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This excerpt taken from the MRVL 8-K filed Nov 14, 2006. (h) Taxes of Transferred Sub.(i) Each of Buyer and Seller will promptly notify the other in writing upon receipt of notice of any pending or threatened audits or assessments with respect to Taxes of Transferred Sub for which such other Party (or such other Party’s Affiliates) may be liable hereunder. Seller shall assume responsibility for and control the conduct of any audit related to Taxes of Transferred Sub for any taxable period the majority of the days of which occur prior to the Closing. In connection with any such audit involving the Israeli Tax Authority (or any similar or successor Governmental Authority) and for which Seller has responsibility, Buyer agrees to appoint or cause to be appointed as representatives for Transferred Sub, working on behalf of Seller, KPMG Somekh Chaikin (or such other firm of accountants or lawyers nationally recognized in Israel as Seller determines). The Party that is (or whose Affiliates are) in control of an audit of Transferred Sub shall not enter into any compromise or agree to settle any claim for Taxes that would adversely affect the other Party or its Affiliates without the written consent of such other Party, not to be unreasonably withheld or delayed. 41 (ii) Seller shall be responsible for the following Taxes: (i) Taxes imposed on Transferred Sub with respect to taxable periods ending before the Closing Date, (ii) with respect to taxable periods beginning before the Closing Date and ending on or after the Closing Date, Taxes imposed on Transferred Sub which are allocable, pursuant to Section 5.09(h)(iv) hereof, to the Pre-Closing Tax Period, and (iii) Taxes arising on the Closing Date that arise out of the ordinary course of business of Transferred Sub as a result of actions taken by or at the request of Seller or its Affiliates; provided, however, that if there is an adjustment to a Tax Return for a Pre-Closing Tax Period that results in a Tax benefit with respect to a Post-Closing Tax Period, Seller’s obligation with respect to such adjustment shall be reduced by such Tax benefit; provided, further, that Seller shall be responsible for Taxes to the extent described in Section 5.09(h)(vi)(A), but not for Taxes described in Section 5.09(h)(vi)(B). Seller shall be treated as having paid any such amounts that are paid in respect of any such Taxes by Transferred Sub, Seller or Seller’s Affiliates prior to the Closing Date. Buyer and Transferred Sub shall be responsible for Taxes imposed on Transferred Sub arising on the Closing Date, except to the extent of (A) Sales Taxes imposed on Transferred Sub arising on the Closing Date for which Seller is responsible as provided in Section 5.09(f), and (B) Taxes (other than Sales Taxes) imposed on Transferred Sub arising on the Closing Date that arise out of the ordinary course of business of Transferred Sub as a result of actions taken by or at the request of Seller or its Affiliates; provided, further, that Buyer and Transferred Sub shall be responsible for Taxes to the extent described in Section 5.09(h)(vi)(B), but not for Taxes described in Section 5.09(h)(vi)(A). Buyer and Transferred Sub shall also be responsible for all Taxes of Transferred Sub attributable to Post-Closing Tax Periods, other than such Taxes that are the responsibility of Seller pursuant to this Section 5.09(h)(ii). Seller shall prepare or cause to be prepared all Tax Returns of Transferred Sub for taxable periods ending prior to the Closing Date, and Buyer shall prepare or cause to be prepared all Tax Returns of Transferred Sub for taxable periods including and ending on or after the Closing Date. To the extent Seller cannot file such Tax Returns under Applicable Law, Seller shall deliver (or cause to be delivered) such Tax Returns to Buyer before the due date (including extensions) for the filing thereof, and Buyer shall sign and file or cause to be signed and filed such Tax Returns no later than such due date. All such Tax Returns shall be prepared in a manner consistent with past practice of Transferred Sub except as otherwise required by Applicable Law. To the extent permitted or required by Applicable Law or administrative practice, the taxable year of Transferred Sub that includes the Closing Date shall be closed as of the end of the day prior to (or at the beginning of) the Closing Date. If any Party is liable hereunder for any portion of the Tax shown due on any Tax Return required to be filed by any other Party, the Party preparing such Tax Return will deliver a copy of the relevant portions of such Tax Return to the Party so liable for its review and approval not less than fifteen (15) days prior to the date on which such Tax Return is due to be filed (taking into account any applicable extensions), together with a statement showing the other Party’s obligations for Taxes relating to such Tax Return, which shall be paid no later than the due date of such Taxes (or, if later, fifteen (15) days following receipt of such Tax Return), and shall accrue interest if not timely paid, as provided in Section 5.09(c). If the Parties disagree as to any item reflected on any such Tax Return, the Parties will jointly request a third party accounting firm to resolve any issue in dispute as promptly as possible. The decision of such third party accounting firm will be final and binding on the parties, and the expenses of such accounting firm will be shared equally by Seller and Buyer. 42 (iii) Neither Seller nor Buyer shall, nor shall Seller or Buyer cause or permit the Transferred Sub or its Affiliates to, amend, refile, or otherwise modify any Tax Return relating to Transferred Sub with respect to any Pre-Closing Tax Period if such amendment, refiling or modification could adversely affect Seller. (iv) In the case of Taxes of Transferred Sub that are payable with respect to a taxable period that begins before and ends on or after the Closing Date, the portion of any such Tax that is allocable to the portion of the period ending on the day before the Closing Date shall be: (A) in the case of Taxes that are either (x) based upon or related to income, sales, receipts, payroll or other items of income or expense, or (y) imposed in connection with any sale or other transfer or assignment of property (real or personal, tangible or intangible), deemed equal to the amount which would be payable if the taxable year ended at the close of business on the day before the Closing Date; and (B) in the case of Taxes imposed on a periodic basis with respect to the assets of Transferred Sub, or otherwise measured by the level of any item, deemed to be the amount of such Taxes for the entire period (or, in the case of such Taxes determined on an arrears basis, the amount of such Taxes for the immediately preceding period), multiplied by a fraction the numerator of which is the number of calendar days in the period ending the day before the Closing Date and the denominator of which is the number of calendar days in the entire period. (v) Seller shall be entitled to any refund of, or credit for, Taxes to the extent such refund represents a refund of Taxes paid with respect to a Pre-Closing Tax Period, such credit arises as a result of Taxes paid with respect to a Pre-Closing Tax Period, or such Tax represents a Sales Tax that was the responsibility of Seller pursuant to this Agreement; provided, however, that if any such refund or credit results in a correlative Tax detriment to Buyer or its Affiliates with respect to a Post-Closing Tax Period, Buyer’s obligation with respect to such refund or credit shall be reduced by such Tax detriment. Buyer shall pursue such refund or credit as reasonably requested by Seller, provided that Seller shall reimburse Buyer for its reasonable out of pocket costs (including any Taxes arising from the receipt of such refund, net of any Tax benefit of the payment thereof to Seller hereunder). (vi) (A) Seller shall be responsible for Taxes imposed on Transferred Sub on or following the Closing Date to the extent such Taxes constitute the recapture of Tax incentives that reduced the liability of Transferred Sub for Taxes with respect to Pre-Closing Tax Periods, but only to the extent such recapture is a direct result of the failure of the Investment Center to approve the transfer of the Transferred Shares to Buyer or Buyer Designee pursuant to this Agreement; provided, that Buyer has complied with its obligations under Section 5.03 with respect to obtaining such approval and has not taken or refrained from taking action that prevented such approval; and (B) Buyer and Transferred Sub shall be responsible for all other Taxes attributable to the recapture of Tax incentives received by Transferred Sub. (i) Exclusivity of Tax Provisions. Notwithstanding anything to the contrary contained in this Agreement (including Article VII) this Section 5.09 contains the exclusive provisions governing the liability of the parties for Taxes, and no claim for indemnification may be made under any other provision hereof with respect to matters pertaining to Taxes. In the event of a 43 conflict between the provisions of this Section 5.09 and any other section of this Agreement, this Section 5.09 shall govern and control. (j) Adjustment to Cash Consideration. The parties shall treat all indemnification payments made under this Agreement as an adjustment to the Cash Consideration for applicable Tax purposes. (k) Tax Treatment; Section 338 Election. The Parties acknowledge and agree that, for U.S. federal income Tax purposes, the purchase of the Transferred Shares pursuant to this Agreement shall be treated as a purchase of the assets of the Transferred Sub for an amount equal to the sum of (A) the Subsidiary Sellers Cash Consideration, (B) the fair market value as of the Closing Date of the Subsidiary Sellers Stock Consideration, and (C) each liability or other item of the Transferred Sub to the extent treated as an “amount realized” for U.S. federal income Tax purposes. If requested in writing by Seller, Buyer shall cause to be made, without cost or obligation to Seller, a protective election under Section 338 of the United States Internal Revenue Code of 1986, as amended, with respect to the purchase of the Transferred Shares hereby, as and when requested by Seller. (l) Israeli Tax Ruling. Buyer has been informed that Subsidiary Sellers intend to prepare and file with the Israeli Tax Authority an application for a ruling determining the tax consequences to Subsidiary Sellers of the sale of the Transferred Shares, specifically with respect to deferral of Israeli taxation on any Subsidiary Sellers Stock Consideration received by Subsidiary Sellers in such sale (the “Israeli Tax Ruling”). Buyer agrees to, and agrees to use commercially reasonable efforts to cause its outside counsel, advisors and accountants to, cooperate as Subsidiary Sellers reasonably request for the purpose of procuring the Israeli Tax Ruling. 5.10 Allocation of Consideration. The Parties agree that, for U.S. federal income Tax purposes, and where permitted all other income Tax purposes, the Subsidiary Sellers Stock Consideration and the Subsidiary Sellers Cash Consideration (together with certain liabilities of Transferred Sub and other amounts) shall be treated as consideration paid for the assets of Transferred Sub as provided in Section 5.09(k). All other consideration paid hereunder (including the assumption of Assumed Liabilities to the extent treated as consideration for applicable Tax purposes) shall be treated as consideration paid for the Transferred Assets (and not the Transferred Shares or the assets of Transferred Sub). Neither Party shall take any position inconsistent with this Section 5.10 in any Tax Return, unless otherwise required by Applicable Law.5.11 Accounts Receivable. Following the Closing, Buyer shall forward to Seller, immediately upon receipt thereof, any payments of Accounts Receivable of Seller; and Seller shall forward to Buyer, immediately upon receipt thereof, any payments of accounts receivable of Buyer. Promptly following the Closing, the Parties shall cooperate in advising customers to direct to the appropriate Party any future payments by such customers. In determining whether a payment received by either Party is a payment of an Account Receivable of Seller or accounts receivable of Buyer, the receiving Party may rely on any invoice or contract number referred to on the payment or in correspondence accompanying such payment. If a payment, refund or other amount is received by either Buyer, a Buyer Designee or a Selling Party from an account debtor that has not designated the invoice being paid thereby, such payment shall be applied to the earliest invoice outstanding with respect to indebtedness of such account debtor, except for those invoices44 which are subject to a dispute to the extent of such dispute. Following the Closing, Buyer will, at Seller’s expense, provide such cooperation as Seller shall reasonably request in connection with Seller’s collection of outstanding Accounts Receivable of Seller.5.12 Accounts Payable. To the extent that Buyer receives any invoices for Accounts Payable or statements evidencing amounts owed by Seller to another Party, Buyer will promptly deliver such documents to Seller. To the extent that Seller receives any invoices for Accounts Payable or statements evidencing amounts owed by Buyer to another Party, Seller will promptly deliver such documents to Buyer.5.13 Operation of the Business Prior to Closing. Between the date of this Agreement and the Closing Date, except as permitted by this Agreement or any of the other Acquisition Documents or as set forth in Schedule 5.13, or unless Buyer shall otherwise consent in writing (which consent shall not be unreasonably withheld or delayed), the Selling Parties and Transferred Sub shall use commercially reasonable efforts to operate the Business in the ordinary course of business consistent with past practice and shall use commercially reasonable efforts to preserve the material business relationships with customers, suppliers, distributors and others with whom the Selling Parties deal in connection with the Business in the ordinary course. Without limiting the generality of the foregoing, between the date of this Agreement and the Closing Date, unless Buyer shall otherwise consent in writing (which consent shall not be unreasonably withheld or delayed), except as contemplated by this Agreement, any other Acquisition Document or as set forth on Schedule 5.13, Seller shall not (and shall cause each other Selling Party and the Transferred Sub not to): |
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