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SCHEDULE 13D
Under the Securities Exchange Act of 1934
PRG-SCHULTZ INTERNATIONAL, INC.
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(Name of Company)
Common Stock
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(Title of Class of Securities)
69357C107
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(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 9 Pages
---------------------------------- -----------------------
----------- --------------------------------------------------------------------
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Thales Holdings LTD
----------- --------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [X]
----------- --------------------------------------------------------------------
3 SEC USE ONLY
----------- --------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC
----------- --------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [ ]
----------- --------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Bermuda
--------------------- --------- ------------------------------------------------
7 SOLE VOTING POWER
0
--------- ------------------------------------------------
NUMBER OF SHARES 8 SHARED VOTING POWER
BENEFICIALLY
OWNED BY 440,142 shares (including 335,142 shares
EACH issuable upon conversion of notes and payable as
REPORTING shares of interest under the notes) (see Item 3)
PERSON WITH --------- ------------------------------------------------
9 SOLE DISPOSITIVE POWER
0
--------- ------------------------------------------------
10 SHARED DISPOSITIVE POWER
440,142 shares (including 335,142 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
440,142 shares (including 335,142 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)
0.6% (see Item 5)
----------- --------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
----------- --------------------------------------------------------------------
SCHEDULE 13D
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CUSIP NO. 69357C107 PAGE 3 of 9 Pages
---------------------------------- -----------------------
----------- --------------------------------------------------------------------
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Thales Fund Management, LLC
----------- --------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [X]
----------- --------------------------------------------------------------------
3 SEC USE ONLY
----------- --------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC
----------- --------------------------------------------------------------------
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 SHARES 8 SHARED VOTING POWER
BENEFICIALLY
OWNED BY 440,142 shares (including 335,142 shares
EACH issuable upon conversion of notes and payable as
REPORTING shares of interest under the notes) (see Item 3)
PERSON WITH --------- ------------------------------------------------
9 SOLE DISPOSITIVE POWER
0
--------- ------------------------------------------------
10 SHARED DISPOSITIVE POWER
440,142 shares (including 335,142 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
440,142 shares (including 335,142 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)
0.6% (see Item 5)
----------- --------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
OO
----------- --------------------------------------------------------------------
ITEM 1 SECURITY AND COMPANY
This statement on Schedule 13D relates to the shares of Common Stock (the
"Shares") of PRG-Schultz International, Inc., a Georgia corporation (the
"Company"), and is being filed pursuant to Rule 13d-1 under the Act. The
principal executive office and mailing address of the Company is 600 Galleria
Parkway, Suite 100, Atlanta, Georgia 30339-5986
ITEM 2 IDENTITY AND BACKGROUND
(a) This statement is filed by:
(i) Thales Holdings LTD, a company incorporated in Bermuda
("Thales"), with respect to Shares of the Company beneficially owned by Thales;
and
(ii) Thales Fund Management, LLC, a Delaware limited liability company
(the "Advisor"), with respect to Shares beneficially owned by Thales.
The foregoing persons are hereinafter collectively referred to as the "Reporting
Persons". The Joint Statement of the Reporting Persons is attached hereto as
Exhibit 1 and incorporated herein by reference. Any disclosures herein with
respect to persons other than the Reporting Persons are made on information and
belief after making inquiry to the appropriate party.
(b) The address of the principal business office of each Reporting Person
is 140 Broadway, 45th Fl, New York, NY 10005.
(c) The principal business of the Reporting Persons is providing
investment advisory and fund management services.
(d) During the past five years, none of the Reporting Persons has been
convicted in a criminal proceeding.
(e) During the past five years, none of the Reporting Persons was a party
to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a judgment,
decree or final order enjoining future violations of, or prohibiting or
mandating activities subject to, Federal or State securities laws or finding any
violation with respect to such laws.
ITEM 3 SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
The Reporting Persons purchased 75,000 Shares on November 21, 2005 at a
price of $0.34 per share. 30,000 Shares were purchased on December 16, 2005 at a
price of $0.656 per share. The remainder of the Shares reported herein as being
beneficially owned by the Reporting Persons are issuable upon conversion of the
Company's 4 3/4% Convertible Subordinated Notes Due 2006 (the "Notes"). The
Reporting Persons purchased $650,000 principal amount of Notes on December 13,
2005 for $422,500 and purchased $1,944,000 principal amount of Notes on December
21, 2005 for $1,292,760. The Notes beneficially owned by the Reporting Persons
are convertible into 335,142
Shares. All Shares and Notes beneficially owned by the Reporting Persons were
acquired with investment funds in accounts under management.
ITEM 4. PURPOSE OF TRANSACTION.
On October 26, 2005 at the request of the Company, an Ad Hoc Committee (the
"Ad Hoc Committee") of holders of the Notes was organized to consider strategic
alternatives relating to the Company.
On December 23, 2005, the Advisor entered into a confidentiality agreement
with the Company and became a member of the Ad Hoc Committee. A copy of the
confidentiality agreement is attached as an exhibit hereto and incorporated into
this Item 4 by reference. The members of the Ad Hoc Committee are filing
statements on Schedule 13D because they may be deemed to be part of a "group"
within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934,
as amended.
On December 23, 2005, the Advisor entered into a Restructuring Support
Agreement (the "Restructuring Support Agreement") with the Company and certain
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.
The Reporting Persons intend to review their investment in the Company on a
continuing basis. Although no Reporting Person has any specific plan or proposal
to acquire or dispose of the Company's securities, consistent with its
investment purpose, each Reporting Person at any time and from time to time may
acquire additional securities of the Company or dispose of any or all of its
investment in the Company depending upon an ongoing evaluation of the investment
in the Company's securities, price and availability of securities of the
Company, subsequent developments affecting the Company, its business and
prospects, general prevailing market and economic conditions, tax
considerations, other investment opportunities, liquidity requirements of the
Reporting Person and/or other investment considerations and factors deemed
relevant. In addition, each of the Reporting Persons may in the future take such
actions with respect to its investment in the Company as it deems appropriate
including, without limitation, seeking board representation, making proposals to
the Company concerning changes to the capitalization, ownership structure or
operations of the Company, engaging in short selling of or any hedging or
similar transaction with respect to the Common Stock or changing its intention
with respect to any and all matters referred to in Item 4.
Also, consistent with the investment purpose, the Reporting Persons may
engage in communications with one or more shareholders of the Company, one or
more officers of the Company, one or more members of the board of directors of
the Company and/or one or more representatives of the Company regarding the
Company, including but not limited to its operations. The Reporting Persons may
discuss ideas that, if effected may result in any of the following: the
acquisition by persons of additional securities of the Company, an extraordinary
corporate transaction involving the Company, and/or changes in the board of
directors or management of the Company.
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.
Although the foregoing represents the range of activities presently
contemplated by the Reporting Persons with respect to the Company, it should be
noted that the possible activities of the Reporting persons are subject to
change at any time. Except to the extent the foregoing may be deemed a plan or
proposal, none of the Reporting Persons has any plans or proposals which relate
to, or could result in, any of the matters referred to in paragraphs (a) through
(j), inclusive, of the instructions to Item 4 of Schedule 13D. The Reporting
Persons may, at any time and from time to time, review or reconsider their
position and/or change their purpose and/or formulate plans or proposals with
respect thereto.
Each of the Reporting Persons expressly disclaim beneficial ownership of
securities held by any person or entity other than, to the extent of any
pecuniary interest therein, the various accounts under such Reporting Person's
management and control. The securities reported herein as being beneficially
owned by the Reporting Persons do not include any securities held by other
members of the Ad Hoc Committee (including but not limited to accounts or
entities under its control or under common control with such other members) or
any other person or entity other than the various accounts under the Reporting
Persons' management and control.
ITEM 5. INTEREST IN SECURITIES OF THE COMPANY.
(a), (b) According to the Company's most recent Form 10-Q, there were
67,956,832 Shares issued and outstanding as of October 31, 2005. Based on such
information, the Reporting Persons report beneficial ownership of 440,142 Shares
held by Thales, of which the Reporting Persons share the power to dispose and to
direct the vote. The 440,142 Shares represent 0.6% of the total issued and
outstanding Shares. The Ad Hoc Committee may be deemed to be a group.
(c) See Item 3 above.
(d) and (e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE COMPANY.
The Confidentiality Agreement and Restructuring Support Agreement are
incorporated by reference into this Item 6.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
1. Joint Filing Agreement dated January 5, 2005.
2. Confidentiality Agreement dated December 23, 2005, between the Advisor and
the Company.
3. Restructuring Support Agreement, dated December 23, 2005, among the Advisor,
the Company and certain 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: January 5, 2005
THALES HOLDINGS LTD
By: THALES FUND MANAGEMENT, LLC
its Investment Advisor
By: /s/ Roger Insley
-------------------------------------
Name: Roger Insley
Title: Chief Financial Officer
THALES FUND MANAGEMENT, LLC
By: /s/ Roger Insley
-------------------------------------
Name: Roger Insley
Title: Chief Financial Officer
EXHIBIT INDEX
1. Joint Filing Agreement dated January 5, 2005.
2. Confidentiality Agreement dated December 23, 2005, between the Advisor and
the Company.
3. Restructuring Support Agreement, dated December 23, 2005, among the Advisor,
the Company and certain 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: January 5, 2005
THALES HOLDINGS LTD
By: THALES FUND MANAGEMENT, LLC
its Investment Advisor
By: /s/ Roger Insley
-------------------------------------
Name: Roger Insley
Title: Chief Financial Officer
THALES FUND MANAGEMENT, LLC
By: /s/ Roger Insley
-------------------------------------
Name: Roger Insley
Title: Chief Financial Officer
EXHIBIT 2
STRICTLY CONFIDENTIAL
December 23, 2005
Ladies and Gentlemen:
The purpose of this agreement is to set forth the basis upon which
PRG-Schultz International, Inc. (together with all of its affiliates, the
"Company") proposes to provide you with Evaluation Material (as defined herein),
as a member of the ad hoc committee of holders of the Company's 4 3/4%
Convertible Subordinated Notes due 2006 (the "Notes" and such committee, the "Ad
Hoc Noteholders Committee") for use in connection with discussions between the
Company and the Ad Hoc Noteholders Committee regarding a possible transaction (a
"Possible Transaction") involving the restructuring of the Notes.
CONFIDENTIALITY OF EVALUATION MATERIALS: As a condition to your being
furnished with such information, you agree to treat any information concerning
the Company furnished to you by or on behalf of the Company after October 26,
2005 and regardless of the manner in which it is furnished, together with
analyses, compilations, studies or other documents or records prepared by you or
any of your directors, officers, employees, affiliates, agents or advisors
(including, without limitation, attorneys, accountants, consultants, bankers,
financial advisors and any representatives of your advisors) (collectively,
"Representatives") to the extent that such analyses, compilations, studies,
documents or records contain or otherwise reflect or are generated from such
information (hereinafter collectively referred to as the "Evaluation Material"),
in accordance with the provisions of this agreement. The term "Evaluation
Material" does not include information which (i) was or becomes generally
available to the public other than as a result of a disclosure by you or your
Representatives in violation of this agreement, (ii) was or becomes available to
you on a non-confidential basis from a source other than the Company or its
advisors provided that such source is not known to you to be bound by a
confidentiality agreement with the Company or otherwise not known to you to be
prohibited from transmitting the information to you by a contractual, legal or
fiduciary obligation, (iii) was within your possession prior to its being
furnished to you by or on behalf of the Company, provided that the source of
such information was not known to you to be bound by a confidentiality agreement
with the Company or otherwise not known to you to be prohibited from
transmitting the information to you by a contractual, legal or fiduciary
obligation, or (iv) was independently developed by you using information that is
not known to otherwise constitute Evaluation Material. Any combination of
information shall not be deemed to be within the foregoing exceptions because
individual features of the information are in the public domain.
RESTRICTIONS ON DISCLOSURE AND USE: You agree that the Evaluation Material
will be used solely for the purpose of evaluating and/or participating in a
Possible Transaction, and not used for any other purpose, and that such
Evaluation Material will be kept confidential by you and your Representatives;
provided, however, that (a) such Evaluation Material may be disclosed to your
Representatives who need to know such information for the purpose of evaluating
any
such Possible Transaction (it being understood that such Representatives
shall have been informed by you of the confidential and proprietary nature of
the Evaluation Material and shall have been advised by you of this agreement and
whom you shall cause to comply with the provisions hereof), and (b) any
disclosure of such Evaluation Material may be made to which the Company consents
in writing prior to disclosure. In any event, you shall be responsible for any
breach of this agreement by any of your Representatives and you agree, at your
sole expense, to take all reasonable measures (including but not limited to
court proceedings) to restrain your Representatives from prohibited or
unauthorized disclosure or use of the Evaluation Material. You further agree
that the Evaluation Material that is in written form shall not be copied or
reproduced at any time without the prior written consent of the Company, except
for distribution to your Representatives in accordance with and subject to the
provisions of this agreement.
You acknowledge that you are aware, and will advise each of your
Representatives who is informed as to the matters that are the subject of this
agreement, that the securities laws of the United States prohibit any person who
or that has received from an issuer of securities material, non-public
information from purchasing or selling securities of such issuer or from
communicating such information to any person under circumstances in which it is
reasonably foreseeable that such person is likely to purchase or sell such
securities.
In addition, except as required by any applicable law, rule or regulation,
without the prior written consent of the Company, you will not, and will direct
your Representatives not to, disclose to any person other than other members of
the Ad Hoc Noteholders Committee, (i) the existence of this agreement and that
the Evaluation Material has been made available to you or your Representatives,
(ii) that discussions or negotiations are taking place concerning a Possible
Transaction between the Company and you or (iii) any terms, conditions or other
facts with respect to any such Possible Transaction, including the status
thereof. For these purposes, it is understood and agreed that the members of the
Ad Hoc Noteholders Committee may make securities filings under Section 13(d) of
the Securities Exchange Act of 1934 in which the matters set forth in clauses
(i) and (ii) above may be disclosed to the extent counsel for the Ad Hoc
Noteholders Committee believes such disclosure is required by law.
In the event that you or your Representatives are requested or required
pursuant to any applicable law, rule or regulation (by oral questions,
interrogatories, requests for information or documents, subpoena, civil
investigative demand or other process) to disclose any Evaluation Material or
any other information regarding the existence of this agreement or discussions
or negotiations concerning a Possible Transaction between the Company and you,
it is agreed that you will provide the Company with prompt notice of any such
request or requirement (written if practical) so that the Company may seek an
appropriate protective order or waive your compliance with the provisions of
this agreement. If, failing the entry of a protective order or the receipt of a
waiver hereunder, you or your Representatives are legally compelled to disclose
Evaluation Material, you or your Representatives may disclose only that portion
of the Evaluation Material which you or your Representatives are legally
compelled to disclose and will exercise reasonable efforts to obtain assurance
that confidential treatment will be accorded to that portion of the Evaluation
Material which is being disclosed. In any event, you or your Representatives
will not oppose action by the Company to obtain an appropriate protective order
or other reliable assurance that confidential treatment will be accorded the
Evaluation Material.
2
In the event that you or your Representatives shall have complied with the
provisions of this paragraph, the Company agrees that such disclosure may be
made by you or your Representatives without any liability hereunder.
NO WARRANTY: Subject to the terms and conditions of any definitive
agreement providing for a transaction and without prejudice thereto, you
understand and acknowledge that any and all information contained in the
Evaluation Material is being provided without any representation or warranty,
express or implied, as to the accuracy or completeness of the Evaluation
Material, on the part of the Company. It is understood that the scope of any
representations and warranties to be given by the Company will be negotiated
along with other terms and conditions in arriving at a mutually acceptable form
of definitive agreement should discussions between you and the Company progress
to such a point. Notwithstanding anything in this agreement to the contrary, we
represent and warrant that we may rightfully disclose or make available
Evaluation Material to you without the violation of any contractual, legal,
fiduciary or other obligation to any person.
OWNERSHIP AND RETURN OF THE EVALUATION MATERIAL: All Evaluation Material
disclosed by the Company shall be and shall remain the property of the Company.
Upon the request of the Company, you shall, at your election, either return or
destroy all documents thereof furnished to you by the Company, except one copy
of such documents may be kept in your legal department for compliance purposes.
Except to the extent a party is advised by counsel such destruction is
prohibited by law, you will also, at your election, either return to the Company
or destroy all written material, memoranda, notes, copies, excerpts and other
writings or recordings whatsoever prepared by you or your Representatives based
upon, containing or otherwise reflecting any Evaluation Material except one copy
of such documents may be kept in your legal department or with your legal
counsel for compliance purposes. Any destruction of materials shall be verified
by you in writing by one of your duly authorized officers. Any Evaluation
Material that is not returned or destroyed, including without limitation, any
oral Evaluation Material, shall remain subject to the confidentiality
obligations set forth in this agreement.
NO OBLIGATION: You agree that unless and until a definitive agreement
regarding a Possible Transaction between the Company and you has been executed,
neither the Company nor you will be under any legal obligation of any kind
whatsoever with respect to such a transaction by virtue of this agreement except
for the matters specifically agreed to herein. You further acknowledge and agree
that the Company reserves the right, in its sole discretion, to reject any and
all proposals made by you or any of your Representatives with regard to a
Possible Transaction, to terminate discussions and negotiations with you or your
Representatives at any time and to conduct any process for a transaction
involving the Company as it may determine.
REMEDIES: It is understood and agreed that money damages would not be a
sufficient remedy for any breach of this agreement and each party shall be
entitled to seek specific performance and injunctive or other equitable relief
as a remedy for any such breach and you further agree to waive any requirement
for the security or posting of any bond in connection with such remedy. Such
remedy shall not be deemed to be the exclusive remedy for breach of this
agreement but shall be in addition to all other remedies available at law or
equity. In the event of litigation relating to this agreement, if a court of
competent jurisdiction determines in a final,
3
non-appealable order that either party or its Representatives have breached this
agreement, then such party shall reimburse the other party for its reasonable
legal fees and expenses incurred in connection with such litigation, including
any appeals therefrom.
GOVERNING LAW; JURISDICTION: This agreement shall be governed and construed
in accordance with the laws of the State of Delaware, regardless of the laws
that might otherwise govern under applicable principles of conflicts of law
thereof. You agree, on behalf of yourself and your Representatives, to submit to
the jurisdiction of any state or federal court of competent jurisdiction located
in the state of Delaware to resolve any dispute relating to this agreement and
waive any right to move to dismiss or transfer any such action brought in any
such court on the basis of any objection to personal jurisdiction or venue.
ENTIRE AGREEMENT: This agreement constitutes the entire agreement, and
supersedes the Confidentiality Agreement (which is hereby terminated) and any
and all other prior agreements, representations and undertakings, both written
and oral, among the parties, or any of them, with respect to the subject matter
hereof.
TERM: Your obligations under this agreement shall expire on the earliest of
(i) December 23, 2005, (ii) the date on which the Company files, or there is
commenced against the Company, any petition for relief under Title 11 of the
United States Code, (iii) the date on which the Company announces the acceptance
of an offer from any party, other than an offer accepted or endorsed by the Ad
Hoc Noteholders Committee, for any business combination, sale or similar
extraordinary transaction involving the Company or all or substantially all of
its assets (a "Significant Transaction"), and (iv) the date on which the Company
announces its intent to conduct, or initiates the conduct of, an auction or
similar process involving a Significant Transaction (provided that the
provisions of this clause (iv) shall not apply to a limited market check
involving prior participants in the Company's previously conducted auction) (the
earliest of such dates, the "Termination Date").
Within five business days after the Termination Date, the Company shall
publicly disclose, by press release, Securities and Exchange Commission filing
or otherwise, an appropriate summary of the Evaluation Material that the Company
believes, in its reasonable judgment, constitutes the then material non-public
information contained in the Evaluation Material. If the Company fails to make
such disclosure prior to such date, the Company, recognizing that time is of the
essence, agrees that, at the Company's sole expense, you are authorized to make
the Evaluation Material or any portion thereof available to the public
generally, without any liability to the Company for such disclosure.
4
This agreement may be executed in two or more counterparts, each of which
shall be deemed to be an original, but all of which shall constitute one and the
same agreement. Please confirm that the foregoing is in accordance with your
understanding of our agreement by signing and returning to us a copy of this
letter.
Very truly yours,
PRG-SCHULTZ INTERNATIONAL, INC.
By: /s/ Clinton McKeller, Jr.
-------------------------------------
Name: Clinton McKellar, Jr.
Title: Senior Vice President,
General Counsel and Secretary
Accepted and agreed as of the
date first written above:
By: /s/ A. Aadel Shaaban
-----------------------------------------
Name: A. Aadel Shaaban
Title: Analyst
5
EXHIBIT 3
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 Secretary
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.
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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.
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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")
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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
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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.
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7