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Drafting Preliminary Agreements
A confidentiality agreement (“Confidentiality Agreement”), also sometimes called a non- disclosure agreement (“NDA”), is typically the first stage in the due diligence process for an acquisition transaction as parties generally are reluctant to provide confidential information to the other side without having the protection of a confidentiality agreement. After a Confidentiality Agreement is in place, the parties exchange information and proceed to negotiate the terms of a transaction. If the negotiations are successfully completed, the parties may enter into a letter of intent. While the parties initially intend that a letter of intent does not bind the parties to proceed with a transaction, disputes often arise as to whether and to what extent the parties are contractually bound.
Non-Disclosure and Other Preliminary Agreements in Business Transactions
A confidentiality agreement (“Confidentiality Agreement”), also sometimes called a nondisclosure agreement (“NDA”), is typically the first stage for the due diligence process as parties generally are reluctant to provide confidential information to the other side without having the protection of a confidentiality agreement. The target typically proposes its form of confidentiality agreement, and a negotiation of the confidentiality agreement ensues. A seller’s form of confidentiality agreement is attached as Appendix A.
Confidentiality Agreements are Contracts with Long Teeth
A confidentiality agreement (also sometimes called a non-disclosure agreement or “NDA”) is typically the first stage for the due diligence process in a business combination or joint venture transaction (collectively, “M&A”) as parties generally are reluctant to provide confidential information to the other side without having the protection of an NDA. The target typically proposes its form of NDA, which may provide that it makes no representations regarding any information provided, and a negotiation of the NDA ensues. Some NDAs contain covenants restricting activities of the buyer after receipt of confidential information. The recent cases discussed below highlight that possible consequences of an agreement to maintain the confidentiality of information can be far reaching and are evolving. These cases also teach that, in addition to the importance of having contractual provisions sufficient to accomplish the intended objectives, director awareness of the effects of provisions in NDAs their companies enter into can have fiduciary duty implications.