Common use of Work in Process Adjustment Clause in Contracts

Work in Process Adjustment. The Purchase Price shall be decreased on a dollar for dollar basis by any negative Net WIP Adjustment, determined in accordance with this Section 4. (a) Within five (5) Business Days of Closing, Seller and ▇▇▇▇▇▇ shall deliver to Buyer a schedule (the “Closing Date WIP Schedule”) of the work-in-process of the Company (“WIP”) as of the Closing Date, including the specific jobs that are in process on the Closing Date, and after all invoices for May, 2012 and prior months have been processed and billed in accordance with past Company practice. The aggregate amount of WIP set forth in the Closing Date WIP Schedule shall be referred to as the “Pre-Closing WIP”. Seller and ▇▇▇▇▇▇ jointly and severally warrant to Buyer that the Closing Date WIP Schedule will accurately, completely and correctly reflect the WIP of the Company as of the Closing Date, will have been prepared from the books and records of the Company and the Business, and will have been prepared in accordance with GAAP and in accordance with the Company’s past accounting practices. (b) During the six (6) month period following the Closing (the “WIP Determination Period”) the Company shall track any additional amounts charged to each of the jobs set forth in the Closing Date WIP Schedule as well as all write-ups and write-downs made to each such job during that period. (c) During the WIP Determination Period, the Company will continue to manage jobs in accordance with past Company practice, and without limiting the generality of the foregoing, the Company shall not apply costs to jobs that were not historically applied to jobs, will not allocate overhead or indirect costs to jobs (except to the extent consistent with past practice), will not assign additional personnel to jobs and will not otherwise take any action the effect of which is to increase the amount of write-downs applied to Pre-Closing WIP, except with respect to each of the foregoing items in this sentence, to the extent reasonably necessary to complete and deliver project/job deliverables completely and in compliance with applicable deadlines and specifications, to ensure adequate staffing levels (including without limitation staff replacements or substitutions as reasonably required, whether due to attrition, under-performance, or otherwise), or as otherwise reasonably necessary to meet customer or project requirements. Policies and procedures used in the determination of WIP during the WIP Determination Period shall conform in all material respects to the policies and procedures used in the determination of WIP in effect on the Closing Date. Without limiting the generality of the foregoing: (i) All WIP will be recognized as revenue in general ledger account 4210 (Unbilled Professional Fees) as soon as time entry occurs. Once an invoice is finalized, the amount invoiced will be recorded in general ledger account 4110 (Professional Fees Billed), and related amounts in general ledger account 4210 will be reclassified to general ledger account 4110 at that time. (ii) WIP for fixed/unit price work will be recorded at an established hourly rate applied to time incurred. The hourly billing rate will be based on a historical average of total ▇▇▇▇▇▇▇▇ divided by total hours for fixed/unit price work. WIP will be “reconciled” when the work is invoiced and either a write-up or write-down will be recognized if the amount invoiced differs from the amount reported for the job in general ledger account 4110. A write-down also will occur if additional time is incurred on a particular job after it has been invoiced. (d) All such adjustments shall be allocated to the Pre-Closing WIP in proportion to the value of the job as of the Closing Date compared to the value of the job at the time it is invoiced (whether or not a job is completed as of the adjustment date). For example, if the Pre-Closing WIP for a particular job were $500,000 and the job was billed for $750,000, then 66.67% of any write-downs or write-ups with respect to that job would be allocated to that job’s Pre-Closing WIP. (e) Any change orders or other material modifications of a job arising after the Closing Date shall be treated as a new or “Phase 2” project for purposes of WIP calculation, and costs incurred with respect thereto shall not affect Pre-Closing WIP. (f) During the WIP Determination Period, Buyer shall permit Seller reasonable access to all information relevant to the determination of all adjustments to Pre-Closing WIP and to Company personnel involved in or knowledgeable about such adjustments. (g) Within ten (10) days following the end of the WIP Determination Period, Buyer shall prepare and deliver to Seller Buyer’s determination of the sum of all positive and negative adjustments to Pre-Closing WIP during the WIP Determination Period (the “Net WIP Adjustment”). If the Net WIP Adjustment is a negative number, Buyer and Seller will have twenty (20) days after Buyer’s delivery of the Net WIP Adjustment to review Buyer’s calculation of the Net WIP Adjustment, and Buyer and Seller will in good faith seek to reach agreement on the final Net WIP Adjustment. If agreement is reached on before the end of this twenty (20) day period, then upon reaching such agreement, Seller shall pay to Buyer an amount equal to the Net WIP Adjustment, which amount shall be paid as provided in Section 3(d)(v); provided, however, that any agreed amount payable pursuant to this Section 4(g) shall be combined with any agreed amount payable pursuant to Section 3(d)(ii), and the net agreed amount payable (if any) shall be paid as provided in Section 3(d)(vi). If Buyer and Seller cannot agree on the final Net WIP Adjustment within this twenty (20) day period, then such dispute shall be resolved using the procedures set forth in Section 3(d)(iii), Section 3(d)(iv) and Section 3(d)(vi).

Work in Process Adjustment. The Purchase Price shall be decreased on a dollar for dollar basis by any negative Net WIP Adjustment, determined in accordance with this Section 4. (a) Within For each Assigned Contract and Subcontracted Contract involving WIP with a customer that has not been completed and delivered (“WIP Contracts”), the Buyer and Shareholder shall, within five (5) Business Days of days prior to the Closing, conduct a physical, in-person accounting of the WIP and Contracts and agree upon a calculation of the following in a jointly signed written statement (“WIP Statement”): (a) the total completion percentage of each WIP Contract, based on the estimated total costs of each WIP Contract that have been expended including costs expended with respect to approved change orders and change orders pending approval (“WIP Contract Completion Percentage”), (b) the total amounts actually received from or invoiced to the third party customer under each WIP Contract (“WIP Contract Actual Received/Invoiced Amount”), (c) the total amounts that the Seller was or is entitled to receive upon completion of the WIP Contract in full, in the aggregate upon the initial entry into each WIP Contract plus the aggregate amount due on all approved change orders and ▇▇▇▇▇▇ all change orders pending approval (“WIP Contract Aggregate Consideration”), and (d) the calculation of the product of: (i) the WIP Contract Completion Percentage, multiplied by (ii) the WIP Contract Aggregate Consideration, for each WIP Contract (“WIP Actual Earned Amount”). If the WIP Actual Earned Amount exceeds the WIP Contract Actual Received/Invoiced Amount, such difference shall deliver be credited to Seller Parties at the Closing, and if the WIP Contract Actual Received/Invoiced Amount exceeds the WIP Actual Earned Amount, such difference shall be credited to Buyer a schedule at the Closing (collectively, the “Closing Date WIP ScheduleAdjustment”) of ). In determining the work-in-process of the Company (“WIP”) as of the Closing DateWIP Contract Completion Percentage for each WIP Contract, including the specific jobs that are in process all inventory stored on the Closing Date, and after all invoices for May, 2012 and prior months have been processed and billed in accordance with past Company practice. The aggregate amount of WIP set forth construction site shall be included in the Closing Date costs expended for that WIP Schedule shall be referred to as the “Pre-Closing WIP”. Seller and ▇▇▇▇▇▇ jointly and severally warrant to Buyer that the Closing Date WIP Schedule will accurately, completely and correctly reflect the WIP of the Company as of the Closing Date, will have been prepared from the books and records of the Company and the Business, and will have been prepared in accordance with GAAP and in accordance with the Company’s past accounting practicesContract. (b) During In the six (6) month period following event Buyer and Shareholder disagree on any matters or components relating to the Closing (the “WIP Determination Period”) the Company shall track any additional amounts charged Statement, such matters shall, at or prior to Closing, be summarized in reasonable detail in separate written statements, prepared by each of Buyer and Shareholder and submitted to the jobs set forth in the Closing Date WIP Schedule as well as all write-ups and write-downs made to each such job during that period. (c) During the WIP Determination Period, the Company will continue to manage jobs in accordance with past Company practiceother party, and without limiting which statements shall include the generality of the foregoing, the Company shall not apply costs to jobs that were not historically applied to jobs, will not allocate overhead or indirect costs to jobs (except to the extent consistent with past practice), will not assign additional personnel to jobs and will not otherwise take any action the effect of which is to increase the amount of write-downs applied to Pre-Closing WIP, except with respect to each of the foregoing items in this sentence, to the extent reasonably necessary to complete and deliver project/job deliverables completely and in compliance with applicable deadlines and specifications, to ensure adequate staffing levels (including without limitation staff replacements or substitutions as reasonably required, whether due to attrition, under-performance, or otherwise), or as otherwise reasonably necessary to meet customer or project requirements. Policies and procedures used in the determination of WIP during the WIP Determination Period shall conform in all material respects to the policies and procedures used in the determination of WIP in effect on the Closing Date. Without limiting the generality of the foregoing: (i) All WIP will be recognized as revenue in general ledger account 4210 (Unbilled Professional Fees) as soon as time entry occurs. Once an invoice is finalized, the amount invoiced will be recorded in general ledger account 4110 (Professional Fees Billed), and related amounts in general ledger account 4210 will be reclassified to general ledger account 4110 at that time. (ii) WIP for fixed/unit price work will be recorded at an established hourly rate applied to time incurred. The hourly billing rate will be based on a historical average of total ▇▇▇▇▇▇▇▇ divided by total hours for fixed/unit price work. WIP will be “reconciled” when the work is invoiced and either a write-up or write-down will be recognized if the amount invoiced differs from the amount reported for the job in general ledger account 4110. A write-down also will occur if additional time is incurred on a particular job after it has been invoiced. (d) All such adjustments shall be allocated to the Pre-Closing WIP in proportion to the dollar value of the job as of the Closing Date compared to the value of the job at the time it is invoiced (whether or not a job is completed as of the adjustment date)underlying dispute. For example, if the Pre-Closing WIP for a particular job were $500,000 and the job was billed for $750,000, then 66.67% of any write-downs or write-ups with respect to that job would be allocated to that job’s Pre-Closing WIP. (e) Any change orders or other material modifications of a job arising after the Closing Date shall be treated as a new or “Phase 2” project for purposes of WIP calculation, and costs incurred with respect thereto shall not affect Pre-Closing WIP. (f) During the WIP Determination Period, Buyer shall permit Seller reasonable access to all information relevant to the determination of all adjustments to Pre-Closing WIP and to Company personnel involved in or knowledgeable about such adjustments. (g) Within ten (10) days following the end of the WIP Determination Period, Buyer shall prepare and deliver to Seller Buyer’s determination of the sum of all positive and negative adjustments to Pre-Closing WIP during the WIP Determination Period (the “Net WIP Adjustment”). If the Net WIP Adjustment is a negative numberClosing, Buyer and Seller will have twenty shall together engage: (20A) days after Buyer’s delivery of an independent third party with familiarity in conducting inventories in the Net Business (if such disputed matters relate to the WIP Adjustment Contract Completion Percentage), and/or (B) an independent accounting firm (if such disputed matters relate to review Buyer’s the calculation of the Net WIP Actual Earned Amount or the WIP Adjustment) to review such disputed matter(s) (as applicable, the “Reviewer”). Following the engagement of the Reviewer, each party, no later than forty-eight (48) hours thereafter, shall submit their written statements, together with any other information deemed relevant by them, to the Reviewer(s). A party failing to submit its summary within this timeframe shall be deemed to have waived such right of submission under this Section 2.06(b). The Reviewer(s) shall make a determination on the disputed matters submitted to it, and the parties shall use commercially reasonable best efforts to cause the Reviewer to make such determinations within thirty (30) days of the Closing Date, which determination shall be final and binding on the parties absent manifest error. The parties shall take all such further actions and provide all such further information as reasonably requested by the applicable Reviewer. The fees and expenses of the Reviewer(s) (“Reviewer Fees”) shall be borne equally by the Buyer and Seller will in good faith seek to reach agreement on Shareholder, and shall be paid immediately following the final Net WIP Adjustment. If agreement is reached on before resolution by the end of Reviewer under this twenty Section 2.06. (20c) day period, then upon reaching such agreement, Seller shall pay to Buyer an An amount equal to the Net WIP Adjustment, which amount dollar value of the disputed amounts shall be paid as provided withheld by the Buyer at the Closing. If the determination of the Reviewer: (A) is ultimately made in Section 3(d)(v); providedwhole or in part in favor of the Seller, however, that any agreed amount payable pursuant to this Section 4(g) such finally determined amounts shall be combined with any agreed amount payable pursuant promptly paid by the Buyer to Section 3(d)(ii)the Seller Parties, and (B) is made in favor of the net agreed amount payable (if any) Buyer, no further amounts shall be paid as provided in Section 3(d)(vi)owed to Buyer or Seller under this Section. If The Buyer and Seller cannot may, as an alternative to the dispute resolution process set forth above, mutually agree to split or agree on any alternative remedy with respect to such disputed amounts upon the final Net WIP Adjustment within this twenty (20) day period, then such dispute shall be resolved using joint written consent of the procedures set forth in Section 3(d)(iii), Section 3(d)(iv) Buyer and Section 3(d)(vi)Seller.