PRG-SCHULTZ INTERNATIONAL, INC.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): September 17, 2007
PRG-Schultz International, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Georgia
(State or Other Jurisdiction of Incorporation)
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0-28000
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58-2213805 |
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(Commission File Number)
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(IRS Employer Identification No.) |
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600 Galleria Parkway, Suite 100, Atlanta, Georgia
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30339-5949 |
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(Address of Principal Executive Offices)
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(Zip Code) |
(Registrants Telephone Number, Including Area Code)
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy
the filing obligation of the registrant under any of the following provisions (see General
Instruction A.2. below):
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c)) |
Item 1.01 |
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Entry into a Material Definitive Agreement. |
Amended and Restated Credit Facility
On September 17, 2007, PRG-Schultz International, Inc. (PRG or the Company) entered into an
Amended and Restated Financing Agreement (the Credit Facility) with Ableco Finance LLC, as
collateral agent and administrative agent (Ableco), and the lenders from time to time party
thereto. The Credit Facility, which amends and restates the Companys existing credit facility with
Ableco, renews and extends the Companys current $20 million revolving credit facility (the
Revolver) and adds (i) a $45 million term loan (the Term Loan) and (ii) a delayed funding term
loan of up to $31 million (the Delayed Funding Loan) for an aggregate amount of financing of $96
million. The Credit Facility is guaranteed by each of PRGs direct and indirect domestic wholly
owned subsidiaries and certain of its foreign subsidiaries and is secured by substantially all of
PRGs assets (including the stock of the Companys domestic subsidiaries and two-thirds of the
stock of certain of the Companys foreign subsidiaries). The Credit Facility will mature on
September 17, 2011.
PRG will use the funds from the Term Loan to redeem its outstanding 11% Senior Notes due 2011 (the
Senior Notes), which Senior Notes will be redeemed by the Company on October 4, 2007. In
addition, PRG will use the Delayed Funding Facility to redeem any of its 10% Senior Convertible
Notes due 2011 (the Convertible Notes) and any of its 9% Series A preferred stock (the Preferred
Stock) that remain outstanding on the redemption dates for such securities. PRG has set October
4, 2007 as the redemption date for the Convertible Notes and October 19, 2007 as the redemption
date for the Preferred Stock. Given the current market price of the Companys common stock and the
conversion prices under both the indenture governing the Convertible Notes and the terms of the
Preferred Stock, PRG expects that virtually all of the outstanding Convertible Notes and shares of
Preferred Stock will be converted by the holders into shares of the Companys common stock prior to
the applicable redemption dates. The Revolver will be available for the Companys general working
capital needs.
The interest rates payable under the Credit Facility are as follows:
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Revolver. At the Companys option, the Revolver bears interest at a rate per annum
equal to either (i) the greater of (a) 5.25% and (b) the one-month rate of interest
determined by Ableco at which U.S. dollar deposits are offered to major banks in the
London interbank market adjusted by the reserve percentage prescribed by governmental
authorities (the LIBOR Rate), plus, in either case, 2.00%, or (ii) the greater of
(y) 8.25% and (z) the rate of interest publicly announced from time to time by Wells
Fargo Bank, N.A. as its reference rate, base rate or prime rate (the Reference
Rate). |
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Term Loan. The Term Loan will initially bear interest at a rate per annum equal
to, at the Companys option, either the LIBOR Rate plus 4.50% or the Reference Rate
plus 1.75%. However, under certain circumstances set forth in the Credit Facility,
the interest rate on the Term Loan may be reduced to the LIBOR Rate plus 4.00% or the
Reference Rate plus 1.25%. |
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Delayed Funding Facility. The Delayed Funding Facility, if needed, will bear
interest at a rate per annum equal to, at the Companys option, either the LIBOR Rate
plus 5.00%-5.50% or the Reference Rate plus 2.00%-3.00%, with the exact amount of the
margin above either the LIBOR Rate or the Reference Rate to be determined by the
amount actually funded under the Delayed Funding Facility. |
Funding of both the Term Loan and the Delayed Funding Facility are subject to a number of standard,
limited conditions, including the Companys representations and warranties provided under the
Credit Facility being true and correct as of the funding dates, and there being no default or event
of default on the funding dates.
The Credit Facility includes customary affirmative, negative, and financial covenants binding on
the Company, including delivery of financial statements and other reports, maintenance of
existence, and transactions with affiliates. The negative covenants limit the ability of the
Company to, among other things, incur debt, incur liens, sell assets, repurchase shares of its
capital stock or declare or pay dividends on its capital stock. The financial covenants included
in the Credit Facility, among other things, limit the amount of capital expenditures the Company
can make, set forth a maximum leverage ratio for the Company and a minimum fixed charge coverage
ratio, and also require the Company to maintain minimum consolidated earnings before interest,
taxes, depreciation and amortization. In addition, the Credit Facility also requires mandatory
prepayment with the net cash proceeds from certain asset sales, equity offerings and insurance
proceeds received by the Company. The Credit Facility also includes certain prepayment penalties
if the loans under the Credit Facility are permanently paid off within two years of the initial
funding date.
The Credit Facility contains customary events of default, including events of default related to
(i) failure to make payments when due under the Credit Facility, (ii) failure to comply with the
covenants included in the Credit Facility, (iii) defaults under other agreements or instruments of
indebtedness, (iv) filing for bankruptcy, (v) the rendering of one or more judgments against the
Company in excess of certain specified thresholds or (vi) a change in control of the Company.
A copy of the Credit Facility is included with this Current Report as Exhibit 10.1 and is
incorporated herein by reference.
Sixth Amendment to Shareholder Protection Rights Agreement.
On September 17, 2007, PRG entered into the Sixth Amendment (the Sixth Amendment) to its
Shareholder Protection Rights Agreement (the Rights Plan) with American Stock Transfer and Trust
Company (as successor in interest to Wachovia Bank, N.A.) dated August 9, 2000 (and previously
amended on May 15, 2002, August 16, 2002, November 7, 2005 and March 15, 2006). The purpose of the
Sixth Amendment was to (i) revise the definition Acquiring Person under the Rights Plan and (ii)
to amend the procedures by which the Company can deliver notices under the Rights Plan.
Under the terms of the Sixth Amendment, the term Acquiring Person has been revised to permit the
Blum Investors (as defined in the Rights Plan) to acquire up to 49.9% of the Companys outstanding
common stock. Prior to the Sixth Amendment, the Blum Investors were generally not permitted to
acquire any additional shares of PRGs common stock and such ownership limitation was reduced, on a
share-for-share basis, every time the Blum Investors disposed of any shares of the Companys common
stock. This revised ownership limitation corresponds with the ownership limitations set forth in
the previously disclosed Amended and Restated Standstill Agreement with the Blum Investors, which
became effective upon the execution of the Credit Facility described above.
In addition, under the terms of the Sixth Amendment, prior to the Separation Time (as defined in
the Rights Plan), the Company may deliver notice to holders of the rights by issuing a press
release and filing the press release with the SEC on a Form 8-K. Previously, all notices required
to be delivered to rights holders under the Rights Plan were required to be delivered via first
class mail.
Except as described above, all other material terms of the Rights Plan remain in full force and
effect. A copy of the Sixth Amendment is filed with this Current Report as Exhibit 4.1 and is
incorporated herein by reference.
Forward Looking Statements
In addition to historical information, this Current Report includes certain forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such
statements include both implied and express statements regarding the Companys financial condition
and liquidity, the redemption of the Senior Notes, the Convertible Notes and the Preferred Stock,
the availability of funding under the Credit Facility, and the anticipated conversions of the
Convertible Notes and Preferred Stock into common stock. Such forward looking statements are not
guarantees of future performance and are subject to risks, uncertainties and other factors that may
cause the actual results, performance or achievements of the Company to differ materially from the
historical results or from any results expressed or implied by such forward-looking statements.
Risks that could affect the Companys future performance include the Companys ability to satisfy
the terms and conditions for funding of the Credit Facility, market conditions for the
Companys common stock that could affect the conversions of the Convertible Notes and the Preferred
Stock and other risks generally applicable to the Companys business. For a discussion of other
risk factors that may impact the Companys business, please see the Companys filings with the
Securities and Exchange Commission, including its Form 10-K filed on March 23, 2007. The Company
disclaims any obligation or duty to update or modify these forward-looking statements.
Item 2.03 |
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Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet
Arrangement. |
The information set forth above in Item 1.01 regarding the Credit Facility is incorporated by
reference into this Item 2.03.
Item 3.03 |
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Material Modification to Rights of Security Holders. |
The information set forth in Item 1.01 regarding the Sixth Amendment to the Companys Shareholder
Protection Rights Agreement is incorporated by reference into this Item 3.03.
Item 9.01 |
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Financial Statements and Exhibits. |
(d) Exhibits.
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4.1
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Sixth Amendment to Shareholder Rights Protection Agreement, dated
September 17, 2007, by and between PRG-Schultz International, Inc.
and the Rights Agent. |
10.1
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Amended and Restated Financing Agreement dated September 17, 2007. |
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly
authorized.
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PRG-Schultz International, Inc.
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By: |
/s/ Victor A. Allums
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Victor A. Allums |
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Senior Vice President, Secretary and
General Counsel |
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Dated: September 21, 2007