Streamline your document signing process with airSlate SignNow's sales advisory process in NDAs

How to create outlook signature

welcome to the contract teardown show from law Insider where legal experts tear down contracts from some of the most well-known companies and high-profile Executives around the world in this episode of the contract teardown show shamul Hawk convinces me that ndas might be the most important contract you'll ever enter into almost so let's tear it down hey everybody welcome back to the contract teardown show from law Insider I'm Mike Whalen today I'm hanging out with my buddy shamul hakshimul how are you today very well thank you Mike good uh we are getting together to talk about the thing that nobody likes to talk about but everybody likes to talk about the non-disclosure agreement we've talked about ndas in the past uh but it just everybody seems to be worried about these so I'd like to get a new perspective shmuel I'd like to dig into yours let me share this agreement with the folks at home what is this document this NDA that we're looking at when are we going to run into a document like this that's a really great question Mike so this is a document between two large industrial units so we would see a document like this when they're looking to engage in a complex business transaction maybe a merger acquisition divestment or you know maybe one is looking to invest in the other yeah so we've got a big deal deal going on people are sharing information that probably they don't want out in the world before we dig into it and we'll tell us about you what's your background what brings you to documents like this I have a solo law firm and I mostly help Enterprise customers and um when when my clients are either looking to engage into a complex negotiations that will spend months uh this is the first thing they put into place yeah these are so common I feel like the complaint that I get all the time is that uh these are rarely enforceable nobody likes them and it just feels like it's 40 of everybody's job so um I I don't know my sense of these is that uh um there's a lot of concern um and uh hopefully we can shed some light on it so we're gonna dig into this one uh get me started uh this is as I'm looking at it a a document between 3M and cogent big companies what's the context for this particular document well it looks like they're going to engage in a complex business transaction and the beauty of ndas is that it sort of is agnostic in that you can leave a lot of the details blank there will be information flowing in a particular way and this document is meant to protect that information why what for for how long all those are details that will be figured out later yeah well let me ask you about that so I'm going to read a sentence the party's wish to protect and preserve the confidential and or proprietary nature nature of certain information and materials of the company right company Capital C so that's defined it's defined as cogent so there's 3M there's cogent one of the companies is cogent that they say that we're trying to protect why is that only one way what about this Preamble is telling you in the nature of this relationship that that makes sense that it should only be one direction that's a great question Mike so one way ndas are rare and if you think about it it's rare that you get any interaction where information is just flowing one way even if you are let's say you as a person are interacting with a you know Fortune 10 company um they are sending you a lot of information you are sending them your email address you're sending them you know whatever Services you'll be providing so one way ndas are more common when an organization is maybe hiring an independent contractor or when um you know like VCS are approaching startups for their seed round and just trying to sort of bully them these are two well-established complex lawyered up organizations so the fact that 3M agreed to a one-way NDA tells me that there was something very specific going on here and that they agreed to hard code this in right because they could have just had neutral language that says that the disclosing party will expect the receiving party to protect all the information but they didn't do that they just went right into the Preamble and they say only 3M will be receiving the information only cogent will be providing the information so that is definitely significant so it tells us something about the nature of the transaction you're saying that because we've done this there's a you know it we don't know obviously because this was because of the way this was filed what the background deal is but we know that 3M is going in and trying to extract some kind of information and made cogent presumably in sort of the power position to say okay but if you're going to do that we're going to control it they start to do it with a couple of very long paragraphs uh under one proprietary information and other definitions 1.1 is proprietary information and it is long I mean it means all information with the representatives in connection with the proposals together with all the communications data reports analyzes it's expansive and I think it probably needs to be expansive what do you think about the way they're defining proprietary information so this is how I look at it like when you see a definition like this it's really the first 10 or 15 words that matter because after that they'll just start listing all the things that could be proprietary information but they could easily drop that and if it falls under the definition it's proprietary so if you will think about categories of definitions the usual definition of proprietary or confidential information is that you know there has to be some business value to it if a third party aside from the two parties of the NDA get to know that information they will have an undue advantage and that definition that you know it has to be having some innate business value or proprietary by nature is the most common definition you will see in an NDA Category 2 would be all non-public information is confidential or proprietary information and that just you know sort of makes a lot of sense to me I have um well regarded Financial Service clients who use that definition in that you know don't worry about whether any information has uh business value or not if it's non-public we want it covered under this NDA this NDA goes even beyond that it just says all information disclosed by disclosing party is proprietary information and that is unusual yeah I take your point about the 15 words being relevant so I'm going to read some of these words because it's actually relevant to my next question it says proprietary information means any and all information and material disclosed by disclosing party or any of its representatives to receiving party or any of its representatives in connection with the proposed transaction or in the course of the party's evaluation and negotiation of the proposed transaction so it's very it's very and then as you said it goes into a lot of examples like it could include you know datas and reports and and you know smoke signals and uh you know birds with notes tied to their feet it goes into this long list but to get to the point about Representatives uh in 1.2 it defines Representatives it says Representatives means as to any person its directors officers employees agents and advisors including without limitation financial advisors financing sources attorneys accountants and their respective Representatives I'm seeing a couple of category categories that might be missing what do you think about this definition of Representatives thank you Mike so hearing lies one of the innate paradoxes of modern day information Exchange the large complex organizations that are likely to have these information that you know if they get disclosed that could substantially move the market or have other material values are also the same types of organizations who are likely to have a lot of contractors maybe a large part of their employment Force are contractors they're likely to have um support teams all over the world so you see the underlying tension there and this sort of approaches to that tension in that yes your organization itself and all its employees get access to it but we will also let this other class of people have access to it because they're all modern corporations of of Note have these Army of people who are catering to them and it's impractical to try to exchange information or engage into a deal without bringing them in so this NDA is just sort of front loading that acknowledging right off the bat that yes there are all these people who also need to be brought in got it all right well let me jump down uh speaking of Representatives because as you mentioned there's you know there's multiple layers uh in these businesses of Representatives of Representatives of Representatives right you've got all these layers when I look at 2.2 in the decree of care it says that you're getting the rep the receiving party shall take the same degree of care that it uses to protect its own confidential and proprietary information of a similar nature uh and and you can't allow the representatives to decompile disassemble there's this sort of assumption behind all of this and almost agency relationship that everybody's going to act as if this is their kids this is their baby this is their and you're doing it in degrees as you pass it down to the different entities that are part of this what do you what do you think about the way they deal with that kind of responsibility and the disclosures that are associated with in any kind of sharing of this information that's a great question Mike so sort of a two-part answer to that the interesting thing about the definition of Representatives here is that you know as you said they have agents they have officers they have um you know employees of course what they don't have are contractors or Consultants now agents and advisors overlap to a large extent with the type of people who may be contractors and Consultants but not completely if you have a customer service representative they may be a contractor they would not be an advisor and they probably would not be an agent either so I think they did this in a very thoughtful way but that sort of limits the circle of um disclosure right there and then there is another requirement tied to that in that to reveal to any of these Representatives they have to have a confidentiality obligation that's at least as strong as the ones found in this NDA so that's the other um way to keep the circle small what this NDA doesn't have and I've seen in a lot of places is that it requires a need to know basis to disclose it to a representative they have to have a need to know and what this document instead says that you know the representative have to be actively and directly participating which I think is a clunkier way of getting to the same position um and you see throughout this as as we go through the they talk about different particular types of Representatives the attorney-client relationship uh these kinds of things and then you see wrapped into this document some of the stuff that that seems common there's sort of a separate thing which is solicitation non-solicitation of employees uh there's some of the security stuff in here uh there's remedies uh listed before we get to the big picture and talking about what this document is trying to do I want to Target one thing specifically which is the termination if you look down at six in the term it's very short it says except as provided herein the obligations this agreement shall terminate on the second anniversary of the effective date and then it lists off sections that will still survive the termination what do you think about determination I you pointed out before we prepared that it doesn't specifically say anything about convenience how do you think they're handling that here so another great question and NDA is almost unlike any other agreement that commercial parties agree in that theoretically it's an exchange of information so if you cut it off if the underlying NDA goes away all that happens is um you cannot disclose any further information but again like a lot of other features in this NDA they just hard-coded an expiration date this goes for two years and then you know if the parties want obviously they get extended as they did actually if you scroll all the way to the bottom but there is no way to terminate it for convenience if three months in the term 3M feels like you know we are not getting what we wanted this is not a good use of our time let's stop this process they can't they can walk away from you know the underlying transaction but they're stuck with the obligations of this agreement um yeah well in closing I'm gonna ask you to do me a favor I'm going to ask you to talk me into ndas because as I mentioned I hear a lot of complaints about them but we all do them they obviously are serving a purpose and as we've talked about on the show before you know the nature of contract is to create trust between two people or companies who have no inherent reason to trust each other they're not in the same tribe they're not in the same family this is not their baby their by contract they're saying treat this as if this was your baby act as if our company was your company but it's not right so what is an NDA doing in these kind of large deals that make us say we need to have these we need to take them seriously we need to make them better talk me into the value of an NDA if you can absolutely and the example or the analogy I always use is that if you love you know like the big chunky novels like the um George R Martin's you know Song of Ice and Fire or tallest toys Classics those are the you know the big Master service agreements or the standard terms and conditions and NDA is like a short story by those same Masters in that you know they rarely exceed maybe six or eight pages but they convey the organization's priorities in an unmistakable manner I have a client who is probably the most organized client in my career and the first document they always put into place for any relationship is the NDA and they make sure they make it clear that the NDA stands by itself throughout the organization in that they may sign confidentiality to occupants or other Master agreements that have confidentiality terms but none of that overrules the NDA so you see where this is going this sort of use the NDA to set the tone for the rest of the discussion and that's how I see mbas as well like if you read into the subtext you can really see what the priorities are of an organization gosh that's really interesting because it it you're expanding on this idea of the NDA specifically as a trust creating tool because you're saying Hey listen in principle we want to get together we want to like each other we want to be friends we want to be buddies we're all acting in good faith here and as a way to signal that we're going to act in good faith I'm going to treat your information like it matters right I know it matters to you doesn't matter to me because I run a different cup but I'm going to treat it like a matter so you know that I'm serious about the rest of the stuff right the meat of what we're trying to get to that's a that's an that makes an NDA interestingly not only like not something that you should just cast aside and say that this is so boring but it's something that you should really take seriously as the First Trust signal document to to your analogy it's the it's the inside of the cover of the novel right when you go by the novel it's that inside part that gets people hooked that's a really interesting analogy thank you and a lot of big companies now have ndas that have objectionable language in there in one sense or another and how you respond to them really can set the tone for the rest of the relationship if you sign a NDA as is without you know really checking what you're getting into they will know that you know you didn't do your due diligence and they'll sort of just try to bully you the rest of the way either the other thing I would say is that it's getting more and more common for ndas to include language that have no business being there specific caps of liability non-solicitation um you know all those things belong in the master agreement that you enter if you decide there's a relationship you want to pursue but companies are front loading it you know because they want people to sign them and their makes the job easier for them yeah sign sign put it in the NDA nobody pays attention to those anyway right so just drop it in there and they'll sign it no that that makes a lot of sense well I I gotta be honest with you you've broken my brain today you've given me a new perspective on this dang document so I appreciate you doing that uh and coming on and tearing down this document we'll share this document over at lonsetter.com resources but we also want to share your contact information if people want to reach out to you learn more about your practice and how you deal with documents like this what's the best way to connect online best way is through my email shamulawoffice.com if I have an email in my inbox I love it it's a written record and I will get back to you awesome we'll include that and also your LinkedIn profile I think I have as well we'll make sure that's over at the website at lionsider.com resources and if you want to be a guest on the contract teardown show just email me I'm at Community lawinsider.com we would love to have you we'll see you all next time thank you again thank you Mike thanks so much for tuning in to this episode of intract teardown show from law Insider if you're enjoying the show please feel free to rate subscribe and leave a review wherever you listen to your podcasts that helps others find the show we really appreciate it thanks again for listening and we'll catch you in the next episode