EXHIBIT 10.5
CONSENT AND
AMENDMENT AGREEMENT
THIS CONSENT AND AMENDMENT AGREEMENT ("Agreement") is executed this 16th
day of August, 2002 by and among PRG-Schultz International, Inc., a Georgia
corporation f/k/a The Profit Recovery Group International, Inc. ("PRGX"), John
M. Cook, a Georgia resident ("Cook"), John M. Toma, a Georgia resident
("Toma"), HSAT, Inc., a Texas corporation f/k/a Howard Schultz & Associates
International, Inc. ("HSAT"), Howard Schultz, a Texas resident ("H. Schultz"),
Andrew H. Schultz, a Texas resident ("A. Schultz") and H. Schultz, as
Shareholders' Representative of all the shareholders of HSAT pursuant to the
Asset Agreement, defined below, and of each former shareholder of each of the
Affiliated Companies pursuant to the Stock Agreement defined below, who held
such shares immediately prior to the transactions contemplated therein
(collectively, HSAT, each of the shareholders of HSAT and each of the
shareholders of the Affiliated Companies (as such shareholders are represented
by the Shareholders' Representative) being the "Schultz Parties").
W I T N E S S E T H:
WHEREAS, on January 24, 2002, PRGX acquired substantially all of the
assets of HSAT pursuant to an Amended and Restated Agreement and Plan of
Reorganization, dated as of December 11, 2001, as amended, by and among certain
of the parties hereto and the other parties named therein (the "Asset
Agreement"), and acquired substantially all of the outstanding stock of certain
companies affiliated with the Schultz Parties (collectively, the "Affiliated
Companies"), pursuant to that certain Amended and Restated Agreement and Plan
of Reorganization Pursuant to Section 368(a)(1)(B) of the Internal Revenue
Code, as Amended, dated as of December 11, 2001, as amended, by and among
certain of the parties hereto and others named therein (the "Stock Agreement"),
with the consideration under both the Asset Agreement and the Stock Agreement
being shares of Common Stock of PRGX ("PRGX Shares");
WHEREAS, in connection with the closing of the Asset Agreement and the
Stock Agreement, PRGX and/or Cook and Toma entered into other agreements,
including a shareholder agreement with HSAT and certain shareholders of HSAT
(the "Shareholder Agreement") and a registration rights agreement with HSAT and
all of its shareholders and all of the former shareholders of the Affiliated
Companies (the "Registration Rights Agreement"), both relating to the PRGX
Shares acquired pursuant to the Asset Agreement and Stock Agreement
(collectively, the "Other Agreements");
WHEREAS, pursuant to certain stock purchase agreements dated August 16,
2002 (each being a "Sale Agreement"), certain of the Schultz Parties and
Schultz PRG Liquidating Investments Ltd., a Texas limited partnership ("LP")
have agreed to sell 8,677,014 PRGX Shares ("Shares to be Sold") to affiliates
of Blum Capital Partners L.P. and to affiliates of Berkshire Partners LLC
(collectively the "Buyers" and such transactions being referred to herein as
the "Sales");
WHEREAS, pursuant to a First Option Agreement and a Second Option
Agreement, both of even date herewith, LP has granted to PRGX options
("Options") to purchase an aggregate of 2,892,336 PRGX Shares ("Option
Shares");
WHEREAS, each of the Buyers has loaned $12,610,584.96 to the LP, and as
security for its payment obligations, the LP has granted a security interest in
and pledged 1,446,168 shares of PRGX Common Stock to each of the Buyers
pursuant
to Pledge Agreements between the LP and each Buyer of even date herewith
("Pledge Agreements");
WHEREAS, H. Schultz and A. Schultz shall beneficially retain after the
closings of the Sales, an aggregate of 1,500,000 PRGX Shares, which are not
subject to the Options (the "Retained Shares");
WHEREAS, the Schultz Parties have requested that Cook and Toma consent to
the Sales as required under the Shareholder Agreement, that PRGX amend its
Shareholder Protection Rights Plan dated as of August 9, 2000 to permit the
Sale to the affiliates of Blum Capital Partners, that PRGX grant certain
registration rights to the Buyers with respect to the PRGX Shares they acquire
(without which registration rights the Buyers would not acquire such shares),
and that PRGX, Cook and Toma provide assistance to the Schultz Parties in
effecting the Sales to the Buyers, which amendments, agreements and assistance
the Schultz Parties acknowledge PRGX, Cook and Toma are not required to
provide;
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. SHAREHOLDER AGREEMENT.
(a) CONSENT. Pursuant to Section 3.1 of the Shareholder Agreement, the
Shareholders' Representative, on behalf of all of the Holders (as defined in
the Shareholder Agreement and being those shareholders of HSAT party thereto)
thereunder, and each of Cook and Toma hereby consent to the following
transactions:
(i) the Sales of the Shares to be Sold to each of the Buyers;
(ii) the transfer of 4,450,452 shares of PRGX Common Stock by
H.Schultz to the LP; subject to the LP's execution of this Agreement,
whereby the LP agrees to be bound by the terms of the Shareholder
Agreement, as amended hereby;
(iii) the grant of the Options by the LP to PRGX;
(iv) the pledge by the LP of an aggregate of 2,892,336 PRGX Shares to
each of the Buyers pursuant to the Pledge Agreements and any transfers of
the PRGX Shares pursuant to the exercise of any rights under the notes
subject to the Pledge Agreement; and
(v) the exercise of the Options by PRGX.
(b) RESTRICTIONS. At the closing of each of the Sales, all of the Shares
to be Sold shall be free of any and all transfer, voting and other restrictions
contained in Article III of the Shareholder Agreement, and all of the Option
Shares and Retained Shares and the Holders thereof (as defined in the
Shareholder Agreement) shall, notwithstanding any provision to the contrary in
the Shareholder Agreement, remain subject to all of the transfer, voting and
other restrictions contained in Article III of the Shareholder Agreement until
January 24, 2004. In addition, each of the Schultz Parties hereby agrees that
effective upon the closings of the Sales, the exceptions to the restrictions on
Transfer contained in subsections (iv), (v) and (vii) of Section 3.1 of the
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Shareholder Agreement shall be null and void and no longer available to the
Schultz Parties during the term of the Shareholder Agreement.
(c) COOK AND TOMA. In consideration of the consents given by Cook and Toma
to the Sales pursuant hereto, effective upon ------------- the closing of the
Sales:
(i) Toma will no longer be bound by any of the restrictions contained
in Article III of the Shareholder Agreement; and
(ii) Cook hereby agrees that the exceptions to the restrictions on
Transfer contained in subsections (iv), (v) and (vii) of Section 3.1 of
the Shareholder Agreement shall be null and void and no longer available
to Cook during the term of the Shareholder Agreement and the following
additional exception to the restrictions shall apply solely to Cook: "(iv)
transfers of less than 2,043,571 shares of PRGX Common Stock in the
aggregate"; and the current subsection (vi) is renumbered subsection (v).
(d) TERM. Section 4.1 of the Shareholder Agreement is hereby deleted and
replaced with the following: This Agreement ---- will terminate on January 24,
2004.
(e) NO ADDITIONAL SHARES. H. Schultz and A. Schultz agree that they shall
not directly or indirectly acquire record --------------------- or beneficial
ownership any shares of PRGX Common Stock prior to a date 271 days after the
date hereof, except in connection with a recapitalization, reclassification,
stock split, stock dividend, combination, subdivision or similar transaction in
respect of shares of PRGX Common Stock.
2. REGISTRATION RIGHTS AGREEMENT. Effective upon the closing of the Sales,
PRGX, HSAT and the Shareholders' Representative hereby terminate the
Registration Rights Agreement. HSAT and the Shareholders' Representative, on
behalf of all of the shareholders of HSAT and of all of the former shareholders
of the Affiliated Companies, acknowledge and agree that, as of the date of such
termination, HSAT, the shareholders of HSAT and the former shareholders of each
of Affiliated Companies shall have no further rights thereunder.
3. WAIVER. Any and all notices required under any of the Other Agreements
amended hereunder for the amendments ------ contemplated herein are hereby
waived.
4. AUTHORITY. H. Schultz, as Shareholders' Representative, is authorized to
act hereunder on behalf of all of the --------- shareholders of HSAT and of all
of the former shareholders of the Affiliated Companies who are not otherwise
parties to this Agreement.
5. EFFECT. Except to the extent expressly modified above, the Shareholder
Agreements shall remain in full force and ------ effect as originally executed.
6. MISCELLANEOUS.
(a) GOVERNING LAW. THIS AGREEMENT AND ALL RIGHTS AND OBLIGATIONS OF THE
PARTIES HERETO SHALL BE GOVERNED, CONSTRUED AND INTERPRETED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF GEORGIA WITHOUT GIVING EFFECT TO PRINCIPLES OF
CONFLICTS OF LAW.
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(b) MODIFICATIONS. No modification of or amendment to this Agreement, nor
any waiver or any rights under this Agreement, shall be effective unless in
writing signed by the parties to this Agreement. The failure by either party to
enforce any rights under this Agreement shall not be construed as a waiver of
any rights of such party.
(c) NOTICES. Any notice required or permitted by this Agreement shall be
in writing and delivered in accordance with the provisions of Section 10.5 of
the Asset Agreement.
(d) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original ------------ and all of
which together shall constitute one instrument. (E) SUCCESSORS AND ASSIGNS. The
rights and benefits of this Agreement shall inure to the benefit of, and be
enforceable by PRGX's and HSAT's respective successors and assigns. The rights
and obligations of the other parties to this Agreement under this Agreement may
only be assigned with the prior written consent of PRGX.
[Remainder of page intentionally left blank. Signatures on following page.]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
PRG-SCHULTZ INTERNATIONAL, INC.
By: /s/ Clinton McKellar, Jr.
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Name: Clinton McKellar, Jr.
Its: General Counsel and Secretary
/s/ John M. Cook
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John M. Cook
/s/ John M. Toma
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John M. Toma
HSAT, INC.
By: /s/ Andrew H. Schultz
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Name: Andrew H. Schultz
Its: Executive Vice President
/s/ Howard Schultz
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Howard Schultz
/s/ Andrew H. Schultz
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Andrew H. Schultz
/s/Howard Schultz
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Howard Schultz, Shareholders' Representative, on
behalf of all shareholders of HSAT, Inc. and on
behalf of all former shareholders of the
Affiliated Companies
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SCHULTZ PRG LIQUIDATING INVESTMENTS, LTD.
By: SCHULTZ PRG LIQUIDATING
INVESTMENTS GP, LLC
Its: General Partner
By: /s/ Howard Schultz
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Name: Howard Schultz
Its: Manager
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