defa14a
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON, D.C.
20549
SCHEDULE 14A
INFORMATION
Proxy
Statement Pursuant to Section 14(a) of
the
Securities Exchange Act of 1934
Filed by the
Registrant þ
Filed by a party
other than the Registrant
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Check the
appropriate box:
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Preliminary Proxy
Statement
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Confidential, for
Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
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Definitive Proxy
Statement
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Definitive
Additional Materials
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Soliciting Material
Pursuant to
§ 240.14a-12
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TechTeam
Global, Inc.
(Name
of Registrant as Specified In Its Charter)
(Name
of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing
Fee (Check the appropriate box):
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No fee required.
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Fee computed on
table below per Exchange Act
Rules 14a-6(i)(1)
and 0-11.
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(1)
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Title of each class
of securities to which transaction applies:
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(2) Aggregate
number of securities to which transaction applies:
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(3)
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Per unit price or
other underlying value of transaction computed pursuant to
Exchange Act
Rule 0-11
(set forth the amount on which the filing fee is calculated and
state how it was determined):
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(4) Proposed
maximum aggregate value of transaction:
(5) Total
fee paid:
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Fee paid previously
with preliminary materials.
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Check box if any
part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2)
and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing.
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(1)
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Amount Previously
Paid:
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(2)
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Form, Schedule or
Registration Statement No.:
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TECHTEAM GLOBAL,
INC.
27335 West
11 Mile Road
Southfield,
Michigan 48033
September 15,
2010
Dear Stockholder:
On or about
August 3, 2010, we first delivered to our stockholders a
definitive proxy statement dated July 30, 2010 relating to
a Special Meeting of Stockholders of TechTeam Global, Inc.
(TechTeam) originally scheduled to be held on
August 31, 2010, at 10:00 a.m. (local time), at The
Langham Hotel, 250 Franklin Street, Boston, Massachusetts
02110 (the Special Meeting), to consider and vote
upon the following proposals:
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(i)
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a proposal to adopt
and approve that certain Stock Purchase Agreement dated as of
June 3, 2010 (the Stock Purchase Agreement), by
and among Jacobs Engineering Group Inc., Jacobs Technology Inc.
(collectively, Jacobs) and TechTeam, and the
consummation of the transactions contemplated by the Stock
Purchase Agreement and all other agreements, documents,
certificates and instruments contemplated thereby (the
Stock Sale);
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(ii)
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a proposal to
adjourn the Special Meeting, if necessary, to facilitate the
approval of the preceding proposal, including to permit the
solicitation of additional proxies if there were not sufficient
votes at the time of the Special Meeting to approve the
preceding proposal; and
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(iii)
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such other business
as properly may come before the Special Meeting.
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As discussed in the
definitive proxy statement, TechTeam had previously requested
from Jacobs a waiver of a condition precedent to Jacobs
obligation to consummate the Stock Sale, which condition could
not be satisfied prior to the closing of the Stock Sale. On
August 27, 2010, Jacobs informed TechTeam by letter that
Jacobs believed it had the right to terminate the Stock Purchase
Agreement. Jacobs also stated that it continued to have an
interest in acquiring TTGSI at a fair price that reflected its
value, which it stated to be about $38 million.
On August 31,
2010, after consultation with Jacobs, the Special Meeting was
convened for the sole purpose of having TechTeams
stockholders consider the approval of the proposal to adjourn
the Special Meeting to a later date in order to provide us with
additional time to discuss with Jacobs the terms of a possible
amendment to the Stock Purchase Agreement, including a revised
net purchase price, revised escrow terms, and the waiver of
certain conditions precedent to the parties respective
obligations to consummate the Stock Sale, that could facilitate
the consummation of the Stock Sale upon such revised terms. The
adjournment proposal was approved by more than a majority of the
shares of common stock present, in person or represented by
proxy, at the Special Meeting and entitled to vote on this
matter.
On September 14,
2010, the parties entered into Amendment No. 1 to Stock
Purchase Agreement and Limited Waiver (the
Amendment). The Amendment has the effect of, among
other things, decreasing the net purchase price payable by
Jacobs for TTGSI pursuant to the Stock Sale, from $59,000,000 to
$43,000,000 and decreasing the aggregate amount to be placed in
escrow accounts from $17,520,294 to $11,370,294, each subject to
such additions, subtractions and other adjustments provided for
by, and the other provisions set forth in, the Stock Purchase
Agreement, the Amendment and the Escrow Agreement, as amended.
We agreed to reduce
the net purchase price, as described above, following a
reevaluation of the terms of the Stock Sale as a result of,
among other things, the statements made by Jacobs in its
August 27, 2010 letter, which indicated Jacobs
unwillingness to waive the conditions precedent to its
obligation to consummate the Stock Sale under the terms of the
Stock Purchase Agreement absent a reduction in the purchase
price. In connection with the Amendment, the parties also agreed
to waive and modify certain conditions to their obligations to
consummate the Stock Sale that had been contained in the Stock
Purchase Agreement, which we believe increases the likelihood
that the closing might occur.
The full text of the
Amendment and the amended form of Escrow Agreement are included
as Exhibits A and B, respectively, to the
proxy statement supplement that accompanies this letter. For a
chronological description of the material contacts and events
relating to the Amendment, see Update to
Proposal 1 Background of the Amendment.
After careful
consideration, our Board of Directors has unanimously approved
the Amendment and determined that the Stock Purchase Agreement,
as amended thereby, is expedient and in the best interests of us
and our stockholders. Our Board of Directors has unanimously
approved the Stock Sale (as so amended, the Amended Stock
Sale) and unanimously recommends that you vote
FOR the adoption and approval of
the Amended Stock Sale.
The Special Meeting
will be reconvened on Tuesday, September 28, 2010, at
10:00 a.m. (local time), at The Langham Hotel, 250 Franklin
Street, Boston, Massachusetts 02110, for the purpose of
approving the Amended Stock Sale. The record date for the
Special Meeting has not changed. Only stockholders of record who
owned shares of our common stock at the close of business on
July 30, 2010, the record date for the Special Meeting,
will be entitled to vote at the Special Meeting.
Attached to this
letter is a supplement to the definitive proxy statement
containing additional and updated information about us, the
Amendment, the Amended Stock Sale and related matters. Please
read this document carefully in its entirety. We also encourage
you, if you have not done so already, to review carefully the
definitive proxy statement that was previously sent to you. The
proxy statement supplement is dated September 15, 2010 and
is being first sent or given to TechTeam stockholders on
September 15, 2010.
Pursuant to the
Stock Purchase Agreement and the Amendment, the Amended Stock
Sale must be approved by the affirmative vote of the holders of
at least a majority of the outstanding shares of our common
stock entitled to vote at the Special Meeting. Therefore, an
abstention or failure to vote will have the same effect as a
vote against the approval of the Amended Stock Sale.
YOUR VOTE IS
VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU
HOLD. IF
YOU HAVE ALREADY DELIVERED A PROPERLY EXECUTED PROXY OR VOTING
INSTRUCTION CARD, VOTED ELECTRONICALLY BY THE INTERNET OR
BY TELEPHONE, OR OTHERWISE INSTRUCTED YOUR BROKER HOW TO VOTE
YOUR SHARES, YOU DO NOT NEED TO DO ANYTHING UNLESS YOU WISH TO
CHANGE YOUR VOTE OR REVOKE YOUR PROXY.
If you have not
previously voted, or if you wish to change your vote, whether or
not you plan to attend the Special Meeting, please complete,
date, sign and return the enclosed proxy or voting instruction
card as soon as possible in the envelope provided, or vote
electronically by the Internet or by telephone as provided in
the proxy statement and the accompanying supplement to the proxy
statement. Voting by proxy will ensure your representation at
the Special Meeting if you do not attend in person and does not
deprive you of your right to attend the Special Meeting and vote
your shares in person. If you attend the Special Meeting, you
can revoke your proxy at any time before it is exercised at the
Special Meeting and vote your
shares personally by
following the procedures described in the proxy statement and
the accompanying supplement to the proxy statement.
If you have any
questions about the accompanying proxy statement supplement or
the Special Meeting or require assistance in submitting your
proxy card, please contact TechTeam Global, Inc., Attention:
Investor Relations, 27335 West 11 Mile Road, Southfield,
Michigan 48033, or by calling us at
(248) 357-2866;
or The Altman Group, Inc., the firm assisting us in the
solicitation of proxies, 1200 Wall Street West, Lyndhurst, New
Jersey 07071, toll-free at
(877) 283-0320.
Banks and brokerage firms can call The Altman Group collect at
(201) 806-7300.
On behalf of the
Board of Directors, thank you for your cooperation and continued
support as a stockholder of TechTeam.
Sincerely,
Seth W. Hamot
Chairman of the
Board of Directors
TECHTEAM GLOBAL,
INC.
27335 West 11 Mile Road
Southfield, Michigan 48033
NOTICE OF
RECONVENED SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON
SEPTEMBER 28, 2010
TO OUR STOCKHOLDERS:
Notice is hereby
given that a reconvened Special Meeting of Stockholders (the
Special Meeting) of TechTeam Global, Inc. (the
Company) will be held at The Langham Hotel, 250
Franklin Street, Boston, Massachusetts 02110, at 10:00 a.m.
(local time) on Tuesday, September 28, 2010. The Special
Meeting was initially convened and adjourned on Tuesday,
August 31, 2010. The Special Meeting is being reconvened
and held for the following purposes:
1. To
adopt and approve (a) that certain Stock Purchase Agreement
dated as of June 3, 2010, as amended by that certain
Amendment No. 1 to Stock Purchase Agreement and Limited
Waiver, dated as of September 14, 2010 (collectively, the
Stock Purchase Agreement), by and among Jacobs
Engineering Group Inc., Jacobs Technology Inc. and the Company,
(b) the consummation of the sale of all of the outstanding
capital stock of TechTeam Government Solutions, Inc. to Jacobs
Technology Inc. pursuant to the terms of the Stock Purchase
Agreement, and (c) the consummation of all of the other
transactions contemplated by the Stock Purchase Agreement and
all other agreements, documents, certificates and instruments
required to be delivered pursuant thereto (the matters described
in clauses (a), (b) and (c) above being referred to
collectively as the Stock Sale Proposal); and
2. To
transact such other business as may properly come before the
Special Meeting, or any adjournment, postponement, continuation
or rescheduling thereof.
The foregoing items
of business are more fully described in the Companys
definitive Proxy Statement dated July 30, 2010, and
Supplement No. 1 thereto dated September 15, 2010 (the
Supplement). A copy of the Supplement accompanies
this notice.
Our Board of
Directors unanimously recommends that you vote
FOR the approval of the Stock Sale Proposal.
NO ACTION IS REQUIRED BY ANY STOCKHOLDER WHO HAS PREVIOUSLY
SUBMITTED A PROXY OR PROVIDED VOTING INSTRUCTIONS TO SUCH
STOCKHOLDERS BROKER, BANK, FIDUCIARY, AGENT, CUSTODIAN OR
OTHER NOMINEE, AND WHO DOES NOT WISH TO REVOKE SUCH PROXY OR
CHANGE SUCH VOTING INSTRUCTIONS.
Stockholders who
wish to vote or change their vote may do so using the enclosed
proxy or voting instruction card or by voting by the Internet or
telephone, as described in the Proxy Statement and the
accompanying Supplement.
Only stockholders of
record of the Companys common stock, par value $.01 per
share, as shown on the transfer books of the Company, at the
close of business on July 30, 2010, are entitled to notice
of, and to vote at, the Special Meeting or any adjournments,
postponements, continuations or reschedulings thereof. No change
in the record date with respect to the Special Meeting was made
as a result of the adjournment thereof on August 31, 2010.
A list of the stockholders as of the record date will be
available for inspection by stockholders at the Companys
offices during business hours for a period of 10 days prior
to the Special Meeting.
All stockholders are
cordially invited to attend the Special Meeting in person.
However, to ensure your representation at the Special Meeting,
and regardless of whether you plan to attend the Special
Meeting, you are urged to complete, sign, date and return the
enclosed proxy or voting instruction card as promptly as
possible in the postage prepaid envelope enclosed for that
purpose or to vote by the Internet or telephone. Instructions on
how to vote by the Internet or telephone are included in the
Proxy Statement and the accompanying Supplement.
If you have any
questions about the Proxy Statement, the accompanying Supplement
or the Special Meeting, or you require assistance in submitting
your proxy, please contact TechTeam Global, Inc., Attention:
Investor Relations, 27335 West 11 Mile Road, Southfield,
Michigan 48033, or by calling us at
(248) 357-2866;
or The Altman Group, Inc., the firm assisting us in the
solicitation of proxies, 1200 Wall Street West, Lyndhurst,
New Jersey 07071, toll-free at
(877) 283-0320.
Banks and brokerage firms can call The Altman Group collect at
(201) 806-7300.
By order of the
Board of Directors,
Michael A. Sosin
Corporate Vice
President, Secretary and
General Counsel
September 15,
2010
Southfield, Michigan
NO ACTION IS
REQUIRED BY ANY STOCKHOLDER WHO HAS PREVIOUSLY SUBMITTED A PROXY
OR PROVIDED VOTING INSTRUCTIONS TO SUCH STOCKHOLDERS
BROKER, BANK, FIDUCIARY, AGENT, CUSTODIAN OR OTHER NOMINEE, AND
WHO DOES NOT WISH TO REVOKE SUCH PROXY OR CHANGE SUCH VOTING
INSTRUCTIONS.
IF YOU HAVE NOT
ALREADY VOTED WITH RESPECT TO THE SPECIAL MEETING, OR YOU WISH
TO CHANGE YOUR VOTE, WHETHER OR NOT YOU PLAN TO ATTEND THE
SPECIAL MEETING, PLEASE VOTE BY TELEPHONE OR THE INTERNET, OR BY
COMPLETING, SIGNING, DATING AND RETURNING THE ACCOMPANYING PROXY
OR VOTING INSTRUCTION CARD IN THE ENCLOSED POSTAGE-PAID
ENVELOPE TODAY. SEE THE SPECIAL MEETING --
VOTING IN THE PROXY STATEMENT FOR FURTHER
DETAILS.
IF YOU DO ATTEND
THE SPECIAL MEETING, YOU MAY, IF YOU PREFER, REVOKE YOUR
PROXY
AND VOTE YOUR SHARES IN PERSON.
TABLE OF
CONTENTS
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S-1
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S-1
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S-2
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S-2
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S-3
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S-3
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S-4
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S-7
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S-8
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S-8
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S-10
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S-13
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S-15
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S-18
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S-20
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S-20
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S-22
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S-22
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S-24
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S-30
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S-34
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S-34
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S-34
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S-35
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S-35
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S-36
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S-36
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S-36
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S-37
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S-38
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S-38
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S-39
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S-40
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S-40
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S-40
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A-1
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B-1
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C-1
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EXHIBIT D --
OPINION OF HOULIHAN LOKEY CAPITAL, INC
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D-1
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E-1
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F-1
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G-1
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TECHTEAM GLOBAL,
INC.
27335 West 11 Mile Road
Southfield, Michigan 48033
SUPPLEMENT
NO. 1 TO PROXY STATEMENT
SPECIAL MEETING OF STOCKHOLDERS
INTRODUCTION
General
Information
This Supplement
No. 1 to Proxy Statement (this Supplement) is
being furnished to supplement the proxy statement dated
July 30, 2010 of TechTeam Global, Inc. (the Proxy
Statement) in connection with the solicitation of proxies
by the Board for use at the Special Meeting of Stockholders of
the Company and at any adjournment, postponement, continuation
or rescheduling thereof, to be reconvened on Tuesday,
September 28, 2010, at 10:00 a.m. (local time), at The
Langham Hotel, 250 Franklin Street, Boston, Massachusetts 02110
(the Special Meeting), for the purposes set forth
herein. Accompanying this Supplement is the Boards proxy
card or a voting instruction card for the Special Meeting, which
you may use to indicate your vote on the proposal described in
this Supplement. The Supplement is dated September 15, 2010
and is being first sent or given to TechTeam stockholders on or
about September 15, 2010.
We are providing our
stockholders with this Supplement because on September 14,
2010, we entered into Amendment No. 1 to Stock Purchase
Agreement and Limited Waiver (the Amendment), which
amended the Stock Purchase Agreement. This Supplement is being
sent in order to give TechTeam stockholders an opportunity to
consider and vote upon a proposal to approve the Stock Sale
Proposal in light of the Amendment.
This Supplement is
being sent or delivered to TechTeam stockholders who are
eligible to vote at the Special Meeting. All holders of record
of our Common Stock as of the close of business on July 30,
2010, which is the record date for the Special Meeting, are
entitled to vote at the Special Meeting.
As discussed in the
Proxy Statement, we had previously requested from Jacobs
Technology a waiver of a condition precedent to Jacobs
Technologys obligation to consummate the Stock Sale, which
condition could not be satisfied prior to the closing of the
Stock Sale. On August 27, 2010, Jacobs informed TechTeam
that Jacobs believed it had the right to terminate the Stock
Purchase Agreement. The grounds for termination stated by Jacobs
included, without limitation:
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the failure of
certain employees of TTGSI to remain employed with TTGSI;
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the apparent
inability of TechTeam to obtain certain consents required by the
terms of the Stock Purchase Agreement;
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Jacobs belief
(based on information provided by TechTeam) that the
deterioration in TTGSIs business constituted a material
adverse effect (as defined in the Stock Purchase
Agreement); and
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the apparent failure
of TechTeams representations and warranties to remain true
and correct as of the date of Jacobs letter, to the extent
specified in the Stock Purchase Agreement.
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The statements made
by Jacobs in its August 27 letter indicated Jacobs
unwillingness to waive the conditions precedent to its
obligation to consummate the Stock Sale under the terms of the
Stock Purchase Agreement absent a reduction in the purchase
price. Jacobs also stated that it continued to have an interest
in acquiring TTGSI at a fair price that reflected its value,
which it stated to be about $38 million.
From August 28 to
August 30, 2010, TechTeam and Jacobs had been negotiating
the terms of an amendment to the Stock Purchase Agreement, but
as of the Special Meeting date, those negotiations had not
concluded. Therefore, on August 31, 2010, after
consultation with Jacobs, the Special Meeting was convened for
the sole purpose of having stockholders consider the proposal to
adjourn the Special Meeting to a later date in order to provide
us with additional time to discuss with Jacobs the terms of a
possible amendment to the Stock Purchase Agreement, including
the revised net purchase price, revised escrow terms and the
waiver of conditions to the consummation of the Stock Sale, that
could facilitate the consummation of the Stock Sale upon such
revised terms. The adjournment proposal was approved by more
than a majority of the shares of Common Stock present, in person
or represented by proxy at the Special Meeting and entitled to
vote on this matter at the Special Meeting. On
September 14, 2010, we entered into the Amendment with
Jacobs, whereby the Stock Purchase Agreement was amended as
reflected thereby.
S-1
After careful
consideration, our Board unanimously determined that the Stock
Purchase Agreement, the Amendment and the Stock Sale are
expedient and in the best interests of the Company and its
stockholders. Our Board has unanimously approved the Stock
Purchase Agreement, the Amendment and the Stock Sale.
OUR BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
FOR THE APPROVAL OF THE STOCK SALE
PROPOSAL.
Stockholders are
urged to read this Supplement carefully together with the Proxy
Statement. The information contained in this Supplement replaces
and supersedes any inconsistent information set forth in the
Proxy Statement. If you need another copy of the Proxy Statement
or this Supplement, please contact TechTeam Global, Inc.,
Attention: Investor Relations, 27335 West 11 Mile Road,
Southfield, Michigan 48033, or call us at
(248) 357-2866;
or contact The Altman Group, Inc., the firm assisting us in the
solicitation of proxies, 1200 Wall Street West, Lyndhurst, New
Jersey 07071, toll-free at
(877) 283-0320.
Banks and brokerage firms can call The Altman Group collect at
(201) 806-7300.
The Proxy Statement and this Supplement may also be found on the
Internet at
http://www.proxyvote.com
or
http://www.sec.gov.
Unless the context
otherwise requires, references throughout the Proxy Statement,
as amended by this Supplement, to the Stock Purchase Agreement,
the Stock Sale and the Stock Sale Proposal shall be to the Stock
Purchase Agreement, the Stock Sale and the Stock Sale Proposal,
respectively, as amended by the Amendment. Unless otherwise
defined or the context otherwise indicates, other terms used
throughout this Supplement have the meanings ascribed to them in
the Proxy Statement.
Quorum and
Voting
Under Delaware law,
the presence of a quorum at the reconvened Special Meeting will
be presumed to exist because a quorum was present when the
Special Meeting was first convened on August 31, 2010. The
holders of record of shares of our Common Stock as of the close
of business on July 30, 2010 are entitled to vote at the
Special Meeting. Holders of record of our Common Stock may vote
in person at the Special Meeting in the manner set forth in the
sections of the Proxy Statement entitled The Special
Meeting Voting and The Special
Meeting Proxies.
Revocability of
Proxies
A stockholder giving
a proxy has the power to revoke his or her proxy, at any time
prior to the time it is voted, by:
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filing a written
notice of revocation with the Companys Corporate Secretary
at 27335 West 11 Mile Road, Southfield, Michigan 48033,
before the Special Meeting;
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submitting another
properly completed proxy with a later date; or
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attending the
Special Meeting and voting in person.
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Simply attending the
Special Meeting will not constitute revocation of your proxy. If
your shares are held in street name, the above-described options
for revoking your proxy do not apply and you must instead follow
the instructions of your broker, bank, fiduciary, agent,
custodian or other nominee to revoke a previously given proxy.
Stockholders may change their vote through the Internet at
http://www.proxyvote.com
by following the instructions printed on their proxy or voting
instruction card, or by using the telephone number printed on
their proxy or voting instruction card.
NO ACTION IN
CONNECTION WITH THIS SUPPLEMENT IS REQUIRED BY ANY STOCKHOLDER
WHO HAS PREVIOUSLY SUBMITTED A PROXY OR PROVIDED VOTING
INSTRUCTIONS TO SUCH STOCKHOLDERS BROKER, BANK,
FIDUCIARY, AGENT, CUSTODIAN OR OTHER NOMINEE, AND WHO DOES NOT
WISH TO REVOKE SUCH PROXY OR CHANGE SUCH VOTING
INSTRUCTIONS.
The form of proxy
accompanying this Supplement confers discretionary authority
upon the named proxy holders with respect to any other matters
which may properly come before the Special Meeting. As of the
date of this Supplement, management knows of no such matters
expected to come before the Special Meeting which are not
referred to in this Supplement.
S-2
UPDATE TO SUMMARY
TERM SHEET
This updated
summary highlights selected information about the Stock Sale and
the Amendment from this Supplement and may not contain all the
information that is important to you. You should carefully read
this entire Supplement and the Proxy Statement, including each
of the exhibits thereto. The Amendment is attached as
Exhibit A
to this Supplement. Each item in this summary refers to the
page of this Supplement on which the applicable subject is
discussed in more detail.
The Stock
Sale
Background of
the Amendment
(page S-20)
On August 27,
2010, Jacobs informed TechTeam by letter that Jacobs believed it
had the right to terminate the Stock Purchase Agreement. The
grounds for termination stated by Jacobs included, without
limitation:
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the failure of
certain employees of TTGSI to remain employed with TTGSI;
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the apparent
inability of TechTeam to obtain certain consents required by the
terms of the Stock Purchase Agreement;
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Jacobs belief
(based on information provided by TechTeam) that the
deterioration in TTGSIs business constituted a material
adverse effect (as defined in the Stock Purchase
Agreement); and
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the apparent failure
of TechTeams representations and warranties to remain true
and correct as of the date of Jacobs letter, to the extent
specified in the Stock Purchase Agreement.
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Jacobs also stated
that it continued to have an interest in acquiring TTGSI at a
fair price that reflected its value, which it stated to be about
$38 million. The statements made by Jacobs in its August 27
letter indicated Jacobs unwillingness to waive the
conditions precedent to its obligation to consummate the Stock
Sale under the terms of the Stock Purchase Agreement absent a
reduction in the purchase price.
As a result of
having received such letter, our Board began the process of
negotiating the Amendment with Jacobs, which ultimately resulted
in an agreed upon net purchase price of $43,000,000.
For a chronological
description of the material contacts and events occurring after
the date of the Proxy Statement and relating to the entering
into the Amendment with Jacobs on September 14, 2010, see
Update to Proposal 1 Background of the
Amendment.
Recommendation
of Our Board of Directors
(page S-22)
After careful
consideration, our Board has determined that the Stock Purchase
Agreement, as amended by the Amendment, and the transactions
contemplated thereby, including the Stock Sale, are expedient
and in the best interests of our stockholders. Our Board has
unanimously approved the Stock Purchase Agreement, as
amended, and the transactions contemplated thereby, including
the Stock Sale. Accordingly, our Board unanimously recommends
that you vote FOR the approval of the
Stock Sale Proposal.
Reasons for
Recommending that Stockholders Approve the Amended Stock Sale
Proposal
(page S-22)
In evaluating the
Stock Sale, our Board consulted with our senior management,
outside legal counsel and financial advisor. Our Board also
consulted with outside legal counsel regarding its fiduciary
duties, legal due diligence matters and the terms of the Stock
Purchase Agreement, the Amendment and related agreements. After
carefully considering these consultations and the other factors
referenced in Update to Proposal 1
Reasons for Recommending that Stockholders Approve the Amended
Stock Sale Proposal, our Board concluded that the Stock
Sale was expedient and in the best interests of TechTeam and our
stockholders and unanimously recommended that our stockholders
vote FOR the approval of the Stock
Sale Proposal.
S-3
Opinion of
Tech Teams Financial Advisor
(page S-24)
In connection with
the Stock Sale, TechTeams financial advisor, Houlihan
Lokey Capital, Inc., or Houlihan Lokey, delivered a written
opinion, dated September 14, 2010, to our Board as to the
fairness, from a financial point of view and as of the date of
the opinion, to TechTeam of the $43,000,000 cash consideration
to be received in the Stock Sale by TechTeam. The full text of
Houlihan Lokeys written opinion, dated September 14,
2010, which describes the procedures followed, assumptions made,
qualifications and limitations on the review undertaken and
other matters considered by Houlihan Lokey in preparing its
opinion, is attached to this Supplement as
Exhibit D. Houlihan Lokeys opinion was
furnished for the use and benefit of our Board (in its capacity
as such) in connection with its evaluation of the $43,000,000
cash consideration, only addresses the fairness, from a
financial point of view, to TechTeam of such consideration and
does not address any other aspect or implication of the Stock
Sale.
The summary of
Houlihan Lokeys opinion in the Supplement is qualified in
its entirety by reference to the full text of its written
opinion. Houlihan Lokeys opinion should not be construed
as creating any fiduciary duty on Houlihan Lokeys part to
any party. Houlihan Lokeys opinion was not intended to be,
and does not constitute, a recommendation to our Board, any
securityholder or any other person as to how to act or vote with
respect to any matter relating to the Stock Sale.
Use of
Proceeds of the Stock Sale (page S-34)
We estimate that the
net cash proceeds to be received by us from the Stock Sale at
closing will be approximately $31.6 million, after
deducting the amounts to be paid into escrow accounts but not
including estimated fees and expenses payable by us directly
related to the Stock Sale. Fees and expenses directly
attributable to the Stock Sale are estimated to be approximately
$5.4 million, of which approximately $3.3 million have
already been paid by us. The actual amount of net cash proceeds
from the Stock Sale will vary from this estimate. We intend to
use the net cash proceeds from the Stock Sale for, among other
things, to pay off our current outstanding indebtedness under
our existing credit facility, which as of August 31, 2010,
was approximately $17.8 million. The net cash proceeds that
we receive from the Stock Sale would also enable our Board to
consider, from time to time, repurchasing Common Stock for cash
as market and business conditions warrant. Further, the
remaining net cash proceeds of the Stock Sale will be used for
working capital, general corporate purposes and to selectively
invest in the growth of our Commercial Business. While we may
use some of the net cash proceeds to be received by us from the
Stock Sale to pursue strategic business acquisitions related to
the growth of our Commercial Business, no specific acquisition
targets have been identified at this time.
Amendment
No. 1 to Stock Purchase Agreement and Limited
Waiver
Amended
Purchase Price; Escrow (page S-35)
On September 14,
2010, we entered into the Amendment with Jacobs, which, among
other things, amended the Stock Purchase Agreement to decrease
the net purchase price payable by Jacobs Technology to us
pursuant to the Stock Sale from $59,000,000 to $43,000,000. The
Amendment also provided for a decrease in the amount of the
aggregate cash payment of the net purchase price to be placed in
escrow accounts from $17,520,294 to $11,370,294, which as a
percentage of the net purchase price represents a decrease from
29.6% to 26.4%.
As a result of these
changes, in exchange for the sale of all of the stock of TTGSI,
we will be paid by Jacobs a net purchase price of $43,000,000,
consisting of a base cash payment of $31,629,706 to be received
at closing, plus a cash payment of $11,370,294 to be placed in
escrow accounts, each subject to such additions, subtractions
and other adjustments provided for by, and the other terms and
provisions set forth in, the Stock Purchase Agreement and the
Escrow Agreement. Of the $11,370,294 to be deposited into
escrow, $8,600,000 will be held in an escrow account to secure
the payment of any future indemnification claims that may be
made by Jacobs against us during the
36-month
period after the closing date, and $2,770,294 will be held in an
escrow account to secure the payment to Jacobs by us of any
post-closing
net tangible book value adjustment that has the effect of
reducing the net purchase price, as described in the Proxy
Statement.
S-4
Other
Covenants and Agreements (page S-36)
Amended Form of
Escrow
Agreement. In
connection with the Amendment, the form of the Escrow Agreement
was amended to provide that, upon closing of the Stock Sale, the
escrow agent will receive from the aggregate amount of the net
purchase price, subject to the terms and conditions of the Stock
Purchase Agreement and the Escrow Agreement, each as amended:
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$8,600,000, which
will be held in an escrow account to secure the payment of any
future indemnification claims against us by Jacobs; and
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$2,770,294, which
will be held in an escrow account to secure any post-closing net
tangible book value purchase price adjustment that would results
in a reduction of the purchase price and a payment from us to
Jacobs.
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Pursuant to the
Amendment and amended form of Escrow Agreement, on the first
business day following the
24-month
anniversary of the closing, the escrow agent will distribute to
us an amount equal to $2,866,667 (instead of $4,916,667 as
contemplated under the original Stock Purchase Agreement),
reduced by all amounts previously paid out of the
indemnification escrow fund with respect to indemnity claims and
reduced by the amount of pending escrow claims. On the first
business day following the
36-month
anniversary of the closing, the escrow agent will distribute to
us an amount, if any, equal to the sum of the amount remaining
in the indemnification escrow fund minus the amount of all
pending escrow claims.
Amended Form of
Transitional Services
Agreement. In
connection with the Amendment, the form of Transitional Services
Agreement was amended as described in Amendment No. 1
to Stock Purchase Agreement and Limited Waiver Other
Covenants and Agreements Transitional Services
Agreement.
Conditions to
Completion of the Stock Sale (page S-37)
Our and Jacobs
obligations to complete the Stock Sale are subject to the
satisfaction or waiver of certain conditions. In connection with
the Amendment, some of such conditions were waived or modified
as described below.
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A condition to the
completion of the Stock Sale related to our representations and
warranties was modified to state that, except as set forth in an
officers certificate we delivered to Jacobs upon signing
the Amendment (the Amendment Officers
Certificate), our representations and warranties in the
Stock Purchase Agreement must be true and correct in all
material respects as of June 3, 2010 and as of the date of
the Amendment (but not as of the closing date), as if made on
the date of the Amendment (except those representations and
warranties that relate to a particular date or period, which
need only be true and correct as of such date or for such
period).
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The condition to
Jacobs obligation to complete the Stock Sale related to
our making our closing deliveries and otherwise performing and
complying in all material respects with all of our other
covenants and obligations under the Stock Purchase Agreement was
modified to provide exceptions for the information set forth in
the Amendment Officers Certificate and any covenants or
obligations under the Stock Purchase Agreement expressly waived
by Jacobs in the Amendment.
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The condition to
Jacobs obligation to complete the Stock Sale relating to
TTGSI not having entered into certain teaming agreements or
similar contracts or government bids was amended to provide an
exception for agreements, contracts or bids:
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described in the
Amendment Officers Certificate; or
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that may be
consented to by Jacobs in writing in advance and after the date
of the Amendment.
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S-5
As of
September 14, 2010, and in reliance on and conditioned upon
the effectiveness of the amendments to the Stock Purchase
Agreement:
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we and Jacobs waived
the condition to our respective obligations to complete the
Stock Sale that neither we nor Jacobs has become aware of any
organizational conflict of interest, as defined
under the Federal Acquisition Regulations, or similar impact on
TTGSI or Jacobs, that would result from the consummation of the
Stock Sale, with respect to one teaming agreement described in
the Amendment;
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Jacobs waived the
following conditions to its obligation to complete the Stock
Sale:
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the requirement that
we deliver an assignment of a specific office building lease
described in the Amendment at the closing, which assignment must
be delivered within 90 days after the closing;
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our receipt of
certain specified consents, as described in the Amendment, to
the Stock Sale required to be obtained under the Stock Purchase
Agreement;
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no material adverse
effect shall have occurred with respect to the Government
Solutions Business, TechTeam or Jacobs;
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no proceeding shall
be pending or threatened by or on behalf of Jacobs or any
affiliate of Jacobs which could reasonably be expected to
materially and adversely affect the Government Solutions
Business, TTGSI or Jacobs (including, without limitation, any
such proceeding relating to any alleged violation of, or
non-compliance with, any applicable law or any allegation of
fraud or intentional misrepresentation); and
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the requirement that
all of the TTGSI employees identified in the Stock Purchase
Agreement must continue to be employed by TTGSI or shall not
have indicated an intent not to remain employed by TTGSI or
Jacobs after the closing pursuant to the terms of any employment
agreement; and
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we waived the
condition to our obligation to complete the Stock Sale that no
material adverse effect shall have occurred with respect to
Jacobs Technology, us or the Government Solutions Business.
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Indemnification;
Survival of Indemnification Obligations
(page S-38)
As a result of the
reduction in the net purchase price pursuant to the Amendment,
subject to certain exceptions set forth in the Stock Purchase
Agreement, as amended:
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our maximum
liability for certain claims for indemnification for the first
24 months after the closing date was decreased from
$14,750,000 to $8,600,000; and
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our maximum
liability for certain claims for indemnification for the period
beginning on the first day of the 25th month after the
closing date until the last day of the 36th month after the
closing date was decreased from $9,833,333 to $5,733,333 (less
the amount of claims in excess of $2,866,667 applied against the
preceding cap within the first 24 months after the closing).
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Termination of
the Stock Purchase Agreement; Termination Fee and Reimbursement
of Expenses (pages S-39 and S-40)
Pursuant to the
Amendment, Jacobs no longer has the right to terminate the Stock
Purchase Agreement if:
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a material adverse
effect (as defined in the Stock Purchase Agreement) has occurred
with respect to the Government Solutions Business or any event
or circumstance has occurred which could reasonably be expected
to have a material adverse effect with respect to the Government
Solutions Business or TechTeam;
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S-6
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any of our
representations and warranties shall have been inaccurate as of
June 3, 2010 or as of the date of the Amendment, if such
inaccuracy has been disclosed in the Amendment Officers
Certificate as of the date of the Amendment;
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any of our
representations and warranties shall have been inaccurate as of
date subsequent to June 3, 2010 (as if made on such
subsequent date) and the inaccuracy has not been cured by us
within five business days after we receive written notice
thereof and remains uncured at the time notice of termination is
given, such that the closing condition with respect thereto
would not be satisfied;
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any of our covenants
are breached such that the closing condition with respect
thereto would not be satisfied, so long as (i) such breach
was disclosed in the Amendment Officers Certificate, or
(ii) the breach of a covenant or condition was expressly
waived by Jacobs pursuant to the Amendment; or
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TTGSI enters into
certain types of contracts that impermissibly restrict
TTGSIs ability to compete and which Jacobs reasonably
believes would, individually or in the aggregate, materially and
adversely affect Jacobs, its affiliates or TTGSI after the
closing, so long as the contract was described in the Amendment
Officers Certificate or was consented to in writing by
Jacobs after the date of the Amendment.
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Moreover, we can no
longer terminate the Stock Purchase Agreement if:
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a material adverse
effect has occurred with respect to TechTeam or the Government
Solutions Business, or any event or circumstance has occurred
which could reasonably be expected to have a material adverse
effect with respect to TechTeam or the Government Solutions
Business; or
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any of our
representations and warranties shall have become inaccurate as
of a date subsequent to June 3, 2010 (as if made on such
subsequent date) such that the closing condition with respect
thereto would not be satisfied.
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In addition, as set
forth in the Amendment, the Stock Purchase Agreement may be
terminated upon providing written notice, by us or Jacobs, if
the Stock Sale has not been completed on or before
October 5, 2010 (instead of October 1, 2010), unless
the failure of the closing to have occurred by that date is
attributable to a failure by such party to perform any material
obligation required to be performed at or prior to the closing
under the Stock Purchase Agreement.
The termination fee
that we must pay to Jacobs if the Stock Purchase Agreement is
terminated under certain circumstances was reduced from
$2,360,000 to $1,720,000 due to the reduction of the net
purchase price that we will receive in connection with the Stock
Sale.
Voting Agreements
(page S-37)
On June 3,
2010, in order to induce Jacobs to enter into the Stock Purchase
Agreement, Costa Brava Partnership III L.P. and
Emancipation Capital, LLC, which beneficially owned in the
aggregate approximately 18.3% of our outstanding Common Stock as
of that date, entered into separate voting agreements with
Jacobs. On September 14, 2010, these stockholders consented
to the amendments to the Stock Purchase Agreement effected by
the Amendment. As a result, under these voting agreements, each
of these stockholders is required to, among other things, vote
our Common Stock held by them FOR the
Stock Sale Proposal at the Special Meeting. See Amendment
No. 1 to Stock Purchase Agreement and Limited
Waiver Other Covenants and Agreements
Voting Agreements.
S-7
UPDATE TO
QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE STOCK
SALE
The following
updated questions and answers briefly address some additional
anticipated questions about the Special Meeting and the Stock
Sale. These questions and answers may not address all
information that may be important to you as a stockholder. You
should still carefully read this entire Supplement and the Proxy
Statement, including each of the exhibits to the Supplement and
the Proxy Statement.
This Supplement is
being furnished to the holders of our Common Stock in connection
with our solicitation of proxies for use at the Special Meeting.
The Special
Meeting
Why am I
receiving this Supplement?
We sent you this
Supplement because you held shares of our Common Stock as of
July 30, 2010, the record date for the Special Meeting,
which was originally convened on August 31, 2010 and has
been adjourned until Tuesday, September 28, 2010. Our Board
is continuing to solicit proxies to vote at the Special Meeting.
On September 14,
2010, we and Jacobs amended the Stock Purchase Agreement to
provide for, among other things, a reduction in the net purchase
price payable by Jacobs to us in the Stock Sale from $59,000,000
to $43,000,000. The Amendment also provides for a decrease in
the amount of the aggregate cash payment of the net purchase
price to be placed in escrow accounts from $17,520,294 to
$11,370,294. This Supplement provides information about the
changes to the Stock Purchase Agreement and the impact of such
changes on the Stock Sale, and serves to supplement the Proxy
Statement, which was first sent or given to TechTeam
stockholders on or about August 3, 2010.
Why was the
Special Meeting called and adjourned on August 31,
2010?
On August 27,
2010, Jacobs informed TechTeam by letter that Jacobs was
unwilling to waive the conditions precedent to its obligation to
consummate the Stock Sale under the terms of the Stock Purchase
Agreement, absent a reduction in the purchase price.
On August 31,
2010, after consultation with Jacobs, the Special Meeting was
convened for the sole purpose of having our stockholders
consider a proposal to adjourn the Special Meeting to a later
date in order to provide us with additional time to discuss with
Jacobs the terms of a possible amendment to the Stock Purchase
Agreement that could facilitate the consummation of the Stock
Sale upon revised terms agreed to by the parties, including a
reduction of the net purchase price for TTGSI. That adjournment
proposal was approved by more than a majority of the shares of
Common Stock present, in person or represented by proxy, at the
Special Meeting and entitled to vote on this matter.
When and where
will the Special Meeting be reconvened?
The Special Meeting
will be reconvened on Tuesday, September 28, 2010, at
10:00 a.m. (local time), at The Langham Hotel, 250 Franklin
Street, Boston, Massachusetts 02110.
What proposals
will be voted at the reconvened Special Meeting?
Our stockholders
will be asked to approve the Stock Sale Proposal and to transact
such other business as may properly come before the Special
Meeting.
Who is
entitled to vote at the reconvened Special
Meeting?
The record date for
the Special Meeting has not changed. Only holders of our Common
Stock as of the close of business on July 30, 2010, the
record date for the Special Meeting, will be entitled to vote at
the Special Meeting.
S-8
Does our Board
still support the Stock Sale?
Yes. On September 8,
2010, our Board unanimously approved the Stock Purchase
Agreement, as amended, and the Stock Sale, and it unanimously
recommended that our stockholders vote
FOR the approval of the Stock
Sale Proposal.
What should I
do if I already voted using a proxy or voting instruction card
that I was provided with earlier?
First, carefully
read this Supplement and the Proxy Statement, including each of
the exhibits to the Supplement and the Proxy Statement. If you
have already submitted a proxy or voting instruction card to
instruct a broker, bank, fiduciary, agent, custodian or other
nominee through which you beneficially own your shares (meaning,
your shares are held in street name), you do not
need to do anything unless you wish to revoke your proxy or
change your vote. You may revoke your proxy or change your vote
as discussed below under How do I revoke my
proxy or change my vote? If your shares are held in
street name by your broker, and you wish to change
your vote, please refer to your voting instruction card or other
information you may have received to determine how to instruct
the record holder of your shares to vote your shares.
IF YOU HAVE
ALREADY SUBMITTED A PROXY OR VOTING INSTRUCTION CARD AND
YOU DO NOT REVOKE YOUR PROXY OR CHANGE YOUR VOTE, YOU WILL BE
CONSIDERED TO HAVE VOTED ON THE STOCK SALE PROPOSAL AS
INDICATED IN THE PROXY OR VOTING INSTRUCTION CARD YOU
PROVIDED EARLIER, AND THE PROXIES IDENTIFIED IN THE PROXY OR
VOTING INSTRUCTION CARD YOU PROVIDED EARLIER WILL VOTE YOUR
SHARES AS INDICATED IN THAT PREVIOUSLY SUBMITTED PROXY OR
VOTING INSTRUCTION CARD.
What should I
do if I have not voted my shares?
First, carefully
read this Supplement and the Proxy Statement, including each of
the exhibits to the Supplement and the Proxy Statement. If your
Common Stock is registered in your name, you are considered to
be a record owner. All record owners may vote by the Internet,
telephone, mail or in person at the Special Meeting, in
accordance with the instructions provided in the Proxy Statement
for voting by record owners. The deadline for stockholders of
record to vote by telephone or electronically through the
Internet is 11:59 p.m., Eastern Daylight Time, on
September 27, 2010.
If your shares are
held in street name, you will need to instruct the nominee as to
how to vote your shares. You should have received information
with this Supplement as to how to transmit your voting
instructions. Under applicable rules, a broker with respect to
shares held in street name may not be permitted to cast votes on
the proposal to be brought at the Special Meeting unless the
broker has timely received your voting instructions.
Whether or not you
plan to attend the Special Meeting, we urge you to vote promptly
using one of the methods described in the Proxy Statement to
ensure your vote is received and counted. If you vote by
telephone or electronically through the Internet, you do not
need to return your proxy or voting instruction card.
If you are an
employee of the Company who is a TechTeam stockholder through
our Retirement Savings Plan (the Plan), you will
receive a form of proxy with respect to all of your shares so
registered. You have the right to direct the Trustee of the Plan
how to vote the shares allocated to your account. If no
instructions are given, your shares will not be voted.
REGARDLESS OF
HOW YOU HOLD YOUR SHARES OF COMMON STOCK OR HOW MANY
SHARES YOU OWN, YOUR VOTE IS VERY
IMPORTANT.
ACCORDINGLY, WE URGE YOU TO SIGN AND RETURN THE ENCLOSED PROXY
OR VOTING INSTRUCTION CARD AS SOON AS POSSIBLE OR VOTE VIA
THE INTERNET OR TELEPHONE, WHETHER OR NOT YOU PLAN TO ATTEND THE
SPECIAL MEETING.
S-9
How do I
revoke my proxy or change my vote?
If you have
previously submitted a proxy or voting instruction card, you may
change your vote one or more times by completing and returning a
new proxy card to the Company, by delivering to our Corporate
Secretary a written instrument revoking the proxy or by voting
in person at the Special Meeting. If you are permitted to vote
by the Internet or telephone, you may also change your vote
electronically by the Internet or telephone by following the
procedures used to submit your initial vote. The last vote
received chronologically will supersede any prior votes. You may
request a new proxy card from the Companys Corporate
Secretary.
You may revoke a
proxy before its exercise by filing a written notice of
revocation with the Companys Corporate Secretary at
27335 West 11 Mile Road, Southfield, Michigan 48033 before
the Special Meeting. If your shares are held in street name, the
above-described options for revoking your proxy do not apply and
instead you must follow the instructions of your nominee to
revoke previously given voting instructions.
What if other
matters are presented for my consideration at the Special
Meeting?
As of the date of
this Supplement, we know of no matters that will be presented
for determination at the Special Meeting other than the Stock
Sale Proposal. If any other matters properly come before the
Special Meeting calling for a vote of stockholders, proxies
returned to us or voted by telephone or through the Internet
will be voted in accordance with the recommendation of our Board
or, in the absence of such recommendation, in the discretion of
the proxy holders. The designated proxy holders are Gary J.
Cotshott and Margaret M. Loebl.
How can I
obtain additional copies of our proxy materials?
Stockholders who
wish to receive, free of charge, a separate written copy of this
Supplement or the Proxy Statement should submit a written
request to TechTeam Global, Inc., Attention: Investor Relations,
27335 West 11 Mile Road, Southfield, Michigan 48033; by
calling
(248) 357-2866;
or by visiting our Web site at
http://www.techteam.com/investors.
Please note that you may incur long-distance telephone charges
in placing a telephonic request. Copies of the Supplement or the
Proxy Statement may also be obtained from
http://www.proxyvote.com.
We file annual,
quarterly and current reports, proxy statements and other
information with the SEC. These reports, statements and other
information are available to the public on the Internet at the
SECs website at
http://www.sec.gov
or at its Public Reference Room, located at
100 F Street, N.E., Washington, D.C. 20549. Our
filings with the SEC are also available free of charge at
http://www.techteam.com/investors.
Stockholders may
also obtain separate written copies of this Supplement and the
Proxy Statement, free of charge, by contacting The Altman Group,
the firm assisting us in the solicitation of proxies, toll-free
at
(877) 283-0320.
Banks and brokerage firms can call collect at
(201) 806-7300.
The Stock
Sale
What is the
effect of the Amendment on the Stock Sale?
On
September 14, 2010, the parties entered into the Amendment,
which has the effect of, among other things, decreasing the net
purchase price payable by Jacobs for TTGSI pursuant to the Stock
Sale, before adjustments, from $59,000,000 to $43,000,000 and
decreasing the amount of the aggregate cash payment of the net
purchase price to be placed in escrow accounts from $17,520,294
to $11,370,294, each subject to such additions, subtractions and
other adjustments provided for by, and the other terms and
provisions set forth in, the Stock Purchase Agreement and the
Escrow Agreement, each as amended. The parties also agreed to
waive and modify certain conditions to closing that had been
contained in the Stock Purchase Agreement, which we believe
increases the likelihood that the closing might occur.
Of the amount of the
net purchase price to be deposited into escrow, $8,600,000
(reduced from $14,750,000) will be placed in an escrow account
to secure the payment by us to Jacobs of any
S-10
indemnification
claims that may be made by Jacobs during the
36-month
period after the closing date, subject to the limitations and
exclusions contained in the Stock Purchase Agreement, as
amended. In addition, $2,770,294 will be placed in an escrow
account to secure the payment by us to Jacobs of any
post-closing net tangible book value adjustment that results in
a reduction in the net purchase price. All amounts deposited
into escrow accounts shall be held, invested and distributed
only as provided in the Escrow Agreement, as amended.
Why did we
agree to reduce the net purchase price in connection with the
Stock Sale?
We agreed to reduce
the net purchase price, as summarized in response to the
immediately preceding question, following a reevaluation of the
terms of the Stock Sale as a result of, among other things, the
statements made by Jacobs in its August 27, 2010 letter.
These statements indicated Jacobs unwillingness to waive
the conditions precedent to its obligation to consummate the
Stock Sale under the terms of the Stock Purchase Agreement
absent a reduction in the purchase price.
In connection with
the Amendment, we also agreed to waive and modify certain
conditions to closing that had been contained in the Stock
Purchase Agreement, which we believe increases the likelihood
that the closing might occur.
What are the
estimated net cash proceeds from the Stock Sale?
We estimate that the
net proceeds to be received by us from the Stock Sale at closing
will be approximately $31.6 million, after deducting the
amounts to be paid into escrow accounts but not including
estimated fees and expenses payable by us directly related to
the Stock Sale. Fees and expenses directly attributable to the
Stock Sale are estimated to be approximately $5.4 million,
of which approximately $3.3 million have already been paid
by us. The actual amount of net cash proceeds from the Stock
Sale will vary from this estimate. See Update to
Proposal 1 Use of Proceeds of the
Stock Sale.
How do we plan
to use the net cash proceeds from the Stock Sale?
We intend to use the
net proceeds from the Stock Sale for, among other things, to pay
off our current outstanding indebtedness under our existing
credit facility, which as of August 31, 2010, was
approximately $17.8 million. Further, the remaining net
proceeds of the Stock Sale will be used for working capital,
general corporate purposes and to selectively invest in the
growth of our Commercial Business. The net cash proceeds that we
receive from the Stock Sale would also enable our Board to
consider, from time to time, repurchasing Common Stock for cash
as market and business conditions warrant. While we may use some
of the net proceeds received by us from the Stock Sale to pursue
strategic business acquisitions related to the growth of our
Commercial Business, no specific acquisition targets have been
identified at this time.
S-11
Who can help
answer additional questions?
If you have
additional questions about the Special Meeting or the Stock Sale
or require assistance in submitting your proxy, you should
contact us, as follows:
TechTeam Global,
Inc.
Attention: Investor Relations
27335 West 11 Mile Road
Southfield, Michigan 48033
Telephone:
(248) 357-2866
or
The Altman Group,
Inc.
1200 Wall Street West
Lyndhurst, New Jersey 07071
Stockholders Call
Toll-Free:
(877) 283-0320
Banks and Brokerage
Firms Call Collect:
(201) 806-7300
Your vote is
important, regardless of how many or how few shares you
own. If
you have not already voted on the stock sale proposal, and
whether or not you plan to attend the special meeting, please
complete, sign and date the enclosed proxy or voting
instruction card and return it in the enclosed postage-paid
envelope today or vote by the Internet or telephone.
S-12
UPDATE TO
CAUTIONARY STATEMENTS CONCERNING FORWARD-LOOKING
INFORMATION
In addition to
historical information, this Supplement, including the exhibits
attached hereto, contains forward-looking statements
within the meaning of Section 21E of the Securities
Exchange Act of 1934. The forward-looking statements are not
historical facts but rather are based on current expectations,
estimates and projections about our business and industry, and
our beliefs and assumptions. Words such as
anticipate, believe,
estimate, expect, intend,
assume, may, seek to,
will, would, should,
could, guidance, potential,
continue, project, forecast,
confident, prospects,
projections and plan, and variations of
these words and similar expressions, identify forward-looking
statements, although not all forward-looking statements contain
these identifying words.
These statements are
not guarantees of future performance and are subject to risks,
uncertainties and other factors, many of which are beyond our
control, are difficult to predict and could cause actual results
to differ materially from those expressed or forecasted in the
forward-looking statements. These risks and uncertainties
include, but are not limited to, those described in this
Supplement and the Proxy Statement. Factors, risks and
uncertainties that may affect our ability to complete the Stock
Sale and that could adversely affect our business, financial
condition and operating results include, but are not limited to:
|
|
|
|
|
the failure to
satisfy any of the conditions to completing the Stock Sale,
including with respect to the required approval of our
stockholders and other third parties;
|
|
|
|
the occurrence of
any event, change or other circumstances that could result in
the Stock Sale not being consummated;
|
|
|
|
the restrictions and
limitations on the conduct of the Government Solutions Business
prior to the consummation of the Stock Sale, which may delay or
prevent us from pursuing business opportunities or other actions
that could benefit us or the Government Solutions Business
pending completion of the Stock Sale;
|
|
|
|
restrictions on our
Boards ability to solicit or engage in discussion or
negotiations with, or provide information to, a third party
regarding alternative transactions involving TTGSI;
|
|
|
|
the outcome of any
legal proceedings instituted against us and others in connection
with the proposed Stock Sale;
|
|
|
|
the failure of the
Stock Sale to close for any other reason;
|
|
|
|
the termination fee
and
out-of-pocket
expense reimbursements that we would be required to pay to
Jacobs in the event of a termination of the Stock Purchase
Agreement, as amended, under certain circumstances;
|
|
|
|
uncertainty as to
the amount of the net tangible book value adjustment to the net
purchase price for the acquisition of TTGSI, including our
potential liability to Jacobs in the event of a net tangible
book value adjustment that results in a reduction of the net
purchase price;
|
|
|
|
the amount of the
costs, fees, expenses and charges relating to the Stock Sale;
|
|
|
|
uncertainties
related to the amount of our future indemnification obligations
and other liabilities under the Stock Purchase Agreement, as
amended, including our inability to receive some or all of the
portion of the net purchase price that will be escrowed to
secure our payment to Jacobs of such indemnification
obligations, and that in certain cases the cap on our potential
indemnification liability to Jacobs may be equal to the full
purchase price;
|
|
|
|
uncertainties as to
how the Stock Sale and the terms of the Stock Purchase
Agreement, as amended, including the escrow and the
indemnification provisions, may affect our ability to explore
various strategic alternatives with respect to our Commercial
Business;
|
|
|
|
our inability to
recognize the anticipated benefits of the Stock Sale;
|
S-13
|
|
|
|
|
uncertainties
related to our proposed strategy of separating the Government
Solutions Business from the Commercial Business;
|
|
|
|
uncertainties
regarding our Boards review of potential strategic
alternatives for the Commercial Business, the timing of such
review and the outcome of such review;
|
|
|
|
our inability to
successfully operate the Commercial Business after the Stock
Sale on a stand-alone basis;
|
|
|
|
the fact that the
Stock Sale will leave us as a significantly smaller public
company, with fewer revenue-producing assets and a
less-diversified business;
|
|
|
|
uncertainties as to
the amount, if any, of our cash that our stockholders may
receive in the future;
|
|
|
|
the implementation
of our strategic repositioning and market acceptance of our
refocused strategy;
|
|
|
|
quarterly
fluctuations in our financial results;
|
|
|
|
our ability to
exploit fully the value of our technology outsourcing services;
|
|
|
|
delays in the
implementation of our business strategy or the development of
new service offerings;
|
|
|
|
changes in a
customers business or requirements thereof;
|
|
|
|
difficulties in
providing service solutions for our customers;
|
|
|
|
the global economic
recession and financial crisis;
|
|
|
|
the performance of
our contracts by suppliers, customers and partners;
|
|
|
|
the difficulty of
aligning expense levels with revenue changes;
|
|
|
|
complexities of
global, national, regional and local political and economic
developments; and
|
|
|
|
other risks,
including but not limited to the items discussed in:
|
|
|
|
|
|
Material
Considerations Relating to the Stock Sale Proposal
beginning on page 33 of the Proxy Statement, as
supplemented by Update to Material Considerations Relating
to the Stock Sale Proposal included in this Supplement;
|
|
|
|
Item 1A
Risk Factors of our Annual Report on Form
10-K for the
fiscal year ended December 31, 2009, as filed with the SEC
on March 30, 2010 (the 2009
Form 10-K),
a copy of which is reproduced as Exhibit F to the
Proxy Statement; and
|
|
|
|
Part II,
Item 1A Risk Factors of our Quarterly
Report on
Form 10-Q
for the quarter ended June 30, 2010, as filed with the SEC
on August 9, 2010 (the June 30, 2010
Form 10-Q),
a copy of which is reproduced as Exhibit E to this
Supplement.
|
Unpredictable or
unknown factors could also have material adverse effects on us.
Forward-looking statements that were believed to be true at the
time made may ultimately prove to be incorrect or false. All
forward-looking statements included in this Supplement, or in
the documents to which we refer you in this Supplement, are
expressly qualified in their entirety by the foregoing
cautionary statements. You should not place undue reliance upon
our forward-looking statements. Our forward-looking statements
are based on the information available to us as of the date of
this Supplement, or, in the case of forward-looking statements
included in any referenced documents, as of the date of the
filing thereof. We undertake no obligation to update or revise,
or to publicly release the results of, or any update or revision
to, these forward-looking statements.
S-14
UPDATE TO SUMMARY
SELECTED HISTORICAL AND PRO FORMA FINANCIAL
INFORMATION
The following tables
present selected historical consolidated financial information
for us and TTGSI and our selected pro forma consolidated
financial information giving effect to the consummation of the
sale of the Government Solutions Business to Jacobs Technology
pursuant to the Stock Sale, as more fully described below.
Our selected audited
historical consolidated financial information as of
December 31, 2009 and 2008 and for each of the years ended
December 31, 2009, 2008 and 2007 presented below was
derived from our audited consolidated financial statements
included in the 2009
Form 10-K,
a copy of which is reproduced as Exhibit F to the
Proxy Statement. Our selected audited historical consolidated
balance sheet as of December 31, 2007 was derived from our
audited consolidated balance sheet included in our Annual Report
for the year ended December 31, 2008, as filed with the SEC
on March 16, 2009 (the 2008
Form 10-K),
a copy of which is not included in this Supplement and was not
included in the Proxy Statement. Our selected unaudited
historical consolidated financial information as of
June 30, 2010 and for the six months ended June 30,
2010 and 2009 presented below was derived from our unaudited
consolidated financial statements included in the June 30,
2010
Form 10-Q,
a copy of which is reproduced as Exhibit E to this
Supplement.
The selected
unaudited historical consolidated financial information of TTGSI
presented below as of and for each of the years ended
December 31, 2009, 2008 and 2007, and as of June 30,
2010 and for the six months ended June 30, 2010 and 2009,
was derived from the available financial information contained
in the accounting records of TTGSI and its subsidiaries and is
substantially representative of the financial results of the
Government Solutions Business to be sold to Jacobs Technology in
the Stock Sale as of such dates and for such periods.
The unaudited pro
forma consolidated financial information was derived from our
unaudited pro forma consolidated financial statements, a copy of
which is reproduced as Exhibit F to this Supplement,
and the historical financial information provided in this
Supplement and the Proxy Statement. The unaudited pro forma
consolidated statement of operations information presented below
for the six months ended June 30, 2010 and 2009, and for
each of the years ended December 31, 2009, 2008 and 2007,
assumes that the Stock Sale had occurred as of January 1,
2010, 2009, 2008 and 2007, respectively. The unaudited pro forma
consolidated balance sheet information as of June 30, 2010
presented below was prepared to give effect to the consummation
of the Stock Sale, as if it had occurred on that date.
The following
selected historical and pro forma financial information should
be read in conjunction with:
|
|
|
|
|
our audited
historical consolidated financial statements as of
December 31, 2009 and 2008 and for each of the years ended
December 31, 2009, 2008 and 2007 and the notes thereto
contained in the 2009
Form 10-K,
a copy of which is reproduced as Exhibit F to the
Proxy Statement;
|
|
|
|
our audited
historical consolidated balance sheet as of December 31,
2007 contained in the 2008
Form 10-K,
a copy of which is not provided in this Supplement and was not
provided in the Proxy Statement;
|
|
|
|
our unaudited
historical consolidated financial statements as of June 30,
2010 and for the six months ended June 30, 2010 and 2009,
and the notes thereto contained in the June 30, 2010
Form 10-Q,
a copy of which is reproduced as Exhibit E to this
Supplement;
|
|
|
|
our unaudited pro
forma consolidated financial statements as of June 30, 2010
and for the six months ended June 30, 2010 and 2009, and
for each of the years ended December 31, 2009, 2008 and
2007, and the adjustments provided therewith, a copy of which is
reproduced as Exhibit F to this Supplement;
|
|
|
|
the unaudited
historical consolidated financial statements of TTGSI as of
June 30, 2010 and for the six months ended June 30,
2010 and 2009 and as of and for each of the years ended
|
S-15
|
|
|
|
|
December 31,
2009, 2008 and 2007, and the notes thereto, a copy of which is
reproduced as Exhibit G to this Supplement; and
|
|
|
|
|
|
Part II,
Item 7 of the 2009
Form 10-K
and Part I, Item 2 of the June 30, 2010
Form 10-Q
entitled Managements Discussion and Analysis of
Financial Condition and Results of Operations.
|
The following
selected financial information is being provided for information
purposes only. It is not intended to represent or be indicative
of the results of operations or financial position that would
have been reported if TTGSI had been operated as a separate
entity as of the respective dates presented and during the
periods ended on such dates, or if the Stock Sale had been
completed as of the dates presented. The following selected
financial information may not be representative of the future
financial position or results of operations of us or TTGSI.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of
Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Information
(Unaudited):
|
|
For the Six
Months Ended June 30, 2010
|
|
|
For the Six
Months Ended June 30, 2009
|
|
(in thousands,
except per
|
|
TechTeam
|
|
|
TechTeam
|
|
|
TTGSI
|
|
|
TechTeam
|
|
|
TechTeam
|
|
|
TTGSI
|
|
share
information)
|
|
Historical
|
|
|
Pro Forma
|
|
|
Historical
|
|
|
Historical
|
|
|
Pro Forma
|
|
|
Historical
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
64,547
|
|
|
$
|
64,547
|
|
|
$
|
--
|
|
|
$
|
69,587
|
|
|
$
|
69,587
|
|
|
$
|
--
|
|
Government Technology Services
|
|
|
30,244
|
|
|
|
--
|
|
|
|
30,244
|
|
|
|
40,845
|
|
|
|
--
|
|
|
|
40,845
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
$
|
94,791
|
|
|
$
|
64,547
|
|
|
$
|
30,244
|
|
|
$
|
110,432
|
|
|
$
|
69,587
|
|
|
$
|
40,845
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
14,772
|
|
|
$
|
14,772
|
|
|
$
|
--
|
|
|
$
|
15,745
|
|
|
$
|
15,745
|
|
|
$
|
--
|
|
Government Technology Services
|
|
|
6,759
|
|
|
|
--
|
|
|
|
6,759
|
|
|
|
11,529
|
|
|
|
--
|
|
|
|
11,529
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total gross profit
|
|
$
|
21,531
|
|
|
$
|
14,772
|
|
|
$
|
6,759
|
|
|
$
|
27,274
|
|
|
$
|
15,745
|
|
|
$
|
11,529
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
$
|
(3,051
|
)
|
|
$
|
(3,008
|
)
|
|
$
|
(1,923
|
)
|
|
$
|
5,931
|
|
|
$
|
985
|
|
|
$
|
3,496
|
|
Income (loss) before income taxes
|
|
$
|
(3,089
|
)
|
|
$
|
(2,743
|
)
|
|
$
|
(2,226
|
)
|
|
$
|
4,679
|
|
|
$
|
283
|
|
|
$
|
2,946
|
|
Net income (loss)
|
|
$
|
(2,515
|
)
|
|
$
|
(2,374
|
)
|
|
$
|
(1,363
|
)
|
|
$
|
2,940
|
|
|
$
|
191
|
|
|
$
|
1,807
|
|
Basic earnings (loss) per common share
|
|
$
|
(0.24
|
)
|
|
$
|
(0.22
|
)
|
|
|
|
|
|
$
|
0.28
|
|
|
$
|
0.02
|
|
|
|
|
|
Diluted earnings (loss) per common share
|
|
$
|
(0.24
|
)
|
|
$
|
(0.22
|
)
|
|
|
|
|
|
$
|
0.28
|
|
|
$
|
0.02
|
|
|
|
|
|
Weighted average number of common shares outstanding --
basic
|
|
|
10,687
|
|
|
|
10,687
|
|
|
|
|
|
|
|
10,599
|
|
|
|
10,599
|
|
|
|
|
|
Weighted average number of common shares outstanding --
diluted
|
|
|
10,687
|
|
|
|
10,687
|
|
|
|
|
|
|
|
10,624
|
|
|
|
10,624
|
|
|
|
|
|
S-16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of
Operations Information:
|
|
For
the Year Ended December 31, 2009
|
|
|
For
the Year Ended December 31, 2008
|
|
|
For
the Year Ended December 31, 2007
|
|
(in thousands,
except per
|
|
TechTeam
|
|
|
TechTeam
|
|
|
TTGSI
|
|
|
TechTeam
|
|
|
TechTeam
|
|
|
TTGSI
|
|
|
TechTeam
|
|
|
TechTeam
|
|
|
TTGSI
|
|
share
information)
|
|
Historical
|
|
|
Pro Forma
|
|
|
Historical
|
|
|
Historical
|
|
|
Pro Forma
|
|
|
Historical
|
|
|
Historical
|
|
|
Pro Forma
|
|
|
Historical
|
|
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
134,801
|
|
|
$
|
134,801
|
|
|
$
|
--
|
|
|
$
|
171,340
|
|
|
$
|
171,340
|
|
|
$
|
--
|
|
|
$
|
152,942
|
|
|
$
|
152,942
|
|
|
$
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government Technology Services
|
|
|
76,440
|
|
|
|
--
|
|
|
|
76,440
|
|
|
|
88,615
|
|
|
|
--
|
|
|
|
88,615
|
|
|
|
69,254
|
|
|
|
--
|
|
|
|
69,254
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
$
|
211,241
|
|
|
$
|
134,801
|
|
|
$
|
76,440
|
|
|
$
|
259,955
|
|
|
$
|
171,340
|
|
|
$
|
88,615
|
|
|
$
|
222,196
|
|
|
$
|
152,942
|
|
|
$
|
69,254
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
30,049
|
|
|
$
|
30,049
|
|
|
$
|
--
|
|
|
$
|
36,204
|
|
|
$
|
36,204
|
|
|
$
|
--
|
|
|
$
|
30,903
|
|
|
$
|
30,903
|
|
|
$
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government Technology Services
|
|
|
20,437
|
|
|
|
--
|
|
|
|
20,437
|
|
|
|
24,232
|
|
|
|
--
|
|
|
|
24,232
|
|
|
|
18,867
|
|
|
|
--
|
|
|
|
18,867
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total gross profit
|
|
$
|
50,486
|
|
|
$
|
30,049
|
|
|
$
|
20,437
|
|
|
$
|
60,436
|
|
|
$
|
36,204
|
|
|
$
|
24,232
|
|
|
$
|
49,770
|
|
|
$
|
30,903
|
|
|
$
|
18,867
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
$
|
(20,201
|
)
|
|
$
|
(6,211
|
)
|
|
$
|
(16,831
|
)
|
|
$
|
7,797
|
|
|
$
|
(2,217
|
)
|
|
$
|
7,473
|
|
|
$
|
10,295
|
|
|
$
|
2,911
|
|
|
$
|
6,682
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
$
|
(21,894
|
)
|
|
$
|
(6,912
|
)
|
|
$
|
(17,823
|
)
|
|
$
|
7,150
|
|
|
$
|
(1,328
|
)
|
|
$
|
5,937
|
|
|
$
|
9,639
|
|
|
$
|
3,189
|
|
|
$
|
5,748
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(18,633
|
)
|
|
$
|
(6,411
|
)
|
|
$
|
(14,038
|
)
|
|
$
|
2,968
|
|
|
$
|
(2,293
|
)
|
|
$
|
3,653
|
|
|
$
|
6,296
|
|
|
$
|
2,340
|
|
|
$
|
3,513
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per common share
|
|
$
|
(1.75
|
)
|
|
$
|
(0.60
|
)
|
|
|
|
|
|
$
|
0.28
|
|
|
$
|
(0.22
|
)
|
|
|
|
|
|
$
|
0.61
|
|
|
$
|
0.23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per common share
|
|
$
|
(1.75
|
)
|
|
$
|
(0.60
|
)
|
|
|
|
|
|
$
|
0.28
|
|
|
$
|
(0.22
|
)
|
|
|
|
|
|
$
|
0.60
|
|
|
$
|
0.22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding --
basic
|
|
|
10,618
|
|
|
|
10,618
|
|
|
|
|
|
|
|
10,529
|
|
|
|
10,529
|
|
|
|
|
|
|
|
10,355
|
|
|
|
10,355
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding --
diluted
|
|
|
10,618
|
|
|
|
10,618
|
|
|
|
|
|
|
|
10,555
|
|
|
|
10,555
|
|
|
|
|
|
|
|
10,506
|
|
|
|
10,506
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2010 (Unaudited)
|
|
December 31,
2009
|
|
December 31,
2008
|
|
December 31,
2007
|
Balance Sheet
Information:
|
|
TechTeam
|
|
TechTeam
|
|
TTGSI
|
|
TechTeam
|
|
TTGSI
|
|
TechTeam
|
|
TTGSI
|
|
TechTeam
|
|
TTGSI
|
(in
thousands)
|
|
Historical
|
|
Pro Forma
|
|
Historical
|
|
Historical
|
|
Historical
|
|
Historical
|
|
Historical
|
|
Historical
|
|
Historical
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
(Unaudited)
|
|
|
|
(Unaudited)
|
|
Cash and cash equivalents
|
|
$
|
14,846
|
|
|
$
|
44,931
|
|
|
$
|
--
|
|
|
$
|
15,969
|
|
|
$
|
--
|
|
|
$
|
16,881
|
|
|
$
|
3
|
|
|
$
|
19,431
|
|
|
$
|
32
|
|
Working capital
|
|
$
|
34,786
|
|
|
$
|
54,464
|
|
|
$
|
6,515
|
|
|
$
|
36,954
|
|
|
$
|
12,143
|
|
|
$
|
42,427
|
|
|
$
|
18,090
|
|
|
$
|
43,173
|
|
|
$
|
12,026
|
|
Goodwill and other intangible assets, net
|
|
$
|
46,278
|
|
|
$
|
8,523
|
|
|
$
|
37,755
|
|
|
$
|
47,270
|
|
|
$
|
38,794
|
|
|
$
|
77,361
|
|
|
$
|
62,340
|
|
|
$
|
76,686
|
|
|
$
|
65,264
|
|
Total assets
|
|
$
|
114,151
|
|
|
$
|
95,947
|
|
|
$
|
58,327
|
|
|
$
|
122,520
|
|
|
$
|
66,338
|
|
|
$
|
167,363
|
|
|
$
|
93,705
|
|
|
$
|
182,169
|
|
|
$
|
102,963
|
|
Total current liabilities
|
|
$
|
22,602
|
|
|
$
|
16,083
|
|
|
$
|
10,411
|
|
|
$
|
27,095
|
|
|
$
|
11,612
|
|
|
$
|
38,474
|
|
|
$
|
12,579
|
|
|
$
|
51,175
|
|
|
$
|
24,839
|
|
Total long-term liabilities
|
|
$
|
11,964
|
|
|
$
|
11,853
|
|
|
$
|
19,252
|
|
|
$
|
11,796
|
|
|
$
|
24,699
|
|
|
$
|
30,156
|
|
|
$
|
37,061
|
|
|
$
|
33,963
|
|
|
$
|
37,712
|
|
Total shareholders equity
|
|
$
|
79,585
|
|
|
$
|
68,011
|
|
|
$
|
28,664
|
|
|
$
|
83,629
|
|
|
$
|
30,027
|
|
|
$
|
98,733
|
|
|
$
|
44,065
|
|
|
$
|
97,031
|
|
|
$
|
40,412
|
|
As of June 30,
2010, our unaudited book value per share on a consolidated
historical and pro forma basis was $7.11 and $6.07, respectively.
S-17
UPDATE TO
MATERIAL CONSIDERATIONS RELATING TO THE STOCK SALE
PROPOSAL
You should
carefully review the considerations described below as well as
the other information provided to you or referenced in this
Supplement and the Proxy Statement in deciding how to vote on
the Stock Sale Proposal. For a discussion of additional
considerations, we refer you to the documents we file from time
to time with the SEC, particularly the 2009
Form 10-K,
a copy of which is reproduced as
Exhibit F
to the Proxy Statement, and the June 30, 2010
Form 10-Q,
a copy of which is reproduced as Exhibit E to this
Supplement. Additional considerations not presently known to us
or that we currently believe are immaterial may also adversely
affect our business and operations. If any of the following
considerations actually occur, our business, financial condition
or results of operations could be materially and adversely
affected, the value of our common shares could decline, and you
may lose all or part of your investment. Please note that the
considerations discussed below also include forward-looking
statements and our actual results may differ substantially from
those discussed in those forward-looking statements. See
Update to Cautionary Statements Regarding Forward-Looking
Information.
There is no
assurance that the Stock Sale will be completed, and our
inability to consummate the Stock Sale could harm the market
price of our Common Stock and our business, results of
operations and financial condition.
We cannot assure you
that the Stock Sale will be consummated. The consummation of the
Stock Sale is subject to the satisfaction or waiver of a number
of conditions, including, among others, the requirement that we
obtain stockholder approval of the Stock Sale Proposal, the
requirement to obtain certain consents and other approvals, and
requirements with respect to the satisfaction or waiver of
certain of our closing covenants. In addition, Jacobs may
terminate the Stock Purchase Agreement if, among other things,
such closing conditions are not satisfied by October 5,
2010.
We cannot guarantee
that we will be able to meet all of the closing conditions of
the Stock Purchase Agreement. Although certain of our closing
conditions contained in the Stock Purchase Agreement were waived
in the Amendment, it is possible that other conditions to the
obligations of Jacobs Technology to complete the Stock Sale will
not be satisfied by the time of the closing. If we are unable to
meet all of the closing conditions, Jacobs would not be
obligated to close the Stock Sale and Jacobs may have the right,
at any time, to terminate the Stock Purchase Agreement. We
cannot be sure that other circumstances will not arise that
would allow Jacobs to terminate the Stock Purchase Agreement
prior to closing. If the Stock Sale is not approved by TechTeam
stockholders or does not close, our Board will be forced to
evaluate other alternatives, which may be less favorable to us
than the proposed Stock Sale.
As a result of the
execution of the Stock Purchase Agreement, employees of the
Government Solutions Business may become concerned about the
future of the Government Solutions Business and seek other
employment. Also, as a result of our execution of the Stock
Purchase Agreement and the announcement of the Stock Sale and
the Amendment, third parties may be unwilling to enter into
material agreements with us with respect to the Government
Solutions Business. New or existing customers may prefer to
enter into agreements with our competitors who have not
expressed an intention to sell their business because customers
may perceive that such new relationships are likely to be more
stable. If we fail to complete the proposed Stock Sale, the
failure to maintain existing business relationships or enter
into new ones could adversely affect our business, results of
operations and financial condition.
In addition, if the
Stock Sale is not consummated, our directors, executive officers
and other employees will have expended extensive time and effort
and will have experienced significant distractions from their
work during the pendency of the transaction and we will have
incurred significant transaction costs, in each case, without
any commensurate benefit. After focusing on the potential sale
of the Government Solutions Business for an extended period, if
the Stock Sale is not consummated, we may not be able to develop
and implement a strategy for the future growth and development
of the Government Solutions Business that would generate a
return similar to or better than the return which would be
generated by the Stock Sale. Furthermore, the perception of our
continuing business could potentially result in a loss of
customers, business partners and employees if the Stock Sale is
not consummated. The
S-18
occurrence of one or
more of the foregoing circumstances could likely have a material
and adverse effect on our business, stock price, results of
operations and financial condition.
The Stock
Purchase Agreement, as amended, may expose us to contingent
liabilities, and we may never ultimately receive any of the net
cash purchase price deposited into escrow accounts for
indemnification purposes.
Under the Stock
Purchase Agreement, we have agreed to indemnify Jacobs for any
breach or violation of any representation, warranty, covenant or
undertaking made by us in the Stock Purchase Agreement and for
other matters, subject to certain limitations and exceptions. Of
the net cash purchase price of $43,000,000, $8,600,000 will be
deposited into an escrow account to secure our indemnification
obligations to Jacobs for a period of up 36 months after
closing. However, Jacobs right to seek indemnification
from us for certain indemnification claims may not be limited by
this
36-month
time period or to any time limitations at all and may not be
limited by any amounts contained in the indemnification escrow
fund.
Although the
Amendment reduced the net purchase price as compared to the
original Stock Purchase Agreement and provides for the waiver of
various conditions to the consummation of the Stock Sale, the
Amendment does not provide for any party to waive any claims for
Losses (as defined in the Stock Purchase Agreement) that it may
incur or have incurred that are indemnifiable pursuant to the
terms of the Stock Purchase Agreement. Moreover, in the updated
schedules attached to the officers certificate delivered
by us in connection with our execution of the Amendment, we may
make disclosures upon which Jacobs may bring a post-closing
claim against us for indemnification. Moreover, in the event
that other matters exist that could permit Jacobs to terminate
the Stock Purchase Agreement, but we do not disclose such
matters to Jacobs in connection with the execution of the
Amendment, Jacobs could have the ability to terminate the Stock
Purchase Agreement and also, subject to the terms of the Stock
Purchase Agreement, as amended, potentially assert claims
against us for any Losses incurred as a result of such
disclosures not being made.
S-19
UPDATE TO
PROPOSAL 1 ADOPTION AND APPROVAL OF THE AMENDED
STOCK PURCHASE AGREEMENT AND THE CONSUMMATION OF THE STOCK
SALE
The following is an
update to the description of the material aspects of the Stock
Sale contained in the Proxy Statement, including background
information relating to the Amendment. While we believe that the
following description covers the updated material terms of the
Stock Sale, the Amendment and other arrangements between Jacobs
and us, the description may not contain all of the information
that is important to you. You should carefully read this
Supplement and the Proxy Statement and the other documents to
which we refer, including the Stock Purchase Agreement and the
Amendment, for a complete understanding of the terms of the
Stock Sale. A copy of the Amendment is attached as
Exhibit A to this Supplement.
Background of the
Amendment
On August 10,
2010, Mr. Williams provided Mr. Udovic with certain
financial information of TTGSI as of and for the six months
ended June 30, 2010.
On August 20,
2010, a representative of Blank Rome circulated to a
representative of Paul Hastings a draft of a proposed amendment
to the Stock Purchase Agreement that, among other things, sought
Jacobs waiver of certain outstanding closing conditions.
Despite numerous requests for a response, TechTeam did not
receive any direct response from Jacobs with respect to this
draft proposed amendment to the Stock Purchase Agreement.
On August 23,
2010, Mr. Udovic requested an update of the projected
financial information that TechTeam had previously provided to
Jacobs. On August 24 and August 26, 2010, in response to
this request, TechTeam and TTGSI provided Jacobs with updated
projected financial information.
On August 27,
2010, Jacobs informed TechTeam by letter that Jacobs believed it
had the right to terminate the Stock Purchase Agreement. The
grounds for termination stated by Jacobs included, without
limitation:
|
|
|
|
|
the failure of
certain employees of TTGSI to remain employed with TTGSI;
|
|
|
|
the apparent
inability of TechTeam to obtain certain consents required by the
terms of the Stock Purchase Agreement;
|
|
|
|
Jacobs belief
(based on information provided by TechTeam) that the
deterioration in TTGSIs business constituted a Material
Adverse Effect (as defined in the Stock Purchase
Agreement); and
|
|
|
|
the apparent failure
of TechTeams representations and warranties to remain true
and correct as of the date of Jacobs letter, to the extent
specified in the Stock Purchase Agreement.
|
Jacobs also stated
that it continued to have an interest in acquiring TTGSI at a
fair price that reflected its value, which it stated to be about
$38 million. The statements made by Jacobs in its August 27
letter indicated Jacobs unwillingness to waive the
conditions precedent to its obligation to consummate the Stock
Sale under the terms of the Stock Purchase Agreement absent a
reduction in the purchase price. In its letter, Jacobs proposed
that, if TechTeam was amenable to this purchase price, it would,
in recognition of TechTeams need for certainty of closing,
waive appropriate conditions and proceed expeditiously to
closing by a date no later than October 1, 2010.
On the afternoon of
August 28, 2010, Mr. Hamot
e-mailed
Mr. Kunberger to inquire as to whether Jacobs was intending
to terminate the Stock Purchase Agreement or still remained
interested in acquiring TTGSI but at a reduced purchase price.
Mr. Hamot reaffirmed to Mr. Kunberger that TechTeam
and its Board remained fully committed to consummating the Stock
Sale pursuant to the then current terms of the Stock Purchase
Agreement.
Later that day, in a
subsequent phone conversation with Mr. Hamot,
Mr. Kunberger confirmed that Jacobs remained interested in
acquiring TTGSI but at a reduced purchase price and during the
course of
S-20
that conversation,
Messrs. Hamot and Kunberger engaged in negotiations
regarding a reduced purchase price at which Jacobs would
continue to be interested in acquiring TTGSI.
On the morning of
August 29, 2010, Mr. Kunberger
e-mailed
Mr. Hamot and indicated that Jacobs would be willing to
consider moving forward with the acquisition of TTGSI if the net
purchase price was reduced to $43,000,000. Mr. Kunberger
also indicated that, in return for a lower net purchase price,
Jacobs would reduce the indemnification escrow from 25% to 20%
of the net purchase price. In addition, Mr. Kunberger
indicated that Jacobs would agree to waive all of the conditions
to closing that Jacobs was then asserting were not satisfied.
On the evening of
August 29, 2010, our Board convened a telephonic meeting to
discuss the letter received from Jacobs and the revised
transaction terms proposed therein. One or more representatives
of TechTeams senior management were also present for this
meeting. Following discussion, our Board directed the members of
the Strategy Committee to continue negotiations with Jacobs to
determine whether the parties could reach mutually acceptable
terms and to thereafter report back to our Board.
Later in the evening
of August 29, 2010, Mr. Hamot
e-mailed to
Mr. Kunberger and informed him that the Board had met
earlier to discuss the revised terms proposed by Jacobs. In his
e-mail,
Mr. Hamot expressed, on behalf of the Board, the following
concerns with respect to the revised terms proposed by Jacobs:
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that the proposed
reduced purchase price may not justify all of the post-closing
contingent liabilities created by the original Stock Purchase
Agreement; and
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if TechTeam did not
have absolute certainty of closing on the Stock Sale (other than
with respect to the need to obtain stockholder approval of the
Stock Sale Proposal and injunctions prohibiting the consummation
of the Stock Sale), that TechTeam would like to be able to talk
to other potential suitors, particularly suitors for the
entirety of the Company, until the closing date of the Stock
Sale.
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In addition,
Mr. Hamot inquired of Mr. Kunberger as to whether
Jacobs would consider eliminating any of the post-closing
contingent liabilities being allocated to the remaining
Commercial Business (and, accordingly, avoid the need for any
indemnification escrow) such that Tech Team would be able to
assure any buyer of the remaining Commercial Business that
Jacobs would have no recourse to such buyer under any
circumstances.
On the morning of
August 30, 2010, Mr. Hamot held a telephone call with
Mr. Kunberger to discuss various issues relating to the
terms of a revised transaction.
On the evening of
August 30, 2010, Mr. Kunberger
e-mailed
Mr. Hamot and informed him that Jacobs was not prepared to
consider, in connection with a revised transaction, releasing
TechTeam from post-closing liabilities that would be allocated
to the remaining Commercial Business following the closing of
the Stock Sale (other than a reduction in the amount of the
indemnification escrow). Mr. Kunberger also informed
Mr. Hamot that if the terms earlier proposed by Jacobs were
not acceptable to our Board, then the parties should move
forward to negotiating an amicable termination of the Stock
Purchase Agreement.
On the morning of
August 31, 2010, at the request of the Strategy Committee,
Mr. Williams
e-mailed
Mr. Udovic to report that he had been directed to
communicate TechTeams acceptance of the revised
transaction terms that were proposed by Jacobs, which included a
net purchase price of $43 million, a 20% indemnification
escrow and the waiver of certain conditions to the respective
obligations of the parties to consummate the Stock Sale that
TechTeam believed increased certainty of closing.
Mr. Williams also informed Mr. Udovic that he would
provide him with a draft amendment to the Stock Purchase
Agreement later that day.
Later on the morning
of August 31, 2010, following consultation with Jacobs,
TechTeam convened the Special Meeting as scheduled, and,
immediately after the adjournment proposal had been approved by
TechTeams stockholders, TechTeam thereafter adjourned the
Special Meeting in order to provide it with additional time to
discuss with Jacobs the terms of a possible amendment to the
Stock Purchase Agreement, including a reduction in the net
purchase price, a reduction in the indemnification escrow
S-21
amount and the
waiver of certain conditions precedent to Jacobs
obligations to consummate the Stock Sale, that could facilitate
the consummation of the Stock Sale upon such revised terms.
From August 31
through September 7, 2010, the parties continued to
negotiate and finalize the terms of the Amendment.
On the afternoon of
September 8, 2010, our Board convened a telephonic meeting
to discuss the proposed amendment to the Stock Purchase
Agreement. Members of our senior management and representatives
of Blank Rome and Houlihan Lokey were also present at this
meeting. At this meeting, a representative of Blank Rome
provided our Board with a summary of the proposed amendment to
the Stock Purchase Agreement. Houlihan Lokey also reviewed with
our Board a financial analysis of the $43,000,000 cash
consideration and indicated to our Board that, subject to no
material changes in the information considered by Houlihan Lokey
and subject to finalization of the Amendment upon the terms
presented at the telephonic meeting, Houlihan Lokey had no
reason to believe as of such date that it would not be in a
position to render to our Board, in connection with the
execution of the Amendment, an opinion as to the fairness, from
a financial point of view, to TechTeam of the $43,000,000 cash
consideration to be received by TechTeam in the Stock Sale.
Following discussion, our Board unanimously determined that the
Stock Purchase Agreement, as amended by the Amendment, and the
Stock Sale were expedient and in the best interests of TechTeam
and its stockholders, unanimously approved the Amendment and the
Stock Sale, and recommended that TechTeams stockholders
approve the Stock Sale Proposal.
Between September 8
and September 14, 2010, the parties continued to negotiate the
terms of the Amendment and the related disclosure schedules and
certificates thereto.
On September 14,
2010, TechTeam and Jacobs agreed on the final terms of the
Amendment. At the request of our Board, in connection with the
execution by TechTeam and Jacobs of the Amendment, Houlihan
Lokey delivered to our Board a written opinion, dated
September 14, 2010, to the effect that, as of that date and
based on and subject to the matters described in the opinion,
the $43,000,000 cash consideration to be received in the Stock
Sale by TechTeam was fair, from a financial point of view, to
TechTeam.
On
September 14, 2010, the Amendment was executed by TechTeam
and Jacobs, and prior to commencement of trading on NASDAQ on
September 15, 2010, TechTeam issued a press release
announcing that it had entered into the Amendment. Concurrently
with the execution of the Amendment, Costa Brava
Partnership III L.P. and Emancipation Capital, LLC provided
written approval to Jacobs of the Amendment as required by the
terms of their respective voting agreements with Jacobs.
Recommendation of
Our Board of Directors
After careful
consideration, our Board unanimously determined that the Stock
Sale, as amended by the Amendment, is expedient and in the best
interests of TechTeam and our stockholders and has unanimously
approved the Amendment and the Stock Sale. As a result, our
Board has unanimously recommended to our stockholders that they
vote FOR the approval of the Stock
Sale Proposal, as amended by the Amendment, at the Special
Meeting.
OUR BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
FOR THE APPROVAL OF THE STOCK SALE PROPOSAL,
AS AMENDED BY THE AMENDMENT.
Reasons for
Recommending that Stockholders Approve the Amended Stock Sale
Proposal
In evaluating the
Stock Sale, as amended, our Board consulted with our senior
management, our outside legal counsel and TechTeams
financial advisor. Our Board also consulted with outside legal
counsel regarding the terms of the Stock Purchase Agreement and
the Amendment, and the related agreements. After carefully
considering these consultations and the other factors discussed
below, our Board unanimously determined that the Stock Sale, as
amended by the Amendment, was expedient and in the best
interests of TechTeam and our stockholders, and unanimously
recommended that our stockholders approve the Stock Sale
Proposal, as amended by the Amendment.
S-22
Our Board also
considered a number of factors in its deliberations concerning
the Stock Sale, as summarized in the section entitled
Proposal 1 Reasons for Recommending that
Stockholders Approve the Stock Sale Proposal beginning on
page 79 of the Proxy Statement. In addition to the factors
and considerations set forth in that section, our Board also
considered the following material reasons and factors (which are
not listed in any order of importance) in making its
recommendation, although the following discussion is not, and is
not intended to be, exhaustive:
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the net purchase
price of $43,000,000 in cash at closing, less escrowed amounts
and a post-closing adjustment based on the final net tangible
book value of the Government Solutions Business at closing, as
determined, in each case, pursuant to the terms of the Stock
Purchase Agreement, as amended;
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Jacobs stated
belief that it had a right to terminate the Stock Purchase
Agreement and not consummate the Stock Sale, on the grounds set
forth in its August 27, 2010 letter to TechTeam;
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Jacobs
indication of its unwillingness to waive the conditions
precedent to its obligation to consummate the Stock Sale under
the terms of the Stock Purchase Agreement absent a reduction in
the purchase price;
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the short- and
long-term prospects of the Government Solutions Business,
including the decline in (i) the financial and operational
performance of the Government Solutions Business since the
execution and delivery of the Stock Purchase Agreement, and
(ii) the expected future financial condition and results of
operations of TTGSI if it continued to be owned and managed by
TechTeam;
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the belief of our
Board that the Stock Sale would not be consummated in the
absence of the Amendment and the revised terms agreed to therein;
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the history of
TechTeams discussions with Jacobs leading up to the
execution of the Amendment;
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the fact that, as a
result of the Amendment, the parties would waive and modify
certain conditions to the parties obligations to
consummate the Stock Sale that are contained in the Stock
Purchase Agreement, which TechTeam believes increases the
likelihood that the closing might occur;
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the limitations, as
a result of the Amendment, on Jacobs ability to not
consummate the Stock Sale as a result of the occurrence of a
Material Adverse Effect with respect to the Government Solutions
Business, or the occurrence of any event or circumstance that,
in combination with any other events or circumstances, could
reasonably be expected to have a Material Adverse Effect with
respect to the Government Solutions Business or TechTeam;
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the other
limitations, as a result of the Amendment, on Jacobs
ability to terminate the Stock Purchase Agreement;
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the absence of any
other parties being known to TechTeam as currently interested in
acquiring TTGSI for a purchase price in excess of the net
purchase price contemplated by the Amendment;
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the belief of our
Board that the Amendment would not alter the flexibility that
our Board has under the terms of the Stock Purchase Agreement to
(i) consider, evaluate and accept a Superior Proposal (as
defined in the Stock Purchase Agreement) from a third party,
(ii) furnish information to such third party pursuant to a
confidentiality agreement, and (iii) participate in any
discussions or negotiations with such third party, under the
conditions described beginning on page 128 of the Proxy
Statement in the section entitled The Stock Purchase
Agreement No Negotiations; and
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S-23
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the opinion of
Houlihan Lokey, dated September 14, 2010, to our Board as to the
fairness, from a financial point of view and as of the date of
the opinion, to TechTeam of the $43,000,000 cash consideration
to be received by TechTeam in the Stock Sale, which opinion was
based on and subject to the procedures followed, assumptions
made, qualifications and limitations on the review undertaken
and other matters considered by Houlihan Lokey in preparing its
opinion attached hereto as Exhibit D and as more
fully described in Update to Proposal 1
Opinion of TechTeams Financial Advisor.
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Opinion of
TechTeams Financial Advisor
TechTeam engaged
Houlihan Lokey as its financial advisor in connection with
various potential transactions involving TechTeam, including the
proposed Stock Sale. In connection with this engagement, our
Board requested that Houlihan Lokey evaluate the fairness, from
a financial point of view and as of the date of the opinion, to
TechTeam of the $43,000,000 cash consideration to be received in
the Stock Sale by TechTeam. On September 14, 2010, in connection
with the execution by TechTeam and Jacobs of the Amendment,
Houlihan Lokey delivered a written opinion, dated September 14,
2010, to our Board, to the effect that, as of that date and
based on and subject to the procedures followed, assumptions
made, qualifications and limitations in the review undertaken
and other matters considered by Houlihan Lokey in the
preparation of its opinion, the $43,000,000 cash consideration
to be received in the Stock Sale by TechTeam was fair, from a
financial point of view, to TechTeam.
Houlihan
Lokeys opinion was furnished for the use and benefit of
our Board (in its capacity as such) in connection with its
evaluation of the $43,000,000 cash consideration, only addresses
the fairness, from a financial point of view, to TechTeam of
such consideration and does not address any other aspect or
implication of the Stock Sale. The summary of Houlihan
Lokeys opinion in this Supplement is qualified in its
entirety by reference to the full text of its written opinion,
which is attached as Exhibit D hereto. Houlihan
Lokeys opinion should not be construed as creating any
fiduciary duty on Houlihan Lokeys part to any party.
Houlihan Lokeys opinion was not intended to be, and does
not constitute, a recommendation to our Board, any
securityholder or any other person as to how to act or vote with
respect to any matter relating to the Stock Sale.
In connection with
its opinion, Houlihan Lokey made such reviews, analyses and
inquiries as it deemed necessary and appropriate under the
circumstances. Among other things, Houlihan Lokey:
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reviewed the
Amendment and the Stock Purchase Agreement;
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reviewed certain
publicly available business and financial information relating
to TTGSI that Houlihan Lokey deemed to be relevant;
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reviewed certain
information relating to TTGSIs historical, current and
future operations, financial condition and prospects made
available to Houlihan Lokey by TechTeam, including financial
projections (and adjustments thereto) provided to Houlihan Lokey
in September 2010 prepared by the managements of TechTeam and
TTGSI for the fiscal year ending December 31, 2010 under
three cases designated by such managements as, respectively,
low, middle and high
projections (collectively, the 2010 Projections)
reflecting alternative assumptions of such managements with
respect to TTGSIs performance under existing government
contracts and ability to win, and the timing of awards for,
recompeted and new government contracts, and discussed with the
managements of TechTeam and TTGSI their assessments as to the
relative likelihood of achieving the future financial results
reflected in the 2010 Projections;
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spoke with certain
members of the managements of TechTeam and TTGSI and certain of
their representatives and advisors regarding (a) the Stock
Sale and related matters and (b) the operations, financial
condition, past performance relative to projected performance
and trends in the financial results and prospects of TTGSI,
including changes in TTGSIs financial condition since the
preparation by the managements of TechTeam and TTGSI of the
financial projections relating to TTGSI for the fiscal years
ending December 31, 2010 through December 31, 2016
previously provided to Houlihan Lokey in connection with the
execution of the Stock Purchase Agreement (collectively, the
Prior Projections), and changes in the views of the
managements
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S-24
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of TechTeam and
TTGSI since the preparation by such managements of the
high projections with respect to TTGSIs
performance under existing government contracts and ability to
win, and the timing of awards for, recompeted and new government
contracts;
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compared the
financial and operating performance of TTGSI with that of public
companies that Houlihan Lokey deemed to be relevant;
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considered the
publicly available financial terms of certain transactions that
Houlihan Lokey deemed to be relevant;
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considered the
results of the third-party solicitation process conducted by
TechTeam, with Houlihan Lokeys assistance, prior to
execution of the Stock Purchase Agreement with respect to a
possible sale of TTGSI; and
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conducted such other
financial studies, analyses and inquiries and considered such
other information and factors as Houlihan Lokey deemed
appropriate.
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Houlihan Lokey
relied upon and assumed, without independent verification, the
accuracy and completeness of all data, material and other
information furnished, or otherwise made available, to Houlihan
Lokey, discussed with or reviewed by Houlihan Lokey, or publicly
available, and did not assume any responsibility with respect to
such data, material and other information. As our Board was
aware, Houlihan Lokey was advised by the managements of TechTeam
and TTGSI that TTGSIs operations and prospects have
declined since the preparation by such managements of the Prior
Projections and that certain assumptions of such managements
with respect to current and prospective government contracts
reflected in the high projections are no longer
valid. Accordingly, the managements of TechTeam and TTGSI
indicated that the Prior Projections and the high
projections are no longer reflective of such managements
best currently available estimates and judgments as to the
future financial results and condition of TTGSI and should not
be relied upon for purposes of Houlihan Lokeys analyses
and opinion. In addition, Houlihan Lokey was advised by the
managements of TechTeam and TTGSI that they have not prepared
updated financial projections relating to TTGSI beyond the
fiscal year ending December 31, 2010. Given the absence of
long-term projections that the managements of TechTeam and TTGSI
believed were reliable, Houlihan Lokey did not perform an
analysis of the estimated present value of TTGSIs future
cash flows. With respect to the low and
middle projections, the managements of TechTeam and
TTGSI advised Houlihan Lokey, and Houlihan Lokey assumed, that
such financial projections (and adjustments thereto) were
reasonably prepared in good faith on bases reflecting the best
currently available estimates and judgments of such managements
as to the future financial results and condition of TTGSI under
the alternative business scenarios reflected therein, and
Houlihan Lokey expressed no opinion with respect to such
projections or the assumptions on which they were based.
Houlihan Lokey relied upon and assumed, without independent
verification, that there had been no change to TTGSI or its
assets, liabilities, financial condition, results of operations,
cash flows or prospects since the date of the most recent
financial statements provided to Houlihan Lokey that would be
material to Houlihan Lokeys analyses or opinion, that the
financial projections relating to TTGSI reviewed by Houlihan
Lokey reflected all assets and liabilities to be sold and
assumed in the Stock Sale and that there was no information or
any facts that would make any of the information reviewed by
Houlihan Lokey incomplete or misleading. Houlihan Lokey also
assumed, at TechTeams direction, that any adjustments to
the $43,000,000 cash consideration pursuant to the Stock
Purchase Agreement, as amended, and payments, if any, made to
Jacobs or its indemnitees from the portion of the consideration
to be held in escrow in accordance with the terms of the Stock
Purchase Agreement, as amended, would not in any respect be
material to Houlihan Lokeys analyses or opinion.
Houlihan Lokey
relied upon and assumed, without independent verification, that:
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the representations
and warranties of all parties to the Stock Purchase Agreement,
as amended, and all other related documents and instruments
referred to in such documents will be true and correct;
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each party to the
Stock Purchase Agreement, as amended, and such other related
documents and instruments would fully and timely perform all of
the covenants and agreements required to be performed by such
party;
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S-25
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all conditions to
the consummation of the Stock Sale would be satisfied without
waiver; and
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the Stock Sale would
be consummated in a timely manner in accordance with the terms
described in the Stock Purchase Agreement, as amended, and such
other related documents and instruments, without any amendments
or modifications.
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Houlihan Lokey also
relied upon and assumed, without independent verification, that:
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the Stock Sale would
be consummated in a manner that complies in all respects with
all applicable federal and state statutes, rules and
regulations; and
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all governmental,
regulatory, and other consents and approvals necessary for the
consummation of the Stock Sale would be obtained and that no
delay, limitations, restrictions or conditions would be imposed
or amendments, modifications or waivers made that would have an
effect on TTGSI, TechTeam or the Stock Sale that would be
material to Houlihan Lokeys analyses or opinion.
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Furthermore, in
connection with its opinion, Houlihan Lokey was not requested to
make, and did not make, any physical inspection or independent
appraisal or evaluation of any of the assets, properties or
liabilities (fixed, contingent, derivative, off-balance sheet or
otherwise) of TechTeam (including, without limitation, TTGSI) or
any other party, nor was Houlihan Lokey provided with any such
appraisal or evaluation. Houlihan Lokey did not estimate, and
expressed no opinion regarding, the liquidation value of TTGSI
or any entity. Houlihan Lokey did not undertake an independent
analysis of any potential or actual litigation, regulatory
action, possible unasserted claims or other contingent
liabilities, to which TechTeam (including, without limitation,
those relating to TTGSI) is or may be a party or is or may be
subject, or of any governmental investigation of any possible
unasserted claims or other contingent liabilities to which
TechTeam (including, without limitation, those relating to
TTGSI) is or may be a party or is or may be subject.
Houlihan
Lokeys opinion was necessarily based on financial,
economic, market and other conditions as in effect on, and the
information made available to Houlihan Lokey as of, September
14, 2010. Houlihan Lokey did not undertake, and is under no
obligation, to update, revise, reaffirm or withdraw its opinion,
or otherwise comment on or consider events occurring or coming
to Houlihan Lokeys attention after September 14, 2010.
Houlihan Lokey was
not requested to opine as to, and its opinion did not express an
opinion as to or otherwise address, among other things:
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the underlying
business decision of TechTeam, its securityholders or any other
party to proceed with or effect the Stock Sale;
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the terms of any
arrangements, understandings, agreements or documents related
to, or the form, structure or any other portion or aspect of,
the Stock Sale or otherwise (other than the $43,000,000 cash
consideration to the extent expressly specified in Houlihan
Lokeys opinion), including, without limitation, any terms
or aspects of any stockholder voting agreement, retention
agreement (or related payments) or escrow, indemnity, guarantee
or licensing arrangements entered into in connection with, or
any tax implications of, the Stock Sale;
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the fairness of any
portion or aspect of the Stock Sale to the holders of any class
of securities, creditors or other constituencies of TechTeam, or
to any other party, except if and only to the extent expressly
set forth in Houlihan Lokeys opinion;
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the relative merits
of the Stock Sale as compared to any alternative business
strategies relating to, or that might exist for, TTGSI, TechTeam
or any other party or the effect of any other transaction
involving TTGSI or in which TechTeam or any other party might
engage;
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the fairness of any
portion or aspect of the Stock Sale to any one class or group of
TechTeams or any other partys securityholders or
other constituents vis-à-vis any other class or group of
TechTeams or such other partys securityholders or
other constituents (including, without
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S-26
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limitation, the
allocation of any consideration among or within such classes or
groups of securityholders or other constituents);
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whether or not
TechTeam, its securityholders or any other party is receiving or
paying reasonably equivalent value in the Stock Sale;
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the solvency,
creditworthiness or fair value of TechTeam (including, without
limitation, TTGSI) or any other participant in the Stock Sale,
or any of their respective assets, under any applicable laws
relating to bankruptcy, insolvency, fraudulent conveyance or
similar matters; or
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the fairness,
financial or otherwise, of the amount, nature or any other
aspect of any compensation to or consideration payable to or
received by any officers, directors or employees of any party to
the Stock Sale, any class of such persons or any other party,
relative to the cash consideration or otherwise.
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Furthermore, no
opinion, counsel or interpretation was intended in matters that
require legal, regulatory, accounting, insurance, tax or other
similar professional advice. Houlihan Lokey assumed that such
opinions, counsel or interpretations were or would be obtained
from appropriate professional sources. Furthermore, Houlihan
Lokey relied, with TechTeams consent, on the assessments
by TechTeam and its advisors as to all legal, regulatory,
accounting, insurance and tax matters with respect to TTGSI,
TechTeam and the Stock Sale. The issuance of Houlihan
Lokeys opinion was approved by a Houlihan Lokey committee
authorized to approve opinions of this nature. Except as
described above, TechTeam imposed no other instructions or
limitations on Houlihan Lokey with respect to the investigations
made or the procedures followed by it in rendering its opinion.
In preparing its
opinion to our Board, Houlihan Lokey performed a variety of
analyses, including those described below. This summary is not a
complete description of Houlihan Lokeys opinion or the
financial analyses performed and factors considered by Houlihan
Lokey in connection with its opinion. The preparation of a
financial opinion is a complex analytical process involving
various quantitative and qualitative judgments and
determinations as to the most appropriate and relevant
financial, comparative and other analytical methods employed and
the adaptation and application of those methods to the
particular facts and circumstances presented. Therefore, a
financial opinion and its underlying analyses are not readily
susceptible to summary description. Houlihan Lokey arrived at
its ultimate opinion based on the results of all analyses
undertaken by it and assessed as a whole and did not draw, in
isolation, conclusions from or with regard to any one factor or
method of analysis for purposes of its opinion. Accordingly,
Houlihan Lokey believes that its analyses and the following
summary must be considered as a whole and that selecting
portions of its analyses, methodologies, and factors or focusing
on information presented in tabular format, without considering
all analyses, methodologies, and factors or the narrative
description of the analyses, could create a misleading or
incomplete view of the processes underlying Houlihan
Lokeys analyses and opinion. Each analytical technique has
inherent strengths and weaknesses, and the nature of the
available information may further affect the value of particular
techniques.
In performing its
analyses, Houlihan Lokey considered industry performance,
general business, economic, market and financial conditions and
other matters as they existed on, and could be evaluated as of,
September 14, 2010, many of which are beyond TechTeams
control. Accordingly, the information may not reflect current or
future market conditions. No company, business or transaction
used in the analyses for comparative purposes is identical to
TTGSI or the Stock Sale, and an evaluation of the results of
those analyses is not entirely mathematical. Rather, the
analyses involve complex considerations, judgments, and
assumptions concerning financial and operating characteristics
and other factors that could affect the acquisition, public
trading or other values of the companies, business segments or
transactions analyzed. Houlihan Lokey believes that mathematical
derivations (such as determining an average or median) of
financial data are not by themselves meaningful and should be
considered together with judgments and informed assumptions. The
assumptions and estimates contained in Houlihan Lokeys
analyses and the reference ranges resulting from any particular
analysis are not necessarily indicative of actual values or
predictive of future results or values, which may be
significantly more or less favorable than those suggested by its
analyses. In addition, analyses relating to the value of assets,
businesses or securities do not purport to be appraisals or to
reflect the prices at which assets, businesses or securities
actually may
S-27
be sold.
Accordingly, the assumptions and estimates used in, and the
results derived from, Houlihan Lokeys analyses are
inherently subject to substantial uncertainty.
Houlihan
Lokeys opinion and financial analyses provided to our
Board in connection with its evaluation of the $43,000,000 cash
consideration, from a financial point of view, to TechTeam were
only one of many factors considered by our Board in its
evaluation of the Stock Sale and should not be viewed as
determinative of the views of our Board or management with
respect to the Stock Sale or the consideration payable in the
Stock Sale. Houlihan Lokey was not requested to, and it did not,
recommend the specific consideration payable in the Stock Sale.
The type and amount of consideration payable in the Stock Sale
was determined through negotiation between TechTeam and Jacobs,
and the decision to enter into the Stock Sale was solely that of
our Board.
The following is a
summary of the material financial analyses prepared by Houlihan
Lokey in connection with Houlihan Lokeys opinion dated
September 14, 2010. The order of analyses does not represent
relative importance or weight given to those analyses by
Houlihan Lokey. The financial analyses summarized below
include information presented in tabular format. In order to
fully understand Houlihan Lokeys financial analyses, the
tables must be read together with the text of each summary. The
tables alone do not constitute a complete description of the
financial analyses. Considering the data in the tables below
without considering the full narrative description of the
financial analyses, including the methodologies and assumptions
underlying and the qualifications and evaluations affecting the
analyses, could create a misleading or incomplete view of
Houlihan Lokeys financial analyses.
TTGSI Selected
Companies Analysis
Houlihan Lokey
reviewed financial information of TTGSI and financial and stock
market information for the following eight selected publicly
held companies with operations in the government information
technology and professional services industry, which is the
industry in which TTGSI operates:
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CACI International
Inc.
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Dynamics Research
Corporation
|
|
|
ICF International,
Inc.
|
|
|
ManTech
International Corporation
|
|
|
NCI, Inc.
|
|
|
SAIC, Inc.
|
|
|
SRA International,
Inc.
|
|
|
VSE Corporation
|
Houlihan Lokey
reviewed, among other things, enterprise values of the selected
companies, calculated as equity market value based on reported
fully-diluted common shares outstanding and closing stock prices
on September 14, 2010, plus debt outstanding and preferred
stock, less cash and cash equivalents, as a multiple of one
fiscal year forward estimated earnings before interest, taxes,
depreciation and amortization, referred to as EBITDA, as
adjusted for non-recurring items, referred to as adjusted
EBITDA. Houlihan Lokey then applied a range of selected
multiples of one fiscal year forward estimated adjusted EBITDA
derived from the selected companies to TTGSIs fiscal year
2010 estimated adjusted EBITDA based both on the low
and middle projections prepared by the managements
of TechTeam and TTGSI. Financial data for the selected companies
were based on publicly available research analysts
estimates, public filings and other publicly available
information. This analysis indicated the following implied
enterprise value reference ranges for TTGSI, as compared to the
cash consideration to be received by TechTeam in the Stock Sale:
|
|
|
|
|
Implied Total
Enterprise Value
|
|
|
Reference Ranges
Based on:
|
|
|
Low Projections
|
|
Middle Projections
|
|
Cash Consideration
|
|
$25.3 million - $29.9 million
|
|
$27.8 million - $32.9 million
|
|
$43.0 million
|
TTGSI Selected
Transactions Analysis
Houlihan Lokey
reviewed transaction values of the following 31 acquisition
transactions of controlling interests announced between
January 1, 2008 and September 14, 2010 involving
companies
S-28
with operations in
the government information technology and professional services
industry, which is the industry in which TTGSI operates:
|
|
|
Acquiror
|
|
Target
|
|
VSE Corporation
|
|
Akimeka LLC
|
ASRC Federal Holding Company, LLC
|
|
Mission Solutions Engineering, LLC
|
Wyle Inc.
|
|
CAS, Inc.
|
Vangent, Inc.
|
|
Buccaneer Computer Systems and Service,
Inc.
|
AECOM Technology Corporation
|
|
McNeil Technologies, Inc.
|
SRA International, Inc.
|
|
SENTECH, Inc.
|
Salient Federal Solutions, Inc.
|
|
SGIS
|
CGI Group Inc.
|
|
Stanley, Inc.
|
Cerberus Capital Management, L.P.
|
|
DynCorp International Inc.
|
ManTech International Corporation
|
|
Sensor Technologies, Inc.
|
ICF International, Inc.
|
|
Jacob & Sundstrom Inc.
|
Harris Corporation
|
|
Patriot Technologies, LLC
|
General Atlantic LLC, Kohlberg Kravis
Roberts & Co.
|
|
TASC, Inc.
|
Ernst & Young LLP
|
|
Capital City Technologies, LLC
|
Snow Phipps Group, LLC
|
|
ITSolutions, LLC
|
MCR, LLC
|
|
Aerodyne Inc.
|
Court Square Capital Partners
|
|
Wyle Laboratories Inc.
|
ICF International, Inc.
|
|
Macro International Inc.
|
US Investigations Services, Inc.
|
|
Labat-Anderson Inc.
|
Preferred Systems Solutions, Inc.
|
|
Integrated Network Services, Inc.
|
Deloitte LLP
|
|
BearingPoint, Inc. (Public Services
Business)
|
Kforce Inc.
|
|
dNovus RDI
|
New Mountain Capital, LLC
|
|
Camber Corporation
|
Kratos Defense & Security
Solutions, Inc.
|
|
Digital Fusion, Inc.
|
The Veritas Capital Fund III LP
|
|
CherryRoad GT Inc.
|
Serco Inc.
|
|
SI International, Inc.
|
Dynamics Research Corporation
|
|
Kadix Systems, LLC
|
AEA Technology plc
|
|
Project Performance Corporation
|
Netstar-1, Inc.
|
|
AVIEL Systems, Inc.
|
VSE Corporation
|
|
G&B Solutions, Inc.
|
Excellere Partners, LLC
|
|
Acquisition Solutions, Inc.
|
Houlihan Lokey
reviewed, among other things, transaction values in the selected
transactions, calculated as the purchase price paid for the
target companys equity, plus debt outstanding and
preferred stock, less cash and cash equivalents, as a multiple,
to the extent publicly available, of such target companies
latest 12 months EBITDA. Houlihan Lokey then applied a
range of selected multiples of latest 12 months EBITDA
derived from the selected transactions to TTGSIs latest
12 months (as of June 30, 2010) adjusted EBITDA.
Financial data for TTGSI were based on internal data of the
managements of TechTeam and TTGSI. Financial data for the
selected transactions were based on publicly available
information at the time of announcement of the relevant
transaction. This analysis indicated the following implied
enterprise value reference range for TTGSI, as compared to the
cash consideration to be received by TechTeam in the Stock Sale:
|
|
|
Implied Total
Enterprise Value
|
|
|
Reference Range
|
|
Cash Consideration
|
|
$33.3 million - $38.0 million
|
|
$43.0 million
|
S-29
Miscellaneous
TechTeam has agreed
to pay Houlihan Lokey for its financial advisory services an
aggregate fee currently estimated to be approximately
$1.45 million, a portion of which is contingent upon the
consummation of the Stock Sale. TechTeam also has agreed to
reimburse certain of Houlihan Lokeys expenses, including
the fees and expenses of Houlihan Lokeys legal counsel,
and to indemnify Houlihan Lokey and certain related parties for
certain potential liabilities, including liabilities under the
federal securities laws, relating to, or arising out of,
Houlihan Lokeys engagement.
TechTeam selected
Houlihan Lokey to act as its financial advisor in connection
with various potential transactions involving TechTeam,
including the proposed Stock Sale, based on Houlihan
Lokeys reputation and experience. Houlihan Lokey is
regularly engaged to provide advisory services in connection
with mergers and acquisitions, financings and financial
restructurings.
In the ordinary
course of business, certain of Houlihan Lokeys affiliates,
as well as investment funds in which such affiliates may have
financial interests, may acquire, hold or sell, long or short
positions, or trade or otherwise effect transactions, in debt,
equity, and other securities and financial instruments
(including loans and other obligations) of, or investments in,
TechTeam, Jacobs or any other party that may be involved in the
Stock Sale and their respective affiliates or any currency or
commodity that may be involved in the Stock Sale.
Houlihan Lokey and
certain of its affiliates in the past provided investment
banking, financial advisory and other financial services to
Jacobs
and/or
certain of its affiliates, for which Houlihan Lokey and such
affiliates received compensation. Houlihan Lokey and certain of
its affiliates currently are providing financial advisory
services to TechTeam in connection with TechTeams
exploration of certain strategic alternatives relating to its
Commercial Business, and in the future may provide investment
banking, financial advisory and other financial services to
TechTeam, Jacobs, other participants in the Stock Sale or
certain of their respective affiliates, for which Houlihan Lokey
and such affiliates may receive compensation. In addition,
Houlihan Lokey and certain of its affiliates and certain of
Houlihan Lokeys and such affiliates respective
employees may have committed to invest in private equity or
other investment funds managed or advised by certain affiliates
or securityholders of TechTeam or other participants in the
Stock Sale, and in portfolio companies of such funds, and may
have co-invested with certain affiliates or securityholders of
TechTeam or other participants in the Stock Sale, and may do so
in the future. Furthermore, in connection with bankruptcies,
restructurings, and similar matters, Houlihan Lokey and certain
of its affiliates may have in the past acted, may currently be
acting and may in the future act as financial advisor to
debtors, creditors, equity holders, trustees and other
interested parties (including, without limitation, formal and
informal committees or groups of creditors) that may have
included or represented and may include or represent, directly
or indirectly, or may have been adverse to, certain affiliates
or securityholders of TechTeam or other participants in the
Stock Sale, for which advice and services Houlihan Lokey and
such affiliates received and may receive compensation.
Updated Projected
Financial Information
In connection with
Jacobs continuing due diligence review of TTGSI, we
provided to Jacobs certain updated projected financial
information for fiscal year 2010 concerning TTGSI that was
prepared by us and TTGSI (collectively, the Updated
Projections). We also provided the Updated Projections to
TechTeams financial advisor. The Updated Projections are
not being included in this Supplement to influence any
stockholders voting decision on the Stock Sale Proposal,
but only because we made them available to Jacobs. The Updated
Projections should be evaluated, if at all, in conjunction with
our historical and pro forma consolidated financial statements
and the unaudited consolidated financial statements of TTGSI
contained elsewhere in this Supplement. In light of the factors
described herein and the uncertainties inherent in these
projections, and given that the Updated Projections are being
included in this Supplement only because we made them available
to Jacobs, stockholders are cautioned not to rely on the Updated
Projections included and described in this Supplement as being a
prediction of future operating results.
The Updated
Projections have revised, replaced and superseded, in their
entirety, each of (i) the projected financial information
of TTGSI with respect to fiscal year 2010 that had been provided
to Jacobs and, solely for that reason, described on page 97
in the section of the Proxy Statement entitled
Proposal 1 Projected Financial
Information, and (ii) the projected financial
information of TTGSI with respect to fiscal
S-30
years 2011 through
2016 that had been provided to Jacobs and, solely for that
reason, described on page 98 of the Proxy Statement
(collectively, the Prior Projections, and, together
with the Updated Projections, the Projections). We
also provided the Prior Projections to TechTeams financial
advisor. Given the decline in the operations and prospects of
the Government Solutions Business since the preparation by us
and TTGSI of the Prior Projections, our and TTGSIs
managements no longer view the Prior Projections as reflecting
such managements best currently available estimates and
judgments as to the future financial results and condition of
TTGSI. Stockholders are strongly cautioned that the Prior
Projections have been revised, replaced and superseded in their
entirety by the Updated Projections (and further subject to the
limitations, qualifications and other considerations with
respect thereto described in this section), and thus
stockholders should not view the Prior Projections as
reasonable, reliable or a prediction of the future operating
results of TTGSI.
The Projections were
prepared solely by us and TTGSI for internal use and were not
prepared with a view toward public disclosure, nor were they
prepared with a view toward compliance with published guidelines
of the SEC, the guidelines established by the American Institute
of Certified Public Accountants for preparation and presentation
of financial forecasts, or generally accepted accounting
principles. Neither Ernst & Young LLP, our independent
registered public accounting firm, nor any other independent
accountants, have compiled, examined or performed any procedures
with respect to the Projections, nor have they expressed any
opinion or any other form of assurance on such information or
its achievability, and they assume no responsibility for, and
disclaim any association with, the Projections. The report of
Ernst & Young LLP, included in the 2009
Form 10-K,
a copy of which is reproduced as Exhibit F to the
Proxy Statement, relates to TechTeams historical
consolidated financial statements. It does not extend to any of
the Projections and should not be read to do so.
The Projections
reflect numerous estimates and assumptions made by us and TTGSI
with respect to industry performance, general business,
economic, regulatory, market and financial conditions and other
future events, as well as matters specific to TTGSIs
business, all of which are uncertain and difficult to predict,
and many of which are beyond our control. The Projections were
also based upon data available and assumptions and expectations
of our and TTGSIs managements at the time the Projections
were prepared. As a result, the Projections may prove not to be
reflective of actual results. The Projections are subjective in
many respects and thus are susceptible to multiple
interpretations and periodic revisions based on actual
experience and business developments. As such, the Projections
constitute forward-looking information and are subject to risks
and uncertainties that could cause actual results to differ
materially from the results forecasted in the Projections,
including, but not limited to, TTGSIs performance,
industry performance, general business and economic conditions,
customer requirements, competition, adverse changes in
applicable laws, regulations or rules, and the various risks and
uncertainties set forth in this Supplement, the Proxy Statement
and our other filings with the SEC. Further, as noted above, our
and TTGSIs managements do not currently believe that the
results forecasted in the Prior Projections are reasonably
achievable, and thus it is expected that actual results will be
materially worse than the results forecasted in the Prior
Projections.
There can be no
assurance that the projected results that form a part of the
Projections will be realized or that actual results will not be
significantly higher or lower than projected. In addition, the
Projections will be affected by TTGSIs ability to achieve
strategic goals, objectives and targets over the applicable
periods. The assumptions upon which the Projections were based
necessarily involve judgments with respect to, among other
things, future economic, competitive and regulatory conditions
and financial market conditions, all of which are difficult or
impossible to predict accurately and many of which are beyond
TTGSIs control. The Projections also reflect assumptions
as to certain business decisions that are subject to change.
Such Projections cannot, therefore, be considered a guarantee of
future operating results, and this information should not be
relied on as such. The inclusion of the Prior Projections in the
Proxy Statement and the inclusion of the Updated Projections in
this Supplement should not be regarded as an indication that we,
TTGSI, Jacobs, or anyone who received this information then
considered, or now considers it to be a guarantee of future
operating results, and this information should not be relied
upon as such. We and our affiliates disclaim any obligation to
update or revise the Projections in the future.
The Projections do
not take into account any changes in TTGSIs operations,
business, financial condition or results of operations which may
result from the Stock Sale, including without limitation any
cost savings or other benefits. Further, the Projections do not
take into account the effect of any failure to
S-31
complete the Stock
Sale. Neither the inclusion of the Prior Projections in the
Proxy Statement nor the Updated Projections in this Supplement
should be deemed an admission or representation by us or TTGSI
that they are viewed by us or TTGSI as material information with
respect to us or TTGSI, and in fact we and TTGSI do not view the
Projections as material because of the inherent risks and
uncertainties associated with such Projections.
In mid-summer 2010,
our and TTGSIs managements prepared the Updated
Projections based on five months of actual data and seven months
of forecasted data for TTGSI. Three scenarios, providing a range
of potential financial outcomes for 2010, were considered by us
and TTGSI, and have been presented as low,
middle and high forecasts. These
forecasts provided a range of potential outcomes with respect to
the 2010 TTGSI financial projections, ranging from the
low forecast as the most conservative or lowest
revenue/profit 2010 financial forecast to a high
forecast as the most aggressive or highest revenue/profit 2010
financial forecast. Following the preparation and delivery of
the Updated Projections, the operations and prospects of TTGSI
have declined and certain assumptions of our and TTGSIs
managements with respect to current and prospective government
contracts reflected in the high forecast are no
longer valid. Accordingly, our and TTGSIs managements
believe that the high forecast is not reflective of
such managements best currently available estimates and
judgments as to the future financial results and condition of
TTGSI and should not be relied upon by stockholders. Finally, it
should be noted that our and TTGSIs managements presently
believe the ultimate financial outcome for 2010 will be closer
to the low end of the range of outcomes provided below.
In preparing the
Updated Projections, our and TTGSIs managements considered
that revenue is projected to be down notably in 2010 as compared
to that provided in the Prior Projections because of, among
other things:
|
|
|
|
|
the loss or
potential loss of certain existing re-compete contracts;
|
|
|
|
the delay of certain
key awards by the U.S. government;
|
|
|
|
higher than
predicted loss rate on new bids; and
|
|
|
|
changes to
TTGSIs marketing and bid proposal organizations.
|
Important factors
that may affect actual results and result in the Updated
Projections not being achieved include, but are not limited to:
|
|
|
|
|
a continuation or
worsening of the circumstances described in the immediately
preceding paragraph;
|
|
|
|
the inherently
unpredictable nature of projections and the fact that they do
not reflect a final approved strategic plan of our Board;
|
|
|
|
our failure to
maintain our relationships with significant customers and to
bring in new customer business;
|
|
|
|
the inability to
close additional business in the Government Solutions Business
pipeline;
|
|
|
|
our inability to
execute planned cost management programs;
|
|
|
|
factors affecting
the pricing of our services;
|
|
|
|
fluctuations in
demand for our services;
|
|
|
|
the failure to
retain key management and technical personnel;
|
|
|
|
the inability to
execute on a business plan or meet a financial forecast;
|
|
|
|
adverse reactions to
the proposed Stock Sale by our clients, suppliers and strategic
partners; and
|
|
|
|
the other risks and
uncertainties described in the 2009
Form 10-K,
the June 30, 2010
Form 10-Q,
this Supplement, the Proxy Statement and our other filings with
the SEC.
|
S-32
TTGSI Projected
Financial Information 2010 Fiscal Year
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands,
except percentages)
|
|
Low
Forecast
|
|
|
Middle
Forecast
|
|
|
High
Forecast
|
|
|
Total revenue
|
|
$
|
61,910
|
|
|
$
|
63,908
|
|
|
$
|
66,496
|
|
Cost of sales
|
|
|
47,114
|
|
|
|
48,659
|
|
|
|
50,603
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
14,796
|
|
|
|
15,249
|
|
|
|
15,893
|
|
Gross profit margin
|
|
|
23.9
|
%
|
|
|
23.9
|
%
|
|
|
23.9
|
%
|
Selling, general and administrative expenses
|
|
$
|
14,949
|
|
|
$
|
14,949
|
|
|
$
|
14,949
|
|
Operating income (loss)
|
|
$
|
(173
|
)
|
|
$
|
280
|
|
|
$
|
924
|
|
EBITDA (1)
|
|
$
|
2,245
|
|
|
$
|
2,697
|
|
|
$
|
3,341
|
|
Adjusted EBITDA (2)
|
|
$
|
4,897
|
|
|
$
|
5,349
|
|
|
$
|
5,993
|
|
|
|
|
(1)
|
|
As used in the table
above, EBITDA is defined as our consolidated operating income
(loss), minus depreciation and amortization. The following table
presents a reconciliation of operating income (loss), which was
the most directly comparable operating performance measure under
U.S. generally accepted accounting principles, or GAAP, provided
in the Updated Projections, to EBITDA for each of the scenarios
presented in the Updated Projections above:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in
thousands)
|
|
Low
Forecast
|
|
|
Middle
Forecast
|
|
|
High
Forecast
|
|
|
Operating income (loss)
|
|
$
|
(173
|
)
|
|
$
|
280
|
|
|
$
|
924
|
|
Subtract depreciation
|
|
|
(339
|
)
|
|
|
(339
|
)
|
|
|
(339
|
)
|
Subtract amortization
|
|
|
(2,079
|
)
|
|
|
(2,079
|
)
|
|
|
(2,079
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
$
|
2,245
|
|
|
$
|
2,697
|
|
|
$
|
3,341
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2)
|
|
As used in the table
above, adjusted EBITDA is equal to EBITDA, plus
corporate overhead allocation, minus stand-alone overhead costs,
plus stock-based compensation expense, plus International
Organization for Standardization, or ISO, registration costs.
The following table presents a reconciliation of EBITDA to
adjusted EBITDA. EBITDA has been previously reconciled to
operating income (loss) in the table provided above in
footnote(1).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in
thousands)
|
|
Low
Forecast
|
|
Middle
Forecast
|
|
High
Forecast
|
|
EBITDA
|
|
$
|
2,245
|
|
|
$
|
2,697
|
|
|
$
|
3,341
|
|
Add corporate overhead allocation
|
|
|
2,936
|
|
|
|
2,936
|
|
|
|
2,936
|
|
Subtract stand-alone overhead costs
|
|
|
(670
|
)
|
|
|
(670
|
)
|
|
|
(670
|
)
|
Add stock-based compensation expense
|
|
|
297
|
|
|
|
297
|
|
|
|
297
|
|
Add ISO registration costs
|
|
|
90
|
|
|
|
90
|
|
|
|
90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
$
|
4,897
|
|
|
$
|
5,349
|
|
|
$
|
5,997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We believe the
non-GAAP financial measures set forth above provide important
supplemental information to investors. These non-GAAP financial
measures reflect an additional way of viewing aspects of
TTGSIs operations that, when viewed with TTGSIs GAAP
results and the accompanying reconciliation to the most directly
comparable GAAP financial measure, provide a more complete
understanding of factors and trends affecting TTGSIs
business and results of operations.
These non-GAAP
financial measures should not be considered as alternatives to,
or more meaningful than, net income prepared on a GAAP basis.
Management strongly encourages investors to review our
consolidated financial statements in their entirety and to not
rely on any single financial measure. Because non-GAAP financial
measures are not standardized, it may not be possible to compare
this financial measure with other companies non-GAAP
financial measures having same or similar names. In addition, we
expect to continue to incur expenses similar to the non-GAAP
adjustments described above, and the exclusion of these items
from a non-GAAP measure should not be construed as an inference
that these costs are unusual, infrequent or non-recurring.
S-33
Post-Closing
Strategies
The third
sentence in the last bullet point beginning on page 101 of
the Proxy Statement in the section entitled
Proposal 1
Post-Closing
Strategies Attractive Marketplace is
hereby amended in its entirety to read as follows:
As of June 30,
2010, on a pro forma basis assuming the completion of the Stock
Sale, we would have had $44.9 million in cash on hand.
Effects of the
Stock Sale
The discussion
included in the second paragraph beginning on page 102 of
the Proxy Statement in the section entitled
Proposal 1 Effects of the Stock Sale and
of Not Consummating the Stock Sale Effects of the
Stock Sale is hereby amended in its entirety to read as
follows:
The Commercial
Business constituted approximately 63.8% and 65.9% of our
revenues for the 2009 and 2008 fiscal years, respectively, and
approximately 67.7% and 62.0% of our revenues for the six months
ended June 30, 2010 and 2009, respectively. The Government
Solutions Business contributed $(17.8) million and
$5.9 million of income (loss) before income taxes in fiscal
2009 and 2008, respectively, and $(2.2) million and
$2.9 million of income (loss) before income taxes for the
six months ended June 30, 2010 and 2009, respectively.
Following the Stock Sale, our ability to produce the level of
total revenue and net income in the short-term that we produced
prior to the Stock Sale will be reduced.
Use of Proceeds
of the Stock Sale
We estimate that the
net cash proceeds to be received by us from the Stock Sale at
closing will be approximately $31.6 million, after
deducting the amounts to be paid into escrow accounts but not
including estimated fees and expenses payable by us directly
related to the Stock Sale. Fees and expenses directly
attributable to the Stock Sale are estimated to be approximately
$5.4 million, of which approximately $3.3 million have
already been paid by us. The actual amount of net cash proceeds
from the Stock Sale will vary from this estimate. We intend to
use the net cash proceeds from the Stock Sale for, among other
things, to pay off our current outstanding indebtedness under
our existing credit facility, which as of August 31, 2010,
was approximately $17.8 million. The net cash proceeds that
we receive from the Stock Sale would also enable our Board to
consider, from time to time, repurchasing Common Stock for cash
as market and business conditions warrant. Further, the
remaining net cash proceeds of the Stock Sale will be used for
working capital, general corporate purposes and to selectively
invest in the growth of our Commercial Business. While we may
use some of the net cash proceeds received by us from the Stock
Sale to pursue strategic business acquisitions related to the
growth of our Commercial Business, no specific acquisition
targets have been identified at this time. See the section
entitled Proposal 1 Post-Closing
Strategies beginning on page 100 of the Proxy
Statement.
S-34
AMENDMENT
NO. 1 TO STOCK PURCHASE AGREEMENT AND LIMITED
WAIVER
The following is a
summary of the material terms of the Amendment. This summary
does not purport to describe all the terms of the Stock Purchase
Agreement or the Amendment and is qualified by reference to the
complete Amendment, a copy of which is attached as
Exhibit A to this Supplement, and the Stock Purchase
Agreement, a copy of which is attached as Exhibit A
to the Proxy Statement. We urge you to read the Stock Purchase
Agreement, as amended by the Amendment, carefully and in its
entirety because it, and not the Proxy Statement or this
Supplement, is the legal document that governs the Stock Sale.
The terms of the
Stock Purchase Agreement (such as the representations and
warranties), as amended by the Amendment, are intended to govern
the contractual rights and relationships, and allocate risks,
between the parties in relation to the Stock Sale. The Stock
Purchase Agreement, as so amended, contains representations and
warranties that TechTeam, on the one hand, and Jacobs, on the
other hand, made to each other as of specific dates. The
representations and warranties were negotiated between the
parties with the principal purpose of setting forth their
respective rights with respect to their obligations to
consummate the Stock Sale and may be subject to important
limitations and qualifications as set forth therein, including a
contractual standard of materiality different from that
generally applicable under federal securities laws. In addition,
certain representations and warranties relate to information
that is not known currently by either party and have been
negotiated such that the risk that such representations or
warranties are ultimately shown to not be true is allocated
between the parties.
Such representations
and warranties are qualified by information in confidential
disclosure schedules that TechTeam provided to Jacobs in
connection with the signing of the Stock Purchase Agreement.
While TechTeam does not believe that the disclosure schedules
contain information which has not been previously publicly
disclosed and that the securities laws require to be publicly
disclosed, the disclosure schedules do contain information
regarding TechTeams representations and warranties, which
information modifies, qualifies and creates exceptions to the
representations and warranties set forth in the Stock Purchase
Agreement. Accordingly, you should not rely on the
representations and warranties as characterizations of the
actual state of facts. These disclosure schedules contain
information that has been included in our prior public
disclosures, as well as additional non-public information.
Moreover, information concerning the subject matter of the
representations and warranties may have changed since the date
of the Stock Purchase Agreement, which subsequent information
may or may not be fully reflected in our public disclosures. In
addition, in connection with the execution of the Amendment, we
provided to Jacobs information in a confidential certificate
that modifies, qualifies and creates exceptions to Jacobs
obligation to consummate the Stock Sale based on the accuracy of
TechTeams representations and warranties as of
June 3, 2010 and the date of the Amendment.
Amended Purchase
Price; Escrow
Aggregate
Purchase Price to be Paid by Jacobs at Closing
On September 14,
2010, we entered into the Amendment with Jacobs, which, among
other things, amended the Stock Purchase Agreement to decrease
the net purchase price payable by Jacobs Technology to us
pursuant to the Stock Sale from $59,000,000 to $43,000,000. The
Amendment also provided for a decrease in the amount of the
aggregate cash payment of the net purchase price to be placed in
escrow accounts from $17,520,294 to $11,370,294, which as a
percentage of the net purchase price represents a decrease from
29.6% to 26.4%.
As a result of these
changes, in exchange for the sale of all of the stock of TTGSI,
we will be paid by Jacobs a net purchase price of $43,000,000,
consisting of a base cash payment of $31,629,706 to be received
at closing, plus a cash payment of $11,370,294 to be placed in
escrow accounts, each subject to such additions, subtractions
and other adjustments provided for by, and the other terms and
provisions set forth in, the Stock Purchase Agreement and the
Escrow Agreement. Of the $11,370,294 to be deposited into
escrow, $8,600,000 will be held in an escrow account to secure
the payment of any future indemnification claims that may be
made by Jacobs against us during the
36-month
period after the closing date, and $2,770,294 will be held in an
escrow account to secure the payment to Jacobs by us of any
post-closing
net tangible book value adjustment that has the effect of
reducing the net purchase price, as described in the Proxy
Statement.
Escrow
Payment
From the net cash
purchase price to be paid by Jacobs at closing as described
above, an aggregate cash payment of $11,370,294 will be
deposited by Jacobs into escrow accounts pursuant to the
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terms and conditions
of the Stock Purchase Agreement, as amended by the Amendment,
and the amended form of Escrow Agreement. Of this amount
deposited into escrow accounts, $8,600,000 (the
Indemnification Escrow Fund) will be allocated to
secure the payment by us of any indemnification claims that may
be made by Jacobs against us during the
36-month
period after the closing date, subject to the limitations and
exclusions contained in the Stock Purchase Agreement, and
$2,770,294 (the Net Tangible Book Value Adjustment
Fund) will be allocated to secure the payment from us to
Jacobs of any post-closing adjustment to the purchase price to
the extent that the Closing Net Tangible Book Value of the
Government Solutions Business as of the closing is less than the
target net tangible book value amount, which is $12,189,759. All
amounts deposited into escrow accounts shall be held, invested
and distributed as provided in the amended Escrow Agreement. See
Potential Post-Closing Adjustment to the
Purchase Price, Other Covenants and
Agreements Amended Form of Escrow Agreement
and Indemnification; Survival of
Indemnification Obligations.
Potential
Post-Closing Adjustment to the Purchase Price
The aggregate net
purchase price to be paid in cash by Jacobs at the closing of
the Stock Sale, as described above, may be adjusted after the
closing as provided in the Stock Purchase Agreement and
described in the Proxy Statement. In connection with such
adjustments, within 90 days after the closing date or such
other time as mutually agreed by the parties, Jacobs will
prepare an unaudited balance sheet of the Government Solutions
Business as of the close of business on the closing date,
including a preliminary unaudited statement of the Closing Net
Tangible Book Value. Pursuant to the Amendment, the closing
balance sheet will be prepared as if the close of business
Eastern Time on the day immediately prior to, instead of the
close of business on, the closing date was our fiscal-year end.
Closing
As a result of the
Amendment, the closing of the Stock Sale will occur on the later
of October 5, 2010 or the first calendar day following the
satisfaction or waiver of all conditions to the obligations of
the parties under the Stock Purchase Agreement, including the
approval by our stockholders of the Stock Sale Proposal as
required by the Stock Purchase Agreement.
Other Covenants
and Agreements
Amended Form
of Escrow Agreement
In connection with
the Stock Purchase Agreement and as a condition to the
consummation of the Stock Sale, we, Jacobs and JPMorgan Chase
Bank, National Association, as escrow agent, will enter into the
Escrow Agreement at the closing of the Stock Sale. In connection
with the Amendment, the form of the Escrow Agreement was amended
to provide that, upon closing of the Stock Sale, the escrow
agent will receive from Jacobs an aggregate amount of
$11,370,294, to be held in two distinct and segregated accounts.
In accordance with the Escrow Agreement and the Stock Purchase
Agreement, each as amended, the escrowed funds will serve as
security for our indemnification obligations pursuant to the
Stock Purchase Agreement and our payment obligations to Jacobs
to the extent that the Closing Net Tangible Book Value of the
Government Solutions Business may be less than the target net
tangible book value amount, which is $12,189,759. Subject to the
terms and conditions of the Stock Purchase Agreement and the
Escrow Agreement, $11,370,294 shall be allocated among the two
segregated accounts as follows:
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$8,600,000 will
comprise the Indemnification Escrow Fund; and
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$2,770,294 will
comprise the Net Tangible Book Value Adjustment Fund.
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Pursuant to the
Amendment and amended form of Escrow Agreement, on the first
business day following the
24-month
anniversary of the closing, the escrow agent will distribute to
us an amount equal, if any, to $2,866,667 (instead of $4,916,667
as contemplated under the original Stock Purchase Agreement),
reduced by all amounts previously paid out of the
Indemnification Escrow Fund with respect to indemnity claims and
reduced by the amount of pending escrow claims. On the first
business day following the
36-month
anniversary of the closing, the escrow agent will distribute to
us an amount, if any, equal to the sum of the amount remaining
in the Indemnification Escrow Fund minus the amount of all
pending escrow claims.
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The foregoing
summary of the terms of the amended form of Escrow Agreement
does not purport to describe all such terms and is qualified by
reference to the complete text of the amended form of Escrow
Agreement, a copy of which is attached as Exhibit B
to this Supplement.
Voting
Agreements
On June 3,
2010, in order to induce Jacobs to enter into the Stock Purchase
Agreement, Costa Brava Partnership III L.P. and
Emancipation Capital, LLC, which beneficially owned in the
aggregate approximately 18.3% of our outstanding Common Stock as
of that date, entered into separate voting agreements with
Jacobs. On September 14, 2010, these stockholders consented to
the amendments to the Stock Purchase Agreement effected by the
Amendment. As a result, under these voting agreements, each of
these stockholders is required to, among other things, vote our
Common Stock held by them FOR the
Stock Sale Proposal at the Special Meeting. They are also
required to vote their shares against the approval of a
competing transaction proposal or any proposal made in
opposition to or in competition with the Stock Sale, and against
any actions intended, or actions that could reasonably be
expected, to impede, interfere with, delay, postpone, discourage
or adversely affect the Stock Sale. Costa Brava
Partnership III L.P. is an affiliate of Seth W. Hamot, a
member of our Board. Emancipation Capital, LLC is an affiliate
of Charles Frumberg, a member of our Board.
Transitional
Services Agreement
In connection with
the Amendment, the form of Transitional Services Agreement was
amended to reduce from 60 to 30 days the maximum period,
during which, if requested by Jacobs, we will provide each of
the transferred employees (and their dependents and other
individuals covered through them) with the group, medical,
dental and vision coverage they enjoyed immediately prior to the
closing. We will charge each such transferred employee the same
monthly premium as currently charged to each such transferred
employee. In addition, with respect such welfare benefits
services, Jacobs must pay to us the difference between the total
insurance premium for group medical, dental and vision coverage
that is actually billed for the period during which we provide
such benefits and the amount charged to the transferred
employees for such coverage.
The foregoing
summary of the terms of the amended form of Transitional
Services Agreement does not purport to describe all such terms
and is qualified by reference to the complete text of the
amended form of Transitional Services Agreement, a copy of which
is attached as Exhibit C to this Supplement.
Conditions to
Completion of the Stock Sale
Our and Jacobs
obligations to complete the Stock Sale are subject to the
satisfaction or waiver of certain conditions. In connection with
the Amendment, some of such conditions were waived or modified
as described below.
Pursuant to the
Amendment, a condition to the completion of the Stock Sale
related to our representations and warranties was modified to
state that, except as set forth in our Amendment Officers
Certificate (as defined below), our representations and
warranties in the Stock Purchase Agreement must be true and
correct in all material respects as of June 3, 2010 and as
of the date of the Amendment (but not as of the closing date),
as if made on the date of the Amendment (except those
representations and warranties that relate to a particular date
or period, which need only be true and correct as of such date
or for such period). In connection with entering into the
Amendment, we delivered to Jacobs a certification executed by
our duly authorized officer (the Amendment Officers
Certificate). The Amendment Officers Certificate
modifies, qualifies and creates exceptions to Jacobs
obligation to consummate the Stock Sale based on the accuracy of
TechTeams representations and warranties as of
June 3, 2010 and the date of the Amendment. The Amendment
provides that the Amendment Officers Certificate is null
and void if the closing does not occur.
In addition, the
obligation of Jacobs to complete the Stock Sale is subject to
our satisfaction (or Jacobs waiver) of specified
conditions, including, but not limited to, our making all of our
closing deliveries and otherwise performing and complying in all
material respects with all of our other covenants and
obligations under the Stock Purchase Agreement. Pursuant to the
Amendment, this condition was modified to provide exceptions for
the information set forth in the Amendment Officers
Certificate and any covenants or obligations under the Stock
Purchase Agreement expressly waived by Jacobs in the Amendment.
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The condition to
Jacobs obligation to complete the Stock Sale relating to
TTGSI not having entered into certain teaming agreements or
similar contracts or government bids was amended to provide an
exception for agreements, contracts or bids (i) described
in the Amendment Officers Certificate, or (ii) that
may be consented to by Jacobs in writing in advance and after
the date of the Amendment.
As of September 14,
2010, and in reliance on and conditioned upon the effectiveness
of the amendments to the Stock Purchase Agreement:
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we and Jacobs waived
the condition to our respective obligations to complete the
Stock Sale that neither we nor Jacobs has become aware of any
organizational conflict of interest, as defined
under the Federal Acquisition Regulations, or similar impact on
TTGSI or Jacobs, that would result from the consummation of the
Stock Sale, with respect to one teaming agreement described in
the Amendment;
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Jacobs waived the
following conditions to its obligation to complete the Stock
Sale:
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the requirement that
we deliver an assignment of a specific office building lease
described in the Amendment, which assignment must be delivered
on or before the 90th day after the closing;
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our receipt of
certain specified consents, as described in the Amendment, to
the Stock Sale required to be obtained under the Stock Purchase
Agreement;
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no Material Adverse
Effect shall have occurred with respect to the Government
Solutions Business, TechTeam or Jacobs;
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no proceeding shall
be pending or threatened by or on behalf of Jacobs or any
affiliate of Jacobs which could reasonably be expected to
materially and adversely affect the Government Solutions
Business, TTGSI or Jacobs (including, without limitation, any
such proceeding relating to any alleged violation of, or
non-compliance with, any applicable law or any allegation of
fraud or intentional misrepresentation); and
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the requirement that
all of the TTGSI employees identified in the Stock Purchase
Agreement must continue to be employed by TTGSI or shall not
have indicated an intent not to remain employed by TTGSI or
Jacobs after the closing pursuant to the terms of any employment
agreement; and
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we waived the
condition to our obligation to complete the Stock Sale that no
Material Adverse Effect shall have occurred with respect to
Jacobs Technology, TechTeam or the Government Solutions Business.
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Use of TechTeam
Name and Trademarks
Pursuant to the
Amendment, within five business days following the date on which
the last change of name agreement that TTGSI is required to
submit pursuant to the applicable law or by the applicable
governmental authority with respect to any government contract
is accepted and countersigned by the applicable governmental
authority and delivered to TTGSI, Jacobs will cause the
certificate of incorporation of TTGSI to be amended such that
its name will be changed to delete the name TechTeam.
Indemnification;
Survival of Indemnification Obligations
Subject to certain
exceptions set forth in the Stock Purchase Agreement, as
amended, our liability for any claim for indemnification brought
by a Jacobs Indemnitee is limited to:
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$8,600,000 for the
first 24 months following the closing date; and
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$5,733,333 for the
period beginning on the first day of the 25th month
following the closing date until the last day of the
36th month after the closing (less the amount of claims in
excess of $2,866,667 applied against the foregoing cap within
the first 24 months after the closing).
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S-38
In addition, in
connection with the Amendment, the parties agreed that,
notwithstanding any other provision of the Stock Purchase
Agreement, the Amendment or the Amendment Officers
Certificate to the contrary, we will indemnify and hold the
Jacobs Indemnitees harmless, subject to certain restrictions and
limitations set forth in the Stock Purchase Agreement, for any
losses or claims arising from any breach of any of our
representations or warranties contained in the Stock Purchase
Agreement as of June 3, 2010 or as of the closing date as
if each such representation and warranty was made on and as of
the closing date.
Termination
We and Jacobs may by
mutual written consent terminate the Stock Purchase Agreement at
any time prior to the closing date of the Stock Sale. In
addition, upon providing written notice, Jacobs or we may
terminate the Stock Purchase Agreement under certain specific
circumstances set forth in the Stock Purchase Agreement, as
modified by the Amendment.
Pursuant to the
Amendment, Jacobs no longer has the right to terminate the Stock
Purchase Agreement if:
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a Material Adverse
Effect has occurred with respect to the Government Solutions
Business or any event or circumstance has occurred which could
reasonably be expected to have a Material Adverse Effect with
respect to the Government Solutions Business or TechTeam;
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any of our
representations and warranties shall have been inaccurate as of
June 3, 2010 or as of the date of the Amendment, if such
inaccuracy has been disclosed in the Amendment Officers
Certificate as of the date of the Amendment;
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any of our
representations and warranties shall have been inaccurate as of
date subsequent to June 3, 2010 (as if made on such
subsequent date) and the inaccuracy has not been cured by us
within five business days after we receive written notice
thereof and remains uncured at the time notice of termination is
given, such that the closing condition with respect thereto
would not be satisfied;
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any of our covenants
are breached such that the closing condition with respect
thereto would not be satisfied, so long as (i) such breach
was disclosed in the Amendment Officers Certificate, or
(ii) the breach of a covenant or condition was expressly
waived by Jacobs pursuant to the Amendment; or
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TTGSI enters into
any teaming or similar contract, government contract or
government bid that:
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imposes any
restriction on TTGSI to compete in any business or activity
within a certain geographic area, or pursuant to which any
benefit or right is required to be given or lost as a result of
so competing with any person;
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grants any exclusive
license, supply or distribution agreement or other exclusive
rights; or
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grants any
most favored nation rights, rights of first refusal,
rights of first negotiation or similar rights with respect to
any product, service or intellectual property right of TTGSI;
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and which Jacobs
reasonably believes would, individually or in the aggregate,
materially and adversely affect Jacobs Technology, its
affiliates, or TTGSI after the closing, so long as such teaming
agreement or similar contract or government bid (i) was
described in the Amendment Officers Certificate, or
(ii) was consented to in writing by Jacobs after the date
of the Amendment.
Moreover, we can no
longer terminate the Stock Purchase Agreement if:
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a Material Adverse
Effect has occurred with respect to TechTeam or the Government
Solutions Business or any event or circumstance has occurred
which could reasonably be expected to have a Material Adverse
Effect with respect to TechTeam or the Government Solutions
Business; or
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any of our
representations and warranties shall have become inaccurate as
of a date subsequent to June 3, 2010 (as if made on such
subsequent date) such that the closing condition with respect
thereto would not be satisfied.
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In addition, as set
forth in the Amendment, the Stock Purchase Agreement may be
terminated upon providing written notice, by us or Jacobs, if
the Stock Sale has not been completed on or before
October 5, 2010 (instead of October 1, 2010), unless
the failure of the closing to have occurred by that date is
attributable to a failure by such party to act as required under
the Stock Purchase Agreement.
Termination Fee
and Reimbursement of Expenses
The termination fee
that we must pay to Jacobs if the Stock Purchase Agreement is
terminated under certain circumstances was reduced from
$2,360,000 to $1,720,000 due to the reduction of the net
purchase price that we will receive in connection with the Stock
Sale.
OUR BOARD
UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE
APPROVAL OF THE STOCK SALE PROPOSAL.
ADJOURNMENT OF
THE SPECIAL MEETING
As previously
announced, on August 31, 2010, after consultation with
Jacobs, the Special Meeting was convened for the sole purpose of
having our stockholders consider the approval of a proposal (the
Adjournment Proposal) to adjourn the Special Meeting
to a later date in order to provide us with additional time to
discuss with Jacobs the terms of a possible amendment to the
Stock Purchase Agreement. The Adjournment Proposal was approved
by the holders of more than a majority of the shares of common
stock present, in person or represented by proxy, at the Special
Meeting and entitled to vote on this matter. Following such
vote, the Special Meeting was adjourned.
The Special Meeting
is currently scheduled to be reconvened on Tuesday,
September 28, 2010, at 10:00 a.m. (local time), at The
Langham Hotel, 250 Franklin Street, Boston, Massachusetts 02110.
The record date for the Special Meeting remains July 30,
2010. Given the approval of the Adjournment Proposal by our
stockholders on August 31, 2010 and given the conditions
precedent that continue to exist to the obligations of Jacobs to
consummate the Stock Sale, no assurances can be given that we
will not need to seek further adjournments or postponements of
the Special Meeting. To the extent that we determine that a
further adjournment or postponement is needed in advance of the
reconvened Special Meeting scheduled to be held on
September 28, 2010, we will publicly announce such
determination in advance of the Special Meeting.
WHERE YOU CAN
FIND ADDITIONAL INFORMATION
We file annual,
quarterly and current reports, proxy statements and other
information with the SEC. The reports, statements and other
information that we file electronically with the SEC are
available to the public on the Internet at the SECs
website at
http://www.sec.gov.
Copies of certain information filed by us with the SEC are also
available on our website at
http://www.techteam.com/investors.
You may also read and copy any document we file with the SEC at
its Public Reference Room, located at 100 F Street,
N.E., Washington, D.C. 20549. You may obtain information on
the operation of the Public Reference Room by calling the SEC at
(800) SEC-0330.
THIS SUPPLEMENT AND
THE PROXY STATEMENT DO NOT CONSTITUTE THE SOLICITATION OF A
PROXY IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM OR FROM
WHOM IT IS UNLAWFUL TO MAKE SUCH PROXY SOLICITATION IN SUCH
JURISDICTION. YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED
IN THIS SUPPLEMENT AND THE PROXY STATEMENT (INCLUDING THE
EXHIBITS HERETO AND THERETO) TO VOTE YOUR SHARES AT
THE SPECIAL MEETING. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE
YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED IN
THIS SUPPLEMENT AND THE PROXY STATEMENT. THIS SUPPLEMENT IS
DATED AS OF THE DATE INDICATED ON THE COVER OF THE SUPPLEMENT,
AND THE INFORMATION CONTAINED IN THIS SUPPLEMENT SPEAKS ONLY AS
OF SUCH DATE, UNLESS THE INFORMATION SPECIFICALLY INDICATES THAT
ANOTHER DATE
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APPLIES. YOU SHOULD
NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS SUPPLEMENT IS
ACCURATE AS OF ANY DATE OTHER THAN THE DATE OF THIS SUPPLEMENT
(OR SUCH OTHER DATE INDICATED), AND THE MAILING OF THIS
SUPPLEMENT TO STOCKHOLDERS DOES NOT CREATE ANY IMPLICATION TO
THE CONTRARY.
By order of the
Board of Directors,
Michael A. Sosin
Corporate Vice
President, General Counsel and Secretary
September 15,
2010
Southfield, Michigan
S-41
Exhibit A
Execution
Version
AMENDMENT
NO. 1 TO STOCK PURCHASE AGREEMENT
AND LIMITED WAIVER
This AMENDMENT NO. 1 TO STOCK PURCHASE AGREEMENT AND LIMITED
WAIVER (this Amendment and Waiver) is made
effective as of September 14, 2010, by and among TechTeam
Global, Inc., a Delaware corporation
(Seller), Jacobs Engineering Group Inc., a
Delaware corporation (Buyer Parent), and
Jacobs Technology Inc., a Tennessee corporation and a
wholly-owned subsidiary of Buyer Parent
(Buyer), in connection with that certain
Stock Purchase Agreement, dated as of June 3, 2010, by and
among Seller, Buyer Parent and Buyer (the Stock
Purchase Agreement). Unless otherwise specifically
defined herein, each term used herein shall have the meaning
assigned to such term in the Stock Purchase Agreement.
WHEREAS, pursuant to Section 11.02 of the Stock
Purchase Agreement, the Parties desire to amend the Stock
Purchase Agreement as specified in Section A below; and
WHEREAS, Each of Seller and Buyer are willing to waive
certain conditions precedent to such Partys respective
obligation to consummate the Closing pursuant to the terms of
the Stock Purchase Agreement as expressly set forth in
Section C below;
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements contained herein, the Parties,
intending to be legally bound hereby, agree as follows:
A. Amendment to Stock Purchase
Agreement. Effective as of the date hereof, the
Stock Purchase Agreement shall be, and hereby is, amended as
follows:
1. References. From and after the
execution of this Amendment and Waiver by the Parties,
(a) any references to the Stock Purchase Agreement shall be
deemed a reference to the Stock Purchase Agreement as amended by
this Amendment and Waiver, and (b) any reference in the
Stock Purchase Agreement to hereof,
herein, hereunder, hereby
and this Agreement shall be deemed to refer to the
Stock Purchase Agreement as amended by this Amendment and Waiver.
2. Definitions.
a. The definition of Amendment and Waiver set
forth below shall be added to Section 1.1 of the Stock
Purchase Agreement immediately after the definition of
Agreement:
Amendment and Waiver shall mean that certain
Amendment No. 1 to Stock Purchase Agreement and Limited
Waiver, dated as of September 14, 2010, by and among
Seller, Buyer Parent and Buyer.
b. The definition of Amendment Officers
Certificate set forth below shall be added to
Section 1.1 of the Stock Purchase Agreement immediately
after the definition of Amendment and Waiver:
Amendment Officers Certificate has the
meaning ascribed thereto in Section B of the Amendment and
Waiver.
c. The definition of Enterprise Value
set forth in Section 1.1 of the Stock Purchase Agreement is
hereby amended and restated in its entirety to read as follows:
Enterprise Value means Forty-Five Million
Dollars ($45,000,000).
d. The definition of Escrow Agreement
set forth in Section 1.1 of the Stock Purchase Agreement is
hereby amended and restated in its entirety to read as follows:
Escrow Agreement means the Escrow Agreement
to be entered into concurrently with the Closing by and among
Seller, Buyer and the Escrow Agent, substantially in the form
attached as Exhibit
A-1
A to the Amendment and Waiver, as amended, supplemented
or otherwise modified from time to time after the Closing Date
with the written consent of all parties thereto.
e. The definition of Indemnification Escrow
Amount set forth in Section 1.1 of the Stock
Purchase Agreement is hereby amended and restated in its
entirety to read as follows:
Indemnification Escrow Amount means Eight
Million Six Hundred Thousand Dollars ($8,600,000).
f. The definition of Outside Date set
forth in Section 1.1 of the Stock Purchase Agreement is
hereby amended and restated in its entirety to read as follows:
Outside Date means October 5, 2010.
g. The definition of Transition Services
Agreement set forth in Section 1.1 of the Stock
Purchase Agreement is hereby amended and restated in its
entirety to read as follows:
Transitional Services Agreement means the
Transitional Services Agreement to be entered into by and
between Seller and Buyer concurrently with the Closing in the
form attached as Exhibit B to the Amendment and Waiver.
3. Closing. Section 2.03 of the
Stock Purchase Agreement is hereby amended and restated in its
entirety to read as follows:
The closing (the Closing) of the
purchase and sale of the Shares hereunder shall take place on
the later of October 5, 2010 or the first (1st) calendar
day following the date on which the last to be satisfied or
waived of the conditions set forth in Article VIII of this
Agreement (excluding those conditions which by their nature are
to be satisfied as part of the Closing), at 10:00 a.m.,
Washington, D.C. time, at the offices of Blank Rome LLP,
Watergate 600 New Hampshire Avenue, Washington, DC 20037, or at
such other place, time or date as the Parties hereto may agree
(the date on which the Closing actually occurs, the
Closing Date). The Closing shall be deemed to
be effective as of 12:01 a.m. Eastern Time on the
Closing Date.
4. Deliveries by
Buyer. Section 2.04(a)(i) of the Stock
Purchase Agreement is hereby amended and restated in its
entirety to read as follows:
payment of the Initial Cash Amount by, at Buyers
election, either (A) certified or official bank check
payable in immediately available funds to the order of Seller,
or (B) by wire transfer of immediately available funds to
an account or accounts designated by Seller, by written notice
to Buyer, which notice shall be delivered at least two
(2) Business Days prior to the Closing Date;
5. Deliveries by Seller to
Buyer. Section 2.05(e) of the Stock Purchase
Agreement is hereby amended and restated in its entirety to read
as follows:
a Certification executed by a duly authorized officer of
Seller certifying to the matters set forth in
Section 8.02(a) as amended and restated pursuant to the
Amendment and Waiver and, except as set forth in the Amendment
Officers Certificate or for any covenant or obligation
expressly waived by Buyer in the Amendment and Waiver, to the
matters set forth in Section 8.02(b).
6. Purchase Price Adjustment. The second
sentence of Section 2.07(b) of the Stock Purchase Agreement
is hereby amended and restated in its entirety to read as
follows:
The Closing Balance Sheet shall be prepared as if the
close of business Eastern Time on the day immediately prior to
the Closing Date was the Companys fiscal year-end and
shall be prepared in accordance with GAAP and in a manner
consistent with the preparation of the Financial Statements (as
hereinafter defined).
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7. Escrow
Arrangements. Section 2.08(c) of the Stock
Purchase Agreement is hereby amended and restated in its
entirety to read as follows:
On the first Business Day following the twenty-four
(24) month anniversary of the Closing Date (such Business
Day, the First Scheduled Escrow Release
Date), Seller and Buyer shall cause the Escrow Agent
(including by delivering joint written instructions to the
Escrow Agent) to release, or disburse, from the Escrow Account
to Seller an amount (if such amount is greater than zero) equal
to the difference of (x) Two Million Eight Hundred
Sixty-Six Thousand Six Hundred Sixty Seven Dollars ($2,866,667)
(the First Escrow Release Amount),
minus (y) the sum of (A) the aggregate amount
of all amounts previously paid to Buyer Indemnitees from the
Indemnification Escrow Amount, plus (B) the
aggregate amount of all Unsatisfied Escrow Claims.
8. Disclosure
Schedule Supplements. The last sentence of
Section 5.08 of the Stock Purchase Agreement is hereby
amended and restated in its entirety to read as follows:
Any such supplements, modifications and updates set forth
in the Updated Disclosure Schedules shall not be deemed to have
cured any breach of any representation or warranty made in this
Agreement for purposes of the indemnifications provided for in
Article IX hereof and, except for any matter set forth in
the Amendment Officers Certificate, will not be deemed to
have cured any such breach of representation or warranty made in
this Agreement for purposes of determining whether or not the
conditions set forth in Sections 8.01 or 8.02 have been
satisfied.
9. Use of Sellers
Name. Section 6.03(f) of the Stock Purchase
Agreement is hereby amended and restated in its entirety to read
as follows:
Buyer shall, within five (5) Business Days following
the date on which the last change of name agreement that an
Acquired Company is required to submit pursuant to Applicable
Law or by the applicable Governmental Authority with respect to
any Government Contracts (as applicable) is accepted and
countersigned by the applicable Governmental Authority and
delivered to such Acquired Company, cause an amendment to the
Certificate of Incorporation of each Acquired Company to become
effective changing the name of such entity to delete the name
TechTeam to the extent such Acquired Companys
name contains the word TechTeam.
10. Conditions to Obligations of Seller and
Buyer. Section 8.01(d) of the Stock Purchase
Agreement is hereby amended and restated in its entirety to read
as follows:
Except as set forth in the Amendment Officers
Certificate, each of the representations and warranties of
Seller in this Agreement shall be true and correct in all
material respects (other than representations and warranties
which are qualified by materiality or by Material Adverse
Effect, which shall be true and correct in all respects) as of
June 3, 2010 and on and as of the date of the Amendment and
Waiver as if made on the date of the Amendment and Waiver,
except to the extent such representations and warranties relate
to a particular date or time period (in which case such
representations and warranties shall be true and correct on and
as of such date or for such time period).
11. Conditions to Obligations of Buyer.
a. Section 8.02(a) of the Stock Purchase Agreement is
hereby amended and restated in its entirety to read as follows:
Except as set forth in the Amendment Officers
Certificate and except for any covenant or obligation expressly
waived by Buyer in the Amendment and Waiver, Seller shall have
performed and complied in all respects with all covenants and
obligations under Section 2.05 of this Agreement required to be
performed and complied with by it as of the Closing Date and,
except as set forth in the Amendment Officers Certificate
and except for any covenant or obligation expressly waived by
Buyer in the Amendment and Waiver, Seller shall have performed
and complied in all material respects with all of its other
covenants and obligations under this Agreement required to be
performed and complied with by it as of the Closing Date.
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b. Section 8.02(g) of the Stock Purchase Agreement is
hereby amended and restated in its entirety to read as follows:
Except as set forth in the Amendment Officers
Certificate and except with the prior written consent of Buyer
after the date of the Amendment and Waiver, none of the Acquired
Companies shall have entered into any teaming or similar
Contract, Government Contract or Government Bid which (i)
(A) imposes any restriction on the ability of any Acquired
Company to compete in any business or activity within a certain
geographic area, or pursuant to which any benefit or right is
required to be given or lost as a result of so competing,
(B) grants any exclusive license, supply or distribution
agreement or other exclusive rights, or (C) grants any
most favored nation, rights of first refusal, rights
of first negotiation or similar rights with respect to any
product, service or Intellectual Property Right, and
(ii) Buyer reasonably believes would, individually or in
the aggregate, materially and adversely affect Buyer, its
Affiliates or any of the Acquired Companies following the
Closing.
12. Indemnification by Seller.
a. The first sentence of Section 9.02(d) of the Stock
Purchase Agreement is hereby amended and restated in its
entirety to read as follows:
Notwithstanding anything to the contrary herein (other
than Section 9.02(e) below), Sellers aggregate liability
under Section 9.02(a) shall not exceed: (i) during the
period beginning on the Closing Date and ending on the last day
of the twenty-fourth (24th) month following the Closing, an
amount equal to Eight Million Six Hundred Thousand Dollars
($8,600,000) (the Initial Cap), and
(ii) during the period beginning on the first day of the
twenty-fifth (25th) month following the Closing and ending on
the last day of the thirty-sixth (36th) month following the
Closing, an amount equal to Five Million Seven Hundred
Thirty-Three Thousand Three Hundred Thirty Three Dollars
($5,733,333) (minus the amount of claims in excess of Two
Million Eight Hundred Sixty-Six Thousand Six Hundred Sixty Seven
Dollars ($2,866,667) applied against the Initial Cap within the
first twenty-four (24) months after the Closing) (the
Adjusted Cap).
b. Notwithstanding any other provision of the Stock
Purchase Agreement, this Amendment and Waiver or the Amendment
Officers Certificate to the contrary, the Parties hereby
acknowledge and agree that the Buyer Indemnitees shall be
indemnified and held harmless by Seller pursuant to
Section 9.02(a) of the Stock Purchase Agreement, subject to
the restrictions and limitations set forth in Article IX of
the Stock Purchase Agreement, for any Losses sustained, suffered
or incurred by any of the Buyer Indemnitees, or to which any of
the Buyer Indemnitees may be subjected, arising from any breach
of any representation or warranty of Seller contained in the
Stock Purchase Agreement as of June 3, 2010 or as of the
Closing Date as if each such representation and warranty was
made on and as of the Closing Date.
13. Grounds for Termination.
a. Section 10.01(i) of the Stock Purchase Agreement is
hereby deleted in its entirety;
b. Section 10.01(j) of the Stock Purchase Agreement is
hereby amended and restated in its entirety to read as follows:
(j) by Buyer (by written notice of termination from
Buyer to Seller, in which reference is made to the specific
provision(s) of this subsection giving rise to the right of
termination) if (i) except as set forth in the Amendment
Officers Certificate, any of Sellers representations
and warranties shall have been inaccurate as of June 3,
2010, or as of the date of the Amendment and Waiver, such that
the condition set forth in Section 8.01(d) would not be
satisfied, (ii) except as set forth in the Amendment
Officers Certificate or for any covenant or condition
expressly waived by Buyer in the Amendment and Waiver, any of
Sellers covenants contained in this Agreement shall have
been breached, such that the condition set forth in Section
8.02(a) would not be satisfied, (iii) any of the Acquired
Companies shall have entered into any teaming or similar
Contract, Government Contract or Government Bid, such that the
condition set forth in Section 8.02(g) would not be
satisfied, or (iv) any Proceeding shall be initiated,
threatened or pending (other than any Proceeding initiated or
threatened by Buyer, Buyer Parent or any of their
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respective Affiliates) which could reasonably be expected to
materially and adversely affect the Business, the Acquired
Companies, Buyer or Buyer Parent (including, without limitation,
any such Proceeding relating to any alleged violation of, or non
compliance with, any Applicable Law or any allegation of fraud
or intentional misrepresentation);
c. Section 10.01(k) of the Stock Purchase Agreement is
hereby amended and restated in its entirety to read as follows:
(k) by Seller (by written notice of termination from
Seller to Buyer, in which reference is made to the specific
provision(s) of this subsection giving rise to the right of
termination) if (i) any of Buyers representations and
warranties shall have been inaccurate as of the date of this
Agreement, such that the condition set forth in Section 8.03(a)
would not be satisfied, (ii) (A) any of Buyers
representations and warranties become inaccurate as of a date
subsequent to the date of this Agreement (as if made on such
subsequent date), such that the condition set forth in Section
8.03(a) would not be satisfied and (B) such inaccuracy has
not been cured by Buyer within five (5) Business Days after
its receipt of written notice thereof and remains uncured at the
time notice of termination is given, or (iii) any of the
Buyers covenants contained in this Agreement shall have
been breached, such that the condition set forth in
Section 8.03(b) would not be satisfied; and; and
d. Section 10.01(l) of the Stock Purchase Agreement is
hereby amended and restated in its entirety to read as follows:
(l) by Seller (by written notice of termination from
Seller to Buyer, in which reference is made to this subsection,
specifying the nature of the Material Adverse Effect) if, since
the date of this Agreement, there shall have occurred any
Material Adverse Effect with respect to Buyer or there shall
have occurred any event or circumstance that, in combination
with any other events or circumstances, could reasonably be
expected to have, a Material Adverse Effect with respect to
Buyer.
14. No Further Amendment. Except as
otherwise provided in this Section A, the Stock Purchase
Agreement shall remain unchanged and in full force and effect.
B. Amendment Officers
Certificate. Concurrently with the execution of
this Amendment and Waiver, Seller shall deliver, or cause to be
delivered for and on behalf of Seller, to Buyer a Certification
executed by a duly authorized officer of Seller in the form
attached hereto as Exhibit C (the Amendment
Officers Certificate), certifying for and on
behalf of Seller that: (i) except as set forth in the
Amendment Officers Certificate, each of the
representations and warranties of Seller in the Agreement were
true and correct in all material respects (other than such
representations and warranties which are qualified by
materiality or by Material Adverse Effect, which were true and
correct in all respects) when made and each of the
representations and warranties of Seller contained in the Stock
Purchase Agreement are true and correct in all material respects
(other than such representations and warranties which are
qualified by materiality or by Material Adverse Effect, which
shall be true and correct in all respects) on and as of the date
of this Amendment and Waiver as if made on the date of this
Amendment and Waiver, except to the extent such representations
and warranties relate to a particular date or time period (in
which case such representations and warranties shall be true and
correct on and as of such date or for such time period) and
(ii) except as set forth in the Amendment Officers
Certificate, except for any covenant or obligation expressly
waived by Buyer in the Amendment and Waiver and except for the
covenants and obligations under Section 2.05 of this
Agreement, Seller has performed and complied in all material
respects with all other covenants and obligations that it is
required to perform and comply with under this Agreement on or
prior to the date of the Amendment and Waiver, and
(iii) except as set forth in the Amendment Officers
Certificate or for any covenant or obligation expressly waived
by Buyer in the Amendment and Waiver, (A) all Consents and
Government Contract Consents set forth on
Schedule 8.02(b)(i), (B) all notices set forth on
Schedule 8.02(b)(ii), and (C) all Governmental
Approvals have been obtained, made or given (as applicable).
C. Limited Waivers.
1. Conditions to Obligations of Seller and
Buyer. Effective as of the date hereof, and in
reliance and conditioned upon the effectiveness of the
amendments to the Stock Purchase Agreement set forth in
Section A
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above, each of Seller and Buyer hereby waives the following
condition precedent to its respective obligation to consummate
the Closing pursuant to the terms of the Stock Purchase
Agreement:
a. with respect to the Teaming Agreement between the
Company and Spectrum Comm., Inc. dated April 13, 2010 (the
Spectrum Teaming Agreement) and only the
Spectrum Teaming Agreement, the condition set forth in
Section 8.01(e) of the Stock Purchase Agreement.
2. Conditions to Obligations of
Buyer. Effective as of the date hereof, and in
reliance and conditioned upon the effectiveness of the
amendments to the Stock Purchase Agreement set forth in
Section A above, Buyer hereby waives the following
conditions precedent to its obligation to consummate the Closing
pursuant to the terms of the Stock Purchase Agreement:
a. with respect to the assignment of the Lease set forth on
Schedule B hereto, and only the assignment of such
Lease, the condition set forth in Section 8.02(a) of the
Stock Purchase Agreement;
b. with respect to the Consents set forth on
Schedule A hereto (the Specified
Consents) and only with respect to the Specified
Consents, the condition set forth in Section 8.02(b) of the
Stock Purchase Agreement;
c. Section 8.02(c) of the Stock Purchase Agreement in
its entirety;
d. Section 8.02(d) of the Stock Purchase Agreement
with respect to any Proceeding initiated or threatened by or on
behalf of Buyer, Buyer Parent or any of their respective
Affiliates; and
e. Section 8.02(f) of the Stock Purchase Agreement in
its entirety.
3. Conditions to Obligations of
Seller. Effective as of the date hereof, and in
reliance and conditioned upon the effectiveness of the
amendments to the Stock Purchase Agreement set forth in
Section A above, Seller hereby waives the following
condition precedent to its obligation to consummate the Closing
pursuant to the terms of the Stock Purchase Agreement:
a. Section 8.03(c) of the Stock Purchase Agreement in
its entirety.
4. Condition to Effectiveness of
Waivers. Each of the Parties acknowledges and
agrees that the limited waivers made herein by such Party are
expressly made in reliance and continued upon the effectiveness
of all of the amendments to the Stock Purchase Agreement set
forth in Section A above, and but for the effectiveness of
such amendments, such Party would not be making such waiver.
5. No Other Waiver. Any waiver herein
shall constitute a waiver only with respect to the specific
matters described herein and shall in no way impair the rights,
powers or remedies of the Party granting such waiver in any
other respect or at any other time.
D. Agreement Regarding Lease
Agreement. Notwithstanding the waiver granted in
Section C.2.b. above or any other provision of this
Amendment and Waiver or the Stock Purchase Agreement to the
contrary, Seller shall deliver to Buyer an assignment of the
Lease set forth on Schedule C hereto, duly executed
by Seller and the landlord pursuant to such Lease, on or before
the ninetieth (90th) calendar day following the Closing.
E. Acknowledgements by
Buyer. Notwithstanding any other provision of
this Amendment and Waiver or the Stock Purchase Agreement to the
contrary, Buyer acknowledges and agrees that Buyer shall not
have any right to refuse to consummate the Contemplated
Transactions pursuant to Section 8.01(d),
Section 8.02(a), Section 8.02(b) or
Section 8.02(g), in each case, based on any matter set
forth in the Amendment Officers Certificate or, with
respect to Section 8.01(d) only, any matter arising after
the date of this Amendment and Waiver, including any matter that
is set forth in any Updated Disclosure Schedule delivered by
Seller to Buyer following the date of this Amendment and Waiver.
Notwithstanding any other provision of this Amendment and Waiver
or the Stock Purchase Agreement to the contrary, Buyer
acknowledges and agrees that the Amendment Officers
Certificate shall be void and shall have no force or effect if
the Closing does not occur, in which case, any references to the
Amendment Officers Certificate herein shall also no longer
have any force or effect.
F. Governing Law. This Amendment shall be
governed by and construed and enforced in accordance with the
internal laws of the State of Delaware, without giving effect to
applicable principles of conflicts of law thereof or
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of any other jurisdiction to the extent that the application of
the laws of another jurisdiction would be required thereby.
G. Counterparts. This Amendment may be
executed in any number of counterparts, each of which shall be
deemed an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument. In the event
that any signature to this Amendment and Waiver is delivered by
facsimile transmission or by
e-mail
delivery of a portable document format (.pdf or similar format)
data file, such signature shall create a valid and binding
obligation of the party so executing (or on whose behalf such
signature is executed), with the same force and effect as if
such facsimile or .pdf signature page were an
original thereof.
H. Descriptive Headings. The descriptive
headings herein are inserted for convenience of reference only
and shall in no way be construed to define, limit, describe,
explain, modify, amplify, or add to the interpretation,
construction or meaning of any provision of, or scope or intent
of, this Amendment and Waiver or the Stock Purchase Agreement
nor in any way affect this Amendment and Waiver or the Stock
Purchase Agreement.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties have caused this Amendment and
Waiver to be duly executed and delivered as of the day and year
first above written.
TECHTEAM GLOBAL, INC.
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By:
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/s/ Margaret
M. Loebl
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Margaret M. Loebl
Corporate Vice President,
Chief Financial Officer and Treasurer
JACOBS ENGINEERING GROUP INC.
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By:
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/s/ John
W. Prosser, Jr.
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John W. Prosser, Jr.
Executive Vice President, Finance
and Administration and Treasurer
JACOBS TECHNOLOGY INC.
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By:
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/s/ John
W. Prosser, Jr.
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John W. Prosser, Jr.
Treasurer
[SIGNATURE
PAGE TO AMENDMENT NO. 1 TO
STOCK PURCHASE AGREEMENT AND LIMITED WAIVER]
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Exhibit B
ESCROW
AGREEMENT
THIS ESCROW AGREEMENT (as the same may be amended or modified
from time to time pursuant hereto, this
Agreement) is made and entered into as of
October [ ], 2010, by and among TechTeam Global,
Inc., a Delaware corporation (Seller), Jacobs
Engineering Group Inc., a Delaware corporation (Buyer
Parent), Jacobs Technology Inc., a Tennessee
corporation and wholly-owned subsidiary of Buyer Parent
(Buyer and together with Seller and Buyer
Parent, sometimes referred to herein individually as a
Party or collectively as the
Parties), and JPMorgan Chase Bank, National
Association (the Escrow Agent). Any
capitalized terms used but not otherwise defined herein shall
have the respective meanings ascribed to such terms in that
certain Stock Purchase Agreement, dated as of June 3, 2010,
among Seller, Buyer, and Buyer Parent, as amended by that
certain Amendment No. 1 to Stock Purchase Agreement and
Limited Waiver, dated as of September 14, 2010 (the
Stock Purchase Agreement).
WHEREAS, pursuant to the terms of the Stock Purchase
Agreement, Buyer will purchase from Seller, and Seller will sell
to Buyer, one hundred percent (100%) of the Capital Stock of
TechTeam Government Solutions, Inc., a Virginia corporation, and
wholly-owned subsidiary of Seller.
WHEREAS, Section 2.04(b) of the Stock Purchase
Agreement provides that, at the Closing, Buyer shall deliver to
the Escrow Agent an aggregate amount equal to Eleven Million
Three Hundred Seventy Thousand Two Hundred Ninety-Four Dollars
($11,370,294) (the Escrow Amount) to be held
in accordance with this Agreement as security for (i) the
indemnification obligations of Seller pursuant to
Article IX of the Stock Purchase Agreement (the
Indemnification Obligations); and
(ii) the payment obligations of Seller with respect to any
NTBV Shortfall pursuant to the Stock Purchase Agreement (the
NTBVA Obligations).
WHEREAS, Eight Million Six Hundred Thousand Dollars ($8,600,000)
of the Escrow Amount is solely with respect to the
Indemnification Obligations and shall constitute the
Indemnification Escrow Fund, and
(ii) Two Million Seven Hundred Seventy Thousand Two Hundred
Ninety-Four Dollars ($2,770,294) of the Escrow Amount is solely
with respect to the NTBVA Obligations and shall constitute the
NTBVA Escrow Fund.
NOW THEREFORE, in consideration of the foregoing and the
covenants and agreements contained in this Agreement and for
other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, Seller, Buyer Parent, Buyer
and the Escrow Agent, intending to be legally bound hereby,
agree as follows:
1. Appointment. The Parties hereby
appoint the Escrow Agent as their escrow agent for the purposes
set forth herein, and the Escrow Agent hereby accepts such
appointment under the terms and conditions set forth herein.
2. Fund. At the Closing, Buyer shall
deposit with the Escrow Agent the Escrow Amount. The Escrow
Agent shall hold, subject to the terms and conditions hereof,
the Indemnification Escrow Fund and the NTBA Escrow Fund in two
separate and distinct segregated accounts. The Escrow Agent
shall hold the Escrow Amount and, subject to the terms and
conditions hereof, shall invest and reinvest the Escrow Amount
and all earnings, interest and income thereon (the
Fund) as directed in Section 3. For the
avoidance of doubt, the Buyer and Seller acknowledge and agree
that, notwithstanding any other provision of this Agreement or
the Stock Purchase Agreement to the contrary, the NTBVA Escrow
Fund shall relate solely to the NTBVA Obligations and shall not
be available to satisfy any Claims (as defined below) relating
to or arising out of Indemnification Obligations.
3. Investment of Fund. During the term of
this Agreement, the Fund shall be invested in a JPMorgan Money
Market Deposit Account (MMDA), or a successor
or similar investment offered by the Escrow Agent, unless
otherwise jointly instructed in writing by Buyer and Seller and
as shall be acceptable to the Escrow Agent. MMDA have rates of
compensation that may vary from time to time based upon market
conditions. Instructions to make any other investment
(Alternative Investment) must be made jointly
by Buyer and Seller in writing and shall specify the type and
identity of the investments to be purchased
and/or sold.
The Escrow Agent is hereby authorized to execute purchases and
sales of investments through the facilities of its own trading
or capital markets operations or
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those of any affiliated entity. The Escrow Agent or any of its
affiliates may receive compensation with respect to any
Alternative Investment directed hereunder including without
limitation charging any applicable agency fee in connection with
each transaction. The Parties recognize and agree that the
Escrow Agent will not provide supervision, recommendations or
advice relating to either the investment of moneys held in the
Fund or the purchase, sale, retention or other disposition of
any investment described herein. The Escrow Agent shall not have
any liability for any loss sustained as a result of any
investment in an investment made pursuant to the terms of this
Agreement or as a result of any liquidation of any investment
prior to its maturity or for the failure of the Parties to give
the Escrow Agent instructions to invest or reinvest the Fund,
except to the extent that such loss arises from the Escrow
Agents gross negligence, bad faith or willful misconduct.
The Escrow Agent shall have the right to liquidate any
investments held in order to provide funds necessary to make
required payments under this Agreement. The Escrow Agent shall
provide Buyer and Seller monthly and annual statements of assets
and transactions for the Fund. In addition, the Escrow Agent
shall respond to reasonable telephone requests for account
balances during normal business hours.
4. Disposition and Termination.
(a) Term of Fund. Unless released
earlier pursuant to this Agreement, the Fund shall be held by
the Escrow Agent and disbursed in accordance with the following:
(i) Within ten (10) Business days after the Closing
NTBV is Finally Determined in accordance with the
Section 2.07 of the Stock Purchase Agreement, Buyer and
Seller shall jointly instruct the Escrow Agent in writing to
disburse the NTBVA Escrow Fund to Buyer
and/or
Seller, as applicable, in accordance with Section 2.07(f)
of the Stock Purchase Agreement.
(ii) On the first Business Day following the twenty-four
(24) month anniversary of the Closing Date (such Business
Day, the First Release Date), Seller and
Buyer shall jointly instruct the Escrow Agent in writing to
disburse to Seller from the Indemnification Escrow Fund an
amount (if such amount is greater than zero) equal to the
difference of (x) Two Million Eight Hundred Sixty-Six
Thousand Six Hundred Sixty-Seven Dollars ($2,866,667),
minus (y) the sum of (A) the aggregate amount
of all amounts previously paid to Buyer Indemnitees (and to
third parties at the direction of Buyer) from the
Indemnification Escrow Fund, plus (B) the aggregate
amount of all Unsatisfied Escrow Claims (as defined below).
(iii) On the first Business Day following the thirty-six
(36) month anniversary of the Closing Date (such Business
Day, the Second Release Date), Seller and
Buyer shall jointly instruct the Escrow Agent in writing to
disburse to Seller from the Indemnification Escrow Fund an
amount (if such amount is greater than zero) equal to the
difference of (x) the amount remaining in the
Indemnification Escrow Fund on such date,
minus (y) the aggregate amount of all
Unsatisfied Escrow Claims.
(iv) Following the Second Release Date, the amount of any
Unsatisfied Escrow Claim which is Finally Determined, in whole
or in part, in favor of Buyer (or any other Buyer Indemnitee) or
Seller, as applicable, shall be paid to Buyer (or to the
applicable third party, if so directed by Buyer) or Seller, as
applicable, within (3) Business Days following the earlier
to occur of (A) the Escrow Agents receipt of a joint
written instruction from Buyer and Seller, which instruction
resolves any portion of a Disputed Claim in favor of Buyer or
Seller, as applicable, or (B) the Escrow Agents
receipt of a final, non-appealable order or judgment of a court
of competent jurisdiction, which final order or judgment
resolves any portion of a Disputed Claim in favor of Buyer or
Seller, applicable; provided, that the amount of any
Unsatisfied Escrow Claim to be distributed to Seller pursuant to
the foregoing shall be reduced, if at all, to the extent (and
only to the extent) that the amounts remaining in the
Indemnification Escrow Fund would be less than the amount of any
then outstanding Unsatisfied Escrow Claim(s). When no
Unsatisfied Escrow Claims remain following the Second Release
Date, the Escrow Agent shall promptly disburse to Seller the
amounts remaining in the Indemnification Escrow Fund. Upon
disbursement by the Escrow Agent of all amounts remaining in the
Fund, this Agreement shall terminate.
For purposes of this Agreement (x) the term
Unsatisfied Escrow Claim shall mean, as of
the date of determination, all claims for indemnification,
payment or reimbursement by the Buyer Indemnitees, or any of
them, pursuant to Section 9.02 of the Stock Purchase
Agreement which either (A) were asserted in writing, in
good faith,
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prior to, and are pending on, such date or (B) have been
Finally Determined in favor of the Buyer Indemnitees, or any of
them, to the extent such claims (as so Finally Determined) have
not been paid from the Indemnification Escrow Fund as of such
date; and (y) Finally Determined shall
mean, (i) with respect to any claim for indemnification,
payment or reimbursement by the Buyer Indemnitees, or any of
them, pursuant to Section 9.02 of the Stock Purchase
Agreement, the amount of such claim the entitlement to which by
such Buyer Indemnitee(s) (A) has been consented to in
writing by Seller (whether pursuant to a settlement agreement or
otherwise), or (B) has been determined pursuant to a final,
non-appealable judgment or other similar determination of a
court of competent jurisdiction, and (ii) with respect to
the determination of Closing NTBV, has been finally determined
in accordance with Section 2.07 of the Stock Purchase
Agreement.
(b) Claims for Payment from the Indemnification
Escrow Fund.
(i) Subject to the provisions of the Stock Purchase
Agreement, if at any time on or before
5:00 p.m. Chicago Time on the Second Release Date,
Buyer (A) believes that it (or any other Buyer Indemnitee)
is entitled to payment, or that payment should be made to a
third party, pursuant to the terms of Article IX of the
Stock Purchase Agreement, and (B) desires to make a claim
for payment from the Indemnification Escrow Fund (a
Claim) in connection therewith, then Buyer
shall give written notice of such Claim (a Claim
Notice) to Seller and the Escrow Agent, specifying in
reasonable detail the nature of the Claim, the basis for
indemnification under the Stock Purchase Agreement, and the
amount (to the extent reasonably determinable) of such Claim.
(ii) Prior to 5:00 p.m. Chicago Time thirty
(30) days after the Escrow Agents receipt of a Claim
Notice (the Response Period), Seller may
deliver to Buyer and to the Escrow Agent a written response (the
Response Notice) in which Seller
(A) agrees that the full amount of the subject Claim may be
released from the Indemnification Escrow Fund to Buyer,
(B) agrees that part, but not all, of the amount of the
subject Claim may be released from the Indemnification Escrow
Fund to Buyer, or (C) indicates that no part of the amount
of the subject Claim may be released from the Indemnification
Escrow Fund to Buyer. The amount of the subject Claim that
Seller indicates may not be released to Buyer under the Response
Notice shall be deemed a Disputed Claim. If
no Response Notice is received by the Escrow Agent within the
Response Period, the Claim set forth in the Claim Notice shall
be paid to Buyer, or the applicable third party (if directed by
Buyer), by the Escrow Agent from the Indemnification Escrow Fund
within three (3) Business Days following the end of the
Response Period.
(iii) In the event that a Response Notice with respect to
the subject Claim is received by the Escrow Agent within the
Response Period, the Escrow Agent shall pay Buyer, or the
applicable third party (if so directed by Buyer), from the
Indemnification Escrow Fund within three (3) Business Days
following the Escrow Agents receipt of the Response
Notice, the amount of the Claim not in dispute, if any, and
shall retain the amount of the Disputed Claim. Buyer and Seller
shall attempt in good faith to resolve such Disputed Claim and,
if they are able to do so in whole or in part, shall jointly
instruct the Escrow Agent in writing as to the full or partial
resolution of such Disputed Claim and the amount of the Disputed
Claim allowed, if any. To the extent a Disputed Claim is
resolved in whole or in part, the allowed amount of the Disputed
Claim, if any, shall be paid to Buyer, or the applicable third
party (if so directed by Buyer), by the Escrow Agent from the
Indemnification Escrow Fund within three (3) Business Days
following the Escrow Agents receipt of a joint written
instruction from Buyer and Seller to the Escrow Agent regarding
such resolution. Except to the extent that the amount remaining
in the Indemnification Escrow Fund at any time is insufficient
to satisfy other Claims that are either undisputed or have been
resolved in whole or in part in favor of Buyer, the Escrow Agent
shall not pay out any portion of the Indemnification Escrow Fund
with respect to the amount of a Disputed Claim which continues
to be in dispute until (A) jointly instructed in writing by
Buyer and Seller, or (B) the Escrow Agent receives a final,
non-appealable order or judgment of a court of competent
jurisdiction, which final order or judgment resolves any portion
of a Disputed Claim in favor of Buyer or Seller. In the event
that a previously Disputed Claim is resolved in whole or in
part, in favor of Buyer (or any other Buyer Indemnitee), the
amount which is Finally Determined in favor of Buyer (or any
other Buyer Indemnitee) shall be paid to Buyer or to the
applicable third party (if so directed by Buyer), within
(3) Business Days following the earlier to occur of
(A) the Escrow Agents receipt of a joint written
instruction from Buyer and Seller, which instruction resolves
any portion of a Disputed Claim in favor of Buyer, or
(B) the Escrow Agents receipt of a final,
non-appealable order or judgment of a court of competent
jurisdiction, which final order or judgment resolves any portion
of a Disputed Claim in favor of Buyer.
B-3
(c) Interest. Except as otherwise
provided in this Section 4(c), all earnings, interest and
other income, if any, resulting from the investment of the Fund
(or any income on or additions to the Fund) by the Escrow Agent
(Investment Income) shall be retained by the
Escrow Agent and shall be considered, for all purposes of this
Agreement, to be part of the Fund. The Escrow Agent shall
disburse to Buyer forty percent (40%) of the taxable Investment
Income on an annual basis, in order to satisfy tax liabilities
attributable to any such Investment Income. Upon distribution of
any amount from the Escrow Fund, the respective Party to whom
the amount is being distributed shall also receive all
Investment Income attributable to such distributed amount, less
the amount of Investment Income previously distributed to Buyer
to cover taxes due on such Investment Income in accordance with
this Section 4(c).
(d) No Other Disbursements. The
Escrow Agent shall not distribute or release any of the Fund
except in accordance with the express terms and conditions of
this Agreement.
5. Escrow Agent.
(a) The Escrow Agent shall have only those duties as are
specifically and expressly provided herein, which shall be
deemed purely ministerial in nature, and no other duties shall
be implied. The Escrow Agent shall neither be responsible for,
nor chargeable with, knowledge of, nor have any requirements to
comply with, the terms and conditions of any other agreement,
instrument or document between the Parties, in connection
herewith, if any, including without limitation the Stock
Purchase Agreement (except with respect to capitalized terms
that are used herein as defined in the Stock Purchase
Agreement), nor shall the Escrow Agent be required to determine
if any person or entity has complied with any such agreements,
nor shall any additional obligations of the Escrow Agent be
inferred from the terms of such agreements, even though
reference thereto may be made in this Agreement. Unless and
until the Escrow Agent shall be notified in writing that an
inconsistency or a conflict exists between this Agreement and
the Stock Purchase Agreement, it shall be entitled to
conclusively assume that no such inconsistency or conflict
exists. Notwithstanding the foregoing, as between the Parties,
to the extent any terms and provisions of this Agreement are in
any way inconsistent with or conflict with any term, condition
or provision of the Stock Purchase Agreement, the Stock Purchase
Agreement shall govern and control. As it pertains to the Escrow
Agent, in the event of any conflict between the terms and
provisions of this Agreement or any schedule or exhibit attached
to this Agreement and those of the Stock Purchase Agreement or
any other agreement among the Parties, the terms and conditions
of this Agreement shall control. The Escrow Agent may rely upon
and shall not be liable for acting or refraining from acting
upon any written notice, document, instruction or request
furnished to it hereunder and reasonably believed by it to be
genuine and to have been signed or presented by the proper Party
or Parties without inquiry and without requiring substantiating
evidence of any kind. Concurrent with the execution of this
Agreement, the Parties shall deliver to the Escrow Agent
authorized signers forms in the form of
Exhibit A-1,
Exhibit A-2
and Schedule 1 to this Agreement. The Escrow Agent shall
not be liable to any Party, any beneficiary or other person for
refraining from acting upon any instruction setting forth,
claiming, containing, objecting to, or related to the transfer
or distribution of the Fund, or any portion thereof, unless such
instruction shall have been delivered to the Escrow Agent in
accordance with Section 11 below and the Escrow Agent has
been able to satisfy any applicable security procedures as may
be required hereunder and as set forth in Section 11. The
Escrow Agent shall be under no duty to inquire into or
investigate the validity, accuracy or content of any such
document, notice, instruction or request. The Escrow Agent shall
have no duty to solicit any payments which may be due it or the
Fund, including, without limitation, the Escrow Amount nor shall
the Escrow Agent have any duty or obligation to confirm or
verify the accuracy or correctness of any amounts deposited with
it hereunder.
(b) The Escrow Agent shall not be liable for any action
taken, suffered or omitted to be taken by it in good faith
except to the extent that a final adjudication of a court of
competent jurisdiction determines that the Escrow Agents
gross negligence, bad faith or willful misconduct was the cause
of any loss to any Party. The Escrow Agent may execute any of
its powers and perform any of its duties hereunder directly or
through affiliates or agents. The Escrow Agent may consult with
counsel, accountants and other skilled persons to be selected
and retained by it. The Escrow Agent shall not be liable for any
action taken, suffered or omitted to be taken by it in
accordance with, or in reasonable reliance upon, the advice or
opinion of any such counsel, accountants or other skilled
persons. In the event that the Escrow Agent shall be uncertain
or believe there is some ambiguity as to its duties or rights
hereunder or shall receive instructions, claims or demands from
any Party hereto which, in its opinion, conflict with any of the
provisions of this Agreement, it shall be entitled to refrain
from taking any action and its sole obligation shall be to
B-4
keep safely all property held in escrow until it shall be given
a direction in writing by the Parties which eliminates such
ambiguity or uncertainty to the satisfaction of Escrow Agent or
by a final and non-appealable order or judgment of a court of
competent jurisdiction. To the extent reasonably practicable,
the Parties agree to pursue any redress or recourse in
connection with any dispute without making the Escrow Agent a
party to the same. Anything in this Agreement to the contrary
notwithstanding, the Escrow Agent shall not be liable for
special, incidental, punitive, indirect or consequential loss or
damage of any kind whatsoever (including but not limited to lost
profits), even if the Escrow Agent has been advised of the
likelihood of such loss or damage and regardless of the form of
action.
6. Succession.
(a) The Escrow Agent may resign from its duties or
obligations hereunder by giving thirty (30) days advance
notice in writing of such resignation to the Parties specifying
a date (which date shall be at least thirty (30) days after
the Parties receipt of such notice) when such resignation
shall take effect, and the Parties may remove the Escrow Agent
by giving the Escrow Agent thirty (30) days advance notice
in writing of such removal to the Escrow Agent specifying a date
(which date shall be at least thirty (30) days after the
Escrow Agents receipt of such notice). If the Parties have
failed to appoint a successor escrow agent prior to the
expiration of thirty (30) days following receipt of the
notice of resignation or removal, the Escrow Agent may petition
any court of competent jurisdiction for the appointment of a
successor escrow agent or for other appropriate relief, and any
such resulting appointment shall be binding upon all of the
Parties hereto. Escrow Agents sole responsibility after
such thirty (30) day notice period expires shall be to hold
the Fund (without any obligation to reinvest the same) and to
deliver the same to a designated substitute escrow agent, if
any, or in accordance with the directions of a final order or
judgment of a court of competent jurisdiction, at which time of
delivery Escrow Agents obligations hereunder shall cease
and terminate.
(b) Any entity into which the Escrow Agent may be merged or
converted or with which it may be consolidated, or any entity to
which all or substantially all the escrow business may be
transferred, shall be the Escrow Agent under this Agreement
without further act.
7. Compensation and Reimbursement. Each
of Buyer and Seller agree severally, and not jointly, to
(a) pay the Escrow Agent upon execution of this Agreement
and from time to time thereafter one-half of all reasonable
compensation for the services to be rendered hereunder, which
unless otherwise agreed to in writing by Buyer and Seller shall
be as described in Schedule 2 attached hereto and shall be
intended as full compensation for the Escrow Agents
services as contemplated by this Agreement, and (b) pay or
reimburse the Escrow Agent upon request for one-half of all
reasonable, necessary and documented out-of-pocket expenses,
disbursements and advances, including, without limitation
reasonable attorneys fees and expenses, incurred or made
by it in connection with the performance, modification and
termination of this Agreement. The obligations set forth in this
Section 7 shall survive the resignation, replacement or
removal of the Escrow Agent or the termination of this Agreement.
8. Indemnity.
(a) Each of Buyer and Seller severally, and not jointly,
indemnify, defend and save harmless the Escrow Agent and its
affiliates and their respective successors, assigns, agents and
employees (the Indemnitees) from and against
such Partys one-half of any and all losses, damages,
claims, liabilities, penalties, judgments, settlements,
litigation, investigations, costs or expenses (including,
without limitation, the fees and expenses of outside counsel and
experts and their staffs and all documented out-of-pocket
expense of document location, duplication and
shipment)(collectively Losses), arising out
of or in connection with (i) the Escrow Agents
execution and performance of this Agreement, tax reporting or
withholding, the enforcement of any rights or remedies under or
in connection with this Agreement, or as may arise by reason of
any act, omission or error of the Indemnitee, except in the case
of any Indemnitee to the extent that such Losses are finally
adjudicated by a court of competent jurisdiction to have been
primarily caused by the gross negligence, bad faith or willful
misconduct of such indemnitee, or (ii) its following any
instructions or other directions, whether joint or singular,
from the Parties, except to the extent that its following any
such instruction or direction is expressly forbidden by the
terms hereof. The indemnity obligations set forth in this
Section 8(a) shall survive the resignation, replacement or
removal of the Escrow Agent or the termination of this Agreement.
B-5
(b) The Escrow Agent hereby waives any and all rights to
offset that it may have against the Fund, including, without
limitation, claims arising as a result of any claims, amounts,
liabilities, costs, expenses, damages or other losses that the
Escrow Agent may be entitled to collect from any party to this
Escrow Agreement.
9. Patriot Act Disclosure/Taxpayer Identification
Numbers/Tax Reporting.
(a) Patriot Act
Disclosure. Section 326 of the Uniting and
Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism Act of 2001 (USA
PATRIOT Act) requires the Escrow Agent to implement
reasonable procedures to verify the identity of any person that
opens a new account with it. Accordingly, the Parties
acknowledge that Section 326 of the USA PATRIOT Act and the
Escrow Agents identity verification procedures require the
Escrow Agent to obtain information which may be used to confirm
the Parties identity including without limitation name, address
and organizational documents (identifying
information). The Parties agree to provide the Escrow
Agent with and consent to the Escrow Agent obtaining from third
parties any such identifying information required as a condition
of opening an account with or using any service provided by the
Escrow Agent.
(b) Certification and Tax Reporting. The
Parties have provided the Escrow Agent with their respective
fully executed Internal Revenue Service (IRS)
Form W-8,
or W-9
and/or other
required documentation. The Parties acknowledge and agree that
the Escrow Amount shall be treated as an installment obligation
for purposes of Section 453 of the Code, and Seller shall
not be treated as having received any portion of the Escrow
Amount or any Investment Income until such amounts are actually
released to Seller, and no Party shall take any action or filing
position inconsistent with such characterization. The Parties
acknowledge and agree that the Escrow Agent shall have no duty
or obligation to provide any calculations or perform any tax
reporting regarding the allocation of imputed interest or
original issue discount under the IRS regulations relating to
installment sales. The Parties acknowledge and agree that Buyer
will be deemed to be the owner of the Fund for income tax
purposes, and will report all Investment Income as the income of
Buyer in the taxable year or years, in which such Investment
Income is properly includible and pay any taxes attributable
thereto. To the extent required by law, the Escrow Agent shall
report such Investment Income to the IRS, or any other taxing
authority, on IRS Form 1099 or 1042S (or other appropriate
form) as income earned from the Fund by the Buyer whether or not
said Investment Income has been distributed during such year.
Escrow Agent shall withhold any taxes it deems appropriate in
the absence of proper tax documentation or as required by law,
and shall remit such taxes to the appropriate authorities. The
Parties hereby represent and warrant to the Escrow Agent that
there is no sale or transfer of an United States Real Property
Interest as defined under IRC Section 897(c) in the
underlying transaction giving rise to this Agreement.
10. Notices. All notices, consents and
other communications hereunder, except for notices, consents and
other communications from the Parties setting forth, claiming,
containing, objecting to, or in any way related to the transfer
or distribution of funds, including but not limited to funds
transfer instructions (all of which shall be specifically
governed by Section 11 below), shall be in writing and
shall be deemed to have been duly given (a) when delivered
by hand or by Federal Express or a similar overnight courier,
(b) five (5) days after being deposited in any United
States Post Office enclosed in a postage prepaid, registered or
certified envelope addressed, or (c) when successfully
transmitted by fax (with a confirming copy of such communication
to be sent as provided in clauses (a) or (b) above) to
the party for whom intended, at the address or fax number for
such party set forth below (or at such other address or fax
number for a party as shall be specified by like notice,
provided, however, that the day any notice of change of address
or fax number shall be effective only upon receipt).
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If to Buyer
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Jacobs Engineering Group Inc.
1111 South Arroyo Parkway
Pasadena, California 91105
(for personal delivery and overnight courier)
P.O. Box 7084
Pasadena, California 91109-7084
(for U.S. Mail)
Attention: Mike Udovic, Esq.
Facsimile: (626) 568-7144
Email: Mike.Udovic@jacobs.com
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B-6
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with a copy (which shall not constitute notice) to:
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Paul, Hastings, Janofsky & Walker LLP
515 S. Flower Street
Los Angeles, California 90071
Attention: Robert A. Miller, Esq.
Facsimile: (213) 996-3254
Email: RobertMiller@Paulhastings.com
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If to Seller
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TechTeam Global, Inc.
27335 West 11 Mile Road
Southfield, MI 48033
Facsimile No.: (248) 357-2570
Attention: Michael A. Sosin, Esq.
MSosin@techteam.com
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with a copy (which shall not constitute notice) to:
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Blank Rome LLP
Watergate 600 New Hampshire Avenue
Washington, DC 20037
Facsimile No.: (202) 572-1434
Attention: Keith E. Gottfried, Esq.
Email: Gottfried@Blankrome.com
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If to the Escrow Agent
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JPMorgan Chase Bank, N.A.
Escrow Services
420 W. Van Buren Street, IL 1-0113
Chicago, IL 60606
Attention: Chris Koenig
Fax No.: (312) 954-0430
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11. Security Procedures. Notwithstanding
anything to the contrary set forth in Section 10, any
instructions setting forth, claiming, containing, objecting to,
or in any way related to the transfer or distribution of funds,
including but not limited to any such funds transfer
instructions that may otherwise be set forth in a written
instruction permitted pursuant to Section 4 of this
Agreement, may be given to the Escrow Agent only by confirmed
facsimile and no instruction for or related to the transfer or
distribution of the Fund, or any portion thereof, shall be
deemed delivered and effective unless the Escrow Agent actually
shall have received such instruction by facsimile at the number
provided to the Parties by the Escrow Agent in accordance with
Section 10 and as further evidenced by a confirmed
transmittal to that number.
(a) In the event funds transfer instructions are so
received by the Escrow Agent by facsimile, the Escrow Agent is
authorized to seek confirmation of such instructions by
telephone call-back to the person or persons designated on
Schedule 1 hereto, and the Escrow Agent may rely upon the
confirmation of anyone purporting to be the person or persons so
designated. The persons and telephone numbers for call-backs may
be changed only in a writing actually received and acknowledged
by the Escrow Agent. If the Escrow Agent is unable to contact
any of the authorized representatives identified in
Schedule 1, the Escrow Agent shall not be required to make
any disbursements until such representative has been contacted.
The Escrow Agent and the beneficiarys bank in any funds
transfer may rely solely upon any account numbers or similar
identifying numbers provided by Buyer or Seller to identify
(i) the beneficiary, (ii) the beneficiarys bank,
or (iii) an intermediary bank. The Escrow Agent may apply
any of the escrowed funds for any payment order it executes
using any such identifying number, even when its use may result
in a person other than the beneficiary being paid, or the
transfer of funds to a bank other than the beneficiarys
bank or an intermediary bank designated.
B-7
(b) Buyer acknowledges that the Escrow Agent is authorized
to use the following funds transfer instructions to disburse any
funds due to Buyer under this Agreement without a verifying
call-back as set forth in Section 11(a) above:
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Buyers Bank account information:
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Bank name:
Bank Address:
ABA number:
Account name:
Account number:
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(c) Seller acknowledges that the Escrow Agent is authorized
to use the following funds transfer instructions to disburse any
funds due to Seller under this Agreement without a verifying
call-back as set forth in Section 11(a) above:
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Sellers Bank account information:
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Bank name:
Bank Address:
ABA number:
Account name:
Account number:
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(d) In addition to their respective funds transfer
instructions as set forth in Section 11(b) above, Buyer and
Seller acknowledge that repetitive funds transfer instructions
may be given to the Escrow Agent for one or more beneficiaries
of Buyer or Seller where only the date of the requested
transfer, the amount of funds to be transferred,
and/or the
description of the payment shall change within the repetitive
instructions (Standing Settlement
Instructions). Accordingly, Buyer and Seller shall
deliver to Escrow Agent such specific Standing Settlement
Instructions only for each of their respective beneficiaries as
set forth in Schedule 1, by facsimile in accordance with
this Section 11. Escrow Agent may rely solely upon such
Standing Settlement Instructions and all identifying information
set forth therein for each beneficiary. Escrow Agent, Seller and
Buyer agree that such Standing Settlement Instructions shall be
effective as the funds transfer instructions of Buyer or Seller,
as applicable, without requiring a verifying call-back as set
forth in Section 11(a), whether or not authorized, if such
Standing Settlement Instructions are consistent with previously
authenticated Standing Settlement Instructions for that
beneficiary.
(e) The Parties acknowledge that the security procedures
set forth in this Section 11 are commercially reasonable.
12. Compliance with Court Orders. In the
event that any escrow property shall be attached, garnished or
levied upon by any court order, or the delivery thereof shall be
stayed or enjoined by an order of a court, or any order,
judgment or decree shall be made or entered by any court order
affecting the property deposited under this Agreement, the
Escrow Agent is hereby expressly authorized, in its sole
discretion, to obey and comply with all writs, orders or decrees
so entered or issued, which it is advised by legal counsel of
its own choosing is binding upon it, whether with or without
jurisdiction, and in the event that the Escrow Agent obeys or
complies with any such writ, order or decree it shall not be
liable to any of the Parties hereto or to any other person,
entity, firm or corporation, by reason of such compliance
notwithstanding such writ, order or decree be subsequently
reversed, modified, annulled, set aside or vacated.
13. Miscellaneous. Except for change to
funds transfer instructions as provided in Section 11, the
provisions of this Agreement may be waived, altered, amended or
supplemented, in whole or in part, only by a writing signed by
the Escrow Agent and the Parties. Neither this Agreement nor any
right or interest hereunder may be assigned in whole or in part
by the Escrow Agent or any Party, except as provided in
Section 6, without the prior consent of the Escrow Agent
and the other Parties. This Agreement shall be governed by and
construed under the laws of the State of Delaware. Each Party
and the Escrow Agent irrevocably waives any objection on the
grounds of venue, forum non-conveniens or any similar grounds
and irrevocably consents to service of process by mail or in any
other manner permitted by applicable law and consents to the
jurisdiction of the courts located in the State of Delaware. To
the extent that in any jurisdiction any Party may now or
hereafter be entitled to claim for itself or its assets,
immunity from suit, execution attachment (before or after
judgment), or other legal process, such Party shall not claim,
and it hereby irrevocably waives, such immunity. Each Party and
the Escrow Agent further hereby waive any right to a trial
B-8
by jury with respect to any lawsuit or judicial proceeding
arising or relating to this Agreement. No party to this
Agreement is liable to any other party for losses due to, or if
it is unable to perform its obligations under the terms of this
Agreement because of, acts of God, fire, war, terrorism, floods,
strikes, electrical outages, equipment or transmission failure,
or other causes reasonably beyond its control. This Agreement
may be executed in one or more counterparts, each of which shall
be deemed an original, but all of which together shall
constitute one and the same instrument. All signatures of the
parties to this Agreement may be transmitted by facsimile, and
such facsimile will, for all purposes, be deemed to be the
original signature of such party whose signature it reproduces,
and will be binding upon such party. The failure of any Party to
this Escrow Agreement at any time or times to require
performance of any provision under this Escrow Agreement shall
in no manner affect the right at a later time to enforce the
same performance. A waiver by any Party to this Escrow Agreement
of any such condition or breach of any term, covenant,
representation, or warranty contained in this Escrow Agreement,
in any one or more instances, shall neither be construed as a
further or continuing waiver of any such condition or breach nor
a waiver of any other condition or breach of any other term,
covenant, representation, or warranty contained in this Escrow
Agreement. If any provision of this Agreement is determined to
be prohibited or unenforceable by reason of any applicable law
of a jurisdiction, then such provision shall, as to such
jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining
provisions thereof, and any such prohibition or unenforceability
in such jurisdiction shall not invalidate or render
unenforceable such provisions in any other jurisdiction. A
person who is not a party to this Agreement shall have no right
to enforce any term of this Agreement. The Parties represent,
warrant and covenant that each document, notice, instruction or
request provided by such Party to Escrow Agent shall comply with
applicable laws and regulations. Where, however, the conflicting
provisions of any such applicable law may be waived, they are
hereby irrevocably waived by the parties hereto to the fullest
extent permitted by law, to the end that this Agreement shall be
enforced as written. Except as expressly provided in
Section 8 above, nothing in this Agreement, whether express
or implied, shall be construed to give to any person or entity
other than the Escrow Agent and the Parties any legal or
equitable right, remedy, interest or claim under or in respect
of this Agreement or any funds escrowed hereunder.
[SIGNATURE
PAGE FOLLOWS]
B-9
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date set forth above.
BUYER
JACOBS TECHNOLOGY INC.
By:
Name:
Title:
BUYER PARENT
JACOBS ENGINEERING GROUP INC.
By:
Name:
Title:
SELLER
TECHTEAM GLOBAL, INC.
By:
Name:
Title:
ESCROW AGENT
JPMORGAN CHASE BANK, NATIONAL
ASSOCIATION
By:
Name:
Title:
B-10
EXHIBIT A-1
Certificate
as to Authorized Signatures
The specimen signatures shown below are the specimen signatures
of the persons who have been designated as authorized
representatives of Buyer who are authorized to initiate and
approve transactions of all types for the escrow account or
accounts established under the Escrow Agreement to which this
Exhibit A-1
is attached, on behalf of Buyer.
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Name/Title
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Specimen Signature
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John W. Prosser,
Jr.
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Name
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Signature
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Executive Vice President, Finance
and Administration and Treasurer
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Title
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Michael S.
Udovic
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Name
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Signature
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Vice President and Corporate Secretary
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Title
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Name
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Signature
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Title
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B-11
EXHIBIT A-2
Certificate
as to Authorized Signatures
The specimen signatures shown below are the specimen signatures
of the persons who have been designated as authorized
representatives of Seller who are authorized to initiate and
approve transactions of all types for the escrow account or
accounts established under the Escrow Agreement to which this
Exhibit A-2
is attached, on behalf of Seller.
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Name
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Specimen Signature
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Name
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Signature
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B-12
SCHEDULE 1
Telephone
Number(s) and authorized signature(s) for
Person(s) Designated to give Funds Transfer
Instructions
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Person(s) Designated to Confirm Funds Transfer
Instructions
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ABA number:
Account name:
Account number:
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All funds transfer instructions must include the signature of
the person(s) authorizing said funds transfer.
[Seller or Buyer] agrees that repetitive or standing settlement
instructions will be effective as the funds transfer
instructions of the stated beneficiary, whether or not
authorized, if such settlement instructions are verified
pursuant to the security procedure provided in the Agreement or
such other security procedure to which Escrow Agent and [Seller
or Buyer] may agree.
B-13
SCHEDULE 2
Based upon our current understanding of your proposed
transaction, our fee proposal is as follows:
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Account Acceptance Fee
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1,500
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Encompassing review, negotiation and execution of governing
documentation, opening of the account, and completion of all due
diligence documentation. Payable upon closing.
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Annual Administration Fee
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The Administration Fee covers our usual and customary
ministerial duties, including record keeping, distributions,
document compliance and such other duties and responsibilities
expressly set forth in the governing documents for each
transaction. Payable upon closing and annually in advance
thereafter, without pro-ration for partial years.
Extraordinary
Services and Out-of Pocket Expenses
Any additional services beyond our standard services as
specified above, and all reasonable out-of-pocket expenses
including attorneys or accountants fees and expenses
will be considered extraordinary services for which related
costs, transaction charges, and additional fees will be billed
at the Banks then standard rate. Disbursements, receipts,
investments or tax reporting exceeding 25 items per year may be
treated as extraordinary services thereby incurring additional
charges.
Disclosure &
Assumptions
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Please note that the fees quoted are based on a review of the
transaction documents provided and an internal due diligence
review. JPMorgan reserves the right to revise, modify, change
and supplement the fees quoted herein if the assumptions
underlying the activity in the account, level of balances,
market volatility or conditions or other factors change from
those used to set our fees.
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The escrow deposit shall be continuously invested in a JPMorgan
Chase Bank money market deposit account
(MMDA) or a JPMorgan Chase Bank Cash
Compensation account. MMDA and Cash Compensation Accounts have
rates of compensation that may vary from time to time based upon
market conditions. The Annual Administration Fee would include a
supplemental charge up to 25 basis points on the escrow
deposit amount if another investment option were to be chosen.
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The Parties acknowledge and agree that they are permitted by
U.S. law to make up to six (6) pre-authorized
withdrawals or telephonic transfers from an MMDA per calendar
month or statement cycle or similar period. If the MMDA can be
accessed by checks, drafts, bills of exchange, notes and other
financial instruments (Items), then no more
than three (3) of these six (6) transfers may be made
by an Item. The Escrow Agent is required by U.S. law to
reserve the right to require at least seven (7) days notice
prior to a withdrawal from a money market deposit account.
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Payment of the invoice is due upon receipt.
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Compliance
To help the government fight the funding of terrorism and money
laundering activities, Federal law requires all financial
institutions to obtain, verify, and record information that
identifies each person or entity that opens an account. We may
ask for information that will enable us to meet the requirements
of the Act.
B-14
Exhibit C
TRANSITIONAL
SERVICES AGREEMENT
TRANSITIONAL SERVICES AGREEMENT (this
Agreement), dated as of
October [ ], 2010, is made and entered into by
and between TechTeam Global, Inc., a Delaware corporation (the
Seller), and Jacobs Technology Inc., a
Tennessee corporation (the Buyer). Buyer and
Seller are referred to herein collectively as the
Parties and each, a
Party. Capitalized terms used herein
and not otherwise defined shall have the meanings set forth in
the Stock Purchase Agreement (as defined below).
RECITALS
WHEREAS, pursuant to the Stock Purchase Agreement, dated
as of June 3, 2010, by and among Seller, Jacobs Engineering
Group Inc. and Buyer, as amended by that certain Amendment
No. 1 to Stock Purchase Agreement and Limited Waiver, dated
as of September 14, 2010 (the Stock Purchase
Agreement), Seller will sell to Buyer the Shares of
the Acquired Companies, through which Seller conducts the
Business (the Business subsequent to such sale, the
Transferred Business);
WHEREAS, in connection with the Stock Purchase Agreement,
and as a condition to Closing, the Parties are required to enter
into this Agreement;
WHEREAS, Buyer desires that Seller, or one or more of its
Affiliates, continue to provide certain services to the
Transferred Business following the Closing; and
WHEREAS, Seller has agreed to perform and to cause one or
more of its Affiliates to perform the Transition Services
(defined below) for the Transferred Business on the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises
contained herein and for other valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
Parties hereby agree as follows:
ARTICLE I
SERVICES
Section 1.1 Services. Under
the terms and conditions of this Agreement, Seller shall, or
shall cause one or more of its Affiliates to, provide to Buyer
for the Transferred Business each of the services set forth on
Exhibit A hereto (each a Transition
Service and collectively, the Transition
Services) for the period set forth opposite each such
Transition Service on Exhibit A (which period shall
run from the Closing Date) or, if earlier, until the termination
of such Transition Service pursuant to Section 1.3,
or the expiration or termination of this Agreement, whichever
occurs first.
Section 1.2 Standard
of Performance. Subject to the terms of this
Agreement, Seller shall use reasonable diligence and care in
performing the Transition Services and shall perform the
Transition Services in a manner that is substantially consistent
in all material respects, in terms of quality, service levels
and time schedules, and using no less than that degree of
effort, diligence, and care, that it or any of its Affiliates
have used in performing the Transition Services on behalf of the
Transferred Business prior to Closing. Seller shall not perform
a Transition Service if the provision of such Transition Service
conflicts with or violates Applicable Law, any Contract to which
Seller is a party or the rights of any third party with respect
thereto. Seller represents and warrants to Buyer that, to the
Knowledge of Seller, Sellers performance of the Transition
Services as contemplated herein will not conflict with, or
result in the violation of, any Applicable Law or Contract to
which Seller is a party or the rights of any third party with
respect thereto. Seller shall not, without Buyers prior
written consent, knowingly perform any Transition Service in a
manner that would reasonably be expected to result in Buyer
and/or any
of its Subsidiaries and Affiliates incurring any Liability in
tort or for the breach of any Contract. Nothing in this
Agreement shall require Seller to favor the Transferred Business
over its own businesses or those of any of its Affiliates.
Seller may subcontract the performance of the Transition
Services to any Affiliate of Seller, or, with Buyers prior
written consent (which shall not be unreasonably withheld,
delayed or conditioned), any Person that is not its Affiliate,
C-1
provided that (i) Seller subcontracts the
performance of the same services provided for itself or its
Affiliates, and (ii) Seller shall remain responsible
for compliance of such subcontractor in accordance with the
terms and conditions of this Agreement. Seller shall not be
required to provide Buyer with extraordinary levels of
Transition Services, special studies, training, or the like or
the advantage of systems, equipment, facilities, training or
improvements procured, obtained or made after the Closing Date
by Seller, unless such systems, equipment, facilities, training
or improvements are being procured, obtained or made after the
Closing Date in order to replace any items reasonably necessary
for the Transition Services.
Section 1.3 Discontinuation
of Services.
(a) Buyer may discontinue any or all Transition Services by
giving Seller at least thirty (30) days prior written
notice (except where a shorter notice is set forth on
Exhibit A or agreed to in writing by the Parties),
which notice shall identify the particular Transition Service to
be discontinued and the effective date as of which any such
Transition Services indicated in such notice shall be
discontinued. The discontinuance by Buyer pursuant to this
Section 1.3 of a Transition Service or group of
Transition Services will not relieve Seller of its obligations
to continue to provide the other Transition Services.
(b) Upon discontinuation of a Transition Service with
respect to which Seller holds books, records, files, databases,
confidential information, computer software or hardware
(including, but not limited to, current and archived copies of
computer files) or other property owned or leased by Buyer and
used in connection with the provision of the Transition Service
(the Materials), Seller shall promptly
deliver the Materials to Buyer at Buyers sole cost and
expense or, upon Buyers written request, Seller shall
destroy and certify the destruction of all such Materials.
Section 1.4 Independent
Contractor. For all purposes hereof, Seller
shall at all times act as an independent contractor and shall
have no authority to represent Buyer or any of its Subsidiaries
or Affiliates in any way or otherwise be deemed an agent,
employee, representative, joint venturer or fiduciary of Buyer
or any of its Subsidiaries or Affiliates. Neither the Parties,
nor or any of their Subsidiaries or Affiliates or their
respective Representatives shall declare or represent to any
Person that Seller or any of its Subsidiaries or Affiliates or
their respective Representatives shall have any power or
authority to negotiate or conclude any agreement, or to make any
representation or to give any undertaking, on behalf of Buyer or
any of its Subsidiaries or Affiliates in any way whatsoever. At
all times during the Term, all Persons (including, without
limitation, the personnel of Seller and the personnel of its
Subsidiaries and Affiliates) performing the Transition Services
hereunder shall be construed as independent contractors with
respect to Buyer and shall not be construed as agents or
employees of Buyer or any Subsidiary or Affiliate of Buyer
thereof by virtue of performing such Transition Services and no
such Persons shall be entitled to any of the benefits provided
by Buyer, its Subsidiaries or Affiliates to any of their
respective employees or agents.
Section 1.5 Sufficient
Access. To the extent necessary in connection
with the provision of the Transition Services upon reasonable
advance notice, Buyer shall give, or cause to be given, Seller
and its Representatives reasonable access during normal business
hours (or, in the event that Seller reasonably determines that
emergency maintenance is necessary, at such other times as are
reasonably appropriate under the circumstances) to the
properties, systems, computer programs, products and equipment
of the Transferred Business as necessary from time to time for
reasons of modification or preventative or emergency maintenance.
Section 1.6 Change
in Services. The Parties acknowledge the
transitional and dynamic nature of the Transition Services and
agree that Seller may make reasonably necessary changes from
time to time in the manner of performing the Transition
Services, subject in all cases to Section 1.2 above
and the other terms of this Agreement, including, without
limitation, that Seller may modify or change the specifications
of any Transition Services involving systems and associated
computer programs, products, equipment and services to the
extent reasonably necessary to prevent damage to the systems or
other assets of Seller or Buyer. Seller shall use its Best
Efforts to provide Buyer with reasonable advance notice of any
such modifications and changes. Seller may suspend the provision
of Transition Services (or any part thereof) to the extent
reasonably necessary for reasons of preventative or emergency
maintenance, provided that Seller shall not discriminate against
Buyer in such suspension. Seller shall use its Best Efforts to
provide Buyer with reasonable advance notice of any such
suspension and to limit the time period of any such suspension.
C-2
Section 1.7 Service
Coordinators. Seller and Buyer shall each
nominate a representative to act as the primary contact person
with respect to the performance of the services contemplated by
this Agreement (the Service Coordinators).
The initial Service Coordinator will be Cynthia Del Papa for
Seller and [Ward Johnson] for Buyer. Unless Seller and Buyer
otherwise agree, all communications relating to this Agreement
and the schedule of Transition Services on Exhibit A
hereto will be directed to the Service Coordinators. The Parties
will cause their respective Service Coordinator to keep the
other Service Coordinator informed and updated as to the status
and performance of the Transition Services hereunder and the
requirements of each Party so as to facilitate a mutual
cooperation so as to provide the Transition Services in an
orderly fashion and work towards the establishment of such
services by Buyer independent of Seller.
Section 1.8 Further
Assurances. Subject to the terms and
conditions of this Agreement, Buyer may request in writing that
Seller provide to Buyer for the Transferred Business additional
services of a type and nature not specifically contemplated by
Exhibit A (each an Additional Transition
Service and collectively, the Additional
Transition Services) . To the extent that Seller
determines to provide such Additional Transition Services, the
Parties shall mutually agree on the scope of such Additional
Transition Services and the fees, costs and expenses to be paid
by Buyer in exchange for such Additional Transition Services.
ARTICLE II
SERVICE
CHARGES
Section 2.1 Fees
and Expenses During the Term. Buyer shall
reimburse Seller for all reasonable documented
out-of-pocket
fees and expenses incurred by Seller or any of its Affiliates in
providing the Transition Services. Notwithstanding anything to
the contrary contained herein, the obligation in the immediately
preceding sentence shall not apply to the Transition Services
described in Section 1.F. (Welfare Benefits) and
Buyers sole obligation with respect to the Transition
Services described in Section 1.F. (Welfare Benefits) shall
be to pay the amounts specified in Section II.G. Any
travel-related expenses incurred by Seller in performing the
applicable Transition Services hereunder shall be incurred,
documented and charged to Buyer in accordance with Sellers
then applicable business travel policies; provided,
however, that Buyer shall not be obligated to reimburse
Seller for any travel-related expenses unless such travel was
approved in writing in advance by Buyer. Buyer shall pay all of
its costs related to Migration Services (as defined below).
Buyer shall pay all of Sellers reasonable documented
out-of-pocket
costs related to Migration Services.
Section 2.2 Taxes. In
accordance with Section 3.1, Buyer shall reimburse
Seller for any sales tax, use tax, transfer tax, value-added
tax, goods and services tax, consumption tax or similar tax
(Taxes) (but excluding any Tax based upon the
income of Seller, which shall be paid by Seller) payable with
respect to the provision of Transition Services, which shall be
separately stated on the relevant invoice. Seller shall be
responsible for filing all necessary returns and information
with, and paying any such Taxes to, the appropriate taxing
authority.
ARTICLE III
PAYMENT
Section 3.1 Payment. For
Transition Services provided, Seller shall invoice Buyer for all
reasonable documented
out-of-pocket
fees and expenses incurred by Seller or any of its Affiliates in
providing the Transition Services. Buyer shall remit payment for
such reasonable
out-of-pocket
fees and expenses by wire transfer of immediately available
funds in U.S. Dollars, to the account specified in such
invoice within ten (10) Business Days after receipt of the
invoice. Each invoice shall set forth the period covered by such
invoice and the reasonable documented
out-of-pocket
expenses required to be reimbursed pursuant to
Section 2.1 relating to Transition Services
performed during such period. Buyer shall not withhold, set-off
or deduct any payments due to Seller under this Agreement from
any amounts otherwise due to Buyer from Seller under any other
agreement, notwithstanding any dispute that may be pending
between them. Promptly following the expiration of the Term or
the earlier termination of this Agreement pursuant to
Section 6.2, Seller shall refund to Buyer the amount of the
excess, if any, of the payments made by Buyer hereunder over the
amounts to which Seller is entitled hereunder.
C-3
Section 3.2 Disputes. If
Buyer shall dispute any invoice or shall in any way object to
the manner in which any of the Transition Services are provided
or otherwise allege that the Transition Services are not being
provided in a timely manner and in accordance with this
Agreement, then prior to taking any other action, Buyers
Service Coordinator shall promptly notify Sellers Service
Coordinator in writing of the objection
and/or
claim. Each Party shall cause its Service Coordinator to
promptly investigate the objection
and/or claim
and cause the Service Coordinators to use their Best Efforts to
obtain the relevant facts and, if possible, resolve
and/or
correct the objection or claim. If and to the extent possible,
the Service Coordinators shall execute a writing evidencing the
resolution of such matter and the Parties shall be bound
thereby. It is the intention of the Parties to amicably resolve
their disputes in rendering the Transition Services hereunder.
ARTICLE IV
TRANSITION
Section 4.1 System
Migration. Seller agrees to use its
commercially reasonable efforts to assist Buyer in connection
with the transition from the performance of the Transition
Services by Seller to the performance of such services by Buyer
(including the migration of Buyers systems and other
services related to the transfer of a function rather than the
ongoing performance of such function) (collectively, the
Migration Services), taking into account the
need to minimize both the cost of such transition and the
disruption to the ongoing business activities of the Parties
hereto. It is the intention of the Parties that Seller transfer
to Buyer and provide reasonable information to Buyer relating to
the design, configuration, system
start-up and
hardware and software
set-up
currently used by the Transferred Business; provided,
that Seller will not provide recommendations or advice with
respect to any design, configuration, system
start-up or
hardware or software
set-up in
relation to the Transferred Business or otherwise. The Parties
shall keep each other reasonably informed on a regular basis of
the status of the performance of Transition Services, the
Transition Services that will be required and the timing thereof
and the estimated dates for termination of such Transition
Services. The Parties shall communicate by telephone,
e-mail and
other forms of communication to have an open working
relationship to support the Transition Services and smooth the
transition of the Transition Services to Buyer independently.
The Parties shall work together to shorten, to the extent
reasonably practicable, the period of migration and thereby the
Term of this Agreement.
ARTICLE V
INTELLECTUAL
PROPERTY
Section 5.1 Title
to Intellectual Property. The Parties agree
that any Intellectual Property Rights of Buyer or its
Subsidiaries and its Affiliates (including, without limitation,
the Acquired Companies) made available to Seller, its
Subsidiaries or Affiliates in connection with the Transition
Services and any derivative works, additions, modifications or
enhancements thereof shall remain the sole property of Buyer and
its Subsidiaries and Affiliates. To the extent that Seller, its
Subsidiaries or Affiliates use their own or third-party
Intellectual Property Rights in connection with providing the
Transition Services, such Intellectual Property Rights, and any
derivative works, additions, modifications or enhancements
thereof created during the Term shall remain the sole property
of Seller, its Subsidiaries or its Affiliates or the third
party, as the case may be.
ARTICLE VI
TERM AND
TERMINATION
Section 6.1 Term. Unless
earlier terminated in accordance with Section 6.2,
the term of this Agreement shall commence on the Closing Date
and end on the last day of the seventh (7th) month following the
Closing Date (the Term). Notwithstanding the
foregoing, if all Transition Services to be provided hereunder
are discontinued pursuant to Section 1.3 prior to
the end of the Term, the Term shall end on the date on which the
last such Transition Service is discontinued.
C-4
Section 6.2 Termination
for Cause. Either Party (the
Terminating Party) may terminate this
Agreement with immediate effect by written notice to the other
Party (the Other Party) on or at any
time after the occurrence of any of the following events:
(a) the Other Party is in default of any of its material
obligations under this Agreement and (if the breach is capable
of remedy) has failed to remedy the breach within thirty
(30) days after receipt of a written notice from the
Terminating Party with respect thereto;
(b) the Other Party shall commence a voluntary case or
other proceeding seeking liquidation, reorganization or other
relief with respect to itself or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial
part of its property, or shall consent to any such relief or to
the appointment of or taking possession by any such official in
an involuntary case or other proceeding commenced against it, or
shall make a general assignment for the benefit of creditors, or
shall fail generally to pay its debts as they become due, or
shall take any corporate action to authorize any of the
foregoing; and
(c) an involuntary case or other proceeding shall be
commenced against the Other Party seeking liquidation,
reorganization or other relief with respect to it or its debts
under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it
or any substantial part of its property, and such involuntary
case or other proceeding shall remain undismissed and unstayed
for a period of sixty (60) days; or an order for relief
shall be entered against the Other Party.
Section 6.3 Survival. The
following sections shall survive any termination of this
Agreement: Article II (Service Charges) (to the extent of
amounts incurred prior to termination or expiration of the
Term); Section 3.1 (Payment) (to the extent of
amounts accrued prior to termination or owing to Buyer after the
expiration of the Term); Section 5.1 (Title to
Intellectual Property); this Section 6.3 (Survival);
Article VII (Confidentiality; Systems Security);
Section 8.1 (Indemnity); and Article IX
(Miscellaneous).
ARTICLE VII
CONFIDENTIALITY;
SYSTEMS SECURITY
Section 7.1 Confidentiality.
(a) Except as otherwise provided in this Agreement,
(i) Seller shall, and shall cause its Subsidiaries and
Affiliates (and each of their respective Representatives to whom
they disclose such information), to keep confidential all
information of Buyer and its Subsidiaries and Affiliates,
including all information relating to the Transferred Business,
whether known before the date of this Agreement or disclosed in
the course of performing the Transition Services, and
(ii) Buyer shall, and shall cause its Subsidiaries and
Affiliates (and each of their respective Representatives to whom
they disclose such information), to keep confidential all
information of Seller or any of its Subsidiaries or Affiliates
that Buyer or any Subsidiary or Affiliate thereof receives in
connection with the performance of the Transition Services,
other than any information solely related to the Transferred
Business, Buyer, its Subsidiaries or Affiliates or their
respective assets.
(b) The provisions of this Section 7.1 shall
not apply to the disclosure by any Party or their respective
Affiliates of any information, documents or materials
(i) that are or become publicly available, other than by
reason of a breach of this Section 7.1 by such Party
or any of its Affiliates, (ii) received from a third party
not bound by any confidentiality agreement with the
non-disclosing Party, except in the case of information relating
to the Transferred Business, the non-disclosing Party shall
include both Buyer and Seller, (iii) required by Applicable
Law to be disclosed by such Party, or (iv) necessary to
establish such Partys rights under this Agreement or the
Stock Purchase Agreement; provided, that in the case of
clauses (iii) and (iv), the Person intending to make
disclosure of confidential information shall promptly notify the
Party to whom it is obligated to keep such information
confidential and, to the extent practicable, provide such Party
a reasonable opportunity to prevent public disclosure of such
information.
C-5
(c) With regard to confidential information concerning the
software of third parties with which Seller conducts business
that is included in or related to the Transition Services, to
the extent required by such third parties, Buyer agrees to
execute and deliver any other reasonable documents or take any
reasonable actions that are reasonably required by any vendor or
licensor of such software in order for Buyer to access and use
such vendors software, including abiding by the terms and
conditions of any such software license agreements.
Section 7.2 Systems
Security. If Buyer shall receive access to
any of Sellers computer facilities, system(s), networks
(voice or data) or software (Systems) in
connection with performance of the Transition Services, Buyer
shall comply with all system security policies, procedures and
requirements that may be provided by Seller to Buyer in writing
from time to time (the Security Regulations)
and shall not tamper with, compromise or circumvent any security
or audit measures employed by Seller. Any employee of Buyer or
any of its Subsidiaries or Affiliates that is expected to have
access to Sellers Systems or that accesses Sellers
Systems shall be required to execute a separate system access
agreement. Buyer shall ensure that only those employees of Buyer
who are specifically authorized to gain access to Sellers
Systems and no other employees of Buyer will gain such access
and shall prevent unauthorized destruction, alteration or loss
of information contained therein by employees of Buyer. If at
any time Seller determines that any personnel of Buyer of any of
its Subsidiaries or Affiliates has sought to circumvent or has
circumvented Sellers Security Regulations or that an
unauthorized Person has accessed or may access Sellers
Systems or a Person has engaged in activities that led or may
lead to the unauthorized access, destruction or alteration or
loss of data, information or software, Seller may immediately
terminate any such Persons access to the Systems and shall
promptly notify Buyer. In addition, a material failure by any
employee of Buyer or any of its Subsidiaries or Affiliates to
comply with Sellers Security Regulations shall be a breach
of this Agreement, in which case, Seller shall notify Buyer and
such Parties, through their Service Coordinators, who shall work
together to remediate the cause of said breach. Notwithstanding
the foregoing, if such breach is reasonably likely to have a
material adverse affect on Sellers computer facilities,
systems, networks or software, Seller shall be entitled to
immediately terminate the Transition Services to which the
breach relates by written notice to Buyer.
ARTICLE VIII
INDEMNITY;
LIMITATION OF LIABILITY
Section 8.1 Indemnity.
(a) Buyer shall indemnify, hold harmless and, at
Sellers option, defend Seller and its Affiliates and each
of their respective officers, directors, employees and
Representatives against all claims, liabilities, damages, losses
or expenses (including reasonable attorneys fees and costs
of litigation) (Losses) to the extent arising
from (i) any material breach of this Agreement by Buyer or
any Affiliate thereof, (ii) the performance by Seller or
any Affiliate thereof of any Transition Service (except to the
extent that such Losses arise from the gross negligence or
willful misconduct of Seller or any Affiliate thereof or a
material breach of this Agreement by Seller or any Affiliate
thereof), or (iii) the gross negligence or willful
misconduct of Buyer or any of its Subsidiaries or Affiliates in
its performance of this Agreement. No action or claim of any
type relating to or arising out of this Agreement may be brought
or made by Seller more than one (1) year after Seller first
has knowledge of the basis for the action or claim.
(b) Seller shall indemnify and hold harmless and, at
Buyers option, defend Buyer and its officers, directors,
employees and Representatives, against all Losses arising from
(i) any material breach by Seller or any Affiliate thereof
of the terms of this Agreement or (ii) the gross negligence
or willful misconduct of Seller or any Affiliate thereof in its
performance of the Transition Services. No action or claim of
any type relating to or arising out of this Agreement may be
brought or made by Buyer more than one (1) year after Buyer
first has knowledge of the basis for the action or claim.
(c) The rights of any Party to indemnification under this
Section 8.1 for any Losses incurred by such Party
shall be reduced by the net amount such Party recovers (after
deducting all reasonable attorneys fees, expenses and
other costs of recovery) from any insurer or other party liable
for such Losses, and such Party shall use its Best Efforts to
effect any such recovery.
C-6
Section 8.2 Limitation
of Liability; Certain Waivers.
TO THE EXTENT PERMITTED UNDER APPLICABLE LAW AND EXCEPT AS
OTHERWISE SPECIFICALLY PROVIDED IN SECTION 8.1(b)
HEREOF, SELLER AND ITS AFFILIATES SHALL HAVE NO LIABILITY TO
BUYER OR BUYERS AFFILIATES RESULTING FROM OR ARISING OUT
OF THE PERFORMANCE, DELIVERY OR PROVISION OF ANY SERVICES
HEREUNDER. THE AGGREGATE CUMULATIVE LIABILITY OF SELLER AND ITS
AFFILIATES UNDER THIS AGREEMENT, WHETHER IN WARRANTY, CONTRACT,
TORT (INCLUDING CONTRIBUTION OR STRICT LIABILITY), PRODUCT
LIABILITY OR OTHERWISE, SHALL NOT EXCEED A MAXIMUM OF $250,000,
EXCEPT TO THE EXTENT THAT ANY SUCH LIABILITY ARISES FROM THE
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SELLER OR ANY
AFFILIATE THEREOF.
THE PARTIES TO THIS AGREEMENT EXPRESSLY WAIVE AND FOREGO ANY
RIGHT TO RECOVER INDIRECT, SPECIAL, CONSEQUENTIAL, INCIDENTAL,
PUNITIVE, EXEMPLARY OR SIMILAR LOSSES OR DAMAGES, INCLUDING
WITHOUT LIMITATION LOSSES OR DAMAGES IN CONNECTION WITH OR
RELATING TO, LOSS OF DATA, LOSS OF REVENUE, LOSS OF CUSTOMERS OR
CLIENTS, LOSS OF GOODWILL OR LOSS OF PROFITS, DAMAGE TO OR LOSS
OF USE OF ANY PROPERTY, ANY INTERRUPTION OR LOSS OF SERVICE, OR
ANY LOSS OF BUSINESS, HOWEVER CAUSED, IN ANY ARBITRATION OR
PROCEEDING ARISING OUT OF OR RESULTING FROM THIS AGREEMENT OR
THE PERFORMANCE OR NON PERFORMANCE OF OBLIGATIONS HEREUNDER,
WHETHER SUCH CLAIM IS BASED ON WARRANTY, CONTRACT, TORT
(INCLUDING NEGLIGENCE, GROSS NEGLIGENCE, CONTRIBUTION OR STRICT
LIABILITY), PRODUCT LIABILITY OR OTHERWISE, EVEN IF THE PARTY
HAS BEEN ADVISED OF THE POSSIBILITY OR LIKELIHOOD OF THE SAME.
EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY OR CLAIM
WHICH MAY ARISE OUT OF OR RELATE TO THIS AGREEMENT IS LIKELY TO
INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY
HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
SERVICES CONTEMPLATED HEREBY.
EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE EITHER OF THE
FOREGOING WAIVERS, (ii) IT UNDERSTANDS AND HAS CONSIDERED
THE IMPLICATIONS OF SUCH WAIVERS, (iii) IT MAKES SUCH
WAIVERS VOLUNTARILY, AND (iv) IT HAS BEEN INDUCED TO ENTER
INTO ANY OF THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION 8.2.
Section 8.3 Disclaimer
of Warranties. NO WARRANTIES, WHETHER
EXPRESS, IMPLIED OR STATUTORY, ARE MADE OR CREATED BETWEEN THE
PARTIES AS A RESULT OF THIS AGREEMENT, INCLUDING, BUT NOT
LIMITED TO, IMPLIED WARRANTIES OF MERCHANTABILITY,
NON-INFRINGEMENT AND FITNESS FOR A PARTICULAR PURPOSE EXCEPT TO
THE EXTENT SPECIFICALLY SET FORTH HEREIN.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Modification;
Waiver. This Agreement may be amended or
modified only by a written instrument executed by each of the
Parties. Any of the terms and conditions of this Agreement may
be waived only in writing by the Party entitled to the benefits
thereof.
Section 9.2 Entire
Agreement. This Agreement, including
Exhibit A (which constitutes an integral part of
this Agreement), together with the Stock Purchase Agreement,
constitute the entire agreement of the Parties with respect to
the subject matter hereof, and supersede all other prior
agreements and understandings, oral or written,
C-7
express or implied, between the Parties and their respective
Affiliates, Representatives and agents in respect of the subject
matter hereof, except that this Agreement does not supersede the
Confidentiality Agreement, the terms and conditions of which the
Parties hereby expressly reaffirm. In the event of a conflict
between the terms and conditions of this Agreement and the Stock
Purchase Agreement, the Stock Purchase Agreement shall govern.
Section 9.3 Further
Actions. Each Party shall execute and deliver
such certificates and other documents and take such other
actions as may reasonably be requested by the other Party in
order to consummate or implement the transactions contemplated
hereby. Seller shall use commercially reasonable efforts to
obtain, and Buyer agrees to provide reasonable assistance at the
request of Seller in obtaining, any waivers, permits, consents
or sublicenses (including, without limitation, any license fees
to third-party vendors) (each, a Consent)
that Seller determines, in its sole discretion, after
consultation with Buyer, may be required with respect to any
existing agreement with any third party in order to provide any
of the Transition Services hereunder; provided, that
(i) Buyer shall, at the exclusive option of Seller, pay, or
reimburse Seller for, any and all costs related to obtaining any
such Consent, and (ii) Seller shall not be under any
obligation to provide any Transition Service hereunder if it is
unable, after using commercially reasonable efforts, to obtain
such Consent necessary to provide such Transition Service;
provided, that if such Consent cannot be obtained, the Parties
shall use their respective commercially reasonable efforts to
arrange for alternative methods of obtaining such Transition
Service.
Section 9.4 Notices. All
notices, requests, demands and other communications made in
connection with this Agreement shall be in writing and shall be
deemed to have been duly given if delivered in accordance with
Section 11.01 of the Stock Purchase Agreement with a
copy to the other Partys Service Coordinator.
Section 9.5 Assignment. This
Agreement shall be binding upon and inure to the benefit of the
Parties and their respective successors and permitted assigns,
but shall not be assignable, by operation of law or otherwise,
by any Party without the prior written consent of each other
Party (except in connection with a business combination of
Seller) and any purported assignment or other transfer in
violation of the foregoing without such consent shall be void
and unenforceable, except that Seller may assign this Agreement
to any of its Affiliates without the consent of Buyer;
provided, that no such assignment shall in any way affect
the obligations or liabilities of Seller under this Agreement,
which obligations and liabilities shall remain in effect
notwithstanding such assignment. Except as otherwise provided
herein, nothing in this Agreement shall confer any rights upon
any Person that is not a Party or a successor or permitted
assignee of a Party.
Section 9.6 Use
and Resale. The Transition Services provided
hereunder shall be used only by Buyer and its Subsidiaries and
Affiliates solely in connection with the operation of the
Transferred Business and no recipient shall resell, license the
use of or otherwise permit the use by others of any such
Transition Services except as permitted hereunder.
Section 9.7 Headings;
Counterparts. The section headings in this
Agreement are for convenience of reference only and shall not be
deemed to alter or affect the meaning or interpretation of any
provision hereof. This Agreement may be executed in any number
of counterparts, all of which shall constitute one and the same
instrument. This Agreement shall become effective when each
Party shall have received a counterpart hereof signed by each
other Party.
Section 9.8 Facsimile. This
Agreement, to the extent signed and delivered by means of
facsimile transmission or by
e-mail
delivery of a portable document format (.pdf or similar format)
data file, shall be treated in all manner and respects as an
original agreement or instrument and shall be considered to have
the same binding effect as if it were the original signed
version thereof delivered in person. No Party shall claim that
this Agreement is invalid, not binding or unenforceable based
upon the use of facsimile transmission or
e-mail
delivery of a portable document format (.pdf or similar format)
data file to deliver a signature, or the fact that any signature
or agreement or instrument was transmitted or communicated
through the use of facsimile transmission or
e-mail
delivery of a portable document format (.pdf or similar format)
data file, and each Party forever waives any such claim or
defense.
Section 9.9 Governing
Law; Consent to Jurisdiction. This Agreement
shall be construed, performed and enforced in accordance with
the laws of the State of Delaware without giving effect to its
principles or rules of conflict of laws to the extent such
principles or rules are not mandatorily applicable by statute
and would require or
C-8
permit the application of the laws of another jurisdiction. Each
of the Parties hereby irrevocably and unconditionally submits,
for itself and for its property, to the exclusive jurisdiction
of any Delaware State court or Federal court of the United
States of America sitting in Delaware and any appellate court
from any court thereof, in any suit, action or proceeding
arising out of or relating to this Agreement or the transactions
contemplated hereby or for recognition or enforcement of any
judgment relating thereto, and each Party hereby irrevocably and
unconditionally agrees that all claims in respect of any such
action or proceeding may be heard and determined in such
Delaware State court or, to the extent permitted by law, in such
Federal court. Each Party agrees that a final judgment in any
such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in
any other manner provided by Applicable Law. Each Party hereby
irrevocably and unconditionally waives, to the fullest extent it
may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any suit, action
or proceeding arising out of or relating to this Agreement or
the transactions contemplated hereby in any Delaware State or
Federal court. Each Party hereby irrevocably waives, to the
fullest extent permitted by Applicable Law, the defense of an
inconvenient forum to the maintenance of such action or
proceeding in any such court. Each Party irrevocably consents to
service of process in the manner provided for notices in
Section 11.01 of the Stock Purchase Agreement.
Nothing in this Agreement will affect the right of any Party to
serve process in any other manner permitted by Applicable Law.
Section 9.10 No
Breach; Force Majeure. Notwithstanding
anything to the contrary set forth in this Agreement,
(i) Seller shall not provide any Services hereunder if the
provision thereof would result in the violation of any
Applicable Law or Order to which any Seller or any of its
Affiliates or its or their properties is a party or otherwise
bound or subject and (ii) no Party shall be liable for a
failure or delay in the performance of any of its obligations
under this Agreement where such failure or delay is (A) the
result of fire, flood, or other natural disaster, act of God,
war, act of war, terrorist act, rebellion, embargo, riot,
strike, lockout or other labor dispute, unavailability of
communication facilities including any delay or failure in
communications or electronic data transmission as a result of
excessive or extraordinary traffic caused by extraordinary
market occurrences or circumstances; the acts or failure of
performance of third party landlords or other third party
vendors, other than the Affiliates of Seller, or the
intervention of any Governmental Authority or other causes
beyond the control of such Party and (B) not due to such
Partys own gross negligence or willful misconduct;
provided, that the Party failing in or delaying its
performance promptly notifies the other Party of its inability
to perform and states the reason for such inability and remedies
such failure or delay as soon as practicable.
Section 9.11 Severability. If
any provision, including any phrase, sentence, clause, section
or subsection, of this Agreement is invalid, inoperative or
unenforceable for any reason, such circumstances shall not have
the effect of rendering such provision invalid, inoperative or
unenforceable in any other case or circumstance, or of rendering
any other provision herein contained invalid, inoperative or
unenforceable to any extent whatsoever and a suitable and
equitable provision shall be substituted for any such invalid,
inoperative or unenforceable provision in order to carry out, so
far as may be valid or enforceable, such provision.
Section 9.12 No
Third Party Beneficiaries. Except as provided
herein, nothing in this Agreement shall confer any rights upon
any Person (other than the Acquired Companies) that is not a
Party or a successor or permitted assignee of a Party.
Section 9.13 Interpretation. The
Parties have participated jointly in the negotiating and
drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation shall arise, this Agreement
shall be construed as if drafted jointly and no presumption or
burden of proof shall arise favoring or disfavoring any Party by
virtue of the authorship of any provisions of this Agreement.
[Remainder
of page intentionally left blank.]
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IN WITNESS WHEREOF, the Parties hereto have executed this
Agreement as of the date first written above.
TECHTEAM GLOBAL, INC.
Name:
Title:
JACOBS ENGINEERING GROUP INC.
Name:
Title:
[SIGNATURE
PAGE TO TRANSITION SERVICE AGREEMENT]
C-10
EXHIBIT A
TRANSITION
SERVICES AND FEES
A. IT Services.
1 Seller shall maintain for the benefit of Buyer the
following IT and telecommunications infrastructure, hardware and
software services necessary to operate the Business as existing
on the Closing Date: telephone conferencing lines and related
services, website hosting, website access for customer support,
website applications (including eTuition), Microsoft SharePoint
access, eDoc access, helpdesk support, hardware and associated
software related to card reader access for the Chantilly and
Bethesda offices, administrative access to the Acquired
Companies enterprise devices, implementation support for
issues regarding the Acquired Companies IT infrastructure,
VPN connectivity, VPN keys for network access, Microsoft
software, PeopleSoft software, Gateway Anti-Virus software,
Active Directory, the domain names <techteam-us.com>,
<techteamgwac.com>, <techteamgov.com>,
<techteamgovt.com>, and all financial reporting
systems, in each case, which shall be maintained by Seller with
procedures and controls reasonably comparable to those provided
to Sellers retained business.
2 Seller shall provide Buyer with the use of one server to
be designated for the use of the domain names identified in
Paragraph I.A.1 above.
3 Seller shall allow the Transferred Employees to send and
receive emails related to Buyers business on Sellers
email accounts until such employees receive email accounts with
Buyer, provided that Buyer shall use its Best Efforts to
coordinate and facilitate such transfer as soon as possible
following the Closing Date.
4 Seller shall provide email and voice mail forwarding as
reasonably requested by Buyer, provided that Buyer shall
use its Best Efforts to notify third parties doing business with
Seller of the new email addresses and phone numbers.
5 Seller shall reasonably assist Buyer and the Transferred
Employees in porting cellular phone and voice mail numbers to
Buyers service as time reasonably permits.
6 Duration: Up to 180 days for the
IT Services described in Sections I.A.1 and 2, up to
90 days for the IT Services described in Sections I.A.3 and
5, and up to 365 days for the IT Services described in
Section I.A.4; provided, however, that the IT Services
described in Section I.A. (other than I.A.4) with respect
to any applications integrated with Active Directory
Authentication shall be provided for a period of up to
210 days.
B. Financial/Accounting Services.
1 Sellers financial and accounting staff will be
reasonably accessible to assist Buyer with questions relating to
the following financial/accounting matters: collections, mail
services, receipts, contract administration, billing and
accounts receivable collection, supplier and landlord related
ordering, and accounts payable administration. Except as
otherwise set forth herein or as otherwise provided for in the
Stock Purchase Agreement, Seller shall not be required to
prepare financial statements, make ledger entries, or prepare or
file tax returns.
2 Duration: Up to 180 days.
C. Treasury Services.
1 Sellers treasury staff will be reasonably
accessible to assist Buyer with the following treasury matters:
bank account management, processing of electronic fund
transfers, cash management, cash controls, customer deposits,
online treasury platform access management, administration of
credit card accounts, administration of state and local taxes
and other tax management; provided that Buyer shall
remain fully responsible for managing its own treasury services.
C-11
2 Duration: Up to 180 days.
D. Payroll Services.
1 Seller shall provide to Buyer payroll processing and
services, either directly or through a payroll processing
company, for the Transferred Employees.
2 Seller shall assist Buyer in transitioning the payroll
processing to Buyers payroll processing provider.
3 Duration: Up to 180 days.
E. Human Resources Services.
1 Sellers human resources staff will be reasonably
accessible to respond to questions of Buyer related to the
payment and benefits of the Transferred Employees, and will
assist the Transferred Employees in enrollment of such employees
into Buyers plans.
2 Duration: Up to 180 days.
F. Welfare Benefits.
1. If requested by Buyer, Seller shall provide each of the
Transferred Employees (and their dependents and other
individuals covered through them) with the group, medical,
dental, and vision coverage they enjoyed immediately prior to
the Closing and shall charge each such Transferred Employee the
same monthly premium as currently charged to each such
Transferred Employee.
2. Duration: Up to 30 days.
G. Miscellaneous
1. Seller shall provide to Buyer reasonable assistance in
transitioning the Acquired Companies ISO 9001
certification.
2. Seller shall permit Buyer to utilize the services
currently used in the Transferred Business pursuant to
Sellers Boscobel, Monster, and Dell agreements (each as
more fully described in Schedule 6.05(c) of the Schedules
to the Stock Purchase Agreement).
3. Duration: Up to 30 days.
A. Buyer shall be responsible for the payment of all out of
pocket costs directly related to the provision of IT services
for the Business for the benefit of Buyer, including without
limitation costs of the following third party providers: Orange
Conferencing, Microsoft, Orion, Dell, Gateway, PeopleSoft. Buyer
shall furthermore be responsible for procuring at its expense
any additional equipment, networking equipment or software to be
used on the designated server described in Section 1.A.
B. Buyer shall be responsible for the payment of all out of
pocket costs directly related to the provision of
Financial/Accounting Services for the Business, including
without limitation costs of the following third party providers:
JPMorgan Chase.
C. Buyer shall be responsible for the payment of all out of
pocket costs directly related to the provision of the Treasury
Services for the Business for the benefit of Buyer, including
without limitation costs of the following third party providers:
Bank of Newport.
D. All payroll amounts shall be paid by Buyer and using
Buyers federal employer identification number. Buyer shall
furthermore be responsible for the payment of all out of pocket
costs directly related to the provision of
C-12
the Payroll Services for the Business for the benefit of Buyer,
including without limitation costs of the following third party
providers: ADP.
E. Buyer shall be responsible for the payment of all out of
pocket costs directly related to the provision of Human
Resources Services for the Business for the benefit of Buyer.
F. Buyer shall be responsible for the payment of all out of
pocket costs directly related to the provision or utilization of
the Miscellaneous Services for the Business for the benefit of
Buyer, including without limitation costs of the following third
party providers: BSI Management Systems, Boscobel, Monster, and
Dell.
G. Buyer shall be responsible for the payment of the
difference between the total insurance premium for group
medical, dental, and vision coverage that is actually billed to
Seller with respect to the Transferred Employees for the period
of coverage elected by Buyer pursuant to Paragraph I.F.
above and the amount charged to Transferred Employees for such
coverage pursuant to existing payroll deduction agreements
between Seller and the Transferred Employees.
C-13
Exhibit D
[LETTERHEAD OF HOULIHAN LOKEY CAPITAL, INC.]
September 14, 2010
TechTeam Global, Inc.
27335 West 11 Mile Road
Southfield, Michigan 48033
Attn: Members of the Board of Directors
Dear Members of the Board of Directors:
We understand that TechTeam Global, Inc. (TechTeam), Jacobs Engineering Group Inc.
(Jacobs) and Jacobs Technology Inc., a wholly owned subsidiary of Jacobs (Jacobs Sub), propose
to enter into an Amendment No. 1 to Stock Purchase Agreement and Limited Waiver, dated as of
September 14, 2010 (the Amendment), pursuant to which TechTeam will sell to Jacobs Sub all of the
outstanding shares of the common stock of TechTeam Government Solutions, Inc., a wholly owned
subsidiary of TechTeam, that conducts TechTeams business of providing information technology-based
and other professional services to governmental authorities and other commercial customers (the
Business and, such sale, the Transaction), for aggregate consideration to be received by
TechTeam of $43 million in cash (the Consideration), subject to certain adjustments and an escrow
arrangement as provided for in the Agreements (as defined below).
You have requested that Houlihan Lokey Capital, Inc. (Houlihan Lokey) provide an opinion
(the Opinion) as to whether, as of the date hereof, the Consideration to be received by TechTeam
in the Transaction is fair to TechTeam from a financial point of view.
In connection with this Opinion, we have made such reviews, analyses and inquiries as we have
deemed necessary and appropriate under the circumstances. Among other things, we have:
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1. |
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reviewed the following agreements and documents: |
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a. |
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the Amendment among TechTeam, a Delaware corporation, Jacobs, a Delaware
corporation, and Jacobs Sub, a Tennessee corporation; and |
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b. |
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the Stock Purchase Agreement, dated as of June 3, 2010, among TechTeam, Jacobs
and Jacobs Sub (the Agreement and, together with the Amendment, the Agreements); |
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2. |
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reviewed certain publicly available business and financial information relating to the
Business that we deemed to be relevant; |
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3. |
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reviewed certain information relating to the historical, current and future operations,
financial condition and prospects of the Business made available to us by TechTeam,
including financial projections (and adjustments thereto) provided to us in September 2010
prepared by the managements of TechTeam and the Business for the fiscal year ending
December 31, 2010 under three cases designated by such managements as, respectively, the
low, middle and high projections (collectively, the 2010 Projections) reflecting
alternative assumptions of such managements with respect to the Business performance under
existing government contracts and ability to win, and the timing of awards for, recompeted
and new government contracts, and |
D-1
TechTeam Global, Inc.
September 14, 2010
|
|
|
discussed with the managements of TechTeam and the Business their assessments as to the
relative likelihood of achieving the future financial results reflected in the 2010
Projections; |
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4. |
|
spoken with certain members of the managements of TechTeam and the Business and certain
of their representatives and advisors regarding (a) the Transaction and related matters and
(b) the operations, financial condition, past performance relative to projected performance
and trends in the financial results and prospects of the Business, including changes in the
financial condition of the Business since the preparation by the managements of TechTeam
and the Business of the financial projections relating to the Business for the fiscal years
ending December 31, 2010 through December 31, 2016 previously provided to us in connection
with the execution of the Agreement (the Prior Projections) and changes in the views of
the managements of TechTeam and the Business since the preparation by such managements of
the high projections with respect to the Business performance under existing government
contracts and ability to win, and the timing of awards for, recompeted and new government
contracts; |
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5. |
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compared the financial and operating performance of the Business with that of public
companies that we deemed to be relevant; |
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6. |
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considered the publicly available financial terms of certain transactions that we
deemed to be relevant; |
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7. |
|
considered the results of the third-party solicitation process conducted by TechTeam,
with our assistance, prior to execution of the Agreement with respect to a possible sale of
the Business; and |
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8. |
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conducted such other financial studies, analyses and inquiries and considered such
other information and factors as we deemed appropriate. |
We have relied upon and assumed, without independent verification, the accuracy and
completeness of all data, material and other information furnished, or otherwise made available, to
us, discussed with or reviewed by us, or publicly available, and do not assume any responsibility
with respect to such data, material and other information. As you are aware, we have been advised
by the managements of TechTeam and the Business that the operations and prospects of the Business
have declined since the preparation by such managements of the Prior Projections and that certain
assumptions of such managements with respect to current and prospective government contracts
reflected in the high projections are no longer valid. Accordingly, the managements of TechTeam
and the Business have indicated that the Prior Projections and the high projections are no longer
reflective of such managements best currently available estimates and judgments as to the future
financial results and condition of the Business and should not be relied upon for purposes of our
analyses and this Opinion. In addition, we have been advised by the managements of TechTeam and
the Business that they have not prepared updated financial projections relating to the Business
beyond the fiscal year ending December 31, 2010. Given the absence of long-term projections that
the managements of TechTeam and the Business believe are reliable, we have not performed an
analysis of the estimated present value of the future cash flows of the Business. With respect to
the low and middle projections, the managements of TechTeam and the Business have advised us,
and we have assumed, that such financial projections (and adjustments thereto) have been reasonably
prepared in good faith on bases reflecting the best currently available estimates and judgments of
such managements as to the future financial results and condition of the Business under the
alternative business scenarios reflected therein, and we express no opinion with respect to such
projections or the assumptions on which they are based. We have relied
D-2
TechTeam Global, Inc.
September 14, 2010
upon and assumed, without independent verification, that there has been no change in the
Business or its assets, liabilities, financial condition, results of operations, cash flows or
prospects since the date of the most recent financial statements provided to us that would be
material to our analyses or this Opinion, that the financial projections relating to the Business
reviewed by us reflect all assets and liabilities to be sold and assumed in the Transaction and
that there is no information or any facts that would make any of the information reviewed by us
incomplete or misleading. We also have assumed, at the direction of TechTeam, that any adjustments
to the Consideration pursuant to the Agreements, and payments, if any, made to Jacobs or its
indemnitees from the portion of the Consideration to be held in escrow in accordance with the terms
of the Agreements, will not in any respect be material to our analyses or this Opinion.
We have relied upon and assumed, without independent verification, that (a) the
representations and warranties of all parties to the Agreements and all other related documents and
instruments that are referred to therein are true and correct, (b) each party to the Agreements and
such other related documents and instruments will fully and timely perform all of the covenants and
agreements required to be performed by such party, (c) all conditions to the consummation of the
Transaction will be satisfied without waiver thereof, and (d) the Transaction will be consummated
in a timely manner in accordance with the terms described in the Agreements and such other related
documents and instruments, without any amendments or modifications thereto. We also have relied
upon and assumed, without independent verification, that (i) the Transaction will be consummated in
a manner that complies in all respects with all applicable federal and state statutes, rules and
regulations, and (ii) all governmental, regulatory, and other consents and approvals necessary for
the consummation of the Transaction will be obtained and that no delay, limitations, restrictions
or conditions will be imposed or amendments, modifications or waivers made that would
have an effect on the Business, TechTeam or the Transaction that would be material to our analyses
or this Opinion.
Furthermore, in connection with this Opinion, we have not been requested to make, and have not
made, any physical inspection or independent appraisal or evaluation of any of the assets,
properties or liabilities (fixed, contingent, derivative, off-balance sheet or otherwise) of
TechTeam (including, without limitation, the Business) or any other party, nor were we provided
with any such appraisal or evaluation. We did not estimate, and express no opinion regarding, the
liquidation value of the Business or any entity. We have undertaken no independent analysis of any
potential or actual litigation, regulatory action, possible unasserted claims or other contingent
liabilities, to which TechTeam (including, without limitation, those relating to the Business) is
or may be a party or is or may be subject, or of any governmental investigation of any possible
unasserted claims or other contingent liabilities to which TechTeam (including, without limitation,
those relating to the Business) is or may be a party or is or may be subject.
This Opinion is necessarily based on financial, economic, market and other conditions as in
effect on, and the information made available to us as of, the date hereof. We have not
undertaken, and are under no obligation, to update, revise, reaffirm or withdraw this Opinion, or
otherwise comment on or consider events occurring or coming to our attention after the date hereof.
This Opinion is furnished for the use and benefit of the Board of Directors of TechTeam (in
its capacity as such) in connection with its evaluation of the Transaction and may not be used for
any other purpose without our prior written consent. This Opinion should not be construed as
creating any fiduciary duty on Houlihan Lokeys part to any party. This Opinion is not intended to
be, and does not constitute, a recommendation to the Board of Directors of TechTeam, any security
holder or any other person as to how to act or vote with respect to any matter relating to the
Transaction.
D-3
TechTeam Global, Inc.
September 14, 2010
In the ordinary course of business, certain of our affiliates, as well as investment funds in
which they may have financial interests, may acquire, hold or sell, long or short positions, or
trade or otherwise effect transactions, in debt, equity, and other securities and financial
instruments (including loans and other obligations) of, or investments in, TechTeam, Jacobs or any
other party that may be involved in the Transaction and their respective affiliates or any currency
or commodity that may be involved in the Transaction.
Houlihan Lokey and certain of its affiliates in the past have provided investment banking,
financial advisory and other financial services to Jacobs and/or certain of its affiliates, for
which Houlihan Lokey and such affiliates have received compensation. Houlihan Lokey and certain of
its affiliates currently are providing financial advisory services to TechTeam in connection with
TechTeams exploration of certain strategic alternatives relating to its commercial business, and
in the future may provide investment banking, financial advisory and other financial services to
TechTeam, Jacobs, other participants in the Transaction or certain of their respective affiliates,
for which Houlihan Lokey and such affiliates may receive compensation. In addition, Houlihan Lokey
and certain of its affiliates and certain of our and their respective employees may have committed
to invest in private equity or other investment funds managed or advised by certain affiliates or
security holders of TechTeam or other participants in the Transaction, and in portfolio companies
of such funds, and may have co-invested with certain affiliates or security holders of TechTeam or
other participants in the Transaction, and may do so in the future. Furthermore, in connection
with bankruptcies, restructurings, and similar matters, Houlihan Lokey and certain of its
affiliates may have in the past acted, may currently be acting and may in the future act as
financial advisor to debtors, creditors, equity holders, trustees and other interested parties
(including, without limitation, formal and informal committees or groups of creditors) that may
have included or represented and may include or represent, directly or indirectly, or may have been
adverse to, certain affiliates or security holders of TechTeam or other participants in the
Transaction, for which advice and services Houlihan Lokey and such affiliates have received and may
receive compensation.
Houlihan Lokey has acted as financial advisor to TechTeam in connection with the Transaction
and has received and will receive a fee for such services, a portion of which is contingent upon
the consummation of the Transaction. TechTeam has agreed to reimburse certain of our expenses and
to indemnify us and certain related parties for certain potential liabilities arising out of our
engagement.
We have not been requested to opine as to, and this Opinion does not express an opinion as to
or otherwise address, among other things: (i) the underlying business decision of TechTeam, its
security holders or any other party to proceed with or effect the Transaction, (ii) the terms of
any arrangements, understandings, agreements or documents related to, or the form, structure or any
other portion or aspect of, the Transaction or otherwise (other than the Consideration to the
extent expressly specified herein), including, without limitation, any terms or aspects of any
stockholder voting agreement, retention agreement (or payments related thereto) or escrow,
indemnity, guarantee or licensing arrangements to be entered into in connection with, or any tax
implications of, the Transaction, (iii) the fairness of any portion or aspect of the Transaction to
the holders of any class of securities, creditors or other constituencies of TechTeam, or to any
other party, except if and only to the extent expressly set forth in the last sentence of this
Opinion, (iv) the relative merits of the Transaction as compared to any alternative business
strategies relating to, or that might exist for, the Business, TechTeam or any other party or the
effect of any other transaction involving the Business or in which TechTeam or any other party
might engage, (v) the fairness of any portion or aspect of the Transaction to any one class or
group of TechTeams or any other partys security holders or other constituents vis-à-vis any other
class or group of TechTeams or such other partys security holders or other constituents
(including, without limitation, the
D-4
TechTeam Global, Inc.
September 14, 2010
allocation of any consideration amongst or within such classes or groups of security holders
or other constituents), (vi) whether or not TechTeam, its security holders or any other party is
receiving or paying reasonably equivalent value in the Transaction, (vii) the solvency,
creditworthiness or fair value of TechTeam (including, without limitation, the Business) or any
other participant in the Transaction, or any of their respective assets, under any applicable laws
relating to bankruptcy, insolvency, fraudulent conveyance or similar matters, or (viii) the
fairness, financial or otherwise, of the amount, nature or any other aspect of any compensation to
or consideration payable to or received by any officers, directors or employees of any party to the
Transaction, any class of such persons or any other party, relative to the Consideration or
otherwise. Furthermore, no opinion, counsel or interpretation is intended in matters that require
legal, regulatory, accounting, insurance, tax or other similar professional advice. It is assumed
that such opinions, counsel or interpretations have been or will be obtained from appropriate
professional sources. Furthermore, we have relied, with your consent, on the assessments by
TechTeam and its advisors as to all legal, regulatory, accounting, insurance and tax matters with
respect to the Business, TechTeam and the Transaction. The issuance of this Opinion was approved
by a committee authorized to approve opinions of this nature.
Based upon and subject to the foregoing, and in reliance thereon, it is our opinion that, as
of the date hereof, the Consideration to be received by TechTeam in the Transaction is fair to
TechTeam from a financial point of view.
Very truly yours,
/s/ Houlihan Lokey Capital, Inc.
HOULIHAN LOKEY CAPITAL, INC.
D-5
Exhibit E
UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly
Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For
the quarterly period ended June 30, 2010
Commission File
Number: 0-16284
TECHTEAM
GLOBAL, INC.
(Exact name of
registrant as specified in its charter)
|
|
|
Delaware
|
|
38-2774613
|
(State or other
jurisdiction of incorporation)
|
|
(I.R.S.
Employer Identification No.)
|
27335 West
11 Mile Road, Southfield, MI 48033
(Address of
principal executive offices) (Zip code)
Registrants
telephone number, including area
code: (248) 357-2866
Indicate by check
mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days. Yes n No o
Indicate by check
mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data
File required to be submitted and posted pursuant to
Rule 405 of
Regulation S-T
during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such
files).
Yes o No o
Indicate by check
mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of large
accelerated filer, accelerated filer and
smaller reporting company in Rule 12b-2 of the
Exchange Act. (Check one):
|
|
|
|
|
Large accelerated
filer o
|
Accelerated
filer n
|
Non-accelerated
filer o
|
Smaller reporting
company o
|
|
(Do not check if a
smaller reporting company)
Indicate by check
mark whether the registrant is a shell company (as defined in
Rule 12b-2
of the Exchange Act).
Yes o No
n
The number of shares
of the registrants common stock outstanding at
August 1, 2010 was 11,189,878.
E-1
TECHTEAM GLOBAL,
INC.
FORM 10-Q
TABLE
OF CONTENTS
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Page
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Number
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E-3
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E-4
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E-5
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E-6
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E-16
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E-28
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E-28
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E-29
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E-29
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E-32
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E-32
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E-32
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E-33
|
E-2
PART 1
FINANCIAL INFORMATION
ITEM 1
FINANCIAL STATEMENTS
TECHTEAM GLOBAL,
INC. AND SUBSIDIARIES
(In thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Three Months
Ended
|
|
|
Six Months
Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IT Outsourcing Services
|
|
$
|
25,498
|
|
|
$
|
26,560
|
|
|
$
|
51,706
|
|
|
$
|
54,278
|
|
IT Consulting and Systems Integration
|
|
|
2,935
|
|
|
|
3,165
|
|
|
|
5,855
|
|
|
|
7,069
|
|
Other Services
|
|
|
3,261
|
|
|
|
3,975
|
|
|
|
6,986
|
|
|
|
8,240
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Commercial
|
|
|
31,694
|
|
|
|
33,700
|
|
|
|
64,547
|
|
|
|
69,587
|
|
Government Technology Services
|
|
|
15,088
|
|
|
|
20,627
|
|
|
|
30,244
|
|
|
|
40,845
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
46,782
|
|
|
|
54,327
|
|
|
|
94,791
|
|
|
|
110,432
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IT Outsourcing Services
|
|
|
19,520
|
|
|
|
20,765
|
|
|
|
39,791
|
|
|
|
42,065
|
|
IT Consulting and Systems Integration
|
|
|
2,333
|
|
|
|
2,660
|
|
|
|
4,702
|
|
|
|
5,629
|
|
Other Services
|
|
|
2,477
|
|
|
|
2,990
|
|
|
|
5,282
|
|
|
|
6,148
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Commercial
|
|
|
24,330
|
|
|
|
26,415
|
|
|
|
49,775
|
|
|
|
53,842
|
|
Government Technology Services
|
|
|
11,375
|
|
|
|
14,566
|
|
|
|
23,485
|
|
|
|
29,316
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of revenue
|
|
|
35,705
|
|
|
|
40,981
|
|
|
|
73,260
|
|
|
|
83,158
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
7,364
|
|
|
|
7,285
|
|
|
|
14,772
|
|
|
|
15,745
|
|
Government Technology Services
|
|
|
3,713
|
|
|
|
6,061
|
|
|
|
6,759
|
|
|
|
11,529
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total gross profit
|
|
|
11,077
|
|
|
|
13,346
|
|
|
|
21,531
|
|
|
|
27,274
|
|
Selling, general and administrative expense
|
|
|
10,805
|
|
|
|
11,450
|
|
|
|
21,442
|
|
|
|
22,042
|
|
Restructuring charge (credit)
|
|
|
(4
|
)
|
|
|
(699
|
)
|
|
|
3,140
|
|
|
|
(699
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
276
|
|
|
|
2,595
|
|
|
|
(3,051
|
)
|
|
|
5,931
|
|
Net interest expense
|
|
|
(203
|
)
|
|
|
(294
|
)
|
|
|
(389
|
)
|
|
|
(604
|
)
|
Foreign currency transaction gain (loss)
|
|
|
156
|
|
|
|
(413
|
)
|
|
|
351
|
|
|
|
(648
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
229
|
|
|
|
1,888
|
|
|
|
(3,089
|
)
|
|
|
4,679
|
|
Income tax provision (benefit)
|
|
|
91
|
|
|
|
598
|
|
|
|
(574
|
)
|
|
|
1,739
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
138
|
|
|
$
|
1,290
|
|
|
$
|
(2,515
|
)
|
|
$
|
2,940
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per common share
|
|
$
|
0.01
|
|
|
$
|
0.12
|
|
|
$
|
(0.24
|
)
|
|
$
|
0.28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Diluted earnings (loss) per common share
|
|
$
|
0.01
|
|
|
$
|
0.12
|
|
|
$
|
(0.24
|
)
|
|
$
|
0.28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares and common share
equivalents outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
10,712
|
|
|
|
10,610
|
|
|
|
10,687
|
|
|
|
10,599
|
|
Diluted
|
|
|
10,712
|
|
|
|
10,642
|
|
|
|
10,687
|
|
|
|
10,624
|
|
See
accompanying notes.
E-3
TECHTEAM GLOBAL,
INC. AND SUBSIDIARIES
(In thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(Unaudited)
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
14,846
|
|
|
$
|
15,969
|
|
Accounts receivable (less allowance of $903 at June 30,
2010
and $1,315 at December 31, 2009)
|
|
|
38,383
|
|
|
|
44,314
|
|
Prepaid expenses and other current assets
|
|
|
4,159
|
|
|
|
3,766
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
57,388
|
|
|
|
64,049
|
|
Property, equipment and software, net
|
|
|
5,280
|
|
|
|
6,231
|
|
Goodwill and other intangible assets, net
|
|
|
46,278
|
|
|
|
47,270
|
|
Deferred income taxes
|
|
|
4,216
|
|
|
|
3,940
|
|
Other assets
|
|
|
989
|
|
|
|
1,030
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
114,151
|
|
|
$
|
122,520
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Current portion of long-term debt
|
|
$
|
4,065
|
|
|
$
|
4,074
|
|
Accounts payable
|
|
|
5,026
|
|
|
|
5,130
|
|
Accrued payroll and related taxes
|
|
|
9,500
|
|
|
|
8,486
|
|
Accrued expenses
|
|
|
1,996
|
|
|
|
5,237
|
|
Other current liabilities
|
|
|
2,015
|
|
|
|
4,168
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
22,602
|
|
|
|
27,095
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term liabilities
|
|
|
|
|
|
|
|
|
Long-term debt, less current portion
|
|
|
10,790
|
|
|
|
11,051
|
|
Other long-term liabilities
|
|
|
1,174
|
|
|
|
745
|
|
|
|
|
|
|
|
|
|
|
Total long-term liabilities
|
|
|
11,964
|
|
|
|
11,796
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders equity
|
|
|
|
|
|
|
|
|
Preferred stock, 5,000,000 shares authorized, no shares
issued
|
|
|
|
|
|
|
|
|
Common stock, $0.01 par value, 45,000,000 shares
authorized, 11,200,053 and 11,118,309 shares issued and
outstanding at June 30, 2010 and December 31, 2009,
respectively
|
|
|
112
|
|
|
|
111
|
|
Additional paid-in capital
|
|
|
80,765
|
|
|
|
79,762
|
|
Retained earnings
|
|
|
212
|
|
|
|
2,726
|
|
Accumulated other comprehensive income (loss)
|
|
|
(1,504
|
)
|
|
|
1,030
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
79,585
|
|
|
|
83,629
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity
|
|
$
|
114,151
|
|
|
$
|
122,520
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes.
E-4
TECHTEAM GLOBAL,
INC. AND SUBSIDIARIES
(Unaudited)
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
Operating activities
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(2,515
|
)
|
|
$
|
2,940
|
|
Adjustments to reconcile net income to net cash
provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
2,758
|
|
|
|
3,384
|
|
Non-cash expense related to stock options and issuance
of common stock and restricted common stock
|
|
|
1,193
|
|
|
|
913
|
|
Other
|
|
|
(101
|
)
|
|
|
755
|
|
Changes in current assets and liabilities
|
|
|
442
|
|
|
|
10,517
|
|
Changes in long-term assets and liabilities
|
|
|
238
|
|
|
|
(266
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
2,015
|
|
|
|
18,243
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities
|
|
|
|
|
|
|
|
|
Purchase of property, equipment and software
|
|
|
(1,008
|
)
|
|
|
(1,141
|
)
|
Cash paid for acquisitions, net of cash acquired
|
|
|
(300
|
)
|
|
|
(250
|
)
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(1,308
|
)
|
|
|
(1,391
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities
|
|
|
|
|
|
|
|
|
Other
|
|
|
(189
|
)
|
|
|
(13
|
)
|
Payments on long-term debt
|
|
|
(270
|
)
|
|
|
(16,606
|
)
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(459
|
)
|
|
|
(16,619
|
)
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash
equivalents
|
|
|
(1,371
|
)
|
|
|
1,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents
|
|
|
(1,123
|
)
|
|
|
1,483
|
|
Cash and cash equivalents at beginning of period
|
|
|
15,969
|
|
|
|
16,881
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
14,846
|
|
|
$
|
18,364
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes.
E-5
Note 1
Basis of Presentation
The accompanying unaudited condensed consolidated financial
statements have been prepared by TechTeam Global, Inc.
(TechTeam or the Company) in accordance
with United States generally accepted accounting principles for
interim financial information and the instructions to
Form 10-Q
and Article 10 of
Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by United States generally accepted
accounting principles for complete financial statements. In the
opinion of management, all adjustments considered necessary for
a fair presentation have been included, and such adjustments are
of a normal recurring nature. Operating results for the three
and six months ended June 30, 2010, are not necessarily
indicative of the results that may be expected for the year
ending December 31, 2010. For further information, refer to
the consolidated financial statements and footnotes thereto
included in the Companys Annual Report on
Form 10-K
for the year ended December 31, 2009.
Note 2
Comprehensive Income (Loss)
Comprehensive income (loss) is defined as net income and all
non-ownership changes in shareholders equity. For the
Company, comprehensive income (loss) for the periods presented
consists of net income (loss), the foreign currency translation
adjustment and net unrealized gain on derivative instruments. A
summary of comprehensive income (loss) for the periods presented
is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
Six Months
Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
Comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
138
|
|
|
$
|
1,290
|
|
|
$
|
(2,515
|
)
|
|
$
|
2,940
|
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
(1,433
|
)
|
|
|
2,207
|
|
|
|
(2,773
|
)
|
|
|
984
|
|
Unrealized gain on derivative instruments
|
|
|
118
|
|
|
|
189
|
|
|
|
239
|
|
|
|
335
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss)
|
|
$
|
(1,177
|
)
|
|
$
|
3,686
|
|
|
$
|
(5,049
|
)
|
|
$
|
4,259
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 3
Earnings (Loss) Per Share
Basic earnings (loss) per share for common stock is computed
using the weighted average number of common shares excluding
unvested restricted shares and shares held in escrow in
connection with the Companys acquisition of RL Phillips,
Inc. Dilutive earnings (loss) per share for common stock is
computed using weighted average number of common shares and
common share equivalents outstanding. Common share equivalents
consist of stock options, unvested restricted stock issued to
employees and shares held in escrow in connection with the
Companys acquisition of RL Phillips, Inc. During the three
months ended June 30, 2010, 1,631,100 stock options were
excluded from the computation of diluted earnings per common
share because the exercise prices of the options were higher
than the average market price of the Companys common stock
for the respective period. During the six months ended
June 30, 2010, common share equivalents (including
1,785,500 stock options) were excluded from the computation of
diluted earnings per common share due to the loss for the
period. During the three and six months ended June 30,
2009, 2,201,000 and 2,203,000 stock options, respectively, were
excluded from the computation of diluted earnings per common
share because the exercise prices of the options were higher
than the average market price of the Companys common stock
for the respective period.
E-6
TECHTEAM GLOBAL,
INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
Note 4
Restructuring
On March 29, 2010, the Company announced a restructuring
plan to reduce certain redundant costs, eliminate excess
capacity and support the Companys strategy to more tightly
focus its business. The restructuring plan was approved by the
Companys Board of Directors on March 23, 2010. The
2010 pre-tax restructuring charge amounted to $3,140,000, and
was primarily related to separation costs for approximately
40 employees and reductions in excess leased facility
capacity around the world.
The following table summarizes the accrued charges related to
the 2010 restructuring plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring
|
|
|
Adjustments
|
|
|
|
|
|
Accrued
|
|
|
|
Charges at
|
|
|
to Accrued
|
|
|
|
|
|
Restructuring
|
|
|
|
December 31,
|
|
|
Restructuring
|
|
|
Cash
|
|
|
Charges at
|
|
|
|
2009
|
|
|
Charges
|
|
|
Payments
|
|
|
June 30,
2010
|
|
|
|
(In thousands)
|
|
Workforce reductions
|
|
$
|
|
|
|
$
|
2,502
|
|
|
$
|
(2,363
|
)
|
|
$
|
139
|
|
Other
|
|
|
|
|
|
|
638
|
|
|
|
(291
|
)
|
|
|
347
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
|
|
|
$
|
3,140
|
|
|
$
|
(2,654
|
)
|
|
$
|
486
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes the 2010 restructuring charges by
operating segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring
|
|
|
Adjustments
|
|
|
|
|
|
Accrued
|
|
|
|
Charges at
|
|
|
to Accrued
|
|
|
|
|
|
Restructuring
|
|
|
|
December 31,
|
|
|
Restructuring
|
|
|
Cash
|
|
|
Charges at
|
|
|
|
2009
|
|
|
Charges
|
|
|
Payments
|
|
|
June 30,
2010
|
|
|
|
(In thousands)
|
|
|
Restructuring charges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IT Outsourcing Services
|
|
$
|
|
|
|
$
|
681
|
|
|
$
|
(681
|
)
|
|
$
|
|
|
IT Consulting and Systems Integration
|
|
|
|
|
|
|
343
|
|
|
|
(343
|
)
|
|
|
|
|
Other Services
|
|
|
|
|
|
|
294
|
|
|
|
(166
|
)
|
|
|
128
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Commercial
|
|
|
|
|