FILED: NEW YORK COUNTY CLERK 01/04/ :21 PM INDEX NO /2016 NYSCEF DOC. NO. 30 RECEIVED NYSCEF: 01/04/2017 EXHIBIT 1

Transcription

1 FILED: NEW YORK COUNTY CLERK 01/04/ :21 PM INDEX NO /2016 NYSCEF DOC. NO. 30 RECEIVED NYSCEF: 01/04/2017 EXHIBIT 1

2 Ú ÔÛÜæ ÒÛÉ ÇÑÎÕ ÝÑËÒÌÇ ÝÔÛÎÕ ðïñðíñîðïé ðëæðï ÐÓ ÒÇÍÝÛÚ ÜÑÝò ÒÑò îì ÒÜÛÈ ÒÑò êëëéîêñîðïê ÎÛÝÛ ÊÛÜ ÒÇÍÝÛÚæ ðïñðíñîðïé SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK JEFFREY PAUL ARNOLD DAY, as Sellers Representative, -vs.- Plaintiff, GARDAWORLD CONSULTING (UK) LIMITED, Defendant. x ) ) ) ) ) ) ) ) ) x INDEX NO.: /2016 COMPLAINT Plaintiff Jeffrey Paul Arnold Day (the Sellers Representative ), by and through his undersigned counsel, alleges upon knowledge as to himself and his own acts, and upon information and belief as to all other matters, as follows: NATURE OF THE ACTION This is an action for declaratory judgment and breach of contract arising out of the failure of defendant GardaWorld Consulting (UK) Limited ( GardaWorld ) to correctly interpret the terms of, and perform its obligations under, an Earnout provision set forth in a July 10, 2015 Purchase and Sale Agreement (the PSA ) governing GardaWorld s purchase of Hestia B.V. ( Hestia ). A copy of the PSA (excluding all exhibits, schedules and other incorporated materials) is attached hereto as Exhibit A. Absent the declaratory relief and specific performance requested herein, GardaWorld s failure to correctly interpret the relevant contract terms and duly perform its obligations will cause the Sellers of Hestia -- represented here by the Sellers Representative -- to lose millions of dollars that they are rightfully owed. 1 1 Undefined capitalized terms used herein have the same meaning as in the PSA. ï ±º íî

3 2. The parties to the PSA are the Sellers, the Sellers Representative, Hestia, GardaWorld, as Purchaser, and Garda World Security Corporation (under 12.3 and only). 3. The Closing of the Hestia sale occurred on September 17, In addition to the initial $130 million purchase price for Hestia (which was subject to certain closing adjustments not relevant here), the PSA offered Sellers the right to receive from GardaWorld up to in additional compensation under the terms of an Earnout provision set forth in 1.5 of the PSA. 4. Section 1.5 provides for the payment of two separate Earnout Amounts -- i.e., the First Earnout Amount and the Second Earnout Amount. The payment due under each Earnout Amount is determined based on the amount of Actual Gross Profit that Hestia s Operating Companies earn over defined time periods associated with each particular Earnout Amount -- i.e., the First Earnout Period and the Second Earnout Period. Only the First Earnout Amount for the First Earnout Period is at issue in this action. 5. Pursuant to 1.5, GardaWorld was obligated to prepare an Earnout Statement and calculate an Earnout Amount for the First Earnout Period. The First Earnout Period consisted of the twelve month period ending January 31, Section 1.5, however, provided that if the Actual Gross Profit of the Operating Companies over that twelve month period as calculated by GardaWorld was less than, then the First Earnout Period would be automatically extended through May 31, referred to as the Extended Earnout Period -- subject only to termination in a prior month if the Operating Companies earned over by the end of that earlier month. Accordingly, the time period to use for calculating the amount of Actual 2 î ±º íî

4 Gross Profit earned by the Operating Companies, and determining whether a First Earnout Amount was due, spanned potentially a twelve to sixteen month period. 6. Between May and June 2016, GardaWorld delivered what it claimed was the Earnout Statement for the twelve month period ending January 31, 2016 and four additional purported Earnout Statements for each of the four periods in the Extended Earnout Period ending May 31, All five of those Earnout Statements showed that, as calculated by GardaWorld, was due to Sellers. 7. Consistent with 1.5, the Sellers Representative timely delivered to GardaWorld an Earnout Dispute Notice (the First Dispute Notice ) and an amended Earnout Dispute Notice (the Amended Dispute Notice and with the First Dispute Notice, the Dispute Notices ), which are attached hereto as Exhibits B and C, respectively. The Dispute Notices asserted numerous disagreements with GardaWorld s five Earnout Statements and its calculation of the Earnout Amount. If the disagreements asserted by the Sellers Representative in the Dispute Notices are resolved in his favor, GardaWorld will owe Sellers a First Earnout Amount in excess of for the First Earnout Period. 8. Section 1.5 directs that disagreements in an Earnout Dispute Notice will be resolved by an Accounting Referee who, acting as an arbitrator, will calculate the Earnout Amount. Section 1.5, however, further provides that disagreements relating to the interpretation or breach of the provision of this Section 1.5, the relevant definitions and certain other matters, shall be resolved by this Court. 9. Of the numerous disagreements identified in the Dispute Notices, this action asserts only four disputes (the Four Disputes ). The Four Disputes are outside the jurisdiction of the Accounting Referee and properly before this Court because each one asserts that, as a 3 í ±º íî

5 matter of law, GardaWorld erroneously interpreted the provisions of 1.5 and the relevant definitions and breached The Four Disputes are as follows: (1) The Calculation Time Period Dispute. Each of the four Earnout Statements GardaWorld prepared for the Extended Earnout Period -- i.e., the periods ending February through May improperly used a twelve month time period to calculate Actual Gross Profit, with each calculation beginning one year before the period for which each Earnout Statement was created. For example, the May 31, 2016 Earnout Statement calculated Actual Gross Profit over the period June 1, 2015 through May 31, Contrary to GardaWorld s calculation, 1.5 required that the four Earnout Statements each include the Actual Gross Profit for the full year ending January 31, 2016 plus those months of the Extended Earnout Period included within the particular Earnout Statement. For example, the May 31, 2016 Earnout Statement should have calculated Actual Gross Profit over the sixteen month period February 1, 2015 through May 31, GardaWorld s use of an abbreviated twelve month period 2 In the Dispute Notices, the Sellers Representative has disagreed with GardaWorld s recognition of the expenses underpinning three of the Four Disputes alleged herein -- i.e., the Afghanistan Withholding Tax Dispute, the Basra Accounts Receivable Dispute and the Unbilled Accounts Receivable Dispute -- on the grounds that the recognition of such expenses was not in accordance with applicable accounting requirements and consistent with past practice of the Company and its Subsidiaries as 1.5 of the PSA requires. These disagreements -- which focus on the appropriate accounting treatment of the expenses -- are not the subject of this action, as they fall within the jurisdiction of the Accounting Referee. By bringing this action, the Sellers Representative does not waive, but instead explicitly preserves, his right to pursue these disagreements before the Accounting Referee. Nonetheless, these disagreements should be heard by the Accounting Referee only if they are not rendered moot by a judgment in favor of the Sellers Representative on his claims in this action, which contend that the disputed expenses, regardless of whether they comply with applicable accounting requirements or were consistent with past practice, must be excluded from the calculation of Actual Gross Profit as a matter of law based on the terms of the PSA. The Sellers Representative further explicitly preserves his right to pursue before the Accounting Referee all other disagreements set forth in the Dispute Notices that are within his jurisdiction. 4 ì ±º íî

6 improperly excluded from its calculation of Actual Gross Profit in each of the four Earnout Statements, resulting in a materially flawed calculation of the Earnout Amount. (2) The Afghanistan Withholding Tax Dispute. GardaWorld improperly reduced the calculation of Actual Gross Profit in the five Earnout Statements by recording an aggregate expense of before it had decided -- which it still had not done as of August 30, whether the expense is permitted under 1.5 s definition of Actual Gross Profit. According to GardaWorld, it has not yet decided whether the. GardaWorld s violation of its contractual duties requires that the aggregate expense be excluded from the calculation of Actual Gross Profit. In the alternative, GardaWorld s recognition of the breach of 1.5 that must be excluded from the calculation of Actual Gross Profit. (3) The Basra Accounts Receivable Dispute. GardaWorld reduced its calculation of Actual Gross Profit in each of the five Earnout Statements by recording an 5 ë ±º íî

7 . Accordingly, because the PSA precluded GardaWorld from recognizing, in its calculation of Actual Gross Profit under 1.5,, its decision to do so is a breach of 1.5. (4) The Unbilled Accounts Receivable Dispute. GardaWorld s calculation of Actual Gross Profit in each of the five Earnout Statements included a expense arising from GardaWorld s decision to reduce the net Unbilled Aged Receivables -- i.e., the Unbilled Aged Receivables less Identified Reserve -- based on its accounting judgment that, for various reasons, the Unbilled Aged Receivables account balance was overstated and not collectable.. Thus, the PSA provides that any Losses GardaWorld may incur from the non-collection of the Unbilled Aged Receivables are recoverable only from the Unbilled Aged Receivables Escrow Fund. Accordingly,, its decision to do so is a breach of 1.5. Second, in the alternative, to the extent that that should have been (but purportedly was not) recorded on the U.S. LLC s balance sheet as of the execution and/or Closing of the PSA -- rather than from GardaWorld s accounting judgment as to the non-collectability of the Unbilled Aged Receivables -- then that expense is precluded because GardaWorld is seeking to recover for Losses incurred as a result of Hestia s purported 6 ê ±º íî

8 breach of its representations and warranties. The terms of the PSA s indemnification provisions do not permit the recovery of such Losses through 1.5 and GardaWorld s attempt to do so is a breach of In this action, the Sellers Representative seeks a declaratory judgment that GardaWorld s interpretation of the provisions of 1.5 and the relevant definitions challenged in the Four Disputes and that GardaWorld s conduct in calculating Actual Gross Profit with respect to the Afghanistan Withholding Tax Dispute is erroneous and contrary to the obligations it owed to Sellers, and to Sellers rights, under the PSA. 12. The Sellers Representative also asserts a claim for breach of contract based on the Four Disputes and seeks specific performance of GardaWorld s obligation to deliver Earnout Statements that calculate Actual Gross Profit consistent with the provisions of 1.5 of the PSA and the relevant definitions. Specific performance is required to provide the Accounting Referee with the correct amount of Actual Gross Profit earned during the First Earnout Period -- at least so far as the Four Disputes are concerned -- so that the Accounting Referee can proceed to calculate the First Earnout Amount for the First Earnout Period after resolving the various disagreements set forth in the Dispute Notices that are within his jurisdiction and are not subject to resolution by this Court. GardaWorld has agreed in 12.9 of the PSA that specific performance is an appropriate remedy to enforce the terms and provisions of the PSA and to enforce compliance with GardaWorld s obligations. The Sellers Representative has no adequate remedy at law. THE PARTIES 13. Plaintiff Jeffrey Paul Arnold Day is an individual and a citizen of the United Kingdom. Pursuant to of the PSA, the Sellers have named plaintiff as the Sellers Representative and authorized him as their representative, exclusive agent and attorney-in-fact 7 é ±º íî

9 to, among other things, protect the Sellers rights and interests under the PSA, including by commencing an action against GardaWorld. 14. Defendant GardaWorld is a private limited company incorporated under the laws of England and Wales with its registered office located in London, United Kingdom. JURISDICTION AND VENUE 15. This Court has personal jurisdiction over GardaWorld because, pursuant to 12.3(a) of the PSA, it consented to personal jurisdiction in this Court and personal jurisdiction also is proper under N.Y. General Obligations Law Venue is proper pursuant to New York Civil Procedure Law & Rules 501 and 509 because plaintiff has designated Supreme Court, New York County as the place of trial and the parties agreed, pursuant to 12.3(a) of the PSA, to fix the place of trial in this Court. FACTUAL BACKGROUND 17. Prior to the closing of the PSA, Hestia was a private limited liability company incorporated under the laws of the Netherlands whose Company Shares were owned entirely by the Sellers. Hestia operated primarily as a holding company which owned, directly or indirectly, the Operating Companies. Collectively, Hestia s operations consisted of the identification, management and mitigation of risk on behalf of governments and corporations worldwide, geopolitical risk analysis, investigation, strategic consultancy, due diligence and kidnap and ransom negotiations. 18. This action concerns, in part, GardaWorld s improper calculation of the Actual Gross Profit of two of Hestia s Operating Companies, Aegis Defence Services Limited ( ADSL ) and Aegis Defense Services LLC ( U.S. LLC ). Both ADSL and U.S. LLC provided specialist security and risk management solutions to counter extreme threats on behalf of governments, international agencies and corporations. Among other activities, ADSL serviced 8 è ±º íî

10 government and corporate clients in Iraq. The U.S. LLC provided services to the United States Government, particularly the Department of State in Afghanistan. 19. The sale of Hestia, as embodied in the PSA, closed on September 17, The PSA provides in 1.1 and 1.2 for the payment by GardaWorld to Sellers of an initial $130 million purchase price in exchange for all of Sellers right title and interest in the Company Shares. That price was subject to adjustment based on certain metrics to be determined as of the Closing Date, which adjustments are not at issue here. 20. Section 1.5 of the PSA further provided for an Earnout entitling Sellers to the payment by GardaWorld of potentially based on the terms set forth therein. THE EARNOUT PROVISIONS OF SECTION Section 1.5 of the PSA provides for the potential payment of two separate Earnout Amounts: the First Earnout Amount and the Second Earnout Amount. Each Earnout Amount is associated with a separate Earnout Period: the First Earnout Period and the Second Earnout Period. Only GardaWorld s calculation of the First Earnout Amount is at issue here. 22. For each Earnout Amount, the PSA specified particular earnings hurdles that the Operating Companies had to achieve over the course of an Earnout Period for a particular Earnout Amount to be paid. Those earnings hurdles were based on the Gross Profit (or Actual Gross Profit 3 ) earned by the Operating Companies. 23. For example, 1.5(a)(i) provided that the First Earnout Amount for the First Earnout Period would be if the Operating Companies earned an Actual Gross Profit 3 Section 1.5(a) uses the term Actual Gross Profit to identify the amount of the earnings hurdles which the Operating Companies had to achieve for an Earnout Amount to be paid. Actual Gross Profit, however, is simply the amount of Gross Profit earned by the Operating Companies as calculated and reported by GardaWorld in the Earnout Statements which it was required to prepare, as alleged below. Under 1.5 and the relevant definitions of the PSA, Gross Profit and Actual Gross Profit are to be calculated in the identical manner. 9 ç ±º íî

11 of least (referred to as the First Earnout Hurdle). In addition, 1.5(a)(i) provided for an additional payment equal to every dollar of Actual Gross Profit earned by the Operating Companies in excess of, up to a -- i.e., a potential First Earnout Amount. Moreover, even if the Operating Companies did not meet the First Earnout Hurdle, 1.5(a)(i) still provided for payment of a First Earnout Amount if the Operating Companies earned at least. 24. The PSA further defined the time period over which the Actual Gross Profit of the Operating Companies was to be calculated for each Earnout Period. Pursuant to 13.1(a) -- and the definitions of First Earnout Period and First Extended Earnout Date set forth therein -- the First Earnout Period consisted of the twelve-month period ended on January 31, 2016, provided that if the Operating Companies failed to earn an Actual Gross Profit of during those twelve months, the First Earnout Period shall be automatically extended to the First Extended Earnout Date, defined as the earlier of (a) May 31, 2016 and (b) the last day of any month during the period commencing on February 1, 2016 until May 31, 2016 in which the Operating Companies achieved an Actual Gross Profit of. In sum, the PSA provided that, for purposes of calculating whether an Earnout Amount was owed, Actual Gross Profit should be calculated over a twelve to sixteen month period, depending on the amount of Actual Gross Profit earned by the Operating Companies during that period To determine whether the earnings hurdles had been achieved and an Earnout Amount was owed, 1.5(a) imposed upon GardaWorld various reporting requirements. For the First Earnout Period, GardaWorld was required, among other things, to prepare and deliver to the 4 As for the Second Earnout Period, which is not at issue, it was to begin immediately following the end of the First Earnout Period and would also last between twelve and sixteen months depending on the amount of Actual Gross Profit -- which for the Second Earnout Period was set at -- earned by the Operating Companies during that time period. 10 ï𠱺 íî

12 Sellers Representative, by April 15, 2016, an Earnout Statement for the twelve month period ending January 31, 2016, showing its calculation of the Operating Companies Actual Gross Profit during that period and the resulting Earnout Amount. 26. Moreover, if GardaWorld s calculation showed that the Operating Companies had not earned, GardaWorld was obligated to prepare and deliver to the Sellers Representative, within thirty days after each month included in the Extended Earnout Period, an Earnout Statement for each of the remaining thirteen through sixteen month periods ending May 31, 2016 (or until such earlier month as the Operating Companies had earned in Actual Gross Profit), showing GardaWorld s calculation of the Operating Companies Actual Gross Profit over the course of each such period and the resulting Earnout Amount owed. 27. The PSA further set forth procedures affording the Sellers Representative the opportunity to review each Earnout Statement and to dispute GardaWorld s calculation of the Earnout Amount. Section 1.5(d)(i) allowed the Sellers Representative sixty days to review each Earnout Statement. To enable that review, 1.5(d)(ii) imposed on GardaWorld the obligation to afford the Sellers Representative, during that review period, access to, among other things, the books, records, personnel and accountants of GardaWorld and the Operating Companies to the extent relevant to the review or preparation of each Earnout Statement and determination of any Earnout Amount. 28. Upon the conclusion of that sixty day review period, 1.5(d)(i) directed that, if the Sellers Representative disagreed with GardaWorld s calculation of the Earnout Amount in an Earnout Statement, the Sellers Representative was to deliver an Earnout Dispute Notice to GardaWorld disagreeing with such calculation and to the extent the Sellers Representative is reasonably able to so specify, setting forth the... basis for such disagreement. 11 ïï ±º íî

13 29. The PSA also set forth the procedures for resolving any disagreements raised in an Earnout Dispute Notice. Section 1.5(d)(iv) directs that any such disagreement shall be resolved according to the procedures set forth in Section 1.4(c)(ii), which essentially provides that, if the parties are unable to negotiate a resolution of the disagreement, all disputed amounts and items will be submitted to, and determined by, an Accounting Referee acting as an arbitrator. Nonetheless, 1.5(d)(iv) exempts certain disagreements from the jurisdiction of the Accounting Referee. Specifically, 1.5(d)(iv) directs that to the extent that the disagreement relates to the validity, interpretation or breach of the provisions of this Section 1.5, the relevant definitions or certain other specified items, then such disagreement shall be resolved by this Court. The Four Disputes that are the subject of this action are outside the scope of the Accounting Referee s jurisdiction under 1.5(d)(iv) because they concern the interpretation and the breach of the provisions of Section 1.5 and the relevant definitions. GARDAWORLD DELIVERS ITS PURPORTED EARNOUT STATEMENTS WHICH THE SELLERS REPRESENTATIVE DISPUTES 30. On April 15, 2016, GardaWorld delivered to the Sellers Representative what it purported to be the results for the year ending January 31, 2016 of the Operating Companies. The Sellers Representative subsequently objected that the information GardaWorld supplied did not provide the information required by the PSA and did not constitute an Earnout Statement. 31. On May 17, 2016, GardaWorld delivered to the Sellers Representative what it now claimed was the Earnout Statement for the twelve months ending January 31, 2016 (the 2016 Earnout Statement ) as well as the purported Earnout Statements for the periods ending February 29, 2016 (the February Earnout Statement ) and March 31, 2016 (the March Earnout Statement ). GardaWorld and the Sellers Representative subsequently agreed that any Earnout Dispute Notice with respect to the 2016 Earnout Statement would not be due until July 18, 2016, 12 ïî ±º íî

14 which was also the date when such a notice would be due for the February Earnout Statement and the March Earnout Statement. 32. On June 2, 2016, GardaWorld delivered to the Sellers Representative what it purported to be the Earnout Statement for the period ending April 30, 2016 (the April Earnout Statement ) and on June 30, 2016 it delivered what it claimed was the Earnout Statement for the period ending May 31, 2016 (the May Earnout Statement and collectively with the 2016 Earnout Statement, the February Earnout Statement, the March Earnout Statement and the April Earnout Statement, the Five Earnout Statements ). 33. On July 15, 2016, GardaWorld and the Sellers Representative agreed that the time for the Sellers Representative to deliver an Earnout Dispute Notice with respect to the 2016 Earnout Statement, the February Earnout Statement and the March Earnout Statement would be extended to August 1, Subsequently, on July 27, 2016, GardaWorld and the Sellers Representative agreed to extend until August 31, 2016 the time for the Sellers Representative to deliver an Earnout Dispute Notice with respect to the Five Earnout Statements. 34. Each of the Five Earnout Statements showed that, as calculated by GardaWorld, was owed for the First Earnout Period. The Sellers Representative made repeated attempts to review GardaWorld s preparation of the Five Earnout Statements and their respective calculations of Actual Gross Profit but was met with stiff resistance. Indeed, beginning shortly after receiving on April 15, 2016 the supposed results of the Operating Companies for the twelve months ended January 31, 2016 and continuing through August 2016, the Sellers Representative made numerous requests for relevant documents and information as well as interviews of persons with knowledge of various accounting issues raised by GardaWorld s preparation of the Five Earnout Statements and its determination of the Earnout 13 ïí ±º íî

15 Amounts. GardaWorld, however, largely failed to respond to the Sellers Representative s requests consistent with its obligations under 1.5(d)(ii). To the contrary, its responses were untimely, evasive, inaccurate, unresponsive and materially incomplete. Moreover, GardaWorld either ignored the Sellers Representative s requests for interviews or inappropriately limited the time allocated for the interviews and/or imposed improper constraints on the circumstances under which they were conducted Despite GardaWorld s failure to comply with its obligations under 1.5(d)(ii), the Sellers Representative prepared and delivered on August 31, 2016 his First Dispute Notice, identifying his disagreements with GardaWorld s calculation of the Earnout Amount in each of the Five Earnout Statements and setting forth his basis for such disagreements to the extent he was reasonably able. 36. Subsequently, after reviewing documents and information first produced by GardaWorld on the evening of August 30, in response to requests the Sellers Representative had made on August 5, the Sellers Representative identified additional disagreements with GardaWorld s calculation of the Earnout Amounts in the Five Earnout Statements. Accordingly, on September 23, 2016, the Sellers Representative delivered to GardaWorld his Amended Dispute Notice. If all the disagreements identified in the Dispute Notices are resolved in favor of the Sellers Representative, GardaWorld will owe Sellers a First Earnout Amount in excess of for the First Earnout Period. 5 The Sellers Representative is not asserting in this action a claim premised on GardaWorld s breach of its obligations under 1.5(d)(ii). The Sellers Representative, however, reserves his right to assert GardaWorld s breach of its obligations under 1.5(d)(ii) in any proceedings before the Accounting Referee with respect to any disagreements raised in the Dispute Notices that are not asserted in, or are not mooted by, this action and seek appropriate relief therein. 14 ïì ±º íî

16 37. This action focuses on four disagreements with GardaWorld s calculation of the Earnout Amounts in the Five Earnout Statements asserted by the Sellers Representative in the Dispute Notices: the Calculation Time Period Dispute; the Afghanistan Withholding Tax Dispute; the Basra Accounts Receivable Dispute and the Unbilled Accounts Receivable Dispute. Each of these Four Disputes relates solely to the interpretation and breach of the provisions of 1.5 of the PSA and the relevant definitions. Accordingly, the Four Disputes are outside the jurisdiction of the Accounting Referee and properly asserted in this Court. THE FOUR DISPUTES The Calculation Time Period Dispute 38. In the 2016 Earnout Statement, GardaWorld calculated the supposed Earnout Amount based on the purported amount of Actual Gross Profit earned by the Operating Companies over the twelve month period ending January 31, For each of the four Earnout Statements subsequently delivered during the Extended Earnout Period -- i.e., the February Earnout Statement, the March Earnout Statement, the April Earnout Statement and the May Earnout Statement (collectively, the 2016 Extended Earnout Statements ) -- GardaWorld continued to calculate the Actual Gross Profit based on a twelve month period ending on the last day of each month for each of the Earnout Statements in the Extended Earnout Period. For example, the February Earnout Statement calculated Actual Gross Profit over the twelve month period March 1, 2016 through February 29, Similarly, the remaining 2016 Extended Earnout Statements employed a twelve month period over which to calculate the amount of Actual Gross Profit earned for purposes of the particular Earnout Statement. 39. The result of using a rolling twelve month period to calculate the amount of Actual Gross Profit earned by the Operating Companies was that each Earnout Statement ignored the Actual Gross Profit earned in preceding months included in GardaWorld s ïë ±º íî

17 Earnout Statement. For example, the February Earnout Statement calculated Actual Gross Profit by ignoring the Actual Gross Profit earned in the month ending February 2015, which GardaWorld had reported to be. Similarly, the March Earnout Statement calculated Actual Gross Profit by ignoring the Actual Gross Profit earned in the months ending February and March 2015, which collectively equaled, according to GardaWorld s calculation,. GardaWorld employed the same approach for all the other Earnout Statements included in the 2016 Extended Earnout Statements, ultimately resulting in the May Earnout Statement calculating Actual Gross Profit by ignoring the Actual Gross Profit earned in the months ending February through May 2015, which totaled, according to GardaWorld s calculation,. 40. GardaWorld s use of a rolling twelve month period to calculate Actual Gross Profit in each of the 2016 Extended Earnout Statements is, as a matter of law, an erroneous interpretation of the provisions of 1.5 of the PSA and its relevant definitions and constitutes a breach of As alleged above (see 24), 1.5 and the relevant definitions it employs -- including Extended Earnout Period, First Earnout Period, and First Extended Earnout Date -- unambiguously provide that Actual Gross Profit during the First Earnout Period (which includes the Extended Earnout Period) shall be calculated over a twelve through sixteen month period, the length of which depends solely on the month in which Actual Gross Profit is calculated to equal or exceed. Thus, under 1.5, each of the 2016 Extended Earnout Statements should have calculated Actual Gross Profit employing the Actual Gross Profit calculated by GardaWorld for the twelve month period ending January 31, 2016 plus the Actual Gross Profit 16 ïê ±º íî

18 for each of the periods in the Extended Earnout Period through May 31, 2016, subject only to termination in that month when Actual Gross Profit equaled or exceeded. 42. If GardaWorld had faithfully complied with the unambiguous terms of 1.5 and its relevant definitions, the 2016 Extended Earnout Statements would not, in calculating Actual Gross Profit, have ignored the Actual Gross Profit earned during any of the twelve months ending January 31, For example, the calculation of Actual Gross Profit in the May Earnout Statement would not have ignored, as it erroneously did, the Gross Profit purportedly earned over the period February through May in Actual Indeed, if GardaWorld had faithfully applied the terms of 1.5 and its relevant definitions in preparing its May Earnout Statement and properly employed the Actual Gross Profit that GardaWorld reported over the period from February 1, 2015 though May 31, 2016 to calculate Actual Gross Profit, then even ignoring (for purposes of this example only) all the Sellers Representatives other disagreements with GardaWorld s calculation of Actual Gross Profit as set forth in the Dispute Notices, GardaWorld would owe the Sellers an Earnout Amount of. The Afghanistan Withholding Tax Dispute 43. The calculation of Actual Gross Profit in the Five Earnout Statements includes an aggregate expense of -- which reduced the amount of Actual Gross Profit that would otherwise have been reported -- relating to a so-called Afghanistan Withholding Tax. In particular, the calculation of Actual Gross Profit in the 2016 Earnout Statement recognizes an expense of in connection with the Afghanistan Withholding Tax. Each of the 2016 Extended Earnout Statements incorporates that same amount in their calculation of Actual Gross Profit as well as an additional expense for each month included in the Extended Earnout Period, 17 ïé ±º íî

19 such that the amount of the expense recognized equals and in the February through May Earnout Statements, respectively. 44. GardaWorld has represented that the expense recorded in connection with the Afghanistan Withholding Tax stems from its recognition of. 45. GardaWorld admits that, when it delivered each of the Five Earnout Statements (and continuing through at least August 30, 2016), -- a process that GardaWorld has cloaked in secrecy on the grounds that it is subject to the attorney-client privilege., GardaWorld reduced its calculation of Actual Gross Profit in the aggregate amount of as of the May Earnout Statement. 18 ïè ±º íî

20 46. GardaWorld s recognition of any expense in connection with the Afghanistan Withholding Tax is, as a matter of law, an erroneous interpretation of the provisions of 1.5 of the PSA and its relevant definitions and constitutes a breach of Under 1.5 of the PSA, GardaWorld owed Sellers a duty to act fairly and in good faith in applying the terms of 1.5 when performing its contractual obligation to prepare the Five Earnout Statements and calculate the amount of Actual Gross Profit earned. 48. By its terms, Gross Profit is defined to exclude any and all corporate or entitylevel Taxes. The term Taxes is defined as meaning any foreign... taxes... of any kind. whatsoever imposed by any Taxing Authority.... And, the term Taxing Authority is defined to mean with respect to any Tax, the Governmental Authority that imposes such tax... (whether within or outside the Unite[d] States of America) By its own admission, GardaWorld knew that the Afghanistan Withholding Tax that must be excluded from the calculation of Actual Gross Profit and knew that, when preparing the Five Earnout Statements, it had not determined otherwise. By proceeding to reduce the calculation of Actual Gross Profit in the Five Earnout Statements by recognizing an expense associated with the Afghanistan Withholding Tax despite knowing that 19 ïç ±º íî

21 the expense may be impermissible -- and knowing that it had not determined that the expense was permissible -- GardaWorld acted arbitrarily and irrationally. Moreover, its conduct served to deliberately frustrate the reasonable expectation of Sellers that GardaWorld would prepare the Earnout Statements and calculate the Earnout Amount consistent with the PSA s definition of Gross Profit. Accordingly, GardaWorld acted in bad faith by recognizing any expense in the Five Earnout Statements related to the Afghanistan Withholding Tax and its conduct is a breach of 1.5 of the PSA. 50. As a consequence of its failure to comply with its contractual obligation of good faith and fair dealing when preparing the Five Earnout Statements and calculating Actual Gross Profit, GardaWorld may not now seek to cure its bad faith conduct by electing what rationale to employ in support of the aggregate expense associated with the Afghanistan Withholding Tax. Accordingly, the aggregate expense associated with the Afghanistan Withholding Tax must be excluded from the calculation of Actual Gross Profit in the Five Earnout Statements. 51. In the alternative and without prejudice to the above-stated allegations that GardaWorld breached its contractual duty of good faith and fair dealing, GardaWorld s recognition of the aggregate expense in its calculation of Actual Gross Profit in the Five Earnout Statements breached 1.5 of the PSA because such expense. 52. Had GardaWorld acted consistent with its obligations under 1.5 and not recognized any of the expense associated with the Afghanistan Withholding Tax in calculating Actual Gross Profit in connection with the preparation of the Five Earnout Statements and had 20 î𠱺 íî

22 GardaWorld properly measured Actual Gross Profit with respect to the other claims comprising the Four Disputes, then GardaWorld would owe Sellers an Earnout Amount in excess of. The Basra Accounts Receivable Dispute 53. As of the PSA Closing, the Basra accounts receivable was an outstanding accounts receivable for work ADSL had previously performed for, and billed to, the Basra Governorate in Iraq but had not yet collected. The net Basra accounts receivable -- i.e., the Basra accounts receivable less the recorded reserve associated with it -- (the Basra Accounts Receivable ) was an asset on the Operating Companies consolidated balance sheet. 54. GardaWorld, in preparing each of the Five Earnout Statements, recorded an in each of the Five Earnout Statements. 55. GardaWorld s decision to reduce Actual Gross Profit is, as a matter of law, a breach of 1.5 of the PSA. 56. As the PSA reflects, in negotiating the Hestia sale, a concern existed over the collectability of the Basra Accounts Receivable. The PSA addressed that concern by establishing procedures to (a) determine an agreed-upon amount of the Basra Accounts Receivable and thus the amount of loss which GardaWorld would incur if the Basra Accounts Receivable was not fully collected; and (b) insure that GardaWorld was fully protected against 21 îï ±º íî

23 such a loss through the use of an escrow fund -- the Basra Aged Receivables Escrow Fund -- which would pay to GardaWorld any portion of the agreed-upon amount of the Basra Accounts Receivable which remained uncollected by the end of the Second Earnout Period. Furthermore, the PSA provided that any Losses GardaWorld incurred in connection with the Basra Aged Receivables -- defined as the amount of the outstanding Basra accounts receivable as of Closing -- would be recoverable solely out of and limited to the amounts deposited in the escrow fund. 57. The above-described structure can be seen from a collective reading of various provisions of the PSA, including 1.5, 1.9(c), 9.2(a)(vii)(A), 9.4(e) and the relevant definitions of 13.1(a) Had GardaWorld acted consistent with its obligations under 1.5 and not expensed the Basra Accounts Receivable in calculating Actual Gross Profit in each of the Five Earnout Statements and had GardaWorld properly measured Actual Gross Profit with respect to the other claims comprising the Four Disputes, then GardaWorld would owe Sellers an Earnout Amount in excess of. 6 These include the definitions for Basra Aged Receivables, Basra Aged Receivables Escrow Amount and the Basra Aged Receivables Uncollected Amount. 22 îî ±º íî

24 The Unbilled Accounts Receivable Dispute 60. As of the PSA Closing, the U.S. LLC had recognized revenue for work it had performed with respect to the Base Year and Option Year 1 on the Swordfish Engagement which it had not yet invoiced to United States Government. The amount of that unbilled revenue was recorded as an asset on the Operating Companies balance sheet less the recorded reserve associated with it (collectively, the Unbilled Accounts Receivable ). 61. GardaWorld, in preparing each of the Five Earnout Statements, reduced Actual Gross Profit. Although GardaWorld s identification and explanation for these adjustments vary -- and GardaWorld has resisted the Sellers Representative s efforts to obtain information about the adjustments -- the adjustments, on information and belief, all stem from GardaWorld s GardaWorld s decision to reduce Actual Gross Profit is, as a matter of law, a breach of the provisions of 1.5 of the PSA. 63. GardaWorld s recognition of the expense is improper for the same reasons alleged above with respect to the Basra Accounts Receivable Dispute. As with the Basra Accounts Receivable, a concern existed when negotiating the Hestia sale over whether the 7 As set forth in the Amended Dispute Notice (Exhibit C at 6 n.4), GardaWorld may have also reduced Actual Gross Profit by expensing of Unbilled Accounts Receivable, although that amount may be incorporated within the figure alleged above. To the extent GardaWorld did separately expense that to reduce Actual Gross Profit, that expense would also reflect an erroneous interpretation of 1.5 and a breach of its terms for the reasons alleged above. 23 îí ±º íî

25 Unbilled Accounts Receivable would be billed and collected. To address that concern, the PSA adopted a solution identical to the one used for the Basra Accounts Receivable -- i.e., it created a process to (1) define an agreed-upon amount for the Unbilled Accounts Receivable and thus the loss GardaWorld would incur if the Unbilled Accounts Receivable was not collected and (2) ensured that GardaWorld would be fully protected against such a loss through use of an escrow fund -- the Unbilled Aged Receivables Escrow Fund -- which would pay to GardaWorld any portion of the agreed-upon amount of Unbilled Accounts Receivable which remained uncollected as of the Second Earnout Period. Moreover, as with the Basra Accounts Receivable, the PSA provided that any Losses GardaWorld incurred in connection with the Unbilled Aged Receivables -- defined as the full amount of the unbilled accounts receivable outstanding as of Closing -- would be recoverable solely out of and limited to the amounts deposited in the escrow fund. This structure is evident from a collective reading of various provisions of the PSA, including 1.5, 1.9(d), 9.2(a)(vii)(B), 9.4(e) and the relevant definitions of 13.1(a) Accordingly, GardaWorld breached 1.5 of the PSA when it recorded an expense totaling in calculating Actual Gross Profit in each of the Five Earnout Statements. 8 These include the definitions for Unbilled Aged Receivables, Unbilled Aged Receivables Amount and Unbilled Aged Receivables Escrow Amount. 24 îì ±º íî

26 66. Second, in the alternative, to the extent that of the above-alleged expense represents Losses supposedly arising from a breach of Hestia s representations and warranties as of the execution and/or Closing of the PSA, such expense is precluded by the PSA s indemnification provisions from being included in the calculation of Actual Gross Profit under 1.5. As alleged above, GardaWorld has offered varying explanations for the expenses at issue in the Unbilled Accounts Receivable Dispute. Among other things, GardaWorld has suggested that. GardaWorld has suggested that, in preparing the Five Earnout Statements, it recognized that liability and recorded a related expense to reduce Actual Gross Profit. 67. If GardaWorld s description of the expense is correct, then GardaWorld is claiming that Hestia s representations and warranties under 3.7 of the PSA were not true and correct as of the execution of the PSA and/or the Closing. The PSA provides, however, that all Losses arising from such claims may only be recovered under the PSA s indemnification provisions and not through 1.5. See 1.5, 8.2(a), 9.2(a)(i), 9.2(c), 9.4(e), 9.5. Accordingly, to the extent that of the expense at issue in the Unbilled Accounts Receivable Dispute arises from a purported breach of a representation and warranty, it is subject to the PSA s indemnification provisions and GardaWorld s recognition of that 25 îë ±º íî

27 expense in its calculation of Actual Gross Profit represents an erroneous interpretation of 1.5 and a breach of its terms. 68. Had GardaWorld acted consistent with its obligations under 1.5 and not recognized the expense associated with its adjustments to the Unbilled Accounts Receivable in calculating Actual Gross Profit in each of the Five Earnout Statements and had GardaWorld properly measured Actual Gross Profit with respect to the other claims comprising the Four Disputes, then GardaWorld would owe Sellers an Earnout Amount in excess of. COUNT ONE (Declaratory Judgment on the Calculation Time Period Dispute) 69. The Sellers Representative hereby repeats and realleges the allegations set forth in paragraphs 1-68 of this Complaint as if fully set forth herein. 70. The PSA is a valid and enforceable contract. 71. There is a justiciable controversy between Sellers Representative and GardaWorld over their competing interpretations of 1.5 of the PSA and its relevant definitions with respect to the calculation of Actual Gross Profit in the 2016 Extended Earnout Statements that form the basis for the Calculation Time Period Dispute as alleged in paragraphs of this Complaint. 72. This dispute is immediate and real because GardaWorld is seeking, by employing its interpretations, to deny paying Sellers a First Earnout Amount to which Sellers Representative contends Sellers are entitled under his interpretations and consistent with Sellers rights under the PSA. 73. Accordingly, the Sellers Representative requests a declaration from this Court that GardaWorld erroneously employed a twelve month period to calculate Actual Gross Profit 26 îê ±º íî

28 in each of the 2016 Extended Earnout Statements and that Actual Gross Profit in each of the 2016 Extended Earnout Statements must be calculated so as to include the Actual Gross Profit for the twelve month period ending January 31, 2016 plus the Actual Gross Profit for every additional month after January 2016 included within the scope of each 2016 Extended Earnout Statement through May 31, 2016, subject only to earlier termination if the Actual Gross Profit in any prior month equals or exceeds. COUNT TWO (Declaratory Judgment on the Afghanistan Withholding Tax Dispute) 74. The Sellers Representative hereby repeats and realleges the allegations set forth in paragraphs 1-73 of this Complaint as if fully set forth herein. 75. The PSA is a valid and enforceable contract. 76. There is a justiciable controversy between Sellers Representative and GardaWorld over their competing interpretations of 1.5 of the PSA, the relevant definitions and GardaWorld s obligations with respect to the calculation of Actual Gross Profit in the Five Earnout Statements that form the basis for the Afghanistan Withholding Tax Dispute as alleged in paragraphs of this Complaint. 77. This dispute is immediate and real because GardaWorld is seeking, by employing its interpretations and based on its conduct, to deny paying Sellers a First Earnout Amount to which Sellers Representative contends Sellers are entitled under his interpretations and consistent with Sellers rights under the PSA. 78. Accordingly, the Sellers Representative requests a declaration from this Court that GardaWorld owed Sellers a duty of good faith and fair dealing when calculating Actual Gross Profit for the Five Earnout Statements which required it, before recognizing an aggregate expense of related to the Afghanistan Withholding Tax Dispute, 27 îé ±º íî

29 . GardaWorld s knowing failure to make that determination requires that the expense be excluded from Actual Gross Profit in any Earnout Statement for the First Earnout Period (including any Extended Earnout Period). In the alternative, because the, it must be excluded from the calculation of Actual Gross Profit in the Five Earnout Statements. COUNT THREE (Declaratory Judgment on the Basra Accounts Receivable Dispute) 79. The Sellers Representative hereby repeats and realleges the allegations set forth in paragraphs 1-78 of this Complaint as if fully set forth herein. 80. The PSA is a valid and enforceable contract. 81. There is a justiciable controversy between Sellers Representative and GardaWorld over their competing interpretations of 1.5 of the PSA and its relevant definitions with respect to the calculation of Actual Gross Profit in the Five Earnout Statements that form the basis for the Basra Accounts Receivable Dispute as alleged in paragraphs of this Complaint. 82. This dispute is immediate and real because GardaWorld is seeking, by employing its interpretation, to deny paying Sellers a First Earnout Amount to which Sellers Representative contends Sellers are entitled under his interpretations and consistent with Sellers rights under the PSA. 83. Accordingly, the Sellers Representative requests a declaration from this Court that GardaWorld erroneously included in its calculation of Actual Gross Profit in each of the Five Earnout Statements an expense of Dispute and that none of that related to the Basra Accounts Receivable expense may be included in calculating Actual Gross 28 îè ±º íî

30 Profit in any Earnout Statement for the First Earnout Period (including any Extended Earnout Period). COUNT FOUR (Declaratory Judgment on the Unbilled Accounts Receivable Dispute) 84. The Sellers Representative hereby repeats and realleges the allegations set forth in paragraphs 1-83 of this Complaint as if fully set forth herein. 85. The PSA is a valid and enforceable contract. 86. There is a justiciable controversy between Sellers Representative and GardaWorld over their competing interpretations of 1.5 of the PSA and its relevant definitions with respect to the calculation of Actual Gross Profit in the Five Earnout Statements that form the basis for the Unbilled Accounts Receivable Dispute as alleged in paragraphs of this Complaint. 87. This dispute is immediate and real because GardaWorld is seeking, by employing its interpretations and based on its conduct, to deny paying Sellers a First Earnout Amount to which Sellers Representative contends Sellers are entitled under his interpretations and consistent with Sellers rights under the PSA. 88. Accordingly, the Sellers Representative requests a declaration from this Court that GardaWorld erroneously included in its calculation of Actual Gross Profit in each of the Five Earnout Statements an expense of Dispute and that none of that related to the Unbilled Accounts Receivable expense may be included in calculating Actual Gross Profit in any Earnout Statement for the First Earnout Period (including any Extended Earnout Period). 29 îç ±º íî

31 COUNT FIVE (Breach of Contract) 89. The Sellers Representative hereby repeats and realleges the allegations set forth in paragraphs 1-88 of this Complaint as if fully set forth herein. 90. The PSA is a valid and enforceable contract. 91. The Sellers and Sellers Representative has substantially performed all of their obligations under the PSA and are willing and able to perform their remaining obligations. 92. The PSA required GardaWorld to prepare and deliver to the Sellers Representative Earnout Statements for the First Earnout Period (including any Extended Earnout Period) consistent with the terms of 1.5 and the relevant definitions. GardaWorld is able to perform its obligations under the PSA. 93. GardaWorld has materially breached and failed to perform its obligations under 1.5 of the PSA by (a) employing an incorrect time period over which to calculate Actual Gross Profit in each of the 2016 Extended Earnout Statements; (b) failing to comply with the implied covenant of good faith and fair dealing when recognizing an aggregate expense of related to the Afghanistan Withholding Tax Dispute or, in the alternative, recognizing an aggregate expense of improperly recognizing an expense of which must be excluded under 1.5; (c) related to the Basra Accounts Receivable Dispute that the PSA requires be excluded from the calculation of Actual Gross Profit; and (d) improperly recognizing an expense of related to the Unbilled Accounts Receivable Dispute that the PSA requires be excluded from the calculation of Actual Gross Profit. 94. As a direct and proximate consequence of GardaWorld s breach, Sellers have suffered injury for which there is no adequate remedy at law. 30 í𠱺 íî