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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
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CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): MARCH 15, 2006
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PRG-SCHULTZ INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
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GEORGIA 000-28000 58-2213805
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(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
600 GALLERIA PARKWAY, SUITE 100, ATLANTA, GEORGIA 30339-5949
(Address of principal executive office) (zip code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (770) 779-3900
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(Former name or former address, if changed since last report)
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Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
|_| Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
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SECTION 1 REGISTRANT'S BUSINESS AND OPERATIONS.
ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
On March 15, 2006, PRG-Schultz International, Inc. (the "Company") entered
into the Fifth Amendment (the "Amendment") to its Shareholder Protection Rights
Agreement (the "Shareholder Rights Plan") with Wachovia Bank, National
Association, as Rights Agent, dated as of August 9, 2000 (previously amended on
May 15, 2002, August 16, 2002 and November 7, 2005), to revise the definition of
"Acquiring Person" contained in the Shareholder Rights Plan.
The Amendment provides a carve out (the "Exchange Offer Carve-Out") for
increases in beneficial ownership of common stock due solely to the closing of
the Company's Exchange Offer (described under Item 3.03 below). Under the
Exchange Offer Carve-Out, no person will be deemed an Acquiring Person (and thus
trigger the poison pill) due solely to an increase in beneficial ownership of
common stock resulting solely from the close of the Company's Exchange Offer, so
long as no subsequent increases are effected without approval by the Board of
Directors.
In addition, the Amendment alters certain exceptions that are provided for
the "Blum Investors." The "Blum Investors" include Blum Capital Partners, L.P.,
Richard C. Blum & Associates, Inc., Blum Strategic GP, LLC, Blum Strategic GP
II, LLC, Blum Strategic Partners, LP, Blum Strategic Partners II, LP, Richard C.
Blum, Stinson Capital Partners, L.P., Stinson Capital Partners II, L.P., Stinson
Capital Partners III, LP, Stinson Capital Fund (Cayman), Ltd., BK Capital
Partners IV, L.P., Carpenters Pension Trust for Southern California, Common Fund
Multi-Strategy Equity Fund, United Brotherhood of Carpenters and all other
affiliates of the above-named Blum Investors that are party to the certain
standstill agreement dated August 16, 2002, as amended and restated on November
14, 2005 remains in effect (the "Standstill Agreement"). Under the Shareholder
Rights Plan, certain acquisitions of common stock by the Blum Investors are
disregarded for purposes of determining whether the Blum Investors constitute an
Acquiring Person under the Shareholder Rights Plan. The Plan provides that,
subject to certain exceptions, no Blum Investor or Investors will be deemed an
Acquiring Person so long as that, and as long as the Blum Investors do not raise
their beneficial ownership of common stock beyond the amount reported (which was
9,851,903 shares) in their amendment to Schedule 13D filed with the SEC on June
17, 2002 by more than 5,784,675 shares (the "Limit").
Prior to the Amendment, the following increases were disregarded in
computing whether the Blum Investors exceeded the Limit:
o increases due to stock splits, share dividends, recapitalizations,
reclassifications, or similar transactions effected by or with the
approval of the Board of Directors; and
o increases due to the acquisition of the Company's 4 3/4% Convertible
Subordinated Notes (and any acquisition of common stock acquired upon
the conversion of such notes) (the "Note Exclusion").
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The Amendment provides that the Note Exclusion expired at the close of the
Company's Exchange Offer (which took place on Friday, March 17, 2006), and it
excludes from the computation of the Limit the shares subject to the Exchange
Offer Carve-Out as well as any shares of Company common stock which were
beneficially owned by other members of the Ad Hoc Committee of bondholders, and
which the Blum Investors may have been deemed to beneficially own due solely to
their membership or participation in that committee.
The Amendment is filed as Exhibit 4.1 hereto and is incorporated by
reference herein. The Rights Agent also serves as the Transfer Agent for the
Company's Common Stock and the Trustee for the Company's outstanding notes.
SECTION 3 SECURITIES AND TRADING MARKETS.
ITEM 3.03 MATERIAL MODIFICATION TO RIGHTS OF SECURITY HOLDERS.
On March 15, 2006, the Company filed Articles of Amendment (the "Articles
of Amendment") to its Articles of Incorporation with the Secretary of State of
Georgia, authorizing issuance of two new series of preferred stock: Series A
Convertible Participating Preferred Stock (the "Series A Preferred Stock") and
Series B Convertible Participating Preferred Stock (the "Series B Preferred
Stock") in connection with the Company's Exchange Offer. On March 17, 2006, upon
the closing of the Exchange Offer, the Company issued an aggregate of (a)
$51,635,846 in principal amount of 11.0% Senior Notes Due 2011 (which included
$1,823,846 in additional principal amount of Senior Notes issued for accrued and
unpaid interest on Exchange Notes that were exchanged), (b) $59,774,400 in
principal amount of 10.0% Senior Convertible Notes Due 2011, and (c) 124,530
shares, or $14,943,600 liquidation preference, of the Series A Preferred Stock
in exchange for $124,530,000 or 99.6% of the outstanding principal amount of its
4.75% Convertible Subordinated Notes due 2006.
No Series B Preferred Stock has yet been issued. The Series B Preferred
Stock is issuable only upon conversion of the new senior convertible notes,
which are only convertible under certain circumstances. Each $1,000 of face
amount of the convertible notes are convertible into approximately 2.083 shares
of series B preferred stock; provided that upon the occurrence of certain
events, including approval by the shareholders of an amendment to the Company's
Articles of Incorporation to increase the number shares of common stock
available for issuance, the convertible notes will be convertible only into
common stock, at a rate of approximately 1,538 shares per $1,000 principal
amount.
The Series A Preferred Stock is convertible at the rate of $0.28405 of
liquidation preference per share of common stock. The Series B Preferred Stock
is convertible at the rate of $0.65 of liquidation preference per share of
common stock, subject to certain conditions, including amendment of the Articles
of Incorporation to allow sufficient additional shares of common stock to be
issued for the conversion.
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Under the Articles of Amendment, the Series A and Series B Preferred Stock
have the right to vote with the Company's common stock on most matters requiring
shareholder votes. Each share of Preferred Stock will be entitled to the number
of votes that the shares of common stock issuable upon conversion of such share
would have. Each share of Series A Preferred Stock will initially have 422.5
votes, and each share of Series B Preferred Stock (were any issued) will
initially have 738.5 votes. Immediately following the closing of the Exchange
Offer, holders of the Company's common stock owned approximately 54% of the
equity of the Company. If all the new senior convertible notes had been
converted into series B preferred stock at the time of closing, the existing
common shareholders would have owned approximately 30% of the equity of the
Company.
The terms of the Preferred Stock also restrict certain distributions,
including the payment of dividends, on the Company's common stock unless the
Company has paid or set aside the cumulative dividends then owed on the
Preferred Stock. The new series A preferred stock has a 9% dividend, payable in
cash or in kind, at the option of the Company. Any Series B preferred stock
issued will have a 10% annual dividend and a liquidation preference equal to the
principal amount of notes converted.
The terms and conditions of the Preferred Stock are more particularly
described in the Articles of Amendment, as corrected, which is filed as Exhibit
3.1 hereto and incorporated hereunder by reference.
The contents of Item 1.01 describing certain revisions to the Company's
Shareholder Rights Plan are incorporated hereunder by reference.
SECTION 5 CORPORATE GOVERNANCE AND MANAGEMENT.
ITEM 5.03 AMENDMENT TO ARTICLES OF INCORPORATION OR BYLAWS; CHANGE IN FISCAL
YEAR.
On March 15, 2006, the Company filed the Articles of Amendment related to
the Preferred Stock, a copy of which is filed herewith as Exhibit 3.1. See Item
3.03 above, the contents of which are incorporated hereunder by reference.
SECTION 9 FINANCIAL STATEMENTS AND EXHIBITS.
ITEM 9.01(D) EXHIBITS.
Exhibit
Number Description
3.1 Articles of Amendment filed March 15, 2006 (as corrected March
17, 2006)
4.1 Fifth Amendment to the Shareholder Protection Rights Agreement,
dated March 15, 2006
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, PRG-Schultz International, Inc. has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
PRG-SCHULTZ INTERNATIONAL, INC.
Date: March 21, 2006 By: /s/ C. McKellar, Jr.
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Clinton McKellar, Jr.
General Counsel and Secretary
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