EXHIBIT 99.3
PARTICIPATION AGREEMENT
This PARTICIPATION AGREEMENT (this "Agreement") dated as of March 14,
2003 is by and between LC CAPITAL MASTER FUND, LTD., a corporation organized
under the laws of the Cayman Islands (the "Noteholder") and PERSONNEL GROUP OF
AMERICA, INC., a Delaware corporation (the "Company").
In consideration of the payment of one dollar and other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the Noteholder hereby represents, covenants and agrees as follows:
1.1. Representations of Noteholder.
(a) For purposes of this Agreement, the Noteholder is
the beneficial owner of Two Million Four Hundred Thousand Dollars ($2,400,000)
in aggregate principal amount of the 5 3/4% Convertible Subordinated Notes of
the Company due 2004 (the "Notes"), and the Noteholder has full power and
authority to assign and transfer all such Notes. The Noteholder has good title
to the Notes, free and clear of any liens, pledges, security interests, claims
or other encumbrances and any options, warrants, or rights to acquire any of
the Notes, in each case, that would prevent or materially impair the
performance of the obligations of the Noteholder under this Agreement.
(b) The Noteholder understands that the Notes Exchange
(as hereinafter defined) involves substantial risk. The Noteholder has
experience as an investor in securities of companies and acknowledges that it
is able to fend for itself, can bear the economic risk of the investment in the
capital stock contemplated hereby, and has such knowledge and experience in
financial or business matters that it is capable of evaluating the merits and
risk of this investment in the Company's capital stock and protecting its own
interests in connection with this investment. The Noteholder is an "accredited
investor" as defined in Rule 501 promulgated under the Securities Act of 1933,
as amended (the "Securities Act").
(c) The Noteholder is acquiring the shares of capital
stock in the Notes Exchange for its own account and for investment purposes
only and not with a view to, or for resale in connection with, any distribution
thereof in violation of the Securities Act.
(d) The Noteholder has had an opportunity to discuss the
Company's business, management and financial affairs with the Company's
management and the opportunity to review the Company's business plan. The
Noteholder has had an opportunity to ask questions of officers of the Company,
which questions were answered to its satisfaction. The Noteholder acknowledges
that it has had an opportunity to conduct its own independent due diligence
investigation of the Company.
(e) Neither the Noteholder nor any of its affiliates,
officers, directors or employees has employed any broker or finder or incurred
any liability for any brokerage fees, commissions or finders' fees in
connection with the transactions contemplated by this Agreement.
(f) There are no actions, suits, arbitrations or
proceedings pending, or to the knowledge of the Noteholder, threatened, before
any court or any foreign or domestic governmental, regulatory or
self-regulatory authority, agency, commission, body or other entity (each, a
"Governmental Entity") against the Noteholder that individually or in the
aggregate could materially impair the Noteholder's ability to consummate the
transactions contemplated by this Agreement, and the Noteholder is not subject
to any order of any Governmental Entity that individually or in the aggregate
is reasonably likely to have a material adverse effect on its ability to
consummate the transactions contemplated by this Agreement.
(g) Other than the confidentiality agreement between the
Noteholder and the Company and any amendments thereto, to the Noteholder's
knowledge, the Noteholder is not a party to any confidentiality agreement or
similar agreement that would prevent the Noteholder from disclosing information
required to be disclosed by it in connection with the consummation of the
transactions contemplated by this Agreement.
(h) The Noteholder agrees that, at the time of issuance,
the shares of capital stock to be issued to it in the Notes Exchange will not
be registered under the Securities Act or qualified under any state securities
laws. Such capital stock is being issued on the basis that the issuance by the
Company of capital stock to the Noteholder in the Notes Exchange is exempt from
registration under the Securities Act and from applicable state securities
laws. The Noteholder agrees that the reliance by the Company on such exemptions
is predicated, in part, on the Noteholder's representations and warranties and
other agreements set forth in this Agreement. The Noteholder acknowledges and
agrees that each certificate representing shares of capital stock issued in the
Notes Exchange shall bear substantially the following legend and that each
certificate for shares of Series B Preferred Stock to be issued in the Notes
Exchange shall bear any additional restrictive legends required by the
certificate of designation for the Series B Preferred Stock:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY APPLICABLE STATE
SECURITIES LAW AND MAY NOT BE TRANSFERRED UNLESS (i) THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR SUCH APPLICABLE STATE
SECURITIES LAWS, OR (ii) IN THE OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE
ISSUER, REGISTRATION UNDER THE SECURITIES ACT OR SUCH APPLICABLE STATE
SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH TRANSFER.
1.2. Agreement to Participate in the Notes Exchange.
(a) Contingent on the satisfaction of certain terms and
conditions or the permitted waiver of such terms and conditions, the Company
has agreed, in a Restructuring Agreement dated as of March 14, 2003 (the
"Restructuring Agreement") among the Company,
PFI Corp., Staffplus, Inc., Infotech Services LLC, BAL Associates Incorporated,
Advanced Business Consultants, Inc., Venturi Staffing Partners LLC, Venturi
Texas Staffing Partners, LP, certain Lenders under Amendment No. 5, dated as of
December 31, 2002, to the Amended and Restated Credit Agreement, dated as of
June 23, 1997, of the Company and certain Holders of the Notes (the "Holders"),
to exchange the outstanding Notes held by the Holders for the Notes Exchange
Consideration (as defined below) (the "Notes Exchange"). If and only if the
Company consummates the Notes Exchange with the Holders, the Company agrees to
accept for exchange and exchange the Notes of the Noteholder pursuant to this
Agreement. In connection with the Notes Exchange, the Company will execute and
deliver a Registration Rights Agreement with the Holders (the "Registration
Rights Agreement"), and, upon exchange of its Notes (as set forth below), the
Noteholder shall become a party to such agreement.
For the purposes of this Agreement, the term "Notes Exchange
Consideration" shall mean the consideration payable by the Company in the Notes
Exchange to each Holder in respect of each $1,000 in principal amount of Notes
exchanged in the Notes Exchange, which consideration shall consist of (A)
$28.75 in cash and (B) 190.9560 shares of Common Stock and 9.5242 shares of
Series B Preferred Stock (as defined below), as ratably reduced to reflect any
principal amount less than $1,000 so exchanged. Notwithstanding any other
provision of this Agreement, no fractional shares of Capital Stock or right to
purchase fractional shares will be issued in the Notes Exchange to the
Noteholder, and the fractional interest shall be rounded down or up, as the
case may be, to the nearest whole share. The "Series B Preferred Stock" shall
be substantially as set forth on Exhibit C to the Restructuring Agreement and
have customary terms and conditions no less favorable to the Holders and the
Noteholder than those set forth in such Exhibit and shall be in a form
reasonably acceptable to the Company and the Holders pursuant to the
Restructuring Agreement. Simultaneously with the execution of this Agreement,
the Company has provided to the Noteholder a true and correct copy of the
Restructuring Agreement.
(b) The Noteholder agrees to exchange Two Million Four
Hundred Thousand ($2,400,000) of the Notes held by it in the Notes Exchange for
the Notes Exchange Consideration.
(c) The closing of the Notes Exchange (and the
transactions contemplated by this Agreement) (the "Closing") shall take place
at the location and on the date specified by the Company.
1.3. Closing Deliveries.
(a) Company Deliveries. In connection with and at the
Closing, the Company will deliver the following items to the Noteholder:
(i) the certificates representing the shares of
capital stock of the Company included in the Notes Exchange
Consideration to be received by the Noteholder, duly
executed;
(ii) the cash included in the Notes Exchange
Consideration to be received by the Noteholder, by wire
transfer of immediately available funds to
an account specified by the Noteholder in a writing delivered
to the Company at least two business days prior to the date
of the Closing;
(iii) a copy of the legal opinions of Xxxxxxxx,
Xxxxxxxx & Xxxxxx, P.A. and of the general counsel of the
Company as to the Notes Exchange and the shares of capital
stock issued in connection therewith, dated as of the date of
the Closing, in form and substance reasonably satisfactory to
the Noteholder, duly executed; and
(iv) the Registration Rights Agreement, duly
executed.
(b) Noteholder Deliveries. In connection with and at the
Closing, the Noteholder will deliver the following items to the Company:
(i) the Notes, indirectly through an agent,
custodian or similar arrangement in book-entry form (e.g., by
letter of free transfer) in exchange for the Notes Exchange
Consideration, together with such other written instruments
or accompanying documentation as may be reasonably necessary
or appropriate to transfer and cancel such Notes; and
(ii) such other written instruments or
accompanying documentation necessary or appropriate to
consummate the transactions contemplated by this Agreement,
as reasonably requested by the Company.
1.4. Assignment. This Agreement shall not be assigned by operation
of law or otherwise except to the extent permitted in the following sentence
and provided that any such assignment does not result in a breach of any part
of this Agreement. The Noteholder hereby agrees that, unless and until the
Company notifies the Noteholder that it has abandoned or terminated the Notes
Exchange, the Noteholder will not transfer or assign its Notes to any third
party unless the Noteholder, prior to any such transfer or assignment, obtains
from the transferee or assignee (and delivers to the Company) a written
agreement, in a form reasonably satisfactory to the Company, whereby the
transferee or assignee assumes all obligations of the Noteholder set forth in
this Agreement.
1.5. Governing Law and Venue. THIS AGREEMENT SHALL BE DEEMED TO BE
MADE IN AND IN ALL RESPECTS SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY AND
IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
CONFLICT OF LAW PRINCIPLES THEREOF. The parties hereby irrevocably submit to
the jurisdiction of the courts of the State and County of New York and the
Federal courts of the United States of America located in the Southern District
of the State of New York solely in respect of the interpretation and
enforcement of the provisions of this Agreement and of the documents referred
to in this Agreement, and in respect of the transactions contemplated hereby,
and hereby waive, and agree not to assert, as a defense in any action, suit or
proceeding for the interpretation or enforcement hereof or of any such
document, that it is not subject thereto or that such action, suit or
proceeding may not be brought or is not maintainable in said courts or that the
venue thereof
may not be appropriate or that this Agreement or any such document may not be
enforced in or by such courts, and the parties hereto irrevocably agree that
all claims with respect to such action or proceeding shall be heard and
determined in such a New York State or Federal court. The parties hereby
consent to and grant any such court jurisdiction over the person of such
parties and over the subject matter of such dispute and agree that mailing of
process or other papers in connection with any such action or proceeding in
such other manner as may be permitted by law shall be valid and sufficient
service thereof.
1.6. Capitalized Terms. Capitalized terms used herein without
definition shall have the means ascribed thereto in the Restructuring
Agreement.
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by a duly authorized officer of the party hereto as of the date first
above written.
LC CAPITAL MASTER FUND, LTD.
By: /s/ Xxxxxx Xxxxx
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Name: Xxxxxx Xxxxx
Title: Managing Member
PERSONNEL GROUP OF AMERICA, INC.
By: /s/ Xxx X. Xxxxxxxx, Xx.
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Name: Xxx X. Xxxxxxxx, Xx.
Title: Senior Vice President
