International Operations
PAEs contracts performed internationally may be subject to additional U.S. laws, regulations and policies, including the FCPA, in
addition to the local laws of the jurisdictions in which PAE operates. To the extent that PAE provides products, technical data and services outside the United States, it is also subject to U.S. laws and regulations governing international
transactions. Those include but are not limited to: the International Traffic in Arms Regulations under the Arms Export Control Act, the Export Administration Regulations under the International Emergency Economic Powers Act, and financial and trade
sanctions against embargoed countries and individuals and organizations that are specially designated national and blocked parties, which are administered by the Office of Foreign Assets Control within the U.S. Department of the Treasury.
PAEs international operations are also subject to a multitude of local laws in the jurisdictions in which it operates. PAE must comply
with foreign government laws, regulations and procurement policies and practices, which may differ from U.S. Government requirements, including import-export control, labor laws, tax requirements, exchange controls, repatriation of earnings, and
requirements to expend a portion of program funds in-country. In addition, international hostilities, political instability, and changes in currency values can also impact PAEs international operations.
Risk Insurance
PAE has tailored its
casualty and property risk insurance programs to fit the business risk and to leverage costs of these solutions as part of its offerings to government customers. PAE has a high-deductible workers compensation policy to cover its domestic
employees, and relies on Defense Base Act (the DBA) coverage for its international employees. The DBA generally requires insurance coverage to be provided to persons employed at U.S. military bases and certain contracts with or
funded by the U.S. Government outside of the United States, the cost of which is typically passed to PAEs customers. PAEs high-deductible approach extends to automobile liability and property coverage, which includes rented equipment,
including cranes and machinery. PAE self-insures automotive property for its owned, leased and rented vehicles as its fleet auto safety program enables it to maintain very low losses. Government-furnished equipment is generally not insured per the
governments regulations. PAEs operations cover a wide range of types and geographies. Therefore, PAE has implemented a diverse approach to specialty coverage, including aviation, marine, cargo, professional liability, kidnap and ransom,
pollution, medical malpractice and business travel. PAEs business travel policy is comprehensive given the significant numbers of expatriate employees and the environments in which they work. In addition, PAE has corporate coverages, including
directors and officers, fiduciary, crime and employment practices liability.
PAEs History
PAE has a long history of providing critical services to its customers all over the world. PAE was founded in 1955 as an architecture and
engineering firm to provide facility design and construction supervision services to the U.S. Army Corps of Engineers, Navy and Air Force based in Asia. PAE became one of the largest providers of diverse contract services to the Army during the
Vietnam War era and employed thousands of personnel overseas.
By the 1980s, PAE had developed into a diversified government services firm
capable of performing operations anywhere in the world. During these years, PAEs services included providing operations and maintenance and related services to the U.S. Air Force in Spain, Greece, Japan and Honduras and to the U.S. Army Corps
of Engineers in Saudi Arabia, and providing commercial oil support services in Thailand.
Following the Cold War, PAE significantly
expanded its geographic presence. PAE worked on contracts in many new countries, including Afghanistan, Nigeria, Iraq, Liberia, Bosnia, East Timor, Zaire (now the Democratic Republic of the Congo), the United Arab Emirates, Colombia, Bahrain, Sudan,
Haiti, El Salvador and Ghana.
In 2006, Pacific Architects and Engineers, LLC and its subsidiaries (PAE LLC) were
acquired by Lockheed Martin Corporation (LMC). During its ownership period, LMC broadened PAE LLCs service capabilities and expanded its infrastructure. PAE Holding Corporation (PAE Holding) was
incorporated in the state of Delaware in February 2011 by an affiliate of Lindsay Goldberg, LLC (Lindsay Goldberg), and in April 2011, PAE Holding acquired PAE LLC from LMC; Lindsay Goldberg focused on expanding PAEs
business, completing four acquisitions during the course of its ownership. Shay was incorporated in the state of Delaware in January 2016 by an affiliate of Platinum Equity, LLC (Platinum Equity), and in March 2016, Shays
indirect subsidiary acquired PAE Holding from Lindsay Goldberg. During Platinum Equitys ownership period, PAE saw an increased focus on operational excellence and the continued pursuit of strategic initiatives. PAE executed targeted
enhancements to its smart services platform for tech-enabled capabilities and innovative solutions that benefit its customers while expanding continuous improvement efforts to optimize its cost structure and competitiveness.
As further described in the Explanatory Note, on February 10, 2020, the Business Combination contemplated by the Merger Agreement was
consummated and Shay (as it existed immediately prior to the Business Combination) was acquired by Gores III. In connection with the Business Combination, Gores Holdings III, Inc. changed its name to PAE Incorporated and as a
result of the Business Combination, PAE Incorporated became the indirect owner of all of the equity interests of PAE Holding and its subsidiaries.
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