-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DuOtjm7Sv49ppPm7v5Z5lOyP8CnoXtchAmY6H9kPmO1qFwddntSxpYTx2f+DMamT PeoKMS/t7RwqW4HG1dYW6w== 0000950144-98-012220.txt : 19981111 0000950144-98-012220.hdr.sgml : 19981111 ACCESSION NUMBER: 0000950144-98-012220 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19981029 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19981110 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PROFIT RECOVERY GROUP INTERNATIONAL INC CENTRAL INDEX KEY: 0001007330 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ENGINEERING, ACCOUNTING, RESEARCH, MANAGEMENT [8700] IRS NUMBER: 582213805 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-28000 FILM NUMBER: 98742751 BUSINESS ADDRESS: STREET 1: 2300 WINDY RIDGE PKWY STREET 2: STE 100 N CITY: ATLANTA STATE: GA ZIP: 30339-8426 BUSINESS PHONE: 7707793900 MAIL ADDRESS: STREET 1: 2300 WINDY RIDGE PKWY STREET 2: STE 100 NORTH CITY: ATLANTA STATE: GA ZIP: 30339-8426 8-K 1 PROFIT RECOVERY GROUP INTERNATIONAL INC 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): OCTOBER 29, 1998 THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. (Exact name of registrant as specified in its charter) Commission File Number 0-28000 GEORGIA 58-2213805 (State or other jurisdiction of (IRS Employer Identification No.) incorporation)
2300 WINDY RIDGE PARKWAY SUITE 100 NORTH ATLANTA, GEORGIA 30339-8426 (Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code (770) 779-3900 (Former name or former address, if changed since last report) NOT APPLICABLE - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS On October 29, 1998, The Profit Recovery Group International, Inc., a Georgia corporation (the "Company"), through its wholly owned subsidiary, The Profit Recovery Group International I, Inc. ("PRGI"), acquired all the issued and outstanding common stock of Robert Beck & Associates, Inc. ("RBA"), pursuant to the terms of a Stock Purchase Agreement dated October 29, 1998, effective October 1, 1998, by and among the Company, PRGI, RBA and the shareholders of RBA. RBA is an international recovery auditing firm serving clients primarily in the retail and grocery sectors. The Company also acquired, pursuant to separate Stock Purchase Agreements dated October 29, 1998, all of the issued and outstanding common stock of John E. Flatley & Associates, Inc. and Taylor, Blackburn & Associates, Inc., and, pursuant to separate Asset Purchase Agreements dated October 29, 1998, acquired substantially all of the assets and assumed certain liabilities of RBA Audits, Inc., Savant Consulting, L.L.C., and the sole proprietorships of John H. Cavins, Vincent Creadon, John M. Kirkeide, and Robert N. Beck, Jr. (collectively referred to as the "RBA Companies"). The RBA Companies performed management services for RBA, and received a percentage of cash receipts from RBA's clients for these management services. All recovery auditing operations were performed through RBA, and all client and auditor contracts were with RBA. The aggregate consideration paid consisted of $26.1 million in cash and 644,434 unregistered, restricted shares of the Company's common stock. The consideration given was determined as a result of arm's length negotiations among unrelated parties, and the acquisition will be accounted for using the purchase method of accounting. The Company borrowed $27.2 million from NationsBank N.A. under its $200.0 million senior credit facility to fund the cash portion of the consideration and a portion of the direct acquisition-related costs estimated at $1.3 million. The description of the acquisitions contained herein is qualified in its entirety by reference to the agreements dated October 29, 1998 by and among the Company, PRGI, RBA, the shareholders of RBA, the RBA Companies and the shareholders, members and sole proprietors of the RBA Companies and the Representations, Covenants and Indemnification Agreement entered into in connection therewith attached hereto as Exhibits 2.1 through 2.10 and incorporated herein by reference. 2 3
PAGE NUMBER ------ ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (a) Financial Statements of business acquired ROBERT BECK & ASSOCIATES, INC. Independent Auditors' Report.............................. 4 Statements of Earnings for the year ended December 31, 1997 and the six months ended June 30, 1997 and 1998... 5 Balance Sheets as of December 31, 1997 and June 30, 1998................................................... 6 Statements of Shareholders' Equity for the year ended December 31, 1997 and the six months ended June 30, 1998................................................... 7 Statements of Cash Flows for the year ended December 31, 1997 and the six months ended June 30, 1997 and 1998... 8 Notes to Financial Statements............................. 9 (b) Pro Forma Financial Information THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. AND SUBSIDIARIES Unaudited Pro Forma Consolidated Financial Information.... 14 Unaudited Pro Forma Consolidated Statement of Earnings for the year ended December 31, 1997....................... 15 Unaudited Pro Forma Consolidated Statement of Earnings for the six months ended June 30, 1998..................... 16 Notes to Unaudited Pro Forma Consolidated Statements of Earnings............................................... 17 Unaudited Pro Forma Condensed Consolidated Balance Sheet as of June 30, 1998.................................... 18 Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet.......................................... 19 (c) Exhibits.............................................. 20
3 4 (a) Financial statements of business acquired INDEPENDENT AUDITORS' REPORT The Board of Directors Robert Beck & Associates, Inc.: We have audited the accompanying balance sheet of Robert Beck & Associates, Inc. as of December 31, 1997 and the related statements of earnings, shareholders' equity and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Robert Beck & Associates, Inc. as of December 31, 1997 and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. KPMG PEAT MARWICK LLP Atlanta, Georgia October 30, 1998 4 5 ROBERT BECK & ASSOCIATES, INC. STATEMENTS OF EARNINGS
SIX MONTHS ENDED YEAR ENDED JUNE 30, DECEMBER 31, --------------- 1997 1997 1998 ------------ ------ ------ (UNAUDITED) (AMOUNTS IN THOUSANDS) Revenues.................................................... $14,750 $7,487 $8,158 Cost of revenues............................................ 11,633 5,894 6,244 Selling, general and administrative expenses................ 2,452 1,228 1,208 ------- ------ ------ Operating income.......................................... 665 365 706 Interest income, net........................................ 11 3 5 ------- ------ ------ Net earnings.............................................. $ 676 $ 368 $ 711 ======= ====== ====== Pro forma: Historical net earnings................................... $ 676 $ 368 $ 711 Pro forma income taxes (Note 5)........................... 264 144 277 ------- ------ ------ Pro forma net earnings................................. $ 412 $ 224 $ 434 ======= ====== ======
See accompanying notes to financial statements. 5 6 ROBERT BECK & ASSOCIATES, INC. BALANCE SHEETS
DECEMBER 31, JUNE 30, 1997 1998 ------------ ----------- (UNAUDITED) (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) ASSETS Current assets: Cash...................................................... $ 286 $ 432 Receivables: Billed contract receivables............................ 980 143 Unbilled contract receivables.......................... 3,838 5,038 ------ ------ Total receivables................................. 4,818 5,181 ------ ------ Note receivable from Beck Lease Services, Inc. (Note 2)... 124 -- Other current assets...................................... 27 50 ------ ------ Total current assets.............................. 5,255 5,663 ------ ------ Property and equipment: Automobiles............................................... 128 128 Furniture and fixtures.................................... 226 226 ------ ------ 354 354 Less accumulated depreciation............................. 158 177 ------ ------ 196 177 ------ ------ Prepaid pension cost (Note 4)............................... 186 186 ------ ------ $5,637 $6,026 ====== ====== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses..................... $ 58 $ 93 Accrued commissions and related expenses.................. 3,844 3,937 ------ ------ Total current liabilities......................... 3,902 4,030 ------ ------ Shareholders' equity: Common stock, no par value. Authorized 10,000 shares; issued and outstanding, 891 shares..................... 249 249 Retained earnings......................................... 1,486 1,747 ------ ------ Total shareholders' equity........................ 1,735 1,996 Commitments (Note 6) ------ ------ $5,637 $6,026 ====== ======
See accompanying notes to financial statements. 6 7 ROBERT BECK & ASSOCIATES, INC. STATEMENTS OF SHAREHOLDERS' EQUITY YEAR ENDED DECEMBER 31, 1997 AND SIX MONTHS ENDED JUNE 30, 1998
COMMON STOCK TOTAL --------------- RETAINED SHAREHOLDERS' SHARES AMOUNT EARNINGS EQUITY ------ ------ -------- ------------- (AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA) Balance at December 31, 1996.............................. 891 $249 $1,064 $1,313 Net earnings.............................................. -- -- 676 676 Distributions to shareholders............................. -- -- (254) (254) --- ---- ------ ------ Balance at December 31, 1997.............................. 891 249 1,486 1,735 Net earnings (unaudited).................................. -- -- 711 711 Distributions to shareholders (unaudited)................. -- -- (450) (450) --- ---- ------ ------ Balance at June 30, 1998 (unaudited)...................... 891 $249 $1,747 $1,996 === ==== ====== ======
See accompanying notes to financial statements. 7 8 ROBERT BECK & ASSOCIATES, INC. STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED YEAR ENDED JUNE 30, DECEMBER 31, ------------- 1997 1997 1998 ------------ ----- ----- (UNAUDITED) (AMOUNTS IN THOUSANDS) Cash flows from operating activities: Net earnings.............................................. $ 676 $ 368 $ 711 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation......................................... 60 25 19 Change in assets and liabilities: Receivables....................................... (1,193) (171) (363) Other assets...................................... (87) 26 (23) Accounts payable and accrued expenses............. 43 71 36 Accrued commissions and related expenses.......... 938 76 93 ------- ----- ----- Net cash provided by operating activities....... 437 395 473 ------- ----- ----- Cash flows used in investing activities -- purchase of property and equipment.................................... (138) (109) (1) ------- ----- ----- Cash flows from financing activities: Distributions to shareholders............................. (254) -- (450) Proceeds from note receivable from Beck Lease Services, Inc.................................................... -- -- 124 ------- ----- ----- Net cash used in financing activities............. (254) -- (326) ------- ----- ----- Net increase in cash.............................. 45 286 146 Cash at beginning of period................................. 241 241 286 ------- ----- ----- Cash at end of period....................................... $ 286 $ 527 $ 432 ======= ===== =====
See accompanying notes to financial statements. 8 9 ROBERT BECK & ASSOCIATES, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997 AND JUNE 30, 1997 AND 1998 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (A) DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION Description of Business The principal business of Robert Beck & Associates, Inc. ("RBA") is providing accounts payable and other recovery audit services primarily to large retailers and grocers. RBA provides its services throughout the United States and, on a limited basis, in Canada and Germany. RBA's services are managed by John E. Flatley & Associates, Inc., RBA Audits, Inc., Taylor, Blackburn & Associates, Inc., Savant Consulting, L.L.C., and the sole proprietorships of Vincent Creadon, John H. Cavins, Robert N. Beck, Jr. and John M. Kirkeide (collectively referred to as the "RBA Companies"). The RBA Companies manage the day-to-day operations and client relationships, and receive a percentage of the cash receipts from their respective clients for these management services. All recovery auditing operations were performed through RBA, and all client and auditor contracts are with RBA. Basis of Presentation The financial statements have been prepared in conformity with generally accepted accounting principles. In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets, liabilities and shareholders' equity as of the date of the balance sheet and income and expenses for the period. Actual results could differ from those estimates. A material estimate that is particularly susceptible to change is the estimation of uncollectible claims (see note (1)(b) Revenue Recognition). The accompanying unaudited condensed financial statements of RBA as of June 30, 1998 and for the six months ended June 30, 1997 and 1998 have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six month period ended June 30, 1998 are not necessarily indicative of the results that may be expected for the year ending December 31, 1998. (B) REVENUE RECOGNITION RBA's revenues are based on specific contracts with its clients. Such contracts generally specify (a) time periods covered by the audit, (b) nature and extent of audit services to be provided by RBA, (c) client's duties in assisting and cooperating with RBA, and (d) fee payable to RBA expressed as a specified percentage of the amounts recovered by the client resulting from liability overpayment claims identified. In addition to contractual provisions, most clients also establish specific procedural guidelines which RBA must satisfy prior to submitting claims for client approval. These guidelines are unique to each client and impose specific requirements on RBA such as adherence to vendor interaction protocols, provision of advance written notification to vendors of forthcoming claims, securing written claim validity concurrence from designated client personnel and, in limited cases, securing written claim validity concurrence from the involved vendors. RBA defers revenue recognition until client guidelines, of whatever nature, have been satisfied. Accepted claims basis of revenue recognition With respect to accounts payable and ancillary audit services for retailers and grocers (RBA's historical client base), RBA recognizes revenues at the time overpayment claims are presented to and approved by its clients, as adjusted for estimated uncollectible claims. 9 10 ROBERT BECK & ASSOCIATES, INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) For accounts payable and ancillary audit services provided to retailers and grocers, RBA believes that it has completed substantially all contractual obligations to its client at the time an identified and documented claim which satisfies all client-imposed guidelines is presented to, and approved by, appropriate client personnel. RBA further believes that at the time a claim is submitted and accepted by its client, such claim represents a valid overpayment due to the client from its vendor. Accordingly, RBA believes that it is entitled to its fee upon acceptance of such claim by its client, subject to (a) customary and routine claim disallowance adjustments by the vendor resulting primarily from the receipt of previously unknown information, and (b) applicable laws. Disallowances of client-approved claims are susceptible to experience-based estimation. RBA's standard client contract for accounts payable and ancillary audit services provided to retailers and grocers imposes a duty on the client to process promptly all claims against vendors. In the interest of vendor relations, however, many clients modify the standard client contract with RBA to provide that they retain discretion whether to pursue collection of a claim. In RBA's experience, it is extremely unusual for a client to forego the collection of a large, valid claim. In some cases, a vendor may dispute a claim by providing additional documentation or information supporting its position. Consequently, many clients revise RBA's standard client contract to clarify that RBA is not entitled to payment of its fee until the client recovers the claim from its vendor. Submitted claims for accounts payable and ancillary audit services provided to retailers and grocers that are not approved by clients for whatever reason are not considered when recognizing revenues. Estimated uncollectible claims are initially established, and subsequently adjusted, for each individual client based on historical collection rates, types of claims identified, current industry conditions, and other factors which, in the opinion of management, deserve recognition. RBA records revenues for accounts payable and ancillary audit services provided to retailers and grocers at estimated net realizable value without reserves. Accordingly, adjustments to uncollectible claim estimates are directly charged or credited to earnings, as appropriate. Approved claims for accounts payable and ancillary audit services provided to retailers and grocers are processed by clients and generally taken as credits against outstanding payables or future purchases from the vendors involved. Once credits are taken, RBA invoices its clients for a contractually stipulated percentage of the amounts recovered. RBA's contract receivables for accounts payable and ancillary audit services provided to retailers and grocers are largely unbilled because it does not control (a) the timing of a client's claims processing activities, or (b) the timing of a client's payments for current and future purchases. In RBA's experience, material receivables are expected to be collected within one year after such receivables are recorded. Invoice basis of revenue recognition With regard to accounts payable and other recovery audit services provided to entities other than retailers and grocers, RBA recognizes revenues primarily when it invoices clients for its portion of amounts already recovered. This deferral of revenue recognition for these types of clients results principally from RBA's lack of a historical experience base to accurately estimate uncollectible claims. Revenues recognized in 1997 on the invoice basis represented less than 1% of total revenues for the year. (C) PROPERTY AND EQUIPMENT Property and equipment are stated at cost. Depreciation is provided using the straight-line method over the estimated useful lives of the assets. (D) DIRECT EXPENSES Direct expenses incurred during the course of the accounts payable audits and other recovery audit services are expensed as incurred. Previously established auditor compensation and management fee accruals 10 11 ROBERT BECK & ASSOCIATES, INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) are subsequently adjusted on a monthly basis to correspond with adjustments to uncollectible claim estimates. All non-auditor RBA employees are compensated on the basis of salary and in certain cases, bonuses, which are charged to operations as incurred. (E) SOFTWARE DEVELOPMENT COSTS Software development costs related to the development of RBA's proprietary audit software are expensed as incurred. (F) INCOME TAXES RBA is a Subchapter S Corporation. As such, the Federal and state income taxes with regard to this entity historically have been the responsibility of the respective shareholders. The results of operations for all periods presented have been adjusted on a pro forma basis to reflect Federal and state income taxes at a composite rate of 39% as if RBA had been a C corporation throughout such periods. (2) NOTE RECEIVABLE FROM BECK LEASE SERVICES, INC. At December 31, 1997, RBA held a note receivable from Beck Lease Services, Inc. In February 1998, such note was assigned to the majority owner of RBA in consideration for full payment on the balance of the note. There are no common ownership interests between RBA and Beck Lease Services, Inc. (3) CREDIT FACILITY RBA has an available line of credit in the amount of $101,000 which is personally guaranteed by the majority owner of RBA. No amounts were outstanding under this line of credit at December 31, 1997 or June 30, 1998. (4) PENSION BENEFITS RBA has a qualified noncontributory defined benefit pension plan covering certain employees. The benefits are based on years of service and defined levels of compensation. RBA makes contributions to the plan based on amounts determined by its actuaries. The following table sets forth the plan's funded status and amounts recognized in the accompanying balance sheet at December 31, 1997 (amounts in thousands): Actuarial present value of benefit obligations: Vested benefit obligation................................. $2,617 ====== Accumulated benefit obligation............................ $2,617 ====== Projected benefit obligation................................ $2,702 Plan assets at fair value (primarily common stock).......... 2,778 ------ Plan assets in excess of projected benefit obligation....... 76 Unrecognized net gain....................................... (71) Unrecognized net transition liability....................... 181 ------ Prepaid pension cost.............................. $ 186 ======
11 12 ROBERT BECK & ASSOCIATES, INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) Net pension cost for the year ended December 31, 1997 includes the following components (amounts in thousands): Service cost........................................... $ 155 Interest cost.......................................... 152 Actual return on assets................................ (218) Amortization of net gain............................... (9) Amortization of transition liability................... 13 ----- Net pension cost.................................. $ 93 =====
The assumptions used in accounting for the plan as of December 31, 1997 were as follows: Discount rate.......................................... 7.0% Rate of increase in compensation levels................ 5.0 Expected long-term rate of return on assets............ 10.0
Effective July 1998, RBA curtailed the plan. (5) INCOME TAXES The pro forma provision for income taxes reflects the income taxes as if RBA were subject to all Federal and state income taxes for all periods presented, rather than primarily by the individual shareholders. All pro forma income taxes have been calculated using a 39% composite effective rate. (6) LEASE COMMITMENTS RBA is committed under an operating lease for office space. The lease expires on October 31, 2001 and payments increase based on the change between a base index and the Consumer Price Index with October 31, 1996 being the base index date. Future minimum annual lease payments under this lease agreement, assuming an annual inflation rate of 3.4%, are summarized as follows (amounts in thousands):
YEAR ENDED DECEMBER 31, ----------------------- 1998........................................................ $128 1999........................................................ 132 2000........................................................ 137 2001........................................................ 122
Rent expense for the year ended December 31, 1997 and for the six months ended June 30, 1997 and 1998 was $119,000, $61,000, and $58,000, respectively. The lessor of the facility is a trust controlled by the majority owner of RBA. (7) MAJOR CLIENT RBA had one client during 1997 which provided 10.5% of total revenues. Such client is in the grocery industry. (8) FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying amounts for cash, receivables and notes receivable, accounts payable and accrued expenses, and accrued commissions and related expenses, approximate fair value because of the short maturity of these instruments. 12 13 ROBERT BECK & ASSOCIATES, INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) (9) SALE OF COMPANY On October 29, 1998, The Profit Recovery Group International, Inc. (the "Company") through its wholly owned subsidiary, The Profit Recovery Group International I, Inc. ("PRGI"), acquired all issued and outstanding common stock of RBA, pursuant to the terms of a Stock Purchase Agreement dated October 29, 1998, effective October 1, 1998, by and among the Company, PRGI, RBA and RBA's shareholders. In addition, the Company acquired the management rights of the RBA Companies pursuant to respective Stock and Asset Purchase Agreements dated October 29, 1998, effective October 1, 1998. Pursuant to the purchase agreements, the total consideration paid for RBA and the RBA Companies consisted of $26.1 million in cash and 644,434 unregistered, restricted shares of the Company's common stock. 13 14 (b) Pro Forma Financial Information THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION On October 29, 1998, The Profit Recovery Group International, Inc. (the "Company"), through its wholly owned subsidiary, The Profit Recovery Group International I, Inc. ("PRGI") acquired all the issued and outstanding common stock of Robert Beck & Associates, Inc. ("RBA"), an international recovery auditing firm primarily serving clients in the retail and grocery sectors. In addition, the Company acquired all of the issued and outstanding common stock of John E. Flatley & Associates, Inc. and Taylor, Blackburn & Associates, Inc., and acquired substantially all the assets and assumed certain liabilities of RBA Audits, Inc., Savant Consulting, L.L.C., and the sole proprietorships of John H. Cavins, Vincent Creadon, John M. Kirkeide, and Robert N. Beck, Jr. (collectively referred to as the "RBA Companies"). The RBA Companies performed management services for RBA, and received a percentage of cash receipts from their respective clients for these management services. All recovery auditing operations were performed through RBA, and all client and auditor contracts were with RBA. The transactions were accounted for using the purchase method of accounting, effective as of October 1, 1998, with total consideration of $26.1 million in cash and 644,434 unregistered, restricted shares of the Company's common stock. Approximately $1.3 million in direct acquisition-related costs were also incurred and capitalized as part of this transaction. The Company borrowed $27.2 million from NationsBank N.A. under its $200.0 million senior credit facility to pay the cash consideration and a portion of the direct acquisition-related expenses incurred in connection with the acquisition of RBA and the RBA Companies. The following unaudited pro forma consolidated statements of earnings for the year ended December 31, 1997 and the six months ended June 30, 1998 present the consolidated historical accounts of the Company, adjusted to give effect to the acquisition of RBA and the RBA Companies as of the beginning of the periods presented. The following unaudited pro forma condensed consolidated balance sheet as of June 30, 1998 presents the consolidated historical accounts of the Company as of that date, adjusted to give effect to the acquisition of RBA and the RBA Companies as if the transaction had occurred on June 30, 1998. The unaudited pro forma consolidated financial information and accompanying notes should be read in conjunction with the consolidated financial statements of the Company and related notes, as well as the financial statements and related notes of RBA. The Company believes that the assumptions set forth in the notes on pages 17 and 19 provide a reasonable basis on which to present the pro forma financial information, which is provided for informational purposes only and should not be construed to be indicative of the Company's financial condition or results of operations had the transactions and events described above been consummated on the dates assumed. The unaudited pro forma financial information is not intended to project the Company's financial condition on any future date or results of operations for any future period. 14 15 THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS YEAR ENDED DECEMBER 31, 1997
THE PROFIT RECOVERY GROUP INTERNATIONAL, PRO FORMA INC. RBA ADJUSTMENTS PRO FORMA --------------- --------- ------------ ------------ (AMOUNTS IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA) Revenues........................................ $112,363 $ 14,750 $ -- $127,113 Cost of revenues................................ 57,726 11,633 (2,477)(A) 66,882 Selling, general and administrative expenses.... 37,254 2,452 1,534(B) 41,240 Restructuring costs............................. 1,208 -- -- 1,208 -------- -------- ------- -------- Operating income.............................. 16,175 665 943 17,783 Interest income (expense), net.................. (403) 11 (1,945)(C) (2,337) -------- -------- ------- -------- Earnings before income taxes.................. 15,772 676 (1,002) 15,446 Income taxes.................................... 6,149 -- 280(D) 6,429 -------- -------- ------- -------- Net earnings.................................. $ 9,623 $ 676 $(1,282) $ 9,017 ======== ======== ======= ======== Earnings per share: Basic......................................... $ 0.52 $ .47 ======== ======== Diluted....................................... $ 0.51 $ .46 ======== ======== Weighted average shares outstanding: Basic......................................... 18,415 644(E) 19,059 ======== ======= ======== Diluted....................................... 18,909 644(E) 19,553 ======== ======= ========
See accompanying notes to unaudited pro forma consolidated statements of earnings. 15 16 THE PROPERTY RECOVERY GROUP INTERNATIONAL, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS SIX MONTHS ENDED JUNE 30, 1998
THE PROFIT RECOVERY GROUP INTERNATIONAL, PRO FORMA INC. RBA ADJUSTMENTS PRO FORMA --------------- ------- ------------ ------------ (AMOUNTS IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA) Revenues......................................... $72,078 $8,158 $ -- $80,236 Cost of revenues................................. 38,282 6,244 (1,496)(A) 43,030 Selling, general and administrative expenses..... 27,020 1,208 767(B) 28,995 ------- ------ ------- ------- Operating income............................ 6,776 706 729 8,211 Interest income (expense), net................... (138) 5 (973)(C) (1,106) ------- ------ ------- ------- Earnings before income taxes................ 6,638 711 (244) 7,105 Income taxes..................................... 2,599 -- 386(D) 2,985 ------- ------ ------- ------- Net earnings................................ $ 4,039 $ 711 $ (630) $ 4,120 ======= ====== ======= ======= Earnings per share: Basic....................................... $ .20 $ .19 ======= ======= Diluted..................................... $ .19 $ .19 ======= ======= Weighted average shares outstanding: Basic....................................... 20,650 644(E) 21,294 ======= ======= ======= Diluted..................................... 21,257 644(E) 21,901 ======= ======= =======
See accompanying notes to unaudited pro forma consolidated statements of earnings. 16 17 THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF EARNINGS YEAR ENDED DECEMBER 31, 1997 AND SIX MONTHS ENDED JUNE 30, 1998 The following explanations describe the assumptions used in determining the unaudited pro forma adjustments necessary to present the historical results of operations, giving effect to the acquisition of RBA and the RBA Companies as of the beginning of each period presented. (A) Adjustment relates to historical RBA Companies' management fees in 1997 and 1998 in excess of compensation levels to be paid prospectively to these former owners of the RBA Companies pursuant to employment agreements. (B) Adjustment relates to amortization of the estimated goodwill amounting to $37.6 million over a 25-year period and the noncompete agreements with a combined estimated fair value of $150,000 over a five-year period. (C) Adjustment relates to the $27.2 million of indebtedness, at an interest rate of 7.15%, incurred in connection with the acquisitions. (D) Adjustment relates to the tax benefit derived from the partial deductibility (32%) of the goodwill amortization and full deductibility of interest expense assuming a combined Federal and state income tax rate of 39%, and also reflects RBA's results of operations on a pro forma basis to include Federal and state income taxes at a composite rate of 39% as if RBA had been a C corporation throughout the periods presented. (E) Adjustment reflects the issuance of 644,434 unregistered, restricted shares in connection with the RBA acquisitions. 17 18 THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET JUNE 30, 1998
THE PROFIT RECOVERY GROUP INTERNATIONAL, PRO FORMA INC. RBA ADJUSTMENTS PRO FORMA -------------- ------ ----------- --------- (AMOUNTS IN THOUSANDS OF DOLLARS) Current assets: Cash and cash equivalents............................. $ 18,710 $ 432 $ -- $ 19,142 Receivables: Billed contract receivables......................... 12,735 143 -- 12,878 Unbilled contract receivables....................... 53,272 5,038 -- 58,310 Employee advances................................... 2,927 -- -- 2,927 -------- ------ ------- -------- Total receivables.............................. 68,934 5,181 -- 74,115 -------- ------ ------- -------- Prepaid expenses and other current assets............. 2,130 50 -- 2,180 -------- ------ ------- -------- Total current assets........................... 89,774 5,663 -- 95,437 Property and equipment, net............................. 13,981 177 -- 14,158 Noncompete agreements, less accumulated amortization.... 2,969 -- 150(A) 3,119 Goodwill, less accumulated amortization................. 58,569 -- 37,554(A) 96,123 Deferred income taxes................................... 3,083 -- -- 3,083 Other assets............................................ 554 186 -- 740 -------- ------ ------- -------- $168,930 $6,026 $37,704 $212,660 ======== ====== ======= ======== Current liabilities: Note payable to bank.................................. $ 38 $ -- $ -- $ 38 Current installments of long term-debt................ 82 -- -- 82 Accounts payable and accrued expenses................. 7,116 93 -- 7,209 Accrued payroll and related expenses.................. 25,527 3,937 -- 29,464 Deferred income taxes................................. 9,813 -- -- 9,813 Deferred revenues..................................... 977 -- -- 977 -------- ------ ------- -------- Total current liabilities...................... 43,553 4,030 -- 47,583 Long-term debt, excluding current installments.......... 5,348 -- 27,200(B) 32,548 Deferred compensation................................... 2,909 -- -- 2,909 Other long-term liabilities............................. 410 -- -- 410 -------- ------ ------- -------- Total liabilities.............................. 52,220 4,030 27,200 83,450 -------- ------ ------- -------- Shareholders' equity: Preferred stock....................................... -- -- -- -- Common stock.......................................... 22 249 (248)(C) 23 Additional paid-in capital............................ 98,521 -- 12,499(C) 111,020 Cumulative translation adjustments.................... (1,879) -- -- (1,879) Retained earnings..................................... 20,046 1,747 (1,747)(C) 20,046 -------- ------ ------- -------- Total shareholders' equity..................... 116,710 1,996 10,504 129,210 -------- ------ ------- -------- $168,930 $6,026 $37,704 $212,660 ======== ====== ======= ========
See accompanying notes to unaudited pro forma condensed consolidated balance sheet. 18 19 THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET JUNE 30, 1998 The following describe the assumptions used in determining the unaudited pro forma adjustments necessary to present the historical financial position, giving effect to the acquisition of RBA and the RBA Companies, as of June 30, 1998. (A) The acquisitions are accounted for as a purchase in accordance with Accounting Principles Board Opinion 16, "Business Combinations." The purchase price is allocated first to the tangible and identifiable assets and liabilities of the acquired company and the noncompete agreements based on preliminary estimates of their fair value, with the remainder allocated to goodwill. The following schedule presents the goodwill computation (amounts in thousands): Purchase price: Cash paid................................................. $26,100 Fair value of restricted, unregistered shares issued...... 12,300 ------- 38,400 Estimated direct acquisition-related costs.................. 1,300 Less estimated fair value of net assets acquired from RBA and the RBA Companies..................................... (1,996) Less estimated value of noncompete agreements............... (150) ------- Goodwill............................................... $37,554 =======
(B) The Company incurred indebtedness of $27.2 million to finance the cash paid and a portion of the direct acquisition-related costs incurred in connection with the acquisitions. (C) The changes in components of shareholders' equity are a result of recording the acquisition date equity in RBA. 19 20 (c) Exhibits
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 2.1+ -- Stock Purchase Agreement dated as of October 29, 1998 among the Company, PRGI, Robert Beck & Associates, Inc., and the shareholders of Robert Beck & Associates, Inc. 2.2+ -- Stock Purchase Agreement dated as of October 29, 1998 among the Company, PRGI, Taylor, Blackburn & Associates, Inc., and the shareholders of Taylor, Blackburn & Associates, Inc. 2.3+ -- Stock Purchase Agreement dated as of October 29, 1998 among the Company, PRGI, John E. Flatley & Associates, Inc., and the shareholder of John E. Flatley & Associates, Inc. 2.4+ -- Asset Purchase Agreement dated as of October 29, 1998 among the Company, PRGI, and Vincent Creadon, a sole proprietorship. 2.5+ -- Asset Purchase Agreement dated as of October 29, 1998 among the Company, PRGI, and John H. Cavins, a sole proprietorship. 2.6+ -- Asset Purchase Agreement dated as of October 29, 1998 among the Company, PRGI, RBA Audits, Inc., and the shareholders of RBA Audits, Inc. 2.7+ -- Asset Purchase Agreement dated as of October 29, 1998 among the Company, PRGI, and John M. Kirkeide, a sole proprietorship. 2.8+ -- Asset Purchase Agreement dated as of October 29, 1998 among the Company, PRGI, and Robert N. Beck, Jr., a sole proprietorship. 2.9+ -- Asset Purchase Agreement dated as of October 29, 1998 among the Company, PRGI, Savant Consulting, L.L.C., and the members of Savant Consulting, L.L.C. 2.10+ -- Representations, Covenants and Indemnification Agreement. 23.1+ -- Consent of KPMG Peat Marwick LLP.
- --------------- + Filed herewith. 20 21 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. By: /s/ DONALD E. ELLIS, JR. ------------------------------------ Donald E. Ellis, Jr. Senior Vice President, Chief Financial Officer and Treasurer Date: November 10, 1998 21 EX-2.1 2 STOCK PURCHASE AGRMT / ROBERT BECK & ASSOC. 1 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 2 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 -2- 3 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, -3- 4 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 -4- 5 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. -5- 6 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 -6- 7 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 -7- 8 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 -8- 9 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 -9- 10 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. -10- 11 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; -11- 12 (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; -12- 13 (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. -13- 14 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; -14- 15 (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 -15- 16 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. -16- 17 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 -17- 18 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 -18- 19 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. -19- 20 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 -20- 21 ------------------------------------------ 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 -21- 22 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
EX-2.2 3 STOCK PURCHASE AGRMT / TAYLOR BLACKBURN & ASSOC. 1 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"), TAYLOR, BLACKBURN & ASSOCIATES, INC., a North Carolina 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 Beck & Associates, Inc. ("RBA"), Robert N. Beck, Jr., a sole proprietorship, RBA Audits, Inc., John E. Flatley & Associates, Inc., John H. Cavins, a sole 2 proprietorship, Vincent Creadon, a sole proprietorship, John Kirkeide, a sole proprietorship, and Savant Consulting, L.L.C. (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) $2,348,299, 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 an amount equal to $520.55 per day for each day during the period from and after the Effective Date to and including the day immediately preceding the Closing ("Cash Consideration") and (ii) 57,981 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, that certain of the PRGX Shares shall be issued in the name of the Representative, as nominee and attorney-in-fact -2- 3 for the Owners, to be held in escrow pursuant 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 28,989 of the PRGX Shares issued on the Closing Date pursuant to Section 2.1 hereof (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), and (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) (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 -3- 4 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: 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 or any distributions to Owners of cash or cash equivalents in the Business as of the close of business on August 31, 1998) (collectively, the "Interim Period Reimbursable Liabilities"). (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, 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 or the Cash Flow Statement, which review shall be a final determination of the Interim Period Cash Flow, the Effective Date Reimbursable 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 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 after the Effective Date, except as otherwise specifically provided herein or in the RCI Agreement. -4- 5 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. 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. 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 -5- 6 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 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 -6- 7 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 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 -7- 8 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. 3.3 OTHER COVENANTS BY OWNERS. (a) Each of the Owners hereby covenants and agrees that he or she shall transfer to Seller, by appropriate documents of transfer reasonably satisfactory to PRGI, 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, and any Intellectual Property Rights used by Seller but owned by Owners, so that at the Closing of the transactions contemplated herein all such assets shall be transferred from Seller to PRGI by operation of law. (b) Retail Management Consultants, LLC ("RMC") is a North Carolina limited liability company in which Richard A. Taylor, an Owner of Seller ("R. Taylor"), and certain Associates of RBA are members. RMC is lessee under a real property lease for premises in Jackson, Mississippi ("Jackson Lease") and certain equipment leases used by Seller in its Business. Promptly after the Closing, R. Taylor will use his commercially reasonable best efforts best efforts to cause RMC to assign the Jackson Lease to PRGI and obtain any necessary consents to assignment thereto. The parties hereto agree that from and after the Closing, Seller shall, with the assistance of R. Taylor, maintain the current business relationship between Seller and RMC, as described on Section 2.1 of Seller's Disclosure Schedule to the RCI Agreement. Within 180 days after the date hereof, PRGI intends to offer employment to the members of RMC, which employment will become effective as of January 1, 1999. After each member of RMC has either accepted or refused such employment with PRGI, and after December 31, 1998, R. Taylor agrees to cooperate in the dissolution of RMC. After the Closing, the Owners shall use reasonable efforts to cause RMC to enter into all reasonable and lawful arrangements under which Seller will obtain the benefits of, and assume the post-Closing obligations under any contracts, agreements, leases, understanding or other assets under which RMC currently operates for the benefit of Seller which PRGI specifically agrees to assume (the "RMC Assets"). In addition to any other indemnification obligations, the Owners hereby agree to indemnify and hold Seller, PRGI and PRGX harmless 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 failure to transfer lawfully any of the RMC Assets to Seller or PRGI and in respect of any loss, claim, or other liability asserted by RMC or its members with respect to the termination on or after -8- 9 January 1, 1999 of the agreement described in Seller's Disclosure Schedule or any other relationship between Seller and RMC. 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 any "Cafeteria" benefit plan as identified in Seller's 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 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 after the Closing, the trustee under any such Employee Benefit Plan shall act without compensation, until all assets comprising the related trust under the Employee Benefit 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 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 Employee Benefit Plans and any 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 Employee Benefit Plans. 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. -9- 10 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) evidencing ownership of all of the Purchased Shares shall be delivered to PRGI; (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, -10- 11 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 other 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) the offer letter for employment of the Principal, duly executed by the Principal; (l) the Nonqualified Stock Option Agreement for the Principal, duly executed by the Principal; (m) Closing Escrow Agreement, duly executed by Seller, Owners and the Representative; (n) the Lock-up Agreements, duly executed by each Owner and the Representative; (o) 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; -11- 12 (p) intentionally omitted; (q) if applicable, the spousal consents referred to in the RCI Agreement duly executed by the spouses of the Owners, as appropriate; (r) if applicable, Forms UCC-3, duly executed by each secured lender of Seller releasing all liens on the assets of Seller; (s) a Closing Statement duly executed by the Owners; and (t) 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. -12- 13 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. 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 -13- 14 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 offer letter for employment of the Principal, duly executed by PRGI; (h) the Nonqualified Stock Option Agreement with the Principal, duly executed by PRGX; (i) the Noncompetition and Nonsolicitation Agreements duly executed by PRGX and PRGI; (j) the Indemnity Escrow Agreement duly executed by PRGX and PRGI; (k) a Closing Statement, duly executed by PRGI and PRGX; and (l) 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. -14- 15 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 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 -15- 16 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. 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. -16- 17 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 with a copy to: David Fischer, Esq. Wildman, Harrold, Allen & Dixon 225 West Wacker Drive Chicago, IL 60606-1229 Telefax: (312) 201-2555 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 -17- 18 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 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. -18- 19 7.9 PRONOUNS. All personal pronouns in this Agreement, whether used in the singular shall include the plural and the plural shall include the singular. -19- 20 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: TAYLOR, BLACKBURN & ASSOCIATES, INC. By: --------------------------------- Richard A. Taylor, President OWNERS: ---------------------------------- Name: Richard A. Taylor ---------------------------------- Name: Deborah B. Taylor ---------------------------------- Name: Kimberly D. Baugh ---------------------------------- Name: Jonathan S. Taylor -20- 21 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 4.6(h) General Release Exhibit 4.6(j) Opinion of Counsel of Seller and Owners EX-2.3 4 STOCK PURCHASE AGRMT / JOHN FLATLEY & ASSOC. 1 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"), JOHN E. FLATLEY & ASSOCIATES, INC., an Illinois corporation ("Seller"), and JOHN E. FLATLEY, being the sole shareholder of Seller ("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 Owner owns 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 Owner desires to sell to PRGI all of the Purchased Shares (as hereinafter defined) owned beneficially and of record by 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 Beck & Associates, Inc. ("RBA"), RBA Audits, Inc., Robert N. Beck, Jr., a sole proprietorship, John H. Cavins, a sole proprietorship, Vincent Creadon, a sole proprietorship, John Kirkeide, a sole proprietorship, Savant Consulting, L.L.C. and Taylor, Blackburn & Associates, Inc. (collectively, the "Other Sellers"); 2 WHEREAS, concurrently with the execution hereof, Seller and Owner 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 the Owner 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 (the "Purchase Price") shall be equal to $5,088,653 less any unfundedEffective 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 an amount equal to $589.04 per day for each day during the period from and after the Effective Date to and including the day immediately preceding the Closing, payable at the Closing in cash in immediately available funds. 2.2 ESCROW. At the Closing, the Owner shall enter into and be bound by the terms of an Indemnity Escrow Agreement by and among PRGI, the Owner and the other signatories named therein in substantially the form of Exhibit 2.2 attached hereto (the "Indemnity Escrow Agreement"). Owner acknowledges that the Owners of RBA are depositing in escrow pursuant to the Indemnity Escrow Agreement 37,691 shares of PRGX Common Stock received by them pursuant to the RBA Acquisition Agreement on his behalf. -2- 3 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 Owner under the Principal Agreement or otherwise (except for advances by Owner 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) and (vi) all amounts owed to Persons other than Owner (except for normal trade payables directly related to the Business to be acquired by PRGI pursuant hereto incurred in the ordinary course of business) (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: 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 or any distributions to Owner of cash or cash equivalents in the Business as of the close of business on August 31, 1998) (collectively, the "Interim Period Reimbursable Liabilities"). (c) The Purchase Price 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, 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 or the Cash Flow Statement, which review shall be a final determination of the Interim Period Cash Flow, the Effective Date Reimbursable 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 Owner, any such payment shall be made by the Representative or PRGI to the other, as the case may be, within 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 -3- 4 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 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 Owner, 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, Owner, 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. -4- 5 3.2 COVENANTS RE: TAX MATTERS. (a) Preparation and Filing of Tax Returns. (i) Owner's Rights and Responsibilities. Owner 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. Owner shall permit PRGI to review and comment on each such Tax Return described in the prior sentence prior to filing. Owner 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. The Taxes due by Owner 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) 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 Owner 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. -5- 6 (c) Cooperation on Tax Matters. PRGI and Owner 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 Owner (or the Representative of Owner) available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. PRGI, Owner 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). (d) All transfer, documentary, sales, use, stamp, registration and other such Taxes and fees (including penalties and interest) incurred in connection with this Agreement shall be paid by Owner when due, and Owner will, at his 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. 3.3 OTHER COVENANTS BY OWNER. The Owner hereby covenants and agrees that he 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 (i) the cessation of sponsorship by the Seller of the John E. Flatley & Associates, Inc. Pension Plan and Trust (the "Pension Plan") and the transfer of the Pension Plan and all of its assets to J & LF, Inc., an Illinois corporation which is wholly owned by Owner, (ii) the termination of any and all other Employee Benefit Plans (as defined in the RCI Agreement) currently in effect for Seller's Associates and/or Employees other than Seller's medical plan and any "Cafeteria" benefit plan identified in Seller's Disclosure Schedule, and (iii) 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, Owner) shall timely notify (or Owner shall cause J & LF, Inc. to timely notify, as applicable) Associates and Employees of Seller of the cessation of sponsorship or termination -6- 7 of the Employee Benefit Plans, including, without limitation, the cessation of future benefit accruals under the Pension Plan. As soon as practical after said notification and cessation of sponsorship or 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. In addition, as soon as possible following the Closing and in no event later than December 15, 1998, Owner shall cause J & LF, Inc. to amend the Pension Plan so as to cease all future benefit accruals thereunder and shall timely provide all required notices of such cessation of future benefit accruals under the Pension Plan in accordance with applicable laws and regulations. Owner or, to the extent permitted by applicable law, the Plan shall bear all legal, accounting and tax costs and expenses incurred by Sellers, Owner 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, the termination thereof, and/or the cessation of sponsorship of the Pension Plan by Seller described above and the sponsorship of the Pension Plan by J & LF, Inc., its successors and assigns, pursuant to Section 4.1 of the RCI Agreement. (b) The trustee of any such Employee Benefit Plans shall act, without compensation, until all assets comprising the related trust under the Employee Benefit 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 cessation of sponsorship of or termination of such Employee Benefit Plans in accordance with applicable laws and regulations. In addition to any other indemnification obligations, the Owner of Seller hereby indemnifies and holds Seller, PRGI and PRGX harmless 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 Employee Benefit Plans and any related trust. In addition to any other indemnification obligations, Seller, PRGI and PRGX hereby indemnifies and holds the Owner 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 cessation of sponsorship or termination of the Employee Benefit Plans. 3.5 ACKNOWLEDGEMENT. The parties acknowledge that prior to the Closing Seller may distribute to its Owner all vehicles used in the Business and all furniture and art work to the extent set forth on Schedule 3.5 attached hereto. -7- 8 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 Owner 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 Owner 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 Owner, 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; (b) a certified copy of the corporate resolutions of the Board of Directors of Seller and of the Owner authorizing the transactions contemplated herein and the execution, -8- 9 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 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 other Interim Period Reimbursable Liabilities; (h) a general release in the form of Exhibit 4.6(h) attached hereto, executed by 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) the offer letter for employment to the Principal, duly executed by the Principal; (l) the Nonqualified Stock Option Agreement for the Principal, duly executed by the Principal; (m) the Closing Escrow Agreement, duly executed by Seller, Owner and the Representative; (n) the Indemnity Escrow Agreement, duly executed by Owner and the Representative, as nominee and attorney-in-fact of the Owner; (o) intentionally omitted; (p) if applicable, the spousal consents referred to in the RCI Agreement duly executed by the spouse of the Owner, as appropriate; -9- 10 (q) if applicable, Forms UCC-3, duly executed by each secured lender of Seller releasing all liens on the assets of Seller; (r) a Closing Statement duly executed by the Owner; and (s) 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 Owner 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 Owner 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. -10- 11 ARTICLE 5 CONDITIONS TO SELLER'S AND THE OWNER'S OBLIGATIONS Each and every obligation of Seller and the Owner 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 Owner: 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 Owner each of the following, together with any additional items which the Owner may reasonably request to effect the transactions contemplated herein: (a) the Purchase Price as adjusted pursuant to Sections 2.1 and 2.3; (b) the statement of Effective Date Reimbursable Liabilities; (c) 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; (d) intentionally omitted; (e) the Closing Escrow Agreement, duly executed by PRGI and PRGX; (f) the offer letters for employment of the Principal, duly executed by PRGI; (g) the Nonqualified Stock Option Agreement with the Principal, duly executed by PRGX; -11- 12 (h) the Noncompetition and Nonsolicitation Agreements duly executed by PRGX and PRGI; (i) the Indemnity Escrow Agreement duly executed by PRGX and PRGI; (j) a Closing Statement, duly executed by PRGI and PRGX; and (k) 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 -12- 13 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. 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 Owner; (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 Owner 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 Owner 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. -13- 14 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 Owner (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 Owner 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 Owner: c/o Pasquesi Sheppard LLC, Representative 585 Beck Lane Lake Forest, IL 60045 Attention: Don Sheppard Telefax: (847) 234-1110
-14- 15 with a copy to: David Fischer, Esq. Wildman, Harrold, Allen & Dixon 225 West Wacker Drive Chicago, IL 60606-1229 Telefax: (312) 201-2555 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 Owner, 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 contemplated hereby and/or necessary or appropriate to effect and consummate the transactions -15- 16 contemplated hereby. The Owner 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. -16- 17 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: JOHN E. FLATLEY & ASSOCIATES, INC. ----------------------------- By: JOHN E. FLATLEY Title: President OWNER: ----------------------------- Name: JOHN E. FLATLEY -17- 18
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 4.6(h) General Release Exhibit 4.6(j) Opinion of Counsel of Seller and Owner
EX-2.4 5 ASSET PURCHASE AGRMT / VINCENT CREADON 1 ASSET PURCHASE AGREEMENT THIS ASSET PURCHASE AGREEMENT (the "Agreement") is entered into as of the 29th day of October, 1998 by and between THE PROFIT GROUP INTERNATIONAL I, INC., a Georgia corporation ("PRGI"), THE PROFIT RECOVERY GROUP INTERNATIONAL, INC., a Georgia corporation ("PRGX"), and VINCENT CREADON, an Illinois resident, d/b/a a sole proprietorship (the "Seller"). 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 overpayment 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 service (the "Business"); WHEREAS, Seller wishes to sell to PRGI substantially all of Seller's assets used or held for use in the Business pursuant to the terms and conditions of this Agreement; 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 Beck & Associates, Inc. ("RBA"), RBA Audits, Inc., Robert N. Beck, Jr. a sole proprietorship, John E. Flatley & Associates, Inc., John M. Kirkeide, a sole proprietorship, John H. Cavins, a sole proprietorship, Savant Consulting, L.L.C. and Taylor, Blackburn & Associates, Inc. (collectively, the "Other Sellers"); WHEREAS, concurrently with the execution hereof, Seller has 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 contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 2 ARTICLE 1 PURCHASE AND SALE OF PURCHASED ASSETS 1.1 ASSETS TO BE ACQUIRED. Subject to and upon the terms and conditions set forth herein, PRGI agrees to purchase from Seller, and Seller agrees to sell to PRGI, except as provided in Section 1.2 hereof, all right, title and interest of Seller in and to all of the tangible and intangible assets of Seller used or held for use by Seller in the conduct of the Business as of the Closing Date (as hereinafter defined), which are described in this Section 1.1 with reference to capitalized terms which, if not otherwise defined herein, have the meaning assigned to such capitalized terms in the RCI Agreement, free and clear of all claims, liens, encumbrances, security interests and similar interests of any kind or nature whatsoever, including, without limitation, the following (collectively, the "Purchased Assets"): (a) all of the Fixed Assets; (b) all of Seller's interest in and rights and benefits owing to Seller under those Contracts which PRGI specifically agrees to assume, which assumption shall be evidenced by inclusion of such Contract by PRGI on a schedule to the Assignment and Assumption Agreement (as hereinafter defined) (collectively, the "Assigned Contracts"); (c) all Accounts Receivable outstanding as of the Closing and all Unbilled Claims and Work in Progress as of the Closing; (d) all of Seller's interest in and rights and benefits accruing to Seller as lessee under those Leases which PRGI specifically agrees to assume, which assumption shall be evidenced by inclusion of such Lease by PRGI on a schedule to the Assignment and Assumption Agreement (collectively, the "Assigned Leases"); (e) all Intellectual Property Rights; (f) all Licenses and Permits; (g) all Deposits and Other Rights; (h) all of Seller's customer and supplier lists, all client files, all files related to Employees and Associates, all computer data bases and other records, other than Seller's corporate minute books and stock records; (i) all of Seller's right, title and interest in and to its telephone numbers and the directory advertising for such telephone numbers to the extent assignable; and (j) all of Seller's right, title and interest in and to all other tangible personal property relating to the Business. 1.2 EXCLUDED ASSETS. Notwithstanding anything to the contrary contained in Section 1.1 hereof, PRGI shall not acquire and Seller shall not transfer to PRGI any of the documents relating to the organization, maintenance and existence of Seller, any assets held under any pension, profit -2- 3 sharing or other Employee Benefit Plan (as defined herein), all cash and cash equivalents of Seller in the Business, subject to Section 2.1(b) hereof, Seller's rights to any tax refunds, any insurance policies of Seller, any vehicles owned or leased by Seller, all furniture and art work to the extent listed on Schedule 1.2 attached hereto and any of the rights of Seller under this Agreement, the RCI Agreement, the other Seller Transaction Documents and the other PRGI Transaction Documents. 1.3 CONVEYANCE OF ASSETS. The conveyance, transfer and delivery of the Purchased Assets shall be made by Seller and accepted by PRGI on the Closing Date, effective as of the Effective Date, as follows: (a) Seller shall execute and deliver to PRGI a bill of sale in the form of Exhibit 1.3(a) attached hereto and made a part hereof (the "Bill of Sale"); (b) Seller and PRGI shall execute and deliver an Assignment and Assumption Agreement in the form of Exhibit 1.3(b) attached hereto and made a part hereof (the "Assignment and Assumption Agreement") with respect to the Assumed Liabilities (as hereinafter defined); (c) Seller shall execute and deliver such additional instruments of sale, transfer, conveyance and assignment as of the Closing Date as counsel to Seller and counsel to PRGI shall mutually deem necessary or appropriate. 1.4 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 PRGX Shares or the Cash Consideration 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 1.4 attached hereto (the "Closing Escrow Agreement"), 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 (the "Closing Date"). The parties hereto intend that PRGI receive all of the benefits in respect of the operations of the Business on and after the Effective Date and assume all of the liabilities of the Business incurred in the ordinary course of business after the Effective Date, except as otherwise specifically provided herein or in the RCI Agreement. ARTICLE 2 PURCHASE PRICE; ASSUMPTION OF LIABILITIES 2.1 PURCHASE PRICE. (a) Purchase Price Payment. Subject to the terms and conditions of this Agreement, the purchase price to be paid to Seller for the Purchased Assets pursuant hereto shall be paid in cash and shares of PRGX Common Stock, as follows: (i) $2,973,949, less the Reimbursable Cash (as defined in Section 2.1(b) below), plus an amount equal to 6.75% of such -3- 4 amount calculated on a per annum basis for the period from the Effective Date through and including the Closing Date, plus an amount equal to $589.04 per day for each day during the period from and after the Effective Date to and including the day immediately preceding the Closing Date (the "Cash Consideration") and (ii) subject to execution and delivery by Seller at the Closing of the Lock-up Agreements, pursuant to the RCI Agreement, 73,430 shares of PRGX Common Stock, no par value (the "PRGX Shares") (the Cash Consideration and the PRGX Shares being collectively referred to herein as the "Purchase Price"); provided, however, that certain of the PRGX Shares shall be issued in the name of the Representative, as nominee and attorney-in-fact for the Seller, to be held in escrow pursuant to Section 2.3 below and in lieu of delivering fractional shares, PRGI shall deliver to Seller an amount in cash based on $27.00 per share (the "Closing Price.") (b) Purchase Price Adjustment. On the 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 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 the Interim Period Cash Flow, plus the following cash payments 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: (i) the amount, if any, by which disbursements to Seller during said period exceed the amount of any cash or cash equivalents in the Business as of the close of business on August 31, 1998 and (ii) any amounts paid during the period from and including the Effective Date to and including the Closing Date in respect of the following liabilities: (A) Seller Transaction Expenses, (B) non-trade payables (meaning those not directly related to the Business to be acquired by PRGI pursuant hereto), (C) non-trade accrued expenses (meaning those not directly related to the Business to be acquired by PRGI pursuant hereto), (D) commissions payable as of the Effective Date in respect of accounts receivable collected by Seller prior to the Effective Date; (E) all amounts owed to Seller under the Principal Agreement or otherwise (except for advances 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), and (F) all amounts owed to Persons other than Seller (except for normal trade payables directly relating to the Business to be acquired by PRGI pursuant hereto incurred in the ordinary course of business) (collectively, the "Interim Period Reimbursable Liabilities," which, together with the Interim Period Cash Flow, is referred to herein as the "Reimbursable Cash"). (c) Post-Closing Review. Within sixty (60) days following the Closing Date, PRGI and the Representative shall each have the right to request that the Accountants review the Reimbursable Cash (including the Cash Flow Statement), which review shall be a final determination of the Reimbursable Cash, and in the event that such determination shows that payments are required by PRGI or by the Seller, any such payment shall be made by the Representative or PRGI to the other, as the case may be, within 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. -4- 5 2.2 ASSUMPTION OF LIABILITIES. PRGI agrees to assume, from and after the Closing Date, only the following (the "Assumed Liabilities"): (a) all obligations and liabilities of Seller relating to the Business arising from and after the Effective Date in the ordinary course of business under the Contracts with Customers, Associates and Employees and other Contracts, and equipment and other Leases expressly designated by PRGI as Assigned Contracts and Assigned Leases; (b) Seller's normal trade payables relating to the Business to be acquired by PRGI pursuant hereto incurred in the ordinary course of business and outstanding at the Effective Date or incurred in the ordinary course of business thereafter and advances made after August 31, 1998 used to pay normal trade payables relating to the Business to be acquired by PRGI pursuant hereto, excluding (i) all Seller Transaction Expenses; (ii) non-trade payables (meaning those not directly related to the Business to be acquired by PRGI pursuant hereto), including any Prior Period Payments to RBA; (iii) non-trade accrued expenses (meaning those not directly related to the Business to be acquired by PRGI pursuant hereto); (iv) commission amounts for audit services due to Associates, auditors, or other service providers on accounts receivable collected prior to the Effective Date; and (v) all accounts payable, accrued expenses or other indebtedness due to the Seller as of the Effective Date under the Principal Agreement, or in connection with any advances to Associates, or otherwise; (c) commission amounts for audit services which will be owed by Seller to its Associates, auditors or other service providers upon collection of Accounts Receivable, Unbilled Claims and Work in Progress outstanding at the Effective Date. Except for the Assumed Liabilities, PRGI shall not assume any debts or liabilities of Seller of any kind or nature whatsoever. Seller agrees to make full and prompt payment of all of its trade payables not assumed by PRGI as and when due. Anything to the contrary contained herein notwithstanding, PRGI shall neither assume nor have any obligations or liabilities whatsoever in respect of severance, WARN Act, income tax withholding, payroll and/or unemployment tax, workers' compensation, pension, profit-sharing, health insurance, COBRA or any other employee or other benefit liabilities in respect of any Business Employees or in respect of any Employee Benefit Plans, including, without limitation any contribution, tax, lien, penalty, cost, interest, claim, loss, action, suit, damage, cost assessment, withdrawal liability, liability to the PBGC, liability under Section 412 of the Code or Section 302(a)(2) of ERISA, or other similar liability or expense of Seller or any ERISA Affiliate and PRGI shall not become a party to any Employee Benefit Plan as a result of any of the transactions contemplated by this Agreement. 2.3 ESCROW SHARES. At the Closing, approximately 36,715 of the PRGX Shares issued on the Closing Date pursuant to Section 2.1(a)(ii) hereof (the "Escrow Shares") shall be issued in the name of the Representative, as nominee and attorney-in-fact for the Seller, which Escrow Shares will 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, PRGX, Seller and the other signatories named therein in the form of Exhibit 2.3 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 -5- 6 Acquisition Agreements (approximately $43,500,000) multiplied by (b) 20%, divided by the Closing Price. ARTICLE 3 ADDITIONAL COVENANTS 3.1 REPRESENTATIONS, COVENANTS AND INDEMNIFICATION AGREEMENT. Concurrently with the execution and delivery of this Agreement, Seller, 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, the Purchased 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 Material Leases, Material 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. 3.2 ALLOCATION OF PURCHASE PRICE AMONG PURCHASED ASSETS. The Purchase Price shall be allocated for tax purposes as mutually agreed to by PRGI and Seller within 60 days after the Closing; provided, however, the Purchase Price shall be allocated solely to (a) goodwill; (b) fixed assets at book value; (c) a share of the allocation to the Noncompetition and Nonsolicitation Agreements described in Section 5.4 of the RCI Agreement, as appropriate, and (d) to the extent they exist, Accounts Receivable net of appropriate reserves and accrued commissions. Seller and PRGI agree that they will prepare and file any notice or other filing required pursuant to Section 1060 of the Code, and that any such notices or filings will be prepared based upon such tax allocation of Seller Purchase Price. PRGI agrees to send to Seller a completed copy of its Form 8594 ("Asset Acquisition Statement under Section 1060") with respect to this transaction prior to filing such form with the Internal Revenue Service. 3.3 COVENANT RE: TAX MATTERS. (a) Seller shall be solely responsible for and shall pay, without any cost to PRGI (i) any and all Taxes for which Seller is or may be liable, arising from Seller's activities, the Business or use of the Purchased Assets through the Effective Date (regardless of whether the filing of any Tax Return with respect thereto or payment of any amount in respect thereof is filed, paid or due prior to, on or after the Effective Date), (ii) any Taxes with respect to the acquisition by PRGI from Seller of the Purchased Assets, and all other Taxes, if any, imposed by any Tax Authority assessed in connection with, on account of or resulting from the consummation of the transfer of the Purchased Assets to PRGI. -6- 7 (b) Real and personal property ad valorem Taxes, if any, with respect to the Purchased Assets shall be prorated on a daily basis between Seller, on the one hand, and PRGI on the other hand, as of the Closing Date. Should any amount of such Taxes to be prorated not be fully determined as of the Closing Date, a mutually satisfactory estimate of such amount, made on the basis of Seller's records, shall be used as the basis for settlement at Closing, and the amount finally determined will be prorated and appropriate settlement adjustments made as soon as practicable after such final determination. (c) Except as otherwise provided in this Agreement, the parties hereby agree that each of them shall cooperate with the other in executing or causing to be executed any required document and by making available to the other all work papers, records and notes of any kind at all reasonable times for the purpose of allowing the appropriate party to complete Tax Returns, participate in a proceeding, obtain refunds, make any determination required under this Agreement or defend or prosecute Tax claims. Notwithstanding anything to the contrary contained herein, Seller shall have sole and exclusive authority to prepare and file all Tax Returns concerning Seller related activities occurring prior to the Closing, including, without limitation, its operation of the Business and its use of the Purchased Assets and all matters under agreements not being assumed by PRGI (regardless of when such return is filed). PRGI shall not directly or indirectly take any action to prepare or file such Tax Return but shall be given copies of any such return filed by Seller. (d) At its sole expense, Seller shall promptly pay any and all Taxes, including but not limited to sales and transfer Taxes, levied, imposed or assessed by any Tax Authority as a result of the sale, transfer, assignment and conveyance of the Purchased Assets to PRGI by Seller. 3.4 BULK SALES LAW. PRGI hereby waives compliance by Seller with any applicable U.C.C. bulk sales law, and Seller agrees to indemnify and hold harmless PRGI (and any affiliates thereof) from and against any claims or liabilities not assumed by PRGI pursuant to this Agreement asserted against PRGI (or any affiliate thereof) by any creditor of Seller by reason of such noncompliance. Seller will comply with all applicable tax bulk transfer laws promptly after the public announcement of the transactions contemplated herein, provided that the parties agree that PRGI will only hold back from the Purchase Price amounts required under such applicable laws if such required holdback exceeds $10,000. Seller agrees to indemnify and hold harmless PRGI (and any affiliates thereof) from and against any claims or liabilities against PRGI for failure to comply with any such applicable tax bulk transfer laws. 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: -7- 8 4.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties made by Seller 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. 4.2 OBLIGATIONS PERFORMED. Seller 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 is required to consummate the transactions contemplated herein, if any, and all 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 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) possession of the Purchased Assets; (b) intentionally omitted; (c) intentionally omitted; (d) the Bill of Sale, the Assignment and Assumption Agreement and the other instruments of transfer as shall be reasonably required by PRGI for the transfer to PRGI of all of Seller's right, title and interest to the Purchased Assets free and clear of all claims, liens, encumbrances, security interests and similar interests of any kind or nature whatsoever, including, without limitation, releases of any and all such claims, liens, encumbrances, security interests and similar interests with respect to the Purchased Assets; (e) the Indemnity Escrow Agreement, duly executed by the Seller and the Representative, as nominee and attorney-in-fact of Seller, together with blank stock powers, duly executed by the Representative with medallion level signature guarantee; (f) the Noncompetition and Nonsolicitation Agreements duly executed by Seller; -8- 9 (g) written Seller Consents from all parties, whose consent to the transactions contemplated herein is required; (h) an opinion of counsel to Seller substantially in the form of Exhibit 4.6(h) attached hereto; (i) the offer letter for employment of the Principal, duly executed by the Principal; (j) the Nonqualified Stock Option Agreement for the Principal, duly executed by the Principal; (k) the Lock-up Agreements, duly executed by Seller and the Representative; (l) intentionally omitted; (m) if applicable, the spousal consents, referred to in the RCI Agreement, duly executed by the spouse of Seller; (n) if applicable, Forms UCC-3, duly executed by each secured lender of Seller, releasing all liens on the Purchased Assets; (o) a release of RBA and the Other Sellers in substantially the form of Exhibit 4.6(o) attached hereto, duly executed by Seller; (p) a Closing Escrow Agreement, duly executed by Seller and the Representative; (q) a Closing Statement, duly executed by Seller; 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 acquisition by PRGI of the Purchased Assets pursuant to the transactions contemplated herein, or the ability of PRGI, PRGX or any of their affiliates to own and operate Seller's Business 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 Seller shall have no 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, the Purchased Assets or Seller's Business. 4.9 NO MATERIAL ADVERSE. From the date of this Agreement to the Closing, there shall not have occurred any Material Adverse Effect (without giving effect to the consequences of the -9- 10 transaction 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 the Closing, none of the Primary Customers shall have terminated, decreased or otherwise adversely altered such Primary Customer business relationship with Seller or given notice to Seller 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. ARTICLE 5 CONDITIONS TO SELLER'S OBLIGATIONS Each and every obligation of Seller 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: 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 Seller each of the following, together with any additional items which the Seller may reasonably request to effect the transactions contemplated herein: (a) certified copies of the corporate resolutions of the Board of Directors of PRGI and the Board of Directors of PRGX authorizing the transactions contemplated herein and the -10- 11 execution, delivery and performance of the RCI Agreement, this Agreement and the other PRGI Transaction Documents by PRGX and PRGI, as applicable, together with incumbency certificates with respect to the respective officers of PRGI executing documents or instruments on behalf of PRGI, and, in respect of PRGX, authorizing the issuance of the PRGX Shares to Seller; (b) intentionally omitted; (c) the Cash Consideration, as adjusted pursuant to Section 2.1(a) and (b) hereof, and written confirmation from PRGX's transfer agent that stock certificates representing the PRGX Shares have been issued in the name of Seller; (d) the Indemnity Escrow Agreement, duly executed by PRGI and PRGX; (e) the documents and instruments described in Section 1.3 hereof; (f) the offer letter for employment of the Principal, duly executed by PRGI; (g) the Nonqualified Stock Option Agreement for the Principal, duly executed by PRGX; (h) the Noncompetition and Nonsolicitation Agreements referred to in Section 3.4 hereof duly executed by PRGI; (i) the Closing Escrow Agreement, duly executed by PRGI and PRGX; (j) a Closing Statement, duly executed by PRGI and PRGX; and (k) 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 acquisition by PRGI of the Purchased Assets pursuant to the transactions contemplated herein or the ability of PRGX or PRGI or any of its affiliates to own and operate the Business 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 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. -11- 12 5.7 CONSENTS. PRGI shall have obtained and delivered to Seller written consent of Nations Bank N.A., as agent for the banks party to PRGX's bank credit agreement, to the transactions contemplated herein and such consent(s) shall remain in full force and effect at and as of the Closing. 5.8 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"). 5.9 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. 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 and Seller; (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 5.8 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; or (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. (e) by PRGI, if the conditions set forth in Article 4 hereof have not been satisfied by Seller 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 prior to the Outside Date. -12- 13 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 and set forth in the 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. 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 the Seller (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 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: -13- 14 If to Seller: c/o Pasquesi Sheppard LLC, Representative 585 Bank Lane Lake Forest, IL 60045 Attention: Don Sheppard Telefax: (847) 234-1110 with a copy to: David Fischer, Esq. Wildman, Harrold, Allen & Dixon 225 West Wacker Drive Chicago, IL 60606-1229 Telefax: (312) 201-2555 If to PRGX or PRGI: The Profit Recovery Group International I, Inc. 2300 Windy Ridge Parkway Suite 100 North Atlanta, GA 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 PRGI 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. Except for the Nondisclosure Agreement, which remains in full force and effect in accordance with the terms thereof, this Agreement, the RCI Agreement, the other Seller Transaction Documents, and the PRGI Transaction Documents together with the Exhibits and Schedules attached hereto and thereto, 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 -14- 15 as otherwise expressly provided herein, is not intended to confer upon any person other than Seller, PRGX and PRGI, 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 contemplated hereby and/or necessary or appropriate to effect and consummate the transactions contemplated hereby. Seller agrees to provide to PRGX and PRGI, both before and after the Closing, such information as PRGX and 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. -15- 16 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: ---------------------------------- Name: -------------------------------- Its: --------------------------------- PRGI: THE PROFIT RECOVERY GROUP INTERNATIONAL I, INC. By: ---------------------------------- Name: -------------------------------- Its: --------------------------------- SELLER: VINCENT CREADON d/b/a a sole proprietorship ------------------------------------- VINCENT CREADON -16- 17 Schedules and Exhibits Schedule 1.2 Excluded Assets Exhibit 1.3(a) Bill of Sale Exhibit 1.3(b) Assignment and Assumption Agreement Exhibit 1.4 Closing Escrow Agreement Exhibit 2.3 Indemnity Escrow Agreement Exhibit 3.1 RCI Agreement Exhibit 4.6(h) Opinion of Counsel Exhibit 4.6(n) Release
EX-2.5 6 ASSET PURCHASE AGRMNT / JOHN CAVINS 1 ASSET PURCHASE AGREEMENT THIS ASSET PURCHASE AGREEMENT (the "Agreement") is entered into as of the 29th day of October, 1998 by and between THE PROFIT GROUP INTERNATIONAL I, INC., a Georgia corporation ("PRGI"), THE PROFIT RECOVERY GROUP INTERNATIONAL, INC., a Georgia corporation ("PRGX"), and JOHN H. CAVINS, a Florida resident, d/b/a a sole proprietorship (the "Seller"). 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 overpayment 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 service (the "Business"); WHEREAS, Seller wishes to sell to PRGI substantially all of Seller's assets used or held for use in the Business pursuant to the terms and conditions of this Agreement; 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 Beck & Associates, Inc. ("RBA"), RBA Audits, Inc., Robert N. Beck, Jr. a sole proprietorship, John E. Flatley & Associates, Inc., John M. Kirkeide, a sole proprietorship, Vincent Creadon, a sole proprietorship, Savant Consulting, L.L.C. and Taylor, Blackburn & Associates, Inc. (collectively, the "Other Sellers"); WHEREAS, concurrently with the execution hereof, Seller has 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 contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 2 ARTICLE 1 PURCHASE AND SALE OF PURCHASED ASSETS 1.1 ASSETS TO BE ACQUIRED. Subject to and upon the terms and conditions set forth herein, PRGI agrees to purchase from Seller, and Seller agrees to sell to PRGI, except as provided in Section 1.2 hereof, all right, title and interest of Seller in and to all of the tangible and intangible assets of Seller used or held for use by Seller in the conduct of the Business as of the Closing Date (as hereinafter defined), which are described in this Section 1.1 with reference to capitalized terms which, if not otherwise defined herein, have the meaning assigned to such capitalized terms in the RCI Agreement, free and clear of all claims, liens, encumbrances, security interests and similar interests of any kind or nature whatsoever, including, without limitation, the following (collectively, the "Purchased Assets"): (a) all of the Fixed Assets; (b) all of Seller's interest in and rights and benefits owing to Seller under those Contracts which PRGI specifically agrees to assume, which assumption shall be evidenced by inclusion of such Contract by PRGI on a schedule to the Assignment and Assumption Agreement (as hereinafter defined) (collectively, the "Assigned Contracts"); (c) all Accounts Receivable outstanding as of the Closing and all Unbilled Claims and Work in Progress as of the Closing; (d) all of Seller's interest in and rights and benefits accruing to Seller as lessee under those Leases which PRGI specifically agrees to assume, which assumption shall be evidenced by inclusion of such Lease by PRGI on a schedule to the Assignment and Assumption Agreement (collectively, the "Assigned Leases"); (e) all Intellectual Property Rights; (f) all Licenses and Permits; (g) all Deposits and Other Rights; (h) all of Seller's customer and supplier lists, all client files, all files related to Employees and Associates, all computer data bases and other records, other than Seller's corporate minute books and stock records; (i) all of Seller's right, title and interest in and to its telephone numbers and the directory advertising for such telephone numbers to the extent assignable; and (j) all of Seller's right, title and interest in and to all other tangible personal property relating to the Business. 1.2 EXCLUDED ASSETS. Notwithstanding anything to the contrary contained in Section 1.1 hereof, PRGI shall not acquire and Seller shall not transfer to PRGI any of the documents relating to the organization, maintenance and existence of Seller, any assets held under any pension, profit -2- 3 sharing or other Employee Benefit Plan (as defined herein), all cash and cash equivalents of Seller in the Business as of the close of business, subject to Section 2.1(b) hereof, and Seller's rights to any tax refunds, any insurance policies of Seller, any vehicles owned or leased by Seller and all furniture and art work to the extent listed on Schedule 1.2 attached hereto and any of the rights of Seller under this Agreement, the RCI Agreement, the other Seller Transaction Documents and the other PRGI Transaction Documents. 1.3 CONVEYANCE OF ASSETS. The conveyance, transfer and delivery of the Purchased Assets shall be made by Seller and accepted by PRGI on the Closing Date, effective as of the Effective Date, as follows: (a) Seller shall execute and deliver to PRGI a bill of sale in the form of Exhibit 1.3(a) attached hereto and made a part hereof (the "Bill of Sale"); (b) Seller and PRGI shall execute and deliver an Assignment and Assumption Agreement in the form of Exhibit 1.3(b) attached hereto and made a part hereof (the "Assignment and Assumption Agreement") with respect to the Assumed Liabilities (as hereinafter defined); (c) Seller shall execute and deliver such additional instruments of sale, transfer, conveyance and assignment as of the Closing Date as counsel to Seller and counsel to PRGI shall mutually deem necessary or appropriate. 1.4 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 PRGX Shares or the Cash Consideration 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 1.4 attached hereto (the "Closing Escrow Agreement"), 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 (the "Closing Date"). The parties hereto intend that PRGI receive all of the benefits in respect of the operations of the Business on and after the Effective Date and assume all of the liabilities of the Business incurred in the ordinary course of business after the Effective Date, except as otherwise specifically provided herein or in the RCI Agreement. ARTICLE 2 PURCHASE PRICE; ASSUMPTION OF LIABILITIES 2.1 PURCHASE PRICE. (a) Purchase Price Payment. Subject to the terms and conditions of this Agreement, the purchase price to be paid to Seller for the Purchased Assets pursuant hereto shall be paid in cash and shares of PRGX Common Stock, as follows: (i) $2,178,235, less the -3- 4 Reimbursable Cash (as defined in Section 2.1(b) below), plus an amount equal to 6.75% of such amount calculated on a per annum basis for the period from the Effective Date through and including the Closing Date, plus an amount equal to $520.55 per day for each day during the period from and after the Effective Date to and including the day immediately preceding the Closing Date (the "Cash Consideration") and (ii) subject to execution and delivery by Seller at the Closing of the Lock-up Agreements, pursuant to the RCI Agreement, 53,783 shares of PRGX Common Stock, no par value (the "PRGX Shares") (the Cash Consideration and the PRGX Shares being collectively referred to herein as the "Purchase Price"); provided, however, that certain of the PRGX Shares shall be issued in the name of the Representative, as nominee and attorney-in-fact for the Seller, to be held in escrow pursuant to Section 2.3 below and in lieu of delivering fractional shares, PRGI shall deliver to Seller an amount in cash based on $27.00 per share (the "Closing Price"). (b) Purchase Price Adjustment. On the 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 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 the Interim Period Cash Flow, plus the following cash payments 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: (i) the amount, if any, by which disbursements to Seller during said period exceed the amount of any cash or cash equivalents in the Business as of the close of business on August 31, 1998 and (ii) any amounts paid during the period from and including the Effective Date to and including the Closing Date in respect of the following liabilities: (A) Seller Transaction Expenses, (B) non-trade payables (meaning those not directly related to the Business to be acquired by PRGI pursuant hereto), (C) non-trade accrued expenses (meaning those not directly related to the Business to be acquired by PRGI pursuant hereto), (D) commissions payable as of the Effective Date in respect of accounts receivable collected by Seller prior to the Effective Date; (E) all amounts owed to Seller under the Principal Agreement or otherwise (except for advances 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), and (F) all amounts owed to Persons other than Seller (except for normal trade payables directly relating to the Business to be acquired by PRGI pursuant hereto incurred in the ordinary course of business) (collectively the "Interim Period Reimbursable Liabilities," which, together with the Interim Period Cash Flow, is referred to herein as the "Reimbursable Cash"). (c) Post-Closing Review. Within sixty (60) days following the Closing Date, PRGI and the Representative shall each have the right to request that the Accountants review the Reimbursable Cash (including the Cash Flow Statement), which review shall be a final determination of the Reimbursable Cash, and in the event that such determination shows that payments are required by PRGI or by the Seller, any such payment shall be made by the Representative or PRGI to the other, as the case may be, within 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. -4- 5 2.2 ASSUMPTION OF LIABILITIES. PRGI agrees to assume, from and after the Closing Date, only the following (the "Assumed Liabilities"): (a) all obligations and liabilities of Seller relating to the Business arising from and after the Effective Date in the ordinary course of business under the Contracts with Customers, Associates and Employees and other Contracts, and equipment and other Leases expressly designated by PRGI as Assigned Contracts and Assigned Leases; (b) Seller's normal trade payables relating to the Business to be acquired by PRGI pursuant hereto incurred in the ordinary course of business and outstanding at the Effective Date or incurred in the ordinary course of business thereafter and advances made after August 31, 1998 used to pay normal trade payables relating to the Business to be acquired by PRGI pursuant hereto, excluding (i) all 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), including any Prior Period Payments to RBA; (iv) commission amounts for audit services due to Associates, auditors, or other service providers on accounts receivable collected prior to the Effective Date; and (v) all accounts payable, accrued expenses or other indebtedness due to the Seller as of the Effective Date under the Principal Agreement, or in connection with any advances to Associates, or otherwise; and (c) commission amounts for audit services which will be owed by Seller to its Associates, auditors or other service providers upon collection of Accounts Receivable, Unbilled Claims and Work in Progress outstanding at the Effective Date. Except for the Assumed Liabilities, PRGI shall not assume any debts or liabilities of Seller of any kind or nature whatsoever. Seller agrees to make full and prompt payment of all of its trade payables not assumed by PRGI as and when due. Anything to the contrary contained herein notwithstanding, PRGI shall neither assume nor have any obligations or liabilities whatsoever in respect of severance, WARN Act, income tax withholding, payroll and/or unemployment tax, workers' compensation, pension, profit-sharing, health insurance, COBRA or any other employee or other benefit liabilities in respect of any Business Employees or in respect of any Employee Benefit Plans, including, without limitation any contribution, tax, lien, penalty, cost, interest, claim, loss, action, suit, damage, cost assessment, withdrawal liability, liability to the PBGC, liability under Section 412 of the Code or Section 302(a)(2) of ERISA, or other similar liability or expense of Seller or any ERISA Affiliate and PRGI shall not become a party to any Employee Benefit Plan as a result of any of the transactions contemplated by this Agreement. 2.3 ESCROW SHARES. At the Closing, approximately 26,891 of the PRGX Shares issued on the Closing Date pursuant to Section 2.1(a)(ii) hereof (the "Escrow Shares") shall be issued in the name of the Representative, as nominee and attorney-in-fact for the Seller, which Escrow Shares will 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, PRGX, Seller and the other signatories named therein in the form of Exhibit 2.3 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 -5- 6 Acquisition Agreements (approximately $43,500,000) multiplied by (b) 20%, divided by the Closing Price. ARTICLE 3 ADDITIONAL COVENANTS 3.1 REPRESENTATIONS, COVENANTS AND INDEMNIFICATION AGREEMENT. Concurrently with the execution and delivery of this Agreement, Seller, 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, the Purchased 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 Material Leases, Material 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. 3.2 ALLOCATION OF PURCHASE PRICE AMONG PURCHASED ASSETS. The Purchase Price shall be allocated for tax purposes as mutually agreed to by PRGI and Seller within 60 days after the Closing; provided, however, the Purchase Price shall be allocated solely to (a) goodwill; (b) fixed assets at book value; (c) a share of the allocation to the Noncompetition and Nonsolicitation Agreements described in Section 5.4 of the RCI Agreement, as appropriate, and (d) to the extent they exist, Accounts Receivable net of appropriate reserves and accrued commissions. Seller and PRGI agree that they will prepare and file any notice or other filing required pursuant to Section 1060 of the Code, and that any such notices or filings will be prepared based upon such tax allocation of Seller Purchase Price. PRGI agrees to send to Seller a completed copy of its Form 8594 ("Asset Acquisition Statement under Section 1060") with respect to this transaction prior to filing such form with the Internal Revenue Service. 3.3 COVENANT RE: TAX MATTERS. (a) Seller shall be solely responsible for and shall pay, without any cost to PRGI (i) any and all Taxes for which Seller is or may be liable, arising from Seller's activities, the Business or use of the Purchased Assets through the Effective Date (regardless of whether the filing of any Tax Return with respect thereto or payment of any amount in respect thereof is filed, paid or due prior to, on or after the Effective Date), (ii) any Taxes with respect to the acquisition by PRGI from Seller of the Purchased Assets, and all other Taxes, if any, imposed by any Tax Authority assessed in connection with, on account of or resulting from the consummation of the transfer of the Purchased Assets to PRGI. (b) Real and personal property ad valorem Taxes, if any, with respect to the Purchased Assets shall be prorated on a daily basis between Seller, on the one hand, and PRGI on -6- 7 the other hand, as of the Closing Date. Should any amount of such Taxes to be prorated not be fully determined as of the Closing Date, a mutually satisfactory estimate of such amount, made on the basis of Seller's records, shall be used as the basis for settlement at Closing, and the amount finally determined will be prorated and appropriate settlement adjustments made as soon as practicable after such final determination. (c) Except as otherwise provided in this Agreement, the parties hereby agree that each of them shall cooperate with the other in executing or causing to be executed any required document and by making available to the other all work papers, records and notes of any kind at all reasonable times for the purpose of allowing the appropriate party to complete Tax Returns, participate in a proceeding, obtain refunds, make any determination required under this Agreement or defend or prosecute Tax claims. Notwithstanding anything to the contrary contained herein, Seller shall have sole and exclusive authority to prepare and file all Tax Returns concerning Seller related activities occurring prior to the Closing, including, without limitation, its operation of the Business and its use of the Purchased Assets and all matters under agreements not being assumed by PRGI (regardless of when such return is filed). PRGI shall not directly or indirectly take any action to prepare or file such Tax Return but shall be given copies of any such return filed by Seller. (d) At its sole expense, Seller shall promptly pay any and all Taxes, including but not limited to sales and transfer Taxes, levied, imposed or assessed by any Tax Authority as a result of the sale, transfer, assignment and conveyance of the Purchased Assets to PRGI by Seller. 3.4 BULK SALES LAW. PRGI hereby waives compliance by Seller with any applicable U.C.C. bulk sales law, and Seller agrees to indemnify and hold harmless PRGI (and any affiliates thereof) from and against any claims or liabilities not assumed by PRGI pursuant to this Agreement asserted against PRGI (or any affiliate thereof) by any creditor of Seller by reason of such noncompliance. Seller will comply with all applicable tax bulk transfer laws promptly after the public announcement of the transactions contemplated herein, provided that the parties agree that PRGI will only hold back from the Purchase Price amounts required under such applicable laws if such required holdback exceeds $10,000. Seller agrees to indemnify and hold harmless PRGI (and any affiliates thereof) from and against any claims or liabilities against PRGI for failure to comply with any such applicable tax bulk transfer laws. 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 in or pursuant to this Agreement and to the RCI Agreement or given on their behalf hereunder or -7- 8 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 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 is required to consummate the transactions contemplated herein, if any, and all 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 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) possession of the Purchased Assets; (b) intentionally omitted; (c) intentionally omitted; (d) the Bill of Sale, the Assignment and Assumption Agreement and the other instruments of transfer as shall be reasonably required by PRGI for the transfer to PRGI of all of Seller's right, title and interest to the Purchased Assets free and clear of all claims, liens, encumbrances, security interests and similar interests of any kind or nature whatsoever, including, without limitation, releases of any and all such claims, liens, encumbrances, security interests and similar interests with respect to the Purchased Assets; (e) the Indemnity Escrow Agreement, duly executed by the Seller and the Representative, as nominee and attorney-in-fact of Seller, together with blank stock powers, duly executed by the Representative with medallion level signature guarantee; (f) the Noncompetition and Nonsolicitation Agreements duly executed by Seller; -8- 9 (g) written Seller Consents from all parties, whose consent to the transactions contemplated herein is required; (h) an opinion of counsel to Seller substantially in the form of Exhibit 4.6(h) attached hereto; (i) the offer letter for employment of the Principal, duly executed by the Principal; (j) the Nonqualified Stock Option Agreement for the Principal, duly executed by the Principal; (k) the Lock-up Agreements, duly executed by Seller and the Representative; (l) intentionally omitted; (m) if applicable, the spousal consents, referred to in the RCI Agreement, duly executed by the spouse of Seller; (n) if applicable, Forms UCC-3, duly executed by each secured lender of Seller, releasing all liens on the Purchased Assets; (o) a release of RBA and the other Sellers in substantially the form of Exhibit 4.6(o) attached hereto, duly executed by Seller. (p) A Closing Escrow Agreement, duly executed by Seller and the Representative; (q) a Closing Statement, duly executed by Seller; 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 acquisition by PRGI of the Purchased Assets pursuant to the transactions contemplated herein, or the ability of PRGI, PRGX or any of their affiliates to own and operate Seller's Business 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 Seller shall have no 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, the Purchased Assets or Seller's Business. 4.9 NO MATERIAL ADVERSE EFFECT. From the date of this Agreement to the Closing, there shall not have occurred any Material Adverse Effect (without giving effect to the consequences of -9- 10 the transaction 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 the Closing, none of the Primary Customers shall have terminated, decreased or otherwise adversely altered such Primary Customer business relationship with Seller or given notice to Seller 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. ARTICLE 5 CONDITIONS TO SELLER'S OBLIGATIONS Each and every obligation of Seller 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: 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 Seller each of the following, together with any additional items which the Seller may reasonably request to effect the transactions contemplated herein: (a) certified copies of the corporate resolutions of the Board of Directors of PRGI and the Board of Directors of PRGX authorizing the transactions contemplated herein and the -10- 11 execution, delivery and performance of the RCI Agreement, this Agreement and the other PRGI Transaction Documents by PRGX and PRGI, as applicable, together with incumbency certificates with respect to the respective officers of PRGI executing documents or instruments on behalf of PRGI, and, in respect of PRGX, authorizing the issuance of the PRGX Shares to Seller; (b) intentionally omitted; (c) the Cash Consideration, as adjusted pursuant to Section 2.1(a) and (b) hereof, and written confirmation from PRGX's transfer agent that stock certificates representing the PRGX Shares have been issued in the name of Seller; (d) the Indemnity Escrow Agreement, duly executed by PRGI and PRGX; (e) the documents and instruments described in Section 1.3 hereof; (f) the offer letter for employment of the Principal, duly executed by PRGI; (g) the Nonqualified Stock Option Agreement for the Principal, duly executed by PRGX; (h) the Noncompetition and Nonsolicitation Agreements referred to in Section 3.4 hereof duly executed by PRGI; (i) the Closing Escrow Agreement, duly executed by PRGI and PRGX; (j) a Closing Statement, duly executed by PRGI and PRGX; and (k) 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 acquisition by PRGI of the Purchased Assets pursuant to the transactions contemplated herein or the ability of PRGX or PRGI or any of its affiliates to own and operate the Business 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 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. -11- 12 5.7 CONSENTS. PRGI shall have obtained and delivered to Seller written consent of Nations Bank N.A., as agent for the banks party to PRGX's bank credit agreement, to the transactions contemplated herein and such consent(s) shall remain in full force and effect at and as of the Closing. 5.8 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"). 5.9 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. 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 and Seller; (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 5.8 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; or (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. (e) by PRGI, if the conditions set forth in Article 4 hereof have not been satisfied by Seller 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 prior to the Outside Date. -12- 13 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 and set forth in the 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. 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 the Seller (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 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: -13- 14 If to Seller: c/o Pasquesi Sheppard LLC, Representative 585 Bank Lane Lake Forest, IL 60045 Attention: Don Sheppard Telefax: (847) 234-1110 with a copy to: Harry Haskins, Esq. 1800 Second Street, Suite 819 Sarasota, FL 34236 Telefax: (941) 953-4284 If to PRGX or PRGI: The Profit Recovery Group International I, Inc. 2300 Windy Ridge Parkway Suite 100 North Atlanta, GA 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 PRGI 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. Except for the Nondisclosure Agreement, which remains in full force and effect in accordance with the terms thereof, this Agreement, the RCI Agreement, the other Seller Transaction Documents, and the PRGI Transaction Documents together with the Exhibits and Schedules attached hereto and thereto, 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 Seller, PRGX and PRGI, any rights or remedies hereunder. -14- 15 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 contemplated hereby and/or necessary or appropriate to effect and consummate the transactions contemplated hereby. Seller agrees to provide to PRGX and PRGI, both before and after the Closing, such information as PRGX and 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. -15- 16 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: ---------------------------------------- Name: -------------------------------------- Its: --------------------------------------- PRGI: THE PROFIT RECOVERY GROUP INTERNATIONAL I, INC. By: ---------------------------------------- Name: -------------------------------------- Its: --------------------------------------- SELLER: JOHN H. CAVINS d/b/a a sole proprietorship ------------------------------------------- JOHN H. CAVINS -16- 17 Schedules and Exhibits Schedule 1.2 Excluded Assets Exhibit 1.3(a) Bill of Sale Exhibit 1.3(b) Assignment and Assumption Agreement Exhibit 1.4 Closing Escrow Agreement Exhibit 2.3 Indemnity Escrow Agreement Exhibit 3.1 RCI Agreement Exhibit 4.6(h) Opinion of Counsel Exhibit 4.6(n) Release
-17- EX-2.6 7 ASSET PURCHASE AGRMT / RBA AUDITS INC. 1 ASSET PURCHASE AGREEMENT THIS ASSET PURCHASE AGREEMENT (the "Agreement") is entered into as of the 29th day of October, 1998 by and between THE PROFIT GROUP INTERNATIONAL I, INC., a Georgia corporation ("PRGI"), THE PROFIT RECOVERY GROUP INTERNATIONAL, INC., a Georgia corporation ("PRGX"), and RBA AUDITS, INC., a Utah corporation (the "Seller"), and RICHARD N. BECK, being the sole owner of all outstanding equity of Seller ("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 overpayment 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 service (the "Business"); WHEREAS, Seller wishes to sell to PRGI substantially all of Seller's assets used or held for use in the Business pursuant to the terms and conditions of this Agreement; 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 Beck & Associates, Inc. ("RBA"), Robert N. Beck, Jr., a sole proprietorship, John E. Flatley & Associates, Inc., John H. Cavins, a sole proprietorship, Vincent Creadon, a sole 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 Owner 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 contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 2 ARTICLE 1 PURCHASE AND SALE OF PURCHASED ASSETS 1.1 ASSETS TO BE ACQUIRED. Subject to and upon the terms and conditions set forth herein, PRGI agrees to purchase from Seller, and Seller agrees to sell to PRGI, except as provided in Section 1.2 hereof, all right, title and interest of Seller in and to all of the tangible and intangible assets of Seller used or held for use by Seller in the conduct of the Business as of the Closing Date (as hereinafter defined), which are described in this Section 1.1 with reference to capitalized terms which, if not otherwise defined herein, have the meaning assigned to such capitalized terms in the RCI Agreement, free and clear of all claims, liens, encumbrances, security interests and similar interests of any kind or nature whatsoever, including, without limitation, the following (collectively, the "Purchased Assets"): (a) all of the Fixed Assets; (b) all of Seller's interest in and rights and benefits owing to Seller under those Contracts which PRGI specifically agrees to assume, which assumption shall be evidenced by inclusion of such Contract by PRGI on a schedule to the Assignment and Assumption Agreement (as hereinafter defined) (collectively, the "Assigned Contracts"); (c) all Accounts Receivable outstanding as of the Closing and all Unbilled Claims and Work in Progress as of the Closing; (d) all of Seller's interest in and rights and benefits accruing to Seller as lessee under those Leases which PRGI specifically agrees to assume, which assumption shall be evidenced by inclusion of such Lease by PRGI on a schedule to the Assignment and Assumption Agreement (collectively, the "Assigned Leases"); (e) all Intellectual Property Rights; (f) all Licenses and Permits; (g) all Deposits and Other Rights; (h) all of Seller's customer and supplier lists, all client files, all files related to Employees and Associates, all computer data bases and other records, other than Seller's corporate minute books and stock records; (i) all of Seller's right, title and interest in and to its telephone numbers and the directory advertising for such telephone numbers to the extent assignable; and (j) all of Seller's right, title and interest in and to all other tangible personal property relating to the Business. 1.2 EXCLUDED ASSETS. Notwithstanding anything to the contrary contained in Section 1.1 hereof, PRGI shall not acquire and Seller shall not transfer to PRGI Seller's corporate minute and stock books and any other documents relating to the organization, maintenance and existence of -2- 3 Seller, the corporate charter, qualifications to conduct business as a foreign corporation, arrangements with registered agents relating to foreign qualifications, taxpayer and other identification numbers, seals, blank certificates, any assets held under any pension, profit sharing or other Employee Benefit Plan (as defined herein), all cash and cash equivalents of Seller in the Business, subject to Section 2.1(b) hereof, Seller's rights to any tax refunds, any insurance policies of Seller, any vehicles owned or leased by Seller, all furniture and art work to the extent listed on Schedule 1.2 attached hereto and any of the rights of Seller under this Agreement, the RCI Agreement, the other Seller Transaction Documents and the other PRGI Transaction Documents. 1.3 CONVEYANCE OF ASSETS. The conveyance, transfer and delivery of the Purchased Assets shall be made by Seller and accepted by PRGI on the Closing Date, effective as of the Effective Date, as follows: (a) Seller shall execute and deliver to PRGI a bill of sale in the form of Exhibit 1.3(a) attached hereto and made a part hereof (the "Bill of Sale"); (b) Seller and PRGI shall execute and deliver an Assignment and Assumption Agreement in the form of Exhibit 1.3(b) attached hereto and made a part hereof (the "Assignment and Assumption Agreement") with respect to the Assumed Liabilities (as hereinafter defined); (c) Seller shall execute and deliver such additional instruments of sale, transfer, conveyance and assignment as of the Closing Date as counsel to Seller and counsel to PRGI shall mutually deem necessary or appropriate. 1.4 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 PRGX Shares or the Cash Consideration 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 1.4 attached hereto (the "Closing Escrow Agreement"), 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 (the "Closing Date"). The parties hereto intend that PRGI receive all of the benefits in respect of the operations of the Business on and after the Effective Date and assume all of the liabilities of the Business incurred in the ordinary course of business after the Effective Date, except as otherwise specifically provided herein or in the RCI Agreement. -3- 4 ARTICLE 2 PURCHASE PRICE; ASSUMPTION OF LIABILITIES 2.1 PURCHASE PRICE. (a) Purchase Price Payment. Subject to the terms and conditions of this Agreement, the purchase price to be paid to Seller for the Purchased Assets pursuant hereto shall be paid in cash and shares of PRGX Common Stock, as follows: (i) $1,772,823, less the Reimbursable Cash (as defined in Section 2.1(b) below), plus an amount equal to 6.75% of such amount calculated on a per annum basis for the period from the Effective Date through and including the Closing Date, plus an amount equal to $589.04 per day for each day during the period from and after the Effective Date to and including the day immediately preceding the Closing Date (the "Cash Consideration") and (ii) subject to execution and delivery by Seller and Owner at the Closing of the Lock-up Agreements, pursuant to the RCI Agreement, 43,773 shares of PRGX Common Stock, no par value (the "PRGX Shares") (the Cash Consideration and the PRGX Shares being collectively referred to herein as the "Purchase Price"); provided, however, that certain of the PRGX Shares shall be issued in the name of the Representative, as nominee and attorney-in-fact for the Seller, to be held in escrow pursuant to Section 2.3 below and in lieu of delivering fractional shares, PRGI shall deliver to Seller an amount in cash based on $27.00 per share (the "Closing Price.") (b) Purchase Price Adjustment. On the 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 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 the Interim Period Cash Flow, plus the following cash payments 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: (i) the amount, if any, by which disbursements to Owner during said period exceed the amount of any cash or cash equivalents in the Business as of the close of business on August 31, 1998 and (ii) any amounts paid during the period from and including the Effective Date to and including the Closing Date in respect of the following liabilities: (A) Seller Transaction Expenses, (B) non-trade payables (meaning those not directly related to the Business to be acquired by PRGI pursuant hereto), (C) non-trade accrued expenses (meaning those not directly related to the Business to be acquired by PRGI pursuant hereto), (D) commissions payable as of the Effective Date in respect of accounts receivable collected by Seller prior to the Effective Date; (E) all amounts owed to Owner under the Principal Agreement or otherwise (except for advances by Owner 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), and (F) all amounts owed to Persons other than Owner (except for normal trade payables directly relating to the Business to be acquired by PRGI pursuant hereto incurred in the ordinary course of business) (collectively, the "Interim Period Reimbursable Liabilities", which, together with the Interim Period Cash Flow, is referred to herein as the "Reimbursable Cash"). (c) Post-Closing Review. Within sixty (60) days following the Closing Date, PRGI and the Representative shall each have the right to request that the Accountants review the -4- 5 Reimbursable Cash (including the Cash Flow Statement), which review shall be a final determination of the Reimbursable Cash, and in the event that such determination shows that payments are required by PRGI or by the Sellers or Owner, any such payment shall be made by the Representative or PRGI to the other, as the case may be, within 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. 2.2 Assumption of Liabilities. PRGI agrees to assume, from and after the Closing Date, only the following (the "Assumed Liabilities"): (a) all obligations and liabilities of Seller relating to the Business arising from and after the Effective Date in the ordinary course of business under the Contracts with Customers, Associates and Employees and other Contracts, and equipment and other Leases expressly designated by PRGI as Assigned Contracts and Assigned Leases; (b) Seller's normal trade payables relating to the Business to be acquired by PRGI pursuant hereto incurred in the ordinary course of business and outstanding at the Effective Date or incurred in the ordinary course of business thereafter and advances made by Owner to Seller after August 31, 1998 used to pay normal trade payables relating to the Business to be acquired by PRGI pursuant hereto, excluding (i) all Seller Transaction Expenses; (ii) non-trade payables (meaning those not directly related to the Business to be acquired by PRGI pursuant hereto), including any Prior Period Payments to RBA; (iii) non-trade accrued expenses (meaning those not directly related to the Business to be acquired by PRGI pursuant hereto); (iv) commission amounts for audit services due to Associates, auditors, or other service providers on accounts receivable collected prior to the Effective Date; and (v) all accounts payable, accrued expenses or other indebtedness due to Owner as of the Effective Date under the Principal Agreement, or in connection with any advances to Associates or otherwise; and (c) commission amounts for audit services which will be owed by Seller to its Associates, auditors or other service providers upon collection of Accounts Receivable, Unbilled Claims and Work in Progress outstanding at the Effective Date. Except for the Assumed Liabilities, PRGI shall not assume any debts or liabilities of Seller of any kind or nature whatsoever. Seller agrees to make full and prompt payment of all of its trade payables not assumed by PRGI as and when due. Anything to the contrary contained herein notwithstanding, PRGI shall neither assume nor have any obligations or liabilities whatsoever in respect of severance, WARN Act, income tax withholding, payroll and/or unemployment tax, workers' compensation, pension, profit-sharing, health insurance, COBRA or any other employee or other benefit liabilities in respect of any Business Employees or in respect of any Employee Benefit Plans, including, without limitation any contribution, tax, lien, penalty, cost, interest, claim, loss, action, suit, damage, cost assessment, withdrawal liability, liability to the PBGC, liability under Section 412 of the Code or Section 302(a)(2) of ERISA, or other similar liability or expense of Seller or any ERISA Affiliate and PRGI shall not become a party to any Employee Benefit Plan as a result of any of the transactions contemplated by this Agreement. -5- 6 2.3 ESCROW SHARES. At the Closing, approximately 21,886 of the PRGX Shares issued on the Closing Date pursuant to Section 2.1(a)(ii) hereof (the "Escrow Shares") shall be issued in the name of the Representative, as nominee and attorney-in-fact for the Seller, which Escrow Shares will 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, PRGX, Seller, Owner and the other signatories named therein in the form of Exhibit 2.3 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. ARTICLE 3 ADDITIONAL COVENANTS 3.1 REPRESENTATIONS, COVENANTS AND INDEMNIFICATION AGREEMENT. Concurrently with the execution and delivery of this Agreement, Seller and Owner, 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, Owner, the Purchased 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 Material Leases, Material 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. 3.2 ALLOCATION OF PURCHASE PRICE AMONG PURCHASED ASSETS. The Purchase Price shall be allocated for tax purposes as mutually agreed to by PRGI and Seller within 60 days after the Closing; provided, however, the Purchase Price shall be allocated solely to (a) goodwill; (b) fixed assets at book value; (c) a share of the allocation to the Noncompetition and Nonsolicitation Agreements described in Section 5.4 of the RCI Agreement, as appropriate, and (d) to the extent they exist, Accounts Receivable net of appropriate reserves and accrued commissions. Seller and PRGI agree that they will prepare and file any notice or other filing required pursuant to Section 1060 of the Code, and that any such notices or filings will be prepared based upon such tax allocation of Seller Purchase Price. PRGI agrees to send to Seller a completed copy of its Form 8594 ("Asset Acquisition Statement under Section 1060") with respect to this transaction prior to filing such form with the Internal Revenue Service. 3.3 COVENANT RE: TAX MATTERS. (a) Seller and Owner shall be solely responsible for and shall pay, without any cost to PRGI (i) any and all Taxes for which Seller or Owner are or may be liable, arising from -6- 7 Seller's activities, the Business or use of the Purchased Assets through the Effective Date (regardless of whether the filing of any Tax Return with respect thereto or payment of any amount in respect thereof is filed, paid or due prior to, on or after the Effective Date), (ii) any Taxes with respect to the acquisition by PRGI from Seller of the Purchased Assets, and all other Taxes, if any, imposed by any Tax Authority assessed in connection with, on account of or resulting from the consummation of the transfer of the Purchased Assets to PRGI. (b) Real and personal property ad valorem Taxes, if any, with respect to the Purchased Assets shall be prorated on a daily basis between Seller and Owner, on the one hand, and PRGI on the other hand, as of the Closing Date. Should any amount of such Taxes to be prorated not be fully determined as of the Closing Date, a mutually satisfactory estimate of such amount, made on the basis of Seller's records, shall be used as the basis for settlement at Closing, and the amount finally determined will be prorated and appropriate settlement adjustments made as soon as practicable after such final determination. (c) Except as otherwise provided in this Agreement, the parties hereby agree that each of them shall cooperate with the other in executing or causing to be executed any required document and by making available to the other all work papers, records and notes of any kind at all reasonable times for the purpose of allowing the appropriate party to complete Tax Returns, participate in a proceeding, obtain refunds, make any determination required under this Agreement or defend or prosecute Tax claims. Notwithstanding anything to the contrary contained herein, Seller and Owner shall have sole and exclusive authority to prepare and file all Tax Returns concerning Seller related activities occurring prior to the Closing, including, without limitation, its operation of the Business and its use of the Purchased Assets and all matters under agreements not being assumed by PRGI (regardless of when such return is filed). PRGI shall not directly or indirectly take any action to prepare or file such Tax Return but shall be given copies of any such return filed by Seller. (d) At its sole expense, Seller shall promptly pay any and all Taxes, including but not limited to sales and transfer Taxes, levied, imposed or assessed by any Tax Authority as a result of the sale, transfer, assignment and conveyance of the Purchased Assets to PRGI by Seller. 3.4 CORPORATE AND FICTITIOUS NAMES. As soon as practicable following the Closing, Seller shall change its corporate name and Seller and Owner shall cooperate with PRGI in any efforts undertaken by PRGI to secure and protect its rights in any name used by Seller in the conduct of its Business prior to the Closing. 3.5 BULK SALES LAW. PRGI hereby waives compliance by Seller with any applicable U.C.C. bulk sales law, and Seller and its Owner agree, jointly and severally, to indemnify and hold harmless PRGI (and any affiliates thereof) from and against any claims or liabilities not assumed by PRGI pursuant to this Agreement asserted against PRGI (or any affiliate thereof) by any creditor of Seller by reason of such noncompliance. Seller will comply with all applicable tax bulk transfer laws promptly after the public announcement of the transactions contemplated herein, provided that the parties agree that PRGI will only hold back from the Purchase Price amounts required under such applicable laws if such required holdback exceeds $10,000. Seller and its Owner agree, jointly and severally, to indemnify and hold harmless PRGI (and any affiliates thereof) from and -7- 8 against any claims or liabilities against PRGI for failure to comply with any such applicable tax bulk transfer laws. 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 Owner 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. 4.2 OBLIGATIONS PERFORMED. Seller and Owner 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 is required to consummate the transactions contemplated herein, if any, and all 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 Owner, 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) possession of the Purchased Assets; (b) a certified copy of the corporate resolutions of the directors of Seller and of Owner authorizing the transactions contemplated herein and the execution, delivery and -8- 9 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) the Bill of Sale, the Assignment and Assumption Agreement and the other instruments of transfer as shall be reasonably required by PRGI for the transfer to PRGI of all of Seller's right, title and interest to the Purchased Assets free and clear of all claims, liens, encumbrances, security interests and similar interests of any kind or nature whatsoever, including, without limitation, releases of any and all such claims, liens, encumbrances, security interests and similar interests with respect to the Purchased Assets; (e) the Indemnity Escrow Agreement, duly executed by the Seller, Owner and the Representative, as nominee and attorney-in-fact of Seller and Owner, together with blank stock powers, duly executed by the Representative with medallion level signature guarantee; (f) the Noncompetition and Nonsolicitation Agreements duly executed by Seller and Owner; (g) written Seller Consents from all parties, whose consent to the transactions contemplated herein is required; (h) an opinion of counsel to Seller and Owner substantially in the form of Exhibit 4.6(h) attached hereto; (i) the offer letter for employment of the Principal, duly executed by the Principal; (j) the Nonqualified Stock Option Agreement for the Principal, duly executed by the Principal: (k) the Lock-up Agreements, duly executed by Seller, Owner and the Representative; (l) intentionally omitted; (m) if applicable, the spousal consents, referred to in the RCI Agreement, duly executed by the spouses of Owner; (n) if applicable, Forms UCC-3, duly executed by each secured lender of Seller, releasing all liens on the Purchased Assets; (o) a release of RBA and the Other Sellers in substantially the form of Exhibit 4.6(o) attached hereto, duly executed by Seller and Owner; -9- 10 (p) a Closing Escrow Agreement, duly executed by Seller, Owner and the Representative; (q) a Closing Statement, duly executed by Seller and Owner; 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 acquisition by PRGI of the Purchased Assets pursuant to the transactions contemplated herein, or the ability of PRGI, PRGX or any of their affiliates to own and operate Seller's Business 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 Owner 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, the Purchased Assets or Seller's Business. 4.9 NO MATERIAL ADVERSE EFFECT. From the date of this Agreement to the Closing, there shall not have occurred any Material Adverse Effect (without giving effect to the consequences of the transaction 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 the Closing, none of the Primary Customers shall have terminated, decreased or otherwise adversely altered such Primary Customer business relationship with Seller or given notice to Seller or Owner 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. -10- 11 ARTICLE 5 CONDITIONS TO SELLER'S AND OWNER'S OBLIGATIONS Each and every obligation of Seller and Owner 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 Owner: 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 Seller and Owner each of the following, together with any additional items which Seller or Owner may reasonably request to effect the transactions contemplated herein: (a) certified copies of the corporate resolutions of the Board of Directors of PRGI and the Board of Directors of PRGX 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, as applicable, together with incumbency certificates with respect to the respective officers of PRGI executing documents or instruments on behalf of PRGI, and, in respect of PRGX, authorizing the issuance of the PRGX Shares to Seller; (b) intentionally omitted; (c) the Cash Consideration, as adjusted pursuant to Section 2.1(a) and (b) hereof, and written confirmation from PRGX's transfer agent that stock certificates representing the PRGX Shares have been issued in the name of Seller; (d) the Indemnity Escrow Agreement, duly executed by PRGI and PRGX; (e) the documents and instruments described in Section 1.3 hereof; (f) the offer letter for employment of the Principal, duly executed by PRGI; (g) the Nonqualified Stock Option Agreement for the Principal, duly executed by PRGX; -11- 12 (h) the Noncompetition and Nonsolicitation Agreements referred to in Section 3.4 hereof duly executed by PRGI; (i) the Closing Escrow Agreement, duly executed by PRGI and PRGX; (j) a Closing Statement, duly executed by PRGI and PRGX; and (k) 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 acquisition by PRGI of the Purchased Assets pursuant to the transactions contemplated herein or the ability of PRGX or PRGI or any of its affiliates to own and operate the Business 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 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. 5.7 CONSENTS. PRGI shall have obtained and delivered to Seller written consent of Nations Bank N.A., as agent for the banks party to PRGX's bank credit agreement, to the transactions contemplated herein and such consent(s) shall remain in full force and effect at and as of the Closing. 5.8 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"). 5.9 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. -12- 13 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 Owner; (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 5.8 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; or (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. (e) by PRGI, if the conditions set forth in Article 4 hereof have not been satisfied by Seller and Owner 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 Owner 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 and set forth in the 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. 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. -13- 14 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 the Seller and Owner (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 Owner 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 Owner: c/o Pasquesi Sheppard LLC, Representative 585 Bank Lane Lake Forest, IL 60045 Attention: Don Sheppard Telefax: (847) 234-1110 -14- 15 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 I, Inc. 2300 Windy Ridge Parkway Suite 100 North Atlanta, GA 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 PRGI 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. Except for the Nondisclosure Agreement, which remains in full force and effect in accordance with the terms thereof, this Agreement, the RCI Agreement, the other Seller Transaction Documents, and the PRGI Transaction Documents together with the Exhibits and Schedules attached hereto and thereto, 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 Seller, PRGX, PRGI and Owner, 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 contemplated hereby and/or necessary or appropriate to effect and consummate the transactions contemplated hereby. Owner and Seller agree to provide to PRGX and PRGI, both before and after -15- 16 the Closing, such information as PRGX and 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. -16- 17 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: ------------------------------ Name: ---------------------------- Its: ----------------------------- PRGI: THE PROFIT RECOVERY GROUP INTERNATIONAL I, INC. By: ------------------------------ Name: ---------------------------- Its: ----------------------------- SELLER: RBA AUDITS, INC. By: ------------------------------ Name: RICHARD N. BECK Its: President OWNER: ---------------------------------- RICHARD N. BECK -17- 18 Schedules and Exhibits Schedule 1.2 Excluded Assets Exhibit 1.3(a) Bill of Sale Exhibit 1.3(b) Assignment and Assumption Agreement Exhibit 1.4 Closing Escrow Agreement Exhibit 2.3 Indemnity Escrow Agreement Exhibit 3.1 RCI Agreement Exhibit 4.6(h) Opinion of Counsel Exhibit 4.6(n) Release EX-2.7 8 ASSET PURCHASE AGRMT / JOHN KIRKEIDE 1 ASSET PURCHASE AGREEMENT THIS ASSET PURCHASE AGREEMENT (the "Agreement") is entered into as of the 29th day of October, 1998 by and between THE PROFIT GROUP INTERNATIONAL I, INC., a Georgia corporation ("PRGI"), THE PROFIT RECOVERY GROUP INTERNATIONAL, INC., a Georgia corporation ("PRGX"), and JOHN M. KIRKEIDE, an Illinois resident, d/b/a a sole proprietorship (the "Seller"). 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 overpayment 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 service (the "Business"); WHEREAS, Seller wishes to sell to PRGI substantially all of Seller's assets used or held for use in the Business pursuant to the terms and conditions of this Agreement; 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 Beck & Associates, Inc. ("RBA"), RBA Audits, Inc., Robert N. Beck, Jr. a sole proprietorship, John E. Flatley & Associates, Inc., John H. Cavins, a sole proprietorship, Vincent Creadon, a sole proprietorship, Savant Consulting, L.L.C. and Taylor, Blackburn & Associates, Inc. (collectively, the "Other Sellers"); WHEREAS, concurrently with the execution hereof, Seller has 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 contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 2 ARTICLE 1 PURCHASE AND SALE OF PURCHASED ASSETS 1.1 ASSETS TO BE ACQUIRED. Subject to and upon the terms and conditions set forth herein, PRGI agrees to purchase from Seller, and Seller agrees to sell to PRGI, except as provided in Section 1.2 hereof, all right, title and interest of Seller in and to all of the tangible and intangible assets of Seller used or held for use by Seller in the conduct of the Business as of the Closing Date (as hereinafter defined), which are described in this Section 1.1 with reference to capitalized terms which, if not otherwise defined herein, have the meaning assigned to such capitalized terms in the RCI Agreement, free and clear of all claims, liens, encumbrances, security interests and similar interests of any kind or nature whatsoever, including, without limitation, the following (collectively, the "Purchased Assets"): (a) all of the Fixed Assets; (b) all of Seller's interest in and rights and benefits owing to Seller under those Contracts which PRGI specifically agrees to assume, which assumption shall be evidenced by inclusion of such Contract by PRGI on a schedule to the Assignment and Assumption Agreement (as hereinafter defined) (collectively, the "Assigned Contracts"); (c) all Accounts Receivable outstanding as of the Closing and all Unbilled Claims and Work in Progress as of the Closing; (d) all of Seller's interest in and rights and benefits accruing to Seller as lessee under those Leases which PRGI specifically agrees to assume, which assumption shall be evidenced by inclusion of such Lease by PRGI on a schedule to the Assignment and Assumption Agreement (collectively, the "Assigned Leases"); (e) all Intellectual Property Rights; (f) all Licenses and Permits; (g) all Deposits and Other Rights; (h) all of Seller's customer and supplier lists, all client files, all files related to Employees and Associates, all computer data bases and other records, other than Seller's corporate minute books and stock records; (i) all of Seller's right, title and interest in and to its telephone numbers and the directory advertising for such telephone numbers to the extent assignable; and (j) all of Seller's right, title and interest in and to all other tangible personal property relating to the Business. 1.2 EXCLUDED ASSETS. Notwithstanding anything to the contrary contained in Section 1.1 hereof, PRGI shall not acquire and Seller shall not transfer to PRGI any of the documents relating to the organization, maintenance and existence of Seller, any assets held under any pension, profit -2- 3 sharing or other Employee Benefit Plan (as defined herein), all cash and cash equivalents of Seller in the Business, subject to Section 2.1(b) hereof, Seller's rights to any tax refunds, any insurance policies of Seller, any vehicles owned or leased by Seller, all furniture and art work to the extent listed on Schedule 1.2 attached hereto and any of the rights of Seller under this Agreement, the RCI Agreement, the other Seller Transaction Documents and the other PRGI Transaction Documents. 1.3 CONVEYANCE OF ASSETS. The conveyance, transfer and delivery of the Purchased Assets shall be made by Seller and accepted by PRGI on the Closing Date, effective as of the Effective Date, as follows: (a) Seller shall execute and deliver to PRGI a bill of sale in the form of Exhibit 1.3(a) attached hereto and made a part hereof (the "Bill of Sale"); (b) Seller and PRGI shall execute and deliver an Assignment and Assumption Agreement in the form of Exhibit 1.3(b) attached hereto and made a part hereof (the "Assignment and Assumption Agreement") with respect to the Assumed Liabilities (as hereinafter defined); (c) Seller shall execute and deliver such additional instruments of sale, transfer, conveyance and assignment as of the Closing Date as counsel to Seller and counsel to PRGI shall mutually deem necessary or appropriate. 1.4 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 PRGX Shares or the Cash Consideration 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 1.4 attached hereto (the "Closing Escrow Agreement"), 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 (the "Closing Date"). The parties hereto intend that PRGI receive all of the benefits in respect of the operations of the Business on and after the Effective Date and assume all of the liabilities of the Business incurred in the ordinary course of business after the Effective Date, except as otherwise specifically provided herein or in the RCI Agreement. ARTICLE 2 PURCHASE PRICE; ASSUMPTION OF LIABILITIES 2.1 PURCHASE PRICE. (a) Purchase Price Payment. Subject to the terms and conditions of this Agreement, the purchase price to be paid to Seller for the Purchased Assets pursuant hereto shall be paid in cash and shares of PRGX Common Stock, as follows: (i) $240,000, less the Reimbursable Cash (as defined in Section 2.1(b) below), plus an amount equal to 6.75% of such -3- 4 amount calculated on a per annum basis for the period from the Effective Date through and including the Closing Date, plus an amount equal to $520.55 per day for each day during the period from and after the Effective Date to and including the day immediately preceding the Closing Date (the "Cash Consideration") and (ii) subject to execution and delivery by Seller at the Closing of the Lock-up Agreements, pursuant to the RCI Agreement, 5,925 shares of PRGX Common Stock, no par value (the "PRGX Shares") (the Cash Consideration and the PRGX Shares being collectively referred to herein as the "Purchase Price"); provided, however, that certain of the PRGX Shares shall be issued in the name of the Representative, as nominee and attorney-in-fact for the Seller, to be held in escrow pursuant to Section 2.3 below and in lieu of delivering fractional shares, PRGI shall deliver to Seller an amount in cash based on $27.00 per share (the "Closing Price"). (b) Purchase Price Adjustment. On the 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 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 the Interim Period Cash Flow, plus the following cash payments 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: (i) the amount, if any, by which disbursements to Seller during said period (but not including the distribution to Owners of any cash or cash equivalents in the Business as of the close of business on August 31, 1998) exceed the commissions paid to Seller for audit and related management counseling services performed by Seller prior to the Effective Date solely in his capacity as an auditor in connection with claims submitted to suppliers of Customers prior to Closing, and (ii) any amounts paid during the period from and including the Effective Date to and including the Closing Date in respect of the following liabilities: (A) Seller Transaction Expenses, (B) non-trade payables (meaning those not directly related to the Business to be acquired by PRGI pursuant hereto), (C) non-trade accrued expenses (meaning those not directly related to the Business to be acquired by PRGI pursuant hereto), (D) commissions payable as of the Effective Date in respect of accounts receivable collected by Seller prior to the Effective Date; (E) all amounts owed to Seller under the Principal Agreement or otherwise (except for advances used to pay normal trade payables directly relating to the Business to be acquired by PRGI incurred on or after the Effective Date or for commissions owed to Seller for audit and related management counseling services performed by Seller solely in his capacity as an auditor in connection with claims submitted to suppliers of Customers prior to Closing), and (F) all amounts owed to Persons other than Seller (except for normal trade payables directly relating to the Business to be acquired by PRGI pursuant hereto incurred in the ordinary course of business) (collectively, the "Interim Period Reimbursable Liabilities," which, together with the Interim Period Cash Flow, is referred to herein as the "Reimbursable Cash"). (c) Post-Closing Review. Within sixty (60) days following the Closing Date, PRGI and the Representative shall each have the right to request that the Accountants review the Reimbursable Cash (including the Cash Flow Statement), which review shall be a final determination of the Reimbursable Cash, and in the event that such determination shows that payments are required by PRGI or by the Seller, any such payment shall be made by the Representative or PRGI to the other, as the case may be, within 15 days after completion of the -4- 5 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. 2.2 ASSUMPTION OF LIABILITIES. PRGI agrees to assume, from and after the Closing Date, only the following (the "Assumed Liabilities"): (a) all obligations and liabilities of Seller relating to the Business arising from and after the Effective Date in the ordinary course of business under the Contracts with Customers, Associates and Employees and other Contracts, and equipment and other Leases expressly designated by PRGI as Assigned Contracts and Assigned Leases; (b) Seller's normal trade payables relating to the Business to be acquired by PRGI pursuant hereto incurred in the ordinary course of business and outstanding at the Effective Date or incurred in the ordinary course of business thereafter and advances made after August 31, 1998 used to pay normal trade payables relating to the Business to be acquired by PRGI pursuant hereto, excluding (i) all Seller Transaction Expenses; (ii) non-trade payables (meaning those not directly related to the Business to be acquired by PRGI pursuant hereto), including any Prior Period Payments to RBA; (iii) non-trade accrued expenses (meaning those not directly related to the Business to be acquired by PRGI pursuant hereto); (iv) commission amounts for audit services due to Associates, auditors, or other service providers (including those to Seller if solely in Seller's capacity as an auditor) on accounts receivable collected prior to the Effective Date; and (v) all accounts payable, accrued expenses or other indebtedness due to the Seller as of the Effective Date under the Principal Agreement, or in connection with any advances to Associates or otherwise (except for certain commissions provided for in Section 2.2(c) below and advances by Owners used to pay normal trade payables of Seller incurred after the Effective Date); and (c) commission amounts for audit services which will be owed by Seller to its Associates, auditors or other service providers (including to Seller, if solely in Seller's capacity as an auditor and in respect of services performed prior to the Effective Date) upon collection of Accounts Receivable, Unbilled Claims and Work in Progress outstanding at the Effective Date. Except for the Assumed Liabilities, PRGI shall not assume any debts or liabilities of Seller of any kind or nature whatsoever. Seller agrees to make full and prompt payment of all of its trade payables not assumed by PRGI as and when due. Anything to the contrary contained herein notwithstanding, PRGI shall neither assume nor have any obligations or liabilities whatsoever in respect of severance, WARN Act, income tax withholding, payroll and/or unemployment tax, workers' compensation, pension, profit-sharing, health insurance, COBRA or any other employee or other benefit liabilities in respect of any Business Employees or in respect of any Employee Benefit Plans, including, without limitation any contribution, tax, lien, penalty, cost, interest, claim, loss, action, suit, damage, cost assessment, withdrawal liability, liability to the PBGC, liability under Section 412 of the Code or Section 302(a)(2) of ERISA, or other similar liability or expense of Seller or any ERISA Affiliate and PRGI shall not become a party to any Employee Benefit Plan as a result of any of the transactions contemplated by this Agreement. 2.3 ESCROW SHARES. At the Closing, approximately 2,962 of the PRGX Shares issued on the Closing Date pursuant to Section 2.1(a)(ii) hereof (the "Escrow Shares") shall be issued in -5- 6 the name of the Representative, as nominee and attorney-in-fact for the Seller, which Escrow Shares will 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, PRGX, Seller and the other signatories named therein in the form of Exhibit 2.3 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. ARTICLE 3 ADDITIONAL COVENANTS 3.1 REPRESENTATIONS, COVENANTS AND INDEMNIFICATION AGREEMENT. Concurrently with the execution and delivery of this Agreement, Seller, 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, the Purchased 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 Material Leases, Material 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. 3.2 ALLOCATION OF PURCHASE PRICE AMONG PURCHASED ASSETS. The Purchase Price shall be allocated for tax purposes as mutually agreed to by PRGI and Seller within 60 days after the Closing; provided, however, the Purchase Price shall be allocated solely to (a) goodwill; (b) fixed assets at book value; (c) a share of the allocation to the Noncompetition and Nonsolicitation Agreements described in Section 5.4 of the RCI Agreement, as appropriate, and (d) to the extent they exist, Accounts Receivable net of appropriate reserves and accrued commissions. Seller and PRGI agree that they will prepare and file any notice or other filing required pursuant to Section 1060 of the Code, and that any such notices or filings will be prepared based upon such tax allocation of Seller Purchase Price. PRGI agrees to send to Seller a completed copy of its Form 8594 ("Asset Acquisition Statement under Section 1060") with respect to this transaction prior to filing such form with the Internal Revenue Service. 3.3 COVENANT RE: TAX MATTERS. (a) Seller shall be solely responsible for and shall pay, without any cost to PRGI (i) any and all Taxes for which Seller is or may be liable, arising from Seller's activities, the Business or use of the Purchased Assets through the Effective Date (regardless of whether the filing of any Tax Return with respect thereto or payment of any amount in respect thereof is filed, paid -6- 7 or due prior to, on or after the Effective Date), (ii) any Taxes with respect to the acquisition by PRGI from Seller of the Purchased Assets, and all other Taxes, if any, imposed by any Tax Authority assessed in connection with, on account of or resulting from the consummation of the transfer of the Purchased Assets to PRGI. (b) Real and personal property ad valorem Taxes, if any, with respect to the Purchased Assets shall be prorated on a daily basis between Seller, on the one hand, and PRGI on the other hand, as of the Closing Date. Should any amount of such Taxes to be prorated not be fully determined as of the Closing Date, a mutually satisfactory estimate of such amount, made on the basis of Seller's records, shall be used as the basis for settlement at Closing, and the amount finally determined will be prorated and appropriate settlement adjustments made as soon as practicable after such final determination. (c) Except as otherwise provided in this Agreement, the parties hereby agree that each of them shall cooperate with the other in executing or causing to be executed any required document and by making available to the other all work papers, records and notes of any kind at all reasonable times for the purpose of allowing the appropriate party to complete Tax Returns, participate in a proceeding, obtain refunds, make any determination required under this Agreement or defend or prosecute Tax claims. Notwithstanding anything to the contrary contained herein, Seller shall have sole and exclusive authority to prepare and file all Tax Returns concerning Seller related activities occurring prior to the Closing, including, without limitation, its operation of the Business and its use of the Purchased Assets and all matters under agreements not being assumed by PRGI (regardless of when such return is filed). PRGI shall not directly or indirectly take any action to prepare or file such Tax Return but shall be given copies of any such return filed by Seller. (d) At its sole expense, Seller shall promptly pay any and all Taxes, including but not limited to sales and transfer Taxes, levied, imposed or assessed by any Tax Authority as a result of the sale, transfer, assignment and conveyance of the Purchased Assets to PRGI by Seller. 3.4 BULK SALES LAW. PRGI hereby waives compliance by Seller with any applicable U.C.C. bulk sales law, and Seller agrees to indemnify and hold harmless PRGI (and any affiliates thereof) from and against any claims or liabilities not assumed by PRGI pursuant to this Agreement asserted against PRGI (or any affiliate thereof) by any creditor of Seller by reason of such noncompliance. Seller will comply with all applicable tax bulk transfer laws promptly after public announcement of the transactions contemplated herein, provided that the parties agree that PRGI will only hold back from the Purchase Price amounts required under such applicable laws if such required holdback exceeds $10,000. Seller agrees to indemnify and hold harmless PRGI (and any affiliates thereof) from and against any claims or liabilities against PRGI for failure to comply with any such applicable tax bulk transfer laws. -7- 8 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 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. 4.2 OBLIGATIONS PERFORMED. Seller 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 is required to consummate the transactions contemplated herein, if any, and all 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 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) possession of the Purchased Assets; (b) intentionally omitted; (c) intentionally omitted; (d) the Bill of Sale, the Assignment and Assumption Agreement and the other instruments of transfer as shall be reasonably required by PRGI for the transfer to PRGI of all of -8- 9 Seller's right, title and interest to the Purchased Assets free and clear of all claims, liens, encumbrances, security interests and similar interests of any kind or nature whatsoever, including, without limitation, releases of any and all such claims, liens, encumbrances, security interests and similar interests with respect to the Purchased Assets; (e) the Indemnity Escrow Agreement, duly executed by the Seller and the Representative, as nominee and attorney-in-fact of Seller, together with blank stock powers, duly executed by the Representative with medallion level signature guarantee; (f) the Noncompetition and Nonsolicitation Agreements duly executed by Seller; (g) written Seller Consents from all parties, whose consent to the transactions contemplated herein is required; (h) an opinion of counsel to Seller substantially in the form of Exhibit 4.6(h) attached hereto; (i) the offer letter for employment of the Principal, duly executed by the Principal; (j) the Nonqualified Stock Option Agreement for the Principal, duly executed by the Principal; (k) the Lock-up Agreements, duly executed by Seller and the Representative; (l) intentionally omitted; (m) if applicable, the spousal consents, referred to in the RCI Agreement, duly executed by the spouse of Seller; (n) a release of RBA and the Other Sellers in substantially the form of Exhibit 4.6(o) attached hereto, duly executed by Seller; (o) if applicable, Forms UCC-3, duly executed by each secured lender of Seller, releasing all liens on the Purchased Assets; (p) a Closing Escrow Agreement, duly executed by Seller and the Representative; (q) a Closing Statement, duly executed by Seller; 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 acquisition by PRGI of the Purchased Assets pursuant to the transactions contemplated herein, or -9- 10 the ability of PRGI, PRGX or any of their affiliates to own and operate Seller's Business 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 Seller shall have no 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, the Purchased Assets or Seller's Business. 4.9 NO MATERIAL ADVERSE EFFECT. From the date of this Agreement to the Closing, there shall not have occurred any Material Adverse Effect (without giving effect to the consequences of the transaction 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 the Closing, none of the Primary Customers shall have terminated, decreased or otherwise adversely altered such Primary Customer business relationship with Seller or given notice to Seller 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. ARTICLE 5 CONDITIONS TO SELLER'S OBLIGATIONS Each and every obligation of Seller 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: 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. -10- 11 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 Seller each of the following, together with any additional items which the Seller may reasonably request to effect the transactions contemplated herein: (a) certified copies of the corporate resolutions of the Board of Directors of PRGI and the Board of Directors of PRGX 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, as applicable, together with incumbency certificates with respect to the respective officers of PRGI executing documents or instruments on behalf of PRGI, and, in respect of PRGX, authorizing the issuance of the PRGX Shares to Seller; (b) intentionally omitted; (c) the Cash Consideration, as adjusted pursuant to Section 2.1(a) and (b) hereof, and written confirmation from PRGX's transfer agent that stock certificates representing the PRGX Shares have been issued in the name of Seller; (d) the Indemnity Escrow Agreement, duly executed by PRGI and PRGX; (e) the documents and instruments described in Section 1.3 hereof; (f) the offer letter for employment of the Principal, duly executed by PRGI; (g) the Nonqualified Stock Option Agreement for the Principal, duly executed by PRGX; (h) the Noncompetition and Nonsolicitation Agreements referred to in Section 3.4 hereof duly executed by PRGI; (i) the Closing Escrow Agreement, duly executed by PRGI and PRGX; (j) a Closing Statement, duly executed by PRGI and PRGX; and (k) 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 acquisition by PRGI of the Purchased Assets pursuant to the transactions contemplated herein or the ability of PRGX or PRGI or any of its affiliates to own and operate the Business or otherwise -11- 12 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 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. 5.7 CONSENTS. PRGI shall have obtained and delivered to Seller written consent of Nations Bank N.A., as agent for the banks party to PRGX's bank credit agreement, to the transactions contemplated herein and such consent(s) shall remain in full force and effect at and as of the Closing. 5.8 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"). 5.9 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. 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 and Seller; (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 5.8 hereof); -12- 13 (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; or (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. (e) by PRGI, if the conditions set forth in Article 4 hereof have not been satisfied by Seller 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 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 and set forth in the 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. 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 the Seller (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, -13- 14 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 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: c/o Pasquesi Sheppard LLC, Representative 585 Bank Lane Lake Forest, IL 60045 Attention: Don Sheppard Telefax: (847) 234-1110 with a copy to: Steven B. Towbin, Esq. D'Ancona & Pflaum 30 North LaSalle Street, Suite 2900 Chicago, IL 60602 Telefax: (312) 580-5006 If to PRGX or PRGI: The Profit Recovery Group International I, Inc. 2300 Windy Ridge Parkway Suite 100 North Atlanta, GA 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 -14- 15 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 PRGI 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. Except for the Nondisclosure Agreement, which remains in full force and effect in accordance with the terms thereof, this Agreement, the RCI Agreement, the other Seller Transaction Documents, and the PRGI Transaction Documents together with the Exhibits and Schedules attached hereto and thereto, 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 Seller, PRGX and PRGI, 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 contemplated hereby and/or necessary or appropriate to effect and consummate the transactions contemplated hereby. Seller agrees to provide to PRGX and PRGI, both before and after the Closing, such information as PRGX and 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. -15- 16 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. -16- 17 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: -------------------------------- Name: ------------------------------ Its: ------------------------------- PRGI: THE PROFIT RECOVERY GROUP INTERNATIONAL I, INC. By: -------------------------------- Name: ------------------------------ Its: ------------------------------- SELLER: JOHN M. KIRKEIDE d/b/a a sole proprietorship ----------------------------------- JOHN M. KIRKEIDE -17- 18 Schedules and Exhibits Schedule 1.2 Excluded Assets Exhibit 1.3(a) Bill of Sale Exhibit 1.3(b) Assignment and Assumption Agreement Exhibit 1.4 Closing Escrow Agreement Exhibit 2.3 Indemnity Escrow Agreement Exhibit 3.1 RCI Agreement Exhibit 4.6(h) Opinion of Counsel Exhibit 4.6(n) Release EX-2.8 9 ASSET PURCHASE AGRMT / ROBERT N. BECK 1 ASSET PURCHASE AGREEMENT THIS ASSET PURCHASE AGREEMENT (the "Agreement") is entered into as of the 29th day of October, 1998 by and between THE PROFIT GROUP INTERNATIONAL I, INC., a Georgia corporation ("PRGI"), THE PROFIT RECOVERY GROUP INTERNATIONAL, INC., a Georgia corporation ("PRGX"), and ROBERT N. BECK, JR., an Illinois resident, d/b/a a sole proprietorship (the "Seller"). 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 overpayment 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 service (the "Business"); WHEREAS, Seller wishes to sell to PRGI substantially all of Seller's assets used or held for use in the Business pursuant to the terms and conditions of this Agreement; 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 Beck & Associates, Inc. ("RBA"), RBA Audits, Inc., John E. Flatley & Associates, Inc., John H. Cavins, a sole proprietorship, Vincent Creadon, a sole 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 has 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 contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 2 ARTICLE 1 PURCHASE AND SALE OF PURCHASED ASSETS 1.1 ASSETS TO BE ACQUIRED. Subject to and upon the terms and conditions set forth herein, PRGI agrees to purchase from Seller, and Seller agrees to sell to PRGI, except as provided in Section 1.2 hereof, all right, title and interest of Seller in and to all of the tangible and intangible assets of Seller used or held for use by Seller in the conduct of the Business as of the Closing Date (as hereinafter defined), which are described in this Section 1.1 with reference to capitalized terms which, if not otherwise defined herein, have the meaning assigned to such capitalized terms in the RCI Agreement, free and clear of all claims, liens, encumbrances, security interests and similar interests of any kind or nature whatsoever, including, without limitation, the following (collectively, the "Purchased Assets"): (a) all of the Fixed Assets; (b) all of Seller's interest in and rights and benefits owing to Seller under those Contracts which PRGI specifically agrees to assume, which assumption shall be evidenced by inclusion of such Contract by PRGI on a schedule to the Assignment and Assumption Agreement (as hereinafter defined) (collectively, the "Assigned Contracts"); (c) all Accounts Receivable outstanding as of the Closing and all Unbilled Claims and Work in Progress as of the Closing; (d) all of Seller's interest in and rights and benefits accruing to Seller as lessee under those Leases which PRGI specifically agrees to assume, which assumption shall be evidenced by inclusion of such Lease by PRGI on a schedule to the Assignment and Assumption Agreement (collectively, the "Assigned Leases"); (e) all Intellectual Property Rights; (f) all Licenses and Permits; (g) all Deposits and Other Rights; (h) all of Seller's customer and supplier lists, all client files, all files related to Employees and Associates, all computer data bases and other records, other than Seller's corporate minute books and stock records; (i) all of Seller's right, title and interest in and to its telephone numbers and the directory advertising for such telephone numbers to the extent assignable; and (j) all of Seller's right, title and interest in and to all other tangible personal property relating to the Business. 1.2 EXCLUDED ASSETS. Notwithstanding anything to the contrary contained in Section 1.1 hereof, PRGI shall not acquire and Seller shall not transfer to PRGI any of the documents relating to the organization, maintenance and existence of Seller, any assets held under any pension, profit -2- 3 sharing or other Employee Benefit Plan (as defined herein), all cash and cash equivalents of Seller in the Business, subject to Section 2.1(b) hereof, Seller's rights to any tax refunds, any insurance policies of Seller, any vehicles owned or leased by Seller, all furniture and art work to the extent listed on Schedule 1.2 attached hereto and any of the rights of Seller under this Agreement, the RCI Agreement, the other Seller Transaction Documents and the other PRGI Transaction Documents. 1.3 CONVEYANCE OF ASSETS. The conveyance, transfer and delivery of the Purchased Assets shall be made by Seller and accepted by PRGI on the Closing Date, effective as of the Effective Date, as follows: (a) Seller shall execute and deliver to PRGI a bill of \ sale in the form of Exhibit 1.3(a) attached hereto and made a part hereof (the "Bill of Sale"); (b) Seller and PRGI shall execute and deliver an Assignment and Assumption Agreement in the form of Exhibit 1.3(b) attached hereto and made a part hereof (the "Assignment and Assumption Agreement") with respect to the Assumed Liabilities (as hereinafter defined); (c) Seller shall execute and deliver such additional instruments of sale, transfer, conveyance and assignment as of the Closing Date as counsel to Seller and counsel to PRGI shall mutually deem necessary or appropriate. 1.4 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 PRGX Shares or the Cash Consideration 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 1.4 attached hereto (the "Closing Escrow Agreement"), 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 (the "Closing Date"). The parties hereto intend that PRGI receive all of the benefits in respect of the operations of the Business on and after the Effective Date and assume all of the liabilities of the Business incurred in the ordinary course of business after the Effective Date, except as otherwise specifically provided herein or in the RCI Agreement. ARTICLE 2 PURCHASE PRICE; ASSUMPTION OF LIABILITIES 2.1 PURCHASE PRICE. (a) Purchase Price Payment. Subject to the terms and conditions of this Agreement, the purchase price to be paid to Seller for the Purchased Assets pursuant hereto shall be paid in cash and shares of PRGX Common Stock, as follows: (i) $240,000, less the Reimbursable Cash (as defined in Section 2.1(b) below), plus an amount equal to 6.75% of such -3- 4 amount calculated on a per annum basis for the period from the Effective Date through and including the Closing Date, plus an amount equal to $479.45 per day for each day during the period from and after the Effective Date to and including the day immediately preceding the Closing Date (the "Cash Consideration") and (ii) subject to execution and delivery by Seller at the Closing of the Lock-up Agreements, pursuant to the RCI Agreement, 5,925 shares of PRGX Common Stock, no par value (the "PRGX Shares") (the Cash Consideration and the PRGX Shares being collectively referred to herein as the "Purchase Price"); provided, however, that certain of the PRGX Shares shall be issued in the name of the Representative, as nominee and attorney-in-fact for the Seller, to be held in escrow pursuant to Section 2.3 below and in lieu of delivering fractional shares, PRGI shall deliver to Seller an amount in cash based on $27.00 per share (the "Closing Price.") (b) Purchase Price Adjustment. On the 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 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 the Interim Period Cash Flow, plus the following cash payments 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: (i) the amount, if any, by which disbursements to Seller during said period (but not including the distribution of any cash or cash equivalents in the Business as of the close of business on August 31, 1998) exceed the commissions paid to Seller for audit and related management counseling services performed by Seller prior to the Effective Date solely in his capacity as an auditor in connection with claims submitted to suppliers of customers prior to Closing and (ii) any amounts paid during the period from and including the Effective Date to and including the Closing Date in respect of the following liabilities: (A) Seller Transaction Expenses, (B) non-trade payables (meaning those not directly related to the Business to be acquired by PRGI pursuant hereto), (C) non-trade accrued expenses (meaning those not directly related to the Business to be acquired by PRGI pursuant hereto), (D) commissions payable as of the Effective Date in respect of accounts receivable collected by Seller prior to the Effective Date; (E) all amounts owed to Seller under the Principal Agreement or otherwise (except for advances used to pay normal trade payables directly relating to the Business to be acquired by PRGI incurred on or after the Effective Date or for commissions owed to Seller for audit and related management counseling services performed by Seller solely in his capacity as an auditor in connection with claims submitted to suppliers of Customers prior to Closing), and (F) all amounts owed to Persons other than Seller (except for normal trade payables directly relating to the Business to be acquired by PRGI pursuant hereto incurred in the ordinary course of business) (collectively, the "Interim Period Reimbursable Liabilities," which, together with Interim Period Cash Flow, is referred to herein as the "Reimbursable Cash"). (c) Post-Closing Review. Within sixty (60) days following the Closing Date, PRGI and the Representative shall each have the right to request that the Accountants review the Reimbursable Cash (including the Cash Flow Statement), which review shall be a final determination of the Reimbursable Cash, and in the event that such determination shows that payments are required by PRGI or by the Seller, any such payment shall be made by the Representative or PRGI to the other, as the case may be, within 15 days after completion of the review by the Accountants, together with interest on such payment amount from the Closing Date -4- 5 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. 2.2 ASSUMPTION OF LIABILITIES. PRGI agrees to assume, from and after the Closing Date, only the following (the "Assumed Liabilities"): (a) all obligations and liabilities of Seller relating to the Business arising from and after the Effective Date in the ordinary course of business under the Contracts with Customers, Associates and Employees and other Contracts, and equipment and other Leases expressly designated by PRGI as Assigned Contracts and Assigned Leases; (b) Seller's normal trade payables relating to the Business to be acquired by PRGI pursuant hereto incurred in the ordinary course of business and outstanding at the Effective Date or incurred in the ordinary course of business thereafter and advances made after August 31, 1998 used to pay normal trade payables relating to the Business to be acquired by PRGI pursuant hereto, excluding (i) all Seller Transaction Expenses; (ii) non-trade payables (meaning those not directly related to the Business to be acquired by PRGI pursuant hereto), including any Prior Period Payments to RBA; (iii) non-trade accrued expenses (meaning those not directly related to the Business to be acquired by PRGI pursuant hereto); (iv) commission amounts for audit services due to Associates, auditors, or other service providers (including those to Seller if solely in Seller's capacity as an auditor) on accounts receivable collected prior to the Effective Date; and (v) all accounts payable, accrued expenses or other indebtedness due to the Seller as of the Effective Date under the Principal Agreement, or in connection with any advances to Associates, or otherwise (except for certain commissions provided for in Section 2.2(c) below and advances by Owners used to pay normal trade payables of Seller incurred after the Effective Date); and (c) commission amounts for audit services which will be owed by Seller to its Associates, auditors or other service providers (including to Seller, if solely in Seller's capacity as an auditor and in respect of services performed prior to the Effective Date) upon collection of Accounts Receivable, Unbilled Claims and Work in Progress outstanding at the Effective Date. Except for the Assumed Liabilities, PRGI shall not assume any debts or liabilities of Seller of any kind or nature whatsoever. Seller agrees to make full and prompt payment of all of its trade payables not assumed by PRGI as and when due. Anything to the contrary contained herein notwithstanding, PRGI shall neither assume nor have any obligations or liabilities whatsoever in respect of severance, WARN Act, income tax withholding, payroll and/or unemployment tax, workers' compensation, pension, profit-sharing, health insurance, COBRA or any other employee or other benefit liabilities in respect of any Business Employees or in respect of any Employee Benefit Plans, including, without limitation any contribution, tax, lien, penalty, cost, interest, claim, loss, action, suit, damage, cost assessment, withdrawal liability, liability to the PBGC, liability under Section 412 of the Code or Section 302(a)(2) of ERISA, or other similar liability or expense of Seller or any ERISA Affiliate and PRGI shall not become a party to any Employee Benefit Plan as a result of any of the transactions contemplated by this Agreement. 2.3 ESCROW SHARES. At the Closing, approximately 2,962 of the PRGX Shares issued on the Closing Date pursuant to Section 2.1(a)(ii) hereof (the "Escrow Shares") shall be issued in the name of the Representative, as nominee and attorney-in-fact for the Seller, which Escrow -5- 6 Shares will 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, PRGX, Seller and the other signatories named therein in the form of Exhibit 2.3 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. ARTICLE 3 ADDITIONAL COVENANTS 3.1 REPRESENTATIONS, COVENANTS AND INDEMNIFICATION AGREEMENT. Concurrently with the execution and delivery of this Agreement, Seller, 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, the Purchased 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 Material Leases, Material 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. 3.2 ALLOCATION OF PURCHASE PRICE AMONG PURCHASED ASSETS. The Purchase Price shall be allocated for tax purposes as mutually agreed to by PRGI and Seller within 60 days after the Closing; provided, however, the Purchase Price shall be allocated solely to (a) goodwill; (b) fixed assets at book value; (c) a share of the allocation to the Noncompetition and Nonsolicitation Agreements described in Section 5.4 of the RCI Agreement, as appropriate, and (d) to the extent they exist, Accounts Receivable net of appropriate reserves and accrued commissions. Seller and PRGI agree that they will prepare and file any notice or other filing required pursuant to Section 1060 of the Code, and that any such notices or filings will be prepared based upon such tax allocation of Seller Purchase Price. PRGI agrees to send to Seller a completed copy of its Form 8594 ("Asset Acquisition Statement under Section 1060") with respect to this transaction prior to filing such form with the Internal Revenue Service. 3.3 COVENANT RE: TAX MATTERS. (a) Seller shall be solely responsible for and shall pay, without any cost to PRGI (i) any and all Taxes for which Seller is or may be liable, arising from Seller's activities, the Business or use of the Purchased Assets through the Effective Date (regardless of whether the filing of any Tax Return with respect thereto or payment of any amount in respect thereof is filed, paid or due prior to, on or after the Effective Date), (ii) any Taxes with respect to the acquisition by -6- 7 PRGI from Seller of the Purchased Assets, and all other Taxes, if any, imposed by any Tax Authority assessed in connection with, on account of or resulting from the consummation of the transfer of the Purchased Assets to PRGI. (b) Real and personal property ad valorem Taxes, if any, with respect to the Purchased Assets shall be prorated on a daily basis between Seller, on the one hand, and PRGI on the other hand, as of the Closing Date. Should any amount of such Taxes to be prorated not be fully determined as of the Closing Date, a mutually satisfactory estimate of such amount, made on the basis of Seller's records, shall be used as the basis for settlement at Closing, and the amount finally determined will be prorated and appropriate settlement adjustments made as soon as practicable after such final determination. (c) Except as otherwise provided in this Agreement, the parties hereby agree that each of them shall cooperate with the other in executing or causing to be executed any required document and by making available to the other all work papers, records and notes of any kind at all reasonable times for the purpose of allowing the appropriate party to complete Tax Returns, participate in a proceeding, obtain refunds, make any determination required under this Agreement or defend or prosecute Tax claims. Notwithstanding anything to the contrary contained herein, Seller shall have sole and exclusive authority to prepare and file all Tax Returns concerning Seller related activities occurring prior to the Closing, including, without limitation, its operation of the Business and its use of the Purchased Assets and all matters under agreements not being assumed by PRGI (regardless of when such return is filed). PRGI shall not directly or indirectly take any action to prepare or file such Tax Return but shall be given copies of any such return filed by Seller. (d) At its sole expense, Seller shall promptly pay any and all Taxes, including but not limited to sales and transfer Taxes, levied, imposed or assessed by any Tax Authority as a result of the sale, transfer, assignment and conveyance of the Purchased Assets to PRGI by Seller. 3.4 BULK SALES LAW. PRGI hereby waives compliance by Seller with any applicable U.C.C. bulk sales law, and Seller agrees to indemnify and hold harmless PRGI (and any affiliates thereof) from and against any claims or liabilities not assumed by PRGI pursuant to this Agreement asserted against PRGI (or any affiliate thereof) by any creditor of Seller by reason of such noncompliance. Seller will comply with all applicable tax bulk transfer laws promptly after the public announcement of the transactions contemplated herein, provided that the parties agree that PRGI will only hold back from the Purchase Price amounts required under such applicable laws if such required holdback exceeds $10,000. Seller agrees to indemnify and hold harmless PRGI (and any affiliates thereof) from and against any claims or liabilities against PRGI for failure to comply with any such applicable tax bulk transfer laws. -7- 8 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 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. 4.2 OBLIGATIONS PERFORMED. Seller 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 is required to consummate the transactions contemplated herein, if any, and all 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 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) possession of the Purchased Assets; (b) intentionally omitted; (c) intentionally omitted; (d) the Bill of Sale, the Assignment and Assumption Agreement and the other instruments of transfer as shall be reasonably required by PRGI for the transfer to PRGI of all of -8- 9 Seller's right, title and interest to the Purchased Assets free and clear of all claims, liens, encumbrances, security interests and similar interests of any kind or nature whatsoever, including, without limitation, releases of any and all such claims, liens, encumbrances, security interests and similar interests with respect to the Purchased Assets; (e) the Indemnity Escrow Agreement, duly executed by the Seller and the Representative, as nominee and attorney-in-fact of Seller, together with blank stock powers, duly executed by the Representative with medallion level signature guarantee; (f) the Noncompetition and Nonsolicitation Agreements duly executed by Seller; (g) written Seller Consents from all parties, whose consent to the transactions contemplated herein is required; (h) an opinion of counsel to Seller substantially in the form of Exhibit 4.6(h) attached hereto; (i) the offer letter for employment of the Principal, duly executed by the Principal; (j) the Nonqualified Stock Option Agreement for the Principal, duly executed by the Principal; (k) the Lock-up Agreements, duly executed by Seller and the Representative; (l) intentionally omitted; (m) if applicable, the spousal consents, referred to in the RCI Agreement, duly executed by the spouse of Seller; (n) a release of RBA and the Other Sellers in substantially the form of Exhibit 4.6(o) attached hereto, duly executed by Seller; (o) if applicable, Forms UCC-3, duly executed by each secured lender of Seller, releasing all liens on the Purchased Assets; (p) a Closing Escrow Agreement, duly executed by Seller and the Representative; (q) a Closing Statement, duly executed by Seller; 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 acquisition by PRGI of the Purchased Assets pursuant to the transactions contemplated herein, or -9- 10 the ability of PRGI, PRGX or any of their affiliates to own and operate Seller's Business 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 Seller shall have no 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, the Purchased Assets or Seller's Business. 4.9 NO MATERIAL ADVERSE EFFECT. From the date of this Agreement to the Closing, there shall not have occurred any Material Adverse Effect (without giving effect to the consequences of the transaction 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 the Closing, none of the Primary Customers shall have terminated, decreased or otherwise adversely altered such Primary Customer business relationship with Seller or given notice to Seller 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. ARTICLE 5 CONDITIONS TO SELLER'S OBLIGATIONS Each and every obligation of Seller 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: 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. -10- 11 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 Seller each of the following, together with any additional items which the Seller may reasonably request to effect the transactions contemplated herein: (a) certified copies of the corporate resolutions of the Board of Directors of PRGI and the Board of Directors of PRGX 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, as applicable, together with incumbency certificates with respect to the respective officers of PRGI executing documents or instruments on behalf of PRGI, and, in respect of PRGX, authorizing the issuance of the PRGX Shares to Seller; (b) intentionally omitted; (c) the Cash Consideration, as adjusted pursuant to Section 2.1(a) and (b) hereof, and written confirmation from PRGX's transfer agent that stock certificates representing the PRGX Shares have been issued in the name of Seller; (d) the Indemnity Escrow Agreement, duly executed by PRGI and PRGX; (e) the documents and instruments described in Section 1.3 hereof; (f) the offer letter for employment of the Principal, duly executed by PRGI; (g) the Nonqualified Stock Option Agreement for the Principal, duly executed by PRGX; (h) the Noncompetition and Nonsolicitation Agreements referred to in Section 3.4 hereof duly executed by PRGI; (i) the Closing Escrow Agreement, duly executed by PRGI and PRGX; (j) a Closing Statement, duly executed by PRGI and PRGX; and (k) 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 acquisition by PRGI of the Purchased Assets pursuant to the transactions contemplated herein or the ability of PRGX or PRGI or any of its affiliates to own and operate the Business or otherwise -11- 12 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 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. 5.7 CONSENTS. PRGI shall have obtained and delivered to Seller written consent of Nations Bank N.A., as agent for the banks party to PRGX's bank credit agreement, to the transactions contemplated herein and such consent(s) shall remain in full force and effect at and as of the Closing. 5.8 NO MATERIAL ADVERSE EFFECT. From the date hereof until the Closing there shall have been no effect or change in the business of PRGI and 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"). 5.9 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. 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 and Seller; (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 5.8 hereof); -12- 13 (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; or (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. (e) by PRGI, if the conditions set forth in Article 4 hereof have not been satisfied by Seller 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 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 and set forth in the 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. 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 the Seller (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 -13- 14 been effected; and (c) may not be assigned by Seller 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: c/o Pasquesi Sheppard LLC, Representative 585 Bank Lane Lake Forest, IL 60045 Attention: Don Sheppard Telefax: (847) 234-1110 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 I, Inc. 2300 Windy Ridge Parkway Suite 100 North Atlanta, GA 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 -14- 15 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 PRGI 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. Except for the Nondisclosure Agreement, which remains in full force and effect in accordance with the terms thereof, this Agreement, the RCI Agreement, the other Seller Transaction Documents, and the PRGI Transaction Documents together with the Exhibits and Schedules attached hereto and thereto, 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 Seller, PRGX and PRGI, 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 contemplated hereby and/or necessary or appropriate to effect and consummate the transactions contemplated hereby. Seller agrees to provide to PRGX and PRGI, both before and after the Closing, such information as PRGX and 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 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. -15- 16 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:_____________________________________ Name:___________________________________ Its:____________________________________ PRGI: THE PROFIT RECOVERY GROUP INTERNATIONAL I, INC. By:_____________________________________ Name:___________________________________ Its:____________________________________ SELLER: ROBERT N. BECK, JR. d/b/a a sole proprietorship ________________________________________ ROBERT N. BECK, JR. -16- 17 Schedules and Exhibits Schedule 1.2 Excluded Assets Exhibit 1.3(a) Bill of Sale Exhibit 1.3(b) Assignment and Assumption Agreement Exhibit 1.4 Closing Escrow Agreement Exhibit 2.3 Indemnity Escrow Agreement Exhibit 3.1 RCI Agreement Exhibit 4.6(h) Opinion of Counsel Exhibit 4.6(n) Release
-17- EX-2.9 10 ASSET PURCHASE AGRMT / SAVANT CONSULTING LLC 1 ASSET PURCHASE AGREEMENT THIS ASSET PURCHASE AGREEMENT (the "Agreement") is entered into as of the 29th day of October, 1998 by and between THE PROFIT GROUP INTERNATIONAL I, INC., a Georgia corporation ("PRGI"), THE PROFIT RECOVERY GROUP INTERNATIONAL, INC., a Georgia corporation ("PRGX"), and SAVANT CONSULTING, L.L.C., a Michigan limited liability company (the "Seller") and JOHN J. POPE ("J.J. Pope"), and JOANN POPE ("JA Pope") being the owners of all outstanding equity 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 overpayment 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 service (the "Business"); WHEREAS, Seller wishes to sell to PRGI substantially all of Seller's assets used or held for use in the Business pursuant to the terms and conditions of this Agreement; 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 Beck & Associates, Inc. ("RBA"), RBA Audits, Inc., Robert N. Beck, Jr., a sole proprietorship, John E. Flatley & Associates, Inc., John H. Cavins, a sole proprietorship, Vincent Creadon, a sole proprietorship, John Kirkeide, a sole proprietorship, 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; 2 NOW, THEREFORE, in consideration of the premises, the mutual representations, warranties and covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE 1 PURCHASE AND SALE OF PURCHASED ASSETS 1.1 ASSETS TO BE ACQUIRED. Subject to and upon the terms and conditions set forth herein, PRGI agrees to purchase from Seller, and Seller agrees to sell to PRGI, except as provided in Section 1.2 hereof, all right, title and interest of Seller in and to all of the tangible and intangible assets of Seller used or held for use by Seller in the conduct of the Business as of the Closing Date (as hereinafter defined), which are described in this Section 1.1 with reference to capitalized terms which, if not otherwise defined herein, have the meaning assigned to such capitalized terms in the RCI Agreement, free and clear of all claims, liens, encumbrances, security interests and similar interests of any kind or nature whatsoever, including, without limitation, the following (collectively, the "Purchased Assets"): (a) all of the Fixed Assets; (b) all of Seller's interest in and rights and benefits owing to Seller under those Contracts which PRGI specifically agrees to assume, which assumption shall be evidenced by inclusion of such Contract by PRGI on a schedule to the Assignment and Assumption Agreement (as hereinafter defined) (collectively, the "Assigned Contracts"); (c) all Accounts Receivable outstanding as of the Closing and all Unbilled Claims and Work in Progress as of the Closing; (d) all of Seller's interest in and rights and benefits accruing to Seller as lessee under those Leases which PRGI specifically agrees to assume, which assumption shall be evidenced by inclusion of such Lease by PRGI on a schedule to the Assignment and Assumption Agreement (collectively, the "Assigned Leases"); (e) all Intellectual Property Rights; (f) all Licenses and Permits; (g) all Deposits and Other Rights; (h) all of Seller's customer and supplier lists, all client files, all files related to Employees and Associates, all computer data bases and other records, other than Seller's corporate minute books and stock records; (i) all of Seller's right, title and interest in and to its telephone numbers and the directory advertising for such telephone numbers to the extent assignable; and (j) all of Seller's right, title and interest in and to all other tangible personal property relating to the Business. -2- 3 1.2 EXCLUDED ASSETS. Notwithstanding anything to the contrary contained in Section 1.1 hereof, PRGI shall not acquire and Seller shall not transfer to PRGI Seller's minute, stock and membership books and any other documents relating to the organization, maintenance and existence of Seller, Seller's articles of organization, operating agreement, qualification to conduct business as a foreign limited liability company, arrangements with registered agents relating to foreign qualifications, taxpayer and other identification numbers, seals, blank certificates, any assets held under any pension, profit sharing or other Employee Benefit Plan (as defined herein), all cash and cash equivalents of Seller in the Business, subject to Section 2.1(b) hereof, and Seller's rights to any tax refunds, any insurance policies of Seller, any vehicles owned or leased by Seller, all furniture and art work to the extent listed on Schedule 1.2 attached hereto and any of the rights of Seller under this Agreement, the RCI Agreement, the other Seller Transaction Documents and the other PRGI Transaction Documents. 1.3 CONVEYANCE OF ASSETS. The conveyance, transfer and delivery of the Purchased Assets shall be made by Seller and accepted by PRGI on the Closing Date, effective as of the Effective Date, as follows: (a) Seller shall execute and deliver to PRGI a bill of sale in the form of Exhibit 1.3(a) attached hereto and made a part hereof (the "Bill of Sale"); (b) Seller and PRGI shall execute and deliver an Assignment and Assumption Agreement in the form of Exhibit 1.3(b) attached hereto and made a part hereof (the "Assignment and Assumption Agreement") with respect to the Assumed Liabilities (as hereinafter defined); (c) Seller shall execute and deliver such additional instruments of sale, transfer, conveyance and assignment as of the Closing Date as counsel to Seller and counsel to PRGI shall mutually deem necessary or appropriate. 1.4 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 PRGX Shares or the Cash Consideration 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 1.4 attached hereto (the "Closing Escrow Agreement"), 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 (the "Closing Date"). The parties hereto intend that PRGI receive all of the benefits in respect of the operations of the Business on and after the Effective Date and assume all of the liabilities of the Business incurred in the ordinary course of business after the Effective Date, except as otherwise specifically provided herein or in the RCI Agreement. -3- 4 ARTICLE 2 PURCHASE PRICE; ASSUMPTION OF LIABILITIES 2.1 PURCHASE PRICE. (a) Purchase Price Payment. Subject to the terms and conditions of this Agreement, the purchase price to be paid to Seller for the Purchased Assets pursuant hereto shall be paid in cash and shares of PRGX Common Stock, as follows: (i) $961,351, less the Reimbursable Cash (as defined in Section 2.1(b) below), plus an amount equal to 6.75% of such amount calculated on a per annum basis for the period from the Effective Date through and including the Closing Date, plus an amount equal to $479.45 per day for each day during the period from and after the Effective Date to and including the day immediately preceding the Closing Date (the "Cash Consideration") and (ii) subject to execution and delivery by Seller and each Owner at the Closing of the Lock-up Agreements, pursuant to the RCI Agreement, 23,737 shares of PRGX Common Stock, no par value (the "PRGX Shares") (the Cash Consideration and the PRGX Shares being collectively referred to herein as the "Purchase Price"); provided, however, that certain of the PRGX Shares shall be issued in the name of the Representative, as nominee and attorney-in-fact for the Seller, to be held in escrow pursuant to Section 2.3 below and in lieu of delivering fractional shares, PRGI shall deliver to Seller an amount in cash based on $27.00 per share (the "Closing Price"). (b) Purchase Price Adjustment. On the 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 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 the Interim Period Cash Flow, plus the following cash payments 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: (i) the amount, if any, by which disbursements to Owners during said period exceed the amount of any cash or cash equivalents in the Business as of the close of business on August 31, 1998 and (ii) any amounts paid during the period from and including the Effective Date to and including the Closing Date in respect of the following liabilities: (A) Seller Transaction Expenses, (B) non-trade payables (meaning those not directly related to the Business to be acquired by PRGI pursuant hereto), (C) non-trade accrued expenses (meaning those not directly relating ed to the Business to be acquired by PRGI pursuant hereto), (D) commissions payable as of the Effective Date in respect of accounts receivable collected by Seller prior to the Effective Date; (E) all amounts owed to any 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), and (F) all amounts owed to Persons other than Owners (except for normal trade payables directly relating to the Business to be acquired by PRGI pursuant hereto incurred in the ordinary course of business) (collectively, the "Interim Period Reimbursable Liabilities," which, together with the Interim Period Cash Flow, is referred to herein as the "Reimbursable Cash"). (c) Post-Closing Review. Within sixty (60) days following the Closing Date, PRGI and the Representative shall each have the right to request that the Accountants review the -4- 5 Reimbursable Cash (including the Cash Flow Statement), which review shall be a final determination of the Reimbursable Cash, and in the event that such determination shows that payments are required by PRGI or by the Sellers or Owner, any such payment shall be made by the Representative or PRGI to the other, as the case may be, within 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. 2.2 ASSUMPTION OF LIABILITIES. PRGI agrees to assume, from and after the Closing Date, only the following (the "Assumed Liabilities"): (a) all obligations and liabilities of Seller relating to the Business arising from and after the Effective Date in the ordinary course of business under the Contracts with Customers, Associates and Employees and other Contracts, and equipment and other Leases expressly designated by PRGI as Assigned Contracts and Assigned Leases; (b) Seller's normal trade payables relating to the Business to be acquired by PRGI pursuant hereto incurred in the ordinary course of business and outstanding at the Effective Date or incurred in the ordinary course of business thereafter and advances made by Owners to Seller after August 31, 1998 used to pay normal trade payables relating to the Business to be acquired by PRGI pursuant hereto, excluding (i) all Seller Transaction Expenses; (ii) non-trade payables (meaning those not directly related to the Business to be acquired by PRGI pursuant hereto), including any Prior Period Payments to RBA; (iii) non-trade accrued expenses (meaning those not directly related to the Business to be acquired by PRGI pursuant hereto); (iv) commission amounts for audit services due to Associates, auditors, or other service providers on accounts receivable collected prior to the Effective Date; and (v) all accounts payable, accrued expenses or other indebtedness due to any Owners as of the Effective Date under the Principal Agreement, or in connection with any advances to Associates, or otherwise; and (c) commission amounts for audit services which will be owed by Seller to its Associates, auditors or other service providers upon collection of Accounts Receivable, Unbilled Claims and Work in Progress outstanding at the Effective Date. Except for the Assumed Liabilities, PRGI shall not assume any debts or liabilities of Seller of any kind or nature whatsoever. Seller agrees to make full and prompt payment of all of its trade payables not assumed by PRGI as and when due. Anything to the contrary contained herein notwithstanding, PRGI shall neither assume nor have any obligations or liabilities whatsoever in respect of severance, WARN Act, income tax withholding, payroll and/or unemployment tax, workers' compensation, pension, profit-sharing, health insurance, COBRA or any other employee or other benefit liabilities in respect of any Business Employees or in respect of any Employee Benefit Plans, including, without limitation any contribution, tax, lien, penalty, cost, interest, claim, loss, action, suit, damage, cost assessment, withdrawal liability, liability to the PBGC, liability under Section 412 of the Code or Section 302(a)(2) of ERISA, or other similar liability or expense of Seller or any ERISA Affiliate and PRGI shall not become a party to any Employee Benefit Plan as a result of any of the transactions contemplated by this Agreement. -5- 6 2.3 ESCROW SHARES. At the Closing, approximately 11,868 of the PRGX Shares issued on the Closing Date pursuant to Section 2.1(a)(ii) hereof (the "Escrow Shares") shall be issued in the name of the Representative, as nominee and attorney-in-fact for the Seller, which Escrow Shares will 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, PRGX, Seller, Owners and the other signatories named therein in the form of Exhibit 2.3 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. ARTICLE 3 ADDITIONAL COVENANTS 3.1 REPRESENTATIONS, COVENANTS AND INDEMNIFICATION AGREEMENT. Concurrently with the execution and delivery of this Agreement, Seller and Owner, 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, Owner, the Purchased 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 Material Leases, Material 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. 3.2 ALLOCATION OF PURCHASE PRICE AMONG PURCHASED ASSETS. The Purchase Price shall be allocated for tax purposes as mutually agreed to by PRGI and Seller within 60 days after the Closing; provided, however, the Purchase Price shall be allocated solely to (a) goodwill; (b) fixed assets at book value; (c) a share of the allocation to the Noncompetition and Nonsolicitation Agreements described in Section 5.4 of the RCI Agreement, as appropriate, and (d) to the extent they exist, Accounts Receivable net of appropriate reserves and accrued commissions. Seller and PRGI agree that they will prepare and file any notice or other filing required pursuant to Section 1060 of the Code, and that any such notices or filings will be prepared based upon such tax allocation of Seller Purchase Price. PRGI agrees to send to Seller a completed copy of its Form 8594 ("Asset Acquisition Statement under Section 1060") with respect to this transaction prior to filing such form with the Internal Revenue Service. 3.3 COVENANT RE: TAX MATTERS. (a) Seller and each Owner shall be solely responsible for and shall pay, without any cost to PRGI (i) any and all Taxes for which Seller or Owners are or may be liable, arising -6- 7 from Seller's activities, the Business or use of the Purchased Assets through the Effective Date (regardless of whether the filing of any Tax Return with respect thereto or payment of any amount in respect thereof is filed, paid or due prior to, on or after the Effective Date), (ii) any Taxes with respect to the acquisition by PRGI from Seller of the Purchased Assets, and all other Taxes, if any, imposed by any Tax Authority assessed in connection with, on account of or resulting from the consummation of the transfer of the Purchased Assets to PRGI. (b) Real and personal property ad valorem Taxes, if any, with respect to the Purchased Assets shall be prorated on a daily basis between Seller and Owner, on the one hand, and PRGI on the other hand, as of the Closing Date. Should any amount of such Taxes to be prorated not be fully determined as of the Closing Date, a mutually satisfactory estimate of such amount, made on the basis of Seller's records, shall be used as the basis for settlement at Closing, and the amount finally determined will be prorated and appropriate settlement adjustments made as soon as practicable after such final determination. (c) Except as otherwise provided in this Agreement, the parties hereby agree that each of them shall cooperate with the other in executing or causing to be executed any required document and by making available to the other all work papers, records and notes of any kind at all reasonable times for the purpose of allowing the appropriate party to complete Tax Returns, participate in a proceeding, obtain refunds, make any determination required under this Agreement or defend or prosecute Tax claims. Notwithstanding anything to the contrary contained herein, Seller and Owners shall have sole and exclusive authority to prepare and file all Tax Returns concerning Seller related activities occurring prior to the Closing, including, without limitation, its operation of the Business and its use of the Purchased Assets and all matters under agreements not being assumed by PRGI (regardless of when such return is filed). PRGI shall not directly or indirectly take any action to prepare or file such Tax Return but shall be given copies of any such return filed by Seller. (d) At its sole expense, Seller shall promptly pay any and all Taxes, including but not limited to sales and transfer Taxes, levied, imposed or assessed by any Tax Authority as a result of the sale, transfer, assignment and conveyance of the Purchased Assets to PRGI by Seller. 3.4 CORPORATE AND FICTITIOUS NAMES. As soon as practicable following the Closing, Seller shall change its corporate name and Seller and each Owner shall cooperate with PRGI in any efforts undertaken by PRGI to secure and protect its rights in any name used by Seller in the conduct of its Business prior to the Closing. 3.5 BULK SALES LAW. PRGI hereby waives compliance by Seller with any applicable U.C.C. bulk sales law, and Seller and each Owner agree, jointly and severally, to indemnify and hold harmless PRGI (and any affiliates thereof) from and against any claims or liabilities not assumed by PRGI pursuant to this Agreement asserted against PRGI (or any affiliate thereof) by any creditor of Seller by reason of such noncompliance. Seller will comply with all applicable tax bulk transfer laws promptly after the public announcement of the transactions contemplated herein, provided that the parties agree that PRGI will only hold back from the Purchase Price amounts required under such applicable laws if such required holdback exceeds $10,000. Seller and each Owner agree, jointly and severally, to indemnify and hold harmless PRGI (and any affiliates -7- 8 thereof) from and against any claims or liabilities against PRGI for failure to comply with any such applicable tax bulk transfer laws. 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 Owners 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. 4.2 OBLIGATIONS PERFORMED. Seller and 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 is required to consummate the transactions contemplated herein, if any, and all 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 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) possession of the Purchased Assets; (b) a certified copy of the corporate resolutions of the directors of Seller and of Owners authorizing the transactions contemplated herein and the execution, delivery and performance of the RCI Agreement, this Agreement and the other Seller Transaction Documents, -8- 9 together with an incumbency certificate with respect to officers of Seller executing documents or instruments on behalf of Seller; (c) intentionally omitted; (d) the Bill of Sale, the Assignment and Assumption Agreement and the other instruments of transfer as shall be reasonably required by PRGI for the transfer to PRGI of all of Seller's right, title and interest to the Purchased Assets free and clear of all claims, liens, encumbrances, security interests and similar interests of any kind or nature whatsoever, including, without limitation, releases of any and all such claims, liens, encumbrances, security interests and similar interests with respect to the Purchased Assets; (e) the Indemnity Escrow Agreement, duly executed by the Seller, Owners and the Representative, as nominee and attorney-in-fact of Seller and Owners, together with blank stock powers, duly executed by the Representative with medallion level signature guarantee; (f) the Noncompetition and Nonsolicitation Agreements duly executed by Seller and each Owner; (g) written Seller Consents from all parties, whose consent to the transactions contemplated herein is required; (h) an opinion of counsel to Seller and Owners substantially in the form of Exhibit 4.6(h) attached hereto; (i) the offer letter for employment of the Principal, duly executed by the Principal; (j) the Nonqualified Stock Option Agreement for the Principal, duly executed by the Principal; (k) the Lock-up Agreements, duly executed by Seller, each Owner and the Representative; (l) intentionally omitted; (m) if applicable, the spousal consents, referred to in the RCI Agreement, duly executed by the spouse of each Owner; (n) if applicable, Forms UCC-3, duly executed by each secured lender of Seller, releasing all liens on the Purchased Assets; (o) a release of RBA and the Other Sellers in substantially the form of Exhibit 4.6(o) attached hereto, duly executed by Seller and Owners; (p) a Closing Escrow Agreement, duly executed by Seller, Owners and the Representative; -9- 10 (q) a Closing Statement, duly executed by Seller and 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 acquisition by PRGI of the Purchased Assets pursuant to the transactions contemplated herein, or the ability of PRGI, PRGX or any of their affiliates to own and operate Seller's Business 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 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, the Purchased Assets or Seller's Business. 4.9 NO MATERIAL ADVERSE EFFECT. From the date of this Agreement to the Closing, there shall not have occurred any Material Adverse Effect (without giving effect to the consequences of the transaction 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 the Closing, none of the Primary Customers shall have terminated, decreased or otherwise adversely altered such Primary Customer business relationship with Seller or given notice to Seller or any 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. -10- 11 ARTICLE 5 CONDITIONS TO SELLER'S AND OWNERS' OBLIGATIONS Each and every obligation of Seller and 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 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 Seller and Owners each of the following, together with any additional items which Seller and Owners may reasonably request to effect the transactions contemplated herein: (a) certified copies of the corporate resolutions of the Board of Directors of PRGI and the Board of Directors of PRGX 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, as applicable, together with incumbency certificates with respect to the respective officers of PRGI executing documents or instruments on behalf of PRGI, and, in respect of PRGX, authorizing the issuance of the PRGX Shares to Seller; (b) intentionally omitted; (c) the Cash Consideration, as adjusted pursuant to Section 2.1(a) and (b) hereof, and written confirmation from PRGX's transfer agent that stock certificates representing the PRGX Shares have been issued in the name of Seller; (d) the Indemnity Escrow Agreement, duly executed by PRGI and PRGX; (e) the documents and instruments described in Section 1.3 hereof; (f) the offer letter for employment of the Principal, duly executed by PRGI; (g) the Nonqualified Stock Option Agreement for the Principal, duly executed by PRGX; -11- 12 (h) the Noncompetition and Nonsolicitation Agreements referred to in Section 3.4 hereof duly executed by PRGI; (i) the Closing Escrow Agreement, duly executed by PRGI and PRGX; (j) a Closing Statement, duly executed by PRGI and PRGX; and (k) 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 acquisition by PRGI of the Purchased Assets pursuant to the transactions contemplated herein or the ability of PRGX or PRGI or any of its affiliates to own and operate the Business 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 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. 5.7 CONSENTS. PRGI shall have obtained and delivered to Seller written consent of Nations Bank N.A., as agent for the banks party to PRGX's bank credit agreement, to the transactions contemplated herein and such consent(s) shall remain in full force and effect at and as of the Closing. 5.8 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"). 5.9 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. -12- 13 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 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 5.8 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; or (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. (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 and set forth in the 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. 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. -13- 14 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 the Seller and 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 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 Owners: c/o Pasquesi Sheppard LLC, Representative 585 Bank Lane Lake Forest, IL 60045 Attention: Don Sheppard Telefax: (847) 234-1110 with a copy to: David Fischer, Esq. Wildman, Harrold, Allen & Dixon 225 West Wacker Drive Chicago, IL 60606-1229 Telefax: (312) 201-2555 -14- 15 If to PRGX or PRGI: The Profit Recovery Group International I, Inc. 2300 Windy Ridge Parkway Suite 100 North Atlanta, GA 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 PRGI 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. Except for the Nondisclosure Agreement, which remains in full force and effect in accordance with the terms thereof, this Agreement, the RCI Agreement, the other Seller Transaction Documents, and the PRGI Transaction Documents together with the Exhibits and Schedules attached hereto and thereto, 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 Seller, PRGX, PRGI and 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 contemplated hereby and/or necessary or appropriate to effect and consummate the transactions contemplated hereby. Each Owner and Seller agree to provide to PRGX and PRGI, both before and after the Closing, such information as PRGX and 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 -15- 16 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. -16- 17 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: ---------------------------------------- Name: -------------------------------------- Its: -------------------------------------- PRGI: THE PROFIT RECOVERY GROUP INTERNATIONAL I, INC. By: ---------------------------------------- Name: -------------------------------------- Its: -------------------------------------- SELLER: SAVANT CONSULTING, L.L.C. By: ---------------------------------------- Name: JOHN J. POPE Its: President OWNERS: ------------------------------------------- JOHN J. POPE -------------------------------------------- JOANN POPE -17- 18 Schedules and Exhibits Schedule 1.2 Excluded Assets Exhibit 1.3(a) Bill of Sale Exhibit 1.3(b) Assignment and Assumption Agreement Exhibit 1.4 Closing Escrow Agreement Exhibit 2.3 Indemnity Escrow Agreement Exhibit 3.1 RCI Agreement Exhibit 4.6(h) Opinion of Counsel Exhibit 4.6(n) Release -18- EX-2.10 11 REPRESENTATIONS COVENANTS AND INDEMNIFICATION AGMT 1 REPRESENTATIONS, COVENANTS AND INDEMNIFICATION AGREEMENT THIS REPRESENTATIONS, COVENANTS AND INDEMNIFICATION AGREEMENT (the "Agreement") is entered into as of the 29th day of October, 1998 by and among the following: THE PROFIT RECOVERY GROUP INTERNATIONAL I, INC., a Georgia corporation ("PRGI"); THE PROFIT RECOVERY GROUP INTERNATIONAL, INC., a Georgia corporation ("PRGX"); ROBERT BECK & ASSOCIATES, INC., an Illinois corporation ("RBA"); ROBERT N. BECK, JR. ("Beck, Jr.") d/b/a Beck, Jr., a sole proprietorship ("BECK SP"); RBA AUDITS, INC., a Utah corporation ("RBA AUDITS"); JOHN H. CAVINS ("Cavins") d/b/a Cavins, a sole proprietorship ("CAVINS SP"); VINCENT CREADON ("Creadon") d/b/a Creadon, a sole proprietorship ("CREADON SP"); JOHN E. FLATLEY & ASSOCIATES, INC., an Illinois corporation ("FLATLEY CORP"); JOHN KIRKEIDE ("Kirkeide") d/b/a Kirkeide, a sole proprietorship ("KIRKEIDE SP"); SAVANT CONSULTING, LLC, a Michigan limited liability company ("SCLLC"); TAYLOR, BLACKBURN & ASSOCIATES, INC., a North Carolina corporation ("TBA"), (RBA, BECK SP, RBA AUDITS, CAVINS SP, CREADON SP, FLATLEY CORP, KIRKEIDE SP, SCLLC, AND TBA are referred to individually as a "Seller" and collectively as the "Sellers"); and all of the owners of the outstanding equity of each such Seller, each of which is identified on Annex A attached hereto under the column entitled "Owners and Percentage Interests in Seller" (individually, an "Owner" and collectively, the "Owners") and PASQUESI SHEPPARD LLC, as nominee, attorney-in-fact and representative of Sellers and Owners pursuant to the appointment contained in Section 5.14 hereof, and any replacement or successor representative thereto (the "Representative"). In respect of BECK SP, CAVINS SP, CREADON SP and KIRKEIDE SP, all sole proprietorships of which Seller and its Owner are the same entity, references herein to "Seller and its Owners" or words of similar import shall mean Beck, Jr., Cavins, Creadon or Kirkeide, respectively. The parties hereto acknowledge that while RBA, TBA and FLATLEY CORP. are referred to herein as Sellers, it is the Owners of RBA, TBA and FLATLEY CORP. who shall, pursuant to the RBA Stock Agreement, the TBA Stock Agreement and the FLATLEY CORP. Stock Agreement, respectively, sell all shares of capital stock of such corporation to PRGI. In respect of any Owner which is a trust (namely, the Robert N. Beck, Sr. Living Trust UTD 10/31/94, the Georgena M. Beck Living Trust UTD 10/31/94 and the Renee N. McCauley Living Trust UTD 7/23/98), the term Owner means for all purposes hereunder and under each Seller Transaction Document to which such trust is a party, the trust and the beneficiary or beneficiaries thereof as of the date hereof, jointly and severally. W I T N E S S E T H: WHEREAS, PRGI, PRGX, and each of Sellers and such Sellers' respective Owners have entered into certain acquisition agreements, each of which is identified below as an Acquisition Agreement and the terms and provisions of each such Acquisition Agreement are expressly incorporated by reference herein; WHEREAS, as a condition to the Acquisition Agreements and as an inducement to the consummation of the transactions contemplated in the Acquisition Agreements, the parties hereto desire to set forth certain representations, warranties, covenants and indemnification provisions made by each to the other pursuant to the terms of this Agreement; 2 NOW, THEREFORE, in consideration of the premises, the mutual representations, warranties and covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE 1 DEFINITIONS As used herein and, unless otherwise defined therein, in the Acquisition Agreements, the following terms have the following meanings: 1.1 "Accountants" means KPMG Peat Marwick LLP. 1.2 "Account Receivable" means, individually, any billed account receivable, note receivable, and advance of commissions or expenses to Associates, Employees, or to either Kirkeide or Beck, Jr. in connection with his role as an auditor, and "Accounts Receivable" means all such Accounts Receivable, collectively. 1.3 "Acquisition Agreements" means, collectively, the following agreements, each of even date herewith: (a) Stock Purchase Agreement by and among PRGX, PRGI, RBA and all of the Owners of RBA (the "RBA Stock Agreement"); (b) Stock Purchase Agreement by and among PRGX, PRGI, TBA and all of the Owners of TBA (the "TBA Stock Agreement"); (c) Stock Purchase Agreement by and among PRGX, RGI, FLATLEY CORP. and the sole Owner of FLATLEY CORP. (the "FLATLEY CORP. Stock Agreement"); (d) Asset Purchase Agreement by and among PRGX, PRGI and Beck, Jr. (the "BECK SP Asset Agreement"); (e) Asset Purchase Agreement by and among PRGX, PRGI and RBA AUDITS and the sole Owner of RBA AUDITS (the "RBA AUDITS Asset Agreement"); (f) Asset Purchase Agreement by and among PRGX, PRGI and Cavins (the "CAVINS SP Asset Agreement"); (g) Asset Purchase Agreement by and among PRGX, PRGI and Creadon (the "CREADON SP Asset Agreement"); (h) Asset Purchase Agreement by and among PRGX, PRGI and Kirkeide (the "KIRKEIDE SP Asset Agreement"); and -2- 3 (i) Asset Purchase Agreement by and among PRGX, PRGI and SCLLC and all of the Owners of SCLLC (the "SCLLC Asset Agreement"); and "Acquisition Agreement" means any of such Acquisition Agreements, individually. 1.4 "Act" means the Securities Act of 1933, as amended. 1.5 "Active Audits" means, collectively, those audits listed in Section 2.14 of the Disclosure Schedule and "Active Audit" means any of such Active Audits, individually. 1.6 "Affiliate" means any individual, partnership, corporation, trust, joint venture or other entity controlled by, controlling or under common control with a respective party. 1.7 "Applicable Assets" means in respect of any Seller all of the tangible and intangible assets of such Seller used or held for use by such Seller in the conduct of the Business of such Seller free and clear of all claims, liens, encumbrances, security interests and similar interests of any kind or nature whatsoever, including, without limitation, with respect to any Asset Seller, the Purchased Assets. 1.8 "Asset Agreements" means, collectively, the BECK SP Asset Agreement, the RBA AUDITS Asset Agreement, the CAVINS SP Asset Agreement, the CREADON SP Asset Agreement, the KIRKEIDE SP Asset Agreement and the SCLLC Asset Agreement, and "Asset Agreement" means each of such Asset Agreements, individually. 1.9 "Associates" means, collectively, those independent contractors and others who perform recovery audit services for the Business, but does not include Kirkeide, Beck, Jr. or any Employees of Seller, and "Associate" means each of such Associates, individually. 1.10 "Asset Sellers" means collectively, BECK SP, RBA AUDITS, CAVINS SP, CREADON SP, KIRKEIDE SP, and SCLLC and "Asset Seller" means each of such Asset Sellers, individually. 1.11 "Beck, Sr." means Robert N. Beck, Sr. 1.12 "Business" means the business of the examination, review and audit of various paid bills and expenses of Customer 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 Customer 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 -3- 4 related management counseling service as conducted by the respective Seller, and, in respect of RBA, means the Business of all Sellers. 1.13 "Business Employees" means, solely for purposes of Section 2.23, current or former directors or employees of Seller or any other persons currently or formerly performing services for Seller, and/or beneficiaries of any such persons. 1.14 "Cancellations" means, individually, any Account Receivable or Unbilled Claim, or portion thereof, which prior to the Effective Date has been both identified to a Seller by a Customer and either refunded or recredited to the supplier to which it relates or relinquished prior to chargeback by the Customer prior to the Effective Date, and "Cancellations" means all such Cancellations, collectively. 1.15 "Closed Audits" means, collectively, any audits for Customers of the Business which are not listed in Section 2.14 of the Disclosure Schedule, and "Closed Audit" means any of such Closed Audits, individually. 1.16 "Closing" means the closing of the transactions contemplated by the Acquisition Agreements. 1.17 "Closing Date" means the date of the Closing. 1.18 "COBRA" is defined in Exhibit 2.23. 1.19 "Code" means the Internal Revenue Code of 1986, as amended. 1.20 "Contracts" means, collectively, all written or oral Customer contracts, employment agreements, agreements with Associates, the Principal Agreements, independent contractor agreements and all other agreements and other instruments relating to the Applicable Assets and the operation of the Business to which a Seller is a party or to which such Seller's Applicable Assets are subject or bound, except for any Lease and "Contract" means each of the Contracts, individually. 1.21 "Corporate Sellers" means collectively, RBA, RBA AUDITS, FLATLEY CORP, and TBA and "Corporate Seller" means each of such Corporate Sellers, individually. 1.22 "Customers" means those Customers to whom Seller provides or has provided the services of the Business. 1.23 "Deposits and Other Rights" means all claims, security and other deposits, refunds, prepaid expenses, causes of action, choses in action, rights of recovery, warranty rights, rights under non-disclosure, non-competition, non-solicitation and similar agreements, and rights of set off in respect of the Business of each Seller and the Applicable Assets. 1.24 "Disclosing Party" is defined in Section 5.1(d). -4- 5 1.25 "Disclosure Schedule" means the disclosure schedule to the representations and warranties of Sellers and Owners, attached hereto, which shall be arranged in paragraphs corresponding to the lettered and numbered paragraphs contained in Article 2 hereof separately in respect of each Seller and its respective Owners, and which shall be updated prior to Closing as provided in the Acquisition Agreements. 1.26 "DOL" means the United States Department of Labor. 1.27 "E&Y" means Ernst & Young LLP. 1.28 "Effective Date" means as of 12:01 a.m. September 1, 1998. 1.29 "Employee Benefits Plans" means, collectively, an employee benefit plan as defined by Section 3(3) of ERISA, and any other bonus, profit sharing, pension, compensation, deferred compensation, stock option, stock purchase, fringe benefit, severance, post-retirement, scholarship, disability, sick leave, vacation, individual employment, commission, bonus, payroll practice, retention, or other plan, agreement, policy, trust fund or arrangement, and "Employee Benefit Plan" means each of such Employee Benefit Plans, individually. 1.30 "Employees" means, collectively, those persons employed by Seller who provide administrative or clerical, but not recovery audit services, to Seller, and "Employee" means each of such Employees, individually. 1.31 "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. 1.32 "ERISA Affiliate" means any trade or business, whether or not incorporated, other than Seller, which has employees who are or have been at any date of determination occurring within the preceding six years, treated pursuant to Section 4001(a(14) of ERISA and/or Section 414 of the Code as employees of a single employer which includes Seller. 1.33 "Escrow Shares" means the shares of Common Stock of PRGX to be deposited in escrow pursuant to Acquisition Agreements and the Indemnity Escrow and Stock Agreement. 1.34 "Fixed Assets" means all of a Seller's machinery, appliances, equipment, including computer hardware, tools, supplies, construction in progress and furniture, used or held for use by a Seller in connection with the Business of such Seller, and rights of such Seller, if any, to leasehold improvements and fixtures used or held for use by a Seller in connection with the Business of such Seller. 1.35 "Historical Statements" means RBA's combined unaudited balance sheets of the Business as of and for the years ended December 31, 1997 and December 31, 1996 and unaudited income statements for the fiscal years then ended. -5- 6 1.36 "Insurance Policies" means, collectively, all insurance policies maintained by Seller for property, fire, casualty, workers' compensation, general liability insurance and other forms of insurance relating to the Applicable Assets and the operation of the Business and "Insurance Policy" means each of the Insurance Policies, individually. 1.37 "Intellectual Property Rights" means all intellectual property owned by Seller including, without limitation, all of Seller's patents, trade secrets, Customer lists, technical information and copyrights (whether registered or unregistered), and other proprietary information rights; all of Seller's rights, title and interest in and to trademarks, pending trademark applications, trade names and logos (including registrations and applications for registration for any of them) owned by Seller in the conduct of its Business, including without limitation, all rights to the name "Robert Beck & Associates" (except as otherwise specifically provided herein or pursuant hereto) and to its legal and assumed names, goodwill and other intangible assets, and all rights to software to the extent assignable. 1.38 "IRCA" means the Immigration Reform and Control Act of 1986, as amended, and all regulations promulgated thereunder. 1.38A "Inter-Seller Agreement" means that certain agreement of even date herewith among the Asset Sellers and all of the Owners relating to the appointment and authorization of the Representative, certain contribution and other matters among the Asset Sellers and the Owners. 1.39 "IRS" means the United States Internal Revenue Service. 1.40 Intentionally Omitted. 1.41 "Leases" means, collectively, all written and oral leases in respect of the Business of a Seller and to which a Seller is a party, including, without limitation, all real property and equipment leases. 1.42 "Licenses and Permits" means all of each Seller's licenses, consents, permits, variances, certifications and approvals of governmental agencies used or held for use in connection with the Business, to the extent assignable. 1.43 "Losses" is defined in Section 4.1. 1.44 "Management" means the respective board of directors, in respect of any Corporate Seller, means managers, in respect of SCLLC, and means the respective Owner, in respect of any SP Seller. 1.45 "Material Adverse Effect" means any change in or effect on the Business of a respective Seller that is or will be materially adverse to the Business, operations, properties (including intangible properties), condition (financial or otherwise), assets, liabilities, prospects, Customer relations or regulatory status of such Seller. -6- 7 1.46 "Material Contracts" means, collectively, all Contracts which (a) involve an aggregate annual expenditure by Seller of $5,000 or more, (b) are not cancelable by Seller without cost on 60 days or less notice, (c) are Principal Agreements, (d) involve the provision of data processing services to Seller, (e) are with Associates or Employees of Seller, (f) are with those entities which constitute Primary Customers for 1998, (g) are with any current Customer and have an unexpired term of 2 or more years, (h) restrict or regulate in any manner the conduct of business of Seller, require the referral of any business by Seller, or require or purport to require the payment of money or the acceleration of performance of any obligations of Seller by virtue of the Closing or (i) Customer agreements which contain any claims guaranty or obligations to provide equipment or services beyond the scope of the Business of recovery auditing and "Material Contract" means each of the Material Contracts, individually. 1.47 "Material Leases" means, collectively, all leases which (a) involve an aggregate annual expenditure by Seller of $5,000 or more, (b) are not cancelable by Seller without cost on 60 days or less notice, or (c) have a term which extends for more than one year from the Effective Date and "Material Lease" means each of the Material Leases, individually. 1.48 "Monthly Statements" means RBA's separate monthly balance sheets and income statements of the Business on a combined basis. 1.49 "Noncompetition and Nonsolicitation Agreements" means the noncompetition and nonsolicitation agreements to be delivered pursuant to Section 5.4. 1.50 "Non-Disclosing Party" is defined in Section 5.1(d). 1.51 "PBGC" means Pension and Benefit Guaranty Corporation. 1.51A "Pre-Tax Operating Profit" means all revenues from operations of the Business of Seller and the Other Sellers for a period, excluding extraordinary or unusual items of revenue, less all expenses, other than acquisition related interest, federal and state income tax and acquisition related expenses, subject to such other adjustments as PRGI, PRGX and Sellers agree upon. 1.52 "PRGI Indemnified Parties" is defined in Section 4.1. 1.53 "PRGI Transaction Documents" means, in respect of each Acquisition Agreement, the Acquisition Agreement and each of the other agreements, documents and instruments referenced in such Acquisition Agreement or in this Agreement to be executed and delivered by PRGI and/or PRGX in connection with the consummation thereof. 1.54 "PRGI Transaction Expenses" is defined in Section 5.12 hereof. -7- 8 1.55 "PRGX/PRGI Disclosure" means the Articles of Incorporation and the Bylaws of PRGI and PRGX, PRGX Report on Form 10-K for the year ended December 31, 1997, as amended, PRGX Annual Report to Shareholders for the year ended December 31, 1997 and Proxy Statement for the 1998 Annual Meeting of Shareholders, PRGX Reports on Form 10-Q for the quarters ended March 31, 1998 and June 30, 1998, the two Reports on Form 8-K, each of which was filed on August 12, 1998, Form S-8 filed September 23, 1998, Prospectus dated March 16, 1998 (the "Prospectus") contained in the Registration Statement on Form S-3 (Reg. No. 333- 46225), copies of all press releases issued by PRGX since December 31, 1997, and information, if any, as to which PRGI has provided notice to Sellers and Owners pursuant to Section 5.16 hereof. 1.56 "PRGX Public Reports" is defined in Section 3.5. 1.57 "PRGX Shares" means the shares of Common Stock of PRGX to be acquired by certain Sellers and Owners under the Acquisition Agreements. 1.58 "Primary Customers" means those 20 Customers of the Business which as of the end of any calendar year (or in respect of 1998, as of the period from January 1, 1998 to the Effective Date) accounted for the highest percentage of the revenues of the Business during such calendar year (or in respect of 1998, such part thereof), which are separately identified for each calendar year on the Disclosure Schedule. 1.59 "Principals" means, collectively, those Owners who are designated as Principals on Annex A attached hereto, and "Principal" means each of such Principals, individually. 1.60 "Principal Agreements" means collectively, any written or oral agreement or understanding, including, without limitation, those described in Section 2.18(b) hereof, between RBA and any Principal or Other Seller (other than the Inter-Seller Agreement) relating to the operation of the Business and the business relationship between RBA and any Principal or Other Seller, including without limitation, the sharing of revenues or commissions of the Business, and "Principal Agreement" means each of the Principal Agreements, individually. 1.61 "Purchased Assets" shall have the meaning assigned to such term in the Asset Agreement between PRGX, PRGI and each respective Asset Seller. 1.62 "Recourse Obligations" is defined in Section 4.4. 1.63 "Representative" is defined in Section 5.14. 1.64 "SEC" means the United States Securities and Exchange Commission. 1.65 "Section 4.1 Indemnified Claims" is defined in Section 4.1. 1.66 "Section 4.2 Indemnified Claims" is defined in Section 4.2. -8- 9 1.67 "Seller Consents" is defined in Section 2.4. 1.68 "Seller Transaction Documents" means, in respect of each Acquisition Agreement, the Acquisition Agreement to which a respective Seller and its Owners is a party and each of the agreements, documents and instruments referenced in such Acquisition Agreement or in this Agreement to be executed and delivered by such Seller and/or any of its Owners in connection with the consummation thereof. 1.69 "SP Sellers" means BECK SP, CAVINS SP, CREADON SP and KIRKEIDE SP and "SP Seller" means each of such SP Sellers, individually. 1.70 "Stock Agreements" means collectively, the RBA Stock Agreement, the FLATLEY Stock Agreement and the TBA Stock Agreement, and "Stock Agreement" means each of such Stock Agreements, individually. 1.71 "Stock Sellers" means collectively, RBA, FLATLEY CORP. and TBA and "Stock Seller" means each of such Stock Sellers, individually. 1.72 "Tax" means all taxes, charges, fees, interest, fines, penalties, additions to tax or other assessments, including without limitation, income, excise, environmental, property, sales, gross receipts, gains, transfer, occupation, privilege, employment (including social security and unemployment), use, value added, capital stock or surplus, franchise taxes, advance corporate tax and customs duties imposed by any Tax Authority, payable by Seller or relating to or chargeable against Seller's assets, revenues or incomes. 1.73 "Tax Authority" means any United States federal, foreign, national, state, county or municipal or other local government, any subdivision, agency, commission or authority thereof, or any quasi-governmental body exercising any taxing authority or any other authority exercising tax regulatory authority. 1.74 "Unbilled Claim" means, individually, any unbilled claim developed in the Business by Seller that has been approved by the Customer to which such claim relates for submission to a supplier for chargeback or refund, and "Unbilled Claims" means all such Unbilled Claims, collectively. 1.75 "Tax Return" means any return, amended return, estimated return, information return and statement (including any related or supporting information) filed or to be filed with any Tax Authority in connection with the determination, assessment, collection or administration of any Tax. 1.76 "WARN" means the Worker Adjustment and Retraining Act. 1.77 "Work in Progress" means, collectively, all work in progress and other claims in respect of an Active Audit not yet billed by a respective Seller, but not including Unbilled Claims. -9- 10 ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF SELLERS AND THE OWNERS In order to induce PRGI and PRGX to enter into the Acquisition Agreements and consummate the transactions contemplated thereby, each Seller and its respective Owners, jointly and severally, make the following representations to PRGI and PRGX in respect of such Seller and its respective Owners, Business and Applicable Assets (and not with respect to any other Seller or Owners of other Sellers), provided RBA and the Owners of RBA, jointly and severally, make the following representations and warranties in respect of all Sellers and Owners, the Business of all Sellers, and all Applicable Assets. Each of the following warranties and representations is material to and relied upon by PRGI and PRGX. 2.1 ORGANIZATION AND AUTHORITY OF SELLER. Each Corporate Seller is a corporation duly organized, validly existing, and in good standing under the laws of the State listed next to such Seller's name on the Disclosure Schedule. SCLLC is a limited liability company duly organized, validly existing, and in good standing under the laws of the State listed next to its name on the Disclosure Schedule. Each SP Seller is a sole proprietorship under the laws of the State listed next to such Seller's name on the Disclosure Schedule. Seller has all necessary legal power and authority to own, lease and operate its properties and conduct its business as it is currently being conducted. Each Corporate Seller does not own, directly or indirectly, any equity interest in any corporation, partnership, joint venture, or other entity. Seller is duly qualified in all jurisdictions in which the conduct of its business or the ownership of its properties requires such qualification (except where the failure to do so would not have a Material Adverse Effect on such Seller) and the Disclosure Schedule lists all the states where Seller is so qualified. 2.2 POWER AND AUTHORITY; DUE AUTHORIZATION. Seller has full legal power and authority, and each of its Owners has full power and authority, to execute and deliver this Agreement and each of the Seller Transaction Documents to which such Seller or any of its Owners is or will be a party and to consummate the transactions contemplated in the Acquisition Agreement. The Management and the Owners of Seller have duly approved and authorized the execution and delivery of this Agreement and each of the Seller Transaction Documents to which Seller is or will be a party and the consummation of the transactions contemplated hereby and thereby. Assuming that this Agreement and each of the respective Seller Transaction Documents which are also PRGI Transaction Documents constitutes a valid and binding agreement of PRGI, this Agreement and each of the Seller Transaction Documents constitutes, a valid and binding agreement of Seller and its Owners, in each case enforceable in accordance with its terms, subject to laws of general application in effect affecting creditors' rights and subject to the exercise of judicial discretion in accordance with general equitable principles. The duly elected Management of Seller and duly elected officers of Seller are set forth on the Disclosure Schedule. 2.3 TITLE TO ASSETS. Except as set forth on the Disclosure Schedule, Seller has good, valid and marketable title to all of its assets used or held for use in the Business of Seller (and a valid and enforceable leasehold interest in all of its assets subject to leases), free and clear of any mortgages, liens, pledges, security interests, encumbrances, claims or similar rights of every kind and nature. At the Closing, each Asset Seller will transfer to PRGI good and valid title to all of the Purchased Assets of such Seller (and valid and enforceable lease hold interests in all such -10- 11 Purchased Assets subject to a lease), free and clear of any liens, pledges, charges encumbrances, claims, rights to purchase or similar rights of third parties. 2.4 NO CONFLICT; REQUIRED CONSENTS. The Disclosure Schedule contains a true, correct and complete list of (a) all Material Contracts and Material Leases that require consent or approval to the assignment of such Material Contract or Material Lease in order to operate the Business on a daily basis as presently conducted and (b) all contracts (other than Material Contracts, Contracts with Customers or Contracts with Associates or Employees) and all Leases (other than Material Leases) that require consent or approval to the assignment of such Contract or Lease where the absence of such consent would result in a Material Adverse Effect (collectively, the "Seller Consents" and individually a "Seller Consent"). Assuming all Seller Consents have been obtained prior to Closing, the execution and delivery by Seller and its Owners of this Agreement and the Seller Transaction Documents, and the consummation by Seller and each of its Owners of the transactions contemplated hereby and thereby do not and will not (a) require the consent, approval or action of, or any filing with or notice to, any corporation, firm, person or other entity or any public, governmental or judicial authority (except for consents and approvals under Contracts and Leases not required to be listed on the Disclosure Schedule); (b) violate the terms of any instrument, document or agreement to which Seller or its Owners is a party, or by which Seller or its Owners or the property of Seller or its Owners is bound, or be in conflict with, result in a breach of or constitute (upon the giving of notice or lapse of time or both) a default under any such instrument, document or agreement, or result in the creation of any lien upon any of the property or assets of Seller or any of its Owners (except for consents and approvals under Contracts and Leases not required to be listed on the Disclosure Schedule); (c) violate the organizational documents of Seller (including the articles of incorporation or bylaws of any Corporate Seller or the certificate of formation or operating agreement of SCLLC); or (d) violate any order, writ, injunction, decree, judgment, ruling, law, rule or regulation of any federal, state, county, municipal, or foreign court or governmental authority applicable to Seller or any of its Owners, or the business or assets of Seller. Neither Seller nor its Owners is subject to, or is a party to, any mortgage, lien, lease, agreement, contract, instrument, order, judgment or decree or any other restriction of any kind or character which would prevent or hinder the continued operation of the Business of such Seller after the Closing on substantially the same basis as theretofore operated. 2.5 CAPITALIZATION OF SELLER. The Disclosure Schedule contains a true, correct and complete list of the authorized capital stock, par value per share, number of issued and outstanding shares of capital stock (designating the Owner thereof) and number of treasury shares for each Corporate Seller. All outstanding shares of such Corporate Seller's capital stock have been duly authorized, and are validly issued, fully paid and nonassessable and are owned of record and beneficially solely by the persons and in the amounts set forth on the Disclosure Schedule. The Disclosure Schedule contains a true, correct and complete list of the authorized issued and outstanding membership interests of SCLLC. All outstanding membership interests of SCLLC have been duly authorized, and are validly issued, fully paid and nonassessable and are owned of record and beneficially solely by the persons and in the amounts set forth on the Disclosure Schedule. No one other than the Owners specified on the Disclosure Schedule has any beneficial or record interest in the equity of any Seller or its respective Business or Applicable Assets. Each of the Owners warrants and represents that he is the lawful owner of, and has good and marketable title to, the equity interests as shown on the Disclosure Schedule as being owned by -11- 12 him, free and clear of any mortgage, pledge, claim, lien, charge, encumbrance or other right in any third party (including any right to purchase, vote or direct the voting of, any equity interests thereof). Seller has not issued any convertible securities, options, warrants, or entered into any contracts, commitments, agreements, understandings, arrangements or restrictions by which it is bound to issue any additional equity interests or other securities. 2.6 COMPLIANCE WITH LAWS. Seller is in compliance with all applicable laws, orders, rules and regulations of all governmental bodies and agencies, except where such noncompliance has and will have, individually or in the aggregate, no Material Adverse Effect on the Business or assets of such Seller. Neither Seller nor any of its Owners has received written notice of any noncompliance with the foregoing. 2.7 LICENSES AND PERMITS. Seller holds and is in compliance with all Licenses and Permits and the list of Licenses and Permits on the Disclosure Schedule constitutes all of the licenses, permits, approvals and authorizations necessary or required for the use or ownership of Seller's assets and the operation of the Business of such Seller (except where the failure to hold or be in compliance with such License or Permit would have no Material Adverse Effect on such Seller). Neither Seller nor any of its Owners has received written notice of any violations in respect of any such licenses, permits, approvals or authorizations. No proceeding is pending or, to the knowledge of Seller or any of its Owners, is threatened, which seeks revocation or limitation of any such licenses, permits, concessions, grants, franchises, approvals or authorizations. 2.8 FINANCIAL INFORMATION. The Disclosure Schedule includes true, correct and complete copies of (a) the Historical Statements, and (b) the Monthly Statements for periods from June 30, 1998 through the last day of the month immediately preceding the date hereof. All such Historical Statements and Monthly Statements are true, correct and complete and fairly present on a cash or accrual basis, as the case may be, the financial condition of the Business of Seller at the respective dates thereof and the results of operations for the periods then ended and are consistent with the books and records of the Business. All factual information included in Section 2.8A (which consists solely of information provided to determine the 1997 Pre-Tax Operating profit of the Business) of the Disclosure Schedule is true and correct. To the Seller's knowledge, the factual information included in Section 2.8B (which consists solely of specifically identified items of other information provided by Seller to the Accountants, E&Y, PRGX or PRGI, which list of items will be developed by PRGX at the completion of its due diligence) of the Disclosure Schedule is true and correct. On the Effective Date, there were no liabilities or obligations of Seller in respect of the business of any nature, whether liquidated, unliquidated, accrued, absolute, contingent or otherwise except for those (i) that are specifically reflected or reserved against as to amount in the balance sheets contained in the Monthly Statements, or (ii) that are specifically set forth on the Disclosure Schedule attached hereto, none of which constitutes a Material Adverse Effect. Seller is not, nor has Seller been during the 12 months immediately preceding the execution of this Agreement, insolvent within the meaning of 11 U.S.C. ss.101(31). Seller has and is paying its debts as they become due. 2.9 SUFFICIENCY OF ASSETS. The Applicable Assets constitute all of the material assets and rights of any nature with which Seller has conducted the Business of such Seller for the twelve month period prior to the Closing Date, subject only to additions and deletions in the -12- 13 ordinary course of business. The Applicable Assets are held solely by, and all agreements, obligations, expenses and transactions related to the Business of each Seller have been entered into, incurred and conducted solely by such Seller. 2.10 DEPOSITS AND OTHER RIGHTS. The Disclosure Schedule sets forth a true, correct and complete list of all Deposits and Other Rights of Seller, setting forth, where applicable, the amount of such Deposit and Other Rights. 2.11 TRADE PAYABLES; ACCRUED EXPENSES; OTHER DEBT. The Disclosure Schedule sets forth a true, correct and complete list of the trade payables, accounts payable, and accrued expenses of Seller relating to the Business of such Seller outstanding as of the Effective Date and all other debts, obligations, guaranties, liabilities and other indebtedness of Seller relating to the Business of such Seller outstanding as of the Effective Date, stating the origin of the obligation, the security therefor and the amount owed as of date hereof and the terms of payment. All such trade payables, accounts payable, accrued expenses and other debts, obligations, guaranties, indebtedness and other liabilities were incurred in the ordinary course of business and none is overdue. 2.12 TAX RETURNS AND LIABILITIES. (a) Except as otherwise disclosed on the Disclosure Schedule attached hereto, with respect to all of the Corporate Sellers: (i) (A) all returns, including estimated returns and reports of every kind with respect to Taxes which are due to have been filed by Seller in accordance with any applicable law, have been duly filed and are true, correct and complete in all respects; (B) all Taxes, deposits or other payments for which Seller may have any liability through the Effective Date (whether or not shown on a return), have been paid in full or are accrued as liabilities for Taxes on the books and records of Seller; (C) the amounts so paid on or before the Effective Date together with any amounts accrued as liabilities for Taxes (whether accrued as currently payable or deferred Taxes) on the books of Seller will be adequate to satisfy all liabilities for Taxes of Seller in any jurisdiction through the Effective Date, including Taxes accruable upon income earned through the Effective Date; (D) with respect to Seller, there are not now any extensions of time in effect with respect to the dates on which any returns or reports of Taxes were or are due to be filed; (E) all deficiencies asserted as a result of any examination of any return or report of Taxes of Seller have been paid in full, accrued on the books of Seller, or finally settled, and no issue has been raised in any such examination which, by application of the same or similar principles, reasonably could be expected to result in a proposed deficiency for any other period not so examined; (F) no claims have been asserted against Seller and no proposals or deficiencies for any Taxes are being asserted against Seller, or, to Seller's or its Owners' knowledge, proposed or threatened, and no audit or investigation of any return or report of Taxes is currently underway or pending or, to Seller's or its Owners' knowledge, threatened; (G) there are no outstanding waivers or agreements by Seller for the extension of time for the assessment of any Taxes or deficiency thereof, nor are there any requests for rulings, outstanding subpoenas or requests for information, notices of proposed reassessment of any property owned or leased by Seller or any other matter pending between Seller and any Tax Authority; (H) there are no liens for Taxes upon any property or assets of Seller except liens for current Taxes not yet due or -13- 14 payable, nor are there any liens which are pending or threatened; (I) to Seller's and its Owners' knowledge, there are no facts which exist or have existed which would constitute meritorious grounds for the assessment of any Taxes against Seller with respect to the periods which have not been audited by the Internal Revenue Service or any other taxing authorities; (J) Seller is not a party to any Tax allocation or sharing agreement; and (K) Seller (1) is not and has never been a member of an affiliated group (within the meaning of Section 1504(a) of the Code) filing a consolidated U.S. federal income tax return and (2) does not have any liability (whether known or unknown, asserted or unasserted, liquidated or unliquidated, and whether due or to become due) for the Taxes of any Person (other than Seller) under Treas. Reg. ss. 1.1502-6 (or any similar provision of state, local or foreign law), as transferee or successor, by contract or otherwise. (ii) SUBMISSION OF TAX RETURNS. Seller has delivered to PRGX copies of all U.S. federal and state income Tax Returns (together with any examination reports and statements of deficiency) relating to the operations of Seller for the taxable years ended December 31, 1996 and 1997. (iii) ELECTIONS. Neither Seller nor its Owners have filed a consent pursuant to Section 341(f) of the Code. Neither Seller nor any predecessor in interest of it, has filed, or may be deemed to have filed, any election under Section 338 of the Code. (iv) EXCESS PARACHUTE PAYMENTS. Seller has not made any payment which constitutes an "excess parachute payment" within the meaning of Section 280G of the Code, and no payment by Seller required to be made under any contract will, if made, constitute an "excess parachute payment" within the meaning of Section 280G of the Code. (v) FIRPTA. Seller has not been a United States real property corporation within the meaning of Section 897(c)(2) of the Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code. (vi) SUBCHAPTER S STATUS. With respect to all such Sellers that are S corporations, the Disclosure Schedule sets froth a true, correct and complete list of the following information in respect of such Seller: (A) the date on which Seller made a valid election to be treated as an S corporation for U.S. federal income tax purposes; and (B) the date as of which such election was effective. Such election has remained valid and effective since the dates specified in the Disclosure Schedule. Except as disclosed on the Disclosure Schedule attached hereto, Seller also has maintained since the date specified in the Disclosure Schedule for such valid election, a valid election to be treated as an S corporation for purposes of the income tax laws of all states which allow S corporation status. Seller has furnished to PRGX a copy of its S election and acknowledgment of receipt thereof by the Internal Revenue Service. Seller and Owners will not revoke or otherwise take any action that would terminate Seller's election to be taxed as an S Corporation within the meaning of Code Section 1361 and 1362 (other than the sale of Seller's stock pursuant to this Agreement). (b) Except as otherwise disclosed on the Disclosure Schedule attached hereto with respect to all Sellers which are partnerships, limited liability companies or sole proprietorships which have been treated as partnerships or ignored for all federal and state income tax purposes: -14- 15 (i) all Tax Returns including estimated returns and reports of any kind with respect to Taxes which are due to have been filed by Seller in accordance with any applicable law have been duly filed and are true, correct and complete in all respects; (A) all Taxes, deposits or other payments for which Seller may have any liability through the Effective Date (whether or not shown on a return) have been paid in full and, for Sellers on the accrual basis, are accrued as liabilities for Taxes on the books of Seller; (B) the amount so paid on or before the Effective Date together with any amounts accrued, for Sellers on the accrual basis, are accrued as liabilities for Taxes (whether accrued as currently payable or deferred taxes) on the books of Seller and reflected in the books of Seller will be adequate to satisfy all liabilities for Taxes of Seller in any jurisdiction through the day immediately preceding the Closing Date including Taxes accruable on income earned through the day immediately preceding the Closing Date; (C) with respect to Seller there are not now any extensions of time in effect with respect to the dates on which any Tax Returns or reports of Taxes were or due to be filed; (D) there are no liens for Taxes upon any property or assets of Seller except for liens for current Taxes not yet due or payable nor are there any liens which are pending or threatened; (E) to Seller's and its Owners' knowledge, there are no facts which exist or have existed which would constitute meritorious grounds for the assessment of any Taxes against Seller with respect to the periods which have not been audited by the Internal Revenue Service or other taxing authorities. (ii) SUBMISSION OF TAX RETURNS. Seller has delivered to PRGX copies of all U.S. federal and state income tax returns or portions thereof with respect to sole proprietorships (together with any examination reports and statements of deficiency) relating to the operations of Seller for the taxable years ending December 31, 1996 and 1997. 2.13 FIXED ASSETS. Except as specifically set forth on the Disclosure Schedule, each of the Fixed Assets is in good operating condition and repair, normal wear and tear excepted. A true, correct and complete list of the Fixed Assets as of the Effective Date and the location thereof is attached on the Disclosure Schedule. 2.14 ACCOUNTS RECEIVABLE. The Disclosure Schedule attached hereto contains a true, correct and complete list of all Accounts Receivable of Seller for Active Audits as of the Effective Date (and such list contains no Closed Audits) showing, by Customer and by such Active Audit, the terms and time period for collection thereof, and all such Accounts Receivable listed thereon are bona fide, arose in the ordinary course of business, and, to the Seller's and its Owners' knowledge as of the date hereof and without representation or warranty as to events that occur or arise after the Closing, are not subject to any disputes or offsets (other than normal Cancellations and cancellations which otherwise meet the definition of Cancellation in Section 1.14 -15- 16 hereof, but with reference to the Closing Date instead of the Effective Date in each instance in such definition and other cancellations, refunds or chargebacks which may arise after the Closing Date in the normal course of business). In respect of all such Accounts Receivable for Active Audits, the supplier in respect thereof has not objected to the claim for reimbursement upon which such Account Receivable is based and the Customer has received a credit or payment therefor. The information set forth on the Disclosure Schedule in respect of each Active Audit is true, correct and complete, all as of the Effective Date. All Accounts Receivable that arose after the Effective Date and prior to Closing are bona fide, arose in the ordinary course of business and, to the Seller's and Owners' knowledge as of the date hereof and without representation or warranty as to events that occur or arise after the Closing, are not subject to any disputes or offsets (other than cancellations which otherwise meet the definition of Cancellation in Section 1.14 hereof, but with reference to the Closing Date instead of the Effective Date in each instance in such definition and other cancellations, refunds or chargebacks which may arise after the Closing Date in the normal course of business). All Accounts Receivable are set forth in Seller's books and records and in any financial statements prepared pursuant to the terms of this Agreement consistent with past practice. 2.15 BANK ACCOUNTS. The Disclosure Schedule contains a true, complete and correct list showing the name and location of each bank or other institution in which Seller has any deposit account or safe deposit box in respect of the Business of such Seller, together with a listing of account numbers and names of all persons authorized to draw thereon or have access thereto. 2.16 MATERIAL CONTRACTS. The Disclosure Schedule sets forth a true and complete list of all Material Contracts of Seller. Seller and its Owners have provided or made available to PRGI true, correct and complete copies of all Material Contracts, including any and all amendments and waivers thereto. Assuming the Material Contracts constitute the valid and binding agreements of the parties thereto other than Seller, such Material Contracts are valid, legally binding and enforceable against the parties thereto subject to laws of general application in effect affecting creditors' rights and subject to the exercise of judicial discretion in accordance with general equitable principles. Neither Seller nor, to the knowledge of Seller and its Owners, any other party to any of the Material Contracts, is in breach of, or in default under, any of the Material Contracts, and no event has occurred which, with the giving of notice or lapse of time, or both, would constitute a default by Seller or, to the knowledge of Seller and its Owners, any other party to any of the Material Contracts. Except as specifically set forth on the Disclosure Schedule, the assignment (by contract or by operation of law) of any of the Material Contracts to PRGI in accordance with the Acquisition Agreements will not constitute a breach or violation of such Material Contract. 2.17 CUSTOMERS AND PRIMARY CUSTOMERS. All Customers of the Business to whom any Seller provides services are invoiced by RBA only. There are no Customers of Seller who have, within the 12 months immediately preceding the Effective Date, expressed to Seller material dissatisfaction with Seller's services. The Disclosure Schedule contains a true, correct and complete list for each of calendar 1996, 1997 and 1998 (as to 1998, from January 1, 1998 to the Effective Date) of each Primary Customer of RBA for such period, the revenues generated for RBA by each such Primary Customer during the respective period, the percentage of the total revenues of RBA for each such -16- 17 period that the revenues of each Primary Customer for such period constitutes, and the term of the Contract for such Primary Customer, including the expiration date thereof. 2.18 EMPLOYEES, ASSOCIATES AND PRINCIPALS. (a) The Disclosure Schedule includes in respect of each current Employee, Associate, auditor and independent contractor of Seller, a true, correct and complete list of the name and position of such person, the commission formulae applicable thereto, the salary, compensation, all other benefits and all accrued commissions and the amount of any advances on commissions (describing the repayment terms thereof) and expenses such person has received which are outstanding as of the Effective Date. Except as otherwise set forth in the Disclosure Schedule, the engagement of each Associate is terminable upon 90 days written notice by Seller or such Associate subject to any rights to commissions earned prior to such termination. Except as set forth on the Disclosure Schedule, no Associate is entitled to receive commissions greater than 50% of fees received by RBA from Customers. Each Associate meets the requirements under the Code and the regulations promulgated thereunder to be an independent contractor. In respect of each of Kirkeide and Beck, Jr., the Disclosure Schedule identifies the Active Audits and Closed Audits for which he has performed audit services and seeks or will seek from RBA payments of commissions for audit and related management counseling services performed by him prior to the Effective Date in respect of such audits. In respect of each such audit, the Disclosure Schedule sets forth the number of days audit services were performed by him both before the Effective Date and from the Effective Date to the Closing Date. (b) The terms of each Principal Agreement, including any oral or written agreement or understanding between RBA and any Principal or Other Seller are set forth on the Disclosure Schedule. As of the Effective Date, all amounts owed under each Principal Agreement had been fully satisfied (other than commissions owed to Beck, Jr. and Kirkeide to the extent described in Section 2.18(a) of the Disclosure Schedule). 2.19 INTELLECTUAL PROPERTY. The Disclosure Schedule sets forth a true, correct and complete list of all Intellectual Property Rights used by Seller in the operation of its Business. Except as indicated on the Disclosure Schedule, Seller is the sole owner of the Intellectual Property Rights. If, as indicated on the Disclosure Schedule, Seller is not the sole owner of such Intellectual Property Rights, Seller has the sole and exclusive right to use such Intellectual Property Rights except as otherwise indicated on the Disclosure Schedule. Upon the consummation of the transactions contemplated hereby and by the Acquisition Agreements and compliance with applicable laws as to the assignment of such Intellectual Property Rights, PRGI will have the sole and exclusive right to own and use the Intellectual Property Rights. No claims have been asserted and no claims are pending or, to Seller's or the Owners' knowledge, threatened by any person or entity, as to the use of any such Intellectual Property Rights or challenging or questioning the validity or effectiveness of any state or federal registration of the Intellectual Property Rights and neither Seller nor any of its Owners knows of any valid basis for such claim. To the Seller's and its Owners' knowledge, Seller's use of the Intellectual Property Rights, and PRGI's continued use of the Intellectual Property Rights following the Closing in the same manner as heretofore used by Seller, does not and will not infringe on the rights of any person or entity. -17- 18 2.20 MATERIAL LEASES. The Disclosure Schedule contains a true, correct and complete list of all Material Leases. Seller has delivered or made available to PRGI true, correct and complete copies of the Material Leases listed in the Disclosure Schedule, together with all amendments, addenda and supplements thereto. With respect to each Material Lease: (a) the Material Lease is legal, valid, binding and enforceable against Seller and in full force and effect, subject to laws of general application in effect affecting creditors' rights and subject to the exercise of judicial discretion in accordance with general equitable principles; (b) subject to obtaining any necessary consent in respect of the transactions contemplated hereunder and set forth in the Disclosure Schedule, the Material Lease will continue to be legal, valid, binding and enforceable against Seller and in full force and effect on identical terms following the Closing; (c) neither Seller, nor, to Seller's or its Owners' knowledge, any other party to the Material Lease is in breach or default, and no event has occurred which, with the giving of notice or lapse of time, would constitute a breach or default by Seller or permit termination, modification or acceleration thereunder by any other party thereto; (d) neither Seller nor, to Seller's or its Owners' knowledge, any other party to the Material Lease has repudiated in writing any provision thereof; (e) there have been and there are no disputes, oral agreements or forebearances in effect as to the Material Lease; and (f) Seller has not assigned, transferred, conveyed, mortgaged, deeded in trust or encumbered any interest in the Material Lease and neither Seller nor its Owners is aware of any such assignment, transfer, conveyance, mortgage, deed in trust or encumbrance of any interest in the leasehold. 2.21 LITIGATION; JUDGMENTS. There is no action, proceeding or investigation pending or, to Seller's or any of its Owners' knowledge, threatened against or involving Seller or any of its Owners relating to the Applicable Assets or the operation of such Seller's Business, nor is there any action or proceeding pending or, to the knowledge of Seller or any of its Owners, threatened before any court, tribunal or governmental body seeking to restrain or prohibit or to obtain damages or other relief in connection with the consummation of the transactions contemplated by this Agreement or the Acquisition Agreements, or which might adversely affect such Seller's Business or the Applicable Assets, or Seller's or its Owners' ability to consummate the transactions contemplated by this Agreement and Seller Transaction Documents. Neither Seller nor any of its Owners is subject to any judgment, order or decree entered in any lawsuit or proceeding relating to the Applicable Assets or the operation of such Seller's Business. 2.22 INSURANCE. The Disclosure Schedule contains a true, correct and complete list of the Insurance Policies, including the name of the insurance company, the policy number, a description of the type of insurance covered by such policy, the dollar limit of the policy, and the annual premiums for such policy. -18- 19 2.23 BENEFIT PLANS AND ERISA. (a) Benefit Plan Sellers. Each Seller and its respective Owners (other than Beck, Jr., Kirkeide and Cavins), jointly and severally, make the representations and warranties to PRGI and PRGX set forth on Exhibit 2.23 as fully and completely as if such representations were set forth herein in full, subject to the introductory paragraph of this Article 2. (b) Non-Benefit Plan Sellers. Each of Beck, Jr., Kirkeide and Cavins hereby represents to PRGI and PRGX that such Seller does not maintain, contribute to or otherwise have any liability whatsoever with respect to any Employee Benefit Plan or other bonus, profit sharing, pension, compensation, deferred compensation, stock option, stock purchase, fringe benefit, severance, post-retirement, scholarship, disability, sick leave, vacation, individual employment, commission, bonus, payroll practice, retention, or other plan, agreement, policy, trust fund or arrangement for any of the Business Employees or other personnel providing services to such Seller. 2.24 IMMIGRATION MATTERS. (a) With respect to all Associates and Employees (as defined in Section 274a.1(g) of Title 8, Code of Federal Regulations) of Seller, Seller has complied with IRCA with respect to the completion, maintenance and other documentary requirements of Forms I-9 (Employment Eligibility Verification Forms) for all current and former employees and the reverification of the employment status of any and all employees whose employment authorization documents indicated a limited period of employment authorization. (b) The Disclosure Schedule attached hereto contains a true and complete list of all Employees and Associates of Seller, if any, who are not citizens of the United States of America and who are not permanent residents of the United States of America, together with a true and complete list of the visa status and visa expiration dates of each such Employee or Associate. (c) Seller has only employed individuals authorized to work in the United States. Seller has not received any written notice of any inspection or investigation relating to its alleged noncompliance with or violation of IRCA, nor has it been warned, fined or otherwise penalized by reason of any failure to comply with IRCA. (d) The consummation of the transactions contemplated by this Agreement and the Acquisition Agreements will not (i) give rise to any liability for the failure properly to complete and update Forms I-9, (ii) give rise to any liability for the employment or engagement of individuals not authorized to work in the United States and (iii) cause any current employee to become unauthorized to work in the United States. 2.25 BROKER'S FEES. Neither Seller nor any of its Owners has retained or utilized the services of any broker, finder or intermediary, or paid or agreed to pay any fee or commission to any other person or entity for or on account of the transactions contemplated hereby, or had any communications with any person or entity with respect thereto, which would obligate PRGI to pay any such fees or commissions. -19- 20 2.26 ABSENCE OF MATERIAL CHANGES. Except as set forth in the Disclosure Schedule, from December 31, 1997 to the date of this Agreement (or for such other period as specified below): (a) there has not been any Material Adverse Effect on the condition (financial or otherwise) of the Business of Seller, the liabilities or the Applicable Assets; (b) to the Seller's and its Owners' knowledge, there has been no Material Adverse Effect on Seller's relations with, nor has Seller lost (or received written notice that it is about to lose) any Primary Customers; (c) Seller has operated its Business in the ordinary course and has not sold, assigned, or transferred any of its assets except in the ordinary course of business consistent with past practice; (d) neither Seller nor any of its Owners has mortgaged, pledged or subjected to any lien, pledge, mortgage, security interest, conditional sales contract, or other encumbrance of any nature whatsoever, any of the Applicable Assets or affected any of the Owners' ownership of Seller's issued and outstanding equity securities (if any); (e) there has been no amendment, termination, or waiver of any right of any Seller under any contract, governmental license or permit that may materially adversely affect the Applicable Assets, the Business of Seller or any of its Owners' ownership of Seller's issued and outstanding equity securities (if any); (f) Seller has not: (i) paid any judgment resulting from any suit, proceeding, arbitration, claim or counterclaim in respect of its assets or business in excess of $1,000 (provided that all such excluded payments do not aggregate to more than $5,000); (ii) made any such payment to any party in settlement of any such suit, proceeding, arbitration, claim or counterclaim in excess of $1,000 (provided that all such excluded payments do not aggregate to more than $5,000); (iii) written down, or failed to write down (in accordance with its past practices consistently applied) or written up the value of any inventory or assets of Seller; (iv) made any material changes in the customary methods of operation of Seller's Business, including practices and policies relating to purchasing, marketing, selling, accounting, payment of trade creditors or in the billing or collection of accounts receivable or work in progress, including without limitation, discounting or writing off any of Seller's accounts receivable or work in progress for early payment, or granting any other deduction or discount thereon or accelerating the collection thereof; -20- 21 (v) (except in respect of ordinary trade payables) incurred any indebtedness or guaranteed any indebtedness, except for borrowings under existing loans or lines of credit in the ordinary course of business consistent with past practice; (vi) issued or sold any of its stock, membership interests, equity interests, notes, bonds or other securities, or any option, warrant or other rights to purchase the same; or (vii) during the period from the Effective Date to the date of this Agreement, taken any action other than in the ordinary course of business and in a manner consistent with past practices (none of which actions has been unreasonable or unusual) with respect to increasing the compensation of any Associate, Employee or Principal, paying bonuses to any (except for bonuses earned in the ordinary course of business), or granting of any severance or termination pay to any Associate, Employee or Principal (otherwise than pursuant to policies of Seller in effect on the date hereof fully disclosed to PRGI in writing prior to the date hereof) or increasing of benefits payable to any Associate, Employee or Principal have been paid under its severance or termination pay policies in effect on the date hereof; provided, however, that from the Effective Date to the date hereof the Principals are entitled to receive salaries at rates to be in effect after the Closing; (viii) during the period from the Effective Date to the date of this Agreement, declared, set aside or paid any dividend or distribution payable in cash, stock, property or otherwise to any Owner or with respect to Seller's equity interests (except for distributions of cash and cash equivalents in the Business as of the close of business on August 31, 1998 or other distributions in the ordinary course consistent with Seller's past practices); or (ix) except in respect of the Success Bonuses, agreed, whether in writing or otherwise, to take any of the actions specified in this Section 2.26. 2.27 CERTAIN ARRANGEMENTS. (a) The Disclosure Schedule sets forth a true, correct and complete list as of December 31, 1997 of any direct or indirect transaction (other than in respect of compensation or travel or expense account reimbursement in the ordinary course of business consistent with past practice) that any Owner, director, officer, member, Employee, Associate or other Affiliate or any relative of any Owner, director, officer, member, Employee, Associate or other Affiliate has or had with Seller at any time during 1997 and contains a brief description of each transaction, including without limitation: (i) any contract, agreement, understanding, commitment or other arrangement providing for the furnishing of services, or the rental of real or personal property from or otherwise requiring payments to any such person (outside of his or her capacity as such Owner, director, officer, member, Employee, or Associate or other Affiliate) or to any such relative of such person; and -21- 22 (ii) any loans or advances to or from Seller (exclusive of travel advances, expense advances, and normal salary advances in connection with vacation periods, or compensation, or travel or expense account reimbursement all in the ordinary course of business), giving for each the principal amount outstanding, interest rate, maturity date and security therefor. (b) Except as set forth on the Disclosure Schedule, there have been no transactions of the nature described in Section 2.27(a) between (i) Seller and (ii) any of its Owners, directors, officers, members, employees, or other Affiliates of Seller since December 31, 1997 to the date of this Agreement or prior to December 31, 1997 which have continued beyond December 31, 1997. 2.28 INVESTMENT INTENT. (a) Each Asset Seller and each of the Owners covenants, warrants, represents and agrees that the PRGX Shares, if any, to be acquired by such Asset Seller or Owner pursuant to the Acquisition Agreements are being acquired solely for such Asset Seller's or the Owner's, as applicable, own account for investment purposes and not with a view to or in connection with any sale or other distribution thereof, within the meaning of the Act, except to the extent that such PRGX Shares may be sold under an effective registration statement under the Act and any applicable state securities law, or in the opinion of counsel reasonably acceptable to PRGX, pursuant to an exemption under the Act and any applicable state securities law. (b) Each Asset Seller and each of the Owners understand and acknowledge that all of the PRGX Shares acquired by it or him are to be issued and sold to such Asset Seller or Owner without registration and in reliance upon certain exemptions under the Act, and in reliance upon certain exemptions from registration requirements under applicable state securities laws. (c) Each Asset Seller and each of the Owners represent and warrant to PRGI and PRGX that it or he will make no transfer or assignment of any of the PRGX Shares except in compliance with the Act and any other applicable securities laws. (d) Each Asset Seller and each of the Owners covenant and agree that, prior to any transfer or disposition not registered under the Act of any of the PRGX Shares, or any shares received from PRGX on account of such PRGX Shares pursuant to a stock dividend, stock split, or similar event, such Asset Seller and/or Owner will give written notice to PRGX, expressing such Asset Seller's or Owner's intention to effect such transfer or disposition and describing the proposed transfer or disposition. Such notice shall be accompanied by an opinion of counsel for the Asset Seller or Owner, acceptable to PRGX, from a law firm or attorney with a national reputation for expertise in federal and state securities laws ("Opinion") that the proposed transfer is exempt under the Act and applicable state securities laws. All reasonable fees and expenses incurred by such Asset Seller or Owner in connection with obtaining any Opinion contemplated by this Section 2.28 shall be promptly reimbursed by PRGI. (e) Each Asset Seller and each of the Owners understand and acknowledge that the PRGX Shares will be inscribed with the following legends, or another legend to the same effect and agrees to the restrictions set forth therein: -22- 23 "The shares represented by this certificate have not been registered under the Securities Act of 1933, as amended, or under the securities laws of any other jurisdiction, in reliance upon exemptions from the registration requirements of such laws. The shares represented by this certificate may not be sold or otherwise transferred, nor will an assignee or endorsee hereof be recognized as an owner of the shares by the issuer unless (i) a registration statement under the Securities Act of 1933 and other applicable securities laws with respect to the shares and the transfer shall then be in effect, or (ii) in the opinion of counsel reasonably satisfactory to the issuer, the shares are transferred in a transaction which is exempt from the registration requirements of such laws." "The shares represented by this certificate are subject to a Lock-Up Agreement dated October 29, 1998, which restricts the transfer of the shares. A copy of such Agreement may be inspected at the principal office of The Profit Recovery Group International, Inc." PRGX agrees to and acknowledges that it will instruct its transfer agent to remove such legends and reissue such certificates free of any legend or restriction in respect of any PRGX Shares which are no longer subject to the restrictions in either legend, provided that (i) the Asset Seller or Owner, as applicable, has satisfied all of the requirements of Rule 144(k) as promulgated under the Act and any other applicable federal and state securities laws and regulations and (ii) PRGX has received from such Asset Seller or Owner, as applicable, an Opinion that such requirements have been satisfied and that the PRGX Shares in respect of which legends have been requested to be removed are no longer subject to the restrictions of the Lock-Up Agreement. (f) Each Asset Seller and each of the Owners understand and acknowledge that it or he is aware that no federal or state agency has made any recommendation or endorsement of the PRGX Shares or any finding or determination as to the fairness of the investment in such PRGX Shares. (g) Each Asset Seller and each of the Owners represent and warrant to PRGX that no offer in respect of the PRGX Shares was made to them by PRGX or any person acting on PRGX's behalf by means of general or public solicitation or general or public advertising, such as by newspaper or magazine advertisements, by broadcast media, or at any seminar or meeting whose attendees were solicited by such means. (h) Neither any Asset Seller nor any of the Owners are aware of any information concerning PRGI, PRGX or their respective businesses, assets, liabilities, and rights which any of them has requested to obtain and which has not been provided by PRGI or PRGX to the Asset Seller and each of the Owners. Each Asset Seller and each of the Owners acknowledge and agree that neither such Asset Seller nor any of the Owners is aware of any additional information it or they require in order to make its or their respective investment decisions herein. (i) Each Asset Seller and each of the Owners hereby acknowledge that the PRGX Shares are a speculative investment. Each Asset Seller represents that it, and each of the Owners -23- 24 represents that he, can bear the economic risks of such an investment for an indefinite period of time. (j) Each Asset Seller and each of the Owners represent and warrant that it or he has such knowledge and experience in financial and business matters, and particularly the business conducted by PRGX, and is capable of evaluating the risk of the investment in PRGX Shares contemplated by this Agreement. (k) Each Asset Seller and each of the Owners represent and warrant that it or he has carefully read this Agreement and discussed its requirements and other applicable limitations (including those set forth in Rule 144 under the Securities Act of 1933, as amended) with respect to the transfer or other disposition of the PRGX Shares with legal counsel. (l) Each Asset Seller and each of the Owners understand and acknowledge that the desirability of an investment in PRGX may be influenced by the federal income tax consequences, and by the various state and local tax consequences, arising from such Asset Seller's and such Owner's receipt of consideration under the Acquisition Agreements, including the PRGX Shares. Because such tax effects depend, among other things, on the specific facts, circumstances and intentions of Asset Seller and each of the Owners, such Asset Seller and each Owner represent and warrant that such Asset Seller and such Owner have consulted its or his own tax advisors with respect to tax consequences and have not relied upon PRGI or its representatives as to such matters. Each Asset Seller and each of the Owners (and such Asset Seller's and Owner's advisors) have taken into account the effects of federal, state and local tax laws on Asset Seller's and the Owner's receipt of consideration under the Acquisition Agreements, including the PRGX Shares. (m) PRGI and PRGX hereby acknowledge and consent to the transfer, as soon as practicable after the Closing, by certain Sellers and Owners hereof to those key employees of RBA as identified thereon certain PRGX Shares received by such Sellers or Owners under their respective Acquisition Agreements as described on Schedule 5.20 attached hereto and hereby waive any requirement of an Opinion in connection with the transfer by the Owners; provided that, as a condition to receiving any such PRGX Shares, such key employee shall sign an investment intent letter and a lock-up agreement in the forms attached hereto as Exhibit 2.28(m) and if a determination is made by PRGX that such person is not an accredited investor, as that term is defined under the Act, or is not otherwise a sophisticated investor, such person shall have, prior to the date such person receives certificates evidencing such shares, appointed an Owner Representative to assist such person in his investment decision pursuant to the forms described in Section 5.11 hereof. Upon the satisfaction of such conditions, PRGX shall direct its transfer agent to record such transfer appropriately on PRGX's stock records. 2.29 FULL DISCLOSURE. The statements, representations and warranties made by Seller and its Owners in this Agreement and in the Schedules, including the Disclosure Schedule, and Exhibits attached hereto do not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained herein or therein, in light of the circumstances under which they were made, not misleading. Each Seller and its Owners has reviewed the Disclosure Schedule attached hereto. To the knowledge of each Seller and its -24- 25 Owners, all information contained in the Disclosure Schedule in respect of each other Seller and its Owners is true, complete and accurate in every material respect. ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF PRGX AND PRGI In order to induce Seller and its Owners to enter into this Agreement and the Acquisition Agreements and to consummate the transactions contemplated hereby and thereby, each of PRGX and PRGI, jointly and severally, represents and warrants to Seller and its Owners as follows, each of which representations and warranties is material to and relied upon by Seller and its Owners: 3.1 ORGANIZATION OF PRGX AND PRGI. Each of PRGX and PRGI is a corporation duly organized and validly existing under the laws of the State of Georgia and has the corporate power and authority to own its property and to carry on its business as now being conducted by it. 3.2 CORPORATE POWER AND AUTHORITY; DUE AUTHORIZATION. Each of PRGX and PRGI has full corporate power and authority to execute and deliver this Agreement and the PRGI Transaction Documents and to consummate the transactions contemplated hereby and thereby. The Board of Directors of PRGX and PRGI has duly approved and authorized the execution and delivery this Agreement and each of the PRGI Transaction Documents and the consummation of the transactions contemplated hereby and thereby, and no other corporate proceedings on the part of PRGI or PRGX are necessary to approve and authorize the execution and delivery of this Agreement and such PRGI Transaction Documents and the consummation of the transactions contemplated hereby and thereby. Assuming that this Agreement and each of the PRGI Transaction Documents constitutes a valid and binding agreement of Seller and/or the Owners, as the case may be, this Agreement and each of the PRGI Transaction Documents constitutes a valid and binding agreement of PRGX and PRGI, enforceable against PRGX and PRGI in accordance with its terms, subject to laws of general application in effect affecting creditors' rights and subject to the exercise of judicial discretion in accordance with general equitable principles. 3.3 NO CONFLICT; CONSENTS. The execution and delivery by PRGX and PRGI of this Agreement, the PRGI Transaction Documents and the consummation by PRGX and PRGI of the transactions contemplated hereby and thereby do not and will not (a) require (other than the consent of NationsBank, N.A. and/or any other bank or institution in the syndicate comprising the secured lender of PRGI and PRGX), the consent, approval or action of, or any filing or notice to, any corporation, firm, person or other entity or any public, governmental or judicial authority; (b) violate the terms of any instrument, document or agreement to which PRGX or PRGI is a party, or by which PRGX or PRGI or the property of PRGX or PRGI is bound, or be in conflict with, result in a breach of or constitute (upon the giving of notice or lapse of time, or both) a default under any such instrument, document or agreement; (c) violate PRGX's or PRGI's Articles of Incorporation or Bylaws; or (d) violate any order, writ, injunction, decree, judgment, ruling, law or regulation of any federal, state, county, municipal, or foreign court or governmental authority applicable to PRGX or PRGI, or the business or assets of PRGX or PRGI, and relating to the transactions contemplated herein. -25- 26 3.4 SHARES TO BE DELIVERED. The PRGX Shares, when issued and delivered to Asset Sellers and Owners entitled to receive such Shares under and pursuant to the Acquisition Agreements, will be duly authorized, validly issued, fully paid and non-assessable shares of Common Stock of PRGX, free of liens and encumbrances created by PRGX except as set forth in this Agreement. 3.5 PRGX/PRGI DISCLOSURE. As of the date hereof, PRGX has made all necessary filings pursuant to the applicable requirements of the Act and the Securities Exchange Act of 1934, as amended (collectively, the "PRGX Public Reports"). The PRGX Public Reports contained in the PRGX/PRGI Disclosure complied at the respective times of the filing thereof in all material respects with the applicable requirements of the Act and the Securities Exchange Act of 1934, as amended, and, as of the dates thereof, to PRGI's knowledge, did not contain any untrue statement of any material fact or omit to state a material fact required therein to be stated or omit to state a material fact in order to make the statements therein not misleading. All financial statements set forth in the PRGX Public Reports present fairly the consolidated financial condition of PRGX and its affiliates as of (or for the years ending on) their respective dates. Notwithstanding the foregoing, in respect of the Private Securities Litigation Reform Act of 1995, statements made by PRGX in the PRGI/PRGX Disclosure which are not historical facts, including projections, statements of plans, objectives, expectations, or future economic performance, are forward looking statements that involve risks and uncertainties and are subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995. PRGX's future financial performance could differ significantly from that set forth in the PRGX Public Reports, and from the expectation of management. Important factors that could cause PRGX's financial performance to differ materially from past results and from those expressed in any forward looking statements contained in the PRGI/PRGX Disclosure include, without limitation, seasonality of PRGI's business, fluctuations in its quarterly operating results, dependence on key clients, PRGI's ability to replace revenues from clients who discontinue engagements with PRGI with revenues from new or existing clients, client bankruptcies, uncertainty of revenue recognition estimates and collection of contract receivables, risks associated with acquisitions and PRGI's management of expanding operations, and risks associated with international operations. For further information and other risk factors, refer to PRGX's Report on Form 10-K for the year ended December 31, 1997, including the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section thereof, as well as the Risk Factors section of the Prospectus, and other PRGX/PRGI Disclosure. As of the date hereof, the information contained in the PRGI/PRGX Disclosure, in its totality, does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading; provided, however, that with respect to any information contained in a PRGX Public Report which prior to the date hereof has been corrected, supplemented or otherwise modified by a subsequently filed PRGX Public Report, the foregoing representation is made only with respect to such information as corrected, supplemented or otherwise modified. 3.6 AUTHORIZED CAPITAL STOCK. As of October 1, 1998, the authorized capital stock of PRGX consists of 60,000,000 shares of Common Stock, no par value per share, and 1,000,000 shares of preferred stock, no par value per share. As of October 1, 1998, there were 23,142,505 shares of Common Stock of PRGX issued and outstanding; there were 4,500,000 shares of Common Stock reserved for issuance pursuant to PRGX's Stock Incentive Plan, 3,041,053 of -26- 27 which have been granted and were outstanding as of October 1, 1998, of which 553,386 were exercisable; and there were no shares of preferred stock outstanding. 3.7 BROKERS FEES AND EXPENSES. Except for BankBoston Robertson Stephens (whose fee will be paid by PRGI), PRGI has not retained or utilized the services of any broker or finder or paid or agreed to pay any fee or commission for or on account of the transactions contemplated hereby, or had any communications with any person or entity which would obligate Seller or the Owners to pay any such fees or commissions. ARTICLE 4 INDEMNIFICATION 4.1 INDEMNIFICATION BY SELLER AND THE OWNERS. In addition to any other indemnification obligation of Seller or its Owners under any other provision of the Acquisition Agreements, Seller and each of its Owners hereby indemnify and hold PRGI, and its Affiliates, directors, officers, stockholders, employees and agents (collectively the "PRGI Indemnified Parties") harmless from and against all claims, liabilities, lawsuits, costs, damages or expenses (including, without limitation, reasonable attorneys' fees and expenses incurred in litigation or otherwise) (collectively, "Losses") arising out of and sustained by any of them due to or relating to (collectively, the "Section 4.1 Indemnified Claims"): (a) with respect to the Businesses of all Sellers, any misrepresentation or breach of any representation or warranty, or breach, nonfulfillment of, or failure to perform, any covenant, obligation or agreement of Seller or any of its Owners contained in this Agreement or in any Seller Transaction Document; (b) with respect to the Businesses of the Asset Sellers acquired pursuant to the Asset Agreements, any liability or obligation suffered by PRGI or PRGX, other than the Assumed Liabilities (as defined in such Seller's Asset Agreement), whether or not the existence or assertion of such liability or obligation would constitute a breach of any representation, warranty, covenant, obligation or agreement contained herein or in any Seller Transaction Document relating to or arising out of the operation of the Business of such Seller, or the ownership or use of such Seller's Purchased Assets (including, by way of illustration and not limitation, any and all known or unknown, fixed or contingent, claims, liabilities, income, payroll, sales or other Tax liabilities of Seller or the Business of such Seller (including, without limitation, any Taxes on the sale by Seller to PRGI of the Purchased Assets); obligations owed by Seller to RBA, Associates, auditors or other service providers in respect of commissions for cash receipts of clients received prior to the Effective Date; debts, contracts, agreements, obligations, damages, costs and expenses claimed or demanded by third parties against PRGI) prior to the Effective Date, except to the extent specifically disclosed herein or in the respective Asset Agreement or the Schedules hereto or thereto; provided that such disclosure shall not cause or result in such obligation or liability becoming an Assumed Liability or, if such obligation or liability is asserted against PRGI or PRGX, affect PRGI's or PRGX's right to defend itself against such obligation or liability, but will only relieve Seller and its Owners of the obligation to indemnify PRGI and PRGX pursuant hereto to the extent so disclosed; -27- 28 (c) with respect to the Businesses of the Stock Sellers acquired pursuant to the Stock Agreements, any liability or obligation suffered by PRGI or PRGX (whether or not the existence or assertion of such liability or obligation would constitute a breach of any representation, warranty, covenant, obligation or agreement contained herein or in any Seller Transaction Document) relating to or arising out of the operation of the Business of such Seller, the transactions contemplated hereby or by the Acquisition Agreement, or the ownership or use of such Seller's Applicable Assets prior to the Closing Date and either (i) not specifically disclosed herein or in the respective Stock Agreements or the schedules hereto or thereto, or (ii) if incurred on or after the Effective Date, was (A) an Effective Date Reimbursable Liability or an Interim Period Reimbursable Liability (as those terms are defined in the Stock Seller's respective Acquisition Agreement) to the extent a Purchase Price adjustment is not made at Closing in respect thereto, or (D) either (1) incurred other than in the ordinary course of business and without PRGI's prior express written consent, or (2) subject to the limitations in Section 4.6(c) hereof, if incurred in the ordinary course of business, had a Material Adverse Effect on such Seller or its Business; (d) with respect to the Businesses of all Sellers, any obligation or liability suffered by PRGI or PRGX (whether or not the existence or assertion of such liability or obligation would constitute a breach of any representation, warranty, covenant, obligation or agreement contained herein or in any Seller Transaction Document and whether or not specifically disclosed hereunder or in the Acquisition Agreements or the schedules hereto or thereto), in respect of the following: (i) the treatment of any Associates or other service providers to the Business as employees, and not as independent contractors, for any federal, state or local purposes, including, without limitation, any withholding for any state or federal income tax or FICA amounts, state or federal unemployment insurance contributions, payments in respect of workers' compensation insurance or payments under the Fair Labor Standards Act or regulations promulgated thereunder, (ii) any failure to obtain prior to Closing any required Seller Consent, (iii) any litigation, arbitrations and mediations that existed on or at any time prior to the Effective Date, (iv) any Losses, including without limitation, any contribution, tax, lien, penalty, cost, interest, claim, loss, action, suit, damage, cost assessment, withdrawal liability, liability to the PBGC, liability under Section 412 of the Code or Section 302(a)(2) of ERISA, or other similar liability or expense of Seller or any ERISA Affiliate arising out of or sustained by PRGI or PRGX or, after the Closing Date, any Stock Seller due to or relating to (A) the termination, or cessation of sponsorship and transfer, before or after the Closing of any Employee Benefit Plan of any Seller or (B) any payments to Associates, Employees or Principals of unused amounts under Seller's "Cafeteria" Employee Benefits Plans, (v) any Losses suffered by PRGI, PRGX or any of the Stock Sellers based on claims by any Person for indemnification from any Seller under any statute, organizational document of Seller, contract or otherwise by reason of such Person's having been a director, officer, employee, agent or other Person acting at the request of any Seller, (vi) any Losses suffered by PRGI, PRGX or, after the Closing, RBA, arising out of or sustained by any of them due to or relating to the payment of the Success Bonuses or in respect of the account receivable of RBA owed by any Owner or Seller in respect of or related to the payment to RBA in the approximate aggregate amount of $1,670,000, payable in cash and PRGX Shares in respect of the period prior to the Effective Date as to which RBA AUDITS, CAVINS SP, CREADON SP and SCLLC will provide irrevocable payment instructions to PRGI at Closing (the "Prior Period Payment"), including, without limitation, the inability of RBA to deduct for any federal, state and local income tax purpose all or any part of the Success Bonus or to deduct -28- 29 all or any portion of it for such purposes in the taxable year in which the Prior Period Payment is recognized as income by RBA, and the incurrence by RBA of any payroll or other withholding tax obligations with respect to the Success Bonus in excess of the withholding amounts shown on Schedule 5.21; and (vii) any Losses suffered by PRGI, PRGX or RBA arising out of or sustained by any of them due to or relating to the ownership of the shares of RBA by Brittney Beck or the authority of any person to act for or on behalf of Brittney Beck; (e) in the event (i) Seller shall be required to refund or repay, or after the Closing Date PRGI or any Stock Seller shall be required to refund or repay, to any Customer any fee or portion thereof received by Seller in respect of a Closed Audit, or (ii) any Customer is entitled to repayment of any fee or portion thereof paid to Seller in respect of a Closed Audit and such Customer offsets such repayment from amounts due Seller after the Effective Date or PRGI after the Closing, Seller and its Owners agree jointly and severally to indemnify and hold the PRGI Indemnified Parties harmless from and against the entire amount of such refund, repayment or offset, less the amount, if any, which PRGI obtains within 120 days after PRGI or Stock Seller receives notice from such Customer requesting repayment or offset or otherwise learns of such requested repayment or offset, using reasonable efforts (but not including litigation), from any Person who was an Associate prior to the Closing and is then an employee of PRGI, of any commission that was paid to such Associate by Seller in respect of the fees or other amounts required to be refunded or repaid to such Customer; provided, the parties acknowledge and agree that the indemnification provided herein shall be: (i) joint and several among all Sellers and Owners (without regard to the number of Escrow Shares delivered in escrow by any particular Seller or Owner or the relative responsibility of any Seller or Owner for such Section 4.1 Indemnified Claim) to the extent that the Escrow Shares are sufficient to indemnify the PRGI Indemnified Parties from any Section 4.1 Indemnified Claims incurred; (ii) to the extent the aggregate amount of the Section 4.1 Indemnified Claims (A) exceeds the value of the Escrow Shares (as valued as provided in the Indemnity Escrow Agreement) and (B) includes Recourse Obligations, the indemnification in respect of such Recourse Obligations in excess of the value of the Escrow Shares shall be joint and several only among: (1) Seller whose Business or breach (or breach of its Owners) generated such Recourse Obligations, (2) its respective Owners, (3) the Owners of RBA and (4) if such Loss arises prior to the Closing, RBA, jointly and severally, and the PRGI Indemnified Parties shall not be entitled to seek indemnification against any other Seller or Owner with respect thereto; and (iii) several and not joint with respect to any indemnity related to any breach from and after the Closing of a covenant not to compete between any Seller or Owner on the one hand, and PRGI or PRGX, on the other, or of any employment agreement between any Seller or Owner, on the one hand, and PRGI or PRGX, on the other, or to maintenance by any Seller or Owner of any confidentiality covenants for the benefit of PRGI or PRGX. -29- 30 In addition, the indemnification obligations in respect of any representations, warranties, covenants, obligations or agreements of Kirkeide or KIRKEIDE SP shall be made solely by the Owners of RBA (and if such Loss arises prior to the Closing, by RBA), jointly and severally. 4.2 INDEMNIFICATION BY PRGI AND PRGX. In addition to any other indemnification obligation of PRGI and PRGX hereunder, PRGI and PRGX hereby, jointly and severally, indemnify and hold each Seller and each of its Owners and the Owners' and Seller's Affiliates, directors, officers, employees and agents harmless from and against all claims, liabilities, lawsuits, costs, damages or expenses (including without limitation reasonable attorneys fees and expenses incurred in litigation or otherwise) arising out of and sustained by any of them due to or relating to: (a) any misrepresentation or breach of any representation, warranty, covenant or agreement of PRGI or PRGX in this Agreement or any of the PRGI Transaction Documents; (b) other than any Section 4.1 Indemnified Claims, with respect to the Stock Sellers, any liability or obligation incurred by any of the Owners of such Stock Sellers (in their capacity as such and by reason of their having been Owners of such Sellers) relating to or arising out of: (i) the operation of such Stock Seller's Business or the ownership or use of such Seller's assets prior to or through the Closing Date and which was (A) specifically disclosed herein or in the Disclosure Schedule or in any Seller Transaction Document or schedule thereto, or (B) incurred after the Effective Date in the ordinary course of business and does not constitute a Material Adverse Effect with respect to such Seller; (ii) the operation of such Stock Seller's Business by PRGI or such Stock Seller or the ownership or use of such Stock Seller's assets by PRGI or such Stock Seller from and after the Closing Date; (iii) in respect of the Owners of RBA, for any additional Taxes or related interest, penalties or other amount suffered by the Owners of RBA arising solely as a result of PRGI's filing of a Section 338(h)(10) election in respect of the transaction contemplated by the RBA Acquisition Agreement so as to put the Owners of RBA in the same economic position that they would have been in had the Section 338(h)(10) election and payment under this indemnification not been made, including but not limited to payment for additional Taxes, interest and penalties (including but not limited to Taxes on payments received by the Owners of RBA under this Section 4.2(b)(iii)), reasonable professional fees, and costs incurred by the Owners of RBA in connection with this election and any subsequent adjustments by taxing authorities; and (c) other than any Section 4.1 Indemnified Claims, with respect to the businesses of the Asset Sellers acquired pursuant to the Asset Agreements, (i) any Assumed Liabilities (as defined in the Asset Agreements); and (ii) any liability or obligation incurred by any of the Asset Sellers or their Owners relating to the operation of such Asset Seller's business by PRGI, or the ownership or use of the Applicable Assets of such Asset Seller by PRGI, from and after the Closing Date (collectively, "Section 4.2 Indemnified Claims"). 4.3 PROVISIONS REGARDING INDEMNIFICATION. The indemnified party (or parties) shall promptly notify the indemnifying party (or parties) of any claim, demand, action or proceeding for which indemnification will or may be sought under Section 4.1 or 4.2 of this Agreement and provide all pleading and other documentation relating to such claim, demand, action or proceeding, and, if such claim, demand, -30- 31 action or proceeding is a third party claim, demand, action or proceeding, the indemnifying party will have the right, at its expense, to assume the defense thereof using counsel reasonably acceptable to the indemnified party. At its own expense, the indemnified party shall have the right to participate in, but not control, the defense of any such third party claim, demand, action or proceeding. In connection with any such third party claim, demand, action or proceeding, the parties shall cooperate with each other. No such third party claim, demand, action or proceeding shall be settled without the prior written consent of the indemnified party; provided, however, that if a firm, written offer is made to settle any such third party claim, demand, action or proceeding and the indemnifying party proposes to accept such settlement and the indemnified party refuses to consent to such settlement, then: (i) the indemnifying party shall be excused from, and the indemnified party shall be solely responsible for, all further defense of such third party claim, demand, action or proceeding; and (ii) the maximum liability of the indemnifying party relating to such third party claim, demand, action or proceeding shall be the amount of the proposed settlement if the amount thereafter recovered from the indemnified party on such third party claim, demand, action or proceeding is greater than the amount of the proposed settlement. The Representative shall in all events act under this Section 4.3 for each and all of Sellers and Owners, whether as an indemnified party or an indemnifying party pursuant to the authority given to the Representative in Section 5.14 hereof and PRGI and PRGX shall have the right to deal exclusively with the Representative in respect of all matters relating to Sellers and Owners under this Section 4.3. 4.4 SURVIVAL. All representations and warranties contained in this Agreement, Seller Transaction Documents and the PRGI Transaction Documents delivered at the Closing or made in writing in connection herewith shall survive the execution and delivery of this Agreement, any examination by or on behalf of the party or parties to whom they were made, the Closing and the completion of the transactions contemplated herein for a period ending on the third anniversary of the Closing Date and shall thereafter cease to be of any force and effect, except for (a)(i) claims as to which notice has been given in accordance with Section 4.3 hereof prior to such date and which are pending on such date, (ii) representations and warranties in respect of title to the Applicable Assets, ownership of any Corporate Seller, ownership of membership interests of SCLLC, the ownership interest of any SP Seller, each of which shall survive without expiration, and (iii) representations and warranties in respect of those matters set forth in Section 3.4 hereof, which shall survive without expiration, and (b) representations, warranties, covenants and agreements relating to Taxes, the independent contractor status of any Associates or other service providers of the Business of Seller, Employee Benefit Plans, and existing litigation, arbitration, or mediations, each of which shall survive until the end of the statute of limitations applicable to the underlying claim for which indemnification is sought (the claims described in Section 4.4(a)(ii) and (b) above and in Section 4.1(e)(iii) hereof are referred to collectively as "Recourse Obligations"). All covenants and agreements contained in this Agreement, Seller Transaction Documents, and the PRGI Transaction Documents shall survive the execution, delivery and closing of this Agreement and the consummation of the transactions contemplated herein. 4.5 INTENTIONALLY OMITTED. 4.6 LIMITATIONS. (a) Notwithstanding anything to the contrary contained herein, PRGI will not assert a claim against any Sellers or Owners under this Article 4 until the total of all Section 4.1 Indemnified Claims (except claims under Section 4.1(c)(ii)(A),(B) or (C), 4.1(d), 4.1(e) or claims for breach of the representations and warranties described in 4.4(a)(ii) or 4.4(b), -31- 32 which shall not be subject to this limitation, but may be asserted without regard to the Base Amount) hereunder and under all Seller Transaction Documents equals or exceeds in the aggregate $100,000 (the "Base Amount"), at which time all Section 4.1 Indemnified Claims, including such Base Amount, may be claimed in full and, if indemnifiable under this Article 4, shall be indemnified in full. (b) The parties hereto acknowledge that, in the event that the amount of Section 4.1 Indemnified Claims hereunder exceeds the value of the Escrow Shares deposited by Seller and the Owners pursuant to the Indemnity Escrow Agreement (as valued therein), except as provided below, PRGI shall assert any such claims exceeding the value of the Escrow Shares against, and be indemnified by, the Owners of RBA (and if prior to Closing, by RBA), jointly and severally, and will not assert claims exceeding the Escrow Shares against any other Seller and its Owners; provided, in respect of Section 4.1 Indemnified Claims exceeding the value of the Escrow Shares if such claims relate to fraud by any Seller or its Owners or to a Recourse Obligations, each Seller and its Owners shall remain jointly and severally liable with RBA's Owners (and if prior to Closing, RBA) in respect thereto. (c) The parties hereto acknowledge that, in respect of any Section 4.1 Indemnified Claims arising out of Section 4.1(c)(ii)(D)(2) hereof, PRGI shall not assert a claim against Sellers or Owners unless the amount of all such Section 4.1(c)(ii)(D)(2) Indemnified Claims exceeds the aggregate under all of the Acquisition Agreements of the Interim Period Cash Flow, as defined and provided in the Acquisition Agreements, in which event, PRGI may assert a claim against Sellers and Owners in accordance with this Agreement and the Indemnity Escrow Agreement for all such Section 4.1(c)(ii)(D)(2) Indemnified Claims, for the amount which exceeds the Interim Cash Flow, and, if indemnifiable under this Article 4, shall be indemnified in full. ARTICLE 5 ADDITIONAL COVENANTS Each Seller and its respective Owners make the following additional covenants in respect of such Seller and its respective Owners, Business and Applicable Assets (and not with respect to any other Seller or Owners of other Sellers): 5.1 DUE DILIGENCE REVIEW. (a) Until the Closing and subject to the terms of Section 5.1(d) hereof, PRGX, PRGI and their employees, agents, counsel, Accountants, E&Y, financial consultants and other representatives may conduct such investigation of the Business of Sellers as PRGI shall determine. During the course of such investigation, Seller agrees to provide such persons full access during normal business hours to the offices, properties, personnel, books, records, files and other documents and information regarding such Seller's assets and Business and shall fully cooperate with PRGX and PRGI in order to verify the accuracy of the information delivered by such Seller. Seller will provide full opportunity to PRGX and PRGI to make such investigation and copy such documents as PRGX, PRGI and their representatives shall desire, including making contact with Customers, employees, or contractors of the Business. No investigation of the Business of Sellers by PRGI either prior to, on, or after the date hereof shall affect PRGI's and PRGX's right to rely -32- 33 upon, or Seller's and its Owners' responsibility for the accuracy of, the representations and warranties of Seller and its Owners' made herein or in its respective Acquisition Agreement. (b) As soon as practical, Seller and its Owners shall provide to PRGI and the Accountants, at the sole expense of such Owners, the financial information relating to the Business of such Seller, including copies of books and records and tax returns, (i) sufficient to enable the Accountants to (A) prepare the (i) combined financial statements of the Business as conducted by Sellers as of and for the year ended December 31, 1997, (ii) combined balance sheet of Sellers as of December 31, 1996, and (iii) combined financial statements as of and for the interim periods ended June 30, 1997 and 1998, in each case prepared on an accrual basis in accordance with generally accepted accounting principles consistently applied (using the same "Submitted Claims Revenue Recognition Basis" used by PRGI) and (B) audit, at PRGI's expense, such combined financial statements and issue an unqualified audit report thereon, and (ii) sufficient for PRGI to file such financial statements with the Securities and Exchange Commission in compliance with all applicable regulations. Seller and its Owners will, and will cause Seller's officers, directors and employees to, cooperate fully with PRGI and such Accountants, both before and after the Closing, to expedite and facilitate the audit and promptly provide all such information and documents as such Accountants or E&Y may periodically request. The parties acknowledge that the preparation of such statements and the audit may not be completed until after the Closing. (c) As soon as practical and to the extent reasonably requested by RBA, each Seller (other than RBA) will provide sufficient information in respect of such Seller to RBA to enable RBA to prepare and provide to PRGI and PRGX the Monthly Statements from July 1998 through the last day of the month immediately preceding the date hereof. After the date hereof and until the Closing, Seller shall continue to provide to RBA any information in respect of such Seller reasonably requested by RBA to enable RBA to prepare and provide to PRGI and PRGX Monthly Statements through the last day of the month immediately preceding the Closing. (d) Except as may be either required by law or as otherwise provided herein, each of Seller, its Owners, PRGX and PRGI shall, and shall cause their employees, agents, counsel, accountants (including the Accountants and E&Y), financial consultants and other representatives to, (i) hold in strict confidence any and all information obtained from the other parties hereto or their representatives or the terms or conditions of the transactions contemplated herein or the fact that such transactions are being contemplated and (ii) not disclose or use any such information (unless such information is or becomes ascertainable from public sources or public disclosure of such information is, in the good faith judgment of the disclosing party (the "Disclosing Party"), required by law); provided, however, that nothing contained herein shall limit the right of any such persons to disclose any such information to their employees, agents, representatives, counsel, accountants or financial advisors for the purpose of facilitating the consummation of the transactions contemplated hereby, so long as such other persons are advised of the confidential nature of such information. In the event a Disclosing Party is requested or required (by oral questions, interrogatories, requests for information or documents, subpoena, -33- 34 civil investigative demand or similar process) to disclose any such information, Disclosing Party agrees (i) to provide the other party(ies) (the "Nondisclosing Party") with prompt notice of such request(s) and the information or documents requested thereby so as to enable the Nondisclosing Party to timely consider seeking to obtain an appropriate protective order and (ii) to consult with the Nondisclosing Party on the advisability of taking legally available steps to resist or narrow such request. The Nondisclosing Party further agrees that if, in the absence of a protective order or the receipt of a waiver hereunder, the Disclosing Party is nonetheless, in the opinion of the Disclosing Party's counsel, compelled to disclose such information to any court or governmental administrative authority or else stand liable for contempt or suffer other material censure or penalty, such information may be disclosed to such court or governmental authority without liability hereunder; provided, however, that the Disclosing Party shall give to the Nondisclosing Party written notice of the information to be so disclosed as soon as reasonably practical, and shall cooperate with the Nondisclosing Party to obtain a protective order or other reliable assurance that confidential treatment will be accorded to such portion of the information required to be disclosed as the Nondisclosing Party reasonably designates. All actions taken at the request of the Nondisclosing Party shall be taken at the Nondisclosing Party's expense. The terms of this subsection 5.1(d) shall not survive Closing. 5.2 EMPLOYMENT MATTERS. Concurrently with the Closing, PRGI will offer employment to each Principal, Associate and Employee of Sellers on terms acceptable to PRGI and such Person; provided that as a condition of their employment with PRGI, each such Person shall sign such customary documents and forms including, without limitation, a Form I-9 and PRGI's customary Employee Agreement (the "Employee Agreement"), as PRGI may reasonably require. Seller and its Owners shall assist PRGI in employing such Persons. Notwithstanding the foregoing, in no event shall PRGI be required to provide employee benefits the same as or similar to those provided by Seller or otherwise. Seller shall be responsible for providing all notices and other communications to employees of Seller which may be required under WARN other than those required solely due to actions of PRGI. 5.3 CONSENTS. Promptly after execution of this Agreement, Seller and its Owners will apply for or otherwise seek, and use their best efforts to obtain, all Seller Consents. Any charges imposed by the lessors or other parties to such Leases or Contracts for such Seller Consents shall be borne by Seller, and Seller and its Owners shall jointly and severally indemnify PRGI against any loss or liability incurred by PRGI resulting from Seller's and its Owners' failure to pay such charges or obtain prior to Closing any such Seller Consents, in accordance with Section 4 hereof. 5.4 NONCOMPETITION AND NONSOLICITATION AGREEMENTS. Concurrently with the Closing, in consideration of the closing of the Acquisition Agreements as contemplated herein, each Asset Seller and all Owners shall enter into a Noncompetition and Nonsolicitation agreement with PRGI, in the forms of Exhibit 5.4A (for a Seller) and Exhibit 5.4B (for the Owners), attached hereto and made a part hereof. The parties hereto agree that the amount paid under all of the Acquisition Agreements in respect of all of the Noncompetition and Nonsolicitation Agreements of the Asset Seller and the Owners in the aggregate is no greater than $150,000, and that each of the parties shall reflect the amount allocated for its respective Acquisition Agreement after determination pursuant to its or his respective Acquisition Agreement on its or his respective Tax Returns. -34- 35 5.5 TERMINATION OF THE PRINCIPAL AGREEMENTS. Concurrently with the Closing, but effective as of the Effective Date, RBA and each of the Principals will terminate their respective Principal Agreements and each Principal shall release, discharge, indemnify and hold harmless RBA, PRGI and PRGX in respect of any and all claims, liabilities or obligations thereunder. 5.6 CONDUCT OF BUSINESS BY SELLER PENDING PURCHASE. Seller and its Owners covenant and agree that, unless PRGI shall otherwise consent in writing, between the Effective Date and the Closing, the Business of Seller shall be conducted only in, and Seller shall not take any action except in, the ordinary course of business and in a manner consistent with past practice; and Seller will use its best efforts to preserve substantially intact the Business of Seller, to keep available the services of the present officers, Employees, Associates, auditors and consultants of Seller, and to preserve the present relationships of Seller with Customers, and other persons having business relationships with Seller. By way of amplification and not limitation, except as expressly provided for in this Agreement or its respective Acquisition Agreement, Seller and its Owners covenant that, between the date hereof and the Closing, Seller and its Owners shall not, directly or indirectly, do any of the following without the prior written consent of PRGI: (a) (i) issue, sell, gift, pledge, transfer, dispose of, encumber, authorize any equity interests, or any options, warrants, convertible securities or other rights of any kind to acquire any equity interests of, or any other ownership interest in, Seller; (ii) amend the organizational documents of Seller; (iii) split, combine or reclassify any outstanding equity interests, or declare, set aside or pay any dividend or distribution payable in cash, equity interests, property or otherwise with respect to Seller's equity interests; provided, however, that Seller may distribute to its Owners all cash and cash equivalents in the Business as of the close of business August 31, 1998; (iv) redeem, purchase or otherwise acquire any shares of Seller's equity interests; or (v) enter into any contract, agreement, commitment or arrangement with respect to any of the matters set forth in this Section 5.6(a); (b) (i) acquire (by merger, consolidation, or acquisition of stock or assets) any interest in any corporation, partnership or other business organization or division thereof; (ii) except in the ordinary course of business and in a manner consistent with past practices, sell, pledge, dispose of, or encumber any assets of Seller; (iii) enter into any contract, lease or agreement, except for Customer contracts in the ordinary course of business, agreements which contemplate an aggregate annual expenditure by Seller of less than $5,000, agreements which are cancelable by Seller without cost on 60 days or less notice, or agreements which have a term of less than 12 months; (iv) authorize any single capital expenditure in excess of $5,000 or capital expenditures in the aggregate in excess of $25,000; or (v) enter into or amend any contract, agreement, commitment or arrangement with respect to any of the matters set forth in this Section 5.6(b); (c) except as provided in Section 5.6(a)(iii) above, make any payments to Beck, Sr. or to the Principals for compensation (other than commissions owed to Beck, Jr. and Kirkeide with respect to audit and related management counseling services performed by Beck, Jr. and Kirkeide prior to the Effective Date in accordance with their respective agreements with RBA solely in their capacity as auditors in connection with claims submitted to suppliers of Customers prior to Closing), or take any action to increase the compensation or other remuneration of any Associate, officer, director, member, equity interest holder, or employee of Seller, pay any -35- 36 bonuses to any of its Associates or Employees, grant any severance or termination pay or increase any benefits payable under its Employee Benefit Plans, severance or termination pay policies in effect on the date hereof; (d) make any payments except in the ordinary course of business and in amounts and in a manner consistent with past practice (none of which payments shall be unreasonable or unusual), under any Employee Benefit Plan or otherwise to any employee of, or independent contractor or consultant to, Seller, enter into any Employee Benefit Plan, any employment or consulting agreement, grant or establish any new awards under any such existing Employee Benefit Plan or agreement, or adopt or otherwise amend any of the foregoing; (e) take any action except in the ordinary course of business and in a manner consistent with past practice with respect to, or make any change in, its methods of management, distribution, marketing, accounting or operating (including practices relating to payment of trade accounts or to other payments) or relating to writing down or failing to write down (in accordance with its past practices consistently applied) or writing up the value of any inventory or other assets of Seller; (f) take any action or enter into any agreement or make any change in the billing or collection of its accounts receivable and unbilled claims (other than in the ordinary course of business and consistent with past practices), including without limitation, discounting or writing off any of Seller's accounts receivable or work in progress for early payment, or granting any other deduction or discount thereon or accelerating the collection thereof; (g) take any action or make any change in the manner in which Seller incurs or pays accounts payable (other than in the ordinary course of business and consistent with past practices), including without limitation, accelerating the accrual of accounts payable or delaying payment of accrued accounts payable; (h) except in the ordinary course of business or as specifically permitted herein, take any action to incur, assume, increase or guarantee prior to Closing any indebtedness for borrowed money from banks or other financial institutions or cancel, without payment in full, any notes, loans or other receivables except in the ordinary course of business; (i) loan or advance monies to any person under any circumstance whatsoever except travel advances or other reasonable expense advances to Associates or Employees of Seller made in the ordinary course of business and consistent with past practice; (j) change any existing bank accounts or lock box arrangements of Seller, except for deposits, withdrawals, or changes of signatories in the ordinary course of business; (k) cancel, let lapse or fail to pay premiums under any Insurance Policy; (l) settle any litigation, arbitration or mediations or fail to respond in a timely manner to any pleadings in respect thereto; -36- 37 (m) waive any material rights of Seller or settle any material claim involving Seller; (n) failed to make any Tax filing or Tax payment required to be made between the Effective Date through the day immediately preceding the Closing Date; (o) do any act or omit to do any act which would cause a breach of, or inability to perform, any contract, commitment or obligation of Seller or any of its Owners, which breach has a Material Adverse Effect on Seller or the ability of Seller or any of its Owners to perform his, her or its obligations under this Agreement or any Seller Transaction Document. 5.7 PRGX SHARES. The PRGX Shares will be unregistered, restricted securities, issued pursuant to customary investment representations contained herein and may not be resold except in accordance with applicable federal and state securities laws. The PRGX Shares will be subject to resale restrictions during the period from the Closing Date until the first anniversary of the Closing Date in accordance with Rule 145 or other applicable rules promulgated by the SEC. In addition, at the Closing, each Asset Seller and each Owner shall execute and deliver a lock-up agreement in respect of the PRGX Shares (together with any additional shares of PRGX Common Stock issued by way of stock split or stock dividend) substantially in the forms of Exhibit 5.7A (for each Asset Seller) and Exhibit 5.7B (for each Owner) attached hereto. 5.8 PUBLIC ANNOUNCEMENTS; AGREEMENT NOT TO TRADE. (a) Except for any public announcement relating to the transactions contemplated herein as may be required by law or stock exchange rule or as provided in this Section or in Section 5.1 hereof, each of Sellers, Owners, PRGX and PRGI agrees that until the consummation of the transactions contemplated herein, each of such parties will not, and will direct its directors, officers, members, employees, representatives and agents who have knowledge of the transactions not to, disclose to any person who is not a participant in discussions concerning the transactions (other than persons whose consent is required to be obtained hereunder), any of the terms, conditions or other facts with respect to the transactions contemplated herein, or any portion of the PRGI/PRGX Disclosure which has not been made publicly available by PRGI/PRGX, including, without limitation, the fact that negotiations are taking place. In addition, Seller and its Owners shall obtain the prior written consent of PRGI (and shall require their respective directors, officers, members, employees, representatives and agents who have knowledge of the transactions contemplated hereby or of any portion of the PRGI/PRGX Disclosure which has not been made publicly available by PRGI or PRGX to obtain the prior written consent of PRGI) before buying, selling or otherwise trading in or engaging in any transactions with respect to PRGX securities, until such time as PRGI shall have notified Seller in writing that such permission is no longer required due to the public availability of all material information with respect to the contemplated transactions and the PRGI/PRGX Disclosure. (b) Seller and its Owners shall obtain the prior written consent of PRGI before issuing any press release or otherwise making any public statements with respect to the transactions contemplated herein and shall not issue any such press release or make any such public statement prior to receiving such consent. The parties acknowledge and agree that PRGX -37- 38 expects to issue a press release with respect to the transactions contemplated herein immediately after the execution of this Agreement by all parties hereto. 5.9 NO NEGOTIATIONS. Seller and each of its Owners covenant that, subject to the termination provisions contained in the Acquisition Agreements, from and after the date hereof until Closing, Seller will not offer the Applicable Assets for sale to any person other than PRGI, and neither Seller, nor its Owners, nor anyone acting on behalf of Seller or its Owners, shall, directly or indirectly, solicit, initiate or encourage any inquiries or proposals that constitute, or could reasonably be expected to lead to, a proposal or offer for a merger, consolidation, business combination, sale or transfer of substantial assets, sale of any shares of capital stock or similar transaction involving Seller or the Applicable Assets, or otherwise engage in the negotiation or discussions concerning, or provide any non-public information to any person, relating to any such potential transaction. 5.10 NONQUALIFIED STOCK OPTIONS. At the Closing, in consideration of their employment with PRGI, PRGX shall, pursuant to a stock option agreement the form of which is attached hereto as Exhibit 5.10, grant to the Principals a nonqualified stock option to purchase the number of shares of PRGX Common Stock; as provided in PRGI's offer of employment to Principal as provided in Section 5.2 hereof; provided, that PRGI and PRGX shall condition such grant upon the prior execution and delivery by such grantee of PRGI's customary Employee Agreement. After the Closing PRGX may grant additional options to those Associates and Employees of Sellers who are employed by PRGI after the Closing as may determined by PRGI; provided that any such grants will be conditioned on prior execution and delivery by such grantee of PRGI's customary Employee Agreement. Such options will be granted under the PRGX Stock Incentive Plan in accordance with the terms of such stock option agreement and the PRGX Stock Incentive Plan at an exercise price equal to the closing price per share of PRGX Common Stock (as reported in The Wall Street Journal) for the Closing Date. All such options shall vest over a five (5) year period at the rate of twenty (20%) per year. If there is any conflict between the terms of the separate stock option agreement and this Agreement, the terms of the stock option agreement shall govern and control. 5.11 OTHER COVENANTS OF OWNERS. (a) Each of the Owners who is a resident of a state which is a community property jurisdiction shall cause his or her spouse to execute and deliver at Closing a spousal consent in substantially the form attached hereto as Exhibit 5.11A. (b) Each of the Owners shall have executed and delivered to PRGI prior to the execution hereof, an Investor Information Questionnaire in the form attached hereto as Exhibit 5.11B. Each such Owner, who is not an accredited investor, as that term is defined under the Act or otherwise a sophisticated investor, shall, if requested by PRGI, appoint a purchaser representative to assist such Owner in the investment decisions related to the transactions contemplated herein. 5.12 TRANSACTION EXPENSES. Except as otherwise specifically provided herein, all of the expenses incurred by PRGI or PRGX in connection with the authorization, negotiation, preparation, execution and performance of this Agreement, the PRGI Transaction Documents and -38- 39 other agreements referred to herein and the consummation of the transactions contemplated hereby, including, without limitation, all fees and expenses of agents, representatives, brokers, counsel and accountants for PRGI and PRGX shall be paid by PRGI or PRGX (the "PRGI Transaction Expenses"). Except as otherwise specifically provided herein, all expenses incurred by a Seller or its Owners in connection with the authorization, negotiation, preparation, execution and performance of this Agreement, Seller Transaction Documents and the other agreements referred to herein and the consummation of the transactions contemplated hereby, including without limitation, all fees and expenses of agents, representatives, brokers, counsel and accountants, shall be paid by the respective Seller or its Owners or, in respect of the Stock Agreements, solely by the respective Owners (the "Seller Transaction Expenses"). 5.13 ACCESS TO BOOKS AND RECORDS. After the Closing, Seller and its Owners shall preserve all of the records and books, Customer records, and any other records of Seller until the fifth anniversary of the Closing Date, and, until such time, make them available, during normal business hours, to PRGI and its designees, counsel, accountants, and others authorized by them for inspection and the making of copies thereof. 5.14 REPRESENTATIVE. (a) Appointment of Representative. Each Owner and each Seller hereby appoints PASQUESI SHEPPARD LLC ("Representative"), as their agent and attorney-in-fact, on their behalf and on behalf of each of them in accordance with the terms of this Section. The Owners and Sellers authorize the Representative (i) to perform all acts which, by the provisions of this Agreement, the Acquisition Agreements, the Indemnity Escrow Agreement, the Closing Escrow Agreement and the other Seller Transaction Documents, are to be performed by Representative; (ii) to waive on behalf of the Owners and Sellers any of the provisions of and to execute and deliver the Indemnity Escrow Agreement and such amendments on behalf of the Owners and Sellers to this Agreement, the Acquisition Agreements, the Closing Escrow Agreement and the other Seller Transaction Documents as it, in its sole judgment, shall deem necessary or advisable; (iii) to execute and deliver documents pursuant to this Agreement, the Acquisition Agreements, the Indemnity Escrow Agreement, the Closing Escrow Agreement and the other Seller Transaction Documents as the Representative, in its sole judgment, shall deem necessary or advisable; (iv) to execute, give and receive all notices, requests and other communications on behalf of each Seller and Owner required, permitted or contemplated under this Agreement, the Acquisition Agreements, the Indemnity Escrow Agreement, the Closing Escrow Agreement and the other Seller Transaction Documents, as Representative, in its sole judgment, shall deem necessary or advisable; (v) to accept service (including the execution of all acknowledgements of service, which Representative is hereby irrevocably instructed to execute and acknowledge in accordance with Rule 4 of the Federal Rules of Civil Procedure and any applicable state rules of procedure) of all writs, process and summons in any suit, action, or proceeding filed in or transferred to the jurisdictions specified in Section 6.9 hereof; (vi) to delegate all or any of his power or authority under this Agreement to any person or entity, as Representative, in its sole judgment, shall deem necessary or advisable; (vii) to expend such amounts in the exercise of its rights and powers and in the performance of his duties hereunder as Representative shall, in its sole judgment, deem necessary or advisable; and (viii) generally to act for and on behalf of the Owners and Sellers, and each of them in all matters connected with this Agreement, the Acquisition Agreements, the Indemnity Escrow Agreement, the Closing Escrow Agreement and the other Seller Transaction -39- 40 Documents, with the same force and effect as though such act had been taken by any of them personally. The Owners and Sellers agree with PRGI and PRGX that the Representative shall be the sole and exclusive person with legal capacity and standing to contest, dispute, compromise, adjust, settle, litigate, appeal or otherwise deal with PRGI and PRGX with respect to the indemnification of the Section 4.1 Indemnified Claims as set forth in Article 4 of this Agreement or the administration of the Acquisition Agreements, the Indemnity Escrow Agreement, the Closing Escrow Agreement and the other Seller Transaction Documents (other than any employment agreements between PRGI and any Owner and the Noncompetition and Nonsolicitation Agreements). This appointment and power-of-attorney shall be a special power-of-attorney coupled with an interest, shall be irrevocable and shall survive the dissolution, disability or incapacity of any of the Owners and Sellers, but shall terminate in respect of RBA, TBA and FLATLEY CORP., but not the Owners thereof, upon the consummation of the Stock Agreements. (b) Successor to Representative. In the event that because of removal, resignation or any other reason, there is no Person acting as Representative, the Representative shall automatically be and become Beck, Sr., who shall serve in such capacity unless, within 30 days after Beck, Sr. becomes the Representative, PRGI receives written notice of the appointment by the Owners of a new Representative, who shall upon the receipt by PRGI of such notice be and become the Representative. The Representative shall have the right to change the designation of successor upon notice to all of the parties to this Agreement. The Representative may resign as Representative at any time by written notice to all of the parties to this Agreement, provided that such resignation shall not be effective unless a successor assumes the responsibilities as Representative immediately upon the resignation taking effect. The Owners and Asset Sellers shall have the right from time to time upon notice to PRGI and PRGX, to remove the Representative and prospectively appoint a new Representative. Nothing in this Section regarding a change in the identity of the Representative shall adversely affect or modify any action taken by a former Representative. (c) Reliance by PRGI and PRGX. The Owners and Sellers agree that PRGI and PRGX may deal solely with the Representative as the exclusive representative of the Owners and Sellers prior to the Closing (and after the Closing, as the exclusive representative of the Owners and the Asset Sellers), with reference to the matters set forth in this Agreement, the Acquisition Agreements, the Indemnity Escrow Agreement, the Closing Escrow Agreement and the other Seller Transaction Documents, that the decisions and actions of the Representative are final and binding on the Owners and Sellers prior to the Closing, (and after the Closing, on the Owners and the Asset Sellers), their successors and assigns, heirs, and legal representatives and that PRGI and PRGX have no duty to ascertain if the Representative is properly authorized by the Owners and Sellers or is properly carrying out its obligations under this Agreement. (d) Acceptance of Appointment. PASQUESI SHEPPARD LLC hereby accepts the appointment as Representative on the terms and conditions set forth herein. 5.15 REMOVAL OF LIENS AND ENCUMBRANCES. Each Seller and its Owners hereby agree to obtain and file releases and termination statements for all recorded liens, encumbrances, judgments and similar filings which in any way relate to or affect the Applicable Assets, which such liens are listed on the Disclosure Schedule (the "Recorded Liens") as and when provided -40- 41 herein. In respect of any such Recorded Liens that reflect underlying obligations of a Seller that have previously been satisfied, Seller shall obtain and file releases and termination statements in respect thereof prior to the Closing Date. In respect of any Recorded Liens that reflect underlying obligations that will be paid by Seller or PRGI at Closing (with a portion of the Purchase Price), Seller shall, prior to the Closing Date, prepare termination statements and releases in respect of such Recorded Liens and cause them to be executed by the secured party in respect thereof and filed promptly after the Closing (and in any event within 10 days after the Closing) upon confirmation by such secured party of receipt of funds satisfying such underlying obligation of Seller. Such Seller and its Owners and Beck, Sr. hereby, jointly and severally, covenant and agree to indemnify and hold PRGI harmless from and against any and all losses or liabilities incurred by PRGI resulting from or arising out of Seller's failure to remove any Recorded Liens. 5.16 NOTIFICATION OF CERTAIN MATTERS. (a) Seller and its Owners shall give prompt notice to PRGI of the following: (i) any facts known by Seller or its Owners relating to any Seller or its Owners, which would make it necessary or advisable to amend the Disclosure Schedule in order to make the information therein not misleading or inaccurate as of the Effective Date; (ii) the occurrence or nonoccurrence of any event since the Effective Date in respect of the Business (A) which causes or would be likely to cause, directly or indirectly, any Material Adverse Effect or (B) which is outside the ordinary course of business; and (ii) any material failure of Seller or its Owners, or any officer, director, manager, Employee, Associate or agent thereof, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder or under Seller Transaction Documents. (b) PRGI shall give prompt notice to the Representative of the following: (i) the occurrence or nonoccurrence of any event whose occurrence or nonoccurrence would be likely to cause any change in or effect on 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 or PRGX, taken as a whole; (ii) any material failure of PRGI or PRGX, or any officer, director, employee or agent thereof, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder or under the PRGI Transaction Documents; and -41- 42 (iii) any facts known by PRGI or PRGX relating to PRGI or PRGX which would make it necessary or advisable to amend the representations and warranties in order to make the information herein not misleading or inaccurate as of the Effective Date. (c) Notwithstanding the foregoing, the delivery of any notice pursuant to this Section 5.16 shall not limit or otherwise affect the remedies available hereunder to the party receiving such notice. 5.17 CONTINUATION OF HEALTH CARE COVERAGE. Each Seller shall obtain and deliver to PRGI prior to the Closing an undertaking from its current health insurance provider that such provider will continue coverage of Seller's active Employees and Associates who remain Employees or Associates of RBA or PRGI after the Closing Date, to the extent covered prior to the Closing, after the transactions contemplated herein at PRGI's expense until such time as such Employees and Associates who are hired by PRGI are enrolled into such PRGI health insurance plans as such persons may be eligible to participate in. 5.18 INTER-SELLER AGREEMENT. Concurrently with the execution hereof, the Asset Sellers and the Owners have entered into the Inter-Seller Agreement. The Stock Sellers are not, but the Owners of the Stock Sellers are, parties to the Inter-Seller Agreement. 5.19 SEVERANCE OBLIGATIONS OF SELLERS. Notwithstanding anything contained herein or in any of the Seller Transaction Documents or the PRGI Transaction Documents to the contrary, PRGI shall not assume or have any obligation in respect of any severance obligations of any Seller to any of its Principals, Associates or Employees. 5.20 SUCCESS BONUSES TO CERTAIN KEY EMPLOYEES. The parties hereto acknowledge that, contingent upon the consummation of the transactions contemplated herein, RBA intends to pay a bonus, payable in cash and shares of PRGX Common Stock, to certain of its key employees in consideration of services heretofore rendered by such key employees and for no other consideration (collectively, the "Success Bonuses"). Schedule 5.20 attached hereto provides the name, address, social security number and current position with RBA of, and the amount of cash and number of PRGX Shares, valued at the Closing Price, to be received by, those key employees of RBA. RBA and its Owners hereby represent and warrant to PRGI and PRGX in accordance with Article 2 hereof, that the aggregate amount of such cash and the value of the PRGX Shares, based on the Closing Price, constituting the Success Bonuses that RBA will cause to be paid to such persons has been accrued prior to the Effective Date on the books of RBA as bonuses for such key employees, and that the amounts shown on Schedule 5.20 attached hereto for federal and state withholding, FICA and Medicare are adequate to satisfy all withholding obligations in accordance with applicable laws and regulations of any Seller in respect of the Success Bonuses. -42- 43 ARTICLE 6 MISCELLANEOUS PROVISIONS 6.1 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. 6.2 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. 6.3 ASSIGNMENT, SURVIVAL AND BINDING AGREEMENT. This Agreement and Seller Transaction Documents and PRGI Transaction Documents (a) may not be assigned by PRGX or PRGI on or prior to the Closing without the prior written consent of Sellers 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, Sellers and Owners; 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 the 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 any Seller or Owner 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, including, without limitation, any successor trust or trusts. 6.4 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. 6.5 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 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 any Seller or any Owner: c/o Pasquesi Sheppard LLC, Representative 585 Bank Lane Lake Forest, IL 60045 Attention: Don Sheppard Telefax: (847) 234-1110 with a copy to: Bruce Balonick, Esq. Arnstein & Lehr 120 South Riverside Plaza, Suite 1200 Chicago, IL. 60606-3913 Telefax: (312) 876-0288 -43- 44 and: David Fischer, Esq. Wildman, Harrold, Allen & Dixon 225 West Wacker Drive Chicago, IL 60606-1229 Telefax: (312) 201-2555 and: Harry Haskins, Esq. 1800 Second Street, Suite 819 Sarasota, FL 34236 Telefax: (941) 953-4284 and: Steven Towbin, Esq. D'Ancona & Pflaum 30 North LaSalle Street Suite 2900 Chicago, IL 60602 Telefax: (312) 580-5006 If to PRGX or PRGI: The Profit Recovery Group International I, Inc. 2300 Windy Ridge Parkway Suite 100 North Atlanta, GA 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 PRGI 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. 6.6 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. Except for that certain Nondisclosure Agreement between Sellers and PRGI dated June 1998, which remains in full force and effect in accordance with the terms thereof, this Agreement, the Acquisition Agreements, -44- 45 together with the Exhibits and Schedules attached hereto and thereto, 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 Seller, PRGX, PRGI and the Owners, any rights or remedies hereunder. 6.7 FURTHER ASSURANCES. The parties to this Agreement agree to execute and deliver, both before and after the Closing, any additional information, documents or agreements contemplated hereby and/or necessary or appropriate to effect and consummate the transactions contemplated hereby. Each of the Owners and Seller agree to provide to PRGX and PRGI, both before and after the Closing, such information as PRGX and PRGI may reasonably request in order to consummate the transactions contemplated hereby and to effect an orderly transition of the Business following Closing. 6.8 GOVERNING LAW. This Agreement shall be governed by and construed under the laws of the state of Georgia exclusive of the conflict of law provisions thereof. 6.9 JURISDICTION AND SERVICE OF PROCESS. Except as otherwise specifically provided in this Agreement, any Seller Transaction Document or any PRGI Transaction Document, any disputes arising out of, in connection with or with respect to this Agreement, any Seller Transaction Document or any PRGI Transaction Document, the subject matter hereof and thereof, the performance or nonperformance of any obligation hereunder or thereunder, or any of the transactions contemplated hereby or thereby shall be adjudicated in the United States District Court for the Northern District of Georgia, or, if there is not a basis for diversity jurisdiction, in a court of competent civil jurisdiction in any jurisdiction as may be permitted by applicable law. Each party hereto hereby irrevocably submits to the personal jurisdiction of such courts for the purpose of any such suit, action, counterclaim, or proceeding arising out of, in connection with or with respect to this Agreement, any Seller Transaction Document or any PRGI Transaction Document, the subject matter hereof, the performance or non-performance of any obligation hereunder or thereunder or any of the transactions contemplated hereby or thereby (collectively, a "Suit"). Each of the parties hereto hereby waives and agrees not to assert by way of motion, as a defense or otherwise in any such Suit, any claim that it is not subject to the jurisdiction of the above courts, that such Suit is brought in an inconvenient forum, or that the venue of such Suit is improper; provided, however, that nothing herein shall be construed as a waiver of any right that any party hereto may have to remove a Suit from a court of sitting in the state of Georgia to the United States District Court for the Northern District of Georgia. Each of PRGI and PRGX hereby agrees that service of all writs, process and summonses in any Suit may be made upon PRGI or PRGX by mail at its address as provided in Section 6.6 hereof. Each Seller and Owner hereby agrees that service of all writs, process and summonses in any Suit may be made upon Representative by mail at its address as provided in Section 6.6 hereof, and each Seller and Owner hereby and pursuant to Section 5.14 hereof irrevocably appoints the Representative its true and lawful attorney-in-fact in its name, place and stead to accept such service of any and all such writs, process and summons, and agrees that the failure of the Representative to give any notice of any such service of process to any Seller or Owner shall not impair or affect the validity of such service or of any judgment based thereon. Nothing herein shall in any way be deemed to limit the ability of any party to serve any such writs, process or summonses in any other manner permitted by applicable law. -45- 46 6.10 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. -46- 47 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: --------------------------------------------- Name: ------------------------------------------- Its: -------------------------------------------- PRGI: THE PROFIT RECOVERY GROUP INTERNATIONAL I, INC. By: --------------------------------------------- Name: ------------------------------------------- Its: -------------------------------------------- [signatures continue on following page] -47- 48 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 --------------------------------------------- Name: Robert N. Beck, Jr. --------------------------------------------- Name: Russell N. Beck --------------------------------------------- Name: Ronald N. Beck --------------------------------------------- Name: Renee N. McCauley, Trustee Renee N McCauley Living Trust Under Trust dated 7/23/98 --------------------------------------------- Name: Melissa A. Beck, as guardian of Brittney L. Beck, a minor [signatures continue on following page] -48- 49 --------------------------------------------- Name: Renee N. McCauley, individually --------------------------------------------- Name: Georgena M. Beck, individually --------------------------------------------- Name: Robert N. Beck, Sr., individually [signatures continue on following page] -49- 50 SELLER: Robert N. Beck, Jr., a sole proprietorship --------------------------------------------- Name: Robert N. Beck, Jr. [signatures continue on following page] -50- 51 SELLER: RBA AUDITS, INC. By: ------------------------------------------ Richard N. Beck, President OWNER: --------------------------------------- Name: Richard N. Beck [signatures continue on following page] -51- 52 SELLER: JOHN E. FLATLEY & ASSOCIATES, INC. By: ------------------------------------------ John E. Flatley, President OWNER: --------------------------------------------- Name: John E. Flatley [signatures continue on following page] -52- 53 SELLER: TAYLOR, BLACKBURN & ASSOCIATES, INC. By: ------------------------------------------ Richard A. Taylor, President OWNERS: --------------------------------------------- Name: Richard A. Taylor --------------------------------------------- Name: Deborah B. Taylor --------------------------------------------- Name: Johnathan S. Taylor --------------------------------------------- Name: Kimberly D. Baugh [signatures continue on following page] -53- 54 SELLER: Vincent Creadon, a sole proprietorship --------------------------------------------- Name: Vince Creadon [signatures continue on following page] -54- 55 SELLER: John H. Cavins, a sole proprietorship --------------------------------------------- Name: John Cavins [signatures continue on following page] -55- 56 SELLER: SAVANT CONSULTING, LLC By: ----------------------------------------- John J. Pope, Member OWNERS: -------------------------------------------- Name: John J. Pope -------------------------------------------- Name: JoAnn Pope [signatures continue on following page] -56- 57 SELLER: John Kirkeide, a sole proprietorship -------------------------------------------- John Kirkeide [signatures continue on following page] -57 58 REPRESENTATIVE: PASQUESI SHEPPARD LLC By: ------------------------------------------ Name: ---------------------------------------- Its: ----------------------------------------- as nominee and attorney-in-fact of all of Sellers and Owners -58- 59 ANNEXES Annex A List of Sellers, Principals, Owners and Management EXHIBITS Exhibit 2.23 Representations Regarding Benefit Plans and ERISA Exhibit 2.28(m) Form of Lock-up Agreement and other Documents for key employees Exhibit 5.4A and 5.4B Forms of Noncompetition and Nonsolicitation Agreements with Asset Sellers and each Owner Exhibit 5.7A and 5.7B Forms of Lock-Up Agreements Exhibit 5.10 Form of Stock Option Agreement Exhibit 5.11A Form of Spousal Consent Exhibit 5.11B Form of Investor Information Questionnaire SCHEDULES Disclosure Schedule Schedule 5.20 Amounts of Success Bonuses to be paid by RBA by in cash and shares of PRGX Common Stock at Closing -59- 60 EXHIBIT 2.23 BENEFIT PLANS AND ERISA (a) The Disclosure Schedule sets forth a true and complete list of each Employee Benefit Plan that is currently in effect, was maintained since December 31, 1991 or which has been approved before the date hereof but is not yet effective, for the benefit of Business Employees or with respect to which Seller or any ERISA Affiliate, has or has had any obligation on behalf of any Business Employee. Except as disclosed on the Disclosure Schedule there are no other benefits to which any Business Employee is entitled or for which Seller has any obligation. (b) Seller has delivered to PRGI, with respect to each Employee Benefit Plan, true and complete copies of (i) the documents embodying and relating to the plan, including, without limitation, the current plan documents and documents creating any trust maintained pursuant thereto, all amendments, investment management agreements, administrative service contracts, group annuity contracts, insurance contracts, collective bargaining agreements, the most recent summary plan description with each summary of material modification, if any, and employee handbooks, (ii) annual reports including but not limited to Forms 5500, 990 and 1041 for the last three years for the plan and any related trust, (iii) actuarial valuation reports and financial statements for the last three years, and (iv) each communication involving the plan or any related trust to or from the IRS, DOL, PBGC or any other governmental authority including, without limitation, the most recent determination letter received from the IRS pertaining to any Employee Benefit Plan intended to qualify under Sections 401(a) or 501(c)(9) of the Code. (c) Seller has no obligation to contribute to or provide benefits pursuant to, and has no other liability of any kind with respect to, (i) a "multiple employer welfare arrangement" (within the meaning of Section 3(40) of ERISA), or (ii) a "plan maintained by more than one employer" (within the meaning of Section 413(c) of the Code). (d) Seller is not liable for, and neither PRGI nor Seller will be liable for, any contribution, tax, lien, penalty, cost, interest, claim, loss, action, suit, damage, cost, assessment or other similar type of liability or expense of any ERISA Affiliate (including predecessors thereof) with regard to any Employee Benefit Plan maintained, sponsored or contributed to by an ERISA Affiliate (if a like definition of Employee Benefit Plan were applicable to the ERISA Affiliate in the same manner as it applies to Seller), including, without limitation, withdrawal liability arising under Title IV, Subtitle E, Part 1 of ERISA, liabilities to the PBGC, or liabilities under Section 412 of the Code or Section 302(a)(2) of ERISA. (e) Seller, each ERISA Affiliate, each Employee Benefit Plan and each Employee Benefit Plan "sponsor" or "administrator" (within the meaning of Section 3(16) of ERISA) has complied in all respects with the applicable requirements of Section 4980B of the Code and Section 601 et seq. of ERISA (such statutory provisions and predecessors thereof are referred to herein collectively as "COBRA"). The Disclosure Schedule lists the name of each Business Employee who has experienced a "Qualifying Event" (as defined in COBRA) with respect to an Employee Benefit Plan who is eligible for "Continuation Coverage" (as defined in COBRA) and whose maximum period for Continuation Coverage required by COBRA has not expired. Included in such list are the current address for each such individual, the date and type of each 2.23 - 1 61 Qualifying Event, whether the individual has already elected Continuation Coverage and, for any individual who has not yet elected Continuation Coverage, the date on which such individual was notified of his or her rights to elect Continuation Coverage. The Disclosure Schedule also lists the name of each Business Employee who is on a leave of absence (whether or not pursuant to the Family and Medical Leave Act of 1993, as amended ("FMLA")) and is receiving or entitled to receive health coverage under an Employee Benefit Plan, whether pursuant to FMLA, COBRA or otherwise. (f) With respect to each Employee Benefit Plan and except as otherwise set forth on the Disclosure Schedule: (i) all payments required by the Employee Benefit Plan, any collective bargaining agreement or by law (including all contributions, insurance premiums, premiums due the PBGC or intercompany charges) with respect to all periods prior to and including the date hereof have been made; (ii) there are no violations of or failures to comply with ERISA and the Code with respect to the filing of applicable reports, documents, and notices regarding the Employee Benefit Plan with the DOL, the IRS, the PBGC or any other governmental authority, or any of the assets of the Employee Benefit Plan or any related trust; (iii) no claim, lawsuit, arbitration or other action has been asserted or instituted or threatened in writing against the Employee Benefit Plan, any trustee or fiduciaries thereof, Seller or any ERISA Affiliate, any director, officer or employee thereof, or any of the assets of the Employee Benefit Plan or any related trust; (iv) all amendments required to bring the Employee Benefit Plan into conformity with applicable law, including, without limitation, ERISA and the Code, have been or will be timely adopted; (v) the Employee Benefit Plan complies with and has been maintained and operated in accordance with its respective terms and the terms and the provisions of applicable law, including, without limitation, ERISA and the Code (including rules and regulations thereunder); (vi) no "prohibited transaction" (within the meaning of Section 4975 of the Code and Section 406 of ERISA) has occurred or is expected to occur with respect to the Employee Benefit Plan (and the transactions contemplated by this Agreement will not constitute or directly or indirectly result in such a "prohibited transaction") which has subjected or could subject Seller, any ERISA Affiliate, PRGI or any officer, director or Business Employee, or any Employee Benefit Plan trustee, administrator or other fiduciary, to a tax or penalty on prohibited transactions imposed by either Section 502 of ERISA or Section 4975 of the Code or any other liability with respect thereto; (vii) Seller has received no oral or written notification that the Employee Benefit Plan is under audit or investigation by the IRS or the DOL or any other governmental authority and no such completed audit, if any, has resulted in the imposition of any tax, interest or penalty; and 2.23 - 2 62 (viii) if the Employee Benefit Plan purports to provide benefits which qualify for tax-favored treatment under Sections 79, 105, 106, 117, 120, 125, 127, 129 or 132 of the Code, the Employee Benefit Plan satisfies the requirements of said Section(s); and (ix) the Employee Benefit Plan may be unilaterally amended or terminated on no more than 90 days notice. (g) Seller is not subject to any liens, and excise or other taxes under ERISA, the Code or other applicable law relating to any Employee Benefit Plan; has not ceased operations at a facility so as to become subject to the provisions of Section 4062(e) of ERISA; has not withdrawn as a substantial employer so as to become subject to the provisions of Section 4063 of ERISA; and has not ceased making contributions to any Employee Benefit Plan subject to 4064(a) of ERISA to which Seller or any ERISA Affiliate made contributions at any time during the six (6) years prior to the date hereof. (h) The consummation of the transactions contemplated by this Agreement will not give rise to any liability for any employee benefits, including, without limitation, liability for severance pay, unemployment compensation, termination pay or withdrawal liability, or accelerate the time of payment or vesting or increase the amount of compensation or benefits due to any Business Employee. (i) Except as set forth on the Disclosure Schedule, no Employee Benefit Plan in any way provides for any benefits of any kind whatsoever (other than under COBRA or any Employee Benefit Plan qualified under Section 401(a) of the Code) to any Business Employee who, at the time the benefit is to be provided, is a former director or former employee of, or other former provider of services to, Seller or an ERISA Affiliate (or a beneficiary of any such person), or any other former employee of Seller, nor have any representations, agreements, covenants or commitments been made to provide such benefits. (j) From December 31, 1997 and through the date hereof, except as set forth on the Disclosure Schedule, neither Seller nor any ERISA Affiliate has, nor from the date hereof to the Closing will it have, instituted or agreed to institute any new employee benefit plan or practice, made or agreed to make any change in any Employee Benefit Plan, made or agreed to make any increase in the compensation payable or to become payable by Seller or any ERISA Affiliate to any Business Employee, or except pursuant to this Agreement and except for contributions required to provide benefits pursuant to the provisions of the Employee Benefit Plans, paid or accrued or agreed to pay or accrue any bonus, percentage of compensation, or other like benefit to, or for the credit of, any Business Employee. (k) Any contribution, insurance premium, excise tax, interest charge or other liability or charge imposed or required with respect to any Employee Benefit Plan which is attributable to any period or any portion of any period prior to the Closing is or shall be reflected as a liability on Seller's regularly prepared financial statements. (l) The Disclosure Schedule sets forth a true, correct and complete list by employee of the number of days and amount of accrued unpaid vacation and sick pay for each Business Employee. 2.23. - 3 63 \ ANNEX A
SELLER AND TYPE OF PRINCIPAL OWNERS ENTITY AND PERCENTAGE INTERESTS IN SELLER - ------------------------------------------------------------------------------------------ Robert Beck & N/A Robert N. Beck, Sr., Trustee Associates, Inc., Robert N. Beck, Sr. Living Trust S.Corporation Under Trust Dated 10/31/94 14.6% Georgena M. Beck, Trustee Georgena M. Beck Living Trust Under Trust Dated 10/31/94 14.6% Richard N. Beck 11.8% Robert N. Beck, Jr. 11.8% Russell N. Beck 11.8% Ronald N. Beck 11.8% Melissa A. Beck, as guardian of Brittney L. Beck, a minor 11.8% Renee N. McCauley, Trustee Renee N. NcCauley Living Trust Under Trust Dated 7/23/98 11.8% - ------------------------------------------------------------------------------------------ Robert N. Beck, Jr., Robert N. Beck, Jr. Robert N. Beck, Jr. 100% a sole proprietorship - ------------------------------------------------------------------------------------------ RBA Audits, Inc., Richard N. Beck Richard N. Beck 100% S.Corporation - ------------------------------------------------------------------------------------------ John H. Cavins, John H. Cavins John H. Cavins 100% a sole proprietorship - ------------------------------------------------------------------------------------------ Vincent Creadon, Vincent Creadon Vincent Creadon 100% a sole proprietorship - ------------------------------------------------------------------------------------------ John E. Flatley & John E. Flatley John E. Flatley 100% Associates, Inc. C Corporation - ------------------------------------------------------------------------------------------ John Kirkeide, John Kirkeide John Kirkeide 100% a sole proprietorship - ------------------------------------------------------------------------------------------ Savant Consulting, John J. Pope John J. Pope 50% L.L.C., a limited Jo Ann Pope 50% liability company - ------------------------------------------------------------------------------------------ Taylor, Blackburn and Richard A. Taylor Richard A. Taylor 72% Associates, Inc., Deborah B. Taylor 20% S. corporation Kimberly Baugh 5% Johnathan S. Taylor 3% ==========================================================================================
EX-23.1 12 CONSENT OF KPMG PEAT MARWICK LLP 1 EXHIBIT 23.1 INDEPENDENT AUDITORS' CONSENT The Board of Directors The Profit Recovery Group International, Inc.: We consent to the incorporation by reference in the registration statements (Nos. 333-30885, 333-08707 and 333-64125) on Form S-8 of The Profit Recovery Group International, Inc. of our report dated October 30, 1998, with respect to the balance sheet of Robert Beck & Associates, Inc. as of December 31, 1997, and the related statements of earnings, shareholders' equity, and cash flows for the year then ended, which report appears in this Form 8-K of The Profit Recovery Group International, Inc. KPMG PEAT MARWICK LLP Atlanta, Georgia November 9, 1998 -----END PRIVACY-ENHANCED MESSAGE-----