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As of September 14, 2005
Mr. James B. McCurry
President and Chief Executive Officer
PRG-Schultz International, Inc.
600 Galleria Parkway, Suite 100
Atlanta, Georgia 30339
Dear Mr. McCurry:
This letter (the "Agreement") will confirm the terms and conditions of the
agreement among PRG-Schultz International, Inc., collectively with its direct
and indirect subsidiaries, (the "Company") and Rothschild Inc. ("Rothschild")
regarding the retention of Rothschild as financial advisor and investment banker
to the Company in connection with a possible restructuring of its businesses
and/or certain liabilities of the Company.
Section 1 Services to be Rendered. In connection with the formulation,
analysis and implementation of various options for a restructuring,
reorganization or other strategic alternative relating to the Company, whether
pursuant to a Transaction (as defined below), any series or combination of
Transactions or otherwise, Rothschild will perform such services as the Company
may request including, but not limited to, the following:
(a) to the extent deemed desirable by the Company, identify and/or initiate
potential Transactions or other transactions;
(b) to the extent Rothschild deems necessary, appropriate and feasible, or
as the Company may request, review and analyze the Company's assets and the
operating and financial strategies of the Company;
(c) review and analyze the business plans and financial projections
prepared by the Company including, but not limited to, testing assumptions and
comparing those assumptions to historical Company and industry trends;
(d) evaluate the Company's debt capacity in light of its projected cash
flows and assist in the determination of an appropriate capital structure for
the Company;
(e) assist the Company and its other professionals in reviewing the terms
of any proposed Transaction or other transaction, in responding thereto and, if
directed, in evaluating alternative proposals for a Transaction or other
transaction, whether in connection with a Plan (as defined below) or otherwise;
(f) determine a range of values for the Company and any securities that the
Company offers or proposes to offer in connection with a Transaction or other
transaction;
(g) advise the Company on the risks and benefits of considering a
Transaction or other transaction with respect to the Company's intermediate and
long-term business prospects and strategic alternatives to maximize the business
enterprise value of the Company, whether pursuant to a Plan or otherwise;
Rothschild Inc. Neil A. Augustine
1251 Avenue of the Americas Managing Director
New York. NY 10020 Telephone 212 403-5411
www.rothschild.com Facsimile 212 403-5454
Email neil.augustine@us.rothschild.com
PRG-Schultz International, Inc.
As of September 14, 2005
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(h) review, analyze and advise the Company with respect to any proposals
the Company receives from third parties in connection with a Transaction or
other transaction;
(i) assist or participate in negotiations with the parties in interest,
including, without limitation, any current or prospective creditors of, holders
of equity in, or claimants against the Company and/or their respective
representatives in connection with a Transaction or other transaction;
(j) advise and attend meetings of the Company's Board of Directors,
creditor groups, official constituencies and other interested parties, as
necessary;
(k) assist the Company in raising equity, debt, and/or hybrid capital
and/or refinancing any of its existing debt facilities;
(l) with respect to any 3(a)(9) Offer (as defined below), subject to the
exemption from registration provided by Section 3(a)(9) of the Securities Act of
1933 (as amended, together with the rules and regulations promulgated
thereunder, the "Securities Act"), Rothschild and the Company shall, in
consultation with their respective counsel establish guidelines regarding the
scope and execution of Rothschild's services hereunder with respect to any
3(a)(9) Offer;
(m) in the event the Company determines to commence Chapter 11 cases in
order to pursue a Transaction or other transaction, and if requested by the
Company, participate in hearings before the Bankruptcy Court in which such cases
are commenced (the "Bankruptcy Court") and provide relevant testimony with
respect to the matters described herein and issues arising in connection with
any proposed Plan; and
(n) render such other financial advisory and investment banking services as
may be agreed upon by Rothschild and the Company in connection with any of the
foregoing.
As used herein, the term "Transaction" shall mean, collectively, whether
pursuant to a plan of reorganization (a "Plan") confirmed in connection with any
case or cases commenced by or against the Company, any of its subsidiaries, any
of its affiliates or any combination thereof, whether individually or on a
consolidated basis (a "Bankruptcy Case"), under Title 11 of the United States
Code Sections 101 et seq. (the "Bankruptcy Code") or otherwise: (a) any
transaction or series of related transactions approved by the Company's Board of
Directors that affects material amendments to or other material changes in the
Company's outstanding indebtedness as of August 31, 2005, including, but not
limited to, any defeasance, redemption, exchange or repayment of any of the
Company's outstanding indebtedness, whether in reliance on the exemption from
registration provided under Section 3(a)(9) of the Securities Act (a "3(a)(9)
Offer") or otherwise; (b) (i) any merger, consolidation, reorganization,
PRG-Schultz International, Inc.
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recapitalization, financing, refinancing, business combination or other
transaction pursuant to which the Company (or control thereof) is acquired by,
or combined with, any person, group of persons, partnership, corporation or
other entity (an "Acquirer") or (ii) any acquisition, directly or indirectly, by
an Acquirer (or by one or more persons acting together with an Acquirer pursuant
to a written agreement or otherwise), whether in a single transaction, multiple
transactions or a series of transactions, of (A) other than in the ordinary
course of business, substantially all of the assets or operations of the Company
or (B) any outstanding or newly-issued shares of the Company's capital stock or
any securities convertible into, or options, warrants or other rights to acquire
such capital stock or other equity securities of the Company, for the purpose of
effecting either (1) a recapitalization or restructuring (as approved by the
Company's Board of Directors) of the Company's outstanding indebtedness as of
August 31, 2005 or (2) a change of control of the Company (each, an "M&A
Transaction"); or (c) raising of new capital, in the form of debt, equity or
hybrid securities in an amount that is mutually agreed upon by the Company and
Rothschild or (d) any transaction (as approved by the Company's Board of
Directors), similar in form to any of the foregoing.
In performing its services pursuant to this Agreement, and notwithstanding
anything to the contrary herein, Rothschild is not assuming any responsibility
for the Company's decision to pursue (or not to pursue) any business strategy or
to effect (or not to effect) any Transaction or other transaction. Rothschild
shall not have any obligation or responsibility to provide accounting, audit,
"crisis management" or business consultant services (except to the extent
expressly described above) to the Company, and shall have no responsibility for
designing or implementing operating, organizational, administrative, cash
management or liquidity improvements.
Section 2 Information Provided by the Company.
(a) The Company will cooperate with Rothschild and furnish to, or cause to
be furnished to, Rothschild any and all information as Rothschild deems
appropriate to enable Rothschild to render services hereunder (all such
information being the "Information"). The Company recognizes and confirms that
Rothschild (i) will use and rely solely on the Information and on information
available from generally recognized public sources in performing the services
contemplated by this Agreement without having assumed any obligation to verify
independently the same; (n) does not assume responsibility for the accuracy or
completeness of the Information and such other information, and (iii) will not
act in the official capacity of an appraiser of specific assets of the Company
or any other party. The Company confirms that the information to be furnished by
the Company, when delivered, to the best of its knowledge (i) will be true and
correct in all material respects (ii) will be prepared in good faith and (iii)
will not contain any material misstatement of fact or omit to state any material
fact. The Company will promptly notify Rothschild if it learns of any
PRG-Schultz International, Inc.
As of September 14, 2005
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material inaccuracy or misstatement in, or material omission from, any
Information theretofore delivered to Rothschild. Company acknowledges that in
the course of this engagement it may be necessary for Rothschild and the Company
to communicate electronically.
(b) The Company further acknowledges that although Rothschild will use
commercially reasonable procedures to check for the most commonly known viruses,
the electronic transmission of information cannot be guaranteed to be secure or
error-free. Furthermore such information could be intercepted, corrupted, lost,
destroyed, arrive late or incomplete or otherwise be adversely affected or
unsafe to use. Accordingly, the Company agrees that to the extent information
communicate electronically is so affected, Rothschild shall have no liability to
the Company with respect to any error or omission arising from or in connection
with: (i) the electronic communication of information to the Company; or (ii)
the Company's reliance on such information.
(c) Except as permitted in Section 9(e), any services, information or
advice provided by Rothschild in connection with this engagement is for the
confidential use of the Company's Board of Directors and senior management and
may not be disclosed or referred to publicly to any third party, without the
Company's prior written consent. All material non-public information furnished
to Rothschild during this engagement, unless publicly available or otherwise
available to Rothschild without, to its actual knowledge, any restriction or
breach of any confidentiality or non-disclosure agreement (the "Confidential
Information"), will be held by Rothschild in confidence and will not be
disclosed to anyone other than Rothschild's employees and advisors (who have a
legal obligation to maintain the confidentiality of such Confidential
Information) without the Company's prior written approval or used for any
purpose other than those described in this Agreement except as (i) required to
perform the services to be rendered pursuant to this engagement, including
disclosing such information to its employees and advisors as necessary, (ii)
such information becomes publicly available other than by disclosure by
Rothschild or its employees or advisors in violation of this Agreement, or (iii)
otherwise required by law or judicial or regulatory process, provided that
Rothschild (if otherwise permitted to do so) has given the Company reasonable
prior notice of such disclosure requirement.
Section 3 Application for Retention of Rothschild. In the event the Company
determines to commence Chapter 11 proceedings in order to pursue a Transaction
or other transaction, the Company shall apply promptly to the Bankruptcy Court
pursuant to Sections 327(a) and 328(a) of the Bankruptcy Code, Rule 2014 of the
Federal Rules of Bankruptcy Procedure, applicable local rules and procedural
orders of the Bankruptcy Court and procedural guidelines established by the
Office of the United States Trustee, for approval of (a) this Agreement and (b)
if permitted under applicable law, Rothschild's retention by the Company under
the terms of this Agreement to the date of this Agreement, and shall use its
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As of September 14, 2005
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best efforts to obtain Bankruptcy Court authorization thereof. The Company shall
use its best efforts to obtain such Bankruptcy Court approval and authorization
subject only to the subsequent review by the Bankruptcy Court under the standard
of review provided in Section 328(a) of the Bankruptcy Code, and not subject to
the standard of review set forth in Section 330 of the Bankruptcy Code. The
Company shall supply Rothschild and its counsel with a draft of such application
and any proposed order authorizing Rothschild's retention sufficiently in
advance of the filing of such application and proposed order to enable
Rothschild and its counsel to review and comment thereon. Rothschild shall have
no obligation to provide any services under this Agreement unless Rothschild's
retention under the terms of this Agreement is approved in the manner set forth
above by a final order of the Bankruptcy Court no longer subject to appeal,
rehearing, reconsideration or petition for certiorari and which order is
reasonably acceptable to Rothschild in all respects.
Rothschild acknowledges that in the event that the Bankruptcy Court
approves its retention by the Company pursuant to the application process
described in this Section 3, payment of Rothschild's fees and expenses shall be
subject to (i) the jurisdiction and approval of the Bankruptcy Court under
Section 328(a) of the Bankruptcy Code and any order approving Rothschild's
retention, (ii) any applicable fee and expense guidelines and/or orders and
(iii) any requirements governing interim and final fee applications. In the
event that Rothschild's engagement hereunder is approved by the Bankruptcy
Court, the Company shall pay all fees and expenses of Rothschild hereunder as
promptly as practicable in accordance with the terms hereof and the orders
governing interim and final fee applications, and after obtaining all necessary
further approvals from the Bankruptcy Court, if any. In so agreeing to seek
Rothschild's retention under Section 328(a) of the Bankruptcy Code, the Company
acknowledges that it believes that Rothschild's general restructuring experience
and expertise, its knowledge of the industry in which the Company operates and
the capital markets and its merger and acquisition capabilities will inure to
the benefit of the Company in pursuing any Transaction or other transaction,
that the value to the Company of Rothschild's services hereunder derives in
substantial part from that expertise and experience and that, accordingly, the
structure and amount of the Monthly Fee, the Completion Fee and the M&A Fee (as
each is defined below) are reasonable regardless of the number of hours to be
expended by Rothschild's professionals in performance of the services to be
provided hereunder.
Section 4 Fees of Rothschild. As compensation for the services rendered
hereunder, the Company, and its successors, if any, agree to pay Rothschild (via
wire transfer or other mutually acceptable means) the following fees in cash:
(a) Commencing as of the date hereof, and whether or not a Transaction is
proposed or consummated, a cash advisory fee (the "Monthly Fee") of $125,000 per
month. The initial Monthly Fee shall be pro-rated based on the commencement of
services as of the
PRG-Schultz International, Inc.
As of September 14, 2005
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date hereof and shall be payable by the Company upon the execution of this
Agreement by each of the parties hereto, and thereafter the Monthly Fee shall be
payable by the Company in advance on the first day of each month.
(b) Either (1) a fee (the "Completion Fee") of $1,737,500, payable in cash
upon the consummation of a Transaction other than an M&A Transaction, or (2) a
fee (the "M&A Fee") equal to the greater of $1,737,500 or 0.85% of the
Consideration (as defined below) for any M&A Transaction. The M&A Fee shall be
payable when and if such Consideration is paid.
The term "Consideration" shall mean the total value of all cash,
securities, the repurchase, cancellation or buy-out of any options or warrants,
any agreements or other property and any other consideration, including, without
limitation, any contingent, earned or other consideration, paid or payable,
directly or indirectly, in connection with a Transaction. Consideration shall be
deemed to include the face amount of any indebtedness for borrowed money,
including, without limitation, pension liabilities and obligations assumed,
retired or defeased, directly or indirectly, in connection with, or which
survive the closing of, a Transaction. In the event such Transaction takes the
form of a recapitalization, restructuring, spin-off or similar transaction,
"Consideration" shall also include the fair market value of (i) the equity
securities of the Company retained by the Company's security holders following
such Transaction and (ii) any securities received by the Company's security
holders in exchange for or in respect of securities of the Company following
such Transaction (all securities received by such security holders being deemed
to have been paid to such security holders in such Transaction).
The Company and Rothschild acknowledge and agree that (i) the hours worked,
(ii) the results achieved and (iii) the ultimate benefit to the Company of the
work performed, in each case, in connection with this engagement, may be
variable, and that the Company and Rothschild have taken such factors into
account in setting the fees hereunder.
The Company shall not be obligated to pay under clause (b) of this Section
4 an amount exceeding the greater of one Completion Fee or one M&A Fee. Except
as otherwise provided in Section 8, the Company shall not be obligated to pay
any Completion Fee or M&A Fee if a Transaction occurs after this Agreement has
terminated. If an M&A Transaction and a non-M&A Transaction both occur on the
"Effective Date" of a Plan or as a part of a transaction outside of a bankruptcy
proceeding, the amount of any fee otherwise payable by the Company shall be the
greater of the M&A Fee for the M&A Transaction or the Completion Fee for the
non-M&A Transaction.
PRG-Schultz International, Inc.
As of September 14, 2005
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To the extent the Company requests Rothschild to perform additional
services not contemplated by this Agreement, such additional fees shall be
mutually agreed upon by Rothschild and the Company, in writing, in advance.
Section 5 Credit. Rothschild shall credit against the Completion Fee or the
M&A Fee, as applicable, 50% of the aggregate Monthly Fees paid to Rothschild
under Section 4(a) in excess of $375,000 (the "Monthly Fee Credit"); provided
that the Monthly Fee Credit shall not exceed the Completion Fee or M&A Fee
payable, as applicable. In addition, the Completion Fee, to the extent paid,
shall be fully credited against the M&A Fee; provided that such credit shall not
exceed the M&A Fee. Alternatively, the M&A Fee, to the extent paid, shall be
fully credited against the Completion Fee; provided that such credit shall not
exceed the Completion Fee.
Section 6 Expenses. Without in any way reducing or affecting the provisions
of Exhibit A hereto, the Company shall reimburse Rothschild for its reasonable
expenses incurred in connection with and solely as the result of the performance
of its engagement hereunder, and the enforcement of this Agreement, including
without limitation the reasonable fees, disbursements and other charges of one
counsel utilized by Rothschild in connection with such enforcement. Reasonable
expenses shall also include, but not be limited to, expenses incurred in
connection with travel and lodging, data processing and communication charges,
research and courier services. In the event the Company becomes a debtor and/or
a debtor-in-possession in a Chapter 11 case, consistent with and subject to any
applicable order of the Bankruptcy Court, the Company shall promptly reimburse
Rothschild for such expenses under this Section 6 upon presentation of an
invoice or other similar documentation with reasonable detail.
Section 7 Indemnity. The Company agrees to the provisions of Exhibit A
hereto which provide for indemnification by the Company of Rothschild and
certain related persons. Such indemnification is an integral part of this
Agreement and the terms thereof are incorporated by reference as if fully stated
herein. Such indemnification shall survive any termination, expiration or
completion of this Agreement or Rothschild's engagement hereunder.
Section 8 Term, (a) The term of Rothschild's engagement shall extend until
the completion of the first Transaction. This Agreement may be terminated by
either the Company or Rothschild after one hundred and twenty (120) days from
the date hereof by providing ten (10) days advance notice in writing. If
terminated, Rothschild shall be entitled to payment of any fees for any monthly
period which are due and owing to Rothschild upon the effective date of
termination; however, such amounts will be pro-rated for any incomplete monthly
period of service, and Rothschild will be entitled to reimbursement of any and
all reasonable expenses described in Section 6. Termination of Rothschild's
engagement
PRG-Schultz International, Inc.
As of September 14, 2005
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hereunder shall not affect or impair the Company's continuing obligation to
indemnify Rothschild and certain related persons as provided in Exhibit A.
(b) If this Agreement is terminated by the Company (other than for a
material breach hereof by Rothschild and after giving Rothschild prior written
notice thereof and a reasonable opportunity to cure) and within one year after
the effective date of such termination (the "Tail Period"), a Transaction is
consummated or the Company enters into a binding written agreement providing for
a Transaction (and such Transaction is subsequently consummated at any time
thereafter), the Company shall pay Rothschild upon consummation of such
Transaction a Completion Fee or M&A Fee (whichever is applicable based on the
Transaction), less the Monthly Fee Credit as provided in Section 5.
(c) Notwithstanding the foregoing, in the event that, prior to the
consummation of any Transaction or entering into a binding agreement providing
for a Transaction, Neil Augustine ("Key Employee") is no longer actively working
on this engagement (other than by reason of death or disability), the
responsibilities of Key Employee shall be assumed by a Managing Director of
Rothschild with similar experience in advising companies on potential
restructurings ("Key Employee Replacement"). If the Company determines, in good
faith and after providing Rothschild with a reasonable opportunity to identify
and discuss with the Company a suitable Key Employee Replacement, that none of
the Key Employee Replacements proposed by Rothschild is acceptable, the Company
may terminate this Agreement as provided in clause (a) above and the Tail Period
otherwise applicable hereunder, shall be reduced to one hundred and thirty-five
(135) days.
Section 9 Miscellaneous.
(a) Administrative Expense Priority. To the extent such compensation is
approved by the Bankruptcy Court, in the event the Company determines to
commence Chapter 11 cases in order to pursue a Transaction or other transaction,
the Company agrees that Rothschild's post-petition compensation as set forth
herein and payments made pursuant to reimbursement and indemnification
provisions of this Agreement shall be entitled to priority as expenses of
administration under Sections 503(b)(1)(A) and 507(a)(1) of the Bankruptcy Code
and shall be entitled to the benefits of any "carve-outs" for professional fees
and expenses in effect in such Chapter 11 cases pursuant to one or more
financing orders entered by the Bankruptcy Court.
(b) Survival, Successors & Assigns. Sections 4 through 9 hereof, inclusive
(excluding the obligation to pay ongoing Monthly Fees as provided in Section
4(a)), including the provisions set forth in Exhibit A hereto, shall survive the
termination or expiration of this Agreement. The benefits of this Agreement and
the indemnification and other obligations of the Company to Rothschild and
certain related persons contained in Exhibit A hereto shall inure to the
respective successors and assigns of the parties hereto and thereto and of the
PRG-Schultz International, Inc.
As of September 14, 2005
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indemnified parties, and the obligations and liabilities assumed in this
Agreement and Exhibit A by the parties hereto and thereto shall be binding upon
their respective successors and assigns.
(c) Benefit of Agreement; No Reliance by Third Parties. The advice (oral or
written) rendered by Rothschild pursuant to this Agreement is intended solely
for the benefit and use of the Company and its professionals and professional
advisors in considering the matters to which this Agreement relates, and the
Company agrees that such advice may not be relied upon by any other person, used
for any other purpose or reproduced, disseminated, quoted or referred to at any
time, in any manner or for any purpose without the prior written consent of
Rothschild.
(d) Nature of Relationship. The relationship of Rothschild to the Company
hereunder shall be that of an independent contractor and Rothschild shall have
no authority to bind, represent or otherwise act as agent, executor,
administrator, trustee, lawyer or guardian for the Company, nor shall Rothschild
have the authority to manage money or property of the Company. The parties
hereto acknowledge and agree that, except as specifically set forth in the last
sentence of Section 1 above, by providing the services contemplated hereunder,
Rothschild will not act, nor will it be deemed to have acted, in any managerial
or fiduciary capacity whatsoever with respect to the Company or any third party
including security holders, creditors or employees of the Company.
(e) Public Announcements. The Company acknowledges that Rothschild may at
its option and expense, after announcement of the Transaction, place
announcements and advertisements or otherwise publicize the Transaction in such
financial and other newspapers and journals as it may choose, stating that
Rothschild acted as financial advisor to the Company in connection with such
Transaction; provided that such actions comply in full with all requirements
imposed by federal and state law and regulations and the Nasdaq stock market, if
any, and the Company is not caused to incur material or significant expense or
regulatory compliance requirements as a result thereof. Company further consents
to Rothschild's public use or display of Company's logo, symbol or trademark as
part of Rothschild's general marketing or promotional activities, provided such
use or display is in the nature of a public record or tombstone announcement in
relation to the Transaction. Rothschild consents to the Company's announcement
in a press release of the engagement of Rothschild and entering into this
Agreement and the disclosure of same in the Company's filings with the SEC and
filing of this Agreement as an exhibit to such SEC filings.
(f) CHOICE OF LAW: JURISDICTION. THIS AGREEMENT HAS BEEN NEGOTIATED,
EXECUTED AND DELIVERED AT AND SHALL BE DEEMED TO HAVE BEEN MADE IN NEW YORK, NEW
YORK. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE
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STATE OF NEW YORK, WITHOUT GIVING EFFECT TO SUCH STATE'S PRINCIPLES OF CONFLICTS
OF LAWS. REGARDLESS OF ANY PRESENT OR FUTURE DOMICILE OR PRINCIPAL PLACE OF
BUSINESS OF THE PARTIES HERETO, EACH SUCH PARTY HEREBY IRREVOCABLY CONSENTS AND
AGREES THAT ANY AND ALL CLAIMS OR DISPUTES BETWEEN THE PARTIES HERETO PERTAINING
TO THIS AGREEMENT OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT
SHALL BE BROUGHT IN ANY OF (A) ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION IN THE STATE OF NEW YORK OR (B) THE BANKRUPTCY COURT OR ANY COURT
HAVING APPELLATE JURISDICTION OVER THE BANKRUPTCY COURT. BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, EACH PARTY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT. EACH PARTY
HERETO HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED ON LACK OF PERSONAL
JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE
GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH
COURT. THE COMPANY CONSENTS TO THE SERVICE OF PROCESS IN ACCORDANCE WITH NEW
YORK LAW, AND AGREES THAT CLINTON MCKELLAR, JR. SHALL BE AUTHORIZED TO ACCEPT
SERVICE ON ITS BEHALF.
(g) Waiver of Jury Trial. Each of the parties hereto hereby knowingly,
voluntarily and irrevocably waives any right it may have to a trial by jury in
respect of any claim upon, arising out of or in connection with this Agreement
or any Transaction or other transaction. Each of the parties hereto hereby
certifies that no representative or agent of any other party hereto has
represented expressly or otherwise that such party would not seek to enforce the
provisions of this waiver. Each of the parties hereto hereby acknowledges that
it has been induced to enter into this Agreement by and in reliance upon, among
other things, the provisions of this paragraph.
(h) Entire Agreement. This Agreement embodies the entire agreement and
understanding of the parties hereto and supersedes any and all prior agreements,
arrangements and understandings relating to the matters provided for herein. No
alteration, waiver, amendment, change or supplement hereto shall be binding or
effective unless the same is set forth in writing signed by a duly authorized
representative of each of the parties hereto.
(i) Authority. Each party hereto represents and warrants that it has all
requisite power and authority to enter into this Agreement and Exhibit A
attached hereto and the transactions contemplated hereby. Each party hereto
further represents that this Agreement has been duly and validly authorized by
all necessary corporate action and has been duly executed and delivered by each
of the parties hereto and constitutes the legal, valid and
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binding agreement thereof, enforceable in accordance with its terms. Rothschild
will assume that any instructions, notices or requests have been properly
authorized by the Company if they are given or purported to be given by a person
who is, or is reasonably believed by Rothschild to be a director or officer of
the Company.
(j) Counterparts. This Agreement may be executed in as many counterparts as
may be deemed necessary and convenient, and by the different parties hereto on
separate counterparts, each of which when so executed shall be deemed an
original, but all such counterparts shall constitute one and the same
instrument. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart to this Agreement.
If the foregoing correctly sets forth the understanding and agreement
between Rothschild and the Company, please so indicate by signing the enclosed
copy of this letter, whereupon it shall become a binding agreement between the
parties hereto as of the date first above written.
Very truly yours,
ROTHSCHILD INC.
By: /s/ Neil A. Augustine
------------------------------------
Neil A. Augustine
Managing Director
Accepted and Agreed to as of
the date first written above:
PRG-SCHULTZ INTERNATIONAL, INC.
By: /s/ Clinton McKellar, Jr.
---------------------------------
Name: Clinton McKellar, Jr.
Title: S.V.P.
Exhibit A
The Company shall indemnify and hold harmless Rothschild and its
affiliates, counsel and other professional advisors, and the respective
directors, officers, controlling persons, agents and employees of each of the
foregoing (Rothschild and all of such other persons collectively, the
"Indemnified Parties"), from and against any losses, claims or proceedings,
including without limitation stockholder actions, damages, judgments,
assessments, investigation costs, settlement costs, fines, penalties,
arbitration awards and any other liabilities, costs, fees and expenses
(collectively, "Losses") (a) directly or indirectly related to or arising out of
(i) oral or written information provided by the Company, the Company's employees
or other agents, which either the Company or an Indemnified Party provides to
any person or entity or (ii) any other action or failure to act by the Company,
the Company's employees or other agents or any Indemnified Party at the
Company's request or with the Company's consent, in each case in connection
with, arising out of, based upon, or in any way related to this Agreement, the
retention of and services provided by Rothschild under this Agreement, or any
Transaction or other transaction contemplated by the Agreement; or (b) otherwise
directly or indirectly in connection with, arising out of, based upon, or in any
way related to the engagement of Rothschild under this Agreement or any
transaction or conduct in connection therewith, provided that the Company shall
not be required to indemnify any Indemnified Party for such Losses if and only
to the extent that it is finally judicially determined by a court of competent
jurisdiction that such Losses arose primarily because of the gross negligence,
willful misconduct or fraud of an Indemnified Party. If multiple claims are
brought against an Indemnified Party in an arbitration, with respect to at least
one of which indemnification is permitted under applicable law and provided for
under this Agreement, the Company agrees that any arbitration award shall be
conclusively deemed to be based on claims as to which indemnification is
permitted and provided for, except to the extent the arbitration award expressly
states that the award, or any portion thereof, is based on a claim as to which
indemnification is not available.
The Company shall further reimburse any Indemnified Party promptly after
obtaining the necessary approval of the Bankruptcy Court, if any, for any
reasonable legal or other fees, disbursements or expenses as they are incurred
(a) in investigating, preparing or pursuing any action or other proceeding
(whether formal or informal) or threat thereof as to which such Indemnified
Party reasonably believes that indemnification hereunder may be available,
whether or not in connection with pending or threatened litigation or
arbitration and whether or not such Indemnified Party is a party (each, an
"Action") and (b) in connection with enforcing such Indemnified Party's rights
under this Agreement; provided, however, that in the event and only to the
extent that it is finally judicially determined by a court of competent
jurisdiction that the Losses of such Indemnified Party arose primarily because
of the gross negligence, willful misconduct or fraud of such Indemnified Party,
such Indemnified Party will promptly remit to the Company any amounts reimbursed
under this paragraph.
Upon receipt by an Indemnified Party of notice of any Action, such
Indemnified Party shall notify the Company in writing of such Action, but the
failure to so notify shall not relieve
PRG-Schultz International, Inc.
As of September 14, 2005
Page A-2.
the Company from any liability hereunder (i) if the Company had actual notice of
such Action or (ii) unless and only to the extent that such failure results in
the forfeiture by the Company of substantial rights and defenses. The Company
shall, if requested by Rothschild, assume the defense of any such Action
including the employment of counsel reasonably satisfactory to Rothschild and
will not, without the prior written consent of Rothschild, settle, compromise,
consent or otherwise resolve or seek to terminate any pending or threatened
Action (whether or not any Indemnified Party is a party thereto) unless such
settlement, compromise, consent or termination (a) contains an express,
unconditional release of each Indemnified Party from all liability relating to
such Action and the engagement of Rothschild under this Agreement and (b) does
not include a statement as to, or an admission of fault, culpability or a
failure to act by or on behalf of any Indemnified Party. Any Indemnified Party
shall be entitled to retain separate counsel of its choice and participate in
the defense of any Action in connection with any of the matters to which this
Agreement relates, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Party unless (x) the Company has failed promptly to
assume the defense and employ counsel or (y) the named parties to any such
Action (including any impleaded parties) include such Indemnified Party and the
Company, and such Indemnified Party shall have been advised by counsel that
there may be one or more legal defenses available to it which are different from
or in addition to those available to the Company; provided that the Company
shall not in such event be responsible under this Agreement for the fees and
expenses of more than one firm of separate counsel (in addition to local
counsel) in connection with any such Action in the same jurisdiction.
The Company agrees that if any right of any Indemnified Party set forth in
the preceding paragraphs is finally determined by a court of competent
jurisdiction to be unavailable (except by reason of the gross negligence,
willful misconduct or fraud of such Indemnified Party),, then the Company shall
contribute to such Losses (a) in such proportion as is appropriate to reflect
the relative benefits received by the Company and its creditors and
stockholders, on the one hand, and such Indemnified Party, on the other hand, in
connection with the transactions contemplated hereby, and (b) if (and only if)
the allocation provided in clause (a) is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (a) but also the relative fault of the Company and such
Indemnified Party; provided, that, in no event shall the aggregate contribution
of all such Indemnified Parties exceed the amount of fees received by Rothschild
under this Agreement. Benefits received by Rothschild shall be deemed to be
equal to the compensation paid by the Company to Rothschild in connection with
this Agreement. Relative fault shall be determined by reference to, among other
things, whether any alleged untrue statement or omission or any other alleged
conduct relates to information provided by the Company or other conduct by the
Company (or the Company's employees or other agents) on the one hand or by
Rothschild on the other hand.
The Company also agrees that no Indemnified Party shall have any liability
(whether direct or indirect, in contract or tort or otherwise) to the Company
for or in connection with
PRG-Schultz International, Inc.
As of September 14, 2005
Page A-3
advice or services rendered or to be rendered by any Indemnified Party pursuant
to this Agreement, the transactions contemplated hereby or any Indemnified
Party's actions or inactions in connection with any such advice, services or
transactions except for and only to the extent that such Losses of the Company
are finally determined by a court of competent jurisdiction to have arisen
primarily because of the gross negligence, willful misconduct or fraud of such
Indemnified Party in connection with any such advice, actions, inactions or
services.
The rights of the Indemnified Parties and the Company hereunder shall be in
addition to any other rights that any of them may have at common law, by statute
or otherwise. Except as otherwise expressly provided for in this Agreement, if
any term, provision, covenant or restriction contained in this Agreement is held
by a court of competent jurisdiction or other authority to be invalid, void,
unenforceable or against its regulatory policy, the remainder of the terms,
provisions, covenants and restrictions contained in this Agreement shall all
remain in full force and effect and shall in no way be affected, impaired or
invalidated. The reimbursement, indemnity and contribution obligations of the
Company set forth herein shall apply to any modification of this Agreement and
shall remain in full force and effect regardless of any termination of, or the
completion of any Indemnified Party's services under or in connection with, this
Agreement.