Second Draft of Waypoint for M&Arefining acquisition-specific terms to the standard business NDA
This post is part of a series, The Waypoint NDA.
Adding mergers-and-acquisitions terms to The Waypoint NDA continues. We’ve had some excellent comments from lawyers deeply versed in the specialty!
Here’s the latest draft of the M&A-specific language, with a few comments:
These terms apply only if the Purpose relates to a potential merger or acquisition of one of the parties, their parents, or their subsidiaries, all or substantially all of one of their assets, or one of their lines of business:
I’ve moved away from defining a term like “Proposed Transaction”. That doesn’t seem necessary, and we actually want the flexibility to distinguish merger-of-equals situations from acquisitions of a clear target by a known acquirer.
No Unauthorized Market Due Diligence
In the case of a potential acquisition, the side of the potential acquirer shall not directly or indirectly communicate about the potential acquisition with any executive, employee, customer, or supplier of the other party, or seek any information in connection with the potential acquisition from them, without the prior, written consent of the other party. The case of a potential “merger of equals”, where neither side is target or acquirer, neither side shall do so.
The idea here is that in acquisition situations, the target should be free to do market due diligence on the acquirer.
Disclosure to Funding Sources
Receiving Party may disclose Confidential Information to a source of debt or equity financing for the potential merger or acquisition, an Affiliate, a limited partner, member, stockholder, or other investor. Breach of Receiving Party obligations by such recipients will be deemed breach of this agreement by Receiving Party itself.
This has been entirely reworded. What was a prohibition on sharing this information with these parties, with listed exceptions, is now a blanket permission. The responsibility-for-breach language directly paralleling that for receiving parties’ advisers in the non-M&A terms of the Waypoint form.
Except as described in Former Personnel or General Solicitation, during discussions of the potential merger or acquisition and for one year after the date of any principal agreement entered into for the transaction, or as long as the law allows, neither party shall solicit to hire any of the following without the prior, written consent of the other party:
any executive employed by the other party or its Affiliate;
any other employee of the other party or its Affiliate; or
any natural-person independent contractor providing services exclusively to the other party or its Affiliate
who they became aware of, or about whose performance they learn, in connection with the potential merger or acquisition.
I’ve dropped this down from a nonsolicit and no-hire to just a nonsolicit, to avoid enforceability questions.
I’ve also limited the coverage of contractors to just exclusive contractors. Any old contractor is likely too broad in many situations.
A party may solicit personnel after their working relationships with the other party or its Affiliate have ended, so long as their working relationships did not end with the soliciting party’s encouragement.
Everything after the comma is new here. This isn’t meant to be a gameable bright-line rule. It’s meant to let parties off when personnel move on of their own accord, unrelated to merger or acquisition talks and confidential exchange.
This agreement does not restrict either party from hiring anyone who responds to an advertisement or announcement that was not specifically directed at personnel of the other party, or any individual introduced by a recruitment firm that did not specifically target personnel of the other party.
No change here.
No Exclusive Financing
Neither party shall, directly or through others, discuss or enter into any oral or written agreement, arrangement, or understanding for debt or equity financing of a Transaction:
on an exclusive basis; or
in any other way that would prohibit or be reasonably expected to prevent any other potential acquirer from getting debt or equity financing from that financing source.
This section, especially the second enumerated point, has been reworked for clarity, and to slightly broader the language to catch moves that don’t prohibit others from getting funding outright, but have the same practical effect.
Definition of Affiliate
Affiliate means any legal entity that has control over, is under the control of, or is under common control of another entity, where control means ownership of substantially all the assets of an entity or the power to direct its management and policies by vote, contract, or otherwise. Control can be direct or indirect.
Right to Assign
Either party may assign this agreement as a whole, without the other party’s consent, in connection with a merger, acquisition, corporate reorganization, or sale of all or substantially all of its assets.
These last two remain the same.
We have dropped the extra “Purpose” section saying explicitly that the nonsolicit is designed to protect confidential information, as unnecessary.
Comments, corrections, and feedback of all kind could not be more welcome. Please feel free to e-mail firstname.lastname@example.org anytime.
Your thoughts and feedback are always welcome by e-mail.
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