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FORBEARANCE AGREEMENT
This
FORBEARANCE AGREEMENT (this "Agreement") is entered into as of
November 8, 2005, between and among PRG-SCHULTZ USA, INC., a
Georgia corporation
(the "Borrower"), PRG-SCHULTZ INTERNATIONAL, INC., a Georgia
corporation
("Parent"), each of the Domestic Subsidiaries of the Parent (such
Domestic
Subsidiaries, together with the Parent, individually a "Guarantor"
and
collectively the "Guarantors"), and BANK OF AMERICA, N.A. (the
"Lender").
Capitalized terms used herein but not otherwise defined shall have
the meanings
set forth, or incorporated, in the Credit Agreement (defined
below).
RECITALS
A.
The Borrower, the Parent, the Guarantors and the Lender are parties
to
that certain Amended and Restated Credit Agreement dated as of
November 30, 2004
(as amended and otherwise modified from time to time, the "Credit
Agreement").
B.
The Borrower has reported that (i) certain Events of Default exist
under
the Credit Agreement arising from (a) the Borrower's failure to
comply with the
financial covenants set forth in Section 7.11 of the Credit
Agreement as of the
fiscal quarter ending September 30, 2005, (b) the Borrower's
failure to provide
written notice to the Lender of the incorporation of PRG-Schultz
Europe, Inc.
(the "New Subsidiary") within 45 days after such incorporation as
required under
Section 7.12(a) of the Credit Agreement, (c) the Borrower's failure
to cause the
New Subsidiary to execute a Joinder Agreement as required under
Section 7.12(a)
of the Credit Agreement, (d) the Borrower's failure to cause 100%
of the Capital
Stock of the New Subsidiary to be delivered and pledged to the
lender as
required under Section 7.12(a) of the Credit Agreement, (e) the
Borrower's
failure to deliver to the Lender copies of the changes to the
articles of
incorporation of The Profit Recovery Group Switzerland, Inc. and
PRG-Schultz
Norway, Inc. (collectively, the "Name Change Subsidiaries") as
required under
Section 8.10 of the Credit Agreement and (f) the Borrower's default
under
Section 9.1(d) of the Credit Agreement resulting from the
Borrower's failure to
provide the notices required under the Security Agreement in
connection with the
corporate activities described above (collectively, the "Existing
Events of
Default"), and (ii) the Borrower anticipates certain additional
Events of
Default may arise under the Credit Agreement or other Credit
Documents as a
result of (a) the Borrower's failure to comply with the financial
covenants set
forth in Section 7.11 of the Credit Agreement as of the fiscal
quarter ending
December 31, 2005, and (b) the Parent's potential failure to make
the interest
payment due in respect of the Subordinated Debt on November 28,
2005 (the
"Anticipated Defaults" and, together with the Existing Events of
Default, the
"Acknowledged Events of Default").
C.
The Borrower has reported that it may borrow up to $10,000,000 on
a
subordinated basis (the "Subordinated Loan"), with a portion of the
proceeds
thereof to be used to fund the payment of interest due in respect
of the
Subordinated Debt on or about November 28, 2005 (the "November
Interest
Payment") and the remaining proceeds to be used for general working
capital
purposes.
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D.
The Borrower has requested that the Lender agree to (i) forbear
from
exercising any rights and remedies arising from the Acknowledged
Events of
Default until March 31, 2006 and (ii) consent to the incurrence of
the
Subordinated Loan.
E.
The Lender has agreed to do so, but only pursuant to the terms
and
conditions set forth herein.
NOW,
THEREFORE, in consideration of the promises and the mutual
covenants
hereinafter contained, and for other good and valuable
consideration, the
receipt and sufficiency of which are hereby acknowledged, the
parties hereto,
intending to be legally bound, agree as follows:
1.
Estoppel, Acknowledgement and Reaffirmation. As of November 2,
2005, the
total outstanding principal amount of Revolving Loans was not less
than
$14,200,000, which constitutes a valid and subsisting obligation of
the Credit
Parties under the Credit Documents that is not subject to any
credits, offsets,
defenses, claims, counterclaims or adjustments of any kind. Each of
the Credit
Parties hereby acknowledges its respective Credit Party Obligations
under the
Credit Documents and reaffirms that each of the Liens and security
interests
created and granted in or pursuant to the Credit Documents are
valid and
subsisting and that this Agreement shall in no manner impair or
otherwise
adversely affect such Credit Party Obligations, Liens or security
interests.
2.
Forbearance. Subject to the terms and conditions set forth herein,
the
Lender agrees that from and after the Forbearance Effective Date
(as defined
below) it shall, until the occurrence of a Forbearance Termination
Event (as
defined below), forbear from exercising any right or remedy under
the Credit
Documents (including without limitation the right to cease making
Revolving
Loans) or applicable law, but only to the extent that such right or
remedy
arises exclusively as a result of the occurrence of the
Acknowledged Events of
Default; provided, however, that the foregoing shall not otherwise
affect (i)
the Lender's right to effect a "Payment Blockage Period" (as
defined in the
Indenture) with respect to the Subordinated Debt (except to the
extent that the
November Interest Payment is funded entirely with proceeds of the
Subordinated
Loan) or (ii) any other rights the Lender may have against the
holder of the
Subordinated Debt; provided, further, that the Lender shall be free
to exercise
any or all of its rights and remedies under the Credit Documents
after the
occurrence of a Forbearance Termination Event.
3.
Forbearance Termination Event. Nothing set forth herein or
contemplated
hereby is intended to constitute an agreement by the Lender to
forbear from
exercising any of the rights and remedies available to it under the
Credit
Agreement, the other Credit Documents, or applicable law (all of
which rights
and remedies are hereby expressly reserved by the Lender) upon or
after the
occurrence of a Forbearance Termination Event. As used herein, a
"Forbearance
Termination Event" shall mean the occurrence of any of the
following: (a) any
Default or Event of Default under the Credit Documents other than
the
Acknowledged Events of Default, (b) a breach by the Credit Parties
of any of the
provisions of this Agreement, and (c) March 31, 2006.
2
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4. One-Time Overadvance. The
Lender agrees, notwithstanding the definition
of Borrowing Base set forth in the Credit Agreement but subject to
all other
terms and conditions of the Credit Agreement, that it shall, on any
one occasion
prior to the occurrence of a Forbearance Termination Event, make
Revolving Loans
to the Borrower in an amount up to $600,000 in excess of the
Borrowing Base to
the extent such funds are necessary for general working capital
purposes (an
"Overadvance"); provided, that the Borrower shall have delivered
the UK
Receivables Documentation (as defined below) prior to the request
for such
Overadvance. An Overadvance shall be available to the Borrower on
only one
occasion and the Borrower shall repay such Overadvance within
thirty (30) days
thereafter, so that at such time the Revolving Obligations
outstanding at such
time do not exceed the Borrowing Base. The failure by the Borrower
to repay such
Overadvance as and when required hereunder shall constitute an
immediate Event
of Default, irrespective of any otherwise applicable grace
period.
5.
Consent to Subordinated Loan. The Lender agrees that neither (a)
the
Borrower's incurrence of up to $10,000,000 of Indebtedness in
connection with
the Subordinated Loan, nor (b) its failure to pay the Lender 100%
of the Net
Cash Proceeds thereof as required under Section 3.3(b)(iv) of the
Credit
Agreement shall constitute an Event of Default under the Credit
Agreement;
provided, that (x) the proceeds of the Subordinated Loan are used
to make the
November Interest Payment and for general working capital purposes,
and (y) the
repayment of s
