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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") dated as of October
29, 1998 by and among THE PROFIT RECOVERY GROUP INTERNATIONAL, INC., a Georgia
corporation ("PRGX"), THE PROFIT RECOVERY GROUP INTERNATIONAL I, INC., a
Georgia corporation and wholly owned subsidiary of PRGX ("PRGI"), ROBERT BECK &
ASSOCIATES, INC., an Illinois corporation ("Seller"), and the undersigned
shareholders of Seller, being all of the shareholders of Seller (collectively,
"Owners" and individually, an "Owner").
W I T N E S S E T H:
WHEREAS, PRGI is in the business of auditing accounts payable,
expenses, capital expenditures, and various other payment arrangements or
obligations between its clients ("Clients") and their suppliers, vendors,
landlords and taxing authorities (the "Client Payees") for the purpose of
identifying and documenting overbilling by and refund, credit or chargeback
claims for overpayments to, the Client Payees (the "Audit Activities") and
rendering management advisory services associated with the Audit Activities
(collectively, the "Business of PRGI")
WHEREAS, Seller is engaged in the business of the examination, review
and audit of various paid bills and expenses of client companies, such as
accounts payable, cooperative advertising, advertising expense, real estate
tax, common area maintenance, legal and professional fees, related and other
charges and expenses for the purpose of discovering and documenting for
subsequent charge back and recovery overbillings, overpayments and/or
under-deductions made by client companies, or for discounts, rebates and
allowances of all types, freight charges, special handling, insurance, and all
other overbillings, overpayments and/or under-deduction incidental or related
thereto and collection with respect to same and the rendering of other related
management counseling services (the "Business");
WHEREAS, PRGI is a wholly-owned subsidiary of PRGX;
WHEREAS, the Owners own in the aggregate all of the issued and
outstanding shares of capital stock of Seller;
WHEREAS, PRGI desires to purchase all of the shares of capital stock
of Seller which are issued and outstanding on the Closing Date (as hereinafter
defined), and each Owner desires to sell to PRGI all of the Purchased Shares
(as hereinafter defined) owned beneficially and of record by such Owner as
hereinafter provided;
WHEREAS, concurrently with the execution hereof, PRGI has entered into
acquisition agreements (collectively, the "Other Acquisition Agreements") in
respect of each of the following entities: Robert N. Beck, Jr., a sole
proprietorship, RBA Audits, Inc., John E. Flatley & Associates, Inc., John H.
Cavins, a sole proprietorship, Vincent Creadon, a sole
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proprietorship, John Kirkeide, a sole proprietorship, Savant Consulting, L.L.C.
and Taylor, Blackburn & Associates, Inc. (collectively, the "Other Sellers");
WHEREAS, concurrently with the execution hereof, Seller and its Owners
have entered into a Representations, Covenants and Indemnification Agreement
with PRGI, PRGX and the parties to the Other Acquisition Agreements (the "RCI
Agreement"), the terms and provisions of which are expressly incorporated
herein by reference; and
WHEREAS, capitalized terms used herein and not otherwise defined
herein shall have the meanings assigned to them in the RCI Agreement;
NOW, THEREFORE, in consideration of the premises, the mutual
representations, warranties and covenants herein contained or incorporated by
reference herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
ARTICLE 1
PURCHASE AND SALE OF STOCK
1.1 PURCHASE AND SALE. On the terms, provisions and conditions set
forth herein and in reliance upon the warranties and representations contained
herein and in the RCI Agreement, PRGI shall purchase, and each of the Owners
shall sell, transfer and assign to PRGI, at the Closing (as hereinafter
defined), all of the issued and outstanding shares of capital stock of Seller
free and clear of all security interests, pledges, liens, encumbrances, charges
or restrictions on the voting, transfer, receipt of dividends or other
attributes of ownership whatsoever (the "Purchased Shares").
ARTICLE 2
CONSIDERATION FOR STOCK TRANSFER
2.1 DETERMINATION OF PURCHASE PRICE.
(a) The aggregate purchase price for the Purchased Shares
shall be equal to the sum of (i) $10,296,690, less any unfunded Effective Date
Reimbursable Liabilities and Interim Period Reimbursable Liabilities, as
provided in Section 2.3 below, plus an amount equal to 6.75% of such amount
calculated on a per annum basis for the period from and after the Effective
Date through and including the Closing Date, plus the Reimbursable Taxes ("Cash
Consideration") and (ii) 379,880 shares of PRGX Common Stock (the "PRGX
Shares") (the Cash Consideration and the PRGX Shares being collectively
referred to herein as the "Purchase Price"); provided, however, certain of the
PRGX Shares shall be issued in the name of the Representative, as nominee and
attorney-in-fact for the Owners, to be held in escrow pursuant
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to Section 2.2 below and in lieu of delivering fractional shares, PRGI shall
deliver to Owners an amount in cash based on $27.00 per share (the "Closing
Price.")
(b) The number of shares of outstanding capital stock of
Seller held by an Owner immediately before the Closing, as set forth on the
Disclosure Schedule to the RCI Agreement, divided by the total number of shares
of capital stock of Seller outstanding immediately before the Closing Date is
such Owner's "Proportionate Share." At the Closing, each Owner shall receive
that portion of each of the Cash Consideration and the PRGX Shares equal to the
product of the Cash Consideration and the PRGX Shares, respectively, multiplied
by such Owner's Proportionate Share, payable at Closing in PRGX Shares and cash
in immediately available funds.
2.2 ESCROW SHARES . At the Closing, an aggregate of approximately
189,936 of the PRGX Shares issued on the Closing Date pursuant to Section 2.1
hereof (including 37,691 deposited in escrow on behalf of John E. Flatley)
(collectively, the "Escrow Shares") shall be issued in the name of the
Representative, as nominee and attorney-in fact for each of the Owners, which
Escrow Shares shall be held in escrow together with shares of PRGX deposited in
escrow by the parties to the other Acquisition Agreements, pursuant to the
terms of the RCI Agreement and the Indemnity Escrow Agreement by and among
PRGI, the Owners and the other signatories named therein in substantially the
form of Exhibit 2.2 attached hereto (the "Indemnity Escrow Agreement"). The
aggregate number of Escrow Shares deposited hereunder and under the Other
Acquisition Agreements shall equal the product of (a) the aggregate Purchase
Prices under this Agreement and the Other Acquisition Agreements (approximately
$43,500,000) multiplied by (b) 20%, divided by the Closing Price.
2.3 DELIVERY OF STATEMENT OF EFFECTIVE DATE REIMBURSABLE
LIABILITIES AND CASH FLOW STATEMENT.
(a) At least 5 business days prior to the Closing Date,
PRGI will present to the Representative, as defined in the RCI Agreement, a
detailed list, including the amount and description thereof, of all of the
following accrued but unpaid liabilities and obligations of Seller's Business
outstanding as of the Effective Date: (i) Seller Transaction Expenses, (ii)
non-trade payables (meaning those not directly related to the Business to be
acquired by PRGI pursuant hereto), (iii) non-trade accrued expenses (meaning
those not directly related to the Business to be acquired by PRGI pursuant
hereto), (iv) commissions payable as of the Effective Date in respect of
accounts receivable collected by Seller prior to the Effective Date; (v) all
amounts owed to the Owners under the Principal Agreement or otherwise (except
for advances by Owners used to pay normal trade payables of Seller directly
relating to the Business to be acquired by PRGI incurred on or after the
Effective Date or advances made to Associates or Employees on or after the
Effective Date), (vi) all amounts owed to Persons other than Owners (except for
normal trade payables directly related to the Business to be acquired by PRGI
pursuant hereto incurred in the ordinary course of business) and (vii) any and
all liability of Seller to pay the Success Bonuses in cash and shares of PRGX
Common Stock, valued at the Closing Price, to key employees of Seller as
described in Section 5.20 of the RCI Agreement,
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including, without limitation, any payroll or other tax liabilities in respect
thereof, to the extent Seller does not receive from certain Other Sellers at
Closing payment in cash and shares of PRGX Common Stock, valued at the Closing
Price, in an amount equal to the amount of cash and the number of shares of
PRGX Common Stock, valued at the Closing Price, necessary and sufficient to pay
the Success Bonuses (collectively, the "Effective Date Reimbursable
Liabilities").
(b) On the last business day immediately preceding the
Closing Date, Seller shall prepare and deliver to PRGI, an estimated cash flow
statement of total cash received by Seller in respect of the Business less
total cash disbursements for the period from and including the Effective Date
to and including the last business day immediately preceding the Closing Date
(the "Interim Period Cash Flow"), detailing all such amounts by category of
payment (the "Cash Flow Statement"). PRGI shall be entitled to reimbursement,
at Closing, of all of the following cash payments or accruals made in respect
of the Business during the period from and including the Effective Date to and
including the day immediately preceding the Closing Date: (A) any amounts paid
or accrued during the period from and including the Effective Date to and
including the day immediately preceding the Closing Date in respect of
liabilities of the type defined as Effective Date Reimbursable Liabilities
above (but not including any Effective Date Reimbursable Liabilities), and (B)
any amounts paid by Seller to any Principals or Other Sellers during the period
between the Effective Date and the day immediately preceding the Closing Date
(except for normal trade payables and accrued expenses arising in the ordinary
course of business, any distributions to Owners or Other Sellers of cash or
cash equivalents in the Business as of the close of business on August 31,
1998, and commissions to Beck, Jr. and Kirkeide for audit and related
counseling services performed prior to the Effective Date solely in their
capacity as auditors in connection with claims submitted to suppliers of
Customers prior to Closing) (collectively, the "Interim Period Reimbursable
Liabilities"). The Owners will be entitled to reimbursement from PRGI of the
amount of federal and state income taxes (which shall not include any taxes
payable by the Owners on the acquisition of the purchased shares by PRGI) paid
by the Owners on the income taxable to them, pursuant to their respective
federal Schedule K-1, from the operations of Seller on and from the Effective
Date (based on an agreed all inclusive effective tax rate of 27%) (the
"Reimbursable Taxes").
(c) The Cash Consideration set forth in Section 2.1
hereof shall be reduced by the amount of Effective Date Reimbursable
Liabilities and Interim Period Reimbursable Liabilities, determined as provided
above. Within sixty (60) days following the Closing Date (or in respect of
Reimbursable Taxes, within 30 days after receipt by PRGI of a copy of each
Owner's federal Schedule K-1 for 1998), PRGI and the Representative shall each
have the right to request that the Accountants review the statements of
Effective Date Reimbursable Liabilities, Interim Period Reimbursable
Liabilities, the Cash Flow Statement or Reimbursable Taxes, which review shall
be a final determination of the Interim Period Cash Flow, the Reimbursable
Taxes (and the taxable income of Seller on which such Reimbursable Taxes are
based), Effective Date Liabilities and the Interim Period Reimbursable
Liabilities, and in the event that such determination shows that payments are
required by PRGI or by Seller or Owners, any such payment shall be made by the
Representative or PRGI to the other, as the case may be, within
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15 days after completion of the review by the Accountants, together with
interest on such payment amount from the Closing Date until the date of such
payment at the rate of 6.75% per annum. The fees and expenses charged by the
Accountants in respect of such review shall be borne equally by PRGI and the
Representative.
2.4 CLOSING. As soon as practicable after the execution hereof,
the parties hereto shall execute and deliver all documents and instruments for
the consummation of the transactions contemplated herein (other than the
certificates for the Purchase Price as defined herein) into escrow with Arnall
Golden & Gregory, LLP, as escrow agent, in accordance with that certain closing
escrow agreement in substantially the form of Exhibit 2.4, attached hereto,
pending execution and delivery in escrow of all documents contemplated by this
Agreement and the Other Acquisition Agreements by all parties thereto. The
closing of the transactions contemplated herein (the "Closing") shall take
place on or before October 29, 1998, at the offices of PRGI's counsel or by the
exchange of documents and instruments by mail, courier, telecopy and wire
transfer to the extent mutually acceptable to the parties hereto upon
compliance with the terms, conditions and contingencies contained herein or on
such other date as is mutually agreed upon by the parties hereto (such date to
be herein referred to as the "Closing Date"). The parties hereto intend that
PRGI receive all of the benefits in respect of the operations of the Business
accruing in the ordinary course of business on and after the Effective Date and
assume all of the liabilities of the Business incurred in the ordinary course
of business on and after the Effective Date, except as otherwise specifically
provided herein or in the RCI Agreement.
ARTICLE 3
ADDITIONAL COVENANTS
3.1 REPRESENTATIONS, COVENANTS AND INDEMNIFICATION AGREEMENT.
Concurrently with the execution and delivery of this Agreement, Seller and
Owners, together with the other signatories named therein, shall execute and
deliver to PRGX and PRGI the RCI Agreement substantially in the form attached
hereto as Exhibit 3.1, together with a disclosure schedule relating to Seller,
Owners, the Applicable Assets and the Business pursuant to the terms of the RCI
Agreement (the "Disclosure Schedule"). Each of the parties hereto acknowledge
that the representations, warranties, covenants, agreements and indemnification
made by them concurrently herewith in the RCI Agreement are an inducement to
the other parties hereto to enter into this Agreement. Prior to the execution
and delivery of the RCI Agreement, Seller shall have delivered to PRGX and PRGI
a draft of the Disclosure Schedule and true, correct and complete copies of all
documents, together with all amendments thereto through the date of execution
hereof, contemplated by or required to be listed in any exhibit or schedule
(including the Disclosure Schedule) to this Agreement or the RCI Agreement,
including, without limitation, all Leases, Contracts, insurance policies, the
Historical Statements, the Monthly Statements through the last day of the month
immediately preceding the date hereof and Seller's Tax Returns.
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3.2 COVENANTS RE: TAX MATTERS.
(a) Preparation and Filing of Tax Returns.
(i) Owners' Rights and Responsibilities. Owners
shall have the right and obligation to prepare and file
timely, or cause to be prepared and filed timely, when due,
any Tax Return that is required to include the operations,
ownership, assets or activities of Seller for Tax periods
ending before the Closing Date. Any such Tax Returns for any
period ending before the Closing Date shall be prepared on
the basis of the closing of the books method of allocating
income and in a manner consistent with prior tax returns.
Owners shall permit PRGI to review and comment on each such
Tax Return described in the prior sentence prior to filing.
To the extent permitted by applicable law, Owners shall
include any income, gain, loss, deduction or other Tax items
for such periods on their Tax Returns in a manner consistent
with the Schedule K-1's prepared by Owners for such periods.
Owners shall pay any Taxes required to be paid with respect
to all periods ending prior to the Closing Date (whether due
before or after Closing) and any Taxes required to be paid
with respect to the pre-closing portion of all Straddle
Periods, subject to PRGI's obligation to reimburse the Owners
for the Reimbursable Taxes. Notwithstanding the foregoing,
PRGI will pay when due the amount owed by Seller in respect
of the 1.5% Illinois Replacement Income Tax on operations of
Seller on and after the Effective Date. The Taxes due by
Owners for any state or local income Tax Straddle Period
shall be determined by using a closing of the books method of
allocating income based on the federal income Tax Return of
Seller for its taxable year ending on the day immediately
preceding the Closing Date and all other Taxes for any
Straddle Period shall be prorated on a daily basis provided,
however, any payroll Taxes attributable to employees hired by
Seller after the Closing in respect to periods after the
Closing and any sales and use Taxes and transfer Taxes
attributable to assets purchased or sold by Seller after the
Closing shall be attributable to PRGI.
(ii) PRGI's Rights and Responsibilities. PRGI
shall have the right and obligation to prepare and file
timely, or cause to be prepared and filed timely, when due,
all Tax Returns that are required to include the operations,
ownership, assets or activities of Seller for any Tax periods
ending on or after the Closing Date including any state or
local Tax periods beginning before and ending after the
Closing Date ("Straddle Period"). After the Closing, PRGI
shall cause such Tax Returns to be filed.
(b) Preparation of Tax Returns.
(i) Owners shall provide to PRGI upon request
such Tax information as is in the possession of Owners and
reasonably requested by PRGI with respect to the operations,
ownership, assets or activities of Seller for pre-Closing
periods
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to the extent such information is relevant to any Tax return
which PRGX or PRGI has the right and obligation hereunder to
file.
(ii) Owners shall, on the one hand, or PRGX or
PRGI shall on the other, with respect to any Tax Return which
such party is responsible for preparing and filing, causing
to be prepared and filed, or under its control or custody,
make such Tax Return and related work papers available for
review by the other party if the Tax Return (A) is with
respect to Taxes for which the other party or one of its
affiliates may be liable hereunder or under applicable tax
law, or (B) claim Tax benefits which the other party or one
of its Affiliates is entitled to receive hereunder. The
filing party shall use its reasonable best efforts to make
Tax Returns available for review as required under this
paragraph sufficiently in advance of the due date for filing
such Tax Returns to provide the non-filing party with a
meaningful opportunity to analyze and comment on such Tax
Returns and have such Tax Returns modified before filing,
accepting the position of the filing party unless such
position is contrary to the provisions of paragraph (a)(i)
and (ii) hereof.
(iii) Consistency of Accounting Method.
Any Tax Return which includes or is based on the operations,
ownership, assets or activities of Seller for any pre-
Closing period, and any Tax Return which includes or is based
on the operations, ownership, assets or activities of Seller
for any post-Closing period to the extent the items reported
on such Tax Return might reasonably increase any Tax
liability of Seller or Owners for any pre-Closing period or
any Straddle Period or the liability of PRGI or PRGX for any
post-Closing period, shall be prepared in accordance with
past Tax accounting practices used with respect to the Tax
Returns in question (unless such past practices are no longer
permissible under the applicable tax law), and to the extent
any items are not covered by past practices (or in the event
such past practices are no longer permissible under the
applicable tax law), in accordance with reasonable Tax
accounting practices selected by the filing party with
respect to such Tax Return under this Agreement with the
consent (not to be unreasonably withheld or delayed) of the
non-filing party.
(c) Amendment of Tax Returns. If Owners become aware that
any Tax Return of Seller for any period when Seller was an S corporation may be
amended to provide a tax refund to the Owners, PRGX, at the expense of Owners,
shall cause Seller to prepare and file such amendments to the Tax Return as may
be necessary, provided, however, that PRGX shall not be required to cause any
such amendment to be filed that would have an adverse tax effect on Seller for
periods prior to or subsequent to the Closing. Seller has no obligation with
respect to pursuing such refund other than to prepare and file amendments
pursuant to this Section. PRGI shall not amend any Tax Return of Seller for any
period ending prior to the Closing without the express written approval of
Owners. Further PRGI shall not make any
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election with respect to the Seller if such election would have any adverse tax
effect on Seller or Owners for periods prior to the Closing.
(d) Tax Audits. In the event of any audit or threatened
audit by the IRS or other taxing authority of the Tax liability of Seller or
the Owners for the periods during which Seller was an S corporation, PRGI shall
notify Owners immediately of such audit or threatened audit. Owners, at their
expense, shall respond to the audit and shall keep PRGI informed of any issues
raised by the Tax Authority involved. Owners shall have the sole right to
settle or contest any deficiency proposed by the IRS or such other authority;
provided, however, that the Owners shall not settle any deficiency without the
consent of PRGI if such settlement would have any adverse tax effect on Seller
for periods prior to or subsequent to the Closing. PRGI shall provide the
Owners with access to Seller's books and records, and cooperate with the
Owners, to enable them to contest any such deficiency.
(e) Cooperation. PRGI and Owners shall cooperate fully,
as and to the extent reasonably requested by the other party, in connection
with the filing of Tax Returns pursuant to this Section, including the
preparation and execution of Tax Returns, and any audit, litigation or other
proceeding with respect to Taxes. Such cooperation shall include the retention
and (upon the other party's request) the provision of records and information
which are reasonably relevant to any such audit, litigation or other proceeding
and making Owners (or the Representative of Owners) available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder. PRGI, Owners and Seller agree (A) to retain all
books and records with respect to Tax matters pertinent to Seller and relating
to any taxable period beginning before the Closing Date until the expiration of
the statute of limitations (and, to the extent notified by PRGI or Seller, any
extensions thereof) of the respective taxable periods, and to abide by all
record retention agreements entered into with any taxing authority, and (B) to
give the other party reasonable written notice prior to transferring,
destroying or discarding any such books and records, and if the other party to
requests, Seller shall allow the other party to take possession of such books
and records. PRGI and Seller further agree, upon request, to use their best
efforts to obtain any certificate or document from any governmental authority
or any other Person as may be necessary to mitigate, reduce or eliminate any
Tax that could be imposed (including, but not limited to, with respect to the
transactions contemplated hereby).
(f) All transfer, documentary, sales, use, stamp,
registration and other such taxes and fees (including penalties and interest)
incurred in connection with the transactions contemplated by this Agreement
shall be paid by Owners when due, and Owners will, at their own expense, file
all necessary Tax Returns and other documentation with respect to all such
transfer, documentary, sales, use, stamp, registration and other Taxes and
fees, and, if required by applicable law, PRGI will join in the execution of
any such Tax Returns and documentation.
(g) Proposed Section 338(h)(10) Election. After the
Closing and prior to January 31, 1999, PRGI will make a determination whether
or not it is in PRGI's best interest for PRGI and Owners to make an election
pursuant to Section 338(h)(10) of the Code in respect
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of the purchase of the shares of RBA herein. Upon notice from PRGI to Robert
Beck, Sr. that PRGI will make this election, each of the Owners agree that such
Owner will consent to such election and sign any and all documents requested by
PRGI to effect such election in a timely manner including IRS Form 8023,
subject to the specific indemnification language in Section 4.2(b)(iii) of the
RCI Agreement.
3.3 OTHER COVENANTS BY OWNERS. Each of the Owners hereby covenants
and agrees that he or she shall transfer to Seller, by appropriate documents of
transfer, prior to the Closing, any and all right he or she has in and to any
assets and rights relating to Seller's Business which Seller uses to conduct
its Business, including without limitation any Intellectual Property Rights
used by Seller, so that at the Closing of the transactions contemplated herein
all such assets shall be transferred from Seller to PRGI by operation of law.
3.4 TERMINATION OF EMPLOYEE BENEFIT PLANS.
(a) Prior to the Closing, the Board of Directors of
Seller shall authorize by appropriate Board action the termination of any and
all Employee Benefit Plans (as defined in the RCI Agreement) currently in
effect for its Associates and/or Employees other than Seller's medical
insurance plan and "cafeteria" benefit plan as identified in the Disclosure
Schedule and, if required by applicable law, the amendment and restatement of
such Employee Benefit Plans in order to comply with applicable law. Seller (or
after the Closing, Owners) shall timely notify Associates and Employees of
Seller of the termination of the Employee Benefit Plans, including, without
limitation, the cessation of future benefit accruals under any defined benefit
plan. As soon as practical after said notification and termination, and in any
event no later than the time prescribed by law, Seller (or PRGI if after the
Closing) shall, with respect to any tax-qualified retirement plan sponsored by
Seller, submit the termination of such plan to the Internal Revenue Service for
a determination as to the continued qualification of such plan under Sections
401(a) and 501(a) or other applicable sections of the Code upon the termination
of such plan. The Owners or, to the extent permitted by applicable law, the
Plan shall bear all legal, accounting and tax costs and expenses incurred by
Sellers, Owners or PRGI in terminating the Employee Benefit Plans and the cost
of any fiduciary insurance and all other expenses of the trustee of the
Employee Benefit Plans, and shall indemnify and hold PRGI and PRGX harmless in
respect of any Losses arising out of such Employee Benefit Plans or the
termination thereof pursuant to Section 4.1 of the RCI Agreement.
(b) The parties agree that Robert N. Beck, Sr. (or in the
event of his death, resignation, removal or other inability to act, Richard N.
Beck) shall act as the sole trustee of that Employee Benefit Plan of Seller
entitled Robert Beck & Associates Retirement Plan and Trust (the "Retirement
Plan"), without compensation, until all assets comprising the related trust
under the Retirement Plan have been distributed in accordance with applicable
laws and regulations. From and after the Closing, Seller, PRGI and PRGX will
provide such information and cooperation as the trustee may reasonably request
in order to effect the termination of such Retirement Plan in accordance with
applicable laws and regulations. In addition to any other indemnification
obligations, the Owners of Seller hereby indemnify and hold Seller, PRGI and
PRGX harmless
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pursuant to Section 4.1 of the RCI Agreement from any and all Losses (as
defined in the RCI Agreement) whatsoever which arise from any such trustee's
actions or omissions taken or occurring before or after the Closing in respect
of the Retirement Plan and related trust. In addition to any other
indemnification obligations, Seller, PRGI and PRGX hereby indemnify and hold
the Owners of Seller harmless pursuant to Section 4.2 of the RCI Agreement from
any and all Losses (as defined in the RCI Agreement) whatsoever which arise
solely from Seller's, PRGI's or PRGX's failure to act from and after the
Closing, upon the trustee's reasonable request, in connection with the
termination of the Retirement Plan.
3.5 ACKNOWLEDGEMENT. The parties acknowledge that prior to the
Closing Seller may distribute to its Owners all vehicles used in the Business
and all furniture and art work to the extent set forth on Schedule 3.5 attached
hereto.
3.6 BECK LEASE. Prior to the Closing, Seller and Owners will sell
to Cliff Harstad or his assigns any and all interest Seller or any Owner has in
Beck Lease Services, Inc. ("Beck Lease"), a business engaged in the audit of
common area maintenance charges. Neither Seller nor Owners have had since the
Effective Date, nor will they have prior to the Closing Date, any active
participation in the management or operations of Beck Lease.
3.7 CERTAIN EMPLOYMENT AGREEMENTS AND SEVERANCE OBLIGATIONS. Prior
to or at the Closing, Georgena M. Beck, Robert N. Beck and Renee McCauley shall
have resigned under their employment agreements with the Seller and waived in
writing any and all rights to severance benefits from Seller thereunder.
3.8 TERMINATION OF STOCKHOLDERS AGREEMENT. Prior to or at the
Closing, Seller and each of the Owners shall have taken all actions necessary
to terminate, without any obligation to PRGI or PRGX, that certain Stockholders
Agreement dated July 2, 1996, as amended, by and among Seller and the Owners.
3.9 CONTINUATION COVERAGE. PRGI will timely offer Continuation
Coverage as of the Closing Date to Beck, Sr., Georgena Beck and Renee McCauley
(and their covered dependents) under PRGI's standard group health plan, and
shall charge Beck, Sr., Georgena Beck and Renee McCauley (and dependents)
premiums for such coverage. The continuation of Beck, Sr.'s, Georgena Beck's
and Renee McCauley's (and dependents') medical and related insurance benefits
will be solely and exclusively pursuant to federal COBRA laws, and such
coverage shall be offered only for the period of time required by federal COBRA
laws. PRGI will provide each of Beck, Sr., Georgena Beck and Renee McCauley
(and dependents) separately with a COBRA notice as to his or her right to elect
Continuation Coverage.
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ARTICLE 4
CONDITIONS TO OBLIGATIONS OF
PRGX AND PRGI TO CLOSE
Each and every obligation of PRGX and PRGI under this Agreement to be
performed on or prior to the Closing shall be subject to the fulfillment, on or
prior to the Closing, of each of the following conditions unless and to the
extent any such condition is expressly waived in writing by PRGX and PRGI:
4.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties made by Seller and the Owners in or pursuant to this Agreement or
the RCI Agreement or given on their behalf hereunder or thereunder shall be
true and correct in all material respects on and as of the Closing Date with
the same effect as though such representations and warranties had been made or
given on and effective as of the Closing Date.
4.2 OBLIGATIONS PERFORMED. Seller and the Owners shall have
performed and complied in all material respects with all agreements, conditions
and obligations required by this Agreement to be performed or complied with by
them prior to or at the Closing.
4.3 CONSENTS. Seller shall have obtained and delivered to PRGI
written Seller Consents of all persons or entities whose consent to the
transactions contemplated herein is required to consummate the transactions
contemplated herein, if any, and all of such Seller Consents shall remain in
full force and effect at and as of the Closing.
4.4 DUE DILIGENCE. PRGI and its Accountants, counsel and other
experts shall have completed their due diligence investigation with respect to
the Business and affairs (including business, legal and financial matters) of
Seller and the Business. Seller shall have resolved, in a manner reasonably
satisfactory to PRGI and its counsel, any and all issues raised as a result of
such investigation which, in PRGI's good faith belief has or is likely to have
a Material Adverse Effect.
4.5 OTHER ACQUISITION AGREEMENTS. Concurrently with the Closing
hereunder, PRGI shall have consummated the transactions contemplated by each of
the Other Acquisition Agreements (as defined in the preambles to this
Agreement).
4.6 CLOSING DELIVERIES. Seller and/or the Owners, as applicable,
shall have delivered to PRGI each of the following, together with any
additional items which PRGI may reasonably request to effect the transactions
contemplated herein:
(a) all stock certificates (with appropriate stock powers
executed in blank with signatures guaranteed by a medallion level national bank
or member firm of the New York Stock Exchange) evidencing ownership of all of
the Purchased Shares shall be delivered to PRGI;
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(b) a certified copy of the corporate resolutions of the
Board of Directors of Seller and the Owners authorizing the transactions
contemplated herein and the execution, delivery and performance of the RCI
Agreement, this Agreement and the other Seller Transaction Documents, together
with an incumbency certificate with respect to officers of Seller executing
documents or instruments on behalf of Seller;
(c) intentionally omitted;
(d) written resignations of all persons from all offices,
directorships, or other management positions with Seller;
(e) the Noncompetition and Nonsolicitation Agreements,
duly executed by each Owner;
(f) written Seller Consents from all parties, whose
consent to the transactions contemplated herein is required;
(g) the Cash Flow Statement and statement of Interim
Period Reimbursable Liabilities;
(h) a general release in the form of Exhibit 4.6(h)
attached hereto, executed by each Owner on the Closing Date;
(i) the corporate minute books, seals and stock transfer
books of Seller and its predecessors (if any) certified by the corporate
secretary of Seller (in form and substance acceptable to PRGI) as true, correct
and complete;
(j) an opinion of counsel to Seller substantially in the
form of Exhibit 4.6(j) attached hereto;
(k) Closing Escrow Agreement duly executed by Seller,
Owners and the Representative;
(l) the Lock-up Agreements, duly executed by each Owner
and the Representative;
(m) the Indemnity Escrow Agreement, duly executed by
Owners and the Representative, as nominee and attorney-in-fact of the Owners,
together with blank stock powers, duly executed by the Representative with
medallion level signature guarantee;
(n) intentionally omitted;
(o) if applicable, the spousal consents referred to in
the RCI Agreement duly executed by the spouses of the Owners, as appropriate;
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(p) if applicable, Forms UCC-3, duly executed by each
secured lender of Seller releasing all liens on the assets of Seller;
(q) a Closing Statement duly executed by the Owners; and
(r) any other documents or agreements contemplated hereby
and/or necessary or appropriate to consummate the transactions contemplated
hereby.
4.7 NO CHALLENGE. There shall not be pending or threatened any
action, proceeding or investigation before any court or administrative agency
by any government agency or any pending action by any other person,
challenging, or seeking material damages in connection with, the sale of all of
the Purchased Shares to PRGI pursuant to the transactions contemplated herein
or the ability of PRGX, PRGI or any of their affiliates to own and operate the
Business of Seller or otherwise materially adversely affecting the Business,
assets, prospects, financial condition or results of operations of Seller.
4.8 NO INVESTIGATIONS OF SELLER OR BUSINESS. As of the Closing
Date there shall be no, and neither Seller nor any of the Owners shall have any
knowledge of or reason to know of any, pending or threatened, investigation by
any municipal, state or federal government agency or regulatory body with
respect to Seller, Seller's assets or Seller's Business.
4.9 NO MATERIAL ADVERSE EFFECT. From and after the date of this
Agreement to the Closing, there shall have been no Material Adverse Effect
(without giving effect to the consequences of the transactions contemplated by
this Agreement) whether reflected in financial statements, the Schedules
attached hereto or to the RCI Agreement or otherwise. Without limiting the
generality of the foregoing, at Closing, none of the Primary Customers shall
have terminated, decreased or otherwise adversely altered such Primary
Customer's business relationship with Seller or given notice to Seller or
Owners that it intends to do so.
4.10 INTENTIONALLY OMITTED.
4.11 LEGALITY. No federal or state statute, rule, regulation,
executive order, decree or injunction shall have been enacted, entered,
promulgated or enforced by any court or governmental authority which is in
effect and has the effect of making the transactions contemplated herein
illegal or otherwise prohibiting the consummation of the transactions
contemplated herein.
4.12 REGULATORY MATTERS. All filings shall have been made and all
approvals shall have been obtained as may be legally required pursuant to
federal and state laws prior to the consummation of the transactions
contemplated by this Agreement and all actions by or in respect of, or filings
with, any governmental body, agency or official or any other person required to
permit the consummation of the transactions contemplated herein so that PRGI
shall be able to continue to carry on the business of Seller substantially in
the manner now conducted by Seller shall have been taken or made.
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ARTICLE 5
CONDITIONS TO SELLER'S
AND THE OWNERS' OBLIGATIONS
Each and every obligation of Seller and the Owners under this
Agreement to be performed on or prior to the Closing, shall be subject to the
fulfillment, on or prior to the Closing, of each of the following conditions
unless and to the extent any such condition is specifically waived in writing
by Seller and the Owners:
5.1 REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. The
representations and warranties made by PRGX and PRGI in or pursuant to this
Agreement and to the RCI Agreement or given on their behalf hereunder or
thereunder shall be true and correct in all material respects, on and as of the
Closing Date with the same effect as though such representations and warranties
had been made or given on and effective as of the Closing Date.
5.2 OBLIGATIONS PERFORMED. PRGX and PRGI shall have performed and
complied in all material respects with all agreements, conditions and
obligations required by this Agreement to be performed or complied with by it
prior to or at the Closing and the Boards of PRGI and PRGX shall have approved
the transactions contemplated herein.
5.3 CLOSING DELIVERIES. PRGX and/or PRGI, as applicable, shall
have delivered to the Owners each of the following, together with any additional
items which the Owners may reasonably request to effect the transactions
contemplated herein:
(a) the Cash Consideration as adjusted pursuant to
Sections 2.1 and 2.3;
(b) written confirmation from PRGX's transfer agent that
stock certificates evidencing the PRGX Shares have been issued in the names of
the Owners;
(c) the statement of Effective Date Reimbursable
Liabilities;
(d) certified copies of the corporate resolutions of the
Board of Directors of PRGX and of the Board of Directors and sole stockholder
of PRGI authorizing the transactions contemplated herein and the execution,
delivery and performance of the RCI Agreement, this Agreement and the other
PRGI Transaction Documents by PRGX and PRGI, together with incumbency
certificates with respect to the respective officers of PRGX and PRGI executing
documents or instruments on behalf of PRGX or PRGI;
(e) intentionally omitted;
(f) the Closing Escrow Agreement, duly executed by PRGI
and PRGX;
(g) the Noncompetition and Nonsolicitation Agreements
duly executed by PRGX and PRGI;
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(h) the Indemnity Escrow Agreement duly executed by PRGX
and PRGI;
(i) a Closing Statement, duly executed by PRGI and PRGX;
and
(j) any other documents or agreements contemplated hereby
and/or necessary or appropriate to consummate the transactions contemplated
hereby.
5.4 NO CHALLENGE. There shall not be pending or threatened any
action, proceeding or investigation before any court or administrative agency
by any government agency or any pending action by any other person, challenging
or seeking material damages in connection with, the sale of all of the
Purchased Shares of Seller to PRGI pursuant to the transactions contemplated
herein or the ability of PRGX, PRGI or any of their affiliates to own and
operate the Business of Seller or otherwise materially adversely affecting the
Business, assets, prospects, financial condition or results of operations of
Seller.
5.5 NO INVESTIGATIONS OF PRGX OR PRGI. As of the Closing Date
there shall be no, and neither PRGX nor PRGI shall have any knowledge of or
reason to know of any, pending or threatened investigation by any municipal,
state or federal government agency or regulatory body with respect to PRGX or
PRGI, PRGX's or PRGI's assets or PRGX's or PRGI's business.
5.6 SECURITIES LAWS. The parties shall have complied with all
federal and state securities laws applicable to the transactions contemplated
by this Agreement.
5.7 LEGALITY. No federal or state statute, rule, regulation,
executive order, decree or injunction shall have been enacted, entered,
promulgated or enforced by any court or governmental authority which is in
effect and has the effect of making the transactions contemplated herein
illegal or otherwise prohibiting the consummation of the transactions
contemplated herein.
5.8 CONSENTS. PRGI shall have obtained and delivered to Seller
written consent of NationsBank, N.A., as agent for the banks party to PRGX's
bank credit agreement, to the transactions contemplated herein, and such
consent shall remain in full force and effect at and as of the Closing.
5.9 NO MATERIAL ADVERSE EFFECT. From the date hereof until the
Closing there shall have been no effect or change in the business of PRGI or
PRGX that is or will be materially adverse to the business, operations,
properties (including intangible properties), condition (financial or
otherwise), assets, liabilities or regulatory status of PRGI and PRGX, taken as
a whole ("PRGI/PRGX Material Adverse Effect").
5.10 REGULATORY MATTERS. All filings shall have been made and all
approvals shall have been obtained as may be legally required pursuant to
federal and state laws prior to the consummation of the transactions
contemplated by this Agreement and all actions by or in respect of, or filings
with, any governmental body, agency or official or any other person
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required to permit the consummation of the transactions contemplated herein so
that PRGI shall be able to continue to carry on the business of Seller
substantially in the manner now conducted by Seller shall have been taken or
made.
ARTICLE 6
TERMINATION
6.1 TERMINATION. This Agreement may be terminated at any time
before the Closing Date:
(a) by mutual written consent of PRGX, PRGI, Seller and
the Owners;
(b) by PRGX or PRGI, if there occurs a Material Adverse
Effect as to Seller or its Business, or by Seller, if there occurs a PRGI/PRGX
Material Adverse Effect (as defined in Section 5.9 hereof);
(c) by any nonbreaching party hereto, if there has been a
material breach of any representation, warranty, covenant or agreement
contained in this Agreement or in the RCI Agreement on the part of any
nonterminating party hereto;
(d) by either PRGI or Seller, if the Closing is not
consummated on or before the Outside Date (as defined below) unless such
failure of consummation is due to the failure of the terminating party to
observe or perform in any material respect the covenants, agreements and
conditions hereof to be performed or observed by it at or before the Closing
Date. As used herein "Outside Date" shall mean November 1, 1998; or
(e) by PRGI, if the conditions set forth in Article 4
hereof have not been satisfied by Seller and Owners or waived by PRGI and PRGX
prior to the Outside Date; by Seller if the conditions set forth in Article 5
hereof have not been satisfied by PRGI or PRGX or waived by Seller and Owners
prior to the Outside Date.
6.2 EFFECTS OF TERMINATION. In the event this Agreement is
terminated pursuant to Section 6.1(a), 6.1(b), 6.1(d) or 6.1(e) above, no party
shall have any obligations to the others hereunder except for those obligations
in respect of confidentiality and the return of confidential information set
forth in Section 5.1(d) of the RCI Agreement and as set forth in the certain
Nondisclosure Agreement between Seller and PRGI and others dated June 1998 (the
"Nondisclosure Agreement"). If this Agreement is terminated pursuant to Section
6.1(c), the obligations in respect of confidentiality and the return of
confidential information set forth in Section 5.1(d) of the RCI Agreement
hereof and set forth in that certain Nondisclosure Agreement shall remain in
effect and each party hereto may exercise all remedies available to it under
this Agreement, at law or in equity.
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ARTICLE 7
MISCELLANEOUS PROVISIONS
7.1 SEVERABILITY. If any provision of this Agreement is prohibited
by the laws of any jurisdiction as those laws apply to this Agreement, that
provision shall be ineffective to the extent of such prohibition and/or shall
be modified to conform with such laws, without invalidating the remaining
provisions hereto.
7.2 MODIFICATION. This Agreement may not be changed or modified
except in writing specifically referring to this Agreement and signed by each
of the parties hereto.
7.3 ASSIGNMENT, SURVIVAL AND BINDING AGREEMENT. This Agreement,
the other Seller Transaction Documents and the other PRGI Transaction Documents
(a) may not be assigned by PRGX or PRGI on or prior to the Closing without the
prior written consent of Seller and the Owners (except for an assignment to a
wholly owned subsidiary of PRGI or PRGX, which may be made without the prior
consent of, but with notice to, Seller; provided that, in such event, the
assignor shall remain obligated hereunder in the same manner as if such
assignment had not been effected); (b) may not be assigned by PRGX or PRGI
after the Closing without the prior written consent of Representative, except
for an assignment to an affiliate of PRGX or PRGI, which may be made without
the prior consent of, but with notice to, the Representative; provided that, in
such event, the assignor shall remain obligated hereunder in the same manner as
if such assignment had not been effected; and (c) may not be assigned by Seller
or any of the Owners at any time, without the prior written consent of PRGI.
The terms and conditions hereof shall survive the Closing as provided herein
and shall inure to the benefit of and be binding upon the parties hereto and
their respective heirs, personal representatives, successors and assigns.
7.4 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.5 NOTICES. All notices, requests, demands, claims or other
communications hereunder will be in writing and shall be deemed duly given if
personally delivered, sent by telefax, sent by a nationally recognized
overnight delivery service which guarantees next day delivery ("Overnight
Delivery") or mailed by registered or certified mail, return receipt requested,
postage prepaid and addressed to the intended recipient as set forth below:
If to Seller or the Owners: c/o Pasquesi Sheppard LLC, Representative
585 Beck Lane
Lake Forest, IL 60045
Attention: Don Sheppard
Telefax: (847) 234-1110
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with a copy to: Bruce Balonick, Esq.
Arnstein & Lehr
120 South Riverside Plaza, Suite 1200
Chicago, IL. 60606-3913
Telefax: (312) 876-0288
If to PRGX or PRGI: The Profit Recovery Group International, Inc.
2300 Windy Ridge Parkway
Suite 100 North
Atlanta, Georgia 30339-8426
Attention: Clinton McKellar, Jr., Senior Vice
President and General Counsel
Telefax: (770) 779-3034
with a copy to: Arnall Golden & Gregory, LLP
2800 One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3450
Attention: Jonathan Golden, Esq.
Telefax: (404) 873-8701
or at such other address as any party hereto notifies the other parties hereof
in writing. The parties hereto agree that notices or other communications that
are sent in accordance herewith (i) by personal delivery or telefax, will be
deemed received on the day sent or on the first business day thereafter if not
sent on a business day, (ii) by Overnight Delivery, will be deemed received on
the first business day immediately following the date sent, and (iii) by U.S.
mail, will be deemed received three (3) business days immediately following the
date sent. For purposes of this Agreement, a "business day" is a day on which
PRGX is open for business and shall not include a Saturday or Sunday or legal
holiday. Notwithstanding anything to the contrary in this Agreement, no action
shall be required of the parties hereto except on a business day and in the
event an action is required on a day which is not a business day, such action
shall be required to be performed on the next succeeding day which is a
business day.
7.6 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. This Agreement,
the RCI Agreement, the other Seller Transaction Documents and the other PRGI
Transaction Documents, together with the Exhibits and Schedules attached hereto
and thereto, and the Nondisclosure Agreement (as defined in Section 6.2 hereof)
constitutes the entire agreement and supersedes any and all other prior
agreements and undertakings, both written and oral, among the parties, or any
of them, with respect to the subject matter hereof and, except as otherwise
expressly provided herein, is not intended to confer upon any person other than
PRGX, Seller, PRGI and, after the Closing Date, the Owners, any rights or
remedies hereunder.
7.7 FURTHER ASSURANCES. The parties to this Agreement agree to execute
and deliver, both before and after the Closing, any additional information,
documents or agreements
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contemplated hereby and/or necessary or appropriate to effect and consummate
the transactions contemplated hereby. The Owners and Seller agree to provide to
PRGX or PRGI, both before and after the Closing, such information as PRGX or
PRGI may reasonably request in order to consummate the transactions
contemplated hereby and to effect an orderly transition of the Business
following Closing.
7.8 GOVERNING LAW AND SUBMISSION TO JURISDICTION. This Agreement shall
be governed by and construed under the laws of the state of Georgia. Section
6.9 of the RCI Agreement regarding choice of forum, submission to the
jurisdiction of the courts specified therein, service of process and all other
provisions of such Section are hereby incorporated by reference herein and the
parties hereto hereby agree to be governed hereunder by the terms thereof.
7.9 PRONOUNS. All personal pronouns in this Agreement, whether used in
the masculine, feminine or neuter gender shall include all other genders, and
the singular shall include the plural and the plural shall include the
singular.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
PRGX:
THE PROFIT RECOVERY GROUP
INTERNATIONAL, INC.
------------------------------------------
By:
--------------------------------------
Title:
-----------------------------------
PRGI:
THE PROFIT RECOVERY GROUP
INTERNATIONAL I, INC.
------------------------------------------
By:
---------------------------------------
Title:
-----------------------------------
SELLER:
ROBERT BECK & ASSOCIATES, INC.
By:
--------------------------------------
Robert N. Beck, Sr. President
OWNERS:
------------------------------------------
Name: Robert N. Beck, Sr., Trustee
Robert N. Beck, Sr. Living Trust
Under Trust Dated 10/31/94
------------------------------------------
Name: Georgena M. Beck, Trustee
Georgena M. Beck Living Trust
Under Trust Dated 10/31/94
------------------------------------------
Name: Richard N. Beck
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------------------------------------------
Name: Robert N. Beck, Jr.
------------------------------------------
Name: Russell N. Beck
------------------------------------------
Name: Ronald N. Beck
------------------------------------------
Name: Renee N. McCauley, Trustee,
Renee N. McCauley Living Trust dated
7/23/98
------------------------------------------
Name: Melissa A. Beck, as guardian
of Brittney L. Beck, a minor
------------------------------------------
Name: Renee N. McCauley, individually
------------------------------------------
Name: Georgena M. Beck, individually
------------------------------------------
Name: Robert N. Beck, Sr., individually
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LIST OF SCHEDULES AND EXHIBITS
Schedule 3.5 List of Vehicles, Furniture and Artwork
Exhibit 2.2 Indemnity Escrow Agreement
Exhibit 2.4 Closing Escrow Agreement
Exhibit 3.1 Representatives, Covenants and Indemnification
Agreement
Exhibit 3.6 Agreement with Harstad
Exhibit 4.6(h) General Release
Exhibit 4.6(j) Opinion of Counsel of Seller and Owners