SXE » Topics » 5.1 Confidentiality .

This excerpt taken from the SXE 8-K filed Apr 2, 2007.

5.1           Confidentiality.

(a)           The Sellers acknowledge and agree that they and the Company have had in the past, currently have, and in the future may possibly have, access to (i) certain information of the business of the Company that has not been disclosed to the public and which constitutes confidential and proprietary business information (the “Confidential Information of the Company”), and (ii) certain information of Purchaser that has not been disclosed to the public and which constitutes confidential and proprietary business information (the “Confidential Information of Purchaser”), including but not limited to, in each case, client and customer lists, software, data, formulae, processes, inventions, trade secrets, marketing information and plans, business strategies and other information about products and services offered or developed or planned to be offered or developed.  Notwithstanding the foregoing, Confidential Information of the Company and Confidential Information of Purchaser does not include any information (A) that is or becomes publicly available, other than as a result of a disclosure by the Sellers or any of their Affiliates in violation of this Agreement or (B) which must be disclosed by the Sellers or any of their Affiliates under applicable Laws or by order of any Governmental or Regulatory Authority.  In the event the Sellers or any of their Affiliates are requested or required (including, without limitation, by oral questions, interrogatories, requests for information or documents in a legal proceeding, subpoena, civil investigative or other similar process) to disclose any Confidential Information of the Company or Confidential Information of Purchaser as described in subpart (B) of the immediately preceding sentence, the Sellers and/or the Company shall provide Purchaser with prompt written notice of any such request or requirement so that Purchaser may seek a protective order or other appropriate remedy, at Purchaser’s sole expense, and/or waive compliance with the provisions of this Agreement.  Each Seller agrees that, on his behalf and on behalf of his Affiliates, without prior written consent of Purchaser, from and after the Closing Date for a period of two (2) years, none of the Sellers nor any of their Affiliates shall in any manner directly or indirectly disclose to any Person or use any Confidential Information of the Company or Confidential Information of Purchaser for any purpose or reason.

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(b)           The Sellers acknowledge that any breach or threatened breach of the provisions of this Section 5.1 will cause irreparable injury to the Purchaser and/or the Company for which an adequate monetary remedy does not exist.  Accordingly, in the event of any such breach or threatened breach, the Purchaser and/or the Company shall be entitled, in addition to the exercise of other remedies, to seek and (subject to court approval) obtain injunctive relief, restraining the Sellers from committing such breach or threatened breach.  The right provided under this Section 5.1(b) shall be in addition to, and not in lieu of, any other rights and remedies available to the Purchaser or the Company.

(c)           Each Seller (i) has carefully read and understands all of the provisions of this Agreement and has had the opportunity for this Agreement to be reviewed by counsel, (ii) acknowledges that the duration, geographical scope and subject matter of this Section 5.1 are reasonable and necessary to protect the goodwill, customer relationships, legitimate business interests, trade secrets and confidential information of the Company and the Purchaser, (iii) acknowledges that the Purchaser would not be willing to enter into the Transaction Documents or consummate the transactions contemplated thereby without the benefits contained in this Agreement and (iv) will be able to earn a satisfactory livelihood without violating this Agreement.

5.2           Indemnification by Company of Managers and Officers.  Subject to the limitations in Section 22 of the Operating Agreement, the Purchaser shall cause the Company to indemnify and hold harmless any Person who was a Manager or officer of the Company on or prior to the Closing Date for any liability (including reasonable attorneys’ fees and court costs) incurred by such Person as a result of a third party bringing an action in connection with any liability disclosed to Purchaser on the Company Financials.

5.3           Certain Tax Matters.The following provisions shall (i) govern the allocation of responsibility as between Purchaser and Sellers for certain Tax matters following the Closing Date, and (ii) address certain other matters relating to Taxes:

(a)           Tax Indemnification.  The Sellers, jointly and severally, shall indemnify the Company and Purchaser and hold them harmless from and against any Losses attributable to (i) all Taxes (or the non-payment thereof) of the Company for all taxable periods ending on or before the Closing Date and the portion through the end of the Closing Date for any taxable period that includes (but does not end on) the Closing Date (“Pre-Closing Tax Period”), and (ii) any and all Taxes of any Person (other than the Company) imposed on the Company as a transferee or successor, by Contract or pursuant to any Law, which Taxes relate to an event or transaction occurring before the Closing Date; provided however, that the Sellers shall be liable only to the extent that such Taxes exceed the amount, if any, reserved for such Taxes (excluding any reserve for deferred Taxes established to reflect timing differences between book and income Tax income) and taken into account in determining any adjustment to the Purchase Price pursuant to Section 2.3.  The Sellers shall pay to (or as directed by) Purchaser any such amounts by no later than five (5) Business Days prior to the due date for paying such amount of Taxes to the relevant tax authority.  Any indemnification claim made under this Section 5.3 shall comply with and be subject the provisions of Section 6.3 and 6.5.

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(b)           Straddle Period.  In the case of any taxable period that includes (but does not end on) the Closing Date (a “Straddle Period”), the amount of any Taxes based on or measured by income or receipts of the Company for the Pre-Closing Tax Period shall be determined based on an interim closing of the books as of the close of business on the Closing Date (and for such purpose, the taxable period of any partnership or other pass-through entity in which the Company holds a beneficial interest shall be deemed to terminate at such time) and the amount of other Taxes of the Company for a Straddle Period that relates to the Pre-Closing Tax Period shall be deemed to be the amount of such Tax for the entire taxable period multiplied by a fraction the numerator of which is the number of days in the taxable period ending on the Closing Date and the denominator of which is the number of days in such Straddle Period.

(c)           Responsibility for Filing Tax Returns.  The Sellers’ Representative shall prepare or cause to be prepared and file or cause to be filed, at Sellers’ expense, all income Tax Returns for the Company that are filed after the Closing Date and relate to any period of time on or prior to the Closing Date.  To the extent necessary to prepare such Tax Returns, Purchaser shall provide access to the Books and Records of the Company to the Sellers’ Representative and any representatives or advisors of the Sellers or the Sellers’ Representative, upon reasonable request of the Sellers’ Representative.  The Sellers’ Representative shall permit Purchaser to review and comment on any income Tax Return described in the prior sentence at least ten (10) days prior to filing and shall make such revisions to such Tax Return as are reasonably requested by Purchaser.  Each Seller shall include any income, gain, loss, deduction or other Tax items of the Company on his Tax Returns in a manner consistent with the Schedule K-1s furnished by the Company to each Seller.  Purchaser shall prepare or cause to be prepared and file or cause to be filed all Tax Returns other than income Tax Returns for the Company that are filed after the Closing Date.  Purchaser shall permit the Sellers to review and comment on each such Tax Return described in the prior sentence at least ten (10) days prior to filing and shall make such revisions to such Tax Returns as are reasonably requested by the Sellers.

(d)           Cooperation on Tax Matters.

(i)            Purchaser and the Sellers shall cooperate fully, as and to the extent reasonably requested by the other party, in connection with the filing of Tax Returns for all periods that begin before the Closing Date and any audit, litigation or other Action or Proceeding with respect to Taxes.  Such cooperation shall include the retention and (upon the other party’s request) the provision of records and information which are reasonably relevant to any such audit, litigation or other Action or Proceeding and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder.  Purchaser and the Sellers agree (A) to retain all Books and Records with respect to Tax matters pertinent to the Company relating to any taxable period beginning before the Closing Date until the expiration of the applicable statute of limitations (and, to the extent notified by the other party, any extensions thereof) of the respective taxable periods, and to abide by all record retention agreements entered into with any Governmental or Regulatory Authority, and (B) to give the other party reasonable written notice prior to transferring, destroying or discarding any

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such Books and Records and, if the other party so requests, the Purchaser or the Sellers, as the case may be, shall allow the other party to take possession of such Books and Records.

(ii)           Purchaser and Sellers further agree, upon request, to use their best efforts to obtain any certificate or other document from any Governmental or Regulatory Authority or any other Person as may be necessary to mitigate, reduce or eliminate any Tax that could be imposed (including without limitation any Tax with respect to the transactions contemplated hereby).

(iii)          Purchaser and Sellers further agree, upon request, to provide the other party with all information that either party may be required to report pursuant to Section 6043 of the Internal Revenue Code, and all Treasury Department Regulations promulgated thereunder.

(e)           Tax Sharing Agreements. All Tax sharing agreements or similar agreements with respect to or involving the Company shall be terminated as of the Closing and, after the Closing, the Company shall not be bound thereby or have any Liability thereunder.

(f)            Certain Taxes.  All transfer, documentary, sales, use, stamp, registration and other such Taxes and fees (including any penalties and interest thereon) incurred in connection with this Agreement shall be shared equally by Sellers, on the one hand, and Purchaser, on the other hand, when due, and Sellers and Purchaser shall cooperate to file all necessary Tax Returns and other documentation with respect to all such transfer, documentary, sales, use, stamp, registration and other such Taxes and fees, and, if required by applicable Law, each of Purchaser and the Sellers will, and will cause its or their Affiliates to, join in the execution of any such Tax Returns and other documentation.  Any expenses incurred by Purchaser in connection with filing the Tax Returns or other documentation shall be shared equally by Purchaser and the Sellers’ Representative.

5.4           Accounts Receivable.   With respect to those accounts receivable of the Company used in determining Working Capital pursuant to Section 2.3, Purchaser shall cause the Company from and after the Closing to continue to use collection activity efforts consistent with the Company’s past practices, and shall promptly remit to the Sellers’ Representative, for the benefit of the Sellers, or shall cause the Company promptly to remit to the Sellers’ Representative, for the benefit of the Sellers, any amount of such accounts receivable that (i) is not collected within One Hundred Twenty (120) days after the invoice date thereof and are counted or credited against the Escrow Amount in accordance with Sections 3.23 and 6.2(a)(i) and (ii) is ultimately received after the date hereof by the Company or Purchaser.

5.5           Satisfaction of UAR Payments.  Within ten (10) Business Days following the Closing, Purchaser agrees to cause the Company payroll account to release to each holder of a UAR his, her or its allocable portion (as set forth in Schedule 2.1(c)(iv)) an aggregate payment amount of $1,627,050.00 (subject to applicable Tax withholding) in full payment, satisfaction and termination of all outstanding UARs; provided, however, that Purchaser shall not direct the release of such payment until (i) such UAR holder has delivered to the Purchaser an executed

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notice of exercise and release, in form and substance satisfactory to Purchaser, (ii) the Purchaser has delivered a copy thereof to the Sellers’ Representative.  Promptly following the release of each such payment, the Purchaser shall deliver to the Sellers’ Representative evidence that each such payment has been made to each holder of a UAR.

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