Common use of Inventory Adjustment Clause in Contracts

Inventory Adjustment. The Closing Date Inventory Amount shall be determined as follows: (i) The Buyer and the Seller shall jointly engage the Neutral Accountant to make a physical count of the Inventory no earlier than thirty (30) days prior to the Closing Date and a determination of the book value of the Inventory as of the Closing Date determined in accordance with Section 1.2(d)(ii). With respect to any Inventory location for which (A) the third party service provider that manages such Inventory location has received an unqualified opinion on a Report on Controls Placed in Operation and Tests of Operating Effectiveness (SAS 70 Type II) or (B) the net book value of the Inventory at such location is less than $100,000, the Parties will rely on the physical count made by the third party service provider that manages such Inventory location, provided that such physical count is made no earlier than thirty (30) days prior to the Closing Date. The Parties will rely upon the physical count made by any such third party service provider to calculate the net book value of the Inventory at the locations referenced in the preceding sentence on the Closing Date. The fees and expenses of the Neutral Accountant shall be shared equally by the Buyer and the Seller, with each Party being severally, but not jointly, responsible for one half (1/2) of such fees and expenses. (ii) The Buyer and the Seller shall each be permitted to have one or more representatives present during such physical count. The Neutral Accountant shall (A) determine the book value of the Inventory in accordance with GAAP, which Inventory shall also exclude the Expired Inventory, and be valued at the lower of cost or net realizable value on a first-in, first-out basis and (B) deliver on the Closing Date to the Buyer and the Seller a report (the "Actual Closing Date Inventory Report"), which shall be binding on the Buyer and the Seller, reflecting its determinations regarding the book value of the Inventory and setting forth the specific adjustments to the Inventory amount if any (the "Actual Closing Date Inventory Amount"). Notwithstanding anything contained herein to the contrary, in no event shall the Actual Closing Date Inventory Amount exceed $1,800,000.

Inventory Adjustment. The Closing Date (a) For purposes of this Agreement, the term "Inventory Amount Value" shall be determined in accordance with GAAP applied on a consistent basis with the accounting principles and methodologies historically used by the Sellers, which were used to prepare the statement of product contribution set forth on Schedule 2.06 (the "Valuation Principles"), determined as follows:if the Closing Date were the Company's normal year end. (ib) The Buyer Sellers and the Seller shall Purchaser have jointly engage the Neutral Accountant to make conducted a physical count of the Inventory no earlier than thirty (30) days prior to the Closing Date and a determination of the book value of the Inventory as of the Closing Date determined pursuant to the procedures set forth on Exhibit 1.04(b) hereto. Such physical count was observed by the Independent Accountant. All fees and expenses of the Independent Accountant incurred in this capacity shall be billed to and shared equally by the Sellers and Purchaser. Such physical inventory count occurred on August 25, 2001, August 26, 2001 and August 27, 2001. Within five business days following the physical count, the Sellers shall calculate in good faith and in accordance with Section 1.2(d)(iithe Valuation Principles the Inventory Value for the Inventory as of the Closing Date and deliver a certificate indicating such Inventory Value to the Purchaser (the "Inventory Calculation"). With respect to any Inventory location for which (A) the third party service provider that manages such Inventory location has received an unqualified opinion on a Report on Controls Placed in Operation and Tests of Operating Effectiveness (SAS 70 Type II) or (B) the net book value For purposes of the Inventory at such location is less than $100,000Calculation, the Parties will rely Inventory in transit on the physical count made by Closing Date shall not be included in the third party service provider that manages calculation of Inventory Value. Purchaser shall pay Sellers, at Sellers' cost, for any such Inventory location, provided that such physical count is made no earlier than thirty (30) days prior to the Closing Date. The Parties will rely upon the physical count made by any such third party service provider to calculate the net book value of the Inventory at the locations referenced in the preceding sentence transit on the Closing Date. The fees and expenses Sellers shall deliver such Inventory to Purchaser upon receipt of the Neutral Accountant shall be shared equally by the Buyer and the Seller, with each Party being severally, but not jointly, responsible for one half (1/2) of such fees and expensespayment from Purchaser. (iic) The Buyer and If the Seller Purchaser disagrees in good faith with the Inventory Calculation, the Purchaser shall each be permitted provide a detailed objection to have one or more representatives present during such physical count. The Neutral Accountant shall the Sellers in writing within ten (A10) determine the book value business days after receipt of notice from Sellers of the Inventory in accordance with GAAPCalculation, which and the (d) In the event that the Inventory Calculation for the Inventory shall also exclude the Expired Inventory, and be valued at the lower of cost or net realizable value on a first-in, first-out basis and less than $24.0 million (B$24,000,000) deliver on the Closing Date to the Buyer and the Seller a report (the "Actual Closing Date Minimum Inventory ReportValue"), which the Sellers shall pay to the Purchaser the shortfall. In the event that the Inventory Calculation for the Inventory shall be binding on more than the Buyer Minimum Inventory Value, the Purchaser shall retain the excess Inventory without further payment to the Sellers for such excess. In the event of a shortfall, (i) any amounts owed by the Sellers to the Purchaser as a result of the Sellers' Inventory Calculation delivered pursuant to Section 1.04(b) shall be delivered to Purchaser within two (2) business days of delivery by Sellers of such notice of Inventory Calculation, and (ii) any amounts owed by the Seller, reflecting its determinations regarding Sellers to the book value Purchaser as a result of the determination of the Inventory Calculation pursuant to Section 1.04(c) (whether through negotiations between the Sellers and setting forth the specific adjustments Purchaser or through a determination of the Independent Accountant) shall be made within two (2) business days of such determination. Any amounts owed pursuant to clause (ii) of the immediately preceding sentence (e) Amounts payable pursuant to this Section 1.04 shall be treated as an adjustment to the Inventory amount if any (the "Actual Closing Date Inventory Amount"). Notwithstanding anything contained herein to the contrary, in no event shall the Actual Closing Date Inventory Amount exceed $1,800,000Purchase Price for all purposes.

Inventory Adjustment. The Closing Date Inventory Amount shall be determined as follows: (ia) The Buyer parties hereto acknowledge and agree that in calculating the Seller shall jointly engage Purchase Price for the Neutral Accountant to make a physical count Assets, they determined the purchase price for the Inventory based upon an assumed value of the Inventory at Closing as reflected on Sellers' books and records. The parties further acknowledge and agree that, for this purpose, the assumed value of the Inventory at Closing ("Inventory Value") is $92 million. (For purposes of this Agreement, Inventory Value equals the perpetual stock ledger value minus discount reserves, calculated in accordance with Sellers' past practices.) Within three (3) Business Days prior to the Closing Date, Sellers shall deliver to Buyer their good faith estimate of the actual Inventory Value (together with a copy of inventory records supporting such estimate) as of the opening of business on the Closing Date (the "Estimated Inventory Value"). The Purchase Price to be paid at Closing shall be increased or decreased, as the case may be, by 50% of the amount that the Estimated Inventory Value is more or less than $92 million. (b) Immediately prior to the Closing, Buyer shall cause to be taken a physical inventory by stock keeping unit (the "Inventory Count") of all Inventory held by Buyer as of the Closing Date. The Inventory Count shall be taken by RGIS Inventory Services, or if RGIS Inventory Services is unable to so serve, by an independent inventory service designated jointly by Sellers and Buyer (the "Inventory Service"). The cost of the Inventory Service shall be paid equally by Sellers and Buyer. The instructions to be delivered to the Inventory Service with respect to the conduct of the Inventory Count shall be mutually agreed upon by Buyer and Sellers and shall be delivered to the Inventory Service as promptly as possible following execution of this Agreement; provided, that each of Buyer and Sellers shall act reasonably in reaching an agreement on such instructions. The Inventory Service shall be additionally instructed by Buyer and Sellers to prepare and deliver to Buyer and Sellers, immediately upon completion of the Inventory Count, and in no earlier event later than thirty (30) calendar days prior to after Closing, a final certified report of Inventory Count. Promptly (and in no event later than fourteen (14) calendar days) following the Closing Date and a determination of the book value of day on which the Inventory Service shall have delivered the final report of Inventory Count to Sellers and Buyer, Sellers and Buyer shall jointly calculate and agree, each acting reasonably and in good faith, an actual Inventory Value as of the Closing Date determined in accordance with Section 1.2(d)(iibased upon the principles set forth above (the "Actual Inventory Value"). With respect If Sellers and Buyer are unable to any reach an agreement regarding the Actual Inventory location for which Value on or prior to fourteen (A14) calendar days following the third party service provider that manages such Inventory location has received an unqualified opinion on a Report on Controls Placed in Operation and Tests of Operating Effectiveness (SAS 70 Type II) or (B) the net book value delivery of the Inventory at such location is less than $100,000Count by the Inventory Service, the Parties will rely on the physical count made next Business Day thereafter the disagreement shall be presented to a leading independent accounting firm to be mutually selected by Buyer and Sellers. Such accounting firm shall be instructed to render a decision as to the third party service provider that manages such Actual Inventory location, provided that such physical count is made no earlier than Value within thirty (30) calendar days prior to thereafter, and such decision shall be final and binding upon each of the Closing Dateparties. The Parties will rely upon the physical count made by any such third party service provider to calculate the net book value of the Inventory at the locations referenced in the preceding sentence on the Closing Date. The fees fees, costs and expenses of the Neutral Accountant incurred in connection therewith shall be shared equally in equal amounts by the Buyer and Sellers. Following a final determination of Actual Inventory Value, it shall be compared to the SellerEstimated Inventory Value. In the event that the Actual Inventory Value exceeds the Estimated Inventory Value, with each Party being severallyBuyer shall promptly remit 50% of the difference to Sellers. In the event that the Estimated Inventory Value exceeds the Actual Inventory Value, but not jointly, responsible for one half (1/2) Sellers shall promptly remit 50% of such fees and expensesthe difference to Buyer. (iic) The In addition to the Inventory, at Closing, Buyer and the Seller shall each be permitted pay to have one or more representatives present during such physical count. The Neutral Accountant shall (A) determine the book value Sellers 100% of the Inventory full landed cost as determined by Sellers and Buyer in accordance with GAAP, which Inventory shall also exclude the Expired Inventory, and be valued at the lower of cost or net realizable value on a first-in, first-out basis and (B) deliver on the Closing Date to the Buyer and the Seller a report good faith (the "Actual Closing Date Inventory ReportOn Order Merchandise Cost"), which shall be binding on the Buyer and the Seller, reflecting its determinations regarding the book value ) of the Inventory and setting forth the specific adjustments to the Inventory amount if any on order merchandise inventory described on Schedule 3.3(c) (the "Actual Closing Date Inventory AmountOn Order Merchandise"). Notwithstanding anything contained herein Buyer shall have the right to direct Sellers to divert the contrarydelivery destinations of any of the On Order Merchandise to any locations that may be selected by Buyer, in no event and Buyer agrees that such On Order Merchandise shall remain at such location (and not be sold by Sellers) pending the Actual Closing. The Purchase Price to be paid at Closing Date Inventory Amount exceed $1,800,000shall be increased by the On Order Merchandise Cost.