-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, J8x9JDqSkopR5+ml+H/CjAPU/FpoFijfM2DNpphcFt88takuW7ApcXqm1zZmTTOT 6z67sz4tO2nqsyTR13T7PQ== 0000950135-02-003928.txt : 20020826 0000950135-02-003928.hdr.sgml : 20020826 20020826160130 ACCESSION NUMBER: 0000950135-02-003928 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 10 FILED AS OF DATE: 20020826 GROUP MEMBERS: BERKSHIRE FUND VI, LP GROUP MEMBERS: BERKSHIRE INVESTORS LLC GROUP MEMBERS: BERKSHIRE PARTNERS LLC FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: BERKSHIRE FUND V L P CENTRAL INDEX KEY: 0001069736 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: ONE BOSTON PLACE CITY: BOSTON STATE: MA ZIP: 02108 BUSINESS PHONE: 6172270050 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: PRG SCHULTZ INTERNATIONAL INC CENTRAL INDEX KEY: 0001007330 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ENGINEERING, ACCOUNTING, RESEARCH, MANAGEMENT [8700] IRS NUMBER: 582213805 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-49706 FILM NUMBER: 02748393 BUSINESS ADDRESS: STREET 1: 2300 WINDY RIDGE PKWY STREET 2: STE 100 N CITY: ATLANTA STATE: GA ZIP: 30339-8426 BUSINESS PHONE: 7707793900 MAIL ADDRESS: STREET 1: 2300 WINDY RIDGE PKWY STREET 2: STE 100 NORTH CITY: ATLANTA STATE: GA ZIP: 30339-8426 FORMER COMPANY: FORMER CONFORMED NAME: PROFIT RECOVERY GROUP INTERNATIONAL INC DATE OF NAME CHANGE: 19960207 SC 13D 1 b43703bfsc13d.txt BERKSHIRE FUND V LP Page 1 of 12 pages SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 SCHEDULE 13D (RULE 13d-101) INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO RULE 13D-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13d-2(a) PRG-SCHULTZ INTERNATIONAL, INC. - -------------------------------------------------------------------------------- (Name of Issuer) Common Stock - -------------------------------------------------------------------------------- (Title of Class of Securities) 69357C107 - -------------------------------------------------------------------------------- (CUSIP Number) Ross M. Jones With a copy to: Berkshire Partners LLC David C. Chapin, Esq. One Boston Place Ropes & Gray Suite 3300 One International Place Boston, Massachusetts 02108 Boston, Massachusetts 02110 (617) 227-0050 (617) 951-7000 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) August 16, 2002 - -------------------------------------------------------------------------------- (Date of Event Which Requires Filing of This Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 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 Rule 13d-7 for other parties to whom copies are to be sent. (Continued on following pages) (Page 1 of 12 Pages) - ------------------- ------------------ CUSIP NO. 69357C107 Page 2 of 12 pages - ------------------- ------------------ SCHEDULE 13D - -------------------------------------------------------------------------------- 1. NAME OF REPORTING PERSONS S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS Berkshire Fund V, Limited Partnership - -------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)[ ] (b)[X] - -------------------------------------------------------------------------------- 3. SEC USE ONLY - -------------------------------------------------------------------------------- 4. SOURCE OF FUNDS OO - -------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS [ ] IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) - -------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION Massachusetts - -------------------------------------------------------------------------------- 7. SOLE VOTING POWER NUMBER OF 1,972,047 SHARES ------------------------------------------------------- BENEFICIALLY 8. SHARED VOTING POWER OWNED BY EACH ------------------------------------------------------- REPORTING 9. SOLE DISPOSITIVE POWER PERSON 1,972,047 WITH ------------------------------------------------------- 10. SHARED DISPOSITIVE POWER - -------------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,972,047 - -------------------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) [X] EXCLUDES CERTAIN SHARES - -------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 3.1% - -------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON PN - -------------------------------------------------------------------------------- - ------------------- ------------------ CUSIP NO. 69357C107 Page 3 of 12 pages - ------------------- ------------------ SCHEDULE 13D - -------------------------------------------------------------------------------- 1. NAME OF REPORTING PERSONS S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS Berkshire Fund VI, Limited Partnership - -------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)[ ] (b)[X] - -------------------------------------------------------------------------------- 3. SEC USE ONLY - -------------------------------------------------------------------------------- 4. SOURCE OF FUNDS OO - -------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS [ ] IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) - -------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION Massachusetts - -------------------------------------------------------------------------------- 7. SOLE VOTING POWER NUMBER OF 2,142,516 SHARES ------------------------------------------------------- BENEFICIALLY 8. SHARED VOTING POWER OWNED BY EACH ------------------------------------------------------- REPORTING 9. SOLE DISPOSITIVE POWER PERSON 2,142,516 WITH ------------------------------------------------------- 10. SHARED DISPOSITIVE POWER - -------------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,142,516 - -------------------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) [X] EXCLUDES CERTAIN SHARES - -------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 3.3% - -------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON PN - -------------------------------------------------------------------------------- - ------------------- ------------------ CUSIP NO. 69357C107 Page 4 of 12 pages - ------------------- ------------------ SCHEDULE 13D - -------------------------------------------------------------------------------- 1. NAME OF REPORTING PERSONS S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS Berkshire Investors LLC - -------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)[ ] (b)[X] - -------------------------------------------------------------------------------- 3. SEC USE ONLY - -------------------------------------------------------------------------------- 4. SOURCE OF FUNDS OO - -------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS [ ] IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) - -------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION Massachusetts - -------------------------------------------------------------------------------- 7. SOLE VOTING POWER NUMBER OF 223,944 SHARES ------------------------------------------------------- BENEFICIALLY 8. SHARED VOTING POWER OWNED BY EACH ------------------------------------------------------- REPORTING 9. SOLE DISPOSITIVE POWER PERSON 223,944 WITH ------------------------------------------------------- 10. SHARED DISPOSITIVE POWER - -------------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 223,944 - -------------------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) [X] EXCLUDES CERTAIN SHARES - -------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 0.3% - -------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON PN - -------------------------------------------------------------------------------- - ------------------- ------------------ CUSIP NO. 69357C107 Page 5 of 12 pages - ------------------- ------------------ SCHEDULE 13D - -------------------------------------------------------------------------------- 1. NAME OF REPORTING PERSONS S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS Berkshire Partners LLC - -------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)[ ] (b)[X] - -------------------------------------------------------------------------------- 3. SEC USE ONLY - -------------------------------------------------------------------------------- 4. SOURCE OF FUNDS OO - -------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS [ ] IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) - -------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION Massachusetts - -------------------------------------------------------------------------------- 7. SOLE VOTING POWER NUMBER OF 39,750 SHARES ------------------------------------------------------- BENEFICIALLY 8. SHARED VOTING POWER OWNED BY EACH ------------------------------------------------------- REPORTING 9. SOLE DISPOSITIVE POWER PERSON 39,750 WITH ------------------------------------------------------- 10. SHARED DISPOSITIVE POWER - -------------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 39,750 - -------------------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) [X] EXCLUDES CERTAIN SHARES - -------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 0.1% - -------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON PN - -------------------------------------------------------------------------------- Page 6 of 12 pages Item 1. SECURITY AND ISSUER. The class of equity securities to which this Statement on Schedule 13D (this "Statement") relates is the Common Stock, no par value (the "Common Stock"), of PRG-Schultz International, Inc., a Georgia corporation (the "Issuer"). The principal executive offices of the Issuer are located at 2300 Windy Ridge Parkway, Suite 100 North Tower, Atlanta, GA, 30339-8426. Item 2. IDENTITY AND BACKGROUND. (a) NAME This Statement is being filed jointly by the following (each a "Reporting Person" and collectively, the "Reporting Persons"): (1) Berkshire Fund V, Limited Partnership, a Massachusetts limited partnership ("Fund V"), (2) Berkshire Fund VI, Limited Partnership, a Massachusetts limited partnership ("Fund VI"), (3) Berkshire Investors LLC, a Massachusetts limited liability company ("Berkshire Investors"), and (4) Berkshire Partners LLC, a Massachusetts limited liability company ("Berkshire Partners"). Fifth Berkshire Associates LLC, a Massachusetts limited liability company ("Fifth Berkshire") is the general partner of Fund V. Sixth Berkshire Associates LLC, a Massachusetts limited liability company ("Sixth Berkshire") is the general partner of Fund VI. The managing members of Fifth Berkshire are: Bradley M. Bloom, J. Christopher Clifford, Kevin T. Callaghan, Richard K. Lubin, Carl Ferenbach, Garth H. Greimann, Jane Brock-Wilson, David R. Peeler, Robert J. Small, and Ross M. Jones (the "Berkshire Principals"). The Berkshire Principals are also the managing members of Sixth Berkshire, Berkshire Investors, and Berkshire Partners. The Reporting Persons, excluding Berkshire Partners, often make acquisitions in, and dispose of, securities of an issuer on the same terms and conditions and at the same time. Based on the foregoing and the relationships described herein, the Reporting Persons may be deemed to constitute a "group" for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934 (the "Exchange Act"). The filing of this statement shall not be construed as an admission that the Reporting Persons are a group, or have agreed to act as a group. (b) PRINCIPAL BUSINESS The principal business of each of Fund V, Fund VI, and Berkshire Investors is to make investments in, buy, sell, hold, pledge, assign, and otherwise deal in securities. The principal business of Fifth Berkshire is to act as general partner of Fund V and certain other affiliated funds. The principal business of Sixth Berkshire is to act as general partner of Fund VI and certain other affiliated funds. The principal occupations of each of the Berkshire Principals is Managing Director of Berkshire Partners. The principal business of Berkshire Partners is to identify, research, and evaluate potential investments for its affiliated clients, including Fund V, Fund VI, and Berkshire Investors. (c) PRINCIPAL ADDRESS The following address is the business address of each of the Berkshire Principals and the address of the principal executive offices and principal business of the Reporting Persons, Fifth Berkshire, Sixth Berkshire, and Berkshire Partners: One Boston Place, Suite 3300, Boston, Massachusetts 02108 (in the case of the Berkshire Principals, c/o Berkshire Partners). (d and e) NO CONVICTIONS OR PROCEEDINGS. Page 7 of 12 pages During the last five years, none of the Reporting Persons, Fifth Berkshire, Sixth Berkshire, or Berkshire Principals, nor any of their executive officers, directors, or partners, as applicable: (i) has been convicted in any criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) has been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction resulting in his being 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. (f) CITIZENSHIP Each of the Reporting Persons, Fifth Berkshire, and Sixth Berkshire is organized under the laws of the Commonwealth of Massachusetts. Each of the Berkshire Principals is a citizen of the United States. Item 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. On August 16, 2002, Fund V and Berkshire Investors (collectively, the "Purchasers") agreed to purchase in a private transaction, shares of Common Stock from two directors of the Issuer, Howard Schultz, chairman, and Andrew Schultz, executive vice president and director, and certain of their affiliates (the "Schultz Holders"). Upon the closing of the transaction, anticipated to occur on August 27, 2002, (the "Closing Date"), Fund V will purchase 1,972,047 shares of Common Stock at a price per share of $8.72 and will have the right, exercisable 170 days after the Closing Date, to acquire up to an additional 657,348 shares of Common Stock pursuant to a put/call arrangement with the Schultz Holders; Fund V, on behalf of Fund VI, will purchase 2,142,516 shares of Common Stock at a price per share of $8.72 on the Closing Date and will have the right, exercisable 170 days after the Closing Date, to acquire up to an additional 714,171 shares of Common Stock pursuant to a put/call arrangement with the Schultz Holders; and Berkshire Investors will purchase 223,944 shares of Common Stock at a price per share of $8.72 on the Closing Date and will have the right, exercisable 170 days after the Closing Date, to acquire up to an additional 74,649 shares pursuant to a put/call arrangement with the Schultz Holders. On the Closing Date, Fund V will purchase both Fund VI's and its allocation of Common Stock with available funds received from capital contributions by its partners. Fund V, an affiliate of Fifth Berkshire, Fund VI, and Sixth Berkshire, will then transfer the shares of Common Stock purchased by Fund VI and Berkshire Investors to those entities subsequent to the Closing Date and up to 45,872 shares to an unaffiliated entity subsequent to the Closing Date. Item 4. PURPOSE OF TRANSACTION. The Schultz Holders have entered into an agreement on August 16, 2002, to sell approximately 4.34 million shares of Common Stock to the Purchasers in a private transaction for approximately $37.8 million. The Purchasers have also agreed to lend to certain Schultz Holders approximately $12.6 million. In addition, the Purchasers have entered into put and call arrangements to purchase additional shares from the Schultz Holders to the extent that the Issuer does not exercise its option granted by the Schultz Holders. That option, expiring in approximately six months, grants to the Issuer the right to purchase up to approximately 1.45 million shares of Common Stock, at a price of $8.72 per share plus accretion at 8% per annum. The Purchasers have also entered into a purchase agreement with an existing investor in the Issuer, pursuant to which the Purchasers may purchase up to an additional 723,084 shares of Common Stock. Upon their purchase of the approximately 4.34 million shares on the Closing Date, the Purchasers are expected to own approximately 6.7% of the outstanding Common Stock of the Issuer. In addition, the Purchasers will have a right, exercisable 170 days after the Closing Date, to acquire up to an additional 1.45 million shares, or approximately 2.2%, of the outstanding Common Stock of the Issuer pursuant to the put/call arrangement and purchase agreement described above. Page 8 of 12 pages The Purchasers have agreed with the Issuer not to sell any shares of Common Stock acquired in the transaction prior to January 24, 2004, except for transfers to affiliates and transfers approved by the Company's board of directors. The Purchasers will also have registration rights with certain limitations. The shares of Common Stock covered by this filing are being held for investment purposes. The Reporting Persons will continue to monitor and evaluate their investment in the Issuer in light of pertinent factors, including without limitation the following: (a) the Issuer's business, operations, assets, financial condition and prospects; (b) market, general economic and other conditions; and (c) other investment opportunities available to the Reporting Persons. In light of the foregoing factors, and the plans and requirements of the Reporting Persons from time to time, including the plans described below, the Reporting Persons may decide to (i) dispose of some or all of the shares of the Common Stock that they beneficially own or (ii) acquire additional shares of Common Stock or other securities of the Issuer. One of the Berkshire Principals, Garth H. Greimann, is currently a member of the Board of Directors of the Issuer and, pursuant to an Investor Rights Agreement between the Purchasers and the Issuer, will be nominated by the Issuer to stand for election as a director for as long as the Purchasers collectively own at least 2,000,000 shares of Common Stock. Except as described above, the Reporting Persons do not have any plans or proposals that relate to or would result in: (i) an extraordinary corporate transaction, such as a merger, reorganization, or liquidation, involving the Issuer or any of its subsidiaries; (ii) a sale or transfer of a material amount of assets of the issuer or of any of its subsidiaries; (iii) any change in the present board of directors or management of the Issuer, including any plans or proposals to change the number or term of directors; (iv) any material change in the present capitalization or dividend policy of the Issuer; (v) any other material change in the Issuer's business or corporate structure; (vi) changes in the Issuer's charter, bylaws or instruments corresponding thereto or other actions which may impede the acquisition of control of the Issuer by any person; (vii) causing a class of securities of the Issuer to be delisted from a national securities exchange or to cease to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association; (viii) a class of equity securities of the Issuer becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Exchange Act; or (ix) any action similar to any of those enumerated above. Item 5. INTEREST IN SECURITIES OF THE ISSUER. (a) Upon the closing of the transaction, the Purchasers collectively will own an aggregate of 4,338,507 shares, or approximately 6.7% of the outstanding shares based on 64,571,944 shares outstanding as of July 31, 2002 as reported by the Issuer on its quarterly report on Form 10-Q filed with the Commission on August 9, 2002. The Purchasers collectively will also have the right, exercisable 170 days after the Closing Date, to acquire up to an aggregate of 1,446,168 additional shares, or approximately 2.2% of the Issuer's outstanding shares. The numbers of shares and percentages included in the previous two sentences do not include 12,291 shares of Common Stock held on the date hereof by certain Berkshire Principals, nor do they include options exercisable for an additional 39,750 shares of Common Stock held on the date hereof by Berkshire Partners that were acquired as compensation for Garth H. Greimann's service as a member of the Issuer's board of directors. Since none of the Purchasers has voting or investment power with respect to the shares beneficially owned by the Berkshire Principals or Berkshire Partners, the Purchasers disclaim beneficial ownership of such shares, and Berkshire Partners disclaims beneficial ownership of the shares beneficially owned by the Berkshire Principals. By virtue of the relationships described herein, the Reporting Persons may be deemed to constitute a "group" within the meaning of Rule 13d-5 under the Exchange Act. As a member of a group, each Reporting Person may be deemed to share voting and dispositive power with respect to, and therefore beneficially own, the shares beneficially owned by members of the group as a whole. The filing of this Statement shall not be construed as an admission that the Reporting Persons beneficially own those shares held by any other members of the group or the Other Berkshire Holders. Page 9 of 12 pages (b) Assuming it acquires all the shares subject to the put/call arrangement, Fund V will have sole voting power with respect to 2,629,395 shares of Common Stock and will have sole dispositive power with respect to 2,629,395 shares of Common Stock. Fund V will be the direct beneficial owner of the 2,629,395 shares of Common Stock over which it will have voting and dispositive power. As the sole general partner of Fund V, Fifth Berkshire may be deemed to beneficially own 2,629,395 shares of Common Stock held by Fund V. The filing of this statement shall not be construed as an admission that Fifth Berkshire is, for the purpose of Section 13(d) of the Exchange Act, the beneficial owner of such shares held by Fund V. Assuming it acquires all the shares subject to the put/call arrangement, Fund VI will have sole voting power with respect to 2,856,687 shares of Common Stock and will have sole dispositive power with respect to 2,856,687 shares of Common Stock. Fund VI will be the direct beneficial owner of the 2,856,687 shares of Common Stock over which it will have voting and dispositive power. As the sole general partner of Fund VI, Sixth Berkshire may be deemed to beneficially own 2,856,687 shares of the Common Stock held by Fund VI. The filing of this statement shall not be construed as an admission that Sixth Berkshire is, for the purpose of Section 13(d) of the Exchange Act, the beneficial owner of such shares held by Fund VI. Assuming it acquires all the shares subject to the put/call arrangement, Berkshire Investors will have sole voting power with respect to 298,593 shares of Common Stock and will have sole dispositive power with respect to 298,593 shares of Common Stock. Berkshire Investors will be the direct beneficial owner of the 298,593 shares of Common Stock over which it will have voting and dispositive power. Berkshire Partners has sole voting power with respect to 39,750 shares of Common Stock and has sole dispositive power with respect to 39,750 shares of Common Stock. Berkshire Partners is the direct beneficial owner of the 39,750 shares of Common Stock over which it has voting and dispositive power. By virtue of their positions as managing members of Fifth Berkshire, Sixth Berkshire, Berkshire Investors, and Berkshire Partners, the Berkshire Principals may be deemed to possess indirect beneficial ownership of the shares of Common Stock beneficially owned by the Reporting Persons. None of the Berkshire Principals, acting alone, however, has voting or investment power with respect to the shares beneficially owned by the Reporting Persons, and, as a result, each Berkshire Principal disclaims beneficial ownership of such shares of Common Stock. (c) Other than the transaction disclosed in Item 4 hereof, there have been no transactions in shares of Common Stock entered into by the Reporting Persons during the past 60 days. Item 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER. The responses to Items 3, 4, and 5 of this Schedule 13D and the Exhibits to this Schedule 13D are incorporated herein by reference. Item 7. MATERIAL TO BE FILED AS EXHIBITS. 99.1 Joint Filing Undertaking. 99.2 Stock Purchase Agreement dated as of August 16, 2002, between the Purchasers and the Schultz Holders. 99.3 Investor Rights Agreement to be dated as of the Closing Date between the Purchasers and the Issuer. 99.4 Registration Rights Agreement to be dated as of the Closing Date between the Purchasers and the Issuer. Page 10 of 12 pages 99.5 Form of Secured Promissory Note to be dated as of the Closing Date between the Purchasers and the Schultz Holders. 99.6 Form of Pledge Agreement to be dated as of the Closing Date between the Purchasers and the Schultz Holders. 99.7 Subordination Agreement to be dated as of the Closing Date between the Purchasers and the Issuer. 99.8 Form of Purchase Agreement to be dated as of the Closing Date made between the Purchasers and certain other parties. 99.9 Side Letter to the Stock Purchase Agreement dated as of August 16, 2002, by the Issuer. Page 11 of 12 pages SIGNATURES After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this Statement is true, complete and correct. Dated: August 26, 2002 BERKSHIRE FUND V, LIMITED PARTNERSHIP By: Fifth Berkshire Associates LLC, its General Partner By: /s/ Ross M. Jones ---------------------------------- Name: Ross M. Jones -------------------------------- Title: Managing Director ------------------------------- BERKSHIRE FUND VI, LIMITED PARTNERSHIP By: Sixth Berkshire Associates LLC, its General Partner By: /s/ Ross M. Jones ---------------------------------- Name: Ross M. Jones -------------------------------- Title: Managing Director ------------------------------- BERKSHIRE INVESTORS LLC By: /s/ Ross M. Jones ---------------------------------- Name: Ross M. Jones -------------------------------- Title: Managing Director ------------------------------- FIFTH BERKSHIRE ASSOCIATES LLC By: /s/ Ross M. Jones ---------------------------------- Name: Ross M. Jones -------------------------------- Title: Managing Director ------------------------------- SIXTH BERKSHIRE ASSOCIATES LLC By: /s/ Ross M. Jones ---------------------------------- Name: Ross M. Jones -------------------------------- Title: Managing Director ------------------------------- Page 12 of 12 pages BERKSHIRE PARTNERS LLC By: /s/ Ross M. Jones ---------------------------------- Name: Ross M. Jones -------------------------------- Title: Managing Director ------------------------------- EX-99.1 3 b43703bfexv99w1.txt JOINT FILING UNDERTAKING Exhibit 99.1 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: August 26, 2002 BERKSHIRE FUND V, LIMITED PARTNERSHIP By: Fifth Berkshire Associates LLC, its General Partner By: /s/ Ross M. Jones ---------------------------------- Name: Ross M. Jones -------------------------------- Title: Managing Director ------------------------------- BERKSHIRE FUND VI, LIMITED PARTNERSHIP By: Sixth Berkshire Associates LLC, its General Partner By: /s/ Ross M. Jones ---------------------------------- Name: Ross M. Jones -------------------------------- Title: Managing Director ------------------------------- BERKSHIRE INVESTORS LLC By: /s/ Ross M. Jones ---------------------------------- Name: Ross M. Jones -------------------------------- Title: Managing Director ------------------------------- FIFTH BERKSHIRE ASSOCIATES LLC By: /s/ Ross M. Jones ---------------------------------- Name: Ross M. Jones -------------------------------- Title: Managing Director ------------------------------- SIXTH BERKSHIRE ASSOCIATES LLC By: /s/ Ross M. Jones ---------------------------------- Name: Ross M. Jones -------------------------------- Title: Managing Director ------------------------------- BERKSHIRE PARTNERS LLC By: /s/ Ross M. Jones ---------------------------------- Name: Ross M. Jones -------------------------------- Title: Managing Director ------------------------------- EX-99.2 4 b43703bfexv99w2.txt STOCK PURCHASE AGREEMENT Exhibit 99.2 STOCK PURCHASE AGREEMENT THIS STOCK PURCHASE AGREEMENT ("AGREEMENT"), dated as of August 16, 2002, is made between Berkshire Fund V Investment Corp., a Massachusetts corporation, and, Berkshire Investors LLC, a Massachusetts limited liability company (each, with their permitted assignees, a "BERKSHIRE FUND," and collectively, "BERKSHIRE"), and each of the entities or individuals listed on Exhibit A hereto (each a "SELLER," and collectively the "SELLERS"). WHEREAS, the Sellers are the direct beneficial owners of 13,069,350 shares of common stock, no par value (the "COMMON STOCK"), of PRG-Schultz International, Inc. ("PRG"). WHEREAS, Berkshire desires to purchase, and the Sellers desire to sell, 4,338,507 shares of Common Stock owned by the Sellers (such shares of Common Stock, the "SHARES"), upon the terms set forth herein, at a price of $8.72 per share and to each Berkshire Fund in the amounts set forth on Exhibit A. WHEREAS, certain capitalized terms used herein are defined in Section 5.1 hereof. NOW, THEREFORE, in consideration of the premises and agreements hereinafter set forth, intending to be legally bound, the parties hereby agree as follows: ARTICLE I. PURCHASE AND SALE OF THE SHARES; THE CLOSING; REGISTRATION RIGHTS 1.1. PURCHASE AND SALE OF SHARES. Upon the terms set forth herein, at the Closing (as defined in Section 1.2) the Sellers shall sell, assign, transfer and deliver to each Berkshire Fund and each Berkshire Fund shall accept and purchase from the Sellers the Shares, free and clear of all Encumbrances, for $8.72 per Share in the amounts and as set forth on Exhibit A. 1.2. CLOSING. Upon the terms contained in this Agreement, the closing of the purchase and sale of the Shares (the "CLOSING") shall take place at the offices of Ropes & Gray, One International Place, Boston, Massachusetts, 02110, at 11:00 A.M., Boston time, on August 27, 2002 or at such other time and place as the Sellers and Berkshire shall mutually agree upon. The date on which the Closing takes place is referred to as the "Closing Date." This Agreement and the obligations of the parties under it shall terminate in the event that the Closing has not taken place by 5:00 P.M. on December 31, 2002, PROVIDED, no such right of termination shall be exercisable by a party who has not complied with or has breached the covenants contained in this Agreement. 1.3. BERKSHIRE CLOSING CONDITIONS. The obligations of each Berkshire Fund to participate in the Closing and make the deliveries specified in Section 1.6 are subject to the satisfaction or waiver of the following conditions at or prior to the Closing: (a) the representations and warranties of the Sellers in Article II shall be true and correct on and as of the Closing Date with the same effect as though such representations and warranties were made as of the Closing Date, (b) Berkshire shall have received (i) a fully executed Registration Rights Agreement, between PRG and each Berkshire Fund (the "BERKSHIRE REGISTRATION RIGHTS AGREEMENT"), in the form attached as Exhibit B hereto, (ii) a fully executed Investor Rights Agreement, between PRG, Blum Strategic Partners II, L.P. ("BLUM") and each Berkshire Fund (the "INVESTOR RIGHTS AGREEMENT"), in the form attached as Exhibit C hereto, (iii) a fully executed Secured Promissory Note and Pledge Agreement, between one of the Sellers and the Berkshire Funds (the "NOTE"), in the form attached as Exhibit D hereto, (iv) a fully executed Subordination Agreement among PRG, Berkshire, and one of the Sellers, in the form attached as Exhibit E hereto (the "SUBORDINATION AGREEMENT") (v) a fully executed Option Agreement in favor of PRG on shares of common stock of PRG held by one of the Sellers and pledged pursuant to the Note (the "COMPANY CALL OPTION"), in the form attached as Exhibit F hereto, (vi) a fully executed Purchase Agreement relating to shares of Common Stock owned by Blum in favor of Berkshire in the form attached as Exhibit G hereto, (vii) a fully executed waiver or amendment of the Shareholder Agreement, entered into as of January 24, 2002, by and among Profit Recovery Group International, Inc., Howard Schultz & Associates International, Inc., the Sellers, John M. Cook and John M. Toma (the "SHAREHOLDER AGREEMENT"), (viii), a fully executed Management Rights Letter addressed from PRG to Berkshire (the "MANAGEMENT RIGHTS LETTER") in the form attached as Exhibit H hereto, and (ix) evidence of the approval of the Berkshire Registration Rights Agreement, the Investor Rights Agreement, the Company Call Option, the Subordination Agreement and the Management Rights Letter by PRG's Board of Directors or a committee thereof and (c) the Sellers shall have made all deliveries required under Section 1.5. Assuming that the Sellers are in compliance with the terms and provisions of this Agreement, Berkshire hereby agrees to execute the documents set forth in this Section 1.3, PROVIDED, that they are each in the form of the applicable attached exhibit. The covenant in the preceding sentence may not be waived by Sellers without the express written consent of PRG. The Closing hereunder shall occur concurrently with the Closing of a sale of at least 4,338,507 shares of Common Stock by Sellers to a third party. 1.4. SELLERS' CLOSING CONDITIONS. The obligations of the Sellers to participate in the Closing and make the deliveries specified in Section 1.5 are subject to the satisfaction or waiver of the following conditions at or prior to the Closing: (a) the representations and warranties of each Berkshire Fund in Article III shall be true and correct on and as of the Closing Date with the same effect as though such representations and warranties were made as of the Closing Date, (b) the Sellers shall have received (i) the fully executed waiver or amendment of the Shareholder Agreement on or prior to the Closing, (ii) the fully executed Company Call Option, (iii) the fully executed Note and (iv) the fully executed Subordination Agreement, and (c) Berkshire shall have made all deliveries required under Section 1.6. Assuming that Berkshire is in compliance with the terms and provisions of this Agreement, the applicable Seller hereby agrees to execute the documents set forth in this Section 1.4, PROVIDED, that they are each in the form of the applicable attached exhibit. The covenant in the preceding sentence may not be waived by Berkshire without the express written consent of PRG. The Closing hereunder shall occur concurrently with the Closing of a sale of at least 4,338,507 shares of Common Stock by Sellers to a third party. 1.5. DELIVERIES BY THE SELLERS. At the Closing, the Sellers are delivering to each Berkshire Fund the following: -2- (a) stock certificates representing the Shares, accompanied by stock powers duly endorsed in blank or accompanied by duly executed instruments of transfer, with all necessary transfer tax and other revenue stamps affixed thereto; (b) a receipt for the payments provided for by Section 1.1 hereof; and (c) an opinion of Sellers' counsel in the form of Exhibit I hereto that the sale of Shares to each Berkshire Fund hereunder is made in compliance with the Securities Act or an available exemption therefrom. 1.6. DELIVERIES BY BERKSHIRE. At the Closing, each Berkshire Fund is delivering to the Sellers by wire transfer to the accounts of the Sellers previously provided in writing to Berkshire the payment provided for in Section 1.1 hereof. ARTICLE II. REPRESENTATIONS AND WARRANTIES OF THE SELLERS Each Seller represents and warrants to each Berkshire Fund as follows: 2.1. AUTHORIZATION; BINDING OBLIGATION. This Agreement has been duly and validly executed and delivered by the Sellers and, assuming due authorization, execution and delivery by each Berkshire Fund, constitutes a legal, valid and binding obligation of the Sellers, enforceable against them in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other federal or state laws of general applicability relating to or affecting creditors' or secured parties' rights and remedies generally and general principles of equity, whether considered in an action at law or in equity. The Sellers have the legal capacity and all requisite power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby and to perform its obligations hereunder. Such execution, delivery and consummation has been duly and validly authorized by all necessary action on the part of the Sellers, and no other corporate or other proceedings on the part of the Sellers are necessary to authorize such execution, delivery and consummation. 2.2. TITLE TO THE SHARES. At the Closing, the Sellers will be the record and beneficial owner of, and had good and marketable title to, the Shares free and clear of all Encumbrances. The Shares owned by the Sellers are validly issued, duly authorized and free of any preemptive rights; there are no voting trusts or other agreements or understandings to which the Sellers are a party with respect to the voting of the Shares. The Shares are not subject to any restrictions on transferability other than those imposed by the Securities Act and applicable state securities laws. There are no options, warrants, calls, commitments or rights of any character to purchase or otherwise acquire Shares from the Sellers pursuant to which the Sellers may be obligated to sell, transfer or otherwise dispose of any of the Shares. At the Closing, Berkshire is acquiring good and marketable title to the Shares, free and clear of all Encumbrances. 2.3. CONSENTS AND APPROVALS; NO VIOLATION. None of the execution and delivery of this Agreement, the consummation of the transactions contemplated hereby, or compliance with any of the provisions hereof, will (i) require any consent, waiver, approval, authorization or -3- permit of, or filing with or notification to, or any other action by, any Governmental Authority by the Sellers, other than necessary filings on Schedule 13D and Form 4 with the Commission and those consents, waivers and approvals obtained under the Shareholder Agreement, (ii) violate the certificate of incorporation, bylaws or trust document of the Sellers, or any Law of any Governmental Authority which may be applicable to the Sellers, or by which any of the Sellers' activities, properties or assets (including, without limitation, the Shares) may be bound or affected or (iii) violate, breach, or conflict with, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation or acceleration or any obligation to pay or result in the imposition of any Encumbrance upon any of the property of the Sellers (including, without limitation, the Shares)) under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, Encumbrance, contract, agreement, Permit, Order, or other instrument or obligation to which the Sellers are a party or by which any of the Sellers' activities, properties or assets (including, without limitation, the Shares) may be bound or affected, other than the Shareholder Agreement and the instruments by which the Daniel Alan Schultz HHS (2001) GST Trust, the Daniel Alan Schultz LVS (2001) GST Trust, the Jaynie Schultz Romaner HHS (2001) GST Trust, and the Jaynie Schultz Romaner LVS (2001) GST Trust obtained the purchase money debt used to acquire their Shares. 2.4. BROKERS AND FINDERS. No agent, broker, investment banker, financial advisor or other firm or person is or will be entitled to any broker's or finder's fee or any other commission or similar fee in connection with any of the transactions contemplated by this Agreement. 2.5. TERMINATION OF CERTAIN AGREEMENTS. Each contract or agreement between the Sellers and PRG or any other party which is binding upon the Sellers with respect to the Shares has been terminated so far as it relates to the Shares and is not and will not be binding upon Berkshire or the Shares after the Closing. There are no other contracts, agreements or understandings, written or oral, between the Sellers and PRG or any other party with respect to the Shares. ARTICLE III. REPRESENTATIONS AND WARRANTIES OF BERKSHIRE Each Berkshire Fund represents and warrants to the Sellers as follows: 3.1. AUTHORIZATION; BINDING OBLIGATION. Such Berkshire Fund has all requisite power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby and to perform its obligations hereunder. The execution and delivery of this Agreement by such Berkshire Fund and the consummation of the transactions contemplated hereby by such Berkshire Fund have been duly and validly authorized by such Berkshire Fund and no other proceedings on the part of such Berkshire Fund are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement has been validly executed and delivered by each Berkshire Fund and, assuming due authorization, execution and delivery by the Sellers, constitutes the legal, valid and binding obligation of such Berkshire Fund, enforceable against such Berkshire Fund in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other federal or state laws of general applicability relating to or -4- affecting creditors' or secured parties' rights and remedies generally and general principles of equity, whether considered in an action at law or in equity. 3.2. CONSENTS AND APPROVALS; NO VIOLATION. None of the execution and delivery of this Agreement, the consummation of the transactions contemplated hereby, or compliance with any of the provisions hereof, will (i) require any consent, waiver, approval, authorization or permit of, or filing with or notification to, or any other action by, any Governmental Authority by such Berkshire Fund, other than a filing on Schedule 13D with the Commission, (ii) violate the limited partnership agreement of such Berkshire Fund, or any Law of any Governmental Authority which may be applicable to such Berkshire Fund, or by which any of such Berkshire Fund's businesses, properties or assets may be bound or affected or (iii) violate, breach, or conflict with, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation or acceleration or any obligation to pay or result in the imposition of any Encumbrance upon any of the property of Berkshire) under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, Encumbrance, contract, agreement, Permit, Order, or other instrument or obligation to which such Berkshire Fund is a party or by which any of such Berkshire Fund's businesses, properties or assets may be bound or affected. 3.3. SECURITIES ACT. Such Berkshire Fund is acquiring the Shares solely for its own account for investment purposes and not with a view to, or for sale in connection with, any distribution or other disposition thereof. Notwithstanding the foregoing, Berkshire may assign their rights and transfer Shares under this Agreement pursuant to Section 4.10 hereof. Such Berkshire Fund acknowledges that as of the Closing Date the Shares have not been registered under the Securities Act and are "restricted securities" within the meaning of Rule 144(a)(3) and may not be sold publicly under Rule 144 until Berkshire Funds meet the holding period requirements of Rule 144(d). Such Berkshire Fund did not borrow any of the funds to be used as payment for the Shares, or, to the extent that such funds were borrowed, such Berkshire Fund has sufficient other means to make required payments on any such indebtedness without being forced to sell the Shares prematurely to meet its obligations. Such Berkshire Fund has sufficient financial means to hold the Shares for investment. 3.4. BROKERS AND FINDERS. No agent, broker, investment banker, financial advisor or other firm or person is or will be entitled to any broker's or finder's fee or any other commission or similar fee in connection with any of the transactions contemplated by this Agreement. 3.5. INVESTMENT EXPERIENCE AND ACCREDITATION. Such Berkshire Fund hereby represents that it is an "accredited investor," as defined in Rule 501(a) of Regulation D under the Securities Act, and is experienced in evaluating the transactions contemplated hereby. Such Berkshire Fund has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of its prospective investment in the Shares and has the ability to bear the economic risks of its prospective investment and can afford the complete loss of such investment. 3.6. DISCLOSURE OF INFORMATION. Each Berkshire Fund has received a copy of PRG's (i) definitive proxy statement dated April 15, 2002, (ii) PRG's report on Form 10-K filed with the Commission on March 15, 2002, (iii) PRG's reports on Form 10-Q filed with the Commission on -5- May 14, 2002 and August 9, 2002, (iv) PRG's Reports on Form 8-K filed with the Commission on January 2, 2002, January 17, 2002, February 5, 2002, February 20, 2002, April 3, 2002, May 2, 2002 and August 1, 2002, respectively, and (v) PRG's draft report on Form S-3/A received August 15, 2002, and to be subsequently filed with the Commission, (collectively, the "OFFERING DOCUMENTS") and has acknowledged that it has had access to such financial and other information, and has been afforded the opportunity to ask questions of PRG and receive answers thereto, as it deemed necessary in connection with its decision to purchase the Shares. 3.7. RESTRICTIONS. Each Berkshire Fund agrees that if it should resell or otherwise transfer the Shares it will do so only: (a) to PRG, any affiliate thereof, or as specified in Section 4.10 hereof; (b) to an accredited investor, including to another Berkshire Fund or any affiliate thereof, that, prior to the transfer, furnishes to PRG a signed letter containing representations and agreements relating to the restrictions on transfer of the Shares reasonably acceptable to PRG and, if PRG requests, an opinion of counsel reasonably acceptable to PRG to the effect that the transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act; (c) pursuant to another available exemption from registration provided under the Securities Act, if available, provided that the representations and agreements and opinion described in (b) above are delivered, if requested by PRG; or (d) pursuant to a registration statement which has been declared effective under the Securities Act and which continues to be effective at the time of such transfer. Each Berkshire Fund agrees that it will give each person to whom it transfers such Shares notice of any restrictions on transfer of such Shares, if then applicable. Each Berkshire Fund acknowledges that PRG will rely upon the truth and accuracy of the foregoing acknowledgements, representations, warranties and agreements and agrees that if any of the acknowledgements, representations, warranties and agreements deemed to have been made by it by its purchase of the Shares are no longer accurate, it shall promptly notify PRG. Each Berkshire Fund acknowledges that none of PRG, the Sellers or any person representing PRG or the Sellers has made any representation to it with respect to PRG or the offering or sale of any Shares, other than the information contained in the Offering Documents, which Offering Documents have been delivered to it and upon which it is making its investment decision with respect to the Shares. 3.8. RESTRICTIVE LEGEND. Each Berkshire Fund acknowledges that each certificate representing a Share will bear a legend substantially to the following effect: "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY OTHER JURISDICTION, IN RELIANCE UPON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SUCH LAWS. THE SHARES REPRESENTED BY THIS CERTIFICATE ARE RESTRICTED SECURITIES WITHIN THE MEANING OF RULE 144(A)(3) AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED, NOR WILL AN -6- ASSIGNEE OR ENDORSEE HEREOF BE RECOGNIZED AS AN OWNER OF THE SHARES BY THE ISSUER, UNLESS: (I) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND OTHER APPLICABLE SECURITIES LAWS WITH RESPECT TO THE SHARES AND THE TRANSFER SHALL THEN BE IN EFFECT, OR (II) IN THE OPINION OF COUNSEL SATISFACTORY TO THE ISSUER, THE SHARES ARE TRANSFERRED IN A TRANSACTION WHICH IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF SUCH LAWS." ARTICLE IV. MISCELLANEOUS 4.1. SURVIVAL OF REPRESENTATION AND WARRANTIES. All representations, warranties and covenants made by any party contained in this Agreement, or any certificate delivered pursuant hereto or made in writing to, by or on behalf of Berkshire or the Sellers, as the case may be, in connection with the transactions contemplated by this Agreement shall survive the Closing. 4.2. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS. 4.3. NOTICES. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered personally, telecopied (with confirmation of receipt), delivered by nationally-recognized overnight express service or sent by registered or certified mail (postage prepaid, return receipt requested) to the parties at the following addresses: (a) If to Berkshire, to: Berkshire Partners LLC One Boston Place Boston, MA 02108-4401 Telephone: (617) 227-0050 Telecopy: (617) 227-6105 Attention: Ross M. Jones With a copy to: Ropes & Gray One International Place Boston, MA 02110 Telephone: (617) 951-7000 Telecopy: (617) 951-7050 Attention: David C. Chapin, Esq. Jane D. Goldstein, Esq. -7- (b) If to the Sellers, to: c/o Howard H. Schultz 9241 LBJ Freeway, Suite 100 Dallas, TX 75243 Telephone: (972) 233-7564 Telecopy: (972) 690-7564 Attention: Howard H. Schultz Andrew H. Schultz With a copy to: Malouf, Lynch, Jackson & Swinson 600 Preston Commons East 8115 Preston Road Dallas, TX 75225 Telephone: (214) 273-0560 (direct dial) Telecopy: (214) 273-0561 (direct fax) Attention: Donald Malouf, Esq. Curtis R. Swinson, Esq. Alex E. Nakos, Esq. or to such other address as the person to whom notice is to be given may have previously furnished to the other in writing in the manner set forth above, provided that notice of a change of address shall be deemed given only upon receipt. 4.4. EXPENSES. Each party hereto shall be solely responsible for all expenses incurred by it or on its behalf in connection with the preparation and execution of this Agreement and the consummation of the transactions contemplated hereby, including, without limitation, the fees and expenses of its counsel, accountants, brokers, finders, financial advisors and other representatives. 4.5. SPECIFIC PERFORMANCE. Without limiting the rights of each party hereto to pursue all other legal and equitable rights available to such party for the other parties' failure to perform their obligations under this Agreement, the parties hereto acknowledge and agree that the remedy at law for any failure to perform their obligations hereunder would be inadequate and that each of them, respectively, shall be entitled to specific performance, injunctive relief or other equitable remedies in the event of any such failure. 4.6. DESCRIPTIVE HEADINGS; INTERPRETATION. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. References in this Agreement to Sections mean Sections of this Agreement, unless otherwise indicated. The term "person" shall mean and include an individual, a partnership, a joint venture, a corporation, a trust, a governmental entity or an unincorporated organization. The parties hereto agree that they have been represented by counsel during the negotiation and execution of this Agreement and, therefore, waive the application of any law, -8- regulation, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the party drafting such agreement or document. 4.7. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. 4.8. SEVERABILITY. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the parties shall negotiate in good faith with a view to the substitution therefor of a suitable and equitable solution in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid provision, provided, however, that the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be in any way impaired thereby, it being intended that all of the rights and privileges of the parties hereto shall be enforceable to the fullest extent permitted by law. 4.9. ENTIRE AGREEMENT; THIRD-PARTY BENEFICIARIES. This Agreement (a) constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof, and (b) except for PRG and Berkshire's permitted assignees, is not intended to confer upon any person other than the parties hereto and their permitted assigns any rights or remedies hereunder. 4.10. ASSIGNMENT. (a) No party hereto may assign its rights or obligations under this Agreement. (b) Up to 45,872 of the Shares may be acquired by Berkshire on behalf of a third party and subsequently transferred to such third party after the Closing. Notwithstanding the provisions of Section 4.10(a), if such third party is duly authorized to acquire such Shares prior to the Closing, Berkshire may assign its right under this Agreement to purchase up to an aggregate of 45,872 Shares to such third party. Sellers agree to use their best efforts to assist and cooperate with Berkshire in order to assign or transfer its rights to purchase such Shares, including entering into separate purchase or other agreements with such third party, including representations and warranties by such third party materially consistent with the representations and warranties contained in Article III of this Agreement. (c) Notwithstanding the foregoing, each Berkshire Fund may assign its rights to purchase Shares hereunder to any one or more of its affiliates, and may assign and transfer any Shares so purchased to any one or more of such affiliates. 4.11. FURTHER ASSURANCES. The Sellers and each Berkshire Fund agree to execute and deliver such other documents, certificates, agreements and other writings and to take such other actions as may be necessary or desirable in order to implement the transactions contemplated by this Agreement. -9- ARTICLE V. DEFINITIONS 5.1. DEFINITIONS. Unless otherwise defined herein, for purposes of this Agreement, the following terms shall have the meanings set forth below (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "Code" shall mean the Internal Revenue Code of 1986, as amended. "Commission" means the Securities and Exchange Commission. "Encumbrance" shall mean any lien, encumbrance, proxy, voting trust arrangement, pledge, security interest, collateral security agreement, financing statement (and similar notices) filed with any Governmental Authority, claim (including any claim as defined in the Code), charge, equities, mortgage, pledge, objection, title defect, option, restrictive covenant or restriction on transfer of any nature whatsoever, and the interest of the lessor in any property subject to a capital lease, except for restrictions or transferability imposed by the Securities Act. "Governmental Authority" shall mean any government or political subdivision thereof, whether federal, state, local or foreign, or any agency, department, commission, board, bureau, court, tribunal, body, administrative or regulatory authority or instrumentality of any such government or political subdivision. "Law" shall mean any law (including common law), rule, regulation, restriction (including zoning), code, statute, ordinance, order, writ, injunction, judgment, decree or other requirement of a Governmental Authority. "Order" shall mean any order, judgment, injunction, award, decree, writ, rule or similar action of any Governmental Authority. "Permit" shall mean any franchise, license, certificate, approval, identification number, registration, permit, authorization, order or approval of, and any required registration with, any Governmental Authority. "Securities Act" shall mean the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. [Remainder of Page Intentionally Left Blank] -10- IN WITNESS WHEREOF, the parties hereto have executed this Agreement, on the day and year first above written. BERKSHIRE FUND V INVESTMENT CORP. By: /s/ Ross M. Jones --------------------------------------- Name: Ross M. Jones Title: Vice-President BERKSHIRE INVESTORS LLC By: /s/ Ross M. Jones --------------------------------------- Name: Ross M. Jones Title: Vice-President HHS CHARITABLE LEAD ANNUITY TRUST By: /s/ Jaynie Schultz Romaner --------------------------------------- Name: Jaynie Schultz Romaner Title: Co-Trustee By: /s/ Daniel Alan Schultz --------------------------------------- Name: Daniel Alan Schultz Title: Co-Trustee By: /s/ Andrew Harold Schultz ------------------------------------ Name: Andrew Harold Schultz Title: Co-Trustee LVS CHARITABLE LEAD ANNUITY TRUST By: /s/ Jaynie Schultz Romaner --------------------------------------- Name: Jaynie Schultz Romaner Title: Co-Trustee By: /s/ Daniel Alan Schultz --------------------------------------- Name: Daniel Alan Schultz Title: Co-Trustee By: /s/ Andrew Harold Schultz --------------------------------------- Name: Andrew Harold Schultz Title: Co-Trustee DANIEL ALAN SCHULTZ HHS (2001) GST TRUST By: /s/ Daniel Alan Schultz --------------------------------------- Name: Daniel Alan Schultz Title: Trustee DANIEL ALAN SCHULTZ LVS (2001) GST TRUST By: /s/ Daniel Alan Schultz --------------------------------------- Name: Daniel Alan Schultz Title: Trustee JAYNIE SCHULTZ ROMANER HHS (2001) GST TRUST By: /s/ Jaynie Schultz Romaner --------------------------------------- Name: Jaynie Schultz Romaner Title: Trustee JAYNIE SCHULTZ ROMANER LVS (2001) GST TRUST By: /s/ Jaynie Schultz Romaner --------------------------------------- Name: Jaynie Schultz Romaner Title: Trustee SCHULTZ PRG LIQUIDATING INVESTMENTS, LTD., a Texas limited partnership By: Schultz PRG Liquidating Investments GP, L.L.C., a Texas limited liability company By: /s/ Howard Schultz --------------------------------------- Name: Howard Schultz Title: Manager/President THE ZACHARY HERMAN SCHULTZ TRUST By: /s/ Howard Schultz --------------------------------------- Name: Howard H. Schultz Title: Trustee THE GABRIELLA SCHULTZ TRUST By: /s/ Howard Schultz --------------------------------------- Name: Howard H. Schultz Title: Trustee THE SAMUEL JOEL SCHULTZ TRUST By: /s/ Howard Schultz --------------------------------------- Name: Howard H. Schultz Title: Trustee ANDREW H. SCHULTZ HHS (2001) GST TRUST By: /s/ Andrew H. Schultz --------------------------------------- Name: Andrew H. Schultz Title: Trustee ANDREW H. SCHULTZ LVS (2001) GST TRUST By: /s/ Andrew H. Schultz --------------------------------------- Name: Andrew H. Schultz Title: Trustee THE ANDREW H. SCHULTZ IRREVOCABLE TRUST By: /s/ Andrew H. Schultz --------------------------------------- Name: Andrew H. Schultz Title: Trustee ANDREW H. SCHULTZ By: /s/ Andrew H. Schultz --------------------------------------- Name: Andrew H. Schultz HOWARD H. SCHULTZ By: /s/ Howard Schultz --------------------------------------- Name: Howard H. Schultz LESLIE SCHULTZ By: /s/ Leslie Schultz --------------------------------------- Name: Leslie Schultz EXHIBIT A Number of Shares Sold NAME to Berkshire(1) ---- --------------------- HHS Charitable Lead Annuity Trust 317,409 shares LVS Charitable Lead Annuity Trust 317,410 shares Daniel Alan Schultz HHS (2001) GST Trust 288,016 shares Daniel Alan Schultz LVS (2001) GST Trust 288,016 shares Jaynie Schultz Romaner HHS (2001) GST Trust 288,016 shares Jaynie Schultz Romaner LVS (2001) GST Trust 288,016 shares Andrew Schultz 649,707 shares The Andrew H. Schultz Irrevocable Trust 1,585,001 shares Andrew Schultz HHS (2001) GST Trust 3,450 shares Andrew Schultz LVS (2001) GST Trust 3,451 shares The Samuel J. Schultz Trust 10,193 shares The Gabriella Schultz Trust 10,194 shares The Zachary H. Schultz Trust 10,193 shares Schultz PRG Liquidating Investments, Ltd. 279,058 shares Leslie Schultz 377 shares TOTAL Shares 4,338,507 shares TOTAL Consideration $37,831,781 - ---------- (1) The allocation of Shares among the Berkshire Funds will be determined prior to the Closing. EXHIBIT B Form Berkshire Registration Rights Agreement EXHIBIT C Form Investor Rights Agreement EXHIBIT D Form Note EXHIBIT E Form Subordination Agreement EXHIBIT F Form Company Call Option EXHIBIT G Form Purchase Agreement EXHIBIT H Form Management Rights Letter EXHIBIT I Opinion of Sellers' Counsel EX-99.3 5 b43703bfexv99w3.txt INVESTOR RIGHTS AGREEMENT Exhibit 99.3 INVESTOR RIGHTS AGREEMENT INVESTOR RIGHTS AGREEMENT (the "AGREEMENT"), made as of August __, 2002 by and among PRG-Schultz International, Inc., a Georgia corporation (the "COMPANY"), Berkshire Fund V, Limited Partnership, a Massachusetts limited partnership, Berkshire Investors LLC, a Massachusetts limited liability company (collectively, "BERKSHIRE") and Blum Strategic Partners II, L.P., a Delaware limited partnership ("BLUM"), each a holder of shares of common stock, no par value, of the Company (the "COMMON STOCK"). WHEREAS, pursuant to the stock purchase agreement dated August 16, 2002 between the Howard H. Schultz, Andrew H. Schultz, HHS Charitable Lead Annuity Trust, LVS Charitable Lead Annuity Trust, Daniel Alan Schultz HHS (2001) GST Trust, Daniel Alan Schultz LVS (2001) GST Trust, Jaynie Schultz Romaner HHS (2001) GST Trust, Jaynie Schultz Romaner LVS (2001) GST Trust, The Andrew H. Schultz Irrevocable Trust (collectively, the "SCHULTZ SHAREHOLDERS") and Berkshire (the "BERKSHIRE STOCK PURCHASE AGREEMENT"), the Schultz Shareholders are selling 4,338,507 shares of their Common Stock to Berkshire in a private placement; WHEREAS, pursuant to the stock purchase agreement dated August 16, 2002 between the Schultz Shareholders and Blum (the "BLUM STOCK PURCHASE AGREEMENT"), the Schultz Shareholders are selling 4,338,507 shares of their Common Stock to Blum in a private placement; and WHEREAS, in connection with the Berkshire Stock Purchase Agreement and the Blum Stock Purchase Agreement, the Company, Berkshire and Blum agree to enter into this Agreement. NOW THEREFORE, in consideration of the premises and agreements set forth herein, the parties agree with each other as follows: 1. NOMINATION OF BERKSHIRE DIRECTOR. Immediately after the date hereof, the Company shall utilize reasonable efforts to cause its Board Nominating Committee or the full Board to designate Garth H. Greimann as a nominee for election to the Board of Directors of the Company (the "BOARD") for so long as Berkshire or their affiliates hold in excess of 2,000,000 shares of Common Stock (subject to adjustment for stock splits, stock dividends and reclassifications). In the event Garth H. Greimann shall cease to serve as a member of the Board for any reason, the Company shall utilize reasonable efforts to cause its Board Nominating Committee or the full Board to designate Ross M. Jones or another person designated by Berkshire as a nominee for election to the Board. 2. NOMINATION OF BLUM DIRECTOR. Immediately after the date hereof, the Company shall utilize reasonable efforts to cause its Board Nominating Committee or the full Board to designate N. Colin Lind as a nominee for election to the Board for so long as Blum or their affiliates hold in excess of 2,000,000 shares of Common Stock (subject to adjustment for stock -1- splits, stock dividends and reclassifications). In the event N. Colin Lind shall cease to serve as a member of the Board for any reason, the Company shall utilize reasonable efforts to cause its Board Nominating Committee or the full Board to designate Jose S. Medeiros or another person designated by Blum as a nominee for election to the Board. 3. BERKSHIRE OBSERVER RIGHTS. For so long as Berkshire and its affiliates beneficially own or control any shares of Common Stock (subject to adjustment for stock splits, stock dividends and reclassifications), the Company shall permit a person designated by Berkshire to attend all meetings of the Board and its committees, other than executive sessions, and such observer shall have the right to receive all written information provided by the Company's management to the Board. Such observer shall initially be Ross M. Jones. Such observer shall have no right to vote on any matter presented to the Board, but otherwise shall have (i) the right to examine books and records of the Company, (ii) the right to review and participate in all discussions of the Board including, without limitation, discussions regarding capital or equity programs, other than executive sessions, (iii) the right to receive, upon request, any information relating to the Company and (iv) the right to meet and consult with the management of the Company on a regular basis; PROVIDED, that any such designee shall agree to be bound by all policies relating to confidentiality and material non-public information which are applicable to the directors and senior executive officers of the Company. 4. BLUM OBSERVER RIGHTS. For so long as Blum and its affiliates beneficially own or control any shares of Common Stock (subject to adjustment for stock splits, stock dividends and reclassifications), the Company shall permit a person designated by Blum to attend all meetings of the Board and its committees, other than executive sessions, and such observer shall have the right to receive all written information provided by the Company's management to the Board. Such observer shall initially be Jose S. Medeiros. Such observer shall have no right to vote on any matter presented to the Board, but otherwise shall have (i) the right to examine books and records of the Company, (ii) the right to review and participate in all discussions of the Board including, without limitation, discussions regarding capital or equity programs, other than executive sessions, (iii) the right to receive, upon request, any information relating to the Company and (iv) the right to meet and consult with the management of the Company on a regular basis; PROVIDED, that any such designee shall agree to be bound by all policies relating to confidentiality and material non-public information which are applicable to the directors and senior executive officers of the Company. All rights of Blum under Section 4.1 of that certain Note Purchase Agreement with the Company dated as of December 3, 2001, are hereby terminated. 5. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS. 6. NOTICES. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered personally, telecopied (with confirmation of receipt), delivered by nationally-recognized -2- overnight express service or sent by registered or certified mail (postage prepaid, return receipt requested) to the parties at the following addresses: a. If to the Company, to: PRG-Schultz International, Inc. 2300 Windy Ridge Parkway Suite 100 North Tower Atlanta, Georgia 30339-8426 Telephone: (770) 779-3900 Facsimile: (770) 779-3034 Attention: Clinton D. McKellar, Esq. With a copy to: Arnall Golden Gregory LLP 2800 One Atlantic Center 1201 West Peachtree Street Atlanta, Georgia 30309 Telephone: (404) 873-8700 Facsimile: (404) 873-8701 Attention: Jonathan Golden, Esq. b. If to Berkshire, to: Berkshire Partners LLC One Boston Place Boston, Massachusetts 02108-4401 Telephone: (617) 227-0050 Facsimile: (617) 227-6105 Attention: Ross M. Jones With a copy to: Ropes & Gray One International Place Boston, Massachusetts 02110 Telephone: (617) 951-7000 Facsimile: (617) 951-7050 Attention: David C. Chapin, Esq. Jane D. Goldstein, Esq. c. If to the Blum, to: Blum Strategic Partners II, L.P. -3- 909 Montgomery Street Suite 400 San Francisco, California 94133 Telephone: (415) 434-1111 Facsimile: (415) 434-3130 Attention: Murray Indick With a copy to: Simpson Thacher & Bartlett 3330 Hillview Avenue Palo Alto, CA 94304 Telephone: (650) 251-5000 Facsimile: (650) 251-5002 Attention: Michael Nooney or to such other address as the person to whom notice is to be given may have previously furnished to the other in writing in the manner set forth above, provided that notice of a change of address shall be deemed given only upon receipt. 7. SPECIFIC PERFORMANCE. Without limiting the rights of each party hereto to pursue all other legal and equitable rights available to such party for the other parties' failure to perform their obligations under this Agreement, the parties hereto acknowledge and agree that the remedy at law for any failure to perform their obligations hereunder would be inadequate and that each of them, respectively, shall be entitled to specific performance, injunctive relief or other equitable remedies in the event of any such failure. 8. DESCRIPTIVE HEADINGS; INTERPRETATION. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. References in this Agreement to Sections mean Sections of this Agreement, unless otherwise indicated. The term "person" shall mean and include an individual, a partnership, a joint venture, a corporation, a trust, a governmental entity or an unincorporated organization. The parties hereto agree that they have been represented by counsel during the negotiation and execution of this Agreement and, therefore, waive the application of any law, regulation, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the party drafting such agreement or document. 9. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. 10. SEVERABILITY. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the parties shall negotiate in good faith with a view to the substitution therefor of a suitable and equitable solution in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid provision, provided, however, that -4- the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be in any way impaired thereby, it being intended that all of the rights and privileges of the parties hereto shall be enforceable to the fullest extent permitted by law. 11. ENTIRE AGREEMENT; THIRD-PARTY BENEFICIARIES. This Agreement constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof, and is not intended to confer upon any person other than the parties hereto and their permitted assigns any rights or remedies hereunder. 12. ASSIGNMENT. No party hereto may assign its rights or obligations under this Agreement, provided that Berkshire and Blum may assign its rights hereunder to any one or more of its affiliates. 13. FURTHER ASSURANCES. The Company, Berkshire and Blum each agree to execute and deliver such other documents, certificates, agreements and other writings and to take such other actions as may be necessary or desirable in order to implement the actions contemplated by this Agreement. [The rest of this page has been intentionally left blank] -5- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written. PRG-SCHULTZ INTERNATIONAL, INC. By: --------------------------------- Name: Title: BERKSHIRE FUND V, LIMITED PARTNERSHIP By: Fifth Berkshire Associates LLC its General Partner By: --------------------------------- Name: Title: BERKSHIRE INVESTORS LLC By: --------------------------------- Name: Title: BLUM STRATEGIC PARTNERS II, L.P. By: Blum Strategic GP II, L.L.C. its General Partner By: --------------------------------- Name: Title: EX-99.4 6 b43703bfexv99w4.txt REGISTRATION RIGHTS AGREEMENT Exhibit 99.4 REGISTRATION RIGHTS AND LOCK-UP AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made as of the 27th day of August, 2002, by and between PRG-Schultz International, Inc., a Georgia corporation ("PRGX"), Berkshire Fund V, Limited Partnership, a Massachusetts limited partnership, and Berkshire Investors LLC, a Massachusetts limited liability company (each, a "Holder," and with any permitted transferees thereof, "Holders"). RECITALS: WHEREAS, concurrently herewith, the Holders, Howard Schultz, Andrew Schultz and certain affiliates thereof ("Schultz Sellers") have entered into a Stock Purchase Agreement dated August 16, 2002 (the "Schultz Stock Purchase Agreement") pursuant to which the Holders have purchased 4,338,507 shares of PRGX common stock from Schultz Sellers; WHEREAS, concurrently herewith, Berkshire Fund V, Limited Partnership, a Massachusetts limited partnership, and Berkshire Investors LLC, a Massachusetts limited liability company (including permitted transferees, each a "Berkshire Fund") and an affiliate of the Schultz Sellers have entered into promissory notes, dated as of August 27, 2002, pursuant to which the Berkshire Funds have agreed to lend the Schultz Sellers an aggregate of $12,610,584, secured by shares of PRGX common stock held by the Schultz Sellers (the "Berkshire Notes"); WHEREAS, in order to facilitate the sales to Holder, PRGX has agreed to grant Holder the rights contained herein. NOW, THEREFORE, in consideration of the mutual promises, covenants, representations and warranties contained herein and of the mutual benefits to be derived herefrom, and intending to be legally bound, the parties hereto agree as follows: ARTICLE I DEMAND REGISTRATION (a) If PRGX shall receive, at any time on or after January 24, 2004, a written request from the Holder(s) of Registrable Securities (as hereinafter defined) that PRGX file a firm commitment, underwritten registration statement pursuant to the Securities Act of 1933, as amended (the "Securities Act") on Form S-1 or a successor form thereto covering the registration of at least $5 million in value of the Registrable Securities (a "Demand Registration"), then PRGX shall use its reasonable best efforts to effect the registration under the Securities Act on Form S-1 of all Registrable Securities which such Holder(s) have requested to be registered. Within ten (10) business days after receipt of any such request, PRGX shall give written notice of such requested registration to all other Holders and the Blum Holders (as defined below), of Registrable Securities, if any, in accordance with Section 9.1 hereof, and shall use its reasonable best efforts to include in such registration all Registrable Securities with respect to which PRGX has received written requests for inclusion therein within fifteen (15) days after the mailing of PRGX's notice; provided, however, that PRGX shall be required to file no more than one (1) registration statement pursuant to the provisions of this Article I(a), regardless of whether or not any Holder chooses not to include securities in any such registration statement. The term "Registrable Securities" means (i) the 4,338,507 shares of PRGX common stock acquired by the Holder pursuant to the Schultz Stock Purchase Agreement, (ii) the shares of PRGX common stock transferred to the Berkshire Funds (or their permitted transferees) upon exercise of the put/call provisions of the Berkshire Notes, if any (iii) the shares of PRGX common stock purchased by the Berkshire Funds (or their permitted transferees) pursuant to a Purchase Agreement dated August 27, 2002 between the Berkshire Funds and Blum Strategic Partners II, L.P. ("Blum") (the "Investor Purchase Agreement"), if any, (iv) any other shares of PRGX common stock acquired after the date hereof by any Holder (or their transferees pursuant to Article VII (i) or (ii) hereof), and (v) any other securities of PRGX issued as (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange for, or in replacement of, the Registrable Securities or resulting from a subdivision of the outstanding shares of Registrable Securities into a greater number of shares (by reclassification, stock split or otherwise); provided, however, that the foregoing definition shall exclude in all cases any Registrable Securities sold by a person in a transaction in which his or her rights under this Agreement are not assigned in conformity with the provisions of Article VII hereof (shares acquired by Holders pursuant to Article I(a)(i), (ii) or (iii) above and any shares issued to Holders in respect of those shares pursuant to Article I(a)(v) above are referred to herein as the "Berkshire Designated Shares"). Notwithstanding the foregoing, any particular shares of PRGX common stock or other securities shall be treated as Registrable Securities only if and so long as they have not been (A) sold to or through a broker or dealer or underwriter in a public distribution or a public securities transaction, or (B) sold in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act under Section 4(1) thereof so that all transfer restrictions, and restrictive legends with respect thereto, if any, are removed upon the consummation of such sale. The term "Registrable Securities" shall not include securities which are eligible for immediate sale under Rule 144(k) or Rule 145 under the Securities Act without the application of volume restrictions. The foregoing notwithstanding, PRGX shall not be obligated to cause any registration pursuant to this Article I(a) or Article I(c) to become effective prior to one hundred eighty (180) days following the effective date of a PRGX- or stockholder-initiated registration (other than a registration effected solely to qualify an employee benefit plan or to effect a business combination pursuant to Rule 145) or such longer period not to exceed one hundred eighty (180) days as any underwriter thereof shall require, provided that PRGX shall use its best efforts to achieve such effectiveness promptly following the end of such period and PRGX shall have complied with Article II hereof with respect to such registration to the extent applicable; 2 (b) Each Demand Registration must be an underwritten, full commitment registration. The underwriter will be selected by PRGX, subject to the approval of a majority in interest of the Holders including Registrable Securities in the requested registration, such approval not to be unreasonably withheld or delayed. The right of any Holder to include its Registrable Securities in the Demand Registration shall be conditioned upon such Holder's participation in such underwriting and the inclusion of such Holder's Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting. Notwithstanding any other provision of this Article I, if the underwriter advises the Holders in writing that marketing factors require a limitation on the number of shares to be underwritten, then, subject to the provisions of Article II with respect to Stockholder Registrations (as defined below), the number of shares of Registrable Securities that may be included in the offering shall be allocated among all Holders thereof in proportion (as nearly as practicable) to the amount of Registrable Securities of PRGX originally requested to be included by each Holder in the underwriting; provided, however, that the number of shares of Registrable Securities to be included in such offering shall not be reduced unless all other securities other than securities included in such registration by Blum Holders pursuant to Article II, if any, are first entirely excluded from the offering; and provided further, that, if a Holder has to reduce the amount of Registrable Securities to be included in the offering, the Holders of Registrable Securities initially requesting such Demand Registration shall be entitled to withdraw such request and, if such request is withdrawn and Holders pay all Registration Expenses (as hereinafter defined) in connection with such registration, such Demand Registration shall not count as the one permitted Demand Registration hereunder. (c) Subject to Article I(a), if PRGX shall receive, at any time on or after January 24, 2004, a written request from the Holder(s) of Registrable Securities that PRGX effect a registration on Form S-3 (or on any successor form to Form S-3 regardless of its designation), PRGX will promptly give written notice of the proposed registration to all other Holders and the Blum Holders and use its reasonable best efforts to effect, as soon as practicable, such registration (and to keep such registration effective for up to 45 days), together with all or such portion of the Registrable Securities of any other Holder or Holders joining in such request as are specified in a written request given within fifteen (15) days after receipt of such written notice from PRGX; provided, however, that PRGX shall not be obligated to effect any such registration, qualification or compliance pursuant to this Article I(c) if: (1) Form S-3 (or any successor form to Form S-3 regardless of its designation) is not available for such offering by the Holders; or (2) the aggregate gross proceeds (before deduction of underwriting discounts and commissions) of the Registrable Securities specified in such request is not at least $2,000,000; and provided, further, that Holders may not exercise a demand right pursuant to this Article I(c) or Article I(a) within 180 days after the effective date of any other registration statement filed pursuant to this Agreement or that certain Registration Rights Agreement of even date herewith among PRGX and Blum Strategic Partners II, LP and certain of its affiliates (the "August Registration Rights Agreement"). 3 (d) Notwithstanding the foregoing, if PRGX shall furnish to Holders requesting a registration statement pursuant to this Article I, in accordance with Section 9.1 hereof, a certificate signed by the General Counsel, Chief Financial Officer or Chief Executive Officer of PRGX stating that, in his good faith judgment after consultation with outside legal counsel, it would require the disclosure of material, nonpublic information and could have a material adverse effect on the business or operations of PRGX and its stockholders for such registration statement to be filed pursuant to this Article I or to be amended or supplemented in accordance with Article III(f) and it is therefore essential to defer the filing of such registration statement or amendment or supplement, PRGX shall have the right to defer such filing for a period of not more than 60 days after receipt of the request of the initiating Holders in the case of an initial filing, or not more than 60 days after the date of delivery of such certificate in the case of an amendment or supplement; provided, however, PRGX may only exercise this twice in any 12-month period and provided further, however, that if a Demand Registration is delayed hereunder, the Holders of Registrable Securities initially requesting such Demand Registration shall be entitled to withdraw such request and, if such request is withdrawn, such Demand Registration shall not count as one of the permitted Demand Registrations hereunder and PRGX shall pay Registration Expenses in connection with such registration. ARTICLE II PIGGYBACK REGISTRATION Subject to Section 5.5 hereof, if there is a PRGX-initiated registration (a "PRGX Registration") or a registration initiated by the holders of rights under the August Registration Rights Agreement (the "Blum Holders"), or any other stockholder of the Company with contractual rights to initiate such registration (each a "Stockholder Registration") (other than a registration effected solely to register an employee benefit or dividend reinvestment plan, to effect a business combination pursuant to Rule 145 or conduct an exchange offer), PRGX will give each Holder written notice of such registration. Upon the written request of each Holder given within ten (10) days after mailing of such notice by PRGX in accordance with Section 9.1, PRGX shall, subject to the provisions below regarding underwritten registrations, cause to be registered under the Securities Act all of the Registrable Securities that each such Holder has requested to be registered. In connection with any offering involving an underwriting of shares of PRGX's capital stock, PRGX shall not be required under this Article II to include any of the Holders' securities in such underwriting unless they accept the terms of the underwriting as agreed upon between PRGX and the underwriters selected by it, and then only in such quantity as the underwriters determine in their sole discretion will not jeopardize the success of the offering. If the total amount of securities, including Registrable Securities, to be included in such offering exceeds the amount of securities to be sold that the underwriters determine in their sole discretion is compatible with the success of the offering, then PRGX shall be required to include in the offering only that number of such securities, including Registrable Securities, which the underwriters determine in their sole discretion will not jeopardize the success of the offering 4 of the securities so included. Securities shall be excluded from a PRGX Registration in the order set forth below: First, the number of shares requested to be registered for the account of persons, if any, whose rights to have their shares included in such registration are subordinate to the rights granted pursuant to this Agreement shall be reduced as required; Second, the number of shares eligible to be registered for the account of the Holders and the number of shares eligible to be registered by the Blum Holders shall be reduced, as required, so Holders of registration rights granted pursuant to this Agreement shall be entitled to sell (i) if such Registrable Securities requested to be included by such Holders include only Berkshire Designated Shares and any shares requested to be included by Blum Holders pursuant to the August Registration Rights Agreement include only Blum Designated Shares (as defined in the August Registration Rights Agreement), up to 50% of the total Registrable Securities allocated for sale in the offering by the Holders and the Blum Holders, in the aggregate, and the Blum Holders shall be entitled to sell up to 50% of the total Registrable Securities allocated for sale in the offering by Holders and the Blum Holders, in the aggregate, or (ii) if such Registrable Securities requested to be included by such Holders include any Registrable Securities other than Berkshire Designated Shares or if any shares requested to be included by Blum Holders pursuant to the August Registration Rights Agreement include shares other than Blum Designated Shares, the Holders shall be entitled to sell up to 40% of the total Registrable Securities allocated for sale in the offering by the Holders and the Blum Holders, in the aggregate, and the Blum Holders shall be entitled to sell up to 60% of the total Registrable Securities allocated for sale in the offering by Holders and the Blum Holders, in the aggregate; provided, however, that, to the extent that the number of shares the Holders or the Blum Holders, in the aggregate, are entitled to register pursuant to this sentence exceeds the number that such holders actually seek to register, then such excess shall be added to the number of shares that the Holders or the Blum Holders, respectively, shall be entitled to register; Third, those shares to be included in satisfaction of any superior contractual registration rights, if any; Last, those shares to be included for the account of the Company, if any. Securities shall be excluded from a Stockholder Registration (other than a demand registration of Purchased Shares (as defined in the August Registration Rights Agreement) prior to January 24, 2002) in the order set forth below: First, those shares to be included for the account of the Company, if any; 5 Second, the number of shares requested to be registered for the account of persons, if any, whose rights to have their shares included in such registration are subordinate to the rights granted pursuant to this Agreement shall be reduced as required; Third, the number of shares eligible to be registered for the account of the Holders and the number of shares eligible to be registered by the Blum Holders shall be reduced, as required, so the Holders of registration rights granted pursuant to this Agreement shall be entitled to sell (i) if such Registrable Securities requested to be included by such Holders include only Berkshire Designated Shares and any shares requested to be included by Blum Holders pursuant to the August Registration Rights Agreement include only Blum Designated Shares, up to 50% of the total Registrable Securities allocated for sale in the offering by the Holders and the Blum Holders, in the aggregate, and the Blum Holders shall be entitled to sell up to 50% of the total Registrable Securities allocated for sale in the offering by Holders and Blum Holders, in the aggregate, or (ii) if such Registrable Securities requested to be included by such Holders include any Registrable Securities other than Berkshire Designated Shares or if any shares requested to be included by Blum Holders pursuant to the August Registration Rights Agreement include shares other than Blum Designated Shares, the Holders shall be entitled to sell up to 40% of the total Registrable Securities allocated for sale in the offering by the Holders and the Blum Holders, in the aggregate, and the Blum Holders shall be entitled to sell up to 60% of the total Registrable Securities allocated for sale in the offering by Holders and the Blum Holders, in the aggregate; provided, however, that, to the extent that the number of shares the Holders or the Blum Holders, in the aggregate, are entitled to register pursuant to this sentence exceeds the number that such holders actually seek to register, then such excess shall be added to the number of shares that the Holders or the Blum Holders, respectively, shall be entitled to register; Last, those shares to be included in satisfaction of any superior contractual registration rights, if any. With respect to a demand registration with respect to Purchased Shares (as defined in the August Registration Rights Agreement) prior to January 24, 2004, all other securities to be included in such registration shall be reduced in their entirety prior to any reduction in the number of Purchased Shares requested to be included by the holder of such Purchased Shares. ARTICLE III REGISTRATION PROCEDURES Whenever the Holders of Registrable Securities have requested that any Registrable Securities be registered pursuant to this Agreement, PRGX will use its reasonable best 6 efforts to effect the registration and the sale of such Registrable Securities in accordance with the intended method of disposition thereof, and pursuant thereto PRGX will as expeditiously as practicable: (a) Prepare and file with the Securities and Exchange Commission ("SEC") a registration statement with respect to such Registrable Securities on Form S-1 or Form S-3 (as appropriate) or a successor form if PRGX is eligible to use such form, or on such substitute form reasonably chosen by PRGX if it is not so eligible, as soon as practicable, but no later than sixty (60) days from receipt of the request, and use its reasonable best efforts to cause such registration statement to become effective as soon as practicable after filing; provided, however, that PRGX shall have no obligation to include securities in a registration statement pursuant to Article II if that registration statement is withdrawn for any reason; and (b) Notify each Holder of the effectiveness of each registration statement filed hereunder and prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective until that date when all Registrable Securities covered by such registration statement have been sold (but not before the expiration of the applicable prospectus delivery period) or such shorter period as PRGX may notify the Holders in the case of a Registration under Article II, and comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement during such period in accordance with the intended methods of disposition by the sellers thereof set forth in such registration statement, and furnish, without charge, to each seller of Registrable Securities, in accordance with Section 9.1 hereof, copies of all correspondence between PRGX and the SEC relating to such registration; and (c) Furnish, without charge, to each seller of Registrable Securities and each underwriter, if any, in accordance with Section 9.1 hereof, such number of copies of such registration statement (including all exhibits), each amendment and supplement thereto, the prospectus included in such registration statement (including each preliminary prospectus) in conformity with the requirements of the Securities Act and such other documents as such seller may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such seller; and (d) Use its best efforts to register or qualify such Registrable Securities under such other securities or blue sky laws of such jurisdictions within the United States as the sellers or any managing underwriter shall request, to keep such registration or qualification in effect for so long as the registration statement is in effect and do any and all other acts and things which may be reasonably necessary or advisable to enable such sellers to consummate the disposition in such jurisdictions of the Registrable Securities owned by such sellers (provided that PRGX will not be required to qualify generally to do business or file any general consent to service of process in any jurisdiction where it would not otherwise be required to qualify or file but for this subparagraph); and 7 (e) Use its best efforts to obtain all other approvals, covenants, exemptions or authorizations from such governmental agencies or authorities as may be necessary to enable the sellers of such Registrable Securities to consummate the disposition of such Registrable Securities; and (f) Notify each seller of such Registrable Securities promptly at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in such registration statement contains an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing, and subject to Article I(c) hereof, prepare and file as soon as practicable with the SEC, but in no event later than thirty (30) days after awareness of such event, and promptly notify each Holder of Registrable Securities of the filing of, a supplement to such prospectus or an amendment to the registration statement so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances under which they were made and in the case of an amendment to the registration statement, use reasonable best efforts to cause it to become effective as soon as possible; and (g) Promptly notify each Holder selling Registrable Securities covered by such registration statement and each managing underwriter, if any: (i) when the registration statement, any pre-effective amendment, the prospectus or any prospectus supplement related thereto or post-effective amendment to the registration statement has been filed and, with respect to the registration statement or any post-effective amendment, when the same has become effective; (ii) of any request by the SEC or any state securities authority for amendments or supplements to the registration statement or the prospectus related thereto or for additional information; and (iii) of the receipt by PRGX of any notification with respect to the suspension of the qualification of any Registrable Securities for sale under the securities or blue sky laws of any jurisdiction or the initiation of any proceeding for such purpose; and (h) Upon receipt of such confidentiality agreements as PRGX may reasonably request, make reasonably available for inspection by any seller of such Registrable Securities covered by such registration statement, by any underwriter, if any, participating in any disposition to be effected pursuant to such registration statement and by any attorney, accountant or other agent retained by any such seller or any such underwriter, all pertinent financial and other records, pertinent corporate documents and properties of PRGX, and supply all information reasonably requested by any such seller, underwriter, attorney, accountant or agent in connection with such registration statement in order to permit them to exercise their due diligence responsibility; and (i) Promptly prior to the filing of any document which is to be incorporated by reference into the registration statement or the prospectus (after the initial filing of such registration statement) and which contains information regarding the selling Holders, 8 provide copies of such document to counsel for the selling Holders of Registrable Securities and to each managing underwriter, and make such changes in such document concerning the selling Holders prior to the filing thereof as counsel for such selling Holders or underwriters may reasonably request; and (j) Furnish to each Holder participating in the offering and the managing underwriter, without charge, at least one signed copy of the registration statement and any post-effective amendments thereto (which may be a photocopy or conformed copy of such signed document), excluding all documents incorporated therein by reference and all exhibits; and (k) Use its best efforts to furnish, at the request of any Holder requesting registration of Registrable Securities pursuant to this Agreement, on the date that such Registrable Securities are delivered to the underwriters for sale in connection with a registration pursuant to this Agreement, if such securities are being sold through underwriters, or, if such securities are not being sold through underwriters, on the date that the registration statement with respect to such securities becomes effective: (i) a copy of an opinion or opinions, dated such date, of the counsel representing PRGX for the purposes of such registration, in form and substance as is customarily given by company counsel to the underwriters in an underwritten public offering, addressed to the underwriters, if any, and (ii) a letter dated such date, from the independent certified public accountant of PRGX, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public officering, addressed to the underwriters, if any, and to the Holders requesting registration of Registrable Securities; (l) Use its best efforts to cooperate with the Holders requesting registration of Registrable Securities pursuant to this Agreement in the disposition of the Registrable Securities covered by such registration statement, including without limitation in the case of an underwritten offering, causing key executives of the Company and its subsidiaries to participate under the direction of the managing underwriter in a "road show" scheduled by such managing underwriter in such locations and of such duration as in the judgment of such managing underwriter are appropriate for such underwritten offering; (m) Cooperate with the selling Holders of Registrable Securities and the managing underwriter, if any, to facilitate the timely preparation and delivery of certificates not bearing any restrictive legends representing the Registrable Securities to be sold, and cause such Registrable Securities to be issued in such denominations and registered in such names in accordance with the underwriting agreement prior to any sale of Registrable Securities to the underwriters or, if not an underwritten offering, in accordance with the written instructions of the selling holders of Registrable Securities at least three business days prior to any sale of Registrable Securities; and (n) In the event of the issuance of any stop order suspending the effectiveness of a registration statement, or the initiation of any proceeding for such purpose, or of any order suspending or preventing the use of any related prospectus or suspending the qualification of any common stock included in such registration statement for sale in any 9 jurisdiction, PRGX will promptly notify each seller of such order, and subject to Article I(c) hereof, will use its reasonable best efforts to promptly obtain the withdrawal of such order; and (o) If the offering is to be underwritten, enter into any necessary agreements in connection therewith (including an underwriting agreement containing customary representations, warranties and agreements); and (p) Cause all such Registrable Securities registered pursuant hereto to be listed on each securities exchange or other quotation service on which similar securities issued by PRGX are then listed; and (q) Provide a transfer agent and registrar for all Registrable Securities registered pursuant hereto and a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration. ARTICLE IV REGISTRATION EXPENSES As used herein, "Registration Expenses" shall mean all expenses incurred in connection with all registrations, (other than underwriters' commissions and discounts) filings or qualifications pursuant hereto, whether or not such registration becomes effective or remains effective for the applicable period contemplated hereby, including (without limitation) all registration, filing and qualification fees, printers' and accounting fees and fees and disbursements of counsel for PRGX, excluding the fees and expenses of counsel for the Holders. All Registration Expenses shall be borne by PRGX. ARTICLE V UNDERTAKINGS OF THE HOLDERS OF REGISTRABLE SECURITIES AND LOCK-UP 5.1 SUSPENSION OF SALES. If any Registrable Securities are included in a registration statement pursuant to the terms of this Agreement, the Holder thereof will not until further notice from PRGX delivered in accordance with Section 9.1 hereof that a registration statement or prospectus is corrected or updated in accordance with Article III(f) effect sales thereof after receipt of written notice from PRGX pursuant to Article III(f) and delivered in accordance with Section 9.1 hereof of the occurrence of an event specified therein in order to permit PRGX to correct or update the registration statement or prospectus in accordance with Article III(f), provided that the obligations of PRGX with respect to maintaining any registration statement current and effective shall be extended by a period of days equal to the period said suspension is in effect. 10 5.2 COMPLIANCE. If any Registrable Securities are being registered in any registration pursuant to this Agreement, the Holder thereof will comply with all anti-stabilization, manipulation and similar provisions of Section 10 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and any rules promulgated thereunder by the SEC. 5.3 TERMINATION OF EFFECTIVENESS. At the end of the period during which PRGX is obligated to keep a registration statement current and effective as described herein, each Holder of Registrable Securities included in the registration statement shall discontinue sales thereof pursuant to such registration statement, unless such Holder has received written notice from PRGX delivered in accordance with Section 9.1 hereof of its intention to continue the effectiveness of such registration statement with respect to any of such securities which remain unsold. 5.4 FURNISH INFORMATION. It shall be a condition precedent to the obligations of PRGX to take any action pursuant to this Agreement with respect to the Registrable Securities of any selling Holder that such Holder shall furnish to PRGX such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as shall reasonably be required to effect the registration of such Holder's Registrable Securities or as shall otherwise reasonably be requested by PRGX, which request shall be delivered in accordance with Section 9.1 hereof; provided, however, that this shall not affect the rights of, or the obligations of PRGX under this Agreement to, any other Holder. Notwithstanding the foregoing, PRGX shall have no obligation with respect to any registration requested pursuant to Article I of this Agreement if, as a result of the application of the preceding sentence, the Registrable Securities of any Holder are excluded from any Demand Registration and the value of the Registrable Securities to be included in the registration is therefore reduced below $5 million; provided, however, that in such event, the remaining Holders requesting such Demand Registration shall be entitled to (i) add additional securities so that the Registrable Securities to be included in the registration are increased to $5 million; or (ii) withdraw such request and, if such request is withdrawn and the Holders pay all Registration Expenses in connection with such registration, such Demand Registration shall not count as the permitted Demand Registration hereunder. PRGX shall only be required to pay the Registration Expenses of such withdrawn registration if the Holders inform PRGX that such registration shall count as its one Demand Registration hereunder. 5.5 LOCK-UP. Other than in connection with transfers (a) pursuant to Article VII(i), (ii) or (iii) to transferees who agree to be bound by the provisions of this Agreement, (b) that have been consented to in writing by the Company in advance, (c) pursuant to a third party tender offer that is recommended by the Board of Directors of the Company, or (d) pursuant to a merger, consolidation or reorganization to which the Company is a party, and notwithstanding the provisions of Article II hereof, the Holders agree that they will not at any time prior to January 24, 2004, sell, gift, transfer or otherwise dispose of, or enter into any collar, swap, prepaid forward, or other hedging transaction that would reduce the risk of ownership of, (i) the 4,338,507 shares of PRGX common stock acquired by the Holders pursuant to the Schultz Stock Purchase Agreement, (ii) the shares of PRGX common stock 11 transferred to the Berkshire Funds (or their permitted transferees) upon the exercise of the put/call provisions of the Berkshire Notes and any shares of PRGX common stock obtained by the Berkshire Funds (or their permitted transferees), pursuant to the Pledge Agreement contemplated by the Berkshire Notes, upon a default under the Berkshire Notes, (iii) the shares of PRGX common stock purchased by the Berkshire Funds (or their permitted transferees) pursuant to the Investor Purchase Agreement, and (iv) any other securities of PRGX issued as (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange for, or in replacement of, these securities or resulting from a subdivision of the outstanding shares of these securities into a greater number of shares (by reclassification, stock split or otherwise). ARTICLE VI UNDERWRITTEN REGISTRATIONS If requested by the underwriters for a Demand Registration, PRGX shall enter into a customary underwriting agreement with the underwriters. Such underwriting agreement shall be reasonably satisfactory in form and substance to the Holders and shall contain such representations and warranties by, and such other agreements on the part of, PRGX and such other terms as are generally included in the underwriting agreements of nationally recognized underwriters, including, without limitation, indemnities and contribution agreements; provided however, that PRGX shall not be required to make any representations or warranties with respect to written information provided by a selling Holder for inclusion in the registration statement. Such underwriting agreement shall also contain such representations and warranties by the participating Holders as are generally included in agreements of that type, including, without limitation, indemnities and contribution agreements, customary in transactions of that type (but excluding any representations or warranties with respect to the Company). Any provisions in any such underwriting agreement with respect to contribution and indemnity shall supersede and render null and void the indemnification and contribution provisions of this Agreement with respect to the securities contained in the underwriting. ARTICLE VII ASSIGNMENT OF REGISTRATION RIGHTS The rights of a Holder of Registrable Securities set forth in this Agreement (including a Holder who received the Registrable Securities by an assignment permitted pursuant to this Agreement), including the right to cause PRGX to register Registrable Securities and pay the Registration Expenses to the extent set forth in Article IV, may be assigned by such Holder, but only to the extent that Registrable Securities are concurrently 12 transferred to the assignee, only to (i) its successors-in-interest by merger, consolidation and similar transaction, (ii) an Affiliate of such Holder or its successor-in-interest which acquires Registrable Securities (including, without limitation, Berkshire Fund VI, Limited Partnership) or one non-affiliate of such Holder, in an aggregate amount not to exceed 45,872 Registrable Securities, (iii) pursuant to the Investor Purchase Agreement, or (iv) a sale of at least 1,000,000 Registrable Securities to a third party, provided in each instance the assignee agrees to be bound by the terms of this Agreement. For purposes of this Agreement, the term "Affiliate" means any person that, directly or indirectly, controls or is controlled by or is under common control with the Holder or its successor-in-interest, as applicable. For purposes of this definition, control of a person means the power, directly or indirectly, to direct or cause the direction of the management and policies of such person, whether by contract or otherwise and, in any event and without limiting the foregoing, any person owning fifty percent (50%) or more of the voting securities of another person shall be deemed to control that person. Notwithstanding the foregoing, other than as provided in parts (i), (ii) and (iii) of the first sentence, in no event may less than 20% of all Registrable Securities be transferred at any time. ARTICLE VIII INDEMNIFICATION 8.1 INDEMNIFICATION BY PRGX. PRGX shall indemnify and hold harmless, with respect to any registration statement filed by it, to the fullest extent permitted by law, each Holder of Registrable Securities covered by such registration statement, its officers, directors, employees, agents, affiliates and general or limited partners (and the directors, officers, employees, affiliates and agents thereof) and each other person, if any, who controls or is alleged to control such Holder within the meaning of the Securities Act (collectively, the "Holder Indemnified Parties") against all losses, claims, damages, liabilities and expenses, joint or several (including reasonable fees of counsel and any amounts paid in settlement effected with PRGX's consent, which consent shall not be unreasonably delayed or withheld), to which any such Holder Indemnified Party may become subject under the Securities Act, the Exchange Act, any other federal law, any state or common law, any rule or regulation promulgated thereunder or otherwise, insofar as such losses, claims, damages, liabilities or expenses (or actions or proceedings, whether commenced or threatened, in respect thereof) are caused solely by (i) any untrue statement or alleged untrue statement of a material fact contained in any registration statement in which such Registrable Securities were included as contemplated hereby or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading or (ii) any untrue statement or alleged untrue statement of a material fact contained in any preliminary, final or summary prospectus, together with the documents incorporated by reference therein (as amended or supplemented if PRGX shall have filed with the SEC any amendment thereof or supplement thereto), or the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they 13 were made, not misleading, or (iii) any violation by PRGX of the Securities Act, the Exchange Act, any other federal law, any state or common law, or any rule or regulation promulgated thereunder in connection with any such registration; and in each such case, PRGX shall reimburse each such Holder Indemnified Party for any reasonable legal or any other expenses incurred by any of them in connection with investigating or defending any such loss, claim, damage, liability, expense, action or proceeding, provided, however, that PRGX shall not be liable to any such Holder Indemnified Party in any such case to the extent that any such loss, claim, damage, liability or expense (or action or proceeding, whether commenced or threatened, in respect thereof) arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement or amendment thereof or supplement thereto or in any such preliminary, final or summary prospectus in reliance upon written information furnished to PRGX by or on behalf of any such Holder Indemnified Party expressly for use in the preparation thereof, and provided further, that PRGX shall not be liable to any such Holder Indemnified Party with respect to any preliminary prospectus to the extent that any such loss, claim, damage, liability or expense of such Holder Indemnified Party results from the fact that such Holder Indemnified Party sold Registrable Securities to a person to whom there was not sent or given, at or before the written confirmation of such sale, a copy of the prospectus (excluding documents incorporated by reference) or of the prospectus as then amended or supplemented (excluding documents incorporated by reference) if PRGX has previously furnished copies thereof to such Holder Indemnified Party in compliance with this Agreement and the loss, claim, damage, liability or expense of such Holder Indemnified Party results from an untrue statement or omission of a material fact contained in such preliminary prospectus which was corrected in the prospectus (or the prospectus as then amended or supplemented) and such corrected document provides a defense to the claim upon which such loss claim, damage, liability or expense was based. Such indemnity and reimbursement of expenses and obligations shall remain in full force and effect regardless of any investigation made by or on behalf of the Holder Indemnified Parties and shall survive the transfer of such securities by such Holder Indemnified Parties. In connection with an underwritten offering, PRGX shall indemnify such underwriters, their officers and directors and each person who controls such underwriters (within the meaning of the Securities Act) to the same extent as provided above with respect to the indemnification of the Holders of Registrable Securities. 8.2 INDEMNIFICATION BY HOLDERS. Each Holder of Registrable Securities participating in any registration hereunder shall severally, and not jointly, indemnify and hold harmless, to the fullest extent permitted by law, PRGX, its directors, officers, employees, affiliates and agents, and each Person who controls or is alleged to control PRGX (within the meaning of the Securities Act) (collectively, "PRGX Indemnified Parties") against all losses, claims, damages, liabilities and expenses, joint or several (including reasonable fees of counsel and any amounts paid in settlement effected with such Holder's consent, which consent shall not be unreasonably delayed or withheld) to which any PRGX Indemnified Parties may become subject under the Securities Act, the Exchange Act, any other federal law, any state or common law or otherwise, insofar as such losses, claims, damages, liabilities or expenses (or actions or proceedings, whether commenced or threatened, in respect thereof) are caused by (i) any untrue statement or 14 alleged untrue statement of a material fact contained in any registration statement in which such Holder's Registrable Securities were included or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, (ii) any untrue statement or alleged untrue statement of a material fact contained in any preliminary, final or summary prospectus, together with the documents incorporated by reference therein (as amended or supplemented if PRGX shall have filed with the Commission any amendment thereof or supplement thereto), or the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading (in the cases described in clauses (i) and (ii) of this Section 8.2, such indemnification by such Holder of Registrable Securities shall apply only to the extent that such untrue statement or omission is contained in any information furnished in writing by such Holder expressly for use in the preparation of the documents described in such clauses (i) and (ii)), (iii) any violation by such Holder of the Securities Act, the Exchange Act, any other federal law, any state or common law, or any rule or regulation promulgated thereunder applicable to such Holder and relating to action of or inaction by such Holder in connection with any such registration other than in connection with any such violation relating to an untrue statement or omission of a material fact relating to information provided by PRGX contained in a preliminary prospectus or prospectus hereunder and (iv) with respect to any preliminary prospectus delivered in a non-underwritten offering, the fact that such Holder sold Registrable Securities to a person to whom there was not sent or given, at or before the written confirmation of such sale, a copy of the prospectus (excluding the documents incorporated by reference) or of the prospectus as then amended or supplemented (excluding documents incorporated by reference) if PRGX has previously furnished copies thereof to such Holder in compliance with this Agreement and the loss, claim, damage, liability or expense of such PRGX Indemnified Party results from an untrue statement or omission of a material fact relating to information provided by such Holder contained in such preliminary prospectus which was corrected in the prospectus (or the prospectus as amended or supplemented) and such corrected document provides a defense to the claim upon which such loss claim, damage, liability or expense was based. Such indemnity obligation shall remain in full force and effect regardless of any investigation made by or on behalf of PRGX Indemnified Parties (except as provided above) and shall survive the transfer of such securities by such Holder. 8.3 CONDUCT OF INDEMNIFICATION PROCEEDINGS. Promptly after receipt by an indemnified party under Section 8.1 or 8.2 above of written notice delivered in accordance with Section 9.1 hereof of the commencement of any action, suit, proceeding, investigation or threat thereof with respect to which a claim for indemnification may be made pursuant to this Section, such indemnified party shall, if a claim in respect thereto is to be made against an indemnifying party, give written notice delivered in accordance with Section 9.1 hereof to the indemnifying party of the threat or commencement thereof, provided, however, that the failure to so notify the indemnifying party shall not relieve it from any liability which it may have to any indemnified party except to the extent that the indemnifying party is actually prejudiced by such failure to give notice in accordance with Section 9.1 hereof. If any such claim or action referred to under Section 8.1 or 8.2 above is 15 brought against any indemnified party and it then notifies the indemnifying party of the threat or commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it wishes, jointly with any other indemnifying party similarly notified, to assume the defense thereof with counsel reasonably satisfactory to such indemnified party. After notice delivered in accordance with Section 9.1 hereof from the indemnifying party to such indemnified party of its election so to assume the defense of any such claim or action, the indemnifying party shall not be liable to such indemnified party under this Article VIII for any legal expenses of counsel or any other expenses (other than reasonable costs of investigation) subsequently incurred by such indemnified party in connection with the defense thereof, unless the indemnifying party has failed to assume the defense of such claim or action or to employ counsel reasonably satisfactory to such indemnified party. Notwithstanding the foregoing, the indemnified party shall have the right to retain its own counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to differing interests between such indemnified party and any other party represented by such counsel in such action. The indemnifying party shall not be required to indemnify the indemnified party with respect to any amounts paid in settlement of any action, proceeding or investigation entered into without the written consent of the indemnifying party. No indemnifying party shall consent to the entry of any judgment or enter into any settlement without the consent of the indemnified party unless (i) such judgment or settlement does not impose any obligation or liability upon the indemnified party other than the execution, delivery or approval thereof, and (ii) such judgment or settlement includes as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a full release and discharge from all liability in respect of such claim and a full release of all persons that may be entitled to or obligated to provide indemnification or contribution under this Article. The obligations of PRGX and the Holders of Registrable Securities under this Article VIII shall survive the completion of any offering of Registrable Securities in a registration statement under this Agreement and the termination of this Agreement. 8.4 CONTRIBUTION. If the indemnification provided for in this Article VIII is unavailable to or insufficient to hold harmless an indemnified party under Section 8.1 or 8.2, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages, liabilities or expenses (or actions or proceedings in respect thereof) referred to in Section 8.1 or 8.2 in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and the indemnified party on the other in connection with the statements, omissions, actions or inactions which resulted in such losses, claims, damages, liabilities or expenses. The relative fault of the indemnifying party and the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the indemnifying party or the indemnified party, any action or inaction by any such party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement, omission, action or inaction. The amount paid or payable by an indemnified party as a result of the losses, 16 claims, damages, liabilities or expenses (or actions or proceedings in respect thereof) pursuant to this Section 8.4 shall be deemed to include any reasonable legal or other expenses incurred by such indemnified party in connection with investigating or defending any such action or claim (which shall be limited as provided in Section 8.3 if the indemnifying party has assumed the defense of any such action in accordance with the provisions thereof) which is the subject of this Section 8.4. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. Promptly after receipt by an indemnified party under this Section 8.4 of written notice delivered in accordance with Section 9.1 hereof of the commencement of any action, suit, proceeding, investigation or threat thereof with respect to which a claim for contribution may be made against an indemnifying party under this Section 8.4, such indemnified party shall, if a claim for contribution in respect thereto is to be made against an indemnifying party, give written notice in accordance with Section 9.1 hereof to the indemnifying party of the commencement thereof (if the notice specified in Section 8.3 has not been given with respect to such action), provided, however, that the failure to so notify the indemnifying party shall not relieve it from any obligation to provide contribution which it may have to any indemnified party under this Section 8.4, except to the extent that the indemnifying party is actually prejudiced by the failure to give notice in accordance with Section 9.1 hereof. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 8.4 were determined by pro rata allocation or by any other method of allocation which does not take account of equitable considerations referred to in this Section 8.4. The provisions of this Section 8.4 shall be in addition to any other rights to indemnification or contribution which any indemnified party may have pursuant to law or contract, shall remain in full force and effect regardless of any investigation made by or on behalf of any indemnified party, and shall survive the transfer of securities by any such party; provided that any indemnification of similar scope entered into pursuant to an underwriting agreement in connection with an offering contemplated herein shall supersede this Article VIII. 8.5 LIMITATION ON LIABILITY OF HOLDERS OF REGISTRABLE SECURITIES. The liability of each Holder in respect of any indemnification or contribution obligation of such Holder arising under this Article 8 shall not in any event exceed an amount equal to the net proceeds to such Holder (after deduction of all underwriters' discounts and commissions and all other expenses paid by such Holder in connection with the registration in question) from the disposition of the Registrable Securities disposed of by such Holder pursuant to such registration. 8.6 INDEMNIFICATION AND CONTRIBUTION OF UNDERWRITERS. In connection with any underwritten offering contemplated by this Agreement which includes Registrable Securities, PRGX and all sellers of Registrable Securities included in any registration statement shall agree to customary provisions for indemnification and contribution (consistent with the other provisions of this Article VIII) in respect of losses, claims, damages, liabilities and expenses of the underwriters of such offering. 17 ARTICLE IX MISCELLANEOUS 9.1 NOTICES. All notices, requests and other communications hereunder shall be in writing and will be deemed to have been duly given and received by any party hereto and any permitted assignees thereof (i) when personally delivered to the appropriate Notice Person (as defined below), (ii) when sent by telefax to the appropriate Notice Person at the number listed below for such Notice Person, (iii) two (2) business days after the day on which the same has been delivered prepaid to an international courier service for delivery to the appropriate Notice Person, or (iv) five (5) business days after the deposit in the United States mail, registered or certified, return receipt requested, postage prepaid, for delivery to the appropriate Notice Person, in each case addressed to the following addresses: (i) if to PRGX: PRG-Schultz International, Inc. 2300 Windy Ridge Parkway Suite 100 North Tower Atlanta, Georgia 30339-8426 Attn: Clinton McKellar, Jr., Esq. General Counsel Telephone: (770) 779-3900 Facsimile: (770) 779-3034 copy to: Arnall Golden Gregory LLP 2800 One Atlantic Center 1201 West Peachtree Street Atlanta, Georgia 30309 Attn: Jonathan Golden, Esq. Telephone: (404) 873-8705 Facsimile: (404) 873-8701 (ii) If to any Berkshire Fund, to: Berkshire Partners LLC One Boston Place Boston, MA 02108-4401 Telephone: (617) 227-0050 Telecopy: (617) 227-6105 Attention: Ross M. Jones 18 copy to: Ropes & Gray One International Place Boston, MA 02110 Telephone: (617) 951-7000 Telecopy: (617) 951-7050 Attention: David C. Chapin, Esq. Jane D. Goldstein, Esq. PRGX or any Holder (collectively, the "Notice Persons") from time to time may change its or his or her address, telefax number or other information for the purpose of notices to the specified parties by giving notice specifying such change to the other Notice Persons. 9.2 ASSIGNMENT. Subject to and without limiting the provisions of Article VII hereof, neither this Agreement nor any right, interest or obligation hereunder may be assigned by any party hereto without the prior written consent of the other parties hereto and any attempt to do so will be void. Subject to the preceding sentence, this Agreement is binding upon, inures to the benefit of, and is enforceable by the parties hereto and their respective successors and permitted assigns. 9.3 WAIVER. Any term or condition of this Agreement may be waived at any time by the party that is entitled to the benefit thereof, but no such waiver shall be effective unless set forth in a written instrument duly executed by or on behalf of the party waiving such term or condition. No waiver by any party of any term or condition of this Agreement, in any one or more instances, shall be deemed to be or construed as a waiver of the same or any other term or condition of this Agreement on any future occasion. 9.4 AMENDMENT. This Agreement may be amended, supplemented or modified only by a written instrument duly executed by or on behalf of each party hereto. 9.5 REMEDIES. Each party hereto will be entitled to enforce any right granted to such party by any provision of this Agreement specifically to recover damages caused by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that any party may in its sole discretion apply to any court of law or equity of competent jurisdiction (without posting any bond or other security) for specific performance and for other injunctive relief in order to enforce or prevent violation of the provisions of this Agreement. 9.6 ENTIRE AGREEMENT. This Agreement supersedes all prior discussions and agreements among the parties hereto with respect to the subject matter hereof and contains the sole and entire agreement among the parties hereto with respect to the subject matter hereof. 19 9.7 CAPTIONS. The captions used in this Agreement have been inserted for convenience of reference only and do not define or limit the provisions hereof. 9.8 EXHIBITS AND SCHEDULES. All exhibits and schedules, if any, referred to in this Agreement, all attachments to such exhibits or schedules, and any other attachment to this Agreement are hereby incorporated by reference into this Agreement and hereby are made a part of this Agreement as if set out in full herein. 9.9 GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware applicable to a contract executed and performed in such State, without giving effect to the conflicts of laws principles thereof. 9.10 COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together will constitute one and the same instrument. 9.11 SEVERABILITY. Any provision of this Agreement which 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, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 9.12 NO THIRD PARTY BENEFICIARY. This Agreement shall not confer any rights or remedies upon any person other than the parties hereto and their respective successors and permitted assigns. 20 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. PRG-SCHULTZ INTERNATIONAL, INC., a Georgia corporation By: --------------------------------------------- Name: -------------------------------------------- Title: ------------------------------------------- BERKSHIRE FUND V, LIMITED PARTNERSHIP By: Fifth Berkshire Associates LLC, its General Partner By: --------------------------------------------- Name: -------------------------------------------- Title: ------------------------------------------- BERKSHIRE INVESTORS LLC By: --------------------------------------------- Name: -------------------------------------------- Title: ------------------------------------------- 21 EX-99.5 7 b43703bfexv99w5.txt FORM OF SECURED PROMISSORY NOTE Exhibit 99.5 SCHULTZ PRG LIQUIDATING INVESTMENTS, LTD Secured Promissory Note due [170 days from Closing] $12,610,584.96 August __, 2002 FOR VALUE RECEIVED, the undersigned Schultz PRG Liquidating Investments, Ltd., a Texas limited partnership (the "BORROWER"), hereby promises to pay to Berkshire Fund V, Limited Partnership, a Massachusetts limited partnership (or its permitted assignees, collectively, "BERKSHIRE") at the address specified in Section 8.3 hereof, or at such other place as Berkshire shall from time to time have designated to Borrower in writing, on or before [170 days from Closing of the Stock Purchase Agreement] (the "STATED MATURITY DATE"), the amount of Twelve million six hundred and ten thousand five hundred and eighty four dollars and ninety six cents ($12,610,584.96) (the "PRINCIPAL AMOUNT"), in cash on the terms and conditions set forth in Article 3 hereof, and with interest as provided in Article 2 hereof. Berkshire and Borrower also hereby agree to the put and call of the shares of common stock, no par value, (the "COMMON STOCK") of PRG-Schultz International, Inc., a Georgia corporation ("PRG") on the terms and conditions set forth in Article 5 hereof. ARTICLE I GENERAL 1.1. THE NOTE. This Note is as contemplated by the Stock Purchase Agreement, dated as of August 16, 2002, among the Borrower, Berkshire and certain other parties thereto (the "STOCK PURCHASE AGREEMENT"), the First Option Agreement, dated as of August __, 2002, among the Borrower and PRG (the "OPTION AGREEMENT") and the Subordination Agreement, dated as of August __, 2002, among the Borrower, Berkshire and PRG (the "SUBORDINATION AGREEMENT"). Terms defined in the Stock Purchase Agreement and the Option Agreement and not otherwise defined herein are used herein as so defined in those agreements. 1.2. ACCELERATION. In case an Event of Default (as defined in Section 7.1 hereof) shall occur, the entire Principal Amount of this Note may become or be declared to be due and payable in the manner and with the effect provided herein. ARTICLE II INTEREST 2.1. INTEREST. This Note shall accrue daily interest from the date hereof on the Principal Amount from time to time unpaid at a rate of eight percent (8%) per annum, said interest being payable upon any prepayment, at the Stated Maturity Date or any accelerated maturity hereof. Page 1 2.2. MANNER OF PAYMENT. All interest on the Principal Amount shall be payable in cash, unless otherwise provided for herein. ARTICLE III PAYMENT OF PRINCIPAL AMOUNT 3.1. PAYMENTS. The outstanding Principal Amount of this Note will be payable on the Stated Maturity Date in cash, unless and to the extent otherwise provided in this Section 3.1 or Article 5 hereof. 3.1.1. FULL EXERCISE OF OPTIONS. Within five (5) days of the notice of exercise in full of the options granted pursuant to the Option Agreement (the "OPTIONS") by PRG and, in any event, no later than simultaneously with the Option Closing, the Borrower will repay the entire Principal Amount (plus accrued interest pursuant to Section 2.1 hereof) in cash on such date, and on such date Berkshire will release the shares of common stock of PRG (the "PLEDGED SHARES") which are the subject of the Pledge Agreement dated as of August __, 2002 and between the parties to this Note, in the form attached as Exhibit A hereto (the "PLEDGE AGREEMENT"), to Borrower pursuant to Article IV of the Pledge Agreement. 3.1.2. PARTIAL EXERCISE AND NON-EXERCISE OF OPTIONS. (a) Within five (5) days of the notice of exercise and, in any event, no later than simultaneously with and in the same amount as the payment by PRG under the Option Agreement for a portion of the Pledged Shares, the Borrower will repay to Berkshire the portion of the Principal Amount relating to the number of Pledged Shares sought to be released to the Borrower (plus accrued interest pursuant to Section 2.1 hereof) in cash on such date (a "SETTLEMENT DATE"), and Berkshire will release on the Settlement Date pursuant to Article IV of the Pledge Agreement such number of Pledged Shares as Borrower is required to deliver to PRG pursuant to the exercise of the Options. (b) To the extent the Options are not exercised by the date of expiration thereof and on such date any unpaid Principal Amount remains outstanding, the provisions of Article 5 hereof will apply. 3.2. NOTICES; DOCUMENTS. For the purpose of verifying and calculating the payments due pursuant to Section 3.1 and Article 5 hereof and as a condition to the release of any Pledged Shares pursuant to Article IV of the Pledge Agreement, the Borrower agrees to provide copies of all documents relating to the exercise of the Options to Berkshire, pursuant to the provisions of Section 8.3 hereof, upon the date of any exercise of the Options. Page 2 ARTICLE IV COVENANTS 4.1. This Note and the obligations hereunder are secured by the 1,446,168 Pledged Shares in accordance with the Pledge Agreement. 4.2. Borrower shall at all times, until this Note is indefeasibly paid in full, hold 1,000,000 shares of Common Stock of PRG, free and clear of any liens or other encumbrances. ARTICLE V 5.1. BERKSHIRE CALL OPTION. For a period of five (5) days after the expiration of the Option Agreement (the "CALL PERIOD") or, subject to the Subordination Agreement in case of an acceleration hereunder, Berkshire will have the right to purchase from Borrower the number of Pledged Shares remaining under the Pledge Agreement (the "BERKSHIRE OPTION"), for a price equal to $9.05 per share (the "EXERCISE PRICE"). The Berkshire Option may be exercised by Berkshire, only for the entire number of Pledged Shares remaining under the Pledge Agreement, on any business day on or prior to the last day of the Call Period, by notice of exercise in accordance with Section 8.3, in substantially the form attached hereto as Exhibit B (or a reasonable facsimile thereof) duly executed by Berkshire and accompanied by payment, in cash or wire transfer of immediately available funds, or by offset of amounts then due by Borrower under this Note, in the amount obtained by multiplying (a) the number of Pledged Shares designated in such notice by (b) the Exercise Price, and Borrower shall thereupon transfer the number of Pledged Shares purchased pursuant to the Berkshire Option to Berkshire. 5.2. BORROWER PUT OPTION. If the Berkshire Option is not exercised by the end of the Call Period, for a period of five (5) days thereafter (the "PUT PERIOD") or, subject to the Subordination Agreement in case of an acceleration hereunder or in the case of an Event of Default after 179 days, Borrower will have the right to sell the number of Pledged Shares remaining under the Pledge Agreement (the "BORROWER PUT"), to Berkshire at the Exercise Price. The Borrower Put may be exercised by Borrower, only for the entire number of Pledged Shares remaining under the Pledge Agreement, on any business day on or prior to the last day of the Put Period, by notice of exercise in accordance with Section 8.3, in substantially the form attached hereto as Exhibit C (or a reasonable facsimile thereof) duly executed by Borrower and accompanied by instructions to release the number of Pledged Shares purchased by Berkshire pursuant to the Borrower Put to Berkshire in return for payment, in cash or wire transfer of immediately available funds, or by offset of amounts then due by Borrower under this Note, in the amount obtained by multiplying (a) the number of Pledged Shares designated in such notice by (b) the Exercise Price. 5.3. CASH PAYMENT. In the event neither the Berkshire Option nor the Borrower Put is exercised, the Note shall be due and payable in cash on the Stated Maturity Date. Page 3 ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE BORROWER The Borrower represents and warrants to Berkshire as follows: 6.1. AUTHORIZATION; BINDING OBLIGATION. This Note has been duly and validly executed and delivered by the Borrower and constitutes a legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other federal or state laws of general applicability relating to or affecting creditors' or secured parties' rights and remedies generally and general principles of equity, whether considered in an action at law or in equity. The Borrower has the legal capacity and all requisite power and authority to execute and deliver this Note and to consummate the transactions contemplated hereby and to perform its obligations hereunder. Such execution, delivery and consummation has been duly and validly authorized by all necessary action on the part of the Borrower, and no other corporate or other proceedings on the part of the Borrower are necessary to authorize such execution, delivery and consummation. 6.2. TITLE TO THE PLEDGED SHARES. Immediately prior to the pledge of the Pledged Shares, the Borrower was the record and beneficial owner of, and had good and marketable title to, the Pledged Shares free and clear of all Encumbrances. The Pledged Shares owned by the Borrower are validly issued, duly authorized and free of any preemptive rights. There are no voting trusts or other agreements or understandings to which the Borrower is a party with respect to the voting of the Pledged Shares. The Pledged Shares are not subject to any restrictions on transferability other than those imposed by the Securities Act and applicable state securities laws. Except for the Option Agreement, there are no options, warrants, calls, commitments or rights of any character to purchase or otherwise acquire the Pledged Shares from the Borrower pursuant to which the Borrower may be obligated to sell, transfer or otherwise dispose of any of the Pledged Shares. Subject to the Subordination Agreement, in the event that (i) the Pledgor defaults under this Note and Berkshire enforces the provisions of the Pledge Agreement or (ii) the provisions of Article 5 hereof apply, Berkshire will acquire good and marketable title to the Pledged Shares, free and clear of all Encumbrances. 6.3. CONSENTS AND APPROVALS; NO VIOLATION. None of the execution and delivery of this Note, the consummation of the transactions contemplated hereby, or compliance with any of the provisions hereof, will (i) require any consent, waiver, approval, authorization or permit of, or filing with or notification to, or any other action by, any Governmental Authority by the Borrower, other than necessary filings on Form 4 with the Commission, (ii) violate the certificate of formation or operating agreement of the Borrower, or any Law of any Governmental Authority which may be applicable to the Borrower, or by which any of the Borrower's activities, properties or assets (including, without limitation the Pledged Shares) may be bound or affected or (iii) violate, breach, or conflict with, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation or acceleration or any obligation to pay or result in the imposition of any Encumbrance upon any of the property of the Borrower (including, without limitation, the Pledged Shares)) under, any of Page 4 the terms, conditions or provisions of any note, bond, mortgage, indenture, Encumbrance, contract, agreement, or other instrument or obligation to which the Borrower is a party or by which any of the Borrower's activities, properties or assets (including, without limitation, the Pledged Shares) may be bound or affected. ARTICLE VII EVENTS OF DEFAULT 7.1. EVENTS OF DEFAULT; REMEDIES. If any of the following events (each such event herein termed an "Event of Default") shall happen, that is to say: 7.1.1. the Borrower shall fail to make any payment of Principal Amount of this Note when due, whether at maturity by acceleration or otherwise; 7.1.2. the Borrower shall fail to perform or observe any of the other covenants, agreements or provisions set forth herein or in the Option Agreement, Stock Purchase Agreement or Pledge Agreement; or 7.1.3. The Borrower shall: (a) commence a voluntary case under Title 11 of the United States Code as from time to time in effect, or authorize, by appropriate proceedings of its board of managers or other governing body, the commencement of such a voluntary case; (b) have filed against it a petition under said Title 11 which shall not have been dismissed within 30 days after the date on which said petition is filed, or file an answer or other pleading within said 30-day period admitting or failing to deny the material allegations of such a petition, or seeking, consenting to or acquiescing in the relief therein provided, or fail to controvert timely the material allegations of any such petition; (c) have entered against it an order for relief in any involuntary case commenced under said Title 11; (d) seek relief as a debtor under any applicable law, other than said Title 11, of any jurisdiction relating to the liquidation or reorganization of debtors or to the modification or alteration of the rights of creditors, or consent to or acquiesce in such relief; (e) have entered against it any order by a court of competent jurisdiction (i) finding it to be bankrupt or insolvent, (ii) ordering or approving its liquidation, reorganization or any modification or alteration of the rights of its creditors or (iii) assuming custody of, or appointing a receiver or other custodian for, all or a substantial part of its property; or Page 5 (f) make an assignment for the benefit of, or enter into a composition with, its creditors or appoint or consent to the appointment of a receiver or other custodian for all or a substantial part of its property. then and in each and every such case, Berkshire shall notify the Borrower of such Event of Default and, in the event such Event of Default is not cured by Borrower within thirty (30) days of the date of such notice, Berkshire may declare all or any part of the unpaid Principal Amount to be forthwith due and payable (unless there shall have occurred an Event of Default under Section 7.1.3 hereof, in which case the unpaid balance of this Note shall automatically become due and payable), and thereupon such unpaid Principal Amount or part thereof, together with interest accrued thereon and all other sums, if any, payable under this Note, shall become so due and payable without presentation, presentment, protest or further demand or notice of any kind, all of which are hereby expressly waived to the extent not prohibited by applicable law that cannot be waived, and Berkshire, subject to the Subordination Agreement, may proceed to enforce payment of such amount or part thereof in such manner as it or they may elect, including the transfer the Pledged Shares to its own account, with the Principal Amount and interest due under this Note being reduced by the amount equal to (i) the number of Pledged Shares transferred to Berkshire, multiplied by (ii) the Exercise Price, and if additional Principal Amount and interest remain outstanding under this Note, Berkshire may proceed to protect and enforce its or their rights by suit in equity, action at law and/or other appropriate proceeding either for specific performance of any covenant, provision or condition contained or incorporated by reference in this Note or the Pledge Agreement, or in aid of the exercise of any power granted in this Note or the Pledge Agreement; PROVIDED; HOWEVER, that it is agreed and acknowledged that Berkshire's recourse hereunder shall be limited to the Pledged Shares and after 179 days Borrower may only cure such default by exercise of the Borrower Put right referred to in Section 5.2 hereof. 7.2. ANNULMENT OF DEFAULTS. An Event of Default shall not be deemed to be in existence for any purpose of this Note if Berkshire shall have waived such event in writing or stated in writing that the same has been cured to its or their reasonable satisfaction. No waiver or statement of satisfactory cure pursuant to this Section 7.2 shall extend to or affect any subsequent or other Event of Default not specifically identified in such waiver or statement of satisfactory cure or impair any of the rights of Berkshire upon the occurrence thereof. 7.3. WAIVERS. The Borrower hereby waives to the extent not prohibited by provisions of applicable law which cannot be waived (a) all presentments, demands for performance and notices of nonperformance (except to the extent specifically required by the provisions hereof), (b) any requirement of diligence or promptness on the part of Berkshire in the enforcement of its rights under the provisions of this Note or the Pledge Agreement, (c) any and all notices of every kind and description which may be required to be given by any legal requirement, and (d) any defense of any kind (other than payment) which it may now or hereafter have with respect to its obligations and liability under this Note, the Option Agreement or the Pledge Agreement. 7.4. COURSE OF DEALING. No course of dealing between the Borrower on the one hand, and Berkshire on the other hand, shall operate as a waiver of the parties' rights under this Note or the Pledge Agreement. No delay or omission in exercising any right under this Note or the Page 6 Pledge Agreement shall operate as a waiver of such right or any other right. A waiver on any one occasion shall not be construed as a waiver of or bar to any right or remedy on any other occasion. No waiver or statement of satisfactory cure or consent shall be binding upon Berkshire unless it is in writing and signed by Berkshire as may be required by the provisions of this Note. ARTICLE VIII MISCELLANEOUS 8.1. SURVIVAL OF REPRESENTATION AND WARRANTIES. All representations, warranties and covenants made by the Borrower, in connection with the transactions contemplated by this Note shall survive the pledge of the Pledged Shares, and transfer of ownership of the same to Berkshire under Article 5 or Section 7.1 hereof, or the provisions of the Pledge Agreement. 8.2. GOVERNING LAW. THIS NOTE SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS. 8.3. NOTICES. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered personally, telecopied (with confirmation of receipt), delivered by nationally-recognized overnight express service or sent by registered or certified mail (postage prepaid, return receipt requested) to the parties at the following addresses: 8.3.1. If to Berkshire, to: Berkshire Partners LLC One Boston Place Boston, MA 02108-4401 Telephone: (617) 227-0050 Telecopy: (617) 227-6105 Attention: Ross M. Jones With a copy to: Ropes & Gray One International Place Boston, MA 02110 Telephone: (617) 951-7000 Telecopy: (617) 951-7050 Attention: David C. Chapin, Esq. Jane D. Goldstein, Esq. 8.3.2. If to the Borrower, to: Page 7 Schultz PRG Liquidating Investments, Ltd. 9241 LBJ Freeway, Suite 100 Dallas, TX 75243 Telephone: (972) 233-7564 Telecopy: (972) 690-7564 Attention: Howard H. Schultz Andrew H. Schultz With a copy to: Malouf, Lynch, Jackson & Swinson 600 Preston Commons East 8115 Preston Road Dallas, TX 75225 Telephone: (214) 273-0560 (direct dial) Telecopy: (214) 273-0561 (direct fax) Attention: Donald Malouf, Esq. Curtis R. Swinson, Esq. Alex E. Nakos, Esq. or to such other address as the person to whom notice is to be given may have previously furnished to the other in writing in the manner set forth above, provided that notice of a change of address shall be deemed given only upon receipt. 8.4. EXPENSES. Each party hereto shall be solely responsible for all expenses incurred by it or on its behalf in connection with the preparation and execution of this Note and the consummation of the transactions contemplated hereby, including, without limitation, the fees and expenses of its counsel, accountants, brokers, finders, financial advisors and other representatives. 8.5. SPECIFIC PERFORMANCE. Without limiting the rights of each party hereto to pursue all other legal and equitable rights available to such party for the other parties' failure to perform their obligations under this Note, the parties hereto acknowledge and agree that the remedy at law for any failure to perform their obligations hereunder would be inadequate and that each of them, respectively, shall be entitled to specific performance, injunctive relief or other equitable remedies in the event of any such failure. 8.6. DESCRIPTIVE HEADINGS; INTERPRETATION. The headings contained in this Note are for reference purposes only and shall not affect in any way the meaning or interpretation of this Note. References in this Note to Sections mean Sections of this Note, unless otherwise indicated. The term "person" shall mean and include an individual, a partnership, a joint venture, a corporation, a trust, a governmental entity or an unincorporated organization. The parties hereto agree that they have been represented by counsel during the negotiation and execution of this Note and, therefore, waive the application of any law, regulation, holding or rule of construction providing that ambiguities in a document will be construed against the party drafting the document. Page 8 8.7. COUNTERPARTS. This Note may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. 8.8. SEVERABILITY. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the parties shall negotiate in good faith with a view to the substitution therefor of a suitable and equitable solution in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid provision, provided, however, that the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be in any way impaired thereby, it being intended that all of the rights and privileges of the parties hereto shall be enforceable to the fullest extent permitted by law. 8.9. ENTIRE AGREEMENT; THIRD-PARTY BENEFICIARIES. This Note constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof, and is not intended to confer upon any person other than the parties hereto and their permitted assigns any rights or remedies hereunder. 8.10. ASSIGNMENT. No party hereto may assign its rights or obligations under this Note, PROVIDED, THAT Berkshire may assign and transfer this Note and its rights hereunder to any one or more of its affiliates, and may assign and transfer any Pledged Shares obtained hereunder to any one or more of such affiliates. 8.11. FURTHER ASSURANCES. The Borrower and Berkshire agree to execute and deliver such other documents, certificates, agreements and other writings and to take such other actions as may be necessary or desirable in order to implement the transactions contemplated by this Note. [The remainder of this page is intentionally blank] Page 9 The undersigned has caused this Note to be executed and delivered by its duly authorized officer as of the date first written above. SCHULTZ PRG LIQUIDATING INVESTMENTS, LTD., a Texas limited partnership By: Schultz PRG Liquidating Investments GP, L.L.C., a Texas limited liability company By: --------------------------------------- Name: Howard Schultz Title: Manager/President BERKSHIRE FUND V, LIMITED PARTNERSHIP By: Fifth Berkshire Associates LLC its General Partner By: --------------------------------------- Name: Title: EXHIBIT A PLEDGE AGREEMENT EX-99.6 8 b43703bfexv99w6.txt FORM OF PLEDGE AGREEMENT Exhibit 99.6 SCHULTZ PRG LIQUIDATING INVESTMENTS, LTD. PLEDGE AGREEMENT This Agreement, dated as of August __, 2002, is between Schultz PRG Liquidating Investments, Ltd., a Texas limited partnership (the "PLEDGOR"), and Berkshire Fund V, Limited Partnership, a Massachusetts limited partnership (together with its permitted assignees, collectively, "BERKSHIRE"). The parties agree as follows: ARTICLE I GENERAL 1.1. NOTE. Berkshire is providing extensions of credit to the Pledgor pursuant to a Secured Promissory Note dated as of the date hereof, as from time to time in effect (the "NOTE"), between the Pledgor and Berkshire. As a condition to providing the loans under the Note, Berkshire is requiring the Pledgor to pledge the stock contemplated hereby to secure and satisfy the Pledgor's payment obligations under the Note (the "CREDIT OBLIGATIONS"). 1.2. CERTAIN RULES OF CONSTRUCTION. Capitalized terms defined in the Note and not otherwise defined herein are used herein with the meanings so defined. Certain other capitalized terms are used in this Agreement as specifically defined below in this Section 1. Except as the context otherwise explicitly requires, (a) terms defined in the UCC and not otherwise defined herein have the meaning provided under the UCC and (b) references to a particular person include such person's successors and assigns to the extent not prohibited by this Agreement and the Note. References to "the date hereof" mean the date first set forth above. 1.3. DEFINITIONS. The following definitions apply herein: (a) "AGREEMENT" means this Pledge Agreement as amended, modified and from time to time in effect. (b) "GOVERNMENTAL AUTHORITY" means any government or political subdivision thereof, whether federal, state, local or foreign, or any agency, department, commission, board, bureau, court, tribunal, body, administrative or regulatory authority or instrumentality of any such government or political subdivision. (c) "LAW" means any law (including common law), rule, regulation, restriction, code, statute, ordinance, order, writ, injunction, judgment, decree or other requirement of a Governmental Authority. (d) "LIEN" means any lien, encumbrance, proxy, voting trust arrangement, pledge, security interest, collateral security agreement, financing statement (and similar notices) filed with any Governmental Authority, claim (including any claim as defined in the Internal Revenue Code of 1986, as amended), charge, equities, mortgage, pledge, objection, title defect, option, restrictive covenant or restriction on transfer of any nature whatsoever, and the interest of the lessor in any property subject to a capital lease, except for restrictions or transferability imposed by the Securities Act. (e) "SUBORDINATION AGREEMENT" means that certain Subordination Agreement dated as of the date hereof between the Pledgor, Berkshire and PRG-Schultz International, Inc. ("PRG"). (f) "UCC" means the Uniform Commercial Code as in effect in Delaware on the date hereof; PROVIDED, HOWEVER, that with respect to the perfection of Berkshire's Lien on the Pledged Shares and the effect of nonperfection thereof, the term "UCC" means the Uniform Commercial Code as in effect in any jurisdiction the laws of which are made applicable by section 9-305 of the Uniform Commercial Code as in effect in Delaware. ARTICLE II SECURITY 2.1. PLEDGED SHARES. As security for the payment and performance of the Credit Obligations, the Pledgor mortgages, pledges and collaterally grants and assigns to Berkshire, and creates a security interest in favor of Berkshire in, all of the Pledgor's right, title and interest in and to (but none of its obligations or liabilities with respect to) the 1,446,168 shares of common stock of PRG set forth in Exhibit A, being collectively referred to as the "PLEDGED SHARES." 2.2. COVENANTS WITH RESPECT TO PLEDGED SHARES. The Pledgor covenants that: 2.2.1. PLEDGED SHARES. The Pledged Shares shall be at all times duly authorized, validly issued, fully paid and nonassessable. The Pledgor will deliver to Berkshire certificates representing the Pledged Shares held by the Pledgor, accompanied by three stock transfer powers executed in blank and in form and manner satisfactory to Berkshire. Upon the occurrence and during the continuance of an Event of Default but subject always to the provisions of the Subordination Agreement so long as it is in effect, Berkshire may transfer into its name or the name of its nominee any Pledged Shares. All Pledged Shares shall be listed on Exhibit A hereto. 2.2.2. NO LIENS OR RESTRICTIONS ON TRANSFER. The Pledged Shares shall be free and clear of any Liens and restrictions on the transfer thereof. Except for the arrangements set out in the Option Agreement, none of the Pledged Shares shall be subject to any option to purchase or similar rights of any Person. 2.2.3. NO SALE OF PLEDGED SHARES. The Pledgor will not sell, transfer or otherwise dispose of all or any portion of its interests in the Pledged Shares except in connection with the Option Agreement and except to Berkshire as contemplated under the Note or this Agreement. 2.2.4. PERFECTION OF PLEDGED SHARES. This Agreement shall create in favor of Berkshire, a legal, valid and enforceable first priority security interest in the Pledged -2- Shares. When stock certificates representing such Pledged Shares and stock transfer powers related thereto duly executed in blank by the Pledgor are delivered to Berkshire, this Agreement shall provide a fully perfected, first priority Lien on, and security interest in, all right, title and interest of the Pledgor in the Pledged Shares, in each case prior and superior in right to any other Person, except as provided pursuant to the Option Agreement. Upon Berkshire's reasonable request from time to time, the Pledgor will execute and deliver, and file and record in the proper filing and recording places, all such instruments, including UCC financing statements, and will take all such other action, as Berkshire deems reasonably necessary for confirming to it the Pledged Shares, or to carry out any other purpose of this Agreement or the Note. 2.3. ADMINISTRATION OF PLEDGED SHARES. Subject to the provisions of the Subordination Agreement and in accordance with Section 7.1 of the Note, the Pledged Shares shall be administered as follows, and if an Event of Default shall have occurred and be continuing, Section 2.4 shall also apply. 2.3.1. SEGREGATED PROCEEDS. All sums collected or received and all property recovered or possessed by the Pledgor in connection with any Pledged Shares shall be received and held by the Pledgor in trust for and on Berkshire's behalf, shall be segregated from the assets and funds of the Pledgor, and shall be delivered to Berkshire. 2.3.2. DISTRIBUTIONS. All distributions on or with respect to the Pledged Shares, including additional Pledged Shares or other distributions by way of a dividend or otherwise will be retained by Berkshire (or if received by the Pledgor shall be held by the Pledgor in trust and shall be immediately delivered by the Pledgor to Berkshire in the original form received, endorsed in blank) and held by Berkshire as part of the Pledged Shares or applied by Berkshire to the payment of the Credit Obligations. 2.3.3. VOTING. (a) Until an Event of Default shall occur and be continuing, the Pledgor shall be entitled to vote or consent with respect to the Pledged Shares in any manner not inconsistent with the terms of the Note or the Option Agreement, and Berkshire will (if so requested) execute appropriate revocable proxies therefor. (b) If an Event of Default shall have occurred and be continuing, only Berkshire shall be entitled to vote or consent or take any other action with respect to the Pledged Shares, and the Pledgor will (if so requested) execute or cause to be executed appropriate proxies therefor. 2.4. RIGHT TO REALIZE UPON PLEDGED SHARES. Except to the extent prohibited by applicable Law that cannot be waived and subject to the provisions of the Subordination Agreement, this Section 2.4 shall govern Berkshire's right to realize upon the Pledged Shares if any Event of Default shall have occurred and be continuing. 2.4.1. ADDITIONAL RIGHTS. The provisions of this Section 2.4 are in addition to any rights and remedies available at law or in equity and in addition to the provisions of the Note. -3- 2.4.2. GENERAL AUTHORITY. The Pledgor grants Berkshire full and exclusive power and authority, subject to the other terms hereof and applicable law, to take any of the following actions (for the sole benefit of Berkshire, but at the Pledgor's expense): (a) To sell, transfer, assign or otherwise deal in or with any Pledged Shares or the proceeds thereof, as fully as the Pledgor otherwise could do. (b) To ask for, demand, take, collect, sue for and receive all payments in respect of any Pledged Shares which the Pledgor could otherwise ask for, demand, take, collect, sue for and receive for its own use. (c) To settle, compromise, prosecute or defend any action or proceeding with respect to any Pledged Shares and to enforce all rights and remedies thereunder which the Pledgor could otherwise enforce. ARTICLE III REPRESENTATIONS AND WARRANTIES The Pledgor represents and warrants to Berkshire as follows: 3.1. AUTHORIZATION; BINDING OBLIGATION. This Agreement has been duly and validly executed and delivered by the Pledgor and, assuming due authorization, execution and delivery by Berkshire, constitutes a legal, valid and binding obligation of the Pledgor, enforceable against the Pledgor in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other federal or state laws of general applicability relating to or affecting creditors' or secured parties' rights and remedies generally and general principles of equity, whether considered in an action at law or in equity. The Pledgor has the legal capacity and all requisite power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby and to perform its obligations hereunder. Such execution, delivery and consummation has been duly and validly authorized by all necessary action on the part of the Pledgor, and no other corporate or other proceedings on the part of the Pledgor are necessary to authorize such execution, delivery and consummation. 3.2. TITLE TO THE PLEDGED SHARES. Immediately prior to the pledge of the Pledged Shares the Pledgor was the record and beneficial owner of, and had good and marketable title to, the Pledged Shares free and clear of all Liens. The Pledged Shares owned by the Pledgor are validly issued, duly authorized and free of any preemptive rights. There are no voting trusts or other agreements or understandings to which the Pledgor is a party with respect to the voting of the Pledged Shares. The Pledged Shares are not subject to any restrictions on transferability other than those imposed by the Securities Act and applicable state securities laws. Except for the Option Agreement, there are no options, warrants, calls, commitments or rights of any character to purchase or otherwise acquire the Pledged Shares from the Pledgor pursuant to which the Pledgor may be obligated to sell, transfer or otherwise dispose of any of the Pledged Shares. In the event that (i) the Pledgor defaults under the Note and Berkshire enforces the provisions of this Agreement, or (ii) the provisions of Section 3.1 of the Note apply, Berkshire will acquire good and marketable title to the Pledged Shares, free and clear of all Liens. -4- 3.3. CONSENTS AND APPROVALS; NO VIOLATION. None of the execution and delivery of this Agreement, the consummation of the transactions contemplated hereby, or compliance with any of the provisions hereof, will (i) require any consent, waiver, approval, authorization or permit of, or filing with or notification to, or any other action by, any Governmental Authority by the Pledgor, other than necessary filings on Form 4 with the Securities and Exchange Commission, (ii) violate the certificate of formation or limited partnership agreement of the Pledgor, or any Law of any Governmental Authority which may be applicable to the Pledgor, or by which any of the Pledgor's activities, properties or assets (including, without limitation the Pledged Shares) may be bound or affected or (iii) violate, breach, or conflict with, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation or acceleration or any obligation to pay or result in the imposition of any Lien upon any of the property of the Pledgor (including, without limitation, the Pledged Shares)) under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, Lien, contract, agreement, or other instrument or obligation to which the Pledgor is a party or by which any of the Pledgor's activities, properties or assets (including, without limitation, the Pledged Shares) may be bound or affected. ARTICLE IV DEFEASANCE If the Option Agreement is exercised, in whole or in part, and all corresponding Credit Obligations have been paid, performed and reasonably determined by Berkshire to have been indefeasibly discharged in full, at the Pledgor's written request (if appropriate), accompanied by a copy of the written exercise of the Option Agreement and such certificates and other items as Berkshire shall reasonably deem necessary, the number of Pledged Shares required to be delivered by the Pledgor upon the exercise, in whole or in part, of the Option Agreement shall revert to the Pledgor and the right, title and interest of Berkshire therein shall terminate. Thereupon, on the Pledgor's demand and at its cost and expense, Berkshire shall execute proper instruments, acknowledging satisfaction of and discharging this Agreement with respect to the Pledged Shares to be transferred, and shall redeliver to the Pledgor, for delivery to PRG, the number of Pledged Shares required to be delivered by the Pledgor to PRG upon the exercise of the Option Agreement. ARTICLE V MISCELLANEOUS 5.1. SURVIVAL OF REPRESENTATION AND WARRANTIES. All representations, warranties and covenants made in this Agreement, or made in writing to Berkshire, by or on behalf of the Pledgor, in connection with the transactions contemplated by this Agreement shall survive the pledge of the Pledged Shares, and transfer of ownership of the same to Berkshire under the Note or this Agreement. 5.2. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS. -5- 5.3. NOTICES. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered personally, telecopied (with confirmation of receipt), delivered by nationally-recognized overnight express service or sent by registered or certified mail (postage prepaid, return receipt requested) to the parties at the following addresses: 5.3.1. If to Berkshire, to: Berkshire Partners LLC One Boston Place Boston, MA 02108-4401 Telephone: (617) 227-0050 Telecopy: (617) 227-6105 Attention: Ross M. Jones With a copy to: Ropes & Gray One International Place Boston, MA 02110 Telephone: (617) 951-7000 Telecopy: (617) 951-7050 Attention: David C. Chapin, Esq. Jane D. Goldstein, Esq. 5.3.2. If to the Pledgor, to: Schultz PRG Liquidating Investments, Ltd. 9241 LBJ Freeway Dallas, Texas 75243 Attention: Howard Schultz Telefax: (972) 690-7564 With a copy to: Malouf, Lynch, Jackson & Swinson 600 Preston Commons East 8115 Preston Road Dallas, TX 75225 Telephone: (214) 273-0560 (direct dial) Telecopy: (214) 273-0561 (direct fax) Attention: Donald Malouf, Esq. Curtis R. Swinson, Esq. Alex E. Nakos, Esq. or to such other address as the person to whom notice is to be given may have previously furnished to the other in writing in the manner set forth above, provided that notice of a change of address shall be deemed given only upon receipt. -6- 5.4. EXPENSES. Each party hereto shall be solely responsible for all expenses incurred by it or on its behalf in connection with the preparation and execution of this Agreement and the consummation of the transactions contemplated hereby, including, without limitation, the fees and expenses of its counsel, accountants, brokers, finders, financial advisors and other representatives. 5.5. SPECIFIC PERFORMANCE. Without limiting the rights of each party hereto to pursue all other legal and equitable rights available to such party for the other parties' failure to perform their obligations under this Agreement, the parties hereto acknowledge and agree that the remedy at law for any failure to perform their obligations hereunder would be inadequate and that each of them, respectively, shall be entitled to specific performance, injunctive relief or other equitable remedies in the event of any such failure. 5.6. DESCRIPTIVE HEADINGS; INTERPRETATION. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. References in this Agreement to Sections mean Sections of this Agreement, unless otherwise indicated. The term "person" shall mean and include an individual, a partnership, a joint venture, a corporation, a trust, a governmental entity or an unincorporated organization. The parties hereto agree that they have been represented by counsel during the negotiation and execution of this Agreement and, therefore, waive the application of any law, regulation, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the party drafting such agreement or document. 5.7. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. 5.8. SEVERABILITY. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the parties shall negotiate in good faith with a view to the substitution therefor of a suitable and equitable solution in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid provision, provided, however, that the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be in any way impaired thereby, it being intended that all of the rights and privileges of the parties hereto shall be enforceable to the fullest extent permitted by law. 5.9. ENTIRE AGREEMENT; THIRD-PARTY BENEFICIARIES. This Agreement constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof, and is not intended to confer upon any person other than the parties hereto and their permitted assigns any rights or remedies hereunder. 5.10. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall inure to the benefit of Berkshire and its successors and assigns and shall be binding upon the Pledgor. Berkshire may assign its rights and obligations under this Agreement, including the right to receive or hold Pledged Shares, to its affiliates, without the consent of the Pledgor. The Pledgor -7- may not assign its rights or obligations under this Agreement without the written consent of Berkshire. 5.11. FURTHER ASSURANCES. The Pledgor and Berkshire agree to execute and deliver such other documents, certificates, agreements and other writings and to take such other actions as may be necessary or desirable in order to implement the transactions contemplated by this Agreement. 5.12. TERMINATION. This Agreement will terminate upon the full satisfaction of the Credit Obligations by Borrower. [The remainder of this page is intentionally blank] -8- Each of the undersigned has caused this Agreement to be executed and delivered by its duly authorized officer as of the date first written above. SCHULTZ PRG LIQUIDATING INVESTMENTS, LTD., a Texas limited partnership By: Schultz PRG Liquidating Investments GP, L.L.C., a Texas limited liability company By: ----------------------------------------------- Name: Howard Schultz Title: Manager/President BERKSHIRE FUND V, LIMITED PARTNERSHIP By: Fifth Berkshire Associates LLC its General Partner By: ----------------------------------------------- Name: Title: EXHIBIT A PLEDGED SHARES Shares of Holder Common Stock Certificate No. ------ ------------ --------------- Schultz PRG Liquidating 1,446,168 Investments, Ltd. EX-99.7 9 b43703bfexv99w7.txt SUBORDINATION AGREEMENT Exhibit 99.7 SUBORDINATION AGREEMENT THIS SUBORDINATION AGREEMENT ("Agreement") is made this __ day of August, 2002, by and among PRG-Schultz International, Inc., a Georgia corporation ("PRGX"), and Berkshire Fund V, Limited Partnership, a Massachusetts limited partnership and Berkshire Investors LLC, a Massachusetts limited liability company (collectively with their permitted assignees, "Berkshire") and Schultz PRG Liquidating Investments, Ltd., a Texas limited partnership ("LP"). W I T N E S S E T H: WHEREAS, on the date hereof, LP granted to PRGX an option (the "Option") to purchase 1,446,168 shares of Common Stock of PRGX ("Option Shares") pursuant to that certain First Option Agreement of even date herewith ("Option Agreement"); WHEREAS, on the date hereof, Berkshire loaned $12,610,584.96 to LP as evidenced by secured promissory notes of even date herewith ("Notes") and, as security for its payment obligations under the Notes, the LP has granted a security interest in and pledged the Option Shares (hereafter, the "Pledged Shares") to Berkshire, pursuant to Pledge Agreements of even date herewith ("Pledge Agreements"); WHEREAS, on the date hereof, the LP and its affiliates sold an aggregate of 4,338,507 shares of PRGX Common Stock to affiliates of Berkshire; WHEREAS, PRGX has granted registration rights to Berkshire with respect to shares of PRGX Common Stock pursuant to a registration rights agreement, without which Berkshire would not have acquired the 4,338,507 PRGX Shares referred to above; NOW THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. Berkshire's right to realize upon the Pledged Shares upon an Event of Default under the Pledge Agreements and/or the Notes shall be subordinate to the rights of PRGX to such Pledged Shares (but not to the proceeds thereof) under the Option Agreement. 2. Berkshire hereby agrees (i) that until the expiration of the Option Agreement it will take no action with respect to the Pledged Shares or any portion thereof pursuant to the Pledge Agreements, nor will it take any action against the LP to interfere with or impair PRGX's ability to obtain full right, title, and interest in the Pledged Shares or any portion thereof pursuant to the exercise of the Option Agreement and purchase of the Pledged Shares thereunder and (ii) that, upon the full exercise of the Option under the Option Agreement, the Pledge Agreements will be cancelled and terminated. 3. Upon repayment of the Notes in whole or in part by LP to Berkshire in accordance with Section 3.1 of the Notes, Berkshire shall release the number of Pledged Shares relating to such repayment to the LP, as agent on behalf of the parties to deliver such shares to PRGX. In the event an Event of Default occurs (as defined in the Notes) and is continuing, and notice thereof is given to PRGX prior to payment under the Option Agreement, PRGX shall, if it exercises the Option, hold the Purchase Price therefor in trust for the benefit of Berkshire and/or LP in accordance with the terms of the Option Agreement. The parties hereto hereby acknowledge that PRGX shall have no liability to any party on account of its failure to disburse the Purchase Price for the Pledged Shares in the event of any dispute as to whom is entitled to receive such Purchase Price. In such event, PRGX shall have the right to retain the funds and disburse them (a) in accordance with joint instructions from Berkshire and LP, (b) in accordance with the final order of a court of competent jurisdiction, or (c) by deposit by PRGX of the Purchase Price for the Pledged Shares with said court, pending a final decision of such controversy. The parties hereto further agree that PRGX shall not be liable for failure of the depository and shall only be liable otherwise in the event of its gross negligence or willful misconduct. 4. COLLECTION OF PROCEEDS. Nothing herein contained shall limit or restrict the right of Berkshire to collect any proceeds paid to LP upon the exercise of the Option Agreement. 5. MISCELLANEOUS. (a) GOVERNING LAW. THIS AGREEMENT AND ALL RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED, CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW. (b) MODIFICATIONS. No modification of or amendment to this Agreement, nor any waiver or any rights under this Agreement, shall be effective unless in writing signed by all of the parties to this Agreement. The failure by any party to enforce any rights under this Agreement shall not be construed as a waiver of any rights of such party. (c) NOTICES. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered personally, telecopied (with confirmation of receipt), delivered by nationally-recognized overnight express service or sent by registered or certified mail (postage prepaid, return receipt requested) to the parties at the following addresses: If to Berkshire, to: Berkshire Partners LLC One Boston Place Boston, MA 02108-4401 Telephone: (617) 227-0050 Telecopy: (617) 227-6105 Attention: Ross M. Jones -2- With a copy to: Ropes & Gray One International Place Boston, MA 02110 Telephone: (617) 951-7000 Telecopy: (617) 951-7050 Attention: David C. Chapin, Esq. Jane D. Goldstein, Esq. If to the PRGX, to: PRG-Schultz International, Inc. 2300 Windy Ridge Parkway Suite 100 North Atlanta, GA 30339-8426 Telephone: (770) 779-3051 Telecopy: (770) 779-3034 Attention: Clinton McKellar, Jr. Senior Vice President and General Counsel With a copy to: Arnall Golden Gregory LLP 1201 W. Peachtree Street, Suite 2800 Atlanta, GA 30309-3400 Telephone: 404 (873)-8700 Telecopy: 404 (873)-8701 Attention: Jonathan Golden If to LP: Schultz PRG Liquidating Investments, Ltd 9241 LBJ Freeway Dallas, Texas 75243 Attention: Howard Schultz Telefax: (972) 690-7564 With a copy to: Malouf, Lynch, Jackson & Swinson 600 Preston Commons East 8115 Preston Road Dallas, Texas 75225 Attention: Curtis Swinson, Esq. Telefax: (214) 273-0567 or to such other address as the person to whom notice is to be given may have previously furnished to the other in writing in the manner set forth above, provided that notice of a change of address shall be deemed given only upon receipt. -3- (d) COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument. (e) SUCCESSORS AND ASSIGNS. The rights and benefits of this Agreement shall inure to the benefit of, and be enforceable by PRGX's and Berkshire's respective successors and assigns and any assignee of the Notes held by Berkshire shall be bound by this Agreement. (f) SPECIFIC PERFORMANCE. Without limiting the rights of each party hereto to pursue all other legal and equitable rights available to such party for the other parties' failure to perform their obligations under this Agreement, the parties hereto acknowledge and agree that the remedy at law for any failure to perform their obligations hereunder would be inadequate and that each of them, respectively, shall be entitled to specific performance, injunctive relief or other equitable remedies in the event of any such failure. (g) FURTHER ASSURANCES. PRGX and Berkshire agree to execute and deliver such other documents, certificates, agreements and other writings and to take such other actions as may be reasonably necessary or desirable in order to implement the transactions contemplated by this Agreement and the transfer of any shares of PRGX Common Stock under that certain Agreement dated as of the date hereof between Berkshire and Blum Strategic Partners II, LP. (h) TERMINATION. This Agreement will terminate upon the earlier of the expiration of the Option Agreement or indefeasible payment of the Notes by LP in accordance with the terms thereof. (i) CAPITALIZED TERMS. Capitalized terms defined in the Note and not otherwise defined herein shall have the meanings set forth in the Note. [Remainder of Page Intentionally Left Blank. Signatures Begin on Next Page] -4- IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. PRG-SCHULTZ INTERNATIONAL, INC. By: --------------------------------- Name: ------------------------------- Its: -------------------------------- BERKSHIRE FUND V, LIMITED PARTNERSHIP By: Fifth Berkshire Associates LLC Its: General Partner By: ------------------------------ Name: ---------------------------- Its: ----------------------------- BERKSHIRE INVESTORS LLC By: ------------------------------ Name: ---------------------------- Its: ----------------------------- SCHULTZ PRG LIQUIDATING INVESTMENTS, LTD. By: SCHULTZ PRG LIQUIDATING INVESTMENTS GP, LLC Its: General Partner By: ------------------------------- Name: Andy Schultz, Vice President -5- EX-99.8 10 b43703bfexv99w8.txt FORM OF PURCHASE AGREEMENT Exhibit 99.8 PURCHASE AGREEMENT THIS PURCHASE AGREEMENT (the "AGREEMENT"), dated as of August __, 2002, is made between Berkshire Fund V, Limited Partnership, a Massachusetts limited partnership, Berkshire Investors LLC, a Massachusetts limited liability company (collectively, together with their permitted assignees, "BERKSHIRE") and Blum Strategic Partners II, L.P., a Delaware limited partnership ("BLUM"). WHEREAS, Berkshire has entered into a promissory note (the "BERKSHIRE NOTES"), dated as of August __, 2002, with Schultz PRG Liquidating Investments, Ltd., a Texas limited partnership ("SCHULTZ LIMITED") pursuant to which Berkshire has agreed to lend Schultz Limited an aggregate of $12,610,584.96, secured by 1,446,168 shares of common stock, no par value, (the "COMMON STOCK") of PRG-Schultz International, Inc., a Georgia corporation ("PRG") held by Schultz Limited and the Pledge Agreement associated thereunder (the "Pledge Agreement"); WHEREAS, PRG has entered into an option agreement with Schultz Limited, dated as of August __, 2002, pursuant to which PRG has the right to purchase the Common Stock held by Schultz Limited and pledged to Berkshire pursuant to the Berkshire Notes (the "FIRST OPTION"); WHEREAS, Blum has entered into a promissory note, dated as of August __, 2002, with Schultz Limited pursuant to which Blum has agreed to lend Schultz Limited an aggregate of $12,610,584.96, secured by 1,446,168 shares of Common Stock held by Schultz Limited (the "BLUM NOTE"); WHEREAS, PRG has entered into an option agreement with Schultz Limited, dated as of August __, 2002, pursuant to which PRG has the right to purchase the Common Stock held by Schultz Limited and pledged to Blum pursuant to the Blum Note, with a limit equal to the shares purchased by PRG pursuant to the First Option (the "SECOND OPTION"); and WHEREAS, Berkshire desires to purchase and Blum desires to sell the Subject Shares (as defined below) subject to the terms and conditions provided in this Agreement. NOW, THEREFORE, in consideration of the premises and agreements hereinafter set forth, intending to be legally bound, the parties hereby agree as follows: ARTICLE I. RIGHT TO PURCHASE 1.1. NOTICE OF ACTIONS. For the purpose of making the calculations of Subject Shares and Purchase Price under Section 1.2, up and until the later of the Notice Date or the Closing (as defined below) and pursuant to the notice provisions of Section 2.3.: (i) promptly after each notice to Berkshire by Schultz Limited of the exercise (in whole or in part) of the First Option by PRG and the corresponding repayment of all or a portion of the Berkshire Notes by Schultz Limited in cash in return for the release of shares of Common Stock pledged by Shultz Limited pursuant to the Berkshire Notes, Berkshire will provide written notice ("BERKSHIRE NOTE REPAYMENT NOTICE") to Blum in the form of Exhibit A hereto of (a) the number of shares of Common Stock released to Schultz Limited in connection with a cash repayment ("BERKSHIRE SHARES") and (b) the total payment of principal and interest made by Schultz Limited under the Berkshire Notes at the at the time of repayment and transfer of Common Stock (a "BERKSHIRE PAYMENT AMOUNT"), (ii) promptly after each notice to Blum by Schultz Limited of the exercise (in whole or in part) of the Second Option by PRG and the corresponding repayment of all or a portion of the Blum Note by Schultz Limited in cash in return for the release of shares of Common Stock pledged by Shultz Limited pursuant to the Blum Note, Blum will provide written notice to Berkshire in the form of Exhibit A hereto of (a) the number of shares of Common Stock released to Schultz Limited in connection with a cash repayment and (b) the total payment of principal and interest made by Schultz Limited under the Blum Note at the time of repayment and transfer of Common Stock and (iii) each of Blum and Berkshire agree to promptly provide copies of all documents relating to the repayment of the Blum Note and the Berkshire Notes to the other parties. 1.2. EXERCISE; AMOUNT. Berkshire shall have the right to purchase from Blum (the "PURCHASE RIGHT"), such number of duly authorized, validly issued, fully paid and nonassessable shares of PRG Common Stock as is determined by multiplying (i) the excess, if any of (a) the number of shares of Common Stock transferred by Schultz Limited to Blum pursuant to the put/call under the Blum Note over (b) the number of shares of Common Stock transferred by Schultz Limited to Berkshire pursuant to the put/call under the Berkshire Notes, by (ii) 0.5 (the "SUBJECT SHARES"). The price per share to be paid by Berkshire for the Subject Shares upon the exercise of the Purchase Right shall be equal to (i) the sum of the Berkshire Payment Amounts set forth in all of the Berkshire Note Repayment Notices divided by (ii) the total number of Berkshire Shares set forth in all Berkshire Note Repayment Notices (the "PER SHARE PURCHASE PRICE"). The number of Subject Shares each Berkshire Fund may purchase and the Per Share Purchase Price will be subject to adjustment to account for any stock splits, stock dividends or reclassifications affecting PRG's Common Stock, which are effected or declared after the date hereof and prior to the Closing (as defined below). The amount of Subject Shares each Berkshire Fund may purchase shall not include any fractional shares and shall be rounded up to the nearest whole share of Common Stock. 1.3. MANNER OF EXERCISE. Notice of the exercise of the Purchase Right may be made by Berkshire on any business day after the expiration of the Second Option and on or prior to 260 days (the "NOTICE DATE"), by written exercise notice to Blum in substantially the form attached as Exhibit B to this Agreement (or a reasonable facsimile thereof), duly executed by Berkshire. 1.4. PAYMENT; DELIVERY OF STOCK CERTIFICATES, ETC. As soon as practicable after the exercise of the Purchase Right, and in any event within three (3) days thereafter, upon receipt of payment by wire transfer of immediately available funds to Blum in the amount obtained by multiplying (a) the number of Subject Shares elected to be purchased (the "PURCHASED SHARES") by (b) the Per Share Purchase Price, Blum will deliver to Berkshire a certificate or certificates for the number of duly authorized, validly issued, fully paid and nonassessable Purchased Shares to which Berkshire is entitled, free and clear of all Encumbrances, with duly executed stock transfer powers in the names designated by Berkshire (the "CLOSING"). At the Closing, Blum will deliver to Berkshire a written representation that the Purchased Shares so delivered are free and clear of 2 any lien, encumbrance, proxy, voting trust arrangement, pledge, security interest, collateral security agreement, financing statement (and similar notices) filed with any governmental authority, claim (including any claim as defined in the Internal Revenue Code of 1986, as amended), charge, equities, mortgage, pledge, objection, title defect, option, restrictive covenant or restriction on transfer of any nature whatsoever, except for restrictions or transferability imposed by applicable Securities Laws or any Registration Rights and Lock-Up Agreement existing on the date hereof ("ENCUMBRANCES"). 1.5. TRANSACTION AGREEMENTS. Berkshire represents and warrants to Blum that the only agreements it has entered into with PRG, Schultz Limited or otherwise in connection with the transactions contemplated by this Agreement are: (i) a Stock Purchase Agreement, dated August 16, 2002, between Berkshire, Schultz Limited and certain other parties, (ii) a Registration Rights Agreement, dated the date hereof, between PRG and Berkshire, (iii) an Investor Rights Agreement, dated the date hereof, between PRG, Blum and Berkshire, (iv) the Berkshire Notes (v) a Subordination Agreement between PRG, Berkshire and Schultz Limited, (vi) the Pledge Agreement, (vii) this Agreement, (viii) a letter regarding execution of documents dated the date hereof between PRG and Berkshire, and (ix) a Management Rights Letter, dated the date hereof, between PRG and Berkshire. Blum represents and warrants to Berkshire that the only agreements it has entered into with PRG, Schultz Limited or otherwise in connection with the transactions contemplated by this Agreement are: (i) a Stock Purchase Agreement, dated August 16, 2002, between Blum, Schultz Limited and certain other parties, (ii) a Registration Rights Agreement, dated the date hereof, between PRG and Blum, (iii) an Investor Rights Agreement, dated the date hereof, between PRG, Blum and Berkshire, (iv) the Blum Note, (v) a Subordination Agreement between PRG, Blum and Schultz Limited, (vi) the Pledge Agreement, (vii) this Agreement, (viii) a letter regarding execution of documents dated the date hereof between PRG and Blum, (ix) a Standstill Agreement, dated the date hereof, between PRG and Blum, (x) a Second Amendment to Shareholder Protection Rights Agreement, dated August 16, 2002, between PRG and Wachovia Bank, National Association f/k/a First Union National Bank, and (xi) a Management Rights Letter, dated the date hereof, between PRG and Blum. ARTICLE II. MISCELLANEOUS 2.1. NO IMPAIRMENT; OTHER ACTIONS. The parties hereto will not avoid or seek to avoid the observance or performance of any of the terms of this Agreement, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the parties hereto against dilution or impairment. 2.2. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS. 2.3. NOTICES. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered 3 personally, telecopied (with confirmation of receipt), delivered by nationally-recognized overnight express service or sent by registered or certified mail (postage prepaid, return receipt requested) to the parties at the following addresses: (a) If to Berkshire, to: Berkshire Partners LLC One Boston Place Boston, MA 02108-4401 Telephone: (617) 227-0050 Facsimile: (617) 227-6105 Attention: Ross M. Jones With a copy to: Ropes & Gray One International Place Boston, MA 02110 Telephone: (617) 951-7000 Facsimile: (617) 951-7050 Attention: David C. Chapin, Esq. Jane D. Goldstein, Esq. (b) If to Blum, to: Blum Strategic Partners II, L.P. 909 Montgomery Street Suite 400 San Francisco, California 94133 Telephone: (415) 434-1111 Facsimile: (415) 434-3130 Attention: Murray Indick With a copy to: Simpson Thacher & Bartlett 3330 Hillview Avenue Palo Alto, CA 94304 Telephone: (650) 251-5000 Facsimile: (650) 251-5002 Attention: Michael Nooney or to such other address as the person to whom notice is to be given may have previously furnished to the other in writing in the manner set forth above, provided that notice of a change of address shall be deemed given only upon receipt. 4 2.4. EXPENSES. Each party hereto shall be solely responsible for all expenses incurred by it or on its behalf in connection with the preparation and execution of this Agreement and the consummation of the transactions contemplated hereby, including, without limitation, the fees and expenses of its counsel, accountants, brokers, finders, financial advisors and other representatives. 2.5. SPECIFIC PERFORMANCE. Without limiting the rights of each party hereto to pursue all other legal and equitable rights available to such party for the other parties' failure to perform their obligations under this Agreement, the parties hereto acknowledge and agree that the remedy at law for any failure to perform their obligations hereunder would be inadequate and that each of them, respectively, shall be entitled to specific performance, injunctive relief or other equitable remedies in the event of any such failure. 2.6. DESCRIPTIVE HEADINGS; INTERPRETATION. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. References in this Agreement to Sections mean Sections of this Agreement, unless otherwise indicated. The term "person" shall mean and include an individual, a partnership, a joint venture, a corporation, a trust, a governmental entity or an unincorporated organization. The parties hereto agree that they have been represented by counsel during the negotiation and execution of this Agreement and, therefore, waive the application of any law, regulation, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the party drafting such agreement or document. 2.7. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. 2.8. SEVERABILITY. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the parties shall negotiate in good faith with a view to the substitution therefor of a suitable and equitable solution in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid provision, provided, however, that the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be in any way impaired thereby, it being intended that all of the rights and privileges of the parties hereto shall be enforceable to the fullest extent permitted by law. 2.9. ENTIRE AGREEMENT; THIRD-PARTY BENEFICIARIES. This Agreement constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof, and is not intended to confer upon any person other than the parties hereto and their permitted assigns any rights or remedies hereunder. 2.10. ASSIGNMENT. No party hereto may assign its rights or obligations under this Agreement, provided that each Berkshire Fund may assign its rights to purchase Subject Shares hereunder to any one or more of its affiliates, and may assign and transfer any Purchased Shares so purchased to any one or more of such affiliates; PROVIDED, FURTHER that Blum may assign its 5 rights to sell Subject Shares hereunder to any one of its affiliates, and may assign and transfer any Subject Shares to be purchased by Berkshire to any one or more of such affiliates. 2.11. TERMINATION. Berkshire's Purchase Right under this Agreement will terminate upon the earlier of (i) the failure of Berkshire to exercise its Purchase Right by midnight on the Notice Date, (ii) the failure of PRG to exercise the First Option by the relevant exercise date, or (iii) the exercise, in their entirety, of the First Option and the Second Option by PRG, provided, that Sections 1.5 and Article II shall survive any such termination. [Remainder of Page Intentionally Left Blank] 6 IN WITNESS WHEREOF, the parties hereto have executed this Agreement, on the day and year first above written. BERKSHIRE FUND V, LIMITED PARTNERSHIP By: Fifth Berkshire Associates LLC its General Partner By: ----------------------------------- Name: Title: BERKSHIRE INVESTORS LLC By: ----------------------------------- Name: Title: BLUM STRATEGIC PARTNERS II, L.P. By: Blum Strategic GP II, L.L.C., its General Partner By: ----------------------------------- Name: Title: EXHIBIT A FORM OF NOTE REPAYMENT NOTICE To [_____]: The undersigned party (or permitted assignee) to the Purchase Agreement, dated August __, 2002 between Berkshire Fund V, Limited Partnership, Berkshire Investors LLC and Blum Strategic Partners II, L.P.(the "Agreement"), hereby provides this Note Repayment Notice to [_____] pursuant to Section 1.1 of the Agreement such that (i) the number of shares of Common Stock released to Schultz Limited in connection with a cash repayment on [______] of the Promissory Note issued by [___] is [____] shares and (ii) the total payment of principal and interest made by Schultz Limited under the Promissory Note issued by [___ ] at the at the time of repayment and transfer of Common Stock is $______ . Dated: __________ [Name Entity] By: ----------------------------------- Name: Title: EXHIBIT B FORM OF EXERCISE To Blum Strategic Partners II, L.P.: The undersigned party (or permitted assignee) to the Purchase Agreement, dated August __, 2002 between Berkshire Fund V, Limited Partnership, Berkshire Investors LLC and Blum Strategic Partners II, L.P., hereby irrevocably exercises its Purchase Right for _______ shares of PRG Common Stock and upon payment of $______ therefor, requests that the certificates for such shares be transferred in the name of, and delivered to ________, whose address is _____________. Dated: _______, 2003 [Name of Berkshire Entity] By: ----------------------------------- Name: Title: EX-99.9 11 b43703bfexv99w9.txt SIDE LETTER TO THE STOCK PURCHASE AGREEMENT Exhibit 99.9 PRG-Schultz International, Inc. 2300 Windy Ridge Parkway Suite 100 North Tower Atlanta, GA 30339-8426 August 16, 2002 Berkshire Fund V Investment Corp. and Berkshire Investors LLC c/o Berkshire Partners LLC One Boston Place Boston, MA 02100-4401 Re: Execution of Closing Documents ------------------------------ Ladies and Gentlemen: This letter will confirm our understanding that, in connection with the Stock Purchase Agreement, dated as of August 16, 2002, made between Berkshire Fund V Investment Corp., Berkshire Investors LLC, and the individuals identified therein as Sellers (the "STOCK PURCHASE AGREEMENT"), PRG-Schultz International, Inc. ("PRG") hereby agrees to execute at the date of the Closing under the Stock Purchase Agreement (the "CLOSING DATE") the documents set forth below, PROVIDED, that they are each in the form of the applicable exhibit to the Stock Purchase Agreement and that all of the conditions to Closing in the Stock Purchase Agreement have been satisfied or, if waived, PRG shall have consented to such waiver: 1. The Investor Rights Agreement to be made as of the Closing Date, by and among PRG, Berkshire Fund V Investment Corp., Berkshire Investors LLC, and Blum Strategic Partners II, L.P.; 2. The Registration Rights Agreement to be made as of the Closing Date, by and between PRG, Berkshire Fund V Investment Corp., and Berkshire Investors LLC; 3. The Subordination Agreement to be made as of the Closing Date, by and among PRG, Berkshire Fund V Investment Corp., and Berkshire Investors LLC; 4. The Consent and Amendment Agreement, dated August 16, 2002, by and among PRG, Howard Schultz & Associates International, Inc., the Sellers, John M. Cook, and John M. Toma; and 5. The Management Rights Letter addressed from PRG to the Berkshire entities. [SIGNATURE PAGE FOLLOWS] August 16, 2002 Page 2 Very truly yours, PRG-Schultz International, Inc. By: /s/ Clinton McKellar, Jr. --------------------------------------- Name: Clinton McKellar, Jr. Title: Senior Vice President, General Counsel and Secretary -----END PRIVACY-ENHANCED MESSAGE-----