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 o

 

Check the appropriate box:

 

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):

 

 

(2)   Aggregate number of securities to which transaction applies:

 

 

(4)   Proposed maximum aggregate value of transaction:

 

(5)   Total fee paid:

 

 

 

 

 

 

 

 

 

 

 

 

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:

 

 

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 TechTeam’s 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 Company’s 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 STOCKHOLDER’S 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 Company’s 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 Company’s 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 STOCKHOLDER’S 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

 

TECHTEAM GLOBAL, INC.
27335 West 11 Mile Road
Southfield, Michigan 48033

 

SUPPLEMENT NO. 1 TO PROXY STATEMENT
SPECIAL MEETING OF STOCKHOLDERS

 

 

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 Board’s 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 Technology’s 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:

 

 

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.

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.

 

 

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.”

 

 

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:

 

 

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 STOCKHOLDER’S 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.

 

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.

 

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:

 

 

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.

Opinion of Tech Team’s Financial Advisor (page S-24)

 

In connection with the Stock Sale, TechTeam’s 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 Lokey’s 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 Lokey’s 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 Lokey’s opinion in the Supplement is qualified in its entirety by reference to the full text of its written opinion. Houlihan Lokey’s opinion should not be construed as creating any fiduciary duty on Houlihan Lokey’s part to any party. Houlihan Lokey’s 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.

 

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.

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:

 

 

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.

 

 

 

As of September 14, 2010, and in reliance on and conditioned upon the effectiveness of the amendments to the Stock Purchase Agreement:

 

 

 

 

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:

 

 

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:

 

 

 

Moreover, we can no longer terminate the Stock Purchase Agreement if:

 

 

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.

 

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.”

 

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.

 

 

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.

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.

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 Company’s Corporate Secretary.

 

You may revoke a proxy before its exercise by filing a written notice of revocation with the Company’s 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 SEC’s 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.

 

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

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.

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.

 

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:

 

 

 

 

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.

 

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:

 

 

 

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.

 

 

 

 

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.

 

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

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 officer’s 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.

 

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.

 

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:

 

 

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 TechTeam’s 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

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 TechTeam’s 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:

 

 

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 TechTeam’s 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 TechTeam’s 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

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 TechTeam’s 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.

 

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.

 

In evaluating the Stock Sale, as amended, our Board consulted with our senior management, our outside legal counsel and TechTeam’s 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.

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:

 

 

 

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 Lokey’s 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 Lokey’s 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 Lokey’s opinion should not be construed as creating any fiduciary duty on Houlihan Lokey’s part to any party. Houlihan Lokey’s 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:

 

 

 

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 TTGSI’s 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 Lokey’s 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 TTGSI’s 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 Lokey’s 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 TechTeam’s 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 Lokey’s analyses or opinion.

 

Houlihan Lokey relied upon and assumed, without independent verification, that:

 

 

 

Houlihan Lokey also relied upon and assumed, without independent verification, that:

 

 

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 Lokey’s 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 Lokey’s 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:

 

 

 

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 TechTeam’s 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 Lokey’s 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 Lokey’s 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 Lokey’s 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 TechTeam’s 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 Lokey’s 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

be sold. Accordingly, the assumptions and estimates used in, and the results derived from, Houlihan Lokey’s analyses are inherently subject to substantial uncertainty.

 

Houlihan Lokey’s 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 Lokey’s 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 Lokey’s 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 Lokey’s 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:

 

 

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 TTGSI’s 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:

 

 

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

with operations in the government information technology and professional services industry, which is the industry in which TTGSI operates:

 

 

Houlihan Lokey reviewed, among other things, transaction values in the selected transactions, calculated as the purchase price paid for the target company’s 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 TTGSI’s 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:

 

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 Lokey’s expenses, including the fees and expenses of Houlihan Lokey’s 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 Lokey’s 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 Lokey’s 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 Lokey’s 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 TechTeam’s 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 Lokey’s 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.

 

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 TechTeam’s financial advisor. The Updated Projections are not being included in this Supplement to influence any stockholder’s 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

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 TechTeam’s 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 TTGSI’s 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 TechTeam’s 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 TTGSI’s 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 TTGSI’s 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, TTGSI’s 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 TTGSI’s 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 TTGSI’s 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 TTGSI’s 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 TTGSI’s 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

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 TTGSI’s 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 TTGSI’s managements with respect to current and prospective government contracts reflected in the “high” forecast are no longer valid. Accordingly, our and TTGSI’s 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 TTGSI’s 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 TTGSI’s 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:

 

 

Important factors that may affect actual results and result in the Updated Projections not being achieved include, but are not limited to:

 

 

TTGSI Projected Financial Information – 2010 Fiscal Year

 

 

 

 

 

 

 

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 TTGSI’s operations that, when viewed with TTGSI’s GAAP results and the accompanying reconciliation to the most directly comparable GAAP financial measure, provide a more complete understanding of factors and trends affecting TTGSI’s 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.

 

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.

 

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.

 

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.

 

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 TechTeam’s 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 TechTeam’s representations and warranties as of June 3, 2010 and the date of the Amendment.

 

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

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.”

 

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.

 

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.

 

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:

 

 

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.

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.

 

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 Officer’s 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 Officer’s Certificate”). The Amendment Officer’s Certificate modifies, qualifies and creates exceptions to Jacobs’ obligation to consummate the Stock Sale based on the accuracy of TechTeam’s representations and warranties as of June 3, 2010 and the date of the Amendment. The Amendment provides that the Amendment Officer’s 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 Officer’s Certificate and any covenants or obligations under the Stock Purchase Agreement expressly waived by Jacobs in the Amendment.

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 Officer’s 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:

 

 

 

 

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”.

 

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:

 

 

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 Officer’s 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.

 

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:

 

 

 

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 Officer’s 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:

 

 

 

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.

 

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.

 

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.

 

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 SEC’s 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

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

 

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 Party’s 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 Officer’s 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 Officer’s 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 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 Buyer’s 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 Officer’s 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 Company’s 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).”

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 Officer’s 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 Seller’s 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 Company’s 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 Officer’s 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 Officer’s 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 Officer’s 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.”

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 Officer’s 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), Seller’s 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 Officer’s 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 Officer’s Certificate, any of Seller’s 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 Officer’s Certificate or for any covenant or condition expressly waived by Buyer in the Amendment and Waiver, any of Seller’s 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

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 Buyer’s 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 Buyer’s 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 Buyer’s 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 Officer’s 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 Officer’s Certificate”), certifying for and on behalf of Seller that: (i) except as set forth in the Amendment Officer’s 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 Officer’s 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 Officer’s 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

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 Officer’s 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 Officer’s 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 Officer’s 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

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]

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.

 

Margaret M. Loebl

Corporate Vice President,

Chief Financial Officer and Treasurer

 

JACOBS ENGINEERING GROUP INC.

 

John W. Prosser, Jr.

Executive Vice President, Finance

and Administration and Treasurer

 

JACOBS TECHNOLOGY INC.

 

John W. Prosser, Jr.

Treasurer

 

 

[SIGNATURE PAGE TO AMENDMENT NO. 1 TO
STOCK PURCHASE AGREEMENT AND LIMITED WAIVER]

 

 

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

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 Agent’s 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 Agent’s 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 Agent’s 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,

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 Agent’s 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 Agent’s 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 Agent’s 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 Agent’s 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 Agent’s 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.

(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 Agent’s 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

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 Agent’s 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 Agent’s 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 Agent’s 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 Agent’s 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 attorney’s 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 Party’s 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 Agent’s 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) 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 Agent’s 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).