PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this "Pledge Agreement") is entered into as of
December 23, 2005 among PRG-SCHULTZ USA, INC., a Georgia corporation (the
"Borrower"), PRG-SCHULTZ INTERNATIONAL, INC., a Georgia corporation (the
"Parent"), certain of the Domestic Subsidiaries of the Parent (such Domestic
Subsidiaries, together with the Parent, individually a "Guarantor", and
collectively the "Guarantors"; the Guarantors together with the Borrower,
individually a "Pledgor", and collectively the 'Pledgors") and Blum Strategic
Partners II, L.P., as the collateral agent for the Lenders referred to below (in
such capacity together with its successors and permitted assigns, the
"Collateral Agent").
RECITALS
WHEREAS, pursuant to that certain Credit Agreement dated as of the
date hereof (as amended, modified, extended, renewed or replaced from time to
time, the "Credit Agreement"), among the Borrower, the Guarantors, the lenders
from time to time party thereto (each a "Lender" and collectively, the
"Lenders") and the Collateral Agent, each of the Lenders, severally and not
jointly or jointly and severally, has agreed to make the Loans upon the terms
and subject to the conditions set forth therein; and
WHEREAS, it is a condition precedent to the effectiveness of the
Credit Agreement and the obligations of the Lenders to make the Loans under the
Credit Agreement that the Pledgors shall have executed and delivered this Pledge
Agreement to the Collateral Agent for the benefit of the Lenders.
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Definitions.
(a) Unless otherwise defined herein, capitalized terms used
herein shall have the meanings ascribed to such terms in the Credit
Agreement, and the following terms which are defined in the Uniform
Commercial Code as in effect in the State of New York on the date
hereof (the "UCC"), are used herein as so defined: Accession,
Financial Asset, Proceeds and Security.
(b) In addition, the following term shall have the following
meaning:
"Secured Obligations": means, without duplication, (i) all of the
obligations of the Credit Parties to the Collateral Agent and the Lenders, under
the Credit Agreement or any other Credit Document (including, but not limited
to, any interest accruing after the commencement of a proceeding by or against
any Credit Party under any Debtor Relief Laws, regardless of whether such
interest is an allowed claim under such proceeding), whether now existing or
hereafter arising, due or to become due, direct or indirect, absolute or
contingent, howsoever evidenced, created, held or acquired, whether primary,
secondary, direct, contingent,
or joint and several, as such obligations may be amended, modified, increased,
extended, renewed or replaced from time to time and (ii) all costs and expenses
incurred in connection with enforcement and collection of the obligations
described in the foregoing clause (i), including Attorney Costs.
2. Pledge and Grant of Security Interest. To secure the prompt payment
and performance in full when due, whether by lapse of time, acceleration,
mandatory prepayment or otherwise, of the Secured Obligations, each Pledgor
hereby pledges and assigns to the Collateral Agent, and grants to the Collateral
Agent, in each case, for the benefit of the Lenders, a continuing security
interest in, and a right to set-off against, any and all right, title and
interest of such Pledgor in and to the following, whether now owned or existing
or owned, acquired, or arising hereafter (collectively, the "Pledged
Collateral"):
(a) Pledged Shares. (i) 100% (or, if less, the full amount owned
by such Pledgor) of the issued and outstanding Capital Stock owned by
such Pledgor of each Domestic Subsidiary of such Pledgor set forth on
Schedule 2(a) attached hereto and (ii) 66% of the issued and
outstanding shares of Capital Stock entitled to vote (within the
meaning of Treas. Reg. Section 1.956-2(c)(2)) ("Voting Equity") and
100% (or, if less, the full amount owned by such Pledgor) of the
issued and outstanding Capital Stock not entitled to vote (within the
meaning of Treas. Reg. Section 1.956-2(c)(2)) ("Non-Voting Equity")
owned by such Pledgor of each Material Foreign Subsidiary set forth on
Schedule 2(a) attached hereto, in each case together with the
certificates (or other agreements or instruments), if any,
representing such Capital Stock, and all options and other rights,
contractual or otherwise, with respect thereto (collectively, together
with the Capital Stock described in Section 2(b) and 2(c) below, the
"Pledged Shares"), including, but not limited to, the following:
(A) all shares, securities, membership interests or other
equity interests representing a dividend on any of the Pledged
Shares, or representing a distribution or return of capital upon
or in respect of the Pledged Shares, or resulting from a stock
split, revision, reclassification or other exchange therefor, and
any subscriptions, warrants, rights or options issued to the
holder of, or otherwise in respect of, the Pledged Shares; and
(B) without affecting the obligations of the Pledgors under
any provision prohibiting such action hereunder or under the
Credit Agreement, in the event of any consolidation or merger
involving the issuer of any Pledged Shares and in which such
issuer is not the surviving entity, all Capital Stock of the
successor entity formed by or resulting from such consolidation
or merger.
(b) Additional Shares. 100% (or, if less, the full amount owned
by such Pledgor) of the issued and outstanding Capital Stock owned by
such Pledgor of any Person which hereafter becomes a Domestic
Subsidiary of such Pledgor and 66% of the Voting Equity and 100% (or,
if less, the full amount owned by such Pledgor) of the Non-Voting
Equity owned by such Pledgor of any Person which hereafter becomes a
Material Foreign Subsidiary of such Pledgor,
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including, without limitation, the certificates (or other agreements
or instruments) representing such Capital Stock.
(c) Accessions and Proceeds. All Accessions and Proceeds of the
foregoing, however and whenever acquired and in whatever form.
Without limiting the generality of the foregoing, it is hereby
specifically understood and agreed that a Pledgor may from time to time
hereafter deliver additional Capital Stock to the Collateral Agent (or its
designee) as collateral security for the Secured Obligations. Upon delivery to
the Collateral Agent (or its designee), such additional Capital Stock shall be
deemed to be part of the Pledged Collateral of such Pledgor and shall be subject
to the terms of this Pledge Agreement whether or not Schedule 2(a) is amended to
refer to such additional Capital Stock.
3. Security for Secured Obligations. The security interest created
hereby in the Pledged Collateral of each Pledgor constitutes continuing
collateral security for all of the Secured Obligations.
4. Delivery of the Pledged Collateral. Each Pledgor hereby agrees
that:
(a) Delivery of Certificates. Each Pledgor shall, deliver to the
Collateral Agent (or its designee) (i) simultaneously with or prior to
the execution and delivery of this Pledge Agreement, all certificates
representing the Pledged Shares of such Pledgor and (ii) promptly upon
the receipt thereof by or on behalf of a Pledgor, all other
certificates and instruments constituting Pledged Collateral of a
Pledgor. Prior to delivery to the Collateral Agent (or its designee),
all such certificates and instruments constituting Pledged Collateral
of a Pledgor shall be held in trust by such Pledgor for the benefit of
the Collateral Agent pursuant hereto. All such certificates shall be
delivered in suitable form for transfer by delivery or shall be
accompanied by duly executed instruments of transfer or assignment in
blank, substantially in the form provided in Exhibit 4(a) attached
hereto.
(b) Additional Securities. If such Pledgor shall receive by
virtue of its being or having been the owner of any Pledged
Collateral, any (i) certificate, including without limitation, any
certificate representing a dividend or distribution in connection with
any increase or reduction of capital, reclassification, merger,
consolidation, sale of assets, combination of shares, or other equity
interests, stock splits, spin-off or split-off, promissory notes or
other instruments; (ii) option or right, whether as an addition to,
substitution for, or an exchange for, any Pledged Collateral or
otherwise; (iii) dividends payable in securities; or (iv)
distributions of securities in connection with a partial or total
liquidation, dissolution or reduction of capital, capital surplus or
paid-in surplus, then such Pledgor shall receive such certificate,
instrument, option, right or distribution in trust for the benefit of
the Collateral Agent, shall segregate it from such Pledgor's other
property and shall deliver it forthwith to the Collateral Agent (or
its designee) in the exact form received together with any necessary
endorsement and/or appropriate stock power duly executed in blank,
substantially in the form provided in Exhibit 4(a), to be held by the
Collateral
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Agent (or its designee) as Pledged Collateral and as further
collateral security for the Secured Obligations.
(c) Financing Statements. Each Pledgor authorizes the Collateral
Agent to file one or more financing statements disclosing the
Collateral Agent's security interest in the Pledged Collateral
(including any financing statement indicating that the Collateral is
"all assets" or "all personal property" or words of similar effect or
describing or identifying the Collateral by type or in any manner as
the Collateral Agent may determine). Each Pledgor agrees to execute
and deliver to the Collateral Agent such financing statements and
other applicable financing statements as may be reasonably requested
by the Collateral Agent in order to perfect and protect the security
interest created hereby in the Pledged Collateral of such Pledgor.
5. Representations and Warranties. Each Pledgor hereby represents and
warrants to the Collateral Agent and each Lender, that so long as any of the
Secured Obligations remain outstanding or any Credit Document is in effect:
(a) Authorization of Pledged Shares. The Pledged Shares are duly
authorized and validly issued, are fully paid and, except for Pledged
Shares which are shares (the "ULC Shares") in PRG-Schultz Canada Corp.
("PRG-Schultz Canada"), a Nova Scotia unlimited liability company (the
"ULC"), nonassessable and are not subject to the preemptive rights of
any Person. All other Capital Stock constituting Pledged Collateral
will be duly authorized and validly issued, fully paid and, except for
Pledged Shares which are ULC Shares, nonassessable and not subject to
the preemptive rights of any Person.
(b) Title. Each Pledgor has good and indefeasible title to the
Pledged Collateral of such Pledgor and will at all times be the legal
and beneficial owner of such Pledged Collateral free and clear of any
Lien, other than Permitted Liens. There exists no "adverse claim"
within the meaning of Section 8-102 of the Uniform Commercial Code as
in effect in the State of New York (the "UCC") with respect to the
Pledged Shares of such Pledgor.
(c) Exercising of Rights. Neither the exercise by the Collateral
Agent or any Lender of its rights and remedies hereunder nor the
execution, delivery or performance of this Agreement by the Pledgor
will violate any law or governmental regulation or any material
contractual restriction binding on or affecting a Pledgor or any of
its property.
(d) Pledgor's Authority. No authorization, approval or action by,
and no notice or filing with any Governmental Authority or with the
issuer of any Pledged Shares is required either (i) for the pledge
made by a Pledgor or for the granting of the security interest by a
Pledgor pursuant to this Pledge Agreement (except as have already been
obtained) or (ii) for the exercise by the Collateral Agent or any
Lender of its rights and remedies hereunder (except as may be required
by laws affecting the offering and sale of securities).
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(e) Security Interest/Priority. This Pledge Agreement creates a
valid security interest in favor of the Collateral Agent, for the
benefit of the Lenders, in the Pledged Collateral. The delivery to the
Collateral Agent (or its designee) of certificates evidencing the
Pledged Collateral, together with duly executed stock powers in
respect thereof, will perfect and establish the first priority
(subject in priority solely to the Liens in favor of the Working
Capital Lender) of the Collateral Agent's security interest in any
certificated Pledged Collateral that constitutes a Security. The
filing of appropriate UCC financing statements in the appropriate
filing offices in the jurisdiction of organization of the applicable
Pledgor or obtaining "control" over such interests in accordance with
the provisions of Section 8-106 of the UCC will perfect and establish
the first priority (subject in priority solely to the Liens in favor
of the Working Capital Lender) of the Collateral Agent's security
interest in any uncertificated Pledged Collateral that constitutes a
Security. The filing of appropriate UCC financing statements in the
appropriate filing offices in the jurisdiction of organization of the
applicable Pledgor will perfect and establish the first priority
(subject in priority solely to the Liens in favor of the Working
Capital Lender) of the Collateral Agent's security interest in any
Pledged Collateral that does not constitute a Security. Except as set
forth in this Section 5(e), no action is necessary to perfect or
otherwise protect such security interest.
(f) Partnership and Membership Interests. Except as previously
disclosed to the Lenders, none of the Pledged Shares consisting of
partnership or limited liability company interests (i) is dealt in or
traded on a securities exchange or in a securities market, (ii) by its
terms expressly provides that it is a security governed by Article 8
of the UCC, (iii) is an investment company security, (iv) is held in a
securities account or (v) constitutes a Security or a Financial Asset.
(g) No Other Interests. No Pledgor owns any Capital Stock in any
Subsidiary other than as set forth on Schedule 2(a) attached hereto.
6. Covenants. Each Pledgor hereby covenants, that so long as any of
the Secured Obligations remain outstanding or any Credit Document is in effect,
such Pledgor shall:
(a) Books and Records. Mark its books and records (and shall
cause the issuer of the Pledged Shares of such Pledgor to mark its
books and records) to reflect the security interest granted to the
Collateral Agent pursuant to this Pledge Agreement.
(b) Defense of Title. Warrant and defend title to and ownership
of the Pledged Collateral of such Pledgor at its own expense against
the claims and demands of all other parties claiming an interest
therein, keep the Pledged Collateral free from all Liens, except for
Permitted Liens, and not sell, exchange, transfer, assign, lease or
otherwise dispose of Pledged Collateral of such Pledgor or any
interest therein, except as permitted under the Credit Agreement and
the other Credit Documents.
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(c) Further Assurances. Promptly execute and deliver at its
expense all further instruments and documents and take all further
action that may be reasonably necessary and desirable or that the
Collateral Agent may reasonably request in order to (i) perfect and
protect the security interest created hereby in the Pledged Collateral
of such Pledgor (including without limitation any and all action
necessary to reasonably satisfy the Collateral Agent that the
Collateral Agent has obtained a first priority (subject in priority
solely to the Liens in favor of the Working Capital Lender) perfected
security interest in any Capital Stock); (ii) enable the Collateral
Agent or any Lender to exercise and enforce its rights and remedies
hereunder in respect of the Pledged Collateral of such Pledgor; and
(iii) otherwise effect the purposes of this Pledge Agreement,
including, without limitation, and if requested by the Collateral
Agent, delivering to the Collateral Agent (or its designees)
irrevocable proxies in respect of the Pledged Collateral of such
Pledgor upon the occurrence of and during the continuation of an Event
of Default.
(d) Amendments. Not make or consent to any amendment or other
modification or waiver with respect to any of the Pledged Collateral
of such Pledgor or enter into any agreement or allow to exist any
restriction with respect to any of the Pledged Collateral of such
Pledgor other than pursuant hereto.
(e) Compliance with Securities Laws. File all reports and other
information now or hereafter required to be filed by such Pledgor with
the United States Securities and Exchange Commission and any other
state, federal or foreign agency in connection with the ownership of
the Pledged Collateral of such Pledgor.
(f) Issuance or Acquisition of Capital Stock. Not, without
executing and delivering, or causing to be executed and delivered, to
the Collateral Agent (or its designees) such agreements, documents and
instruments as the Collateral Agent may reasonably require, issue or
acquire any Capital Stock consisting of an interest in a partnership
or a limited liability company that (i) is dealt in or traded on a
securities exchange or in a securities market, (ii) by its terms
expressly provides that it is a security governed by Article 8 of the
UCC, (iii) is an investment company security, (iv) is held in a
securities account or (v) constitutes a Security or a Financial Asset.
(g) Authorization. Authorize the Collateral Agent to prepare and
file such financing statements (including renewal statements),
amendments and supplements or such other instruments as the Collateral
Agent may from time to time reasonably deem necessary, appropriate or
convenient in order to perfect and maintain the security interests
granted hereunder in accordance with the UCC.
7. Advances by Collateral Agent. On failure of any Pledgor to perform
any of the covenants and agreements contained herein, the Collateral Agent may,
at its sole option and in its sole discretion, perform the same and in so doing
may expend such sums as the Collateral Agent may reasonably deem advisable in
the performance thereof, including, without limitation, the payment of any
insurance premiums, the payment of any taxes, a payment to obtain a release
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of a Lien or potential Lien, expenditures made in defending against any adverse
claim and all other expenditures which the Collateral Agent may make for the
protection of the security hereof or which may be compelled to make by operation
of law. All such sums and amounts so expended shall be repayable by the Pledgors
on a joint and several basis promptly upon timely notice thereof and demand
therefor, shall constitute additional Secured Obligations and shall bear
interest from the date said amounts are expended at the Default Rate specified
in Section 3.1 of the Credit Agreement. No such performance of any covenant or
agreement by the Collateral Agent on behalf of any Pledgor, and no such advance
or expenditure therefor, shall relieve the Pledgors of any default under the
terms of this Pledge Agreement, the other Credit Documents or any other
documents relating to the Secured Obligations. The Collateral Agent may make any
payment hereby authorized in accordance with any bill, statement or estimate
procured from the appropriate public office or holder of the claim to be
discharged without inquiry into the accuracy of such bill, statement or estimate
or into the validity of any tax assessment, sale, forfeiture, tax lien, title or
claim except to the extent such payment is being contested in good faith by a
Pledgor in appropriate proceedings and against which adequate reserves are being
maintained in accordance with GAAP.
8. Events of Default. The occurrence of an event which under the
Credit Agreement would constitute an Event of Default shall be an Event of
Default hereunder (an "Event of Default").
9. Remedies.
(a) General Remedies. Upon the occurrence of an Event of Default
and during the continuation thereof, the Collateral Agent shall have,
(i) in respect of the Pledged Collateral of any Pledgor, except for
Pledged Collateral consisting of ULC Shares, in addition to the rights
and remedies provided herein, in any other documents relating to the
Secured Obligations, in the Credit Documents or by law, the rights and
remedies of a secured party under the UCC or any other applicable law
and (ii) in respect of any PRG-Schultz Canada's Pledged Collateral
consisting of ULC Shares, the rights and remedies described in this
Section 9.
(b) Sale of Pledged Collateral. Upon the occurrence of an Event
of Default and during the continuation thereof, without limiting the
generality of this Section 9 and without notice, the Collateral Agent
may, in its sole discretion, sell or otherwise dispose of or realize
upon the Pledged Collateral, or any part thereof, in one or more
parcels, at public or private sale, at any exchange or broker's board
or elsewhere, at such price or prices and on such other terms as the
Collateral Agent may deem commercially reasonable, for cash, credit or
for future delivery or otherwise in accordance with applicable law. To
the extent permitted by law, the Collateral Agent and any Lender may
in such event, bid for the purchase of such securities. Each Pledgor
agrees that, to the extent notice of sale shall be required by law and
has not been waived by such Pledgor, any requirement of reasonable
notice shall be met if notice, specifying the place of any public sale
or the time after which any private sale is to be made, is personally
served on or mailed, postage prepaid, to such Pledgor, in accordance
with the notice provisions of Section 10.1 of the Credit Agreement at
least 10
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days before the time of such sale. The Collateral Agent shall not be
obligated to make any sale of Pledged Collateral of such Pledgor
regardless of notice of sale having been given. The Collateral Agent
may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was
so adjourned.
(c) Private Sale. Upon the occurrence of an Event of Default and
during the continuation thereof, the Pledgors recognize that the
Collateral Agent may deem it impracticable to effect a public sale of
all or any part of the Pledged Shares or any of the securities
constituting Pledged Collateral and that the Collateral Agent may,
therefore, determine to make one or more private sales of any such
securities to a restricted group of purchasers who will be obligated
to agree, among other things, to acquire such securities for their own
account, for investment and not with a view to the distribution or
resale thereof. Each Pledgor acknowledges that any such private sale
may be at prices and on terms less favorable to the seller than the
prices and other terms which might have been obtained at a public sale
and, notwithstanding the foregoing, agrees that such private sale
shall be deemed to have been made in a commercially reasonable manner
and that the Collateral Agent shall have no obligation to delay sale
of any such securities for the period of time necessary to permit the
issuer of such securities to register such securities for public sale
under the Securities Act of 1933. Each Pledgor further acknowledges
and agrees that any offer to sell such securities which has been (i)
publicly advertised on a bona fide basis in a newspaper or other
publication of general circulation in the financial community of New
York, New York (to the extent that such offer may be advertised
without prior registration under the Securities Act of 1933), or (ii)
made privately in the manner described above shall be deemed to
involve a "public sale" under the UCC, notwithstanding that such sale
may not constitute a "public offering" under the Securities Act of
1933, and the Collateral Agent may, in such event, bid for the
purchase of such securities.
(d) Retention of Pledged Collateral. In addition to the rights
and remedies hereunder, upon the occurrence of an Event of Default,
the Collateral Agent (for the ratable benefit of the Lenders) may,
after providing the notices required by Sections 9-620 and 9-621 of
the UCC or otherwise complying with the requirements of applicable law
of the relevant jurisdiction, accept or retain all or any portion of
the Pledged Collateral in satisfaction of the Secured Obligations.
Unless and until the Collateral Agent shall have provided such
notices, however, the Collateral Agent shall not be deemed to have
accepted or retained any Pledged Collateral in satisfaction of any
Secured Obligations for any reason.
(e) Deficiency. In the event that the proceeds of any sale,
collection or realization are insufficient to pay all amounts to which
the Collateral Agent and the Lenders are legally entitled, the
Pledgors shall be jointly and severally liable for the deficiency,
together with interest thereon at the Default Rate specified in
Section 3.1 of the Credit Agreement, together with the costs of
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collection and the reasonable fees of any attorneys employed by the
Collateral Agent or any Lender to collect such deficiency. Any surplus
remaining after the full payment and satisfaction of the Secured
Obligations shall be returned to the Pledgors or to whomsoever a court
of competent jurisdiction shall determine to be entitled thereto.
10. Rights of the Collateral Agent.
(a) Power of Attorney. In addition to other powers of attorney
contained herein, each Pledgor hereby designates and appoints the
Collateral Agent and each of its designees or agents as
attorney-in-fact of such Pledgor, irrevocably and with power of
substitution, with authority to take any or all of the following
actions (in the case of PRG-Schultz Canada's Pledged Collateral
consisting of ULC Shares, such actions to be taken in the name of
PRG-Schultz Canada and not in the Collateral Agent's own behalf) upon
the occurrence and during the continuance of an Event of Default:
(i) to demand, collect, settle, compromise, adjust and
give discharges and releases concerning the Pledged
Collateral of such Pledgor, all as the Collateral Agent may
reasonably determine;
(ii) to commence and prosecute any actions at any court
for the purposes of collecting any of the Pledged Collateral
of such Pledgor and enforcing any other right in respect
thereof;
(iii) to defend, settle or compromise any action
brought and, in connection therewith, give such discharge or
release as the Collateral Agent may deem reasonably
appropriate;
(iv) to pay or discharge taxes, liens, security
interests, or other encumbrances levied or placed on or
threatened against the Pledged Collateral of such Pledgor;
(v) to direct any parties liable for any payment under
any of the Pledged Collateral to make payment of any and all
monies due and to become due thereunder directly to the
Collateral Agent or as the Collateral Agent shall direct;
(vi) to receive payment of and receipt for any and all
monies, claims, and other amounts due and to become due at
any time in respect of or arising out of any Pledged
Collateral of such Pledgor;
(vii) to sign and endorse any drafts, assignments,
proxies, stock powers, verifications, notices and other
documents relating to the Pledged Collateral of such
Pledgor;
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(viii) to settle, compromise or adjust any suit, action or
proceeding described above and, in connection therewith, to give
such discharges or releases as the Collateral Agent may deem
reasonably appropriate;
(ix) to execute and deliver all assignments, conveyances,
statements, financing statements, renewal financing statements,
pledge agreements, affidavits, notices and other agreements,
instruments and documents that the Collateral Agent may
reasonably determine necessary in order to perfect and maintain
the security interests and liens granted in this Pledge Agreement
and in order to fully consummate all of the transactions
contemplated therein;
(x) to exchange any of the Pledged Collateral of such
Pledgor or other property upon any merger, consolidation,
reorganization, recapitalization or other readjustment of the
issuer thereof and, in connection therewith, deposit any of the
Pledged Collateral of such Pledgor with any committee,
depository, transfer agent, registrar or other designated agency
upon such terms as the Collateral Agent may reasonably determine;
(xi) to vote for a shareholder resolution, or to sign an
instrument in writing, sanctioning the transfer of any or all of
the Pledged Collateral of such Pledgor into the name of the
Collateral Agent into the name of any transferee to whom the
Pledged Collateral of such Pledgor or any part thereof may be
sold pursuant to Section 9 hereof; and
(xii) to do and perform all such other acts and things as
the Collateral Agent may reasonably deem to be necessary or
proper in connection with the Pledged Collateral of such Pledgor.
This power of attorney is a power coupled with an interest and shall
be irrevocable for so long as any of the Secured Obligations remain outstanding
or any Credit Document is in effect. The Collateral Agent shall be under no duty
to exercise or withhold the exercise of any of the rights, powers, privileges
and options expressly or implicitly granted to the Collateral Agent in this
Pledge Agreement, and shall not be liable for any failure to do so or any delay
in doing so. The Collateral Agent shall not be liable for any act or omission or
for any error of judgment or any mistake of fact or law in its individual
capacity or its capacity as attorney-in-fact except acts or omissions resulting
from its gross negligence or willful misconduct. This power of attorney is
conferred on the Collateral Agent solely to protect, preserve and realize upon
its security interest in Pledged Collateral.
(b) Performance by the Collateral Agent of Pledgor's Obligations.
If any Pledgor fails to perform any agreement or obligation contained
herein, the Collateral Agent itself may perform, or cause performance
of, such agreement or obligation, and the expenses of the Collateral
Agent incurred in connection
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therewith shall be payable by the Pledgors on a joint and several
basis pursuant to Section 26 hereof.
(c) Assignment by the Collateral Agent and the Lenders. The
Collateral Agent and each Lender may from time to time assign the
Secured Obligations and any portion thereof in accordance with the
Credit Agreement and/or the Pledged Collateral and any portion
thereof, and the assignee shall be entitled to all of the rights and
remedies of the Collateral Agent or such Lender, as applicable, under
this Pledge Agreement in relation thereto.
(d) The Collateral Agent's Duty of Care. Other than the exercise
of reasonable care to assure the safe custody of the Pledged
Collateral while being held by the Collateral Agent hereunder, the
Collateral Agent shall have no duty or liability to preserve rights
pertaining thereto, it being understood and agreed that the Pledgors
shall be responsible for preservation of all rights in the Pledged
Collateral of such Pledgor, and the Collateral Agent shall be relieved
of all responsibility for Pledged Collateral upon surrendering it or
tendering the surrender of it to the Pledgors. The Collateral Agent
shall be deemed to have exercised reasonable care in the custody and
preservation of the Pledged Collateral in its possession if such
Pledged Collateral is accorded treatment substantially equal to that
which the Collateral Agent accords its own property, which shall be no
less than the treatment employed by a reasonable and prudent agent in
the industry, it being understood that the Collateral Agent shall not
have responsibility for (i) ascertaining or taking action with respect
to calls, conversions, exchanges, maturities, tenders or other matters
relating to any Pledged Collateral, whether or not the Collateral
Agent has or is deemed to have knowledge of such matters; or (ii)
taking any necessary steps to preserve rights against any parties with
respect to any Pledged Collateral.
(e) Voting Rights in Respect of the Pledged Collateral.
(i) So long as no Event of Default shall have occurred
and be continuing, to the extent permitted by law, each
Pledgor may exercise any and all voting and other consensual
rights pertaining to the Pledged Collateral of such Pledgor
or any part thereof for any purpose not inconsistent with
the terms of this Pledge Agreement or the Credit Agreement;
and
(ii) Upon the occurrence and during the continuance of
an Event of Default, all rights of a Pledgor to exercise the
voting and other consensual rights which it would otherwise
be entitled to exercise pursuant to paragraph (i) of this
subsection shall cease and all such rights shall thereupon
become vested in the Collateral Agent which shall then have
the sole right to exercise such voting and other consensual
rights.
(f) Dividend Rights in Respect of the Pledged Collateral.
11
(i) So long as no Event of Default shall have occurred
and be continuing and subject to Section 4(b) hereof, each
Pledgor may receive and retain any and all dividends (other
than stock dividends and other dividends constituting
Pledged Collateral which are addressed hereinabove) or
interest paid in respect of the Pledged Collateral to the
extent they are allowed under the Credit Agreement.
(ii) Upon the occurrence and during the continuance of
an Event of Default:
(A) all rights of a Pledgor to receive the
dividends and interest payments which it would
otherwise be authorized to receive and retain pursuant
to paragraph (i) of this subsection shall cease and all
such rights shall thereupon be vested in the Collateral
Agent (or its designee) which shall then have the sole
right to receive and hold as Pledged Collateral such
dividends and interest payments; and
(B) all dividends and interest payments which are
received by a Pledgor contrary to the provisions of
paragraph (A) of this subsection shall be received in
trust for the benefit of the Collateral Agent, shall be
segregated from other property or funds of such
Pledgor, and shall be forthwith paid over to the
Collateral Agent (or its designee) as Pledged
Collateral in the exact form received, to be held by
the Collateral Agent (or its designee) as Pledged
Collateral and as further collateral security for the
Secured Obligations.
(g) Release of Pledged Collateral. The Collateral Agent may
release any of the Pledged Collateral from this Pledge Agreement or
may substitute any of the Pledged Collateral for other Pledged
Collateral without altering, varying or diminishing in any way the
force, effect, lien, pledge or security interest of this Pledge
Agreement as to any Pledged Collateral not expressly released or
substituted, and this Pledge Agreement shall continue as a first
priority lien (subject in priority solely to the Liens in favor of the
Working Capital Lender) on all Pledged Collateral not expressly
released or substituted.
11. Exception for Unlimited Liability Company Shares. Notwithstanding
anything contained in this Pledge Agreement to the contrary, with respect to the
Pledged Collateral that constitutes the ULC Shares, subsections 10(e) and 10(f)
shall not apply to such ULC Shares, and neither the Collateral Agent nor any
person other than the PRG-Schultz Canada shall become or deemed to become
members or shareholders of the ULC for the purposes of the Companies Act (Nova
Scotia) pursuant to this Pledge Agreement until such time as notice is given to
the PRG-Schultz Canada and further steps are taken under this Pledge Agreement
to register the Collateral Agent or its nominee as holder of the ULC Shares. No
provision in this Pledge Agreement or actions taken by the Collateral Agent
pursuant to this
12
Pledge Agreement which might provide or be deemed to provide otherwise than as
set forth above or which might provide or be deemed to provide the Collateral
Agent any other ownership or indicia of ownership of the ULC shall apply in
respect of ULC Shares except as set forth in the final sentence of this Section
11. To the extent that any provision of this Pledge Agreement would have the
effect of constituting the Collateral Agent as a member of the ULC prior to the
time of the re-registration of the shares in its name or that of its nominee,
such provision shall be severed herefrom and rendered ineffective with respect
to (but only with respect to) Pledged Collateral comprising the ULC Shares and
without otherwise invalidating or rendering unenforceable this Pledge Agreement
or invalidating or rendering unenforceable such provision insofar as it relates
to Pledged Collateral that is not comprised of the ULC Shares. Without limiting
the generality of the foregoing and notwithstanding anything to the contrary in
this Pledge Agreement with respect to the ULC Shares only, neither PRG-Schultz
Canada nor the ULC, the issuer of the ULC Shares, shall, or shall be obliged to,
cause or permit the Collateral Agent to be, or to be deemed to be or entitled
to, (i) be registered as shareholder or member, or apply to be registered as
shareholder or member of the ULC other than upon the enforcement of rights'
described in the final sentence of this Section 11 upon the giving of notice;
(ii) be referred to in any notation entered in any share register in respect of
ULC Shares; (iii) be held out as shareholder or member of the ULC; or (iv) to
act as shareholder or member of the ULC, or obtain, exercise or attempt to
exercise any rights of a shareholder or member including, without limitation,
the right to attend a meeting of, or to vote the shares of, the ULC or to
receive (other than to hold as Pledged Collateral), any dividend or other
distribution in respect of ULC Shares. The foregoing limitations shall not
restrict the Collateral Agent from exercising the rights, powers and remedies
which it is entitled to exercise under Section 9 of this Pledge Agreement in
respect of any Pledged Collateral constituting the ULC Shares at any time that
the Collateral Agent shall be entitled to realize on all or any portion of the
Pledged Collateral pursuant to the security interests and pledges granted by
this Pledge Agreement, provided that no such exercise shall occur, or be deemed
to have occurred, prior to the provision to PRG-Schultz Canada by the Collateral
Agent of prior written notice of the Collateral Agent's intention to exercise
such rights, powers and remedies.
12. Application of Proceeds. Upon the occurrence and during the
continuance of an Event of Default, any payments in respect of the Secured
Obligations and any proceeds of any Pledged Collateral, when received by the
Collateral Agent or the Lenders in cash or its equivalent, will be applied in
reduction of the Secured Obligations in the order set forth in Section 9.3 of
the Credit Agreement, and each Pledgor irrevocably waives the right to direct
the application of such payments and proceeds and acknowledges and agrees that
the Collateral Agent and the Lenders shall have the continuing and exclusive
right to apply and reapply any and all such payments and proceeds in the
Collateral Agent's and the Lenders' sole discretion, notwithstanding any entry
to the contrary upon any of its books and records.
13. Costs of Counsel. At all times hereafter, the Pledgors agree to
promptly pay upon demand any and all reasonable costs and expenses of (a) the
Collateral Agent and each Lender, as required under Section 10.4 of the Credit
Agreement and (b) of the Collateral Agent as the incurrence of such costs and
expenses are reasonably necessary to protect the Pledged Collateral or to
exercise any rights or remedies under this Pledge Agreement or with respect to
any Pledged Collateral. All of the foregoing costs and expenses shall constitute
Secured Obligations hereunder.
13
14. Continuing Agreement.
(a) This Pledge Agreement shall be a continuing agreement in
every respect and shall remain in full force and effect so long as any
of the Secured Obligations remain outstanding and the Credit Document
shall not have been terminated (other than any obligations with
respect to the indemnities and the representations and warranties set
forth in the Credit Documents). Upon such payment and termination,
this Pledge Agreement shall be automatically terminated and the
Collateral Agent shall, upon the request and at the expense of the
Pledgors, forthwith promptly release all of its liens and security
interests hereunder and shall execute and deliver all UCC termination
statements and/or other documents reasonably requested by the Pledgors
evidencing such termination. Notwithstanding the foregoing all
releases and indemnities provided hereunder shall survive termination
of this Pledge Agreement.
(b) This Pledge Agreement shall continue to be effective or be
automatically reinstated, as the case may be, if at any time payment,
in whole or in part, of any of the Secured Obligations is rescinded or
must otherwise be restored or returned by the Collateral Agent or any
Lender as a preference, fraudulent conveyance or otherwise under any
bankruptcy, insolvency or similar law, all as though such payment had
not been made; provided that in the event payment of all or any part
of the Secured Obligations is rescinded or must be restored or
returned, all reasonable costs and expenses (including without
limitation any reasonable legal fees and disbursements) incurred by
the Collateral Agent or any Lender in defending and enforcing such
reinstatement shall be deemed to be included as a part of the Secured
Obligations.
15. Amendments; Waivers: Modifications. This Pledge Agreement and the
provisions hereof may not be amended, waived, modified, changed, discharged or
terminated unless such amendment, change, waiver, discharge or termination is in
writing entered into by, or approved in writing by, the Collateral Agent and
each of the Obligors.
16. Successors in Interest. This Pledge Agreement shall create a
continuing security interest in the Collateral and shall be binding upon each
Pledgor, its successors and assigns and shall inure, together with the rights
and remedies of the Collateral Agent hereunder, to the Collateral Agent, for the
ratable benefit of the Lenders and each of their respective successors and
permitted assigns; provided, however, that none of the Pledgors may assign its
rights or delegate its duties hereunder without the prior written consent of the
Required Lenders. To the fullest extent permitted by law, each Pledgor hereby
releases the Collateral Agent and each Lender, and their successors and assigns
and their respective officers, attorneys, employees and agents, from any
liability for any act or omission or any error of judgment or mistake of fact or
of law relating to this Pledge Agreement or the Collateral, except as set forth
in Section 10 hereof and except for any liability arising from the gross
negligence or willful misconduct of the Collateral Agent or any Lender,
respectively, or its officers, employees or agents.
14
17. Notices. All notices required or permitted to be given under this
Pledge Agreement shall be in conformance with Section 10.1 of the Credit
Agreement.
18. Counterparts. This Pledge Agreement may be executed in any number
of counterparts, each of which where so executed and delivered shall be an
original, but all of which shall constitute one and the same instrument. It
shall not be necessary in making proof of this Pledge Agreement to produce or
account for more than one such counterpart.
19. Headings. The headings of the sections and subsections hereof are
provided for convenience only and shall not in any way affect the meaning or
construction of any provision of this Pledge Agreement.
20. Governing Law; Submission to Jurisdiction; Venue.
(a) THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE;
PROVIDED THAT THE COLLATERAL AGENT AND THE LENDERS SHALL RETAIN ALL
RIGHTS ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS PLEDGE
AGREEMENT OR ANY OTHER CREDIT DOCUMENT MAY BE BROUGHT IN THE COURTS OF
THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY, NEW YORK OR OF THE
UNITED STATES FOR THE SOUTHERN DISTRICT OF SUCH STATE, AND BY
EXECUTION AND DELIVERY OF THIS PLEDGE AGREEMENT, EACH CREDIT PARTY,
EACH LENDER AND THE COLLATERAL AGENT CONSENTS, FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE
COURTS. EACH CREDIT PARTY, EACH LENDER AND THE COLLATERAL AGENT
IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE
LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CON VENIENS,
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR
PROCEEDING IN SUCH JURISDICTION IN RESPECT OF ANY CREDIT DOCUMENT OR
OTHER DOCUMENT RELATED THERETO. EACH CREDIT PARTY, EACH LENDER AND THE
COLLATERAL AGENT WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR
OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY THE
LAW OF SUCH STATE.
21. Waiver of Jury Trial. EACH PARTY TO THIS PLEDGE AGREEMENT HEREBY
EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION ARISING UNDER THIS PLEDGE AGREEMENT OR ANY OTHER CREDIT DOCUMENT
OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE
PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS PLEDGE AGREEMENT OR ANY OTHER
CREDIT DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE
15
WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT OR
TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT
A JURY, AND THAT ANY PARTY TO THIS PLEDGE AGREEMENT MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
22. Severability. If any provision of this Pledge Agreement is
determined to be illegal, invalid or unenforceable, such provision shall be
fully severable and the remaining provisions shall remain in full force and
effect and shall be construed without giving effect to the illegal, invalid or
unenforceable provisions.
23. Entirety. This Pledge Agreement, the other Credit Documents and
the other documents relating to the Secured Obligations represent the entire
agreement of the parties hereto and thereto, and supersede all prior agreements
and understandings, oral or written, if any, including any commitment letters or
correspondence relating to the Credit Documents, any other documents relating to
the Secured Obligations or the transactions contemplated herein and therein.
24. Survival. All representations and warranties of the Pledgors
hereunder shall survive the execution and delivery of this Pledge Agreement, and
the other Credit Documents.
25. Other Security. To the extent that any of the Secured Obligations
are now or hereafter secured by property other than the Pledged Collateral
(including, without limitation, real and other personal property owned by a
Pledgor), or by a guarantee, endorsement or property of any other Person, then
the Collateral Agent shall, subject in priority solely to the Liens in favor of
the Working Capital Lender, have the right to proceed against such other
property, guarantee or endorsement upon the occurrence of any Event of Default,
and the Collateral Agent has the right, in its sole discretion, to determine
which rights, security, liens, security interests or remedies the Collateral
Agent shall at any time pursue, relinquish, subordinate, modify or take with
respect thereto, without in any way modifying or affecting any of them or any of
the Collateral Agent's rights or the Secured Obligations under this Pledge
Agreement, under any other of the Credit Documents or under any other documents
relating to the Secured Obligations.
26. Joint and Several Obligations of Pledgors.
(a) Each of the Pledgors is accepting joint and several liability
hereunder in consideration of the financial accommodation to be
provided by the Collateral Agent and the Lenders under the Credit
Agreement, for the mutual benefit, directly and indirectly, of each of
the Pledgors and in consideration of the undertakings of each of the
Pledgors to accept joint and several liability for the obligations of
each of them.
(b) Each of the Pledgors jointly and severally hereby irrevocably
and unconditionally accepts, not merely as a surety but also as a
co-debtor, joint and several liability with the other Pledgors with
respect to the payment and
16
performance of all of the Secured Obligations arising under this
Pledge Agreement, and the other Credit Documents, it being the
intention of the parties hereto that all the Secured Obligations shall
be the joint and several obligations of each of the Pledgors without
preferences or distinction among them.
(c) Notwithstanding any provision to the contrary contained
herein, in any other of the Credit Documents, the obligations of each
Guarantor under the Credit Agreement, the other Credit Documents and
the documents relating to the Secured Obligations shall be limited to
an aggregate amount equal to the largest amount that would not render
such obligation subject to avoidance under Section 548 of the United
States Bankruptcy Code or any comparable provisions of any applicable
state law.
27. Intercreditor Agreement. Notwithstanding anything to the contrary
in this Pledge Agreement, (i) the rights of each Pledgor, the Collateral Agent
and the Lenders under this Pledge Agreement are subject to the terms of the
Intercreditor Agreement, (ii) any obligation of any Pledgor in this Pledge
Agreement that requires delivery of Pledged Collateral to, possession or control
of Pledged Collateral with, the pledge, assignment, endorsement or transfer of
Pledged Collateral to or the registration of Pledged Collateral in the name of,
the Collateral Agent shall be deemed complied with and satisfied if such
delivery of Pledged Collateral is made to, such possession or control of Pledged
Collateral is with, or such Pledged Collateral be assigned, endorsed or
transferred to or registered in the name of, the Working Capital Lender, and
(iii) in the event of a direct conflict between the terms and provisions of this
Pledge Agreement and the terms and provisions of the Intercreditor Agreement, it
is the intention of each Pledgor, the Collateral Agent and the Lenders that such
provisions shall be read together and construed, to the fullest extent possible,
to be in concert with each other; however, in the event of any actual,
irreconcilable conflict that cannot be resolved as aforesaid, the terms and
provisions of the Intercreditor Agreement shall control and, in such case, no
Pledgor shall be in breach of its obligations under this Pledge Agreement as a
result of complying with the terms and provisions of the Intercreditor
Agreement; provided that, notwithstanding the foregoing, nothing contained in
this Section 27 shall limit or otherwise adversely effect the grant of a lien on
or a security interest in any Pledged Collateral under Section 2 of this Pledge
Agreement.
[remainder of page intentionally left blank]
17
Each of the parties hereto has caused a counterpart of this Pledge
Agreement to be duly executed and delivered as of the date first above written.
PLEDGORS: PRG-SCHULTZ USA, INC.,
a Georgia corporation
By: s/
------------------------------------
Name: James E. Moylan, Jr.
Title: Executive Vice President
- Finance, Chief Financial
Officer and Treasurer
PRG SCHULTZ INTERNATIONAL, INC.,
a Georgia corporation
By: s/
------------------------------------
Name: James E. Moylan, Jr.
Title: Executive Vice President
- Finance, Chief Financial
Officer and Treasurer
PRGFS, INC.,
PRGLS, INC.
Each a Delaware corporation
By: s/
------------------------------------
Name: James E. Moylan, Jr.
Title: Executive Vice President
- Finance
PRGFS, INC., a Delaware corporation
By: s/
------------------------------------
Name: James B. McCurry
Title: President
PRG HOLDING CO. (FRANCE) NO. 1, LLC,
PRG HOLDING CO. (FRANCE) NO.2, LLC,
Each a Delaware limited liability
company
By: s/
------------------------------------
Name: James E. Moylan, Jr.
Title: Executive Vice President
- Finance, Chief Financial
Officer and Treasurer
18
THE PROFIT RECOVERY GROUP ASIA, INC.,
PRG-SCHULTZ CANADA, INC.,
THE PROFIT RECOVERY GROUP NEW ZEALAND,
INC.,
THE PROFIT RECOVERY GROUP NETHERLANDS,
INC.,
THE PROFIT RECOVERY GROUP MEXICO, INC.
PRG-SCHULTZ FRANCE, INC.,
PRG-SCHULTZ AUSTRALIA, INC.,
PRG-SCHULTZ BELGIUM, INC.,
PRG-SCHULTZ CHILE, INC.,
THE PROFIT RECOVERY GROUP GERMANY, INC.,
PRG INTERNATIONAL, INC.,
PRG-SCHULTZ SWITZERLAND, INC.,
THE PROFIT RECOVERY GROUP SOUTH AFRICA,
INC.,
THE PROFIT RECOVERY GROUP SPAIN, INC.,
THE PROFIT RECOVERY GROUP ITALY, INC.,
PRG-SCHULTZ SCANDINAVIA, INC.,
PRG-SCHULTZ PORTUGAL, INC.,
PRG-SCHULTZ JAPAN, INC.,
THE PROFIT RECOVERY GROUP COSTA RICA,
INC.,
PRG-SCHULTZ PUERTO RICO, INC.,
PRG USA, INC.,
PRG-SCHULTZ EUROPE, INC.,
EACH A GEORGIA CORPORATION
By: s/
------------------------------------
Name: James E. Moylan, Jr.
Title: Executive Vice President
- Finance, Chief Financial
Officer and Treasurer
HS&A ACQUISITION - UK, INC.,
a Texas corporation
By: s/
------------------------------------
Name: James E. Moylan, Jr.
Title: Executive Vice President
- Finance, Chief Financial
Officer and Treasurer
19
COLLATERAL AGENT: BLUM STRATEGIC PARTNERS II, L.P.
By: s/
------------------------------------
Name: Jose Medeiros
Title: Partner
20
Schedule 2(a)
to
Pledge Agreement
dated as of December __, 2005
in favor of [____________]
as Collateral Agent
PLEDGED STOCK
PLEDGOR: [EACH PLEDGOR]
Number of Certificate Percentage
Name of Subsidiary Shares Number Ownership
- ------------------ --------- ----------- ----------
[EACH SUBSIDIARY OF
SUCH PLEDGOR]
Exhibit 4(b)
to
Pledge Agreement
dated as of December __, 2005
in favor of [____________]
as Collateral Agent
IRREVOCABLE STOCK POWER
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers to __________________________________ the following shares of capital
stock of ________________________ - ______________ corporation:
No. of Shares Certificate No.
- ------------- ---------------
and irrevocably appoints ____________________________________ its agent and
attorney-in-fact to transfer all or any part of such capital stock and to take
all necessary and appropriate action to effect any such transfer. The agent and
attorney-in-fact may substitute and appoint one or more persons to act for him.
a _______________________ corporation
_________________________,
a ________________________ corporation
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------