AMENDMENT TO FORBEARANCE AGREEMENT
AND CREDIT AGREEMENT
This AMENDMENT TO FORBEARANCE AGREEMENT AND CREDIT AGREEMENT (this
"Agreement") is entered into as of December 23, 2005, between and among
PRG-SCHULTZ USA, INC., a Georgia corporation (the "Borrower"), PRG-SCHULTZ
INTERNATIONAL, INC., a Georgia corporation ("Parent"), each of the Domestic
Subsidiaries of the Parent (such Domestic Subsidiaries, together with the
Parent, individually a "Guarantor" and collectively the "Guarantors"), and BANK
OF AMERICA, N.A. (the "Lender"). Capitalized terms used herein but not otherwise
defined shall have the meanings set forth, or incorporated, in the Forbearance
Agreement (defined below).
RECITALS
A. The Borrower, the Parent, the Guarantors and the Lender are parties to
that certain Amended and Restated Credit Agreement dated as of November 30, 2004
(as amended and otherwise modified from time to time, the "Credit Agreement").
B. The Borrower, the Parent, the Guarantors and the Lender are parties to
that certain Forbearance Agreement dated as of November 8, 2005 (as amended and
otherwise modified from time to time, the "Forbearance Agreement") pursuant to
which the Lender agreed to temporarily forbear from exercising its rights and
remedies arising from the Acknowledged Events of Default pursuant to the terms
and conditions set forth therein.
C. The Borrower has requested that the Lender amend the Forbearance
Agreement (i) to extend the deadline by which the Borrower is required to
deliver to the Lender a bona fide commitment letter from a recognized lender to
make a Refinancing Loan (as defined in the Forbearance Agreement), (ii) to
require the pledge of certain Canadian Receivables (as defined below) to the
Lender and (iii) to modify the requirement to pledge UK Receivables (as defined
below).
D. The Borrower has also requested that the Lender permit the Borrower to
incur certain subordinated debt, as contemplated under the Forbearance
Agreement, for working capital purposes and to enable the Borrower to make the
November Interest Payment with respect to the Subordinated Debt.
E. The Lender has agreed to do so, but only pursuant to the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Estoppel, Acknowledgement and Reaffirmation. As of December 22, 2005,
the total outstanding principal amount of Revolving Loans was not less than
$14,600,000, which amount constitutes a valid and subsisting obligation of the
Credit Parties under the Credit
Documents that is not subject to any credits, offsets, defenses, claims,
counterclaims or adjustments of any kind. Each of the Credit Parties hereby
acknowledges its Credit Party Obligations under the Credit Documents and
reaffirms that each of the Liens and security interests created and granted in
or pursuant to the Credit Documents are valid and subsisting and that this
Agreement shall in no manner impair or otherwise adversely effect such Credit
Party Obligations, Liens or security interests.
2. Amendments to Forbearance Agreement.
(a) Extension of Commitment Letter Deadline. Section 7 of the
Forbearance Agreement is hereby amended by deleting the reference to
"December 23, 2005" contained in the first sentence thereof and replacing
it with "January 31, 2006".
(b) Waiver and Consent. Notwithstanding the provisions of Section 9 of
the Forbearance Agreement, the Lender hereby waives notice of payment with
respect to the November Interest Payment on the Subordinated Debt and
acknowledges that the proceeds of the Subordinated Debt may be applied to
such payment.
(c) Pledge of Foreign Receivables.
(i) Section 4 of the Forbearance Agreement is hereby amended by
deleting the reference to "UK Receivables Documentation" contained in
the proviso thereof and replacing it with "Foreign Receivables
Documentation."
(ii) Section 10 of the Forbearance Agreement is amended and
restated in its entirety so that such Section reads as follows:
10. Foreign Receivables. As soon as practicable but in any event
on or before January 15, 2006, the Borrower shall (i) cause all
accounts receivable arising from the operations of PRG-Schultz UK Ltd.
in the United Kingdom (excluding accounts receivable owed by clients
for auditing services performed by independent contractors hired by
PRG-Schultz UK, Ltd.) (the "UK Receivables") to be pledged to the
Lender as collateral for the Credit Party Obligations pursuant to
documentation satisfactory to the Lender, (ii) cause all accounts
receivable arising from the operations of PRG-Schultz Canada Corp. in
Canada (the "Canadian Receivables", and together with the UK
Receivables, the "Foreign Receivables") to be pledged to the Lender as
collateral for the Credit Party Obligations pursuant to documentation
satisfactory to the Lender, (iii) execute such other documents or
instruments (including, without limitation, a guaranty by any such
Subsidiaries or Affiliate of the Credit Party Obligations, limited in
amount to the value of the UK Receivables or the Canadian Receivables,
as applicable) as may be reasonably requested by the Lender in
connection with such pledge to ensure that the Lender has a first
priority perfected security interest in such Foreign Receivables
(collectively, the "Foreign Receivables Documentation").
(d) Addition of Acknowledged Event of Default. The "Acknowledged
Events of Default" shall include the failure of the representation
contained in Section 6.18 to be true (whether prior to the date hereof or
hereafter).
3. Amendments to Credit Agreement.
(a) Definitions.
(i) The following definitions set forth in Section 1.1 of the
Credit Agreement are hereby amended and restated in their entirety to
read as follows:
"Amendment Effective Date" means the date which the
conditions specified in the Amendment to Forbearance Agreement
and Credit Agreement have been satisfied or waived.
"Credit Documents" means a collective reference to this
Credit Agreement, the Notes, the LOC Documents, each Joinder
Agreement, the Intercreditor Agreement, the Collateral Documents
and all other related agreements and documents issued or
delivered hereunder or thereunder or pursuant hereto or thereto
(in each case as the same may be amended, modified, restated,
supplemented, extended, renewed or replaced from time to time),
and "Credit Document" means any one of them.
(ii) Subpart (xi) and (xii) of the definition of "Permitted
Liens" set forth in Section 1.1 of the Credit Agreement are hereby
amended and restated in their entirety and the definition of
"Permitted Liens" is further amended by adding the new subsections
(xiii) to read as follows:
(xi) Lien in favor of Meridian International on the Capital
Stock of PRG-Schultz UK Ltd. owned by Tamebond which Lien secures
the Meridian Loan;
(xii) Liens on Property of Meridian or any of its
Subsidiaries securing those obligations of Meridian or any of its
Subsidiaries permitted under Section 8.1(h); and
(xiii) Liens in favor of the Subordinated Term Loan Lenders
to secure the Subordinated Term Loan Debt, provided that such
liens are subordinated to the Lien of the Lender pursuant to the
Intercreditor Agreement.
(iii) The following new definitions are hereby added to Section
1.1 of the Credit Agreement in the appropriate alphabetical order to
read as follows:
"Extraordinary Receipts" means any cash received by the
Parent or any of its Subsidiaries not in the ordinary course of
business
(and not consisting of proceeds described in Section 3.3(b)(ii)
and (iii) hereof) including, without limitation, (i) foreign,
United States, state or local tax refunds, (ii) pension plan
reversions, (iii) proceeds of insurance, (iv) judgments, proceeds
of settlements or other consideration of any kind in connection
with any cause of action, (v) condemnation awards (and payments
in lieu thereof), (vi) indemnity payments and (vii) any purchase
price adjustment received in connection with any purchase
agreement.
"Intercreditor Agreement" means the Intercreditor and
Subordination Agreement, dated as of the 23rd day of December,
2005, by and between Lender, the Subordinated Term Loan Lenders,
Borrower, Parent and the Guarantors (as amended from time to
time).
"Subordinated Term Loan Lenders" means the holders of the
Subordinated Term Loan Debt from time to time.
"Subordinated Term Loan Credit Agreement" the Credit
Agreement, dated as December 23, 2005, by and among each of the
Subordinated Term Loan Lenders, Blum Strategic Partners II, L.P.
as collateral agent for the Subordinated Term Loan Lenders and
the Borrower (as amended from time to time to the extent
permitted under the Intercreditor Agreement).
"Subordinated Term Loan Debt" shall mean and include all
indebtedness, obligations and liabilities of any Credit Party
under the Subordinated Term Loan Documents, including, without
limitation, all principal, interest, expenses, and other amounts
payable thereunder or with respect thereto.
"Subordinated Term Loan Documents" shall mean the
Subordinated Term Loan Credit Agreement and all agreements,
documents and instruments executed and delivered in connection
therewith (each as amended from time to time to the extent
permitted under the Intercreditor Agreement).
(b) Mandatory Prepayment. Section 3.3(b) of the Credit Agreement is
hereby amended to add new subsection (v) to read as follows:
(v) Extraordinary Receipts. Upon the receipt by any Credit Party
or any of its Subsidiaries of any Extraordinary Receipts, the Borrower
shall repay the outstanding principal of the Loans in an amount equal
to 100% of such Extraordinary Receipts, net of any reasonable expenses
incurred in collecting such Extraordinary Receipts.
(c) Information Covenant. Subsection (l) of Section 7.1 of the Credit
Agreement is hereby amended and restated in its entirety and Section 7.1 of
the Credit Agreement is amended by adding the new subsection (m) to read as
follows:
(l) Monthly Financial Statements. As soon as available, and in
any event within 30 days after the end of each fiscal month of the
Consolidated Parties commencing with the first fiscal month of the
Consolidated Parties ending after the Amendment Effective Date, an
internally prepared consolidated balance sheets and income statements
of the various geographic segments of the Consolidated Parties, as at
the end of such fiscal month, and for the period commencing at the end
of the immediately preceding fiscal year and ending with the end of
such fiscal month, together with related consolidated statements of
cash flows for such month, all in reasonable detail and certified by
the chief financial officer of the Borrower to the effect that such
financial statements fairly present in all material respects the
financial condition of the Consolidated Parties and have been prepared
in accordance with GAAP, subject to changes resulting from audit and
normal year-end adjustments.
(m) Other Information. With reasonable promptness upon any such
request, such other information regarding the business, properties or
financial condition of any Consolidated Party as the Lender may
reasonably request.
(d) Debt Covenant. Subsections (h) and (i) of Section 8.1 of the
Credit Agreement are hereby amended and restated in their entirety and
Section 8.1 of the Credit Agreement is amended by adding the new subsection
(j) to read as follows:
(h) obligations of Meridian or any of its Subsidiaries with
respect to any letter of credit, bond or other surety provided for the
account of Meridian or any of its Subsidiaries to support Meridian's
or any of its Subsidiaries' obligations to the French VAT authorities;
provided, that (i) the aggregate amount of such obligations shall not
exceed $6,000,000 in the aggregate and (ii) such Indebtedness shall
not have a cross-default to the Indebtedness arising under this Credit
Agreement and the other Credit Documents;
(i) the Meridian Loan; and
(j) the Subordinated Term Loan Debt in a principal amount not to
exceed $10,000,000, provided that the repayment of such Subordinated
Term Loan Debt is subordinated to the payment of the Credit Party
Obligations pursuant to the Intercreditor Agreement, and provided that
the covenants, defaults and events of default in the Subordinated Term
Loan Documents are not materially more restrictive to any of the
Credit Parties, or materially more
extensive, than the covenants, defaults and events of default in the
Credit Agreement.
(e) Limitation of Restricted Actions. Section 8.11 of the Credit
Agreement is hereby amended by (i) deleting the word "or" appearing at the
end of clause (iv) thereto and substituting a "," in lieu thereof, (ii)
deleting the "." at the end of clause (v) thereof and substituting "or" in
lieu thereof and adding new clause (vi) as follows: "(vi) the Subordinated
Term Loan Documents."
(f) Capital Expenditures. Section 8.14 of the Credit Agreement is
hereby amended and restated in its entirety to read as follows:
8.14 Capital Expenditures.
The Credit Parties will not permit aggregate Consolidated
Capital Expenditures for any fiscal year to exceed $6 million.
(g) Subordinated Debt / Term Loan Debt. Section 8.17 of the Credit
Agreement is hereby amended and restated in its entirety to read as
follows:
8.17 Subordinated Debt and Subordinated Term Loan Debt.
(a) No Credit Party will, nor will it permit any of its
Subsidiaries to (a) make or offer to make any principal payments
with respect to the Subordinated Debt, (b) redeem or offer to
redeem any of the Subordinated Debt, (c) deposit any funds
intended to discharge the Subordinated Debt, or (d) amend or
modify the Subordinated Debt in any manner that would adversely
affect the Lender without the prior written consent of the
Lender.
(b) No Credit Party will, nor will it permit any of its
Subsidiaries to, subject to the Intercreditor Agreement, (a) make
any payments with respect to the Subordinated Term Loan Debt
other than as expressly permitted by the Intercreditor Agreement,
(b) deposit any funds intended to discharge the Subordinated Term
Loan Debt, or (c) amend or modify the Subordinated Term Loan Debt
in any manner.
(h) Additional Negative Covenant. The following new Section 8.19 is
hereby added to the Credit Agreement to read as follows:
8.19 Liens/Guarantees
(A) Unless the Credit Parties shall have previously granted
or shall simultaneously grant a Lien to the Lender pursuant to
documentation reasonably satisfactory to the Lender, the Credit
Parties shall not grant a Lien in any property of any Credit
Party or
any guarantor or any other person or entity as security for the
Subordinated Term Loan Debt, as in effect from time to time, and
(B) unless the Lender shall have previously obtained or shall
simultaneously obtain a comparable guaranty or other instruments
in connection with the obligations hereunder, pursuant to
documentation reasonably satisfactory to the Lender, no Person
shall guarantee, or otherwise become an obligor on, all or any
portion of the Subordinated Term Loan Debt, as in effect from
time to time.
(i) Events of Default. Subsections (i) and (j) of Section 9.1 of the
Credit Agreement are hereby amended and restated in their entirety and
Section 9.1 of the Credit Agreement is amended by adding the new
subsections (k) to read as follows:
(i) Ownership. There shall occur a Change of Control;
(j) Subordinated Debt. There shall occur (a) an "Event of
Default" under, and as defined in, the Indenture or (b) a "Change in
Control" (or any comparable term) under and as defined in the
Indenture; or
(k) Subordinated Term Loan Debt. There shall occur a "Default" or
an "Event of Default" under, and as defined in, the Subordinated Term
Loan Credit Agreement or any of the Subordinated Term Loan Documents.
4. Expenses. Upon demand therefor, the Borrower shall pay all reasonable
out-of-pocket expenses incurred by the Lender (including without limitation the
reasonable fees and out-of-pocket expenses of counsel) in connection with or
related to the negotiation, drafting, and execution of this Agreement and the
transactions contemplated hereby.
5. Prepayment Waiver. Lender hereby waives the mandatory prepayment
otherwise required under Section 3.3(b) of the Credit Agreement and any required
reduction to the Revolving Committed Amount otherwise required pursuant to
Section 3.4(b) with respect to the Subordinated Term Loan Debt (as defined in
the Credit Agreement as amended hereby).
6. Conditions Precedent. As conditions precedent to the effectiveness of
this Agreement:
(a) the Lender shall have received counterparts of this Agreement duly
executed by the Credit Parties;
(b) the Lender shall have received a fully executed copy of the
Intercreditor Agreement (as defined in the Credit Agreement as amended
hereby);
(c) the Lender shall have received a fully executed copy of the
Subordinated Term Loan Documents (as defined in the Credit Agreement as
amended hereby);
(d) the Lender shall have received a copy of an opinion of counsel to
the Borrower in form reasonably acceptable to the Lender with respect to
the Borrower's execution of and performance under the Subordinated Term
Loan Documents (as defined in the Credit Agreement as amended hereby),
including without limitation an opinion that such execution and performance
does not violate the terms of the Indenture or of the Credit Agreement (as
amended hereby); and
(e) the Borrower shall have reimbursed the Lender for any unreimbursed
fees and expenses of its counsel, Moore & Van Allen, PLLC incurred through
the date hereof in the amount of $40,000.
7. No Waiver. Nothing herein is or shall be construed to be a waiver of the
Acknowledged Events of Default, or any other Default or Event of Default that
may exist under the Credit Documents. Except as expressly modified or limited
hereby, the terms and conditions of the Credit Documents remain in full force
and effect.
8. Representations and Warranties. Each of the Credit Parties hereby
represents and warrants to the Lender that:
(a) after giving effect to this Agreement, other than the Acknowledged
Events of Default, no Default or Event of Default exists under the Credit
Documents;
(b) (i) the execution, delivery and performance by the Credit Parties
of this Agreement are within the Credit Parties' corporate powers and have
been duly authorized by all necessary corporate action on the part of the
Credit Parties, (ii) subject to the effect of bankruptcy, insolvency,
reorganization, arrangement, moratorium or other similar laws relating to
or affecting creditors' rights (including, without limitation, preference
and fraudulent conveyance or transfer laws), this Agreement constitutes a
legal, valid and binding obligation of the Credit Parties enforceable
against the Credit Parties in accordance with its terms and (iii) neither
this Agreement, nor the execution, delivery or performance by the Credit
Parties hereof (A) violates any law or regulation, or any order or decree
of any court or governmental authority, (B) conflicts with or results in
the breach or termination of, constitutes a default under or accelerates
any performance required by, any material indenture, mortgage, deed of
trust, lease, agreement or other instrument to which the Credit Parties are
a party or by which the Credit Parties or any of their property is bound,
or (C) results in the creation or imposition of any lien upon any of the
Collateral (as defined under the Security Agreement);
(c) the covenants, defaults and events of default in the Subordinated
Term Loan Documents (as defined in the Credit Agreement as amended hereby)
are not materially more restrictive to any of the Credit Parties, or
materially more extensive, than the covenants, defaults and events of
default in the Credit Agreement (as amended hereby); and
(d) there are no fees or other amounts, other than reimbursement of
costs and expenses, payable by any Credit Party in connection with the
Subordinated Term Loan
Debt (as defined in the Credit Agreement as amended hereby) except for
those set forth on Schedule 8(d) hereof.
9. Release. In consideration of the willingness of the Lender to enter into
this Agreement, the Credit Parties hereby release the Lender and its officers,
employees, representatives, counsel, subsidiaries, affiliates, trustees and
directors, from any and all actions, causes of action, claims, demands, damages
and liabilities of whatever kind or nature, in law or in equity, now known or
unknown, suspected or unsuspected relating to or arising under the Credit
Documents, excluding any ongoing obligations the Lender may have pursuant to the
Credit Documents.
10. Further Assurances. The parties hereto each agree to execute and
deliver, or to cause to be executed and delivered, all such instruments as they
may reasonably request to effectuate the intent and purposes, and to carry out
the terms, of this Agreement.
11. Governing Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
INTERNAL LAW OF THE STATE OF GEORGIA (WITHOUT REGARD TO CONFLICTS OF LAW
PROVISIONS THEREOF).
12. Miscellaneous.
(a) This Agreement shall be binding on and shall inure to the benefit
of the Borrower, the Guarantors, the Lender and their respective successors
and permitted assigns. The terms and provisions of this Agreement are for
the purpose of defining the relative rights and obligations of the
Borrower, the Guarantors and the Lender with respect to the transactions
contemplated hereby and there shall be no third party beneficiaries of any
of the terms and provisions of this Agreement.
(b) Section headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this
Agreement for any other purpose.
(c) Wherever possible, each provision of this Agreement shall be
interpreted in such a manner as to be effective and valid under applicable
law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Agreement.
(d) Except as otherwise provided in this Agreement, if any provision
contained in this Agreement is in conflict with, or inconsistent with, any
provision in the Credit Documents, the provision contained in this
Agreement shall govern and control.
(e) This Agreement may be executed in any number of separate
counterparts, each of which shall collectively and separately constitute
one agreement. Delivery of an executed counterpart of this Agreement by
telecopy shall be effective as an original and shall constitute a
representation that an original shall be delivered to the Lender.
(f) This Agreement and the documents executed in connection herewith
shall be deemed Credit Documents executed pursuant to the Credit Agreement
and the other Credit Documents and shall (unless otherwise expressly
indicated therein) be construed, administered and applied in accordance
with the terms and provisions of the Credit Agreement and the other Credit
Documents.
13. Entirety. This Agreement and the Credit Documents embody the entire
agreement between the parties and supersede all prior agreements and
understandings, if any, relating to the subject matter hereof. This Agreement
and the other Credit Documents represent the final agreement between the parties
and may not be contradicted by evidence of prior, contemporaneous or subsequent
oral agreements of the parties.
[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY.]
IN WITNESS WHEREOF, this Agreement has been duly executed as of the date
first written above.
BORROWER: PRG-SCHULTZ USA, INC.,
a Georgia corporation
By: /s/
------------------------------------
Name: James E. Moylan, Jr.
Title: Executive Vice President -
Finance,
Chief Financial Officer
and Treasurer
GUARANTORS: 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
PRGRS, INC., a Delaware corporation
By: /s/
------------------------------------
Name: James B. McCurry
Title: President
GUARANTORS: 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
LENDER: BANK OF AMERICA, N.A.
By: /s/
------------------------------------
Name: Joseph M. Martens
Title: Senior Vice President
SCHEDULE 8(D)
FEES PAYABLE TO THE SUBORDINATED TERM LOAN LENDERS
1) $100,000 on execution of the Commitment,
2) $25,000 on increase in Commitment to $10,000,000 and
3) $225,000 on the Closing Date