for any reason, or otherwise if such employee no longer qualifies as an eligible employee. Upon any withdrawal from participation, all payroll deductions not applied to purchase Common Stock will be returned to the employee (except in the case of certain inactive employees who are awaiting assignment). The number of shares of Common Stock reserved for purchase under the Stock Purchase Plan is 500,000. Except pursuant to an adjustment as a result of a change in the Company's capital structure, the number of shares of Common Stock reserved for purchase under the Stock Purchase Plan will not be decreased as a result of a decrease in the number of shares outstanding. Such reserved shares may be made available by the Company from either authorized and unissued shares or treasury shares. The Stock Purchase Plan will be administered by the Compensation Committee, which will have the authority to make, adopt, construe and enforce rules not inconsistent with the Stock Purchase Plan, to interpret the Stock Purchase Plan, and to prescribe the contents of all forms and documents required in connection with the Plan. The Stock Purchase Plan may be amended in any respect at any time by the Board of Directors, except that where shareholder approval is necessary or desirable to comply with applicable law, in which case such amendment shall be conditioned on such approval. The Stock Purchase Plan may be terminated at any time by the Board of Directors. 20 22 FEDERAL INCOME TAX CONSIDERATIONS The Stock Purchase Plan is intended to qualify as an "employee stock purchase plan" within the meaning of Section 423 of the Code, and it is intended to comply with the provisions of Sections 421 and 424 of the Code as well. Under the Code as currently in effect, there are no federal income tax consequences in connection with the acquisition of Common Stock pursuant to the Stock Purchase Plan until the year in which the participant sells or otherwise disposes of the shares, or, if earlier, the year in which the participant dies. However, social security (FICA) taxes are applicable on the last day of each Purchase Period (the "Exercise Date") on the amount by which purchase price is discounted from the fair market value of the shares. If the shares are sold or otherwise disposed of prior to a participant's death, then the income tax consequences will depend upon whether or not the shares are sold within two years after the first business day of the applicable three-month period in which such shares were purchased (the "Offering Date"). If the shares are sold or disposed of more than two years after the applicable Offering Date, then the participant will recognize ordinary income in an amount equal to the lesser of (i) 15% of the fair market value of the shares on the applicable Offering Date or (ii) the amount by which the fair market value of the shares at the time of such sale or disposition exceeds the amount paid for the shares, and the Company will not be entitled to any income tax deduction. If the shares are sold or otherwise disposed of within two years after the applicable Offering Date, a participant will generally recognize ordinary income in the amount by which the fair market value of the shares on the applicable Exercise Date exceeds the amount paid for the shares, and the Company will be entitled to a corresponding income tax deduction. In the event of the death of a participant prior to a sale or other disposition of the shares (whether or not within two years after the applicable Offering Date), a participant will be subject to ordinary income tax in an amount equal to the lesser of (i) 15% of the fair market value of the shares on the applicable Offering Date, or (ii) the amount, if any, by which the fair market value of the shares as of the date of death exceeds the amount actually paid for the shares. In any case, the participant may also have a capital gain or loss (long-term or short-term depending upon the length of time the shares were held) in an amount equal to the difference between the amount realized upon the sale and the participant's adjusted tax basis in the shares (the amount paid for the shares plus the amount of ordinary income which the participant must recognize at the time of the sale or other disposition). The affirmative vote of a majority of the outstanding shares of Common Stock present in person or represented by Proxy at the Annual Meeting and entitled to vote is required to approve the adoption of the Stock Purchase Plan. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF THE ADOPTION OF THE 1997 EMPLOYEE STOCK PURCHASE PLAN. 21 23 PROPOSAL 5 RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS The Board of Directors, on the recommendation of the Company's Audit Committee, has selected Price Waterhouse LLP ("Price Waterhouse") as of March 17, 1997 as the Company's independent public accountants for the year ending December 28, 1997. One or more representatives of Price Waterhouse LLP will be present at the Annual Meeting, will have the opportunity to make a statement if they desire to do so and are expected to be available to respond to appropriate questions from shareholders. The Company has been advised by Price Waterhouse LLP that the firm did not have any direct financial interest or any material interest in the Company and its subsidiaries during the Company's most recent fiscal year. As the result of hiring a new Chief Financial Officer, Mr. James Hunt, who has a family relationship with a partner in the Greensboro, North Carolina office of Arthur Andersen LLP ("Arthur Andersen"), which had served as the Company's independent public accountants since 1995, the Company received a letter from Arthur Andersen dated March 17, 1997 indicating that it would decline to stand for reappointment as the Company's independent public accountants for the current fiscal year. The reports of Arthur Andersen on the Company's financial statements for the fiscal years ended December 31, 1995 and December 29, 1996 contained no adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles. In connection with the audits of the Company's financial statements for each of the fiscal years ended December 31, 1995 and December 29, 1996, there were no disagreements with Arthur Andersen on matters of accounting principles or practices, financial statement disclosure or auditing scope or procedures which, if not resolved to the satisfaction of Arthur Andersen, would have caused Arthur Andersen to make reference to such matter in its report. The Company has furnished Arthur Andersen with a copy of the disclosures in the three preceding paragraphs and, in response thereto, Arthur Andersen has furnished the Company with a letter dated March 21, 1997, addressed to the Securities and Exchange Commission, indicating no disagreement with the foregoing statements. One or more representatives of Arthur Andersen will be present at the Annual Meeting, will have the opportunity to make a statement if they desire to do so and are expected to be available to respond to appropriate questions from shareholders. Approval of the proposal to ratify the selection of Price Waterhouse requires the affirmative vote of a majority of the outstanding shares of Common Stock present in person or represented by proxy at the annual meeting and entitled to vote. Should the shareholders vote negatively, the Board of Directors will consider a change in independent public accountants for the next fiscal year. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE PROPOSAL TO RATIFY THE SELECTION OF PRICE WATERHOUSE LLP AS THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER 28, 1997. 22 24 PROPOSALS FOR 1998 ANNUAL MEETING OF SHAREHOLDERS Shareholders who intend to present proposals for consideration at next year's annual meeting are advised that any such proposal must be received by the Secretary of the Company no later than the close of business on December 11, 1997 if such proposal is to be considered for inclusion in the proxy statement and proxy appointment form relating to that meeting. OTHER BUSINESS The Board knows of no other business to be brought before the Annual Meeting. If, however, any other business should properly come before the Annual Meeting, the persons named in the accompanying proxy will vote proxies as in their discretion they may deem appropriate, unless they are directed by a proxy to do otherwise. 23 25 EXHIBIT A PROPOSED AMENDMENT TO THE CERTIFICATE OF INCORPORATION Paragraph (a) of Article IV of the Company's Restated Certificate of Incorporation shall be amended and restated in its entirety by deleting the current text of such paragraph (a) of Article IV and replacing it with the following: "(a) The Corporation is authorized to issue two classes of shares to be designated, respectively, "Common Stock" and "Preferred Stock." The total number of shares which the Corporation shall have authority to issue is One Hundred Million (100,000,000) shares, and the aggregate par value of all such shares which are to have a par value is One Million (1,000,000). The total number of shares of Preferred Stock which the Corporation shall have authority to issue is Five Million (5,000,000) shares, and the par value of each share of Preferred Stock is One Cent ($0.01). The total number of shares of Common Stock which the Corporation shall have the authority to issue is Ninety-Five Million (95,000,000) shares, and the par value of each share of Common Stock is One Cent ($0.01)." 24 26 EXHIBIT B PROPOSED AMENDMENT TO 1995 EQUITY PARTICIPATION PLAN The second sentence of Section 2.1(a) of the 1995 Equity Participation Plan is hereby amended and restated in its entirety by deleting the current text of such sentence and replacing it with the following: "The aggregate number of such shares which may be issued upon exercise of such options or rights upon any such awards under the Plan shall not exceed 15% of the then issued and outstanding Common Stock of the Company, and the number of shares reserved for issuance under the Plan shall automatically be adjusted from time to time to an amount equal to 15% of the Common Stock then issued and outstanding." 25 27 EXHIBIT C PERSONNEL GROUP OF AMERICA, INC. EMPLOYEE STOCK PURCHASE PLAN ARTICLE I INTRODUCTION Sec. 1.01 Statement of Purpose. The purpose of the Personnel Group of America, Inc. Employee Stock Purchase Plan is to provide eligible employees of the Company and its Subsidiaries, who wish to become stockholders, an opportunity to purchase common stock of the Company. The Board of Directors of the Company believes that employee participation in ownership will be to the mutual benefit of both the employees and the Company. Sec. 1.02 Internal Revenue Code Considerations. The Plan is intended to constitute an "employee stock purchase plan" within the meaning of section 423 of the Internal Revenue Code of 1986, as amended. ARTICLE II DEFINITIONS Sec. 2.01 "Board" means the Board of Directors of the Company. Sec. 2.02 "Code" means the Internal Revenue Code of 1986, as amended. Sec. 2.03 "Company" means Personnel Group of America, Inc., a Delaware corporation. Sec. 2.04 "Compensation" means the total remuneration paid, during the period of reference, to an Employee by the Company or a Subsidiary, including regular salary or wages, overtime payments, bonuses, commissions and vacation pay, to which has been added (a) any elective deferral amounts by which the Employee has had his current remuneration reduced for the purposes of funding a contribution to any plan sponsored by the Company and satisfying the requirements of section 401(k) of the Code, and (b) any amounts by which the Employee's compensation has been reduced pursuant to a compensation reduction agreement between the Employee and the Company for the purpose of funding benefits through any cafeteria plan sponsored by the Company meeting the requirements of section 125 of the Code. There shall be excluded from "Compensation" for the purposes of the Plan, whether or not reportable as income by the Employee, expense reimbursements of all types, payments in lieu of expenses, the Company contributions to any qualified retirement plan or other program of deferred compensation (except as provided above), the Company contributions to Social Security or worker's compensation, the costs paid by the Company in connection with fringe benefits and relocation, including gross-ups, and any amounts accrued for the benefit of Employee, but not paid, during the period of reference. 28 Sec. 2.05 "Compensation Committee" means the Compensation Committee of the Board. Sec. 2.06 "Continuous Service" means the period of time during which the Employee has been employed by the Company or a Subsidiary and during which there has been no interruption of Employee's employment by the Company. For this purpose, periods during which an Employee is on Temporary Inactive Status shall not be considered to be interruptions of Continuous Service. If determined by the Compensation Committee, periods of service with an entity prior to its becoming a Subsidiary shall be taken into account. Sec. 2.07 "Effective Date" shall mean July 1, 1997 if, within 12 months of that date, the Plan is or has been approved at a meeting of the stockholders of the Company by the affirmative vote of the holders of the majority of the outstanding Stock of the Company. Sec. 2.08 "Eligible Employee" means each person who: (a) is an Employee whose customary employment is for more than 20 hours per week and more than 5 months in any calendar year; (b) is an Employee on the Effective Date, or otherwise has completed at least 180 days of Continuous Service; and (c) is not deemed for purposes of section 423 (b) (3) of the Code to own capital stock possessing 5% or more of the total combined voting power or value of all classes of capital stock of the Company. Sec. 2.09 "Employee" means each person employed by the Company or a Subsidiary. Sec. 2.10 "Exercise Date" means the last day of each Purchase Period. Sec. 2.11 "Market Value" means, with respect to Stock, the fair market value of such Stock, determined by such methods or procedures as shall be established from time to time by the Compensation Committee; provided, however, that if the Stock is listed on a national securities exchange or quoted in an interdealer quotation system, the Market Value of such Stock on a given date shall be based upon the last sales price or, if unavailable, the average of the closing bid and asked prices per share of the Stock on such date (or, if there was no trading or quotation in the Stock on such date, on the next preceding date on which there was trading or quotation) as provided by one of such organizations. 2 29 Sec. 2.12 "Offering" means the offering of shares of Stock under the Plan. Sec. 2.13 "Offering Date" means the first business day of each July, October, January and April during which the Plan is in effect, or such dates as may otherwise be specified by the Compensation Committee. Sec. 2.14 "Participant" means each Eligible Employee who elects to participate in the Plan. Sec. 2.15 "Plan" means the Personnel Group of America, Inc. Employee Stock Purchase Plan, as the same is set forth herein and as may hereafter be amended. Sec. 2.16 "Purchase Agreement" means the document prescribed by the Compensation Committee pursuant to which an Eligible Employee has enrolled to be a Participant. Sec. 2.17 "Purchase Period" means the period beginning on an Offering Date and ending on the business day preceding the next following Offering Date. Sec. 2.18 "Purchase Price" means such term as it is defined in Section 4.03 hereof. Sec. 2.19 "Stock" means the common stock, $.01 par value, of the Company. Sec. 2.20 "Stock Purchase Account" means a noninterest bearing account consisting of all amounts withheld from an Employee's Compensation (or otherwise paid into the Plan) for the purpose of purchasing shares of Stock for such employee under the Plan, reduced by all amounts applied to the purchase of Stock for such Employee under the Plan. Sec. 2.21 "Subsidiary" shall mean a corporation described in section 424(f) of the Code that has, with the permission of the Board, adopted the Plan. Sec. 2.22 "Temporary Inactive Status" shall describe the status of a former hourly Employee whose employment was terminated upon completion of an assignment for the Company or a Subsidiary, for so long as such former Employee (i) remains available for future assignments with the Company or a Subsidiary, (ii) has not, directly or indirectly, accepted an assignment from or a position with an entity unaffiliated with the Company and its Subsidiaries, and (iii) otherwise remains in good standing with the Company and its Subsidiaries. 3 30 ARTICLE III ADMISSION TO PARTICIPATION Sec. 3.01 Initial Participation. Any Eligible Employee may elect to be a Participant and may become a Participant by executing and filing with the Compensation Committee a Purchase Agreement at such time in advance and on such forms as prescribed by the Compensation Committee. The effective date of an Eligible Employee's participation shall be the Offering Date next following the date on which the Compensation Committee receives from the Eligible Employee a properly executed and timely filed Purchase Agreement. Participation in the Plan will continue automatically from one Purchase Period to another unless notice to the contrary is given pursuant to Section 3.02. Sec. 3.02 Voluntary Discontinuance of Participation. Any Participant may voluntarily withdraw from the Plan by filing a Notice of Withdrawal with the Compensation Committee at such time in advance as the Compensation Committee may specify. Upon such withdrawal, there shall be paid to the Participant the amount, if any, standing to his credit in his Stock Purchase Account. Sec. 3.03 Involuntary Discontinuance of Participation. If a Participant ceases to be an Eligible Employee, the entire amount, if any, standing to the Participant's credit in his Stock Purchase Account shall be refunded to him. Notwithstanding the foregoing, should a Participant cease to be an Eligible Employee by reason of acquiring Temporary Inactive Status, such Participant may continue to participate through the end of the Purchase Period during which such status was acquired with respect to payroll deductions attributable to the portion of the Purchase Period prior to the time such status was acquired. Sec. 3.04 Readmission to Participation. Any Eligible Employee who has previously been a Participant, who has discontinued participation, and who wishes to be reinstated as a Participant may again become a Participant for any subsequent Purchase Period by executing and filing with the Compensation Committee, at such time in advance as the Compensation Committee shall determine, a new Purchase Agreement on forms provided by the Compensation Committee. Reinstatement to Participant status shall be effective no earlier than the Offering Date that occurs six months following the Exercise Date for the Purchase Period in which the Eligible Employee discontinued participation. 4 31 ARTICLE IV STOCK PURCHASE Sec. 4.01 Reservation of Shares. There shall be 500,000 shares of Stock reserved for the Plan, subject to adjustment in accordance with the antidilution provisions hereinafter set forth. Except as provided in Section 5.02 hereof, the aggregate number of shares that may be purchased under the Plan shall not exceed the number of shares reserved for the Plan. Sec. 4.02 Limitation on Shares Available. The maximum number of shares of Stock that may be purchased for each Participant on an Exercise Date is the lower of (a) the number of shares of Stock that can be purchased by applying the full balance of his Stock Purchase Account to such purchase of shares at the Price (as hereinafter determined), or (b) the Participant's proportionate part of the maximum number of whole shares of Stock available within the limitation established by the maximum aggregate number of such shares reserved for the Plan, as stated in Section 4.01 hereof. Notwithstanding the foregoing, if any person entitled to purchase shares pursuant to any offering hereunder would be deemed for the purposes of section 423(b) (3) of the Code to own stock (including any number of shares that such person would be entitled to purchase hereunder) possessing 5% or more of the total combined voting power or value of all classes of capital stock of Company, the maximum number of shares that such person shall be entitled to purchase pursuant to the Plan shall be reduced to that number which, when added to the number of shares of Stock that such person is so deemed to own (excluding any number of shares that such person would be entitled to purchase hereunder), is one less than such 5%. Any portion of a Participant's Stock Purchase Account that cannot be applied by reason of the foregoing limitation shall remain in the Participant's Stock Purchase Account for application to the purchase of Stock on the next Offering Date (unless withdrawn before that Offering Date). Sec. 4.03 Purchase Price of Shares. The Purchase Price per share of the Stock sold to Participants pursuant to any Offering shall be the sum of (a) 85% of the Market Value of such share on the Offering Date on which such Offering commences or on the Exercise Date on which such Offering expires, whichever is lower, and (b) any transfer, excise or similar tax imposed on the transaction pursuant to which such share of Stock is purchased. If the Exercise Date with respect to the purchase of Stock is a day on which the Stock is selling ex-dividend but is on or before the record date for such dividend, then for Plan purposes the Purchase Price per share will be increased by an amount equal to the dividend per share. In no event shall the Purchase Price be less than the par value of the Stock. Sec. 4.04 Exercise of Purchase Privilege. (a) Subject to the provisions of Section 4.02 above, if on the date of the last paycheck of a Participant issued prior to any Exercise Date there is a bank credit in the Participant's Stock Purchase Account, there shall be purchased for the Participant at the Purchase Price of the Purchase Period that expires on such Exercise Date the largest number of whole shares of Stock as can be purchased with the entire amount standing to the Participant's credit in his Stock Purchase Account on such paycheck issue date. Each such purchase shall be deemed to have occurred on the Exercise Date occurring at the close of the Offering for which the purchase was made. 5 32 (b) Any amount remaining in the Stock Purchase Account on the Exercise Date after the purchase of the maximum number of whole shares shall remain in the Stock Purchase Account to the credit of the Participant and be applied to purchase additional shares of Stock on subsequent Exercise Dates. (c) Notwithstanding anything contained herein to the contrary, a Participant may not during any calendar year purchase shares of Stock having an aggregate Market Value, determined at the time of each Offering Date during such calendar year, of more than $25,000. Sec. 4.05 Establishment of Stock Purchase Account. Each Participant shall authorize payroll deductions from Compensation for the purposes of funding his Stock Purchase Account. In the Purchase Agreement, each Participant shall authorize a deduction from each payment of his Compensation during a Purchase Period, which deduction shall be not less than 1% nor more than 7% of the gross amount of such payment, subject to Section 4.04 (c). Subject to Section 3.02, a Participant may not reduce or increase his payroll deduction rate during any Purchase Period. However, a Participant may change the deduction to any permissible level for any subsequent Offering by filing notice thereof at such time preceding the Offering Date on which such subsequent Offering commences as the Compensation Committee shall determine. Sec. 4.06 Payment for Stock. The Purchase Price for all shares of Stock purchased by a Participant under the Plan shall be paid out of the Participant's Stock Purchase Account. As of each Exercise Date, the entire amount standing to the credit of each Participant in his Stock Purchase Account on the date of the last paycheck issued to the Participant prior to the Exercise Date in the Purchase Period that expires on such Exercise Date shall be charged with the aggregate Purchase Price of the shares of Stock purchased by such Participant on the Exercise Date. No interest shall be paid or payable with respect to any amount held in the Participant's Stock Purchase Account. Sec. 4.07 Share Ownership; Issuance of Certificates. (a) The shares purchased by a Participant on an Exercise Date shall, for all purposes, be deemed to have been issued and/or sold at the close of business on such Exercise Date. Prior to that time, none of the rights or privileges of a stockholder of the Company shall inure to the Participant with respect to such shares. All the shares of Stock purchased under the Plan shall be delivered by the Company in a manner as determined by the Compensation Committee. 6 33 (b) The Compensation Committee, in its sole discretion, may determine that the shares of Stock shall be delivered by the Company (i) by issuing and delivering to the Participant a certificate for the number of whole shares of Stock purchased by such Participant on an Exercise Date or during a calendar year, or (ii) by issuing and delivering a certificate or certificates for the number of shares of Stock purchased by all Participants on an Exercise Date or during a calendar year to a member firm of the New York Stock Exchange which is also a member of the National Association of Securities Dealers, as selected by the Compensation Committee from time to time, which shares shall be maintained by such member firm in separate brokerage accounts of each participant, or (iii) by issuing and delivering a certificate or certificates for the number of shares of Stock purchased by all Participants on an Exercise Date or during the calendar year to a bank or trust company or affiliate thereof, as selected by the Compensation Committee from time to time, which shares shall be maintained by such bank or trust company or affiliate in separate accounts for each Participant or, if he designates on his Stock Purchase Agreement, in his name jointly with his spouse, with right of survivorship. A Participant who is a resident of a jurisdiction that does not recognize such joint tenancy may have a certificate or account in his name as tenant in common with his spouse, without right of survivorship. Such designation may be changed by filing a notice thereof signed by the Participant and his spouse. Such spouse shall be bound by all of the terms and conditions of the Plan as if such spouse were a Participant. Sec. 4.08 Restrictions on Resale. Stock acquired under the Plan may not be sold or otherwise disposed of for at least six months after the Exercise Date on which the shares were acquired, except in the case of death or disability. Any Stock certificates delivered to a Participant prior to the expiration of such six-month period shall contain a legend to reflect such restriction. ARTICLE V SPECIAL ADJUSTMENTS Sec. 5.01 Shares Unavailable. If, on any Exercise Date, the aggregate funds available for the purchase of Stock would purchase a number of shares in excess of the number of shares then available for purchase under the Plan, the following events shall occur: (a) The number of shares that would otherwise be purchased by each Participant shall be proportionately reduced on the Exercise Date in order to eliminate such excess; 7 34 (b) The Plan shall automatically terminate immediately after the Exercise Date as of which the supply of available shares is exhausted; and (c) Any amount remaining in the Stock Purchase Account of each of the Participants shall be repaid to such Participants. Sec. 5.02 Antidilution Provisions. The aggregate number of shares of Stock reserved for purchase under the Plan, as hereinabove provided, and the calculation of the Purchase Price per share may be appropriately adjusted to reflect any increase or decease in the number of issued shares of Stock resulting from a subdivision or consolidation of shares or other capital adjustment, or the payment of a stock dividend, or other increase or decrease in such shares, if effected without receipt of consideration by the Company. Any such adjustment shall be made by the Compensation Committee acting with the consent of, and subject to the approval of, the Board. Sec. 5.03 Effect of Certain Transactions. Subject to any required action by the stockholders, if the Company shall be the surviving or resulting corporation in any merger or consolidation, or if the Company shall be merged for the purpose of changing the jurisdiction of its incorporation, any Offering hereunder shall pertain to and apply to the shares of stock of the Company or the survivor. However, in the event of a dissolution or liquidation of the Company, or of a merger or consolidation in which the Company is not the surviving or resulting corporation, the Plan and any Offering hereunder shall terminate upon the effective date of such dissolution, liquidation, merger or consolidation, and the balance then standing to the credit of each Participant in his Stock Purchase Account shall be returned to him. ARTICLE VI MISCELLANEOUS Sec. 6.01 Nonalienation. The right to purchase shares of Stock under the Plan is personal to the Participant, is exercisable only by the Participant during his lifetime except as hereinafter set forth, and may not be assigned or otherwise transferred by the Participant. Notwithstanding the foregoing, there shall be delivered to the executor, administrator or other personal representative of a deceased Participant such shares of Stock and such residual balance as may remain in the Participant's Stock Purchase Account as of the date the Participant's death occurs. However, such representative shall be bound by the terms and conditions of the Plan as if such representative were a Participant. Sec. 6.02 Administrative Costs. The Company shall pay all Administrative expenses associated with the operation of the Plan. No Administrative charges shall be levied against the Stock Purchase Accounts of the Participants. Sec. 6.03 Collection of Taxes. The Company shall be entitled to require any Participant to remit, through payroll withholding or otherwise, any tax that it determines it is so obligated to collect with respect to the issuance of Stock hereunder, or the subsequent sale or disposition of such Stock, and the Compensation Committee shall institute such mechanisms as shall insure the collection of such taxes. 8 35 Sec. 6.04 Compensation Committee. The Compensation Committee shall have the authority and power to administer the Plan and to make, adopt, construe and enforce rules and regulations not inconsistent with the provisions of the Plan. The Compensation Committee shall adopt and prescribe the contents of all forms required in connection with the administration of the Plan, including, but not limited to the Purchase Agreement, payroll withholding authorizations, withdrawal documents and all other notices required hereunder. The Compensation Committee shall have the fullest discretion permissible under law in the discharge of its duties. The Compensation Committee's interpretations and decisions in respect of the Plan, the rules and regulations pursuant to which it is operated, and the rights of Participants hereunder shall be final and conclusive. Sec. 6.05 Amendment of the Plan. The Board may amend the Plan without the consent of stockholders or Participants, except that any such action shall be subject to the approval of the Company's stockholders at or before the next annual meeting of stockholders for which the record date is after such Board action if such stockholder approval is required by any federal or state law or regulation or the rules of any stock exchange or automated quotation system on which the Stock may then be listed or quoted, and the Board may otherwise, in its discretion, determine to submit other such changes to the Plan to stockholders for approval; provided, however, that, without the consent of an affected Participant, no such action may materially impair the rights of such Participant under any award theretofore granted to him. Sec. 6.06 Termination of the Plan. The Plan shall continue in effect unless terminated pursuant to action by the Board, which shall have the right to terminate the Plan at any time without prior notice to any Participant and without liability to any Participant. Upon the termination of the Plan, the balance, if any, then standing to the credit of each Participant in his Stock Purchase Account shall be refunded to him. Sec. 6.07 Repurchase of Stock. The Company shall not be required to purchase or repurchase from any Participant any of the shares of Stock that the Participant acquired under the Plan. Sec. 6.08 Notice. A Purchase Agreement and any notice that a Participant files pursuant to the Plan shall be on the form prescribed by the Compensation Committee and shall be effective only when received by the Compensation Committee. Sec. 6.09 Government Regulation. The Company's obligation to sell and to deliver the Stock under the Plan is at all times subject to all approvals of any governmental authority required in connection with the authorization, issuance, sale or delivery of such Stock. 9 36 Sec. 6.10 Headings, Captions, Gender. The headings and captions herein are for convenience of reference only and shall not be considered as part of the text. The masculine shall include the feminine, and vice versa. Sec. 6.11 Severability of Provisions; Prevailing Law. The provisions of the Plan shall be deemed severable. In the event any such provision is determined to be unlawful or unenforceable by a court of competent jurisdiction or by reason of a change in an applicable statute, the Plan shall continue to exist as though such provision had never been included therein (or, in the case of a change in an applicable statute, had been deleted as of the date of such change). The Plan shall be governed by the laws of the State of Delaware, to the extent such laws are not in conflict with, or superseded by, federal law. 10 37 APPENDIX A [DETACH HERE] PROXY PERSONNEL GROUP OF AMERICA, INC. ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 21, 1997 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned hereby appoints Edward P. Drudge, Jr. and Ken R. Bramlett, Jr. as Proxies, each with the power to appoint his substitute, and hereby authorizes each of them to represent and to vote, as designated on the reverse side, all the shares of common stock of Personnel Group of America, Inc. (the "Company") held of record by the undersigned on March 28, 1997, at the annual meeting of shareholders to be held on May 21, 1997 or any adjournment thereof. CONTINUED AND TO BE SIGNED ON REVERSE SIDE [See reverse side] - ----------------------------------------------------------------------------- detach here [X] Please mark votes as in this example. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH PROPOSAL, AND THIS PROXY WILL BE VOTED FOR EACH PROPOSAL AND FOR THE ELECTION OF THE DIRECTOR NOMINEES NAMED HEREIN UNLESS THE SHAREHOLDER DIRECTS OTHERWISE, IN WHICH CASE IT WILL BE VOTED AS DIRECTED. 1. ELECTION OF DIRECTORS: NOMINEES: Kevin P. Egan, J. Roger King FOR [ ] WITHHELD [ ] [ ] _______________________________________ For both nominees except as noted above MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW [ ] 2. Proposal to amend the Company's Certificate of Incorporation to increase the Company's authorized Common Stock. FOR [ ] AGAINST [ ] ABSTAIN [ ] 3. Proposal to amend the Company's 1995 Equity Participation Plan. FOR [ ] AGAINST [ ] ABSTAIN [ ] 4. Proposal to approve the Company's 1997 Employee Stock Purchase Plan. FOR [ ] AGAINST [ ] ABSTAIN [ ] 5. Proposal to ratify the selection of Price Waterhouse LLP as the Company's independent public accountants. FOR [ ] AGAINST [ ] ABSTAIN [ ] 6. In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting. The undersigned acknowledges receipt of the Notice of Annual Meeting and Proxy Statement dated April 10, 1997, and revokes all proxies heretofore given by the undersigned. PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED POSTAGE PREPAID ENVELOPE. Please sign exactly as name appears hereon. When shares are held by joint tenants, both should sign. When signing as attorney, as executor, administrator, trustee or guardian, please give full title as such. If a corporation, please sign in full corporate name by President or other authorized officer. If a Partnership, please sign in partnership name by authorized person. Signature:________________________Date:_____________ Signature:________________________Date:_____________ -----END PRIVACY-ENHANCED MESSAGE-----