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SCHEDULE 13D
(AMENDMENT NO. 16)
Under the Securities Exchange Act of 1934
PRG-SCHULTZ INTERNATIONAL, INC.
--------------------------------------------------------------------------------
(Name of Company)
Common Stock
--------------------------------------------------------------------------------
(Title of Class of Securities)
69357C107
--------------------------------------------------------------------------------
(CUSIP Number of Class of Securities)
Andre Weiss, Esq.
Schulte Roth & Zabel LLP
919 Third Avenue
New York, New York 10022
(212) 756-2431
--------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
December 23, 2005
--------------------------------------------------------------------------------
(Date of Event which Requires
Filing of this Schedule)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of ss.ss.240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the
following box. [ ]
NOTE: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See ss.240.13d-7 for other
parties to whom copies are to be sent.
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
SCHEDULE 13D
--------------------------------------------------------------------------------
CUSIP NO. 69357C107 PAGE 2 OF 13 PAGES
--------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
BLUM CAPITAL PARTNERS, L.P. I.R.S. ID: 94-3205364
--------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [x]
(b) [x]
--------------------------------------------------------------------------------
3 SEC USE ONLY
--------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
See Item 3
--------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
--------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
California
--------------------------------------------------------------------------------
7 SOLE VOTING POWER
0
----------------------------------------------------------
8 SHARED VOTING POWER
NUMBER OF
SHARES 13,939,012 shares (including 4,651,939 shares
BENEFICIALLY issuable upon conversion of notes and payable as
OWNED BY shares of interest under the notes) (see Item 5)
EACH ---------------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON WITH
0
----------------------------------------------------------
10 SHARED DISPOSITIVE POWER
13,939,012 shares (including 4,651,939 shares
issuable upon conversion of notes and payable as
shares of interest under the notes) (see Item 5)
--------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON
13,939,012 shares (including 4,651,939 shares issuable upon
conversion of notes and payable as shares of interest under the
notes) (see Item 5)
--------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
--------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) (see Item 5)
17.0% (see Item 5)
--------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN, IA
--------------------------------------------------------------------------------
SCHEDULE 13D
--------------------------------------------------------------------------------
CUSIP NO. 69357C107 PAGE 3 OF 13 PAGES
--------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
RICHARD C. BLUM & ASSOCIATES, INC. I.R.S. ID: 94-2967812
--------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X]
(b) [X]
--------------------------------------------------------------------------------
3 SEC USE ONLY
-------------------------------------------------------------------
4 SOURCE OF FUNDS*
See Item 3
--------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
--------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
California
--------------------------------------------------------------------------------
7 SOLE VOTING POWER
0
----------------------------------------------------------
8 SHARED VOTING POWER
NUMBER OF
SHARES 13,939,012 shares (including 4,651,939 shares
BENEFICIALLY issuable upon conversion of notes and payable as
OWNED BY shares of interest under the notes) (see Item 5)
EACH ----------------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON WITH
0
----------------------------------------------------------
10 SHARED DISPOSITIVE POWER
13,939,012 shares (including 4,651,939 shares
issuable upon conversion of notes and payable as
shares of interest under the notes) (see Item 5)
--------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON
13,939,012 shares (including 4,651,939 shares issuable upon
conversion of notes and payable as shares of interest under the
notes) (see Item 5)
--------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
--------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
17.0% (see Item 5)
--------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
--------------------------------------------------------------------------------
SCHEDULE 13D
--------------------------------------------------------------------------------
CUSIP NO. 69357C107 PAGE 4 OF 13 PAGES
--------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
BLUM STRATEGIC GP, L.L.C. I.R.S. ID: 94-3303831
--------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X]
(b) [X]
--------------------------------------------------------------------------------
3 SEC USE ONLY
--------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
See Item 3
--------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
--------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
--------------------------------------------------------------------------------
7 SOLE VOTING POWER
0
----------------------------------------------------------
8 SHARED VOTING POWER
NUMBER OF 13,939,012 shares (including 4,651,939 shares
SHARES issuable upon conversion of notes and payable as
BENEFICIALLY shares of interest under the notes) (see Item 5)
OWNED BY ----------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
PERSON WITH 0
----------------------------------------------------------
10 SHARED DISPOSITIVE POWER
13,939,012 shares (including 4,651,939 shares
issuable upon conversion of notes and payable as
shares of interest under the notes) (see Item 5)
--------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON
13,939,012 shares (including 4,651,939 shares issuable upon
conversion of notes and payable as shares of interest under the
notes) (see Item 5)
--------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
--------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) (see Item 5)
17.0% (see Item 5)
--------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
OO
--------------------------------------------------------------------------------
SCHEDULE 13D
--------------------------------------------------------------------------------
CUSIP NO. 69357C107 PAGE 5 OF 13 PAGES
--------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
BLUM STRATEGIC PARTNERS II, L.P. I.R.S. ID: 94-3395151
--------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X]
(b) [X]
--------------------------------------------------------------------------------
3 SEC USE ONLY
--------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
See Item 3
--------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
--------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
California
--------------------------------------------------------------------------------
7 SOLE VOTING POWER
0
----------------------------------------------------------
8 SHARED VOTING POWER
NUMBER OF 13,939,012 shares (including 4,651,939 shares
SHARES issuable upon conversion of notes and payable as
BENEFICIALLY shares of interest under the notes) (see Item 5)
OWNED BY ----------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
PERSON WITH 0
----------------------------------------------------------
10 SHARED DISPOSITIVE POWER
13,939,012 shares (including 4,651,939 shares
issuable upon conversion of notes and payable as
shares of interest under the notes) (see Item 5)
--------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON
13,939,012 shares (including 4,651,939 shares issuable upon
conversion of notes and payable as shares of interest under the
notes) (see Item 5)
--------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
--------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) (see Item 5)
17.0% (see Item 5)
--------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
--------------------------------------------------------------------------------
SCHEDULE 13D
--------------------------------------------------------------------------------
CUSIP NO. 69357C107 PAGE 6 OF 13 PAGES
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
BLUM STRATEGIC GP II, L.L.C. I.R.S. ID: 94-3395150
--------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)[x]
(b)[x]
--------------------------------------------------------------------------------
3 SEC USE ONLY
--------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
See Item 3
--------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
--------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
--------------------------------------------------------------------------------
7 SOLE VOTING POWER
0
----------------------------------------------------------
8 SHARED VOTING POWER
NUMBER OF 13,939,012 shares (including 4,651,939 shares
SHARES issuable upon conversion of notes and payable as
BENEFICIALLY shares of interest under the notes) (see Item 5)
OWNED BY ----------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
PERSON WITH 0
----------------------------------------------------------
10 SHARED DISPOSITIVE POWER
13,939,012 shares (including 4,651,939 shares
issuable upon conversion of notes and payable as
shares of interest under the notes) (see Item 5)
--------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON
13,939,012 shares (including 4,651,939 shares issuable upon
conversion of notes and payable as shares of interest under the
notes) (see Item 5)
--------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
--------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
17.0% (see Item 5)
--------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
OO
--------------------------------------------------------------------------------
This Amendment No. 16 amends the Statement on Schedule 13D (the "Schedule 13D")
filed with the Securities and Exchange Commission on December 21, 2005 by Blum
Capital Partners, L.P., a California limited partnership ("Partners"); Richard
C. Blum & Associates, Inc., a California corporation; Blum Strategic GP, L.L.C.,
a Delaware limited liability company; Blum Strategic GP II, L.L.C., a Delaware
limited liability company; and Blum Strategic Partners II, L.P. ("Blum"), a
Delaware limited partnership (collectively, the "Reporting Persons"). This
amendment to the Schedule 13D relates to the shares of Common Stock (the
"Shares") of PRG-Schultz International, Inc., a Georgia corporation (the
"Company"). The following amendments to the Schedule 13D are hereby made. Unless
otherwise defined herein, all capitalized terms shall have the meanings ascribed
to them in the Schedule 13D.
ITEM 4. PURPOSE OF TRANSACTION.
Item 4 of the Schedule 13D is hereby supplemented by the following:
On December 23, 2005, Blum and an affiliate of Blum entered into a
Credit Agreement (the "Credit Agreement") with the Company, its wholly-owned
subsidiary PRG-Schultz USA, Inc. (the "Borrower"), certain subsidiaries of the
Company from time to time parties thereto, as guarantors, and Blum, as the
collateral agent. In connection with the Credit Agreement, Blum (as collateral
agent), the Company, the Borrower and certain subsidiaries of the Company
entered into (x) a Pledge Agreement (the "Pledge Agreement") and (y) a Security
Agreement (the "Security Agreement"). The Borrower also issued notes (the
"Notes") to Blum and its affiliate for their portion of the term loan made
pursuant to the Credit Agreement. A copy of each of the Credit Agreement, the
Pledge Agreement, the Security Agreement and the Notes is attached as an exhibit
hereto and incorporated into this Item 4 by reference.
In addition, on December 23, 2005, Partners entered into a
Restructuring Support Agreement (the "Restructuring Support Agreement") with the
Company and the other members of the Ad Hoc Committee. A copy of the
Restructuring Support Agreement is attached as an exhibit hereto and
incorporated into this Item 4 by reference.
Except as set forth above, the Reporting Persons have no oral or
written agreements, understandings or arrangements with each other or any other
person relating to acquiring, holding, voting or disposing of any securities of
the Company or otherwise with respect to the Company.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE COMPANY.
Item 6 of the Schedule 13D is hereby supplemented by the following:
The Credit Agreement, the Pledge Agreement, the Security Agreement, the
Notes and the Restructuring Support Agreement are incorporated by reference into
this Item 6.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
1. Joint Filing Agreement dated December 28, 2005.
2. Credit Agreement, dated December 23, 2005, among the Reporting Persons, the
Company, the Borrower, certain subsidiaries of the Company and the Collateral
Agent.
3. Pledge Agreement, dated December 23, 2005, among the Reporting Persons, the
Company and the Borrower.
4. Security Agreement, dated December 23, 2005, among the Reporting Persons, the
Company and the Borrower.
5. Note, dated December 23, 2005, issued to Blum Strategic Partners II GMBH &
Co. KG.
6 Note, dated December 23, 2005, issued to Blum Strategic Partners II, L.P.
7. Restructuring Support Agreement, dated December 23, 2005, among the Partners,
the Company and the other members of the Ad Hoc Committee.
SIGNATURES
After reasonable inquiry and to the best of his knowledge and belief,
each of the undersigned certifies that the information set forth in this
statement is true, complete and correct.
Dated: December 28, 2005
BLUM CAPITAL PARTNERS, L.P.
By: Richard C. Blum & Associates, Inc.
its General Partner
By: /s/ Gregory D. Hitchan
--------------------------------
Name: Gregory D. Hitchan
Title: Counsel and Secretary
RICHARD C. BLUM & ASSOCIATES, INC.
By: /s/ Gregory D. Hitchan
--------------------------------
Name: Gregory D. Hitchan
Title: Counsel and Secretary
BLUM STRATEGIC GP, L.L.C.
By: /s/ Gregory D. Hitchan
--------------------------------
Name: Gregory D. Hitchan
Title: Member and General Counsel
BLUM STRATEGIC PARTNERS II, L.P.
By: Blum Strategic GP II, L.L.C.,
Its General Partner
By: /s/ Gregory D. Hitchan
--------------------------------
Name: Gregory D. Hitchan
Title: Member and General Counsel
BLUM STRATEGIC GP II, L.L.C.
By: /s/ Gregory D. Hitchan
--------------------------------
Name: Gregory D. Hitchan
Title: Member and General Counsel
EXHIBIT INDEX
1. Joint Filing Agreement dated December 28, 2005.
2. Credit Agreement, dated December 23, 2005, among the Reporting Persons, the
Company, the Borrower, certain subsidiaries of the Company and the Collateral
Agent.
3. Pledge Agreement, dated December 23, 2005, among the Reporting Persons, the
Company and the Borrower.
4. Security Agreement, dated December 23, 2005, among the Reporting Persons, the
Company and the Borrower.
5. Note, dated December 23, 2005, issued to Blum Strategic Partners II GMBH &
Co. KG.
6 Note, dated December 23, 2005, issued to Blum Strategic Partners II, L.P.
7. Restructuring Support Agreement, dated December 23, 2005, among the Partners,
the Company and the other members of the Ad Hoc Committee.
EXHIBIT 1
JOINT FILING UNDERTAKING
The undersigned, being duly authorized thereunto, hereby execute this agreement
as an exhibit to this Schedule 13D to evidence the agreement of the below-named
parties, in accordance with the rules promulgated pursuant to the Securities
Exchange Act of 1934, to file this Schedule jointly on behalf of each such
party.
Dated as of December 28, 2005
BLUM CAPITAL PARTNERS, L.P.
By: Richard C. Blum & Associates, Inc.
its General Partner
By: /s/ Gregory D. Hitchan
--------------------------------
Name: Gregory D. Hitchan
Title: Counsel and Secretary
RICHARD C. BLUM & ASSOCIATES, INC.
By: /s/ Gregory D. Hitchan
--------------------------------
Name: Gregory D. Hitchan
Title: Counsel and Secretary
BLUM STRATEGIC GP, L.L.C.
By: /s/ Gregory D. Hitchan
--------------------------------
Name: Gregory D. Hitchan
Title: Member and General Counsel
BLUM STRATEGIC PARTNERS II, L.P.
By: Blum Strategic GP II, L.L.C.,
Its General Partner
By: /s/ Gregory D. Hitchan
--------------------------------
Name: Gregory D. Hitchan
Title: Member and General Counsel
BLUM STRATEGIC GP II, L.L.C.
By: /s/ Gregory D. Hitchan
--------------------------------
Name: Gregory D. Hitchan
Title: Member and General Counsel
EXHIBIT 2
EXECUTION
VERSION
CREDIT AGREEMENT
among
PRG-SCHULTZ USA, INC.,
as Borrower,
PRG-SCHULTZ INTERNATIONAL, INC.,
as Parent,
CERTAIN SUBSIDIARIES OF THE PARENT
FROM TIME TO TIME PARTY HERETO,
as Guarantors,
AND
THE LENDERS IDENTIFIED ON THE SIGNATURE PAGES HERETO,
as Lenders
AND
BLUM STRATEGIC PARTNERS II, L.P.,
as the Collateral Agent
DATED AS OF DECEMBER 23, 2005
TABLE OF CONTENTS
PAGE
SECTION 1 DEFINITIONS........................................................ 1
1.1 Definitions.....................................................1
1.2 Computation of Time Periods....................................17
1.3 Accounting Terms...............................................17
SECTION 2 CREDIT FACILITIES..................................................18
2.1 Term Loan......................................................18
2.2 [Intentionally Omitted]........................................19
SECTION 3 OTHER PROVISIONS RELATING TO CREDIT FACILITIES.....................19
3.1 Default Rate...................................................19
3.2 [Intentionally Omitted]........................................19
3.3 Prepayments....................................................19
3.4 Termination the Commitment.....................................20
3.5 Fees...........................................................20
3.6 [Intentionally Omitted]........................................20
3.7 [Intentionally Omitted]........................................20
3.8 [Intentionally Omitted]........................................20
3.9 Taxes..........................................................20
3.10 [Intentionally Omitted]........................................21
3.11 Payments Computations, Etc.....................................21
3.12 Evidence of Debt...............................................22
SECTION 4 GUARANTY...........................................................22
4.1 The Guaranty...................................................22
4.2 Obligations Unconditional......................................22
4.3 Reinstatement..................................................23
4.4 Certain Additional Waivers.....................................24
4.5 Remedies.......................................................24
4.6 Rights of Contribution.........................................24
4.7 Guarantee of Payment; Continuing Guarantee.....................24
SECTION 5 CONDITIONS.........................................................25
5.1 Closing Conditions.............................................25
SECTION 6 REPRESENTATIONS AND WARRANTIES.....................................28
6.1 Financial Condition............................................28
6.2 No Material Change.............................................29
6.3 Organization and Good Standing.................................29
6.4 Power; Authorization; Enforceable Obligations..................29
6.5 No Conflicts...................................................30
6.6 No Default.....................................................30
i
6.7 Ownership......................................................30
6.8 Indebtedness...................................................30
6.9 Litigation.....................................................30
6.10 Taxes..........................................................30
6.11 Compliance with Law............................................31
6.12 ERISA..........................................................31
6.13 Subsidiaries...................................................32
6.14 Governmental Regulations, Etc..................................33
6.15 Purpose of Loans and Letters of Credit.........................34
6.16 Environmental Matters..........................................34
6.17 Intellectual Property..........................................35
6.18 Solvency.......................................................35
6.19 Investments....................................................35
6.20 Location of Collateral.........................................35
6.21 Disclosure.....................................................35
6.22 Brokers' Fees..................................................36
6.23 Labor Matters..................................................36
SECTION 7 AFFIRMATIVE COVENANTS..............................................36
7.1 Information Covenants..........................................36
7.2 Preservation of Existence and Franchises.......................39
7.3 Books and Records..............................................40
7.4 Compliance with Law............................................40
7.5 Payment of Taxes and Other Indebtedness........................40
7.6 Insurance......................................................40
7.7 Maintenance of Property........................................41
7.8 Performance of Obligations.....................................41
7.9 Use of Proceeds................................................41
7.10 Audits/Inspections.............................................41
7.11 [Intentionally Omitted]........................................42
7.12 Additional Credit Parties......................................42
7.13 Environmental Laws.............................................43
7.14 Collateral.....................................................43
7.15 Working Capital Borrowing Base.................................44
7.16 Post-Closing Deliveries........................................44
SECTION 8 NEGATIVE COVENANTS.................................................44
8.1 Indebtedness...................................................44
8.2 Liens..........................................................45
8.3 Nature of Business.............................................45
8.4 Consolidation, Merger, Dissolution, etc........................45
8.5 Asset Dispositions.............................................46
8.6 Investments....................................................47
8.7 Restricted Payments............................................47
8.8 Transactions with Affiliates...................................47
8.9 Fiscal Year; Organizational Documents..........................47
8.10 Limitation on Restricted Actions...............................47
ii
8.11 Ownership of Subsidiaries......................................48
8.12 Sale Leasebacks................................................48
8.13 Capital Expenditures...........................................48
8.14 No Further Negative Pledges....................................48
8.15 Limitation on Foreign EBITDA...................................49
8.16 Subordinated Debt..............................................49
8.17 Notice under the Indenture.....................................49
8.18 Working Capital Loan Documents.................................49
SECTION 9 EVENTS OF DEFAULT..................................................49
9.1 Events of Default..............................................49
9.2 Acceleration; Remedies.........................................52
9.3 Application of Funds...........................................52
SECTION 10 MISCELLANEOUS.....................................................53
10.1 Notices........................................................53
10.2 Right of Set-Off; Adjustments..................................55
10.3 Successors and Assigns.........................................55
10.4 Expenses; Indemnification......................................56
10.5 Amendments, Waivers and Consents...............................57
10.6 Counterparts...................................................58
10.7 Headings.......................................................58
10.8 Survival.......................................................58
10.9 Governing Law; Submission to Jurisdiction; Venue...............58
10.10 Waiver of Jury Trial...........................................59
10.11 Survival of Representations and Warranties.....................59
10.12 Severability...................................................59
10.13 Entirety.......................................................59
10.14 Binding Effect; Termination....................................59
10.15 Confidentiality................................................60
10.16 Conflict.......................................................61
10.17 USA Patriot Act Notice.........................................61
SECTION 11 COLLATERAL AGENT..................................................61
11.1 Appointment....................................................61
11.2 Nature of Duties...............................................62
11.3 Rights, Exculpation, Etc.......................................62
11.4 Reliance.......................................................63
11.5 Indemnification................................................63
11.6 Collateral Agent Individually..................................63
11.7 Successor Collateral Agent.....................................64
11.8 Collateral Matters.............................................64
11.9 Agency for Perfection..........................................65
iii
SCHEDULES
Schedule 1.1(a) Commitments
Schedule 1.1(b) Investments
Schedule 1.1(c) Liens
Schedule 6.9 Litigation
Schedule 6.10 Tax Returns
Schedule 6.13 Subsidiaries
Schedule 6.17 Intellectual Property
Schedule 6.20 Chief Executive Office/Exact Legal Name/State of Incorporation
Schedule 6.22 Broker's Fees
Schedule 7.6 Insurance
Schedule 8.1 Indebtedness
EXHIBITS
Exhibit A Form of Borrowing Notice
Exhibit B Form of Note
Exhibit C Form of Officer's Compliance Certificate
Exhibit D [Intentionally Omitted]
Exhibit E Form of Joinder Agreement
iv
CREDIT AGREEMENT
THIS CREDIT AGREEMENT (this "CREDIT AGREEMENT"), dated as of December 23,
2005, is by and among PRG-SCHULTZ USA, INC., a Georgia corporation (the
"BORROWER"), PRG-SCHULTZ INTERNATIONAL, INC., a Georgia corporation (the
"PARENT"), each of the Domestic Subsidiaries of the Parent (such Domestic
Subsidiaries, together with the Parent, individually a "GUARANTOR" and
collectively the "GUARANTORS") and each of the Lenders identified on the
signature pages hereto (each a "LENDER" and collectively, the "LENDERS") and
Blum Strategic Partners II, L.P., as the collateral agent for the Lenders (in
such capacity, the "COLLATERAL AGENT").
WITNESSETH:
The Borrower has asked the Lenders to extend credit to the Borrower
consisting of a term loan in the aggregate principal amount of $10,000,000, the
proceeds of which shall be used (i) to fund certain of the Borrower's working
capital needs, provided, that in no event shall the proceeds of the Term Loan be
used to make any severance payments or other similar payments to John Cook or
Jack Toma and (ii) to pay transaction fees and expenses related to this Credit
Agreement and the other transactions contemplated hereby. The Lenders are
severally, and not jointly, willing to extend such credit to the Borrower
subject to the terms and conditions hereinafter set forth.
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
SECTION 1
DEFINITIONS
1.1 DEFINITIONS.
As used in this Credit Agreement, the following terms shall have the
meanings specified below unless the context otherwise requires:
"ADDITIONAL CREDIT PARTY" means each Person that becomes a Guarantor
after the Closing Date by execution of a Joinder Agreement.
"AFFILIATE" means, with respect to any Person, any other Person (i)
directly or indirectly controlling or controlled by or under direct or
indirect common control with such Person or (ii) directly or indirectly
owning or holding five percent (5%) or more of the Capital Stock in such
Person. For purposes of this definition, "control" when used with respect
to any Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing. Notwithstanding
the foregoing, in no event shall any Lender or any Affiliate of a Lender be
deemed an Affiliate of any Consolidated Party.
"ASSET DISPOSITION" means the disposition of any or all of the assets
(including without limitation the Capital Stock of a Subsidiary) of any
Consolidated Party whether by sale, lease, transfer or otherwise (including
pursuant to any casualty or condemnation event).
"ATTORNEY COSTS" means and includes all reasonable and documented
fees, expenses and disbursements of any law firm or other external counsel.
"BANKRUPTCY CODE" means the Bankruptcy Code in Title 11 of the United
States Code, as amended, modified, succeeded or replaced from time to time.
"BANKRUPTCY EVENT" means, with respect to any Person, the occurrence
of any of the following with respect to such Person: (i) a court or
governmental agency having jurisdiction in the premises shall enter a
decree or order for relief in respect of such Person in an involuntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or appointing a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or similar official) of such Person or
for any substantial part of its Property or ordering the winding up or
liquidation of its affairs; or (ii) there shall be commenced against such
Person an involuntary case under any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect, or any case, proceeding or
other action for the appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or similar official) of such Person or
for any substantial part of its Property or for the winding up or
liquidation of its affairs, and such involuntary case or other case,
proceeding or other action shall remain undismissed, undischarged or
unbonded for a period of sixty (60) consecutive days; or (iii) such Person
shall commence a voluntary case under any applicable bankruptcy, insolvency
or other similar law now or hereafter in effect, or consent to the entry of
an order for relief in an involuntary case under any such law, or consent
to the appointment or taking possession by a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or similar official) of such
Person or for any substantial part of its Property or make any general
assignment for the benefit of creditors; or (iv) such Person shall be
unable to, or shall admit in writing its inability to, pay its debts
generally as they become due.
"BORROWER" means the Person identified as such in the Preamble,
together with any permitted successors and assigns.
"BUSINESS DAY" means a day other than a Saturday, Sunday or other day
on which commercial banks in New York, New York are authorized or required
by law to close.
"CAPITAL LEASE" means, as applied to any Person, any lease of any
Property (whether real, personal or mixed) by that Person as lessee which,
in accordance with GAAP, is or should be accounted for as a capital lease
on the balance sheet of that Person.
"CAPITAL STOCK" means (i) in the case of a corporation, capital stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated)
of capital stock, (iii) in the case of a
2
partnership, partnership interests (whether general or limited), (iv) in
the case of a limited liability company, membership interests and (v) any
other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets
of, the issuing Person.
"CASH EQUIVALENTS" means (a) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the
United States of America is pledged in support thereof) having maturities
of not more than twelve months from the date of acquisition, (b) U.S.
dollar denominated time deposits and certificates of deposit of (i) any
Lender, (ii) any domestic commercial bank of recognized standing having
capital and surplus in excess of $500,000,000 or (iii) any bank whose
short-term commercial paper rating from S&P is at least A-1 or the
equivalent thereof or from Moody's is at least P-1 or the equivalent
thereof (any such bank being an "APPROVED BANK"), in each case with
maturities of not more than 270 days from the date of acquisition, (c)
commercial paper and variable or fixed rate notes issued by any Approved
Bank (or by the parent company thereof) or any variable rate notes issued
by, or guaranteed by, any domestic corporation rated A-1 (or the equivalent
thereof) or better by S&P or P-1 (or the equivalent thereof) or better by
Moody's and maturing within six months of the date of acquisition, (d)
repurchase agreements entered into by any Person with a bank or trust
company or recognized securities dealer having capital and surplus in
excess of $500,000,000 for direct obligations issued by or fully guaranteed
by the United States of America in which such Person shall have a perfected
first priority security interest (subject to no other Liens) and having, on
the date of purchase thereof, a fair market value of at least 100% of the
amount of the repurchase obligations and (e) Investments, classified in
accordance with GAAP as current assets, in money market investment programs
registered under the Investment Company Act of 1940, as amended, which are
administered by reputable financial institutions having capital of at least
$500,000,000 and the portfolios of which are limited to Investments of the
character described in the foregoing subdivisions (a) through (d).
"CHANGE OF CONTROL" means the occurrence of any of the following
events: (i) any Person or two or more Persons acting in concert shall have
acquired "beneficial ownership," directly or indirectly, of, or shall have
acquired by contract or otherwise, or shall have entered into a contract or
arrangement that, upon consummation, will result in its or their
acquisition of, control over, Voting Stock of the Parent (or other
securities convertible into such Voting Stock) representing 35% or more of
the combined voting power of all Voting Stock of the Parent, (ii) during
any period of up to 24 consecutive months, commencing after the Closing
Date, individuals who at the beginning of such 24 month period were
directors of the Parent (together with any new director whose election by
the Parent's Board of Directors or whose nomination for election by the
Parent's shareholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the beginning
of such period or whose election or nomination for election was previously
so approved) cease for any reason to constitute a majority of the directors
of the Parent then in office, or (iii) the Parent shall fail to own
directly 100% of the outstanding Capital Stock of the Borrower. As used
herein,
3
"beneficial ownership" shall have the meaning provided in Rule 13d-3 of the
Securities and Exchange Commission under the Securities Act of 1934.
"CLOSING DATE" means the date hereof.
"CLOSING FEE" shall have the meaning assigned to such term in SECTION
3.5.
"CODE" means the Internal Revenue Code of 1986, as amended, and any
successor statute thereto, as interpreted by the rules and regulations
issued thereunder, in each case as in effect from time to time. References
to sections of the Code shall be construed also to refer to any successor
sections.
"COLLATERAL" means a collective reference to the collateral which is
identified in, and at any time will be covered by, the Collateral
Documents.
"COLLATERAL AGENT" shall have the meaning assigned to such term in the
Preamble.
"COLLATERAL DOCUMENTS" means a collective reference to the Security
Agreement, the Pledge Agreement, the Foreign Pledge Agreements and such
other documents executed and delivered in connection with the attachment
and perfection of the Lenders' security interests and liens arising
thereunder, including without limitation, UCC financing statements and
patent and trademark filings.
"COMMITMENT" means, with respect to each Lender, the commitment of
such Lender to make a portion of the Term Loan to the Borrower in the
amount set forth in Schedule 1.1(a) hereto, as the same may be terminated
or reduced from time to time in accordance with the terms of this Credit
Agreement.
"COMPLIANCE CERTIFICATE" means a certificate substantially in the form
of EXHIBIT C.
"CONSOLIDATED CAPITAL EXPENDITURES" means, for any period, all capital
expenditures of the Consolidated Parties on a consolidated basis for such
period, as determined in accordance with GAAP.
"CONSOLIDATED EBITDA" shall have the meaning specified therefor in the
Working Capital Loan Agreement.
"CONSOLIDATED PARTIES" means a collective reference to the Parent and
its Subsidiaries, and "CONSOLIDATED PARTY" means any one of them.
"CREDIT AGREEMENT" shall have the meaning assigned to such term in the
Preamble.
"CREDIT DOCUMENTS" means a collective reference to this Credit
Agreement, any Notes, each Joinder Agreement, the Collateral Documents and
all other related agreements and documents issued or delivered hereunder or
thereunder or pursuant hereto or thereto (in each ease as the same may be
amended, modified, restated,
4
supplemented, extended, renewed or replaced from time to time), and "CREDIT
DOCUMENT" means any one of them.
"CREDIT PARTIES" means a collective reference to the Borrower and the
Guarantors, and "CREDIT PARTY" means any one of them.
"CREDIT PARTY OBLIGATIONS" means, without duplication, all of the
obligations of the Credit Parties to the Lenders and the Collateral Agent,
the Notes, the Collateral Documents or any of the other Credit Documents
(including, but not limited to, any interest accruing after the
commencement by or against any Credit Party or any Affiliate thereof of any
proceeding under any Debtor Relief Laws naming such Person as the debtor in
such proceeding, regardless of whether such interest and fees are allowed
claims in such proceeding).
"DEBT ISSUANCE" means the issuance of any Indebtedness for borrowed
money by any Consolidated Party other than Indebtedness permitted by
Section 8.1.
"DEBTOR RELIEF LAWS" means the Bankruptcy Code of the United States,
and all other liquidation, conservatorship, bankruptcy, assignment for the
benefit of creditors, moratorium, rearrangement, receivership, insolvency,
reorganization, or similar debtor relief Laws of the United States or other
applicable jurisdictions from time to time in effect and affecting the
rights of creditors generally.
"DEFAULT" means any event, act or condition which with notice or lapse
of time, or both, would constitute an Event of Default.
"DISCLOSURE DOCUMENT" means the quarterly report of the Parent on Form
10-Q filed with the Securities and Exchange Commission for the quarterly
period ended September 30, 2005.
"DOLLARS" and "$" means dollars in lawful currency of the United
States of America.
"DOMESTIC SUBSIDIARY" means, with respect to any Person, any
Subsidiary of such Person which is incorporated or organized under the laws
of any State of the United States or the District of Columbia.
"ENVIRONMENTAL LAWS" means any and all lawful and applicable Federal,
state, local and foreign statutes, laws, regulations, ordinances, rules,
judgments, orders, decrees, permits, concessions, grants, franchises,
licenses, agreements or other governmental restrictions relating to the
environment or to emissions, discharges, releases or threatened releases of
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes into the environment including, without limitation,
ambient air, surface water, ground water, or land, or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants, chemicals, or
industrial, toxic or hazardous substances or wastes.
5
"ENVIRONMENTAL LIABILITY" means any liability, contingent or otherwise
(including any liability for damages, costs of environmental remediation,
fines, penalties or indemnities), of the Borrower or any Subsidiary of the
Parent directly or indirectly resulting from or based upon (a) violation of
any Environmental Law, (b) the generation, use, handling, transportation,
storage, treatment or disposal of any Hazardous Materials, (c) exposure to
any Hazardous Materials, (d) the release or threatened release of any
Hazardous Materials into the environment or (e) any contract, agreement or
other consensual arrangement pursuant to which liability is assumed or
imposed with respect to any of the foregoing.
"EQUITY ISSUANCE" means any issuance by any Consolidated Party to any
Person which is not a Credit Party of (a) shares of its Capital Stock, (b)
any shares of its Capital Stock pursuant to the exercise of options or
warrants or (c) any shares of its Capital Stock pursuant to the conversion
of any debt securities to equity.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute thereto, as interpreted by the rules and
regulations thereunder, all as the same may be in effect from time to time.
References to sections of ERISA shall be construed also to refer to any
successor sections.
"ERISA AFFILIATE" means an entity which is under common control with
any Consolidated Party within the meaning of Section 4001(a)(14) of ERISA,
or is a member of a group which includes any Consolidated Party and which
is treated as a single employer under Sections 414(b) or (c) of the Code.
"ERISA EVENT" means (i) with respect to any Plan, the occurrence of a
Reportable Event or the substantial cessation of operations (within the
meaning of Section 4062(e) of ERISA); (ii) the withdrawal by any
Consolidated Party or any ERISA Affiliate from a Multiple Employer Plan
during a plan year in which it was a substantial employer (as such term is
defined in Section 4001(a)(2) of ERISA), or the termination of a Multiple
Employer Plan; (iii) the distribution of a notice of intent to terminate or
the actual termination of a Plan pursuant to Section 4041(a)(2) or 4041A of
ERISA; (iv) the institution of proceedings to terminate or the actual
termination of a Plan by the PBGC under Section 4042 of ERISA; (v) any
event or condition which might constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to
administer, any Plan; (vi) the complete or partial withdrawal of any
Consolidated Party or any ERISA Affiliate from a Multiemployer Plan; (vii)
the conditions for imposition of a lien under Section 302(f) of ERISA exist
with respect to any Plan; or (viii) the adoption of an amendment to any
Plan requiring the provision of security to such Plan pursuant to Section
307 of ERISA.
"EVENT OF DEFAULT" shall have the meaning as defined in Section 9.1.
"EXECUTIVE OFFICER" of any Person means any of the chief executive
officer, chief operating officer, president, senior vice president, chief
financial officer or treasurer of such Person.
6
"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 Sections 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.
"FACILITIES" shall have the meaning assigned to such term in Section
6.16.
"FIRST TIER FOREIGN SUBSIDIARY" means each Foreign Subsidiary which is
owned directly by a Credit Party.
"FINANCIAL STATEMENTS" means the unaudited consolidated balance sheet
of the Parent and its Subsidiaries as at September 30, 2005.
"FOREIGN PLEDGE AGREEMENT" means any pledge agreement or similar
document governed by laws other than the laws of the state of New York
entered into by any Credit Party in favor of the Lenders, in accordance
with the terms hereof, as amended, modified, restated or supplemented from
time to time.
"FOREIGN SUBSIDIARY" means, with respect to any Person, any Subsidiary
of such Person which is not a Domestic Subsidiary of such Person.
"GAAP" means generally accepted accounting principles in the United
States applied on a consistent basis and subject to the terms of Section
1.3.
"GOVERNMENTAL AUTHORITY" means the government of the United States or
any other nation, or of any political subdivision thereof, whether state or
local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining
to government (including any supra-national bodies such as the European
Union or the European Central Bank).
"GUARANTORS" means the Parent, each of the Domestic Subsidiaries of
the Parent (other than the Borrower), each of the Domestic Subsidiaries of
the Borrower, each Additional Credit Party which has executed a Joinder
Agreement, and any other Person who becomes a Guarantor, together with
their successors and permitted assigns, and "GUARANTOR" means any one of
them.
"GUARANTY OBLIGATIONS" means, with respect to any Person, without
duplication, any obligations of such Person (other than endorsements in the
ordinary course of business of negotiable instruments for deposit or
collection) guaranteeing or intended to guarantee any Indebtedness of any
other Person in any manner, whether direct or indirect, and including
without limitation any obligation, whether or not contingent, (i) to
purchase any such Indebtedness or any Property constituting security
therefor, (ii) to advance or provide funds or other support for the payment
or purchase of any such indebtedness or
7
to maintain working capital, solvency or other balance sheet condition of
such other Person (including without limitation keep well agreements,
maintenance agreements, comfort letters or similar agreements or
arrangements) for the benefit of any holder of Indebtedness of such other
Person, (iii) to lease or purchase Property, securities or services
primarily for the purpose of assuring the holder of such Indebtedness, or
(iv) to otherwise assure or hold harmless the holder of such Indebtedness
against loss in respect thereof. The amount of any Guaranty Obligation
hereunder shall (subject to any limitations set forth therein) be deemed to
be an amount equal to the outstanding principal amount (or maximum
principal amount, if larger) of the Indebtedness in respect of which such
Guaranty Obligation is made.
"HAZARDOUS MATERIALS" means all explosive or radioactive substances or
wastes and all hazardous or toxic substances, wastes or other pollutants,
including petroleum or petroleum distillates, asbestos or
asbestos-containing materials, polychlorinated biphenyls, radon gas,
infectious or medical wastes and all other substances or wastes of any
nature regulated pursuant to any Environmental Law.
"HEDGING AGREEMENTS" means any interest rate protection agreement or
foreign currency exchange agreement.
"IMMATERIAL FOREIGN SUBSIDIARY" means, at any time, any First Tier
Foreign Subsidiary (i) for which the portion of Consolidated EBITDA
attributable to such First Tier Foreign Subsidiary does not exceed 5% of
Consolidated EBITDA for the most recently ended four fiscal quarter period
and (ii) for which the portion of Consolidated EBITDA attributable to such
First Tier Foreign Subsidiary, together with the portion of Consolidated
EBITDA attributable to all other First Tier Foreign Subsidiaries with
respect to which the Collateral Agent has not received a pledge of 66% of
Capital Stock of such First Tier Foreign Subsidiaries, does not exceed 10%
of Consolidated EBITDA for the most recently ended four fiscal quarter
period.
"INDEBTEDNESS" means, with respect to any Person, without duplication,
(a) all obligations of such Person for borrowed money, (b) all obligations
of such Person evidenced by bonds, debentures, notes or similar
instruments, or upon which interest payments are customarily made, (c) all
obligations of such Person under conditional sale or other title retention
agreements relating to Property purchased by such Person (other than
customary reservations or retentions of title under agreements with
suppliers entered into in the ordinary course of business), (d) all
obligations of such Person issued or assumed as the deferred purchase price
of Property or services purchased by such Person (other than trade debt
incurred in the ordinary course of business and due within six months of
the incurrence thereof) which would appear as liabilities on a balance
sheet of such Person, (e) all obligations of such Person under take-or-pay
or similar arrangements or under commodities agreements, (f) all
Indebtedness of others secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured
by) any Lien on, or payable out of the proceeds of production from,
Property owned or acquired by such Person, whether or not the obligations
secured thereby have been assumed, (g) all Guaranty Obligations of such
Person, (h) the principal portion of all obligations of such Person under
Capital Leases, (i) all obligations of such Person under
8
Hedging Agreements, (j) commercial letters of credit and the maximum amount
of all standby letters of credit issued or bankers' acceptances facilities
created for the account of such Person and, without duplication, all drafts
drawn thereunder (to the extent unreimbursed), (k) the principal portion of
all obligations of such Person under Synthetic Leases, (l) all preferred
Capital Stock issued by such Person and which by the terms thereof could
(at the request of the holders thereof or otherwise) be subject to
mandatory sinking fund payments, redemption or other acceleration by a
fixed date, (m) all obligations of such Person to repurchase any securities
issued by such Person at any time on or prior to the Maturity Date which
repurchase obligations are related to the issuance thereof, including,
without limitation, obligations commonly known as residual equity
appreciation potential shares, (n) the Indebtedness of any partnership or
unincorporated joint venture in which such Person is a general partner or a
joint venturer to the extent such Indebtedness is recourse to such Person
and (o) the aggregate amount of uncollected accounts receivable of such
Person subject at such time to a sale of receivables (or similar
transaction) to the extent such transaction is effected with recourse to
such Person (whether or not such transaction would be reflected on the
balance sheet of such Person in accordance with GAAP).
"INDENTURE" means that certain Indenture, dated as of November 26,
2001, between the Parent and SunTrust Bank, as trustee, as amended or
modified in accordance with the terms hereof and thereof.
"INTERCREDITOR AGREEMENT" means the Intercreditor and Subordination
Agreement dated as of the date hereof, by and among the Lenders, and the
Working Capital Lender in form and substance satisfactory to the Lenders,
as amended, restated, supplemented, modified or otherwise changed from time
to time in accordance with the terms thereof.
"INVESTMENT" means (a) the acquisition (whether for cash, property,
services, assumption of indebtedness, securities or otherwise) of assets,
Capital Stock, bonds, notes, debentures, partnership, joint ventures or
other ownership interests or other securities of any Person or (b) any
deposit with, or advance, loan or other extension of credit to, any Person
(other than deposits made in connection with the purchase or lease of
equipment or other assets in the ordinary course of business or the leasing
of real property in the ordinary course of business) or (c) any other
capital contribution to or investment in any Person, including, without
limitation, any Guaranty Obligations (including any support for a letter of
credit issued on behalf of such Person) incurred for the benefit of such
Person.
"JOINDER AGREEMENT" means a Joinder Agreement substantially in the
form of EXHIBIT E hereto, executed and delivered by an Additional Credit
Party in accordance with the provisions of Section 7.12.
"LAWS" means, collectively, all international, foreign, Federal, state
and local statutes, treaties, rules, guidelines, regulations, ordinances,
codes and administrative or judicial precedents or authorities, including
the interpretation or administration thereof by any Governmental Authority
charged with the enforcement, interpretation or administration thereof, and
all applicable administrative orders, directed duties, requests,
9
licenses, authorizations and permits of, and agreements with, any
Governmental Authority.
"LENDER" or "LENDERS" shall have the meanings assigned to such terms
in the Preamble.
"LIEN" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, security interest, encumbrance, lien (statutory or otherwise),
preference, priority or charge of any kind (including any agreement to give
any of the foregoing, any conditional sale or other title retention
agreement, any financing or similar statement or notice filed under the
Uniform Commercial Code as adopted and in effect in the relevant
jurisdiction or other similar recording or notice statute, and any lease in
the nature thereof).
"LOAN" or "LOANS" means the Term Loan or any portion thereof made by
the Lenders to the Borrower pursuant to this Credit Agreement.
"MATERIAL ADVERSE EFFECT" means, other than the Working Capital
Acknowledged Defaults and matters disclosed in the Disclosure Document, a
material adverse effect on (i) the condition (financial or otherwise),
operations, business, assets, liabilities or prospects of the Parent and
its Subsidiaries taken as a whole, (ii) the ability of any Credit Party to
perform any material obligation under the Credit Documents to which it is a
party or (iii) the material rights and remedies of the Collateral Agent or
any Lender under the Credit Documents.
"MATERIAL FOREIGN SUBSIDIARY" means, at any time, any First Tier
Foreign Subsidiary of a Credit Party that is not an Immaterial Foreign
Subsidiary.
"MATURITY DATE" means the earlier of (i) August 15, 2006, and (ii) the
date on which the "Transactions" as defined in the Restructuring Term Sheet
shall have been substantially consummated.
"MERIDIAN" means Meridian Corporation Limited (formerly known as
Meridian VAT Corporation Limited), a company incorporated in Jersey.
"MERIDIAN INTERNATIONAL" means Meridian VAT Processing (International)
Limited, a company incorporated in Jersey.
"MERIDIAN LOAN" means the loan by Meridian International to Meridian
in an aggregate amount not to exceed approximately 12,700,000 Euros.
"MOODY'S" means Moody's Investors Service, Inc., or any successor or
assignee of the business of such company in the business of rating
securities.
"MULTIEMPLOYER PLAN" means a Plan which is a multiemployer plan as
defined in Sections 3(37) or 4001(a)(3) of ERISA.
10
"MULTIPLE EMPLOYER PLAN" means a Plan which any Consolidated Party or
any ERISA Affiliate and at least one employer other than the Consolidated
Parties or any ERISA Affiliate are contributing sponsors.
"NET CASH PROCEEDS" means the aggregate cash proceeds received by the
Consolidated Parties in respect of any Asset Disposition, Equity Issuance
or Debt Issuance, net of (a) direct costs (including, without limitation,
legal, accounting and investment banking fees, sales commissions and
compensation related expenses) and (b) taxes paid or payable as a result
thereof; it being understood that "Net Cash Proceeds" shall include,
without limitation, cash received upon the sale or other disposition of any
non-cash consideration received by the Consolidated Parties in any Asset
Disposition, Equity Issuance or Debt Issuance.
"NOTE" shall have the meaning specified therefor in Section 3.12.
"NOTICE OF BORROWING" shall have the meaning specified therefor in
Section 2.1(b).
"OPERATING LEASE" means, as applied to any Person, any lease
(including, without limitation, leases which may be terminated by the
lessee at any time) of any Property (whether real, personal or mixed) which
is not a Capital Lease other than any such lease in which that Person is
the lessor.
"OTHER TAXES" shall have the meaning assigned to such term in Section
3.9.
"PARENT" means PRG-Schultz International, Inc., a Georgia corporation,
together with any successors and permitted assigns.
"PBGC" means the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA and any successor thereof.
"PERMITTED INVESTMENTS" means Investments which are either (i) cash
and Cash Equivalents; (ii) accounts receivable created, acquired or made by
any Consolidated Party in the ordinary course of business and payable or
dischargeable in accordance with customary trade terms; (iii) Investments
consisting of Capital Stock, obligations, securities or other property
received by any Consolidated Party in settlement of accounts receivable
(created in the ordinary course of business) from bankrupt obligors; (iv)
Investments existing as of the Closing Date and set forth in SCHEDULE
1.1(B); (v) Guaranty Obligations permitted by Section 8.1; (vi) advances or
loans to directors, officers, employees, agents, customers or suppliers
that do not exceed $500,000 in the aggregate at any one time outstanding
for all of the Consolidated Parties; (vii) Investments by one Credit Party
in another Credit Party (other than the Parent); (viii) Investments by the
Borrower in the Parent in an amount necessary to allow the Parent to pay
regularly scheduled interest payments on the Subordinated Debt; (ix)
Investments in Foreign Subsidiaries of the Parent in an amount not to
exceed $4,000,000 in the aggregate during the term of this Credit
Agreement; PROVIDED, however, that for purposes of calculating Investments
in Foreign Subsidiaries for purposes of this clause (ix), the actual
aggregate Investments in Foreign Subsidiaries
11
shall be reduced by an amount equal to cash repatriated to the United
States from Meridian; (x) compensation advances to commissioned auditors
made in the ordinary course of business; (xi) Investment by Meridian
International in Meridian in the form of the Meridian Loan; and (xii) other
loans, advances and Investments of a nature not contemplated in the
foregoing subsections in an amount not to exceed $1,000,000 in the
aggregate at any time outstanding.
"PERMITTED LIENS" means:
(i) Liens in favor of the Lender to secure the Credit Party
Obligations;
(ii) Liens (other than Liens created or imposed under ERISA) for
taxes, assessments or governmental charges or levies not yet due or
Liens for taxes being contested in good faith by appropriate
proceedings for which adequate reserves determined in accordance with
GAAP have been established (and as to which the Property subject to
any such Lien is not yet subject to foreclosure, sale or loss on
account thereof);
(iii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and suppliers and other Liens
imposed by law or pursuant to customary reservations or retentions of
title arising in the ordinary course of business, PROVIDED that such
Liens secure only amounts not yet due and payable or, if due and
payable, are unfiled and no other action has been taken to enforce the
same or are being contested in good faith by appropriate proceedings
for which adequate reserves determined in accordance with GAAP have
been established (and as to which the Property subject to any such
Lien is not yet subject to foreclosure, sale or loss on account
thereof);
(iv) Liens (other than Liens created or imposed under ERISA)
incurred or deposits made by any Consolidated Party in the ordinary
course of business in connection with workers' compensation,
unemployment insurance and other types of social security, or to
secure the performance of tenders, statutory obligations, bids,
leases, government contracts, performance and return-of-money bonds
and other similar obligations (exclusive of obligations for the
payment of borrowed money);
(v) Liens in connection with attachments or judgments (including
judgment or appeal bonds) PROVIDED that the judgments secured shall,
within 30 days after the entry thereof, have been discharged or
execution thereof stayed pending appeal, or shall have been discharged
within 30 days after the expiration of any such stay;
(vi) easements, rights-of-way, restrictions (including zoning
restrictions), minor defects or irregularities in title and other
similar charges or encumbrances not, in any material respect,
impairing the use of the encumbered Property for its intended
purposes;
(vii) Liens on Property of any Person securing purchase money
Indebtedness (including Capital Leases and Synthetic Leases) of such
Person to the extent permitted
12
under Section 8.1(c), PROVIDED that any such Lien attaches to such
Property concurrently with or within 90 days after the acquisition
thereof;
(viii) leases or subleases granted to others not interfering in
any material respect with the business of any Consolidated Party;
(ix) normal and customary rights of setoff upon deposits of cash
in favor of banks or other depository institutions;
(x) Liens existing as of the Closing Date and set forth on
SCHEDULE 1.1(C); PROVIDED that (a) no such Lien shall at any time be
extended to or cover any Property other than the Property subject
thereto on the Closing Date and (b) the principal amount of the
Indebtedness secured by such Liens shall not be extended, renewed,
refunded or refinanced;
(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 granted in favor of the Working Capital Lender to
secure the obligations of the Credit Parties under the Working Capital
Loan Documents, provided that such Liens are subject to the terms of
Intercreditor Agreement or a replacement intercreditor agreement in
form and substance acceptable to the Lenders.
"PERSON" means any individual, partnership, joint venture, firm,
corporation, limited liability company, association, trust or other
enterprise (whether or not incorporated) or any Governmental
Authority.
"PLAN" means any employee benefit plan (as defined in Section
3(3) of ERISA) which is covered by ERISA and with respect to which any
Consolidated Party or any ERISA Affiliate is (or, if such plan were
terminated at such time would under Section 4069 of ERISA be deemed to
be) an "employer" within the meaning of Section 3(5) of ERISA.
"PLEDGE AGREEMENT" means the pledge agreement dated as of the
Closing Date executed in favor of the Collateral Agent by each of the
Credit Parties, as amended, modified, restated or supplemented from
time to time.
"PROPERTY" means any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"PRO RATA SHARE" means with respect to all matters (including,
without limitation, the indemnification obligations arising under
Section 10.5), including a Lender's obligation to make a Loan
constituting a portion of the Term Loan and receive payments of
interest, fees, and principal with respect thereto, the percentage
obtained by dividing (i) such Lender's Commitment, by (ii) the Total
Commitment, PROVIDED that if the Total
13
Commitment has been reduced to zero, the numerator shall be the
aggregate unpaid principal amount of such Lender's portion of the Term
Loan and the denominator shall be the aggregate unpaid principal
amount of the Term Loan.
"REGULATION T, U, OR X" means Regulation T, U or X, respectively,
of the Board of Governors of the Federal Reserve System as from time
to time in effect and any successor to all or a portion thereof.
"RELATED PARTIES" means, with respect to any Person, such
Person's Affiliates and the partners, directors, officers, employees,
agents and advisors of such Person and of such Person's Affiliates.
"REPORTABLE EVENT" means any of the events set forth in Section
4043(c) of ERISA, other than those events as to which the notice
requirement has been waived by regulation.
"REQUIREMENT OF LAW" means, as to any Person, the certificate of
incorporation and by-laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation or
determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or
any of its material property is subject.
"REQUIRED LENDERS" means Lenders whose Pro Rata Share of the Term
Loan aggregate at least 65% of the aggregate outstanding principal
amount of the Term Loan.
"RESTRICTED PAYMENT" means (i) any dividend or other payment or
distribution, direct or indirect, on account of any shares of any
class of Capital Stock of any Consolidated Party, now or hereafter
outstanding (including without limitation any payment in connection
with any merger or consolidation involving any Consolidated Party), or
to the direct or indirect holders of any shares of any class of
Capital Stock of any Consolidated Party, now or hereafter outstanding,
in their capacity as such (other than dividends or distributions
payable in the same class of Capital Stock of the applicable Person to
any Credit Party (directly or indirectly through Subsidiaries), (ii)
any redemption, retirement, sinking fund or similar payment, purchase
or other acquisition for value, direct or indirect, of any shares of
any class of Capital Stock of any Consolidated Party, now or hereafter
outstanding and (iii) any payment made to retire, or to obtain the
surrender of, any outstanding warrants, options or other rights to
acquire shares of any class of Capital Stock of any Consolidated
Party, now or hereafter outstanding.
"RESTRUCTURING TERM SHEET" means the Summary of Financial
Restructuring Term Sheet, dated December 23, 2005, describing an
agreement in principal between the Credit Parties and a committee of
holders of the notes issued by the Parent under the Indenture.
"S&P" means Standard & Poor's Ratings Group, a division of McGraw
Hill, Inc., or any successor or assignee of the business of such
division in the business of rating securities.
14
"SALE AND LEASEBACK TRANSACTION" means any direct or indirect
arrangement with any Person or to which any such Person is a party,
providing for the leasing to any Consolidated Party of any Property,
whether owned by such Consolidated Party as of the Closing Date or
later acquired, which has been or is to be sold or transferred by such
Consolidated Party to such Person or to any other Person from whom
funds have been, or are to be, advanced by such Person on the security
of such Property.
"SECURITY AGREEMENT" means the security agreement dated as of the
Closing Date executed in favor of the Collateral Agent by each of the
Credit Parties, as amended, modified, restated or supplemented from
time to time.
"SHIP & DEBIT DIVISION" means the discrete unit within the
Borrower responsible for providing revenue recovery services to
electronic manufacturers and similar businesses.
"SINGLE EMPLOYER PLAN" means any Plan which is covered by Title
IV of ERISA, but which is not a Multiemployer Plan or a Multiple
Employer Plan.
"SOLVENT" means, with respect to the Parent and its Subsidiaries
on a consolidated basis as of a particular date, that on such date the
Parent and its Subsidiaries have on a consolidated basis an enterprise
value (as a going concern) in excess of their consolidated
liabilities.
"SUBORDINATED DEBT" means the Indebtedness of the Parent
evidenced by the Indenture in an aggregate principal amount not to
exceed $125,000,000.
"SUBSIDIARY" means, as to any Person at any time, (a) any
corporation more than 50% of whose Capital Stock of any class or
classes having by the terms thereof ordinary voting power to elect a
majority of the directors of such corporation (irrespective of whether
or not at such time, any class or classes of such corporation shall
have or might have voting power by reason of the happening of any
contingency) is at such time owned by such Person directly or
indirectly through Subsidiaries, and (b) any partnership, association,
joint venture or other entity of which such Person directly or
indirectly through Subsidiaries owns at such time more than 50% of the
Capital Stock.
"SYNTHETIC LEASE" means any synthetic lease, tax retention
operating lease, off-balance sheet loan or similar off-balance sheet
financing product where such transaction is considered borrowed money
indebtedness for tax purposes but is classified as an Operating Lease.
"TAMEBOND" means Tamebond Limited, a U.K. corporation.
"TAXES" shall have the meaning assigned to such term in Section
3.9.
"TERM LOAN" means, collectively, the term loans made by the
Lenders to the Borrower on the Closing Date pursuant to Section 2.1.
The aggregate principal amount of the Term Loan as of the Closing Date
is $10,000,000.
15
"TOTAL COMMITMENT" means the sum of the Commitments of all the
Lenders.
"VOTING STOCK" means, with respect to any Person, Capital Stock
issued by such Person the holders of which are ordinarily, in the
absence of contingencies, entitled to vote for the election of
directors (or persons performing similar functions) of such Person,
even though the right so to vote has been suspended by the happening
of such a contingency.
"WHOLLY OWNED SUBSIDIARY" of any Person means any Subsidiary 100%
of whose Voting Stock is at the time owned by such Person directly or
indirectly through other Wholly Owned Subsidiaries.
"WORKING CAPITAL ACKNOWLEDGED DEFAULTS" means "Acknowledged
Events of Defaults", as such term is defined in the Working Capital
Forbearance Agreement, amended by the Working Capital Amendment,
solely to the extent such defaults are not cured or waived or the
applicable provisions are not amended or otherwise changed.
"WORKING CAPITAL AMENDMENT" shall have the meaning assigned to
such term in Section 5.1(m).
"WORKING CAPITAL BORROWING BASE" means the "Borrowing Base", as
such term is defined in and calculated under the Working Capital Loan
Agreement as in effect on the date hereof, including the applicable
percentage (as in effect on the Closing Date) of "Eligible
Receivables" and "Eligible Backlog" (as such terms are defined in the
Working Capital Loan Agreement as in effect on the Closing Date) set
forth in such definition of "Borrowing Base", and giving effect to any
reserves (including, without limitation, the reserve for Working
Capital LC Obligations) from time to time established by the Working
Capital Lender against such Borrowing Base in accordance with the
Working Capital Loan Agreement.
"WORKING CAPITAL COMMITMENT" means the aggregate "Commitments",
as such term is defined in the Working Capital Loan Agreement.
"WORKING CAPITAL EVENT OF DEFAULT" means an "Event of Default",
as such term is defined in the Working Capital Loan Agreement.
"WORKING CAPITAL FACILITY" means the credit facility provided to
the Borrower by the Working Capital Lender pursuant to the Working
Capital Loan Documents consisting of the Working Capital Revolving
Loans and the Working Capital LCs.
"WORKING CAPITAL FORBEARANCE AGREEMENT" means the Forbearance
Agreement, dated as of November 8, 2005, by and among the Borrower,
the Parent and the Working Capital Lender, as amended by the Working
Capital Amendment.
"WORKING CAPITAL LC OBLIGATIONS" means, at any time and without
duplication, the sum of (i) the aggregate stated amount of all issued
and outstanding Working Capital LCs plus (ii) the aggregate amount of
any drawing under the Working Capital LCs for which the Working
Capital Lender has not been reimbursed.
16
"WORKING CAPITAL LCS" means the letters of credit, or guaranties
by the Working Capital Lender in respect of letters of credit,
issuable under the Working Capital Loan Agreement in a maximum
aggregate stated amount of $10,000,000.
"WORKING CAPITAL LENDER" means Bank of America, N.A. and/or any
other lender from time to time party to the Working Capital Loan
Agreement.
"WORKING CAPITAL LOAN AGREEMENT" means the Amended and Restated
Credit Agreement, dated as of November 30, 2004, as supplemented by
the Working Capital Forbearance Agreement, and as amended by the
Working Capital Amendment, by and among the Credit Parties and the
Working Capital Lender, as amended, restated, modified, supplemented,
renewed, replaced or otherwise changed from time to time.
"WORKING CAPITAL LOAN DOCUMENTS" means the "Credit Documents", as
such term is defined in the Working Capital Loan Agreement, as
amended, restated, modified, supplemented, renewed, replaced or
otherwise changed from time to time pursuant to the terms of this
Credit Agreement.
"WORKING CAPITAL LOANS" means the revolving credit loans made or
to be made to the Borrower by the Working Capital Lender pursuant to
the Working Capital Loan Agreement.
"WORKING CAPITAL REVOLVING COMMITMENT" means the commitment of
certain Working Capital Lender to make Working Capital Loans to the
Borrower and assist the Borrower with the issuance of Working Capital
LCs pursuant to the Working Capital Loan Agreement in the aggregate
principal amount of $30,000,000, as the same may be reduced or
terminated pursuant to the Working Capital Loan Agreement.
1.2 COMPUTATION OF TIME PERIODS.
For purposes of computation of periods of time hereunder, the word "from"
means "from and including" and the words "to" and "until" each mean "to but
excluding."
1.3 ACCOUNTING TERMS.
Except as otherwise expressly provided herein, all accounting terms used
herein shall be interpreted, and all financial statements and certificates and
reports as to financial matters required to be delivered to the Lenders
hereunder shall be prepared, in accordance with GAAP applied on a consistent
basis. All calculations made for the purposes of determining compliance with
this Credit Agreement shall (except as otherwise expressly provided herein) be
made by application of GAAP applied on a basis consistent with the most recent
annual or quarterly financial statements delivered pursuant to Section 7.1;
PROVIDED, HOWEVER, if (a) the Credit Parties shall object to determining such
compliance on such basis at the time of delivery of such financial statements
due to any change in GAAP or the rules promulgated with respect thereto or (b)
the Required Lenders shall so object in writing within 60 days after delivery of
such financial statements, then such calculations shall be made on a basis
consistent with the most recent financial statements delivered by the Credit
Parties to the Lenders as to which no such objection shall have been made.
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SECTION 2
CREDIT FACILITIES
2.1 TERM LOAN.
(a) TERM LOAN. Subject to the terms and conditions hereof and in
reliance upon the representations and warranties set forth herein, each Lender
severally agrees to make such Lender's Pro Rata Share of the Term Loan to the
Borrower on the Closing Date, in an aggregate principal amount not to exceed the
amount of such Lender's Commitment. The aggregate principal amount of the Term
Loan made by all Lenders on the Closing Date shall not exceed the Total
Commitment. Any principal amount of the Term Loan which is repaid or prepaid may
not be reborrowed.
(b) TERM LOAN BORROWING. (i) The Borrower shall give the Lenders prior
telephonic notice (immediately confirmed in writing, in substantially the form
of Exhibit A hereto (the "NOTICE OF BORROWING")), not later than 1:00 p.m. (New
York City time) on the date which is three (3) Business Days prior to the date
of the proposed Term Loan (or such shorter period to the extent agreed to by all
of the Lenders). The Notice of Borrowing shall be irrevocable and shall specify
(i) the principal amount of the proposed Term Loan, and (ii) the proposed
borrowing date, which must be a Business Day, and must be the Closing Date. The
Lenders may act without liability upon the basis of written, telecopied or
telephonic notice believed by the Lenders in good faith to be from the Borrower
(or from any Executive Officer thereof designated in writing purportedly from
the Borrower to the Lenders). The Borrower hereby waives the right to dispute
the Lenders' record of the terms of any such telephonic Notice of Borrowing.
Each Lender shall be entitled to rely conclusively on any Executive Officer's
authority to request the Term Loan on behalf of the Borrower until the Lenders
receive written notice to the contrary. The Lenders shall have no duty to verify
the authenticity of the signature appearing on any written Notice of Borrowing.
(ii) The Notice of Borrowing pursuant to this Section 2.1(b) shall be
irrevocable and the Borrower shall be bound to make a borrowing in
accordance therewith.
(iii) All Loans under this Credit Agreement shall be made by the
Lenders simultaneously and proportionately to their Pro Rata Shares of the
Total Commitment, it being understood that no Lender shall be responsible
for any default by any other Lender in that other Lender's obligations to
make a Loan requested hereunder, nor shall the Commitment of any Lender be
increased or decreased as a result of the default by any other Lender in
that other Lender's obligation to make any Loan requested hereunder, and
each Lender shall be obligated to make the Loans required to be made by it
by the terms of this Credit Agreement regardless of the failure by any
other Lender.
(c) REPAYMENT. The principal amount of the Term Loan shall be due and
payable in full on the Maturity Date, unless accelerated sooner pursuant to
Section 9.2.
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(d) INTEREST. Subject to the provisions of Section 3.1, the Term Loan
shall bear interest at a per annum rate equal to twelve percent (12%). Interest
on the Term Loan shall be payable monthly in arrears on the last Business Day of
each calendar month (or at such other times as may be specified herein).
2.2 [INTENTIONALLY OMITTED]
SECTION 3
OTHER PROVISIONS RELATING TO CREDIT FACILITIES
3.1 DEFAULT RATE.
Upon the occurrence, and during the continuance, of an Event of
Default, the principal of and, to the extent permitted by law, interest on the
Loans and any other amounts owing hereunder or under the other Credit Documents
shall bear interest, payable on demand, at a per annum rate equal to 14%.
3.2 [INTENTIONALLY OMITTED]
3.3 PREPAYMENTS.
(a) VOLUNTARY PREPAYMENTS. Subject to the terms of the Intercreditor
Agreement, the Borrower shall have the right to prepay the Term Loan in whole or
in part from time to time; PROVIDED, that (i) the Term Loan may be prepaid by
the Borrower giving notice to the Lender (which may be given by telephone) no
later than 11:00 a.m. (New York City time) on the date of the requested
prepayment and (ii) each partial prepayment of the Term Loan shall be in a
minimum principal amount of $1,000,000 and integral multiples of $1,000,000
(unless the amount of Term Loan outstanding immediately prior to such prepayment
is less than $1,000,000). All prepayments under this Section 3.3(a), shall be
made without premium or penalty and shall be applied to the Term Loan ratably.
(b) MANDATORY PREPAYMENTS.
(i) EXTRAORDINARY RECEIPTS. Subject to the terms of Intercreditor
Agreement, upon the receipt by any Credit Party or any of its
Subsidiaries of any Extraordinary Receipts, the Borrower shall prepay
the outstanding principal of the Term Loan in an amount equal to 100%
of such Extraordinary Receipts, net of any reasonable expenses
incurred in collecting such Extraordinary Receipts.
(ii) ASSET DISPOSITION. Subject to the terms of the Intercreditor
Agreement, the Borrower shall immediately prepay the Term Loan in an
aggregate amount equal to one hundred percent (100%) of the Net Cash
Proceeds of any Asset Disposition (other than any Asset Disposition
permitted by Section 8.5(i), (ii), (iii), (iv) or (v)) (to be applied
as set forth in Section 3.3(c) below).
(iii) EQUITY ISSUANCE. Subject to the terms of the Intercreditor
Agreement, immediately upon receipt by a Credit Party or any of its
19
Subsidiaries (other than the Parent) of proceeds from any Equity Issuance,
the Borrower shall prepay the Term Loan in an aggregate amount equal to
100% of the Net Cash Proceeds of such Equity Issuance to the Lenders (such
prepayment to be applied as set forth in Section 3.3(c) below).
(iv) DEBT ISSUANCE. Subject to the terms of the Intercreditor
Agreement, immediately upon receipt by a Credit Party or any of its
Subsidiaries of proceeds from any Debt Issuance, the Borrower shall
prepay the Term Loan in an aggregate amount equal to 100% of the Net
Cash Proceeds of such Debt Issuance to the Lenders (such prepayment to
be applied as set forth in Section 3.3(c) below).
(v) WORKING CAPITAL ACCELERATION. The Borrower will immediately
prepay the outstanding principal amount of the Term Loan in the event
that the Working Capital Commitment or the Working Capital Loan
Documents are terminated as a result of an acceleration of the
indebtedness thereunder (it being agreed that the maturity of the
Working Capital Facility solely in accordance with its terms and
without further action by the Working Capital Lender (e.g., upon its
scheduled maturity date) shall not constitute an acceleration).
(c) APPLICATION OF MANDATORY PREPAYMENTS. All amounts required to be
paid pursuant to Section 3.3(b) shall be applied to repay the Term Loan ratably.
All prepayments under this Section 3.3(c) shall be subject to Section 3.11.
3.4 TERMINATION THE COMMITMENT. The Total Commitment shall terminate at
5:00 p.m. (New York City time) on the Closing Date.
3.5 FEES. On or prior to the Closing Date, the Borrower shall pay to the
Lenders, in accordance with their respective Pro Rata Shares, a non-refundable
closing fee (the "CLOSING FEE") equal to $225,000, which shall be deemed fully
earned when paid.
3.6 [INTENTIONALLY OMITTED]
3.7 [INTENTIONALLY OMITTED]
3.8 [INTENTIONALLY OMITTED]
3.9 TAXES.
(a) Any and all payments by any Credit Party to or for the account of any
Lender hereunder or under any other Credit Document shall be made free and clear
of and without deduction for any and all present or future taxes, duties,
levies, imposts, deductions, assessments, fees, withholdings or similar charges,
and all liabilities with respect thereto, EXCLUDING taxes imposed on or measured
by such Lender's overall net income, and franchise or similar taxes imposed on
such Lender (in lieu of, or in addition to, net income taxes), by the
jurisdiction (or any political subdivision thereof) under the Laws of which such
Lender is organized or maintains a lending office (all such non-excluded taxes,
duties, levies, imposts, deductions, assessments, fees, withholdings or similar
charges, and liabilities being hereinafter referred to as "TAXES"). If any
20
Credit Party shall be required by any Laws to deduct any Taxes from or in
respect of any sum payable under any Credit Document to any Lender, (i) the sum
payable shall be increased as necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section), such Lender receives an amount equal to the sum it would have
received had no such deductions been made, (ii) such Credit Party shall make
such deductions, (iii) such Credit Party shall pay the full amount deducted to
the relevant taxation authority or other authority in accordance with applicable
Laws, and (iv) within thirty days after the date of such payment, such Credit
Party shall furnish to such Lender the original or a certified copy of a receipt
evidencing payment thereof or, if no such receipt is available, other evidence
of payment reasonably satisfactory to such Lender.
(b) In addition, the Borrower agrees to pay any and all present or
future stamp, count or documentary taxes and any other excise or property taxes
or charges or similar levies which arise from any payment made under any Credit
Document or from the execution, delivery, performance, enforcement or
registration of, or otherwise with respect to, any Credit Document (hereinafter
referred to as "OTHER TAXES").
(c) The Borrower agrees to indemnify each Lender for (i) the full
amount of Taxes and Other Taxes (including any Taxes or Other Taxes imposed or
asserted by any jurisdiction on amounts payable under this Section) paid by such
Lender, and (ii) any liability (including additions to tax, penalties, interest
and expenses) arising therefrom or with respect thereto, in each case whether or
not such Taxes or Other Taxes were correctly or legally imposed or asserted by
the relevant Governmental Authority. Payment under this subsection (c) shall be
made within thirty days after the date such Lender makes a demand therefor.
3.10 [INTENTIONALLY OMITTED]
3.11 PAYMENTS COMPUTATIONS, ETC.
Except as otherwise specifically provided herein, all payments hereunder
shall be made to the Lenders in Dollars in immediately available funds, without
condition or deduction for any counterclaim, defense, recoupment or setoff not
later than 2:00 p.m. (New York City time) on the date when due. Payments
received after such time shall be deemed to have been received on the next
succeeding Business Day. Each Lender may (but shall not be obligated to) debit
the amount of any such payment which is not made by such time to any ordinary
deposit account of the Borrower or any other Credit Party maintained with such
Lender (with notice to the Borrower or such other Credit Party). The Borrower
shall, at the time it makes any payment under this Credit Agreement, specify to
the Lenders the Loans, the Closing Fee, interest or other amounts payable by the
Borrower hereunder to which such payment is to be applied. Whenever any payment
hereunder shall be stated to be due on a day which is not a Business Day, the
due date thereof shall be extended to the next succeeding Business Day (subject
to accrual of interest and the Closing Fee for the period of such extension).
All computations of interest and fees shall be made on the basis of actual
number of days elapsed over a year of 360 days. Interest shall accrue from and
include the date of borrowing, but exclude the date of payment.
21
3.12 EVIDENCE OF DEBT.
The Loans made by each Lender shall be evidenced by one or more accounts or
records maintained by such Lender in the ordinary course of business. The
accounts or records maintained by such Lender shall be prima facie evidence of
the existence of the amount of the Loans made by such Lender to the Borrower and
the interest and payments thereon. Any failure to so record or any error in
doing so shall not, however, limit or otherwise affect the obligation of the
Borrower hereunder to pay any amount owing with respect to the Credit Party
Obligations. The Borrower shall execute and deliver to such Lender a promissory
note, which shall evidence such Lender's Pro Rata Share of the Term Loan in
addition to such accounts or records. Each promissory note shall be in the form
of EXHIBIT B (each a "NOTE" and, collectively, the "NOTES"). The Lenders may
attach schedules to the Note and endorse thereon the date, amount and maturity
of its Loans and payments with respect thereto.
SECTION 4
GUARANTY
4.1 THE GUARANTY.
Each of the Guarantors hereby jointly and severally guarantees to each
Lender, as primary obligor and not as surety, the prompt payment of the Credit
Party Obligations in full when due (whether at stated maturity, as a mandatory
prepayment, by acceleration, as a mandatory cash collateralization or otherwise)
strictly in accordance with the terms thereof. The Guarantors hereby further
agree that if any of the Credit Party Obligations are not paid in full when due
(whether at stated maturity, as a mandatory prepayment, by acceleration, as a
mandatory cash collateralization or otherwise), the Guarantors will, jointly and
severally, promptly pay the same, without any demand or notice whatsoever, and
that in the case of any extension of time of payment or renewal of any of the
Credit Party Obligations, the same will be promptly paid in full when due
(whether at extended maturity, as a mandatory prepayment, by acceleration, as a
mandatory cash collateralization or otherwise) in accordance with the terms of
such extension or renewal.
Notwithstanding any provision to the contrary contained herein or in any
other Credit Documents, the obligations of each Guarantor under this Credit
Agreement and the other Credit Documents shall be limited to an aggregate amount
equal to the largest amount that would not render such obligations subject to
avoidance under the Debtor Relief Laws or any comparable provisions of any
applicable state law.
4.2 OBLIGATIONS UNCONDITIONAL.
The obligations of the Guarantors under Section 4.1 are joint and several,
absolute and unconditional, irrespective of the value, genuineness, validity,
regularity or enforceability of any of the Credit Documents or any other
agreement or instrument referred to therein, or any substitution, release,
impairment or exchange of any other guarantee of or security for any of the
Credit Party Obligations, and, to the fullest extent permitted by applicable
law, irrespective of any other circumstance whatsoever which might otherwise
constitute a legal or equitable
22
discharge or defense of a surety or guarantor, it being the intent of this
Section 4.2 that the obligations of the Guarantors hereunder shall be absolute
and unconditional under any and all circumstances. Each Guarantor agrees that
such Guarantor shall have no right of subrogation, indemnity, reimbursement or
contribution against the Borrower or any other Guarantor for amounts paid under
this Section 4 until such time as all Lenders have been paid in full and the
Credit Agreement shall have been terminated and no Person or Governmental
Authority shall have any right to request any return or reimbursement of funds
from the Lenders in connection with monies received under the Credit Documents.
Without limiting the generality of the foregoing, it is agreed that, to the
fullest extent permitted by law, the occurrence of any one or more of the
following shall not alter or impair the liability of any Guarantor hereunder
which shall remain absolute and unconditional as described above:
(a) at any time or from time to time without notice to any Guarantor,
the time for any performance of or compliance with any of the Credit Party
Obligations shall be extended, or such performance or compliance shall be
waived;
(b) any of the acts mentioned in any of the provisions of any of the
Credit Documents or any other agreement or instrument referred to in the Credit
Documents shall be done or omitted;
(c) the maturity of any of the Credit Party Obligations shall be
accelerated, or any of the Credit Party Obligations shall be modified,
supplemented or amended in any respect, or any right under any of the Credit
Documents or any other agreement or instrument referred to in the Credit
Documents shall be waived or any other guarantee of any of the Credit Party
Obligations or any security therefor shall be released, impaired or exchanged in
whole or in part or otherwise dealt with;
(d) any Lien granted to, or in favor of, the Lenders as security for
any of the Credit Party Obligations shall fail to attach or be perfected; or
(e) any of the Credit Party Obligations shall be determined to be void
or voidable (including, without limitation, for the benefit of any creditor of
any Guarantor) or shall be subordinated to the claims of any Person (including,
without limitation, any creditor of any Guarantor).
With respect to its obligations hereunder, each Guarantor hereby expressly
waives diligence, presentment, demand of payment, protest and all notices
whatsoever, and any requirement that the Lenders exhaust any right, power or
remedy or proceed against any Person under any of the Credit Documents or any
other agreement or instrument referred to in the Credit Documents, or against
any other Person under any other guarantee of, or security for, any of the
Credit Party Obligations.
4.3 REINSTATEMENT.
The obligations of the Guarantors under this Section 4 shall be
automatically reinstated if and to the extent that for any reason any payment by
or on behalf of any Person in respect of the Credit Party Obligations is
rescinded or must be otherwise restored by any holder of any of the Credit Party
Obligations, whether as a result of any proceedings in bankruptcy or
reorganization
23
or otherwise, and each Guarantor agrees that it will indemnify each Lender and
the Collateral Agent on demand for all reasonable costs and expenses (including,
without limitation, reasonable fees and expenses of counsel) incurred by such
Lender and the Collateral Agent in connection with such rescission or
restoration, including any such reasonable costs and expenses incurred in
defending against any claim alleging that such payment constituted a preference,
fraudulent transfer or similar payment under any bankruptcy, insolvency or
similar law.
4.4 CERTAIN ADDITIONAL WAIVERS.
Each Guarantor agrees that such Guarantor shall have no right of recourse
to security for the Credit Party Obligations, except through the exercise of
rights of subrogation pursuant to Section 4.2 and through the exercise of rights
of contribution pursuant to Section 4.6.
4.5 REMEDIES.
The Guarantors agree that, to the fullest extent permitted by law, as
between the Guarantors, on the one hand, and the Lenders, on the other hand, the
Credit Party Obligations may be declared to be forthwith due and payable as
provided in Section 9.2 (and shall be deemed to have become automatically due
and payable in the circumstances provided in said Section 9.2) for purposes of
Section 4.1 notwithstanding any stay, injunction or other prohibition preventing
such declaration (or preventing the Credit Party Obligations from becoming
automatically due and payable) as against any other Person and that, in the
event of such declaration (or the Credit Party Obligations being deemed to have
become automatically due and payable), the Credit Party Obligations (whether or
not due and payable by any other Person) shall forthwith become due and payable
by the Guarantors for purposes of Section 4.1. The Guarantors acknowledge and
agree that their obligations hereunder are secured in accordance with the terms
of the Security Agreement, the Pledge Agreement and the other Collateral
Documents and that each Lender may exercise its remedies thereunder in
accordance with the terms thereof.
4.6 RIGHTS OF CONTRIBUTION.
The Guarantors hereby agree as among themselves that, in connection with
payments made hereunder, each Guarantor shall have a right of contribution from
each other Guarantor in accordance with applicable Law. Such contribution rights
shall be subordinate and subject in right of payment to the Credit Party
Obligations until such time as the Credit Party Obligations have been
irrevocably paid in full and the commitments relating thereto shall have expired
or been terminated, and none of the Guarantors shall exercise any such
contribution rights until the Credit Party Obligations have been irrevocably
paid in full and the commitments relating thereto shall have expired or been
terminated.
4.7 GUARANTEE OF PAYMENT; CONTINUING GUARANTEE.
The guarantee in this Section 4 is a guaranty of payment and not of
collection, is a continuing guarantee, and shall apply to all Credit Party
Obligations whenever arising.
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SECTION 5
CONDITIONS
5.1 CLOSING CONDITIONS.
The obligation of each Lender to enter into this Credit Agreement and to
make its Pro Rata Share of the Term Loan, shall be subject to satisfaction or
waiver of the following conditions (in form and substance acceptable to such
Lender in its reasonable discretion):
(a) EXECUTED CREDIT DOCUMENTS. Receipt by the Lenders of duly executed
copies of: (i) this Credit Agreement, (ii) the Notes, (iii) the Collateral
Documents (other than the Foreign Pledge Agreements), (iv) the Intercreditor
Agreement and (v) all other Credit Documents, each in form and substance
acceptable to each Lender in its reasonable discretion.
(b) CORPORATE DOCUMENTS. Receipt by the Lenders of the following:
(i) CHARTER DOCUMENTS. Copies of the articles or certificates
of incorporation or other charter documents (collectively,
"ORGANIZATIONAL DOCUMENTS") of the Borrower and the Parent certified to
be true and complete as of a recent date by the appropriate
Governmental Authority of the state or other jurisdiction of its
incorporation and copies of all Organizational Documents of all Credit
Parties certified by a secretary or assistant secretary of such Credit
Party to be true and correct as of the Closing Date.
(ii) BYLAWS. A copy of the bylaws of each Credit Party
certified by a secretary or assistant secretary of such Credit Party to
be true and correct as of the Closing Date.
(iii) RESOLUTIONS. Copies of resolutions of the Board of Directors
of each Credit Party approving and adopting the Credit Documents to
which it is a party, the transactions contemplated therein and
authorizing execution and delivery thereof, certified by a secretary or
assistant secretary of such Credit Party to be true and correct and in
force and effect as of the Closing Date.
(iv) GOOD STANDING. Copies of certificates of good standing,
existence or its equivalent with respect to the Borrower and the Parent
certified as of a recent date by the appropriate Governmental
Authorities of the state or other jurisdiction of incorporation.
(v) INCUMBENCY. An incumbency certificate of each Credit Party
certified by a secretary or assistant secretary to be true and correct
as of the Closing Date.
(c) [Intentionally Omitted]
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(d) OPINIONS OF COUNSEL. The Lenders shall have received a legal
opinion in form and substance reasonably satisfactory to the Lenders dated as of
the Closing Date from counsel to the Credit Parties.
(e) PERSONAL PROPERTY COLLATERAL. The Lenders shall have received:
(i) searches of Uniform Commercial Code filings in the
jurisdiction of the chief executive office of each Credit Party and, if
requested, each jurisdiction where any Collateral is located or where a
filing would need to be made in order to perfect the Lenders' security
interest in the Collateral (it being understood and agreed that liens
are not to be perfected with respect to personal property located in
certain field offices), copies of the financing statements on file in
such jurisdictions and evidence that no Liens exist other than
Permitted Liens;
(ii) duly authorized UCC financing statements for each appropriate
jurisdiction as is necessary, in the Lenders' reasonable discretion, to
perfect the Collateral Agent's security interest in the Collateral;
(iii) searches of ownership of intellectual property in the
appropriate governmental offices and such patent/trademark/copyright
filings as requested by the Lenders in order to perfect the Collateral
Agent's security interest in the Collateral;
(iv) copies of all stock certificates evidencing the Capital
Stock pledged to the Collateral Agent pursuant to the Pledge Agreement,
together with copies of the duly executed in blank, undated stock
powers and other instruments of transfer attached thereto (unless, with
respect to the pledged Capital Stock of any Foreign Subsidiary, such
stock powers are deemed unnecessary by the Lenders in their reasonable
discretion under the law of the jurisdiction of incorporation of such
Person), PROVIDED that the originals of such promissory notes, stock
certificates, stock powers and other instruments of transfer shall have
been delivered to the Working Capital Lender and held by it as bailee
for the Lenders, subject to the terms of Intercreditor Agreement;
(v) such patent/trademark/copyright filings as requested by
the Lenders in order to perfect the Collateral Agent's security
interest in the Collateral; and
(vi) duly executed consents as are necessary, in the Lenders'
sole discretion, to perfect the Collateral Agent's security
interest in the Collateral.
(f) PRIORITY OF LIENS. The Lenders shall have received satisfactory
evidence that (i) the Collateral Agent holds a perfected, first priority Lien on
all Collateral (subject in priority solely to the Liens in favor of the Working
Capital Lender) and (ii) none of the Collateral is subject to any other Liens
other than Permitted Liens.
(g) [Intentionally Omitted]
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(h) MATERIAL ADVERSE EFFECT. Except for the Working Capital
Acknowledged Defaults and as otherwise disclosed in the Disclosure Documents, no
material adverse change shall have occurred since September 30, 2005 in the
condition (financial or otherwise), business, assets, operations, management or
prospects of the Consolidated Parties taken as a whole.
(i) LITIGATION. There shall not exist any pending or threatened action,
suit, investigation or proceeding against a Consolidated Party that could
reasonably be expected to have a Material Adverse Effect.
(j) OFFICER'S CERTIFICATES. The Lenders shall have received a
certificate or certificates executed by an Executive Officer of the Borrower as
of the Closing Date stating that (A) each Credit Party is in compliance with all
existing financial obligations (other than the Working Capital Acknowledged
Events of Default), (B) all material governmental, shareholder and third party
consents and approvals, if any, necessary in connection with respect to the
Credit Documents and the transactions contemplated thereby have been obtained,
(C) no action, suit, investigation or proceeding is pending or, to the knowledge
of such Executive Officer, threatened in any court or before any arbitrator or
governmental instrumentality that purports to affect any Credit Party or any
transaction contemplated by the Credit Documents, if such action, suit,
investigation or proceeding could reasonably be expected to have a Material
Adverse Effect, and (D) immediately after giving effect to this Credit
Agreement, the other Credit Documents and all the transactions contemplated
therein to occur on such date, (1) the Parent and its Subsidiaries, taken as a
whole, are Solvent, (2) no Default or Event of Default exists, (3) all
representations and warranties contained herein and in the other Credit
Documents are true and correct in all material respects (unless such
representation or warranty was made as of a specified date, in which case such
representation or warranty shall be true and correct only as of such specified
date), (4) the Credit Parties are in compliance with each of the financial
covenants set forth in Section 7.11 of the Working Capital Loan Agreement, and
(5) except for the Working Capital Acknowledged Defaults, no Working Capital
Event of Default exists.
(k) FEES AND EXPENSES. Payment by the Credit Parties of all fees and
expenses owed by them to the Lenders.
(l) REPRESENTATIONS AND WARRANTIES; NO EVENT OF DEFAULT. The following
statements shall be true and correct: (i) the representations and warranties
contained in Section 6 and in each other Credit Document, certificate or other
writing delivered to the Collateral Agent and the Lenders or pursuant hereto or
thereto on or prior to the Closing Date are true and correct on and as of the
Closing Date as though made on and as of such date (unless such representation
or warranty was made as of a specified date, in which case such representation
or warranty shall be true and correct only as of such specified date), (ii) no
Default or Event of Default shall have occurred and be continuing on the Closing
Date or would result from this Credit Agreement or the other Credit Documents
becoming effective in accordance with its or their respective terms and (iii)
except for the Working Capital Acknowledged Defaults, no "default", "event of
default" or similar event shall have occurred and be continuing, and no
forbearance from exercising remedies in respect thereof shall exist, on the
Closing Date under any Working Capital Loan Document or the Indenture or would
result from this Credit Agreement or the other Credit Documents becoming
effective in accordance with its or their respective terms.
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(m) AMENDMENT TO WORKING CAPITAL LOAN AGREEMENT. The Lenders shall have
been satisfied with the amendment to Working Capital Loan Agreement and the
Working Capital Forbearance Agreement permitting the transactions contemplated
under this Credit Agreement and a copy of such amendment shall be certified on
behalf of the Borrower by an Executive Officer (the "WORKING CAPITAL
AMENDMENT").
(n) WORKING CAPITAL LOAN DOCUMENTS; INDENTURE. The Lenders shall have
received copies of the Working Capital Loan Documents, the Indenture and the
other documents related thereto, in each case, as in effect on the Closing Date,
certified as true, complete and correct copies thereof by an Executive Officer
of the Borrower, together with a certificate of an Executive Officer of the
Borrower stating that such agreements remain in full force and effect.
(o) DUE DILIGENCE. Each Lender shall have completed its legal due
diligence with respect to each Credit Party and the Collateral and the results
thereof shall be reasonably acceptable to each Lender in its sole discretion.
Without limiting the foregoing, each Lender and its counsel shall have (i)
completed a review of all ERISA, environmental, tax, regulatory, material
permits, accounting, litigation, material contracts and labor matters, (ii)
completed a review of all Working Capital Loan Documents, in each case of
clauses (i) and (ii) above, the results of which shall be reasonably
satisfactory to such Lender.
(p) RESTRUCTURING TERM SHEET. The Lenders shall been satisfied in their
sole reasonable discretion with the terms of the Restructuring Term Sheet.
(q) INTEREST PAYMENT UNDER THE INDENTURE. The Lenders shall have
received satisfactory evidence that the interest payment due under the Indenture
shall have been made.
(r) OTHER. Receipt by the Lenders of such other documents, instruments,
agreements or information as reasonably requested by the Lenders, including, but
not limited to, information regarding litigation, tax, accounting, labor,
insurance, pension liabilities (actual or contingent), real estate leases,
material contracts, debt agreements, property ownership and contingent
liabilities of the Consolidated Parties.
SECTION 6
REPRESENTATIONS AND WARRANTIES
The Credit Parties hereby represent to the Lenders that:
6.1 FINANCIAL CONDITION.
The Financial Statements delivered to the Lenders (i) have been prepared in
accordance with GAAP and (ii) present fairly (on the basis disclosed in the
footnotes to such financial statements) the consolidated financial condition,
results of operations and cash flows of the Consolidated Parties as of such date
and for such periods.
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6.2 NO MATERIAL CHANGE.
Since September 30, 2005 (a) there has been no development or event
relating to or affecting a Consolidated Party which has had or could reasonably
be expected to have a Material Adverse Effect and (b) except as otherwise
permitted under this Credit Agreement, no dividends or other distributions have
been declared, paid or made upon the Capital Stock in a Consolidated Party nor
has any of the Capital Stock in a Consolidated Party been redeemed, retired,
purchased or otherwise acquired for value.
6.3 ORGANIZATION AND GOOD STANDING.
Each of the Consolidated Parties (a) is duly organized, validly existing
and is in good standing under the Laws of the jurisdiction of its incorporation
or organization, (b) has the corporate or other necessary power and authority,
and the legal right, to own and operate its property, to lease the property it
operates as lessee and to conduct the business in which it is currently engaged
and (c) is duly qualified as a foreign entity and in good standing under the
Laws of each jurisdiction where its ownership, lease or operation of property or
the conduct of its business requires such qualification, other than in the case
of clauses (a) (other than with respect to the Borrower) (b) and (c) where such
failures could not be reasonably expected to have a Material Adverse Effect.
6.4 POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS.
Each of the Credit Parties has the corporate or other necessary power and
authority, and the legal right, to make, deliver and perform the Credit
Documents to which it is a party, and in the case of the Borrower, to obtain
extensions of credit hereunder, and has taken all necessary corporate action to
authorize the borrowings and other extensions of credit on the terms and
conditions of this Credit Agreement and to authorize the execution, delivery and
performance of the Credit Documents to which it is a party. No consent or
authorization of, filing with, notice to or other similar act by or in respect
of, any Governmental Authority or any other Person is required to be obtained or
made by or on behalf of any Credit Party in connection with the borrowings or
other extensions of credit hereunder or with the execution, delivery,
performance, validity or enforceability of the Credit Documents to which such
Credit Party is a party, except (i) for filings to perfect the Liens created by
the Collateral Documents, (ii) for consents, authorizations, notices or similar
acts which will be obtained on or before, and are in full force and effect as
of, the Closing Date or (iii) where the failure to obtain such consents,
authorizations or notices or make such similar acts is immaterial. This Credit
Agreement has been, and each other Credit Document to which any Credit Party is
a party will be, duly executed and delivered on behalf of the Credit Parties.
This Credit Agreement constitutes, and each other Credit Document to which any
Credit Party is a party when executed and delivered will constitute, a legal,
valid and binding obligation of such Credit Party enforceable against such party
in accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles (whether enforcement is sought by proceedings in equity or
at law).
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6.5 NO CONFLICTS.
Neither the execution and delivery of the Credit Documents, nor the
consummation of the transactions contemplated therein, nor performance of and
compliance with the terms and provisions thereof by such Credit Party will (a)
violate or conflict with any provision of its articles or certificate of
incorporation or bylaws or other organizational or governing documents of such
Person, (b) violate, contravene or materially conflict with any Requirement of
Law or any other law, regulation (including, without limitation, Regulation U or
Regulation X), order, writ, judgment, injunction, decree or permit applicable to
it, (c) violate, contravene or conflict with contractual provisions of, or cause
an event of default under, any Working Capital Loan Documents, any indenture
(including, to the extent applicable, the Indenture), loan agreement, mortgage,
deed of trust, contract or other agreement or instrument to which it is a party
or by which it may be bound, the violation of which could reasonably be expected
to have a Material Adverse Effect, or (d) result in or require the creation of
any Lien (other than those contemplated in or created in connection with the
Credit Documents) upon or with respect to its properties.
6.6 NO DEFAULT.
No Consolidated Party is in default in any respect under any contract,
lease, loan agreement, indenture (including, to the extent applicable, the
Indenture after giving effect to the interest payment with the proceeds of the
Term Loan), mortgage, security agreement, Working Capital Loan Document (other
than the Working Capital Acknowledged Defaults) or other agreement or obligation
to which it is a party or by which any of its properties is bound which default
could have a Material Adverse Effect. No Default or Event of Default has
occurred or exists except as previously disclosed in writing to the Lenders.
6.7 OWNERSHIP.
Each Consolidated Party is the owner of, and has good and marketable title
to, all of its respective assets material to the conduct of its business and
none of such assets is subject to any Lien other than Permitted Liens.
6.8 INDEBTEDNESS.
Except as otherwise permitted under Section 8.1, the Consolidated Parties
have no Indebtedness.
6.9 LITIGATION.
Except as provided on SCHEDULE 6.9, there are no actions, suits or legal,
equitable, arbitration or administrative proceedings, pending or, to the
knowledge of any Credit Party, threatened against any Consolidated Party which
could reasonably be expected to have a Material Adverse Effect.
6.10 TAXES.
Each Consolidated Party has filed, or caused to be filed (except for those
tax returns identified on SCHEDULE 6.10), all tax returns (federal, state, local
and foreign) required to be filed
30
and paid (a) all amounts of taxes shown thereon to be due (including interest
and penalties) and (b) all other taxes, fees, assessments and other governmental
charges (including mortgage recording taxes, documentary stamp taxes and
intangibles taxes) owing by it, except for such taxes (i) which are not yet
delinquent or (ii) that are being contested in good faith and by proper
proceedings, and against which adequate reserves are being maintained in
accordance with GAAP. No Credit Party is aware as of the Closing Date of any
proposed tax assessments against it or any other Consolidated Party.
6.11 COMPLIANCE WITH LAW.
Each Consolidated Party is in compliance with all Requirements of Law and
all other laws, rules, regulations, orders and decrees (including without
limitation Environmental Laws) applicable to it, or to its properties, unless
such failure to comply could reasonably be expected to have a Material Adverse
Effect.
6.12 ERISA.
(a) During the five-year period prior to the date on which this
representation is made or deemed made: (i) no ERISA Event has occurred, and, to
the best knowledge of the Credit Parties, no event or condition has occurred or
exists as a result of which any ERISA Event could reasonably be expected to
occur, with respect to any Plan; (ii) no "accumulated funding deficiency," as
such term is defined in Section 302 of ERISA and Section 412 of the Code,
whether or not waived, has occurred with respect to any Plan; (iii) each Plan
has been maintained, operated, and funded in material compliance with its own
terms and in material compliance with the provisions of ERISA, the Code, and any
other applicable federal or state laws; and (iv) no Lien in favor of the PBGC or
a Plan has arisen or is reasonably likely to arise on account of any Plan.
(b) The actuarial present value of all "benefit liabilities" (as
defined in Section 4001(a)(16) of ERISA), whether or not vested, under each
Single Employer Plan, as of the last annual valuation date prior to the date on
which this representation is made or deemed made (determined, in each case, in
accordance with Financial Accounting Standards Board Statement 87, utilizing the
actuarial assumptions used in such Plan's most recent actuarial valuation
report), did not exceed as of such valuation date the fair market value of the
assets of such Plan.
(c) Neither any Consolidated Party nor any ERISA Affiliate has
incurred, or, to the best knowledge of the Credit Parties, could be reasonably
expected to incur, any withdrawal liability under ERISA to any Multiemployer
Plan or Multiple Employer Plan. Neither any Consolidated Party nor any ERISA
Affiliate would become subject to any withdrawal liability under ERISA if any
Consolidated Party or any ERISA Affiliate were to withdraw completely from all
Multiemployer Plans and Multiple Employer Plans as of the valuation date most
closely preceding the date on which this representation is made or deemed made.
Neither any Consolidated Party nor any ERISA Affiliate has received any
notification that any Multiemployer Plan is in reorganization (within the
meaning of Section 4241 of ERISA), is insolvent (within the meaning of Section
4245 of ERISA), or has been terminated (within the meaning of Title IV of
ERISA), and no Multiemployer Plan is, to the best knowledge of the Credit
Parties, reasonably expected to be in reorganization, insolvent, or terminated.
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(d) No prohibited transaction (within the meaning of Section 406 of
ERISA or Section 4975 of the Code) or breach of fiduciary responsibility has
occurred with respect to a Plan which has subjected or may subject any
Consolidated Party or any ERISA Affiliate to any material liability under
Sections 406, 409, 502(i), or 502(l) of ERISA or Section 4975 of the Code, or
under any agreement or other instrument pursuant to which any Consolidated Party
or any ERISA Affiliate has agreed or is required to indemnify any Person against
any such material liability.
(e) Neither any Consolidated Party nor any ERISA Affiliates has any
material liability with respect to "expected post-retirement benefit
obligations" within the meaning of the Financial Accounting Standards Board
Statement 106. Each Plan which is a welfare plan (as defined in Section 3(1) of
ERISA) to which Sections 601-609 of ERISA and Section 4980B of the Code apply
has been administered in compliance in all material respects of such sections.
(f) Neither the execution and delivery of this Credit Agreement nor the
consummation of the financing transactions contemplated thereunder will involve
any transaction which is subject to the prohibitions of Sections 404, 406 or 407
of ERISA or in connection with which a tax could be imposed pursuant to Section
4975 of the Code. The representation by the Credit Parties in the preceding
sentence is made in reliance upon and subject to the accuracy of the Lenders'
representation in Section 10.16 with respect to its source of funds and is
subject, in the event that the source of the funds used by the Lenders in
connection with this transaction is an insurance company's general asset
account, to the application of Prohibited Transaction Class Exemption 95-60, 60
Fed. Reg. 35,925 (1995), compliance with the regulations issued under Section
401(c)(1)(A) of ERISA, or the issuance of any other prohibited transaction
exemption or similar relief, to the effect that assets in an insurance company's
general asset account do not constitute assets of an "employee benefit plan"
within the meaning of Section 3(3) of ERISA of a "plan" within the meaning of
Section 4975(e)(1) of the Code.
6.13 SUBSIDIARIES.
Set forth on SCHEDULE 6.13 is a complete and accurate list of all
Subsidiaries of each Consolidated Party. Information on SCHEDULE 6.13 includes
jurisdiction of incorporation or organization, the number of shares of each
class of Capital Stock outstanding, the number and percentage of outstanding
shares of each class owned (directly or indirectly) by such Consolidated Party;
and the number and effect, if exercised, of all outstanding options, warrants,
rights of conversion or purchase and all other similar rights with respect
thereto. The outstanding Capital Stock of all such Subsidiaries is validly
issued, fully paid and non-assessable and is owned by each such Consolidated
Party, directly or indirectly, free and clear of all Liens (other than those
arising under or contemplated in connection with the Credit Documents). Other
than as set forth in SCHEDULE 6.13, no Consolidated Party has outstanding any
securities convertible into or exchangeable for its Capital Stock nor does any
such Person have outstanding any rights to subscribe for or to purchase or any
options for the purchase of, or any agreements providing for the issuance
(contingent or otherwise) of, or any calls, commitments or claims of any
character relating to its Capital Stock. SCHEDULE 6.13 may be updated from time
to time by the Borrower by giving written notice thereof to the Lenders as to
any changes after the Closing Date.
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6.14 GOVERNMENTAL REGULATIONS, ETC.
(a) No proceeds of the Loans will be used, directly or indirectly, in
any manner that would constitute a violation of Regulation T, Regulation U or
Regulation X. "Margin stock" within the meaning of Regulation U does not
constitute more than 25% of the value of the consolidated assets of the
Consolidated Parties. None of the transactions contemplated by this Credit
Agreement (including, without limitation, the direct or indirect use of the
proceeds of the Loans) will violate or result in a violation of the Securities
Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, or
regulations issued pursuant thereto, or Regulation T, U or X. If requested by a
Lender, the Borrower will furnish to such Lender a statement to the effect of
the foregoing sentences in conformity with the requirements of FR Form U-1
referred to in Regulation U or any other comparable form.
(b) No Consolidated Party is subject to regulation under the Public
Utility Holding Company Act of 1935, the Federal Power Act or the Investment
Company Act of 1940, each as amended. In addition, no Consolidated Party is (i)
an "investment company" registered or required to be registered under the
Investment Company Act of 1940, as amended, or controlled by such a company, or
(ii) a "holding company", or a "subsidiary company" of a "holding company", or
an "affiliate" of a "holding company" or of a "subsidiary" of a "holding
company", within the meaning of the Public Utility Holding Company Act of 1935,
as amended.
(c) No director, executive officer or principal shareholder of any
Consolidated Party is a director, executive officer or principal shareholder of
any Lender. For the purposes hereof the terms "director", "executive officer"
and "principal shareholder" (when used with reference to a Lender) have the
respective meanings assigned thereto in Regulation O issued by the Board of
Governors of the Federal Reserve System.
(d) Except where the failure to have or hold any such item would not
have a Material Adverse Effect, each Consolidated Party has obtained and holds
in full force and effect, all franchises, licenses, permits, certificates,
authorizations, qualifications, accreditations, easements, rights of way and
other rights, consents and approvals which are necessary for the ownership of
its respective Property and to the conduct of its respective businesses as
presently conducted.
(e) No Consolidated Party is in violation of any applicable statute,
regulation or ordinance of the United States of America, or of any state, city,
town, municipality, county or any other jurisdiction, or of any agency thereof
(including without limitation, environmental laws and regulations), which
violation could reasonably be expected to have a Material Adverse Effect.
(f) Each Consolidated Party is current with all material reports and
documents, if any, required to be filed with any state or federal securities
commission or similar agency and is in full compliance in all material respects
with all applicable rules and regulations of such commissions.
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6.15 PURPOSE OF LOANS AND LETTERS OF CREDIT.
The proceeds of the Loans hereunder shall be used solely by the Borrower
(i) to fund certain of the Borrower's working capital needs, provided, that in
no event shall the proceeds of the Term Loan be used to make any severance
payments or other similar payments to John Cook or Jack Toma and (ii) to pay
transaction fees and expenses related to the Credit Agreement and other
transactions contemplated hereby, including the proposed recapitalization of its
outstanding debt.
6.16 ENVIRONMENTAL MATTERS.
Except where failure to comply could not reasonably be expected to have a
Material Adverse Effect;
(a) Each of the facilities and properties owned, leased or operated by
the Consolidated Parties (the "Facilities") and all operations at the Facilities
are in compliance with all applicable Environmental Laws, and there is no
violation of any Environmental Law with respect to the Facilities or the
businesses operated by the Consolidated Parties (the "BUSINESSES"), and there
are no conditions relating to the Businesses or Facilities that would be
reasonably likely to give rise to liability under any applicable Environmental
Laws.
(b) None of the Facilities contains, or has previously contained, any
Hazardous Materials at, on or under the Facilities in amounts or concentrations
that constitute or constituted a violation of, or would be reasonably likely to
give rise to liability under, Environmental Laws.
(c) No Consolidated Party has received any written or verbal notice of,
or inquiry from any Governmental Authority regarding, any violation, alleged
violation, non-compliance, liability or potential liability regarding
environmental matters or compliance with Environmental Laws with regard to any
of the Facilities or the Businesses, nor does any Consolidated Party have
knowledge or reason to believe that any such notice will be received or is being
threatened.
(d) Hazardous Materials have not been transported or disposed of from
the Facilities, or generated, treated, stored or disposed of at, on or under any
of the Facilities or any other location, in each case by or on behalf of the
Borrower or any Subsidiary of the Parent in violation of, or in a manner that
would be reasonably likely to give rise to liability under, any applicable
Environmental Law.
(e) No judicial proceeding or governmental or administrative action is
pending or, to the best knowledge of any Credit Party, threatened, under any
Environmental Law to which any Consolidated Party is or will be named as a
party, nor are there any consent decrees or other decrees, consent orders,
administrative orders or other orders, or other administrative or judicial
requirements outstanding under any Environmental Law with respect to the
Consolidated Parties, the Facilities or the Businesses.
(f) There has been no release or, threat of release of Hazardous
Materials by the Borrower or its Subsidiaries at or from the Facilities, or
arising from or related to the
34
operations (including, without limitation, disposal) of the Borrower or any
Subsidiary of the Parent in connection with the Facilities or otherwise in
connection with the Businesses, in violation of or in amounts or in a manner
that would be reasonably likely to give rise to liability under Environmental
Laws.
6.17 INTELLECTUAL PROPERTY.
Each Consolidated Party owns, or has the legal right to use, all
trademarks, tradenames, copyrights, technology, know-how and processes (the
"INTELLECTUAL PROPERTY") necessary for each of them to conduct its business as
currently conducted except for those the failure to own or have such legal right
to use could not reasonably be expected to result in a Material Adverse Effect.
Set forth on SCHEDULE 6.17 is a list of all Intellectual Property owned by each
Consolidated Party or that any Consolidated Party has the right to use. Except
as provided on SCHEDULE 6.17, no claim has been asserted and is pending by any
Person challenging or questioning the use of any such Intellectual Property or
the validity or effectiveness of any such Intellectual Property, nor does any
Credit Party know of any such claim, and to the Credit Parties' knowledge the
use of such Intellectual Property by any Consolidated Party does not infringe on
the rights of any Person, except for such claims and infringements that, in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect. SCHEDULE 6.17 may be updated from time to time by the Borrower by giving
written notice to the Lenders as to any changes after the Closing Date.
6.18 SOLVENCY.
The Parent and its Subsidiaries, taken as a whole, are and, after
consummation of the transactions contemplated by this Credit Agreement, will be
Solvent.
6.19 INVESTMENTS.
All Investments of each Consolidated Party are Permitted Investments.
6.20 LOCATION OF COLLATERAL.
Set forth on SCHEDULE 6.20 is the exact legal name, jurisdiction of
incorporation or organization and chief executive office of each Credit Party.
SCHEDULE 6.20 may be updated from time to time by the Borrower by written notice
to the Lenders.
6.21 DISCLOSURE.
Neither this Credit Agreement nor any financial statements delivered to the
Lenders nor any other document, certificate or statement furnished to the
Collateral Agent or the Lenders by or on behalf of any Consolidated Party in
connection with the transactions contemplated hereby contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained therein or herein not misleading.
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6.22 BROKERS' FEES.
Except as disclosed on Schedule 6.22, Consolidated Party has any obligation
to any Person in respect of any finder's, broker's, investment banking or other
similar fee in connection with any of the transactions contemplated under the
Credit Documents.
6.23 LABOR MATTERS.
There are no collective bargaining agreements or Multiemployer Plans
covering the employees of a Consolidated Party as of the Closing Date and none
of the Consolidated Parties has suffered any strikes, walkouts, work stoppages
or other material labor difficulty within the last five years.
SECTION 7
AFFIRMATIVE COVENANTS
Each Credit Party hereby covenants and agrees that, so long as this Credit
Agreement is in effect or any amounts payable hereunder or under any other
Credit Document (other than indemnification claims not yet asserted) shall
remain outstanding and until all the Credit Documents shall have terminated:
7.1 INFORMATION COVENANTS.
The Credit Parties will furnish, or cause to be furnished, to each Lender:
(a) ANNUAL FINANCIAL STATEMENTS. As soon as available, and in any event
within 90 days after the close of each fiscal year of the Consolidated Parties,
a consolidated balance sheet and income statement of the Consolidated Parties,
as of the end of such fiscal year, together with related consolidated statements
of operations and retained earnings and of cash flows for such fiscal year,
setting forth in comparative form consolidated figures for the preceding fiscal
year, all such financial information described above to be in reasonable form
and detail and audited by independent certified public accountants of recognized
national standing reasonably acceptable to the Required Lenders and whose
opinion shall be to the effect that such financial statements have been prepared
in accordance with GAAP (except for changes with which such accountants concur)
and shall not be limited as to the scope of the audit or qualified as to the
status of the Consolidated Parties as a going concern.
(b) QUARTERLY FINANCIAL STATEMENTS. As soon as available, and in any
event within 45 days after the close of each of the three fiscal quarters of the
Consolidated Parties (other than the fourth fiscal quarter, in which case 90
days after the end thereof) a consolidated balance sheet and income statement of
the Consolidated Parties, as of the end of such fiscal quarter, together with
related consolidated statements of operations for such fiscal quarter and cash
flows for such year to date, in each case setting forth in comparative form
consolidated figures for the corresponding period of the preceding fiscal year,
all such financial information described above to be in a form satisfying the
Securities and Exchange Commission requirements for a 10-Q filing or otherwise
in reasonable form and detail and reasonably acceptable to the Required Lenders,
and accompanied by a certificate of the chief financial
36
officer of the Borrower to the effect that such quarterly 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 audit adjustments.
(c) 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 Closing 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.
(d) OFFICER'S CERTIFICATE. At the time of delivery of the financial
statements provided for in Sections 7.1(a), 7.1(b) and 7.1(c) above, a
certificate of the chief financial officer of the Borrower substantially in the
form of EXHIBIT C, stating that no Default or Event of Default exists, or if any
Default or Event of Default does exist, specifying the nature and extent thereof
and what action the Credit Parties propose to take with respect thereto.
(e) ACCOUNTANT'S CERTIFICATE. Within the period for delivery of the
annual financial statements provided in Section 7.1(a), a certificate of the
accountants conducting the annual audit stating that they have reviewed this
Credit Agreement and stating further whether, in the course of their audit, they
have become aware of any Default or Event of Default and, if any such Default or
Event of Default exists, specifying the nature and extent thereof.
(f) AUDITOR'S REPORTS. Promptly upon receipt thereof, a copy of any
other report or "management letter" submitted by independent accountants to any
Consolidated Party in connection with any annual, interim or special audit of
the books of such Person.
(g) REPORTS. Promptly upon transmission or receipt thereof, (i) copies
of any filings and registrations with, and reports to or from, the Securities
and Exchange Commission, or any successor agency, and copies of all financial
statements, proxy statements, notices and reports as any Consolidated Party
shall send to its shareholders or to a holder of any Indebtedness owed by any
Consolidated Party in its capacity as such a holder and (ii) upon the request of
any Lender, all reports and written information to and from the United States
Environmental Protection Agency, or any state or local agency responsible for
environmental matters, the United States Occupational Health and Safety
Administration, or any state or local agency responsible for health and safety
matters, or any successor agencies or authorities concerning environmental,
health or safety matters.
(h) NOTICES. Upon obtaining knowledge thereof, the Credit Parties will
give written notice to each Lender promptly of (i) the occurrence of an event or
condition consisting of a Default or Event of Default, specifying the nature and
existence thereof and what action the
37
Credit Parties propose to take with respect thereto, and (ii) the occurrence of
any of the following with respect to any Consolidated Party (A) the pendency or
commencement of any litigation, arbitral or governmental proceeding against such
Person which if adversely determined is likely to have a Material Adverse
Effect, (B) the institution of any proceedings against such Person with respect
to, or the receipt of notice by such Person of potential liability or
responsibility for violation, or alleged violation of any federal, state or
local law, rule or regulation, including but not limited to, Environmental Laws,
the violation of which could be reasonably expected to have a Material Adverse
Effect, or (C) any notice or determination concerning the imposition of any
withdrawal liability by a Multiemployer Plan against such Person or any ERISA
Affiliate, the determination that a Multiemployer Plan is, or is expected to be,
in reorganization within the meaning of Title IV of ERISA or the termination of
any Plan.
(i) ERISA. Upon obtaining knowledge thereof, the Credit Parties will
give written notice to each Lender promptly (and in any event within five
business days) of: (i) any event or condition, including, but not limited to,
any Reportable Event, that constitutes, or might reasonably lead to, an ERISA
Event; (ii) with respect to any Multiemployer Plan, the receipt of notice as
prescribed in ERISA or otherwise of any withdrawal liability assessed against
the Credit Parties or any ERISA Affiliates, or of a determination that any
Multiemployer Plan is in reorganization or insolvent (both within the meaning of
Title IV of ERISA); (iii) the failures to make full payment on or before the due
date (including extensions) thereof of all amounts which any Consolidated Party
or any ERISA Affiliate is required to contribute to each Plan pursuant to its
terms and as required to meet the minimum funding standard set forth in ERISA
and the Code with respect thereto; or (iv) any change in the funding status of
any Plan that could have a Material Adverse Effect, together with a description
of any such event or condition or a copy of any such notice and a statement by
the chief financial officer of the Borrower briefly setting forth the details
regarding such event, condition, or notice, and the action, if any, which has
been or is being taken or is proposed to be taken by the Credit Parties with
respect thereto. Promptly upon request, the Credit Parties shall furnish each
Lender with such additional information concerning any Plan as may be reasonably
requested, including, but not limited to, copies of each annual report/return
(Form 5500 series), as well as all schedules and attachments thereto required to
be filed with the Department of Labor and/or the Internal Revenue Service
pursuant to ERISA and the Code, respectively, for each "plan year" (within the
meaning of Section 3(39) of ERISA).
(j) ENVIRONMENTAL.
(i) Upon the reasonable written request of any Lender, the Credit
Parties will furnish or cause to be furnished to each Lender, at the
Credit Parties' expense, a report of an environmental assessment of
reasonable scope, form and depth, (including, where appropriate,
invasive soil or groundwater sampling) by a consultant reasonably
acceptable to the Lenders as to the nature and extent of the presence
of any Hazardous Materials on any Facilities that are either owned by
a Credit Party or for which the Credit Party is the tenant for a
majority of the usable space, and as to the compliance by any
Consolidated Party with Environmental Laws at such Facilities. If the
Credit Parties fail to deliver such an environmental report within
seventy-five (75) days after receipt of such written request then the
Lender may arrange for same, and the Consolidated Parties hereby grant
to the Lender and their representatives access to the Facilities to
reasonably undertake
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such an assessment (including, where appropriate, invasive soil or
groundwater sampling). The reasonable cost of any assessment arranged
for by the Lender pursuant to this provision will be payable by the
Credit Parties on demand and added to the obligations secured by the
Collateral Documents.
(ii) The Consolidated Parties will conduct and complete all
investigations, studies, sampling, and testing and all remedial,
removal, and other actions necessary to address all Hazardous
Materials on, from or affecting any of the Facilities referred to in
the preceding clause (i) to the extent necessary to be in compliance
with all Environmental Laws and with the validly issued orders and
directives of all Governmental Authorities with jurisdiction over such
Facilities to the extent any failure could have a Material Adverse
Effect.
(k) ADDITIONAL PATENTS AND TRADEMARKS. At the time of delivery of the
financial statements and reports provided for in Section 7.1(a), a report
signed by the chief financial officer or treasurer of the Borrower setting
forth (i) a list of registration numbers for all patents and copyrights
awarded to any Consolidated Party since the last day of the immediately
preceding fiscal year and (ii) a list of all patent applications and
copyright applications submitted by any Consolidated Party since the last
day of the immediately preceding fiscal year and the status of each such
application, all in such form as shall be reasonably satisfactory to the
Lenders.
(l) WORKING CAPITAL LOAN DOCUMENTS. As soon as possible and in any
event within three (3) Business Days after execution, receipt or delivery
thereof, copies of any material formal notices, statements, reports or
other information that any Credit Party executes or receives from the
Working Capital Lender in connection with any Working Capital Loan
Documents. For the avoidance of doubt, this Section 7.1(l) shall not
require delivery of any notice, statement, report or other information
executed by the Credit Parties or received from the Working Capital Lender
that is executed or received in the ordinary course of business and that
are immaterial, but shall include the Borrowing Base Certificate.
(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 any Lender may reasonably
request.
(n) INDENTURE. As soon as possible and in any event within three (3)
Business Days after execution, receipt or delivery thereof, copies of any
material notices, statements, reports or other information that any Credit
Party executes or receives from the Trustee (as defined in the Indenture)
in connection with the Indenture. For the avoidance of doubt, this Section
7.1(n) shall not require delivery of any notice, statement, report or other
information executed by the Credit Parties or received from the Trustee (as
defined in the Indenture) that is executed or received in the ordinary
course of business and that are immaterial.
7.2 PRESERVATION OF EXISTENCE AND FRANCHISES.
Except as a result of or in connection with a merger of a Subsidiary
permitted under Section 8.4, each Credit Party will, and will cause each of its
Subsidiaries to, do all things
39
necessary to preserve and keep in full force and effect its existence, rights,
franchises and authority.
7.3 BOOKS AND RECORDS.
Each Credit Party will, and will cause each of its Subsidiaries to, keep
complete and accurate books and records of its transactions in accordance with
good accounting practices on the basis of GAAP (including the establishment and
maintenance of appropriate reserves).
7.4 COMPLIANCE WITH LAW.
Each Credit Party will, and will cause each of its Subsidiaries to, comply
with all Laws and all orders, writs, injunctions and decrees applicable to it
and its Property if noncompliance with any such law, rule, regulation, order or
restriction could be reasonably expected to have a Material Adverse Effect.
7.5 PAYMENT OF TAXES AND OTHER INDEBTEDNESS.
Each Credit Party will, and will cause each of its Subsidiaries to, pay and
discharge (a) all taxes, assessments and governmental charges or levies imposed
upon it, or upon its income or profits, or upon any of its properties, before
they shall become delinquent, (b) all lawful claims (including claims for labor,
materials and supplies) which, if unpaid, might give rise to a Lien upon any of
its properties, and (c) except as prohibited hereunder, all of its other
Indebtedness as it shall become due; PROVIDED, HOWEVER, that no Consolidated
Party shall be required to pay any such tax, assessment, charge, levy, claim or
Indebtedness which is being contested in good faith by appropriate proceedings
and as to which adequate reserves therefor have been established in accordance
with GAAP, unless the failure to make any such payment (i) could give rise to an
immediate right to foreclose on a Lien securing such amounts or (ii) could be
reasonably expected to have a Material Adverse Effect.
7.6 INSURANCE.
(a) Each Credit Party will, and will cause each of its Subsidiaries
to, at all times maintain in full force and effect insurance (including worker's
compensation insurance, liability insurance, casualty insurance and business
interruption insurance) in such amounts, covering such risks and liabilities and
with such deductibles or self-insurance retentions as are in accordance with
normal industry practice (or as otherwise required by the Collateral Documents).
The Collateral Agent shall be named as loss payee or mortgagee, as its interest
may appear, and/or additional insured with respect to any such insurance
providing coverage in respect of any Collateral, and each provider of any such
insurance shall agree, by endorsement upon the policy or policies issued by it
or by independent instruments furnished to the Collateral Agent, that it will
give the Collateral Agent thirty (30) days prior written notice before any such
policy or policies shall be altered or canceled, and that no act or default of
any Consolidated Party or any other Person shall affect the rights of the
Collateral Agent under such policy or policies. The present insurance coverage
of the Consolidated Parties is outlined as to carrier, policy number, expiration
date, type and amount on SCHEDULE 7.6.
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(b) In case of any material loss, damage to or destruction of the
Collateral of any Credit Party or any part thereof, such Credit Party shall
promptly give written notice thereof to the Lenders generally describing the
nature and extent of such damage or destruction. In case of any loss, damage to
or destruction of the Collateral of any Credit Party or any part thereof, such
Credit Party, whether or not the insurance proceeds, if any, received on account
of such damage or destruction shall be sufficient for that purpose, at such
Credit Party's cost and expense, will promptly repair or replace the Collateral
of such Credit Party so lost, damaged or destroyed; PROVIDED, HOWEVER, that such
Credit Party need not repair or replace the Collateral of such Credit Party so
lost, damaged or destroyed to the extent the failure to make such repair or
replacement (i) is desirable to the proper conduct of the business of such
Credit Party in the ordinary course and otherwise in the best interest of such
Credit Party; and (ii) would not materially impair the rights and benefits of
the Lenders under the Collateral Documents or any other Credit Document. In the
event a Credit Party shall receive any proceeds of such insurance in a net
amount in excess of $100,000, such Credit Party will immediately pay over such
proceeds to the Lenders, for payment on the Credit Party Obligations; PROVIDED,
HOWEVER, that the Lenders agree to release such insurance proceeds to such
Credit Party for replacement or restoration of the portion of the Collateral of
such Credit Party lost damaged or destroyed if, but only if, (A) no Default or
Event of Default shall have occurred and be continuing at the time of release,
(B) written application for such release is received by the Lenders from such
Credit Party within 30 days of receipt of such proceeds, and (C) the Lenders
have received evidence reasonably satisfactory to them that the Collateral lost,
damaged or destroyed has been or will be replaced or restored to its condition
immediately prior to the loss, destruction or other event giving rise to the
payment of such insurance proceeds.
7.7 MAINTENANCE OF PROPERTY.
Each Credit Party will, and will cause each of its Subsidiaries to,
maintain and preserve its properties and equipment material to the conduct of
its business in good repair, working order and condition, normal wear and tear
and casualty and condemnation excepted, and will make, or cause to be made, in
such properties and equipment from time to time all repairs, renewals,
replacements, extensions, additions, betterments and improvements thereto as may
be needed or proper, to the extent and in the manner customary for companies in
similar businesses.
7.8 PERFORMANCE OF OBLIGATIONS.
Each Credit Party will, and will cause each of its Subsidiaries to, perform
in all material respects all of its obligations under the terms of all material
agreements, indentures, mortgages, security agreements or other debt instruments
to which it is a party or by which it is bound.
7.9 USE OF PROCEEDS.
The Borrower will use the proceeds of the Loans solely for the purposes set
forth in Section 6.15.
7.10 AUDITS/INSPECTIONS.
Upon reasonable notice and during normal business hours, each Credit Party
will, and will cause each of its Subsidiaries to, permit representatives
appointed by the Required Lenders, including, without limitation, independent
41
accountants, agents, attorneys, and appraisers to visit and inspect its
property, including its books and records, its accounts receivable and
inventory, its facilities and its other business assets, and to make photocopies
or photographs thereof and to write down and record any information such
representative obtains and shall permit any Lender or its representatives to
investigate and verify the accuracy of information and to discuss all such
matters with the officers, employees and representatives of such Person.
7.11 [INTENTIONALLY OMITTED]
7.12 ADDITIONAL CREDIT PARTIES.
(a) As soon as practicable and in any event within 45 days after any
Person becomes a Domestic Subsidiary of any Credit Party, the Borrower shall
provide the Lenders with written notice thereof setting forth information in
reasonable detail describing all of the assets of such Person and shall cause
such Person to execute a Joinder Agreement in substantially the same form as
EXHIBIT E, (b) subject to the terms of the Intercreditor Agreement, cause 100%
of the Capital Stock of such Person to be delivered to the Collateral Agent
(together with undated stock powers or copies thereof, as applicable, signed in
blank) and pledged to the Collateral Agent pursuant to an appropriate pledge
agreement(s) in form acceptable to the Collateral Agent in its reasonable
discretion and cause such Person to deliver such other documentation as the
Collateral Agent may reasonably request in connection with the foregoing,
including, without limitation, appropriate UCC-1 financing statements, real
estate title insurance policies, environmental reports, landlord's waivers,
certified resolutions and other organizational and authorizing documents of such
Person, and favorable opinions of counsel to such Person all in form, content
and scope reasonably satisfactory to the Collateral Agent.
(b) As soon as practicable and in any event within 180 days after any
Person becomes a Material Foreign Subsidiary of any Credit Party, the Borrower
shall provide the Lenders with written notice thereof setting forth information
in reasonable detail describing all of the assets of such Person and shall,
subject to the terms of the Intercreditor Agreement, cause 66% of the Capital
Stock of such Person to be delivered to the Collateral Agent (together with
undated stock powers or copies thereof, as applicable, signed in blank (unless,
such stock powers are deemed unnecessary by the Collateral Agent in its
reasonable discretion under the law of the jurisdiction of incorporation of such
Person)) and pledged to the Collateral Agent pursuant to an appropriate pledge
agreement(s) in form acceptable to the Collateral Agent in its reasonable
discretion and cause such Person to deliver such other documentation as the
Collateral Agent may reasonably request in connection with the foregoing,
including, without limitation, appropriate UCC-1 financing statements, certified
resolutions and other organizational and authorizing documents of such Person,
and favorable opinions of counsel to such Person all in form, content and scope
reasonably satisfactory to the Collateral Agent. It is specifically understood
and agreed that no Material Foreign Subsidiary shall be required to pledge any
of the Capital Stock of any Foreign Subsidiary owned by such Material Foreign
Subsidiary.
(c) (A) If the Working Capital Lender is granted a Lien in any
property of any Credit Party or any guarantor or any other person or entity as
security for the Working Capital Facility, as in effect from time to time, the
Lenders, shall also promptly receive a Lien in such property, subject to the
terms of Intercreditor Agreement, pursuant to documentation reasonably
42
satisfactory to the Required Lenders and the Collateral Agent (including,
without limitation, the additional collateral required by the Working Capital
Lender pursuant to the Working Capital Amendment) and (B) if any Person
guarantees, or otherwise becomes an obligor on, all or any portion of the
Working Capital Facility, as in effect from time to time, a comparable guaranty
or other instruments is promptly obtained in favor of the Lenders in connection
with the obligations hereunder, pursuant to documentation reasonably
satisfactory to the Lenders.
7.13 ENVIRONMENTAL LAWS.
(a) The Consolidated Parties shall comply in all material respects
with, and take reasonable actions to ensure compliance in all material respects
by all tenants and subtenants, if any, with, all applicable Environmental Laws
and obtain and comply in all material respects with and maintain, and take
reasonable actions to ensure that all tenants and subtenants obtain and comply
in all material respects with and maintain, any and all licenses, approvals,
notifications, registrations or permits required by applicable Environmental
Laws except to the extent that failure to do so would not reasonably be expected
to have a Material Adverse Effect;
(b) The Consolidated Parties shall conduct and complete all
investigations, studies, sampling and testing, and all remedial, removal and
other actions required under Environmental Laws and promptly comply in all
material respects with all lawful orders and directives of all Governmental
Authorities regarding Environmental Laws except to the extent that the same are
being contested in good faith by appropriate proceedings and the failure to do
or the pendency of such proceedings would not reasonably be expected to have a
Material Adverse Effect; and
(c) The Consolidated Parties shall defend, indemnify and hold harmless
the Lender, and its employees, agents, officers and directors, from and against
any and all claims, demands, penalties, fines, liabilities, settlements,
damages, costs and expenses of whatever kind or nature known or unknown,
contingent or otherwise, arising out of, or in any way relating to the violation
of, noncompliance with or liability under, any Environmental Law applicable to
the operations of the Borrower or any of its Subsidiaries or the Facilities, or
any orders, requirements or demands of Governmental Authorities related thereto,
including, without limitation, reasonable attorney's and consultant's fees,
investigation and laboratory fees, response costs, court costs and litigation
expenses, except to the extent that any of the foregoing arise out of the gross
negligence or willful misconduct of the party seeking indemnification therefor.
The agreements in this paragraph shall survive repayment of the Loans and all
other amounts payable hereunder, and termination of the Commitments.
7.14 COLLATERAL.
If, subsequent to the Closing Date, a Credit Party shall acquire any real
property, intellectual property, securities instruments, chattel paper or other
personal property required to be delivered to the Collateral Agent as Collateral
hereunder or under any of the Collateral Documents, the Borrower shall notify
the Lenders of same in each case as soon as practicable after the acquisition
thereof or execution of such lease agreement, as appropriate. Each Credit Party
shall take such action as reasonably requested by the Lenders or the Collateral
Agent and at its own expense, to ensure that the Collateral Agent shall have a
first priority perfected Lien in
43
all real property and personal property of the Credit Parties (whether now owned
or hereafter acquired), subject only to Permitted Liens. To the extent
reasonably requested by the Collateral Agent, the Credit Parties shall execute
an intercompany note and pledge and deliver such intercompany note to the
Collateral Agent (or its designee) to be held (or delivered to the Working
Capital Lender) subject to the terms of the Intercreditor Agreement.
7.15 WORKING CAPITAL BORROWING BASE.
The Credit Parties shall maintain all Working Capital Loans and Working
Capital LC Obligations (i) so as not to incur obligations in excess of the
amount of the Senior Debt (as defined in the Intercreditor Agreement) and (ii)
in compliance with the Intercreditor Agreement.
7.16 POST-CLOSING DELIVERIES.
(a) On or prior to December 31, 2005, deliver to the Lenders copies of
certificates of insurance of the Consolidated Parties evidencing liability and
casualty insurance meeting the requirements set forth in the Credit Documents.
SECTION 8
NEGATIVE COVENANTS
Each Credit Party hereby covenants and agrees that, so long as this Credit
Agreement is in effect or any amounts payable hereunder or under any other
Credit Document shall remain outstanding (other than indemnification claims not
yet asserted), and until all of the Credit Document shall have terminated:
8.1 INDEBTEDNESS.
The Credit Parties will not permit any Consolidated Party to contract,
create, incur, assume or permit to exist any Indebtedness, except:
(a) Indebtedness arising under this Credit Agreement and the other
Credit Documents;
(b) Indebtedness of the Consolidated Parties set forth in SCHEDULE 8.1
(and renewals, refinancings and extensions thereof);
(c) purchase money Indebtedness (including obligations in respect of
Capital Leases or Synthetic Leases) hereafter incurred by any Consolidated Party
to finance the purchase of fixed assets PROVIDED that (i) the total of all such
purchase money Indebtedness (including any such purchase money Indebtedness
referred to in subsection (b) above) shall not exceed an aggregate principal
amount of $10,000,000 at any one time outstanding; (ii) such purchase money
Indebtedness when incurred shall not exceed the purchase price of the asset(s)
financed; and (iii) no such purchase money Indebtedness shall be refinanced for
a principal amount in excess of the principal balance outstanding thereon at the
time of such refinancing;
44
(d) obligations of the Consolidated Parties in respect of Hedging
Agreements entered into in order to manage existing or anticipated interest rate
or exchange rate risks and not for speculative purposes;
(e) other unsecured Indebtedness of the Consolidated Parties in an
amount not to exceed $5,000,000 in the aggregate at any one time;
(f) the Subordinated Debt;
(g) unsecured intercompany Indebtedness owing by a Consolidated Party
to a Credit Party (permitted under Section 8.6);
(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) Indebtedness owing to the Working Capital Lender under the Working
Capital Loan Documents in an aggregate principal amount not to exceed the amount
of Senior Debt (as defined in the Intercreditor Agreement) permitted under the
Intercreditor Agreement, less the amount of each principal payment made in
respect of the Working Capital Loans but only to the extent that the Working
Capital Revolving Commitment is permanently reduced by the amount of such
payment.
8.2 LIENS.
The Credit Parties will not permit any Consolidated Party to contract,
create, incur, assume or permit to exist any Lien with respect to any of its
Property (other than any "margin stock" within the meaning of Regulation U),
whether now owned or after acquired, except for Permitted Liens.
8.3 NATURE OF BUSINESS.
The Credit Parties will not permit any Consolidated Party to materially
alter the nature of the business conducted by such Person as of the Closing
Date.
8.4 CONSOLIDATION, MERGER, DISSOLUTION, ETC.
The Credit Parties will not permit any Consolidated Party to enter into any
transaction of merger or consolidation or liquidate, wind up or dissolve itself
(or suffer any liquidation or dissolution); PROVIDED that, notwithstanding the
foregoing provisions of this Section 8.4, (a) the Parent or the Borrower may
merge or consolidate with any of its Subsidiaries PROVIDED that (i) the Parent
or the Borrower shall be the continuing or surviving corporation, (ii) the
Parent shall not merge or consolidate with the Borrower, (iii) the Credit
Parties shall cause to be
45
executed and delivered such documents, instruments and certificates as the
Required Lenders or the Collateral Agent may reasonably request in order to
maintain the perfection and priority of the Collateral Agent's liens on the
assets of the Credit Parties as required by Section 7.14 after giving effect to
such transaction and (iv) after giving effect to such transaction, no Default or
Event of Default exists, (b) any Credit Party other than the Borrower and the
Parent may merge or consolidate with any other Credit Party other than the
Borrower or the Parent; PROVIDED that (i) the Credit Parties shall cause to be
executed and delivered such documents, instruments and certificates as the
Required Lenders or the Collateral Agent may reasonably request in order to
maintain the perfection and priority of the Collateral Agent's liens on the
assets of the Credit Parties as required by Section 7.14 after giving effect to
such transaction and (ii) after giving effect to such transaction, no Default or
Event of Default exists, (c) any Consolidated Party which is not a Credit Party
may be merged or consolidated with or into any Credit Party; PROVIDED that (i)
such Credit Party shall be the continuing or surviving corporation, (ii) the
Credit Parties shall cause to be executed and delivered such documents,
instruments and certificates as the Required Lenders or the Collateral Agent may
reasonably request in order to maintain the perfection and priority of the
Collateral Agent's liens on the assets of the Credit Parties as required by
Section 7.14 after giving effect to such transaction and (iii) after giving
effect to such transaction, no Default or Event of Default exists, and (d) any
Consolidated Party which is not a Credit Party may be merged or consolidated
with or into any other Consolidated Party which is not a Credit Party; PROVIDED
that, after giving effect to such transaction, no Default or Event of Default
exists.
8.5 ASSET DISPOSITIONS.
The Credit Parties will not permit any Consolidated Party to make any Asset
Disposition (including, without limitation, any Sale and Leaseback Transaction)
other than:
(i) the sale of inventory in the ordinary course of business for fair
consideration;
(ii) the sale or disposition of machinery and equipment no longer used
or useful in the conduct of such Person's business;
(iii) the sale, transfer or other disposition of "margin stock" within
the meaning of Regulation U;
(iv) other sales of assets in an aggregate amount not to exceed
$1,000,000 in any fiscal year; and
(v) the sale of the Ship & Debit Division; PROVIDED that (A) the
Borrower receives at least $1,000,000 in Net Cash Proceeds from the sale of
such division and (B) the Borrower immediately prepays the Loans with such
Net Cash Proceeds in accordance with the terms of Section 3.3(b)(ii) and
the Intercreditor Agreement.
Upon a sale of assets permitted by this Section 8.5, the Lenders and/or the
Collateral Agent shall deliver to the Borrower, upon the Borrower's request and
at the Borrower's expense, such documentation as is reasonably necessary to
evidence the release of the Collateral Agent's security interest in such assets.
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8.6 INVESTMENTS.
The Credit Parties will not permit any Consolidated Party to make
Investments in or to any Person, except for Permitted Investments.
8.7 RESTRICTED PAYMENTS.
The Credit Parties will not permit any Consolidated Party to, directly or
indirectly, declare, order, make or set apart any sum for or pay any Restricted
Payment, except (a) to make dividends payable solely in the same class of
Capital Stock of such Person, (b) to make dividends or other distributions
payable to the Borrower (directly or indirectly through Subsidiaries) and (c)
the Borrower may make distributions to the Parent in an amount necessary to pay
interest on the Subordinated Debt.
8.8 TRANSACTIONS WITH AFFILIATES.
The Credit Parties will not permit any Consolidated Party to enter into or
permit to exist any transaction or series of transactions with any officer,
director, shareholder, Subsidiary or Affiliate of such Consolidated Party other
than (a) normal compensation and reimbursement of expenses of officers and
directors and (b) except as otherwise specifically limited in this Credit
Agreement, other transactions which are entered into in the ordinary course of
such Person's business on terms and conditions substantially as favorable to
such Person as would be obtainable by it in a comparable arms-length transaction
with a Person other than an officer, director, shareholder, Subsidiary or
Affiliate of such Consolidated Party. Notwithstanding the foregoing, Meridian
International is permitted to make the Meridian Loan.
8.9 FISCAL YEAR; ORGANIZATIONAL DOCUMENTS.
The Credit Parties will not permit any Consolidated Party to (a) amend,
modify or change its articles of incorporation (or corporate charter or other
similar organizational document) or bylaws (or other similar document) in a
manner materially adverse to the Lenders or (b) change its fiscal year; it being
understood and agreed that any amendment to the articles of incorporation of
PRGRS, Inc. that provides the books and records of such Credit Party will be
maintained in the Cayman Islands or Bermuda shall not be deemed to be materially
adverse to the Lenders. The Credit Parties will promptly deliver to the Lenders
copies of any amendments, modifications and changes to the articles of
incorporation (or corporate charter or other similar organizational document) or
bylaws (or other similar document) of any Consolidated Party.
8.10 LIMITATION ON RESTRICTED ACTIONS.
The Credit Parties will not permit any Consolidated Party to, directly or
indirectly, create or otherwise cause or suffer to exist or become effective any
encumbrance or restriction on the ability of any such Person to (a) pay
dividends or make any other distributions to any Credit Party on its Capital
Stock or with respect to any other interest or participation in, or measured by,
its profits, (b) pay any Indebtedness or other obligation owed to any Credit
Party, (c) make loans or advances to any Credit Party, (d) sell, lease or
transfer any of its properties or assets to any Credit Party, or (e) act as a
Guarantor and pledge its assets pursuant to the Credit Documents or any
renewals, refinancings, exchanges, refundings or extension thereof, except (in
respect of any
47
of the matters referred to in clauses (a)-(d) above) for such encumbrances or
restrictions existing under or by reason of (i) this Credit Agreement and the
other Credit Documents, (ii) the Working Capital Loan Documents, (iii)
applicable law, (iv) the Indenture or (v) any document or instrument governing
Indebtedness incurred pursuant to Section 8.1(c), PROVIDED that any such
restriction contained therein relates only to the asset or assets constructed or
acquired in connection therewith.
8.11 OWNERSHIP OF SUBSIDIARIES.
Notwithstanding any other provisions of this Credit Agreement to the
contrary, the Credit Parties will not permit any Consolidated Party to (i)
permit any Person (other than the Parent or any Wholly-Owned Subsidiary of the
Parent) to own any Capital Stock of any Subsidiary of the Parent, (ii) permit
any Subsidiary of the Parent to issue Capital Stock (except to the Parent or to
a Wholly-Owned Subsidiary of the Parent), (iii) permit, create, incur, assume or
suffer to exist any Lien thereon, in each case except (A) to qualify directors
where required by applicable law or to satisfy other requirements of applicable
law with respect to the ownership of Capital Stock of Foreign Subsidiaries or
(B) for Permitted Liens and (iv) notwithstanding anything to the contrary
contained in clause (ii) above, permit any Subsidiary of the Parent to issue any
shares of preferred Capital Stock.
8.12 SALE LEASEBACKS.
Except for transactions permitted by Section 8.1(c) hereof, the Credit
Parties will not permit any Consolidated Party to, directly or indirectly,
become or remain liable as lessee or as guarantor or other surety with respect
to any lease, whether an Operating Lease or a Capital Lease, of any Property
(whether real, personal or mixed), whether now owned or hereafter acquired, (a)
which such Consolidated Party has sold or transferred or is to sell or transfer
to a Person which is not a Consolidated Party or (b) which such Consolidated
Party intends to use for substantially the same purpose as any other Property
which has been sold or is to be sold or transferred by such Consolidated Party
to another Person which is not a Consolidated Party in connection with such
lease.
8.13 CAPITAL EXPENDITURES.
The Credit Parties will not permit aggregate Consolidated Capital
Expenditures to exceed $6,000,000 at any time during the term of this Credit
Agreement.
8.14 NO FURTHER NEGATIVE PLEDGES.
The Credit Parties will not permit any Consolidated Party to enter into,
assume or become subject to any agreement prohibiting or otherwise restricting
the creation or assumption of any Lien upon its properties or assets, whether
now owned or hereafter acquired, or requiring the grant of any security for such
obligation if security is given for some other obligation, except (a) pursuant
to this Credit Agreement and the other Credit Documents, (b) pursuant to the
Indenture, (c) pursuant to the Working Capital Loan Documents or (d) pursuant to
any document or instrument governing Indebtedness incurred pursuant to Section
8.1(c), PROVIDED that any such restriction contained therein relates only to the
asset or assets constructed or acquired in connection therewith.
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8.15 LIMITATION ON FOREIGN EBITDA.
The Credit Parties will not permit the aggregate portion of Consolidated
EBITDA for any period attributable to First Tier Foreign Subsidiaries which are
not Material Foreign Subsidiaries to exceed 10% of Consolidated EBITDA for such
period.
8.16 SUBORDINATED DEBT.
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, restate,
supplement, modify or otherwise change the Subordinated Debt in any manner that
would adversely affect the Lenders without the prior written consent of the
Required Lenders.
8.17 NOTICE UNDER THE INDENTURE.
The Parent covenants and agrees that it will give the written notice
pursuant to Section 11.11 of the Indenture to the Trustee (as defined in the
Indenture) immediately upon the request of the Required Lenders.
8.18 WORKING CAPITAL LOAN DOCUMENTS.
No Credit Party will, nor will it permit any of its Subsidiaries to amend,
restate, supplement, modify or otherwise change the Working Capital Loan
Agreement or any other Working Capital Loan Documents except as otherwise
permitted under the terms of the Intercreditor Agreement.
SECTION 9
EVENTS OF DEFAULT
9.1 EVENTS OF DEFAULT.
An Event of Default shall exist upon the occurrence and during the
continuance of any of the following specified events other than any Event of
Default arising solely as a result of a Working Capital Acknowledged Event of
Default (except with respect to clauses (h) and (l) below) (each an "EVENT OF
DEFAULT"):
(a) PAYMENT. Any Credit Party shall default, and such default shall
continue for five (5) or more Business Days, in the payment when due of any
principal of or interest on the Loans, or of any fees or other amounts owing
hereunder, under any of the other Credit Documents or in connection herewith or
therewith; or
(b) REPRESENTATIONS. Any representation, warranty or statement made or
deemed to be made by any Credit Party herein, in any of the other Credit
Documents, or in any
49
statement or certificate delivered or required to be delivered pursuant hereto
or thereto shall prove untrue in any material respect on the date as of which it
was deemed to have been made; or
(c) COVENANTS. Any Credit Party shall
(i) default in the due performance or observance of any term,
covenant or agreement contained in Sections 7.2, 7.4, 7.9, 7.12 or
7.14 or Section 8;
(ii) default in the due performance or observance of any term,
covenant or agreement contained in Sections 7.1(a), (b), (c), (d), (e)
or (f) and such default shall continue unremedied for a period of at
least 5 days after the earlier of a responsible officer of a Credit
Party becoming aware of such default or notice thereof by the Lender;
or
(iii) default in the due performance or observance by it of any
term, covenant or agreement (other than those referred to in
subsections (a), (b), (c)(i) or (c)(ii) of this Section 9.1) contained
in this Credit Agreement and such default shall continue unremedied
for a period of at least 30 days after the earlier of a responsible
officer of a Credit Party becoming aware of such default or notice
thereof by the Lenders; or
(d) CREDIT DOCUMENTS. (i) Any Credit Party shall default in the due
performance or observance of any term, covenant or agreement in any of the other
Credit Documents (subject to applicable grace or cure periods, if any) or (ii)
except as a result of or in connection with a merger of a Subsidiary permitted
under Section 8.4, any Credit Document shall fail to be in full force and effect
or to give the Collateral Agent the Liens, rights, powers and privileges
purported to be created thereby, or any Credit Party shall so state in writing;
or
(e) GUARANTIES. Except as the result of or in connection with a merger
of a Subsidiary permitted under Section 8.4, the guaranty given by any Guarantor
hereunder (including any Additional Credit Party) or any provision thereof shall
cease to be in full force and effect, or any Guarantor (including any Additional
Credit Party) hereunder or any Person acting by or on behalf of such Guarantor
shall deny or disaffirm such Guarantor's obligations under such guaranty, or any
Guarantor shall default in the due performance or observance of any term,
covenant or agreement on its part to be performed or observed pursuant to any
guaranty (subject to applicable grace and cure periods, if any); or
(f) BANKRUPTCY, ETC. Any Bankruptcy Event shall occur with respect to
any Consolidated Party; or
(g) DEFAULTS UNDER OTHER AGREEMENTS.
(i) Any Consolidated Party shall default in the performance or
observance (beyond the applicable grace period with respect thereto,
if any) of any material obligation or condition of any contract or
lease material to the Consolidated Parties, taken as a whole, other
than any defaults under the Working Capital Loan Documents; or
50
(ii) With respect to any Indebtedness (other than Indebtedness
outstanding under this Credit Agreement or under the Working Capital
Loan Documents) in excess of $1,000,000 in the aggregate for the
Consolidated Parties taken as a whole, (A) any Consolidated Party
shall (1) default in any payment (beyond the applicable grace period
with respect thereto, if any) with respect to any such Indebtedness,
or (2) the occurrence and continuance of a default in the observance
or performance relating to such Indebtedness or contained in any
instrument or agreement evidencing, securing or relating thereto, or
any other event or condition shall occur or condition exist, the
effect of which default or other event or condition is to cause, or
permit, the holder or holders of such Indebtedness (or trustee or
agent on behalf of such holders) to cause (determined without regard
to whether any notice or lapse of time is required), any such
Indebtedness to become due prior to its stated maturity, or (B) any
such Indebtedness shall be declared due and payable, or required to be
prepaid other than by a regularly scheduled required prepayment, prior
to the stated maturity thereof; or
(h) JUDGMENTS. One or more judgments or decrees shall be entered
against one or more of the Consolidated Parties involving a liability of
$1,000,000 or more in the aggregate (to the extent not paid or fully covered by
insurance provided by a carrier who has acknowledged coverage and has the
ability to perform) and any such judgments or decrees shall not have been
vacated, discharged or stayed or bonded pending appeal within 30 days from the
entry thereof; or
(i) ERISA. Any of the following events or conditions, if such event or
condition could have a Material Adverse Effect: (i) any "accumulated funding
deficiency," as such term is defined in Section 302 of ERISA and Section 412 of
the Code, whether or not waived, shall exist with respect to any Plan, or any
lien shall arise on the assets of any Consolidated Party or any ERISA Affiliate
in favor of the PBGC or a Plan; (ii) an ERISA Event shall occur with respect to
a Single Employer Plan, which is, in the reasonable opinion of the Lender,
likely to result in the termination of such Plan for purposes of Title IV of
ERISA; (iii) an ERISA Event shall occur with respect to a Multiemployer Plan or
Multiple Employer Plan, which is, in the reasonable opinion of the Required
Lenders, likely to result in (A) the termination of such Plan for purposes of
Title IV of ERISA, or (B) any Consolidated Party or any ERISA Affiliate
incurring any liability in connection with a withdrawal from, reorganization of
(within the meaning of Section 4241 of ERISA), or insolvency or (within the
meaning of Section 4245 of ERISA) such Plan; or (iv) any prohibited transaction
(within the meaning of Section 406 of ERISA or Section 4975 of the Code) or
breach of fiduciary responsibility shall occur which may subject any
Consolidated Party or any ERISA Affiliate to any liability under Sections 406,
409, 502(i), or 502(1) of ERISA or Section 4975 of the Code, or under any
agreement or other instrument pursuant to which any Consolidated Party or any
ERISA Affiliate has agreed or is required to indemnify any person against any
such liability; or
(j) OWNERSHIP. There shall occur a Change of Control; or
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(k) 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
(l) WORKING CAPITAL FACILITY. There shall occur a Working Capital
Event of Default under any Working Capital Loan Document and the Working Capital
Lender shall have accelerated the indebtedness thereunder (whether as a result
of the Working Capital Acknowledged Events of Default or otherwise), it being
agreed that the maturity of the Working Capital Facility solely in accordance
with its terms and without further action by the Working Capital Lender (e.g.,
upon its scheduled maturity date) shall not constitute an acceleration.
9.2 ACCELERATION; REMEDIES.
Upon the occurrence of an Event of Default, and at any time thereafter
unless and until such Event of Default has been waived by the Required Lenders
or cured to the satisfaction of the Lenders in their reasonable discretion, the
Required Lenders shall, by written notice to the Credit Parties, take any of the
following actions:
(a) [Intentionally Omitted]
(b) ACCELERATION. Declare the unpaid principal of and any accrued
interest in respect of all Loans and any and all other indebtedness or
obligations of any and every kind owing by the Credit Parties to the Lenders and
the Collateral Agent hereunder to be due whereupon the same shall be immediately
due and payable without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by the Credit Parties.
(c) [Intentionally Omitted]
(d) ENFORCEMENT OF RIGHT. Enforce any and all rights and interests
created and existing under the Credit Documents including, without limitation,
all rights and remedies existing under the Collateral Documents, all rights and
remedies against a Guarantor and all rights of set-off.
Notwithstanding the foregoing, if an Event of Default specified in SECTION
9.1(F) shall occur with respect to the Borrower, then all Loans, all accrued
interest in respect thereof, all accrued and unpaid fees and other indebtedness
or obligations owing to the Lenders and the Collateral Agent hereunder
automatically shall immediately become due and payable without the giving of any
notice or other action by the Lenders or the Collateral Agent.
9.3 APPLICATION OF FUNDS.
After the exercise of remedies provided for in SECTION 9.2 (or after the
Loans have automatically become immediately due and payable as set forth in the
proviso to SECTION 9.2), any amounts received on account of the Credit Party
Obligations shall be applied, first, to pay any fees, expenses or indemnities of
the Collateral Agent, and, second, by the Lenders in the manner determined by
the Lenders in their sole discretion. Any surplus remaining after payment in
full of the Credit Party Obligations shall be returned to the Borrower or
whomsoever a court of competent jurisdiction shall determine to be entitled
thereto.
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SECTION 10
MISCELLANEOUS
10.1 NOTICES.
(a) NOTICES GENERALLY. Except as otherwise expressly provided herein,
all notices and other communications shall have been duly given and shall be
effective (i) when delivered, (ii) when transmitted via telecopy (or other
facsimile device) to the number set out below, (iii) the Business Day following
the day on which the same has been delivered prepaid to a reputable national
overnight air courier service, or (iv) the third Business Day following the day
on which the same is sent by certified or registered mail, postage prepaid, in
each case to the respective parties at the address, in the case of the Credit
Parties and the Lender, set forth below, or at such other address as such party
may specify by written notice to the other parties hereto:
if to any Credit Party:
PRG-Schultz USA, Inc.
600 Galleria Parkway, Suite 100
Atlanta, Georgia 30339
Attn: Chief Financial Officer
Telephone: (770) 779-3230
Telecopy: (770) 779-3042
with a copy to:
PRG-Schultz USA, Inc.
600 Galleria Parkway, Suite 100
Atlanta, Georgia 30339
Attn: General Counsel
Telephone: (770) 779-3051
Telecopy: (770) 779-3034
if to any Lender:
to its address set forth on its signature page,
with a copy to:
Schulte Roth & Zabel LLP
919 Third Avenue
New York, NY 10022
Attn: Jeffrey S. Sabin
Telephone: (212) 756-2000
Telecopy: (212) 593-5955
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if to the Collateral Agent:
Attn:
-------------------------------
Telephone:
-------------------------
Telecopy:
--------------------------
with a copy to:
Schulte Roth & Zabel LLP
919 Third Avenue
New York, NY 10022
Attn: Jeffrey S. Sabin
Telephone: (212) 756-2000
Telecopy: (212) 593-5955
Notices sent by hand or overnight courier service, or mailed by certified or
registered mail, shall be deemed to have been given when received; notices sent
by telecopier shall be deemed to have been given when sent (except that, if not
given during normal business hours for the recipient, shall be deemed to have
been given at the opening of business on the next business day for the
recipient). Notices delivered through electronic communications to the extent
provided in subsection (b) below, shall be effective as provided in such
subsection (b).
(b) ELECTRONIC COMMUNICATIONS. Notices and other communications to a
Lender hereunder may be delivered or furnished by electronic communication
(including e-mail and Internet or intranet websites) pursuant to procedures
approved by such Lender. Any Lender or the Borrower may, in its discretion,
agree to accept notices and other communications to it hereunder by electronic
communications pursuant to procedures approved by it, PROVIDED that approval of
such procedures may be limited to particular notices or communications.
Unless the Required Lenders otherwise prescribes, (i) notices and other
communications sent to an e-mail address shall be deemed received upon the
sender's receipt of an acknowledgement from the intended recipient (such as by
the "return receipt requested" function, as available, return e-mail or other
written acknowledgement), PROVIDED that if such notice or other communication is
not sent during the normal business hours of the recipient, such notice or
communication shall be deemed to have been sent at the opening of business on
the next business day for the recipient, and (ii) notices or communications
posted to an Internet or intranet website shall be deemed received upon the
deemed receipt by the intended recipient at its e-mail address as described in
the foregoing clause (i) of notification that such notice or communication is
available and identifying the website address therefor.
(c) CHANGE OF ADDRESS, ETC. Each of the Borrower, each Lender and the
Collateral Agent may change its address, telecopier or telephone number for
notices and other communications hereunder by notice to the other parties
hereto.
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(d) RELIANCE BY LENDER. Each Lender and the Collateral Agent shall be
entitled to rely and act upon any notices (including telephonic Notice of
Borrowing) purportedly given by an executive officer of the Borrower on behalf
of the Borrower even if (i) such notices were not made in a manner specified
herein, were incomplete or were not preceded or followed by any other form of
notice specified herein, or (ii) the terms thereof, as understood by the
recipient, varied from any confirmation thereof. The Borrower shall indemnify
each Lender, the Collateral Agent and its Related Parties from all losses,
costs, expenses and liabilities resulting from the reliance by such Person on
each notice purportedly given by or on behalf of the Borrower. All telephonic
notices to and other telephonic communications with each Lender or the
Collateral Agent may be recorded by such Lender or the Collateral Agent, and
each of the parties hereto hereby consents to such recording.
10.2 RIGHT OF SET-OFF; ADJUSTMENTS.
Upon the occurrence and during the continuance of any Event of Default,
each of the Lenders and the Collateral Agent (and each of its Affiliates) is
hereby authorized at any time and from time to time, to the fullest extent
permitted by law, to set off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other indebtedness at
any time owing by such Lender (or any of its Affiliates) to or for the credit or
the account of any Credit Party against any and all of the obligations of such
Person now or hereafter existing under this Credit Agreement, under the Notes,
under any other Credit Document or otherwise, irrespective of whether such
Lender or Collateral Agent shall have made any demand under hereunder or
thereunder and although such obligations may be unmatured. Each of the Lenders
and the Collateral Agent agrees promptly to notify any affected Credit Party
after any such set-off and application made by such Lender or the Collateral
Agent; PROVIDED, HOWEVER, that the failure to give such notice shall not affect
the validity of such set-off and application. The rights of each of the Lenders
and the Collateral Agent under this Section 10.2 are in addition to other rights
and remedies (including, without limitation, other rights of set-off) that such
Lender or the Collateral Agent may have.
10.3 SUCCESSORS AND ASSIGNS.
(a) The provisions of this Credit Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns permitted hereby, except that the Credit Parties may not assign or
otherwise transfer any of their rights or obligations hereunder without the
prior written consent of each Lender (and any attempted assignment or transfer
by any Credit Party without such consent shall be null and void). Nothing in
this Credit Agreement, expressed or implied, shall be construed to confer upon
any Person (other than the parties hereto, their respective successors and
assigns permitted hereby and, to the extent expressly contemplated hereby, the
Indemnitees) any legal or equitable right, remedy or claim under or by reason of
this Credit Agreement.
(b) Each Lender may assign all or a portion of its rights and
obligations under this Credit Agreement (including all or any portion of the
Loans). From and after the effective date of such assignment, the assignee
thereunder shall be a party hereto and, to the extent of the interest assigned
by such assignment, have the rights and obligations of the assigning Lender
under this Credit Agreement, and the assigning Lender thereunder shall, to the
extent of the
55
interest assigned by such assignment, be released from its obligations under
this Credit Agreement (and, in the case of an assignment covering all of the
assigning Lender's rights and obligations under this Credit Agreement, the
assigning Lender shall cease to be a party hereto but shall continue to be
entitled to the benefits of Sections 10.4, 10.8 and 10.12). Upon request by the
assigning Lender and/or the assignee Lender, the Borrower shall execute and
deliver new or replacement Note to the assigning Lender and the assignee Lender.
(c) Notwithstanding anything herein to the contrary, each Lender may
at any time, without the consent of the Borrower, pledge or assign a security
interest in all or any portion of its rights under this Credit Agreement
(including under each Note) to secure obligations of such Lender, including any
pledge or assignment to secure obligations to a Federal Reserve Bank; PROVIDED
that no such pledge or assignment shall release such Lender from any of its
obligations hereunder or substitute any such pledgee or assignee for such Lender
as a party hereto.
10.4 EXPENSES; INDEMNIFICATION.
(a) The Credit Parties jointly and severally agree to pay on demand
all reasonable costs and expenses of each Lender in connection with the
preparation, execution, delivery, administration, modification, and amendment of
this Credit Agreement, the other Credit Documents, and the other documents to be
delivered hereunder, including, without limitation, the reasonable fees and
expenses of counsel for the Lenders and the Collateral Agent with respect
thereto and with respect to advising such Lender and the Collateral Agent as to
their rights and responsibilities under the Credit Documents. The Credit Parties
further jointly and severally agree to pay on demand all reasonable costs and
expenses of the Lenders and the Collateral Agent, if any (including, without
limitation, reasonable attorneys' fees and expenses), in connection with the
enforcement (whether through negotiations, legal proceedings, or otherwise) of
the Credit Documents and the other documents to be delivered hereunder.
(b) Whether or not the transactions contemplated hereby are
consummated, the Borrower agrees to indemnify, save and hold harmless each
Lender, the Collateral Agent and its respective Affiliates, directors, officers,
employees, counsel, agents and attorneys-in-fact (collectively the
"INDEMNITEES") from and against: (a) any and all claims, demands, actions or
causes of action that are asserted against any Indemnitee by any Person (other
than such Lender or the Collateral Agent) relating directly or indirectly to a
claim, demand, action or cause of action that such Person asserts or may assert
against any Credit Party, any Affiliate of any Credit Party or any of their
respective officers or directors; (b) any and all claims, demands, actions or
causes of action that may at any time (including at any time following repayment
of the Credit Party Obligations) be asserted or imposed against any Indemnitee,
arising out of or relating to, the Credit Documents, any predecessor Credit
Documents, the Commitments, the use or contemplated use of the proceeds of any
extension of credit, or the relationship of any Credit Party and such Lender or
the Collateral Agent under this Credit Agreement or any other Credit Document;
(c) any actual or alleged presence or release of Hazardous Materials on or from
any property currently or formerly owned or operated by the Borrower or any
Subsidiary of the Parent, or any Environmental Liability related in any way to
the Borrower or any Subsidiary of the Parent; (d) any administrative or
investigative proceeding by any Governmental Authority arising out of or related
to a claim, demand, action or cause of action described in subsection (a)
56
or (b) above; and (e) any and all liabilities (including liabilities under
indemnities), losses, costs or expenses (including reasonable fees and costs of
counsel) that any Indemnitee suffers or incurs as a result of the assertion of
any foregoing claim, demand, action, cause of action or proceeding, or as a
result of the preparation of any defense in connection with any foregoing claim,
demand, action, cause of action or proceeding, in all cases, whether or not
arising out of the negligence of an Indemnitee, and whether or not an Indemnitee
is a party to such claim, demand, action, cause of action or proceeding (all the
foregoing, collectively, the "INDEMNIFIED LIABILITIES"); PROVIDED that no
Indemnitee shall be entitled to indemnification for any claim caused by its own
gross negligence or willful misconduct or for any loss asserted against it by
another Indemnitee. The agreements in this Section shall survive the termination
of the Commitments and repayment of all the other Credit Party Obligations.
(c) Without prejudice to the survival of any other agreement of the
Credit Parties hereunder, the agreements and obligations of the Credit Parties
contained in this Section 10.4 shall survive the repayment of the Loans and
other obligations under the Credit Documents and the termination of the
Commitments hereunder.
10.5 AMENDMENTS, WAIVERS AND CONSENTS.
Except for actions expressly permitted to be taken by the Collateral Agent,
neither this Credit Agreement nor any other Credit Document nor any of the terms
hereof or thereof may be amended, changed, waived, discharged or terminated
unless such amendment, change, waiver, discharge or termination is in writing
entered into by, or approved in writing by, the Borrower and the Required
Lenders or by the Collateral Agent with the consent of the Required Lenders, and
then such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given, PROVIDED, HOWEVER, that no amendment,
change, waiver, discharge, termination or consent shall (i) increase the
Commitment of any Lender, reduce the principal of, or interest on, the Loans
payable to any Lender, reduce the amount of any fee payable for the account of
any Lender, or postpone or extend any date fixed for any payment of principal
of, or interest or, fees on, the Loans payable to any Lender, in each case
without the written consent of each Lender affected thereby, (ii) increase the
Total Commitment without the written consent of each Lender affected thereby,
(iii) change the percentage of the Commitments or of the aggregate unpaid
principal amount of the Loans that is required for the Lenders or any of them to
take any action hereunder without the written consent of each Lender affected
thereby, (iv) amend the definition of "Required Lenders" or "Pro Rata Share"
without the written consent of each Lender or (v) release all or a substantial
portion of the Collateral (except as otherwise provided in this Credit Agreement
and the other Credit Documents), subordinate any Lien granted in favor of the
Collateral Agent for the benefit of the Lenders, or release any Credit Party
without the written consent of each Lender, (vi) amend, change or waive this
Section 10.5 without the written consent of each Lender. Notwithstanding the
foregoing, no amendment, change, waiver, discharge, termination or consent
shall, unless in writing and signed by the Collateral Agent, affect the rights
or duties of the Collateral Agent (but not in its capacity as a Lender) under
this Credit Agreement or the other Credit Documents.
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10.6 COUNTERPARTS.
This Credit Agreement may be executed in any number of counterparts, each
of which when 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 Credit Agreement to produce or account for more than one
such counterpart for each of the parties hereto. Delivery by facsimile by any of
the parties hereto of an executed counterpart of this Credit Agreement shall be
as effective as an original executed counterpart hereof and shall be deemed a
representation that an original executed counterpart hereof will be delivered.
10.7 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 Credit Agreement.
10.8 SURVIVAL.
All indemnities set forth herein, including, without limitation, in Section
3.11, 3.12 or 10.5 shall survive the execution and delivery of this Credit
Agreement, the making of the Loans, the repayment of the Loans and other
obligations under the Credit Documents and the termination of the Commitments
hereunder, and all representations and warranties made by the Credit Parties
herein shall survive delivery of the Notes and the making of the Loans
hereunder.
10.9 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE.
(a) THIS CREDIT 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 LENDERS AND
THE COLLATERAL AGENT SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS CREDIT
AGREEMENT OR ANY OTHER CREDIT DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE
OF NEW YORK SITTING IN THE COUNTY OF NEW YORK OR OF THE UNITED STATES DISTRICT
COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, AND BY EXECUTION AND DELIVERY OF
THIS CREDIT 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 CONVENIENS, 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,
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COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY
THE LAW OF SUCH STATE.
10.10 WAIVER OF JURY TRIAL.
EACH PARTY TO THIS CREDIT AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO
TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER ANY
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 ANY CREDIT
DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE 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 CREDIT 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.
10.11 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
All representations and warranties made hereunder and in any other Credit
Document or other document delivered pursuant hereto or thereto or in connection
herewith or therewith shall survive the execution and delivery hereof and
thereof. Such representations and warranties have been or will be relied upon by
the Lenders and the Collateral Agent, regardless of any investigation made by
the Lenders, the Collateral Agent or on its behalf and notwithstanding that the
Lender or the Collateral Agent may have had notice or knowledge of any Default
at the time of any Loans, and shall continue in full force and effect as long as
any Loan or any other Obligation hereunder shall remain unpaid or unsatisfied.
10.12 SEVERABILITY.
If any provision of any of the Credit Documents 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.
10.13 ENTIRETY.
This Credit Agreement together with the other Credit Documents 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 or the transactions
contemplated herein and therein.
10.14 BINDING EFFECT; TERMINATION.
(a) This Credit Agreement shall become effective at such time when all
of the conditions set forth in Section 5.1 have been satisfied or waived by the
Lenders and it shall have
59
been executed by each Credit Party and each Lender and the Collateral Agent, and
thereafter this Credit Agreement shall be binding upon and inure to the benefit
of each Credit Party, each Lender, the Collateral Agent and its respective
successors and assigns.
(b) The term of this Credit Agreement shall be until no Loans, or any
other amounts payable hereunder or under any of the other Credit Documents shall
remain outstanding, all of the Credit Party Obligations (other than
indemnification claims not yet asserted) have been irrevocably satisfied in full
and this Credit Agreement and the other Credit Documents shall have been
terminated.
10.15 CONFIDENTIALITY.
Each of the Lenders and the Collateral Agent agrees to maintain the
confidentiality of the Information (as defined below), except that Information
may be disclosed (a) to its and its Affiliates' directors, officers, employees
and agents, including accountants, legal counsel and other advisors (it being
understood that the Persons to whom such disclosure is made will be informed of
the confidential nature of such Information and must agree to keep such
Information confidential); (b) to the extent requested by any regulatory
authority; (c) to the extent required by applicable laws or regulations or by
any subpoena or similar legal process (each of the Lenders and the Collateral
Agent agrees to provide notice of any such requirement to the Borrower and, to
the extent reasonably requested by the Borrower, cooperate with the Borrower and
its Subsidiaries if the Borrower or any of its Subsidiaries seeks to have such
Information subject to a protective order); (d) to any other party to this
Credit Agreement; (e) in connection with the exercise of any remedies hereunder
or any suit, action or proceeding relating to this Credit Agreement or the
enforcement of rights hereunder, (f) subject to an agreement containing
provisions substantially the same as those of this Section, to (i) any assignee
of or participant in, or any prospective assignee of or participant in, any of
its rights or obligations under this Credit Agreement, provided that such
assignee or participant or prospective assignee or participant agrees to keep
the Information confidential or (ii) any direct or indirect contractual
counterparty or prospective counterparty (or such contractual counterparty's or
prospective counterparty's professional advisor) to any credit derivative
transaction relating to obligations of the Credit Parties, provided that such
contractual counterparty or prospective counterparty agrees to keep the
Information confidential; (g) with the consent of the Borrower; (h) to the
extent such Information (i) becomes publicly available other than as a result of
a breach of this Section or (ii) becomes available to such Lender or the
Collateral Agent on a non-confidential basis from a source other than the Credit
Parties; or (i) to the National Association of Insurance Commissioners or any
other similar organization or any nationally recognized rating agency that
requires access to information about such Lender's or its Affiliates' investment
portfolio in connection with ratings issued with respect to such Lender or its
Affiliates. In addition, each of the Lenders and the Collateral Agent may
disclose the existence of this Credit Agreement and information about this
Credit Agreement to market data collectors, similar service providers to the
lending industry, and service providers to such Lender or the Collateral Agent
in connection with the administration and management of this Credit Agreement,
the other Credit Documents, the Commitment, and the Loans. For the purposes of
this Section, "INFORMATION" means all information received from any Credit Party
or any Subsidiary of the Parent relating to any Credit Party or any Subsidiary
of the Parent or its business, other than any such information that is available
to any Lender or the Collateral Agent on a non-confidential basis prior to
disclosure by any Credit Party or any Subsidiary of the Parent. Any Person
60
required to maintain the confidentiality of Information as provided in this
Section shall be considered to have complied with its obligation to do so if
such Person has exercised the same degree of care to maintain the
confidentiality of such Information as such Person would accord to its own
confidential information. Each of the Lenders and the Collateral Agent
acknowledges that it is aware that the Borrower is a public company with
securities that are publicly traded and that the Information includes material
non-public Information.
10.16 CONFLICT.
To the extent that there is a conflict or inconsistency between any
provision hereof, on the one hand, and any provision of any Credit Document, on
the other hand, this Credit Agreement shall control.
10.17 USA PATRIOT ACT NOTICE.
Each Lender and the Collateral Agent hereby notifies the Borrower that
pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56
(signed into law October 26, 2001)) (the "ACT"), it may be required to obtain,
verify and record information that identifies the Borrower, which information
includes the name and address of the Borrower and other information that will
allow such Lender to identify the Borrower in accordance with the Act.
SECTION 11
COLLATERAL AGENT
11.1 APPOINTMENT.
Each Lender hereby irrevocably appoints and authorizes the Collateral Agent
to perform the duties of the Collateral Agent as set forth in this Credit
Agreement and the other Credit Documents including: (i) to execute or file any
and all financing or similar statements or notices, amendments, renewals,
supplements, documents, instruments, proofs of claim, notices and other written
agreements with respect to this Credit Agreement or any other Credit Document;
(ii) to perform, exercise, and enforce any and all other rights and remedies of
the Lenders with respect to the Credit Parties, the Credit Party Obligations, or
otherwise related to any of same to the extent reasonably incidental to the
exercise by the Collateral Agent of the rights and remedies specifically
authorized to be exercised by the Collateral Agent by the terms of this Credit
Agreement or any other Credit Document; (iii) to incur and pay such fees
necessary or appropriate for the performance and fulfillment of its functions
and powers pursuant to this Credit Agreement or any other Credit Document; and
(iv) subject to Section 11.3 of this Credit Agreement, to take such action as
the Collateral Agent deems appropriate on its behalf to exercise the powers
delegated to the Collateral Agent by the terms hereof or the other Credit
Documents together with such powers as are reasonably incidental thereto to
carry out the purposes hereof and thereof. As to any matters not expressly
provided for by this Credit Agreement and the other Credit Documents (including,
without limitation, enforcement or collection of the Loans), the Collateral
Agent shall not be required to exercise any discretion or take any action, but
shall be required to act or to refrain from acting (and shall be fully protected
61
in so acting or refraining from acting) upon the instructions of the Required
Lenders, and such instructions of the Lenders shall be binding upon all Lenders
and all makers of Loans.
11.2 NATURE OF DUTIES.
The Collateral Agent shall have no duties or responsibilities except those
expressly set forth in this Credit Agreement or in the other Credit Documents.
The duties of the Collateral Agent shall be mechanical and administrative in
nature. The Collateral Agent shall not have by reason of this Credit Agreement
or any other Credit Document a fiduciary relationship in respect of any Lender.
Nothing in this Credit Agreement or any other Credit Document, express or
implied, is intended to or shall be construed to impose upon the Collateral
Agent any obligations in respect of this Credit Agreement or any other Credit
Document except as expressly set forth herein or therein. Each Lender shall make
its own independent investigation of the financial condition and affairs of the
Credit Parties in connection with the making and the continuance of the Loans
hereunder and shall make its own appraisal of the creditworthiness of the Credit
Parties and the value of the Collateral, and the Collateral Agent shall have no
duty or responsibility, either initially or on a continuing basis, to provide
any Lender with any credit or other information with respect thereto, whether
coming into its possession before the initial Loan hereunder or at any time or
times thereafter, provided that, upon the reasonable request of a Lender, the
Collateral Agent shall provide to such Lender any documents or reports delivered
to the Collateral Agent by the Credit Parties pursuant to the terms of this
Credit Agreement or any other Credit Document. If the Collateral Agent seeks the
consent or approval of the Required Lenders to the taking or refraining from
taking any action hereunder, the Collateral Agent shall send notice thereof to
each Lender.
11.3 RIGHTS, EXCULPATION, ETC.
The Collateral Agent and its directors, officers, agents or employees shall
not be liable for any action taken or omitted to be taken by them under or in
connection with this Credit Agreement or the other Credit Documents, except for
their own gross negligence or willful misconduct as determined by a final
judgment of a court of competent jurisdiction. Without limiting the generality
of the foregoing, the Collateral Agent (i) may treat the payee of any Loan as
the owner thereof until the Collateral Agent receives written notice of the
assignment or transfer thereof, pursuant to Section 10.3 hereof, signed by such
payee and in form satisfactory to the Collateral Agent; (ii) may consult with
legal counsel (including, without limitation, counsel to the Collateral Agent or
counsel to the Credit Parties), independent public accountants, and other
experts selected by any of them and shall not be liable for any action taken or
omitted to be taken in good faith by any of them in accordance with the advice
of such counsel or experts; (iii) makes no warranty or representation to any
Lender and shall not be responsible to any Lender for any statements,
certificates, warranties or representations made in or in connection with this
Credit Agreement or the other Credit Documents; (iv) shall not have any duty to
ascertain or to inquire as to the performance or observance of any of the terms,
covenants or conditions of this Credit Agreement or the other Credit Documents
on the part of any Person, the existence or possible existence of any Default or
Event of Default, or to inspect the Collateral or other property (including,
without limitation, the books and records) of any Person; (v) shall not be
responsible to any Lender for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Credit Agreement or
the other Credit Documents or any
62
other instrument or document furnished pursuant hereto or thereto; and (vi)
shall not be deemed to have made any representation or warranty regarding the
existence, value or collectibility of the Collateral, the existence, priority or
perfection of the Collateral Agent's Lien thereon, or any certificate prepared
by any Credit Party in connection therewith, nor shall the Collateral Agent be
responsible or liable to the Lenders for any failure to monitor or maintain any
portion of the Collateral. The Collateral Agent may at any time request
instructions from the Lenders with respect to any actions or approvals which by
the terms of this Credit Agreement or of any of the other Credit Documents the
Collateral Agent is permitted or required to take or to grant, and if such
instructions are promptly requested, the Collateral Agent shall be absolutely
entitled to refrain from taking any action or to withhold any approval under any
of the Credit Documents until it shall have received such instructions from the
Lenders. Without limiting the foregoing, no Lender shall have any right of
action whatsoever against the Collateral Agent as a result of the Collateral
Agent acting or refraining from acting under this Credit Agreement or any of the
other Credit Documents in accordance with the instructions of the Required
Lenders.
11.4 RELIANCE.
The Collateral Agent shall be entitled to rely upon any written notices,
statements, certificates, orders or other documents or any telephone message
believed by it in good faith to be genuine and correct and to have been signed,
sent or made by the proper Person, and with respect to all matters pertaining to
this Credit Agreement or any of the other Credit Documents and its duties
hereunder or thereunder, upon advice of counsel selected by it.
11.5 INDEMNIFICATION.
To the extent that the Collateral Agent is not reimbursed and indemnified
by any Credit Party, the Lenders will reimburse and indemnify the Collateral
Agent from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses, advances or disbursements
of any kind or nature whatsoever which may be imposed on, incurred by, or
asserted against the Collateral Agent in any way relating to or arising out of
this Credit Agreement or any of the other Credit Documents or any action taken
or omitted by the Collateral Agent under this Credit Agreement or any of the
other Credit Documents, in proportion to each Lender's Pro Rata Share,
including, without limitation, advances and disbursements made pursuant to
Section 11.5; PROVIDED, HOWEVER, that no Lender shall be liable for any portion
of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses, advances or disbursements for which there has
been a final judicial determination that such liability resulted from the
Collateral Agent's gross negligence or willful misconduct. The obligations of
the Lenders under this Section 11.5 shall survive the payment in full of the
Loans and the termination of this Credit Agreement and of the other Credit
Documents.
11.6 COLLATERAL AGENT INDIVIDUALLY.
With respect to its Pro Rata Share of the Total Commitment hereunder and
the Loans made by it, the Collateral Agent shall have and may exercise the same
rights and powers hereunder and is subject to the same obligations and
liabilities as and to the extent set forth herein for any other Lender or maker
of a Loan. The terms "Lenders" or "Required Lenders" any similar terms shall,
unless the context clearly otherwise indicates, include the Collateral Agent in
63
its individual capacity as a Lender or one of the "Required Lenders." The
Collateral Agent and its Affiliates may accept deposits from, lend money to, and
generally engage in any kind of banking, trust or other business with the
Borrower as if it were not acting as the Collateral Agent pursuant hereto
without any duty to account to the other Lenders.
11.7 SUCCESSOR COLLATERAL AGENT.
(a) The Collateral Agent may resign from the performance of all its
functions and duties hereunder and under the other Credit Documents at any time
by giving at least thirty (30) Business Days' prior written notice to the
Borrower and each Lender. Such resignation shall take effect upon the acceptance
by a successor Collateral Agent of appointment pursuant to clauses (b) and (c)
below or as otherwise provided below.
(b) Upon any such notice of resignation, the Required Lenders shall
appoint a successor Collateral Agent. Upon the acceptance of any appointment as
Collateral Agent hereunder by a successor Collateral Agent, such successor
Collateral Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the Collateral Agent, and the
Collateral Agent shall be discharged from its duties and obligations under this
Credit Agreement and the other Credit Documents. After the Collateral Agent's
resignation hereunder as the Collateral Agent, the provisions of this Section 11
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was the Collateral Agent under this Credit Agreement and the other
Credit Documents.
(c) If a successor Collateral Agent shall not have been so appointed
within said thirty (30) Business Day period, the Collateral Agent shall then
appoint a successor Collateral Agent who shall serve as the Collateral Agent
until such time, if any, as the Required Lenders appoint a successor Collateral
Agent as provided above.
11.8 COLLATERAL MATTERS.
(a) [intentionally omitted]
(b) The Lenders hereby irrevocably authorize the Collateral Agent, at
its option and in its discretion, to release any Lien granted to or held by the
Collateral Agent upon any Collateral upon termination of the Total Commitment
and payment and satisfaction of all Loans and all other Credit Party Obligations
in accordance with the terms hereof; or constituting property being sold or
disposed of in compliance with the terms of this Credit Agreement and the other
Credit Documents; or constituting property in which the Credit Parties owned no
interest at the time the Lien was granted or at any time thereafter; or if
approved, authorized or ratified in writing by the requisite Lenders. Upon
request by the Collateral Agent at any time, the Lenders will confirm in writing
the Collateral Agent's authority to release particular types or items of
Collateral pursuant to this Section 11.8(b).
(c) Without in any manner limiting the Collateral Agent's authority to
act without any specific or further authorization or consent by the Lenders (as
set forth in Section 11.8(b), each Lender agrees to confirm in writing, upon
request by the Collateral Agent, the authority to release Collateral conferred
upon the Collateral Agent under Section 11.8. Upon receipt by the Collateral
Agent of confirmation from the requisite Lenders of its authority to
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release any particular item or types of Collateral, and upon prior written
request by any Credit Party, the Collateral Agent shall (and is hereby
irrevocably authorized by the Lenders to) execute such documents as may be
necessary to evidence the release of the Liens granted to the Collateral Agent
for the benefit of the Lenders upon such Collateral; PROVIDED, HOWEVER, that (i)
the Collateral Agent shall not be required to execute any such document on terms
which, in the Collateral Agent's opinion, would expose the Collateral Agent to
liability or create any obligations or entail any consequence other than the
release of such Liens without recourse or warranty, and (ii) such release shall
not in any manner discharge, affect or impair the Credit Party Obligations or
any Lien upon (or obligations of any Credit Party in respect of) all interests
in the Collateral retained by any Credit Party.
(d) The Collateral Agent shall have no obligation whatsoever to any
Lender to assure that the Collateral exists or is owned by the Credit Parties or
is cared for, protected or insured or has been encumbered or that the Lien
granted to the Collateral Agent pursuant to this Credit Agreement or any other
Credit Document has been properly or sufficiently or lawfully created,
perfected, protected or enforced or is entitled to any particular priority, or
to exercise at all or in any particular manner or under any duty of care,
disclosure or fidelity, or to continue exercising, any of the rights,
authorities and powers granted or available to the Collateral Agent in this 11.8
or in any other Credit Document, it being understood and agreed that in respect
of the Collateral, or any act, omission or event related thereto, the Collateral
Agent may act in any manner it may deem appropriate, in its sole discretion,
given the Collateral Agent's own interest in the Collateral as one of the
Lenders and that the Collateral Agent shall have no duty or liability whatsoever
to any other Lender, except as otherwise provided herein.
11.9 AGENCY FOR PERFECTION. Each Lender hereby appoints the Collateral
Agent and each other Lender as agent and bailee for the purpose of perfecting
the security interests in and liens upon the Collateral in assets which, in
accordance with Article 9 of the Uniform Commercial Code, can be perfected only
by possession or control (or where the security interest of a secured party with
possession or control has priority over the security interest of another secured
party) and the Collateral Agent and each Lender hereby acknowledges that it
holds possession of or otherwise controls any such Collateral for the benefit of
the Collateral Agent and the Lenders as secured party. Should any Lender obtain
possession or control of any such Collateral, such Lender shall notify the
Collateral Agent thereof, and, promptly upon the Collateral Agent's request
therefor shall deliver such Collateral to the Collateral Agent or in accordance
with the Collateral Agent's instructions. In addition, the Collateral Agent
shall also have the power and authority hereunder to appoint such other
sub-agents as may be necessary or required under applicable state law or
otherwise to perform its duties and enforce its rights with respect to the
Collateral and under the Credit Documents. Each Credit Party by its execution
and delivery of this Credit Agreement hereby consents to the foregoing.
[Signature Pages to Follow]
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Each of the parties hereto has caused a counterpart of this Credit
Agreement to be duly executed and delivered as of the date first above written.
BORROWER: PRG-SCHULTZ USA, INC.,
a Georgia corporation
By: /s/ James E. Moylan, Jr.
------------------------------------------
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/ James E. Moylan, Jr.
------------------------------------------
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/ James E. Moylan, Jr.
------------------------------------------
Name: James E. Moylan, Jr.
Title: Senior Vice President - Finance,
Chief Financial Officer, Assistant
Secretary and Assistant Treasurer
PRGRS, INC., a Delaware corporation
By: /s/ James B. McCurry
------------------------------------------
Name: James B. McCurry
Title: President
66
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/ James E. Moylan, Jr.
------------------------------------------
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/ James E. Moylan, Jr.
------------------------------------------
Name: James E. Moylan, Jr.
Title: Executive Vice President - Finance,
Chief Financial Officer and Treasurer
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LENDERS: BLUM STRATEGIC PARTNERS II, L.P.
By: /s/ Jose S. Medeiros
--------------------------
Name: Jose S. Medeiros
Title: Partner
909 Montgomery Street, Suite 400
San Francisco, CA 94133
Attention: Jose S. Medeiros
Telephone: 415-288-7201
Facsimile: 415-283-0601
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LENDERS: BLUM STRATEGIC PARTNERS II
GMBH & CO. KG.
By: /s/ Jose S. Medeiros
--------------------------
Name: Jose S. Medeiros
Title: Partner
909 Montgomery Street, Suite 400
San Francisco, CA 94133
Attention: Jose S. Medeiros
Telephone: 415-288-7201
Facsimile: 415-283-0601
69
LENDERS: PARKCENTRAL GLOBAL HUB LIMITED
By: /s/ Steven Blasnik
--------------------------
Name: Steven Blasnik
Title: President
2300 West Plano Parkway
Plano, TX 75075
Attention: Steve Blasnik
Telephone: 972-535-1900
Facsimile: 972-535-1997
70
71
LENDERS: PETRUS SECURITIES L.P.
By: /s/ Steven Blasnik
--------------------------
Name: Steven Blasnik
Title: President of General Partner
2300 West Plano Parkway
Plano, TX 75075
Attention: Steve Blasnik
Telephone: 972-535-1919
Facsimile: 972-535-1997
72
COLLATERAL AGENT: BLUM STRATEGIC PARTNERS II, L.P.
By: /s/ Jose S. Medeiros
--------------------------
Name: Jose S. Medeiros
Title: Partner
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EXHIBIT 3
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
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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, 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
3
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 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
4
Agent or any Lender of its rights and remedies hereunder (except as
may be required by laws affecting the offering and sale of
securities).
(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
5
or any interest therein, except as permitted under the Credit
Agreement and the other Credit Documents.
(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.
6
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 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
7
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 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.
8
(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
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;
9
(vii) to sign and endorse any drafts, assignments, proxies,
stock powers, verifications, notices and other documents relating
to the Pledged Collateral of such Pledgor;
(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.
10
(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 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
11
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.
(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
12
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
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
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.
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
14
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.
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.
15
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 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
16
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 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/James E. Moylan, Jr.
------------------------------
Name: James E. Moylan, Jr.
Title: Executive Vice President - Finance
Chief Financial Officer
and Treasurer
PRG SCHULTZ INTERNATIONAL, INC.,
a Georgia corporation
By: /s/James E. Moylan, Jr.
------------------------------
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/James E. Moylan, Jr
------------------------------
Name: James E. Moylan, Jr.
Title: Senior Vice President - Financee
Chief Financial Officer,
Assistant Secretary and Assistant Treasurer
PRGRS, INC., a Delaware corporation
By: /s/ James B. McCurry
--------------------------------
Name: James B. McCurry
Title: President
Pledge Agreement
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/James E. Moylan, Jr.
-------------------------------
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/James E. Moylan, Jr.
-------------------------------
Name: James E. Moylan, Jr.
Title: Executive Vice President - Finance,
Chief Financial Officer and Treasurer
Pledge Agreement
COLLATERAL AGENT: BLUM STRATEGIC PARTNERS II, L.P.
---------------
By: /s/Jose S. Medeiros
-------------------------------
Name: Jose S. Medeiros
Title: Partner
Pledge Agreement
EXHIBIT 4
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "SECURITY 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 an "OBLIGOR", and collectively the "OBLIGORS") 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 Obligors shall have executed and delivered this
Security Agreement in favor of 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 in effect in the State of New York on the date hereof
(the "UCC") are used herein as so defined: Accession, Account,
As-Extracted Collateral, Chattel Paper, Commercial Tort Claim,
Commingled Goods, Consumer Goods, Deposit Account, Document,
Equipment, Farm Products, Fixtures, General Intangible, Goods,
Instrument, Inventory, Investment Property, Letter-of-Credit Right,
Manufactured Home, Proceeds, Software, Standing Timber, Supporting
Obligation and Tangible Chattel Paper.
(b) In addition, the following terms shall have the following
meanings:
"COLLATERAL" has the meaning provided in Section 2 hereof.
"COPYRIGHT LICENSES": any written agreement, naming any Obligor
as licensor, granting any right under any Copyright including, without
limitation, any thereof referred to in SCHEDULE 6.17 to the Credit
Agreement.
"COPYRIGHTS": (a) all copyrights registered in the United States
or any other country in all Works, now existing or hereafter created
or acquired, all registrations and recordings thereof, and all
applications in connection therewith, including, without limitation,
registrations, recordings and applications in the United States
Copyright office including, without limitation, any thereof referred
to in SCHEDULE 6.17 to the Credit Agreement, and (b) all renewals
thereof including, without limitation, any thereof referred to in
SCHEDULE 6.17 of the Credit Agreement.
"INDEMNIFIED PARTY": has the meaning provided in Section 8(b)
hereof.
"PATENT LICENSE": all agreements, whether written or oral,
providing for the grant by or to an Obligor of any right to
manufacture, use or sell any invention covered by a Patent, including,
without limitation, any thereof referred to in SCHEDULE 6.17 of the
Credit Agreement.
"PATENTS": (a) all letters patent of the United States or any
other country and all reissues and extensions thereof, including,
without limitation, any thereof referred to in SCHEDULE 6.17 of the
Credit Agreement, and (b) all applications for letters patent of the
United States or any other country and all divisions, continuations
and continuations-in-part thereof, including, without limitation, any
thereof referred to in SCHEDULE 6.17 of the Credit Agreement.
"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.
"TRADEMARK LICENSE": means any agreement, written or oral,
providing for the grant by or to an Obligor of any right to use any
Trademark, including, without limitation, any thereof referred to in
SCHEDULE 6.17 of the Credit Agreement.
"TRADEMARKS": (a) all trademarks, trade names, corporate names,
company names, business names, fictitious business names, trade
styles, service marks, logos and other source or business identifiers,
-2-
and the goodwill associated therewith, now existing or hereafter
adopted or acquired, all registrations and recordings thereof, and all
applications in connection therewith, whether in the United States
Patent and Trademark Office or in any similar office or agency of the
United States, any State thereof or any other country or any political
subdivision thereof, or otherwise, including, without limitation, any
thereof referred to in SCHEDULE 6.17 to the Credit Agreement, and (b)
all renewals thereof.
"WORK": any work which is subject to copyright protection
pursuant to Title 17 of the United States Code.
2. GRANT OF SECURITY INTEREST IN THE COLLATERAL. 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 Obligor hereby grants to the Collateral Agent, 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 Obligor in and to all personal
property of such Obligor of whatever type or description, whether now owned or
existing or owned, acquired, or arising hereafter, including, without
limitation, the following (collectively, the "COLLATERAL"):
(a) all Accounts;
(b) all cash and currency;
(c) all Chattel Paper;
(d) all Commercial Tort Claims identified on SCHEDULE 2(D) attached
hereto;
(e) all Copyrights;
(f) all Copyright Licenses;
(g) all Deposit Accounts;
(h) all Documents;
(i) all Equipment;
(j) all Fixtures;
(k) all General Intangibles;
(l) all Goods;
(m) all Instruments;
(n) all Inventory;
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(o) all Investment Property;
(p) all Letter-of-Credit Rights;
(q) all Patents;
(r) all Patent Licenses;
(s) all Software;
(t) all Supporting Obligations;
(u) all Trademarks;
(v) all Trademark Licenses; and
(w) to the extent not otherwise included, all Accessions and all
Proceeds of any and all of the foregoing.
The Obligors and the Collateral Agent, hereby acknowledge and agree that
the security interest created hereby in the Collateral (i) constitutes
continuing collateral security for all of the Secured Obligations, whether now
existing or hereafter arising and (ii) is not to be construed as an assignment
of any Copyrights, Copyright Licenses, Patents, Patent Licenses, Trademarks or
Trademark Licenses.
3. PROVISIONS RELATING TO ACCOUNTS.
(a) Anything herein to the contrary notwithstanding, each of the
Obligors shall remain liable under each of the Accounts to observe and
perform all the conditions and obligations to be observed and performed by
it thereunder, all in accordance with the terms of any agreement giving
rise to each such Account. Neither the Collateral Agent nor any of the
Lenders shall have any obligation or liability under any Account (or any
agreement giving rise thereto) by reason of or arising out of this Security
Agreement or the receipt by the Collateral Agent or any Lender of any
payment relating to such Account pursuant hereto, nor shall the Collateral
Agent nor any Lender be obligated in any manner to perform any of the
obligations of an Obligor under or pursuant to any Account (or any
agreement giving rise thereto), to make any payment, to make any inquiry as
to the nature or the sufficiency of any payment received by it or as to the
sufficiency of any performance by any party under any Account (or any
agreement giving rise thereto), to present or file any claim, to take any
action to enforce any performance or to collect the payment of any amounts
which may have been assigned to it or to which it may be entitled at any
time or times.
(b) Once during each calendar year or at any time after the occurrence
and during the continuation of an Event of Default, the Collateral Agent
shall have the right, but not the obligation, to make test verifications
-4-
of the Accounts in any manner and through any medium that it reasonably
considers advisable, and the Obligors shall furnish all such assistance and
information as the Collateral Agent may require in connection with such test
verifications. At any time and from time to time, upon the Collateral
Agent's reasonable request and at the expense of the Obligors, the Obligors
shall cause independent public accountants or others satisfactory to the
Collateral Agent to furnish to the Collateral Agent reports showing
reconciliations, aging and test verifications of, and trial balances for,
the Accounts. The Collateral Agent in its own name or in the name of others
may communicate with account debtors on the Accounts to verify with them to
the Collateral Agent's reasonable satisfaction the existence, amount and
terms of any Accounts.
4. REPRESENTATIONS AND WARRANTIES. Each Obligor hereby represents and
warrants to the Collateral Agent and each of the Lenders that so long as any of
the Secured Obligations remain outstanding or any Credit Document is in effect:
(a) LEGAL NAME; CHIEF EXECUTIVE OFFICE.
(i) Each Obligor's exact legal name, taxpayer identification
number, organization identification number, state of incorporation or
formation, principal place of business and chief executive office are
(and for the four months prior to the date hereof has been) as set
forth on SCHEDULE 4(A)(I) attached hereto.
(ii) Other than as set forth on SCHEDULE 4(A)(II) attached
hereto, no Obligor has been party to a merger, consolidation or other
change in structure or used any tradename in the four months prior to
the date hereof.
(b) OWNERSHIP. Each Obligor is the legal and beneficial owner of its
Collateral and has the right to pledge, sell, assign or transfer the same.
(c) SECURITY INTEREST/PRIORITY. This Security Agreement creates a
valid security interest in favor of the Collateral Agent, for the benefit
of the Lenders, in the Collateral of such Obligor and, when properly
perfected by filing, shall constitute a valid perfected security interest
in such Collateral, to the extent such security interest can be perfected
by filing under the UCC, free and clear of all Liens except for Permitted
Liens.
(d) TYPES OF COLLATERAL. None of the Collateral consists of, or is the
Accessions or the Proceeds of, As-Extracted Collateral, Consumer Goods,
Farm Products, Manufactured Homes or Standing Timber.
(e) ACCOUNTS. (i) Each Account of the Obligors and the papers and
documents relating thereto are genuine and in all material respects what
they purport to be, (ii) each Account arises out of (A) a bona fide sale of
goods sold and delivered by such Obligor (or is in the process of being
delivered) or (B) services theretofore actually rendered by such Obligor
to, the account debtor named therein, (iii) no Account of an Obligor is
evidenced by any Instrument or Chattel Paper unless such Instrument or
Chattel Paper has been theretofore endorsed over and delivered to, or
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submitted to the control of, the Collateral Agent or its designee and (iv)
no surety bond was required or given in connection with any Account of an
Obligor or the contracts or purchase orders out of which they arose.
(f) INVENTORY. No Inventory is held by an Obligor pursuant to
consignment, sale or return, sale on approval or similar arrangement.
(g) COPYRIGHTS, PATENTS AND TRADEMARKS.
(i) SCHEDULE 6.17 to the Credit Agreement includes all
Copyrights, Copyright Licenses, Patents, Patent Licenses, Trademarks
and Trademark Licenses owned by any Obligor in its own name, or to
which any Obligor is party, as of the date hereof.
(ii) To the best of each Obligor's knowledge, each Copyright,
Patent and Trademark of such Obligor is valid, subsisting, unexpired,
enforceable and has not been abandoned.
(iii) Except as set forth in SCHEDULE 6.17 to the Credit
Agreement, none of such Copyrights, Patents and Trademarks is the
subject of any licensing or franchise agreement.
(iv) No holding, decision or judgment has been rendered by any
Governmental Authority which would limit, cancel or question the
validity of any Copyright, Patent or Trademark.
(v) No action or proceeding is pending seeking to limit, cancel
or question the validity of any Copyright, Patent or Trademark, or
which would have a material adverse effect on the value of any
Copyright, Patent or Trademark.
(vi) All applications pertaining to the Copyrights, Patents and
Trademarks of each Obligor have been duly and properly filed, and all
registrations or letters pertaining to such Copyrights, Patents and
Trademarks have been duly and properly filed and issued, and all of
such Copyrights, Patents and Trademarks are valid and enforceable.
(vii) No Obligor has made any assignment or agreement in conflict
with the security interest in the Copyrights, Patents or Trademarks of
each Obligor hereunder.
5. COVENANTS. Each Obligor covenants that, so long as any of the Secured
Obligations remain outstanding or any Credit Document is in effect, such Obligor
shall:
(a) OTHER LIENS. Defend the Collateral against the claims and demands
of all other parties claiming an interest therein, keep the Collateral free
from all Liens, except for Permitted Liens, and not sell, exchange,
-6-
transfer, assign, lease or otherwise dispose of the Collateral or any
interest therein, except as permitted under the Credit Agreement.
(b) PRESERVATION OF COLLATERAL. Keep the Collateral in good order,
condition and repair and not use the Collateral in violation of the
provisions of this Security Agreement or any other agreement relating to
the Collateral or any policy insuring the Collateral or any applicable
statute, law, bylaw, rule, regulation or ordinance.
(c) INSTRUMENTS/TANGIBLE CHATTEL PAPER/DOCUMENTS. If any amount
payable under or in connection with any of the Collateral shall be or
become evidenced by any Instrument or Tangible Chattel Paper, or if any
property constituting Collateral shall be stored or shipped subject to a
Document, such Obligor shall ensure that (i) such Instrument, Tangible
Chattel Paper or Document is either in the possession of such Obligor at
all times or, if requested by the Collateral Agent, is immediately
delivered to the Collateral Agent or its designee, duly endorsed in a
manner satisfactory to the Collateral Agent and (ii) any Collateral
consisting of Tangible Chattel Paper is marked with a legend acceptable to
the Collateral Agent indicating the Collateral Agent's security interest in
such Tangible Chattel Paper.
(d) CHANGE IN STRUCTURE, LOCATION OR TYPE. Not, without providing 10
days prior written notice to the Collateral Agent and without authorizing
the Collateral Agent to file such financing statements and amendments to
any previously filed financing statements as the Collateral Agent may
require, change its name or state of formation or be party to a merger,
consolidation or other change in structure or use any tradename.
(e) INSPECTION. Upon reasonable notice, and during reasonable hours,
at all times allow the Collateral Agent or its representatives to visit and
inspect the Collateral as set forth in SECTION 7.10 of the Credit
Agreement.
(f) AUTHORIZATION. Authorize the Collateral Agent to file one or more
financing statements disclosing the Collateral Agent's security interest in
the Collateral. Each Obligor 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
Collateral of such Obligor.
(g) PERFECTION OF SECURITY INTEREST. Execute and deliver to the
Collateral Agent or its designee such agreements, assignments or
instruments (including affidavits, notices, reaffirmations and amendments
and restatements of existing documents, as the Collateral Agent may
reasonably request) and do all such other things as the Collateral Agent
may reasonably deem necessary or appropriate (i) to assure to the
Collateral Agent the effectiveness and priority of its security interests
hereunder, including (A) such financing statements (including renewal
statements) or amendments thereof or supplements thereto or other
instruments as the Collateral Agent may from time to time reasonably
request in order to perfect and maintain the security interests granted
hereunder in accordance with the UCC, (B) with regard to Copyrights,
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a Notice of Grant of Security Interest in Copyrights for filing with the
United States Copyright Office in the form of SCHEDULE 5(F)(I) attached
hereto, (C) with regard to Patents, a Notice of Grant of Security Interest
in Patents for filing with the United States Patent and Trademark Office in
the form of SCHEDULE 5(F)(II) attached hereto and (D) with regard to
Trademarks, a Notice of Grant of Security Interest in Trademarks for filing
with the United States Patent and Trademark Office in the form of SCHEDULE
5(F)(III) attached hereto, (ii) to consummate the transactions contemplated
hereby and (iii) to otherwise protect and reasonably assure the Collateral
Agent of its rights and interests hereunder. To that end, each Obligor
agrees that the Collateral Agent may file one or more financing statements
(with collateral descriptions broader, including without limitation, "all
assets" and/or "all personal property" collateral descriptions, and/or less
specific than the description of the Collateral contained herein)
disclosing the Collateral Agent's security interest in any or all of the
Collateral of such Obligor without, to the extent permitted by law, such
Obligor's signature thereon, and further each Obligor also hereby
irrevocably makes, constitutes and appoints the Collateral Agent, its
nominee or any other Person whom the Collateral Agent may designate, as
such Obligor's attorney-in-fact with full power and for the limited purpose
to sign in the name of such Obligor any such financing statements
(including renewal statements), amendments and supplements to financing
statements, renewal financing statements, notices or any similar documents
which in the Collateral Agent's reasonable discretion would be necessary,
appropriate or convenient in order to perfect and maintain perfection of
the security interests granted hereunder, such power, being coupled with an
interest, being and remaining irrevocable and in effect so long as the
Credit Agreement is in effect or any amounts payable thereunder or under
any other Credit Document is in effect. Each Obligor hereby agrees that a
carbon, photographic or other reproduction of this Security Agreement or
any such financing statement is sufficient for filing as a financing
statement by the Collateral Agent without notice thereof to such Obligor
wherever the Collateral Agent may in its reasonable discretion desire to
file the same. In the event for any reason the law of any jurisdiction
other than New York becomes or is applicable to the Collateral of any
Obligor or any part thereof, or to any of the Secured Obligations, such
Obligor agrees to execute and deliver all such instruments and to do all
such other things as the Collateral Agent in its sole discretion reasonably
deems necessary or appropriate to preserve, protect and enforce the
security interests of the Collateral Agent under the law of such other
jurisdiction (and, if an Obligor shall fail to do so promptly upon the
request of the Collateral Agent, then the Collateral Agent or its designee
may execute any and all such requested documents on behalf of such Obligor
pursuant to the power of attorney granted hereinabove). If any Collateral
is in the possession or control of an Obligor's agents and the Collateral
Agent so requests, such Obligor agrees to notify such agents in writing of
the Collateral Agent's security interest therein and, upon the Collateral
Agent's request, instruct them to hold all such Collateral for the
Collateral Agent's (or its designee's) account and subject to the
Collateral Agent's (or its designee's) instructions. Each Obligor agrees to
mark its books and records to reflect the security interest of the
Collateral Agent in the Collateral.
(h) CONTROL. Execute and deliver all agreements, assignments,
instruments or other documents as the Collateral Agent shall reasonably
request for the purpose of obtaining and maintaining control within the
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meaning of the UCC with respect to any Collateral consisting of Deposit
Accounts, Investment Property, Letter-of-Credit Rights and Electronic
Chattel Paper.
(i) COLLATERAL HELD BY WAREHOUSEMAN, BAILEE, ETC. If any Collateral is
at any time in the possession or control of a warehouseman, bailee, agent
or processor of such Obligor, (i) notify the Collateral Agent of such
possession or control, (ii) notify such Person of the Collateral Agent's
security interest in such Collateral, (iii) instruct such Person to hold
all such Collateral for the Collateral Agent's (or its designee's) account
and subject to the Collateral Agent's (or its designee's) instructions and
(iv) use its best efforts to obtain an acknowledgment from such Person that
it is holding such Collateral for the benefit of the Collateral Agent and
the Lenders.
(j) TREATMENT OF ACCOUNTS. Not grant or extend the time for payment of
any Account, or compromise or settle any Account for less than the full
amount thereof, or release any Person or property, in whole or in part,
from payment thereof, or allow any credit or discount thereon, other than
as normal and customary in the ordinary course of an Obligor's business.
(k) COVENANTS RELATING TO COPYRIGHTS.
(i) Employ the Copyright for each Work with such notice of
copyright as may be required by law to secure copyright protection.
(ii) Not do any act or knowingly omit to do any act whereby any
material Copyright may become invalidated and (A) not do any act, or
knowingly omit to do any act, whereby any material Copyright may
become injected into the public domain; (B) notify the Collateral
Agent immediately if it knows that any material Copyright may become
injected into the public domain or of any adverse determination or
development (including, without limitation, the institution of, or any
such determination or development in, any court or tribunal in the
United States or any other country) regarding an Obligor's ownership
of any such Copyright or its validity; (C) take all necessary steps as
it shall deem appropriate under the circumstances, to maintain and
pursue each application (and to obtain the relevant registration) and
to maintain each registration of each material Copyright owned by an
Obligor including, without limitation, filing of applications for
renewal where necessary; and (D) promptly notify the Collateral Agent
of any material infringement of any material Copyright of an Obligor
of which it becomes aware and take such actions as it shall reasonably
deem appropriate under the circumstances to protect such Copyright,
including, where appropriate, the bringing of suit for infringement,
seeking injunctive relief and seeking to recover any and all damages
for such infringement.
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(iii) Not make any assignment or agreement in conflict with the
security interest in the Copyrights of each Obligor hereunder.
(l) COVENANTS RELATING TO PATENTS AND TRADEMARKS.
(i) (A) Continue to use each Trademark on each and every
trademark class of goods applicable to its current line as reflected
in its current catalogs, brochures and price lists in order to
maintain such Trademark in full force free from any claim of
abandonment for non-use, (B) maintain as in the past the quality of
products and services offered under such Trademark, (C) employ such
Trademark with the appropriate notice of registration, (D) not adopt
or use any mark which is confusingly similar or a colorable imitation
of such Trademark unless the Collateral Agent shall obtain a perfected
security interest in such mark pursuant to this Security Agreement,
and (E) not (and not permit any licensee or sublicensee thereof to) do
any act or knowingly omit to do any act whereby any Trademark may
become invalidated.
(ii) Not do any act, or omit to do any act, whereby any Patent
may become abandoned or dedicated.
(iii) Notify the Collateral Agent immediately if it knows that
any application or registration relating to any Patent or Trademark
may become abandoned or dedicated, or of any adverse determination or
development (including, without limitation, the institution of, or any
such determination or development in, any proceeding in the United
States Patent and Trademark Office or any court or tribunal in any
country) regarding an Obligor's ownership of any Patent or Trademark
or its right to register the same or to keep and maintain the same.
(iv) Whenever an Obligor, either by itself or through an agent,
employee, licensee or designee, shall file an application for the
registration of any Patent or Trademark with the United States Patent
and Trademark Office or any similar office or agency in any other
country or any political subdivision thereof, such Obligor shall
report such filing to the Collateral Agent within five Business Days
after the last day of the fiscal quarter in which such filing occurs.
Upon request of the Collateral Agent, an Obligor shall execute and
deliver any and all agreements, instruments, documents and papers as
the Collateral Agent may reasonably request to evidence the Collateral
Agent's security interest in any Patent or Trademark and the goodwill
and general intangibles of an Obligor relating thereto or represented
thereby.
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(v) Take all reasonable and necessary steps, including, without
limitation, in any proceeding before the United States Patent and
Trademark Office, or any similar office or agency in any other country
or any political subdivision thereof, to maintain and pursue each
application (and to obtain the relevant registration) and to maintain
each registration of the Patents and Trademarks, including, without
limitation, filing of applications for renewal, affidavits of use and
affidavits of incontestability.
(vi) Promptly notify the Collateral Agent after it learns that
any Patent or Trademark included in the Collateral is infringed,
misappropriated or diluted by a third party and promptly sue for
infringement, misappropriation or dilution, to seek injunctive relief
where appropriate and to recover any and all damages for such
infringement, misappropriation or dilution, or take such other actions
as it shall reasonably deem appropriate under the circumstances to
protect such Patent or Trademark.
(vii) Not make any assignment or agreement in conflict with the
security interest in the Patents or Trademarks of each Obligor
hereunder.
(m) NEW PATENTS, COPYRIGHTS AND TRADEMARKS. Promptly provide the
Collateral Agent with (i) a listing of all applications, if any, for new
Copyrights, Patents or Trademarks (together with a listing of the issuance
of registrations or letters on present applications), which new
applications and issued registrations or letters shall be subject to the
terms and conditions hereunder, and (ii) (A) with respect to Copyrights, a
duly executed Notice of Security Interest in Copyrights, (B) with respect
to Patents, a duly executed Notice of Security Interest in Patents, (C)
with respect to Trademarks, a duly executed Notice of Security Interest in
Trademarks or (D) such other duly executed documents as the Collateral
Agent may reasonably request in a form acceptable to counsel for the
Collateral Agent and suitable for recording to evidence the security
interest in the Copyright, Patent or Trademark which is the subject of such
new application.
(n) INSURANCE. Insure, repair and replace the Collateral of such
Obligor as set forth in the Credit Agreement. All insurance proceeds shall
be subject to the security interest of the Collateral Agent hereunder.
(o) COMMERCIAL TORT CLAIMS.
(i) Promptly notify the Collateral Agent in writing of the
initiation of any Commercial Tort Claim before any Governmental
Authority by or in favor of such Obligor or any of its Subsidiaries.
(ii) Execute and deliver such statements, documents and notices
and do and cause to be done all such things as the Collateral Agent
may reasonably deem necessary, appropriate or convenient, or as are
required by law, to create, perfect and maintain the Collateral
Agent's security interest in any Commercial Tort Claim.
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6. ADVANCES BY THE COLLATERAL AGENT. On failure of any Obligor 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 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 Obligors
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 Obligor, and no such advance
or expenditure therefor, shall relieve the Obligors of any default under the
terms of this Security 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 an
Obligor in appropriate proceedings and against which adequate reserves are being
maintained in accordance with GAAP.
7. 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").
8. REMEDIES.
(a) GENERAL REMEDIES. Upon the occurrence of an Event of Default and
during continuation thereof, the Collateral Agent shall have, in addition
to the rights and remedies provided herein, in the Credit Documents, in any
other documents relating to the Secured Obligations or by law (including,
but not limited to, levy of attachment, garnishment, and the rights and
remedies set forth in the Uniform Commercial Code of the jurisdiction
applicable to the affected Collateral), the rights and remedies of a
secured party under the UCC (regardless of whether the UCC is the law of
the jurisdiction where the rights and remedies are asserted and regardless
of whether the UCC applies to the affected Collateral), and further, the
Collateral Agent may, with or without judicial process or the aid and
assistance of others, (i) enter on any premises on which any of the
Collateral may be located and, without resistance or interference by the
Obligors, take possession of the Collateral, (ii) dispose of any Collateral
on any such premises, (iii) require the Obligors to assemble and make
available to the Collateral Agent at the expense of the Obligors any
Collateral at any place and time designated by the Collateral Agent which
is reasonably convenient to both parties, (iv) remove any Collateral from
any such premises for the purpose of effecting sale or other disposition
-12-
thereof, and/or (v) without demand and without advertisement, notice,
hearing or process of law, all of which each of the Obligors hereby waives
to the fullest extent permitted by law, at any place and time or times,
sell and deliver any or all Collateral held by or for it at public or
private sale, by one or more contracts, in one or more parcels, for cash,
upon credit or otherwise, at such prices and upon such terms as the
Collateral Agent deems advisable, in its sole discretion (subject to any
and all mandatory legal requirements). Each of the Obligors acknowledges
that any private sale referenced above may be at prices and on terms less
favorable to the seller than the prices and terms that might have been
obtained at a public sale and agrees that such private sale shall be deemed
to have been made in a commercially reasonable manner. Neither the
Collateral Agent's compliance with applicable law nor its disclaimer of
warranties relating to the Collateral shall be considered to adversely
affect the commercial reasonableness of any sale. In addition to all other
sums due to the Collateral Agent and the Lenders with respect to the
Secured Obligations, the Obligors shall pay the Collateral Agent and the
Lenders all reasonable documented costs and expenses incurred by the
Collateral Agent and the Lenders, including, but not limited to, reasonable
attorneys' fees and court costs, in obtaining or liquidating the
Collateral, in enforcing payment of the Secured Obligations, or in the
prosecution or defense of any action or proceeding by or against the
Collateral Agent, any Lender or the Obligors concerning any matter arising
out of or connected with this Security Agreement, any Collateral or the
Secured Obligations, including, without limitation, any of the foregoing
arising in, arising under or related to a case under the Debtor Relief
Laws. To the extent the rights of notice cannot be legally waived
hereunder, each Obligor agrees that any requirement of reasonable notice
shall be met if such notice is personally served on or mailed, postage
prepaid, to the Borrower in accordance with the notice provisions of
SECTION 10.1 of the Credit Agreement at least 10 days before the time of
sale or other event giving rise to the requirement of such notice. The
Collateral Agent shall not be obligated to make any sale or other
disposition of the Collateral regardless of notice having been given. To
the extent permitted by law, the Collateral Agent and any Lender may be a
purchaser at any such sale. To the extent permitted by applicable law, each
of the Obligors hereby waives all of its rights of redemption with respect
to any such sale. Subject to the provisions of applicable law, the
Collateral Agent may postpone or cause the postponement of the sale of all
or any portion of the Collateral by announcement at the time and place of
such sale, and such sale may, without further notice, to the extent
permitted by law, be made at the time and place to which the sale was
postponed, or the Collateral Agent may further postpone such sale by
announcement made at such time and place.
(b) REMEDIES RELATING TO ACCOUNTS. Upon the occurrence of an Event of
Default and during the continuation thereof, whether or not the Collateral
Agent has exercised any or all of its rights and remedies hereunder, each
Obligor will, promptly upon request of the Collateral Agent, instruct all
account debtors to remit all payments in respect of Accounts to a mailing
location selected by the Collateral Agent (or its designee). In addition,
the Collateral Agent or its designee shall have the right to enforce any
Obligor's rights against its customers and account debtors and may notify
any of Obligor's customers and account debtors that the Accounts of such
Obligor have been assigned to the Collateral Agent or of the Collateral
Agent's security interest therein, and may (either in its own name or in
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in the name of an Obligor or both) demand, collect (including without
limitation by way of a lockbox arrangement), receive, take receipt for,
sell, sue for, compound, settle, compromise and give acquittance for any
and all amounts due or to become due on any Account, and, in the Collateral
Agent's discretion, file any claim or take any other action or proceeding
to protect and realize upon the security interest of the Collateral Agent
in the Accounts. Each Obligor acknowledges and agrees that the Proceeds of
its Accounts remitted to or on behalf of the Collateral Agent in accordance
with the provisions hereof shall be solely for the Collateral Agent's own
convenience and that such Obligor shall not have any right, title or
interest in such Accounts or in any such other amounts except as expressly
provided herein. The Collateral Agent shall have no liability or
responsibility to any Obligor for acceptance in good faith of a check,
draft or other order for payment of money bearing the legend "payment in
full" or words of similar import or any other restrictive legend or
endorsement or be responsible for determining the correctness of any
remittance. Each Obligor hereby agrees to indemnify the Collateral Agent
and each Lender from and against all liabilities, damages, losses, actions,
claims, judgments, costs, expenses, charges and reasonable attorneys' fees
suffered or incurred by the Collateral Agent or such Lender (each, an
"INDEMNIFIED PARTY") because of the maintenance of the foregoing
arrangements except as relating to or arising out of the gross negligence
or willful misconduct of an Indemnified Party or its officers, employees or
agents. In the case of any investigation, litigation or other proceeding,
the foregoing indemnity shall be effective whether or not such
investigation, litigation or proceeding is brought by an Obligor, its
directors, shareholders or creditors or an Indemnified Party or any other
Person or any other Indemnified Party is otherwise a party thereto.
(c) ACCESS. In addition to the rights and remedies hereunder, upon the
occurrence of an Event of Default and during the continuance thereof, the
Collateral Agent shall have the right to enter and remain upon the various
premises of the Obligors without cost or charge to the Collateral Agent,
and use the same, together with materials, supplies, books and records of
the Obligors for the purpose of collecting and liquidating the Collateral,
or for preparing for sale and conducting the sale of the Collateral,
whether by foreclosure, auction or otherwise. In addition, the Collateral
Agent may remove Collateral, or any part thereof, from such premises and/or
any records with respect thereto, in order to effectively collect or
liquidate such Collateral.
(d) NONEXCLUSIVE NATURE OF REMEDIES. Failure by the Collateral Agent
or any Lender to exercise any right, remedy or option under this Security
Agreement, any other Credit Document, any other document relating to the
Secured Obligations or as provided by law, or any delay by the Collateral
Agent or any Lender in exercising the same, shall not operate as a waiver
of any such right, remedy or option. No waiver hereunder shall be effective
unless it is in writing, signed by the party against whom such waiver is
sought to be enforced and then only to the extent specifically stated,
which in the case of the Collateral Agent shall only be granted as provided
herein. To the extent permitted by law, neither the Collateral Agent, any
Lender nor any party acting as attorney for the Collateral Agent or any
Lender, shall be liable hereunder for any acts or omissions or for any
error of judgment or mistake of fact or law other than their gross
negligence or willful misconduct hereunder. The rights and remedies of the
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Collateral Agent and the Lenders under this Security Agreement shall be
cumulative and not exclusive of any other right or remedy which the
Collateral Agent or any Lender may have.
(e) RETENTION OF COLLATERAL. 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 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 Collateral in satisfaction of any Secured Obligations for
any reason.
(f) 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 each Lender is legally entitled, the Obligors 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 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 Obligors or to whomsoever a
court of competent jurisdiction shall determine to be entitled thereto.
9. RIGHTS OF THE COLLATERAL AGENT.
(a) POWER OF ATTORNEY. In addition to other powers of attorney
contained herein, each Obligor hereby designates and appoints the
Collateral Agent and each of its designees or agents, as attorney-in-fact
of such Obligor, irrevocably and with power of substitution, with authority
to take any or all of the following actions upon the occurrence and during
the continuance of an Event of Default:
(i) to demand, collect, settle, compromise, adjust, give
discharges and releases, all as the Collateral Agent may reasonably
determine;
(ii) to commence and prosecute any actions at any court for the
purposes of collecting any Collateral 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 receive, open and dispose of mail addressed to an Obligor
and endorse checks, notes, drafts, acceptances, money orders, bills of
lading, warehouse receipts or other instruments or documents
evidencing payment, shipment or storage of the goods giving rise to
-15-
the Collateral of such Obligor on behalf of and in the name of such
Obligor, or securing, or relating to such Collateral;
(iii) to pay or discharge taxes, liens, security interests or
other encumbrances levied or placed on or threatened against the
Collateral;
(iv) to direct any parties liable for any payment in connection
with any of the 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;
(v) 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 Collateral;
(viii) to sell, assign, transfer, make any agreement in respect
of, or otherwise deal with or exercise rights in respect of, any
Collateral or the goods or services which have given rise thereto, as
fully and completely as though the Collateral Agent were the absolute
owner thereof for all purposes;
(ix) to adjust and settle claims under any insurance policy
relating to the Collateral;
(x) to execute and deliver all assignments, conveyances,
statements, financing statements, renewal financing statements,
security and 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 Security Agreement and in
order to fully consummate all of the transactions contemplated
therein;
(xi) to institute any foreclosure proceedings that the Collateral
Agent may deem appropriate; and
(xii) to do and perform all such other acts and things as the
Collateral Agent may reasonably deem to be necessary, proper or
convenient in connection with the Collateral.
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 Security Agreement, and shall not be liable for
any failure to do so or any delay in doing so. The Collateral Agent shall
-16-
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 the Collateral.
(b) PERFORMANCE BY THE COLLATERAL AGENT OF OBLIGATIONS. If any Obligor
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 reasonable expenses of the Collateral
Agent incurred in connection therewith shall be payable by the Obligors on
a joint and several basis pursuant to SECTION 24 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 and/or the 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 under this Security 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 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 Obligors shall be responsible for
preservation of all rights in the Collateral, and the Collateral Agent
shall be relieved of all responsibility for the Collateral upon
surrendering it or tendering the surrender of it to the Obligors. The
Collateral Agent shall be deemed to have exercised reasonable care in the
custody and preservation of the Collateral in its possession if the
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 taking any necessary steps to preserve rights against any parties with
respect to any of the Collateral.
10. 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 the 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 or
other document relating to the Secured Obligations, and each Obligor 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.
-17-
11. COSTS OF COUNSEL. If at any time hereafter, whether upon the occurrence
of an Event of Default or not, the Collateral Agent [or any Lender employs] [and
Lenders employ](1) counsel to prepare or consider amendments, waivers or
consents with respect to this Security Agreement, or to take action or make a
response in or with respect to any legal or arbitral proceeding relating to this
Security Agreement or relating to the Collateral, or to protect the Collateral
or exercise any rights or remedies under this Security Agreement or with respect
to the Collateral, then the Obligors agree to promptly pay upon demand any and
all such reasonable documented costs and expenses of such Person, all of which
costs and expenses shall constitute Secured Obligations hereunder.
12. CONTINUING AGREEMENT.
(a) This Security 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 have
not 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 Security Agreement
shall be automatically terminated and the Collateral Agent shall, upon the
request and at the expense of the Obligors, forthwith 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 Obligors evidencing such termination. Notwithstanding the foregoing all
releases and indemnities provided hereunder shall survive termination of
this Security Agreement.
(b) This Security 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.
13. AMENDMENTS; WAIVERS; MODIFICATIONS. This Security 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.
14. SUCCESSORS IN INTEREST. This Security Agreement shall create a
continuing security interest in the Collateral and shall be binding upon each
Obligor, 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 successors and permitted
-18-
assigns; PROVIDED, HOWEVER, that none of the Obligors 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 Obligor hereby releases
the Collateral Agent and each Lender, and their respective 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 Security Agreement or the Collateral, except as set
forth in SECTION 8(D) 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.
15. NOTICES. All notices required or permitted to be given under this
Security Agreement shall be in conformance with SECTION 10.1 of the Credit
Agreement.
16. COUNTERPARTS. This Security 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 Security Agreement to produce or
account for more than one such counterpart.
17. 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 Security Agreement.
18. GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE.
(a) THIS SECURITY 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 SECURITY 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
SECURITY 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 CONVENIENS,
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.
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19. WAIVER OF JURY TRIAL. EACH PARTY TO THIS SECURITY AGREEMENT HEREBY
EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION ARISING UNDER THIS SECURITY 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 SECURITY AGREEMENT OR
ANY OTHER CREDIT DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE
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 SECURITY 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.
20. SEVERABILITY. If any provision of this Security 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.
21. ENTIRETY. This Security 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.
22. SURVIVAL. All representations and warranties of the Obligors hereunder
shall survive the execution and delivery of this Security Agreement, the other
Credit Documents and the other documents relating to the Secured Obligations,
the delivery of the Notes and the making of the Loans under the Credit
Agreement.
23. OTHER SECURITY. To the extent that any of the Secured Obligations are
now or hereafter secured by property other than the Collateral (including,
without limitation, real property and securities owned by an Obligor), or by a
guarantee, endorsement or property of any other Person, then the Collateral
Agent shall 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
-20-
agent's rights or the Secured Obligations under this Security Agreement, under
any other of the Credit Documents or under any other documents relating to the
Secured Obligations.
24. JOINT AND SEVERAL OBLIGATIONS OF OBLIGORS.
(a) Each of the Obligors 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 Obligors and in
consideration of the undertakings of each of the Obligors to accept joint
and several liability for the obligations of each of them.
(b) Each of the Obligors 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 Obligors with respect to the
payment and performance of all of the Secured Obligations arising under
this Security Agreement and the other Credit Documents and any other
documents relating to the Secured Obligations, it being the intention of
the parties hereto that all the Secured Obligations shall be the joint and
several obligations of each of the Obligors without preferences or
distinction among them.
(c) Notwithstanding any provision to the contrary contained herein, in
any other of the Credit Documents or in any other documents relating to the
Secured Obligations, the obligations of each Guarantor under the Credit
Agreement, the other Credit Documents and the other documents relating to
the Secured Obligations shall be limited to an aggregate amount equal to
the largest amount that would not render such obligations subject to
avoidance under Section 548 of the United States Bankruptcy Code or any
comparable provisions of any applicable state law.
25. INTERCREDITOR AGREEMENT. Notwithstanding anything to the contrary in
this Security Agreement, (i) the rights of the Obligors, the Collateral Agent
and the Lenders under this Security Agreement are subject to the terms of the
Intercreditor Agreement, (ii) any obligation of the Obligors in this Security
Agreement that requires delivery of Collateral to, possession or control of
Collateral with, the pledge, assignment, endorsement or transfer of Collateral
to or the registration of Collateral in the name of, the Collateral Agent shall
be deemed complied with and satisfied if such delivery of Collateral is made to,
such possession or control of Collateral is with, or such 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 Security Agreement and the terms and provisions of the
Intercreditor Agreement, it is the intention of the Obligors, 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, the Obligors shall not be in breach of their obligations
under this Security Agreement as a result of complying with the terms and
provisions of the Intercreditor Agreement; provided that, notwithstanding the
-21-
foregoing, nothing contained in this Section 25 shall limit or otherwise
adversely effect the grant of a lien on or a security interest in any Collateral
under Section 2 of this Security Agreement.
[remainder of page intentionally left blank]
-22-
Each of the parties hereto has caused a counterpart of this Security
Agreement to be duly executed and delivered as of the date first above written.
OBLIGORS: PRG-SCHULTZ USA, INC.,
a Georgia corporation
By: /s/ James E. Moylan, Jr.
-----------------------------------------
Name: James E. Moylan, Jr.
Title: Executive Vice President - Finance,
Chief Financial Officer and Treasurer
PRG-SCHULTZ INTERNATIONAL, INC.,
a Georgia corporation
By: /s/ James E. Moylan, Jr.
-----------------------------------------
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/ James E. Moylan, Jr.
-----------------------------------------
Name: James E. Moylan, Jr.
Title: Senior Vice President - Finance, Chief
Financial Officer, Assistant Secretary
and Assistant Treasurer
PRGRS, INC., a Delaware corporation
By: /s/ James B. McCurry
-----------------------------------------
Name: James B. McCurry
Title: President
OBLIGORS: 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/ James E. Moylan, Jr.
-----------------------------------------
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/ James E. Moylan, Jr.
-----------------------------------------
Name: James E. Moylan, Jr.
Title: Executive Vice President - Finance,
Chief Financial Officer and Treasurer
COLLATERAL AGENT: BLUM STRATEGIC PARTNERS II, L.P.
By: /s/ Jose S. Medeiros
-----------------------------------------
Name: Jose S. Medeiros
Title: Partner
EXHIBIT 5
TERM NOTE
December 23, 2005
FOR VALUE RECEIVED, PRG-SCHULTZ USA, Inc., a Georgia corporation (the
"BORROWER"), hereby promises to pay to the order of BLUM STRATEGIC PARTNERS II
GMBH & CO. KG., and its successors and assigns (the "LENDER"), on or before the
Maturity Date in lawful money of the United States of America and in immediately
available funds, the principal sum of one hundred, twenty-one thousand, two
hundred and twelve dollars ($121,212.00), as provided in the Credit Agreement.
The Borrower promises to pay interest on the unpaid principal amount of
each Term Loan from the date of such Term Loan until such principal amount is
paid in full, at such interest rates and at such times as provided in the Credit
Agreement. All payments of principal and interest shall be made to the Lender in
Dollars in immediately available funds. If any amount is not paid in full when
due hereunder, such unpaid amount shall bear interest, to be paid upon demand,
from the due date thereof until the date of actual payment (and before as well
as after judgment) computed at the per annum rate set forth in the Credit
Agreement.
This Note is one of the Notes referred to in the Credit Agreement, dated as
of December 23, 2005 (as amended and modified, the "CREDIT AGREEMENT"), among
the Borrower, PRG-Schultz International, Inc., a Georgia corporation (the
"PARENT"), the other Credit Parties party thereto, each of the Lenders
identified on the signature pages thereto (the "LENDERS") and Blum Strategic
Partners II, L.P., as the collateral agent for the Lenders (in such capacity,
the "COLLATERAL AGENT"). Terms used but not otherwise defined herein shall have
the meanings provided in the Credit Agreement.
The holder may endorse and attach a schedule to reflect borrowings
evidenced by this Note and all payments and prepayments thereon; provided that
any failure to endorse such information shall not affect the obligation of the
undersigned Borrower to pay amounts evidenced hereby.
Upon the occurrence and during the continuance of an Event of Default, all
amounts evidenced by this Note may, or shall, become immediately due and payable
as provided in the Credit Agreement without diligence, presentment, demand,
protest or notice of protest, demand, dishonor and nonpayment of this Note, all
of which are waived by the Borrower. In the event payment of amounts evidenced
by this Note is not made at any stated or accelerated maturity, the Borrower
agrees to pay, in addition to principal and interest, all costs of collection,
including reasonable attorneys' fees.
This Note and the Loans and amounts evidenced hereby may be transferred
only as provided in the Credit Agreement.
This Note is subordinated to the prior payment and satisfaction in cash of
all Senior Debt, as defined in the Intercreditor and Subordination Agreement
dated as of December 23, 2005 between Bank of America, N.A. as Senior Lender and
the other parties thereto, as the same may be amended, modified, restated or
supplemented from time to time (the "INTERCREDITOR AGREEMENT"), to the extent,
and in the manner provided in the Intercreditor Agreement.
This Note shall be governed by, and construed and interpreted in accordance
with, the law of the State of New York.
IN WITNESS WHEREOF, the undersigned Borrower has caused this Note to be
duly executed as of the date first above written.
PRG-SCHULTZ USA, INC.,
a Georgia corporation
By: /s/ James B. McCurry
------------------------
Name: James B. McCurry
Title: President
EXHIBIT 6
TERM NOTE
December 23, 2005
FOR VALUE RECEIVED, PRG-SCHULTZ USA, Inc., a Georgia corporation (the
"BORROWER"), hereby promises to pay to the order of BLUM STRATEGIC PARTNERS II,
L.P., and its successors and assigns (the "LENDER"), on or before the Maturity
Date in lawful money of the United States of America and in immediately
available funds, the principal sum of five million, eight hundred seventy-eight
thousand, seven hundred and eighty-eight dollars ($5,878,788.00), as provided in
the Credit Agreement.
The Borrower promises to pay interest on the unpaid principal amount of
each Term Loan from the date of such Term Loan until such principal amount is
paid in full, at such interest rates and at such times as provided in the Credit
Agreement. All payments of principal and interest shall be made to the Lender in
Dollars in immediately available funds. If any amount is not paid in full when
due hereunder, such unpaid amount shall bear interest, to be paid upon demand,
from the due date thereof until the date of actual payment (and before as well
as after judgment) computed at the per annum rate set forth in the Credit
Agreement.
This Note is one of the Notes referred to in the Credit Agreement, dated as
of December 23, 2005 (as amended and modified, the "CREDIT AGREEMENT"), among
the Borrower, PRG-Schultz International, Inc., a Georgia corporation (the
"PARENT"), the other Credit Parties party thereto, each of the Lenders
identified on the signature pages thereto (the "LENDERS") and Blum Strategic
Partners II, L.P., as the collateral agent for the Lenders (in such capacity,
the "COLLATERAL AGENT"). Terms used but not otherwise defined herein shall have
the meanings provided in the Credit Agreement.
The holder may endorse and attach a schedule to reflect borrowings
evidenced by this Note and all payments and prepayments thereon; provided that
any failure to endorse such information shall not affect the obligation of the
undersigned Borrower to pay amounts evidenced hereby.
Upon the occurrence and during the continuance of an Event of Default, all
amounts evidenced by this Note may, or shall, become immediately due and payable
as provided in the Credit Agreement without diligence, presentment, demand,
protest or notice of protest, demand, dishonor and nonpayment of this Note, all
of which are waived by the Borrower. In the event payment of amounts evidenced
by this Note is not made at any stated or accelerated maturity, the Borrower
agrees to pay, in addition to principal and interest, all costs of collection,
including reasonable attorneys' fees.
This Note and the Loans and amounts evidenced hereby may be transferred
only as provided in the Credit Agreement.
This Note is subordinated to the prior payment and satisfaction in cash of
all Senior Debt, as defined in the Intercreditor and Subordination Agreement
dated as of December 23, 2005 between Bank of America, N.A. as Senior Lender and
the other parties thereto, as the same may be amended, modified, restated or
supplemented from time to time (the "INTERCREDITOR AGREEMENT"), to the extent,
and in the manner provided in the Intercreditor Agreement.
This Note shall be governed by, and construed and interpreted in accordance
with, the law of the State of New York.
IN WITNESS WHEREOF, the undersigned Borrower has caused this Note to be
duly executed as of the date first above written.
PRG-SCHULTZ USA, INC.,
a Georgia corporation
By: /s/ James B. McCurry
---------------------------
Name: James B. McCurry
Title: President
EXHIBIT 7
EXECUTION COPY
RESTRUCTURING SUPPORT AGREEMENT
This RESTRUCTURING SUPPORT AGREEMENT is made and entered into as of
December 23, 2005 (the "AGREEMENT") by and among PRG-Schultz International,
Inc., a Georgia corporation ("PRG" or the "COMPANY"), and (i) each of the
undersigned beneficial owners (or investment managers or advisors for the
beneficial owners) of the Notes (as defined below) and (ii) each other
beneficial owner (or investment manager or advisor for such beneficial owner) of
the Notes that executes a counterpart signature page to this Agreement after the
date of this Agreement, as provided herein (each, a "NOTEHOLDER" and
collectively, the "NOTEHOLDERS").
RECITALS:
A. PRG has issued and outstanding $125,000,000 aggregate principal amount
of its 4-3/4% Convertible Subordinated Notes due 2006 (the "NOTES") pursuant to
that certain indenture, dated as of November 26, 2001 (the "INDENTURE"), between
PRG (as successor in interest to The Profit Recovery Group International, Inc.)
and SunTrust Bank, as trustee.
B. The Noteholders are beneficial owners of the Notes (and/or are serving
as the investment advisors or managers or in a similar capacity for the
beneficial owners of such Notes, having the power to enter into this Agreement
on behalf of such beneficial owners) in the respective aggregate principal
amounts separately disclosed to PRG on a confidential basis (provided that the
aggregate principal amount of the holdings of all the Noteholders shall not be
deemed confidential).
C. Exhibit A hereto (the "TERM SHEET") and the provisions hereof set
forth the basic terms of a financial restructuring of the Notes to be realized
through an exchange offer (the "EXCHANGE OFFER" and, collectively with any
transactions substantially as contemplated by the Term Sheet or this Agreement,
the "RESTRUCTURING").
D. The parties have agreed to the terms of the Restructuring and the
Noteholders each have agreed to support the Restructuring on the terms and
conditions set forth herein.
E. The Company intends to (i) conduct the Exchange Offer as soon as
practicable and (ii) use commercially reasonable efforts to obtain acceptance of
the Exchange Offer by the holders of 99% of the outstanding Notes.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises and mutual covenants
and agreements set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
Section 1. GENERAL.
(a) The Company agrees and covenants that, subject to the conditions
set forth on the Term Sheet, it will use its commercially reasonable best
efforts to complete the Restructuring through the Exchange Offer.
(b) The parties shall negotiate in good faith (i) the documentation
regarding the Restructuring contemplated by the Term Sheet, (ii) the Exchange
Offer, and (iii) the other documents contemplated hereby and thereby
(collectively, the "RESTRUCTURING DOCUMENTS").
(c) The parties hereto shall not (i) object to, delay, impede, or
commence any proceeding pertaining to, or take any other action to interfere,
directly or indirectly, in any material respect with the acceptance or
implementation of, the Restructuring provided that the terms of the final
Restructuring Documents are materially consistent with the Term Sheet and
otherwise in form and substance satisfactory to the Company and the Noteholders
in their reasonable discretion, (ii) encourage or support any person or entity
to do any of the foregoing, (iii) in the case of the Noteholders, exercise any
rights under any indenture or other agreement with the Company or instruct any
trustee to exercise any such rights except as consistent with this Agreement, or
(iv) seek or solicit, propose, file, support, encourage, vote for, consent to,
instruct, or engage in discussions with any person or entity, other than PRG,
concerning any restructuring, workout, plan of reorganization, dissolution,
winding up, acquisition or liquidation of PRG and/or its affiliates, other than
the Exchange Offer, provided that the Company may, upon one Business Day's
notice to the other parties hereto, respond to and engage in discussions
concerning unsolicited offers that the Company's board of directors believes in
good faith will lead to an alternative transaction that would provide more value
to the holders of the Notes and to PRG's current shareholders than the
Restructuring.
(d) The parties agree nothing in this Agreement shall limit, modify or
otherwise effect any of the Lenders' rights under that certain Credit Agreement
among PRG-Schultz USA, Inc as Borrower, PRG and certain of its other affiliates,
as Guarantors and certain of the Noteholders, as Lenders, dated December 23,
2005 (the "BRIDGE LOAN CREDIT AGREEMENT"), or any documents related thereto
(collectively, the "BRIDGE LOAN DOCUMENTS").
Section 2. SUPPORT FOR THE RESTRUCTURING.
(a) PRG agrees and covenants that it will use commercially reasonable
best efforts to take or cause to be taken all actions commercially reasonably
necessary and appropriate in furtherance of the Exchange Offer, including as
promptly as practicable to:
(1) prepare the solicitation materials relating to the Exchange
Offer (the "SOLICITATION MATERIALS") in form and substance consistent with the
Term Sheet, except to the extent otherwise consented to by the Noteholders;
(2) commence the Exchange Offer and disseminate the Solicitation
Materials in a manner customary for comparable transactions;
(3) seek satisfaction of all conditions precedent to the
Restructuring;
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(4) defend in good faith any suit or other legal or administrative
proceeding seeking to interfere with, impair or impede the Restructuring;
(5) promptly amend the Solicitation Materials, as necessary and as
may be required by applicable law and provide a draft of such amended
Solicitation Materials to the Ad Hoc Committee prior to the distribution of such
materials to holders of the Notes;
(6) not solicit or encourage others to formulate any other tender
offer, settlement offer, or exchange offer for the Notes other than the Exchange
Offer;
(7) so long as this Agreement is effective and has not been
terminated in accordance with Section 5 or 6, hereof, and except to the extent
necessary for the fulfillment of the fiduciary duties of the Company's board of
directors as referred to in Section 6(c) hereof, not object to, nor otherwise
commence any proceeding to oppose, the Restructuring, it being understood and
agreed that the Company shall not seek, solicit, support, consent to,
participate in the formulation of, or encourage any other plan, sale, proposal,
or offer of winding up, liquidation, reorganization, merger, consolidation,
dissolution, or restructuring of the Company; and
(8) subject to the satisfaction or waiver of any conditions
precedent to the Exchange Offer, consummate the Exchange Offer, including
delivery of all securities required to be issued thereunder (within the time
that is customary for transactions of this type) and the other transactions that
are part of the Restructuring.
(b) PRG agrees and covenants that it will not, and will cause each of
its direct and indirect subsidiaries not to, sell, liquidate, or dispose of any
assets, outside the ordinary course of business consistent with past practices,
prior to the date on which the Exchange Offer closes other than as permitted by
the Section 8.5 of the Bridge Loan Credit Agreement as in effect on the Closing
Date (as defined under the Bridge Loan Credit Agreement), without the prior
written consent of the holders of a majority of the Notes subject to this
Agreement.
(c) Each of the Noteholders agrees and covenants that it shall, as
long as this Agreement is in effect:
(1) no later than 15 days prior to the first date scheduled for
the closing of the Exchange Offer, (i) tender all Notes beneficially owned by it
and (ii) cause the beneficial owner of all Notes for which the Noteholder is the
investment advisor or manager having the power to vote and dispose of such Notes
on behalf of such beneficial owner, to tender all such Notes together with
properly completed and duly executed letter or letters of transmittal with
respect to such Notes as required by the instructions to the letter of
transmittal pursuant to and in accordance with the Exchange Offer within 5
business days after receipt of the relevant letters of transmittal;
(2) not revoke any of the foregoing unless and until this
Agreement is terminated in accordance with its terms;
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(3) not vote for, consent to, provide any support for, participate
in the formulation of, or solicit or encourage others to formulate any other
tender offer, settlement offer, or exchange offer for the Notes other than the
Exchange Offer; and
(4) so long as this Agreement is effective and has not been
terminated in accordance with Section 5 or 6 hereof and the final Restructure
Documents are materially consistent with the Term Sheet, not object to, nor
otherwise commence any proceeding to oppose, the Restructuring, it being
understood and agreed that each Noteholder shall not (i) directly or indirectly
seek, solicit, support, or encourage any other plan, sale, proposal, or offer of
winding up, liquidation, reorganization, merger, consolidation, dissolution, or
restructuring of the Company or (ii) commence an involuntary bankruptcy case
against the Company.
Section 3. REPRESENTATIONS AND WARRANTIES.
(a) Each of the parties severally represents and warrants to each of
the other parties that the following statements are true and correct as of the
date hereof:
(1) POWER AND AUTHORITY. It has all requisite power and authority
to enter into this Agreement and to carry out the transactions contemplated by,
and perform its respective obligations under, this Agreement.
(2) AUTHORIZATION. The execution and delivery of this Agreement
and the performance of its obligations hereunder have been duly authorized by
all necessary action on its part.
(3) NO CONFLICTS. The execution, delivery, and performance by it
of this Agreement do not and shall not (i) violate any provision of law, rule,
or regulation applicable to it or its certificate of incorporation or by-laws
(or other organizational documents) or (ii) conflict with, result in a breach
of, or constitute (with due notice or lapse of time or both) a default under any
material contractual obligation to which it is a party or under its certificate
of incorporation or by-laws (or other organizational documents), except, with
respect to the Company, for any contractual obligation that would not have a
material adverse effect on the business, assets, financial condition, or results
of operations of PRG and its subsidiaries, taken as a whole.
(4) GOVERNMENTAL CONSENTS. The execution, delivery, and
performance by it of this Agreement do not and shall not require any
registration or filing with, consent or approval of, or notice to, or other
action to, with, or by, any Federal, state, or other governmental authority or
regulatory body, except (i) such filings as may be necessary and/or required for
disclosure by the Securities and Exchange Commission and (ii) filings with
NASDAQ in connection with the Restructuring.
(5) BINDING OBLIGATION. This Agreement is the legally valid and
binding obligation of it, enforceable against it in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium, or other
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similar laws relating to or limiting creditors' rights generally or by equitable
principles relating to enforceability.
(6) PROCEEDINGS. No litigation or proceeding before any court,
arbitrator, or administrative or governmental body is pending against it that
would adversely affect its ability to enter into this Agreement or perform its
obligations hereunder.
(b) Each of the Noteholders represents and warrants, severally and not
jointly, to each of the other parties that the following statements are true,
correct, and complete as of the date hereof:
(1) OWNERSHIP. It has disclosed to PRG on a confidential basis the
aggregate principal amount of the Notes for which (i) it is the sole beneficial
owner and (ii) it is the investment advisor or manager for the beneficial owners
of such Notes, having the power to vote and dispose of such Notes on behalf of
such beneficial owners. It is entitled (for its own account or for the account
of other persons claiming through it) to all of the rights and economic benefits
of such Notes.
(2) TRANSFERS. It has made no prior assignment, sale,
participation, grant, conveyance, or other transfer of, and has not entered into
any other agreement to assign, sell, participate, grant, or otherwise transfer,
in whole or in part, any right, title, or interests in (or portion thereof) the
Notes referred to in Subsection 3(b)(1), except as permitted by Section 4
hereto.
(3) LAWS. It (i) is a sophisticated investor with respect to the
transactions described herein with knowledge and experience in financial and
business matters sufficient to evaluate the merits and risks of owning and
investing in securities similar to the Notes (including any securities that may
be issued in connection with the Restructuring), making an informed decision
with respect thereto, and evaluating properly the terms and conditions of this
Agreement, and it has made its own analysis and decision to enter in this
Agreement, (ii) is, and any person for which it is the investment advisor or
manager and which is the beneficial owner of Notes is, an "accredited investor"
within the meaning of Rule 501 of the Securities Act of 1933, as amended, and
(iii) it has had the opportunity to meet with management of PRG and to ask
questions and review information with respect to PRG's business, financial
condition, results of operations and financial and operational outlook, and it
has obtained all information it deems necessary or appropriate in order to enter
into this agreement and make the investment decision contemplated hereby.
Section 4. RESTRICTION ON THE SALE OF THE NOTES. Each Noteholder
individually covenants that, from the date hereof until the termination of this
Agreement, such party shall not, directly or indirectly, sell, pledge,
hypothecate, or otherwise transfer any Notes or any option, right to acquire, or
voting, participation, or other interest therein, except to a purchaser or other
entity who executes and delivers to PRG, concurrently or prior to any binding
commitment with respect to such transfer, an agreement in writing to be bound by
all the terms of this Agreement with respect to the relevant Notes or other
interests being transferred to such purchaser (which agreement shall include the
representations and warranties set forth in Section 3 hereof). This Agreement
shall in no way be construed to preclude a party from acquiring additional Notes
or
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other interests in PRG. All Notes held by a Noteholder, including Notes acquired
after the date hereof shall be subject to all the terms of this Agreement.
Section 5. TERMINATION BY THE NOTEHOLDERS. This Agreement may be terminated
by Noteholders that beneficially own or act as the investment advisor or manager
with respect to at least a majority of the Notes subject to the terms of this
Agreement on the occurrence of any of the following events (each a "NOTEHOLDER
TERMINATION EVENT"), by delivering written notice of the occurrence of such
event in accordance with Section 11 below to the other parties:
(a) the Exchange Offer has not been commenced by January 31, 2006 or
completed by March 31, 2006;
(b) after the date hereof there shall have occurred any event or
circumstance that individually or in the aggregate reflect a material adverse
change in the financial condition, business, or operations of the Company and
its subsidiaries; or
(c) the failure to repay all obligations under the facility
contemplated by the Bridge Loan Documents (the "Bridge Loan"), in full, in cash,
concurrent with the closing of the Exchange Offer
(d) the exercise of any remedies under the Bridge Loan Documents
following an Event of Default (as defined therein) arising from any the
following: (i) the failure to make any scheduled payment of principal or
interest as and when required under the Bridge Loan Documents; (ii) the failure
by the Company to make any Mandatory Prepayments or Payment of Taxes; (iii) a
default under any Other Indebtedness, unless otherwise permitted by the Bridge
Loan Documents; (iv) the failure to maintain Insurance required by the Bridge
Loan Documents; (v) the incurrence of any Debt or Indebtedness in excess of the
limitations in the Bridge Loan Documents; (iv) any Consolidation, Dissolution or
Merger in violation of the Bridge Loan Documents; (vii) making any Restricted
Payments in violation of the Bridge Loan Documents; (viii) any Transactions with
Affiliates in violation of the Bridge Loan Documents; (ix) taking any Restricted
Action in violation of the Bridge Loan Documents; (x) making any Negative Pledge
in violation of the Bridge Loan Documents; (xi) occurrence of any Bankruptcy
Event or Change of Control.(1)
(e) the exercise of any remedies under that certain Amended and
Restated Credit Agreement among PRG-Schulz USA, Inc., as Borrower, PRG, and
certain of its other affiliates, as Guarantors, and Bank of America, N.A., dated
as of November 30, 2004, and any documents related thereto;
(f) the Restructuring or the final Restructuring Documents do not
conform to the Term Sheet with respect to the treatment of the Notes, except as
modified in any non-material respect or as approved by the Ad Hoc Committee of
the Noteholders (the members of which are identified on the signature pages
hereto); or
----------------------
(1) All capitalized terms used in this Section 5(c) shall have the meaning
given such terms in the Bridge Loan Credit Agreement.
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(g) a material breach of this Agreement by the Company that is not, by
its terms, curable or that is, by its terms, curable and is not cured by the
fifth calendar day after notice of such breach (for the purposes of this
Agreement, the term "material breach" includes a breach of the covenant in
Section 2(b)).
Section 6. TERMINATION BY THE COMPANY. The Company shall have the right to
terminate this Agreement on the occurrence of any of the following events (each
a "COMPANY TERMINATION EVENT") by giving written notice in accordance with
Section 11 below to the other parties:
(a) the exercise of any remedies under the Bridge Loan Documents; or
(b) a material breach of this Agreement by any of the Noteholders that
is not, by its terms, curable or that is, by its terms, curable and is not cured
by the fifth calendar day after notice of such breach; or
(c) a good faith determination by the Company's board of directors
(following consultation with its reputable outside legal counsel and its
financial advisor of national recognized reputation) that such termination is
required by its fiduciary duty to the Company, its then current shareholders,
and its creditors in order to enter into an alternative transaction (whether in
the form of a merger, consolidation or combination with a third party or the
sale of all, substantially all, or a significant portion of the assets or
businesses of the Company) that will be at least as favorable to each of such
parties but more favorable to the parties as a whole, from a financial
perspective, than the Restructuring and is reasonably capable of being
consummated, taking into account, among other things, all legal, financial,
regulatory and other aspects of the alternative transaction and the person or
group making such proposal (a "SUPERIOR PROPOSAL"); provided that (i) the Bridge
Loan has been paid in full, in accordance with the Bridge Loan Documents, (ii)
the Company provides the Noteholders five (5) business days prior notice of the
Company's intent to terminate this Agreement under this Section (c) and the
terms and conditions of such Superior Proposal (including the identity of the
person or group making such Superior Proposal), and (iii) the Company provides
the Noteholders and their representatives a good faith opportunity during such 5
day notice period and prior to any such termination to revise the terms of the
Restructuring.
Section 7. TERMINATION OF AGREEMENT. Notwithstanding anything to the
contrary in this Agreement, the Term Sheet or any other agreement, this
Agreement shall terminate on the earlier of (a) the occurrence of a Noteholder
Termination Event after expiration of any cure periods and satisfaction of any
conditions set forth in Section 5 of this Agreement, (b) the occurrence of a
Company Termination Event, after expiration of any cure periods and satisfaction
of any conditions set forth in Section 6 of this Agreement, and (c) 5:00 pm on
June 15, 2006.
Section 8. EFFECT OF TERMINATION AND OF WAIVER OF TERMINATION EVENT. On
the delivery of the written notice referred to in Sections 5 or 6 in connection
with the valid termination of this Agreement, the obligations of each of the
parties hereunder shall thereupon terminate and be of no further force and
effect. Prior to the delivery of such notice the Noteholders may waive the
occurrence of a Noteholder Termination Event and PRG may waive
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the occurrence of a Company Termination Event. No such waiver shall affect any
subsequent termination event or impair any right consequent thereon. Upon
termination of this Agreement, no party shall have any continuing liability or
obligation to the other parties hereunder; PROVIDED, HOWEVER, that no such
termination shall relieve any party from liability for its breach or
non-performance of its obligations hereunder prior to the date of such
termination.
Section 9. AMENDMENTS. This Agreement may be modified, amended, or
supplemented by a written agreement executed by the Company and the Noteholders
that beneficially own or act as the investment advisors or managers with respect
to at least a majority of the aggregate principal face amount of the Notes
subject to this Agreement, PROVIDED, HOWEVER, that in the event of a material
change to the Term Sheet, or a change of any of the economic terms of the Term
Sheet, any Noteholder that does not consent shall have no further obligations
under the Agreement.
Section 10. FURTHER ASSURANCES. Each of the parties to this Agreement
hereby further covenants and agrees to cooperate in good faith to execute and
deliver all further documents and agreements and take all further action that
may be commercially reasonably necessary or desirable in order to enforce and
effectively implement the terms and conditions of this Agreement. Each
Noteholder agrees to advise the Company of any changes in the amount of Notes
beneficially owned by it and the amount of Notes for which such Noteholder is
the investment manager or advisor for beneficial owners.
Section 11. GOVERNING LAW; JURISDICTION. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of New York,
regardless of the laws that might otherwise govern under applicable principles
of conflict of laws of the State of New York. By its execution and delivery of
this Agreement, each of the parties hereto hereby irrevocably and
unconditionally agrees for itself that any legal action, suit, or proceeding
against it with respect to any matter under or arising out of or in connection
with this Agreement or for recognition or enforcement of any judgment rendered
in any such action, suit, or proceeding, shall be brought in a federal court of
competent jurisdiction in the Southern District of New York. By execution and
delivery of this Agreement, each of the parties hereto hereby irrevocably
accepts and submits to the jurisdiction of such court, generally and
unconditionally, with respect to any such action, suit, or proceeding.
Section 12. NOTICES. All demands, notices, requests, consents, and
communications hereunder shall be in writing and shall be deemed to have been
duly given if delivered personally or by courier service, messenger, facsimile,
telecopy, or if duly deposited in the mails, by certified or registered mail,
postage prepaid-return receipt requested, and shall be deemed to have been duly
given or made (i) upon delivery, if delivered personally or by courier service,
or messenger, in each case with record of receipt, (ii) upon transmission with
confirmed delivery, if sent by facsimile or telecopy, or (iii) two business days
after being sent by certified or registered mail, postage pre-paid, return
receipt requested, to the following addresses, or such other addresses as may be
furnished hereafter by notice in writing, to the following parties:
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If to PRG, or any of its subsidiaries, to:
PRG-Schultz International, Inc.
600 Galleria Parkway, Suite 600
Atlanta, GA 30339
Facsimile: (770) 779-3133
Attn: Clint McKellar, Esq.
with a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, NY 10153
Facsimile: (212) 310-8007
Attn: Michael F. Walsh, Esq.
If to the Noteholders, or any one Noteholder, to:
Houlihan Lokey Howard & Zukin
685 Third Avenue, 15th Floor
New York, NY 10017
Facsimile: (212) 497-3070
Attn: David Hilty
with a copy to:
Schulte Roth & Zabel LLP
919 Third Avenue
New York, NY 10022
Facsimile: (212) 593-5955
Attn: Jeffrey S. Sabin, Esq.
Section 13. ENTIRE AGREEMENT. This Agreement constitutes the full and
entire understanding and agreement among the parties with regard to the subject
matter hereof, and supersedes all prior agreements with respect to the subject
matter hereof.
Section 14. HEADINGS. The headings of the paragraphs and subparagraphs of
this Agreement are inserted for convenience only and shall not affect the
interpretation hereof.
Section 15. SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and
inure to the benefit of the parties and their respective permitted successors
and assigns, PROVIDED, HOWEVER, that nothing contained in this paragraph shall
be deemed to permit sales, assignments, or transfers other than in accordance
with Section 4.
Section 16. SPECIFIC PERFORMANCE. Each party hereto recognizes and
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause other parties to sustain damages for which such
parties would not have an adequate remedy at law for
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money damages, and therefore each party hereto agrees that in the event of any
such breach, such other parties shall be entitled to the remedy of specific
performance of such covenants and agreements and injunctive and other equitable
relief in addition to any other remedy to which such parties may be entitled, at
law or in equity.
Section 17. SEVERAL, NOT JOINT, OBLIGATIONS. The agreements,
representations, and obligations of the parties under this Agreement are, in all
respects, several and not joint.
Section 18. REMEDIES CUMULATIVE. All rights, powers, and remedies provided
under this Agreement or otherwise available in respect hereof at law or in
equity shall be cumulative and not alternative, and the exercise of any right,
power, or remedy thereof by any party shall not preclude the simultaneous or
later exercise of any other such right, power, or remedy by such party.
Section 19. NO WAIVER. The failure of any party hereto to exercise any
right, power, or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon compliance by any other
party hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, shall not constitute a waiver by such
party of its right to exercise any such or other right, power, or remedy or to
demand such compliance.
Section 20. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which shall
constitute one and the same Agreement. Delivery of an executed signature page of
this Agreement by telecopier or email shall be as effective as delivery of a
manually executed signature page of this Agreement.
Section 21. SEVERABILITY. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
Section 22. NO THIRD-PARTY BENEFICIARIES. Unless expressly stated herein,
this Agreement shall be solely for the benefit of the parties, and no other
person or entity shall be a third party beneficiary hereof.
Section 23. ADDITIONAL PARTIES. Without in any way limiting the provisions
hereof, additional holders of Notes may elect to become parties by executing and
delivering to PRG a counterpart hereof. Each such additional holder shall become
a party to this Agreement as a Noteholder in accordance with the terms of this
Agreement.
Section 24. NO SOLICITATION. This Agreement is not intended to be, and each
signatory to this Agreement acknowledges that this Agreement is not, a
solicitation with respect to the Exchange Offer or with respect to any other
mechanism to accomplish a restructuring of the obligations under the Notes,
whether such mechanism is to be accomplished in or outside a court.
Section 25. CONSIDERATION. It is hereby acknowledged by the parties hereto
that, other than the agreements, covenants, representations, and warranties set
forth herein and in the Term
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Sheet, no consideration shall be due or paid to the Noteholders for their
agreement to vote to accept the Exchange Offer in accordance with the terms and
conditions of this Agreement.
Section 26. RECEIPT OF ADEQUATE INFORMATION; REPRESENTATION BY COUNSEL.
Each party acknowledges that it has received adequate information to enter into
this Agreement and that it has been represented by counsel in connection with
this Agreement and the transactions contemplated by this Agreement. Accordingly,
any rule of law or any legal decision that would provide any party with a
defense to the enforcement of the terms of this Agreement against such party
shall have no application and is expressly waived. The provisions of the
Agreement shall be interpreted in a reasonable manner to effect the intent of
the parties.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement as of the date first above written.
PRG-Schultz International, Inc.
By: /s/ Clinton McKellar, Jr.
------------------------------------
Name: Clinton McKellar, Jr.
Title: Senior Vice President,
General Counsel and Security
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NOTEHOLDERS:
Blum Capital Partners, L.P.
---------------------------------------
By: /s/ Jose S. Medeiros
-----------------------------------
Name: Jose S. Medeiros
Title: Partner
Address: 909 Montgomery Street, Suite 400
San Francisco, CA 94133
Facsimile No.: 415-283-0601
Attn.:
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NOTEHOLDERS:
Parkcentral Global Hub Limited
---------------------------------------
By: /s/ Steven Blasnik
-----------------------------------
Name: Steven Blasnik
Title: President
Address: 2300 West Plano Parkway
Plano, TX 75075
Facsimile No.: 972-535-1997
Attn.: Steven Blasnik
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NOTEHOLDERS:
Petrus Securities LP
---------------------------------------
By: /s/ Steven Blasnik
-----------------------------------
Name: Steven Blasnik
Title: President of General Partner
Address: 2300 West Plano Parkway
Plano, TX 75075
Facsimile No.: 972-535-1997
Attn.: Steven Blasnik
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NOTEHOLDERS:
Tenor Opportunity Master Fund, Ltd.
---------------------------------------
By: /s/ Robin Shah
-----------------------------------
Name: Robin Shah
Title: Partner
Address: 65 East 55th Street
New York, NY 10022
Facsimile No.: 212-593-5955
Attn.: Andrew Gottesman
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NOTEHOLDERS:
Thales Fund Management, LLC
---------------------------------------
By: /s/ A. Aadel Shaaban
-----------------------------------
Name: A. Aadel Shaaban
Title: Senior Analyst
Address: 140 Broadway, 45th Fl
New York, NY 10005
Facsimile No.:
Attn.:
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EXHIBIT A
TERM SHEET
PRG-SCHULTZ INTERNATIONAL, INC.
SUMMARY FINANCIAL RESTRUCTURING TERM SHEET - DECEMBER 23, 2005
---------------- -----------------------------------------------------------
PROPOSED The following describes an agreement in principle between
TRANSACTION: PRG-Schultz International, Inc. and its subsidiaries
(collectively, the "COMPANY") and the Ad Hoc Committee
of Holders of the Company's 4.75% Convertible Subordinated
Notes due 2006 (the "AD HOC COMMITTEE") and to
restructure the financial obligations of the Company.
The Transaction will involve the recapitalization of the
Company through:
(i) A Bridge Loan (as defined below) of $10
million to provide the Company with
sufficient funds to pay the interest payment
due on the Notes and additional working
capital, pending the closing of the
Recapitalization (as defined below);
(ii) A credit facility or facilities, consisting
of a minimum revolver of $20 million and
total commitments of no more than $47.5
million, amending or refinancing (a) the
Amended and Restated Credit Agreement, dated
as of November 30, 2004, among (x)
PRG-Schultz USA, Inc., the Company, and
certain of the Company's subsidiaries and (y)
Bank of America, N.A. (the "EXISTING CREDIT
FACILITY"), and (b) the Bridge Loan and
(iii) A pro-rata exchange of the 4.75% Convertible
Subordinated Notes due 2006 issued by the
Company (the "NOTES") for three new
securities including: (1) New Senior Notes;
(2) New Senior Convertible Notes; and (3) New
Senior Series A Convertible Participating
Preferred Stock (collectively the
"TRANSACTION SECURITIES").
Points (i) through (iii), collectively are defined as the
"RECAPITALIZATION".
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PRG-SCHULTZ INTERNATIONAL, INC.
SUMMARY FINANCIAL RESTRUCTURING TERM SHEET - DECEMBER 23, 2005
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CREDIT FACILITIES: BRIDGE LOAN
$10 million second lien loan (the "Bridge Loan") to be
provided by certain holders of the Notes (or their
affiliates). The Bridge Loan will have the following terms:
(i) Second lien on assets securing the Existing
Credit Facility;
(ii) 12% interest in cash, payable monthly;
(iii) 50 bps closing fee;
(iv) Maturity date: Earlier of closing of the
Recapitalization or August 15, 2006;
(v) Non-refundable commitment fee of 1.25% of $10
million, payable upon signing the Commitment
Letter; an additional 1.75% Placement Fee of
the amount borrowed, payable upon closing of
the Bridge Loan; plus all out-of-pocket
expenses;
(vi) Proceeds will be used for general corporate
purposes to eliminate risk of adverse
customer actions, including paying the
interest due on the existing Notes. Up to
$2.5 million may be used to fund foreign
operations, provided that, if requested by
the Ad Hoc Committee, appropriate promissory
note and other documentation evidences such
inter-company transfers and lien is received
on those promissory notes. Proceeds cannot be
used to make severance or similar payments to
John Cook and Jack Toma.
REVOLVING CREDIT FACILITY/ NEW SECOND LIEN TERM LOAN
The Existing Credit Facility will be either amended with
Bank of America or refinanced with a replacement lender to
provide a minimum commitment of $20 million of senior
secured financing.
The Bridge Loan will be repaid upon completion of the
refinancing of the Existing Credit Facility with a credit
facility or facilities, consisting of a minimum revolver of
$20 million and total commitments of no more than $47.5
million.
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TRANSACTION In exchange for the $125 million principal amount of Notes,
SECURITIES: the Noteholders will receive, upon the closing of the
exchange offer (the "Closing Date"), their pro-rata share
of the following securities with preference options for the
different securities structured, if possible:
(i) $50 million of New Senior Notes;
(ii) $60 million of New Senior Convertible Notes;
and
(iii) $15 million of New Senior Series A
Convertible Participating Preferred Stock.
The interest payment due November 26, 2005 on the notes,
will be paid in cash from the proceeds of the Bridge Loan
during the 30 day grace period as soon as documentation is
completed and Bank of America agrees to the terms of an
Intercreditor and Subordination Agreement.
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PRG-SCHULTZ INTERNATIONAL, INC.
SUMMARY FINANCIAL RESTRUCTURING TERM SHEET - DECEMBER 23, 2005
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NEW SENIOR NOTES: Issuer: Company
Face Amount: $50 million
Coupon: 11.0% cash, payable semi-annually
starting on the six-month anniversary of
the Closing Date
Maturity: 5 years from the Closing Date
Call Protection: Callable at any time at 104 in year 1,
102 in year 2; par in year 3 until
maturity plus all accrued interest
thereon through the date of the
prepayment
Convertible: Not convertible
Ranking: Senior to existing Notes with carve-out
for up to $47.5 million in senior
financing and an additional basket of
indebtedness TBD
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NEW SENIOR Issuer: Company
CONVERTIBLE NOTES:
Face Amount: $60 million
Coupon: 10% cash or PIK, at the option of the
Company, payable semi-annually starting
on the six-month anniversary of the
Closing Date
Maturity: 5 years from the Closing Date
Redemption Callable at par plus accrued interest at
Rights: any time after payment of the New Senior
Notes in full
Ranking: Pari passu with the New Senior Notes
Convertible: At the option of the holder, the New
Senior Convertible Notes are convertible
at any time into New Senior Series B
Convertible Participating Preferred
Stock at a conversion price of $0.65 per
share.
If (i) the New Senior Notes have been
repaid in full; (ii) all the PIK
interest and accrued interest on the New
Senior Convertible Notes through the
date of conversion has been paid in
cash; (iii) no amount of Notes remains
outstanding; (iv) the 45 day average
trading price of the common stock is at
$0.65 or higher at the time of the
notice of conversion and (v) at least 30
days prior notice has been given to the
holders, then the Company can impose
conversion of the New Senior Convertible
Notes into New Senior Series B
Convertible Participating Preferred
Stock at a conversion price of $0.65 per
share.
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PRG-SCHULTZ INTERNATIONAL, INC.
SUMMARY FINANCIAL RESTRUCTURING TERM SHEET - DECEMBER 23, 2005
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NEW SENIOR THE NEW SENIOR SERIES B CONVERTIBLE PARTICIPATING PREFERRED
CONVERTIBLE NOTES STOCK SHALL HAVE THE FOLLOWING TERMS:
(CONTINUED):
Face Amount: Principal amount of New Senior
Convertible Notes converted plus, if
converted at the option of the holder,
any PIK and accrued and unpaid interest.
Dividend: 10% dividend rate payable in cash or in
kind at the option of the Company.
Maturity: Same as the maturity of the New Senior
Convertible Notes (5 years from the
Closing Date).
Convertible: At the option of the holder, the New
Senior Series B Convertible
Participating Preferred Stock is
convertible into common stock at $0.65
per share.
Redemption: Redeemable at face amount plus accrued
dividends only upon prior or
simultaneous refinancing in full of the
New Senior Notes and the New Senior
Convertible Notes.
Voting: Votes with common stock on all issues on
an as converted basis
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PRG-SCHULTZ INTERNATIONAL, INC.
SUMMARY FINANCIAL RESTRUCTURING TERM SHEET - DECEMBER 23, 2005
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NEW SENIOR SERIES A Issuer: Company
CONVERTIBLE
PARTICIPATING Face Amount: $15 million
PREFERRED STOCK:
Dividend: 9% dividend rate payable in cash or kind
at the option of the Company
Maturity: 5 years from the Closing Date
Convertible: Convertible into the common stock of the
Company at any time at $0.28405 per
share at the option of the holder
Initial conversion implies 45.9% of the
Common Stock of the Company prior to the
conversion of the New Senior Convertible
Notes into New Senior Series B
Convertible Participating Preferred
Stock or its conversion into common
stock.
Redemption: Redeemable at face amount plus accrued
dividends only upon prior or
simultaneous refinancing in full of the
New Senior Notes and the outstanding New
Senior Convertible Notes.
Voting: Votes with Common Stock on all issues on
an as converted basis
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EXISTING COMMON The Company's existing common shareholders will retain
SHAREHOLDERS: their existing shares representing approximately 54.1% of
the Common Stock following the initial dilution from the
New Senior Convertible Participating Preferred Stock (30%
assuming the full and immediate conversion of the New
Senior Convertible Notes into New Senior Series B
Convertible Participating Preferred Stock).
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GOVERNANCE: BOARD OF DIRECTORS:
Six directors to be nominated based upon post-restructuring
voting ownership plus the Company's CEO.
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MANAGEMENT Shares Phantom shares representing 10% of the
INCENTIVE PLAN: Common Stock
Recordkeeping A notional account shall be established
as to each participating executive to
which the phantom shares awarded to such
executive shall be credited ("PHANTOM
STOCK ACCOUNT")
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PRG-SCHULTZ INTERNATIONAL, INC.
SUMMARY FINANCIAL RESTRUCTURING TERM SHEET - DECEMBER 23, 2005
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Vesting 1/3 on the effective date of the
Recapitalization ("EFFECTIVE DATE")
1/3 on the first anniversary of the
Effective Date
1/3 on the second anniversary of the
Effective Date
Vesting schedule for executives hired
after the Effective Date will be over a
three-year period commencing on the date
of hire.
100% vesting on a change in control.
Conversion of the New Senior Convertible
Notes, the New Senior Series A
Convertible Participating Preferred
Stock, and/or the New Senior Series B
Convertible Participating Preferred
Stock into Common Stock is not a change
in control.
Allocation To be determined by the Compensation
Committee of the new board of directors
upon the recommendation of the CEO;
PROVIDED, HOWEVER, that the Company's
CEO will receive a minimum of 40% of
amount allocated to Management Incentive
Plan
Anti-Dilution Standard anti-dilution provisions PLUS
Provisions dilution protection against conversion
of the New Senior Convertible Notes, the
New Senior Series A Convertible
Participating Preferred Stock, and/or
the New Senior Series B Convertible
Participating Preferred Stock into
Common Stock will apply to the Phantom
Stock Account, but will not apply to
shares of Common Stock actually
distributed to the executive from such
account.
Distribution Distribution of the Phantom Stock
Events Account shall be made, at the individual
election of each executive, not earlier
than the dates and in the amounts set
forth below.
2d anniversary of Effective Date 25%
3d anniversary of Effective Date 50%
4th anniversary of Effective Date 75%
5th anniversary of Effective Date 100%
Distribution of the entire value of an
executive's Phantom Stock Account shall
be made upon the executive's death,
disability, or termination of
employment, or a change in control (see
"Vesting" above) of the Company.
Form of Payment Value of Phantom Stock Account is
distributed to the executive in cash to
the extent required to satisfy any
applicable taxes and balance in shares
of Common Stock
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PRG-SCHULTZ INTERNATIONAL, INC.
SUMMARY FINANCIAL RESTRUCTURING TERM SHEET - DECEMBER 23, 2005
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Other Incentive This Management Incentive Plan is in
Payments addition to an annual cash bonus program
based on EBITDA or other targets
implemented by the Compensation
Committee of the new board of directors
409A The Management Incentive Plan shall
comply with the requirements of Section
409A of the Tax Code, as applicable
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CONDITIONS: (i) Acceptance of the proposed exchange offer by a
minimum amount of 99% of Notes;
(ii) Acceptable documentation, including agreements from
the Ad Hoc Committee members to accept and support
the exchange offer (lockup) and resolution of issues
related to the structure of the exchange offer;
(iii) Renewal of the Company's D&O policy or the purchase
of an extended claims' notice period for such
policy, in either case, on terms reasonably
satisfactory to the current board of directors of
the Company; and
(iv) Acceptable renegotiation or settlement of the
severance agreements with John Cook and Jack Toma.
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