FORM 8-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
November 28, 2008
Date of Report (Date of earliest event reported)
PRG-Schultz International, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Georgia
(State or Other Jurisdiction of Incorporation)
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0-28000
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58-2213805 |
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(Commission File Number)
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(IRS Employer Identification No.) |
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600 Galleria Parkway, Suite 100, Atlanta, Georgia
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30339-5949 |
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(Address of Principal Executive Offices)
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(Zip Code) |
770-779-3900
(Registrants Telephone Number, Including Area Code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy
the filing obligation of the registrant under any of the following provisions (see General
Instruction A.2. below):
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR 240.13e-4(c)) |
Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of
Certain Officers; Compensatory Arrangements of Certain Officers.
Resignation of James B. McCurry as Chairman, President and Chief Executive Officer
As previously announced, James B. McCurry resigned as Chairman, President and Chief Executive
Officer of PRG-Schultz International, Inc. (the Company) effective November 30, 2008. In
connection with Mr. McCurrys resignation, the Company entered into a Release Agreement with Mr.
McCurry dated December 1, 2008 (the Release Agreement). The Release Agreement provides, among
other things, that the Company will pay to Mr. McCurry a pro-rated portion of the 2008 annual
incentive bonus, if any, Mr. McCurry would have received had he remained employed in accordance
with the Companys Performance Bonus Plan. Pursuant to the Release Agreement, Mr. McCurry released
and fully discharged, except for certain specified preserved rights, the Company and its
subsidiaries and their officers and directors from all claims, rights, and causes of action of all
nature, known or unknown, in any way arising out of, connected with or related to his employment.
The foregoing description is qualified in its entirety by reference to the Release Agreement,
a copy of which is filed herewith as Exhibit 10.1 and incorporated herein by reference.
Appointment of Patrick G. Dills as Chairman, Interim Chief Executive Officer, and Interim President
The Board of Directors of the Company believes that it is in the final stages of its search
for a Chief Executive Officer and President to succeed Mr. McCurry and expects to announce the
successor for these positions in the near term. The Board has appointed Patrick G. Dills to serve as Interim Chief Executive Officer and
Interim President until a permanent Chief Executive Officer and President is appointed by the
Board. The Board has also appointed Mr. Dills as Chairman of the
Board. Mr. Dills appointment to these positions is effective as of December 1, 2008. Mr. Dills,
55, has been a member of the Board since March 2006. As a result of his appointment as an interim
executive officer of the Company, Mr. Dills has resigned from his positions on the Audit Committee
and Compensation Committee. During the period of his service as the Interim Chief Executive
Officer and Interim President, the Company will pay Mr. Dills a salary of $35,000 per month.
In addition to his role at the Company, Mr. Dills also serves as Executive Chairman of the
Board of MSC Group, Inc., a nationwide leader in the delivery of medical products and services to
the workers compensation industry. MSC Group, Inc. is a successor, as of June 2008, to certain of the business interests and assets
of Medical Services Company, where Mr. Dills was also Executive Chairman of the Board. Prior to
joining Medical Services Company in 2006, Mr. Dills served from 1988 to 2005 in several
executive roles at First Health Group Corp., which was acquired by
Coventry Health Care in 2005. Mr. Dills last position with
First Health Group was Executive Vice President.
He was also President of two wholly owned subsidiaries of First
Health Group, CCN and Health
Net Plus, from 2001 to 2005 and
2003 to 2005, respectively.
Executive Officer Employment Agreements
On November 28, 2008, the Company entered into new employment agreements (the Employment
Agreements) with certain executive officers of the Company, including the following named
executive officers of the Company: Peter Limeri, Larry Robinson, and Bradley Roos (collectively,
the Named Executive Officers) who serve as the Companys Chief Financial Officer and Treasurer,
Senior Vice President and President-Americas, and Senior Vice President and President-Europe and
Asia Pacific, respectively. The Company entered these agreements as part of an effort to implement
a standard executive employment agreement to improve the consistency of the terms of such
agreements among its executive officers. The material terms of the Employment Agreements, many of
which are substantially similar to the material terms of the Named Executive Officers previous
employment arrangements, are as follows:
1. Term. Each Employment Agreement provides for a term of one year which will automatically be
extended for additional one-year periods, unless either party notifies the other in writing at
least 30 days prior to the end of the original term or any additional term of its intention not to
extend the agreement.
2. Compensation. The Employment Agreements for Messrs. Limeri, Robinson, and Roos provide for an
annual base salary of approximately $300,000, $419,270, and $323,000, respectively. Each Named
Executive Officer will be eligible for an annual target bonus equal to 50% of the Named Executive
Officers annual base salary and a maximum bonus equal to 100% of the Named Executive Officers
annual base salary, based on the achievement of certain performance objectives to be set by the
Companys Compensation Committee. The Named Executive Officers will also be eligible to receive
stock options, restricted stock, stock appreciation rights and/or other equity awards under the
Companys applicable equity plans on such basis as the Compensation Committee may determine. The
Employment Agreements also provide for standard expense reimbursement, paid time off, and other
standard executive benefits.
3. Post-Termination Benefits.
(a) No Change of Control. If any of the Named Executive Officers, other than within two years
after a Change of Control (as defined in the Employment Agreements), (x) terminates his employment
for Good Reason (as defined in the Employment Agreements), (y) is terminated by the Company without
Cause (as defined in the Employment Agreements), or (z) terminates his employment upon the
Companys failure to renew the Agreement, then the Named Executive Officer is entitled to the
following: (i) payment of the Named Executive Officers annual base salary for the period equal to
the greater of one year or the sum of four weeks for each full year of continuous service the Named
Executive Officer has with the Company (the Severance Period); (ii)
payment of any actual earned full-year bonus (pro-rated) for the year in which the Named Executive
Officers employment termination occurs; (iii) continuation of health care plan coverage for the
Severance Period; (iv) payment of accrued obligations; (v) vesting in full of the Named Executive
Officers outstanding unvested options, restricted stock and other equity-based awards that would
have vested solely based on the continued employment of the Named Executive Officer, as well as the
continuation of outstanding stock options, until the earlier of one year after the date of
termination of the Named Executive Officers employment or the original expiration date of the
options; and (vi) payment of up to $20,000 of outplacement services.
(b) Change of Control. If, within 2 years following a Change in Control, any of the Named
Executive Officers (x) terminates his employment for Good Reason, (y) is terminated by the Company
without Cause, or (z) terminates his employment upon the Companys failure to renew the Employment
Agreement, then the Named Executive Officer is entitled to receive the same benefits as such Named
Executive Officer would have received as described above under No Change in Control except that
(i) the payment of the Named Executive Officers annual base salary shall be for the period equal
to the greater of 18 months or the sum of four weeks for each full year of continuous service the
Named Executive Officer has with the Company (the Change in Control Severance Period) and (ii)
the Named Executive Officers health care plan coverage shall continue for the Change in Control
Severance Period.
(c) For Cause. If the Company terminates a Named Executive Officers employment for Cause or
a Named Executive Officer terminates his employment for other than Good Reason, the Employment
Agreements terminate and the Company will have no further obligations to the Named Executive
Officer other than to pay any accrued obligations.
4. Business Protection Agreements. Each of the Named Executive Officers is also bound by
confidentiality provisions, non-competition covenants and non-solicitation restrictions concerning
both customers and employees of the Company.
5. Additional Benefits. Under their respective agreements, Mr. Robinson and Mr. Roos each receive
certain additional compensation and benefits as a result of their assignments to Dallas, Texas and
the United Kingdom, respectively. During the period of Mr. Robinsons assignment to Dallas, Texas,
which is expected to last until July 31, 2011, Mr. Robinson is entitled to a housing allowance, a
one-time relocation allowance, reimbursement of medical costs, reimbursement of applicable costs
for a work permit/visa, an auto allowance, and tax preparation assistance associated with
equalization of his tax liability to Canada.
During the period of Mr. Roos assignment to the United Kingdom, which is expected
to last through December 31, 2009, Mr. Roos is entitled to occupation of a house leased by the
Company, tax consultation and preparation assistance, an education allowance for Mr. Roos children
to attend the American school, and an annual tax equalization benefit designed to ensure that Mr.
Roos bears a total tax liability
approximately equivalent to the tax liabilities he would have incurred if working for the Company
in the United States.
The foregoing description is qualified in its entirety by reference to Messrs. Limeri,
Robinson, and Roos Employment Agreements, copies of which are filed herewith as Exhibit
10.2, Exhibit 10.3, and Exhibit 10.4, respectively, and incorporated herein by
reference.
Separation Agreement
On November 30, 2008 the Company entered into a Separation Agreement (the Separation
Agreement) with Norman Lee White, the Companys Executive Vice President and Executive Vice
President of the Companys subsidiary, PRG-Schultz USA, Inc. (PRG-Schultz USA). Pursuant to the
Separation Agreement, PRG-Schultz USA and Mr. White mutually agreed to end Mr. Whites employment
effective as of December 31, 2008 (the Termination Date), and to terminate, as of November 30,
2008, the Employment Agreement between the parties dated June 19, 2006. The material terms of the
Separation Agreement are as follows:
1. Post-employment Compensation. The Separation Agreement provides for PRG-Schultz USA to make
severance payments to Mr. White equal to his current annual salary for 26 bi-weekly pay periods
following the Termination Date. Mr. White will receive the full year annual bonus, if any, that he
would have received for calendar year 2008 had Mr. White remained employed with PRG-Schultz USA.
PRG-Schultz USA will permit Mr. White to continue medical and dental insurance coverage for
himself, his spouse, and his eligible dependents during the period in which Mr. White is receiving
severance payments under the Separation Agreement on the same basis and at the same cost as if he
remained employed. Mr. White is also entitled to any vested, accrued benefits under the Companys
401(k) plan, any base salary that accrued through the Termination Date, and any vested benefits
under the Companys 2006 Management Incentive Plan.
2. Consulting Agreement. The Separation Agreement contemplates that, following the Termination
Date, Mr.White shall render certain consulting services to PRG-Schultz USA. Mr. White will perform
these services for no charge until March 31, 2009, after which PRG-Schultz USA will pay Mr. White a
consulting fee of one hundred and fifty dollars ($150) per hour, as well as reimbursement for
reasonable out-of-pocket expenses.
3. Business Protection Agreements. Mr. White is also bound by confidentiality provisions,
non-competition covenants and non-solicitation restrictions concerning both customers and employees
of PRG-Schultz USA.
4. Release. In order to collect his severance benefits, Mr. White is obligated to sign and return
a release agreement, pursuant to which Mr. White will agree to release all
current or future claims, known or unknown, arising on or before the date of the release against
PRG-Schultz USA and its affiliates and their respective officers, directors, employees, agents,
insurers, assigns, and successors in interest.
The foregoing description is qualified in its entirety by reference to the Separation
Agreement, a copy of which is filed herewith as Exhibit 10.5 and incorporated herein by
reference.
Forward Looking Statements
In addition to historical information, this Current Report on Form 8-K includes certain
forward-looking statements within the meaning of the Private Securities Litigation Reform Act of
1995. Such statements include both implied and express statements regarding the status of the
Companys search for the successor to Mr. McCurry. Such forward looking statements are not
guarantees of future performance and are subject to risks, uncertainties and other factors that may
cause the actual results, performance or achievements of the Company to differ materially from the
historical results or from any results expressed or implied by such forward-looking statements.
Risks that could affect the Companys future performance include the Companys ability to locate a
qualified successor to Mr. McCurry and retain existing personnel, revenues that do not meet
expectations or justify costs incurred, the Companys ability to develop material sources of
revenue in addition to its core accounts payable services, changes in the market for the Companys
services, client bankruptcies, loss of major clients, the risk that the Company may not participate
in the proposed national rollout of the Medicare recovery audit program or that the national
rollout will be significantly delayed, and other risks generally applicable to the Companys
business. For a discussion of other risk factors that may impact the Companys business, please see
the Companys filings with the Securities and Exchange Commission, including its Form 10-K filed on
March 12, 2008. The Company disclaims any obligation or duty to update or modify these
forward-looking statements.
Item 9.01. Financial Statements and Exhibits
The following exhibits are filed herewith:
10.1 Release Agreement dated December 1, 2008 between the Company and Mr. McCurry
10.2 Employment Agreement dated November 28, 2008 between the Company and Mr. Limeri
10.3 Employment Agreement dated November 28, 2008 between the Company
and Mr. Robinson
10.4 Employment Agreement dated November 28, 2008 between the Company
and Mr. Roos
10.5 Separation Agreement dated November 30, 2008 between PRG-Schultz
USA and Mr. White
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly
authorized.
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PRG-Schultz International, Inc.
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By: |
/s/ Victor A. Allums
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Victor A. Allums |
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Senior Vice President, Secretary and General
Counsel |
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Dated: December 4, 2008
EXHIBIT INDEX
10.1 Release Agreement dated December 1, 2008 between the Company and Mr. McCurry
10.2 Employment Agreement dated November 28, 2008 between the Company and Mr. Limeri
10.3 Employment Agreement dated November 28, 2008 between the Company
and Mr. Robinson
10.4 Employment Agreement dated November 28, 2008 between the Company
and Mr. Roos
10.5 Separation Agreement dated November 30, 2008 between PRG-Schultz
USA and Mr. White