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SCHEDULE 13D
(Amendment No. 1)
Under the Securities Exchange Act of 1934
PRG-SCHULTZ INTERNATIONAL, INC.
-------------------------------------------------------------------
(Name of Company)
Common Stock
-------------------------------------------------------------------
(Title of Class of Securities)
69357C107
-------------------------------------------------------------------
(CUSIP Number of Class of Securities)
Andre Weiss, Esq.
Schulte Roth & Zabel LLP
919 Third Avenue
New York, New York 10022
(212) 756-2431
-------------------------------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
December 23, 2005
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(Date of Event which Requires
Filing of this Schedule)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of ss.ss.240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the
following box. [ ]
NOTE: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See ss.240.13d-7 for other
parties to whom copies are to be sent.
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
SCHEDULE 13D
--------------------- ---------------------
CUSIP NO. 69357C107 PAGE 2 OF 10 PAGES
--------------------- ---------------------
--------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Tenor Opportunity Master Fund Ltd.
--------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [X]
--------------------------------------------------------------------------------
3 SEC USE ONLY
--------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC, OO
--------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e)
[ ]
--------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Cayman Islands
--------------------------------------------------------------------------------
7 SOLE VOTING POWER
0
-----------------------------------------------------------
NUMBER OF 8 SHARED VOTING POWER
SHARES
BENEFICIALLY 533,591 shares issuable upon conversion of notes
OWNED BY and payable as shares of interest under the
EACH notes (see Item 3)
REPORTING -----------------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH
0
-----------------------------------------------------------
10 SHARED DISPOSITIVE POWER
533,591 shares issuable upon conversion of notes
and payable as shares of interest under the
notes (see Item 3)
--------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON
533,591 shares issuable upon conversion of notes and payable as
shares of interest under the notes (see Item 3)
--------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES*
[ ]
--------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) (see Item 5)
0.8% (see Item 5)
--------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
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SCHEDULE 13D
--------------------- ---------------------
CUSIP NO. 69357C107 PAGE 3 OF 10 PAGES
--------------------- ---------------------
--------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Tenor Capital Management Co., L.P.
--------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [X]
--------------------------------------------------------------------------------
3 SEC USE ONLY
--------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC, OO
--------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e)
[ ]
--------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
--------------------------------------------------------------------------------
7 SOLE VOTING POWER
0
-----------------------------------------------------------
NUMBER OF 8 SHARED VOTING POWER
SHARES
BENEFICIALLY 0
OWNED BY EACH
REPORTING -----------------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH
0
-----------------------------------------------------------
10 SHARED DISPOSITIVE POWER
533,591 shares issuable upon conversion of notes
and payable as shares of interest under the
notes (see Item 3)
--------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON
533,591 shares issuable upon conversion of notes and payable as
shares of interest under the notes (see Item 3)
--------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES*
[ ]
--------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) (see Item 5)
0.8% (see Item 5)
--------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
--------------------------------------------------------------------------------
SCHEDULE 13D
--------------------- ---------------------
CUSIP NO. 69357C107 PAGE 4 OF 10 PAGES
--------------------- ---------------------
--------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Robin R. Shah
--------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [X]
--------------------------------------------------------------------------------
3 SEC USE ONLY
--------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC, OO
--------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e)
[ ]
--------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
--------------------------------------------------------------------------------
7 SOLE VOTING POWER
0
-----------------------------------------------------------
NUMBER OF 8 SHARED VOTING POWER
SHARES
BENEFICIALLY 533,591 shares issuable upon conversion of notes
OWNED BY and payable as shares of interest under the
EACH notes (see Item 3)
REPORTING -----------------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH
0
-----------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
--------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON
533,591 shares issuable upon conversion of notes and payable as
shares of interest under the notes (see Item 3)
--------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES*
[ ]
--------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.8% (see Item 5)
--------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
--------------------------------------------------------------------------------
This Amendment No. 1 amends the Statement on Schedule 13D (the "Schedule 13D")
filed with the Securities and Exchange Commission on December 12, 2005 by Tenor
Opportunity Master Fund Ltd., an exempted company organized under the laws of
the Cayman Islands ("Tenor"), Tenor Capital Management Co., L.P., a Delaware
limited partnership and Robin R. Shah (collectively, the "Reporting Persons").
This amendment to the Schedule 13D relates to the shares of Common Stock (the
"Shares") of PRG-Schultz International, Inc., a Georgia corporation (the
"Company"). The following amendments to the Schedule 13D are hereby made. Unless
otherwise defined herein, all capitalized terms shall have the meanings ascribed
to them in the Schedule 13D.
ITEM 4. PURPOSE OF TRANSACTION.
Item 4 of the Schedule 13D is hereby supplemented by the following:
On December 23, 2005, Tenor entered into a Restructuring Support Agreement
(the "Restructuring Support Agreement") with the Company and the other members
of the Ad Hoc Committee. A copy of the Restructuring Support Agreement is
attached as an exhibit hereto and incorporated into this Item 4 by reference.
Except as set forth above, the Reporting Persons have no oral or written
agreements, understandings or arrangements with each other or any other person
relating to acquiring, holding, voting or disposing of any securities of the
Company or otherwise with respect to the Company.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE COMPANY
Item 6 of the Schedule 13D is hereby supplemented by the following:
The Restructuring Support Agreement is incorporated by reference into this
Item 6.
Item 7. MATERIAL TO BE FILED AS EXHIBITS.
1. Joint Filing Agreement dated December 28, 2005.
5. Restructuring Support Agreement, dated December 23, 2005, among Tenor, the
Company and the other members of the Ad Hoc Committee.
SIGNATURES
After reasonable inquiry and to the best of his knowledge and belief,
each of the undersigned certifies that the information set forth in this
statement is true, complete and correct.
Dated: December 28, 2005
TENOR OPPORTUNITY MASTER FUND, LTD.
By: Tenor Opportunity Associates, LLC,
its Investment Advisor
By: /s/ Robin R. Shah
-------------------------------
Name: Robin R. Shah
Title: Member
TENOR CAPITAL MANAGEMENT CO., L.P.
By: /s/ Robin R. Shah
-------------------------------
Name: Robin R. Shah
Title: Partner
By: /s/ Robin R. Shah
-------------------------------
Name: Robin R. Shah
EXHIBIT INDEX
1. Joint Filing Agreement dated December 28, 2005.
2. Restructuring Support Agreement, dated December 23, 2005 among Tenor, the
Company and the other members of the Ad Hoc Committee.
EXHIBIT 1
JOINT FILING UNDERTAKING
The undersigned, being duly authorized thereunto, hereby execute this
agreement as an exhibit to this Schedule 13D to evidence the agreement of the
below-named parties, in accordance with the rules promulgated pursuant to the
Securities Exchange Act of 1934, to file this Schedule jointly on behalf of each
such party.
Dated: December 28, 2005
TENOR OPPORTUNITY MASTER FUND, LTD.
By: Tenor Opportunity Associates, LLC,
its Investment Advisor
By: /s/ Robin R. Shah
-------------------------------
Name: Robin R. Shah
Title: Member
TENOR CAPITAL MANAGEMENT CO., L.P.
By: /s/ Robin R. Shah
-------------------------------
Name: Robin R. Shah
Title: Partner
By: /s/ Robin R. Shah
-------------------------------
Name: Robin R. Shah
EXHIBIT 2
EXECUTION COPY
RESTRUCTURING SUPPORT AGREEMENT
This RESTRUCTURING SUPPORT AGREEMENT is made and entered into as of
December 23, 2005 (the "AGREEMENT") by and among PRG-Schultz International,
Inc., a Georgia corporation ("PRG" or the "COMPANY"), and (i) each of the
undersigned beneficial owners (or investment managers or advisors for the
beneficial owners) of the Notes (as defined below) and (ii) each other
beneficial owner (or investment manager or advisor for such beneficial owner) of
the Notes that executes a counterpart signature page to this Agreement after the
date of this Agreement, as provided herein (each, a "NOTEHOLDER" and
collectively, the "NOTEHOLDERS").
RECITALS:
A. PRG has issued and outstanding $125,000,000 aggregate principal amount
of its 4-3/4% Convertible Subordinated Notes due 2006 (the "NOTES") pursuant to
that certain indenture, dated as of November 26, 2001 (the "INDENTURE"), between
PRG (as successor in interest to The Profit Recovery Group International, Inc.)
and SunTrust Bank, as trustee.
B. The Noteholders are beneficial owners of the Notes (and/or are serving
as the investment advisors or managers or in a similar capacity for the
beneficial owners of such Notes, having the power to enter into this Agreement
on behalf of such beneficial owners) in the respective aggregate principal
amounts separately disclosed to PRG on a confidential basis (provided that the
aggregate principal amount of the holdings of all the Noteholders shall not be
deemed confidential).
C. Exhibit A hereto (the "TERM SHEET") and the provisions hereof set
forth the basic terms of a financial restructuring of the Notes to be realized
through an exchange offer (the "EXCHANGE OFFER" and, collectively with any
transactions substantially as contemplated by the Term Sheet or this Agreement,
the "RESTRUCTURING").
D. The parties have agreed to the terms of the Restructuring and the
Noteholders each have agreed to support the Restructuring on the terms and
conditions set forth herein.
E. The Company intends to (i) conduct the Exchange Offer as soon as
practicable and (ii) use commercially reasonable efforts to obtain acceptance of
the Exchange Offer by the holders of 99% of the outstanding Notes.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises and mutual covenants
and agreements set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
Section 1. GENERAL.
(a) The Company agrees and covenants that, subject to the conditions
set forth on the Term Sheet, it will use its commercially reasonable best
efforts to complete the Restructuring through the Exchange Offer.
(b) The parties shall negotiate in good faith (i) the documentation
regarding the Restructuring contemplated by the Term Sheet, (ii) the Exchange
Offer, and (iii) the other documents contemplated hereby and thereby
(collectively, the "RESTRUCTURING DOCUMENTS").
(c) The parties hereto shall not (i) object to, delay, impede, or
commence any proceeding pertaining to, or take any other action to interfere,
directly or indirectly, in any material respect with the acceptance or
implementation of, the Restructuring provided that the terms of the final
Restructuring Documents are materially consistent with the Term Sheet and
otherwise in form and substance satisfactory to the Company and the Noteholders
in their reasonable discretion, (ii) encourage or support any person or entity
to do any of the foregoing, (iii) in the case of the Noteholders, exercise any
rights under any indenture or other agreement with the Company or instruct any
trustee to exercise any such rights except as consistent with this Agreement, or
(iv) seek or solicit, propose, file, support, encourage, vote for, consent to,
instruct, or engage in discussions with any person or entity, other than PRG,
concerning any restructuring, workout, plan of reorganization, dissolution,
winding up, acquisition or liquidation of PRG and/or its affiliates, other than
the Exchange Offer, provided that the Company may, upon one Business Day's
notice to the other parties hereto, respond to and engage in discussions
concerning unsolicited offers that the Company's board of directors believes in
good faith will lead to an alternative transaction that would provide more value
to the holders of the Notes and to PRG's current shareholders than the
Restructuring.
(d) The parties agree nothing in this Agreement shall limit, modify or
otherwise effect any of the Lenders' rights under that certain Credit Agreement
among PRG-Schultz USA, Inc as Borrower, PRG and certain of its other affiliates,
as Guarantors and certain of the Noteholders, as Lenders, dated December 23,
2005 (the "BRIDGE LOAN CREDIT AGREEMENT"), or any documents related thereto
(collectively, the "BRIDGE LOAN DOCUMENTS").
Section 2. SUPPORT FOR THE RESTRUCTURING.
(a) PRG agrees and covenants that it will use commercially reasonable
best efforts to take or cause to be taken all actions commercially reasonably
necessary and appropriate in furtherance of the Exchange Offer, including as
promptly as practicable to:
(1) prepare the solicitation materials relating to the Exchange
Offer (the "SOLICITATION MATERIALS") in form and substance consistent with the
Term Sheet, except to the extent otherwise consented to by the Noteholders;
(2) commence the Exchange Offer and disseminate the Solicitation
Materials in a manner customary for comparable transactions;
(3) seek satisfaction of all conditions precedent to the
Restructuring;
2
(4) defend in good faith any suit or other legal or administrative
proceeding seeking to interfere with, impair or impede the Restructuring;
(5) promptly amend the Solicitation Materials, as necessary and as
may be required by applicable law and provide a draft of such amended
Solicitation Materials to the Ad Hoc Committee prior to the distribution of such
materials to holders of the Notes;
(6) not solicit or encourage others to formulate any other tender
offer, settlement offer, or exchange offer for the Notes other than the Exchange
Offer;
(7) so long as this Agreement is effective and has not been
terminated in accordance with Section 5 or 6, hereof, and except to the extent
necessary for the fulfillment of the fiduciary duties of the Company's board of
directors as referred to in Section 6(c) hereof, not object to, nor otherwise
commence any proceeding to oppose, the Restructuring, it being understood and
agreed that the Company shall not seek, solicit, support, consent to,
participate in the formulation of, or encourage any other plan, sale, proposal,
or offer of winding up, liquidation, reorganization, merger, consolidation,
dissolution, or restructuring of the Company; and
(8) subject to the satisfaction or waiver of any conditions
precedent to the Exchange Offer, consummate the Exchange Offer, including
delivery of all securities required to be issued thereunder (within the time
that is customary for transactions of this type) and the other transactions that
are part of the Restructuring.
(b) PRG agrees and covenants that it will not, and will cause each of
its direct and indirect subsidiaries not to, sell, liquidate, or dispose of any
assets, outside the ordinary course of business consistent with past practices,
prior to the date on which the Exchange Offer closes other than as permitted by
the Section 8.5 of the Bridge Loan Credit Agreement as in effect on the Closing
Date (as defined under the Bridge Loan Credit Agreement), without the prior
written consent of the holders of a majority of the Notes subject to this
Agreement.
(c) Each of the Noteholders agrees and covenants that it shall, as
long as this Agreement is in effect:
(1) no later than 15 days prior to the first date scheduled for
the closing of the Exchange Offer, (i) tender all Notes beneficially owned by it
and (ii) cause the beneficial owner of all Notes for which the Noteholder is the
investment advisor or manager having the power to vote and dispose of such Notes
on behalf of such beneficial owner, to tender all such Notes together with
properly completed and duly executed letter or letters of transmittal with
respect to such Notes as required by the instructions to the letter of
transmittal pursuant to and in accordance with the Exchange Offer within 5
business days after receipt of the relevant letters of transmittal;
(2) not revoke any of the foregoing unless and until this
Agreement is terminated in accordance with its terms;
3
(3) not vote for, consent to, provide any support for, participate
in the formulation of, or solicit or encourage others to formulate any other
tender offer, settlement offer, or exchange offer for the Notes other than the
Exchange Offer; and
(4) so long as this Agreement is effective and has not been
terminated in accordance with Section 5 or 6 hereof and the final Restructure
Documents are materially consistent with the Term Sheet, not object to, nor
otherwise commence any proceeding to oppose, the Restructuring, it being
understood and agreed that each Noteholder shall not (i) directly or indirectly
seek, solicit, support, or encourage any other plan, sale, proposal, or offer of
winding up, liquidation, reorganization, merger, consolidation, dissolution, or
restructuring of the Company or (ii) commence an involuntary bankruptcy case
against the Company.
Section 3. REPRESENTATIONS AND WARRANTIES.
(a) Each of the parties severally represents and warrants to each of
the other parties that the following statements are true and correct as of the
date hereof:
(1) POWER AND AUTHORITY. It has all requisite power and authority
to enter into this Agreement and to carry out the transactions contemplated by,
and perform its respective obligations under, this Agreement.
(2) AUTHORIZATION. The execution and delivery of this Agreement
and the performance of its obligations hereunder have been duly authorized by
all necessary action on its part.
(3) NO CONFLICTS. The execution, delivery, and performance by it
of this Agreement do not and shall not (i) violate any provision of law, rule,
or regulation applicable to it or its certificate of incorporation or by-laws
(or other organizational documents) or (ii) conflict with, result in a breach
of, or constitute (with due notice or lapse of time or both) a default under any
material contractual obligation to which it is a party or under its certificate
of incorporation or by-laws (or other organizational documents), except, with
respect to the Company, for any contractual obligation that would not have a
material adverse effect on the business, assets, financial condition, or results
of operations of PRG and its subsidiaries, taken as a whole.
(4) GOVERNMENTAL CONSENTS. The execution, delivery, and
performance by it of this Agreement do not and shall not require any
registration or filing with, consent or approval of, or notice to, or other
action to, with, or by, any Federal, state, or other governmental authority or
regulatory body, except (i) such filings as may be necessary and/or required for
disclosure by the Securities and Exchange Commission and (ii) filings with
NASDAQ in connection with the Restructuring.
(5) BINDING OBLIGATION. This Agreement is the legally valid and
binding obligation of it, enforceable against it in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium, or other
4
similar laws relating to or limiting creditors' rights generally or by equitable
principles relating to enforceability.
(6) PROCEEDINGS. No litigation or proceeding before any court,
arbitrator, or administrative or governmental body is pending against it that
would adversely affect its ability to enter into this Agreement or perform its
obligations hereunder.
(b) Each of the Noteholders represents and warrants, severally and not
jointly, to each of the other parties that the following statements are true,
correct, and complete as of the date hereof:
(1) OWNERSHIP. It has disclosed to PRG on a confidential basis the
aggregate principal amount of the Notes for which (i) it is the sole beneficial
owner and (ii) it is the investment advisor or manager for the beneficial owners
of such Notes, having the power to vote and dispose of such Notes on behalf of
such beneficial owners. It is entitled (for its own account or for the account
of other persons claiming through it) to all of the rights and economic benefits
of such Notes.
(2) TRANSFERS. It has made no prior assignment, sale,
participation, grant, conveyance, or other transfer of, and has not entered into
any other agreement to assign, sell, participate, grant, or otherwise transfer,
in whole or in part, any right, title, or interests in (or portion thereof) the
Notes referred to in Subsection 3(b)(1), except as permitted by Section 4
hereto.
(3) LAWS. It (i) is a sophisticated investor with respect to the
transactions described herein with knowledge and experience in financial and
business matters sufficient to evaluate the merits and risks of owning and
investing in securities similar to the Notes (including any securities that may
be issued in connection with the Restructuring), making an informed decision
with respect thereto, and evaluating properly the terms and conditions of this
Agreement, and it has made its own analysis and decision to enter in this
Agreement, (ii) is, and any person for which it is the investment advisor or
manager and which is the beneficial owner of Notes is, an "accredited investor"
within the meaning of Rule 501 of the Securities Act of 1933, as amended, and
(iii) it has had the opportunity to meet with management of PRG and to ask
questions and review information with respect to PRG's business, financial
condition, results of operations and financial and operational outlook, and it
has obtained all information it deems necessary or appropriate in order to enter
into this agreement and make the investment decision contemplated hereby.
Section 4. RESTRICTION ON THE SALE OF THE NOTES. Each Noteholder
individually covenants that, from the date hereof until the termination of this
Agreement, such party shall not, directly or indirectly, sell, pledge,
hypothecate, or otherwise transfer any Notes or any option, right to acquire, or
voting, participation, or other interest therein, except to a purchaser or other
entity who executes and delivers to PRG, concurrently or prior to any binding
commitment with respect to such transfer, an agreement in writing to be bound by
all the terms of this Agreement with respect to the relevant Notes or other
interests being transferred to such purchaser (which agreement shall include the
representations and warranties set forth in Section 3 hereof). This Agreement
shall in no way be construed to preclude a party from acquiring additional Notes
or
5
other interests in PRG. All Notes held by a Noteholder, including Notes acquired
after the date hereof shall be subject to all the terms of this Agreement.
Section 5. TERMINATION BY THE NOTEHOLDERS. This Agreement may be terminated
by Noteholders that beneficially own or act as the investment advisor or manager
with respect to at least a majority of the Notes subject to the terms of this
Agreement on the occurrence of any of the following events (each a "NOTEHOLDER
TERMINATION EVENT"), by delivering written notice of the occurrence of such
event in accordance with Section 11 below to the other parties:
(a) the Exchange Offer has not been commenced by January 31, 2006 or
completed by March 31, 2006;
(b) after the date hereof there shall have occurred any event or
circumstance that individually or in the aggregate reflect a material adverse
change in the financial condition, business, or operations of the Company and
its subsidiaries; or
(c) the failure to repay all obligations under the facility
contemplated by the Bridge Loan Documents (the "Bridge Loan"), in full, in cash,
concurrent with the closing of the Exchange Offer
(d) the exercise of any remedies under the Bridge Loan Documents
following an Event of Default (as defined therein) arising from any the
following: (i) the failure to make any scheduled payment of principal or
interest as and when required under the Bridge Loan Documents; (ii) the failure
by the Company to make any Mandatory Prepayments or Payment of Taxes; (iii) a
default under any Other Indebtedness, unless otherwise permitted by the Bridge
Loan Documents; (iv) the failure to maintain Insurance required by the Bridge
Loan Documents; (v) the incurrence of any Debt or Indebtedness in excess of the
limitations in the Bridge Loan Documents; (iv) any Consolidation, Dissolution or
Merger in violation of the Bridge Loan Documents; (vii) making any Restricted
Payments in violation of the Bridge Loan Documents; (viii) any Transactions with
Affiliates in violation of the Bridge Loan Documents; (ix) taking any Restricted
Action in violation of the Bridge Loan Documents; (x) making any Negative Pledge
in violation of the Bridge Loan Documents; (xi) occurrence of any Bankruptcy
Event or Change of Control.(1)
(e) the exercise of any remedies under that certain Amended and
Restated Credit Agreement among PRG-Schulz USA, Inc., as Borrower, PRG, and
certain of its other affiliates, as Guarantors, and Bank of America, N.A., dated
as of November 30, 2004, and any documents related thereto;
(f) the Restructuring or the final Restructuring Documents do not
conform to the Term Sheet with respect to the treatment of the Notes, except as
modified in any non-material respect or as approved by the Ad Hoc Committee of
the Noteholders (the members of which are identified on the signature pages
hereto); or
----------------------
(1) All capitalized terms used in this Section 5(c) shall have the meaning
given such terms in the Bridge Loan Credit Agreement.
6
(g) a material breach of this Agreement by the Company that is not, by
its terms, curable or that is, by its terms, curable and is not cured by the
fifth calendar day after notice of such breach (for the purposes of this
Agreement, the term "material breach" includes a breach of the covenant in
Section 2(b)).
Section 6. TERMINATION BY THE COMPANY. The Company shall have the right to
terminate this Agreement on the occurrence of any of the following events (each
a "COMPANY TERMINATION EVENT") by giving written notice in accordance with
Section 11 below to the other parties:
(a) the exercise of any remedies under the Bridge Loan Documents; or
(b) a material breach of this Agreement by any of the Noteholders that
is not, by its terms, curable or that is, by its terms, curable and is not cured
by the fifth calendar day after notice of such breach; or
(c) a good faith determination by the Company's board of directors
(following consultation with its reputable outside legal counsel and its
financial advisor of national recognized reputation) that such termination is
required by its fiduciary duty to the Company, its then current shareholders,
and its creditors in order to enter into an alternative transaction (whether in
the form of a merger, consolidation or combination with a third party or the
sale of all, substantially all, or a significant portion of the assets or
businesses of the Company) that will be at least as favorable to each of such
parties but more favorable to the parties as a whole, from a financial
perspective, than the Restructuring and is reasonably capable of being
consummated, taking into account, among other things, all legal, financial,
regulatory and other aspects of the alternative transaction and the person or
group making such proposal (a "SUPERIOR PROPOSAL"); provided that (i) the Bridge
Loan has been paid in full, in accordance with the Bridge Loan Documents, (ii)
the Company provides the Noteholders five (5) business days prior notice of the
Company's intent to terminate this Agreement under this Section (c) and the
terms and conditions of such Superior Proposal (including the identity of the
person or group making such Superior Proposal), and (iii) the Company provides
the Noteholders and their representatives a good faith opportunity during such 5
day notice period and prior to any such termination to revise the terms of the
Restructuring.
Section 7. TERMINATION OF AGREEMENT. Notwithstanding anything to the
contrary in this Agreement, the Term Sheet or any other agreement, this
Agreement shall terminate on the earlier of (a) the occurrence of a Noteholder
Termination Event after expiration of any cure periods and satisfaction of any
conditions set forth in Section 5 of this Agreement, (b) the occurrence of a
Company Termination Event, after expiration of any cure periods and satisfaction
of any conditions set forth in Section 6 of this Agreement, and (c) 5:00 pm on
June 15, 2006.
Section 8. EFFECT OF TERMINATION AND OF WAIVER OF TERMINATION EVENT. On
the delivery of the written notice referred to in Sections 5 or 6 in connection
with the valid termination of this Agreement, the obligations of each of the
parties hereunder shall thereupon terminate and be of no further force and
effect. Prior to the delivery of such notice the Noteholders may waive the
occurrence of a Noteholder Termination Event and PRG may waive
7
the occurrence of a Company Termination Event. No such waiver shall affect any
subsequent termination event or impair any right consequent thereon. Upon
termination of this Agreement, no party shall have any continuing liability or
obligation to the other parties hereunder; PROVIDED, HOWEVER, that no such
termination shall relieve any party from liability for its breach or
non-performance of its obligations hereunder prior to the date of such
termination.
Section 9. AMENDMENTS. This Agreement may be modified, amended, or
supplemented by a written agreement executed by the Company and the Noteholders
that beneficially own or act as the investment advisors or managers with respect
to at least a majority of the aggregate principal face amount of the Notes
subject to this Agreement, PROVIDED, HOWEVER, that in the event of a material
change to the Term Sheet, or a change of any of the economic terms of the Term
Sheet, any Noteholder that does not consent shall have no further obligations
under the Agreement.
Section 10. FURTHER ASSURANCES. Each of the parties to this Agreement
hereby further covenants and agrees to cooperate in good faith to execute and
deliver all further documents and agreements and take all further action that
may be commercially reasonably necessary or desirable in order to enforce and
effectively implement the terms and conditions of this Agreement. Each
Noteholder agrees to advise the Company of any changes in the amount of Notes
beneficially owned by it and the amount of Notes for which such Noteholder is
the investment manager or advisor for beneficial owners.
Section 11. GOVERNING LAW; JURISDICTION. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of New York,
regardless of the laws that might otherwise govern under applicable principles
of conflict of laws of the State of New York. By its execution and delivery of
this Agreement, each of the parties hereto hereby irrevocably and
unconditionally agrees for itself that any legal action, suit, or proceeding
against it with respect to any matter under or arising out of or in connection
with this Agreement or for recognition or enforcement of any judgment rendered
in any such action, suit, or proceeding, shall be brought in a federal court of
competent jurisdiction in the Southern District of New York. By execution and
delivery of this Agreement, each of the parties hereto hereby irrevocably
accepts and submits to the jurisdiction of such court, generally and
unconditionally, with respect to any such action, suit, or proceeding.
Section 12. NOTICES. All demands, notices, requests, consents, and
communications hereunder shall be in writing and shall be deemed to have been
duly given if delivered personally or by courier service, messenger, facsimile,
telecopy, or if duly deposited in the mails, by certified or registered mail,
postage prepaid-return receipt requested, and shall be deemed to have been duly
given or made (i) upon delivery, if delivered personally or by courier service,
or messenger, in each case with record of receipt, (ii) upon transmission with
confirmed delivery, if sent by facsimile or telecopy, or (iii) two business days
after being sent by certified or registered mail, postage pre-paid, return
receipt requested, to the following addresses, or such other addresses as may be
furnished hereafter by notice in writing, to the following parties:
8
If to PRG, or any of its subsidiaries, to:
PRG-Schultz International, Inc.
600 Galleria Parkway, Suite 600
Atlanta, GA 30339
Facsimile: (770) 779-3133
Attn: Clint McKellar, Esq.
with a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, NY 10153
Facsimile: (212) 310-8007
Attn: Michael F. Walsh, Esq.
If to the Noteholders, or any one Noteholder, to:
Houlihan Lokey Howard & Zukin
685 Third Avenue, 15th Floor
New York, NY 10017
Facsimile: (212) 497-3070
Attn: David Hilty
with a copy to:
Schulte Roth & Zabel LLP
919 Third Avenue
New York, NY 10022
Facsimile: (212) 593-5955
Attn: Jeffrey S. Sabin, Esq.
Section 13. ENTIRE AGREEMENT. This Agreement constitutes the full and
entire understanding and agreement among the parties with regard to the subject
matter hereof, and supersedes all prior agreements with respect to the subject
matter hereof.
Section 14. HEADINGS. The headings of the paragraphs and subparagraphs of
this Agreement are inserted for convenience only and shall not affect the
interpretation hereof.
Section 15. SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and
inure to the benefit of the parties and their respective permitted successors
and assigns, PROVIDED, HOWEVER, that nothing contained in this paragraph shall
be deemed to permit sales, assignments, or transfers other than in accordance
with Section 4.
Section 16. SPECIFIC PERFORMANCE. Each party hereto recognizes and
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause other parties to sustain damages for which such
parties would not have an adequate remedy at law for
9
money damages, and therefore each party hereto agrees that in the event of any
such breach, such other parties shall be entitled to the remedy of specific
performance of such covenants and agreements and injunctive and other equitable
relief in addition to any other remedy to which such parties may be entitled, at
law or in equity.
Section 17. SEVERAL, NOT JOINT, OBLIGATIONS. The agreements,
representations, and obligations of the parties under this Agreement are, in all
respects, several and not joint.
Section 18. REMEDIES CUMULATIVE. All rights, powers, and remedies provided
under this Agreement or otherwise available in respect hereof at law or in
equity shall be cumulative and not alternative, and the exercise of any right,
power, or remedy thereof by any party shall not preclude the simultaneous or
later exercise of any other such right, power, or remedy by such party.
Section 19. NO WAIVER. The failure of any party hereto to exercise any
right, power, or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon compliance by any other
party hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, shall not constitute a waiver by such
party of its right to exercise any such or other right, power, or remedy or to
demand such compliance.
Section 20. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which shall
constitute one and the same Agreement. Delivery of an executed signature page of
this Agreement by telecopier or email shall be as effective as delivery of a
manually executed signature page of this Agreement.
Section 21. SEVERABILITY. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
Section 22. NO THIRD-PARTY BENEFICIARIES. Unless expressly stated herein,
this Agreement shall be solely for the benefit of the parties, and no other
person or entity shall be a third party beneficiary hereof.
Section 23. ADDITIONAL PARTIES. Without in any way limiting the provisions
hereof, additional holders of Notes may elect to become parties by executing and
delivering to PRG a counterpart hereof. Each such additional holder shall become
a party to this Agreement as a Noteholder in accordance with the terms of this
Agreement.
Section 24. NO SOLICITATION. This Agreement is not intended to be, and each
signatory to this Agreement acknowledges that this Agreement is not, a
solicitation with respect to the Exchange Offer or with respect to any other
mechanism to accomplish a restructuring of the obligations under the Notes,
whether such mechanism is to be accomplished in or outside a court.
Section 25. CONSIDERATION. It is hereby acknowledged by the parties hereto
that, other than the agreements, covenants, representations, and warranties set
forth herein and in the Term
10
Sheet, no consideration shall be due or paid to the Noteholders for their
agreement to vote to accept the Exchange Offer in accordance with the terms and
conditions of this Agreement.
Section 26. RECEIPT OF ADEQUATE INFORMATION; REPRESENTATION BY COUNSEL.
Each party acknowledges that it has received adequate information to enter into
this Agreement and that it has been represented by counsel in connection with
this Agreement and the transactions contemplated by this Agreement. Accordingly,
any rule of law or any legal decision that would provide any party with a
defense to the enforcement of the terms of this Agreement against such party
shall have no application and is expressly waived. The provisions of the
Agreement shall be interpreted in a reasonable manner to effect the intent of
the parties.
[Signature Page Follows]
11
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement as of the date first above written.
PRG-Schultz International, Inc.
By: /s/ Clinton McKellar, Jr.
------------------------------------
Name: Clinton McKellar, Jr.
Title: Senior Vice President,
General Counsel and Security
12
NOTEHOLDERS:
Blum Capital Partners, L.P.
---------------------------------------
By: /s/ Jose S. Medeiros
-----------------------------------
Name: Jose S. Medeiros
Title: Partner
Address: 909 Montgomery Street, Suite 400
San Francisco, CA 94133
Facsimile No.: 415-283-0601
Attn.:
13
NOTEHOLDERS:
Parkcentral Global Hub Limited
---------------------------------------
By: /s/ Steven Blasnik
-----------------------------------
Name: Steven Blasnik
Title: President
Address: 2300 West Plano Parkway
Plano, TX 75075
Facsimile No.: 972-535-1997
Attn.: Steven Blasnik
13
NOTEHOLDERS:
Petrus Securities LP
---------------------------------------
By: /s/ Steven Blasnik
-----------------------------------
Name: Steven Blasnik
Title: President of General Partner
Address: 2300 West Plano Parkway
Plano, TX 75075
Facsimile No.: 972-535-1997
Attn.: Steven Blasnik
13
NOTEHOLDERS:
Tenor Opportunity Master Fund, Ltd.
---------------------------------------
By: /s/ Robin Shah
-----------------------------------
Name: Robin Shah
Title: Partner
Address: 65 East 55th Street
New York, NY 10022
Facsimile No.: 212-593-5955
Attn.: Andrew Gottesman
13
NOTEHOLDERS:
Thales Fund Management, LLC
---------------------------------------
By: /s/ A. Aadel Shaaban
-----------------------------------
Name: A. Aadel Shaaban
Title: Senior Analyst
Address: 140 Broadway, 45th Fl
New York, NY 10005
Facsimile No.:
Attn.:
13
EXHIBIT A
TERM SHEET
PRG-SCHULTZ INTERNATIONAL, INC.
SUMMARY FINANCIAL RESTRUCTURING TERM SHEET - DECEMBER 23, 2005
---------------- -----------------------------------------------------------
PROPOSED The following describes an agreement in principle between
TRANSACTION: PRG-Schultz International, Inc. and its subsidiaries
(collectively, the "COMPANY") and the Ad Hoc Committee
of Holders of the Company's 4.75% Convertible Subordinated
Notes due 2006 (the "AD HOC COMMITTEE") and to
restructure the financial obligations of the Company.
The Transaction will involve the recapitalization of the
Company through:
(i) A Bridge Loan (as defined below) of $10
million to provide the Company with
sufficient funds to pay the interest payment
due on the Notes and additional working
capital, pending the closing of the
Recapitalization (as defined below);
(ii) A credit facility or facilities, consisting
of a minimum revolver of $20 million and
total commitments of no more than $47.5
million, amending or refinancing (a) the
Amended and Restated Credit Agreement, dated
as of November 30, 2004, among (x)
PRG-Schultz USA, Inc., the Company, and
certain of the Company's subsidiaries and (y)
Bank of America, N.A. (the "EXISTING CREDIT
FACILITY"), and (b) the Bridge Loan and
(iii) A pro-rata exchange of the 4.75% Convertible
Subordinated Notes due 2006 issued by the
Company (the "NOTES") for three new
securities including: (1) New Senior Notes;
(2) New Senior Convertible Notes; and (3) New
Senior Series A Convertible Participating
Preferred Stock (collectively the
"TRANSACTION SECURITIES").
Points (i) through (iii), collectively are defined as the
"RECAPITALIZATION".
---------------- -----------------------------------------------------------
1
PRG-SCHULTZ INTERNATIONAL, INC.
SUMMARY FINANCIAL RESTRUCTURING TERM SHEET - DECEMBER 23, 2005
---------------- -----------------------------------------------------------
CREDIT FACILITIES: BRIDGE LOAN
$10 million second lien loan (the "Bridge Loan") to be
provided by certain holders of the Notes (or their
affiliates). The Bridge Loan will have the following terms:
(i) Second lien on assets securing the Existing
Credit Facility;
(ii) 12% interest in cash, payable monthly;
(iii) 50 bps closing fee;
(iv) Maturity date: Earlier of closing of the
Recapitalization or August 15, 2006;
(v) Non-refundable commitment fee of 1.25% of $10
million, payable upon signing the Commitment
Letter; an additional 1.75% Placement Fee of
the amount borrowed, payable upon closing of
the Bridge Loan; plus all out-of-pocket
expenses;
(vi) Proceeds will be used for general corporate
purposes to eliminate risk of adverse
customer actions, including paying the
interest due on the existing Notes. Up to
$2.5 million may be used to fund foreign
operations, provided that, if requested by
the Ad Hoc Committee, appropriate promissory
note and other documentation evidences such
inter-company transfers and lien is received
on those promissory notes. Proceeds cannot be
used to make severance or similar payments to
John Cook and Jack Toma.
REVOLVING CREDIT FACILITY/ NEW SECOND LIEN TERM LOAN
The Existing Credit Facility will be either amended with
Bank of America or refinanced with a replacement lender to
provide a minimum commitment of $20 million of senior
secured financing.
The Bridge Loan will be repaid upon completion of the
refinancing of the Existing Credit Facility with a credit
facility or facilities, consisting of a minimum revolver of
$20 million and total commitments of no more than $47.5
million.
---------------- -----------------------------------------------------------
TRANSACTION In exchange for the $125 million principal amount of Notes,
SECURITIES: the Noteholders will receive, upon the closing of the
exchange offer (the "Closing Date"), their pro-rata share
of the following securities with preference options for the
different securities structured, if possible:
(i) $50 million of New Senior Notes;
(ii) $60 million of New Senior Convertible Notes;
and
(iii) $15 million of New Senior Series A
Convertible Participating Preferred Stock.
The interest payment due November 26, 2005 on the notes,
will be paid in cash from the proceeds of the Bridge Loan
during the 30 day grace period as soon as documentation is
completed and Bank of America agrees to the terms of an
Intercreditor and Subordination Agreement.
---------------- -----------------------------------------------------------
2
PRG-SCHULTZ INTERNATIONAL, INC.
SUMMARY FINANCIAL RESTRUCTURING TERM SHEET - DECEMBER 23, 2005
---------------- -----------------------------------------------------------
NEW SENIOR NOTES: Issuer: Company
Face Amount: $50 million
Coupon: 11.0% cash, payable semi-annually
starting on the six-month anniversary of
the Closing Date
Maturity: 5 years from the Closing Date
Call Protection: Callable at any time at 104 in year 1,
102 in year 2; par in year 3 until
maturity plus all accrued interest
thereon through the date of the
prepayment
Convertible: Not convertible
Ranking: Senior to existing Notes with carve-out
for up to $47.5 million in senior
financing and an additional basket of
indebtedness TBD
---------------- -----------------------------------------------------------
NEW SENIOR Issuer: Company
CONVERTIBLE NOTES:
Face Amount: $60 million
Coupon: 10% cash or PIK, at the option of the
Company, payable semi-annually starting
on the six-month anniversary of the
Closing Date
Maturity: 5 years from the Closing Date
Redemption Callable at par plus accrued interest at
Rights: any time after payment of the New Senior
Notes in full
Ranking: Pari passu with the New Senior Notes
Convertible: At the option of the holder, the New
Senior Convertible Notes are convertible
at any time into New Senior Series B
Convertible Participating Preferred
Stock at a conversion price of $0.65 per
share.
If (i) the New Senior Notes have been
repaid in full; (ii) all the PIK
interest and accrued interest on the New
Senior Convertible Notes through the
date of conversion has been paid in
cash; (iii) no amount of Notes remains
outstanding; (iv) the 45 day average
trading price of the common stock is at
$0.65 or higher at the time of the
notice of conversion and (v) at least 30
days prior notice has been given to the
holders, then the Company can impose
conversion of the New Senior Convertible
Notes into New Senior Series B
Convertible Participating Preferred
Stock at a conversion price of $0.65 per
share.
---------------- -----------------------------------------------------------
3
PRG-SCHULTZ INTERNATIONAL, INC.
SUMMARY FINANCIAL RESTRUCTURING TERM SHEET - DECEMBER 23, 2005
---------------- -----------------------------------------------------------
NEW SENIOR THE NEW SENIOR SERIES B CONVERTIBLE PARTICIPATING PREFERRED
CONVERTIBLE NOTES STOCK SHALL HAVE THE FOLLOWING TERMS:
(CONTINUED):
Face Amount: Principal amount of New Senior
Convertible Notes converted plus, if
converted at the option of the holder,
any PIK and accrued and unpaid interest.
Dividend: 10% dividend rate payable in cash or in
kind at the option of the Company.
Maturity: Same as the maturity of the New Senior
Convertible Notes (5 years from the
Closing Date).
Convertible: At the option of the holder, the New
Senior Series B Convertible
Participating Preferred Stock is
convertible into common stock at $0.65
per share.
Redemption: Redeemable at face amount plus accrued
dividends only upon prior or
simultaneous refinancing in full of the
New Senior Notes and the New Senior
Convertible Notes.
Voting: Votes with common stock on all issues on
an as converted basis
---------------- -----------------------------------------------------------
4
PRG-SCHULTZ INTERNATIONAL, INC.
SUMMARY FINANCIAL RESTRUCTURING TERM SHEET - DECEMBER 23, 2005
---------------- -----------------------------------------------------------
NEW SENIOR SERIES A Issuer: Company
CONVERTIBLE
PARTICIPATING Face Amount: $15 million
PREFERRED STOCK:
Dividend: 9% dividend rate payable in cash or kind
at the option of the Company
Maturity: 5 years from the Closing Date
Convertible: Convertible into the common stock of the
Company at any time at $0.28405 per
share at the option of the holder
Initial conversion implies 45.9% of the
Common Stock of the Company prior to the
conversion of the New Senior Convertible
Notes into New Senior Series B
Convertible Participating Preferred
Stock or its conversion into common
stock.
Redemption: Redeemable at face amount plus accrued
dividends only upon prior or
simultaneous refinancing in full of the
New Senior Notes and the outstanding New
Senior Convertible Notes.
Voting: Votes with Common Stock on all issues on
an as converted basis
---------------- -----------------------------------------------------------
EXISTING COMMON The Company's existing common shareholders will retain
SHAREHOLDERS: their existing shares representing approximately 54.1% of
the Common Stock following the initial dilution from the
New Senior Convertible Participating Preferred Stock (30%
assuming the full and immediate conversion of the New
Senior Convertible Notes into New Senior Series B
Convertible Participating Preferred Stock).
---------------- -----------------------------------------------------------
GOVERNANCE: BOARD OF DIRECTORS:
Six directors to be nominated based upon post-restructuring
voting ownership plus the Company's CEO.
---------------- -----------------------------------------------------------
MANAGEMENT Shares Phantom shares representing 10% of the
INCENTIVE PLAN: Common Stock
Recordkeeping A notional account shall be established
as to each participating executive to
which the phantom shares awarded to such
executive shall be credited ("PHANTOM
STOCK ACCOUNT")
---------------- -----------------------------------------------------------
5
PRG-SCHULTZ INTERNATIONAL, INC.
SUMMARY FINANCIAL RESTRUCTURING TERM SHEET - DECEMBER 23, 2005
---------------- -----------------------------------------------------------
Vesting 1/3 on the effective date of the
Recapitalization ("EFFECTIVE DATE")
1/3 on the first anniversary of the
Effective Date
1/3 on the second anniversary of the
Effective Date
Vesting schedule for executives hired
after the Effective Date will be over a
three-year period commencing on the date
of hire.
100% vesting on a change in control.
Conversion of the New Senior Convertible
Notes, the New Senior Series A
Convertible Participating Preferred
Stock, and/or the New Senior Series B
Convertible Participating Preferred
Stock into Common Stock is not a change
in control.
Allocation To be determined by the Compensation
Committee of the new board of directors
upon the recommendation of the CEO;
PROVIDED, HOWEVER, that the Company's
CEO will receive a minimum of 40% of
amount allocated to Management Incentive
Plan
Anti-Dilution Standard anti-dilution provisions PLUS
Provisions dilution protection against conversion
of the New Senior Convertible Notes, the
New Senior Series A Convertible
Participating Preferred Stock, and/or
the New Senior Series B Convertible
Participating Preferred Stock into
Common Stock will apply to the Phantom
Stock Account, but will not apply to
shares of Common Stock actually
distributed to the executive from such
account.
Distribution Distribution of the Phantom Stock
Events Account shall be made, at the individual
election of each executive, not earlier
than the dates and in the amounts set
forth below.
2d anniversary of Effective Date 25%
3d anniversary of Effective Date 50%
4th anniversary of Effective Date 75%
5th anniversary of Effective Date 100%
Distribution of the entire value of an
executive's Phantom Stock Account shall
be made upon the executive's death,
disability, or termination of
employment, or a change in control (see
"Vesting" above) of the Company.
Form of Payment Value of Phantom Stock Account is
distributed to the executive in cash to
the extent required to satisfy any
applicable taxes and balance in shares
of Common Stock
---------------- -----------------------------------------------------------
6
PRG-SCHULTZ INTERNATIONAL, INC.
SUMMARY FINANCIAL RESTRUCTURING TERM SHEET - DECEMBER 23, 2005
---------------- -----------------------------------------------------------
Other Incentive This Management Incentive Plan is in
Payments addition to an annual cash bonus program
based on EBITDA or other targets
implemented by the Compensation
Committee of the new board of directors
409A The Management Incentive Plan shall
comply with the requirements of Section
409A of the Tax Code, as applicable
---------------- -----------------------------------------------------------
CONDITIONS: (i) Acceptance of the proposed exchange offer by a
minimum amount of 99% of Notes;
(ii) Acceptable documentation, including agreements from
the Ad Hoc Committee members to accept and support
the exchange offer (lockup) and resolution of issues
related to the structure of the exchange offer;
(iii) Renewal of the Company's D&O policy or the purchase
of an extended claims' notice period for such
policy, in either case, on terms reasonably
satisfactory to the current board of directors of
the Company; and
(iv) Acceptable renegotiation or settlement of the
severance agreements with John Cook and Jack Toma.
---------------- -----------------------------------------------------------
7