THIS
EMPLOYMENT AGREEMENT (this “Agreement”) is made and
entered into as of May 26, 2009, to be effective June 1,
2009 (the “Effective Date”) by and between PRG-Schultz
International, Inc., a Georgia corporation (the
“Company”), and Robert B. Lee (the
“Executive”). This Agreement supersedes, replaces and
terminates any employment agreement previously entered into by and
among the Company and/or any of its subsidiaries and the
Executive.
WHEREAS ,
the Company considers the availability of the Executive’s
services to be important to the management and conduct of the
Company’s business and desires to secure the availability of
the Executive’s services; and
WHEREAS ,
the Executive is willing to make the Executive’s services
available to the Company on the terms and subject to the conditions
set forth herein.
NOW,
THEREFORE , in consideration of the foregoing and of the mutual
covenants and agreements hereinafter set forth and intending to be
legally bound, the Company and the Executive agree as
follows:
1.
Employment and Duties .
(a)
Position . The Company hereby employs the Executive,
and the Executive hereby accepts such employment, as the Chief
Financial Officer, Treasurer and Controller of the Company, on the
terms and subject to the conditions of this Agreement. The
Executive agrees to perform such duties and responsibilities as are
customarily performed by persons acting in such capacity or as are
assigned to Executive from time to time by the Board of Directors
of the Company or its designees. The Executive acknowledges and
agrees that from time to time the Company may assign Executive
additional positions with the Company or the Company’s
subsidiaries, with such title, duties and responsibilities as shall
be determined by the Company. The Executive agrees to serve in any
and all such positions without additional compensation. The
Executive will report directly to the Chief Executive Officer of
the Company.
(b)
Duties . The Executive shall devote the
Executive’s best efforts and full professional time and
attention to the business and affairs of the Company and the
Company’s subsidiaries. During the Term, Executive shall not
serve as a director or principal of any other company or charitable
or civic organization without the prior written consent of the
Board of Directors of the Company. The principal place of
employment of the Executive shall be the Company’s executive
offices in Atlanta, Georgia, subject to reasonable travel on the
business of the Company or the Company’s subsidiaries. The
Executive shall be expected to follow and be bound by the terms of
the Company’s Code of Conduct and Code of Ethics for Senior
Financial Officers and any other applicable policies as the Company
from time to time may adopt.
2.
Term . This Agreement is effective as of the
Effective Date, and will continue through the first anniversary of
the Effective Date, unless terminated or extended as hereinafter
provided. This Agreement shall be extended for successive one-year
periods following the original term (through each subsequent
anniversary thereafter) unless any party notifies the other in
writing at least 30 days prior to the end of the original
term, or the end of any additional one-year renewal
term, that the
Agreement shall not be extended beyond its then current term. The
term of this Agreement, including any renewal term, is referred to
herein as the “Term.”
(a)
Base Salary . The Company shall pay the Executive an
annual base salary of $205,000. The annual base salary shall be
paid to the Executive in accordance with the established payroll
practices of the Company (but no less frequently than monthly)
subject to ordinary and lawful deductions. The Compensation
Committee of the Company will review the Executive’s base
salary from time to time to consider whether any increase should be
made. The base salary during the Term will not be less than that in
effect at any time during the Term.
(b)
Annual Bonus . During the Term, the Executive will be
eligible to participate in an annual incentive bonus plan that will
establish measurable criteria and incentive compensation levels
payable to the Executive for performance in relation to defined
targets established by the Compensation Committee of the
Company’s Board of Directors, after consultation with
management, and consistent with the Company’s business plans
and objectives. To the extent the targeted performance levels are
exceeded, the incentive bonus plan will provide a means by which
the annual bonus will be increased. Similarly, the incentive plan
will provide a means by which the annual bonus will be decreased or
eliminated if the targeted performance levels are not achieved. In
connection with such annual incentive bonus plan, subject to the
corresponding performance levels being achieved, the Executive
shall be eligible for an annual target bonus equal to
50 percent of the Executive’s annual base salary and an
annual maximum bonus equal to 100 percent of the
Executive’s annual base salary. Any bonus payments due
hereunder shall be payable to the Executive no later than the
15 th
day of the third month following the
end of the applicable year to which the incentive bonus relates.
For calendar year 2009, the Executive’s annual incentive
bonus shall be equal to the sum of (i) a prorated bonus for
the period from January 1, 2009 through May 31, 2009,
based on the bonus plan that would have been applicable to the
Executive for 2009 (including a target bonus of $50,000 and a
maximum bonus of $100,000), had he not accepted the offer to become
the Company’s Chief Financial Officer, and (ii) a
prorated bonus under this Section 3(b) based on the number of days
that Executive is actually employed by the Company as its Chief
Financial Officer during 2009 (beginning with the Effective
Date).
(c)
Stock Compensation . The Executive also shall be
eligible to receive stock options, restricted stock, stock
appreciation rights and/or other equity awards under the
Company’s applicable equity plans on such basis as the
Compensation Committee or the Board of Directors of the Company or
their designees, as the case may be, may determine on a basis not
less favorable than that provided to the class of employees that
includes the Executive. Except as specifically set forth above,
however, nothing herein shall require the Company to make any
equity grants or other awards to the Executive in any specific
year.
4
Indemnity. The Company and the Executive will enter
into the Company’s standard indemnification agreement for
executive officers.
(a)
Benefit Programs . The Executive shall be eligible to
participate in any plans, programs or forms of compensation or
benefits that the Company or the Company’s
2
subsidiaries
provide to the class of employees that includes the Executive, on a
basis not less favorable than that provided to such class of
employees, including, without limitation, group medical, disability
and life insurance, paid time-off, and retirement plan, subject to
the terms and conditions of such plans, programs or forms of
compensation or benefits.
(b)
Paid Time-Off . The Executive shall be entitled to
five weeks of paid time-off, to be accrued and used in accordance
with the normal Company paid time-off policy.
6 .
Reimbursement of Expenses . The Company shall
reimburse the Executive, subject to presentation of adequate
substantiation, including receipts, for the reasonable travel,
entertainment, lodging and other business expenses incurred by the
Executive in accordance with the Company’s expense
reimbursement policy in effect at the time such expenses are
incurred. In no event will such reimbursements, if any, be made
later than the last day of the year following the year in which the
Executive incurs the expense.
7.
Termination of Employment .
(a)
Death or Incapacity . The Executive’s
employment under this Agreement shall terminate automatically upon
the Executive’s death. If the Company determines that the
Incapacity, as hereinafter defined, of the Executive has occurred,
it may terminate the Executive’s employment and this
Agreement. “Incapacity” shall mean the inability of the
Executive to perform the essential functions of the
Executive’s job, with or without reasonable accommodation,
for a period of 90 days in the aggregate in any rolling
180-day period.
(b)
Termination by Company For Cause . The Company may
terminate the Executive’s employment during the Term of this
Agreement for Cause. For purposes of this Agreement,
“Cause” shall mean, as determined by the Board of
Directors of the Company in good faith, the following:
(i)
the Executive’s willful misconduct or gross negligence in
connection with the performance of the Executive’s duties
which the Board of Directors of the Company believes does or is
likely to result in material harm to the Company or any of its
subsidiaries;
(ii)
the Executive’s misappropriation or embezzlement of funds or
property of the Company or any of its subsidiaries;
(iii)
the Executive’s fraud or dishonesty with respect to the
Company or any of its subsidiaries;
(iv)
the Executive’s conviction of, indictment for (or its
procedural equivalent), or entering of a guilty plea or plea of no
contest with respect to any felony or any other crime involving
moral turpitude or dishonesty; or
(v)
the Executive’s breach of a material term of this Agreement,
or violation in any material respect of any code or standard of
behavior generally applicable to officers of the Company
(including, without, limitation the Company’s Code of
Conduct, Code of Ethics for Senior Financial Officers and any other
applicable policies as the Company from time to time may adopt),
after being advised in writing of such breach or
3
violation and
being given 30 days to remedy such breach or violation, to the
extent that such breach or violation can be cured;
(vi)
the Executive’s breach of fiduciary duties owed to the
Company or any of its subsidiaries;
(vii)
the Executive’s engagement in habitual insobriety or the use
of illegal drugs or substances; or
(viii)
the Executive’s willful failure to cooperate, or willful
failure to cause and direct persons under the Executive’s
management or direction, or employed by, or consultants or agents
to, the Company or its subsidiaries to cooperate, with all
corporate investigations or independent investigations by the Board
of Directors of the Company or its subsidiaries, all governmental
investigations of the Company or its subsidiaries or orders
involving the Executive, the Company or the Company’s
subsidiaries entered by a court of competent
jurisdiction.
Notwithstanding
the above, and without limitation, the Executive shall not be
deemed to have been terminated for Cause unless and until there has
been delivered to the Executive (i) a letter from the Board of
Directors of the Company finding that the Executive has engaged in
the conduct set forth in any of the preceding clauses and
specifying the particulars thereof in detail and (ii) a copy
of a resolution duly adopted by the affirmative vote of the
majority of the members of the Board of Directors of the Company
who are not officers of the Company at a meeting of the Board of
Directors called and held for such purpose or such other
appropriate written consent (after reasonable notice to the
Executive and an opportunity for the Executive, together with the
Executive’s counsel, to be heard before the Board of
Directors of the Company), finding that the Executive has engaged
in such conduct and specifying the particulars thereof in
detail.
(c)
Termination by Executive for Good Reason . The
Executive may terminate the Executive’s employment for Good
Reason. For purposes of this Agreement, “Good Reason”
shall mean, without the Executive’s consent, the
following:
(i)
any action taken by the Company which results in a material
reduction in the Executive’s authority, duties or
responsibilities as Chief Financial Officer of the Company (except
that any change in the foregoing that results solely from
(A) the Company ceasing to be a publicly traded entity or from
the Company becoming a wholly-owned subsidiary of another publicly
traded entity or (B) any change in the geographic scope of the
Executive’s authority, duties or responsibilities will not,
in any event and standing alone, constitute a substantial reduction
in the Executive’s authority, duties or responsibilities),
including any requirement that the Executive report directly to
anyone other than the Chief Executive Officer of the
Company;
(ii)
the assignment to the Executive of duties that are materially
inconsistent with Executive’s authority, duties or
responsibilities as Chief Financial Officer of the
Company;
(iii)
any material decrease in the Executive’s base salary or
annual bonus opportunity or the benefits generally available to the
class of employees that includes the
4
Executive,
except to the extent the Company has instituted a salary, bonus or
benefits reduction generally applicable to all executives of the
Company other than in contemplation of or after a Change in
Control;
(iv)
the relocation of the Executive to any primary place of employment
other than as specified in Section 1(b) above which might require
the Executive to move the Executive’s residence which, for
this purpose, means any reassignment to a place of employment 50
miles or more from the place (or, if applicable, all places) of
employment set forth in Section 1(b), without the Executive’s
express written consent to such relocation; provided, however, this
subsection (iv) shall not apply in the case of business travel
which requires the Executive to relocate temporarily for periods of
90 days or less;
(v)
the failure by the Company to pay to the Executive any portion of
the Executive’s base salary, annual bonus or other benefits
within 10 days after the date the same is due; or
(vi)
any material failure by the Company to comply with the terms of
this Agreement.
Notwithstanding
the above, and without limitation, “Good Reason” shall
not include (x) any resignation by the Executive where Cause
for the Executive’s termination by the Company exists and the
Company then follows the procedures described above, or
(y) any removal of Executive from the offices or positions of
Controller, Treasurer and/or any other position or office other
than Chief Financial Officer. The Executive must give the Company
notice of any event or condition that would constitute “Good
Reason” within 30 days of the event or condition which
would constitute “Good Reason,” and upon the receipt of
such notice the Company shall have 30 days to remedy such
event or condition. If such event or condition is not remedied
within such 30-day period, any termination of employment by the
Executive for “Good Reason” must occur within
30 days after the period for remedying such condition or event
has expired.
(d)
Termination by Company Without Cause or by Executive Other
than For Good Reason . The Company may terminate the
Executive’s employment during the Term of this Agreement
without Cause, and Executive may terminate the Executive’s
employment for other than Good Reason, upon 30 days’ written
notice. The Company may elect to pay the Executive during any
applicable notice period (in accordance with the established
payroll practices of the Company, no less frequently than monthly)
and remove him from active service.
(e)
Termination by Executive on Failure to Renew . The
Executive may terminate the Executive’s employment at any
time on or before the expiration of the Term of the Agreement, if
the Company notifies the Executive that the Term of the Agreement
shall not be extended as provided in Section 2
above.
8.
Obligations of the Company Upon Termination
.
(a)
Without Cause; Good Reason; Non-Renewal (No Change in
Control) . If, during the Term, the Company terminates the
Executive’s employment without Cause in accordance with
Section 7(d) hereof, the Executive terminates the Executive’s
employment for Good Reason in accordance with Section 7(c) hereof,
or the Executive terminates the Executive’s employment
upon
5
the
Company’s failure to renew the Agreement in accordance with
Section 7(e) hereof, other than within two years after a Change in
Control, subject to Section 20 below, the Executive shall be
entitled to receive:
(i)
payment of the Executive’s annual base salary in effect
immediately preceding the date of the Executive’s termination
of employment (or, if greater, the Executive’s annual base
salary in effect immediately preceding any action by the Company
described in Section 7(c)(iii) above for which the Executive has
terminated the Executive’s employment for Good Reason), for
the period equal to the greater of one year or the sum of four
weeks for each full year of continuous service the Executive has
with the Company and its subsidiaries at the time of termination of
employment, beginning immediately following termination of
employment (the “Severance Period”), payable in
accordance with the established payroll practices of the Company
(but no less frequently than monthly), beginning on the first
payroll date following 30 days after termination of
employment, with the Executive to receive at that time a lump sum
payment with respect to any installments the Executive was entitled
to receive during the first 30 days following termination of
employment, and the remaining payments made as if they had
commenced immediately following termination of
employment;
(ii)
payment of an amount equal to the Executive’s actual earned
full-year bonus for the year in which the termination of
Executive’s employment occurs, prorated based on the number
of days the Executive was employed for the year, payable at the
time the Executive’s annual bonus for the year otherwise
would be paid had the Executive continued employment;
(iii)
continuation after the date of termination of employment of any
health care (medical, dental and vision) plan coverage, other than
that under a flexible spending account, provided to the Executive
and the Executive’s spouse and dependents at the date of
termination for the Severance Period, on a monthly or more frequent
basis, on the same basis and at the same cost to the Executive as
available to similarly-situated active employees during such
Severance Period, provided that such continued participation is
possible under the general terms and provisions of such plans and
programs and provided that such continued coverage by the Company
shall terminate in the event Executive becomes eligible for any
such coverage under another employer’s plans. If the Company
reasonably determines that maintaining such coverage for the
Executive or the Executive’s spouse or dependents is not
feasible under the terms and provisions of such plans and programs
(or where such continuation would adversely affect the tax status
of the plan pursuant to which the coverage is provided), the
Company shall pay the Executive cash equal to the estimated cost of
the expected Company contribution therefor for such same period of
time, with such payments to be made in accordance with the
established payroll practices of the Company (not less frequently
than monthly) for the period during which such cash payments are to
be provided;
(iv)
payment of any Accrued Obligations. For purposes of this Agreement,
“Accrued Obligations” shall mean the sum of
(A) the Executive’s annual base salary through
Executive’s termination of employment which remains unpaid,
(B) the amount, if any, of any incentive or bonus compensation
earned for any completed fiscal year of the Company which has not
yet been paid, (C) any reimbursements for expenses
incurred
6
but not yet
paid, and (D) any benefits or other amounts, including both
cash and stock components, which pursuant to the terms of any
plans, policies or programs have been earned or become payable, but
which have not yet been paid to the Executive, including payment
for any unused paid time-off (but not including amounts that
previously had been deferred at the Executive’s request,
which amounts will be paid in accordance with the Executive’s
existing directions). The Accrued Obligations will be paid to the
Executive in a lump sum as soon as administratively feasible after
the Executive’s termination of employment, which for purposes
of any incentive or bonus compensation described in (B) above
shall mean at the same time such annual bonus would otherwise have
been paid;
(v)
vesting in full of the Executive’s outstanding unvested
options, restricted stock and other equity-based awards that would
have vested based solely on the continued employment of the
Executive. Additionally, all of Executive’s outstanding stock
options shall remain outstanding until the earlier of (i) one
year after the date of termination of the Executive’s
employment or (ii) the original expiration date of the options
(disregarding any earlier expiration date provided for in any other
agreement, including without limitation any related grant
agreement, based solely on the termination of the Executive’s
employment); and
(vi)
payment of one year of outplacement services from Executrack or an
outplacement service provider of the Executive’s choice,
limited to $20,000 in total. This outplacement services benefit
will be forfeited if the Executive does not begin using such
services within 60 days after the termination of the
Executive’s employment.
(b)
Without Cause; Good Reason; Non-Renewal (Change in
Control) . If, during the Term, the Company terminates the
Executive’s employment without Cause in accordance with
Section 7(d) hereof, the Executive terminates the Executive’s
employment for Good Reason in accordance with Section 7(c) hereof,
or the Executive terminates the Executive’s employment upon
the Company’s failure to renew the Agreement in accordance
with Section 7(e) hereof, within two years after a Change in
Control, subject to Section 20 below, the Executive shall be
entitled to receive:
(i)
payment of the Executive’s annual b
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