asset acquisitions - Jackson Walker LLP

liability words in bold face or other conspicuous type, even in jurisdictions which to datehave not imposed a conspicuousness requirement.12. CONFIDENTIALITYCOMMENTArticle 12 of the Model Agreement provides more in-depth treatment ofconfidentiality issues than many asset acquisition agreements. Often this greater detail willbe appropriate.Most of the time, a confidentiality agreement will have been signed by the time abuyer and seller are negotiating the terms of an asset acquisition agreement. Most definitiveasset acquisition agreements therefore give only passing treatment to confidentiality issues,typically by addressing the existing confidentiality agreement in the integration clause toprovide either that the confidentiality agreement survives or does not survive execution ofthe agreement or closing of the transaction.For several reasons, this approach may not be satisfactory to the buyer. First,typically a confidentiality agreement is a unilateral document drafted by the seller to protectthe confidentiality of its information. In the course of negotiating the asset purchaseagreement and closing the transaction, confidential information of the buyer may bedisclosed to the seller. This is likely when part of the consideration for the purchase is stockor other securities of the buyer. The buyer wants the confidentiality of this informationprotected. This issue may sometimes be addressed during the course of due diligence byagreeing to make the provisions of the confidentiality agreement reciprocal and bilateral orentering into a mirror agreement protecting the buyer’s confidential information that isdisclosed to the seller. Neither of these steps, however, fully addresses the confidentialityissues that arise at the definitive agreement stage.Second, the treatment of confidential information of the seller under a typicalconfidentiality agreement may not be appropriate following the closing of the transaction.There are four categories for consideration: (1) seller treatment of information relating toassets and liabilities retained by the seller, (2) seller treatment of information relating toassets and liabilities transferred to the buyer, (3) buyer treatment of information relating toassets and liabilities retained by the seller, and (4) buyer treatment of information relating toassets and liabilities transferred to the buyer. Typically, after the closing the buyer shouldmaintain the confidentiality of category (3) information and be able to utilize category (4)information however it wants as the buyer now owns those assets and liabilities. Providingfor the survival of the confidentiality agreement would prohibit the buyer from usingcategory (4) information, and providing for the termination of the confidentiality agreementwould release the buyer from its obligation relating to the category (3) information. Neitheroption addresses category (2) information, which a typical buyer will want the seller torefrain from using and keep confidential. Article 12 is intended to address these issues.The Model Agreement follows typical practice and assumes that a confidentialityagreement has already been signed. Article 12 supersedes that agreement, which underSection 13.7 does not survive the signing of the Model Agreement. The provisions in Article12 would also be applicable, however, where a confidentiality agreement had not beensigned.3148166v1- 177 -