Exhibit 10.1
Earnout Agreement
This
Earnout Agreement (this “Agreement”) is
dated as of July [ ], 2007, by and between
Wireless Facilities, Inc., a Delaware corporation (“Seller”),
and Burgundy Acquisition Corporation, a Delaware corporation (“Purchaser”). Seller
and Purchaser are sometimes individually referred to herein as a “Party” and collectively as the “Parties.”
RECITALS
Whereas,
as set forth in the Asset Purchase Agreement, dated as of July 7, 2007, between
Purchaser and Seller (the “Purchase Agreement”),
Purchaser has agreed to purchase from Seller and Seller has agreed to sell,
transfer, assign and deliver to Purchaser all of the Transferred Assets against
delivery of the Purchase Price in accordance with the terms of the Purchase
Agreement;
Whereas,
the Purchase Agreement provides that the Parties shall enter into an agreement
pursuant to which the Earnout Amount, subject to the terms and conditions
hereof, may be paid to Seller, in addition to the Closing Purchase Price paid
at Closing, in further consideration of the sale of the Business by Seller to
Purchaser; and
Whereas,
Seller and Purchaser hereby desire to set forth the terms and conditions upon
which the Earnout Amount may be determined and paid.
Now,
Therefore, for good and
valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows:
1. Definitions;
Construction.
1.1 Initially
capitalized terms used but not defined herein (including such terms used in the
Recitals above) shall have the meaning assigned in the Purchase Agreement.
1.2 “2008 Cash Collections Calculation” shall
have the meaning set forth in Section 2.1.
1.3 “2009 Cash Collections Calculation” shall
have the meaning set forth in Section 2.1.
1.4 “2010 Cash Collections Calculation” shall
have the meaning set forth in Section 2.1.
1.5 “Cash Collections” shall mean the net cash
amounts realized by Purchaser from customers of the Business during a
particular period, which shall exclude (a) the net amounts realized from any
other operations of Purchaser other than the Business, including in such
exclusion any add-ons to the Business after the Closing Date and (b) any
amounts received for payment to be made on any customer’s behalf (i.e., pass
through payments) that include no mark-up for the benefit of the Business.
1.6 “Cumulative Cash Collections Calculation”
shall mean the sum of the 2008 Cash Collections Calculation, the 2009 Cash
Collections Calculation and the 2010 Cash Collections Calculation.
1.7 “Earnout Amount” shall mean Six Million
Dollars ($6,000,000), subject to adjustment as set forth in Section 3
below.
1.8 “Earnout Payment” shall mean the payment of
the Earnout Amount after determination of the Earnout Amount after expiration
of the Earnout Period in accordance with Section 3.
1.9 “Earnout Period” shall mean the date
commencing on January 1, 2008 and continuing through and including December 31,
2010.
1.10 “Threshold Amount” shall mean aggregate
Cash Collections during the Earnout Period of at least Three Hundred Sixty
Million Dollars ($360,000,000).
1.11 Unless
the context of this Agreement clearly requires otherwise, (a) references
to the plural include the singular, and references to the singular include the
plural, (b) references to any gender include the other genders,
(c) the words “include,” “includes” and “including” do not limit the
preceding terms or words and will be deemed to be followed by the words “without
limitation”, (d) the terms “hereof,” “herein,” “hereunder,” “hereto” and
similar terms in this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement, (e) the terms “day” and “days”
mean and refer to calendar day(s) and (f) the terms “year” and “years”
mean and refer to calendar year(s).
Unless otherwise set forth herein, references in this Agreement to
(a) any document, instrument or agreement (including this Agreement)
include (1) all documents, instruments or agreements issued or executed in
replacement thereof and (2) such document, instrument or agreement, or
replacement or predecessor thereto, as amended, modified or supplemented from
time to time in accordance with its terms and in effect at any given time, and
(b) a particular Law (as hereinafter defined) means such Law as amended,
modified, supplemented or succeeded, from time to time and in effect through
the Closing Date. All Article, Section,
Exhibit and Schedule references herein are to Articles, Sections, Exhibits and
Schedules of this Agreement, unless otherwise specified. This Agreement will not be construed as if
prepared by one of the Parties, but rather according to its fair meaning as a
whole, as if all Parties had prepared it.
All accounting terms not specifically defined herein will be construed in
accordance with GAAP.
2. Computation
of Cash Collections.
2.1 Calculation
of Cash Collections. Within 15 days
following the completion of Purchaser’s audit for each of 2008, 2009 and 2010,
but in no event later than 90 days following the end of each such fiscal year
of Purchaser, Purchaser shall deliver to Seller its calculations of the Cash
Collections for such audited year, together with reasonable detail to support
such calculations (such calculations shall be referred to herein individually
each as a “Cash Collections Calculation”
or the “2008 Cash Collections Calculation,”
“2009 Cash Collections Calculation” and “2010
Cash Collections Calculation,” as applicable). No later than the date that the 2010 Cash
Collections Calculation must be delivered by Purchaser to Seller as
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set forth herein,
Purchaser shall also deliver its calculation of the Cumulative Cash Collections
Calculation to Seller, together with reasonable detail to support such
calculation.
2.2 Objection
by Seller. Within fifteen (15) days
following receipt of the Cumulative Cash Collections Calculation, Seller may
object to the Cumulative Cash Collections Calculation by giving written notice
to Purchaser setting forth the reasons for Seller’s objection and Seller’s
proposed adjustments to Purchaser’s calculation (“Seller’s Objection”).
If Seller fails to object to the Cumulative Collections Calculation
within such fifteen (15) day period, Seller will be deemed to have conclusively
agreed with and shall be bound by the Cumulative Cash Collections Calculation
for the purposes of this Section 2, and such Cumulative Cash Collections
Calculation will be used for calculating the Earnout Payment in accordance with
Section 3 below. If Seller
objects to the Cumulative Cash Collections Calculation, Purchaser and Seller
shall confer in good faith for a period of up to fifteen (15) days following
Purchaser’s receipt of Seller’s Objection (the “Resolution Period”) to attempt to reach agreement regarding
such calculation. If Purchaser and
Seller are unable to reach agreement during the Resolution Period, then
Purchaser and Seller shall confer in good faith for up to five (5) days to
agree on a nationally recognized independent accounting firm, which shall not
be the regular accounting firm of Purchaser or Seller (the “Resolution Firm”) to resolve the
outstanding disagreement in accordance with the procedures set forth below; provided, however, that if the Parties
cannot agree on a Resolution Firm, then each of Seller and Purchaser will
select a nationally recognized accounting firm and the two firms selected by
Seller and Purchaser will select the Resolution Firm. The Resolution Firm will review the
Cumulative Cash Collections Calculation, Seller’s Objection, the underlying
data supporting each of Purchaser’s and Seller’s calculations and such other
information as the Resolution Firm reasonably deems appropriate and make a
final written determination of the Cumulative Cash Collections Calculation,
which determination shall be conclusive and binding on Seller and Purchaser,
and be used for the calculation of the Earnout Payment under Section 3 below. Purchaser and Seller shall take all
reasonable actions to facilitate the Resolution Firm’s review of the Cumulative
Cash Collections Calculation, including, without limitation, granting the
Resolution Firm access to the relevant Books and Records of the Business and
promptly responding to substantive inquiries made by the Resolution Firm
regarding the Cumulative Cash Collections Calculation. The Resolution Firm’s
engagement pursuant to this Section 2.2 shall be solely limited to
determining the Cumulative Cash Collections Calculation.
2.3 Maintenance
of Books and Records. Purchaser shall maintain the Books and
Records of the Business in accordance with GAAP consistently applied following
the Closing Date through the final determination of the Cumulative Cash
Collections Calculation in accordance with this Section 2.
2.4 Costs
of Resolution Firm. If a Resolution Firm is engaged pursuant to Sections
2.2, Seller and Purchaser shall bear the fees and expenses of such
engagement in equal proportions and each of the parties shall bear its own
legal, accounting and other fees and expenses of participating in such dispute
resolution procedure.
2.5 Cooperation. Purchaser and Seller shall provide such
documents and materials as reasonably requested by the other Party and the
Resolution Firm, if applicable, and
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shall fully
cooperate with the other and the Resolution Firm, if applicable, in order to
determine the calculations set forth in this Section 2.
3. Earnout
Payment.
3.1 If
after the final determination of the Cumulative Cash Collections Calculation in
accordance with the procedures set forth in Section 2 above, the
Cumulative Cash Collections Calculation equals or exceeds the Threshold Amount,
Purchaser shall pay Seller the Earnout Amount.
3.2 If
after the final determination of the Cumulative Cash Collections Calculation,
the Cumulative Cash Collections Calculation is less than the Threshold Amount
but equals or exceeds Three Hundred Forty Five Million Dollars ($345,000,000)
an adjusted Earnout Payment shall be due as follows:
(i) If the Cumulative
Cash Collections Calculation equals or exceeds Three Hundred Fifty Five Million
Dollars ($355,000,000) but is less than the Threshold Amount, the Earnout Amount
shall be Four Million Five Hundred Thousand Dollars ($4,500,000);
(ii) If the Cumulative
Cash Collections Calculation equals or exceeds Three Hundred Fifty Million
Dollars ($350,000,000) but is less than Three Hundred Fifty Five Million
Dollars ($355,000,000), the Earnout Amount shall be Three Million Dollars
($3,000,000);
(iii) If the Cumulative Cash
Collections Calculation equals or exceeds Three Hundred Forty Five Million
Dollars ($345,000,000) but is less than Three Hundred Fifty Million Dollars
($350,000,000), the Earnout Amount shall be One Million Five Hundred Thousand
Dollars ($1,500,000); and
(iv) If the Cumulative Cash
Collections Calculation is less than Three Hundred Forty Five Million Dollars
($345,000,000), no Earnout Payment shall be due.
3.3 Any
Earnout Payment determined in accordance with this Section 3 shall be
paid by Purchaser to Seller by wire transfer of immediately available funds
within five (5) days of the final determination of the Cumulative Cash
Collections Calculation in accordance with the provisions of Section 2.
3.4 Character
of Payments. Any payments made
pursuant to this Section 3 shall be consistently treated as adjustments
to the Purchase Price for all Tax purposes by Seller and Purchaser.
4. Notices. All notices, communications and deliveries
required or made hereunder must be made in writing signed by or on behalf of
the Party making the same and will be delivered personally or by telecopy
transmission or by a national overnight courier service or by registered or certified
mail (return receipt requested) (with postage and other fees prepaid) as
follows:
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If to Seller:
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Wireless Facilities, Inc.
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Attention:
Corporate Secretary
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4810 Eastgate
Mall
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San Diego, CA
92121
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Phone: (858)
228-2000
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Fax: (858)
523-5941
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With a copy
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(not
constituting notice) to:
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Morrison & Foerster LLP
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Attention: Scott
M. Stanton
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12531 High Bluff
Drive, Suite 100
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San Diego, CA
92130
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Phone: (858)
720-5100
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Fax: (858)
720-5125
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If to Purchaser:
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Burgundy Acquisition Corporation
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c/o Platinum
Equity Advisors, LLC
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360 North
Crescent Drive, South Building
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Beverly Hills,
California 90210
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Attention: Eva
M. Kalawski, Esq., General Counsel
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Phone: (310) 712-1850
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Fax: (310) 712-1863
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With a copy
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(not
constituting notice) to:
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Marc E. Kenny, A Professional Law Corporation
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225 South Lake
Avenue, Suite 1400
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Pasadena,
California 91101
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Attention: Marc
E. Kenny, Esq.
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Phone: (626) 584-6025
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Fax: (626) 584-6642
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or to such other representative or at such other address of a Party as
such Party may furnish to the other Party in writing. Any such notice, communication or delivery
will be deemed given or made (a) on the date of delivery, if delivered in
person, or (b) upon transmission by facsimile or email if receipt is
confirmed, (c) on the first (1st) Business Day following timely delivery
to a national overnight courier service or (d) on the fifth (5th) Business Day following it
being mailed by registered or certified mail.
5. Captions. The titles and captions contained in this
Agreement are inserted in this Agreement only as a matter of convenience and
for reference and in no way define, limit, extend or describe the scope of this
Agreement or the intent of any provision of this Agreement.
6. Controlling
Law; Amendment; Waiver. This
Agreement will be governed by and construed and enforced in accordance with the
internal Laws of the State of New York without reference to its choice of law
rules. Any provision of this Agreement
may be amended or waived if, but only if, such amendment or waiver is in
writing and is signed, in the case of an amendment, by each party to this
Agreement, and in the case of a waiver, by the party against whom the waiver is
to be effective. No failure or delay by
any party in exercising any right,
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power or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege.
Except as otherwise provided herein, the rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by Law.
7. Severability. If any provision of this Agreement, or the
application thereof, is for any reason held to any extent to be invalid,
illegal or unenforceable, then the remainder of this Agreement and the
application thereof will nevertheless remain in full force and effect so long
as the economic and legal substance of the transactions contemplated by this
Agreement are not affected in any manner materially adverse to any party
hereto. Upon such determination that any
provision is invalid, illegal or unenforceable, the parties agree to replace
such provision with a valid, legal and enforceable provision that will achieve,
to the maximum extent legally permissible, the economic, business and other
purposes of such provision.
8. Counterparts. This Agreement may be signed in any number of
counterparts (including by facsimile), each of which shall be deemed an
original, with the same effect as if the signatures thereto and hereto were
upon the same instrument. This Agreement
shall become effective when each party hereto shall have received a counterpart
hereof signed by the other party hereto.
9. Integration. The Transaction Documents supersede all
negotiations, agreements and understandings between the Parties with respect to
the subject matter of this Agreement and constitute the entire agreement
between the Parties with respect to the subject matter hereof.
10. Dispute
Resolution; Attorney’s Fees. Any
controversy, claim or dispute of whatever nature, including claims for fraud in
the inducement and disputes as to arbitrability, arising between Seller and
Purchaser under this Agreement or in connection with the transactions
contemplated hereunder shall be resolved in accordance with the procedures set
forth in Section 11.7 of the Purchase Agreement and subject to the
Attorney’s Fees provision set forth in Section 11.12 of the Purchase
Agreement.
11. Succession;
Assignment; No Third Party Beneficiaries.
The provisions of this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns. No Party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of each other party hereto.
Notwithstanding the foregoing and anything contained in this Agreement
to the contrary, Purchaser may, without the consent of Seller, (i) assign any
or all of its rights, interests and obligations hereunder to one or more of its
Affiliates, (ii) make a collateral assignment of any rights or benefits
hereunder to any lender, or (iii) assign any or all of its rights, interests or
obligations hereunder in connection with any sale of Purchaser or all or
substantially all of the assets of Purchaser; provided, however, that any
assignment shall not be permitted to any Person listed on a United States
government restricted party list, including (a) the U.S. Department of
Commerce, BIS Denial Parties List, Entity List, and Unverified List, (b) the
U.S. Treasury, Office of Foreign Assets Control Specially Designated Nationals
Lists or (c) the U.S. Department of State, Directorate of Defense Trade
Controls Debarred List and the Nonproliferation Bureau lists of proliferation
sanctioned parties. Upon any such
permitted assignment, the references in this Agreement to Purchaser shall also
apply to any such assignee
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unless the context
otherwise requires. Nothing herein,
express or implied, is intended to or shall confer upon any other Person any
legal or equitable right, benefit or remedy of any nature under this Agreement.
12. Controlling
Agreement. In the event of a
conflict between the terms and conditions set forth in this Agreement and the
terms and conditions set forth in the Purchase Agreement, or the interpretation
and application thereof, the terms and conditions set forth in the Purchase
Agreement shall prevail, govern and control in all respects.
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