Common use of Net Worth Adjustment Clause in Contracts

Net Worth Adjustment. (a) To the extent that on the Closing Date the Net Worth (as hereinafter defined) of the Company, as determined in accordance with the procedures set forth in Section 1.3(b) hereof, is determined to be less than One Million dollars ($1,000,000), the Purchase Price payable by Buyer pursuant to Section 1.2(a) hereof shall be reduced by an amount equal to the amount by which the Net Worth of the Company is determined to be below One Million dollars ($1,000,000). Within five business days after the final determination of the Net Worth pursuant to the procedures in Section 1.3(b) hereof, in the event that the Net Worth is determined pursuant to Section 1.3(b) to be less than One Million dollars ($1,000,000), the Stockholders shall pay to Buyer, by wire transfer, in immediately available funds, the amount by which such final determination of the Net Worth shall be less than One Million dollars ($1,000,000). For purposes of this Agreement, the term "Net Worth" shall mean the total assets of the Company minus the total liabilities of the Company, and shall be determined in accordance with generally accepted accounting principles, except that for purposes of computing Net Worth (i) depreciation of assets (period and lives) shall be consistent with the Latest Balance Sheet; (ii) there will be no reserve for "bad debt" with respect to accounts receivable on the Closing Date Balance Sheet; (iii) inventory reflected on the Closing Date Balance Sheet shall be based on a physical inventory done on November 1 and 2, 1997 and there will be no reserve for obsolete or slow moving inventory; and (iv) the Closing Date Balance Sheet will not reflect as an asset any receivable from an employee. The Buyer and Stockholders agree that the Closing Date Balance Sheet will reflect all liabilities in accordance with generally accepted accounting principals, including without limitation, (i) the dollar amount of all Indebtedness (other than the dollar amount of Indebtedness which is subtracted from the Cash Purchase Price pursuant to Section 1.2); (ii) all accrued property taxes (real estate and other assets) to the Closing Date; (iii) accrued vacation pay to the Closing Date; (iv) accrued benefit costs to the Closing Date; (v) federal and state income taxes to the Closing Date; (vi) accrued payables to Guard Manufacturing Company Inc. to the Closing Date solely with respect to health insurance premiums with respect to employees of the Company, and compensation for Larr▇ ▇▇▇▇▇▇▇; ▇▇d (vii) $3,000 deferred compensation to employees of the Company.

Net Worth Adjustment. (a) To If the extent that Net Book Value (as defined below) of the Company as of the Closing Date (as defined below) is less than One Million Nine Hundred Fifteen Thousand Dollars ($1,915,000.00), the purchase price for the Shares shall be decreased by the amount of such shortfall. If the Net Book Value of the Company as of 3 the Closing Date is more than $1,915,000, Seller and Purchaser shall take such action (including, without limitation, an advance of cash by Purchaser to the Company) as may be necessary to cause the Company to either (i) declare and pay a dividend to Seller as shareholder of record immediately prior to the Closing or (ii) cause the Company to remain obligated to Seller (rather than release as provided in Section 9.5) with respect to intercompany indebtedness (the "Retained Indebtedness"), in either case in a sum sufficient to reduce the Net Book Value of the Company to $1,915,000. The amount, if any, by which the Net Book Value of the Company as of the Closing Date is more or less than $1,915,000 is referred to herein as the "Adjustment Amount." For purposes hereof, the "Net Book Value" of the Company as of the Closing Date shall equal the total consolidated assets (not including intercompany receivables) of the Company less the total consolidated liabilities (not including intercompany indebtedness except as necessary to accomplish the actions described in the second sentence of this subparagraph (a)) of the Company as reflected on the Closing Date the Net Worth Balance Sheet (as hereinafter defineddefined below). (b) Not less than five (5) business days prior to the Closing Date, Seller shall prepare and deliver to Purchaser for Purchaser's approval an estimated balance sheet of the Company, Company as of the Closing Date and a calculation of the estimated Adjustment Amount (the "Estimated Adjustment Amount") determined in accordance with Paragraph 1.2(a). Purchaser shall review such estimated balance sheet and Estimated Adjustment Amount and the procedures set forth parties shall negotiate in Section 1.3(b) hereofgood faith to resolve any differences with respect thereto prior to Closing, is determined and, if they are unable to be less than One Million dollars ($1,000,000)resolve any such differences, the Purchase Price payable parties shall request Seller's independent accountants to prepare such estimate and shall postpone the Closing until such accountants have done so. At or immediately prior to the Closing, either (i) the Seller shall pay to Purchaser by Buyer pursuant wire transfer to Section such account as Purchaser may designate, a price adjustment as provided in Paragraph 1.2(a) hereof shall be reduced by in an amount equal to the amount by which Estimated Adjustment Amount or (ii) the Net Worth Book Value of the Company is determined shall be decreased to be below One Million dollars $1,915,000 in the manner provided in Paragraph 1.2(a); the Company shall pay to the Seller by wire transfer to such account as the Seller may designate a dividend or a payment on the Retained Indebtedness in an amount equal to the Estimated Adjustment Amount; and the Purchaser shall, 4 if required, advance to the Company sufficient funds to pay such dividend or make such payment. ($1,000,000). c) Within five business twenty (20) days after the final determination of the Net Worth pursuant Closing Date, Seller shall prepare and deliver to the procedures in Section 1.3(b) hereof, in the event that the Net Worth is determined pursuant to Section 1.3(b) to be less than One Million dollars ($1,000,000), the Stockholders shall pay to Buyer, by wire transfer, in immediately available funds, the amount by which such final determination of the Net Worth shall be less than One Million dollars ($1,000,000). For purposes of this Agreement, the term "Net Worth" shall mean the total assets Purchaser a balance sheet of the Company minus the total liabilities as of the Company, and close of business on the Closing Date (the "Closing Balance Sheet"). The Closing Balance Sheet shall be determined prepared in accordance with generally accepted accounting principles, except that for purposes principles as in effect in the United States ("GAAP"). A physical inventory of computing Net Worth the Company shall be taken in connection with the preparation of the Closing Balance Sheet and Representatives of Purchaser shall be permitted to observe such inventory and review and comment upon Seller's work and procedures and all drafts of the Closing Balance Sheet. Seller shall include on the Closing Balance Sheet: (i) depreciation of assets (period and lives) shall be consistent with the Latest Balance Sheet; (ii) there will be no reserve an accrual for "bad debt" with respect to accounts receivable on the Closing Date Balance Sheet; (iii) inventory reflected on the Closing Date Balance Sheet shall be based on a physical inventory done on November 1 and 2, 1997 and there will be no reserve for obsolete or slow moving inventory; and (iv) the Closing Date Balance Sheet will not reflect as an asset any receivable from an employee. The Buyer and Stockholders agree that the Closing Date Balance Sheet will reflect all liabilities in accordance with generally accepted accounting principals, including without limitation, (i) the dollar amount of all Indebtedness (other than the dollar amount of Indebtedness which is subtracted from the Cash Purchase Price pursuant to Section 1.2); (ii) all accrued property taxes (real estate and other assets) to the Closing Date; (iii) accrued vacation pay to the Closing Date; (iv) accrued benefit costs to the Closing Date; (v) federal and state income taxes to the Closing Date; (vi) accrued payables to Guard Manufacturing Company Inc. to the Closing Date solely with respect to health insurance premiums with respect to employees 11/12ths of the Company, and compensation for Larrbonus due Gera▇▇ ▇▇▇▇▇▇▇; ▇ ▇▇d ▇er the Company's Manager Incentive Plan for fiscal year 1995 calculated in a manner consistent with past practices; and (viiii) $3,000 deferred compensation an accrual for 2/3rds of an estimated amount of commissions due under the Company's 1995 Sales Commissions Plan for the last quarter of 1995 which shall be calculated as of the Closing Date by reducing each Participants' sales targets by 33%. (d) Following Seller's delivery of the Closing Balance Sheet to employees Purchaser, Purchaser shall review the Closing Balance Sheet. To facilitate such review, Seller shall provide Purchaser or its independent accountants access to any work papers, schedules and other documents prepared or utilized by Seller in connection with its preparation of the Closing Balance Sheet and determination of the Company's Net Book Value as of the Closing Date. (e) The Closing Balance Sheet as prepared by Seller shall be final and binding on Purchaser unless, within twenty (20) days after the date Seller has delivered the Closing Balance Sheet and made available to related work papers, schedules and other documents to Purchaser, Purchaser shall have given written notice of objection (a "Notice of Objection") to Seller. The Notice of Objection shall state in reasonable detail the nature of Purchaser's objection(s). Seller and Purchaser shall thereafter promptly consult with each other with respect to the objection(s). Seller and Purchaser shall use their best good faith efforts to resolve any objection(s) within thirty (30) days after the Notice of Objection. 5 If Seller and Purchaser are unable to resolve their differences within thirty (30) days after the Notice of Objection has been given, then either party may request that such disagreement be referred to the Newport Beach, California office of Coopers & Lybr▇▇▇ ▇▇▇ determination (the "Resolving Accounting Firm") and the determination of the Resolving Accounting Firm shall be binding and conclusive upon the parties. Seller and Purchaser shall cooperate fully with the Resolving Accounting Firm and shall execute such engagement letters and other agreements in connection with the engagement of the Resolving Accounting Firm as it may reasonably request. Seller and Purchaser shall give the Resolving Accounting Firm such assistance and access to the assets and books and records of the Company (including those maintained at Seller's offices), and any applicable work papers, schedules and other documents as of the Resolving Accounting Firm shall reasonably request. The fees and expenses of the Resolving Accounting Firm shall be borne equally by Seller and Purchaser. (f) Within ten (10) days after the Adjustment Amount, if any, has been finally determined as provided in this Section 1.2, (i) if the Adjustment Amount results in an adjustment in favor of Purchaser, Seller shall pay, by wire transfer to such account as Purchaser may designate, the difference between the Adjustment Amount and the Estimated Adjustment Amount, together with interest thereon accruing from the Closing Date to the date of payment at the rate of 8- 3/4% per annum, which payment shall constitute a reduction of the Purchase Price; or (ii) if the Adjustment Amount results in an adjustment in favor of Seller, Purchaser shall cause the Company to adjust the amount of the dividend paid, if any, in connection with the Closing pursuant to Paragraph 1(a) above, or to pay the Retained Indebtedness to Seller, in each case in an amount equal to the difference between the Adjustment Amount and the Estimated Adjustment Amount, together with interest thereon accruing from the Closing Date to the date of payment at the rate of 8-3/4% per annum, and to wire transfer such amount to such account as Seller may designate.

Net Worth Adjustment. (a) To As soon as practicable following the extent that Closing, the Chief Financial Officer of the Company immediately prior to the Closing shall deliver to Parent an unaudited combined statement of financial condition of the Company and the Subsidiaries as of the close of business on the last day of the calendar month immediately preceding the calendar month in which the Closing Date occurs (the "Statement Date") reasonably satisfactory to Parent (the "Closing Balance Sheet"), together with a statement (the "Statement") setting forth Company Net Worth (as hereinafter defined) of the Company, as determined in accordance with close of business on the procedures set forth in Section 1.3(b) hereof, is determined to be less than One Million dollars Statement Date ($1,000,000"Closing Company Net Worth"), . The Closing Balance Sheet and the Purchase Price payable by Buyer pursuant to Section 1.2(a) hereof Statement shall be reduced accompanied by an amount equal to a certificate of the amount by which the Net Worth Chief Financial Officer of the Company is determined to be below One Million dollars ($1,000,000). Within five business days after certifying that the final determination Closing Balance Sheet was prepared in good faith on the basis of the Net Worth pursuant to the procedures in Section 1.3(b) hereof, in the event that the Net Worth is determined pursuant to Section 1.3(b) to be less than One Million dollars ($1,000,000), the Stockholders shall pay to Buyer, by wire transfer, in immediately available funds, the amount by which such final determination of the Net Worth shall be less than One Million dollars ($1,000,000). For purposes of this Agreement, the term "Net Worth" shall mean the total assets accounting books and records of the Company minus and the total liabilities of the Company, Subsidiaries and shall be determined was prepared in accordance conformity with United States generally accepted accounting principles, except that for purposes of computing Net Worth principals (i"GAAP") depreciation of assets (period and lives) shall be applied on a basis consistent with the Latest Balance Sheet; Financial Statements (iias defined in Section 3.06(a)) there will be no reserve (except for "bad debt" with respect the absence of footnotes and subject to accounts receivable on the normal recurring quarterly, annual and audit adjustments). The Closing Date Balance Sheet; (iii) inventory reflected on the Closing Date Balance Sheet (and Closing Company Net Worth) shall be based on a physical inventory done on November 1 and 2, 1997 and there will be no reserve for obsolete or slow moving inventory; and (iv) the Closing Date Balance Sheet will not reflect as an asset any receivable from an employee. The Buyer and Stockholders agree that the Closing Date Balance Sheet will reflect all liabilities in accordance with generally accepted accounting principals, including without limitation, (i) the dollar amount consummation of all Indebtedness (other than the dollar amount of Indebtedness which is subtracted from the Cash Purchase Price pursuant to Section 1.2); Merger, (ii) all accrued property taxes (real estate any of the payments to be made pursuant to this Article II or Section 6.13 and other assets) to the Closing Date; (iii) accrued vacation pay to any Transition Expenses (as defined in Section 5.05) or any obligations therefor. The Closing Balance Sheet shall reflect in the Closing Date; (iv) accrued benefit costs to the Closing Date; (v) federal and state income taxes to the Closing Date; (vi) accrued payables to Guard Manufacturing Company Inc. to the Closing Date solely with respect to health insurance premiums with respect to employees aggregate of the CompanyLiabilities (as defined in Section 2.04(b)) the Escheatment Amount (as defined in Section 6.12(b)). The Closing Balance Sheet shall reflect in the aggregate of the Liabilities a legal reserve equal to $15,500,000 minus amounts paid since March 31, 2000 in settlement of legal matters reserved for as of March 31, 2000 plus an accrual of $500,000 at May 31, 2000 (plus an additional pro rata accrual for each month after May 2000 through the month in which the Statement Date occurs) plus accruals in respect of any new (including material changes to existing) legal matters arising after March 31, 2000. All fees and compensation for Larrexpenses incurred (including a reasonable estimate of any such fees and expenses not yet billed) by the Company or any Subsidiary in connection with the Merger and the other Transactions, including the fees and expenses of U.S. Bancorp ▇▇▇▇▇ ▇▇▇▇▇▇▇; ▇▇d (vii) $3,000 deferred compensation ▇ and the Company's legal counsel, but excluding any Transition Expenses, shall to employees the extent not previously paid prior to the close of business on the Statement Date be reflected in the aggregate of the CompanyLiabilities on the Closing Balance Sheet (and Closing Company Net Worth). Not later than two business days prior to the Closing, the Company shall deliver to Parent a good faith estimate of the Closing Company Net Worth.