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EXHIBIT 10.56
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made as of this 1st
day of June, 2000, by and among THE PROFIT RECOVERY GROUP USA, INC., a Georgia
corporation ("PRGUSA"), THE PROFIT RECOVERY GROUP INTERNATIONAL, INC., a Georgia
corporation ("PRGX"), TSL SERVICES, INC., a Delaware corporation ("Seller"),
ENTERPRISE PROFIT SOLUTIONS CORPORATION, a Delaware corporation and the sole
shareholder of Seller ("Shareholder") and EPS SOLUTIONS CORPORATION, a Delaware
corporation and the sole shareholder of Shareholder ("EPS").
W I T N E S S E T H:
WHEREAS, PRGUSA is in the business of (i) auditing accounts payable,
telecommunications invoices, expenses, capital expenditures, freight bills and
invoices and various other payment arrangements or obligations between its
clients and their suppliers, vendors, carriers, landlords and taxing authorities
for the purpose of identifying and documenting overbilling by and refund, credit
or chargeback claims for overpayments to, the clients' suppliers, vendors,
carriers, landlords and taxing authorities or future cost reductions,
efficiencies or other savings, and (ii) sales, consignment, and product return
arrangements between clients and customers, distributors, or consignees for the
purpose of identifying claims of clients for underpayments or excessive credits
or charges (the "Audit Activities"), managing, processing, handling, reporting
and transmitting freight information, data and/or records, freight payment,
logistics (including rate negotiation and supply chain management) and other
related services (the "Freight Activities"), electronic commerce software
development and information systems consulting (the "E-Commerce Activities") and
rendering management advisory services, including contract negotiations in the
telecommunications industry, associated with the Audit Activities, Freight
Activities and E-Commerce Activities (the "Advisory Activities") (collectively,
such Audit Activities, Freight Activities, E-Commerce Activities and Advisory
Activities being the "Business of PRGUSA");
WHEREAS, Seller is in the business of providing comprehensive
information technology financial management solutions, including the following:
telecommunications and information technology cost control, telecommunications
consulting services, the provision of billing verification services and
optimization; call accounting services; software development, sales and
maintenance, managed invoice processing; consulting services; outsource
information technology services, including moves, adds and changes; and
professional technical temporary staffing (the "Business");
WHEREAS, the parties hereto desire that Seller sell to PRGUSA and that
PRGUSA purchase substantially all of the assets of Seller used or held for use
in the Business pursuant to the terms of this Agreement;
WHEREAS, the parties hereto desire to set forth certain representations,
warranties and covenants made by each to the other as an inducement to the
consummation of the transactions contemplated herein and certain additional
agreements related thereto;
NOW, THEREFORE, in consideration of the premises, the mutual
representations, warranties and covenants herein contained and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
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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, PRGUSA agrees to purchase from Seller, and Seller agrees to
sell to PRGUSA, as of the Effective Date (as hereinafter defined), 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 Effective Date whether owned by
Seller, Shareholder, EPS or any affiliate thereof, free and clear of all claims,
liens, encumbrances, security interests and similar interests of any kind or
nature whatsoever (collectively, the "Purchased Assets"), including the
following:
(a) all of Seller's machinery, appliances, equipment, including
computer hardware (and as to each computer, the software licensed for use
thereon), tools, supplies, leasehold improvements, construction in progress,
furniture and fixtures, used or held for use by Seller in connection with the
Business as of the Effective Date, including those items listed on Schedule
1.1(a) attached hereto ("Fixed Assets");
(b) all of Seller's right, title and interest under those
"Contracts" (which, for purposes hereof, shall mean all written or oral
contracts with Clients ("Client Contracts"), employment agreements, agreements
with consultants and independent contractors and all other agreements and
instruments relating to the Purchased Assets and the operation of the Business
to which Seller is a party or to which the Purchased Assets are subject or
bound, except for any Lease) which PRGUSA specifically agrees to assume, which
assumption shall be evidenced by inclusion of such Contract by PRGUSA on a
schedule to the Assignment and Assumption Agreement, as defined herein
(collectively, "Assigned Contracts");
(c) all accounts receivable, notes receivable, employee advances
of Seller outstanding as of the Effective Date (collectively, "Accounts
Receivable") and all work in progress including all unbilled claims of Seller as
of the Effective Date (collectively, the "Work in Progress");
(d) all of Seller's right, title and interest in, and benefits
accruing to Seller as lessee or sublessee under, those "Leases" (which, for
purposes hereof, means all written and oral leases or subleases in respect of
the Business and to which Seller is a party, including all real property and
equipment leases), which PRGUSA specifically agrees to assume, which assumption
shall be evidenced by inclusion of such Lease by PRGUSA on a schedule to the
Assignment and Assumption Agreement (collectively, the "Assigned Leases");
(e) all intellectual property used or owned by Seller or the
Business, including (i) the names "TSL Services," "Telecom Services Limited,"
"TOMS", "Fraud-Check", "E-Z View" and all registered and unregistered
trademarks, service marks and applications (collectively, "Marks"); (ii) all
patents and patent applications (collectively, "Patents"); all copyrights in
both published works and unpublished works (collectively, "Copyrights"); (iii)
all computer and electronic data processing programs and software programs and
systems and related documentation, research projects, computer software under
development, software concepts owned and proprietary intellectual property,
processes, formulae and algorithms, including all intellectual property used in
the ownership, marketing, development, maintenance, support and delivery of the
software and presently owned or licensed by the Seller which are used or
proposed to be used or
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reserved for use by the Seller in the Seller's Business (including "TOMS"
Software, Internal Report Tools Systems and any other computer software programs
and databases developed by or for Seller and the Business or licensed to them)
(the "Software"); (iv) all inventions, improvements, developments, modifications
and derivative works, whether or not reduced to practice, which Seller,
Shareholder, EPS or any employee of Seller, together or individually, alone or
in combination with each other or any other person, has made which relates to
the Business (collectively, "Developments"); and (v) all know-how, trade
secrets, formulas, confidential information, customer lists, technical
information, data, reports, deliverables, source code, object code, process
technology, plans, drawings and blueprints (collectively, "Trade Secrets"; and
collectively, the Marks, Patents, Copyrights, Software, Developments and Trade
Secrets being the "Intellectual Property Assets");
(f) all of 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 and listed on Schedule
1.1(f) attached hereto;
(g) all claims, security and other deposits, refunds, prepaid
expenses, causes of action, choses in action, rights of recovery (including any
and all rights to indemnification against InterVoice-Brite, Inc., its successors
and assigns (collectively, "I-B") in respect of the Business and Purchased
Assets), warranty rights, rights under non-disclosure, noncompetition,
non-solicitation and similar agreements, and rights of set off in respect of the
Business and Purchased Assets, including those items listed on Schedule 1.1(g)
attached hereto (collectively, the "Deposits and Other Rights");
(h) all of Seller's client and supplier lists, all client files,
all files related to employees, consultants or independent contractors, all
computer data bases and other business records relating to the Purchased Assets
other than Seller's corporate minute books and stock records;
(i) all of Seller's right, title and interest in and to their
telephone numbers and the directory advertising for such telephone numbers to
the extent assignable; and
(j) all of Seller's and EPS's right, title and interest in and to
the Lock Box at Bank of America, Los Angeles, California, identified in Section
3.19 hereof;
(k) Cash at Closing in the total aggregate amount equal to the
sum of (i) the net increase in cash, if any, after payment of operating expenses
incurred in the ordinary course of business consistent with past practices (but
without any decrease in cash for Seller's Transaction Expenses, as hereinafter
defined, which shall be borne other than at the expense of PRGUSA) provided by
the Business for the period from and after the Effective Date through the
Closing Date, plus (ii) an amount of cash equal to the cash applied during the
period from the Effective Date to the Closing Date to either Seller Transaction
Expenses, non-current payables (as defined in Section 2.2(a)), payables incurred
outside the ordinary course of Business or inconsistent with past practices,
non-trade payables (as defined in Section 2.2(a)), payables which are past due
as of the Effective Date, or payables or other indebtedness due to the
Shareholder, EPS or any affiliates of Shareholder or EPS from Seller, plus (iii)
the amount of cash paid by the Seller from and after the Effective Date in
satisfaction of outstanding commission amounts payable that relate to
receivables collected by the Seller prior to the Effective Date (such sum being
the "Cash Assets"); and
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(l) all of Seller's right, title and interest in and to all other
tangible personal property and intangible property used or held for use in
connection with the Business, including any and all goodwill and going concern
value of the Business and Seller.
1.2 EXCLUDED ASSETS. Notwithstanding anything to the contrary contained
in Section 1.1 hereof, PRGUSA shall not acquire and Seller shall not transfer to
PRGUSA Seller's corporate minute and stock books, or any assets held under any
pension, profit sharing or other Employee Benefit Plan (as defined herein), any
vehicles owned or leased by Seller, cash (except as provided in Section 1.1(k)
hereof) and inter-company receivables owed to Seller by EPS, Shareholder or
those entities identified in Section 4.29(c) of Schedule 4.29 and identified as
"IntUnTSL" and "InterL/T Rec" on the Estimated Closing Balance Sheet (as defined
herein) (collectively, the "Excluded Assets").
1.3 CONVEYANCE OF ASSETS. The conveyance, transfer and delivery of the
Purchased Assets shall be made by Seller and accepted by PRGUSA on the Closing
Date, as of the Effective Date, as follows:
(a) Seller shall execute and deliver to PRGUSA a ▇▇▇▇ of sale in
the form of Exhibit 1.3(a) attached hereto and made a part hereof (the "▇▇▇▇ of
Sale");
(b) Seller and PRGUSA shall execute and deliver to PRGUSA 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 to PRGUSA a trademark
assignment in the form of Exhibit 1.3(c)-1 attached hereto and made a part
hereof and a copyright assignment in the form of Exhibit 1.3(c)-2 attached
hereto and made a part hereof; and
(d) Seller shall execute and deliver such additional instruments
of sale, transfer, conveyance and assignment on the Closing Date, as counsel to
Seller and counsel to PRGUSA shall mutually deem necessary or appropriate.
1.4 CLOSING. The closing of the transactions contemplated herein (the
"Closing") shall take place on or before June 7, 2000 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 being the "Closing Date").
The Closing shall be effective as of 12:01 a.m. June 1, 2000 (the "Effective
Date" (and, in respect of Cash Assets, as of the end of the banking business day
immediately preceding the Effective Date), so that effective control of the
Business and the Purchased Assets, including all risks and rewards of ownership,
all cash receipts, profits and losses, and all benefits and burdens of ownership
shall transfer to PRGUSA on and as of the Effective Date, and, subject to the
provisions of Section 3.5 hereof, all day-to-day management and operating
control of the Business and the Purchased Assets shall pass to PRGUSA from and
after the Effective Date and all computations, adjustments and transfers
pursuant hereto for purposes hereof shall be on and as of 12:01 am on the
Effective Date (and, in respect of Cash Assets, as of the end of the banking
business day immediately preceding the Effective Date).
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ARTICLE 2
PURCHASE PRICE; ASSUMPTION OF LIABILITIES
2.1 PURCHASE PRICE. Subject to the adjustments set forth herein and the
other terms and conditions of this Agreement, the Purchase Price ("Purchase
Price") for the Purchased Assets shall be $18.25 million. In addition to the
Purchase Price, PRGUSA shall pay an aggregate of $100,000 to Seller, Shareholder
and certain affiliates of Seller in consideration of the Noncompetition
Agreement defined herein. The Purchase Price, less the escrow amount provided
for in Section 2.3 hereof, and the payments under the Noncompetition Agreement,
shall be paid in cash on the Closing Date by wire transfer or other immediately
available funds.
2.2 ASSUMPTION OF LIABILITIES. PRGUSA agrees to assume, from and after
the Closing Date, only the following liabilities, to the extent disclosed to and
accepted by PRGUSA on the Estimated Closing Balance Sheet (as defined herein) or
the Schedules attached hereto, subject to Section 2.4(d) hereof (the "Assumed
Liabilities"):
(a) normal current (which means trade payables not older than 30
days from the date originally invoiced (regardless of any agreements allowing
for later payments)) trade payables of the Business incurred in the ordinary
course of business and outstanding as of the Effective Date or incurred in the
ordinary course of business thereafter consistent with past practices and the
provisions of Section 3.5 hereof, excluding (A) all Seller Transaction Expenses
(as defined in Section 3.13 hereof); (B) non-trade payables (meaning those not
directly related to the Business to be acquired by PRGUSA pursuant hereto); (C)
payables past due as of the Effective Date; and (D) all accounts payable or
other indebtedness due to the Shareholder or EPS or any affiliates of
Shareholder or EPS from Seller;
(b) commission amounts which will be owed by the Business to its
commissioned employees, consultants or independent contractors (but not to
Shareholder or EPS) upon collection of Accounts Receivable and Work in Progress
outstanding on the Effective Date;
(c) all obligations and liabilities of Seller arising from and
after the Effective Date under the Assigned Contracts (which shall include all
Client Contracts) and the Assigned Leases, to the extent not yet performed by
Seller;
(d) accrued employee vacation liability as of the Effective Date
reflected on the Estimated Closing Balance Sheet to Hired Employees; and
(e) accrued bonuses to employees of the Business as of the
Effective Date as reflected on the Estimated Closing Balance Sheet.
Except for the Assumed Liabilities, PRGUSA shall not assume any debts or
liabilities of Seller of any kind or nature whatsoever. Without limiting the
generality of the foregoing, PRGUSA shall not assume any accounts payable (other
than the trade payables described in 2.2(a) above), any liabilities for payroll,
sick leave or sick pay, bonus, retirement plans and similar payroll expenses
(whether or not accrued), loans due to Shareholder, bank debt or other notes
payable, or disputed, contingent or unliquidated liabilities of any kind
whatsoever (including any liability in respect of any claims made by Information
Source Inc., including those related to the lawsuit Information Source, Inc. v.
Telecom Services, Ltd., a division of Brite Voice Systems, Inc. in the
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▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇, Law Division, ▇▇▇▇▇▇ County, Docket No.
L-2972-98). Anything to the contrary contained herein notwithstanding, PRGUSA
shall neither assume nor have any obligations or liabilities whatsoever in
respect of any amounts owed by TSL to EPS, Shareholder or those entities
identified in Section 4.29(c) of Schedule 4.29 attached hereto, including that
item identified as "Inter L/T Rec" under the heading Other Assets in the
Estimated Closing Balance Sheet, Seller's Taxes (as hereinafter defined),
severance, income tax withholding, payroll and/or unemployment tax, workers'
compensation, pension, profit-sharing, health insurance, COBRA (as hereinafter
defined) or any other employee or other benefit liabilities in respect of any
Business Employees (as hereinafter defined) or in respect of any Employee
Benefit Plans (as hereinafter defined), including any contribution, tax, lien,
penalty, cost, interest, claim, loss, action, suit, damage, cost assessment,
withdrawal liability, liability to the Pension Benefit Guaranty Corporation (the
"PBGC"), liability under Section 412 of the Internal Revenue Code of 1986, as
amended (the "Code") or Section 302(a)(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or other similar liability or
expense of Seller or any ERISA Affiliate (as hereinafter defined), and PRGUSA
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. At the Closing, PRGUSA will deposit $1,000,000 of the
Purchase Price (subject to increase in accordance with Section 3.18 hereof) in
cash with First Union National Bank, N.A., which will be held in escrow until
the first anniversary of the Closing Date (or as otherwise described in Section
3.18) as a non-exclusive source for any claims for indemnification by PRGUSA
against Seller or Shareholder pursuant to the terms of the Indemnity Escrow
Agreement by and among PRGUSA, PRGX, Seller and Shareholder in the form of
Exhibit 2.3 attached hereto (the "Indemnity Escrow Agreement").
2.4 ESTIMATED CLOSING BALANCE SHEET AND PURCHASE PRICE ADJUSTMENTS.
(a) On or before two business days prior to the Closing Date, the
Seller shall prepare in accordance with Section 2.4(b) hereof, and PRGUSA and
the Seller shall agree upon, a written estimated balance sheet as of the
Effective Date, including a detailed listing of the assets and liabilities of
Seller outstanding as of the Effective Date (the "Estimated Closing Balance
Sheet"), which statement will contain with respect to any item which is not
capable of determination at the Effective Date, a good faith estimate of such
item as of the Effective Date and which shall, when delivered, be attached
hereto as Schedule 2.4.
(b) The Estimated Closing Balance Sheet shall be prepared in
accordance with generally accepted accounting principles ("GAAP") on a basis
consistent with the Year-End Statements (as defined herein) including the notes
thereto, shall include the same categories of assets and liabilities of the
Seller as of the Effective Date as were included on the December 31, 1999
balance sheet included in the Year-End Statements (as defined below) of the
Seller, and shall be consistent with the Seller's past accounting practices and
procedures on a stand-alone basis.
(c) As of the Effective Date, the Purchase Price shall be
adjusted to decrease the Purchase Price by the sum of those items set forth on
Schedule 2.4-A attached hereto including, without limitation (i) the amount if
any, by which accrued employee vacation liability to employees of the Business
as of the Effective Date exceeds $215,000 , (ii) the amount, if any, by which
the trade payables of the Business assumed by PRGUSA in accordance with 2.2(a)
hereof
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exceed $250,000, (iii) the amount of all commission payments owed by Seller on
the Effective Date on accounts receivable collected by Seller before the
Effective Date, and (iv) an aggregate of $95,835, reflecting the aggregate
amount of the bonuses, whether or not accrued on the Estimated Closing Balance
Sheet, allocated to the employees of Seller listed on Attachment A to the
Estimated Closing Balance Sheet for the period from January 1, 2000 to the
Effective Date to the extent not paid by Seller to its employees at or prior to
the Effective Date. The Cash Assets shall be delivered by Seller to PRGUSA at
Closing by wire transfer to an account designated by PRGUSA. The amount of the
Cash Assets set forth in Section 1.1(k) hereof shall be determined at Closing
based upon an estimated cash flow statement (the "Cash Flow Statement") prepared
by Seller for the period including the Effective Date to and including the
Closing Date. Seller shall deliver the Cash Flow Statement to PRGUSA the day
immediately prior to the Closing Date.
(d) After presentation by Seller of the Estimated Closing Balance
Sheet and the Cash Flow Statement, PRGUSA shall have the right to question the
bases of any items therein and Seller, Shareholder and EPS will cooperate with
PRGUSA and provide appropriate representatives during normal business hours as
reasonably requested by PRGUSA to answer questions and resolve any issues raised
by PRGUSA in such statements. If the parties are unable to resolve any such
issues, PRGUSA shall have the right, within seventy-five days after the Closing
Date, to request that KPMG LLP ("KPMG") review the Estimated Closing Balance
Sheet and/or the Cash Flow Statement (each a "Statement")and make such
adjustments in such amounts so as to be true and correct as of 12:01 a.m. on the
Effective Date and to be consistent with the provisions of Section 1.1(k), 1.4
and 2.4 hereof. KPMG shall present its proposed adjustments to PRGUSA and Seller
as soon as practicable and PRGUSA and Seller shall have the opportunity to
discuss with KPMG and/or object to any such adjustments within 10 days after
receipt thereof. Thereafter, KPMG shall issue a final version of any such
Statement submitted to it for review, which Statement shall be the final
determination thereof, and in the event that such determination shows that
payments are required to be made by Seller or PRGUSA, any such payment shall be
made by PRGUSA or Seller to the other, as the case may be, together with
interest thereon at a rate of 5.5% per annum from the Closing Date until the
date of payment, within 15 days after completion of the review by KPMG. The fees
and expenses charged by KPMG in respect of all services rendered by it pursuant
to this Section 2.4(a) shall be borne solely by PRGUSA.
(e) The Purchase Price shall be adjusted by pro rating between
PRGUSA and Seller on a per diem basis as of the Effective Date all assessments,
real estate taxes, personal property and ad valorem taxes, additional rent
related to taxes and insurance and other similar charges assessed against the
Purchased Assets for the current calendar year and any prior years; provided,
however, that (A) Seller shall pay all sales and use taxes and similar charges,
if any, arising out of the transfer of the Purchased Assets pursuant to this
Agreement; (B) Seller shall pay any income, sales, use, business, occupation,
withholding, employment, security or similar tax, or any other taxes of any kind
whatsoever with respect to the Purchased Assets and the operation of the
Business relating to any period before the Effective Date; (C) Seller shall pay
all transfer and deed taxes and similar charges arising out of the transfer of
the Purchased Assets. At Closing, Seller will pay all obligations to its
employees for salary, bonus, and benefits, including contributions pursuant to
the 401(k) Plan (as defined herein) accrued on the Estimated Closing Balance
Sheet as of the Effective Date which are not Assumed Liabilities and will timely
pay after the Effective Date all other obligations of Seller which are not
Assumed Liabilities.
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(f) The parties acknowledge that, after the Closing, PRGUSA shall
move those former Business Employees (as defined herein) who become PRGUSA
employees ("Hired Employees") to PRGUSA's payroll system as soon as practicable,
but no later than September 1, 2000. A former Business Employee will be a Hired
Employee if and only if such person (A) reports to work for PRGUSA and (B)
executes and delivers to PRGUSA an Employee Agreement (as defined in Section 3.2
hereof) (1) if a Key Employee (as defined herein), on or before the Effective
Date, or (2) if not a Key Employee, within 3 days after the Closing Date. Until
such time as such Hired Employees are included on PRGUSA's payroll system,
Seller shall when and as funded by PRGUSA make disbursements on behalf of PRGUSA
and as PRGUSA's agent to the Hired Employees for payroll and employee
compensation earned after the Closing Date in respect of their employment by
PRGUSA in accordance with Seller's past practices pursuant to instructions from
PRGUSA. PRGUSA hereby agrees to fund Seller with all amounts necessary to make
such payments prior to the time such payments are due to the Hired Employees,
and PRGUSA and PRGX shall indemnify and hold Seller harmless in respect of any
and all liabilities arising from such arrangement, other than Seller's failure
to properly apply the funds advanced by PRGUSA.
ARTICLE 3
ADDITIONAL COVENANTS
3.1 DUE DILIGENCE REVIEW.
(a) Upon the execution and delivery hereof, Seller shall
concurrently deliver to PRGUSA all Schedules required to be attached hereto and
true, correct and complete copies of all documents, together with all amendments
thereto through the date of execution hereof, contemplated by this Agreement and
required by the terms hereof to be listed on the Exhibits or Schedules attached
hereto not previously delivered to PRGUSA, including any Material Leases (as
defined in Section 4.16 below), Material Contracts (as defined in Section 4.15
below), insurance policies, the Historical Statements (as defined in Section 3.1
below) and Seller's Tax Returns for 1996, 1997, 1998 and 1999 (pursuant to
Section 4.12 hereof). Prior to the Effective Date, PRGUSA its counsel and
representatives, including KPMG (collectively, the "PRGUSA Representatives")
shall have conducted such due diligence investigation of the Business of Seller
as PRGUSA shall determine. Seller shall provide such persons full access during
normal business hours to the offices, properties, books, records, files and
other documents and information regarding Seller's assets and Business, to
Seller's employees, officers, sales agents, project managers, contract service
providers, strategic partners, other representatives and customers and to all
materials, programs, data, reports, systems, practices, deliverables, source
codes, and other properties and assets and shall fully cooperate with PRGUSA and
such persons and provide full opportunity to said parties to make such
investigation and copy such documents as PRGUSA shall desire, including
permitting such persons to contact customers of Seller. No investigation of the
Business of Seller by PRGUSA, its counsel and representatives, including the
PRGUSA Representatives, either prior to, on, or after the date hereof shall
affect PRGUSA's and PRGX's right to rely upon, or Seller's and Shareholder's
responsibility for the accuracy of the representations and warranties of Seller
and Shareholder made herein.
(b) As soon as practicable, Seller and Shareholder, at their sole
cost and expense, shall prepare and provide to PRGUSA and KPMG financial
statements of the Business as of December 31, 1999 for the year ended December
31, 1999, containing thereon an
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unqualified audit report (the "Report") of Ernst & Young LLP, Seller's
independent auditor (collectively, the "Year-End Statement") and separate
internal monthly balance sheets and income statements as of and for the months
of December, 1998, January, February, March, April and May, 2000 and on a
stand-alone basis for the year ended December 31, 1999 (collectively, with the
Year-End Statements, the "Historical Statements"). At the sole cost of PRGUSA,
Seller and Shareholder will provide after Closing, if and promptly after
requested by PRGUSA, such other financial information, including copies of books
and records and other materials (i) sufficient to enable KPMG to prepare such
pro forma financial statements as shall comply with the provisions of Article 11
of Regulation S-X, and (ii) in form and substance satisfying the requirements
for filing the Historical Statements and Report with the Securities and Exchange
Commission. Seller and Shareholder will, and will cause each of its officers,
directors and employees to, cooperate fully with PRGUSA and the PRGUSA
Representatives to provide all such information and documents as PRGUSA or the
PRGUSA Representatives may periodically request.
(c) Between the date of this Agreement and the Closing Date,
PRGUSA and Seller will maintain in confidence, and will cause their respective
directors, officers, employees, agents, representatives and advisors of PRGUSA
and Seller, to maintain in confidence any written, oral or other information
obtained in confidence from any other party hereto in connection with this
Agreement or the transactions contemplated herein, unless (a) such information
is already known to such party or to others not bound by a duty of
confidentiality or such information becomes publicly available through no fault
of such party, (b) or use of such information is necessary or appropriate in
making any filing or obtaining any consent or approval required for the
consummation of the transactions contemplated herein, or (c) the furnishing of
such information is required by, or is necessary or appropriate in connection
with, legal proceedings.
3.2 EMPLOYMENT MATTERS. Prior to the Effective Date, PRGUSA offered
employment (such employment to be effective as of the Closing Date for all
purposes under this Agreement) to such employees, consultants and independent
contractors of Seller as, PRGUSA designated on Schedule 3.2 attached hereto as
persons whose continued employment is critical to the success of the Business
(such persons, as designated or modified from time to time by PRGUSA prior to
the Closing, together with the Shareholder, being the "Key Employee") and
concurrently with or as soon as practicable after the Closing, PRGUSA will offer
employment (such employment to be effective as of the Closing Date for all
purposes under this Agreement) to all other employees of Seller on terms
acceptable to PRGUSA and such persons; provided that, as a condition of
employment, each such Key Employee and other person who accepts employment from
PRGUSA shall sign customary documents and forms including a Form I-9 and
PRGUSA's Employee Agreement (providing for non-competition, non-solicitation and
confidentiality covenants during the term of such person's employment and for 24
months thereafter), in substantially the form attached hereto as Exhibit 3.2
(the "Employee Agreement"), as PRGUSA may require. Seller and Shareholder shall
cooperate with and assist PRGUSA in obtaining written employment agreements from
Key Employees and such other employees, consultants and independent contractors
as PRGUSA designates as needed or requested by PRGUSA. Notwithstanding the
foregoing, in no event shall PRGUSA be required to provide employee benefits the
same as or similar to those provided by Seller or otherwise.
3.3 CONSENTS. Promptly after execution of this Agreement, Seller and
Shareholder will apply for or otherwise seek, and use their best efforts to
obtain, all consents, releases and
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approvals required with respect to Seller and/or Shareholder for consummation of
the transactions contemplated hereby, including without limitation, those
consents listed in Schedule 4.4 hereof (including estoppels and consents from
the lessors under the Assigned Leases and consents to the assignment to PRGUSA
of the Assigned Contracts) ("Consents"). Any charges imposed by the lessors or
other parties to the Assigned Contracts for such estoppels and consents shall be
borne by Seller, and each of the Seller and Shareholder shall, jointly and
severally, indemnify PRGUSA and PRGX against any loss or liability incurred by
PRGUSA or PRGX resulting from Seller's and Shareholder's failure to pay such
charges, in accordance with Article 6 hereof. Notwithstanding anything contained
herein to the contrary, the receipt of any such Consents (other than the Consent
and release of liens on the Purchased Assets of the Lenders under the Credit
Agreement as described in Section 7.3 hereof, the Acknowledgement and Consent of
InterVoice-Brite, Inc. in form and substance satisfactory to PRGUSA and an
agreement acceptable to PRGUSA relating to an assignment of Seller's leasehold
interest in certain equipment leased to Seller from LaSalle National Leasing
Corporation and described on Schedule 4.16 hereof) shall not be a condition
precedent to the Closing and the occurrence of the Closing will not constitute a
waiver of Seller's and Shareholder's obligation to obtain the Consents. After
the Closing, Seller shall continue to use its best efforts and shall assist and
cooperate with PRGUSA in obtaining all such Consents. The failure to obtain any
Consents after the Closing shall be subject to the indemnification provisions of
Section 6.1 hereof.
3.4 NONCOMPETITION AGREEMENT. Concurrently with the Closing, in
consideration of the acquisition of Purchased Assets as contemplated herein,
Seller, Shareholder and EPS shall enter into a noncompetition, nonsolicitation
and confidentiality agreement with PRGUSA in substantially the form attached
hereto as Exhibit 3.4 (the "Noncompetition Agreement").
3.5 CONDUCT OF BUSINESS BY SELLER PENDING PURCHASE. Seller and
Shareholder covenant and agree that, unless PRGUSA shall otherwise consent in
writing, between the date hereof and the Closing, the Business shall be
conducted at the direction of PRGUSA and only in, and Seller shall not take any
action, nor shall PRGUSA direct it to take any action, except in, the ordinary
course of business and in a manner consistent with Seller's 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,
and consultants of Seller, and to preserve the present relationships of Seller
with customers, clients and other persons having business relationships with
Seller. Between the date hereof and Closing, there shall be no material
diminution of the Purchased Assets, nor any material increase in the Assumed
Liabilities. By way of amplification and not limitation, except as expressly
provided for in this Agreement, Seller and Shareholder covenant that, between
the date hereof and the Closing, Seller and Shareholder (in respect of Seller
and the Business) shall not, directly or indirectly, do any of the following
without the prior written consent of PRGUSA, nor shall PRGUSA direct Seller or
Shareholder to do any of the following without the prior written consent of
Seller or Shareholder:
(a) (i) issue, sell, gift pledge, transfer, dispose of, encumber,
authorize any shares of capital stock, or any options, warrants, convertible
securities or other rights of any kind to acquire any shares of capital stock
of, or any other ownership interest in, Seller; (ii) amend the Articles of
Incorporation or By-Laws of Seller; (iii) split, combine or reclassify any
outstanding share of Seller's capital stock, or declare, set aside or pay any
dividend or distribution payable in cash, stock, property or otherwise with
respect to Seller's capital stock (except for normal salary and bonuses earned
in the ordinary course of business, in each case consistent with Seller's past
practices and as disclosed to PRGUSA in writing in advance of payment) (iv)
redeem, purchase
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or otherwise acquire any shares of Seller's capital stock; or (v) enter into any
contract, agreement, commitment or arrangement with respect to any of the
matters set forth in this Section 3.5(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 material contract or
agreement, except for client contracts in the ordinary course of business; (iv)
authorize any single capital expenditure in excess of $5,000 or capital
expenditures in the aggregate in excess of $10,000; or (v) enter into or amend
any contract, agreement, commitment or arrangement with respect to any of the
matters set forth in this Section 3.5(b);
(c) take any action other than in the ordinary course of business
and in a manner consistent with past practice (none of which actions shall be
unreasonable or unusual) with respect to materially increasing the compensation
or other remuneration of any officer, director, Shareholder or employee of
Seller, pay any bonuses to any of its employees (except for bonuses earned in
the ordinary course of business and disclosed to PRGUSA in writing in advance of
payment), or with respect to the grant of any severance or termination pay
(otherwise than pursuant to policies of Seller in effect on the date hereof and
fully disclosed to PRGUSA in writing prior to the date hereof) or with respect
to any increase of benefits payable under its 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 establishing or adjusting reserves, writing down or failing to
write down (in accordance with its past practices consistently applied) or
writing up the value of any 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) 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;
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(h) loan or advance monies to any person under any circumstance
whatsoever except travel advances or other reasonable expense advances to
employees of Seller made in the ordinary course of business and consistent with
past practice;
(i) 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;
(j) waive any material rights of Seller or settle any material
claim involving Seller;
(k) sell, license, or otherwise dispose of any of its
Intellectual Property Assets other than in the ordinary course of business
consistent with past practice;
(l) fail to make any Tax filing or Tax payment required to be
made prior to the Effective Date; or
(m) 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
Shareholder, which breach has a Material Adverse Effect (as defined in Section
4.6 hereof) on Seller or the ability of Seller or Shareholder to perform its,
his or her obligations under this Agreement or any Seller Transaction Document
(as defined in Section 4.2 hereof).
3.6 TAX ALLOCATION. Seller and PRGUSA agree that they will prepare and
file any notice or other filing required pursuant to Section 1060 of the Code in
respect of allocation of the Purchase Price. PRGUSA agrees to send to Seller,
and Seller agrees to send to PRGUSA, 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.
3.7 NOTIFICATION. Between the date of this Agreement and the Closing
Date, Seller will promptly notify PRGUSA in writing if Seller or Shareholder
becomes aware of any fact or condition that causes or constitutes a breach of
any of Seller's or Shareholder's representations and warranties as of the date
of this Agreement, or if Seller or Shareholder becomes aware of the occurrence
after the date of this Agreement of any fact or condition that would (except as
expressly contemplated by this Agreement) cause or constitute a breach of any
such representation or warranty had such representation or warranty been made as
of the time of occurrence or discovery of such fact or condition. Should any
such fact or condition require any change in the Schedules if the Schedules were
dated the date of the occurrence or discovery of any such fact or condition,
Seller will promptly deliver to PRGUSA a supplement to the Schedules specifying
such change. During the same period, Seller will promptly notify PRGUSA of the
occurrence of any breach of any covenant of Seller or Shareholder in this
Article 3 or of the occurrence of any event that may make the satisfaction of
the conditions in Article 7 impossible or unlikely.
3.8 PUBLIC ANNOUNCEMENTS.
(a) PRGUSA and Seller will issue a mutually agreeable joint press
release at such time as PRGUSA and Seller shall agree. Seller and Shareholder
shall obtain the prior written consent of PRGUSA before issuing any press
release or otherwise making any public
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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.
(b) Except for any public announcement relating to the
transactions contemplated herein as may be required by law or stock exchange
rules or as provided in this Section or in Section 3.1 hereof, each of Seller,
Shareholder, PRGX and PRGUSA agrees that until the press release contemplated in
Section 3.8(a) hereof is issued, each of such parties have not, and have
directed its directors, officers, 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 PRGUSA/PRGX Disclosure which has not been made publicly available by
PRGUSA/PRGX, including the fact that negotiations are taking place. In addition,
Seller and Shareholder shall obtain the prior written consent of PRGUSA (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 PRGUSA/PRGX Disclosure which has not been made
publicly available by PRGUSA or PRGX to obtain the prior written consent of
PRGUSA) before buying, selling or otherwise trading in or engaging in any
transactions with respect to PRGX securities, until such time as PRGUSA 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 PRGUSA/PRGX Disclosure.
3.9 NO NEGOTIATIONS. Seller and Shareholder covenant that, subject to
the termination provisions contained herein, from and after the date hereof
until June 15, 2000 and thereafter until either PRGUSA or Seller shall give five
(5) days' written notice of termination to the other, neither Seller,
Shareholder or EPS (or any of their respective agents or representatives) will,
either directly or indirectly, offer the Purchased Assets for sale to any person
other than PRGUSA, and neither Seller, nor Shareholder nor anyone acting on
behalf of Seller or Shareholder, 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 Purchased 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. Seller and Shareholder and their respective
representatives will promptly notify PRGUSA of any unsolicited proposals or
indications of interest therein (including identifying the potential purchaser
and disclosing the terms of the offer, if any) they receive.
3.10 COVENANT RE: TAX MATTERS.
(a) As used in this Agreement, the following terms have the
specified meanings:
(i) "Tax" or "Taxes" shall mean all taxes, assessments,
charges, duties, fees, levies or other governmental charges (including interest,
penalties or additions associated therewith) including U.S. federal, state,
city, county, non-U.S. or other income, franchise, capital stock, real property,
personal property, tangible, intangible, withholding, FICA, unemployment
compensation, disability, transfer, sales, use, excise, gross receipts,
registration,
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license, stamp, occupation, premium, windfall profits, environmental,
value-added, alternative or add-on minimum, estimated and all other taxes of any
kind for which the Seller may have any liability imposed by the United States or
any state, county, city, or municipality or other governmental subdivision
thereof or by any non-U.S. government or governmental subdivision or agency
thereof, whether disputed or not.
(ii) "Tax Authority" shall mean 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.
(iii) "Tax Return" shall mean 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 of, filed by or including Seller or Shareholder in respect of the
Business.
(b) Seller and Shareholder shall be solely responsible for and
shall pay, without any cost to PRGUSA, (i) any and all Taxes for which Seller or
Shareholder is or may be liable, arising from Seller's activities, the Business
or the ownership 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) and (ii) any Taxes with respect to the acquisition of
the Purchased Assets by PRGUSA, 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 PRGUSA.
3.11 TERM INSURANCE. As soon as reasonably practicable after the date
hereof, PRGUSA shall obtain, at the sole expense of PRGUSA, a term life
insurance policy on the life of S. ▇▇▇▇ ▇▇▇▇▇ in the amount of $3 million, and
on the life of ▇▇▇▇▇▇ ▇. ▇▇▇▇ in the amount of $1 million, designating PRGUSA as
sole beneficiary, and each of ▇▇▇▇▇ and ▇▇▇▇ agrees to provide all information
and submit to all examinations required by the insurer in connection therewith.
3.12 CORPORATE NAME. As soon as practicable following Closing, Seller
shall change its corporate name, and Seller and Shareholder shall cooperate with
PRGUSA in any efforts undertaken by PRGUSA to secure or protect its rights in
any name used by Seller in the conduct of the Business prior to Closing.
3.13 TRANSACTION EXPENSES. Except as otherwise specifically provided
herein, all of the expenses incurred by PRGUSA in connection with the
authorization, negotiation, preparation, execution and performance of this
Agreement and other agreements referred to herein and the consummation of the
transactions contemplated hereby, including all fees and expenses of agents,
representatives, brokers, counsel and accountants for PRGUSA, shall be paid by
PRGUSA ("PRGUSA Transaction Expenses"). Except as otherwise specifically
provided herein, all expenses incurred by Seller or Shareholder in connection
with the authorization, negotiation, preparation, execution and performance of
this Agreement 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 Seller and Shareholder ("Seller Transaction Expenses").
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3.14 REGULATORY AUTHORIZATION. On May 3, 2000, Seller and PRGUSA filed
with the United States Federal Trade Commission ("FTC") and the United States
Department of Justice (the "DOJ") the notification and report form required for
the transactions contemplated hereby pursuant to the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended (the "HSR Act"). The filing fees required
in connection with the filings with the FTC and DOJ described in this Section
3.14 shall be borne 50% by PRGUSA and 50% by Seller.
3.15 REMOVAL OF LIENS AND ENCUMBRANCES. Seller and Shareholder hereby
agree to use their best efforts 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 Purchased Assets, as described on
Schedule 4.3 hereto (the "Recorded Liens") as and when provided 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 PRGUSA 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.
Seller and Shareholder hereby covenant and agree to indemnify and hold PRGUSA
harmless from and against any and all losses or liabilities incurred by PRGUSA
resulting from or arising out of Seller's failure to remove any Recorded Liens,
in accordance with Article 6 hereof.
3.16 CONTINUATION OF HEALTH CARE COVERAGE. Seller shall use its best
efforts to obtain and deliver to PRGUSA prior to the Closing an undertaking from
its current group health and dental insurance providers that such providers will
continue coverage of (a) the Hired Employees (as defined in Section 2.4 hereof),
(b) their covered dependents as of the Effective Date and (c) COBRA qualified
beneficiaries as of the Effective Date, to the extent covered prior to the
Effective Date, after the transactions contemplated herein, at PRGUSA's sole
expense, subject to participants' contributions, deductibles and copayments, as
applicable, until such time as such employees who are hired by PRGUSA are
enrolled into such PRGUSA health and welfare benefit plans as such persons may
be eligible to participate in. Seller shall notify PRGUSA of the termination of
any group health or dental insurance plans sponsored by Seller which occurs
after the Effective Date.
3.17 BULK SALES LAW. PRGUSA hereby waives compliance by Seller with any
applicable U.C.C. or tax bulk sales law, and Seller and Shareholder agree,
jointly and severally, to indemnify and hold harmless PRGUSA (and affiliates
thereof) from and against any claims or liabilities not assumed by PRGUSA
pursuant to this Agreement asserted against PRGUSA (or any affiliate thereof) by
any creditor of Seller by reason on such noncompliance or for any other claims
or liabilities against PRGUSA for failure to comply with any such bulk transfer
law.
3.18 SELLER'S 401(K) PLAN. (a) EPS agrees that it will cause the account
balance, if any, of each Business Employee (as defined in Section 4.22) under
the EPS Solutions 401(k) Plan (the "401(k) Plan") to be fully vested as of the
Effective Date. Such vested account balances shall include $164,894 in respect
of the discretionary employer matching contribution to be made on behalf of
Business Employees for the 401(k) Plan's 1999 plan year (the "1999 Employer
Match"). The 1999 Employer Match will be contributed by EPS to the 401(k) Plan
on or prior to
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September 15, 2000. Subject to and in accordance with Code Section 401(k) and
other applicable law, Business Employees shall be eligible to receive a
distribution of their vested account balances under the 401(k) Plan within a
reasonable period following the date of such contribution. As soon as
administratively feasible following distribution of all such vested account
balances, the Seller shall take all necessary actions to cease to be an adopting
employer under the 401(k) Plan.
(b) Because the 1999 Employer Match to the 401(k) Plan will not
be made by EPS until a date subsequent to the Closing Date, the amount of the
Purchase Price held in escrow pursuant to Section 2.3 hereof shall be increased
by the amount of such 1999 Employer Match ("Increase in Escrow") and the amount
of Purchase Price payable to Seller at Closing will be reduced by an amount
equal to the Increase in Escrow. The amount of such Increase in Escrow shall be
held pursuant to the Indemnity Escrow Agreement until such time as PRGUSA
receives written confirmation from the Prototype Plan sponsor of the 401(k) Plan
(Prudential Mutual Fund Management, Inc.) in form and substance reasonably
satisfactory to PRGUSA that the 1999 Employer Match contribution has been made
in full and that the entire 1999 Employer Match has been allocated to the
individual accounts of the Business Employees (the "Sponsor Notice"), at which
time PRGUSA will promptly instruct the Escrow Agent to distribute to EPS from
the escrow fund established under the Indemnity Escrow Agreement an amount equal
to the 1999 Employer Match, together with interest earned thereon from the
Closing Date to the date of payment, in accordance with the Indemnity Escrow
Agreement. In the event PRGUSA does not receive the Sponsor Notice on or before
October 2, 2000, PRGUSA will promptly instruct the Escrow Agent to distribute to
PRGUSA an amount equal to the 1999 Employer Match, together with interest earned
thereon from the Closing Date to the date of payment, in accordance with the
Indemnity Escrow Agreement. In the event that the 1999 Employer Match, together
with interest earned thereon from the Closing Date to the date of payment, is
paid to PRGUSA in accordance with the Indemnity Escrow Agreement, PRGUSA agrees
that it will promptly pay to each of those Business Employees who are employees
of PRGUSA an amount in cash equal to the amount of the 1999 Employer Match that
would have been allocated to such employee by the Prototype Plan Sponsor had EPS
timely made the 1999 Employer Match.
3.19 BANK ACCOUNTS. Prior to the Effective Date and effective as of the
Effective Date, Seller, Shareholder and EPS shall have caused the following to
occur in respect of the Bank Accounts (as defined in Section 4.30 hereof): All
payments to Seller, including client payments, are made to the lock box
identified in Schedule 4.30 ("Lock Box"), which payments are swept to an EPS
account ("EPS Account"). From the Effective Date to the Closing Date, Seller
will receive payments and make disbursements in respect of the Business in the
ordinary course consistent with past practices for the sole benefit of PRGUSA in
accordance with Section 1.4 hereof, providing the Closing occurs in accordance
with the terms hereof. On the business day immediately preceding the Closing
Date, EPS shall deliver irrevocable written instructions to Bank of America
National Trust and Savings Association (the "Bank") to discontinue, as of the
end of the banking business day immediately preceding the Closing Date, the
sweep from the Lock Box into the EPS Account or any other account, and instead
sweep all amounts received in the Lock Box from and after the end of the banking
business day immediately preceding the Closing Date into PRGUSA's account at the
Bank, Account No. ▇▇▇ ▇▇▇▇▇▇▇ (the "PRGUSA Account"). In addition to receipts in
the Lock Box, all payments to Seller, Shareholder or EPS in connection with the
Business otherwise received on or after the Effective Date will be for the sole
benefit of PRGUSA and, provided the Closing occurs, shall be remitted to PRGUSA
as part
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of the Cash Assets. Signature cards required by the Bank to change or add to
persons authorized to access the Lock Box shall have been provided to PRGUSA
with sufficient time for PRGUSA to complete and transmit to the Bank prior to
the Closing Date.
3.20 INTERVOICE-BRITE, INC. In the event that the transfer of Seller's,
Shareholder's and EPS's rights to indemnification against I-B in accordance with
Section 1.1(g) hereof is ineffective for any reason, each of Seller, Shareholder
and EPS agree that they shall assert those rights, if any, against I-B in
respect of the Business and Purchased Assets on behalf of PRGUSA, in the same
manner and with the same diligence as it would assert claims of its own, and
will remit to PRGUSA any proceeds it receives from such assertion in respect of
the Business and Purchased Assets; provided, however, that the claims PRGUSA
desires to assert are made in good faith and have a reasonable basis. PRGUSA and
PRGX shall jointly and severally indemnify and hold Seller, Shareholder and EPS
harmless from and against all reasonable, properly documented, out-of-pocket
expenses (including reasonable attorneys fees and expenses incurred in
litigation or otherwise) arising out of and sustained by any of them in
connection with assertions of claims pursuant to this Section 3.20.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF
SELLER AND SHAREHOLDER
In order to induce PRGUSA and PRGX to enter into this Agreement and consummate
the transactions contemplated hereby, Seller and Shareholder jointly and
severally represent and warrant to PRGUSA and PRGX as follows, each of which
warranties and representations is material to and relied upon by PRGUSA and
PRGX. In making the warranties contained herein, Seller and Shareholder shall be
deemed to have the actual knowledge in any way relating to the Seller, the
Business and the conduct of the Business of S. ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇ and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇.
4.1 ORGANIZATION AND AUTHORITY OF SELLER. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Seller is duly qualified as a foreign corporation 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 (as defined in Section 4.6 hereof) on Seller) and Schedule 4.1
lists all the states where Seller is so qualified. Seller has all necessary
corporate power and authority to own, lease and operate its properties and
conduct its business as it is currently being conducted. Seller does not own,
directly or indirectly, any equity interest in any corporation, partnership,
joint venture, or other entity.
4.2 CORPORATE POWER AND AUTHORITY; DUE AUTHORIZATION. Seller has full
corporate power and authority, and Shareholder has full power and authority, to
execute and deliver this Agreement and each of the Seller Transaction Documents
to which Seller or Shareholder is or will be a party and to consummate the
transactions contemplated hereby. "Seller Transaction Documents" means each of
the agreements, documents and instruments referenced in this Agreement to be
executed and delivered by Seller and/or Shareholder. Prior to the Effective
Date, the directors and the Shareholder of Seller shall 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
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thereby, and no other corporate proceedings shall then be necessary. Assuming
that this Agreement and each of the Seller Transaction Documents which are also
PRGUSA Transaction Documents (as defined in Section 5.3 herein) constitutes a
valid and binding agreement of PRGUSA, this Agreement and each of the Seller
Transaction Documents constitutes, or will constitute when executed and
delivered, a valid and binding agreement of Seller and/or Shareholder, as the
case may be, in each case enforceable in accordance with its terms. The duly
elected directors and officers of Seller are set forth on Schedule 4.2 attached
hereto.
4.3 TITLE TO ASSETS. Except as set forth on Schedule 4.3 attached
hereto, Seller has good, valid and marketable title to all of its assets free
and clear of any mortgages, liens, pledges, security interests, encumbrances,
claims or similar rights of every kind and nature. Seller does not own any real
property used or held for use in connection with the Business.
4.4 NO CONFLICT; REQUIRED CONSENTS. Schedule 4.4 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) and all Leases
(other than Material Leases) that require consent or approval to the assignment
of a 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 compliance with the applicable requirements of the
HSR Act, if any, and assuming all Seller Consents have been obtained or taken
prior to Closing, the execution and delivery by Seller and Shareholder of this
Agreement and the Seller Transaction Documents, and the consummation by Seller
and Shareholder of the transactions contemplated hereby and thereby do not and
will not (i) 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 Schedule 4.4); (ii) violate
the terms of any instrument, document or agreement to which Seller is a party,
or by which Seller or Shareholder or the property of Seller 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 (except for consents and approvals under Contracts and Leases
not required to be listed on Schedule 4.4), in each case except where such
violation, conflict, breach, default or lien will not have a Material Adverse
Effect (as defined below); (iii) violate Seller's Articles of Incorporation or
Bylaws; or (iv) 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, the Business or the
Purchased Assets. Neither Seller nor Shareholder 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 Seller after the Effective
Date on substantially the same basis as theretofore operated.
4.5 OWNERSHIP OF CAPITAL STOCK. All outstanding shares of Seller's
capital stock are validly issued, fully paid and nonassessable and are owned of
record and beneficially solely by Shareholder. No one other than the Shareholder
has any beneficial or record interest in the capital stock of Seller.
Shareholder warrants and represents that it is the lawful owner of, and has good
and marketable title to, all of Seller's outstanding capital stock, 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 shares thereof). Seller has not issued any
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convertible securities, options, warrants, or entered into any contracts,
commitments, agreements, understandings, arrangements or restrictions by which
it is bound to issue any additional shares of its capital stock or other
securities.
4.6 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 Purchased Assets. The
term "Material Adverse Effect" means any change in or effect on the Business of
Seller that is or will be materially adverse to the Business, operations,
properties (including intangible properties), condition (financial or
otherwise), assets, liabilities, customer relations, regulatory status or
prospects of Seller. Neither Seller nor Shareholder has received written notice
of any noncompliance with the foregoing, nor are they aware of any basis
therefor.
4.7 LICENSES AND PERMITS. Seller holds and is in compliance with all
Licenses and Permits listed on Schedule 1.1(f) attached hereto, and such list
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 (collectively, the "Licenses and Permits"), except where such failure
to hold or noncompliance has or will have, individually or in the aggregate, no
Material Adverse Effect on the Business or Purchased Assets. Neither of the
Seller nor the Shareholder has received written notice of any violations in
respect of any such Licenses and Permits. No proceeding is pending or, to the
knowledge of Seller or Shareholder, threatened, which seeks revocation or
limitation of any such Licenses and Permits.
4.8 FINANCIAL INFORMATION. Attached hereto as Schedule 4.8 are true,
correct and complete copies of the Historical Statements for periods through the
last day of the month immediately preceding the date hereof, except that
Historical Statements for the months of January, February, March and April, 2000
do not contain customary footnotes. The Historical Statements have been, and the
Estimated Closing Balance Sheet will be, prepared in accordance with GAAP,
fairly present the financial condition of the Business at the respective dates
thereof and the results of its operations for the periods then ended in each
case in accordance with past practice and GAAP consistently applied during the
periods presented (except as otherwise disclosed in the notes thereto), and are
consistent with the books and records of the Business. All work papers related
to the Historical Statements and the Estimated Closing Balance Sheet and other
financial information provided by Seller to PRGUSA or KPMG in connection with
their due diligence are true, correct and consistent with the books and records
of the Business. On the date hereof there were, and as of the Effective Date
there will be, no liabilities or obligations of Seller 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 Historical Statements or the Estimated
Closing Balance Sheet, or (ii) that are specifically set forth on Schedule 4.8
attached hereto, none of which, individually or in the aggregate, constitutes a
Material Adverse Effect. Seller is not, nor has it 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 paid and is paying its debts as
they become due.
4.9 SUFFICIENCY OF ASSETS. The Purchased Assets, together with the
Excluded Assets, constitute all of the material assets and rights of any nature
with which Seller has conducted the Business for the twelve month period prior
to the Effective Date, subject only to additions and deletions in the ordinary
course of business. Except as otherwise set forth on Schedule 4.9
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attached hereto, the Purchased Assets are owned and held solely by, and all
agreements, obligations, expenses and transactions related to the Business have
been entered into, incurred and conducted solely by, Seller.
4.10 DEPOSITS AND OTHER RIGHTS. Attached as Schedule 1.1(g) is a true,
correct and complete list of all Deposits and Other Rights of Seller, listing,
where appropriate, the location thereof. Schedule 1.1(g) lists as of the
Effective Date, the amount of all monetary Deposits and Other Rights.
4.11 TRADE PAYABLES; ACCRUED EXPENSES; OTHER DEBT. Schedule 4.11A is a
true, correct and complete list as of the Effective Date, of the trade payables
and accrued expenses of Seller outstanding as of the Effective Date. All such
trade payables and accrued expenses were incurred in the ordinary course of
business and none is overdue other than those not yet paid due to a bona fide
dispute (as detailed on Schedule 4.11A). Schedule 4.11B is a true, correct and
complete list as of the Effective Date of all other debts, obligations,
guaranties, liabilities and other indebtedness of 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.
4.12 TAX MATTERS. Seller or EPS has timely filed with the appropriate
Tax Authority all Tax Returns required by law to be filed on or before the
Effective Date in respect of Seller's Business and shall correctly and timely
file all Tax Returns required by law to be filed regarding Seller's Business on
or prior to the Effective Date, subject to Seller's right to request or obtain
extensions. All such Tax Returns are true, correct and complete in all material
respects, and all amounts shown as owing thereon have been paid. No penalties,
interest or other charges are or will be due with respect to the late filing of
any such Tax Returns. Seller or EPS has made all estimated Tax payments and
withholdings in respect of Seller's Business required to be made under
applicable law. Neither Seller nor EPS has received a claim of Taxes due or
notice of any issues raised by any Tax Authority with respect to Seller. Except
as set forth on Schedule 4.12, there are no pending or, to the knowledge of
Seller or EPS, threatened audits, investigations or claims by any Tax Authority
for or relating to any liability in respect of Taxes. There are no liens for
Taxes on Seller or 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, to the knowledge of Seller and EPS, threatened. Neither Seller nor EPS has
entered into any agreements or waivers extending the time for the assessment of
any Tax relating to Seller's Business. Prior to the execution of this Agreement,
Seller has provided to PRGUSA true, correct and complete copies of all income
tax returns for 1999, 1998, 1997 and 1996, which returns were properly signed
and timely filed with the relevant Tax Authorities.
4.13 FIXED ASSETS. The Fixed Assets and the fixed assets leased by
Seller include all of the furniture, fixtures, and equipment owned and used by
Seller in the operation of the Business. Except as specifically set forth on
Schedule 1.1(a) attached hereto, each of the Fixed Assets is in the possession
of the Seller and in good operating condition and repair, normal wear and tear
excepted. A list true, correct and complete in all material respects of the
Fixed Assets as of the date hereof (which list will be updated so as to be true,
correct and complete in all material respects on the Effective Date) and the
location thereof is attached as Schedule 1.1(a).
4.14 ACCOUNTS RECEIVABLE. Schedule 4.14 attached hereto is a true,
correct and complete list (including aging) of all Accounts Receivable of Seller
that are reflected on the Estimated Closing Balance Sheet, showing the terms and
time period for collection thereof.
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Each of the Accounts Receivable represent valid obligations arising from sales
actually made or services actually performed by Seller in the ordinary course of
Business. Such Accounts Receivable are as of the Effective Date current and
collectible net of the reserve shown on the Estimated Closing Balance Sheet
(which reserve is adequate and calculated consistent with past practice and will
not represent a greater percentage of the Accounts Receivable reflected on the
Estimated Closing Balance Sheet than the reserve reflected in the Year-End
Statements represented of the accounts receivable reflected therein) and will
not represent a material adverse change in the composition of such Accounts
Receivable in terms of aging. Subject to such reserve, each of such Accounts
Receivable will be collected in full, without any setoff, within ninety (90)
days after the day on which it first becomes due and payable. Except as set
forth on Schedule 4.14, there is no contest, claim, defense or right of setoff
under any Contract with any account debtor of an Account Receivable relating to
the amount or validity of such Account Receivable. Schedule 4.14 also includes a
true, correct and complete list of all Work in Progress as of the Effective
Date.
4.15 MATERIAL CONTRACTS. Schedule 4.15 attached hereto is a true,
correct and complete list of all "Material Contracts" which, for purposes
hereof, means, collectively, all Contracts which (a) involve an aggregate annual
expenditure by Seller of $5,000 or more, (b) are contracts with vendors of
products or services to Seller not cancelable by Seller without cost on 60 days
or less notice, (c) involve the provision of data processing services or
telecommunications services to Seller, (d) are with employees of Seller, (e) are
with sales agents of Seller; (f) are with strategic or business partners of
Seller; (g) are license agreements (including those related to Software), either
as licensor or licensee; (h) are with those entities which constitute Primary
Clients (as defined in Section 4.17 hereof) for 1999 and 2000, (i) are with any
current Client and have an unexpired term of 2 or more years, (j) have or may
have the effect of (1) prohibiting or impairing any business practice of the
Seller, any acquisition of property (tangible or intangible) by Seller or the
conduct of business by the Seller, (2) requiring the referral of any business by
Seller, or (3) requiring or purporting to require the payment of money or the
acceleration of performance of any obligations of Seller by virtue of the
Closing or (k) are Client Contracts which contain any (1) obligations to provide
equipment or services beyond the scope of the Business or (2) any guaranty,
rebate or refund that will or is reasonably likely to exceed $5,000 in any 12
month period, and "Material Contract" means each of the Material Contracts,
individually. Schedule 4.15 indicates thereon the category of Material Contract
described in the immediately preceding sentence to which such Material Contract
belongs. Except as specifically set forth in Schedule 4.15B, Seller has not
entered into any agreement under which it is restricted from providing services
to customers or potential customers or any class of customers, in any geographic
area during any period of time or in any segment of the market. Seller and
Shareholder have provided or made available to PRGUSA true, correct and complete
copies of all written Material Contracts, including any and all amendments and
waivers thereto, and have provided descriptions of the material terms of any
oral Material Contracts on Schedule 4.15A hereof. 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 Seller 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. Except as specifically set
forth on Schedule 4.15B, neither Seller nor, to the knowledge of Seller or
Shareholder, 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
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Seller or, to the knowledge of Seller or Shareholder, any other party to any of
the Material Contracts. Except as specifically set forth on Schedule 4.15B, the
assignment of any of the Material Contracts to PRGUSA in accordance with this
Purchase Agreement will not constitute a breach or violation of such Material
Contract. Except as specifically set forth on Schedule 4.15B, each Client
Contract and each employment agreement of Seller is in the same form as attached
hereto to Schedule 4.15C, except for immaterial modifications which do not
confer additional benefits on such Clients or employees, as appropriate, or
impose additional liability on Seller. None of Seller's agreements or
arrangements with sales agents or independent contractors will obligate PRGUSA
to pay commissions, fees or other compensation to such sales agents or
independent contractors for revenues earned by PRGUSA for services performed for
Clients after the Effective Date other than services of the type Seller provided
to such Clients prior to the Effective Date.
4.16 MATERIAL LEASES. Schedule 4.16 attached hereto is a true, correct
and complete list of all "Material Leases," which means, for purposes hereof,
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 sixty (60) days' or
less notice, or (c) have a term which extends for more than one (1) year from
the Effective Date. Seller has delivered to PRGUSA true, correct and complete
copies of all of the Material Leases, together with all amendments, addenda and
supplements thereto. Except as specifically set forth on Schedule 4.16, with
respect to each Material Lease:
(a) Seller holds the leasehold interest created under each
Material Lease;
(b) assuming the Material Lease constitutes the valid and binding
agreement of the party thereto other than Seller, 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;
(c) subject to obtaining any necessary consent in respect of the
transactions contemplated hereunder and assuming the Material Lease constitutes
the valid and binding agreement of the party thereto other than PRGUSA, the
Material Lease will continue to be legal, valid, binding and enforceable against
PRGUSA and in full force and effect on identical terms following the Effective
Date;
(d) neither Seller, nor, to Seller's or Shareholder's 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;
(e) neither Seller nor, to Seller's or to Shareholder's
knowledge, any other party to the Material Lease has repudiated in writing any
provision thereof;
(f) there have been and there are no disputes, oral agreements or
forbearances in effect as to the Material Lease;
(g) neither Seller has assigned, transferred, conveyed,
mortgaged, deeded in trust or encumbered any interest in the leasehold of the
Material Lease and neither Seller nor
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Shareholder is aware of any such assignment, transfer, conveyance, mortgage,
deed in trust or encumbrance of any interest in the leasehold of the Material
Lease;
(h) in respect of each such Material Lease which is a facility
lease, (i) such facility lease is the only instrument which gives rise to a
right of occupancy by Seller at any facility, (ii) Seller is the original lessee
(or has validly succeeded to the rights of the original lessee) under such
facility lease, (iii) Seller actively occupies each of the facilities, (iv)
Seller has paid the rent under the facility leases on a current basis and there
are no past due amounts; and
(i) in respect of each such Material Lease which is an equipment
lease, (i) Seller is in actual possession of the equipment leased under each
equipment lease, (ii) Seller has paid the rent set forth in each of the
equipment leases on a current basis and there are no past due amounts. Attached
as Schedule 4.16 is a true, correct and complete list of the equipment subject
to each equipment lease.
4.17 CLIENTS AND PRIMARY CLIENTS. For purposes hereof, "Clients" means
those clients to whom Seller provides or has provided the services of the
Business and "Primary Clients" means those 20 Clients of the Business which as
of the end of any calendar year after 1998 (or in respect of 2000, as of the
period from January 1, 2000 to the date hereof) accounted for the highest
percentage of the revenues of the Business during such calendar year (or in
respect of 2000, such part thereof), which are separately identified for each
calendar year on Schedule 4.17. Except as specifically described on Schedule
4.17, there are no Clients of Seller who have, within the 12 months immediately
preceding the date hereof, expressed to Seller material dissatisfaction with
Seller's services. Schedule 4.17 contains a true, correct and complete list for
each of calendar year 1999 and 2000 (as to 2000, from January 1, 2000 to the
date hereof) of each Primary Client of Seller for such period, the revenues
generated for Seller by each such Primary Client during the respective period,
the percentage of the total revenues of Seller for each such period that the
revenues of each Primary Client for such period constitutes, and the term of the
Contract for such Primary Client, including the expiration date thereof. To the
knowledge of Seller and Shareholder, there are no outstanding contracts,
commitments or bids, or proposals for, software licenses, software development
or other services, or sales proposals, that will result in any substantial loss
upon completion or performance thereof, after allowance for direct employee
expenses, overhead, licensing, development, distribution expenses and other
costs.
4.18 EMPLOYEES AND CONSULTANTS.
(a) Schedule 4.18(a) includes in respect to each current
employee, sales agent, business or strategic partner and independent contractor
of Seller, a true, correct and complete list of the name and position of such
person, any bonus, commission formulae or profit sharing agreements applicable
thereto, the salary, compensation, all other benefits and all accrued
commissions, 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. Schedule 4.18(a) includes a true, correct and complete list
of all oral and written agreements and understandings between Seller and its
employees concerning their employment relationship with Seller (including all
restrictive covenant agreements), true, correct and complete copies of which
have been provided to PRGUSA (or descriptions contained on Schedule 4.18(a) in
respect of any oral agreements). Except as otherwise set forth in Schedule
4.18(a), the engagement of each employee, sales agent, business or strategic
partner, consultant or independent contractor is
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terminable within 90 days' written notice by Seller or such person, subject to
any rights to salaries and commissions earned prior to such termination and no
such person has been granted the right to continued employment or engagement by
Seller or to any material compensation following termination of employment or
engagement with Seller. Each consultant or other person who is designated as an
independent contractor meets the requirements under the Code (as defined in
Section 2.2 hereof), and the regulations promulgated thereunder to be an
independent contractor. To Seller's knowledge, no officer or Key Employee, or
any group of employees, intends to terminate their employment with Seller, nor
does Seller have a present intention to terminate the employment of any officer,
Key Employee or group of employees.
(b) Seller (i) is in compliance with all applicable laws, rules
and regulations respecting employment, employment practices, terms and
conditions of employment and wages and hours in respect of its employees; (ii)
has withheld all amounts required by law or by agreement to be withheld from the
wages, salaries and other payments to its employees; (iii) is not liable for any
arrears of wages or any taxes or any penalty for failure to comply with any of
the foregoing; and (iv) is not liable for any payment to any trust or other fund
or to any governmental or administrative authority with respect to unemployment
compensation benefits, social security or other benefits for employees (other
than routine payments to be made in the normal course of business and consistent
with past practice). In respect of Seller's current and former employees, except
as set forth on Schedule 4.18(b), (i) there are no charges, investigations,
administrative proceedings or formal complaints of discrimination pending or, to
the Seller's and the Shareholder's knowledge, threatened before any governmental
authority against Seller; (ii) there have been no governmental audits of
Seller's equal employment opportunity practices; (iii) no current or former
employee of Seller has notified Seller of any fact or circumstance which, if
true, might constitute a violation of any Employment Law (as defined below); and
(iv) to the Seller's and the Shareholder's knowledge, neither Seller nor any
employee of Seller has engaged in any activity which constitutes a violation of
any Employment Law. For purposes hereof, "Employment Laws" means state, federal
or local constitutional, statutory, regulatory or common law relating to
employment discrimination or harassment, including, but not limited to, the Age
Discrimination in Employment Act, the Older Workers' Benefit Protection Act,
Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991 and the
Americans with Disabilities Act.
(c) To the knowledge of Seller and Shareholder, after diligent
inquiry and except as set forth in Schedule 4.18(c), (i) no person employed or
engaged as an employee, sales agent, business or strategic partner, independent
contractor or consultant by Seller has, in respect of his or her activities to
date on behalf of Seller, violated any of the terms or conditions of his or her
employment agreement, proprietary inventions or similar agreement or other
engagement with Seller or any other contract to which Seller is a party with any
third party, or disclosed or used any trade secrets or proprietary or
confidential information or documentation of any third party without the
authorization of such third party, or interfered in the employment relationship
between any third party and any of its employees and (ii) no person employed or
engaged as an employee, sales agent, business or strategic partner, independent
contractor or consultant by Seller has disclosed or used any trade secrets or
any other proprietary or confidential information or documentation of any former
employer or other third party, or has violated any non-compete obligation or
confidential relationship that such person has or may have had with any third
party, in connection with such person's activities on behalf of Seller. To
Seller's knowledge, except as set forth on Schedule 4.18(c) no former employees
whose employment with Seller was
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terminated by Seller or such employee or otherwise expired within the last 2
years is currently or has within the last 2 years competed with the Business.
4.19 INTELLECTUAL PROPERTY.
(a) The Intellectual Property Assets constitute all the
intellectual property necessary for the operation of the Business as it is
currently conducted. Seller is the owner of all right, title, and interest in
and to each of the Intellectual Property Assets, free and clear of all liens,
security interests, charges, encumbrances, equities, and other adverse claims,
and has the right to use without payment to a third party all of the
Intellectual Property Assets, except as set forth on Schedule 4.19(a).
(b) Schedule 4.19(b) contains a complete and accurate list and
summary description of all Patents. Seller is the owner of all right, title, and
interest in and to each of the Patents, free and clear of all liens, security
interests, charges, encumbrances, entities, and other adverse claims. All of the
issued Patents are currently in compliance with formal legal requirements
(including payment of filing, examination, and maintenance fees and proofs of
working or use) and are valid and enforceable. No Patent has been or is now
involved in any interference, reissue, reexamination, or opposition proceeding.
To Seller's and Shareholder's knowledge, there is no potentially interfering
patent or patent application of any third party. No Patent is infringed or, to
Seller's and Shareholder's knowledge, has been challenged or threatened in any
way. None of the products manufactured and sold, nor any process or know-how
used, by Seller infringes or is alleged to infringe any patent or other
proprietary right of any other person. All products made, used, or sold under
the Patents have been marked with the proper patent notice.
(c) Schedule 4.19(c) contains a complete and accurate list and
summary description of all Marks. Seller is the owner of all right, title, and
interest in and to each of the Marks, free and clear of all liens, security
interests, charges, encumbrances, equities, and other adverse claims, except as
set forth on Schedule 4.19(c). All Marks that have been registered with the
United States Patent and Trademark Office are currently in compliance with all
formal legal requirements (including the timely post-registration filing of
affidavits of use and incontestability and renewal applications) and are valid
and enforceable. No ▇▇▇▇ has been or is now involved in any opposition,
invalidation, or cancellation and, to Seller's and Shareholder's knowledge, no
such action is threatened with respect to any of the Marks. Except as shown on
Schedule 4.19(c), to Seller's and Shareholder's knowledge, there is no
potentially interfering trademark or trademark application of any third party.
No ▇▇▇▇ is infringed or, to Seller's and Shareholder's knowledge, has been
challenged or threatened in any way. None of the Marks used by Seller infringes
or is alleged to infringe any trade name, trademark, or service ▇▇▇▇ of any
third party. All products and materials containing a ▇▇▇▇ ▇▇▇▇ the proper
federal registration notice where permitted by law.
(d) Schedule 4.19(d) contains a complete and accurate list and
summary description of all of the Software and Developments. Schedule 4.19(d)
identifies certain third-party software which has been incorporated into the
Software (the "Incorporated Software"), and identifies certain other standard
third party software required to utilize the Software which is readily available
to the general public (including PRGUSA) at a standard price. Except as
specified on Schedule 4.19(d), the Seller has taken no measures to register,
patent, copyright or otherwise protect the Software other than reasonable
efforts to protect the confidentiality of the source code for the
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Software. Except as set forth on Schedule 4.19(d), Seller owns outright the
Software and Developments, and Seller has not sold, licensed, leased or
otherwise transferred or granted any interest or rights to any of such Software
and Developments, and:
(i) Seller possesses or has access to the original and all
copies of all documentation, including all source code for all Software and
Developments owned by it;
(ii) any Intellectual Property Assets that were created by
employees of Seller were made in the regular course of such employees'
employment relationship with Seller using Seller's facilities and resources and,
as such, constitute "works made for hire" within the meaning of the United
States Copyright Act of 1976, as amended (the "Copyright Act"). In the event and
to the extent that work performed by any employee, contractor or consultant does
not constitute a "work made for hire" within the meaning of the Copyright Act,
each such person has signed a proprietary inventions or similar agreement with
Seller transferring and assigning to Seller all right, title and interest in and
to all Intellectual Property Assets developed by such employee, contractor or
consultant. Such agreements require such individuals to cooperate with Seller in
perfecting ownership in, and enforcing any intellectual property rights relating
to, such Intellectual Property Assets. Seller acquired its rights to the
Incorporated Software pursuant to the license agreements listed on Schedule
4.19(d), complete copies of which have been delivered to PRGUSA (the
"Intellectual Property Rights Agreements"). As to Incorporated Software, Seller
has the rights granted to it in the related Intellectual Property Rights
Agreements;
(iii) subject to receipt of any consents required by the
terms thereof, the consummation of the transactions contemplated hereby will not
cause the termination, or cancellation, or otherwise affect in any manner any
licenses or other rights held by Seller in the Intellectual Property Assets
(including rights to Incorporated Software) and will not alter or in any way
impair any of the Intellectual Property Assets (including rights to Incorporated
Software), and
(iv) with respect to all Software and Developments and
except as disclosed in the Intellectual Property Rights Agreements or the Client
Contracts: (A) neither the manufacture, marketing, license, sale or use of any
Software or Development violates or will violate any license or agreement with
any third party or infringes or has infringed on the intellectual property
rights of others, (B) Seller has the exclusive right to use the Software and
Developments, (C) Seller has retained the exclusive right to reproduce, copy,
sell, license and/or distribute the Software and Developments.
(v) For each item of Software, Schedule 4.19(d) lists the
third-party software required to be licensed by customers of in order to utilize
that item of Software, including both applications and operating systems, and
third-party software, excluding Incorporated Software, required for PRGUSA to
develop, maintain and deliver the Software.
(vi) All of the Software which is licensed by Seller under
Client Contracts complies in all material respects with the performance
representations with respect thereto contained in the Seller's user and
technical manuals in effect at the time of the Client Contracts, and, when used
in accordance with such user and technical manuals, performs in accordance with
the Client Contracts in all material respects. Except as set forth on Schedule
4.19(d), any such Software as is currently made available for licensing to or
access by customers is ready for installation and/or use in substantial
conformance with the capability and
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performance standards set forth in the user or instruction manual associated
with such Software. Any such marketed Software system is documented and the
documentation supplied to each licensee or user of each such system is
sufficient in all material respects to enable a user reasonably competent in
such matters to operate, access and/or use such system as intended. Nothing has
come to the attention of the Seller or the Shareholder to indicate that the
license agreements entered into by the Seller for use of Software by customers
do not contain provisions for protection of Seller's confidential information,
trade secrets and proprietary rights which the Seller reasonably believes have
been and will be sufficient to preserve the Seller's proprietary rights therein.
(vii) Except as set forth on Schedule 4.19(d), the Seller
has no royalty, commission or similar obligation relating to the Software.
(viii) Except as specified on Schedule 4.19(d), and to the
knowledge of the Seller and the Shareholder, none of the past or present
employees or independent contractors of the Seller is in possession of Software,
nor has made unauthorized use of Software or the Intellectual Property Assets,
except such as have had and will have no Material Adverse Effect. To the
knowledge of the Seller and the Shareholder, no party other than the Seller have
access to or possession of source code, except as disclosed in the Client
Contracts. Except as set forth on Schedule 4.19(d), none of the elements of the
Software and the Intellectual Property Assets is in the public domain.
(e) Seller has taken all reasonable precautions to protect the
secrecy, confidentiality, and value of its Trade Secrets. Seller has good title
and an absolute (but not necessarily exclusive) right to use the Trade Secrets.
The Trade Secrets are not part of the public knowledge or literature, and, to
Seller's and Shareholder's knowledge, have not been used, divulged, or
appropriated either for the benefit of any person or to the detriment of Seller.
No Trade Secret is subject to any adverse claim or has been challenged or
threatened in any way.
(f) All third party software utilized by Seller is identified in
either Schedule 1.1(a) or Schedule 4.19. Seller does not utilize any third party
software which is not properly licensed to it, nor has it violated any such
license. All software on each personal computer owned or leased by Seller or EPS
is properly licensed to Seller or EPS, and Seller has in its possession written
evidence of each such license. Upon the Closing, each such license will permit
PRGUSA's continued use of such third party software after the Effective Date,
with no additional cost to PRGUSA.
4.20 INTERNET PRESENCE. Except as set forth on Schedule 4.20 attached
hereto, neither Seller has any public, private or reserved presence on the world
wide web, multi-party extranet, virtual private network, or similar internet
based, linked system ("Internet Presence"). Seller's domain name(s), if any, are
currently registered with the currently authorized Internet Domain Name
Registrar, are transferable to PRGUSA, and are in good standing. Except as set
forth on Schedule 4.20 attached hereto, Seller warrants that its Internet
Presence, if any, is wholly passive and informational in nature and involves no
interactivity between third parties and Seller including purchases, sales,
leases or other commercial transactions conducted in any degree by or through
the Internet Presence.
4.21 YEAR 2000 COMPLIANCE. Except as set forth on Schedule 4.21 attached
hereto, Seller has previously performed unit, integration and acceptance testing
of all software,
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hardware, and all other devices containing or utilizing electronic components
reasonably necessary to the performance of the Business' obligations and
operations and the Software (all of the foregoing collectively, "Computer
Systems"), including all Computer Systems owned, leased, sold, developed,
assembled, distributed, supported, maintained, used, or operated by, to, for, or
from Seller, and the results of such testing, as well as the Seller's experience
to date, establish that all Computer Systems, have functioned normally before,
during, and after the change from the year 1999 to each successive year through
the year 2010, and Seller has no basis to believe there will be any interruption
in service in the future attributable to such change.
4.22 BENEFIT PLANS AND ERISA.
(a) Schedule 4.22 sets forth a true and complete list of each
"employee benefit plan" (as defined by Section 3(3) of ERISA (as defined in
Section 2.2 hereof)), 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 (each such plan,
agreement, policy, trust fund or arrangement is referred to herein as an
"Employee Benefit Plan", and collectively, the "Employee Benefit Plans") that is
currently in effect, was maintained since December 31, 1993 or which has been
approved before the date hereof but is not yet effective, for the benefit of (i)
directors or employees of Seller working in the Business or any other persons
performing services for Seller in the Business, (ii) former directors or
employees of Seller working in the Business or any other persons formerly
performing services for Seller in the Business, and/or (iii) beneficiaries of
anyone described in (i) or (ii) (collectively, "Business Employees") or with
respect to which Seller or any "ERISA Affiliate" (hereby defined to include 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 (6) years, treated pursuant to Section 4001(a)(14) of ERISA and/or
Section 414 of the Code (as defined in Section 2.2 hereof) as employees of a
single employer which includes Seller) has or has had any obligation on behalf
of any Business Employee. Except as disclosed on Schedule 4.22 attached hereto,
there are no other benefits to which any Business Employee is entitled.
(b) Except as set forth in Schedule 4.22, each Employee Benefit
Plan is in compliance with the provisions of ERISA and the provisions of the
Code, applicable to it. Except as set forth in Schedule 4.22, Seller has not
maintained or contributed to any plan subject to the minimum funding standards
of Section 302 of ERISA or Section 412 of the Code during its last six (6)
fiscal years, and each plan maintained by an ERISA Affiliate which is subject to
Title IV of ERISA or Section 412 of the Code is fully accrued and funded in
compliance with ERISA and the Code as of the Effective Date, and if any such
plan or plans were terminated as of the Effective Date, the termination would
satisfy the minimum funding requirements of ERISA and the Code. All Employee
Benefit Plans which are "pension plans" as defined in Section 3(2) of ERISA have
received favorable determination letters from the Internal Revenue Service as to
their tax-qualified status and the tax-exempt status of any related trust under
Sections 401(a) and 501 of the Code, respectively, which determinations are
currently in effect.
(c) PRGUSA shall not, as a result of the transactions
contemplated by this Agreement (or any employment by PRGUSA of Business
Employees): (i) become 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 Seller or any ERISA Affiliate (including
predecessors
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thereof) with regard to any Employee Benefit Plan or any Employee Benefit Plan
sponsored, maintained or contributed to by an ERISA Affiliate (including
predecessors thereof) (assuming a like definition of "Employee Benefit Plan"
were applicable to ERISA Affiliates as to those same types of agreements,
policies, trusts, funds and arrangements sponsored, maintained or contributed to
by them) (each such plan for an ERISA Affiliate, an "ERISA Affiliate Employee
Benefit Plan"), including 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, or (ii) be or become a party to any
Employee Benefit Plan or any ERISA Affiliate Employee Benefit Plan.
(d) Each 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 Part 6 of Subtitle B of Title I of ERISA and Section 4980B of
the Code (such statutory provisions and predecessors thereof are referred to
herein collectively as "COBRA"). Schedule 4.22 attached hereto 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 has not expired. Included in such list are the current
address for each such individual, the date and type of each 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.
Schedule 4.22 attached hereto 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 is entitled to
receive health coverage under an Employee Benefit Plan, whether pursuant to
FMLA, COBRA or otherwise.
(e) Attached hereto as a part of Schedule 4.22 is a true, correct
and complete list by employee of the number of days and amount of accrued unpaid
vacation and sick pay for each employee of Seller.
(f) Seller has no liability to Business Employees upon
termination of employment for unused and/or accrued sick pay.
4.23 ENVIRONMENTAL COMPLIANCE. For purposes of this Agreement: (a)
"Environmental Laws" means the Resource Conservation and Recovery Act, 42 U.S.C.
Section 6901 et seq., the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. Section 9601 et seq., and all other applicable federal,
state, county, municipal, administrative or other laws, ordinances, rules,
regulations and requirements or common law doctrines pertaining to
environmental, health, safety or ecological conditions, along with any
regulations promulgated thereunder; and (b) "Hazardous Material" means (i) any
"hazardous substance", "hazardous waste" or "hazardous material" defined as such
in (or for purposes of) any Environmental Law; (ii) any petroleum product; and
(iii) any other substance, regardless of physical form, that is subject to any
law regulating, or imposing obligations, liability, or standards of conduct
concerning the protection of human health, plant life, animal life, natural
resources, or property.
(A) Neither the Seller, nor to the knowledge of Seller and
Shareholder, any prior owner, user or occupant of any property currently or
formerly owned, leased, or occupied
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by Seller (collectively, the "Properties"), has conducted or authorized the use,
generation, transportation, storage, handling, treatment, or disposal of any
Hazardous Material on the Properties, except as is necessary in the ordinary
course of business and in all cases in material compliance with the
Environmental Laws and in each instance in a manner that has not and will not
result in any liability to Seller, PRGUSA or the Properties;
(B) There has been no spill, discharge, release, emission, or
contamination of the Properties by any Hazardous Material;
(C) Neither Seller nor Shareholder has received any written
actual notice of, and to the knowledge of Seller and Shareholder, no
governmental authority or any employee or agent thereof has determined, or
threatens to determine, that there exists a violation of any Environmental Law
at the Properties or that the Seller has incurred any liability with respect to
the Properties or any wastes or material generated at the Properties under any
Environmental Law;
(D) There is no pending litigation or proceeding by or before any
governmental authority in which it is alleged that there has been a discharge,
spill, disposal or release of any Hazardous Material on or from the Properties,
nor is Seller or any Shareholder aware of any facts or circumstances that would
reasonably lead it to believe that any person or governmental authority may
allege any of the foregoing;
(E) There are no agreements between the Seller and any
Governmental Authority relating in any way to the presence, spill, discharge,
release, threat of release, storage, treatment or disposal of any Hazardous
Material on or from the Properties;
(F) There are no Environmental Laws applicable to the Properties
that would require the Seller to obtain the approval of or provide notice to any
governmental authority as a condition to the consummation of the transactions
contemplated by this Agreement;
(G) The Seller is, and at all times has been in full compliance
with, and has not been and is not in violation of or liable under any
Environmental Laws;
(H) Seller is not required to obtain any permits required by any
Environmental Laws to conduct the Business as it is presently being conducted;
(I) Neither the Seller nor the Properties have incurred any
liability or obligation under the Environmental Laws or otherwise pertaining to
Hazardous Materials that remains unresolved;
(J) During the Seller's leasing and occupancy of the Properties,
(A) none of the Properties has been excavated; and (B) no construction debris or
other debris was buried on the Properties;
(K) Seller and/or Shareholder have delivered to PRGX true and
complete copies of all reports or tests with respect to the compliance of the
Properties with the Environmental Laws and/or the presence of any Hazardous
Material on the Properties that were (A) prepared for the Seller or (B) prepared
for other parties and are in the possession of the Seller or the Shareholder;
and
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(L) The Seller (by virtue of its conduct of the Business) is not
an "industrial establishment" within the meaning of the Industrial Site Recovery
Act (N.J.S.A. 13:1K) and the applicable regulations thereunder (N.J.A.C. 7:26B)
and such act and regulations impose no conditions or obligations on the
consummation of the transactions contemplated by this Agreement and neither
Seller nor the Business has incurred any liability or obligation under such act
or regulations.
4.24 LITIGATION; JUDGMENTS. Except as set forth on Schedule 4.24
attached hereto, there is no action, proceeding or investigation pending or, to
Seller's or to Shareholder's knowledge, threatened against or involving Seller
or Shareholder relating to the Purchased Assets or the operation of Seller's
Business, nor any basis therefor, nor is there any action or proceeding pending
or, to the knowledge of Seller or of Shareholder, 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 which might adversely affect the Business or
the Purchased Assets, or Seller's or Shareholder's ability to consummate the
transactions contemplated by this Agreement and the Seller Transaction
Documents, nor any basis therefor. Except as set forth on Schedule 4.24, neither
Seller nor Shareholder is subject to any judgment, order or decree entered in
any lawsuit or proceeding relating to the Purchased Assets or the operation of
the Business, nor has any such action been settled, or resulted in a final
judgment, since January 1, 1999.
4.25 INSURANCE.
(a) Schedule 4.25 attached hereto contains a true, correct and
complete list of all of the insurance policies maintained by Seller, which
schedule includes 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, and the name and phone
number of the insurance agent in respect thereto. Seller shall maintain such
insurance policies in full force and effect through the Effective Date. Except
as set forth on Schedule 4.25, (i) no claims are pending under the listed
policies, nor does Seller or Shareholder know of any basis therefor and (ii)
there have been no settlement of insurance claims since January 1, 1999.
(b) Neither Seller nor Shareholder knows of anything related to
the health of ▇▇▇▇▇, ▇▇▇▇ or ▇▇▇▇▇▇▇ which would or is reasonably likely to
prevent PRGUSA from obtaining life insurance of such persons at standard rates
in accordance with Section 3.11 hereof.
4.26 IMMIGRATION MATTERS.
(a) With respect to all employees (as defined in Section
274a.1(g) of Title 8, Code of Federal Regulations) of Seller, Seller has
complied with the Immigration Reform and Control Act of 1986, as amended, and
all regulations promulgated thereunder ("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) Schedule 4.26 attached hereto contains a true and complete
list of all employees of each Seller, if any, who are not citizens of the United
States of America and who
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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.
(c) Seller has only employed individuals authorized to work in
the United States. Neither Seller has 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 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 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.
4.27 BROKER'S FEES. Neither Seller nor Shareholder has retained or
utilized the services of any broker, finder or intermediary (except for ▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated, whose fee will be paid by Seller and
Shareholder), 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 PRGUSA to pay any such fees or commissions.
4.28 ABSENCE OF MATERIAL CHANGES. Except as set forth in Schedule 4.28
attached hereto, from December 31, 1999 to the date of this Agreement:
(a) there has not been any Material Adverse Effect (as defined in
Section 4.6 hereof);
(b) Seller has not lost (or received written notice that it is
about to lose) any Primary Clients or Primary Clients with which Seller has
significant business relations;
(c) no salesperson whose clients represent 3% or more of Seller's
revenue during 1999 nor any senior manager of Seller has terminated his
employment or engagement with Seller nor has Seller terminated such person's
employment or engagement;
(d) Seller has operated the Business in the ordinary course and
has not sold, assigned, or transferred any assets except in the ordinary course
of business consistent with past practice;
(e) neither Seller nor Shareholder 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 Purchased
Assets;
(f) there has been no amendment, termination, or waiver of any
right of Seller under any contract, governmental license or permit that may
materially adversely affect the Purchased Assets or the Business;
(g) Seller has not:
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(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 the 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 except in
accordance with past practices consistently applied;
(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) 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 officer, director, consultant or employee of Seller, paid bonuses to any
consultant or employees (except for bonuses earned in the ordinary course of
business), or with respect to the grant of any severance or termination pay
(otherwise than pursuant to policies of Seller in effect on the date hereof
fully disclosed to PRGUSA in writing prior to the date hereof) or with respect
to any increase of benefits payable under its severance or termination pay
policies in effect on the date hereof;
(vii) declared, set aside or paid any dividend or
distribution payable in cash, stock, property or otherwise with respect to
Seller's capital stock (except for distributions to Shareholder consistent with
past practices); or
(viii) agreed, whether in writing or otherwise, to take
any of the actions specified in this Section 4.28.
4.29 CERTAIN ARRANGEMENTS.
(a) Schedule 4.29 is a true, correct and complete list as of the
date hereof and since November 30, 1998, 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 Shareholder, director, officer, employee or other affiliate (for purposes
of this Agreement, "affiliate" means any individual, partnership, corporation,
trust, joint venture or other entity controlled by, controlling or under common
control with Seller, Shareholder or EPS) or any relative of Shareholder,
director, officer, employee or other affiliate
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(collectively, a "Related Party") has or had with Seller and contains a brief
description of each transaction, including without limitation:
(i) any oral or written contract, agreement,
understanding, commitment or other arrangement providing for the furnishing of
services, or the sale or rental of real or personal property from or otherwise
requiring payments to any such Related Party or to any affiliate or relative of
such Related Party;
(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) to any such Related Party or to any
affiliate or relative of such Related Party, giving for each the principal
amount outstanding, interest rate, maturity date and security therefor;
(iii) any direct or indirect interest in any property,
real or personal, tangible or intangible by any such Related Party or to any
affiliate or relative of such Related Party, including inventions, patents,
copyrights, trademarks, or trade names, used in or pertaining to the Business,
except for the normal rights of a shareholder; and
(iv) all services and overhead support provided by such
Related Party to Seller, describing the nature and value of such services and
support, the amount of all compensation, fees, commissions or other amounts owed
by or to the Related Party and a description of the relationship of, and oral or
written agreements or understandings between, Seller and such Related Party in
respect of such Related Party as a supplier or customer to Seller.
(b) Except as set forth on Schedule 4.29, all services, overhead
support and other interests provided by Shareholder, EPS or any affiliate
thereof to Seller have been provided on a basis no more favorable to Seller than
could be obtained in an arms' length transaction.
(c) Except as set forth on Schedule 4.29, neither Shareholder nor
EPS owns an equity interest in any other business. None of the businesses listed
on Schedule 4.29 is engaged in competition with Seller with respect to any line
of the products or services of Seller (a "Competing Business") in any market
presently served by Seller except for ownership of less than one percent of the
outstanding capital stock of any Competing Business that is publicly traded on
any recognized exchange or in the over-the-counter market, nor do any of such
businesses use the services of any employee of the Business.
4.30 BANK ACCOUNTS. Schedule 4.30 contains a true, correct and complete
list showing the name and location of each bank or other institution in which
Seller has any deposit account, lock box or safe deposit box (collectively, the
"Bank Accounts"), together with a listing of all account numbers and names of
all persons authorized to draw thereon or have access thereto.
4.31 DISCLOSURE. The statements, representations and warranties made by
Seller and Shareholder in this Agreement and in the Schedules 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. No notice given
pursuant to Section 3.7 will contain any untrue statement or omit to state a
material fact necessary to make the statements therein or in this Agreement in
light of the circumstances in which they were made, not misleading. There is no
fact known to Seller,
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Shareholder or EPS that has specific application to Seller (other than general
economic or industry conditions) and that has a Material Adverse Effect or, as
far as Seller, Shareholder or EPS can reasonably foresee, materially threatens
to have a Material Adverse Effect that has not been set forth in this Agreement
or the Schedules hereto.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
OF PRGX AND PRGUSA
In order to induce Seller and Shareholder to enter into this Agreement
and consummate the transactions contemplated hereby, each of PRGX and PRGUSA,
jointly and severally, represents and warrants to Seller and Shareholder as
follows, each of which representations and warranties is material to and relied
upon by Seller and Shareholder:
5.1 ORGANIZATION OF PRGX AND PRGUSA. Each of PRGX and PRGUSA is a
corporation duly organized, validly existing and in good standing 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.
5.2 CORPORATE POWER AND AUTHORITY; DUE AUTHORIZATION. Each of PRGX and
PRGUSA has full corporate power and authority to execute and deliver this
Agreement and each of the other agreements, documents and instruments referenced
in this Agreement to which PRGUSA and/or PRGX is or will be a party (the "PRGUSA
Transaction Documents") and to consummate the transactions contemplated hereby
and thereby. Prior to the Effective Date, the Board of Directors of PRGX and
PRGUSA shall have duly approved and authorized the execution and delivery of
this Agreement and each of the PRGUSA Transaction Documents and the consummation
of the transactions contemplated hereby and thereby, and no other corporate
proceedings on the part of PRGUSA or PRGX are necessary to approve and authorize
the execution and delivery of this Agreement and such PRGUSA Transaction
Documents and the consummation of the transactions contemplated hereby and
thereby. Assuming that this Agreement and each of the PRGUSA Transaction
Documents constitutes a valid and binding agreement of Seller and/or
Shareholder, as the case may be, this Agreement and each of the PRGUSA
Transaction Documents constitutes, or will constitute when executed and
delivered, a valid and binding agreement of PRGX and PRGUSA, enforceable against
PRGX and PRGUSA in accordance with its terms.
5.3 NO CONFLICT; CONSENTS. The execution and delivery by PRGX and PRGUSA
of this Agreement, the PRGUSA Transaction Documents and the consummation by PRGX
and PRGUSA of the transactions contemplated hereby and thereby do not and will
not (a) require, other than compliance with applicable requirements of the HSR
Act, if any, and the consent of or notice to PRGUSA's principal lenders (a bank
syndicate led by Bank of America, N.A.), 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 PRGUSA is a party, or by
which PRGX or PRGUSA or the property of PRGX or PRGUSA 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 PRGUSA's Articles of Incorporation or Bylaws;
or (d) violate any order, writ, injunction, decree, judgment, ruling, law or
regulation
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of any federal, state, county, municipal, or foreign court or governmental
authority applicable to PRGX or PRGUSA, or the business or assets of PRGX or
PRGUSA.
5.4 BROKER'S FEES AND EXPENSES. PRGUSA has not retained or utilized the
services of any broker, finder, or intermediary (except for ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ &
Company, Incorporated, whose fee will be paid by PRGUSA), 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 which would obligate Seller or Shareholder to pay any such fees or
commissions.
ARTICLE 6
INDEMNIFICATION
6.1 INDEMNIFICATION BY SELLER AND SHAREHOLDER. In addition to any other
indemnification obligation of Seller or Shareholder under any other provision
hereof, Seller, Shareholder and EPS, jointly and severally, indemnify and hold
PRGUSA, PRGX, and its affiliates, directors, officers, employees and agents,
harmless from and against all claims, liabilities, lawsuits, costs, damages or
expenses (including reasonable attorneys' fees and expenses incurred in
litigation or otherwise) arising out of and sustained by any of them due to or
relating to, the following (collectively. "Section 6.1 Indemnified Claims"):
(a) 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 Shareholder contained in this Agreement or
any Seller Transaction Document;
(b) any liability or obligation suffered by PRGUSA or PRGX, other
than Assumed Liabilities, 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 the operation of the Business, or the ownership
or use of the Purchased Assets prior to the Effective Date, including, (i) any
failure to comply with Executive Order 11246 and other legal compliance
requirements specified in such contracts in respect of any contracts of Seller
with governmental agencies, departments or other governmental bodies or (ii) the
treatment by any Tax Authority, of any consultants or other service providers of
the Business whom Seller treats as independent contractors 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, FICA or
FUTA amounts, state or federal unemployment insurance contributions, payments in
respect of workers' compensation insurance, Employee Benefit Plans, or payments
under The Fair Labor Standards Act or regulations promulgated thereunder;
(c) any failure to obtain prior to Closing any required consent
to the assignment to PRGUSA of any Purchased Asset;
(d) any failure to pay any amount owed or alleged to be owed by
Seller, Shareholder or EPS to InterVoice-Brite, Inc. or any affiliate thereof,
or to obtain any consent from or take any action in respect of InterVoice-Brite,
Inc. or any affiliate thereof;
(e) failure to comply with any applicable bulk transfer laws;
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(f) the amount, if any, by which Clients offset from amounts due
to PRGUSA after the Effective Date any required refund by Seller to such Clients
of amounts received by Seller prior to the Effective Date;
(g) all adjustments to the Purchase Price pursuant to Section
2.4(c), (d) or (e) hereof which were not deducted from the Purchase Price at the
Closing (or post-Closing in accordance with the terms hereof); and
(h) any liability or obligations to any employees of Seller who
do not accept employment with PRGUSA within 5 business days after the Closing
Date.
6.2 INDEMNIFICATION BY PRGUSA AND PRGX. In addition to any other
indemnification obligation of PRGUSA and PRGX hereunder, PRGUSA and PRGX hereby
jointly and severally indemnify and hold Seller and Shareholder and
Shareholder's and Seller's affiliates, directors, officers, employees and agents
harmless from and against all claims, liabilities, lawsuits, costs, damages or
expenses (including 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 PRGUSA or PRGX in this Agreement or any of the PRGUSA
Transaction Documents; (b) any failure of PRGUSA to discharge the Assumed
Liabilities from and after the Effective Date on a timely basis and (c) any
liability or obligation incurred by Seller or Shareholder relating to the
operation or ownership of Seller's Business by PRGUSA, or the ownership or use
of the Purchased Assets by PRGUSA, from and after the Effective Date, other than
Section 6.1 Indemnified Claims (collectively, "Section 6.2 Indemnified Claims").
6.3 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 6.1 or 6.2 of this Agreement and provide all pleading and other
documentation relating to such claim, demand, action or proceeding, and, if such
claim, demand, 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, Seller, Shareholder, PRGUSA and PRGX 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.
6.4 SURVIVAL. All representations and warranties contained in this
Agreement and in the Seller Transaction Documents and the PRGUSA Transaction
Documents delivered at the Closing or made in writing in connection herewith
shall survive the execution and delivery of
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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 second (2nd) anniversary of the Closing Date
and shall thereafter cease to be of any force and effect, except for (a) claims
as to which notice has been given in accordance with Section 6.3 hereof prior to
such date and which are pending on such date, (b) representations, warranties,
covenants and agreements relating to Taxes, Employee Benefit Plans, and any
litigation, arbitrations and mediations that existed on or at any time prior to
the Effective Date, each of which shall survive until the end of the statute of
limitations applicable to the underlying claim for which indemnification is
sought, and (c) representations and warranties with respect to title to the
Purchased Assets and ownership of capital stock of Seller, each of which shall
survive without expiration. All covenants and agreements contained in this
Agreement and in the Seller Transaction Documents and the PRGUSA Transaction
Documents shall survive the execution, delivery and closing of this Agreement
and the consummation of the transactions contemplated herein without expiration,
provided that any covenant which expressly specifies a period for performance
shall survive until the end of such specified period. In addition,
notwithstanding anything to the contrary contained herein, in the event of a
breach of a representation or warranty or failure to perform a covenant or
agreement by a party which constitutes fraud, the representation, warranty,
covenant or agreement shall survive the consummation of the transactions
contemplated in this Agreement and continue in full force and effect forever
thereafter with respect to such fraud.
6.5 RIGHT OF SET-OFF. PRGUSA shall have the right to set-off any amounts
payable by Seller or Shareholder to PRGUSA pursuant to the indemnification
provisions in this Article 6 against the escrow fund in accordance with the
Indemnity Escrow Agreement.
6.6 LIMITATIONS.
(a) Notwithstanding anything to the contrary contained herein,
PRGUSA will not assert a claim against Seller, Shareholder or EPS under this
Article 6 until the total of all Section 6.1 Indemnified Claims (except for
amounts which constitute Purchase Price adjustments pursuant to Section 2.4(c),
(d) or (e) hereof and were not deducted from the Purchase Price at Closing (or
post-Closing in accordance with the terms hereof), any liability or obligations
to any employees of Seller who do not accept employment with PRGUSA, and claims
in respect of payroll and other Tax liabilities, including those described in
Section 6.1(b)(ii); compliance with laws and regulations relating to Employee
Benefit Plans; compliance with Executive Order 11246 and other legal compliance
requirements specified in such contracts; title to Purchased Assets; ownership
of any equity interest in Seller; and existing litigation, arbitrations, or
mediations, the 1999 Employer Match under the 401(k) Plan, or any failure to pay
any amount owed or alleged to be owed by Seller, Shareholder or EPS to
InterVoice-Brite, Inc. or any affiliate thereof, or to obtain any consent from
or take any action in respect of InterVoice-Brite, Inc. or any affiliate
thereof, which shall not be subject to this limitation, but may be asserted
without regard to the Base Amount) exceeds in the aggregate $50,000 (the "Base
Amount"), at which time, all Section 6.1 Indemnified Claims, including the Base
Amount, may be claimed in full and, if indemnifiable under this Article 6, shall
be indemnified in full.
(b) Notwithstanding anything to the contrary contained herein, in
no event will Seller, Shareholder or EPS be liable for aggregate Section 6.1
Indemnified Claims exceeding 50% of the Purchase Price.
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ARTICLE 7
CONDITIONS TO OBLIGATIONS OF
PRGX AND PRGUSA TO CLOSE
Each and every obligation of PRGX and PRGUSA 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 PRGUSA:
7.1 REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties made by Seller and Shareholder in or pursuant to this Agreement or
given on their behalf hereunder shall have been true and correct on and as of
the Effective Date.
7.2 OBLIGATIONS PERFORMED. Seller and Shareholder 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.
7.3 CONSENTS AND ACKNOWLEDGEMENTS. Seller shall have obtained and
delivered to PRGUSA the written consent of all Lenders under that certain
Amended and Restated Credit Agreement dated as of April 1, 1999 (as amended to
the date hereof, the "Credit Agreement"), by and among Shareholder, as borrower,
and EPS, Seller and certain other affiliates of the Shareholder, as guarantors,
and the several lending institutions from time to time party thereto as
"Lenders" and Bank of America, N.A. (formerly known as Bank of America National
Trust and Savings Association), as administrative agent (in such capacity, the
"Agent") to the sale contemplated herein and a release of all liens of Lenders
on the Purchased Assets satisfactory to PRGUSA, and such consent shall remain in
full force and effect at and as of the Closing. In addition, Seller,
Shareholder, EPS Solutions Corp. and InterVoice-Brite, Inc. shall have provided
PRGX and PRGUSA with written acknowledgements satisfactory to them and to PRGUSA
to the effect that neither Seller, Shareholder and EPS Solutions Corp., on the
one hand, nor InterVoice-Brite, Inc., on the other hand, has any claims against
the other and that InterVoice-Brite, Inc. waives any claims it has or may have
against PRGUSA or PRGX under that certain Warrant No. 1 to purchase 5,000 shares
of Common Stock of Seller and, in certain circumstances shares of Common Stock
of EPS dated April 14, 1999 ("Warrant") including without limitation any claims
under Section 2.06 or Sections 3.04 thereof, to enforce any rights under such
Warrant against PRGUSA or PRGX and agrees that its sole remedy under such
Warrant shall be against Seller and EPS. Seller shall have delivered to PRGUSA a
consent and agreement acceptable to PRGUSA relating to an assignment of Seller's
leasehold interest in certain equipment leased to Seller from LaSalle National
Leasing Corporation and described on Schedule 4.16 hereof
7.4 INTENTIONALLY OMITTED.
7.5 CLOSING DELIVERIES. As of the Effective Date, Seller, Shareholder
and EPS shall have delivered possession of the Purchased Assets to PRGUSA. At
the Closing, Seller, Shareholder and EPS shall have delivered to PRGUSA each of
the following, together with any additional items which PRGUSA may reasonably
request to effect the transactions contemplated herein:
(a) intentionally omitted;
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(b) a certified copy of the corporate resolutions of the
directors of Seller and Shareholder authorizing the transactions contemplated
herein and the execution, delivery and performance of this Agreement and the
Seller Transaction Documents by Seller and any other actions or authorizations
required under Article 3 hereof, together with an incumbency certificate with
respect to officers of Seller executing documents or instruments on behalf of
each Seller;
(c) a certificate of the President of Seller certifying as to the
matters set forth in Sections 7.1 and 7.2 hereof and as to the satisfaction of
all other conditions set forth in this Article 7;
(d) the ▇▇▇▇ of Sale, the Assignment and Assumption Agreement and
the other documents described in Section 1.3 hereof;
(e) the Indemnity Escrow Agreement duly executed by Seller,
Shareholder and EPS;
(f) the Noncompetition Agreement duly executed by Seller,
Shareholder and EPS;
(g) written Seller Consents from all parties whose consent to the
transactions contemplated herein is required;
(h) an opinion of counsel to Seller, Shareholder and EPS
substantially in the form of Exhibit 7.5(h) attached hereto;
(i) the offer letters for employment between PRGUSA and each of
the Key Employees and the Employee Agreements, duly executed by each of the Key
Employees;
(j) a Certificate of Good Standing in respect of Seller issued
within 5 days prior to the Closing, by the Secretary of State of Delaware and by
the Secretary of State of any other state in which Seller is qualified to do
business;
(k) if applicable, Forms UCC-3, duly executed by each secured
lender of Seller, releasing all liens on the Purchased Assets;
(l) a Closing Statement, duly executed by Seller and Shareholder;
(m) the Historical Statements provided for in Section 3.1 hereof
and the Estimated Closing Balance Sheet;
(n) the General Release substantially in the form attached hereto
as Exhibit 7.5(n), duly executed by Seller, Shareholder and EPS; and
(o) the letter agreement among EPS, PRGUSA, ▇▇▇▇▇▇ ▇▇▇▇ and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ described in Section 7.13 hereof.
7.6 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 PRGUSA of the
Purchased Assets or the ability of PRGUSA, PRGUSA
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or any of their affiliates to own and operate the Business or which has or is
reasonably likely to have a Material Adverse Effect.
7.7 INTENTIONALLY OMITTED.
7.8 INTENTIONALLY OMITTED.
7.9 INTENTIONALLY OMITTED.
7.10 INTENTIONALLY OMITTED.
7.11 REGULATORY MATTERS. The parties shall have complied with the HSR
Act, and any waiting period (and any extension thereof) under the HSR Act
applicable to the transaction contemplated hereby shall have expired or been
terminated. All other filings shall have been made and all other 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 PRGUSA shall be able to continue to
carry on the Business substantially in the manner now conducted by Seller shall
have been taken or made. Seller shall cooperate with PRGUSA in applying after
the Closing for tax clearance letters in respect of Seller from applicable state
authorities in respect of Seller's outstanding income, employment, withholding,
sales and use, and similar tax liabilities, if any.
7.12 TERM INSURANCE. Each of S. ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇ and ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇ shall have physically qualified for term life insurance policies of
PRGUSA provided for herein.
7.13 EPS SHARES. At or prior to the Closing, Seller shall have
distributed an aggregate of 50,000 shares of common stock of EPS (as adjusted
for any stock dividends, combinations, splits, recapitalizations and the like
with respect to such shares) to key employees selected by EPS in amounts
determined by EPS, in consideration of past services rendered to Seller by such
employee. Such shares shall be unregistered securities which may be transferred,
subject to the option described below, without any restrictions except for those
required by applicable federal and state securities laws. Such shares shall be
issued subject to an option in favor of PRGUSA to purchase such shares, at a
price of $5 per share, in the event that within two years after the Closing Date
such employee voluntarily terminates his employment with PRGUSA or his
employment is terminated by PRGUSA with Cause (as such term is defined in each
such employee's employment agreement with PRGUSA). Such option in favor of
PRGUSA shall automatically terminate in the event employee's employment is
terminated by PRGUSA without Cause or by such employee's death or permanent
disability.
ARTICLE 8
CONDITIONS TO SELLER'S
AND SHAREHOLDER'S OBLIGATIONS
Each and every obligation of Seller and of Shareholder 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 Shareholder:
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8.1 REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties made by PRGX and PRGUSA in or pursuant to this Agreement or given on
its behalf hereunder shall have been true and correct on and as of the Effective
Date.
8.2 OBLIGATIONS PERFORMED. PRGX and PRGUSA 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 Board of PRGUSA and PRGX shall have approved
this transaction in writing.
8.3 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 PRGUSA
shall be able to continue to carry on the Business substantially in the manner
now conducted by Seller shall have been taken or made.
8.4 CLOSING DELIVERIES. PRGX and/or PRGUSA shall have delivered to
Seller each of the following, together with any additional items which Seller
may reasonably request to effect the transactions contemplated herein:
(a) certified copies of the corporate resolutions of the Board of
Directors of PRGUSA and the Board of Directors of PRGX authorizing the
transactions contemplated herein and the execution, delivery and performance of
this Agreement and the PRGUSA Transaction Documents by PRGX and PRGUSA, as
applicable, together with incumbency certificates with respect to the respective
officers of PRGUSA executing documents or instruments on behalf of PRGUSA;
(b) a certificate of a duly authorized officer of PRGUSA and a
duly authorized officer of PRGX certifying as to the matters set forth in
Sections 8.1 and 8.2 hereof and as to the satisfaction of all other conditions
set forth in this Article 8;
(c) the Purchase Price, less the escrow amount provided for in
Section 2.3, and the payments under the Noncompetition Agreement delivered by
wire transfer to an account or accounts specified by Seller in writing at least
three days prior to the Closing;
(d) the Indemnity Escrow Agreement, duly executed by PRGUSA,
together with the escrow amount provided for in Section 2.3 delivered by wire
transfer to the escrow agent as designated therein;
(e) the documents and instruments described in Section 1.3 hereof
duly executed by PRGUSA;
(f) the offer letters for employment with each of the Key
Employees, duly executed by PRGUSA;
(g) the Noncompetition Agreement referred to in Section 3.4
hereof duly executed by PRGUSA;
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(h) consent of PRGUSA's principal lenders, a bank syndicate led
by Bank of America, N.A.;
(i) the Closing Statement, duly executed by PRGUSA and PRGX;
(j) the letter agreement referred to in Section 7.13, duly
executed by PRGUSA; and
(k) any other documents or agreements, as reasonably requested by
Seller or Shareholder, contemplated hereby and/or necessary to consummate the
transactions contemplated hereby.
8.5 HSR ACT. The parties shall have complied with the HSR Act, and any
waiting period (and any extension thereof) under the HSR Act applicable to the
transaction contemplated hereby shall have expired or been terminated.
8.6 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 PRGUSA of the
Purchased Assets pursuant to the transactions contemplated herein or the ability
of PRGX or PRGUSA 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.
8.7 INTENTIONALLY OMITTED.
8.8 INTENTIONALLY OMITTED.
ARTICLE 9
TERMINATION
9.1 TERMINATION. This Agreement may be terminated at any time before the
Closing Date:
(a) by mutual written consent of PRGX, PRGUSA and Seller;
(b) INTENTIONALLY OMITTED;
(c) by any nonbreaching party hereto if there has been a material
breach of any representation, warranty, covenant or agreement contained in this
Agreement on the part of any nonterminating party hereto;
(d) by either PRGUSA 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 June 7, 2000); or
(e) by PRGUSA, if the conditions set forth in Article 7 hereof
have not been satisfied by Seller and Shareholder or waived by PRGUSA and PRGX
prior to the Outside Date;
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by Seller if the conditions set forth in Article 8 hereof have not been
satisfied by PRGUSA or PRGX or waived by Seller and Shareholder prior to the
Outside Date.
9.2 EFFECTS OF TERMINATION. In the event this Agreement is terminated
pursuant to Section 9.1(a), 9.1(d) or 9.l(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
3.1(d) hereof and as set forth in that certain Nondisclosure Agreement between
Seller and PRGUSA dated September 21, 1999 (the "Nondisclosure Agreement"). If
this Agreement is terminated pursuant to Section 9.1(c) or Section 9.1(d), the
obligations in respect of confidentiality and the return of confidential
information set forth in Section 3.1(d) hereof 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 10
MISCELLANEOUS PROVISIONS
10.1 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.
10.2 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.
10.3 ASSIGNMENT, SURVIVAL AND BINDING AGREEMENT. This Agreement, the
other Seller Transaction Documents and the other PRGUSA Transaction Documents
(a) may not be assigned by PRGX or PRGUSA on or prior to the Closing without the
prior written consent of Seller and Shareholder (except for an assignment to a
wholly owned subsidiary of PRGUSA 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 PRGUSA
after the Closing without the prior written consent of Seller and Shareholder,
except for an assignment to an affiliate of PRGX or PRGUSA, which may be made
without the prior consent of, but with notice to, Seller and Shareholder;
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 Shareholder at any time, without the prior written consent
of PRGUSA. 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.
10.4 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.
10.5 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
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("Overnight Delivery") or mailed by certified mail, return receipt requested,
postage prepaid and addressed to the intended recipient, as set forth below:
If to Seller, Shareholder or EPS: Enterprise Profit Solutions Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇, Gerber & ▇▇▇▇▇▇▇▇▇
Two ▇▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
and a copy to: ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
If to PRGX or PRGUSA: The Profit Recovery Group USA, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇.
Senior Vice President &
General Counsel
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: Arnall Golden & ▇▇▇▇▇▇▇, LLP
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
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 (with written confirmation of receipt), (ii) by Overnight
Delivery, will be deemed received on the first business day immediately
following the date sent, and (iii) by certified U.S. Mail, return receipt
requested, 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 U.S. national banks are 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
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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.
10.6 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, together with the Exhibits and Schedules
attached hereto, 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, PRGUSA and Shareholder, any rights or remedies
hereunder.
10.7 FURTHER ASSURANCES. The parties to this Agreement agree to execute
and deliver, both before and after the Closing, any additional information or
documents or agreements contemplated hereby and/or necessary or appropriate to
effect and consummate the transactions contemplated hereby. Shareholder and
Seller agree to provide to PRGX and PRGUSA, both before and after the Closing,
such information as PRGX and PRGUSA may reasonably request in order to
consummate the transactions contemplated hereby and to effect an orderly
transition of the Business following the Effective Date.
10.8 GOVERNING LAW AND SUBMISSION TO JURISDICTION. This Agreement, and,
except as otherwise provided therein, any Seller Transaction Document and any
PRGUSA Transaction Document shall be governed by and construed under the laws of
the State of Georgia, without reference to principles of conflict of laws.
Except as otherwise expressly provided in this Agreement, any Seller Transaction
Document or any PRGUSA Transaction Document (collectively, the "Agreements"),
any litigation arising out of, in connection with or in relation to any of the
Agreements, or any of the transactions contemplated under any of the Agreements,
shall be adjudicated in the United States District Court for the Northern
District of Georgia or, if there is not a basis for federal court jurisdiction,
in the Superior Court of ▇▇▇▇ County, Georgia. Each party hereto irrevocably
submits to the personal jurisdiction of such courts for the purpose of any such
litigation. Each of the parties hereto expressly waives and agrees not to assert
by way of a defense or motion any claim that it is not subject to the personal
jurisdiction of the courts set forth above, that such litigation is brought in
an inconvenient forum, or that venue for such litigation is improper; provided,
however, that nothing herein shall be construed as a waiver of any right that
any party hereto may have to remove litigation from the Superior Court of ▇▇▇▇
County, Georgia, to the United States District Court for the Northern District
of Georgia. Each of Seller, Shareholder and EPS hereby appoints the Georgia
Secretary of State as its agent for the purpose of receiving service of process
with respect to any proceeding under any of the Agreements; provided, however,
that if any process is served on the Georgia Secretary of State pursuant hereto
a copy of such service will be sent concurrently by certified mail, return
receipt requested, by PRGUSA to Seller, Shareholder and EPS in accordance with
the notice provisions of such agreement.
10.9 SECTION HEADINGS; CONSTRUCTION. The headings of Sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
PRGX:
THE PROFIT RECOVERY GROUP
INTERNATIONAL, INC.
By:________________________________
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇.
Its: Senior Vice President and
General Counsel
PRGUSA:
THE PROFIT RECOVERY GROUP USA, INC.
By:________________________________
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇.
Its: Senior Vice President and
General Counsel
SELLER:
TSL SERVICES, INC.
By:________________________________
Name:______________________________
Its:_______________________________
SHAREHOLDER:
ENTERPRISE PROFIT SOLUTIONS
CORPORATION
By:________________________________
Name:______________________________
Its:_______________________________
EPS:
EPS SOLUTIONS CORPORATION
By:________________________________
Name:______________________________
Its:_______________________________
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LIST OF SCHEDULES AND EXHIBITS
Schedule 1.1(a) Fixed Assets
Schedule 1.1(f) Licenses and Permits
Schedule 1.1(g) Deposits and Other Rights
Schedule 2.4 Estimated Closing Balance Sheet
Schedule 2.4-A Purchase Price Adjustments
Schedule 3.2 Key Employees
Schedule 4.1 States in which Seller is Qualified to do business
Schedule 4.2 Seller's Directors and Officers
Schedule 4.3 Exceptions to Title
Schedule 4.4 Consents
Schedule 4.8 Financial Information
Schedule 4.9 Purchased Assets owned or held by Persons other than Seller
Schedule 4.11A Trade Payables and Accrued Expenses
Schedule 4.11B Other Debts, Obligations, Guaranties and Liabilities
Schedule 4.12 Tax Matters
Schedule 4.14 Accounts Receivable
Schedule 4.15 Material Contracts
Schedule 4.15A Descriptions of oral Material Contracts
Schedule 4.15B Breaches or Defaults of Material Contracts
Schedule 4.16 Material Leases
Schedule 4.17 Clients and Primary Clients
Schedule 4.18 Employees and Consultants
Schedule 4.19 Intellectual Property Assets
Schedule 4.20 Internet Presence
Schedule 4.21 Year 2000 Compliance
Schedule 4.22 Benefit Plans and List of Accrued Vacation Obligations
Schedule 4.24 Litigation
Schedule 4.25 Insurance
Schedule 4.26 Immigration Matters
Schedule 4.28 Material Changes
Schedule 4.29 Certain Arrangements
Schedule 4.30 Bank Accounts
Exhibit 1.3(a) Form of ▇▇▇▇ of Sale
Exhibit 1.3(b) Form of Assignment and Assumption Agreement
Exhibit 2.3 Indemnity Escrow Agreement
Exhibit 3.2 Form of Employee Agreement
Exhibits 3.4 Form of Noncompetition Agreement
Exhibit 7.5(h) Form of Opinion of Seller's, Shareholder's and EPS's Counsel
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