Yankee Chem. Supply Co., Inc. v Block Bldr. Realty LLC

[*1] Yankee Chem. Supply Co., Inc. v Block Bldr. Realty LLC 2009 NY Slip Op 50767(U) [23 Misc 3d 1116(A)] Decided on April 21, 2009 Supreme Court, Kings County Demarest, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on April 21, 2009
Supreme Court, Kings County

Yankee Chemical Supply Co., Inc. and Robert Baxter, Plaintiffs,

against

Block Builder Realty LLC, et al., Defendants.



11318/07



Attorney for Plaintiffs

Michael Schlanger, Esq.

Law Offices of Michael Schlanger

1025 Weschester Avenue, Suite 108

White Plains, New York 10604

Counsel for Defendants BLOCK BUILDER REALTY LLC, SALES OF ALL PRODUCTS LLC,

CLEANSE TEC, INC., ON TIME SALES LLC, STEVEN FEIG AND ROBERT CLARK

Mitchell J. Devack, Esq.

Law Offices of Mitchell J. Devack, PLLC

The Financial Center At Mitchell Field

90 Merrick Ave - Suite 500

East Meadow, New York 11554

Counsel for Defendant NEIL PISANE

Charles E. Boulbol

Charles E. Boulbol, P.C.

26 Broadway - 17th floor

New York, New York 10004

Carolyn E. Demarest, J.

Upon the foregoing papers, plaintiffs Yankee Chemical Supply Co., Inc. (Yankee) and Robert Baxter (Mr. Baxter) (collectively plaintiffs) move, pursuant to CPLR 3212 (e) and (g), for an order awarding partial summary judgment construing: (a) Paragraphs 7.01 through 7.02 of a certain Services Agreement, dated July 11, 2006, to mean that in the event of Defendants' material breach of either the Services Agreement or a certain Asset Purchase Agreement dated March 1, 2006 during the relevant time period, a certain Promissory Note dated July 11, 2006 may be accelerated;(b) Paragraph 7.03 of the aforementioned Services Agreement, to mean that in such event, Defendants would in addition be liable to Plaintiffs for sales commissions in an amount equal to the present value of 12% of the Plaintiffs' gross chemical sales used to compute the above Promissory Note, annualized for the remaining period of the Services Agreement;(c) Paragraph 5 of the above-referenced Promissory Note to the extent that in the event Defendants are shown to have materially breached the Note itself, the Services Agreement or that certain Asset Purchase Agreement dated March 1, 2006, during the relevant time period, the Promissory Note may be accelerated.

Background Facts and Procedural History

For a period of some 19 years, Mr. Baxter was the owner and operator of Yankee, a business involved in the sale of dishwasher and laundry detergents to commercial clients such as dry cleaners, restaurants, and adult care homes. At some point, Mr. Baxter entered into negotiations to sell Yankee to defendant Block Builder Realty LLC (Block). A major issue in these negotiations centered around the method that was to be used to calculate the purchase price of the business. In this regard, defendant Steven Feig, who is a managing member of Block, states in an affidavit that Block was concerned about using Yankee's past sales records as a basis for this calculation inasmuch as these sales records might be inflated and/or sales might drop off following the sale of the business.

Ultimately the parties agreed on a formula whereby a preliminary purchase price would be calculated at an amount equal to 91.5% of Yankee's chemical sales for the 12-month period preceding the July 11, 2006 closing of the sale of the business. Thereafter, the preliminary purchase price would be replaced by a final adjusted purchase price which was to be calculated as an amount equal to 91.5% of the completed sales for the 15-month "look-back period" after the July 11, 2006 closing. The parties also reached an understanding whereby Mr. Baxter would continue to manage client accounts and seek new clients after the closing of the contract.

In accord with this understanding, plaintiffs and Block entered into an Asset Purchase Agreement (APA) dated March 1, 2006. Paragraph 5 of the APA set forth the above-described formula by which the preliminary purchase price and final adjusted purchase price would be calculated.[FN1] Paragraph 6 of the APA provided for the method by which the purchase price would [*2]be paid. Specifically, at the closing of the contract, Block was to deliver a promissory note "in the amount of the preliminary purchase price . . . subject to adjustments in the calculation to determine the final adjusted purchase price as set forth above with a new revised Note ("Revised Note") to issue at the time of the determination of the final adjusted purchase price." The APA further stated that the promissory Note was to provide for "payment to be made in one hundred-twenty (120) monthly installments, including interest at the rate of six and one-quarter (6.25%) percent per annum for the first two (2) years, and thereafter annually adjusted to the Prime Rate (not to exceed 8%)." With regard to the revised Note, the APA provided that upon the establishment of the final adjusted price, "a new revised Promissory Note shall be issued to replace the initial Note in the principal amount of the Final Adjusted Price, less all principal payments under the initial Promissory Note, and shall be for a term equal to the remaining term of the initial Promissory Note, with interest rate the same as noted in the initial Promissory Note."

On July 11, 2006, Yankee and Block closed on the sale and Block executed the initial Promissory Note called for in the APA. This Note indicated a preliminary purchase price of $1,531,832.26 to be paid in 120 monthly payments of $12,765.27 plus interest.[FN2] The Note also contained a "default and acceleration" clause which provided that, upon Block's default, Yankee could "at its option, elect to immediately accelerate the payment of the full remaining balance of this Note and declare same to be due and payable." Among the occurrences which constituted a default under the Note, were Block's "default of any of its obligations as provided for in that certain [APA] or Services Agreement of even date, between [Block and Yankee]." Finally, the Note contained a so-called "pay now, fight later clause" which stated "[i]n any legal action by [Yankee] to enforce this Note, [Block] agrees to pay same free from any offset, defense, or counterclaim in that legal action unless same has previously resulted in a court order or judgment in a separate legal action." This provision would seem to conflict with plaintiffs' suggestion that all of the four documents or agreements executed in the conjunction with the asset purchase (the APA, the Note, the Services Agreement and an Employment Agreement) should be interpreted in pari materia. A necessary predicate to acceleration of the Note based upon a breach of the Services Agreement would be a determination of the fact of breach and an assessment of liability for such breach. Although acceleration of the Note, prior to the substitution of a final Note, would effectively result in liquidation of the purchase price of the assets under the APA, if the alleged default did not fall within those readily-determinable conditions expressly outlined in the terms of the Note (e.g., non-payment of the Note itself, bankruptcy or liquidation or dissolution of the maker, receivership, etc.), complex issues of fact, likely to be the substance of counterclaims or defenses, regarding compliance with the terms of the Services Agreement would need to be litigated as a pre-condition of the right to accelerate. It is noted that the complaint, which was filed within the look-back period and, therefore, prior to the adjustment of price, under the terms of the APA, does not seek damages for non-payment of the Note. Rather, plaintiffs' causes of action are based entirely upon allegations, initially set forth in letters beginning December 29, 2006, regarding compliance with the terms of the APA and the Services and Employment Agreements. Thus, to establish any [*3]entitlement to acceleration, plaintiffs must first meet their burden to prove defendants' breach of those Agreements. Defendants have interposed both affirmative defenses and counterclaims based on plaintiffs' alleged breach of those Agreements. Defendants have been directed to continue payments under the existing Note, however, the so-called "pay now, fight later" clause has no rational application in the circumstances.

On the same July 11, 2006 closing date, Block and Yankee entered into the Services Agreement identified in the initial promissory Note and APA. The Services Agreement, which had a five-year term, provided that Yankee was "to provide the personal services of Baxter, to solicit, sell and manage the business assets which Yankee, [sic] has sold and transferred to [Block] simultaneously with this Agreement, and to solicit the business of Yankee's former customers as well as new ones, and to service and manage those accounts." As base compensation for the services provided under the Agreement, Block agreed to pay Yankee 14% of its gross revenues.

The Services Agreement also contained several provisions dealing with what constituted a default under the Agreement as well as the penalties for default. Specifically, paragraph 7.01 of the Services Agreement stated that "[a] breach by [Block] of its obligations under the [APA] shall constitute a breach of its obligations hereunder." In addition, paragraph 7.02 of the Services Agreement states that, in the event of an uncured breach, including a breach of the APA, "all remaining payments due on that certain promissory note of even date herewith . . . shall become due and payable to Yankee." At the same time, paragraph 7.03 of the Services Agreement contained a clause stating that, in the event that Block breached the Services Agreement, Yankee would be entitled to the immediate payment of the present value of the base compensation agreed to be paid to Yankee for the remaining term of the agreement. The Services Agreement further expressly stated that this payment would constitute liquidated damages as it represented "a fair and reasonable estimate of the damages Yankee would suffer" if Block breached the Services Agreement. Finally, this paragraph provided that the liquidated damages were to be calculated in one of two ways. Specifically, if the breach occurred before the first anniversary of the Services Agreement, the parties agreed that "the Base Compensation due Yankee for the unfulfilled term of this Agreement shall be the present value of twelve (12%) percent of Yankee's Gross Sales . . . for the twelve (12) month period ending on the last day of the last full month before the date of this Agreement." However, if the breach occurred after the first anniversary of the Services Agreement, the parties agreed that the "Base Compensation due Yankee for each month of the unfulfilled term of this Agreement shall be the present value of the average monthly amount earned or paid to Yankee hereunder for the most recent twelve (12) months prior to [breach]."[FN3] [*4]

Shortly after closing, during the look-back period, the relationship between the parties soured. Plaintiffs allege, inter alia,that Block engaged in a bad-faith campaign to lower the adjusted purchase price and reduce Baxter's sales commissions by "chasing away" his lower margin customers. For their part, defendants maintain that Baxter engaged in fraudulent conduct designed to inflate the preliminary purchase price.

On April 3, 2007, plaintiffs commenced the instant breach of contract action against defendants. On or about May 25, 2007, plaintiffs filed an amended complaint alleging six causes of action. The first cause of action alleges that Block breached its obligations to Yankee under the APA, Services Agreement, and Employment Agreement and demands as damages the unpaid balance of the Note plus interest. The second cause of action alleges that Block breached its obligations to Yankee under the Services Agreement and demands the liquidated damages provided for in the Services Agreement. The third cause of action alleges that Block breached its obligations to Baxter under the Employment Agreement. The fourth cause of action (which is not relevant with respect to the instant motion) seeks rescission of a personal guarantee given by Baxter for the indebtedness of a particular client. Finally the fifth and sixth causes of action are alleged against Sales of All Products LLC, On Time Sales LLC, Neil Pisane, Steven Feig, and Robert Clark based upon their written guarantees of the Note and Services Contract.

On or about June 7, 2007, defendants served an answer to the amended complaint in which they alleged numerous counterclaims against plaintiffs sounding in fraud, breach of the APA, Services Agreement, and Employment Agreement, as well as recision. The fraud counterclaim alleged that plaintiffs knowingly misrepresented and concealed true facts concerning the status of Yankee's customer accounts so as to induce Block to complete the purchase and close on the APA at an inflated preliminary purchase price. Defendants further alleged that this misconduct constituted a breach of the APA.

The Instant Motion

During the course of discoveryin this matter, it became apparent that fundamental differences existed between the parties regarding the penalties provided for in the APA, Services Agreement, and initial promissory Note in the event that these agreements were breached during the look-back period. In this regard, plaintiffs are of the opinion that the cross-default provisions in the APA, Services Agreement and initial promissory Note created a "comprehensive liquidated damages regime" in the event a breach occurred during the look-back period. Specifically, plaintiffs' position is that, in the event Block breached these agreements during the look-back period, the July 11, 2006 initial promissory Note may be accelerated so that all remaining payments on the $1,531,832.26 Note become due and payable to Yankee. In contrast, defendants' position is that, as contemplated under the APA, the preliminary purchase price (as reflected in the initial promissory Note) is merely a "placeholder" for the final adjusted purchase price. Thus, according to defendants, in the [*5]event of a breach, the damages will be measured by the remaining balance of a revised promissory Note.

Plaintiff's instant summary judgment motion seeks, in effect, an order resolving this dispute over how damages are to be calculated pursuant to the default provisions in the related agreements. In making this motion, plaintiffs concede that the underlying issue of whether a breach actually occurred cannot be resolved at this point inasmuch as it involves disputed issues of fact. Nevertheless, plaintiffs contend that the instant damages issue is ripe since judicial resolution of this dispute would provide critical guidance regarding the nature and quantity of discovery still required and would also shape the scope of the issues to be tried. Specifically, plaintiffs note that if it was settled that the damages were to be measured by the balance of the initial promissory Note, it would obviate the need for them to call dozens of witnesses to prove, customer-by-customer, the degree to which Mr. Baxter's sales were depressed during the look-back period by defendants' alleged misconduct. Given plaintiffs' initial burden to prove that defendants in fact breached the agreements by failing to provide plaintiffs with consideration due under the Services Agreement (e.g., denial of deliveries, change of credit terms, "talking down" to customers), it is difficult to see how this would be so.

Turning to the substance of the dispute, plaintiffs argue that when read together and in accord with their plain meaning, the cross-default provisions in the Services Agreement and initial promissory Note serve as a comprehensive liquidated damages regime in the event a breach occurs during the look-back period. In particular, plaintiffs maintain that under these provisions, a material breach committed during the look-back period results in an acceleration of the initial promissory Note and obviates the need to calculate a final adjusted purchase price.

In support of this argument, plaintiffs point out that the initial promissory Note specifically provides that Yankee may elect to accelerate payment of the Note upon Block's breach of either the APA or Services Agreement. Similarly, plaintiffs note that the Services Agreement unambiguously states that upon Block's breach of either the APA or Services Agreement, all remaining payments due on the "promissory note of even date" shall become due and payable to Yankee. Moreover, the Services Agreement also provides that a breach of the Agreement during the look-back period liquidates Mr. Baxter's base compensation at 12% of plaintiffs' gross sales in the year prior to closing (i.e., the same sales that were used to calculate the preliminary purchase price). It is noted that no such express provision appears in the APA. In addition, plaintiffs point out that, pursuant to its "pay now, fight later" clause, the initial promissory Note mandates that payments under the Note continue pending judicial resolution of any disputes that arise. Thus, inasmuch as the Note purportedly precludes recalculation of the purchase price even on an interim basis, plaintiffs reason that no recalculation is required in the event of an actual breach by defendants during the look-back period. Although this may have been plaintiffs' intent, it is not clear from the language of the Agreements that defendants shared this understanding. [*6]

In opposition to plaintiffs' motion, defendants maintain that the relief sought is premature inasmuch as no determination has been made regarding the fundamental question of whether a breach of the Services Agreement, APA, or initial promissory Note has even occurred. Thus, defendants argue that, in order to bolster their litigation strategy, plaintiffs are improperly seeking an advisory opinion as to the hypothetical amount of damages prior to any finding of liability. Defendants further maintain that such an advisory opinion would be particularly inappropriate here given defendants' counterclaims alleging that the preliminary purchase price set forth in the initial promissory Note was the product of plaintiffs' fraud and that plaintiffs breached the APA in calculating the preliminary purchase price.

In any event, defendants argue that the interpretation of the APA, Services Agreement, and initial promissory Note urged by plaintiffs is totally inconsistent with the APA, which is the primary agreement between the parties. In this regard, defendants point out the central component of the APA involved recalculating the purchase price of the business based upon a complicated formula that took into account actual sales completed during the look-back period. As such, defendants maintain that the preliminary purchase price merely served as a "placeholder" pending calculation of the final adjusted purchase price and that it was never intended to function as a permanent measure of liquidated damages. Defendants further note that nothing in the APA provides that this critical recalculation requirement would be nullified or that the remaining balance of the preliminary purchase price would serve as liquidated damages, in the event of a breach by Block during the look-back period. In fact, defendants point out, the words liquidated damages do not appear anywhere in the APA. Defendants maintain that were such a liquidated damages scheme contemplated, the agreement would have expressly provided for such damages in the event of a breach during the look-back period as was done with respect to lost sales commissions in paragraph 7.03 of the Services Agreement.[FN4]

In further support of this argument, defendants submit an affidavit by Mr. Feig in which he avers that his primary concern in negotiating a purchase price was that the price be based upon actual sales after the closing. According to Mr. Feig, this concern is the entire reason for the complicated recalculation scheme set forth in the APA. Mr. Feig further maintains that it was never intended that the recalculation of the final adjusted purchase price [*7]would be dispensed with in the event of a breach during the look-back period and defendants never would have agreed to any purchase agreement that contained such a provision. Defendants also argue that this claim is supported by Mr. Baxter's own deposition testimony, wherein he indicated that the initial purchase price "was not that critical" given the look-back/recalculation provision in the APA.

Alternatively, defendants argue that, even assuming that the initial promissory Note and Services Agreement did allow for the acceleration of the preliminary purchase price in the event Block defaulted during the look-back period, plaintiffs continued to perform under the APA, Services Agreement, and the Employment Agreement throughout the look-back period. According to defendants, plaintiffs thereby forfeited any right to accelerate the initial Note and now that the look-back period has expired, plaintiffs cannot avoid the recalculation of the purchase price pursuant to the terms of the APA.

As a final argument, defendants maintain that even if the agreements did contemplate a liquidated damages regime as alleged by plaintiffs, the subject provisions would be unenforceable inasmuch as the liquidated damages are out of proportion to the probable amount of damages.

In reply to defendants' opposition papers, plaintiffs submit an affidavit by Mr. Baxter in which he maintains that there is no merit to defendants' claims regarding alleged fraud in calculating the preliminary purchase price. Mr. Baxter also argues that Mr. Feig's claims regarding what the parties negotiated are irrelevant since the written agreements speak for themselves and supercede all prior discussions during negotiations. Plaintiffs further maintain that there is no merit to defendants' claim that, by continuing to perform under the agreements, plaintiffs waived their right to accelerate the initial promissory Note. Specifically, plaintiffs point out that inasmuch as they put defendants on notice regarding the breach, they had the right to elect to continue performing under the agreements without waiving any of their rights or remedies. Finally, plaintiffs argue that the liquidated damages do not constitute an unenforceable penalty.

Analysis

As a threshold matter, the court must determine whether or not this dispute over potential damages under the agreements is ripe, or whether plaintiff is seeking, in effect, an advisory opinion on a matter that may or may not become relevant in the future. It is true, as plaintiffs point out, that courts may issue declarations as to whether a liquidated damages clause is enforceable or an unenforceable penalty prior to a determination on liability (see Benjamin Partners, LLC v 583-587 Broadway Condominium, 34 AD3d 311, 311-312 [2006]). However, the relief sought by plaintiffs involves different issues, namely whether a liquidated damages agreement even exists between the parties, and if so, how such damages are to be measured. Moreover, a determination as to whether the purported liquidated damages actually constitute a penalty would necessarily involve an assessment of the actual value of the assets, which would also implicate the sales generated during the look-back period. That being said, there is authority for the proposition that under CPLR 3212 (g), a [*8]court may decide "a summary judgment motion of pivotal and controlling issues of law not tied in with disputed facts [that will] aid in the disposition of the action" (Janos v Peck, 21 AD2d 529, 531 [1964], affd 15 NY2d 509 [1964]). This rule is based upon the rationale that "the partial summary judgment procedure affords the opportunity of promptly settling issues which can be disposed of as a matter of law, and furthermore, furnishes a means for the withdrawing from the case of sham and feigned issues of fact and of law which might have a tendency to confuse and complicate the trial" (id.). Thus, "[w]here, among the issues presented on such a motion, there is a question as to the construction of a written contract between the parties and the determination of that question may be reached by reference to and a consideration of the plain and unambiguous wording of the contract, the question, as one of law, should be then and there resolved" (id. at 532).

Applying the law to the instant case, even if the court were to determine that the cross-default provisions in the agreements constitute a comprehensive liquidated damages regime as advocated by plaintiffs, the enforcement of this regime would still be subject to defendants' counterclaims, which allege that the preliminary purchase price (i.e., the proposed liquidated damages amount) was the product of plaintiffs' fraud and that plaintiffs breached the APA in calculating the preliminary purchase price. Thus, final resolution of this liquidated damages issue is not possible at this juncture.[FN5] Furthermore, although plaintiffs maintain that a definitive court ruling on the liquidated damages issue will simplify the trial by eliminating the need to call numerous customer witnesses to prove the degree to which Mr. Baxter's sales were depressed during the look-back period by defendants' alleged misconduct, the fact is, plaintiffs will need to call these witnesses in order to prove that defendants breached the Services Agreement. Accordingly, the policy concerns behind awarding relief under CPLR 3212 (g) would not necessarily be furthered by ruling on the liquidated damages issue at this pre-trial phase of the proceedings.

In any event, there are ambiguities which preclude the court from construing, as a matter of law, the cross-default provisions in the Services Agreement and initial promissory Note as a comprehensive liquidated damages regime as advocated by plaintiffs. "In determining the obligations of parties to a contract, courts will first look to the express contract language used to give effect to the intention of the parties, and where the language of a contract is clear and unambiguous, the court will construe and discern the intent from the document itself as a matter of law" (Shook v Blue Stores Corp., 30 AD3d 811, 812 [2006][internal quotations omitted]). Whether a contract provision is ambiguous is a question of law for the court to resolve, and if an ambiguity is found, extrinsic evidence may then be considered, assuming such evidence exists (Van Wagner Adv. Corp. v S & M Enters., 67 NY2d 186, 191 [1986]). In determining whether ambiguity exists, courts must avoid [*9]creating "irrational conflict between two provisions that can reasonably be reconciled" (G & B Photography, Inc., v Greenberg, 209 AD2d 579, 581 [1994]). However, where there is "a choice among reasonable inferences to be drawn," reliance upon extrinsic evidence is appropriate (Hartford Acc. & Indem. Co. v Wesolowski, 33 NY2d 169, 172 [1973]).

Here, the central component of the APA entered into between the parties concerned the recalculation of the preliminary purchase price into the final adjusted purchase price and the replacement of the initial promissory Note with a new revised promissory Note after the expiration of the look-back period. The APA contains no provisions whereby Block would waive or forfeit its right to a recalculation of the purchase price and the replacement of the original Note with the final recalculated Note. However, both the initial promissory Note and the Services Agreement call for the acceleration of the initial Note in the event Block defaults under the Services Agreement, APA, or initial Note. The practical effect of such an acceleration of the original Note without adjustment would be to "finalize" the preliminary purchase price without determining the final adjusted purchase price as required under the formula set forth in APA. Plaintiffs argue that this was the intent of the parties. Specifically, plaintiffs maintain that the acceleration of the initial promissory Note along with the elimination of the need to calculate the final adjusted purchase price represented a comprehensive liquidated damages regime intended to represent a fair and reasonable estimate of the damages plaintiffs would suffer in the event Block breached the agreements during the look-back period. While this interpretation of the contracts is not unreasonable, ambiguities remain as a result of the discrepancy between this interpretation and other critical material terms of the APA requiring extrinsic evidence in order to determine the true intent of the parties. In particular, although the Services Agreement and initial promissory Note call for the acceleration of the Note in the event of a breach, neither of these documents specify that such a breach would also result in Block's forfeiture of its right to recalculation under the APA. It is certainly possible to give effect to the acceleration provision based upon a recalculated price. Since both the language of the APA and the submissions of both parties indicate that the purpose of the recalculation formula was to correct for possible inaccuracies regarding plaintiffs' representations of sales in the twelve-month period prior to closing, resulting in an inflation of the price, a concern expressed by Feig and now the subject of the fraud counterclaims, it is not possible from the language of the APA alone to find that it was the intent of the parties that a breach by defendants during the look-back period would obviate an essential element of the contract for determining the correct price even if it were determined that plaintiffs had actually defrauded defendants. Such a result would be inconsistent with the obvious intent and purpose of the recalculation provision itself. It is, after all, the duty of the court in interpreting contracts to give effect to all provisions (see McCabe v Witteveen, 34 AD3d 652, 654-655 [2d Dept 2006]).

Furthermore, the subject default provisions do not identify themselves as liquidated damages clauses. This is all the more significant inasmuch as the default provision in the Services Agreement dealing with sales commissions does specifically provide for liquidated damages in the form of 12% of the present value of the gross sales for the 12 months prior to closing. Finally, the court notes that the extrinsic evidence that has been submitted as part of this motion - namely Mr. Block's deposition testimony and Mr. Feig's affidavit - raises questions of fact regarding whether the parties intended [*10]the preliminary purchase price to serve as a measure of liquidated damages in the event Block breached the agreements during the look-back period.

Accordingly, plaintiffs' motion for partial summary judgment pursuant to CPLR 3212 (e) and (g) is denied.

The parties are directed to appear for conference before the court, Comm I, at 10AM on May 29, 2009.

This constitutes the decision and order of the court.

ENTER,

J. S. C. Footnotes

Footnote 1:The formula for calculation of the final adjusted purchase price was more complicated than described here. However, the precise intricacies of the formula, which involved dividing clients into different classes, are not relevant for purposes of the instant motion. The important point is that the final adjusted purchase price was to be based upon completed sales that took place during the look-back period.

Footnote 2:Thus, Yankee's sales for the 12-month period preceding the closing were calculated to be $1,674,133.62.

Footnote 3:In addition to the Services Contract, Block simultaneously entered into an Employment Agreement with Baxter whereby it would pay him an annual salary of $65,000 which payments were to serve as a credit against the total commissions owed to Yankee under the Services Agreement.

Footnote 4:In fact, paragraph (b) of plaintiffs' notice of motion seeks an order construing paragraph 7.03 of the Services Agreement as requiring that damages for lost sales commissions be set at the present value of 12% of plaintiffs' gross chemical sales used to compute the initial promissory Note. However, such relief would seem to be unnecessary as there does not appear to be any real dispute regarding the operation of this provision. That said, the enforceability of this damages clause remains in question given defendants' allegations that the preliminary purchase price set forth in the initial Note was the product of fraud and that plaintiffs breached the APA in calculating the preliminary purchase price.

Footnote 5:Although Mr. Baxter's affidavit takes issue with defendants' claim that the preliminary purchase price was the product of fraud, plaintiffs have not moved to dismiss defendants' counterclaims for fraud and breach of the APA.