A critical aspect of any negotiation for either investment into a company or purchase of a company is a close review of its operations and financial documentation by the Buyer. Normally this review is made before a final agreement is executed or, even if a final agreement is executed, the enforceability of the agreement is predicated on whether the Buyer is satisfied with the financial and operational documentation of the Seller. This normally includes customer lists, formulas, operational reports, etc. In short, the Seller opens its books and trade secrets to review by a Buyer before the deal is binding in most circumstances. Such disclosure to a party who may or may not actually buy the business requires protection of secrets should the deal not be consummated and the contract below provides such protection.
The following agreement can also be used for Parties considering exchanging information for the purpose of creating co ventures in the future, e.g. two companies forming a temporary connection in a joint venture. (See Article on Partnerships in the Retainer Articles). This form may also be downloaded from the Retainer Area Downloads page.
NEGOTIATING NON-DISCLOSURE CONTRACT
___________________and ___________________________________ are interested in exchanging selected business and technical information for the sole purpose of exploring a possible joint venture or other business transaction to_________________________ (the "Project").
WHEREAS, in the course of their exchange, each party will disclose valuable information to the other party and some of the information so disclosed may be confidential. Accordingly, each party agrees to the following terms and conditions:
1. DEFINITION: CONFIDENTIAL INFORMATION
"Confidential Information" is defined as any **OPTIONAL written** information disclosed to the receiving party by the disclosing party relating to the Project which is **OPTIONAL clearly marked at the time of disclosure as**"Confidential." **OPTIONAL Information transmitted orally and identified at that time as confidential shall be considered Confidential Information if it is reduced to writing, marked "confidential," and transmitted to the receiving partywithin ten (10) days after the oral transmission.** When an item of hardware is delivered by one party to another, the same may be brought within the scope of this Agreement by an accompanying letter to the receiving party identifying the item of hardware and claiming confidentiality with respect thereto. Confidential Information may include, without limitation, (i) proprietary technical information regarding the Project; (ii) the identity of or other pertinent information with respect to the actual or potential customers or customer contacts and customer sales strategies; (iii) market studies, penetration data, and other market information; (iv) sales and marketing plans, programs, and strategies; (v) sales, costs, and other financial data; (vi) trade secrets, know-how, designs, and proprietary commercial and technical information, methods, practices, procedures, processes, and formulas with respect to manufacturing, assembly, design, or processing the products subject to this Agreement and any component or part thereof; (vii) sources of supply for products, components, and services; and (viii) any other secret processes, formulas, or methods.
2. NON-DISCLOSURE AND RESTRICTION ON USE
The receiving party agrees to retain Confidential Information in confidence for a period of (______) years from the date of receipt of the Confidential Information by exercising reasonable precautions to prevent unauthorized disclosure of the received Confidential Information to any third party, in whole or in part, and not to use the Confidential Information for any purpose other than in furtherance of the Project. The standard of care imposed on each party for protecting Confidential Information received from the other party will be reasonable and prudent care to prevent improper disclosure or use of such Confidential Information, to the same degree each party employs to protect its own Confidential Information (except neither party shall be excused from its own negligence), including, but not limited to, allowing access to such Confidential Information only to those persons who have a need to know in connection with the Project. In the event of a loss or theft of any documents, items of work in progress, or any work products embodying Confidential Information by or from any party, the other party must be notified in writing immediately. Each party may release information to its professional advisors, provided such party assumes responsibility for such advisor's compliance with this Agreement.
3. REPRODUCTION OF CONFIDENTIAL INFORMATION
No party will reproduce copies of the Confidential Information which bears the legend (or its equivalent): "DO NOT DUPLICATE." Subject to the terms of this Agreement, any party may duplicate documents which do not bear the aforementioned legend, provided that such duplication is a reasonable requirement for furtherance of the Project.
4. DISCLOSURE TO EMPLOYEES AND ADVISORS
Each party shall limit dissemination of the others' Confidential Information to such of its employees and professional advisors who have a need to know for the furtherance of the Project.
5. EXCEPTIONS TO NON-DISCLOSURE
No party shall be subject to the obligations of this Agreement with respect to Confidential Information which:
a. is or becomes known publicly through no wrongful act of the receiving party; or
b. was already known to the receiving party at the time of disclosure hereunder as shown by the receiving party's prior written records; or
c. is learned by the receiving party from a third party under no obligation to the disclosing party; or
d. is independently developed by an employee, agent, or consultant of the receiving party with no knowledge of disclosures hereunder; or
e. is approved for release by written authorization of the disclosing party.
6. NO LICENSE OR RIGHT
No right or license, whether expressed or implied, in the Confidential Information is granted to the receiving party other than to use the Confidential Information in the manner and to the extent authorized by this Agreement.
7. RETURN OF CONFIDENTIAL INFORMATION
The receiving party agrees to promptly return to the disclosing party, upon written request, all Confidential Information and all copies and notes thereon, regardless of the form of storage or retrieval.
8. CONFIDENTIAL INFORMATION EXCHANGE
No Confidential Information shall be exchanged after the parties abandon the Project or any time after prior written notice is given by one party to the other that the notifying party does not wish to receive or disclose any further Confidential Information, whichever occurs earlier.
9. PUBLICITY
No information, release, or public announcement, or confirmation or denial of same, of any phrase of this Project will be made without prior coordination with and express written approval of the other party.
10. CONTROLLING LAW
This Agreement will be governed and construed in accordance with the laws of _________________ without reference to its conflicts of law principals.
11. ENTIRE AGREEMENT
This Agreement contains the entire and complete agreement between the parties, and supersedes any and all prior understandings, promises, representations, and agreements, oral or written, with respect to this Project. No modification, change, or waiver of this Agreement shall be valid unless made in writing by authorized representatives of the parties.
12. ARBITRATION
Any and all disputes relating to this Agreement or its breach shall be settled by arbitration in_____________________ , California, in accordance with the then-current rules of the American Arbitration Association ("AAA"), and judgment upon the award entered by the arbitrator may be entered in any Court having jurisdiction hereof. Costs of arbitration, including reasonable attorney's fees incurred in arbitration, as determined by the arbitrator, together with reasonable attorney's fees incurred by the prevailing Party in Court enforcement of the arbitration award after it is rendered by the arbitrator, must be paid to the prevailing Party by the Party designated by the Arbitrator or Court. Said arbitration shall be conducted in the English language and the award rendered in United States dollars. Service of the Petition to Confirm Arbitration and written notice of the time and place of hearing on the Petition to Confirm the Award of the Arbitrator shall be made in the manner provided herein for all notice. Such service shall be complete on personal delivery or the deposit of the Petition and notice in the United States mail. BOTH PARTIES UNDERSTAND THEY WAIVE THE RIGHT TO A JURY TRIAL OF ANY DISPUTE BY AGREEING TO THIS ARBITRATION PROVISION..
Should one Party either dismiss or abandon his/her claim or counterclaim before hearing thereon, the other Party shall be deemed the "prevailing Party" pursuant to this Agreement. Should both Parties receive judgment or award on their respective claims, the Party in whose favor the larger judgment or award is rendered shall be deemed the "prevailing Party" pursuant to this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized representatives and agree the effective date shall be the later of the dated signatures below.
By: ____________________________________ By: ____________________________________
Title: ___________________________________ Title: ___________________________________
Date: ___________________________________ Date: ___________________________________