Legal Question in Business Law in Nevada

Re: Confidentiality and Non-Disclosure Agreements

This kind of agreement is quite standard, but this is really the time that you should engage a lawyer. You need representation in the sale transaction anyway, and you get an early opportunity to evaluate your new lawyer as he advises you on this preliminary agreement. There are issues of which you should be aware before you assume that you have any real protection under the NDA.

My guess is that the choice of law clause was inadvertent, perhaps a legacy from a prior deal. There is nothing inherently nefarious about that choice of law -- what would matter a lot more to you is the choice of jurisdiction or "venue" if either side has to enforce its rights under the NDA.

On that point, I would suggest that you ask for Massachusetts law and venue.

Please let me know if you want to get substantive legal advice on this transaction. Best wishes,

LDWG

Re: Confidentiality and Non-Disclosure Agreements

There is a reason why Nevada is a particularly popular state to have a corporate headquarters, having to do with privacy of ownership, in some ways that you don't find in any other state. Perhaps there is an American headquarters to this company.

As Delaware is often the state to use for choice of law for any corporate matters, it's possible that Nevada also has a better set of laws on NDA, but I never heard that. If that's the reason they've specified Nevada law, don't assume that it means there is some special loophole in that set of laws; instead, as with Delaware corporate law, it might just mean that the law is better developed there and more clear there than in other states. That's actually a good thing for both parties! This is a more likely explanation than that Nevada has a unique twist that helps them, in my opinion, although I really haven't researched the issue.

Why not simply ask them?

But it's also possible that you just found a "typo" (of sorts) left over from someone else's standard form document. If Nevada was unintentional, you should easily be able to get them to change their form. There are, however, much more serious things to worry about.

For a purely practical matter, you want the jurisdiction selected as "forum" for any disputes to be settled to be here, if you can get that, because you won't be able to afford to litigate the matter further away if you needed to litigate.

Language of the suit should have them agreeing to be reachable here so they can't hide from a suit you might bring here. As I think about it, the only way you can hope to get that to happen is if you use a lawyer to negotiate for you.

Not such a purely practical detail is the detail of what the contract covers. You don't want to be proscribed (prevented) from disclosure of anything a) that you already knew, b) that they didn't tell you, c) that you didn't ask or want to learn from them, or d) that is widely spread information. Also, have the NDA describe the nature of the information they expect to disclose to you. The only purpose (for them to disclose) that makes sense to me is this: I assume that they're trying to buy you with their stock and they want you to feel like an insider and to get excited about their stock price prospects by telling you their secrets.

CONTINUED:

Re: Confidentiality and Non-Disclosure Agreements

You should also narrow the scope of time if you can in their agreement and limit your total liability in the matter. Some NDA's also limit the scope of information to that which the other company identifies as secret, not just regards as secret.

It seems to me that they should be signing one for you! You're the one with the intellectual property, etc., and if they look carefully at your program, then walk away, and then offer something similar later, you'll wish you'd protected yourself. This seems the more likely scenario, doesn't it?

What's your website's URL?

Use a lawyer for this! You must have one already!? So have the document reviewed! (My fax # is (617) 527-1763.) You'll need one anyway to make the business P & S and then to handle the closing, won't you? Software is my first field, by the way, so I'd be interested to hear and learn more about what you're doing.

Congratulations, by the way!

Re: Confidentiality and Non-Disclosure Agreements

Nevada is a popular state for incorporation of smaller business, primarily because of tax reasons and because it requires limited disclosure by parties. The potential buyer may have a corporate relationship with that state. But, as one of the other respondents pointed out, the choice of law clause is probably left over from a prior deal. If neither company is located in Nevada, a choice of law clause should not refer to its law. A court is likely to ignore a choice of law clause selecting a state unrelated to the transaction, meaning that you will not know which law applies to the transaction. Trade secret law is uniform through most of the United States. You should ask for Massachusetts law to apply. Note that if Canadian law applies, your counsel will have to examine Canadian law to understand how the NDA would be enforced, since Canadian contract and trade secret law may differ significantly from US law. Further, since the NDA was drafted with US law in mind, it may not work the way intended if interpreted under Canadian law.

However, the key is that you take a significant legal risk entering into merger negotiations without assistance of counsel that knows how to handle technology mergers and acquisitions. This is the point to bring an attorney on board to discuss the merger and due diligence process and review contracts such as the NDA.

I would be glad to personally answer any additional questions you might have. My number is 617-742-0110 x. 205

-Warren E. Agin

http://www.swiggartagin.com