Common use of Section 338 Elections Clause in Contracts

Section 338 Elections. The Seller, as the sole “S corporation shareholder” (within the meaning of Treasury Regulations Section 1.338(h)(10)-1(b)(5)) will cooperate and join with Buyer (at Buyer’s option) in making an election under Section 338(h)(10) of the Code, and any comparable provision of other applicable Law (collectively, the “Section 338 Elections”) with respect to the purchase and sale of the Shares hereunder. Seller will execute 2 IRS Forms 8023 (and any comparable forms under other applicable Law) at the Closing or at such other time as Buyer may reasonably request or as required by the Code in order to effectuate the Section 338 Elections. In connection with making the Section 338 Elections, Buyer will prepare and deliver to Seller a reasonable allocation of the “aggregate deemed sale price” within the meaning of Treasury Regulations Section 1.338-4, and the “adjusted grossed-up basis,” within the meaning of Treasury Regulations Section 1.338-5, based on reasonable market values, among the assets of the Company on IRS Form 8883 in accordance with Treasury Regulations Section 1.338-6 and 1.338-7 (the “Section 338 Allocation”) at least 30 days before the filing of such Section 338 Allocation, which Section 338 Allocation shall be acceptable to Seller (such acceptance not to be unreasonably withheld, conditioned, or delayed). If Seller disagrees with the proposed Section 338 Allocation, then Buyer and Seller will meet and negotiate in good faith to resolve the disagreement for a period of fifteen (15) days. If the disagreement cannot be resolved within such thirty-day period, then the Section 338 Allocation shall be finally determined by an nationally recognized accounting firm that is mutually acceptable to Buyer and Seller and any final Section 338 Allocation shall be final and binding on Buyer and Seller. Seller agrees to cooperate with Buyer, and to furnish Buyer with such information as Buyer reasonably requests, for purposes of determining such allocation. If Buyer determines to make the Section 338(h)(10) Elections, Seller will file all Tax Returns in a manner consistent with the Section 338 Elections and the Section 338 Allocation. Seller will pay any Tax attributable to the purchase and sale of the Shares hereunder and the making of the Section 338 Elections (including any Taxes imposed under Section 1374 of the Code and any comparable forms under other applicable Law). Neither the Company nor Seller will take or allow to be taken any action that could result in the inability of Seller or Buyer to make valid Section 338 Elections. In connection with the Section 338 Elections, Buyer shall pay to Seller the amount by which Taxes incurred by Seller with respect to the sale of Shares exceed the Taxes which the Seller would have incurred from the sale of Shares if the Section 338 Election had not been made (the “Gross-up Payment”). The Gross-up Payment shall be computed using an assumed tax rate on long-term capital gains of Twenty Percent (20.00%) (the “Assumed Capital Gains Rate”) and an assumed Tax rate on income or gains other than long-term capital gains of Thirty-Seven Percent (37.00%) (the “Assumed Non-Capital Gains Rate”), and shall be equal to the sum of (i) the increased tax Liability of Seller resulting from the deemed sale of assets and liquidation of the Company for Tax purposes based on the Section 338 Elections (as opposed to a sale of the stock if the Section 338 Elections had not been made), and (ii) the increased Tax liability of Seller as a result of receipt of the amounts described in the immediately foregoing clause (i) of this clause (ii). For the purpose of determining the Gross-up Payment, (v) it will be assumed that the Seller has a long-term holding period in the Shares, (w) no tax items of Seller other than such Seller’s tax basis in the Shares and the Tax items allocated to such Seller from the Company (or recognized by such Seller) as a result of the deemed sale of assets and liquidation of the Company pursuant to the Section 338 Elections will be considered in the determination, (x) the Assumed Capital Gains Rate shall be used to determine the Tax liability of Seller upon the sale of the Shares if the Section 338 Elections had not been made, (y) the Assumed Capital Gains Rate shall be used to determine the Tax liability of Seller on any gain allocated to such Seller from the deemed sale of assets qualifying for long-term capital gain upon the deemed sale of assets of the Company pursuant to the Section 338 Elections and any gain recognized by such Seller on such Seller’s Shares resulting from the deemed liquidation of the Company pursuant to the Section 338 Elections and (z) the Assumed Non-Capital Gain Rate shall be used to determine the Tax liability of Seller on any income or non-long-term capital gains allocated to such Seller from the deemed sale of assets pursuant to the Section 338 Elections. Seller shall deliver a schedule showing the computation of the Gross-up Payment (the “Gross-Up Calculation”) to Buyer within thirty (30) days of Seller’s acceptance of the Section 338 Allocation which Gross-Up Calculation shall be acceptable to Buyer (such acceptance not to be unreasonably withheld, conditioned, or delayed). If Buyer disagrees with the proposed Gross-Up Calculation, then Buyer and Seller will meet and negotiate in good faith to resolve the disagreement for a period of thirty (30) days. If the disagreement cannot be resolved within such thirty-day period, then the Gross-Up Calculation shall be finally determined by the Accounting Firm and, absent manifest error, any final Gross-Up Calculation shall be final and binding on Buyer and Seller. The payment of the Gross-up Payment by Buyer to Seller shall be made within ten (10) days following Buyer’s and Seller’s finalization of the Gross-Up Calculation pursuant to this paragraph.

Section 338 Elections. The SellerIf requested by the Buyer, as the sole “S corporation shareholder” (within Buyer and the meaning of Treasury Regulations Section 1.338(h)(10)-1(b)(5)) will cooperate and --------------------- Seller shall join with Buyer (at Buyer’s option) in making an election under Section 338(h)(10to have the provisions of (S)338(h)(10) of the CodeInternal Revenue Code and similar provisions of state law ("SECTION 338 ELECTIONS") apply to the acquisition of the Target and, and any comparable provision of other applicable Law (collectivelywhere permitted by law, the “Section 338 Elections”) with respect INTOOL Subsidiary. The Buyer shall be responsible for and control the preparation and filing of such elections, provided that the Seller shall be entitled to the purchase review and sale of the Shares hereunderapprove such election. Seller will execute 2 IRS Forms 8023 (and any comparable forms under other applicable Law) at the Closing or at such other time as Buyer may reasonably request or as required by the Code in order to effectuate the Section 338 Elections. In connection with making the Section 338 Elections, Buyer will prepare and deliver to Seller a reasonable The allocation of the “aggregate deemed sale price” within the meaning of Treasury Regulations Section 1.338-4, and the “adjusted grossed-up basis,” within the meaning of Treasury Regulations Section 1.338-5, based on reasonable market values, Purchase Price among the assets of the Company Target, the INTOOL Subsidiary, the INTOOL Divisions, and the Intellectual Property of the Business held by the Seller or its Affiliates, shall be as set forth on IRS Form 8883 Schedule 5.4 hereto. Any changes in accordance with Treasury Regulations Section 1.338-6 the Purchase Price resulting from the Purchase Price Adjustment shall be allocated among the assets of the Target, the INTOOL Subsidiary and 1.338-7 the INTOOL Divisions on a prorated basis, unless readily allocable to a particular asset or as otherwise required by Law. Subject to the Seller's right to review and approve, the Seller shall execute and deliver to the Buyer such documents or forms (the “including Section 338 Allocation”Forms, as defined below) at least 30 days before as the filing of such Buyer shall reasonably request or as are required by applicable Law for an effective Section 338 Allocation, which Election. In the event that the Seller does not approve the Buyer's Section 338 Allocation Forms, the Buyer and the Seller shall be acceptable use their best efforts to Seller (reach agreement on changes to such acceptance not to be unreasonably withheld, conditioned, or delayed)Forms. If Seller disagrees with the proposed Section 338 Allocation, then Buyer and Seller will meet and negotiate in good faith to resolve the disagreement for a period of fifteen (15) days. If the disagreement such an agreement cannot be resolved within such thirty-day periodreached, then the Buyer and the Seller shall nevertheless execute and submit the Section 338 Allocation Forms, provided that the Forms shall be finally determined by an nationally recognized accounting firm that is mutually acceptable to Buyer and Seller and any final Section 338 Allocation shall be final and binding silent on Buyer and Seller. Seller agrees to cooperate with Buyer, and to furnish Buyer with such information as Buyer reasonably requests, for purposes of determining such allocation. If Buyer determines to make the Section 338(h)(10) Elections, Seller will file all Tax Returns in a manner consistent with the Section 338 Elections and the Section 338 Allocation. Seller will pay any Tax attributable to the purchase and sale allocation of the Shares hereunder and the making of the Section 338 Elections (including any Taxes imposed under Section 1374 of the Code and any comparable forms under Purchase Price or other applicable Law). Neither the Company nor Seller will take or allow to be taken any action that could result in the inability of Seller or Buyer to make valid Section 338 Elections. In connection with the Section 338 Elections, Buyer shall pay to Seller the amount by items on which Taxes incurred by Seller with respect to the sale of Shares exceed the Taxes which the Seller would have incurred from the sale of Shares if the Section 338 Election had not been made (the “Gross-up Payment”). The Gross-up Payment shall be computed using an assumed tax rate on long-term capital gains of Twenty Percent (20.00%) (the “Assumed Capital Gains Rate”) and an assumed Tax rate on income or gains other than long-term capital gains of Thirty-Seven Percent (37.00%) (the “Assumed Non-Capital Gains Rate”), and shall be equal to the sum of (i) the increased tax Liability of Seller resulting from the deemed sale of assets and liquidation of the Company for Tax purposes based on the Section 338 Elections (as opposed to a sale of the stock if the Section 338 Elections had not been made), and (ii) the increased Tax liability of Seller as a result of receipt of the amounts described in the immediately foregoing clause (i) of this clause (ii). For the purpose of determining the Gross-up Payment, (v) it will be assumed that the Seller has a long-term holding period in the Shares, (w) no tax items of Seller other than such Seller’s tax basis in the Shares and the Tax items allocated to such Seller from the Company (or recognized by such Seller) as a result of the deemed sale of assets and liquidation of the Company pursuant to the Section 338 Elections will be considered in the determination, (x) the Assumed Capital Gains Rate shall be used to determine the Tax liability of Seller upon the sale of the Shares if the Section 338 Elections had not been made, (y) the Assumed Capital Gains Rate shall be used to determine the Tax liability of Seller on any gain allocated to such Seller from the deemed sale of assets qualifying for long-term capital gain upon the deemed sale of assets of the Company pursuant to the Section 338 Elections and any gain recognized by such Seller on such Seller’s Shares resulting from the deemed liquidation of the Company pursuant to the Section 338 Elections and (z) the Assumed Non-Capital Gain Rate shall be used to determine the Tax liability of Seller on any income or non-long-term capital gains allocated to such Seller from the deemed sale of assets pursuant to the Section 338 Elections. Seller shall deliver a schedule showing the computation of the Gross-up Payment (the “Gross-Up Calculation”) to Buyer within thirty (30) days of Seller’s acceptance of the Section 338 Allocation which Gross-Up Calculation shall be acceptable to Buyer (such acceptance not to be unreasonably withheld, conditioned, or delayed). If Buyer disagrees with the proposed Gross-Up Calculation, then Buyer and Seller will meet and negotiate in good faith to resolve the disagreement for a period of thirty (30) days. If the disagreement agreement cannot be resolved within such thirty-day periodreached. "Section 338 Forms" shall mean all returns, then the Gross-Up Calculation shall documents, statements, and other forms that are required to be finally determined by the Accounting Firm andsubmitted to any federal, absent manifest errorstate, county or other local taxing authority in connection with a Section 338 Election, including, without limitation, any final Gross-Up Calculation shall be final "statement of Section 338 Election" and binding on Buyer and Seller. The payment of the Gross-up Payment by Buyer to Seller shall be made within ten IRS Form 8023 (10together with any schedules or attachments thereto) days following Buyer’s and Seller’s finalization of the Gross-Up Calculation that are required pursuant to this paragraphTreasury Regulations.

Section 338 Elections. The Seller, as the sole “S corporation shareholder” (within the meaning of Treasury Regulations Section 1.338(h)(10)-1(b)(5)) will Seller shall cooperate and join with Buyer (to cause an election to be made, at Buyer’s option) in making an election written request (each such request to be made within 90 days following the Closing Date), under Section 338(h)(10) of the Code, and any comparable provision of other applicable Law (collectively, the “Section 338 Elections”) Code with respect to the purchase and sale any or all of the Shares hereunderAcquired Entities, as designated by Buyer. Seller will execute 2 IRS Forms 8023 also shall cooperate with Buyer to cause elections, at Buyer’s written request (and any comparable forms under other applicable Law) at each such request to be made within 90 days following the Closing Date), with respect to any or at such other time all of the Acquired Entities, as Buyer may reasonably request designated by Buyer, under any state or as required by local Law equivalent of Section 338(h)(10); provided that no election shall be made under Section 338(g) of the Code in order with respect to effectuate any Acquired Entity that is a Domestic Corporation within the meaning of Section 338 Elections7701(a)(4) of the Code. In connection with making Within 120 days after the Section 338 ElectionsClosing, the Buyer will prepare and shall deliver to Seller a reasonable schedule (the “Proposed Section 338 Allocation Statement”) showing a proposed allocation for purposes of Section 338 of the Code (and the state and local equivalents thereof) of the “aggregate deemed sale sales price” within of the meaning assets of Treasury Regulations the Acquired Entities for which Section 1.338-4, and the “adjusted grossed-up basis,” within the meaning of Treasury Regulations Section 1.338-5, based on reasonable market values, 338 Elections are made among the assets of the Company on IRS Form 8883 Acquired Entities, in accordance with applicable Treasury Regulations Section 1.338-6 and 1.338-7 (the “Section 338 Allocation”) at least Regulations. The Seller shall have 30 days before following receipt of the filing of such Section 338 Allocation, which Proposed Section 338 Allocation Schedule to provide comments thereron and the parties shall be acceptable to Seller (such acceptance not to be unreasonably withheld, conditioned, or delayed). If Seller disagrees with the proposed Section 338 Allocation, then Buyer and Seller will meet and negotiate work in good faith to resolve reach agreement on any matters in dispute. In the disagreement for a period of fifteen (15) days. If event the disagreement dispute cannot be resolved within such thirty-day period, then the Section 338 Allocation it shall be finally determined by an nationally recognized accounting firm that is mutually acceptable referred to Buyer and the Tax Arbitrator. Each of Seller and any final Section 338 Allocation Buyer shall present its position to the Tax Arbitrator, which shall decide which position shall be adopted. The decision of the Tax Arbitrator shall be final and binding on Buyer binding, and Sellerits fees and costs shall be paid one-half by Seller and one-half by Buyer. The Proposed Section 338 Allocation Statement as amended to reflect agreed or resolved changes, shall become the “Final Section 338 Allocation Statement”. The Final Section 338 Allocation Statement shall be amended to reflect any adjustment to the Purchase Price hereunder. Seller agrees and Buyer shall prepare and file, or cause to cooperate with Buyerbe prepared and filed, and to furnish Buyer with such information as Buyer reasonably requests, for purposes of determining such allocation. If Buyer determines to make the Section 338(h)(10) Elections, Seller will file all Tax Returns in a manner consistent with the Section 338 Elections and the Section 338 Allocation. Seller will pay any Tax attributable to the purchase and sale of the Shares hereunder and the making of the Section 338 Elections (including any Taxes imposed under Section 1374 of the Code and any comparable forms under other applicable Law). Neither the Company nor Seller will take or allow to be taken any action that could result in the inability of Seller or Buyer to make valid Section 338 Elections. In connection with the Section 338 Elections, Buyer shall pay to Seller the amount by which Taxes incurred by Seller with respect to the sale of Shares exceed the Taxes which the Seller would have incurred from the sale of Shares if the Section 338 Election had not been made (the “Gross-up Payment”). The Gross-up Payment shall be computed using an assumed tax rate on long-term capital gains of Twenty Percent (20.00%) (the “Assumed Capital Gains Rate”) and an assumed Tax rate on income or gains other than long-term capital gains of Thirty-Seven Percent (37.00%) (the “Assumed Non-Capital Gains Rate”)consistent, and shall not take, or permit to be equal to taken, any position in a Tax Proceeding inconsistent, with the sum of (i) the increased tax Liability of Seller resulting from the deemed sale of assets and liquidation of the Company for Tax purposes based on the Final Section 338 Elections (Allocation Statement as opposed to a sale of the stock if the Section 338 Elections had not been made), and (ii) the increased Tax liability of Seller as a result of receipt of the amounts described in the immediately foregoing clause (i) of this clause (ii). For the purpose of determining the Gross-up Payment, (v) it will be assumed that the Seller has a long-term holding period in the Shares, (w) no tax items of Seller other than such Seller’s tax basis in the Shares and the Tax items allocated to such Seller from the Company (or recognized by such Seller) as a result of the deemed sale of assets and liquidation of the Company amended pursuant to the Section 338 Elections will be considered in the determination, (x) the Assumed Capital Gains Rate shall be used to determine the Tax liability of Seller upon the sale of the Shares if the Section 338 Elections had not been made, (y) the Assumed Capital Gains Rate shall be used to determine the Tax liability of Seller on any gain allocated to such Seller from the deemed sale of assets qualifying for long-term capital gain upon the deemed sale of assets of the Company pursuant to the Section 338 Elections and any gain recognized by such Seller on such Seller’s Shares resulting from the deemed liquidation of the Company pursuant to the Section 338 Elections and (z) the Assumed Non-Capital Gain Rate shall be used to determine the Tax liability of Seller on any income or non-long-term capital gains allocated to such Seller from the deemed sale of assets pursuant to the Section 338 Elections. Seller shall deliver a schedule showing the computation of the Gross-up Payment (the “Gross-Up Calculation”) to Buyer within thirty (30) days of Seller’s acceptance of the Section 338 Allocation which Gross-Up Calculation shall be acceptable to Buyer (such acceptance not to be unreasonably withheld, conditioned, or delayed). If Buyer disagrees with the proposed Gross-Up Calculation, then Buyer and Seller will meet and negotiate in good faith to resolve the disagreement for a period of thirty (30) days. If the disagreement cannot be resolved within such thirty-day period, then the Gross-Up Calculation shall be finally determined by the Accounting Firm and, absent manifest error, any final Gross-Up Calculation shall be final and binding on Buyer and Seller. The payment of the Gross-up Payment by Buyer to Seller shall be made within ten (10) days following Buyer’s and Seller’s finalization of the Gross-Up Calculation pursuant to this paragraphpreceding sentence.