The CABB form NDA includes non-circumvention and related party non-contact language that I think creates excess risk for buyers. Do any lawyers or experienced investors have a position regarding the way they revise this language before signing, or do folks just blindly 'Docusign' and assume they will never have an issue? Is non-circumvention a 'market' NDA concept (it isn't in commercial real estate)? Lastly, do folks add investors to the list of parties (e.g., lawyers, accountants, lenders) with which they can share confidential information?
Non-circumvention: Per below, the last sentence of this clause makes Buyer responsible for paying Seller’s brokerage fee (if Seller doesn’t pay, regardless of whether a fee is due per the listing agreement) according to a listing agreement to which Buyer was not party. Secondly, “in any way interfere with broker’s right to a fee” is intentionally broad language that creates risk for Buyer. It is also a phrase that by striking, (falsely) indicates to Broker that you must intend to interfere! Further Terms: being prevented from contacting Seller’s…customers, suppliers or otherwise observ(ing) the business for a period of three years is harsh and broad. Some degree###-###-#### mo?) of protection should apply if and only if I get into DD and Seller reveals proprietary customer data (e.g., customer contract terms). However, if I’m hunting for landscaping companies and buy a competitor instead of this one, why should I be prevented for pursuing the top 5 business parks in my city just because their names were listed in a CIM for a company that wouldn’t sign my LOI? Why can’t I buy products from the same suppliers? Also, what does it mean to “observe the business”?
Relevant CABB Agreement Clauses:
4. Non-circumvention Agreement: The seller has entered into an agreement providing that the Seller shall pay a fee to the Seller’s broker if, during the term of that agreement or up to twenty-four months thereafter, the Business is transferred to a buyer introduced by the Seller’s broker or a buyer’s broker. Buyer shall conduct all inquiries into and discussions about the Business solely through the broker identified above and shall not directly contact the seller or the Seller’s representatives without written authorization by the Seller’s broker. Should the Buyer or any person or entity affiliated with Buyer purchase all or part of the Business, acquire any interest in, or become affiliated in any capacity with the Business without the involvement of the broker(s) or in any way interfere with either broker’s right to a fee, Buyer shall be liable to the broker(s) for such fee.
5. Further Terms: For a period of three years, Buyer will not contact Seller’s employees, customers, landlords or suppliers, or otherwise observe the business, without Seller’s consent, nor shall buyer directly or indirectly solicit for employment any employees of seller…
#NDA #legal #non-circumvention