Common use of Section 382 of the Code Clause in Contracts

Section 382 of the Code. The parties acknowledge that to preserve the Company's tax loss carryovers existing immediately prior to Closing in accordance with Section 382 of the Code ("382 BENEFITS"), for a period of three years following the Closing ("RESTRICTED PERIOD"), significant changes in the ownership of the Company's outstanding capital stock may cause the Company to lose some or all of its 382 Benefits. Accordingly, if a Shareholder (the "TRANSFERRING SHAREHOLDER") wishes to Transfer Stock during the Restricted Period, the Transferring Shareholder shall deliver a written notice (a "SALES NOTICE") to the Company. The Sales Notice shall disclose in reasonable detail the identity of the prospective transferee(s) and the proposed number of shares of Stock to be transferred. Upon receipt of any Sales Notice, the Company shall assess how the proposed Transfer would affect the Company's 382 Benefits. Within ten (10) days of receipt of the Sales Notice, the Company shall provide a written notice ("COMPANY NOTICE") to such Transferring Shareholder which shall either (i) permit the Transfer of all of the Stock as proposed in the Sales Notice, (ii) permit the Transfer of a portion of the Stock as proposed in the Sales Notice, or (iii) prohibit the Transfer of any Stock as proposed in the Sales Notice, and in any event, the Company Notice shall contain an explanation of the basis for the Company's determination. If the Company Notice contains a response under clause (i) or (ii) above, such permission shall remain effective for sixty (60) days following delivery of the Company Notice. If the Company Notice contains a response under clause (iii) above, such prohibition shall remain in effect until such Transferring Shareholder receives a Company Notice under clause (i) or (ii).