<PAGE>   1
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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                -----------------
                                    FORM 10-K
                                -----------------
(Mark One)
[X]

              ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                 SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
                   For the fiscal year ended December 29, 1996
                                       OR

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
              THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

         For the transition period from _______________ to _____________

                        Commission file number 001-13956

                        PERSONNEL GROUP OF AMERICA, INC.
             (Exact name of registrant as specified in its charter)
<TABLE>
<S>                                                                                          <C>       
                        Delaware                                                             56-1930691
--------------------------------------------------------------                   -----------------------------------
(State or other jurisdiction of incorporation or organization)                  (I.R.S. Employer Identification No.)

                6302 Fairview Road, Suite, 201
                   Charlotte, North Carolina                                                    28210
--------------------------------------------------------------                   ------------------------------------
           (Address of principal executive offices)                                          (Zip Code)
</TABLE>

                                 (704) 442-5100
                               ------------------
              (Registrant's telephone number, including area code)

        SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

                          Common Stock, $.10 par value
                          ----------------------------
                                (Title of Class)

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

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]

         The aggregate market value of voting stock held by non-affiliates of
the registrant as of February 14, 1997, computed by reference to the closing
sale price on such date, was $291,578,193. (For purposes of calculating this
amount only, all directors, executive officers and greater than 10% shareholders
of the registrant are treated as affiliates.) As of the same date, 12,074,355
shares of Common Stock, $.01 par value, were outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

         The Registrant's definitive Proxy Statement pertaining to the 1997
Annual Meeting of Shareholders ("the Proxy Statement") filed with the Commission
pursuant to Regulation 14A are incorporated herein by reference into Part III.

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



<PAGE>   2



                                   PART I.

ITEM 1. BUSINESS

         Personnel Group of America, Inc. (the "Company"), is a leading provider
of personnel staffing services to businesses, professional and governmental
organizations. The Company is organized into three Divisions, Commercial
Staffing, Information Technology and Health Care Services, and operates in
strategic markets throughout the United States. The Company's staffing services
include temporary staffing, placement of full time employees, on-site management
of temporary employees, training and testing of temporary and permanent workers
and information technology consulting. At February 14, 1997, the Company
operated through a network of 141 Company-operated, 34 franchised and 17
licensed offices in 37 states and the District of Columbia. Each of the
Company's offices does business under established brand names, most of which
have been continuously in use for more than 16 years.

         The Commercial Staffing Division offers a wide variety of temporary
office and clerical services to more than 10,000 organizations nationwide. This
division also provides light technical and light industrial services to its
customers, but these services typically account for less than 25% of the
division's total revenues. The Information Technology Division offers
information technology professionals and consulting services in a range of
computer-related disciplines. The Health Care Services Division provides health
care personnel to supplement the staffing needs of hospitals, nursing homes and
other health care facilities and home health care services and related products
to individuals. For the year ended December 29, 1996 on a pro forma basis, the
Commercial Staffing, Information Technology and Health Care Services Divisions
represented approximately 43%, 30% and 27%of the Company's total revenues,
respectively.

         The Company reviews acquisition opportunities in the ordinary course of
business and completed the acquisition of nine companies in eight transactions
in 1996. Four of the companies acquired in 1996 are in the commercial staffing
business and five are in the information technology business. These companies
had pro forma revenues of approximately $180.0 million in 1996. The Health Care
Services Division also converted six franchised offices in 1996 (which had pro
forma 1996 revenues of approximately $16.8 million) into Company-operated
branches.

         Since December 29, 1996, the Company has completed the acquisitions of
Word Processing Professionals, Inc. ("Word Processing Professionals") in New
York, New York and Energetix, Inc. ("Energetix") in Chicago, Illinois. Word
Processing Professionals, acquired on January 3, 1997, provides word processing
and desktop publishing services to professional services firms and financial
institutions in mid-town Manhattan. Energetix, acquired on February 3, 1997,
provides information technology staffing services to a variety of clients in the
Chicagoland area. These companies had combined revenues in excess of $13.0
million in 1996.

         The Company endeavors to protect its intellectual property rights and
has obtained registrations in the United States of certain of the trademarks,
trade names and service marks that appear in this report.

COMMERCIAL STAFFING DIVISION

         At February 14, 1997, the Company operated its Commercial Staffing
Division ("Commercial Staffing") through 73 offices. Commercial Staffing
provides temporary personnel who perform general office and administrative
services, word processing and desktop publishing, office automation, records
management, production/assembly/distribution, telemarketing and other staffing
services. Certain of Commercial Staffing's offices also provide full-time
placement and payrolling services. Payrolling services entail employment by
Commercial Staffing of individuals recruited by a customer on a fee basis.


                                       1
<PAGE>   3


         Operations

         Commercial Staffing markets its staffing services to local and regional
clients through its network of offices across the United States. The marketing
efforts of Commercial Staffing are decentralized and capitalize on long-standing
business relationships with the clients of Commercial Staffing's companies and
their established brand names, most of which have been in use for more than 16
years. The following table sets forth information at February 14, 1997 on the
names, markets, number of offices and dates founded of Commercial Staffing's
brands:

<TABLE>
<CAPTION>
                                                                                     NUMBER OF          DATE
                NAME                   MARKETS                                       OFFICES(1)       FOUNDED
                ----                   -------                                       ----------       -------

<S>                                    <C>                                                <C>           <C>
Abar Staffing                          San Francisco Bay Area, CA                         6             1954

Allegheny Personnel (2)                Pittsburgh, PA                                     4             1972

Denver Temporaries (2)                 Denver, CO                                         2             1978

FirstWord Staffing Services            Dallas, TX                                         7             1978

Judith Fox Staffing Companies (2)      Richmond and Charlottesville, VA                   3             1978
                                       New York, NY

Profile Temporaries (2)                Loop Area of Chicago, IL                           1             1979

Staffinders Personnel                  Houston, TX                                        3             1983

Temp Connection                        New York and Long Island, NY                       2             1982

TempWorld                              Atlanta, GA                                       15             1980
                                       Birmingham, AL
                                       Washington, DC

Thomas Staffing                        Los Angeles/Orange County, CA                     21             1969
                                       Riverside/San Bernardino, CA
                                       San Diego, CA

West Personnel Service                 North and West Suburban Chicago, IL                6             1954

Word Processing Professionals(3)       New York, NY                                       1             1982

Word Processors Personnel Services     Atlanta, GA                                        2             1978
---------------
</TABLE>


(1)      Does not include vendor-on-premises locations at customer sites.
(2)      Allegheny and Profile were acquired by the Company in March 1996,
         Judith Fox was acquired in May 1996 and Denver Temporaries was acquired
         in July 1996.
(3)      Word Processing Professionals was acquired by the Company in January
         1997.

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

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


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<PAGE>   4

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

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


         Sales and Marketing

         Commercial Staffing has implemented a business development program to
target potential customers with temporary staffing needs and to maintain and
expand existing customer relationships. Commercial Staffing obtains new clients
primarily through personal sales presentations and referrals from other clients
of the Commercial Staffing and the Information Technology Division and supports
its sales efforts with telemarketing, direct mail solicitation and advertising
in a variety of local and national media, including the Yellow Pages,
newspapers, magazines and trade publications.

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

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

INFORMATION TECHNOLOGY DIVISION

         The Company's Information Technology Division (the "IT Division")
provides information technology professionals and consulting services through 19
offices in 13 states. The IT Division employed approximately 1,750 consultants
at February 14, 1997, of which approximately 50% were salaried employees and 50%
were hourly.

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



                                       3
<PAGE>   5

management services or the implementation of turnkey systems to the fulfillment
of temporary staffing needs for technology projects. The IT Division also
provides information technology outsourcing services for long-term information
technology projects.

         Selected offices in the IT Division also provide complementary or
stand-alone consulting services in the information technology area, again
typically on a time and materials basis. For example, BEST Consulting's NewTec
division works with clients, chief executive officers and other executives
interested in alternatives to outsourcing their internal information technology
organization, as well as implementing complex systems integration solutions, and
offers a broad range of consulting services, including systems development
projects and client/server networks that span mainframe, mid-range and desktop
systems. These services are provided at the client's site or at NewTec's
off-site development center. Other IT Division companies also provide consulting
services to supplement their staffing services offerings.

         Operations

         The following table sets forth information at February 14, 1997 on the
names, markets, number of offices, dates formed and dates acquired of the IT
Division companies:

<TABLE>
<CAPTION>
                                                                       NUMBER OF        DATE        DATE
              NAME                MARKETS                               OFFICES        FORMED     ACQUIRED
              ----                -------                               -------        ------     --------
<S>                               <C>                                      <C>          <C>      <C> 
BEST Consulting                   Seattle and Olympic WA                   10           1990     Sept. 1996
                                  Portland, OR
                                  Salt Lake City, UT
                                  Boise, ID
                                  Sacramento, CA
                                  Phoenix, AZ
                                  Minneapolis, MN
                                  Las Vegas and Reno, NE

Broughton Systems                 Richmond, VA                             1            1981      July 1996

Command Technologies              Denver, CO                               1            1978      July 1996

Computer Resources Group          San Francisco,                           4            1972      June 1996
                                  Sacramento and Santa Clara, CA
                                  Salt Lake City, UT

Energetix                         Chicago, IL                              1            1988      Feb. 1997

Software Service Corp.            Atlanta, GA                              2            1990     Sept. 1996
                                  Birmingham, AL
</TABLE>


         Sales and Marketing

         The IT Division has developed a sales and marketing strategy that
focuses on both regional and local accounts, and is implemented in a
decentralized manner through its various branch locations. Accounts are targeted
by account managers at the branch offices permitting the IT Division to
capitalize on the brand names of the companies in the IT Division and the local
expertise and established relationships of its branch office employees. Such
accounts are solicited through personal sales presentations, telephone
marketing, direct mail solicitation, referrals from clients and other companies
in the IT and Commercial Staffing Divisions and advertising in a variety of
local and national media. These advertisements appear in the Yellow Pages,
newspapers and trade publications. Local employees are also encouraged to be
active in civic organizations and industry trade groups to facilitate the
development of new customer relationships.




                                       4
<PAGE>   6


HEALTH CARE SERVICES DIVISION

         The Company's Health Care Services Division ("Nursefinders") operates
under one brand name and provides health care staffing services through 49
Company-operated, 34 franchised and 17 licensed locations at February 14, 1997.
Nursefinders provides home care services to individuals and health care
personnel for supplemental staffing to hospitals, nursing homes and other health
care institutions. The Company believes that Nursefinders is one of the largest
national providers of home nursing care services in terms of revenue and number
of offices. The Company also believes Nursefinders is the largest provider of
supplemental staffing services to health care institutions.

         Nursefinders provides a wide range of licensed and trained personnel
such as registered nurses and licensed practical/vocational nurses, nursing
assistants and technicians, certified aides and companions. Registered nurses
and licensed practical/vocational nurses perform skilled procedures for patients
in the home or in an institutional setting, including nursing assessment and
evaluation, medication administration, infusion therapy, complex therapeutic
treatments and case management. Nursing assistants and technicians perform
personal care and simple procedures for patients in institutional staffing
settings. Home health and personal care aides provide basic personal care,
feeding, dressing and assisting with activities of daily living to the homebound
patient. Companions assist home care patients with meal preparation, shopping
and other light housekeeping tasks. Institutional staffing and home care
services are also provided by physical, occupational, speech and respiratory
therapists and medical social workers. For the year ended December 29, 1996,
approximately 66% of Nursefinders' revenues were derived from providing home
health care services, with the balance derived from health care staffing
services provided to hospitals and other institutions and from franchise fees.


         Operations

         The Nursefinders brand name has been in use for more than 18 years, and
Nursefinders is recognized as a leading provider of home health care staffing
and related services. Nursefinders' local managers have the flexibility of
determining staff selection, compensation, business mix, marketing and pricing,
which allows each Nursefinders office to respond to local competitive
conditions. Most health care staffing services are purchased at the local level,
and Nursefinders' established reputation has resulted in ongoing referrals in
the communities it serves.

         Nursefinders maintains and monitors compliance with precise quality
assurance standards for all of its Company-operated, franchised and licensed
offices. The Company believes these policies and procedures comply with all
local, state and federal regulations for hiring criteria, training programs and
patient care delivery systems. Nursefinders has applied for, and has received
for certain locations, accreditation for Company-operated, franchised and
licensed offices by the Joint Commission on Accreditation of Healthcare
Organizations ("JCAHO"). JCAHO is the recognized national accrediting authority
for health care services, and by participating in the voluntary accreditation
program, Nursefinders is able to better compete in the health care staffing
market. JCAHO has determined that Nursefinders' policies meet JCAHO standards
and began the compliance survey stage of the accreditation review during 1995.

         Nursefinders believes that in the provision of home health care the
caregiver is the critical factor in (i) providing and assuring the quality of
care, (ii) coordinating the effective utilization of all home health care
services and products, and (iii) determining the frequency and level of patient
health care intervention. Nursefinders monitors its home care services through
close supervision and evaluation of patient care outcomes. Specific criteria are
used in accepting and discharging patients so that Nursefinders can assure that
patient needs are met in the home setting. Clinical documentation used in home
care patient records meet professional standards of practice, and quarterly
record reviews are performed by health care professionals to validate the
quality and appropriateness of care.



                                       5
<PAGE>   7

         With managed care organizations focusing on cost containment, an
increasing number of patients are being transferred from hospitals to lower cost
care settings. Consequently, patients with increasingly complex needs are
receiving care in their homes, and the number of patients requiring multiple
services in the home is also increasing significantly. In order to meet this
need, Nursefinders developed the SingleSource program, in which Nursefinders
contracts with other providers of health care products and services to provide
the full continuum of home health care needs. These services include skilled and
non-skilled nursing care, IV therapy, respiratory, physical, occupational and
speech therapies, home medical equipment and medical supplies. Nursefinders pays
its personnel and subcontractors while billing third party payors at
pre-negotiated rates. The Company believes that Nursefinders' ability to manage
all aspects of home health care as a single source or full service provider with
access to and supervision of home health care personnel positions it as a
provider of choice with managed care organizations.

         Managed care and insurance companies are increasingly focusing their
attention on disease states that are expensive to treat because of long hospital
stays. Nursefinders has developed disease-specific early intervention programs
to monitor, and reduce the need for hospitalization of, patients with diabetes,
cancer, cardiovascular conditions and asthma. Nursefinders also is developing
specialty programs to further address the desire of managed care organizations
to reduce costs for psychiatric and pediatric care.

         In the midst of the changing health care legislative and regulatory
environment, Nursefinders believes that participation in the Medicare program
remains important. The trend towards home health care services has resulted in
an increase in the portion of health care revenues being remitted through
Medicare and Medicaid. Additionally, Nursefinders believes Medicare
certification serves as a widely recognized indicator of quality and standing in
local communities and is, therefore, important in obtaining desirable business
from physicians, managed care organizations and certain other referral sources.
At February 14, 1997, Nursefinders provided Medicare and Medicaid services
through its Company-operated network of 28 Medicare- or Medicaid-certified
locations. Additionally, six licensed offices and eight franchised offices are
Medicare- and , in some cases, Medicaid-certified. For the year ended December
29, 1996, approximately 32%, 36% and 32% of Nursefinders' revenues were derived
from private pay and other sources, the Medicare and Medicaid programs and
supplemental staffing services, respectively. Nursefinders locations that are
not certified cannot participate in the Medicare and Medicaid programs and
instead derive all their revenues from supplemental staffing, private pay and
other sources.

         Sales and Marketing

         Home health care staffing services are generally purchased at the local
level, either by case managers on behalf of private insurers or by private
individuals through referrals from physicians, health maintenance organizations
or hospital discharge planners. Nursefinders' marketing efforts for health care
services principally involve direct sales presentations to contract
administrators, utilization review nurses, medical directors and case managers
for managed health care programs, government agencies, social service agencies,
physicians and their staffs, hospital discharge planners, nursing home
supervisors, insurance company representatives and employers with self-funded
employee health benefit programs. Nursefinders also advertises in local and
national media, including the Yellow Pages, newspapers, magazines and trade
publications. Nursefinders has longstanding relationships with clients from whom
it receives referrals and with governmental social service agencies with which
Nursefinders conducts business under non-exclusive contracts that generally are
renewable automatically from year to year.




                                       6
<PAGE>   8


RECRUITING OF TEMPORARY EMPLOYEES

         The Company recruits its temporary employees and IT Division
consultants through a recruiting program that primarily utilizes local and
national advertisements. In addition, the Company has succeeded in recruiting
qualified employees through referrals from its existing labor force. To
encourage further referrals, certain of the companies in Commercial Staffing and
IT Divisions have initiated policies whereby they pay referral fees to employees
responsible for attracting new recruits. The Company interviews, tests, checks
references and evaluates the skills of applicants for temporary employment,
utilizing systems and procedures developed and enhanced over the years by the
Company. Additionally, Nursefinders verifies that all of its health care
providers maintain current licenses. In Commercial Staffing and at Nursefinders,
temporary employees are employed by the Company on an as needed basis dependent
upon client demand. These temporary employees are paid only for time they
actually work.


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

ORGANIZATIONAL STRUCTURE

         The Company utilizes a combination of Company-operated and, at
Nursefinders, franchised and licensed offices based on the characteristics of
the particular market and the nature of services that the Company markets. At
Nursefinders, the Company focuses its licensing and franchising activities in
smaller and mid-sized markets. In larger markets, the Company employs a
Company-operated branch strategy to permit existing supervisory, advertising,
and administration expenses to be spread over a larger number of offices in
close proximity. The Company believes that its franchise and license network is
a benefit to Nursefinders because its franchises and licenses provide the
Company with a substantial local market presence. The franchise and license
network also provides Nursefinders with royalty and license fee income.

         Company-operated Offices

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

         Franchised Offices

         Prior to 1990, Nursefinders offered franchises for Nursefinders
offices. Nursefinders has experienced a low turnover rate in its franchise
operations, with an average tenure of franchise ownership of nine years and
approximately 50% of franchisees operating more than one franchise. At February
14, 1997, Nursefinders' 12 franchisees operated 34 franchised offices.

         Nursefinders grants each franchisee the exclusive right to establish an
office and provide Nursefinders' products and services within a designated
geographic area using the Nursefinders trade names, service marks, advertising
materials, sales programs, manuals and forms. Franchisees receive training from



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<PAGE>   9

Nursefinders, attend seminars, participate in marketing programs and utilize
Nursefinders' sales literature. Nursefinders requires its franchisees to follow
the basic procedures and standards established for its branch and licensed
offices. Nursefinders assists its franchisees in obtaining business from its
national and regional accounts. Nursefinders also makes available to each
franchised office software used by its branch offices to assist in maintaining
availability listings on temporary employees, scheduling employees, maintaining
licensure and other information required by health care providers, and
facilitating the payroll and billing functions.

         Franchisees operate their businesses autonomously within the framework
of Nursefinders' policies and standards, and recruit, employ and pay their own
employees. Each franchisee is responsible for screening and recruiting qualified
temporary personnel, as well as obtaining clients. Nursefinders receives a
royalty equal to 5% of each franchisee's sales. Franchisees pay Nursefinders an
initial non-recurring franchise fee of $19,600 partially to cover screening,
training and other start-up costs incurred by Nursefinders in establishing a
franchised office. Franchise agreements are generally for a term of five years,
but are cancelable by the franchisee upon specified prior notice, and renew at
the option of the franchisee for successive five-year periods thereafter.
Nursefinders may terminate a franchise if the franchisee fails to meet
Nursefinders' standards or otherwise breaches the franchise agreement. In recent
periods, termination of franchise agreements has not had a material adverse
impact on the Company, but there can be no assurance that such terminations in
future periods will not have a material adverse effect on Nursefinders' and the
Company's results of operations, financial condition or business prospects.

         Licensed Offices

         In 1990, Nursefinders began granting licenses instead of franchises
because it believed that the reduced capital requirements of a licensed office
would be more attractive to a larger number of potential licensees and because
it believed that the license arrangement afforded it better control over the
quality of patient care. At February 14, 1997, the Company had 11 licensees
operating 17 licensed offices.

         Licensees operate their businesses autonomously within the framework of
Nursefinders' policies and standards, and recruit, employ and pay their own
permanent employees. Licensees must maintain their own insurance coverage for
the licensed office and its permanent employees, including workers'
compensation, general liability and automobile liability insurance coverage.
Licensees enjoy all the benefits afforded to franchisees. In addition, under the
license agreements, Nursefinders employs all temporary employees, pays all
payroll costs of employing the temporary employees, including workers'
compensation and liability insurance and fidelity bonds, bills the customers and
owns the receivables (with recourse to the licensee). The customers of the
licensed operation belong to Nursefinders.

         Nursefinders records as revenues the amounts billed to clients of
licensees, and the costs of wages and related benefits are recorded by
Nursefinders as costs of services (the difference between revenues and cost of
services being gross profit). Nursefinders remits monthly to licensees the gross
profit of the licensed office less the sum of 7% of gross revenues,
uncollectible receivables and certain other expenses of each licensed office.

         Licensees pay Nursefinders an initial non-recurring license fee of
$19,600 partially to cover screening, training and other start-up costs incurred
by Nursefinders in establishing a licensed office. License agreements are
generally for a term of ten years and renew at the option of the licensee for
successive five-year periods thereafter. Nursefinders may terminate a license if
the licensee fails to meet Nursefinders' standards or otherwise breaches the
agreement. To date, termination of license agreements has not had a material
effect on the Company, but there can be no assurance that such terminations in
future periods will not have a material adverse effect on Nursefinders' and the
Company's results of operations, financial condition or business prospects.



                                       8
<PAGE>   10

AUTOMATED OPERATING SYSTEMS

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

         The software used in the QuestPLUS system is owned by the Company's
former parent. The Company has entered into an agreement to use the software for
a monthly fee of approximately $13,600 through September 1997, with an option to
extend for an additional year. During this period, the Company intends to
replace the software with comparable software developed in connection with the
implementation of the Company's new branch operating and paybill systems
described below.

         The Company has entered into an agreement with a software company for
new branch operating and paybill systems for Commercial Staffing, which will
integrate the results of the Company's skills testing with personal attributes
and work history and automatically match available candidates with customer
requirements. The paybill processing system will provide payroll processing and
customer invoicing. This new system will enhance the QuestPLUS system that is
now utilized. Installation of the new system began in the second quarter of 1996
and is expected to be completed by the end of 1997.

         In the IT Division, the Company has entered into an agreement with a
software company for a new branch operating system for the existing information
technology companies. Installation of this new system is expected to begin in
the first quarter of 1997 and be completed for the existing IT Division
companies in 1998.

COMPETITION

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

         In the temporary staffing industry, competition generally is limited to
firms with offices located within a customer's particular local market. In most
major markets, competitors generally include many of the publicly traded
companies and, in addition, numerous regional and local full-service and
specialized temporary service agencies and health care providers, some of which
may operate only in a single market.

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




                                       9
<PAGE>   11

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

REGULATION

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

         The Company's Health Care Services Division is subject to extensive
government regulation under federal, state and local law, including licensing
requirements, certificate of need requirements, Medicare and Medicaid
certification requirements, reimbursement requirements, periodic examinations by
government agencies, federal and state anti-fraud, anti-abuse and anti-kickback
statutes and regulations, and federal and state laws prohibiting physician
ownership or compensation arrangements with home health care agencies to which
they refer patients for home health care services. Health care providers are
also subject to extensive documentation requirements of government agencies and
industry participants, such as insurance companies and managed care companies.

         The federal Medicare program in particular has come under renewed
pressure recently to reduce costs. Legislative and administrative responses to
these pressures have focused to date on the implementation of reductions in
permitted allocations of general and administrative expenses as reimbursable
shared costs under the Medicare program and on lower reimbursable cost limits
generally. New HCFA instructions implemented in 1996 relating to the allocation
of administrative costs could restrict the allocation of certain previously
reimbursable shared costs under the program going forward. Additionally, the
President's proposed fiscal year 1998 federal budget submitted to Congress in
February 1997 could have the effect of further lowering reimbursable cost limits
for home health agencies that are Medicare providers. These and other
regulations could affect the ability of the Company to collect its fees for
services provided. There can be no assurance that the Company will be able to
continue to obtain or maintain the required governmental approvals or licenses,
obtain reimbursement for its services or avoid compliance or other problems
under applicable laws and regulations, or that changes in applicable laws or
regulations will not have an adverse effect on its results of operations.

         Home health care providers are subject to certificate of need laws in
22 jurisdictions. Some jurisdictions require home health care service providers
to have a certificate of need in order to be licensed to provide home health
care services, including Medicare and Medicaid services, and other jurisdictions
require a certificate of need only to provide Medicare home health care
services. Certificate of need laws restrict the types of care that may be
provided and can limit or eliminate a provider's ability to provide certain
services, including home health care services, to establish or expand operations
and to act as a Medicare or Medicaid provider. The process of obtaining a
certificate of need can be costly and time consuming. The Company currently has
no certificates of need, but offers certain services not restricted by
certificate of need laws in some states which require certificates of need. Some
states in which the Company does business are not currently granting additional
certificates of need. Accordingly, such laws may render it more difficult for
the Company to, or preclude the Company from, expanding the geographic scope of
its home health care services.

           New York State requires the approval by the Public Health Council of
the New York State Department of Health ("NYPHC") of any change in "the
controlling person" of an operator of a licensed 



                                       10
<PAGE>   12

health care services agency (an "LHCSA") or any transfer, assignment or other
disposition of the stock or voting rights thereunder which results in the change
of ownership or control of more than 10% of the stock or voting rights
thereunder of the LHCSA. "Controlling person" includes a person who either
directly or indirectly possesses the ability to direct or cause the direction of
the actions, management or policies of a person, whether through the ownership
of voting securities or voting rights by contract or otherwise, and includes a
parent corporation that possesses or will possess the ability to direct or cause
the direction of the actions, management or policies of the LHCSA corporation
that is the licensed home health care agency. Control of an entity is presumed
to exist if any person directly or indirectly owns, controls or holds the power
to vote 10% or more of the voting securities of such entity. A person seeking to
become a controlling person of an operator of an LHCSA must file an application
for prior approval from NYPHC. The Company has one office in New York State
which is an LHCSA and which is Medicaid certified. Such office accounted for
less than 2% of the Company's revenues for the year ended December 29, 1996. If
any person should become the owner or holder, or acquire control, of the right
to vote 10% or more of the Common Stock of the Company, such person could not
exercise control of the Company's LHCSA until such ownership, control or holding
has been approved by the NYPHC.

         The Company is also subject to various federal and state laws relating
to franchising, principally the Federal Trade Commission's franchise rules and
state franchise registration, disclosure, and relationship laws and state
business opportunity laws.


TRADEMARKS

         The Company maintains a number of trademarks, tradenames, service marks
and other intangible rights, and licenses certain other proprietary rights in
connection with its businesses. Certain proprietary rights relating to the
Company's three divisions, including the tradenames Nursefinders and TempWorld,
are licensed from the Company's former parent corporation pursuant to perpetual
licenses, subject to the former parent corporation's right to require the
Company to purchase these rights at a predetermined price. The Company's former
parent has advised the Company that it intends to require the Company to
purchase such rights. The Company is not currently aware of any infringing uses
or other conditions that would materially and adversely affect its use of its
proprietary rights.

EMPLOYEES

         At February 14, 1997, the Company had approximately 1,100 permanent
administrative employees, of whom 74 were Nursefinders billable staff who
rendered temporary services to patients, and approximately 1,750 information
technology consultants in the IT Division. During 1996, the Company and its
licensees placed over 50,000 temporary employees with clients. None of the
Company's employees are covered by collective bargaining agreements. The Company
believes that its relationships with its employees are good.

ITEM 2.    PROPERTIES

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




                                       11
<PAGE>   13


ITEM 3.    LEGAL PROCEEDINGS

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

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

           No matter was submitted to a vote of security holders during the
fourth quarter of the fiscal year covered by this report.

















                                       12
<PAGE>   14



                                    PART II.

ITEM     5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
         MATTERS.

         Since September 26, 1995, the Company's common stock, $.01 par value
(the "Common Stock"), has been listed on the New York Stock Exchange under the
symbol "PGA." As of February 14, 1997, there were approximately 4,670
shareholders based on the number of holders of record and an estimate of the
number of individual participants represented by securities position listings.

         The Company has paid no cash dividends on its Common Stock with respect
to earnings subsequent to the consummation of the Company's initial public
offering in September 1995. Its policy has been to retain earnings for use in
its business. In addition, the Company's credit agreement with its lenders
currently restricts the payment of dividends, subject to certain terms contained
therein. In the future, the Company's Board of Directors will determine whether
to pay cash dividends based on conditions then existing, including the Company's
earnings, financial condition, capital requirements, financing arrangements and
any other factors deemed relevant by the Board of Directors.

         The following table sets forth the reported high and low sales prices
for the Company's common stock during the periods indicated as reported on the
New York Stock Exchange:

<TABLE>
<CAPTION>
1996                              HIGH            LOW          CLOSE
----                              ----            ---          -----
<S>                              <C>             <C>           <C>  
First Quarter                      20              13          18-1/4
Second Quarter                   26-1/4          18-3/8        24-5/8
Third Quarter                      26            19-7/8          26
Fourth Quarter                   29-1/8          19-3/8        24-1/8
</TABLE>

<TABLE>
<CAPTION>
1995
----
<S>                            <C>                 <C>
First Quarter                  Not traded
Second Quarter                 Not traded
Third Quarter                    14-1/8            14
Fourth Quarter                     15              11
</TABLE>

The last reported sales price on February 14, 1997 was $24.25.















                                       13
<PAGE>   15



ITEM 6.  SELECTED FINANCIAL DATA.

         The following table sets forth selected consolidated financial data for
the Company as of and for each of the years ended December 1996, 1995, 1994,
1993 and 1992. The consolidated financial data as of and for each of such years
are derived from the consolidated financial statements of the Company, which
have been audited by Arthur Andersen LLP, independent public accountants. The
consolidated financial statements include assets and liabilities at historical
amounts from the consolidated financial statements of the Company's former
parent, and other adjustments intended to reflect the revenues and expenses the
Company would have reported had the enterprise been combined prior to the
beginning of the earliest period presented. The results of operations for all
periods are not necessarily indicative of the results which would have been
obtained had the Company been independent in all periods. The data set forth
below should be read in conjunction with the financial statements and other
financial information, including Management's Discussion and Analysis of
Financial Condition and Results of Operations, included elsewhere in this
report.

                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
                                                                YEARS ENDED DECEMBER
                                             1996         1995          1994          1993         1992
                                             ----         ----          ----          ----         ----
RESULTS OF OPERATIONS

<S>                                      <C>             <C>          <C>           <C>           <C>     
Revenues                                 $  366,545      $251,055     $211,867      $172,478      $151,388

Direct costs of services                    263,277       178,966      155,987       126,286       109,707

Other operating expenses                     81,987        59,675       48,920        41,576        41,129

Income before income taxes                   19,849        12,414        6,960         4,616           552

Provision for income taxes                    8,332         5,305        3,061         2,080           462

Net income                               $   11,517      $  7,109     $  3,899      $  2,536      $     90
                                         ==========      ========     ========      ========      ========

Net income per share                     $     1.13            --           --            --            -- 
                                         ==========      ========     ========      ========      ========

Pro forma net income per share(1)        $       --      $   0.89     $   0.49
                                         ==========      ========     ========

Weighted average shares                      10,216         8,000        8,000
 outstanding

FINANCIAL POSITION AT YEAR-END

Working capital                          $   36,712      $ 28,969     $ 26,440      $ 21,331      $ 14,190

Total assets                                314,327       102,623       90,984        84,333        79,395

Short-and long-term debt                     85,722            --           --            --            --

Shareholders' equity                        183,257        75,986       68,438        64,257        58,987
--------------------------
</TABLE>

(1) Pro forma net income per share has been computed assuming the 8,000,000
shares issued in the Company's initial public offering in September 1995 were
outstanding throughout 1995 and 1994.





                                       14
<PAGE>   16



ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS.

INTRODUCTION


         The following discussion and analysis should be read in conjunction
with the Company's consolidated financial statements and notes thereto included
elsewhere in this document. The Company's fiscal year ends on the Sunday nearest
to December 31 and the fiscal quarters end on the Sunday nearest to the end of
the respective calendar quarters.

         The Company operates within one industry segment and is organized into
three Divisions: the Commercial Staffing Division, which provides a wide variety
of temporary office and clerical staffing services; the Information Technology
Division, which provides information technology staffing and consulting services
in a range of computer-related disciplines; and the Health Care Services
Division, which, through Company operated, franchised and licensed offices,
provides home health care services and supplemental staffing for health care
facilities. At December 29, 1996, the Commercial Staffing Division was comprised
of 12 companies, the Information Technology Division was comprised of five
companies and the Health Care Services Division operated under the Nursefinders
brand.

         The following table sets forth the number and nature of the Company's
offices at the end of the years indicated and at February 14, 1997:

<TABLE>
<CAPTION>
                                                    FEBRUARY 14,
                                                       1997            1996             1995               1994
                                                       ----            ----             ----               ----
    <S>                                                <C>              <C>              <C>                <C>
    Commercial staffing offices                         73              74               58                 57
    Information technology offices                      19              18               --                 --
    Company operated Nursefinders offices               49              50               48                 47
    Licensed Nursefinders offices                       17              17               10                  4
    Franchised Nursefinders offices                     34              33               40                 48
                                                       ---              ---              ---                ---
               Total offices                           192              192              156                156
</TABLE>

The Company recognizes as revenues the amounts billed to clients of licensed
Nursefinders offices. In these cases, the temporary workers are the Company's
employees and all costs of employing the temporary workers are the
responsibility of the Company and are included in direct cost of services. The
Company remits monthly to its licensees the gross profits of each licensed
office less 7% of gross revenues, uncollectable receivables and certain other
expenses of the licensed office. The Company does not recognize revenues from
its franchised Nursefinders offices other than a 5% royalty on the gross
revenues of each franchised office.

         The Company has not actively marketed new licenses or franchises in
recent periods and, accordingly, franchise and license fees have not been
material. However, the Company views its franchises and licenses as an important
part of the health care services business, because the program allows
Nursefinders to operate in areas that might not otherwise meet the Company's
criteria for a Company operated office, allows a further spreading of fixed
costs over additional revenues, and is believed to yield a fair profit for the
Company services provided to the licensees and franchisees.

         The Company completed its initial public offering (the "IPO") in
September 1995. Prior to the IPO , the Company was an indirect wholly owned
subsidiary of Adia, S.A., a Swiss corporation ("Adia"). The Company was
organized by Adia to facilitate the IPO. As a result of the IPO, in which Adia
sold its entire ownership interest in the Company, the Company became an
independent public company. The Company did not receive any of the proceeds of
the sale of its shares by Adia in the IPO.


                                       15
<PAGE>   17


         In June 1996, the Company issued 4,025,000 shares of its common stock
in a second underwritten public offering (the "Secondary Offering"), which
raised approximately $95.6 million of net proceeds for the Company. The net
proceeds of the Secondary Offering were used to repay outstanding borrowings
under the Company's revolving credit facility and to fund several recent
acquisitions.

         In 1996, the Company acquired four commercial staffing companies and
five information technology companies. The combined revenues of these nine
companies were approximately $180.0 million in 1996. Also in 1996, the Company
converted six former Nursefinders franchised offices, which had combined 1996
revenues of approximately $16.8 million, to Company operated offices by
acquiring the applicable franchises. Had the Company owned each of these nine
acquired companies and six converted franchises at January 1, 1996, the
Company's pro forma 1996 revenues would have been approximately $464.6 million
and 43%, 30% and 27% of such revenues would have come from Commercial Staffing,
Information Technology and Health Care Services, respectively.

         Since December 29, 1996, the Company has completed the acquisitions of
Word Processing Professionals, Inc. ("Word Processing Professionals") in New
York, New York and Energetix, Inc. ("Energetix") in Chicago, Illinois. Word
Processing Professionals, acquired on January 3, 1997, provides word processing
and desktop publishing services to professional services firms and financial
institutions in mid-town Manhattan. Energetix, acquired on February 3, 1997,
provides information technology staffing services to a variety of clients in the
Chicagoland area. These companies had combined revenues in excess of $13.0
million in 1996.

         Each of the Company's acquisitions to date has been accounted for using
the purchase method of accounting, and has been included in the following
discussion as applicable since the respective date of acquisition. In the
future, the Company's revenues and expenses may be significantly affected by the
number and timing of the opening or acquisition of additional offices or
businesses. The timing of such expansion activities also can affect
period-to-period comparisons of the Company's results of operations.








                                       16
<PAGE>   18



OVERVIEW

         The following table summarizes certain income statement information for
the Company for the years ended December 1996, 1995 and 1994:

<TABLE>
<CAPTION>
                                                         Percent of                Percent of                Percent of
                                              1996        revenues       1995       revenues       1994       revenues
                                              ----        --------       ----       --------       ----       --------
                                                                      (dollars in thousands)
<S>                                        <C>               <C>       <C>           <C>        <C>             <C> 
Revenues:                                                                                                     
    Commercial Staffing                    $188,136          51.4%     $143,243       57.1%     $125,822         59.4%
    Information Technology Services          55,472          15.1            --         --            --           --
    Health Care Services (including                                                                           
       franchise fees)                      122,937          33.5       107,812       42.9        86,045         40.6
                                           --------         -----      --------      -----      --------        -----
                                                                                                              
       Total revenues                       366,545         100.0       251,055      100.0       211,867        100.0
                                           --------         -----      --------      -----      --------        -----
                                                                                                              
Direct cost of services                     263,277          71.8       178,966       71.3       155,987         73.6
Selling, general and administrative          68,329          18.7        51,592       20.5        42,842         20.2
Depreciation and amortization                 5,969           1.6         3,665        1.5         4,391          2.1
License fees                                  7,689           2.1         4,418        1.8         1,687          0.8
                                           --------         -----      --------      -----      --------        -----
        Total expenses                      345,264          94.2       238,641       95.1       204,907         96.7
                                           --------         -----      --------      -----      --------        -----
                                                                                                              
Operating income                             21,281           5.8        12,414        4.9         6,960          3.3
                                                                                                              
Interest expense                              1,432            --            --         --            --           --
                                           --------         -----      --------      -----      --------        -----
                                                                                                              
Income before income taxes                   19,849           5.4        12,414        4.9         6,960          3.3
                                                                                                              
Income tax expense                            8,332           2.3         5,305        2.1         3,061          1.5
                                           --------         -----      --------      -----      --------        -----
                                                                                                              
Net income                                 $ 11,517           3.1%     $  7,109        2.8%     $  3,899          1.8%
                                           ========         =====      ========      =====      ========        =====
</TABLE>                                                                    

         The staffing business is subject to the seasonal impact of summer and
holiday employment trends. Typically, the second six months of each calendar
year is more heavily affected as companies tend to increase their use of
temporary personnel during this period. While the staffing industry is cyclical,
the Company believes that the broad geographic coverage of its operations, and
its emphasis on high-end clerical staffing and information technology staffing
and consulting, mitigate the adverse effects of economic cycles in a single
industry or geographic region.

RESULTS OF OPERATIONS

        YEAR ENDED DECEMBER 29, 1996 VERSUS YEAR ENDED DECEMBER 31, 1995

REVENUES

         Total revenues increased 46.0% to $366.5 million in 1996 from $251.1
million in 1995. Commercial Staffing Division revenue grew 31.3%, primarily as
the result of the contribution of revenues from the four commercial staffing
companies acquired by the Company in 1996, internal growth attributable to
increases in billable hours and billing rates and an improved service mix.
During this period, the Health Care Services Division experienced a 14.0%
increase in revenues (including franchise fees), primarily as a result of the


                                       17
<PAGE>   19

revenues added by the Division from the six franchised office conversions
completed in 1996, increases in home health care visits and billable hours and
increased billing rates and franchise fees. All of the Information Technology
Division's revenues were acquired in 1996.

DIRECT COST OF SERVICES

         Direct costs, consisting of payroll and related expenses of temporary
workers, increased 47.1% to $263.3 million from $179.0 million in 1995. Direct
cost of services as a percentage of revenue increased slightly to 71.8% from
71.3% during 1995. This increase reflected the continuing effects of the
reclassification beginning in the fourth quarter of 1995 of certain non-billable
administrative costs in the Health Care Services Division related to the
Medicare program as direct cost of services, offset by increases in billing
rates and an improved service mix and the positive effects of the Company's
expansion into the higher margin information technology services sector.

OTHER OPERATING EXPENSES

         Other operating expenses, consisting of selling, general and
administrative expenses, depreciation and amortization expense and license fees,
increased 37.4% to $82.0 million in 1996 from $59.7 million in 1995. As a
percentage of revenues, selling, general and administrative expenses decreased
to 18.7% in 1996 from 20.5% for 1995 primarily as the result of the
reclassification of non-billable administrative cost related to the Medicare
program as discussed above and the spreading of these expenses over a larger
revenue base. Depreciation and amortization expense recognized during 1996
increased to 1.6% of revenues from 1.5% of revenues for 1995 primarily due to
the acquisitions completed during 1996. License fees increased by 74.0% to $7.7
million due primarily to an increase in the number of licensed offices during
the year.

INTEREST EXPENSE

         Interest expense increased to $1.4 million in 1996 as the Company
borrowed funds under its revolving credit facility and from certain
owner-sellers at various times during the year primarily to finance
acquisitions. See "Liquidity and Capital Resources." Prior to March 1996, the
Company had not borrowed any funds under the revolving credit facility, and
interest expense had been immaterial.

INCOME TAX EXPENSE

         The effective tax rate decreased to 42.0% in 1996 from 42.7% for 1995.
This decrease was due to reductions in nondeductible amortization expense
related to pretax income and in state income taxes attributable to changes in
the Company's business mix geographically among the states. Although the
Company's effective tax rate has historically been higher than the U.S. federal
statutory rate of 35.0% primarily due to this nondeductible amortization
expense, the Company expects that its effective tax rate will continue to
decline gradually as this nondeductible amortization expense declines.

NET INCOME

         Net income increased 62.0% to $11.5 million in 1996 (or 3.1% of
revenue) from $7.1 million (2.8% of revenue) in 1995 due to the factors
discussed above.

                                       18
<PAGE>   20

        YEAR ENDED DECEMBER 31, 1995 VERSUS YEAR ENDED DECEMBER 25, 1994

REVENUES

         Total revenues increased 18.5% to $251.1 million in 1995 from $211.9
million in 1994. Commercial Staffing Division revenue grew 13.8%, primarily as
the result of increases in billable hours and billing rates and an improved
service mix. During this period, the Health Care Services Division experienced a
25.3% increase in revenues (including franchise fees), primarily as a result of
increases in home health care visits and billable hours and increased billing
rates and franchise fees.

DIRECT COST OF SERVICES

         Direct costs, consisting of payroll and related expenses of temporary
workers, increased 14.7% to $179.0 million in 1995 from $156.0 million in 1994.
Direct cost of services as a percentage of revenue decreased to 71.3% during
1995 from 73.6% during 1994. This decline reflected faster growth in the Health
Care Services Division during the period, which typically has higher gross
margins, and increases in billing rates and an improved service mix.

OTHER OPERATING EXPENSES

         Other operating expenses, consisting of selling, general, and
administrative expenses, depreciation and amortization expenses and license
fees, increased 22.0% to $59.7 million in 1995 from $48.9 million in 1994.
Selling, general and administrative expenses for 1995 as a percentage of total
revenues did not significantly change compared with 1994. Depreciation and
amortization expense recognized during 1995 decreased to 1.5% of revenues from
2.1% of revenues for 1994 primarily due to the completion of the amortization of
certain intangibles as of December 25, 1994, and increased revenues from
licensed Nursefinders' offices. This increase in license fees included $0.8
million related to new licensed offices and $1.1 million related to existing
licensed locations.

INCOME TAX EXPENSE

         The effective tax rate decreased to 42.7% for 1995 from 44.0% for 1994.
This decrease was due to a reduction in nondeductible intangible amortization
expense relative to pretax income for the period. The Company's effective tax
rate was higher than the U.S. federal statutory rate of 35.0% primarily due to
the nondeductibility for tax purposes of certain of the Company's intangible
amortization expense.

NET INCOME

         Net income increased 82.3% to $7.1 million (2.8% of revenue) in 1995
from $3.9 million (1.8% of revenue) in 1994 due to the factors discussed above.





                                       19
<PAGE>   21

LIQUIDITY AND CAPITAL RESOURCES

         The Company's principal uses of cash are to finance receivables and
fund acquisitions and capital expenditures. As of December 29, 1996, receivables
for the Commercial Staffing Division, the Information Technology Division and
the Health Care Services Division remained outstanding an average of 50, 52 and
68 days, respectively, after billing. Health care receivables are generally paid
by insurance companies and governmental agencies and therefore tend to be
outstanding longer than commercial receivables. In the aggregate, days sales
outstanding were 57 at December 29, 1996.

         The Company's primary capital expenditure requirements relate to
acquisitions. During 1996, the Company made cash payments and issued notes
aggregating approximately $179.0 million for acquisitions of existing businesses
and for the conversion of six franchised Nursefinders offices to Company
operated offices. In addition, subsequent to December 29, 1996, the Company has
made post-closing payments to former shareholders of $5.9 million. The Company
is also obligated under certain acquisition agreements to repay seller notes
during the next three years of approximately $17.2 million and to make
contingent earnout payments to former shareholders of acquired companies. The
Company anticipates that the cash generated by the operations of the acquired
companies will provide a substantial part of the capital required to fund the
seller notes and earnout payments. The Company is actively seeking acquisition
opportunities and management believes that the Company will continue to make
acquisitions as attractive opportunities become available. The Company intends
to seek additional capital as necessary to fund other potential acquisitions
through one or more funding sources that may include borrowings under the Credit
Facility described below or offerings of debt or equity securities of the
Company. In addition, the Company regularly evaluates its asset base and
business mix and could elect to make changes in order to take advantage of
attractive acquisition opportunities. Cash flow from operations, to the extent
available, may also be used to fund a portion of these expenditures.

         The Company also expects to spend approximately one percent (1%) of its
revenues during 1997 on capital expenditures not directly related to
acquisitions. The Company plans to open six offices in the Commercial Staffing
Division in 1997. Start-up costs related to the opening of the new branches
vary, but are expected to approximately $100,000 per branch. Costs for
furniture, fixtures and equipment are capitalized and depreciated, and other
start-up costs are expensed as incurred. New Company operated and licensed
offices impose additional working capital requirements on the Company.

         Cash flow provided by operating activities decreased to $7.2 million in
1996 from $10.5 million for 1995, primarily as the result of higher working
capital requirements relating to the Company's revenue growth. Cash used for
investing activities increased to $164.0 million in 1996, from $0.1 million in
1995, reflecting the Company's acquisitions and additions to property and
equipment. Cash flows from financing activities during the same period
approximated $157.6 million, primarily reflecting the net proceeds from the
issuance of 4,025,000 shares of the Company's common stock in the Secondary
Offering completed in June 1996 and net borrowings under the Credit Facility
described below.

         The Company has a bank loan agreement providing for a three-year $125.0
million revolving line of credit (the "Credit Facility"). As of December 29,
1996, approximately $67.3 million had been borrowed under the Credit Facility
(most of which was borrowed to consummate the BEST Consulting and SSC
acquisitions) and approximately $2.8 million had been used for the issuance of
undrawn letters of credit to secure the Company's workers' compensation
programs. Borrowings under the Credit Facility bear interest, payable quarterly,
at a rate equal to LIBOR plus a percentage corresponding to the Company's
consolidated leverage ratio, as defined, or the agents' base rate, as defined,
at the Company's option. At December 29, 1996, the majority of the Company's
borrowings under this facility bore interest at approximately 7.0% (or LIBOR
plus 1.35%). The Credit Facility is secured by pledges of the stock of the
Company's subsidiaries and contains customary covenants such as the maintenance
of certain financial ratios, minimum net worth and working capital requirements
and a restriction on the payment of cash dividends on common stock. The Credit
Facility also limits borrowing availability for acquisition-related purposes.




                                       20
<PAGE>   22

         The Company believes that cash flow from operations, the current
borrowing capacity under the existing Credit Facility and other available
financing alternatives will be adequate to meet its presently anticipated needs
for working capital, capital expenditures and acquisitions.

INFLATION

         The effects of inflation on the Company's operation were not
significant during 1996.

FORWARD-LOOKING INFORMATION

         Information or statements contained in this report, other than
historical information, should be considered forward-looking in nature and are
subject to various risks and uncertainties. For instance, the Company's
strategies and expectations involve risks of competition, changing market
conditions, changes in laws and regulations affecting the Company's industries
and numerous other factors discussed in this report and the Company's other
filings with the Securities and Exchange Commission. Accordingly, actual results
may differ materially from those set forth in any such forward-looking
information or statements.

















                                       21
<PAGE>   23



ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.


REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

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

We have audited the accompanying consolidated balance sheets of Personnel Group
of America, Inc. and subsidiaries (a Delaware corporation) as of December 29,
1996, and December 31, 1995, and the related consolidated statements of income,
shareholders' equity and cash flows for each of the three years in the period
ended December 29, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Personnel Group of America, Inc. and subsidiaries as of December 29, 1996, and
December 31, 1995, and the results of their operations and their cash flows for
each of the three years in the period ended December 29, 1996, in conformity
with generally accepted accounting principles.




                                                      /s/ Arthur Andersen LLP

                                                          Arthur Andersen LLP


Charlotte, North Carolina,
    February 7, 1997.











                                       22
<PAGE>   24



                PERSONNEL GROUP OF AMERICA, INC. AND SUBSIDIARIES

     CONSOLIDATED BALANCE SHEETS -- DECEMBER 29, 1996 AND DECEMBER 31, 1995

                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
  ASSETS                                                                                1996             1995
  ------                                                                              ---------       ----------  
<S>                                                                                   <C>             <C>
CURRENT ASSETS:
    Cash and cash equivalents                                                         $   6,087       $    5,273
    Accounts receivable, net of allowance for                                                    
        doubtful accounts of $1,068 and                                                          
       $514 in 1996 and 1995, respectively,                                                                      
    Prepaid expenses and other current assets                                            67,849           36,727 
    Deferred income taxes                                                                 3,359            1,889 
                 Total current assets                                                     3,512            3,347  
                                                                                      ---------       ----------
                                                                                         80,807           47,236  

Property and equipment, net                                                               7,845            3,602
Excess of cost over fair value of net assets acquired, net                              219,928           50,091
Other intangibles, net                                                                    3,815            1,056
Other assets                                                                              1,932              638
                                                                                      ---------       ----------
                 Total assets                                                         $ 314,327       $  102,623
                                                                                      =========       ==========

  LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
    Current portion of long-term debt                                                 $   6,847       $       --
    Accounts payable                                                                      2,877              222
    Accrued liabilities                                                                  33,593           16,269
    Income taxes payable                                                                    778            1,776
                 Total current liabilities                                            ---------       ----------  
                                                                                         44,095           18,267  
                                                                                                                  
    Long-term debt                                                                       78,875               --
    Deferred income taxes                                                                 8,100            8,370
                 Total liabilities                                                    ---------       ----------
                                                                                        131,070           26,637
                                                                                      ----------      ---------- 
COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY:
    Preferred stock, $.01 par value; shares authorized 5,000;
          no shares issued and outstanding                                                   --               --
    Common stock, $.01 par value; shares authorized 20,000;
          12,034  and 8,000 shares issued and outstanding in 1996 and 1995,                 120               80
       respectively
    Additional paid-in capital                                                          169,273           73,559
    Retained earnings                                                                    13,864            2,347
                                                                                      ---------       ----------
                 Total shareholders' equity                                             183,257           75,986
                                                                                      ---------       ----------
                 Total liabilities and shareholders' equity                           $ 314,327       $  102,623
                                                                                      =========       ==========
</TABLE>



              The accompanying notes are an integral part of these
                       consolidated financial statements.




                                       23
<PAGE>   25



                PERSONNEL GROUP OF AMERICA, INC. AND SUBSIDIARIES

                        CONSOLIDATED STATEMENTS OF INCOME
            FOR THE YEARS ENDED DECEMBER 29, 1996, DECEMBER 31, 1995
                               AND JANUARY 1, 1995

                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>

                                                                        1996              1995             1994
                                                                      --------          --------         --------
REVENUES                                                              $366,545          $251,055         $211,867
                                                                      --------          --------         --------
<S>                                                                   <C>               <C>              <C> 
OPERATING EXPENSES:
    Direct costs of services                                           263,277           178,966          155,987
    Selling, general and administrative                                 68,329            51,592           42,842
    Depreciation and amortization                                        5,969             3,665            4,391
    License fees                                                         7,689             4,418            1,687
                                                                      --------          --------          -------
                 Total operating expenses                              345,264           238,641          204,907

OPERATING INCOME                                                        21,281            12,414            6,960

INTEREST EXPENSE                                                         1,432                --               --
                                                                      --------          --------          -------
INCOME BEFORE INCOME TAXES                                              19,849            12,414            6,960
                                                                      

PROVISION FOR INCOME TAXES                                               8,332             5,305            3,061
                                                                      --------          --------          -------
NET INCOME                                                            $ 11,517          $  7,109          $ 3,899
                                                                      ========          ========          =======

NET INCOME PER SHARE                                                  $   1.13          $     --          $    --

PRO FORMA NET INCOME PER SHARE                                        $     --          $    .89          $   .49
                                                                      ========          ========          =======


WEIGHTED AVERAGE SHARES OUTSTANDING                                     10,216             8,000            8,000
</TABLE>




              The accompanying notes are an integral part of these
                       consolidated financial statements.



                                       24
<PAGE>   26




               PERSONNEL GROUP OF AMERICA, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
            FOR THE YEARS ENDED DECEMBER 29, 1996, DECEMBER 31, 1995
                              AND JANUARY 1, 1995
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                    COMMON STOCK       ADDITIONAL                        TOTAL 
                                                              -----------------------   PAID-IN    RETAINED            SHAREHOLDERS'
                                                                SHARES        AMOUNT    CAPITAL    EARNINGS  NET ASSETS   EQUITY
                                                              ---------     ---------  ---------   --------- ---------  ---------
<S>                                                           <C>           <C>        <C>         <C>       <C>        <C>      
BALANCE, January 2, 1994                                           --       $    --    $    --          --   $  64,257  $  64,257
   Capital contributions, net                                      --            --         --          --         282        282
   Net income                                                      --            --         --          --       3,899      3,899

BALANCE, January 1, 1995                                           --       $    --    $    --          --   $  68,438  $  68,438
    Cash distributions                                             --            --         --          --      (7,351)    (7,351)
    Contributions of assets                                        --            --         --          --       7,790      7,790
    Net income                                                     --            --         --         2,347     4,762      7,109
    Reclassification of net assets as of September 30, 1995       8,000            80     73,559        --     (73,639)      --
                                                              ---------     ---------  ---------   --------- ---------  ---------

BALANCE, December 31, 1995                                        8,000     $      80  $  73,559   $   2,347      --    $  75,986
    Issuance of common stock                                      4,025            40     95,589        --        --       95,629
    Exercises of stock options                                        9          --          125        --        --          125
    Net income                                                     --            --         --        11,517      --       11,517
                                                              ---------     ---------  ---------   --------- ---------  ---------

BALANCE, December 29, 1996                                       12,034     $     120  $ 169,273   $  13,864      --    $ 183,257
                                                              =========     =========  =========   ========= =========  =========

</TABLE>





              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                      25
<PAGE>   27


                PERSONNEL GROUP OF AMERICA, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
            FOR THE YEARS ENDED DECEMBER 29, 1996, DECEMBER 31, 1995
                               AND JANUARY 1, 1995
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                            1996        1995       1994
                                                                         ---------    --------    ------- 
<S>                                                                      <C>          <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net income                                                           $  11,517    $  7,109    $ 3,899
    Adjustments to reconcile net income to net cash provided by
       operating activities-
          Depreciation and amortization                                      5,969       3,665      4,391
          Deferred income taxes, net                                          (435)       (140)      (469)
          Changes in assets and liabilities:
              Accounts receivable                                          (11,749)     (3,547)    (7,322)
              Prepaid expenses and other current assets                       (158)       (531)      (272)
              Other assets                                                  (1,155)       (384)        57
              Accounts payable and accrued liabilities                       4,266       2,585      2,740
              Income taxes payable                                          (1,026)      1,776       --
                                                                         ---------    --------    ------- 
                 Net cash provided by operating activities                   7,229      10,553      3,024
                                                                         ---------    --------    -------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchase of  property and equipment, net                                (3,793)       (840)    (3,251)
    Acquisitions, net of cash acquired                                    (160,177)       --         --
                                                                         ---------    --------    -------
                 Net cash used in investing activities                    (163,970)       (840)    (3,251)
                                                                         ---------    --------    -------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Proceeds from issuance of common stock, net                             95,629        --         --
     Proceeds from exercise of stock options                                   125        --         --
    Repayments under credit facility                                       (30,775)       --         --
    Borrowings under credit facility                                        98,100        --         --
    Repayments of acquired debt                                             (5,524)       --         --
    Contributions from (distributions to) Adia, net                           --        (7,351)       282
                                                                         ---------    --------    -------
                   Net cash provided by (used in) financing                157,555      (7,351)       282
                   activities                                            ---------    --------    -------

Net increase in cash and cash equivalents                                      814       2,342         55

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                               5,273       2,931      2,876
CASH AND CASH EQUIVALENTS AT END OF YEAR                                 ---------    --------    ------- 
                                                                         $   6,087    $  5,273    $ 2,931 
                                                                         =========    ========    ======= 
                                                                         
SUPPLEMENTAL CASH FLOW INFORMATION:
    Cash payments during the period for-
              Income taxes                                               $   9,617    $  3,737    $ 3,530
              Interest                                                   $   1,307    $   --      $  --
</TABLE>



              The accompanying notes are an integral part of these
                       consolidated financial statements.



                                      26

<PAGE>   28


               PERSONNEL GROUP OF AMERICA, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)


1.     ORGANIZATION AND NATURE OF OPERATIONS:


BASIS OF PRESENTATION

         Personnel Group of America, Inc. and its subsidiaries (collectively,
the "Company") completed its initial public offering (the "IPO") in September
1995. Prior to the IPO, the Company was an indirect wholly owned subsidiary of
Adia, S.A., a Swiss corporation ("Adia"). The Company was organized by Adia to
facilitate the IPO. In the Company's formation and organization, Adia
transferred to the Company the subsidiaries and divisions that it had previously
owned (and that now comprise the Company's Health Care Services Division and a
portion of the Commercial Staffing Division) in exchange for common stock. The
financial statements of the Company are presented on an historical cost basis,
and all significant intercompany transactions have been eliminated.

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

NATURE OF OPERATIONS

         The Company operates through a network of Company-operated, franchised
and licensed offices. The Company's business is organized into three Divisions:
the Commercial Staffing Division, which provides temporary office, clerical and
light industrial and light technical services; the Information Technology
Division, which provides information technology staffing and consulting services
in a range of computer-related disciplines; and the Health Care Services
Division, which provides health care personnel for home health care services and
institutional staff augmentation. At December 29, 1996, the Commercial Staffing
Division was comprised of twelve companies, the Information Technology Division
was comprised of five companies and the Health Care Services Division operated
under the Nursefinders name. The Health Care Services Division is subject to
extensive federal, state and local laws and government regulations, including
licensing requirements, certificate of need requirements to be a Medicare
provider in some states, periodic examinations by government agencies, and
federal and state antifraud, anti-abuse and anti-kickback statutes and
regulations.


2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:


RECOGNITION OF REVENUE

         Other than for the items described below, revenues are recognized upon
the performance of services.

         Nursefinders' franchise-related revenues are recognized pursuant to the
specific terms of two different types of agreements (herein referred to as
"Franchise Agreements" and "License Agreements"). For Franchise Agreements, the
Company provides general training, operating, site selection and marketing
programs, administration of insurance and payroll tax obligations and assistance
in tax planning and legal matters. In exchange for these services, the Company
recognizes franchise royalty revenue generally based on 5% of the franchisees'
patient and staffing services revenue. Revenue is recognized upon performance of
patient or staffing service by the franchisee. 



                                      27
<PAGE>   29

Existing Franchise Agreements have a five-year term. Under Franchise
Agreements, the Company recognized revenue of $2,825, $3,702 and $3,345 in
1996, 1995 and 1994, respectively. In addition, included in 1995 revenues is a
$405 gain on the cancellation of the Cleveland franchise agreement.

         For License Agreements, in addition to the services described above,
the Company employs and pays individuals to perform services for the licensees'
customers, invoices customers, maintains professional liability insurance and
supports the training, office administration, systems and marketing needs of the
licensee. All revenues and expenses generated by the licensee, therefore, belong
to the Company and are included in the Company's revenues and expenses. The
Company is primarily liable for operating expenses. The Company pays the
licensee a license fee, based on gross margin for temporary services less 7% of
revenues, adjusted for uncollectible receivables and certain other expenses.
Gross margin is the difference between the amounts billed to clients less direct
cost of services consisting of direct labor, payroll taxes, insurance and
benefits for temporary employees. License fees are included in other operating
expenses. License Agreements generally have a 10-year term.

         Initial agreement fees under both Franchise and License Agreements are
recognized currently as income. These fees are not material.

         Medicare revenues are recognized at an amount equivalent to allowable
costs as defined by the Medicare program. Medicare reimbursable costs are
limited by aggregate cost limits and by disallowance of certain costs not
directly resulting from patient care services such as promotion and advertising.
The Company believes it has not exceeded the aggregate cost limits and believes
adequate provisions have been made for any potential disallowances as a result
of future audits.

CASH AND CASH EQUIVALENTS

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

PROPERTY AND EQUIPMENT

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

EXCESS OF COST OVER FAIR VALUE OF NET ASSETS ACQUIRED AND OTHER INTANGIBLES

         The Company's businesses were initially acquired from unrelated third
parties in exchange for cash and other consideration. Excess of cost over fair
value of net assets acquired resulting from such acquisitions have been recorded
on the books of the Company at historical cost and is amortized on a
straight-line basis over 40 years. In January 1995, Adia acquired all of the
remaining outstanding shares of a majority-owned subsidiary. This acquisition
resulted in additional excess of cost over fair value of net assets acquired
being recorded by Adia. The Company recorded its pro rata share ($7,191) of this
excess. Accumulated amortization of excess of cost over fair value of net assets
acquired amounted to $16,131 and $12,941 at December 29, 1996 and December 31,
1995, respectively.

         Other intangibles consist primarily of client and employee lists and
covenants not to compete.

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



                                      28
<PAGE>   30

of net assets acquired and other intangibles to be fully recovered.

INCOME TAXES

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

         The Company's operating results through September 29, 1995 were
included in Adia's consolidated federal income tax return and combined state tax
returns filed in various states. The Company has filed its own consolidated
federal income tax return and various state returns for the periods ending after
September 29, 1995. The income tax provision is calculated on a separate company
basis for all years presented.

NET INCOME PER SHARE


         Net income per share has been provided only for periods or quarters
subsequent to the IPO (see Note 15). Pro forma net income per share for all
other periods provided is presented assuming that the weighted average number of
shares outstanding equals the 8,000,000 shares sold by Adia in the IPO. The
impact of stock options on net income per share is not material for any of the
periods presented.


USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS

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

3.    ACQUISITIONS

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

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


In addition, the Company converted six formerly franchised Nursefinders'
officers to Company-operated branches in 1996 (one each in January, March and
April and three in July). The acquisitions and the franchise conversions are
collectively referred to hereinafter as the "Transactions" and the acquired
businesses and converted franchised offices are collectively referred to
hereinafter as the 



                                      29
<PAGE>   31

"Acquired Companies." The Acquired Companies had combined annual revenues in
1996 of approximately $197,000.

         The Company has paid approximately $179,000 in cash and notes to
consummate the Transactions (which included direct acquisition costs but
excluded contingent earnout payments associated with certain of the
Transactions). In addition, subsequent to December 29, 1996, the Company made
postclosing payments to former shareholders of $5,882. Certain of the
acquisitions provide for additional purchase price consideration upon attainment
of certain earnings targets for various periods during the next three years. Any
additional consideration will be recorded as additional purchase price when paid
and will increase the amount of excess of cost over fair value of net assets
acquired. All of the Transactions have been accounted for using the purchase
method of accounting. Accordingly, the assets and liabilities of the entities
acquired, based on preliminary allocations, were recorded at their estimated
fair values at the dates of the acquisitions and the results of operations of
the Acquired Companies have been included in the Company's consolidated results
of operations from the dates of the respective acquisitions. Final allocation of
the purchase price may result in adjustments to the amounts previously recorded
as excess of cost over fair market value of net assets acquired. The excess of
cost over the estimated fair value of the net assets acquired is being amortized
on a straight-line basis over 40 years.

         The following table presents the Company's pro forma consolidated
results of operations for 1996 and 1995, as if the Transactions had occurred on
January 1, 1995:

<TABLE>
<CAPTION>
                                             1996            1995
                                             ----            ----
<S>                                        <C>             <C>     
Revenues                                   $464,554        $413,419
Net income                                   12,421           8,766
Net income per share                       $   1.22        $   1.10
                                           ========        ========
Weighted average shares
  outstanding                                10,216           8,000
                                           ========        ========
</TABLE>


         Since December 29, 1996, the Company has completed the acquisitions of
Word Processing Professionals, Inc. ("Word Processing Professionals") in New
York, New York and Energetix, Inc. ("Energetix") in Chicago, Illinois. Word
Processing Professionals, acquired on January 3, 1997, provides word processing
and desktop publishing services to professional services firms and financial
institutions in mid-town Manhattan. Energetix, acquired on February 3, 1997,
provides information technology staffing services to a variety of clients in the
Chicagoland area. These companies had combined revenues in excess of $13.0
million in 1996. The Company funded the acquisitions of Word Processing
Professionals and Energetix primarily through borrowings under the Credit
Facility (see Note 11).



                                      30
<PAGE>   32

4.  ACCOUNTS RECEIVABLE:

         Accounts receivable consisted of the following at December 29, 1996 and
December 31, 1995:

<TABLE>
<CAPTION>
                                                      1996             1995
                                                      ----             ----
<S>                                                 <C>              <C>     
Trade accounts receivable                           $ 61,549         $ 28,190
Medicare/Medicaid, net of contractual allowances       6,712            6,725
Other                                                    656            2,326
                                                    --------         --------
                                                      68,917           37,241
Less-Allowance for doubtful accounts                  (1,068)            (514)
                                                    --------         --------
                                                    $ 67,849         $ 36,727
                                                    ========         ========
</TABLE>

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

<TABLE>
<CAPTION>
                            BALANCE AT    CHARGED TO                    BALANCE
                          BEGINNING OF    COSTS AND                     AT END OF
YEAR ENDED                  OF PERIOD     EXPENSES      DEDUCTIONS       PERIOD
----------                  ---------     --------      ----------       ------
<S>                       <C>             <C>           <C>             <C>
December 29, 1996            $514         $1,627         $(1,073)       $1,068  
December 31, 1995             547            906            (939)          514  
January 1, 1995               697            599            (749)          547  
                             ====         ======         =======        ======  
</TABLE>

5.  PROPERTY AND EQUIPMENT, NET:

         Property and equipment, net, consisted of the following at December 29,
1996 and December 31, 1995:

<TABLE>
<CAPTION>
                                                             1996            1995
                                                           --------         --------
<S>                                                        <C>              <C>     
Purchased software and computer equipment                  $  7,709         $  3,249
Furniture and other equipment                                 7,012            5,602
Leasehold improvements                                          818              659
                                                           --------         --------
                                                             15,539            9,510
Less - Accumulated depreciation                              (7,694)          (5,908)
                                                           --------         --------
                                                           $  7,845         $  3,602
                                                           ========         ========
</TABLE>


                                      31

<PAGE>   33




6.  OTHER INTANGIBLE ASSETS:


         Other intangible assets consisted of the following at December 29, 1996
and December 31, 1995:

<TABLE>
<CAPTION>
                                                        USEFUL
                                                         LIVES        1996         1995
                                                    -------------   --------     --------
<S>                                                 <C>             <C>          <C>    
Covenants not to compete                             4 to 5 years   $  3,091     $ 4,686
Client and employee lists                            5 years           1,265       5,641
Franchise agreements                                 10 years            100       1,665
Other                                                5 years             443         881
                                                                    --------     -------
                                                                       4,899      12,873
 Less - Accumulated amortization                                      (1,084)    (11,817)
                                                                    --------     -------
                                                                    $  3,815     $ 1,056
                                                                    ========     =======
</TABLE>

                                                                  

7.  ACCRUED LIABILITIES:

         Accrued liabilities consisted of the following at December 29, 1996 and
December 31, 1995:


<TABLE>
<CAPTION>
                                                                        1996             1995     
                                                                      --------         --------  
<S>                                                                   <C>              <C>                      
Accrued wages and benefits                                            $ 15,852         $  8,062
Accrued workers' compensation benefits                                   5,461            5,381
Post-closing payments to former shareholders                             5,882             --  
Other                                                                    6,398            2,826
                                                                      --------         --------  
                                                                      $ 33,593         $ 16,269
                                                                      ========         ========
</TABLE>                                                              





8.  EMPLOYEE BENEFIT PLANS:

         The Company has 401(k) profit sharing and nonqualified profit sharing
plans, which cover substantially all of its employees. Company contributions or
allocations are made on a discretionary basis for these plans (except for
matching contributions made to 401(k) profit sharing plans as required by the
terms of such plans). Contributions charged to operating expenses were $810,
$706 and $470 for the years ended December 29, 1996, December 31, 1995 and
January 1, 1995, respectively.

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


9.  CAPITAL STOCK AND STOCK OPTIONS:

         In June 1996, the Company issued 4,025,000 shares of its common stock
in an underwritten public offering (the "Secondary Offering"), which raised
$95,629 for the Company, net of offering expenses. The proceeds from the
Secondary Offering were used to repay outstanding borrowings under the Company's
revolving credit facility (see Note 11) and fund several recent acquisitions
(see Note 3).

         The Company's Board of Directors adopted its 1995 Equity Participation
Plan (the "Incentive Plan") to attract and retain officers, key employees,
consultants and directors. An aggregate of 1,200,000 shares of common stock was
authorized for issuance upon exercise of options, stock 



                                      32
<PAGE>   34

appreciation rights, and other awards, or as restricted or deferred stock
awards under the Incentive Plan. Incentive stock options may be granted only to
employees and, when granted, have an exercise price equal to at least 100% of
fair market value of common stock on the grant date and a term not longer than
10 years.

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

         A summary of stock option activity follows:



<TABLE>
<CAPTION>
                                                                                          WEIGHTED
                                                                         SHARES            AVERAGE 
                                                                         UNDER              PRICE
                                                                        OPTION            PER SHARE
                                                                        -------           -------
         <S>                                                            <C>               <C>    
         Outstanding, January 1, 1995                                    --               $    --
              Granted in 1995                                           432,705             13.85
                                                                        -------           -------
         Outstanding, December 31, 1995                                 432,705             13.85
               Granted in 1996                                          420,648             25.31
                  Exercised                                               9,310             13.38
                  Expired                                                24,090             14.61
                                                                        -------           -------

         Outstanding, December 29, 1996                                 819,953           $ 20.29
                                                                        =======           =======

                Exerciseable, December 31, 1995                         111,541           $ 13.85
                                                                        =======           =======
                Exerciseable, December 29, 1996                         263,556           $ 17.85
                                                                        =======           =======
</TABLE>


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

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



                                      33
<PAGE>   35

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

<TABLE>
<CAPTION>
                                                    1996            1995
                                                    ----            ----
<S>                                               <C>              <C>      
          Net income, as reported                 $11,517          $7,109
          Net income per share, as reported          1.13            0.89
          Pro forma net income                      9,922           6,400
          Pro forma net income per share          $  0.97          $ 0.80
                                                  =======          ======
</TABLE>


         On February 6, 1996, the Board of Directors of the Company declared a
dividend of one nonvoting preferred share purchase right (a "Right") for each
outstanding share of common stock. The dividend was paid on February 27, 1996,
to the shareholders of record on that date. In the event of an acquisition, or
the announcement of an acquisition, by a party of a beneficial interest of at
least 15% of the Company's common stock, each right would become exercisable
(the "Distribution Date"). Each Right entitles the registered holder to purchase
from the Company one one-hundredth of a share of Series A Junior Participating
Preferred Stock, par value $0.01 per share, of the Company at a price of $95.00
per one one-hundredth of a share of Preferred Stock, subject to adjustment. In
addition, each Right entitles the right holder to certain other rights as
specified in the Company's rights agreement. The Rights are not exercisable
until Distribution Date. The Rights will expire on February 6, 2006 (the "Final
Expiration Date"), unless the Final Expiration Date is extended or unless the
Rights are earlier redeemed or exchanged by the Company.



10.  MANAGEMENT FEES:

         Prior to the IPO, Adia and its affiliates provided certain services and
paid certain expenses for the Company in exchange for a management fee. These
services included accounting, billing and collections, legal and other selling,
general and administrative expenses. Management of the Company negotiated with
Adia's management to determine the appropriate fee charged based on the
approximate cost of the services provided and the expenses paid by Adia on
behalf of the Company. All transactions between the Company and Adia were
reflected in the consolidated financial statements. Management fees paid to Adia
for the nine month period ended September 1995 and the year ended January 1,
1995 were $426 and $582, respectively. In addition, the Company had cash
clearing transactions with Adia primarily for dividends, estimated tax payments,
management fees and workers' compensation expenses that were recorded in an
intercompany account. Following the IPO, Adia agreed to provide certain services
to the Company pursuant to various written agreements on terms and at prices as
set forth in such agreements. Fees paid to Adia for services following the IPO
were not material.



                                      34

<PAGE>   36


11. LONG-TERM DEBT:

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

<TABLE>
<CAPTION>
                                                                                             1996
                                                                                             ----
<S>                                                                                         <C>    
     $125,000 revolving credit facility due September 30, 1999                              $67,325
     Notes payable to sellers of the Acquired Companies                                      17,225
     Other notes  payable                                                                     1,172
                                                                                            -------
                                                                                             85,722
           Less current portion                                                               6,847
                                                                                            -------
                                                                                            $78,875
                                                                                            =======
</TABLE>

         During 1996, the Company entered into a new revolving credit agreement
with a bank. This agreement was subsequently amended on December 12, 1996 in
connection with the syndication of the loans. Under the terms of the amended and
restated credit agreement, the Company now has available a $125,000 revolving
credit facility (the "Credit Facility").

         During 1996, the maximum aggregate outstanding borrowing under the
Credit Facility was $67,325 and the average outstanding balance during the 197
days during the year in which the Company had borrowings was $37,800. In
addition, approximately $2,800 of the Credit Facility has been used for
the issuance of undrawn letters of credit to secure the Company's workers'
compensation program. The daily weighted average interest rate under the Credit
Facility was 6.8% and a commitment fee of 3/8% of the unused line was charged
during 1996. At February 7, 1997, the amount available for borrowing under the
Credit Facility was approximately $30,000.

         Borrowings under the Credit Facility bear interest, at a rate equal to
LIBOR plus a percentage corresponding to the Company's consolidated leverage
ratio, as defined, or the agent's base rate, as defined, at the Company's
option. The majority of the Company's borrowings under the Credit Facility bore
interest at an average rate of 7.0% at December 29, 1996. The Credit Facility is
secured by pledges of stock of the Company's subsidiaries and contains customary
covenants such as the maintenance of certain financial ratios, minimum net worth
and working capital requirements and a restriction on the payment of cash
dividends on common stock. The Credit Facility also limits borrowing
availability for acquisition-related purposes. At December 29, 1996, the Company
was in compliance with the covenants contained in the Credit Facility.

         The Company issued notes payable in connection with certain of the
Transactions. These notes are due in varying installments and carry variable
interest rates ranging from 6.6% to 6.9% at December 29, 1996.

         Scheduled maturities of long-term debt at December 29, 1996 are as
follows:

<TABLE>
<S>                        <C>                <C>   
                           1997               $ 6,847
                           1998                 6,241
                           1999                72,634
                                              -------
                                              $85,722
                                              =======
</TABLE>




                                      35


<PAGE>   37

12.  INCOME TAXES:

         The provision for income taxes for the years ended December 29, 1996,
December 31, 1995 and January 1, 1995 consisted of the following:

  
<TABLE>
<CAPTION>
                                                           1996     1995      1994    
                                                           ----     ----      ----    
<S>                                                       <C>      <C>       <C>      
    Current provision                                     $8,767   $5,445    $3,530   
    Deferred benefit                                        (435)    (140)     (469)  
                                                          ------   ------    ------   
                     Total                                $8,332   $5,305    $3,061   
                                                          ======   ======    ======   
</TABLE>                                                  
                                                      

         The reconciliation of the effective tax rate is as follows:


<TABLE>
<CAPTION>
                                                          1996     1995      1994   
                                                          ----     ----      ----   
<S>                                                       <C>      <C>       <C>    
Federal statutory rate                                    35.0%    35.0%     35.0%  
State taxes, net of federal benefit                        4.8      5.0       4.3   
Effect of nondeductible amortization and                                            
     other                                                 2.2      2.7       4.7   
                                                          ----     ----      ----   
                                     Total                42.0%    42.7%     44.0%  
                                                          ====     ====      ====   
</TABLE>                                                  

         The components of the Company's net deferred tax assets and liabilities
were as follows at December 29, 1996 and December 31, 1995:


<TABLE>
<CAPTION>
                                                                      1996      1995
                                                                      ----      ----
<S>                                                                  <C>       <C>   
Deferred tax liability - Excess of cost over fair value of
  net assets acquired                                                $8,100    $8,370
                                                                     ------    ------
Deferred tax assets-
  Accrued workers' compensation                                       2,237     2,614
  Allowance for doubtful accounts and other                           1,275       733
                                                                     ------    ------
                                                                      3,512     3,347
                                                                     ------    ------
Net deferred tax liability                                           $4,588    $5,023
                                                                     ======    ======
</TABLE>



         In certain of the Company's acquisitions, the Company was able to
deduct currently, for tax purposes, certain amounts representing purchase price
paid in excess of book value of recorded assets and liabilities. For financial
reporting purposes, this was recorded as excess of cost over fair value of net
assets acquired with a corresponding deferred tax liability related to this
timing difference.

TAX-SHARING AGREEMENT

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



                                      36


<PAGE>   38

13.  FINANCIAL INSTRUMENTS:


FAIR VALUE OF FINANCIAL INSTRUMENTS

      The fair value of the Company's cash and cash equivalents, accounts
receivable, accounts payable and accrued liabilities approximates the book value
at December 29, 1996, due to the short-term nature of these instruments. The
fair value of the Company's borrowings under the Credit Facility and other
long-term debt approximate the book value at December 29, 1996, because of the
variable rate associated with the borrowings.


CONCENTRATION OF CREDIT RISK

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

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


14.  COMMITMENTS AND CONTINGENCIES:


OPERATING LEASES

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

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

<TABLE>
<S>                                  <C>    
1997                                 $ 4,335
1998                                   3,260
1999                                   2,232
2000                                   1,270
2001 and thereafter                    1,152
                                     -------
                                     $12,249
                                     =======  
</TABLE>


         Total rent expense under operating leases amounted to $4,280, $3,151
and $2,991 for the years ended December 29, 1996, December 31, 1995, and
January 1, 1995, respectively.

INSURANCE

         The Company maintains a self-insurance program for workers'
compensation and medical and dental claims. The Company accrues liabilities
under this program based on the loss and loss adjustment expenses as estimated
by an outside administrator. At December 29, 1996, the Company had a standby
letter of credit with a bank in connection with a portion of its workers'
compensation program.

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



                                      37

<PAGE>   39

MEDICARE COST-REIMBURSEMENT PROGRAM

         Final determination of amounts earned under the Medicare
cost-reimbursement program are subject to review and audit by appropriate
governmental authorities or their agents. In the opinion of management, adequate
provision has been made for any adjustments that could result from future
Medicare audits.

         For the years ended December 29, 1996, December 31, 1995, and January
1, 1995, 9%, 13% and 12% of the Company's revenues, respectively, were derived
from the Medicare program. The Medicare program is subject to statutory and
regulatory changes, retroactive and prospective rate adjustments and
administrative rulings and funding restrictions, all of which could have the
effect of limiting or reducing reimbursement levels for the Company's services.

EMPLOYMENT AGREEMENTS

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

LEGAL PROCEEDINGS

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

INDEMNIFICATION

         The Company and Adia entered into an indemnification agreement in
connection with the IPO, whereby the Company agreed to indemnify Adia against
certain expenses or losses incurred by Adia arising from the conduct of the
Company's business.


15.  SUMMARY OF QUARTERLY FINANCIAL INFORMATION (UNAUDITED):

      The following table sets forth quarterly financial information for each
quarter in the years ended December 29, 1996 and December 31, 1995:

<TABLE>
<CAPTION>
                                                            1996
                                             ----------------------------- -------        
                                              FIRST     SECOND    THIRD    FOURTH
                                             -------   -------   -------   --------        
<S>                                          <C>       <C>       <C>       <C>       
Revenues                                     $66,873   $77,867   $99,302   $122,503  
Operating expenses                            64,282    73,728    93,308    113,946  
Net income                                     1,490     2,250     3,575      4,202  
Net income per share                         $  0.19   $  0.26   $  0.30   $   0.35  
                                             =======   =======   =======   ========  
                                             
</TABLE>

<TABLE>
<CAPTION>
                                                            1995
                                             --------------------------------------    
                                              FIRST     SECOND    THIRD     FOURTH
                                             -------   -------   -------   --------    
<S>                                          <C>       <C>       <C>       <C>         
Revenues                                     $59,512   $61,260   $63,855   $ 66,428    
Operating expenses                            57,675    58,194    60,462     62,310    
Net income                                     1,065     1,700     1,997      2,347    
Net income per share                            --        --        --         0.29    
Pro forma  net income per share                                  
                                             $  0.13   $  0.21   $  0.25   $   --      
                                             =======   =======   =======   ========    
</TABLE>
                                             





                                      38
<PAGE>   40




ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

           The Company has no disagreements on accounting or financial 
disclosure matters with its independent public accountants to report under this
Item 9.

  
                                   PART III.

ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

           Information contained in the Proxy Statement in the first paragraph
under the caption "Election of Directors--Nominees," and under the caption
"Election of Directors--Directors and Executive Officers," is incorporated
herein by reference in response to this Item 10.

ITEM 11.   EXECUTIVE COMPENSATION.

           Information contained in the Proxy Statement under the captions
"Election of Directors--Director Compensation" and "Executive Compensation" is
incorporated herein by reference in response to this Item 11.

ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

           Information contained in the Proxy Statement under the caption
"Securities Ownership of Certain Beneficial Owners and Management" is
incorporated by reference herein in response to this Item 12.

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

           Information contained in the Proxy Statement under the caption
"Certain Transactions" is incorporated herein by reference in response to this
Item 13.




                                      39
<PAGE>   41


                                    PART IV.



ITEM 14.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

           a.    Documents filed as part of this Report

                 (1) The following financial statements of the Company and the
Report of Independent Public Accountants are contained in Item 8 above:

                      CONSOLIDATED FINANCIAL STATEMENTS:

                           Report of Independent Public Accountants

                           Consolidated Balance Sheets as of December 29, 1996
                           and December 31, 1995

                           Consolidated Statements of Income for the years
                           ended December 29, 1996, December 31, 1995 and
                           January 1, 1995

                           Consolidated Statements of Shareholders' Equity for
                           the years ended December 29, 1996, December 31, 1995
                           and January 1, 1995

                           Consolidated Statements of Cash Flows for the years
                           ended December 29, 1996, December 31, 1995 and
                           January 1, 1995

                           Notes to Consolidated Financial Statements

                 (2) No financial statement schedules are filed as part of this
report. All financial statement schedules for which provision is made in the
applicable accounting regulations of the Securities and Exchange Commission are
not required under the related instructions, are inapplicable, or the required
information is included elsewhere in the notes to financial statements referred
to above.

                 (3)  Exhibits:

                 The Exhibits to this Report on Form 10-K are listed in the
accompanying Exhibit Index.

           b.    Reports on Form 8-K

           The Company filed the following Current Reports on Form 8-K during
the fourth quarter of 1996:



                                      40


<PAGE>   42

            Form 8-K, dated September 30, 1996, to report under Item 2,
"Acquisition or Disposition of Assets," the completion of the acquisition of
BEST Consulting (the "BEST 8-K").

            Form 8-K/A, dated November 7, 1996, amending the previously filed 
BEST 8-K to include certain pro forma financial information relating to the
BEST Consulting acquisition under Item 7, "Financial Statements."



                                      41
<PAGE>   43


                                   SIGNATURES


    Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on February 26, 1997.



                                     PERSONNEL GROUP of AMERICA, INC.

                                     By:   /s/ Edward P. Drudge, Jr.
                                           -----------------------------------
                                           Edward P. Drudge, Jr.
                                           Chairman and Chief Executive Officer


    Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons in the capacities indicated on
February 26, 1997.

<TABLE>
<CAPTION>
       Signature
       ---------
<S>                                                  <C>
/s/ Edward P. Drudge, Jr.                            Chairman, Chief Executive Officer and Director
-----------------------------------
Edward P. Drudge, Jr.

/s/ Ken R. Bramlett, Jr.                             Chief Financial Officer and Senior Vice President
-----------------------------------
Ken R. Bramlett, Jr.


/s/ Kevin P. Egan                                    Director
-----------------------------------
Kevin P. Egan

/s/ J. Roger King                                    Director
-----------------------------------
J. Roger King

/s/ James V. Napier                                  Director
-----------------------------------
James V. Napier

/s/ William J. Simione, Jr.                          Director
-----------------------------------
William J. Simione, Jr.
</TABLE>


<PAGE>   44




                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
                                                                 FILED HEREWITH  
                                                                    (*), NON-    
                                                                 APPLICABLE (NA) 
                                                                 OR INCORPORATED 
                                                                  BY REFERENCE   
                                                                      FROM       
                                                                                          COMPANY REG. 
                                                                    PREVIOUS                 NO.
EXHIBIT                                                             EXHIBIT                  OR
NUMBER                          DESCRIPTION                          NUMBER                REPORT
------                          -----------                          ------               --------
<S>              <C>                                                 <C>             <C>             
 3.1             Amended and Restated Certificate of                   3.1                33-95228
                 Incorporation of the Company                               
                                                                            
 3.2             Amended and Restated Bylaws of the Company            3.2                33-95228
                                                                            
 4.0             Specimen Stock Certificate                            4.0                33-95228
                                                                            
 4.1             Rights Agreement between the Company and               1                  0-27792
                 The First National Bank of Boston                          
                                                                            
10.1+            1995 Equity Participation Plan                       10.1            10-Q for quarter
                                                                                        ended 9/30/95

10.2+            Management Incentive Compensation Plan               10.2            10-Q for quarter
                                                                                        ended 9/30/95

10.3+#           Director and Officer Indemnification                 10.3              10-K for year
                 Agreement of James V. Napier                                           ended 12/31/95 

10.4             License Agreement between Adia Services,             10.4            10-Q for quarter
                 Inc., a California corporation ("Adia                                  ended 9/30/95
                 California") and StaffPLUS, Inc.
       
10.5             License Agreement between Adia Services,             10.5            10-Q for quarter
                 Inc., a Delaware corporation ("Adia                                    ended 9/30/95
                 Delaware") and Nursefinders, Inc.
       
10.6             Administrative Services Agreement between            10.6            10-Q for quarter
                 the Company and Adia California                                        ended 9/30/95
       
10.7             Paybill Services Agreement between the               10.7            10-Q for quarter
                 Company and Adia California                                            ended 9/30/95
       
10.8             Software License Agreement between the               10.8            10-Q for quarter
                 Company and Adia California                                            ended 9/30/95

10.9+            Employment Agreement between the Company             10.9            10-Q for quarter
                 and Edward P. Drudge, Jr.                                              ended 9/30/95
                                                                                                     
</TABLE>



<PAGE>   45
<TABLE>
<CAPTION>                                                                     
                                                                  FILED HEREWITH
                                                                    (*), NON- 
                                                                  APPLICABLE (NA)
                                                                 OR INCORPORATED
                                                                   BY REFEREMCE
                                                                       FROM

                                                                                        COMPANY REG.
                                                                     PREVIOUS                NO.
EXHIBIT                                                              EXHIBIT                 OR
NUMBER                        DESCRIPTION                             NUMBER               REPORT
-------                       -----------                            --------              ------
<S>              <C>                                                  <C>               <C>    

10.10+           Employment Agreement between the Company               *     
                 and James C. Hunt                                            
                                                                              
10.11+           Employment Agreement between Adia                    10.13                33-95228
                 Delaware, PFI Corp. and Richard L.                           
                 Peranton                                                     
                                                                              
10.12+           Employment Agreement between the Company               *     
                 and Peter R. Sollenne                                        
                                                                              
10.13+           Employment Agreement between the Company               *     
                 and Ken R. Bramlett, Jr.                                     
                                                                              
10.14            Indemnification Agreement between the                10.14            10-Q for quarter
                 Company and Adia Delaware                                              ended 9/30/95
                                                                              
10.15            Tax-Sharing Agreement between the                    10.15            10-Q for quarter
                 Company, Adia Delaware and Adia California                             ended 9/30/95
                                                                              
10.16            Amended and Restated Non-Qualified                     *     
                 Profit-Sharing Plan                                          
                                                                              
10.17            Loan Agreement between the Company and               10.17            10-Q for quarter
                 NationsBank, N.A., as agent                                            ended 9/29/96
                                                                              
10.18            Amendment No. 1 to Loan Agreement between              *     
                 the Company and NationsBank, N.A., as                        
                 agent                                                        
                                                                              
10.19            Asset Purchase Agreement between the                 10.19               333-04573
                 Company and Judith Fox Staffing Companies                    
                                                                              
10.20            Asset Purchase Agreement between the                 10.2                333-04573
                 Company and Computer Resources Group                         
</TABLE>





<PAGE>   46

<TABLE>
<CAPTION>                                                                     
                                                                  FILED HEREWITH
                                                                    (*), NON- 
                                                                  APPLICABLE (NA)
                                                                 OR INCORPORATED
                                                                   BY REFEREMCE
                                                                       FROM

                                                                                        COMPANY REG.
                                                                     PREVIOUS                NO.
EXHIBIT                                                              EXHIBIT                 OR
NUMBER                        DESCRIPTION                             NUMBER               REPORT
-------                       -----------                            --------              ------
<S>              <C>                                                   <C>            <C>       
10.21            Asset Purchase Agreement between the                  2              8-K dated 9/30/96
                 Company and Business Enterprise Systems
                 and Technology, Inc.  (BEST Consulting)

21.01            Subsidiaries of the Company                           *

23.01            Consent of Arthur Andersen LLP in                     *
                 connection with the Company's
                 Registration Statement on Form S-8

27.01            Financial data schedule (for SEC filing               *
                 purposes only)
</TABLE>



+Management contract or compensatory plan required to be filed under Item 14(c)
of this report and Item 601 of Regulation S-K of the Securities and Exchange
Commission.

#This Exhibit is substantially identical to Director and Officer
Indemnification Agreements of the same date between the Company and the
following individuals: Edward P. Drudge, Jr., Richard L. Peranton, Kevin P.
Egan, J. Roger King, and William Simione, Jr.