UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
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CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): November 11, 2005
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PRG-SCHULTZ INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
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GEORGIA 000-28000 58-2213805
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(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
600 GALLERIA PARKWAY, SUITE 100, ATLANTA, GEORGIA 30339-5949
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(Address of principal executive office) (zip code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (770) 779-3900
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(Former name or former address, if changed since last report)
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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):
|_| Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
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ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
See Item 5.02 below, the contents of which are incorporated herein by reference,
for the terms of Mr. Limeri's employment agreement, a copy of which is filed
herewith as Exhibit 99.1 and incorporated by reference herein, and option
agreement, a copy of which is filed herewith as Exhibit 99.2 and incorporated by
reference herein.
ITEM 5.02. APPOINTMENT OF PRINCIPAL OFFICER
On November 11, 2005, Mr. Peter Limeri and the Company entered into employment
and option agreements effective November 7, 2005, copies of which are filed
herewith as Exhibits 99.1 and 99.2, respectively. Mr. Limeri joined the Company
to serve as the Chief Restructuring Officer. Mr. Limeri's employment agreement
contemplates that within one hundred twenty (120) days after the above effective
date, the Board of Directors of the Company will appoint Mr. Limeri to serve as
the Executive Vice President- Finance, Chief Financial Officer and Treasurer of
the Company.
Mr. Limeri's Business Experience.
Mr. Limeri, age 40, most recently served from June 2004 until November 2005 as
Chief Financial Officer and Chief Operating Officer of Nationwide Furniture
Inc., a portfolio company of Sun Capital Partners, a leading private investment
firm focused on leveraged buyouts, equity, debt and other investments in market
leading companies. From 1999 until May 2004, Mr. Limeri served as Chief
Financial Officer of Anderson Press, Inc. which experienced a significant
business turnaround during his tenure. Before joining Anderson, he served as
Vice President-Finance of Cluett American where he was part of the team that led
the company's financial restructuring and business turnaround.
Mr. Limeri's Employment Contract.
On November 11, 2005 the Company and Mr. Limeri entered into an employment
agreement having an effective date of November 7, 2005, and containing the
following material terms:
1. Appointment. Mr. Limeri will serve as the Chief Restructuring Officer of
the Company and report to the Chief Executive Officer. The Agreement
contemplates that within one hundred twenty (120) Days after the above
effective date, the Board of Directors of the Company will appoint Mr.
Limeri to serve as the Executive Vice President- Finance, Chief Financial
Officer and Treasurer of the Company, with no additional remuneration
payable to Mr. Limeri.
2. Share Ownership Program. Mr. Limeri will be obligated to participate in any
share ownership program for senior executives adopted by the Company.
3. Base Salary. Mr. Limeri's initial salary will be $220,000 per year. The
Compensation Committee may, in its sole discretion, increase his salary,
but may not decrease his salary unless the Company institutes a salary
reduction generally and ratably applicable to senior executives of the
Company.
4. Annual Bonuses. For fiscal year 2005, Mr. Limeri is entitled to receive a
bonus equal to 40% of his base salary ($220,000), prorated based on the
number of days he is employed during the fiscal year. For fiscal year 2006
and thereafter, Mr. Limeri will be eligible to receive an annual bonus,
with the annual bonus potential to be between 40% of Base Salary (i.e., 40%
upon achievement of annual "target" performance goals) and a maximum of 80%
of Base Salary (i.e., 80% upon achievement of annual "maximum" performance
goals), with the "target" and "maximum" performance goals and bonus
criteria to be defined and approved by the Compensation Committee of the
Company in advance for each fiscal year.
5. Inducement Stock Option Grant. Mr. Limeri received a stock option to
purchase 500,000 shares of the Company's Common Stock, which was awarded
outside of the Company's shareholder-approved stock incentive plan,
pursuant to an exemption from the Nasdaq National Market shareholder
approval requirements that is available for qualified inducement grants.
The option will not constitute an incentive stock option under Section 422
of the Internal Revenue Code of 1986. The option was issued on November 11,
2005, at an exercise price of $0.28 per share, the closing price of the
Common Stock on the Nasdaq National Market on that date. The Company is
required to file a Registration Statement on Form S-8 with respect to the
option and the underlying shares of Common Stock as soon as practicable.
The option agreement is filed herewith as Exhibit 99.2. The option will be
subject to the following additional terms:
o Time Vesting. The Time-Vested Option Shares, representing the right to
purchase 125,000 shares, will become exercisable ratably over four
years, as follows: 31,250 Time-Vested Option shares shall vest on each
of the first, second, third and fourth anniversary dates of the Grant
Date if Mr. Limeri remains in the continuous employ of the Company.
The Grant Date was November 11, 2005.
o Performance Vesting. The Performance-Based Option Shares (the balance
of the option), representing the right to purchase 375,000 shares,
will be subject to specific performance criteria and become
exercisable in three tiers, as follows:
o Tier 1, representing the right to purchase 125,000 shares, will
become exercisable at any time after November 11, 2006, if the
closing market price per share of the Company's Common Stock is
$4.50 or higher for 45 consecutive trading days after November
11, 2006.
o Tier 2, representing the right to purchase an additional 125,000
shares, will become exercisable at any time after November 11,
2007, if the closing market price per share of the Company's
Common Stock is $6.50 or higher for 45 consecutive trading days
after November 11, 2007.
o Tier 3, representing the right to purchase the final 125,000
shares, will become exercisable at any time after November 11,
2008, if the closing market price per share of the Company's
Common Stock is $8.00 or higher for 45 consecutive trading days
after November 11, 2008.
The Compensation Committee will have discretion to accelerate the
exercisability of any or all of the Performance-Based Option Shares
without regard to whether the price targets have been met.
o Acceleration. The exercisability of the option will accelerate under
certain circumstances as follows:
o If Mr. Limeri's employment is terminated by the Company as a
Termination without Cause or a Termination for Good Reason (each
as defined in the employment agreement) occurring at any time on
or after November 7, 2007, the Option will automatically become
exercisable with respect to all unvested Time-Vested Option
Shares.
o Upon a Change in Control (as defined in Mr. Limeri's employment
agreement), or if the Company ceases to be a reporting company
under the Exchange Act, as amended, any portion of the
Time-Vested Option Shares not yet vested will become exercisable.
o Upon a Change in Control (as defined in Mr. Limeri's employment
agreement), or if the Company ceases to be a reporting company
under the Exchange Act, as amended, a prorated portion of the
Performance-Based Option Shares will become exercisable, based
upon the extent to which the transaction price per share (or if
there is no transaction resulting in the Company ceasing to be a
reporting company, the closing price of the Company's common
stock immediately preceding its ceasing to be a reporting
company) exceeds the target price set for the vesting of the
relevant tier.
o Term. The option will expire on November 11, 2010, except as follows:
o Unvested (i.e., not yet exercisable) portions of the option will
be forfeited upon termination of employment.
o Vested portions that have not yet been exercised will remain
exercisable:
* for 75 calendar days following termination of employment for
any reason other than death, disability or for Cause; and
* for one year following termination of employment due to
death or disability.
o Vested portions will be forfeited on the date of termination, if
termination is for Cause.
o Transferability. The option may only be transferred by will or by the
laws of descent and distribution, or for no consideration to or for
the benefit of certain specified members of Mr. Limeri's immediate
family.
6. Standard Benefits. Mr. Limeri will be eligible to participate in the
Company's standard benefits package, on the same basis as other senior
executives of the Company.
7. Vacation. Mr. Limeri will be entitled to four weeks of paid vacation per
year.
8. Indemnification. The Company and Mr. Limeri have entered into an
indemnification agreement that provides that Mr. Limeri shall be
indemnified by the Company with respect to certain expenses and liabilities
incurred by him because he is an officer of the Company or is acting at its
request; provided that he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Company, and
with respect to any criminal action or proceeding, he had no reasonable
cause to believe his conduct was unlawful. Mr. Limeri is also entitled to
receive advances from the Company with respect to expenses incurred in
connection with the foregoing upon providing the Company with a written
request for same and providing certain representations in connection
therewith.
9. Professional Fees. The Company will reimburse Mr. Limeri for his reasonable
professional fees and costs incurred in connection with the negotiation and
execution of his employment agreement, up to $10,000.
10. Term. The agreement expires on November 11, 2007, subject to automatic
renewal for two one-year extensions unless either party has given the other
30 days' written notice prior to the expiration of the initial term or, if
applicable, the first extension term.
11. Severance. Mr. Limeri will be entitled to certain severance payments if his
employment is terminated: (i) by the Company without "Cause," as that term
is defined in his agreement, or (ii) by Mr. Limeri for "Good Reason," as
that term is defined in his agreement. In either instance, Mr. Limeri's
severance benefits will be as follows:
o If his employment terminates within the first 120 days, severance
payments will equal to fifty percent (50%) of his Base Salary for the
current fiscal year , payable bi-weekly in installments based on the
Company's payroll practices as in effect on the Date of Termination,
unless the termination is without Cause or for Good Reason following a
Change in Control, in which case the severance payments will be equal
to one hundred percent (100%) of his Base Salary for the current
fiscal year.
o If the Date of Termination occurs more than 120 days after Limeri is
first employed by the Company, severance payments will equal to one
hundred percent (100%) of his Base Salary for the current fiscal year,
payable bi-weekly in installments based on the Company's payroll
practices as in effect on the Date of Termination
Other Post-Employment Payments. Mr. Limeri will be entitled to an
additional amount equal to the employer's subsidy payment made bi-weekly by
the Company for his health benefits in effect as of his termination date,
until the earlier of (a) his coverage under another employer's (or any
other) medical or dental plans and (b) the first anniversary of the
termination of his employment.
12. COBRA Premiums. Until the expiration of any applicable waiting periods
necessary for Mr. Limeri to commence participation in the Company's
healthcare plans, the Company shall reimburse him for the amounts paid by
him on account of premiums to Blue Cross Blue Shield of Georgia, Fortis and
ExcuCare in connection with his rights under COBRA to maintain the
healthcare benefits provided to him by his former employer's health care
plans .
13. Additional Covenants. The agreement contains restrictive covenants,
including non-compete and anti-solicitation provisions extending two years
after termination of his employment, as well as standard confidentiality
obligations.
14. Release. In order to collect any severance benefits, Mr. Limeri is
obligated to sign and return a release agreement. Pursuant to the release
agreement, Mr. Limeri releases all current or future claims, known or
unknown, arising on or before the date of the release against the Company
or any direct and indirect subsidiary, parent, affiliated, or related
company of the Company, or their respective officers or directors.
Certain Relationships and Transactions.
There are no material relationships between Mr. Limeri and the Company other
than Mr. Limeri's position with the Company, his ownership of Company
securities, and as otherwise disclosed above.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Businesses Acquired.
Not applicable.
(b) Pro Forma Financial Information.
Not applicable.
(c) Exhibits.
Exhibit
Number Description
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99.1 Employment Agreement between the Registrant and
Peter Limeri entered into on November 11, 2005
99.2 Option Agreement between the Registrant and Peter
Limeri entered into on November 11, 2005 (included
as Exhibit A to Exhibit 99.1 above)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
PRG-Schultz International, Inc. has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
PRG-SCHULTZ INTERNATIONAL, INC.
Date: November 17, 2005 By: /s/ Clinton McKellar, Jr.
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Clinton McKellar, Jr.
General Counsel and Secretary
Exhibit
Number Description
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99.1 Employment Agreement between the Registrant and
Peter Limeri entered into on November 11, 2005
99.2 Option Agreement between the Registrant and Peter
Limeri entered into on November 11, 2005 (included
as Exhibit A to Exhibit 99.1 above)