As filed with the Securities and Exchange Commission on January 17, 2002
Registration No. 333-______
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
THE PROFIT RECOVERY GROUP INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
GEORGIA 58-2213805
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2300 Windy Ridge Parkway
Suite 100 North
Atlanta, Georgia 30339-8426
(770) 779-3900
(Address, including zip code, telephone
number, including area code, of
registrant's principal executive
offices)
CLINTON MCKELLAR, JR., ESQ.
Senior Vice President, General Counsel and Secretary
2300 Windy Ridge Parkway
Suite 100 North
Atlanta, Georgia 30339-8426
(770) 779-3900
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
COPIES TO:
B. Joseph Alley, Jr., Esq.
Arnall Golden Gregory LLP
2800 One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3450
(404) 873-8500
Approximate Date of Commencement of Proposed Sale To The Public: From time
to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ X ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
Calculation of Registration Fee
------------------------------- ----------------- ----------------------- ----------------------- -----------------------
Proposed Maximum Proposed Maximum Amount of
Title of Each Class of Amount to be Offering Price Aggregate Offering Registration
Securities to be Registered Registered Per Share(1) Price(1) Fee(1)
------------------------------- ----------------- ----------------------- ----------------------- -----------------------
Common Stock, no par
value per share 1,106,684 Shares $8.95 $9,904,821.80 $2,367.25
------------------------------- ----------------- ----------------------- ----------------------- -----------------------
(1) Calculated pursuant to Rule 457(c) and based on the average of the high and
low prices of PRG's common stock on January 14, 2002, as reported on The
Nasdaq National Market.
The Registrant hereby amends this registration on such date or dates as may
be necessary to delay its effective date until the Registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act or until this Registration Statement shall become effective on
such date as the Securities and Exchange Commission acting pursuant to said
Section 8(a), may determine.
The information in this prospectus is incomplete and may be changed. The
selling shareholders may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and it is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.
SUBJECT TO COMPLETION, DATED January 17, 2002
PROSPECTUS
1,106,684 SHARES
THE PROFIT RECOVERY GROUP INTERNATIONAL, INC.
COMMON STOCK
This prospectus relates to the offer and sale from time to time of
1,106,684 shares of PRG common stock by the selling shareholders identified on
page 11 of this prospectus.
The selling shareholders will sell their shares as described in the section
of this prospectus entitled "Plan of Distribution." PRG will not receive any of
the proceeds from the sale of shares of common stock by the selling
shareholders.
PRG's common stock is traded on The Nasdaq National Market under the symbol
"PRGX." The last reported sale price of the common stock on January 16, 2002 was
$9.20 per share.
This investment involves risks. See "RISK FACTORS" beginning on page 5
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
The date of this prospectus is
January ___, 2002.
TABLE OF CONTENTS
Page
----
The Profit Recovery Group International, Inc.........................2
Risk Factors.........................................................5
Use Of Proceeds.....................................................10
Selling Shareholders................................................10
Plan Of Distribution................................................12
Legal Matters.......................................................13
Experts.............................................................13
Where You Can Find More Information.................................13
You should rely only on the information contained or incorporated by
reference in this prospectus. We have not authorized anyone to provide you with
information different from that contained in this prospectus. You should assume
that the information appearing in this prospectus is accurate as of the date on
the front cover of this prospectus only, regardless of the time of delivery of
this prospectus or of any sale of the common stock. In this prospectus, "PRG,"
"we," "us," and "our" refer to The Profit Recovery Group International, Inc. and
its subsidiaries.
THE PROFIT RECOVERY GROUP INTERNATIONAL, INC.
Our Business
We are the leading provider of recovery audit and expense containment
services, with revenues from continuing operations for the nine months ended
September 30, 2001 of approximately $186.3 million, more than double those of
our nearest competitor. Our clients consist primarily of large and mid-size
businesses having numerous payment transactions with many vendors. These
businesses include, but are not limited to:
o retailers such as discount, department, specialty, grocery and drug
stores;
o technology and telecommunications companies;
o manufacturers of pharmaceuticals, consumer electronics, chemicals and
aerospace and medical products;
o wholesale distributors of computer components, food products and
pharmaceuticals; and
o healthcare providers such as hospitals and health maintenance
organizations.
We currently service approximately 2,500 clients in 34 different countries.
Our continuing operations have one operating segment, consisting of Accounts
Payable Services, that offers different types of recovery and cost containment
services.
The Recovery Audit Industry
Businesses that make substantial volumes of payments involving multiple
vendors, numerous discounts and allowances, fluctuating prices and complex tax
and pricing arrangements find it difficult to detect all overpayments. Although
these businesses process the vast majority of payment transactions correctly, a
small number of overpayments do occur, resulting from vendor pricing errors,
missed or inaccurate discounts, allowances and rebates, incorrect freight
charges or duplicate payments. In the aggregate, these transaction errors can
represent meaningful lost profits that can be particularly significant for
businesses with relatively narrow profit margins.
Although some businesses routinely maintain internal recovery audit
departments assigned to recover selected types of payment errors and identify
opportunities to reduce costs, independent recovery audit firms are often
retained as well due to their specialized knowledge and focused technologies. In
the U.S., Canada and Mexico, large retailers routinely engage independent
recovery audit firms as standard business practice, and nonretail enterprises
are increasingly using independent recovery audit firms. We believe that large
retailers and many nonretailers outside North America are also increasingly
engaging independent recovery audit firms.
Many businesses worldwide exchange purchasing, shipping and payment data
electronically. These paperless transactions are widely referred to as
Electronic Data Interchange, or EDI, and implementation of this technology is
maturing. EDI streamlines processing large numbers of transactions, but does not
eliminate payment errors because operator input errors may be replicated
automatically in thousands of transactions. We believe that current global
business-to-business e-commerce initiatives involving the Internet may
ultimately provide technologically advanced recovery audit firms with greater
recovery opportunities than employing EDI solely as a data communications
medium.
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We also believe that many businesses are increasingly outsourcing internal
recovery functions to independent recovery audit firms.
The domestic and international recovery audit industry is characterized by
a small number of firms with a national and international presence, including
Howard Schultz & Associates International, Inc. and us. In addition, there are
many local and regional firms. Many of the smaller firms lack the centralized
resources or broad client base to support technology investments required to
provide comprehensive recovery audit services for large, complex accounts
payable systems. These firms are less equipped to audit large EDI accounts
payable systems. In addition, because of limited resources, most of these firms
subcontract work to third parties and may lack experience and the knowledge of
national promotions, seasonal allowances and current recovery audit practices.
As a result, we believe significant opportunities exist for recovery audit firms
with a national and international presence, well-trained and experienced
professionals, and the advanced technology required to audit increasingly
complex accounts payable systems.
The Proposed Acquisitions of Howard Schultz & Associates International, Inc. and
Affiliates
On August 3, 2001, we entered into definitive agreements to acquire Howard
Schultz & Associates International, Inc., or HSA-Texas, and certain of its
affiliates for aggregate consideration of up to 15,353,846 shares of our common
stock and options to purchase up to an additional 1,678,826 shares of our common
stock. These agreements were amended and restated on December 11, 2001.
HSA-Texas, its subsidiaries and licensees are industry pioneers in providing
recovery audit services. HSA-Texas provides recovery audit services to large and
mid-size businesses having numerous payment transactions with many vendors.
HSA-Texas is currently our principal competitor, with operations throughout
the U.S. and internationally. HSA-Texas had revenues of approximately $138.7
million for the year ended December 31, 2000 and approximately $100.8 million
for the nine month period ended September 30, 2001. A special meeting of our
shareholders is scheduled for January 24, 2002 to vote on the issuance of shares
and options in the proposed acquisitions.
Recent Developments
Convertible Notes Offerings
On November 26, 2001, we closed on a $95.0 million offering of our 4 3/4%
convertible subordinated notes due 2006. We issued an additional $15.0 million
of the notes on December 3, 2001, and on December 4, 2001, the initial
purchasers of the notes issued on November 26, 2001 purchased an additional
$15.0 million of the notes to cover over allotments, bringing to $125.0 million
the aggregate amount issued. We received net proceeds from the offering of
approximately $121.4 million. The proceeds from the sale of the notes were used
to pay down our outstanding balance under our senior credit facility.
The notes are convertible into our common stock at a conversion price of
$7.74 per share, which is equal to a conversion rate of 129.1990 shares per
$1,000 principal amount of notes, subject to adjustment. We may redeem some or
all of the notes at any time on or after November 26, 2004 at a redemption price
of $1,000 per $1,000 principal amount of notes, plus accrued and unpaid
interest, if prior to the redemption date, the closing price of our common stock
has exceeded 140% of the then conversion price for at least 20 trading days
within a period of 30 consecutive days ending on the trading date before the
date of mailing of the optional redemption notice.
Discontinued Operations
In March 2001, we formalized a strategic realignment initiative designed to
enhance our financial position and clarify our investment and operating strategy
by focusing on our core Accounts Payable Services business. Under this strategic
realignment initiative, we decided to divest the following non-core businesses:
Meridian, a part of the Taxation Services segment, the Logistics Management
Services segment, the Communications Services segment and the Ship & Debit
division within the Accounts Payable Services segment. As a result, since the
first quarter of 2001, these businesses have been classified as discontinued
operations.
Owing to the separate and distinct nature of each business to be divested,
we and our advisors determined that we would be unlikely to sell all of these
businesses as a whole to one buyer. As a result, during the last several months,
we have been engaged in independent divestiture processes for each of these
businesses. On October 30, 2001, we consummated the sale of our Logistics
Management Services segment for approximately $13.0 million. We received initial
gross proceeds from the sale of approximately $10.0 million, and we may receive
up to an additional $3.0 million payable in the form of a revenue-based royalty
over the next four years. The other discontinued operations currently remain for
sale. However, if current difficult market conditions continue such that there
is further erosion in the expected net proceeds, we, in consultation with our
advisors, may in the future conclude that the sale of the remaining discontinued
operations is no longer advisable and may revisit the decision to sell some or
all of these businesses.
On December 14, 2001, we consummated the sale of our French Taxation
Services business for approximately $48.3 million. The sale of the French
Taxation Services business resulted in a net loss on the transaction of
approximately $54.0 million in the fourth quarter of 2001. As a result of the
foregoing, the French Taxation Services business has been classified as
discontinued operations in our historical financial statements. See "Risk
Factors - As a result of the sale of our French Taxation Services operations, we
recognized a substantial and material net loss in the fourth quarter of 2001."
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Replacement Senior Credit Facility
On November 9, 2001, we entered into an amendment to our then senior credit
facility, effective September 30, 2001. The amendment waived certain financial
ratio covenant defaults as of September 30, 2001. Pursuant to the amendment,
several current and prospective financial ratio covenants were re-established
and relaxed. The amendment also prospectively increased interest rates and
effectively limited our borrowing capacity to approximately $50.0 million, after
application of the net proceeds of the convertible notes offering. It also
provided for additional mandatory reductions of the balance under the senior
credit facility equal to the net cash proceeds from future sales of the
discontinued operations and any future issuance of debt or equity securities.
All principal balances outstanding under the senior credit facility were repaid
in full from proceeds from the notes offering and the sale of discontinued
operations. As of December 17, 2001, there were no outstanding amounts under our
senior credit facility. On December 31, 2001, we entered into a new senior
credit facility, underwritten by Bank of America, and terminated the previous
senior credit facility. The new facility has a term of three years and a maximum
borrowing capacity of $75 million and will have $50 million of borrowing
capacity available following the closing of the proposed HSA-Texas acquisitions.
In connection with the termination of the prior senior credit facility, PRG
recorded a non-cash, pre-tax charge of approximately $2.6 million in the fourth
quarter of 2001, representing remaining deferred loan costs associated with the
prior credit facility.
---------------------------
Our executive offices are located at 2300 Windy Ridge Parkway, Suite 100
North, Atlanta, Georgia 30339-8426, and our telephone number is (770) 779-3900.
Our Web site address is www.prgx.com. Information contained on our Web site is
not incorporated by reference in this prospectus and should not be considered
part of this prospectus.
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RISK FACTORS
In addition to the other information in this prospectus, the following risk
factors should be considered carefully in evaluating an investment in the common
stock offered hereby.
We depend on our largest clients for significant revenues, and if we lose a
major client, our revenues could be adversely affected.
We generate a significant portion of our revenues from our largest clients.
For the nine month period ended September 30, 2001, our two largest clients
accounted for approximately 17.9% of our revenues from continuing operations and
HSA-Texas' two largest clients accounted for approximately 21.4% of its revenues
from continuing operations. For the year ended December 31, 2000, our two
largest clients accounted for approximately 16.0% of our revenues from
continuing operations and HSA-Texas' two largest clients accounted for
approximately 23% of its revenues from continuing operations. If we lose any
major clients, our results of operations could be materially and adversely
affected by the loss of revenue, and we would have to seek to replace the client
with new business.
Client and vendor bankruptcies and financial difficulties could reduce our
earnings.
Our clients generally operate in intensely competitive environments and
bankruptcy filings are not uncommon. Additionally, the recent terrorist attacks
and adverse economic conditions in the United States may increase the financial
difficulties experienced by our clients. Future bankruptcy filings by one or
more of our larger clients or significant vendor chargebacks by one or more of
our larger clients could have a material adverse effect on our financial
condition and results of operations. Likewise, our failure to collect our
accounts receivables due to the financial difficulties of our clients would
adversely affect our financial condition and results of operations.
If we are not successful in integrating the business of HSA-Texas and its
affiliated companies, our operations may be adversely affected.
To realize the anticipated benefits of the HSA-Texas acquisitions, we must
efficiently integrate the operations of the acquired companies with ours.
Combining the personnel, technologies and other aspects of operations, while
managing a larger entity, will present a significant challenge to our
management. We cannot be certain that the integration will be successful or that
we will fully realize the anticipated benefits of the business combination.
The challenges involved in this integration include:
o retaining and integrating management and other key personnel of each
company;
o combining the corporate cultures of us and HSA-Texas;
o combining service offerings effectively and quickly;
o transitioning HSA-Texas' auditors to our information management and
compensation systems;
o integrating sales and marketing efforts so that customers can
understand and do business easily with the combined company;
o transitioning all worldwide facilities to common accounting and
information technology systems; and
o coordinating a large number of employees in widely dispersed
operations in the United States and several foreign countries.
Risks from unsuccessful integration of the companies include:
o the impairment of relationships with employees, clients and suppliers;
o the potential disruption of the combined company's ongoing business
and distraction of its management;
o delay in introducing new service offerings by the combined company;
and
o unanticipated expenses related to integration of the companies.
We may not succeed in addressing these risks. Further, we cannot assure you
that the growth rate of the combined company will equal or exceed the historical
growth rates experienced by us, HSA-Texas or any of its affiliates individually.
Our ability to realize the anticipated benefits of the HSA-Texas acquisitions
will depend on our ability to integrate HSA-Texas' operations into our current
operations in a timely and efficient manner.
5
This integration may be difficult and unpredictable because our
compensation arrangements, service offerings and processes are highly complex
and have been developed independently from those of HSA-Texas. Successful
integration requires coordination of different management personnel and
auditors, as well as sales and marketing efforts and personnel. If we cannot
successfully integrate the HSA-Texas assets with our operations, we may not
realize the expected benefits of the HSA-Texas acquisitions.
If we are not successful in integrating the business operations of HSA-Texas in
the United Kingdom, our financial results may be adversely affected.
HSA-Texas' operations in the United Kingdom generated revenues of
approximately $24.4 million and operating income of approximately $1.8 million
for its fiscal year ended April 30, 2001. Our ability to realize the anticipated
benefits of the HSA-Texas acquisitions will depend in part on our ability to
integrate HSA-Texas' United Kingdom operations into our current United Kingdom
operations in a timely and efficient manner. If we cannot successfully integrate
such operations with our operations, we may not realize the expected benefits of
the HSA-Texas acquisitions and our financial results may be adversely affected.
The acquisitions by us of businesses outside of our core business of accounts
payable auditing have been, in general, financially and operationally
unsuccessful.
Our acquisitions of businesses outside of our core business of accounts
payable auditing have been, in general, financially and operationally
unsuccessful. As a result, on January 31, 2001, we announced that our board of
directors had approved the sale of its Meridian VAT Reclaim business, the
Communications Services segment, the Logistics Management Services segment, and
the Ship and Debit division within the Accounts Payable Service segment. The
sale of the Logistics Management Services segment was consummated on October 30,
2001. In addition, on December 14, 2001, we consummated the sale of our French
Taxation Services business for approximately $48.3 million. We recognized a loss
on the sale of approximately $54.0 million in the fourth quarter of 2001. While
we believe that the acquisition of HSA-Texas and its affiliates is within our
core business, there can be no assurance that we will be more successful in
achieving financial and operational success with the proposed acquisitions that
we were in previous non-core business acquisitions.
Transaction costs of the HSA-Texas acquisitions could adversely affect combined
financial results.
We and HSA-Texas are expected to incur direct transaction costs of up to
approximately $15.0 million in connection with the HSA-Texas acquisitions. If
the benefits of the HSA-Texas acquisitions do not exceed the costs associated
with the acquisitions, the combined company's financial results, including
earnings per share, could be adversely affected.
The HSA-Texas acquisitions are anticipated to result in lower combined revenues
from clients with respect to which we and HSA-Texas together have had the first
and second audit positions.
Some of our clients require that two independent audit companies perform
recovery audits of their payment transactions in a first recovery audit followed
by a second recovery audit. In situations where both we and HSA-Texas now
perform both the first and second recovery audit services, it is possible that
the client will, upon our acquisition of HSA-Texas, retain another company for
the first or second audit position in place of them. We estimate that there are
38 clients with respect to which we and HSA-Texas together have had the first
and second recovery audit positions. These clients represented approximately 32%
of our total revenues for the year ended December 31, 2000 and 50% of the total
revenues of HSA-Texas for that year. After the combination, a substantial number
of these clients may request that the combined company perform the first or
second audits at reduced rates, or they may award the first or second recovery
audit position to another party, rather than allowing the combined company to
keep both positions. In either case, the combined revenues from these clients
may be materially lower.
If we fail to hire and retain HSA-Texas' auditors and other critical HSA-Texas
personnel, it could diminish the benefits of the HSA-Texas acquisitions to us.
The successful integration of the HSA-Texas business into our current
business operations will depend in large part on our ability to hire and retain
HSA-Texas' auditors and other personnel critical to the business and operations
of HSA-Texas. We may be unable to retain management personnel and auditors that
are critical to the successful operation of the HSA-Texas business, resulting in
loss of key information, expertise or know-how and unanticipated additional
recruiting and training costs and otherwise diminishing anticipated benefits of
the HSA-Texas acquisitions for us and our shareholders. In addition, any
auditors not retained by PRG could compete with the combined company,
particularly in Europe, and could cause existing HSA-Texas clients to cease
doing business with the combined company or to require more client favorable
terms to retain their business. Also, if we cannot successfully implement a
revised compensation plan that reduces the compensation level of a large number
of HSA-Texas' auditors, the anticipated benefits of the HSA-Texas acquisitions
will be diminished. Even if we are successful in implementing the revised
compensation plan, some HSA-Texas auditors may elect not to work for us if their
compensation is reduced.
The acquisition of HSA-Texas and affiliates could result in material dilution to
our earnings per share.
The unaudited pro forma combined financial statements, contained in our
proxy statement for the special shareholder meeting to vote on the HSA-Texas
acquisitions, which give effect to the acquisitions as if they had closed on
January 1, 2000, show a reduction of $0.06 per share in our pro forma combined
diluted earnings per share from continuing operations for the year ended
December 31, 2000 as compared to our historical audited results for the same
period. Our earnings from continuing operations for the year ended December 31,
6
2000 were approximately $5.6 million as compared to pro forma combined earnings
from continuing operations of approximately $3.5 million for the same period. It
is possible that our future earnings per share will be materially diluted as a
result of the acquisition of HSA-Texas and affiliates. If the acquisition of
HSA-Texas and affiliates has a material negative impact on our earnings per
share, the trading price of our common stock may be materially adversely
affected.
If we do not complete our remaining planned divestitures of discontinued
operations as anticipated, our earnings and financial position could be
adversely affected.
We have announced plans to divest our Meridian VAT Reclaim business, our
Communications Services segment, our Logistics Management Services segment, our
Ship & Debit division within the Accounts Payable Services segment and our
French Taxation Services segment. To date, we have completed the sale of the
Logistics Management Services segment and the French Taxation Services segment.
Although we are continuing to seek to complete the divestitures of the other
three businesses, it is possible that we will not be able to complete them on a
timely basis, if at all, or at the prices we anticipate.
In connection with these planned divestitures, we reclassified these
businesses as discontinued operations. In the third quarter of 2001, we
recognized a charge to our earnings of $31.0 million to reflect the loss we
expect to incur upon the disposition of all of these discontinued operations,
except the French Taxation Services segment. Of this amount, $19.0 million
related to the loss on the sale of the Logistics Management Services segment. We
recognized an additional loss of approximately $54.0 million in the fourth
quarter of 2001 as a result of the sale of the French Taxation Services segment.
If we are unable to complete the sales of the other three businesses at the
prices we anticipate, we would have to recognize additional charges to our
earnings. Additionally, if we decide not to divest one or more of the three
businesses, we would have to reclassify those businesses to include them in our
continuing operations. The inclusion of the discontinued operations in our
continuing business could affect our financial results on a historical basis, as
a result of a reclassification, and could also adversely impact our future
results of operations.
If we are unable to divest these businesses, if the timing of the
divestitures exceeds that anticipated, or if the proceeds received in the
divestitures are lower than expected, we may not achieve the anticipated
benefits. For example, we may incur additional losses upon completion of the
divestitures, we may not realize the cost savings anticipated as a result of the
divestitures and management's time and attention may be diverted to a greater
degree than expected. The announced intention to dispose of these businesses may
result in a diminished value of the assets to be divested through, for example,
the loss of customers or key personnel employed by these businesses, and
therefore, we may not be able to obtain the prices we anticipate for these
businesses.
As a result of the sale of our French Taxation Services operations, we
recognized a substantial and material net loss in the fourth quarter of 2001.
On December 14, 2001, we consummated the sale of our French Taxation
Services business for approximately $48.3 million. The sale of the French
Taxation Services business resulted in a net loss on the transaction of
approximately $54.0 million in the fourth quarter of 2001.
We have violated our debt covenants in the past and may do so in the future.
As of September 30, 2001, we were not in compliance with certain financial
ratio covenants in our senior credit facility then in place. Those covenant
violations were waived by the lenders in an amendment to the senior credit
facility dated November 9, 2001. This amendment also relaxed certain financial
ratio covenants for the fourth quarter of 2001 and each of the quarters of 2002.
On December 31, 2001, we entered into a new senior credit facility and canceled
the prior credit facility. No assurance can be provided that we will not violate
the covenants of the new credit facility in the future. If we are unable to
comply with our financial covenants in the future, our lenders could pursue
their contractual remedies under the credit facility, including requiring the
immediate repayment in full of all amounts outstanding, if any. Additionally, we
cannot be certain that if the lenders demanded immediate repayment of any
amounts outstanding that we would be able to secure adequate or timely
replacement financing on acceptable terms or at all.
We rely on international operations for significant revenues.
In 2000, approximately 23.9% of our revenues from continuing operations and
a large portion of the aggregate revenues of HSA-Texas and its affiliates were
generated from international operations. International operations are subject to
risks, including:
o political and economic instability in the international market we
serve;
o difficulties in staffing and managing foreign operations and in
collecting accounts receivable;
o fluctuations in currency exchange rates, particularly weaknesses in
the Euro, the British Pound and other currencies of countries in which
we transact business, which could result in currency translations that
materially reduce our revenues and earnings;
o costs associated with adapting our services to our foreign clients'
needs;
7
o unexpected changes in regulatory requirements and laws;
o difficulties in transferring earnings from our foreign subsidiaries to
us; and
o burdens of complying with a wide variety of foreign laws and labor
practices, including laws that could subject certain tax recovery
audit practices to regulation as the unauthorized practice of law.
Because we expect a significant portion of our revenues to continue to come
from international operations, the occurrence of any of the above events could
materially and adversely affect our business, financial condition and results of
operations.
We require significant management and financial resources to operate and expand
our recovery audit services internationally.
In our experience, entry into new international markets requires
considerable management time as well as start-up expenses for market
development, hiring and establishing office facilities. In addition, we have
encountered, and expect to continue to encounter, significant expense and delays
in expanding our international operations because of language and cultural
differences, staffing, communications and related issues. We generally incur the
costs associated with international expansion before any significant revenues
are generated. As a result, initial operations in a new market typically operate
at low margins or may be unprofitable. Because our international expansion
strategy will require substantial financial resources, we may incur additional
indebtedness or issue additional equity securities which could be dilutive to
our shareholders. In addition, financing for international expansion may not be
available to us on acceptable terms and conditions.
Recovery audit services are not widely used in international markets.
Our long-term growth objectives are based in material part on achieving
significant future growth in international markets. Although our recovery audit
services constitute a generally accepted business practice among retailers in
the U.S., Canada, and Mexico, these services have not yet become widely used in
many international markets. Prospective clients, vendors or other involved
parties in foreign markets may not accept our services. The failure of these
parties to accept and use our services could have a material adverse effect on
our future growth.
The level of our annual profitability is significantly affected by our third and
fourth quarter operating results.
The purchasing and operational cycles of our clients typically cause us to
realize higher revenues and operating income in the last two quarters of our
fiscal year. If we do not continue to realize increased revenues in future third
and fourth quarter periods, due to adverse economic conditions in those quarters
or otherwise, our profitability for any affected quarter and the entire year
could be materially and adversely affected because ongoing selling, general and
administrative expenses are largely fixed. Recent national adverse economic
developments, that have been compounded by the events of September 11, 2001,
have increased the uncertainty associated with fourth quarter revenues in 2001.
We may be unable to protect and maintain the competitive advantage of our
proprietary technology and intellectual property rights.
Our operations could be materially and adversely affected if we are not
able to adequately protect our proprietary software, audit techniques and
methodologies, and other proprietary intellectual property rights. We rely on a
combination of trade secret laws, nondisclosure and other contractual
arrangements and technical measures to protect our proprietary rights. Although
we presently hold U.S. and foreign registered trademarks and U.S. registered
copyrights on certain of our proprietary technology, we may be unable to obtain
similar protection on our other intellectual property. In addition, our foreign
registered trademarks may not receive the same enforcement protection as our
U.S. registered trademarks. We generally enter into confidentiality agreements
with our employees, consultants, clients and potential clients. We also limit
access to, and distribution of, our proprietary information. Nevertheless, we
may be unable to deter misappropriation of our proprietary information, detect
unauthorized use and take appropriate steps to enforce our intellectual property
rights. Our competitors also may independently develop technologies that are
substantially equivalent or superior to our technology. Although we believe that
our services and products do not infringe on the intellectual property rights of
others, we can not prevent someone else from asserting a claim against us in the
future for violating their technology rights.
Our failure to retain the services of John M. Cook, or other key members of
management, could adversely impact our continued success.
Our continued success depends largely on the efforts and skills of our
executive officers and key employees, particularly John M. Cook, our Chairman
and Chief Executive Officer. The loss of the services of Mr. Cook or other key
members of management could materially and adversely affect our business. We
have entered into employment agreements with Mr. Cook and other members of
management. We also maintain key man life insurance policies in the aggregate
amount of $13.3 million on the life of Mr. Cook. While these employment
agreements limit the ability of Mr. Cook and other key employees to directly
compete with us in the future, nothing prevents them from leaving our company.
We may not be able to continue to compete successfully with other businesses
offering recovery audit services.
The recovery audit business is highly competitive. Our principal
competitors for accounts payable recovery audit services include many local and
regional firms and Howard Schultz & Associates International, Inc. If the
HSA-Texas acquisitions are not consummated, we will continue to compete with
that organization. Also, we believe that the major international accounting
8
firms or their former consulting units that have been spun off or divested may
become formidable competitors in the future. We are uncertain whether we can
continue to compete successfully with our competitors. In addition, our profit
margins could decline because of competitive pricing pressures that may have a
material adverse effect on our business, financial condition and results of
operations.
Our further expansion into electronic commerce auditing strategies and processes
may not be profitable.
We anticipate a growing need for recovery auditing services among current
clients migrating to internet-based procurement, as well as potential clients
already engaged in electronic commerce transactions. In response to this
anticipated future demand for our recovery auditing expertise, we have made and
may continue to make significant capital and other expenditures to further
expand into internet technology areas. We can give no assurance that these
investments will be profitable or that we have correctly anticipated demand for
these services.
An adverse judgment in the securities action litigation in which we and John M.
Cook are defendants could have a material adverse effect on our results of
operations and liquidity.
We and John M. Cook, our Chairman and Chief Executive Officer, are
defendants in three putative class action lawsuits filed on June 6, 2000 in the
United States District Court for the Northern District of Georgia, Atlanta
Division, which have since been consolidated into one proceeding (the
"Securities Class Action Litigation"). A judgment against us in this case could
have a material adverse effect on our results of operations and liquidity, while
a judgment against Mr. Cook could adversely affect his financial condition and
therefore have a negative impact upon his performance as our chief executive
officer. Plaintiffs in the Securities Class Action Litigation have alleged in
general terms that the defendants violated Sections 10(b) and 20(a) of the
Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by
allegedly disseminating materially false and misleading information about a
change in our method of recognizing revenue and in connection with revenue
reported for a division. The plaintiffs further allege that these misstatements
and omissions led to an artificially inflated price for our common stock during
the putative class period which runs from July 19, 1999 to July 26, 2000. This
case seeks an unspecified amount of compensatory damages, payment of litigation
fees and expenses, and equitable and/or injunctive relief. Although we believe
the alleged claims in this lawsuit are without merit and intend to defend the
lawsuit vigorously, due to the inherent uncertainties of the litigation process
and the judicial system, we are unable to predict the outcome of this
litigation.
Our articles of incorporation, bylaws, and shareholders' rights plan and Georgia
law may inhibit a change in control that you may favor.
Our articles of incorporation and bylaws and Georgia law contain provisions
that may delay, deter or inhibit a future acquisition of us not approved by our
board of directors. This could occur even if our shareholders are offered an
attractive value for their shares or if a substantial number or even a majority
of our shareholders believe the takeover is in their best interest. These
provisions are intended to encourage any person interested in acquiring us to
negotiate with and obtain the approval of our board of directors in connection
with the transaction. Provisions that could delay, deter or inhibit a future
acquisition include the following:
o a staggered board of directors;
o specified requirements for calling special meetings of shareholders;
and
o the ability of the board of directors to consider the interests of
various constituencies, including our employees, clients and creditors
and the local community.
Our articles of incorporation also permit the board of directors to issue
shares of preferred stock with such designations, powers, preferences and rights
as it determines, without any further vote or action by our shareholders. In
addition, we have in place a "poison pill" shareholders' rights plan that will
trigger a dilutive issuance of common stock upon substantial purchases of our
common stock by a third party which are not approved by the board of directors.
Also, the shareholders' rights plan requires approval by a majority of the
continuing directors, as defined in the plan, to redeem the rights plan, amend
the rights plan, or exclude a person or group who acquires beneficial ownership
or more than 15 percent of our outstanding common stock from being considered an
acquiring person under the rights plan. These provisions also could discourage
bids for our shares of common stock at a premium and have a material adverse
effect on the market price of our shares.
Our stock price has been and may continue to be volatile.
Our common stock is traded on The Nasdaq National Market. The trading price
of our common stock has been and may continue to be subject to large
fluctuations. Our stock price may increase or decrease in response to a number
of events and factors, including:
o future announcements concerning us, key clients or competitors;
o quarterly variations in operating results;
o changes in financial estimates and recommendations by securities
analysts;
9
o developments with respect to technology or litigation;
o the operating and stock price performance of other companies that
investors may deem comparable to our company;
o acquisitions and financings; and
o sales of blocks of stock by insiders.
Stock price volatility is also attributable to the current state of the
stock market, in which wide price swings are common. This volatility may
adversely affect the price of our common stock, regardless of our operating
performance.
Forward Looking Statements
This prospectus contains certain forward-looking statements and information
made by us that are based on the beliefs of our respective management as well as
estimates and assumptions made by and information currently available to our
management. The words "could," "may," "might," "will," "would," "shall,"
"should," "pro forma," "potential," "pending," "intend," "believe," "expect,"
"anticipate," "estimate," "plan," "future" and other similar expressions
generally identify forward-looking statements, including, in particular,
statements regarding future services, market expansion and pending litigation.
These forward-looking statements are made pursuant to the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995. Investors are cautioned
not to place undue reliance on these forward-looking statements. Such
forward-looking statements reflect the views of our management at the time such
statements are made and are subject to a number of risks, uncertainties,
estimates and assumptions, including, without limitation, in addition to those
identified in the text surrounding such statements, those identified under "Risk
Factors" and elsewhere in this prospectus.
Some of the forward-looking statements contained in this prospectus
include:
o statements regarding the expected losses from the disposal of
discontinued operations;
o statements regarding the potential dilutive effect of the acquisition
of HSA-Texas and affiliates on our earnings per share;
o statements regarding increasing outsourcing of internal recovery audit
functions;
o statements regarding the benefits of global e-commerce initiatives to
technologically advanced recovery audit firms; and
o statements regarding market opportunities for recovery audit firms and
the opportunities offered by the accounts payable business.
In addition, important factors to consider in evaluating such
forward-looking statements include changes or developments in United States and
international economic, market, legal or regulatory circumstances, changes in
our business or growth strategy or an inability to execute our strategy due to
changes in our industry or the economy generally, the emergence of new or
growing competitors, the actions or omissions of third parties, including
suppliers, customers, competitors and United States and foreign governmental
authorities, and various other factors. Should any one or more of these risks or
uncertainties materialize, or the underlying estimates or assumptions prove
incorrect, actual results may vary significantly and markedly from those
expressed in such forward-looking statements, and there can be no assurance that
the forward-looking statements contained in this prospectus will in fact occur.
Given these uncertainties, you are cautioned not to place undue reliance on
our forward-looking statements. We disclaim any obligation to announce publicly
the results of any revisions to any of the forward-looking statements contained
in this prospectus, to reflect future events or developments.
USE OF PROCEEDS
This prospectus relates to the offer and sale of our common stock by the
selling shareholders. We will not receive any proceeds from the sale of the
common stock. We will pay all expenses related to the registration of the common
stock except underwriting discounts and commissions and fees and expenses of
counsel for the selling shareholders.
SELLING SHAREHOLDERS
The PRG common stock to which this prospectus relates is being offered by
former shareholders of Howard Schultz & Associates International, Inc.
("HSA-Texas") and former shareholders of HSA-Texas' affiliated foreign operating
companies and/or their permitted transferees. On January 24, 2002, if
shareholder approval is obtained, PRG expects to issue approximately 14,130,471
shares of common stock to HSA-Texas in connection with the acquisition of
substantially all the assets of HSA-Texas and an aggregate of 629,508 shares of
10
common stock to acquire substantially all of the outstanding stock of HS&A
International Pte Ltd. ("HSA-Singapore") and all of the outstanding stock of
Howard Schultz & Associates (Asia) Limited ("HSA-Asia"), Howard Schultz &
Associates (Australia), Inc. ("HSA-Australia") and Howard Schultz & Associates
(Canada), Inc. ("HSA-Canada"), each an affiliated foreign operating company of
HSA-Texas. In connection with such acquisitions, we entered into a registration
rights agreement with shareholders of HSA-Texas and the shareholders of each
affiliated foreign operating company, under which we agreed to register for sale
certain of the shares of PRG common stock issued by PRG to HSA-Texas upon
distribution of such shares by HSA-Texas to shareholders of HSA-Texas and shares
of common stock issued to the shareholders of each affiliated foreign operating
company.
The following table states the name of each of the selling shareholders
and, on a pro forma basis as if the closing of the HSA-Texas acquisitions had
occurred on January 17, 2002, and assuming:
o an average PRG common stock price of $9.036 per share;
o HSA-Texas continues to have outstanding 2,307,482 shares of voting
common stock, 6,435,383 shares of non-voting common stock, options to
purchase 1,133,423 shares and 64,569 SARs, and Howard and Andrew
Schultz's respective beneficial ownership thereof remains unchanged;
and
o HSA-Texas' remaining liabilities, including the expenses of effecting
the liquidation and winding up of HSA-Texas, do not exceed the value
of HSA-Texas' assets not purchased by PRG,
also states the number of shares of common stock of PRG beneficially owned by
each selling shareholder as of January 17, 2002, number of shares which may be
sold for the account of each selling shareholder, the number of shares of common
stock that will be beneficially owned by each selling shareholder after the
completion of the offering assuming the sale of all shares offered, the
percentage of PRG common stock owned by each selling shareholder as of January
17, 2002, and the percentage of PRG common stock owned by each selling
shareholder after the completion of the offering, assuming the sale of all
shares offered.
Beneficial Ownership Number of Beneficial Ownership
Name of Prior to the Offering Shares After the Offering (1)
--------------------- ----------- ----------------------
Selling Shareholder Shares Percentage Offered Shares Percentage
------------------- ------ ---------- ------- ------ ----------
HHS Charitable Lead Trust(2) 690,153 1.09 55,334 634,819 *
LVS Charitable Lead Trust(2) 690,153 1.09 55,334 634,819 *
Daniel Alan Schultz HHS (2001) GST Trust(2) 686,700 1.08 110,668 576,032 *
Daniel Alan Schultz LVS (2001) GST Trust(2) 686,700 1.08 110,668 576,032 *
Jaynie Schultz Romaner HHS (2001) GST Trust(2) 686,700 1.08 110,668 576,032 *
Jaynie Schultz Romaner LVS (2001 GST Trust(2) 686,700 1.08 110,668 576,032 *
Andrew H. Schultz(3) 5,522,758 8.69 498,008 5,024,750 7.91
The Andrew H. Schultz Irrevocable Trust(3) 3,725,336 5.86 55,334 3,670,002 5.78
----------------
Total 1,106,684
------------------------
* Less than 1% of outstanding shares
(1) Assumes all offered PRG common stock will be sold and that no
additional shares of PRG common stock will be issued by PRG or
acquired by any selling shareholder prior to the completion of the
offering.
(2) Harold Berman is trustee and has sole investment and voting power with
respect to such shares.
(3) Andrew H. Schultz is a director of PRG. Includes 3,725,336 shares held
by Andrew H. Schultz Irrevocable Trust, of which Mr. Schultz is the
trustee, as to which he has sole investment and voting power.
11
PLAN OF DISTRIBUTION
The selling shareholders may offer and sell shares of common stock offered
by this prospectus during the 90-day period beginning on the date of this
prospectus, unless such period is extended, in one or more of the following
transactions:
o on The Nasdaq National Market or any other securities exchange that
lists the common stock for trading;
o in the over-the-counter market;
o in transactions other than on such exchanges or in the
over-the-counter market;
o in negotiated transactions;
o in short sales of the common stock, in transactions to cover short
sales or otherwise in connection with short sales;
o by pledge to secure debts and other obligations or on foreclosure of a
pledge;
o through put or call options, including the writing of exchange-traded
call options, or other hedging transactions related to the common
stock; and
o in a combination of any of the above transactions.
No sales may be made hereunder unless the HSA-Texas acquisitions are
consummated. The selling shareholders may sell their shares at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices, at negotiated prices or at fixed prices. The transactions listed above
may include block transactions. We have been advised by the selling shareholders
that they have not made any arrangements with any underwriters or broker-dealers
relating to the distribution of the shares covered by this prospectus.
The selling shareholders may sell their shares directly to purchasers, use
broker-dealers to sell their shares or may sell their shares to broker-dealers
acting as principals. If this happens, broker-dealers may either receive
discounts or commissions from the selling shareholders, or they may receive
commissions from purchasers of shares for whom they acted as agents, or both. If
a broker-dealer purchases shares as a principal, it may resell the shares for
its own account under this prospectus. We will pay all registration fees and
expenses for the common stock offered by this prospectus.
The selling shareholders and any agent, broker or dealer that participates
in sales of common stock offered by this prospectus may be deemed "underwriters"
under the Securities Act of 1933 and any commissions or other consideration
received by any agent, broker or dealer may be considered underwriting discounts
or commissions under the Securities Act. We have agreed to indemnify the selling
shareholders against certain liabilities arising under the Securities Act from
sales of common stock. Selling shareholders may agree to indemnify any agent,
broker or dealer that participates in sales of common stock against liabilities
arising under the Securities Act from sales of common stock.
Because selling shareholders may be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act, the selling shareholders will be
subject to the prospectus delivery requirements of the Securities Act, which may
include delivery through the facilities of The Nasdaq National Market pursuant
to Rule 153 under the Securities Act. We have informed the selling shareholders
that the anti-manipulation provisions of Regulation M under the Securities
Exchange Act of 1934 may apply to their sales of common stock.
Instead of selling common stock under this prospectus, selling shareholders
may sell common stock in compliance with the provisions of Rule 144 under the
Securities Act, if available.
Upon PRG being notified by a selling shareholder that any material
arrangement has been entered into with a broker-dealer for the sale of shares
through a block trade, special offering, exchange distribution or secondary
distribution or a purchase by a broker or dealer, a supplement to this
prospectus will be filed, if required, pursuant to Rule 424(b) under the
Securities Act, disclosing:
o the name of each such selling shareholder and of the participating
broker-dealer;
o the number of shares involved;
o the price at which such shares were sold;
o the commissions paid or discounts or concessions allowed to such
broker-dealer, where applicable;
o that such broker-dealer did not conduct any investigation to verify
the information set out or incorporated by reference in this
prospectus; and
o other facts material to the transaction.
In addition, upon PRG being notified by a selling shareholder that a
permitted transferee to which the right to utilize this prospectus, as
determined in accordance with the registration rights agreement, has been
transferred intends to sell more than 500 shares, a supplement to this
prospectus will be filed.
The term "selling shareholders" may also include persons who obtain common
stock from selling shareholders as a gift, for no consideration upon dissolution
of a corporation, partnership or limited liability company, on foreclosure of a
pledge or in another private transaction; provided, however, that if a permitted
transferee intends to sell more than 500 shares of such PRG common stock, the
filing of a supplement to this prospectus will be required.
12
LEGAL MATTERS
The validity of the shares of common stock offered by this prospectus will
be passed upon for PRG by Arnall Golden Gregory LLP, Atlanta, Georgia. Jonathan
Golden, a partner of Arnall Golden Gregory LLP, is a director of PRG and
beneficially owns approximately 1.21 million shares of PRG common stock. As of
January 17, 2002, attorneys with Arnall Golden Gregory LLP beneficially owned an
aggregate of approximately 1.4 million shares of PRG's common stock.
EXPERTS
The consolidated financial statements and schedule of PRG and subsidiaries
as of December 31, 2000 and 1999, and for each of the years in the three-year
period ended December 31, 2000, have been incorporated by reference in this
prospectus and elsewhere in the registration statement in reliance upon the
reports of KPMG LLP and Ernst & Young Audit, independent auditors, incorporated
by reference herein, and upon the authority of said firms as experts in
accounting and auditing. The report of KPMG LLP covering the December 31, 2000
and 1999 consolidated financial statements refers to changes in accounting for
revenue recognition.
The combined balance sheets of Howard Schultz & Associates International,
Inc. as of December 31, 2000 and 1999, and the related combined statements of
operations, stockholders' equity and cash flows for each of the years in the
three-year period ended December 31, 2000, have been incorporated by reference
in this prospectus and elsewhere in the registration statement in reliance upon
the report of KPMG LLP, independent auditors, incorporated by reference herein,
and upon the authority of said firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
PRG files annual, quarterly and current reports, proxy and information
statements and other information with the Securities and Exchange Commission.
You may read and copy any materials we file at the SEC's public reference room
at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information regarding the public reference room.
PRG's SEC filings are also available to the public at the SEC's web site at
http://www.sec.gov.
The SEC allows PRG to "incorporate by reference" information we file with
the SEC, which means that PRG can disclose important information to you by
referring you to those documents filed separately with the SEC. The information
incorporated by reference is deemed to be part of this prospectus, and later
information that we file with the SEC will automatically update and supersede
information contained in this prospectus.
The following documents filed by PRG (File No. 0-28000) with the SEC are
incorporated by reference in and made a part of this prospectus:
o PRG's Annual Report on Form 10-K for the year ended December 31, 2000;
o PRG's Quarterly Reports on Form 10-Q for the quarters ended March 31,
2001, June 30, 2001 and September 30, 2001;
o PRG's Current Report on Form 8-K filed on October 9, 2001;
o PRG's Current Report on Form 8-K filed on November 1, 2001;
o PRG's Current Report on Form 8-K filed on November 15, 2001;
o PRG's Current Report on Form 8-K filed on November 16, 2001;
o PRG's Current Report on Form 8-K filed on December 17, 2001;
o PRG's Current Report on Form 8-K filed on December 26, 2001;
o PRG's Current Report on Form 8-K filed on January 2, 2002;
o PRG's Current Report on Form 8-K filed on January 17, 2002;
o PRG's Definitive Proxy Statement filed on December 20, 2001; and
o The description of PRG's common stock contained in PRG's registration
statement on Form 8-A (Registration No. 0-28000) as declared effective
by the SEC on March 26, 1996, as amended by the registration statement
on Form 8-A/A on August 9, 2000.
13
We are also incorporating by reference any future filings we make with the
SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act. These
documents will be deemed to be incorporated by reference in this prospectus and
to be a part of it from the date they are filed with the SEC.
You may obtain a copy of these filings, excluding all exhibits unless we
have specifically incorporated by reference an exhibit in this prospectus or in
a document incorporated by reference herein, at no cost, by writing or
telephoning:
The Profit Recovery Group International, Inc.
Leslie H. Kratcoski
Director, Investor Relations
2300 Windy Ridge Parkway
Suite 100 North
Atlanta, Georgia 30339-8426
Telephone: (770) 779-3900
14
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. Other Expenses of Issuance and Distribution
All expenses, other than fees and expenses of legal or other advisors to
the selling shareholders, will be paid by PRG. Such expenses are as follows:*
SEC registration fee........................... $2,367.25
Printing expenses.............................. 500
Accounting fees and expenses................... 5,000
Legal fees and expenses........................ 20,000
Miscellaneous.................................. 500
==============
Total................................. $28,367.25
-----------------------
* The amounts set forth, except for the filing fees for the SEC, are
estimated.
ITEM 15. Indemnification of Directors and Officers
Article 8 of PRG's articles of incorporation and Article 7 of PRG's bylaws
require PRG to indemnify its directors and officers to the fullest extent
allowed by the Georgia Business Corporation Code, as amended from time to time.
Under these indemnification provisions, PRG is required to indemnify any of its
directors and officers against any reasonable expenses (including attorneys'
fees) incurred in the defense of any action, suit or proceeding, whether civil,
criminal, administrative or investigative, to which such person was made a
party, or in defense of any claim, issue or matter therein, by reason of the
fact that such person is or was a director or officer of PRG or, while a
director or officer of PRG, is or was serving at PRG's request as a director,
officer, partner, trustee, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise to
the extent that such director or officer has been successful, on the merits or
otherwise, in such defense. PRG also is required to indemnify any of its
directors or officers against any liability incurred in connection with any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
name of PRG, in which event, additional determinations must be made before
indemnification is provided) by reason of the fact that he or she is or was a
director or officer of PRG who, while a director or officer of PRG, is or was
serving at PRG's request as a director, officer, partner, trustee, employee or
agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise, if such director or officer acted in a manner
he or she believed in good faith to be in, or not opposed to, the best interests
of PRG, and with respect to any criminal proceeding, had no reasonable cause to
believe his or her conduct was unlawful. PRG is also required to provide
advances of expenses incurred by a director or officer in defending such action,
suit or proceeding upon receipt of a written affirmation of such officer or
director that he or she has met certain standards of conduct and an undertaking
by or on behalf of such officer or director to repay such advances unless it is
ultimately determined that he or she is entitled to indemnification by PRG.
PRG's articles of incorporation contain a provision which eliminates, to
the fullest extent permitted by law, director liability for monetary damages for
breaches of the fiduciary duty of care or any other duty as a director.
Pursuant to Section 14-2-851 through 14-2-857 of the Georgia Business
Corporation Code, as amended, the directors, officers, employees and agents of
PRG may, and in some cases must, be indemnified by PRG under certain
circumstances against expenses and liabilities incurred by or imposed upon them
as a result of actions, suits or proceedings brought against them as directors,
officers, employees and agents of PRG (including actions, suits or proceedings
brought against them for violations of the federal securities laws).
PRG has entered into indemnification agreements with each of its directors
and certain executive officers ("Indemnitees"). Pursuant to such agreements, PRG
shall indemnify each Indemnitee whenever he or she is or was a party or is
threatened to be made a party to any proceeding, including without limitation
any such proceeding brought by or in the right of PRG, because he or she is or
was a director or officers of PRG or is or was serving at the request of PRG as
a director or officer of another corporation, partnership, joint venture, trust
or other enterprise, or because of anything done or not done by the Indemnitee
in such capacity, against expenses and liabilities (including the costs of any
investigation, defense, settlement or appeal) actually and reasonably incurred
by the Indemnitee or on his or her behalf in connection with such proceeding, if
he or she acted in good faith and in a manner he or she reasonably believed to
be in or not opposed to the best interests of PRG, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful. The termination of any action suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that an Indemnitee
did not act in good faith and in a manner which he or she reasonably believed to
be in or not opposed to the best interests of PRG, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his or her
conduct was unlawful. If in the judgement of the board of directors of PRG an
II-1
Indemnitee is reasonably likely to be entitled to indemnification pursuant to
the agreement, all reasonable expenses incurred by or on behalf of such
Indemnitee shall be advanced from time to time by PRG to the Indemnitee within
thirty (30) days after PRG's receipt of a written request for an advance of
expenses by such Indemnitee, whether prior to or after final disposition of a
proceeding.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "1933 Act"), may be permitted to directors, officers or persons
controlling PRG pursuant to the foregoing provisions of the Georgia Business
Corporation Code and PRG's articles of incorporation by bylaws, PRG has been
informed that indemnification is considered by the Commission to be against
public policy and therefore unenforceable.
PRG currently maintains an insurance policy which insures the directors and
officers of PRG against certain liabilities, including certain liabilities under
the 1933 Act.
Pursuant to PRG's Stock Incentive Plan (the "Plan"), in addition to such
other rights of indemnification that they may have as directors of PRG or as
members of the Compensation Committee of the Board of Directors of PRG (the
"Committee"), the members of the Committee shall be indemnified by PRG against
the reasonable expenses, including attorneys' fees actually and necessarily
incurred in connection with the defense of any action, suit or proceeding, or in
connection with any appeal thereof, to which they or any of them may be a party
by reason of any action taken or failure to act under or in connection with the
Plan or any option granted thereunder, and against all amounts paid by them in
settlement thereof (provided such settlement is approved by independent legal
counsel selected by PRG) or paid by them in satisfaction of a judgment in any
such action, suit or proceeding, except in relation to matters as to which it
shall be adjudged in such action, suit or proceeding that such Committee member
is liable for negligence or misconduct in the performance of his or her duties.
The asset agreement for the HSA-Texas acquisition provides that PRG will
indemnify HSA-Texas and its shareholders and HSA-Texas' affiliates, directors,
officers, employees and agents and hold them harmless from and against all
claims, liabilities, lawsuits, costs, damages, or expenses, including reasonable
attorneys fees and expenses incurred in litigation or otherwise, arising out of
any sustained by any of them due to or relating to:
o any misrepresentation or breach of any representation, warranty,
covenant or agreement of PRG in the asset agreement; and
o any liability or obligation incurred by HSA-Texas or any of its
shareholders relating to the operation or ownership of the HSA-Texas
business by PRG, or the ownership or use of the acquired assets by
PRG, from and after the effective date.
Concurrently with the closing, PRG, HSA-Texas, Howard Schultz, Andrew
Schultz, the Andrew H. Schultz Irrevocable Trust and certain other affiliated
Schultz family trusts which are parties to the asset agreement will enter into
an indemnification agreement which will set forth the procedures for
indemnification, and the survival period and limitations on indemnification of
the claims described above.
ITEM 16. Exhibits
Exhibit No. Description
----------- -----------
4.1 Specimen Stock Certificate (incorporated by reference to Exhibit
4.1 of the Registrant's Registration Statement on Form S-1
(Registration No. 333-1086).
4.2 Applicable provisions of the Articles of Incorporation and Bylaws
of the Registration (incorporated by reference to Exhibits 4.2
and 4.3 of the Registrant's Registration Statement on Form 8-A/A
filed August 9, 2000).
5* Opinion of Arnall Golden Gregory LLP regarding legality.
23.1* Consent of Arnall Golden Gregory LLP (Included as part of Exhibit
5 hereto).
23.2* Consent of KPMG LLP.
23.3* Consent of KPMG LLP.
23.4* Consent of Ernst & Young Audit.
24* Power of Attorney (included as part of the signature page
hereto).
------------------------------
* Filed herewith.
II-2
ITEM 17. Undertakings
(a) The undersigned Registrant hereby undertakes as follows:
1. To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
2. That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
3. To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
4. That, for purposes of determining any liability under the Securities
Act, each filing of the registrant's annual report pursuant to Section 13(a) or
15(d) of the Exchange Act that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered herein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
5. Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Atlanta and the State of Georgia, on January 17,
2002.
THE PROFIT RECOVERY GROUP INTERNATIONAL, INC.
By: /s/ John M. Cook
-----------------------------------
John M. Cook
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated. Each person whose signature appears below
hereby constitutes and appoints John M. Cook, Clinton McKellar, Jr. and Donald
E. Ellis, Jr., or any one of them, as such person's true and lawful
attorney-in-fact and agent with full power of substitution for such person and
in such person's name, place and stead, in any and all capacities, to sign and
to file with the Securities and Exchange Commission, any and all amendments and
post-effective amendments to this registration statement, with exhibits thereto
and other documents in connection therewith, granting unto said attorney-in-fact
and agent full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as such person might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent, or any
substitute therefor, may lawfully do or cause to be done by virtue thereof.
SIGNATURE TITLE DATE
/s/ John M. Cook Chairman of the Board, Chief Executive Officer January 17, 2002
------------------------------------------ and Director
John M. Cook (principal executive officer)
/s/ Donald E. Ellis, Jr. Executive Vice President, Finance, Chief Financial January 17, 2002
------------------------------------------ Officer and Treasurer
Donald E. Ellis, Jr. (principal financial officer)
/s/ Allison Aden Vice President, Finance January 17, 2002
------------------------------------------ (principal accounting officer)
Allison Aden
/s/ John M. Toma Vice Chairman and Director January 17, 2002
------------------------------------------
John M. Toma
/s/ Stanley B. Cohen Director January 17, 2002
------------------------------------------
Stanley B. Cohen
/s/ Jonathan Golden Director January 17, 2002
------------------------------------------
Jonathan Golden
/s/ Garth H. Greimann Director January 17, 2002
------------------------------------------
Garth H. Greimann
/s/ Fred W.I;. Lachotzki Director January 17, 2002
------------------------------------------
Fred W.I. Lachotzki
/s/ E. James Lowrey Director January 17, 2002
------------------------------------------
E. James Lowrey
/s/ Thomas S. Robertson Director January 17, 2002
------------------------------------------
Thomas S. Robertson
/s/ Jackie M. Ward Director January 17, 2002
------------------------------------------
Jackie M. Ward
II-4
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
4.1 Specimen Stock Certificate (incorporated by reference to Exhibit
4.1 of the Registrant's Registration Statement on Form S-1
(Registration No. 333-1086).
4.2 Applicable provisions of the Articles of Incorporation and Bylaws
of the Registration (incorporated by reference to Exhibits 4.2
and 4.3 of the Registrant's Registration Statement on Form 8-A/A
filed August 9, 2000).
5* Opinion of Arnall Golden Gregory LLP regarding legality.
23.1* Consent of Arnall Golden Gregory LLP (Included as part of Exhibit
5 hereto).
23.2* Consent of KPMG LLP.
23.3* Consent of KPMG LLP.
23.4* Consent of Ernst & Young Audit.
24* Power of Attorney (included as part of the signature page
hereto).
------------------------------
* Filed herewith.
II-5
1408417