Common use of Net Working Capital Calculations Clause in Contracts

Net Working Capital Calculations. Buyer and Seller shall observe and apply the following procedures and principles in the determination of Net Working Capital as that term applies in the Agreement: The difference, if any, between the Target Net Working Capital and the Preliminary Net Working Capital Calculation will be the basis for any payment to be made by Buyer or Seller as provided in Section 2.5(a). The Preliminary Net Working Capital Calculation, the Closing Date Net Working Capital Calculation and the Final Closing Date Net Working Capital Calculation will be made in the same manner as that utilized in the calculation of Target Net Working Capital, except as modified hereby. The foregoing calculations shall be at the close of business on the Closing Date determined on a pro forma basis as if Seller and Buyer had not consummated the transactions contemplated by the Agreements . As defined in the Agreement, Closing Date Net Working Capital and Final Closing Date Net Working Capital shall be more specifically determined by excluding the Excluded Assets and the following items from its scope: a) cash and cash equivalents, b) all fixed assets and related amortization and depreciation including but not limited to land and land improvements, buildings and related improvements, leasehold improvements, automotive, machinery and equipment, furniture and fixtures, construction in process, and equipment leased to others, c) all long term assets including but not limited to investments, patents, licenses and trademarks and their related amortization, goodwill and related amortization and deferred charges, d) all current and long term accrued expense other than those items specifically identified in items accounts payable, accrued payroll and related payroll taxes and accrued vacation, e) all loss and operating reserves including warranty reserves, f) all accounts or notes payable from or to Raytheon except for receivables and payables relating to materials sold or services rendered, g) any reserve, liability or asset resulting from pension benefits, retirement benefits or other post employment benefits, h) all accrued liabilities or benefits for current or deferred federal or state income taxes, and i) all equity related accounts including but not limited to common stock, additional paid in capital and retained earnings. It is further understood that the Seller shall apply the following procedures during the preparation of the Preliminary Net Working Capital Calculation, the Closing Date Net Working Capital Calculation and the Final Closing Date Net Working Capital Calculation. (i) Costs incurred on all Contracts in a loss position by the Businesses between fiscal month ended October 1999 and the Closing Date are to be recorded against loss reserves to the extent such loss reserves exist according to the "Loss Ratios" (as defined below), such that the portion of the costs incurred, determined by multiplying the costs incurred by the Loss Ratios is not recorded to Unbilled Accounts Receivable. "Contract EAC Profit (Loss) Rates" are calculated on an individual Contract (job number) basis by dividing the baseline estimate at completion (EAC) profit

Net Working Capital Calculations. (i) Seller shall, at least five (5) Business Days prior to the Closing Date, cause to be prepared and delivered to Buyer a statement (the "Good Faith Statement") setting forth a good faith estimate of the Net Working Capital (as hereinafter defined) of the Division as of the Effective Time (the "Estimated Net Working Capital") and the components and calculations thereof. Buyer and its representatives shall have an opportunity to review and comment upon the Good Faith Statement, which shall be subject to Buyer's reasonable approval. As used herein, "Net Working Capital" shall mean (i) the sum of (A) accounts receivable, net of reserves for doubtful accounts (but excluding any intercompany accounts receivable and unapplied Cash) and (B) other current assets (other than Cash), less (ii) the sum of (A) trade accounts payable (but excluding any intercompany accounts payable), (B) refunds due to patients and third-party payors, as reflected in account 2512, (C) accrued liabilities (but excluding any intercompany accrued liabilities and excluding the current portion of long-term Indebtedness) and (D) other current liabilities, in accordance with the calculation of Net Working Capital set forth on Schedule III attached hereto, in each case determined in accordance with GAAP, applied in a manner consistent with the manner in which GAAP was applied in the preparation of the Audited Financial Statements (and subject to the exceptions to GAAP set forth therein). (ii) If the Estimated Net Working Capital exceeds the Target Net Working Capital, then, in determining the Initial Purchase Price, the Unadjusted Purchase Price shall be increased by the amount of such excess. If the Estimated Net Working Capital is less than the Target Net Working Capital, then, in determining the Initial Purchase Price, the Unadjusted Purchase Price shall be decreased by the amount of such deficit. Any increase or decrease to the Unadjusted Purchase Price pursuant to this Section 1.6(a)(ii) shall be referred to herein as the "Estimated Net Working Capital Adjustment." (iii) Buyer shall have ninety (90) calendar days after the Closing Date to review the Good Faith Statement together with the work papers used in its preparation. During the course of the preparation of the Good Faith Statement and following the delivery of the Good Faith Statement, Seller shall provide Buyer and its representatives reasonable access, during normal business hours of Seller, to all personnel, books and records of Seller as reasonably requested by Buyer to assist it in its review of the Good Faith Statement and its preparation. The Good Faith Statement shall become final and binding upon the parties on the ninety-first (91st) calendar day following the Closing unless Buyer gives written notice of its disagreement (a "Notice of Disagreement") to Seller prior to such date. Any Notice of Disagreement shall (A) specify in reasonable detail the nature and amount of any disagreement so asserted, and (B) include Buyer's calculation of the Net Working Capital (whichever is being disputed) of the Division as of the Effective Time. If Buyer's calculation of the Net Working Capital, as set forth in Buyer's Notice of Disagreement, results in an Excess Amount or Deficiency Amount of less than $75,000 with respect to Net Working Capital, then the Good Faith Statement shall become final and binding upon the parties; otherwise, the Good Faith Statement shall become final and binding upon the parties on the date the parties hereto resolve in writing any differences they have with respect to any matter properly included in the Notice of Disagreement, in accordance with this Section 1.6(a). During the sixty (60) calendar days immediately following the receipt by Seller of a Notice of Disagreement, the respective Chief Financial Officers of Seller and Buyer or their designees shall negotiate in good faith to resolve any disputed items timely included in a Notice of Disagreement. During such period, Buyer shall have full access to the working papers of Seller prepared in connection with Seller’s preparation of the Good Faith Statement, and Seller shall have full access to the working papers of Buyer prepared in connection with Buyer's preparation of the Notice of Disagreement. Any resolution of disputed items included in the Notice of Disagreement that is agreed upon in writing by Buyer and Seller shall observe be final, binding and apply conclusive as to Seller, Buyer and their respective Affiliates. At the following procedures end of such sixty (60) calendar day period, at the request of Seller or Buyer, any and principles all matters which remain in dispute, and which were included in the Notice of Disagreement, shall be submitted to a mutually acceptable, nationally recognized accounting firm (the "Accounting Firm") selected by Seller and Buyer, with no material relationship to Seller or Buyer or any of their respective Affiliates, for a binding resolution of such disputed items. If Buyer and Seller are not able to agree upon an Accounting Firm, the appointment of an Accounting Firm will be finally selected by mutual agreement of an accounting firm selected by Seller and an accounting firm selected by Buyer; provided that, neither of the accounting firms selected by Buyer or Seller shall serve as the Accounting Firm. The fees and expenses of the Accounting Firm shall be paid by the parties based upon the degree to which the Accountants accept the respective positions of the parties. For example, if it is Buyer’s position that the adjustment owed is $300, Seller’s position that the adjustment owed is $100 and the Accounting Firm’s finding that the adjustment owed is $150, then Buyer shall pay 75% (300-150 / 300-100) of the Accounting Firm’s fees and expenses and Seller shall pay 25% (150-100 / 300-100) of the Accounting Firm’s fees and expenses. Other than the expense of retaining the Accounting Firm, the expense of preparing the Good Faith Statement shall be borne by Seller. (iv) The Accounting Firm shall determine and report in writing to Seller and Buyer as to its determination of all disputed matters submitted to the Accounting Firm and the effect of such determinations on the Good Faith Statement within twenty (20) Business Days after such submission, and such determinations shall be final, binding and conclusive as to Seller, Buyer and their respective Affiliates. In resolving any disputed item, the Accounting Firm, acting in its capacity as an expert and not as an arbitrator: (A) shall limit its review to matters specifically set forth in such Notice of Disagreement delivered pursuant to Section 1.6(a)(iii) as a disputed item (other than those items thereafter resolved by mutual written agreement of Seller and Buyer) and (B) shall further limit its review to whether the calculation of any such disputed item is mathematically accurate and whether the calculation of Net Working Capital has been prepared in accordance with this Agreement and the accounting principles and methodologies set forth in Schedule III attached hereto. Each of Seller and Buyer shall have the right to meet with representatives of the Accounting Firm and present its position as that term applies to the resolution of such disputed item. In addition, Seller and Buyer shall each furnish to the Accounting Firm such work papers and other documents and information relating to the disputed items, as the Accounting Firm may reasonably request. (v) At such time as the Good Faith Statement, as it may be adjusted pursuant to this Section 1.6(a), becomes final, binding and conclusive upon Seller and Buyer in accordance with this Section 1.6(a), the Agreement: Good Faith Statement shall become the "Conclusive Statement." The Conclusive Statement shall set forth the Net Working Capital of the Division (the "Actual Net Working Capital") as of the Effective Time. The Conclusive Statement shall also set forth the difference, if any, between determined by subtracting the Target Estimated Net Working Capital and from the Preliminary Actual Net Working Capital Calculation will (such difference, the "Net Working Capital Adjustment Amount"), it being understood that the Net Working Capital Adjustment Amount may be either a positive or negative number. Buyer shall pay to Seller the basis for amount of any positive Net Working Capital Adjustment Amount (the "Net Excess Amount") and Seller shall pay to Buyer the amount of any negative Net Working Capital Adjustment Amount (the "Net Deficiency Amount"). The Conclusive Statement shall be prepared in accordance with the methodology set forth on Schedule III hereto. (vi) If the Conclusive Statement contains a Deficiency Amount, then Seller shall pay to Buyer an amount in cash equal to such Deficiency Amount. If the Conclusive Statement contains an Excess Amount, then Buyer shall pay to Seller an amount in cash equal to such Excess Amount. Any payment to be made by Buyer or Seller as provided in pursuant to this Section 2.5(a1.6(a) shall be made on the third Business Day following the date on which the Good Faith Statement becomes the Conclusive Statement pursuant to this Section 1.6(a). The Preliminary Net Working Capital Calculation, Any payment required to be made by Seller or Buyer pursuant to this Section 1.6(a) shall bear interest from the Closing Date Net Working Capital Calculation through the date of payment at the Interest Rate and the Final Closing Date Net Working Capital Calculation will be made in the same manner as that utilized in the calculation of Target Net Working Capital, except as modified hereby. The foregoing calculations shall be at the close payable by wire transfer of business on the Closing Date determined on a pro forma basis as if Seller and Buyer had not consummated the transactions contemplated immediately available funds to an account or accounts designated by the Agreements . As defined in the Agreement, Closing Date Net Working Capital and Final Closing Date Net Working Capital shall be more specifically determined by excluding the Excluded Assets and the following items from its scope: a) cash and cash equivalents, b) all fixed assets and related amortization and depreciation including but not limited party entitled to land and land improvements, buildings and related improvements, leasehold improvements, automotive, machinery and equipment, furniture and fixtures, construction in process, and equipment leased to others, c) all long term assets including but not limited to investments, patents, licenses and trademarks and their related amortization, goodwill and related amortization and deferred charges, d) all current and long term accrued expense other than those items specifically identified in items accounts payable, accrued payroll and related payroll taxes and accrued vacation, e) all loss and operating reserves including warranty reserves, f) all accounts or notes payable from or to Raytheon except for receivables and payables relating to materials sold or services rendered, g) any reserve, liability or asset resulting from pension benefits, retirement benefits or other post employment benefits, h) all accrued liabilities or benefits for current or deferred federal or state income taxes, and i) all equity related accounts including but not limited to common stock, additional paid in capital and retained earnings. It is further understood that the Seller shall apply the following procedures during the preparation of the Preliminary Net Working Capital Calculation, the Closing Date Net Working Capital Calculation and the Final Closing Date Net Working Capital Calculation. (i) Costs incurred on all Contracts in a loss position by the Businesses between fiscal month ended October 1999 and the Closing Date are to be recorded against loss reserves receive such funds prior to the extent date when such loss reserves exist according to the "Loss Ratios" (as defined below), such that the portion of the costs incurred, determined by multiplying the costs incurred by the Loss Ratios payment is not recorded to Unbilled Accounts Receivable. "Contract EAC Profit (Loss) Rates" are calculated on an individual Contract (job number) basis by dividing the baseline estimate at completion (EAC) profitdue.