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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
THE PROFIT RECOVERY GROUP INTERNATIONAL, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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[THE PROFIT RECOVERY GROUP INTERNATIONAL LOGO]
2300 WINDY RIDGE PARKWAY
SUITE 100 NORTH
ATLANTA, GA 30339-8426
---------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 15, 1997
---------------------
TO THE SHAREHOLDERS OF
THE PROFIT RECOVERY GROUP INTERNATIONAL, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of THE
PROFIT RECOVERY GROUP INTERNATIONAL, INC. (the "Company") will be held at the
Renaissance Waverly Hotel, 2450 Galleria Parkway, N.W., Atlanta, Georgia, on May
15, 1997 at 10:00 a.m., Atlanta time, for the following purposes:
1. To elect two Class I directors to serve until the annual meeting of
shareholders held in 2000 and until their successors are elected and have
qualified.
2. To consider a proposal to approve the Company's Employee Stock
Purchase Plan.
3. To transact such other business as may properly come before the
meeting or any adjournments thereof.
The Proxy Statement dated April 15, 1997, is attached. Only record holders
of the Company's Common Stock, no par value per share, at the close of business
on March 31, 1997, will be eligible to vote at the meeting.
If you are not able to attend the meeting, please execute, complete, date
and return the proxy in the enclosed envelope. If you attend the meeting, you
may revoke the proxy and vote in person.
By Order of the Board of Directors:
/s/ JOHN M. COOK
JOHN M. COOK
Chairman of the Board,
Chief Executive Officer and President
Date: April 15, 1997
A copy of the Annual Report of The Profit Recovery Group International,
Inc. for the year ended December 31, 1996 containing financial statements is
enclosed.
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[THE PROFIT RECOVERY GROUP INTERNATIONAL LOGO]
2300 WINDY RIDGE PARKWAY
SUITE 100 NORTH
ATLANTA, GA 30339-8426
---------------------
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
APRIL 15, 1997
---------------------
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of The Profit Recovery Group International, Inc. ("PRGX"
or the "Company") of proxies for use at the 1997 Annual Meeting of Shareholders
to be held on May 15, 1997, at 10:00 A.M., Atlanta time, at the Renaissance
Waverly Hotel, 2450 Galleria Parkway, N.W., Atlanta, Georgia. Where appropriate,
all references herein to the Company shall also be deemed to be references to
the Company's predecessors.
This Proxy Statement and the accompanying form of proxy are being first
mailed to Shareholders on or about April 15, 1997. The Shareholder giving the
proxy may revoke it at any time before it is exercised at the meeting by: (i)
delivering to the Secretary of the Company a written instrument of revocation
bearing a date later than the date of the proxy; (ii) duly executing and
delivering to the Secretary a subsequent proxy relating to the same shares; or
(iii) attending the meeting and voting in person (attendance at the meeting will
not in and of itself constitute revocation of a proxy). Any proxy which is not
revoked will be voted at the Annual Meeting in accordance with the Shareholder's
instructions. If a Shareholder returns a properly signed and dated proxy card
but does not mark any choices on one or more items, his or her shares will be
voted in accordance with the recommendations of the Board of Directors as to
such items. The proxy card gives authority to the proxies to vote shares in
their discretion on any other matter properly presented at the Annual Meeting.
Proxies will be solicited from the Company's Shareholders by mail. The
Company will pay all expenses in connection with the solicitation, including
postage, printing and handling, and the expenses incurred by brokers,
custodians, nominees and fiduciaries in forwarding proxy material to beneficial
owners. The Company does not intend to employ a proxy solicitation firm to
solicit proxies in connection with the Annual Meeting. It is possible that
directors, officers and regular employees of the Company may make further
solicitation personally or by telephone, telegraph or mail. Directors, officers
and regular employees of the Company will receive no additional compensation for
any such further solicitation.
Only holders (the "Shareholders") of record of the Company's Common Stock,
no par value per share, at the close of business on March 31, 1997 (the "Record
Date"), are entitled to notice of, and to vote at, the Annual Meeting. On the
Record Date, the Company had outstanding a total of 18,155,151 shares of Common
Stock. Each such share will be entitled to one vote (non-cumulative) on each
matter to be considered at the Annual Meeting. A majority of the outstanding
shares of Common Stock, present in person or represented by proxy at the Annual
Meeting, will constitute a quorum for the transaction of business at the Annual
Meeting.
Votes cast by proxy or in person at the Annual Meeting will be counted by
the persons appointed by the Company to act as election inspectors for the
meeting. Prior to the meeting, the inspectors will sign an oath to perform their
duties in an impartial manner and to the best of their abilities. The inspectors
will ascertain the
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number of shares outstanding and the voting power of each of such shares,
determine the shares represented at the meeting and the validity of proxies and
ballots, count all votes and ballots and perform certain other duties as
required by law.
The affirmative vote of holders of a majority of the outstanding shares of
Common Stock of the Company entitled to vote and present in person or by proxy
at the Annual Meeting is required for approval of the Company's Employee Stock
Purchase Plan. Nominees for election as directors will be elected by a plurality
of the votes cast by the holders of shares entitled to vote in the election.
Accordingly, the two nominees receiving the highest vote totals will be elected
as directors of the Company at the Annual Meeting. It is expected that shares
held by executive officers and directors of the Company, which in the aggregate
represent approximately 65% of the outstanding shares of Common Stock, will be
voted in favor of each proposal. With respect to election of directors,
abstentions, votes "withheld" and broker non-votes will be disregarded and have
no effect on the outcome of the vote. With respect to the approval of the
Company's Employee Stock Purchase Plan, abstentions will have the effect of a
vote against the proposal and broker non-votes will be disregarded and will have
no effect on the outcome of the vote. There are no rights of appraisal or
similar dissenters' rights with respect to any matter to be acted upon pursuant
to this Proxy Statement.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors of the Company recommends a vote FOR the election of
each of the nominees named below for election as director and FOR the proposal
to approve the Company's Employee Stock Purchase Plan.
ELECTION OF DIRECTORS
The proxy holders intend to vote FOR election of the nominees named below
(who are currently members of the Board) as directors of the Company, unless
otherwise specified in the proxy. Directors of the Company elected at the Annual
Meeting to be held on May 15, 1997 will hold office until the Annual Meeting in
2000 or until their successors are elected and qualified. Each of the nominees
has consented to serve on the Board of Directors, if elected. Should any nominee
for the office of director become unable to accept nomination or election, which
is not anticipated, it is the intention of the persons named in the proxy,
unless otherwise specifically instructed in the proxy, to vote for the election
of such other person as the Board of Directors may recommend.
Each of the individuals listed below as nominees for the Board of Directors
was a director of the Company during 1996. The name and age of each director,
his principal occupation, and the period during which he has served as a
director is set forth below:
1997 Director Nominees
NAME OF NOMINEE AGE SERVICE AS DIRECTOR POSITION
- --------------- --- ------------------- --------
John M. Cook(1)....................... 54 Since November 1990 Chairman of the Board, Chief
Executive Officer and
President
John M. Toma(1)....................... 51 Since November 1990 Vice Chairman and Assistant
Secretary
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Other Directors
NAME OF DIRECTOR AGE SERVICE AS DIRECTOR POSITION
- ---------------- --- ------------------- --------
Stanley B. Cohen(1)(2)........................... 53 Since November 1990 Director
Jonathan Golden(1)(3)............................ 59 Since November 1990 Director
Garth H. Greimann(2)(3).......................... 42 Since April 1995 Director
Fred W.I. Lachotzki.............................. 50 Since January 1996 Director
E. James Lowrey(2)(3)............................ 69 Since December 1995 Director
- ---------------
(1) Member of the Executive Committee.
(2) Member of the Audit Committee.
(3) Member of the Compensation Committee.
Mr. T. Charles Fial resigned his position as a director in December 1996. In
January 1997, the Board determined not to seek a replacement at that time and
reduced the number of directors to seven.
John M. Cook is Chairman of the Board, Chief Executive Officer, President
and a director of the Company and has served in such capacities since founding
the Company in November 1990. Prior to forming the Company, Mr. Cook served as
President and Chief Operating Officer of Roy Greene Associates, Inc., from 1989
to 1990. From 1987 to 1989, Mr. Cook served as Senior Vice President of Caldor
Stores, Inc., a division of May Department Stores Co. ("May"). From 1982 to
1987, Mr. Cook served in a similar capacity for Kaufmann's Department Stores,
Inc., also a division of May.
John M. Toma was elected Vice Chairman of the Company in January 1997.
Prior to that, he was Executive Vice President -- Administration of the Company
and had served in such capacity since 1992. Mr. Toma has served as a director of
the Company since its founding in November 1990 and as Senior Vice
President -- Administration of the Company from 1990 to 1992. Prior to forming
the Company, Mr. Toma served as Senior Vice President -- Administration of Roy
Greene Associates, Inc. from 1989 to 1990. Prior to joining Roy Greene
Associates, Inc., Mr. Toma served as Operating Vice President of Caldor Stores,
Inc., a division of May.
Stanley B. Cohen has served as a director of the Company since its founding
in 1990. Mr. Cohen is the Chairman of the Board, Chief Executive Officer and
President of both Advisory Services, Ltd. ("ASL") and SBC Financial Corporation
("SBC"). These companies provide certain financial consulting and investment
services to the Company and certain of its executive officers. See "Certain
Transactions."
Jonathan Golden has served as a director of the Company since its founding
in 1990 and provides consulting services to the Company through Jonathan Golden,
P.C., a wholly owned professional corporation ("JGPC"). See "Compensation
Committee Interlocks and Insider Participation." Mr. Golden also serves through
JGPC as a partner in the Atlanta, Georgia law firm of Arnall, Golden & Gregory,
LLP, which provides legal services to the Company. Mr. Golden also serves as a
director of SYSCO Corporation ("SYSCO"), a distributor of food and related
products.
Garth H. Greimann has served as a director of the Company since April 1995.
Mr. Greimann joined Berkshire Partners, a general partnership, in 1989 and
served as a general partner from 1994 until February 1996, when Berkshire
Partners was succeeded by Berkshire Partners LLC (Berkshire Partners, a general
partnership, and Berkshire Partners LLC are collectively referred to as
"Berkshire Partners"). Mr. Greimann has served as a member of Berkshire Partners
since February 1996, and as a general partner of Third Berkshire Associates, A
Limited Partnership ("Third Berkshire Associates"), the general partner of
Berkshire Fund III, since 1994. From 1982 to 1989, Mr. Greimann held various
positions with The First National Bank of Boston (the "Bank"), most recently as
Vice President of the Bank's Acquisition Finance Division, and served in the
Bank's offices in Korea and Taiwan. Mr. Greimann also serves as a director of
Trico Marine Services, Inc., an owner and operator of a fleet of offshore
drilling support vessels.
Fred W. I. Lachotzki has served as a director of the Company since January
1996. Since 1989, Mr. Lachotzki has served as a Professor of Business Policy at
Nijenrode University, The Netherlands Business
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School, in The Netherlands. Mr. Lachotzki also serves as a Director of Virgin
Blockbuster NV, a chain of music superstores, NVS Salland Verzekeringen, an
insurance company specializing in healthcare, and Merison Holding NV, a supplier
of non-food products to supermarket chains and owner of a franchised chain of
electronics retail stores.
E. James Lowrey has served as a director of the Company since December
1995. Mr. Lowrey served as Executive Vice President -- Finance & Administration
of SYSCO from 1978 until his retirement in 1993 and was a Director of SYSCO from
1981 to 1993. He currently serves as a Director of Riviana Foods, Inc., a
processor and distributor of rice and other food products, and of Hi-Lo
Automotive, Inc., an automotive parts retailer.
No family relationship exists among any of the directors and executive
officers of the Company.
INFORMATION ABOUT THE BOARD OF DIRECTORS
AND COMMITTEES OF THE BOARD
MEETINGS OF THE BOARD OF DIRECTORS
During 1996, there were three meetings of the Board of Directors. Each
incumbent director who was a director during 1996 attended at least 75% of the
sum of all meetings of the Board of Directors and any committees on which that
director served.
DIRECTOR COMPENSATION
Prior to January 1, 1996, no member of the Board was paid any compensation
for service as a director of the Company. Effective January 1, 1996, the Company
began compensating its non-employee directors $20,000 per year for their service
on the Board and any committee thereof. In addition, Messrs. Lowrey and
Lachotzki were each granted options to purchase 10,000 shares of Common Stock of
the Company at an exercise price equal to the fair market value of the Common
Stock on the date of grant. Non-employee directors will be reimbursed for all
out-of-pocket expenses, if any, incurred in attending Board and committee
meetings.
AUDIT COMMITTEE
The Company's Audit Committee consists of three outside directors: Mr.
Cohen, Mr. Greimann and Mr. Lowrey. The Audit Committee met one time in 1996.
The Audit Committee reviews the general scope of the Company's annual audit and
the nature of services to be performed for the Company in connection therewith,
acting as liaison between the Board of Directors and the independent auditors.
The Audit Committee also formulates and reviews various Company policies,
including those relating to accounting practices and internal control structure
of the Company. In addition, the Audit Committee is responsible for
recommending, reviewing and monitoring the performance of the Company's
independent auditors.
COMPENSATION COMMITTEE
The Company has a Compensation Committee currently consisting of three
directors: Mr. Golden, Mr. Greimann and Mr. Lowrey. The Compensation Committee
met four times in 1996. The Compensation Committee is responsible for reviewing
and establishing the annual compensation for all executive officers, including
the salary and the compensation package of each such officer. A portion of the
compensation package may include a bonus award. The Compensation Committee also
administers the Company's benefit plans, including the Company's 1996 Stock
Option Plan; provided, however, that the Board of Directors has delegated all
rights to determine awards of stock-based compensation to individuals who file
reports pursuant to Section 16 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), to a subcommittee of the Compensation Committee
consisting of Messrs. Greimann and Lowrey, each of whom is a "non-employee"
director, as such term is defined in Rule 16b-3 promulgated pursuant to the
Exchange Act.
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NOMINATING COMMITTEE
The Company does not have a standing nominating committee of the Board of
Directors.
Notwithstanding anything to the contrary which is or may be set forth in
any of the Company's filings under the Securities Act of 1933, as amended, or
the Securities Exchange Act of 1934, as amended, that might incorporate Company
filings, including this proxy statement, in whole or in part, the following
Report and the Performance Graph contained on page 24 shall not be incorporated
by reference into any such filings.
REPORT OF THE COMPENSATION COMMITTEE ON
EXECUTIVE COMPENSATION
The Compensation Committee is composed entirely of outside directors. The
Committee considers and establishes compensation policies and approves benefit
plans as well as specifically setting salary, annual cash incentive levels, and
long-term incentive levels for the Chief Executive Officer and other members of
executive management.
COMPENSATION PHILOSOPHY
The Compensation Committee made significant changes to the Company's
executive compensation program in 1996. These changes were necessary to begin a
transition toward greater levels of performance-based compensation, and to
reduce the Company's traditional reliance on relatively high levels of base
salary. Specifically, annual fixed salaries were reduced or held constant for
most members of executive management, and increased emphasis was placed on
performance-based cash incentives and stock option grants. The Compensation
Committee believes that these changes were necessary to more closely align the
financial interests of the Company's executive officer group with those of the
Company's shareholders.
The following objectives were used by the Compensation Committee in
designing the Company's 1996 executive compensation program. The compensation
program must:
- Attract, motivate and retain key executives;
- Align key management and shareholder interests; and
- Provide incentives that reward executive management performance only if
the Company's performance meets or exceeds planned results.
During 1996, certain information was used by the Compensation Committee to
guide decisions concerning executive compensation, including recovery audit
industry practices, compensation surveys prepared by an outside consulting firm
with respect to companies of similar size and growth, peer group surveys, and
experience of the Committee members.
EXECUTIVE COMPENSATION PROGRAM
The 1996 executive compensation program consisted of base salary, annual
cash incentives, and long-term remuneration in the form of deferred compensation
arrangements and non-qualified stock options.
Base Salary
The recovery auditing industry in general and the Company in specific
traditionally have compensated key executives primarily on the basis of cash,
generally consisting of salary and performance-based incentives. Additionally,
to attract talented field managers to home office positions, it has historically
been necessary for the Company to maintain or increase the levels of
remuneration being paid to these individuals, who generally are highly
compensated. Prior to 1996, these two factors over time had significantly
elevated the base compensation levels required to staff the Company's key
management positions. As a result of becoming a publicly traded company,
however, the Compensation Committee decided to reduce the level of emphasis on
base salary throughout the Company's management groups in favor of greater
levels of long-term compensation such as stock options. The Compensation
Committee believes that having greater levels of each
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manager's compensation "at risk," serves to more closely align management's
interests with those of the Company's shareholders.
In determining the appropriate base salary levels for 1996, the
Compensation Committee considered several factors, including current industry
practices, external market surveys of similarly sized companies, and review of
peer group compensation. For 1996, base salaries were set by the Compensation
Committee for members of executive management with the following factors in
mind: (i) the fact that rapidly growing responsibilities and complexities are
inherent in key positions, (ii) the need to retain key executives within the
Company, and (iii) the need to attract new talent as the Company continues to
grow. All of these factors were considered subjectively with no particular
emphasis or weight given to any one factor.
As a result of the foregoing, in 1996 the base salaries of Mr. Cook (Chief
Executive Officer), Mr. Toma (Vice Chairman) and Mr. O'Toole (Executive Vice
President and Chief Audit Officer) were reduced as compared to 1995.
Additionally, the 1996 annual salary of Mr. Ellis (Senior Vice President and
Chief Financial Officer) was not increased from the annualized level paid in
1995. The 1996 salary of Mr. Dinkins (Executive Vice President -- Sales and
Marketing) was increased slightly by 4.5% due to his increased responsibilities
in the international area. Mr. Lustig (Executive Vice President of the Company,
and President of the PRG Retail, Wholesale and Government Divisions since
January 1997) joined the Company in December 1995 and received base salary
adjustments during the year to reflect increasing responsibilities and
promotions.
Annual Incentive Compensation
The 1996 annual incentive plan for executive management included several
performance criteria: Company pro forma earnings per share, Company revenues,
Company operating income, and individual goals. The annual incentive plan was
designed to directly align pay to financial results, with increases and
decreases in incentive pay tied to financial targets achieved and missed,
respectively. Components of each executive officer's annual incentive
compensation were established by the Compensation Committee. The 1996 annual
incentive compensation for Messrs. Cook, Toma and Ellis was based solely on
Company pro forma earnings per share attainment. Annual incentive compensation
in 1996 for the other executive officers was based on factors such as Company
revenues, Company operating income and individual performance objectives. The
1996 annual incentive plans for each executive officer contained threshold
targets for each bonus component to ensure that no annual incentive compensation
would be earned for substandard performance. Additionally, maximum compensation
limits were in effect for each bonus component pertaining to each executive
officer.
Deferred Compensation
The Company historically has provided, and continues to provide,
non-qualified deferred compensation arrangements for certain executive officers.
The purpose of these arrangements is to assist in the retention of these
executives by allowing a portion of their total compensation to be deferred
along with a full or partial matching obligation by the Company. In most
instances, the matching obligation vests over a series of years of continuing
employment with the Company. Each executive officer negotiated the deferred
compensation component of his compensation package when he entered into his
employment agreement with the Company. Mr. Cook did not require a deferred
compensation element in his employment agreement. Since deferred compensation is
accrued and paid in accordance with provisions of the related employment
agreements, no additional determinations with respect to this compensation
component are made by the Compensation Committee.
Other Long-Term Incentive Compensation
The Company's shareholders approved an additional long-term incentive
program through the adoption of the Company's 1996 Stock Option Plan (as
successor in interest to the 1995 Stock Option Plan established by a predecessor
of the Company). All executive officers have received option grants under the
1996 Stock Option Plan. The use of stock options is meant to align the interests
of key executives and shareholders. All options granted under the 1996 Stock
Option Plan through March 26, 1997 have been at fair market value on
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date of grant, and vest ratably over five years of continuous employment with
the Company. The Compensation Committee grants options to key employees of the
Company, including the executive officers, based upon the following subjective
factors: current position, level of performance, potential for future
responsibilities, and the number of vested and unvested options already held.
The size of the grant is intended to create meaningful opportunities for stock
ownership for the executive officers.
Compliance with Internal Revenue Code Section 162(m)
The maximum amount which an employer may claim as a compensation deduction
in any fiscal year, pursuant to Section 162(m) of the Internal Revenue Code of
1986, as amended, is $1,000,000, unless certain performance related compensation
exemptions are met. The Compensation Committee believes it is unlikely that any
executive officers of the Company will, in the near future, receive in excess of
$1,000,000 in aggregate compensation, other than those individuals with respect
to whom the performance related compensation exemptions have been satisfied. The
Committee intends to review the potential effect of Section 162(m) periodically.
Compensation of Chief Executive Officer
On March 20, 1996, Mr. Cook signed a revised employment agreement with the
Company. This agreement expires in the year 2000, but provides for automatic
one-year renewals upon expiration of each year of employment, such that it
always has a five year term, subject to prior notice of non-renewal by the Board
of Directors.
As a result of the previously discussed intent of the Compensation
Committee to emphasize performance based compensation over base salary, Mr.
Cook, working in concert with the Compensation Committee, agreed to reduce his
base salary from $695,000 in 1995 to $350,000 in 1996 as part of the revised
employment agreement. In place of his reduced base salary, two performance based
incentive arrangements were substituted, and are discussed below.
An annual incentive compensation arrangement was established for Mr. Cook
commencing in 1996 whereunder he is eligible to earn an annual cash incentive of
up to 100% of his base salary if the Company achieves certain pro forma earnings
per share goals. The minimum compensable goal for 1996 was established at $.28
per share, which represented a 33% increase over the Company's 1995 pro forma
earnings per share of $.21. The Company achieved pro forma earnings per share of
$.39 in 1996, and Mr. Cook earned an intermediate level bonus of $262,500 with
respect to such year.
In addition to an annual incentive compensation arrangement, Mr. Cook was
also granted options to purchase 150,000 shares of Company common stock. The
grant was made in connection with Mr. Cook's signing of his revised employment
agreement in 1996, was priced at the fair market value of the Company's common
stock at date of grant, and vests ratably and prospectively over five years. Mr.
Cook's employment agreement also provides that further option grants will be
made annually through 1998 if earnings per share exceed the level achieved in
the immediately preceding year by certain specified percentages -- generally 30%
or greater. The Company's 1996 pro forma earnings per share achievement entitled
Mr. Cook to a grant on December 31, 1996 of options to purchase 73,530 shares of
Common Stock at $16.00 per share, which represented the fair market value of the
Company's common stock on that date. The December 31, 1996 options granted
pursuant to this employment agreement provision, and any similar future grants,
vest ratably and prospectively over five years.
COMPENSATION COMMITTEE
E. James Lowrey, Chairman
Jonathan Golden
Garth H. Greimann
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EXECUTIVE COMPENSATION
The following table sets forth the compensation paid or accrued by the
Company to the Company's Chief Executive Officer, the other four most highly
paid executive officers of the Company in 1996 and one former executive officer
(Mr. O'Toole) who would have been among the most highly paid executives but for
the fact that, due to his strategic redeployment, he was no longer serving as an
executive officer at year end (the "Named Executive Officers"). The information
presented is for the years ended December 31, 1996 and 1995.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
-------------
ANNUAL COMPENSATION(1) SECURITIES
----------------------------------- UNDERLYING
OTHER ANNUAL OPTIONS ALL OTHER
NAME AND POSITION YEAR SALARY(2) BONUS COMPENSATION (# OF SHARES) COMPENSATION(1)(3)
- --------------------------- ---- --------- -------- ------------ ------------- ------------------
John M. Cook............... 1996 $356,731 $262,500 $ -- 223,530 $ --
Chairman of the Board, 1995 695,000 -- -- -- 115,000
Chief Executive Officer
and President
John M. Toma............... 1996 307,609 122,400 -- 100,000 55,000
Vice Chairman and 1995 374,000 -- -- -- 4,000
Assistant Secretary
Michael A. Lustig.......... 1996 211,269 67,302 -- 27,500 20,000
Executive Vice President,
and President of PRG
Retail, Wholesale and
Government Divisions(4)
Paul J. Dinkins............ 1996 299,757 114,000 -- 10,000 29,906
Executive Vice 1995 287,000 62,000 -- 100,000 30,000
President
Brian M. O'Toole........... 1996 300,950 108,000 -- -- 57,850
Executive Vice 1995 350,000 28,000 -- 100,000 70,000
President and Chief Audit
Officer
Donald E. Ellis, Jr........ 1996 160,000 56,000 -- 10,000 26,446
Senior Vice President, 1995 131,000 13,000 22,000 120,000 26,000
Treasurer and Chief
Financial Officer(5)
- ---------------
(1) The compensation described in this table does not include medical, group
life insurance or other benefits received by the Named Executive Officers
which are available generally to all salaried employees of the Company and
certain perquisites and other personal benefits, securities or property
received by the Named Executive Officers which do not exceed the lesser of
$50,000 or 10% of any such officer's salary and bonus disclosed in this
table.
(2) Includes contributions made to the Company's 401(k) Plan during the years
presented.
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(3) Consists of:
(a) Premiums for supplemental term life insurance paid by the Company in the
approximate amounts set forth below:
1996 1995
------ --------
Mr. Cook.................................... $ -- $102,000
Mr. Toma.................................... -- 4,000
Mr. Lustig.................................. -- --
Mr. Dinkins................................. 4,906 5,000
Mr. O'Toole................................. 2,850 3,000
Mr. Ellis................................... 1,446 1,000
(b) Deferred compensation accrued in the Consolidated Balance Sheet of the
Company on behalf of Messrs. Toma, Lustig, Dinkins, O'Toole and Ellis in
the amounts of $55,000, $20,000, $25,000, $55,000 and $25,000,
respectively, in 1996; and Messrs. Dinkins, O'Toole and Ellis in the
amounts of $25,000, $67,000, $25,000, respectively, for 1995.
(c) Legal expenses paid by the Company in 1995 on behalf of Mr. Cook in the
amount of $13,000.
(4) Mr. Lustig's 1995 compensation has not previously been disclosed and is
therefore not required to be disclosed herein.
(5) 1995 amounts shown reflect compensation from March 1, 1995, when Mr. Ellis
began employment with the Company.
OPTION GRANTS TABLE
The following table sets forth certain information regarding options
granted to the Named Executive Officers during the year ended December 31, 1996.
No separate stock appreciation rights ("SARs") were granted during fiscal 1996.
STOCK OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
----------------------------------------------- POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED
NUMBER OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS EXERCISE PRICE APPRECIATION FOR
UNDERLYING GRANTED TO OR BASE OPTION TERM
OPTIONS EMPLOYEES PRICE EXPIRATION ------------------------
NAME GRANTED(1) IN 1996 ($/SH) DATE 5% 10%
- ---- ---------- ---------- -------- ---------- ---------- ----------
John M. Cook................... 150,000 22% $11.00 03/26/06 $1,037,850 $2,630,100
73,530 11 16.00 12/31/06 740,006 1,875,309
John M. Toma................... 100,000 15 11.00 03/26/06 691,900 1,753,400
Michael A. Lustig.............. 2,500 * 18.00 07/16/06 28,305 71,730
25,000 4 19.875 07/31/06 312,534 792,019
Paul J. Dinkins................ 10,000 1 11.00 03/26/06 69,190 175,340
Brian M. O'Toole............... -- -- -- -- -- --
Donald E. Ellis, Jr............ 10,000 1 11.00 03/26/06 69,190 175,340
- ---------------
* Less than one percent.
(1) Options are non-qualified options granted under the Company's 1996 Stock
Option Plan. All options have ten year terms and vest as follows: 20%
becomes exercisable on the anniversary of grant and an additional 20%
becomes exercisable on each grant date anniversary thereafter; provided,
however, that Mr. Cook's options will vest automatically upon the occurrence
of certain events. See "Employment Agreements" below.
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OPTION EXERCISES AND YEAR-END VALUE TABLE
None of the Named Executive Officers has held or exercised separate SARs.
The following table sets forth certain information regarding options exercised
during the year ended December 31, 1996, and unexercised options held at fiscal
year-end, by each of the Named Executive Officers.
OPTION VALUES AT DECEMBER 31, 1996
NUMBER OF SECURITIES
SHARES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
ACQUIRED OPTIONS AT FISCAL YEAR-END IN-THE-MONEY OPTIONS AT
ON VALUE (#) FISCAL YEAR-END ($)(1)
EXERCISE REALIZED --------------------------- ---------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------- -------- ----------- ------------- ----------- -------------
John M. Cook.................... -- $ -- -- 223,530 $ -- $ 750,000
John M. Toma.................... -- -- -- 100,000 -- 500,000
Michael A. Lustig............... -- -- 4,800 46,700 38,400 153,600
Paul J. Dinkins................. -- -- 20,000 90,000 214,000 906,000
Brian M. O'Toole................ -- -- 20,000 80,000 214,000 856,000
Donald E. Ellis, Jr............. 24,000 330,050 -- 106,000 -- 1,077,200
- ---------------
(1) Calculated based on a fair market value of $16.00 per share of Common Stock
at December 31, 1996, less the applicable exercise prices.
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement, as amended, with John
M. Cook that expires December 31, 2000. The employment agreement provides for
automatic one-year renewals upon the expiration of each year of employment (such
that it always has a five-year term), subject to prior notice of non-renewal by
the Board of Directors. Under the employment agreement, Mr. Cook is entitled to
receive an annual base salary of $350,000 and bonus of up to $350,000 based upon
the Company's performance. Effective on the date of the Company's initial public
offering, March 26, 1996, Mr. Cook was granted options under the Company's 1996
Stock Option Plan to purchase 150,000 shares of Common Stock at the same price
as the price to public in connection with the offering, $11.00 per share,
vesting over a five-year period at 20% per year. Mr. Cook also is eligible to
receive additional options exercisable for up to 150,000 shares of Common Stock
based upon the Company's performance for each of 1996, 1997 and 1998. Any
options so granted to Mr. Cook shall be granted at fair market value as of the
end of the applicable year. 73,530 such options were granted with respect to
1996 at a purchase price of $16.00 per share. If Mr. Cook is terminated other
than for cause or if Mr. Cook resigns for "Good Reason," he is eligible to
receive a severance payment up to a maximum amount not to be deemed an "excess
parachute payment" under the Internal Revenue Code of 1986, as amended (the
"Code"), and all outstanding options immediately become vested. For purposes of
Mr. Cook's employment agreement "Good Reason" means, unless Mr. Cook consents
thereto, (i) the assignment of duties or a position or title inconsistent with
or lower than the duties, position or title provided in Mr. Cook's employment
agreement; (ii) the principal place where Mr. Cook is required to perform a
substantial portion of his duties is outside of Atlanta, Georgia; (iii) the
reduction of Mr. Cook's compensation unless the Board (or the Compensation
Committee) has authorized a general compensation decrease for all executive
employees of the Company; or (iv) there is a merger, consolidation or
reorganization of the Company or any other transaction resulting in Mr. Cook
(together with his immediate family or trusts or limited partnerships
established for the benefit of Mr. Cook and/or such persons) owning in the
aggregate less than 20% of the voting control of the Company or there is a sale
or agreement to sell or a grant of an option to purchase all or substantially
all of the assets of the Company. Mr. Cook also is entitled to receive certain
supplemental insurance coverage and other personal benefits under his employment
agreement. Mr. Cook has agreed not to compete with the business of the Company
or to solicit any of the Company's clients or employees for a period of 18
months following termination of employment.
The Company has also entered into employment agreements with John M. Toma,
Michael A. Lustig, Paul J. Dinkins, Brian M. O'Toole and Donald E. Ellis, Jr.,
each of which, with the exception of Mr. Dinkins',
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will expire December 31, 1997 and provides for automatic one-year renewals upon
the expiration of each year of employment, subject to prior notice of nonrenewal
by the Board of Directors. Mr. Dinkins' agreement, as amended, will expire
December 31, 1999 but will automatically renew on a year-to-year basis
thereafter unless either party gives the other 90 days prior notice of intention
not to renew. Under Mr. Toma's employment agreement, he is entitled to receive
an annual base salary of $306,000 and an annual bonus of up to 50% of his base
salary based on the Company's performance. Effective on the date of the
Company's initial public offering, March 26, 1996, Mr. Toma was granted options
under the Company's 1996 Stock Option Plan to purchase 100,000 shares of Common
Stock at the same price as the price to public, $11.00 per share, in connection
with the offering, vesting over a five-year period at 20% per year. In addition,
the Company has agreed to make annual contributions in the amount of $55,000 per
year to a deferred compensation program for Mr. Toma, which amounts will vest
50% immediately and the remainder at 10% per year, and to provide him with
certain supplemental insurance coverage and other personal benefits. Upon
termination, other than for cause or by voluntary resignation, Mr. Toma will
receive one year's base salary and other personal benefits. Mr. Toma will
receive one year's base salary if he resigns for "Good Reason" (as such term is
similarly defined in Mr. Cook's employment agreement). Mr. Toma has agreed not
to compete with the business of the Company or to solicit any clients or
employees of the Company for a period of 18 months following termination of
employment.
Under the Company's employment agreements with Messrs. O'Toole and Ellis,
such persons are contractually entitled to receive annual base salaries of
$300,000 and $160,000, respectively, while pursuant to Mr. Lustig's agreement,
in 1996 he was contractually entitled to receive a graduated annual base salary
ranging from $190,000 to $250,000. With respect to 1997, the Compensation
Committee has determined to increase Mr. Ellis' and Mr. Lustig's annual base
salaries to $175,000 and $265,000, respectively, while Mr. Dinkins' employment
agreement, as amended, provides that his 1997 base salary will be $265,000 and
that he will receive additional compensation in the form of sales and account
management incentive compensation, as well as certain payments as compensation
for relocation expenses. In addition, Messrs. O'Toole, Ellis and Lustig are
entitled to receive annual bonuses of up to 50% of their respective base
salaries based on the Company's performance. Also, the Company has agreed to
make annual contributions of up to $55,000 per year for Mr. O'Toole, $25,000 per
year for Messrs. Dinkins and Ellis, and $20,000 per year for Mr. Lustig to a
deferred compensation program for each of such employees, which contributions
will be fully vested upon contribution for Mr. O'Toole and will vest 10% per
year for Messrs. Dinkins, Ellis and Lustig, and to provide them with certain
supplemental insurance coverage and other personal benefits. Upon termination,
other than for cause or by voluntary resignation under certain conditions,
Messrs. O'Toole, Dinkins and Ellis will receive compensation equal to one year's
base salary, while Mr. Lustig will receive compensation equal to six months'
base salary. In addition, Mr. Ellis will receive one year's base salary if he
resigns for "Good Reason" (as such term is similarly defined in Mr. Cook's
employment agreement). In the event of the sale of all or substantially all of
the assets of the Company, certain mergers involving the Company, or the sale by
the shareholders of 51% or more of the outstanding capital stock of the Company
to a third party, Mr. O'Toole may receive additional deferred compensation up to
$400,000, reduced by one-half of the deferred compensation payments made by the
Company on behalf of Mr. O'Toole prior to the date of such sale or merger, and
Mr. O'Toole's employment agreement automatically converts to a term ending three
years from the date of such sale, with annual compensation equal to his then
annual base salary. Messrs. O'Toole, Dinkins, Ellis and Lustig have agreed not
to compete with the business of the Company or to solicit any clients or
employees of the Company for a period of 18 months following termination of
their respective employments.
1996 STOCK OPTION PLAN
In January 1996, the Company, with the approval of its shareholders,
adopted the 1996 Stock Option Plan (the "1996 Plan"). As of February 28, 1997,
options for 1,756,030 shares were outstanding (after adjustment for forfeitures)
and 28,000 had been exercised. Unless sooner terminated by the Board, the 1996
Plan terminates in January 2006.
Options may be granted under the 1996 Plan to key employees, officers or
directors of, and consultants and advisors to, the Company and its subsidiaries.
The Company estimates that, as of the date of this Proxy
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Statement, approximately 700 employees (including officers) and five non-officer
directors of the Company are eligible to participate in the 1996 Plan. The
following discussion contains a summary of the 1996 Plan.
Shares Reserved for the Plan
The Company's 1996 Plan provides for the grant of options to acquire a
maximum of 3,500,000 shares of Common Stock, subject to adjustment in the event
of stock dividends, stock splits, combination of shares, recapitalizations, or
other changes in the outstanding Common Stock. Shares issued under the 1996 Plan
may consist, in whole or in part, of authorized and unissued shares, treasury
shares or shares purchased on the open market.
The 1996 Plan permits the grant of incentive stock options ("ISOs") and
non-qualified stock options ("NSOs") at the discretion of the Compensation
Committee (the "Committee") of the Board of Directors.
Purpose of Plan
The Company desires to attract and retain persons of skill and experience
and to encourage their highest levels of performance on behalf of the Company
and its subsidiaries. The 1996 Plan accordingly affords eligible persons the
opportunity to acquire stock rights in the Company. A portion of the options
issued pursuant to the 1996 Plan may constitute ISOs within the meaning of
Section 422 of the Code or any succeeding provisions. The 1996 Plan is not
qualified under Section 401(a) of the Code and is not subject to the provisions
of the Employee Retirement Income Security Act of 1974.
Duration of Plan
Stock options may be granted pursuant to the 1996 Plan from time to time
prior to the earliest of (1) January 25, 2006; (2) the date on which all shares
have been issued under the 1996 Plan; or (3) such date as the Board of Directors
shall determine in its sole discretion.
Administration of the Plan
The 1996 Plan is administered by the Committee. Subject to the terms of the
1996 Plan, in administering the 1996 Plan and the stock options granted under
the 1996 Plan, the Committee shall have the authority to (1) determine the
employees of the Company and its subsidiaries to whom ISOs may be granted, and
to determine the directors, officers and employees of the Company and its
subsidiaries and the consultants and advisors, to whom NSOs may be granted; (2)
determine the time or times at which options may be granted; (3) determine the
number of shares subject to each option and the exercise price thereof; (4)
determine whether each option granted shall be an ISO or a NSO; (5) determine
the time or times when each option shall become exercisable and the duration of
the exercise period; (6) determine whether restrictions are to be imposed on
shares subject to options and the nature of such restrictions; (7) determine
whether and under what circumstances cash payments shall be made upon the
termination of options, and whether and under what circumstances stock acquired
pursuant to the exercise of an option shall be repurchased by the Company; and
(8) interpret the 1996 Plan and prescribe and rescind rules and regulations, if
any, relating to and consistent with the 1996 Plan; provided, however, that the
Board of Directors has delegated all rights to determine awards of stock-based
compensation to individuals who file reports pursuant to Section 16 of the
Exchange Act to a subcommittee of the Compensation Committee consisting of
Messrs. Greimann and Lowrey, each of whom is a "nonemployee" director, as such
term is defined in Rule 16b-3 promulgated pursuant to the Exchange Act.
The current Committee members are Mr. Lowrey, Chairman, Mr. Golden and Mr.
Greimann. The terms of each of Messrs. Lowrey, Golden and Greimann as directors
expire at the 1998 Annual Meeting of the Shareholders, unless they are reelected
as contemplated. Under the 1996 Plan, acts by a majority of the Committee, or
acts reduced to or approved in writing by a majority of the members of the
Committee, shall be the valid acts of the Committee.
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No members of the Board of Directors or the Committee shall be liable for
any action or determination made in good faith with respect to the 1996 Plan or
any stock options granted under it. No member of the Board or the Committee
shall be liable for any act or omission of any other member of the Board or the
Committee or for any act or omission on his own part, including but not limited
to the exercise of any power or discretion given to him under the 1996 Plan,
except those resulting from his own gross negligence or willful misconduct. In
addition to such other rights of indemnification as he may have as a member of
the Board or Committee, each member of the Board and the Committee shall be
entitled to indemnification by the Company with respect to administration of the
1996 Plan and the granting of stock options under it.
Amendment of the Plan
The 1996 Plan may be terminated or amended by the Board of Directors at any
time, except that the following actions may not be taken without shareholder
approval: (a) materially increasing the number of shares that may be issued
under the 1996 Plan (except by certain adjustments under the 1996 Plan); (b)
materially modifying the requirements as to eligibility for participation in the
1996 Plan; (c) materially increasing the benefits accruing to participants under
the 1996 Plan; (d) modifying the exercise price at which shares may be offered
(except by adjustment pursuant to the 1996 Plan); and (e) modifying the January
25, 2006, expiration date of the 1996 Plan. Stock options may not be granted
under the 1996 Plan after the date of termination of the 1996 Plan, but options
granted prior to that date shall continue to be exercisable according to their
terms.
Eligibility for Participation
Each person who is serving as an officer, director, or employee of the
Company or any of its subsidiaries is eligible to participate in the 1996 Plan.
Furthermore, certain consultants and advisors to the Company may also be
eligible to participate in the 1996 Plan.
Nothing contained in the 1996 Plan or in any stock option agreement may
confer upon any person any right to continue as director, officer or employee of
the Company or its subsidiaries or as a consultant or advisor, or limit in any
way any right of shareholders or of the Board, as applicable, to remove such
person.
Plan Benefits
During 1996 and from January 1, 1997 through March 26, 1997, the number and
exercise price of options granted to executive officers as a group,
non-executive directors and non-executive employees were as set forth below. See
"Stock Option Grants in Last Fiscal Year" Table above for discussion regarding
number of securities underlying options granted to the Named Executive Officers.
Mr. Cook is eligible to receive, annually, options to purchase up to 150,000
shares of Common Stock if the Company achieves certain earnings per share
increases. See "Employment Agreements."
FROM JANUARY 1, 1997
1996 THROUGH MARCH 26, 1997
--------------------------- ---------------------------
EXERCISE PRICE EXERCISE PRICE
NUMBER OF OR RANGE OF NUMBER OF OR RANGE OF
GROUP OPTIONS EXERCISE PRICES OPTIONS EXERCISE PRICES
- ----- --------- --------------- --------- ---------------
Executive Group............................ 478,530 $11.00-$19.875 95,000 $12.75-$14.75
Non-Executive Director Group............... 10,000 $ 8.00 0 N/A
Non-Executive Officer Employee Group....... 187,500 $11.00-$19.875 425,500 $12.75-$16.50
Grant of Stock Options
The Committee may grant stock options to eligible persons in such amounts
and on such terms not inconsistent with the 1996 Plan as it may deem appropriate
up to the number of shares remaining subject to the 1996 Plan. The Company and
each eligible person shall execute an agreement providing for the grant of stock
options in accordance with the pertinent provisions of the 1996 Plan. No
consideration shall be paid in connection with any such grant unless the sale of
shares is made simultaneously with the grant.
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Option Exercise Price
The exercise price per share for the shares subject to NSOs shall be at
whatever price is approved by the Committee. Although there are no limitations
on the exercise price per share of an NSO, the exercise price per share for the
shares subject to ISOs shall be not less than the fair market value per share of
Common Stock on the grant date, except that in the case of an ISO to be granted
to an employee owning more than 10% of the total combined voting power of all
classes of stock of the Company, the exercise price per share shall be not less
than 110% of the fair market value per share of Common Stock on the grant date.
The "fair market value" shall be the closing price on the Nasdaq National Market
on the day of grant or if no sale of the Common Stock has been made on such
date, on the next preceding day on which there was such a sale.
Vesting of Options
Unless otherwise provided by the Committee, options granted under the 1996
Plan generally vest at the rate of 20% per annum over a five-year period so that
all options are vested after five years. In the event of a change of control,
the Committee may also accelerate the vesting of outstanding options under the
1996 Plan.
Adjustments to Exercise Price and Number of Shares
If the shares of Common Stock are subdivided or combined, or a stock
dividend is declared and paid, the number of shares of Common Stock deliverable
upon the exercise of the options shall be increased or decreased
proportionately, and the purchase price per share shall be adjusted to reflect
such subdivision, combination or stock dividend. If, while unexercised Options
remain outstanding under the 1996 Plan, the Company proposes to merge or
consolidate with another corporation, whether or not the Company is to be the
surviving corporation, or if the Company proposes to liquidate or sell or
otherwise dispose of substantially all of its assets, or substantially all of
the outstanding shares of stock of the Company are to be sold, then the
Committee may, in its sole discretion, either (i) make appropriate provision for
the protection of any such outstanding Options by the substitution on an
equitable basis of appropriate stock of the surviving corporation or its parent
in the merger or consolidation, or other reorganized corporation that will be
issuable in respect to the shares of Common Stock of the Company subject to such
options, provided that, with respect to ISOs, such provision shall satisfy the
requirement that no additional benefits shall be conferred upon optionees as a
result of such substitution within the meaning of Section 424(a) of the Code,
and that the excess of the aggregate fair market value of the shares subject to
the options immediately after such substitution over the purchase price thereof
is not more than the excess of the aggregate fair market value of the shares
subject to such options immediately before such substitution over the purchase
price thereof, or (ii) upon written notice to the Optionees, provide that all
unexercised Options must be exercised within a specified number of days of the
date of such notice or they will be terminated. In any such case, the Committee
may, in its discretion, accelerate the date on which outstanding Options become
exercisable. In no event, however, shall the Committee be obligated to take any
action as a result of any such transaction, it being acknowledged that it is in
the Committee's sole discretion to determine if, and to what extent, any such
action shall be taken.
Duration and Termination of Options
Each option expires on the date specified by the Committee, but not more
than (i) ten years from the grant date in the case of NSOs, (ii) ten years from
the grant date in the case of ISOs generally, and (iii) five years from the
grant date in the case of ISOs granted to an employee owning more than 10% of
the total combined voting power of all classes of stock of the Company. If
approved by the Committee, after request by the grantee, ISOs may be converted
into NSOs and the term of such option may be extended.
Means of Exercise of Options
Options are exercised by giving written notice to the Company at its
principal office address, accompanied by full payment of the purchase price
therefor and the applicable withholding tax, either (a) in United States dollars
in cash or by check, or (b) if permitted by the Committee, the delivery of
shares of Common Stock
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having a fair market value equal as of the date of the exercise to the cash
exercise price of the option; provided, however, that such shares must have been
held for at least six months.
Non-transferability of Options
No option is transferable except by will or by the laws of descent and
distribution, and all options are exercisable, during the lifetime of the
optionee, only by the optionee or the optionee's guardian or legal
representative. Shares subject to options granted under the 1996 Plan that have
lapsed or terminated may again be subject to options granted under such 1996
Plan.
Tax Treatment
The following discussion addresses certain anticipated federal income tax
consequences to recipients of awards made under the 1996 Plan. It is based on
the Code and interpretations thereof as in effect on the date of this Proxy
Statement. This summary is not intended to be exhaustive and, among other
things, does not describe state, local or foreign tax consequences.
Under current interpretations of the Code, the grant of a NSO to an
optionee will not result in the recognition of any taxable income to the
optionee, because a NSO does not have a readily ascertainable fair market value
on the date it is granted. Upon exercise of the NSO, however, the optionee will
generally recognize ordinary compensation income equal to the excess, if any, of
the fair market value of the shares received pursuant to the exercise of the
NSOs over the exercise price. Such taxation upon the exercise of a NSO will be
deferred (i) if the NSO shares are subject to restrictions imposed by the
Committee which could result in a substantial risk of their forfeiture or (ii)
if the optionee is subject to the "short-swing profit" forfeiture provisions of
Section 16(b) of the Exchange Act, unless, in either event, the optionee makes
an election pursuant to Section 83(b) of the Code (an "83(b) Election"), within
30 days of receipt of the NSO shares to be taxed on the date of receipt of the
NSO shares. If no 83(b) Election is made, the optionee will recognize ordinary
compensation income at the time the NSO shares are no longer subject to such
restrictions or the optionee is no longer subject to Section 16(b) liability as
a result of the transfer of the NSO, in an amount equal to the excess of the
value of the option shares at such time over the amount paid for them.
Provided it complies with any applicable income tax withholding
requirements, the Company will normally be entitled to a deduction for federal
income tax purposes equal to the amount of income recognized by the optionee due
to the exercise of a NSO.
An optionee to whom an ISO which qualifies under Section 422 of the Code is
granted generally will not recognize income at the time of grant of the ISO or
its exercise. However, the excess of the fair market value of the shares subject
to the ISO over the exercise price of the ISO at the time of its exercise is an
adjustment to taxable income in determining an optionee's alternative minimum
taxable income and ultimately his alternative minimum tax ("AMT"). As a result,
this adjustment could cause the optionee to be subject to AMT or increase his
existing AMT liability.
If an optionee who has exercised an ISO does not sell the ISO shares until
(i) more than one year after exercise and (ii) more than two years after the
date of grant, such optionee will normally recognize long term capital gain or
loss equal to the difference, if any, between the selling price of the shares
and the exercise price. If the optionee sells the shares before the time periods
referenced above expire (a "disqualifying disposition") he or she will recognize
ordinary compensation income equal to the lesser of (i) the difference, if any,
between the fair market value of the shares on the date of exercise and the
exercise price of the ISO, and (ii) the difference, if any, between the selling
price for the shares and the exercise price of the ISO. Any other gain or loss
on such sale will normally be capital gain or loss.
Unless there is a disqualifying disposition of the ISO shares, the Company
does not receive any deduction for federal income tax purposes with respect to
the ISO shares. Upon a disqualifying disposition, and provided the Company
complies with any applicable income tax withholding requirements, the Company
will normally be entitled to a deduction for federal income tax purposes equal
to the amount of income recognized by the optionee due to the disqualifying
disposition.
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EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors has recommended that the shareholders approve The
Profit Recovery Group International, Inc. Employee Stock Purchase Plan. See
"PROPOSAL TO APPROVE THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. EMPLOYEE
STOCK PURCHASE PLAN" below.
THE COMPANY'S 401(k) PLAN
The Company assumed, effective immediately prior to completion of its
initial public offering, the 401(k) plan sponsored by a predecessor of the
Company. This plan (the "401(k) Plan") is a tax-qualified retirement plan
designed to meet the requirements of Sections 401(a) and 401(k) of the Code.
Under the 401(k) Plan, participants may elect to make pre-tax saving deferrals
of from 1% to 15% of their compensation each year, subject to annual limits on
such deferrals (e.g., $9,500 in 1997) imposed by the Code. The Company may also
in its discretion, on an annual basis, make a matching contribution with respect
to such participant elective deferrals and/or additional Company contributions.
The only form of benefit payment under the 401(k) Plan is a single lump-sum
payment equal to the balance in the participant's account. Under the 401(k)
Plan, the vested portion of a participant's accrued benefit is payable upon such
employee's termination of employment, attainment of age 59 1/2 (with respect to
100% vested accounts only), retirement, total and permanent disability or death.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
On June 26, 1991, the Company entered into a lease for office space with
1250 Building, Inc. ("1250 Building") which expired July 1, 1996. Messrs. Cook,
Cohen, Golden and Toma own 73.0%, 10.0%, 10.0% and 7.0% interests, respectively,
in 1250 Building. The Company vacated this office space in December 1993, and
1250 Building relet the space to a third-party lessee, with the Company
remaining responsible for the difference in rent to 1250 Building. During 1996,
the Company paid rental payments to 1250 Building of $15,000.
On December 29, 1994, the Company's predecessor and certain of its foreign
subsidiaries borrowed an aggregate of approximately $1.7 million from their
respective shareholders, consisting of certain of the directors and executive
officers of the Company and certain members of their immediate families, as
follows: John M. Cook -- $1.0 million, members of Mr. Cook's immediate
family -- $179,000, Stanley B. Cohen -- $159,000, Jonathan Golden -- $159,000,
John M. Toma -- $116,000 and members of Mr. Toma's immediate family -- $30,000
(Messrs. Cook, Cohen, Golden and Toma and certain members of their immediate
families are collectively herein called the "Investors"). The proceeds of these
loans were used for working capital. These notes accrued interest at 8.5% per
annum and were payable in annual installments that were to have commenced on
December 31, 1995. The Company partially prepaid the Investors' notes and the
interest accrued thereon in April, 1995 and at December 31, 1995, the following
aggregate principal amounts remained outstanding: John M. Cook, $658,000;
members of Mr. Cook's immediate family, $129,000; Stanley B. Cohen, $108,000;
Jonathan Golden, $108,000; John M. Toma, $54,000; and members of Mr. Toma's
immediate family, $22,000. The notes were due January 31, 1998; however, the
Company prepaid the notes in full with a portion of the net proceeds from its
initial public offering in March 1996. This payment included accrued interest as
follows: John M. Cook, $70,000; members of Mr. Cook's immediate family, $14,000;
Stanley B. Cohen, $11,000; Jonathan Golden, $11,000; John M. Toma, $6,000; and
members of Mr. Toma's immediate family, $2,000.
On April 27, 1995, certain of the Company's predecessors, the Investors and
Mr. T. Charles Fial entered into a Note Purchase Agreement pursuant to which an
aggregate of $12.7 million in Convertible Notes was issued to noteholders.
Berkshire Fund III acquired an aggregate of approximately $11.9 million original
principal amount of Convertible Notes. The Convertible Notes accrued interest at
five percent per annum, payable on each April 27 beginning April 27, 1996 and
were due and payable in full on April 27, 2002 unless earlier exchanged or
converted. Pursuant to a reorganization of the Company and its predecessor, the
Convertible Notes were exchanged for 2,157,622 shares of Common Stock, or 15.2%
of the then outstanding Common Stock. The Company repaid a portion of the
principal on the Convertible Notes ($424,000) in
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March 1996 and paid all accrued and unpaid interest thereon ($585,000) with a
portion of the net proceeds from its initial public offering in March 1996.
Garth H. Greimann, a director of the Company, is a member of Berkshire
Partners and a general partner of Third Berkshire Associates, the general
partner of Berkshire Fund III. In connection with the sale by the Company of the
Convertible Notes to Berkshire Fund III, the Company agreed to pay Berkshire
Partners a one-time transaction fee of $125,000. The Company also engaged
Berkshire Partners to provide consulting services to the Company at a rate of
$7,500 per month beginning in July 1995, which was later amended to $5,800 per
month commencing January 1996. An aggregate of approximately $75,000 was paid in
1996. The consulting agreement was terminated effective December 31, 1996. In
addition, Mr. Greimann personally acquired a Convertible Note in the original
principal amount of approximately $52,000 having the same terms as described
above. Mr. Greimann received an aggregate of approximately $5,000 upon the
prepayment of the Convertible Notes and payment of accrued interest thereon.
Jonathan Golden, a director of the Company, provides consulting services to
the Company through JGPC. Mr. Golden is the sole shareholder of JGPC. During
1996 the Company paid JGPC aggregate consulting fees of approximately $70,000.
The Company currently pays JGPC a consulting fee of $5,800 per month. The
consulting agreement may be terminated by either party for any reason upon not
less than 30 days prior notice. In addition, the Company has paid the law firm
of Arnall, Golden & Gregory, LLP, of which JGPC serves as a partner,
compensation for legal services rendered since 1991 and expects to continue
utilizing this firm's services in the future.
CERTAIN TRANSACTIONS
On January 4, 1995, pursuant to an Agreement and Plan of Reorganization, a
predecessor to the Company acquired certain assets, net of related liabilities,
of Fial & Associates, Inc. ("Fial & Associates") in exchange for 240,000 shares
of common stock. In connection with the Fial & Associates transaction, T.
Charles Fial, the sole shareholder of Fial & Associates, was elected to serve on
the Board of Directors of the Company's predecessor and was granted certain
piggyback registration rights with respect to the common stock received by him
in the Fial & Associates transaction. The Company's predecessor paid Mr. Fial
$1.7 million in connection with the acquisition, of which $1 million was paid
pursuant to Mr. Fial's agreement not to compete with the business of the
predecessor or its assigns in a specified territory for seven years. In
addition, the agreement not to compete provided that the predecessor would pay
Mr. Fial approximately $6.1 million over four years. To secure a portion of the
consideration for the sale of the Fial & Associates assets, the Company's
predecessor assigned to Mr. Fial two term life insurance policies on the life of
John M. Cook in the aggregate amount of $4.0 million for which the Company
continued to pay the premiums. The Company repaid in full the present value of
the amount owing under the non-competition agreement ($3.7 million) with a
portion of the net proceeds from its initial public offering in March 1996.
John M. Cook is a 90% owner and manager and John M. Toma is a 10% owner and
manager of CT Investments, L.L.C. ("CT Investments"). On February 8, 1996, and
on March 14, 1996, CT Investments loaned the Company $1.6 million and $1
million, respectively, at a rate of 8.25% per annum, payable on demand. These
loans were repaid in full with a portion of the proceeds from the Company's
initial public offering.
Several members of Mr. Cook's immediate family are employed with the
Company. John M. Cook's brother, David H. Cook, is a regional Vice President of
the Company. David Cook received compensation of approximately $234,100 in 1996.
John M. Cook's sister-in-law, Harriette L. Cook, is employed by the Company as a
Senior Auditor and received compensation based on commissions of approximately
$60,000 in 1996. John M. Cook's sister, Pamela M. Cook, received approximately
$135,700 in 1996 as a Senior Auditor of Central Services for the Company. John
M. Cook's sister, Patricia Sluiter, is a Senior Auditor for the Company and was
compensated approximately $47,000 in 1996. John M. Cook's daughter, M. Christine
Cook, received compensation based on commissions of approximately $42,000 as a
Manager of Telecommunications for the Company in 1996. John M. Cook's
brother-in-law, Allen R. Sluiter, is a Senior Auditor for the
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Company and was compensated approximately $63,000 in 1996. John M. Cook's son,
Tom Cook, received approximately $8,500 as a legal assistant for the Company in
1996.
Stanley B. Cohen, a director of the Company, provides financial and
investment advisory services to the Company and certain of its executive
officers through ASL and provides financial advisory services to the Company
through SBC. Mr. Cohen is the Chairman, President, Chief Executive Officer and
sole shareholder of ASL and SBC. During 1996, the Company paid SBC aggregate
consulting fees of approximately $70,000. The Company paid ASL consulting fees
of approximately $78,000 in 1996 for providing financial advisory services to
the Company and to certain of the Company's executive officers and expects to
continue utilizing the services of ASL and SBC in the future. The Company
currently pays SBC a consulting fee of $5,800 per month. The consulting
agreement may be terminated by either party for any reason upon not less than 30
days prior notice.
Mr. Toma's sister-in-law, Marie Neff, is employed with the Company as Vice
President of Ancillary Services. For 1996, the Company paid Ms. Neff
compensation of approximately $121,500.
Tony G. Mills joined the Company as Senior Vice President -- Legal Affairs
and Acquisitions, General Counsel and Secretary on October 30, 1995. Until
January 1, 1996, Mr. Mills was a partner and 25% shareholder of the law firm
Silfen, Segal, Fryer & Shuster, P.C. ("SSFS") and remained Of Counsel to this
firm until January 31, 1996. The Company paid SSFS approximately $162,000 for
legal services rendered to the Company in 1996 and the Company expects to
continue utilizing this firm's services in the future.
See "Compensation Committee Interlocks and Insider Participation" for a
discussion of certain additional transactions.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's executive officers
and directors and persons who beneficially own more than 10% of the Company's
stock to file initial reports of ownership and reports of changes in ownership
with the Securities and Exchange Commission. Executive officers, directors and
greater than 10% beneficial owners are required by SEC regulations to furnish
the Company with copies of all Section 16(a) forms they file.
Based solely on its review of copies of forms received by it pursuant to
Section 16(a) of the Securities Exchange Act of 1934, as amended, or written
representations from certain reporting persons, the Company believes that with
respect to 1996, all Section 16(a) filing requirements applicable to its
executive officers, directors and greater than 10% beneficial owners were
complied with, except that (i) Mr. Cook inadvertently failed to report certain
shares held in trust and beneficially owned by him on one Form 3 and four Forms
4; and (ii) Mr. Toma inadvertently failed to report certain shares held in trust
and beneficially owned by him on one Form 3.
PROPOSAL TO APPROVE THE PROFIT RECOVERY GROUP INTERNATIONAL, INC.
EMPLOYEE STOCK PURCHASE PLAN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
In January 1997, the Board adopted, subject to Shareholder approval, The
Profit Recovery Group International, Inc. Employee Stock Purchase Plan (the
"Stock Purchase Plan"). If approved by Shareholders, the Stock Purchase Plan
will provide eligible employees (defined below) with an opportunity to purchase
the Company's Common Stock through payroll deductions. The Stock Purchase Plan
is intended to assist eligible employees in acquiring a stock ownership interest
in the Company pursuant to a plan that is intended to qualify as an "employee
stock purchase plan" under Section 423 of the Code to help eligible employees
provide for their future security and to encourage them to remain in the
employment of the Company and participating subsidiaries. The following
discussion contains a summary of certain material features of the Stock Purchase
Plan. This discussion is qualified in its entirety, however, by reference to the
copy of the Stock Purchase Plan attached as EXHIBIT "A" hereto.
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SHARES RESERVED FOR THE PLAN
The aggregate number of shares of Common Stock which may be purchased under
the Stock Purchase Plan shall not exceed 750,000, subject to adjustment in the
event of stock dividends, stock splits, combination of shares,
recapitalizations, or other changes in the outstanding Common Stock. Shares
issued under the Stock Purchase Plan may consist, in whole or in part, of
authorized and unissued shares, treasury shares or shares purchased on the open
market.
ELIGIBLE PARTICIPANTS
All employees of the Company, or of certain other corporations, the
majority of the voting stock of which is owned by the Company (a "Subsidiary"),
whose customary employment is at least 20 hours per week and five months per
year will be eligible to participate in the Stock Purchase Plan. Currently, The
Profit Recovery Group International I, Inc., The Profit Recovery Group Canada,
Inc., The ShapsGroup, Inc. and Accounts Payable Recovery Services, Inc., are the
only Subsidiaries whose employees are eligible to participate in the Plan.
Additional Subsidiaries may be added by the Committee in the future.
Approximately 650 employees would have been eligible to participate as of
February 28, 1997.
CERTAIN MATERIAL FEATURES OF THE PLAN
The Stock Purchase Plan provides for two purchase periods ("Plan Periods")
of six months each beginning on January 1 and July 1 of each year. On the last
day of each Plan Period, each eligible employee shall be entitled to purchase
shares of Common Stock at a purchase price equal to 85% of the closing sale
price of a share of Common Stock on the Nasdaq National Market on the first
trading day of the Plan Period.
Payment for shares of Common Stock purchased under the Stock Purchase Plan
will be made by authorized payroll deductions from an eligible employee's "Base
Pay." "Base Pay" means an eligible employee's total regular straight-time and
overtime earnings received from the Company or a Subsidiary during a Plan
Period, including payments for incentive compensation, but excluding other
special payments. Eligible employees who elect to participate in the Stock
Purchase Plan will designate a stated whole percentage equaling at least 1%, but
no more than 10%, of Base Pay, to be deposited into a separate account, subject
to a maximum aggregate deduction of $10,625 in each Plan Period. On the date of
exercise, the entire periodic deposit account of each participant in the Stock
Purchase Plan is used to purchase whole shares of Common Stock. No fractional
shares will be purchased, and the amount remaining in the employee's account
after such application will be held for the purchase of Common Stock in the next
purchase period. No interest will be paid on any amounts deducted and credited
to a Participant's account. Participants will be entitled to receive, as soon as
practicable after the end of a purchase period, a stock certificate for the
number of purchased shares.
No participant in the Stock Purchase Plan is permitted to purchase Common
Stock under the Stock Purchase Plan at a rate that exceeds $25,000 in fair
market value of Common Stock for each calendar year. If the number of shares for
which purchase rights are exercised exceeds the number of shares available in
any Plan Period under the Stock Purchase Plan, the shares available for sale
will be allocated pro rata among the participants in such Plan Period in
proportion to the relative amounts in their accounts. All funds received by the
Company from the sale of Common Stock under the Stock Purchase Plan may be used
for any corporate purpose.
NEW PLAN BENEFITS
It is not possible to determine how many eligible employees will
participate in the Stock Purchase Plan in the future. Therefore, it is not
possible to determine the dollar value or number of shares of Common Stock that
will be distributed under the Stock Purchase Plan.
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TAX TREATMENT
The following discussion addresses certain anticipated federal income tax
consequences to recipients of awards made under the Stock Purchase Plan. It is
based on the Code and interpretations thereof as in effect on the date of this
Proxy Statement. This summary is not intended to be exhaustive and, among other
things, does not describe state, local or foreign tax consequences.
The Stock Purchase Plan is intended to qualify as an employee stock
purchase plan within the meaning of Section 423 of the Code. Under the Code, an
employee who elects to participate in an offering under the Stock Purchase Plan
will not recognize income at the time the offering commences or at the time the
shares purchased under the Stock Purchase Plan are transferred to him or her. If
an employee disposes of such shares after two years from the date the offering
of such shares is deemed to have been made for federal income tax
purposes -- generally the first day of each Plan Period -- (the "Grant Date") or
after one year from the date of the transfer of such shares to him or her, or if
the employee holds such shares until his or her death, the employee will be
required to include in income, as compensation for the year in which such
disposition or death occurs, an amount equal to the excess of (i) the lesser of
(x) the fair market value of such shares at the time of disposition or death or
(y) the fair market value of such shares as of the Grant Date, over (ii) the
purchase price. The employee's basis in the shares disposed of will be increased
by an amount equal to the amount so includable in his or her income as
compensation, and any gain or loss computed with reference to such adjusted
basis which is recognized at the time of the disposition will be a capital gain
or loss, either short-term or long-term, depending on the holding period for
such shares. In such event, the Company (or the subsidiary by which the employee
is employed) will not be entitled to any deduction for federal income tax
purposes.
If an employee disposes of the shares purchased under the Stock Purchase
Plan within two years of the Grant Date or one year of the date of the transfer
of the shares, the employee will be required to include in income, as
compensation for the year in which such disposition occurs, an amount equal to
the excess of (i) the fair market value of such shares on the date of purchase
over (ii) the purchase price. The employee's basis in such shares disposed of
will be increased by an amount equal to the amount includable in his or her
income as compensation, and any gain or loss computed with reference to such
adjusted basis which is recognized at the time of disposition will be a capital
gain or loss, either short-term or long-term, depending on the holding period
for such shares. In the event of a disposition within such two-year or one-year
period, the Company (or the subsidiary by which the employee is employed) will
be entitled to a deduction for federal income tax purposes in an amount equal to
the amount the employee is required to include in income as a result of such
disposition.
PLAN ADMINISTRATION AND TERMINATION
The Stock Purchase Plan is administered by the Company's Compensation
Committee. The Committee may adopt rules and procedures not inconsistent with
the provisions of the Stock Purchase Plan for its administration. The
Committee's interpretation and construction of the Stock Purchase Plan is final
and conclusive.
The Committee may at any time, or from time to time, alter or amend the
Stock Purchase Plan in any respect, except that, without approval of the
Shareholders of the Company, no amendment may change the number of shares
reserved for purchase under the Stock Purchase Plan or adversely affect the
rights of any participant with respect to amounts previously credited to his
stock purchase plan account.
The Committee shall have the right to terminate the Stock Purchase Plan or
any offering thereunder at any time for any reason. Unless terminated earlier,
the Stock Purchase Plan shall terminate at the time purchase rights have been
exercised with respect to all shares of Common Stock reserved for grant under
the Stock Purchase Plan. Upon expiration or termination of the Stock Purchase
Plan, any amount not applied toward the purchase of Common Stock will be
refunded.
Although employee directors may have an interest in the Stock Purchase
Plan, the Board of Directors believes that the Stock Purchase Plan is fair and
in the best interest of the Company and the Shareholders.
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Proxies received by the Board of Directors of the Company will be voted for
approval of the Company's Employee Stock Purchase Plan, unless Shareholders
specify a contrary choice in their proxies. The affirmative vote by the holders
of a majority of the outstanding shares of Common Stock present in person or by
proxy at the meeting is required to approve the Company's Employee Stock
Purchase Plan.
OWNERSHIP OF DIRECTORS, PRINCIPAL SHAREHOLDERS
AND CERTAIN EXECUTIVE OFFICERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of March 26, 1997 by: (i) each person
(or group of affiliated persons) known by the Company to be the beneficial owner
of more than 5% of the outstanding Common Stock; (ii) the Named Executive
Officers; (iii) each director of the Company; and (iv) all of the Company's
executive officers and directors as a group. Except as otherwise indicated in
the footnotes to this table, the Company believes that the persons named in this
table have sole voting and investment power with respect to all the shares of
Common Stock indicated.
BENEFICIAL OWNERSHIP
AS OF 3/26/97 (1)
-----------------------
BENEFICIAL OWNER SHARES PERCENTAGE
- ---------------- ---------- ----------
John M. Cook(2)(3).......................................... 5,390,967 29.7%
Cook Family Limited Partnership(2).......................... 1,732,684 9.5
John M. Toma(2)(4).......................................... 740,730 4.1
Donald E. Ellis, Jr.(5)..................................... 26,000 *
Michael A. Lustig(6)........................................ 5,830 *
Paul J. Dinkins(7).......................................... 42,000 *
Brian M. O'Toole(8)......................................... 40,500 *
Tony G. Mills(9)............................................ 1,896,985 10.4
Stanley B. Cohen(2)(10)..................................... 900,000 5.0
Jonathan Golden(2)(11)...................................... 1,082,928 6.0
Fred W. I. Lachotzki(12).................................... 12,000 *
E. James Lowrey(12)......................................... 4,500 *
Berkshire Fund III(13)...................................... 1,766,288 9.7
Bradley M. Bloom(13)(14).................................... 1,780,229 9.8
Jane Brock-Wilson(13)(14)................................... 1,773,949 9.8
Kevin T. Callaghan(13)(14).................................. 1,773,949 9.8
J. Christopher Clifford(13)(14)............................. 1,778,185 9.8
Russell L. Epker(13)(14).................................... 1,778,185 9.8
Carl Ferenbach(13)(14)...................................... 1,780,229 9.8
Garth H. Greimann(13)(14)................................... 1,773,949 9.8
Richard K. Lubin(13)(14).................................... 1,766,288 9.7
Janus Capital Corporation(15)(16)........................... 1,442,950 8.0
Thomas H. Bailey(15)(16).................................... 1,442,950 8.0
All executive officers and directors as a group (12
Persons)(17).............................................. 11,815,224 64.6
- ---------------
* Less than one percent.
(1) Applicable percentage of ownership at March 26, 1997 is based upon
18,155,151 shares of Common Stock outstanding. Beneficial ownership is
determined in accordance with the rules of the Securities and Exchange
Commission and includes voting and investment power with respect to the
shares shown as beneficially owned. Shares of Common Stock subject to
options currently exercisable or exercisable within 60 days are deemed
outstanding for computing the percentage ownership of the person holding
such options, but are not deemed outstanding for computing the percentage
ownership of any other persons.
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(2) The business address for the named individual or entity is 2300 Windy Ridge
Parkway, Suite 100 North, Atlanta, Georgia 30339-8426.
(3) Does not include shares held for the benefit of John M. Cook or M. Lucy
Cook for which Tony G. Mills is the trustee and has the sole investment and
voting power with respect to such shares. Includes 1,732,684 shares held by
the Cook Family Limited Partnership, for which Mr. Cook serves as the
general partner and 16,750 shares held by his spouse. Also includes 134,000
shares owned by Cook Family Foundation, Inc., of which Mr. Cook, his spouse
and members of his immediate family are the directors and 30,000 shares
subject to options which either are currently exercisable or will become
exercisable within sixty days of the date of mailing of this Proxy
Statement.
(4) Includes 39,765 shares held for the benefit of Mr. Toma for which Tony G.
Mills and Mr. Toma's wife serve as co-trustees and the trustees share
investment and voting power with respect to such shares. Includes 218,870
shares held by the Toma Family Limited Partnership, for which Mr. Toma
serves as the general partner. Also includes 50,000 shares held by Mr.
Toma's wife, 2,680 shares held by the Mary Caitlin Cook Trust, of which Mr.
Toma is the trustee, and 20,000 shares subject to options which either are
exercisable or will become exercisable within sixty days of the date of
mailing of this Proxy Statement.
(5) Includes 26,000 shares subject to options which are either currently
exercisable or will become exercisable within sixty (60) days of the date
of mailing of this Proxy Statement.
(6) Includes 4,800 shares subject to options which are either currently
exercisable or will become exercisable within sixty (60) days of the date
of mailing of this Proxy Statement.
(7) Includes 42,000 shares subject to options which are either currently
exercisable or will become exercisable within sixty (60) days of the date
of mailing of this Proxy Statement.
(8) Includes 40,000 shares subject to options which are either currently
exercisable or will become exercisable within sixty (60) days of the date
of mailing of this Proxy Statement and 500 shares owned by his spouse.
(9) Includes shares held by trusts containing 1,801,220 shares for the benefit
of Mr. Cook and his spouse of which Mr. Mills is the sole trustee and by
trusts containing 79,765 shares for the benefit of Mr. Toma and certain
members of his immediate family of which Mr. Mills is a co-trustee. Also
includes 16,000 shares subject to options which are either currently
exercisable or will become exercisable within sixty days of the date of
mailing of this Proxy Statement.
(10) Includes 197,767 shares held for the benefit of Mr. Cohen for which Shirley
L. Cohen, Mr. Cohen's spouse, is the trustee and has sole voting and
investment power with respect to such shares.
(11) Includes 143,408 shares held for the benefit of Mr. Golden for which
Roberta P. Golden is the trustee and has sole voting and investment power
with respect to such shares.
(12) Includes 2,000 shares subject to options which are either currently
exercisable or will become exercisable within sixty (60) days of the date
of mailing of this Proxy Statement.
(13) The business address for the named individual or entity is Suite 3300, One
Boston Place, Boston, Massachusetts 02108-4401.
(14) Includes 1,766,288 shares held by Berkshire Fund III, for which the general
partner is Third Berkshire Associates. Ms. Brock-Wilson and Messrs. Bloom,
Callaghan, Clifford, Epker, Ferenbach, Greimann and Lubin serve as general
partners of Third Berkshire Associates. These individuals each disclaim
beneficial ownership of the shares owned by Berkshire Fund III, except to
the extent of their respective pecuniary interests therein.
(15) The business address for the named individual or entity is 100 Fillmore
Street, Denver, Colorado 80206-4923.
(16) Janus Capital Corporation ("Janus Capital") is a registered investment
adviser which furnishes investment advice to several investment companies
registered under Section 8 of the Investment Company Act of 1940 and
individual and institutional clients (collectively referred to herein as
"Managed Portfolios"). As a result of its role as investment adviser or
sub-adviser to the Manager Portfolios, Janus Capital may be deemed to be
the beneficial owner of the shares of the Company Common Stock held by such
Managed Portfolios. However, Janus Capital does not have the right to
receive any dividends from, or the proceeds from the sale of, the
securities held in the Managed Portfolios and disclaims any ownership
associated with such rights. Mr. Bailey owns approximately
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12.2% of Janus Capital. In addition to being a stockholder of Janus
Capital, Mr. Bailey serves as President and Chairman of the Board of Janus
Capital. Mr. Bailey does not own of record any shares of Company Common
Stock. However, as a result of his position, Mr. Bailey may be deemed to
have the power to exercise or to direct the exercise of such voting and/or
dispositive power that Janus Capital may have with respect to the Common
Stock held by the Managed Portfolios. All shares reported herein have been
acquired by the Managed Portfolios, and Mr. Bailey specifically disclaims
beneficial ownership over any shares of Company Common Stock that he or
Janus Capital may be deemed to beneficially own. The foregoing information
was obtained by the Company from filings made by Janus Capital and Mr.
Bailey with the Securities and Exchange Commission.
(17) Includes options to purchase 121,800 shares which are either currently
exercisable or will become exercisable within 60 days of the date of
mailing of this Proxy Statement. Does not include 636,730 shares subject to
outstanding options which options are not currently exercisable and will
not become exercisable within 60 days of the date of mailing of this Proxy
Statement.
EXECUTIVE OFFICERS
Each of the executive officers of the Company was elected by the Board of
Directors to serve until the Board of Directors' meeting immediately following
the next annual meeting of the Shareholders or until his earlier removal by the
Board or his resignation. Mr. Paul J. Dinkins remains an Executive Vice
President of the Company in 1997, but no longer serves as an executive officer
due to his strategic redeployment. The following table lists the executive
officers of the Company and their ages, offices with the Company, and the date
from which they have continually served in their present offices with the
Company.
DATE FIRST
ELECTED TO
NAME AGE OFFICE WITH REGISTRANT PRESENT OFFICE
- ---- --- ---------------------- --------------
John M. Cook.......... 54 Chairman of the Board, Chief Executive Officer, 1990
President and Director
John M. Toma.......... 51 Vice Chairman, Assistant Secretary and Director 1997
Michael A. Lustig..... 40 Executive Vice President, and President of PRG 1997
Retail, Wholesale and Government Divisions
Robert V. Carlino..... 48 Executive Vice President of PRG Retail, 1997
Wholesale and Government Divisions (United
States Operations)
Donald E. Ellis, 45 Senior Vice President, Treasurer and Chief 1995
Jr.................. Financial Officer
Tony G. Mills......... 40 Senior Vice President -- Legal Affairs and 1995
Acquisitions, General Counsel and Secretary
David A. Brookmire.... 44 Senior Vice President -- Human Resources 1995
The employment histories of those executive officers who are not also
directors are set forth below:
Michael A. Lustig joined the Company in 1995 as Senior Vice
President -- Operations. Mr. Lustig was promoted to Executive Vice
President in 1996, and to President of the PRG Retail, Wholesale and
Government Divisions in 1997. Prior to joining the Company, Mr. Lustig
worked for the Actava Group (formerly Fuqua Industries) from 1992 to 1995
where he held various officer positions concluding with Senior Vice
President of Corporate Development.
Robert V. Carlino joined the Company in 1987 as an auditor and has
held several positions, including Regional Vice President, Senior Vice
President, and Executive Vice President of the PRG Retail, Wholesale and
Government Divisions (United States Operations). Prior to joining the
Company, Mr. Carlino worked for Macy's from 1969-1986, where he held
several financial and executive positions.
Donald E. Ellis, Jr. joined the Company in 1995 as Senior Vice
President, Treasurer and Chief Financial Officer. From 1993 to 1995, Mr.
Ellis served as Vice President -- Finance, Treasurer and Chief Financial
Officer of Information America, Inc., a provider of on-line computer
information services, and from 1991 to 1993, he was an independent
financial consultant. From 1987 to 1991, Mr. Ellis served in
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various positions with KnowledgeWare, Inc., a supplier of application
software, most recently as Senior Vice President, Chief Financial Officer,
Secretary and Treasurer. Mr. Ellis is a certified public accountant.
Tony G. Mills joined the Company in October 1995 as Senior Vice
President -- Legal Affairs and Acquisitions, General Counsel and Secretary.
For 11 years prior to joining the Company, Mr. Mills was a shareholder in
the Atlanta, Georgia law firm of SSFS and provided legal services to the
Company through that firm since 1990. Mr. Mills remained as Of Counsel to
SSFS through January 1996.
David A. Brookmire joined the Company in 1995 as Senior Vice
President -- Human Resources. From 1987 to 1995, Mr. Brookmire held various
positions with Digital Communications Associates, Inc. (now Attachmate
Corp.), most recently as Vice President -- Human Resources.
PERFORMANCE GRAPH
Set forth below is a line-graph presentation comparing the cumulative
shareholder return on the Company's Common Stock (Nasdaq: PRGX), on an indexed
basis, against cumulative total returns of The Nasdaq Stock Market (U.S.
Companies) Index and the Hambrecht & Quist Technology Index. The graph assumes
that the value of the investment in the Common Stock in each index was $100 on
March 26, 1996. The Performance Graph shows total return on investment for the
period beginning March 26, 1996 (the date of the Company's initial public
offering) through December 31, 1996.
VALUE OF $100 INVESTED ON MARCH 26, 1996 AT:
3/26/96 3/31/96 6/30/96 9/30/96 12/31/96
PRGX $100 $141 $184 $132 $145
NASDAQ STOCK MARKET-US $100 $101 $109 $113 $118
HAMBRECHT & QUIST TECHNOLOGY $100 $101 $106 $112 $119
Total return assumes reinvestment of dividends.
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INDEPENDENT PUBLIC ACCOUNTANTS
The accounting firm of KPMG Peat Marwick LLP are the independent certified
public accountants of the Company. Approval or selection of the independent
certified public accountants of the Company is not submitted for a vote at the
Annual Meeting of Shareholders. The Board of Directors of the Company has
historically selected the independent certified public accountants of the
Company, with the advice of the Audit Committee, and the Board believes that it
would be to the detriment of the Company and its Shareholders for there to be
any impediment (such as selection or ratification by the Shareholders) to its
exercising its judgment to remove the Company's independent certified public
accountants if, in its opinion, such removal is in the best interest of the
Company and its Shareholders.
It is anticipated that a representative from the accounting firm of KPMG
Peat Marwick LLP will be present at the Annual Meeting of Shareholders to answer
appropriate questions and make a statement if the representative desires to do
so.
SHAREHOLDER PROPOSALS
Appropriate proposals of Shareholders intended to be presented at the
Company's 1998 Annual Meeting of Shareholders must be received by the Company by
December 16, 1997 for inclusion in its Proxy Statement and form of proxy
relating to that meeting. If the date of the next Annual Meeting is advanced or
delayed by more than 30 calendar days from the date of the annual meeting to
which this Proxy Statement relates, the Company shall, in a timely manner,
inform its shareholders of the change, and the date by which proposals of
shareholders must be received.
UPON THE WRITTEN REQUEST OF ANY RECORD OR BENEFICIAL OWNER OF COMMON STOCK
OF THE COMPANY WHOSE PROXY WAS SOLICITED IN CONNECTION WITH THE 1997 ANNUAL
MEETING OF SHAREHOLDERS, THE COMPANY WILL FURNISH SUCH OWNER, WITHOUT CHARGE, A
COPY OF ITS ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1996.
REQUESTS FOR A COPY OF SUCH ANNUAL REPORT ON FORM 10-K SHOULD BE ADDRESSED TO
TONY G. MILLS, ESQ., SECRETARY, THE PROFIT RECOVERY GROUP INTERNATIONAL, INC.,
2300 WINDY RIDGE PARKWAY, SUITE 100 NORTH, ATLANTA, GEORGIA 30339-8426.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. SHAREHOLDERS WHO DO NOT
EXPECT TO ATTEND THE MEETING IN PERSON ARE URGED TO SIGN, COMPLETE, DATE AND
RETURN THE PROXY CARD IN THE ENCLOSED ENVELOPE, TO WHICH NO POSTAGE NEED BE
AFFIXED.
By Order of the Board of Directors:
/s/ JOHN M. COOK
JOHN M. COOK
Chairman of the Board,
Chief Executive Officer and President
Dated: April 15, 1997
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EXHIBIT "A"
THE PROFIT RECOVERY GROUP INTERNATIONAL, INC.
EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE
The Profit Recovery Group International, Inc. Employee Stock Purchase Plan
(the "Plan") is intended to encourage employee stock ownership by offering
employees of The Profit Recovery Group International, Inc. and certain of its
subsidiaries Purchase Rights (as such term is defined in Section 2 hereof) to
purchase shares of Common Stock. The Plan is intended to be an "employee stock
purchase plan" as defined in Section 423 of the Internal Revenue Code of 1986,
as amended (the "Code"). The provisions of the Plan shall, accordingly, be
construed in a manner consistent with the requirements of Section 423 of the
Code.
2. CERTAIN DEFINITIONS
"Base Pay" means regular straight-time and overtime earnings and
commissions received from the Company, including payments for incentive
compensation, but excluding other special payments.
"Board" means the Board of Directors of the Company.
"Committee" means the Compensation Committee of the Board.
"Common Stock" means the Common Stock, no par value per share, of the
Company.
"Company" means The Profit Recovery Group International, Inc. and each
Subsidiary (as defined in this Section 2).
"Custodian" means [TO BE DESIGNATED], whose address is [TO BE DESIGNATED],
or such other person as the Committee shall designate from time to time.
"Exercise Date" means the last day of a Purchase Period (as such term is
defined in Section 4(b) hereof), on which date all Participants' outstanding
Purchase Rights will automatically be exercised.
"Fair Market Value" means the closing sale price of a share of Common Stock
reported in the table entitled "Nasdaq National Market Issues" or any successor
table in The Wall Street Journal for such date or, if no shares of Common Stock
were traded on that date, on the next preceding day on which there was such a
trade.
"Nasdaq" means the National Association of Securities Dealers Automated
Quotation System.
"Participant" means an employee of the Company who has enrolled in the Plan
by filing a Participation Form (as such term is defined in Section 5 hereof)
with the Plan Administrator.
"Plan Administrator" means the [TO BE DESIGNATED] of the Company, or any
such other person so designated by the Committee.
"Purchase Right" means a Participant's option to purchase shares of Common
Stock that is deemed to be outstanding during a Purchase Period. A Purchase
Right represents an "option" as such term is used under Section 423 of the Code.
"Subsidiaries" means subsidiaries of The Profit Recovery Group
International, Inc. of which it owns the majority of the outstanding voting
shares and which have been designated by the Committee as Subsidiaries;
provided, however, that prior to any such designation by the Committee, each of
The Profit Recovery Group International I, Inc., The Profit Recovery Group
Canada, Inc., The ShapsGroup, Inc. and Accounts Payable Recovery Services, Inc.
shall be deemed a Subsidiary.
"Trading Day" refers to a day during which the Nasdaq National Market
System is available for trading shares of Common Stock.
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3. ELIGIBILITY
(a) Participation in the Plan is voluntary. All employees of the Company,
including officers and directors, whose customary employment is at least 20
hours per week and 5 months per year who have been employed since the fifth day
of the first month of the preceding Purchase Period (January 5, 1997 for the
Purchase Period beginning July 1, 1997) are eligible to participate in the Plan.
(b) Notwithstanding any provision of the Plan to the contrary, no employee
may participate in the Plan:
(i) if following a grant of Purchase Rights under the Plan, the
employee would own, directly or by attribution pursuant to Section 424(d)
of the Code, stock, Purchase Rights or other stock options to purchase
stock representing 5% or more of the total combined voting power or value
of all classes of the Company's stock; or
(ii) to the extent a grant of Purchase Rights under the Plan would
permit the employee's rights to purchase stock under all the Company's Code
Section 423 employee stock purchase plans to accrue at a rate exceeding
$25,000.00, based on the Fair Market Value of the stock (at the time of
grant), for each calendar year in which such Purchase Right is outstanding.
4. SECURITIES SUBJECT TO THE PLAN AND PURCHASE PERIODS
(a) The Plan covers an aggregate of 750,000 shares of Common Stock (subject
to adjustment as provided in Section 15 hereof), which may be authorized but
unissued shares, reacquired shares or shares bought on the open market. If any
Purchase Right that shall have been granted shall expire or terminate for any
reason without having been exercised in full, the unpurchased shares of Common
Stock shall again become available for purposes of the Plan, unless the Plan
shall have been terminated.
(b) Except as discussed below for the first year the Plan is in effect,
there will be two purchase periods (each a "Purchase Period") each calendar
year. There will be only one Purchase Period in calendar 1997, which will begin
on July 1, 1997 and end on December 31, 1997. Thereafter, in each year that the
Plan is in effect, the first Purchase Period will begin on January 1 and end on
June 30 of each year that the Plan is in effect. The second Purchase Period will
begin on July 1 and end on December 31 of each year the Plan is in effect.
5. PARTICIPATION
Eligible employees become Participants in the Plan by authorizing payroll
deductions for that purpose through a form (the "Participation/Withdrawal Form")
filed with the Plan Administrator no later than fifteen (15) days prior to the
start date of a Purchase Period.
6. PAYROLL DEDUCTIONS
(a) In order to purchase Common Stock an employee must indicate on the
Participation/Withdrawal Form the contribution percentage he or she wishes to
authorize the Company to deduct at regular payroll intervals, in integral
percentage amounts ranging from 1% to 10% of such Participant's Base Pay for the
applicable payroll period, with a minimum deduction of $10.00 per payday and a
maximum aggregate deduction of $10,625.00 during each Purchase Period. The
Committee has the power, exercisable at any time prior to the start of a
Purchase Period, to increase or decrease the $10,625.00 maximum for that
Purchase Period. The maximum, as thus adjusted, will continue in effect from
Purchase Period to Purchase Period until the Committee once again exercises its
power to adjust the maximum. The Participation/Withdrawal Form will include
authorization for the Company to make payroll deductions from the Participant's
Base Pay.
(b) In order to comply with the Federal tax laws, a Participant may not be
granted Purchase Rights under the Plan and any other Code Section 423 employee
stock purchase plan of the Company with respect to more than $25,000.00 worth of
Common Stock for any calendar year such Purchase Rights to purchase Common Stock
are outstanding pursuant to the terms of such plans. The $25,000.00 limit is
determined
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according to the Fair Market Value of the Common Stock on the first day (grant
date) of the Purchase Period. Participants will be notified if these limitations
become applicable to them.
(c) The amounts deducted shall be credited to the Participant's account
under the Plan, but no actual separate account will be established by the
Company to hold such amounts. There shall be no interest paid on the balance
outstanding in a Participant's account. The deducted amounts may be commingled
with the general assets of the Company and may be used for its general corporate
purposes.
(d) Payroll deductions begin on the first payday of each Purchase Period,
and end on the last payday of each Purchase Period. Eligible employees may
participate in the Plan and purchase shares only by means of payroll deductions,
except as set forth in the following sentence. A Participant may not make any
separate cash payment into his or her account, except that employees on an
approved leave of absence may continue participating in the Plan, at the sole
discretion of the Plan Administrator, by making cash payments to the Company on
a normal payday equal to the amount of the normal payroll deduction had a leave
of absence not occurred. The right of a Participant on an approved leave of
absence to continue participating in the Plan shall terminate if such leave of
absence exceeds 90 days, unless and so long as the Participant's right to re-
employment by the Company after a longer leave is guaranteed by statute or
contract.
(e) So long as a Participant remains an employee of the Company, payroll
deductions will continue in effect from Purchase Period to Purchase Period,
unless at least fifteen (15) days prior to the first day of the next succeeding
Purchase Period the Participant:
(i) elects a different rate by filing a new Participation/Withdrawal
Form with the Plan Administrator; or
(ii) withdraws from the Plan in accordance with Section 9 hereof.
(f) Unless a Participant files with the Plan Administrator a new
Participation/Withdrawal Form electing to withdraw prior to 15 days before the
beginning of the affected Purchase Period as permitted under the Plan, such
Participant's payroll deductions will continue throughout such Purchase Period
and his or her Purchase Right to purchase Common Stock will be deemed to be
fully and automatically exercised on the last day of such Purchase Period with
respect to payroll deductions made during that period.
7. PURCHASE PRICE
(a) On the first day of each Purchase Period, a Participant is deemed to
have been granted a Purchase Right to purchase on the last day of the Purchase
Period as many full shares of Common Stock as such Participant will be able to
purchase with the payroll deductions credited to such Participant's account
during such period.
(b) The price at which each Purchase Right to purchase Common Stock may be
exercised is 85% of the Fair Market Value of the Common Stock on the Nasdaq
National Market System on the first Trading Day of a Purchase Period.
(c) The number of shares purchasable by each Participant per Purchase
Period will be the number of whole shares obtained by dividing the amount
collected from the Participant (through payroll deductions during that Purchase
Period) by the purchase price in effect for that Purchase Period. Any amount
remaining in the Participant's account after such application will be held for
the purchase of Common Stock in the next Purchase Period.
8. EXERCISE OF PURCHASE RIGHT
(a) Each outstanding Purchase Right will be exercised automatically on the
Exercise Date. The exercise of the Purchase Right is to be effected by applying
the amount credited to each Participant's account as of the Exercise Date to the
purchase on the Exercise Date of whole shares of Common Stock at the purchase
price in effect for the Purchase Period.
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(b) Fractional shares will not be issued under the Plan, and any amount
remaining in the Participant's account after such application will be held for
the purchase of Common Stock in the next Purchase Period.
(c) If the number of shares for which Purchase Rights are exercised exceeds
the number of shares available in any Purchase Period under the Plan, the shares
available for sale will be allocated by the Plan Administrator pro rata among
the Participants in such Purchase Period in proportion to the relative amounts
in their accounts. Any amounts not thereby applied to the purchase of Common
Stock under the Plan will be refunded to the Participants after the end of the
Purchase Period.
9. WITHDRAWAL AND TERMINATION OF PURCHASE RIGHTS
(a) A Participant may withdraw from the Plan by providing written notice to
the Plan Administrator at any time prior to 15 days before the end of the
current Purchase Period. Such notice shall be on the Participation/Withdrawal
Form. The Participation/Withdrawal Form will permit such a Participant to make
the following election:
(i) The Participant may elect to immediately terminate his or her
outstanding Purchase Rights, and such withdrawal will become effective by
the tenth day following the Plan Administrator's receipt of the
Participant's Participation/Withdrawal Form, at which time all outstanding
Purchase Rights will be terminated and all accumulated payroll deductions
will be refunded without penalty; or
(ii) The Participant may elect to continue his or her participation in
the Plan through the end of the current Purchase Period, and thus exercise
such Participant's outstanding Purchase Rights on the following Exercise
Date, but terminate his or her participation in the Plan for subsequent
Purchase Periods. Payroll deductions for such a Participant will continue
until the end of the current Purchase Period. After the applicable Exercise
Date, no further Purchase Rights will be granted to the Participant, and no
further payroll deductions will be made.
(b) Except as otherwise provided by applicable law, any Participant who
withdraws from the Plan pursuant to Section 9(a) will not be eligible to rejoin
the Plan for the Purchase Period underway at the time of withdrawal, and will
have to re-enroll in the Plan by completing and filing a new
Participation/Withdrawal Form should such individual wish to resume
participation in a subsequent Purchase Period.
(c) If a Participant ceases to be an employee of the Company for any reason
during a Purchase Period, his or her outstanding Purchase Right will immediately
terminate, and all sums previously collected from such Participant during such
Purchase Period under the terminated Purchase Right will be refunded.
(d) The Committee may, at its option, treat any attempt to borrow by an
employee on the security of his or her accumulated payroll deductions as an
election under Section 9(a)(i) hereof to withdraw such deductions.
10. RIGHTS AS SHAREHOLDER
(a) A Participant is not a shareholder until the Participant exercises his
or her Purchase Right. Thus, a Participant will not have a right to any dividend
or distribution made prior to the Exercise Date. Following the Exercise Date,
however, the Participant shall have all of the rights of a shareholder with
respect to the shares purchased.
(b) Participants will be entitled to receive, as soon as practicable after
the Exercise Date, a stock certificate for the number of purchased shares upon a
written request made to the Custodian. The Custodian may impose upon, or pass
through to, the Participant a reasonable fee for withdrawal of shares of Common
Stock in the form of stock certificates. It is the responsibility of each
Participant to keep his or her address current with the Company through the Plan
Administrator and with the Custodian.
11. SALE OF COMMON STOCK ACQUIRED UNDER THE PLAN
(a) In general, participants who are not officers or directors of the
Company may sell the shares of Common Stock they acquire under the Plan at any
time without restriction. Officers and directors of the
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32
Company should consult with legal counsel prior to attempting to sell or
otherwise dispose of any shares of Common Stock acquired under the Plan.
(b) A Participant shall immediately provide information to the Plan
Administrator if the Participant transfers any shares purchased through the Plan
within two (2) years from the date of grant of the related Purchase Right. Such
transfer shall include disposition by sale, gift or other manner. The
Participant may be requested to disclose the manner of the transfer, the date of
the transfer, the number of shares involved and the transfer price. By executing
the Participation/Withdrawal Form, each Participant obligates himself or herself
to provide such information to the Plan Administrator.
(c) The Company is authorized to withhold from any payment to be made to a
Participant, including any payroll and other payments not related to the Plan,
amounts of withholding and other taxes due in connection with any transaction
under the Plan, and a Participant's enrollment in the Plan will be deemed to
constitute his or her consent to such withholding.
12. PLAN ADMINISTRATION
(a) The Plan shall be administered by the Committee.
(b) The Committee shall have the plenary power, subject to and within the
limits of the express provisions of the Plan:
(i) to determine the commencement and termination date of the offering
of Common Stock under the Plan; and
(ii) to interpret the terms of the Plan, establish and revoke rules
for the administration of the Plan and correct or reconcile any defect or
inconsistency in the Plan.
(c) The Committee may delegate all or part of its authority to administer
the Plan to the Plan Administrator, who may in turn delegate the day-to-day
operations of the Plan to the Custodian. The Custodian will establish and
maintain, as agent for the Participants, accounts for the purposes of holding
shares of Common Stock and/or cash contributions as may be necessary or
desirable for the administration of the Plan.
(d) The Board may waive or modify any requirement that a notice or election
be made or filed under the Plan a specified period in advance in an individual
case or by adoption of a rule or regulation under the Plan, without the
necessity of an amendment to the Plan.
13. TRANSFERABILITY
(a) Any account maintained by the Custodian for the benefit of a
Participant with respect to shares acquired pursuant to the Plan may only be in
the name of the Participant; provided, however, that the Participant may elect
to maintain such account with right of joint ownership with such Participant's
spouse. Such election may only be made on a form (the "Joint Account Form")
provided by the Company.
(b) Neither payroll deductions credited to a Participant's account nor any
Purchase Rights of or other rights to acquire Common Stock under the Plan may be
assigned, transferred, pledged or otherwise disposed of by Participants other
than by will or the laws of descent and distribution, and during the lifetime of
a Participant, Purchase Rights may be exercised only by the Participant.
14. MERGER OR LIQUIDATION OF THE COMPANY
In the event the Company merges with another corporation and the Company is
not the surviving entity, or in the event all or substantially all of the stock
or assets of the Company are acquired by another company, or in the event of
certain other similar transactions, the Committee may, in connection with any
such transaction, cancel each outstanding Purchase Right and refund all sums
previously collected from Participants under the canceled Purchase Rights, or,
in its discretion, cause each Participant with outstanding Purchase Rights to
have his or her outstanding Purchase Right exercised immediately prior to such
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33
transaction and thereby have the balance of his or her account applied to the
purchase of whole shares of Common Stock at the purchase price in effect for the
Purchase Period, which would be treated as ending with the effective date of
such transaction. The balance of the account not so applied will be refunded to
the Participant.
15. ADJUSTMENT FOR CHANGES IN CAPITALIZATION
To prevent dilution or enlargement of the rights of Participants under the
Plan, appropriate adjustments may be made in the event any change is made to the
Company's outstanding Common Stock by reason of any stock dividend, stock split,
combination of shares, exchange of shares or other change in the Common Stock
effected without the Company's receipt of consideration. Adjustments may be made
to the maximum number and class of securities issuable under the Plan, the
maximum number and class of securities purchasable per outstanding Purchase
Right and the number and class of securities and price per share in effect under
each outstanding Purchase Right. Any such adjustments will be made by the
Committee in its sole discretion.
16. AMENDMENT AND TERMINATION
The Committee may terminate or amend the Plan at any time; provided,
however, such termination or amendment may not affect or change Purchase Rights
previously granted under the Plan without the consent of the affected
Participant, and any amendment that effects any change in the aggregate number
of shares which may be issued under the Plan or changes the type of corporation
whose employees may receive options under the Plan shall be subject to
shareholder approval. If not sooner terminated by the Committee, the Plan shall
terminate at the time Purchase Rights have been exercised with respect to all
shares of Common Stock reserved for grant under the Plan.
17. SHAREHOLDER APPROVAL
The Plan is subject to the approval of shareholders of the Company in
accordance with the provisions of Georgia law.
18. NO EMPLOYMENT RIGHTS
Participation in the Plan will not impose any obligations upon the Company
to continue the employment of the Participant for any specific period and will
not affect the right of the Company to terminate such person's employment at any
time, with or without cause.
19. STOCK LEGEND
All shares of Common Stock issued pursuant to the Plan shall contain the
following legend: "The shares of Common Stock represented by this Certificate
have been issued on __________ pursuant to The Profit Recovery Group
International, Inc. Employee Stock Purchase Plan."
20. COSTS
Except as set forth in Section 10(b), costs and expenses incurred in the
administration of the Plan and the maintenance of accounts with the Custodian
will be paid by the Company, to the extent provided in this Section 20. Any
brokerage fees and commissions for the purchase of Common Stock under the Plan
(including shares of Common Stock purchased upon reinvestment of dividends and
distributions) will be paid by the Company, but any brokerage fees and
commissions for the sale of shares of Common Stock under the Plan by a
Participant will be borne by such Participant.
21. REPORTS
After the close of each Purchase Period, each Participant in the Plan will
receive a report from the Custodian indicating the amount of the Participant's
contributions to the Plan during the Purchase Period, the amount of the
contributions applied to the purchase of Common Stock for the Purchase Period,
the purchase
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34
price per share in effect for the Purchase Period and the amount of the
contributions (if any) carried over to the next Purchase Period.
22. GOVERNING LAW
The validity, construction and effect of the Plan and any rules and
regulations relating to the Plan will be determined in accordance with laws of
the State of Georgia, without giving effect to principles of conflicts of laws,
and applicable Federal law.
23. COMPLIANCE WITH LEGAL AND OTHER REQUIREMENTS
The Plan, the granting and exercising of Purchase Rights hereunder, and the
other obligations of the Company, the Plan Administrator and the Custodian under
the Plan will be subject to all applicable federal, state or international laws,
rules, and regulations, and to such approvals by or registrations with any
regulatory or governmental agency as may be required. The Company may, in its
discretion, postpone the issuance or delivery of shares of Common Stock upon
exercise of Purchase Rights until completion of such registration or
qualification of such shares of Common Stock or other required action under any
federal or state law, rule, or regulation, listing or other required action with
respect to any automated quotation system or stock exchange upon which the
shares of Common Stock or other Company securities are designated or listed, or
compliance with any other contractual obligation of the Company, as the Company
may consider appropriate in connection with the issuance or delivery of shares
of Common Stock in compliance with applicable laws, rules, and regulations,
designation or listing requirements, or other contractual obligations.
24. WITHHOLDING OF TAXES
By electing to participate in the Plan, each Participant acknowledges that
the Company and its participating Subsidiaries are required to withhold taxes
with respect to the amounts deducted from the Participant's Base Pay and
accumulated for the benefit of the Participant under the Plan, and each
Participant agrees that the Company and its participating Subsidiaries may
deduct additional amounts from the Participant's Base Pay when amounts are added
to the Participant's account, used to purchase common stock or refunded, in
order to satisfy such withholding obligations. If the Participant makes a
disposition, within the meaning of Section 424(c) of the Code and the
regulations promulgated thereunder, of any share or shares issued to such
Participant pursuant to such Participant's exercise of an option, and such
disposition occurs within the two-year period commencing on the day after the
option is being treated as granted for purposes of Section 423 of the Code or
within the one-year period commencing on the day after the Exercise Date, such
Participant shall, within ten (10) days of such disposition, notify the Company
thereof and thereafter immediately deliver to the Company any amount of federal,
state or local income taxes and other amounts which the Company informs the
Participant the Company is required to withhold. The Company may also satisfy
any applicable withholding amounts by deducting the necessary amounts of
withholding from the Participant's wages and, in the Committee's sole
discretion, any other amounts owed to or held for the account of the
Participant.
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[THE PROFIT RECOVERY GROUP INTERNATIONAL LOGO]
36
ANNEX
THE PROFIT RECOVERY GROUP INTERNATIONAL, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR USE AT THE ANNUAL MEETING ON MAY 15, 1997
The undersigned Shareholder hereby appoints John M. Cook, Tony G. Mills,
Donald E. Ellis, Jr. or any of them, with full power of substitution, to act as
proxy for, and to vote the stock of, the undersigned at the Annual Meeting of
Shareholders of THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. (the "Company") to
be held on May 15, 1997, and any adjournments thereof. The undersigned
acknowledges receipt of Notice of Annual Meeting of Shareholders and Proxy
Statement, each dated April 15, 1997, and grants authority to said proxies, or
their substitutes, and ratifies and confirms all that said proxies may lawfully
do in the undersigned's name, place and stead. The undersigned instructs said
proxies to vote as indicated hereon. PLEASE VOTE, SIGN, DATE AND RETURN THIS
PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
1. ELECTION OF DIRECTORS.
[ ] FOR election of the individuals set forth below as directors (except
as marked to the contrary)
[ ] REFRAIN FROM VOTING FOR election of the individuals set forth below
as directors
NOMINEES: John M. Cook and John M. Toma
(INSTRUCTION: To withhold authority to vote for any individual nominee(s),
write that person's name on the space provided below.)
- --------------------------------------------------------------------------------
(Continued on the Reverse Side)
2. Resolution of the Shareholders approving the Company's Employee Stock
Purchase Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. Upon such other matters as may properly come before the meeting or any
adjournment thereof.
THE PROXIES SHALL VOTE AS SPECIFIED ABOVE, OR IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR EACH OF THE LISTED PROPOSALS.
Dated: , 1997
--------------------
--------------------------------
(Signature)
--------------------------------
(Signature)
(Shareholders should sign
exactly as name appears on
stock. Where there is more than
one owner, each should sign.
Executors, Administrators,
Trustees and others signing in a
representative capacity should
so indicate.)
Please enter your Social
Security Number or Federal
Employer Identification Number
here:
--------------------------------