Standard Form Confidentiality Agreement for Buyouts by BVCA

Standard Confidentiality Agreement for Buyouts

[on the seller letterhead]

To:
[buyer name] (the Buyer)
[buyer address]

Dear Sirs

Project [project name] - Confidentiality undertaking¹

THE PURPOSE OF THIS LETTER

OPTION 1 The Buyer has expressed an interest in buying the [entire] issued [and to be issued] share capital [business and assets] of [company name] (the Company) through a newly incorporated company controlled by funds [managed or advised]² by the Buyer [or the affiliates of the buyer] (Newco). In this letter, that potential purchase is referred to as the Proposed Transaction.

OPTION 2 The Buyer has expressed an interest in buying the [entire] issued [and to be issued] share capital [business and assets] of [company name] (the Company) through a newly incorporated company controlled by the Buyer (Newco). In this letter, that potential purchase is referred to as the Proposed Transaction.³

This letter sets out undertakings by the Buyer about the use of the Information. The Buyer is giving these undertakings in favour of the Seller and the Seller's Group. It is giving them in return for the Seller agreeing to make the Information available to the Buyer and its Recipients.

Capitalised terms and expressions are defined in the main body of this letter or in the schedule (Schedule).

CONFIDENTIALITY UNDERTAKINGS ATTACHING TO INFORMATION

The Buyer and each Recipient shall hold the Information in strict confidence and may not, directly or indirectly, disclose it to any person other than to another Recipient or the Buyer (as the case may be). For these purposes, ‘disclosing' Information includes making it available in any way, whether deliberately or not.

The Buyer and each Recipient shall only use the Information for the purpose of the Proposed Transaction.

In this letter the obligations in this paragraph 2 are referred to as the Undertakings.

EXCEPTIONS TO THE CONFIDENTIALITY UNDERTAKINGS IN PARAGRAPH 2

The Undertakings and the provisions in paragraph 5 shall not apply to Information to the extent that any of the following circumstances apply to that Information:

the Information is already in the public domain when it is first disclosed to the Buyer or a Recipient;

the Information subsequently enters the public domain, other than through a breach of any of the Undertakings by the Buyer or a Recipient;

when the Information was first disclosed to the Buyer, it was already in the lawful possession of the Buyer or a Recipient;

when the Information was first disclosed to a Recipient, it was already in the lawful possession of the Buyer or such Recipient;

after it is first disclosed to either of them, the Buyer or a Recipient lawfully receives the Information from a third party who does not owe the Seller, or any of its Connected Persons, an obligation of confidence in relation to it; or

the Information is required to be disclosed by applicable law, rule, requirement or official request of any regulatory or governmental authority or stock exchange to which the Buyer or a Recipient is subject. If the Buyer or a Recipient (as the case may be) reasonably believes that this subparagraph (f) applies, it shall, as far as it is practicable and lawful to do so first consult the Seller to give the Seller an opportunity to contest the disclosure and then take into account the Seller's reasonable requirements about the proposed form, timing, nature and extent of the disclosure.

If the Buyer or Recipient (as the case may be) is unable to consult with the Seller before disclosure is made pursuant to paragraph 3.1(f), the Buyer or Recipient (as the case may be) shall, to the extent not prohibited by such applicable law, rule or requirement, inform the Seller of the form, timing, nature and extent of the disclosure as soon as reasonably practicable after such disclosure is made.

ALL RECIPIENTS TO COMPLY WITH THIS LETTER

The Buyer shall ensure that each Recipient is aware of the terms of this letter, and complies with its terms (other than, in the case of Recipients who are Finance Providers, consultants or professional advisers, those contained in paragraph 7.2(b)) as if it had itself signed the letter and agreed to its terms unless the Recipient has already entered into a direct confidentiality undertaking with the Seller in relation to the Proposed Transaction in a form which is acceptable to the Seller.

The Buyer shall be responsible for any breach of the terms of this letter by any Recipient as if the Buyer were the party that had breached them unless the Recipient has entered into a direct confidentiality undertaking with the Seller in relation to the Proposed Transaction in a form which is acceptable to the Seller.

THE SELLER MAY ASK FOR INFORMATION TO BE DESTROYED OR RETURNED

If the Seller asks the Buyer or any Recipient in writing to destroy Information or return Information to the Seller, paragraph 5.2 shall apply, subject to paragraph 5.3.

Within [20] days of receiving the request, the Buyer and each Recipient shall destroy or return to the Seller (at the Buyer's option), each original and every copy of any document or other materials which are in a form reasonably capable of delivery and that contain the Information (other than Derivative Information) and ensure the destruction of all Derivative Information and confirm to the Seller in writing that they have complied with this paragraph 5.2.

The Buyer and each Recipient may retain any Information to the extent it is:

required to do so by any applicable law, rule or requirement of any regulatory or governmental authority or stock exchange, including the rules of a professional body or by its bona fide internal compliance or audit policies and procedures; and/or

contained in any electronic file created pursuant to any routine backup or archiving procedure so long as such file is not generally accessible beyond the need for disaster recovery or similar operations.

Any Information retained under paragraph 5.3 shall continue to be held in compliance with this letter.

NO REPRESENTATION OR WARRANTY GIVEN BY THE SELLER OR ITS CONNECTED PERSONS

The Buyer and each Recipient understands that the Information does not purport to be all-inclusive and that neither the Seller nor any of its Connected Persons makes any representation or warranty as to its accuracy, reliability or completeness.

The Buyer and each Recipient agrees that neither the Seller nor any of its Connected Persons:

has any obligation to provide Information, further information, to update the Information, or to correct any inaccuracies in it;

has any obligation to enter into or continue discussions or negotiations in respect of the Proposed Transaction; or

has any liability to the Buyer, any Recipient or any other person resulting from the use of Information by the Buyer or any Recipient.

The statements in paragraphs 6.1 and 6.2 are made subject to the terms of any definitive written and legally binding agreement or agreements entered into between the Buyer or any of the Buyer's Affiliates and the Seller or any Connected Person of the Seller in relation to the Proposed Transaction (if and when signed).

This paragraph 6 shall not exclude any liability for, or remedy in respect of, fraudulent misrepresentation.

RESTRICTIONS ON THE BUYER'S AND RECIPIENTS' CONTACT WITH EMPLOYEES, CUSTOMERS, SUPPLIERS AND OTHERS

The Buyer and each Recipient shall:

direct all communications to the Seller relating to the Proposed Transaction only to [] or [] of [];

not make, or have, any contact with any officer, manager or employee of any member of the Seller's Group or the Group in relation to the Proposed Transaction, other than anyone identified in writing by [ ] or the Seller for this purpose. Nothing in this letter shall prevent the Buyer or any Recipient from conducting any commercial, market or other similar diligence process in connection with the Proposed Transaction as long as it is conducted through a third party on a no-names basis.

For a period of [one year] after the date of this letter, the Buyer and each Recipient (except where such Recipient is a Finance Provider, consultant or professional adviser in which case paragraph 7.2(a) only shall apply) shall not directly or indirectly, without the Seller's prior written consent:

subject to paragraphs 7.1(b) and 7.3, make or have any contact, in relation to the Proposed Transaction, with any person who is currently a shareholder, director, employee, customer, contractor or sub-contractor of, or supplier of or lender to, any member of the Group; or

solicit, engage, employ (whether paid or unpaid) or offer to employ, any Restricted Person. For these purposes, it does not matter whether that person knows of any Information, or would commit a breach of his or her contract of employment by reason of his or her leaving the employment.

The Buyer and any Recipient may contact any of those persons listed in paragraph 7.2(a) in the ordinary course of its existing business, but only if it does not refer in any way to the Proposed Transaction.

Paragraph 7.2(b) shall not apply to a recruitment offer made to or employment of any person who contacts the Buyer or any of the Recipients solely on his or her own initiative, or in response to a bona fide employment advertisement.

The Buyer and each Recipient shall not directly or indirectly engage, enter into or continue any agreement, arrangement or understanding, written or oral, with any provider or potential provider of debt finance requiring, in any manner, directly or indirectly, such provider or potential provider of debt finance to provide finance exclusively to the Buyer or any Buyer's Affiliate in connection with the Proposed Transaction, without our prior written consent (such consent not to be unreasonably withheld or delayed). The Buyer shall immediately release, or procure the immediate release of, any provider or potential provider of debt finance who has been so engaged or who has entered into any agreement, arrangement or understanding prior to the date of this letter.

The Buyer and any Recipient shall not directly or indirectly enter into or continue, any discussions, negotiations or agreements with any potential provider of equity finance, co-investor or consortium member in connection with the Proposed Transaction without our prior written consent other than with any limited partner or investor in a fund or a managed account in each case which is managed or professionally advised for investment purposes by the Buyer or a Buyer's Affiliate, which shall be permitted in respect of the Proposed Transaction. Appropriate information barriers shall be put in place by such potential provider of equity finance, co-investor or consortium member to prevent Information being accessed other than by those people directly working on the Proposed Transaction.⁴

NO DUTY OF CARE OWED BY THE SELLER OR CONNECTED PERSONS

Subject to the terms of any definitive written agreement or agreements entered into between the Buyer or a Buyer's Affiliate and the Seller or any Connected Person of the Seller, neither the Seller nor any of its Connected Persons shall owe any duty of care to the Buyer or to any other person.

DAMAGES NOT NECESSARILY AN ADEQUATE REMEDY

The Buyer, the Seller and each of its Connected Persons and each Recipient acknowledges that a person with rights under this letter may be irreparably harmed by any breach of its terms, and that damages alone may not necessarily be an adequate remedy.

The Buyer, the Seller and each of its Connected Persons and each Recipient acknowledges that, without affecting any other rights or remedies if a breach of the terms of this letter occurs or is threatened, the remedies of injunction, specific performance and other equitable relief, or any combination of these remedies, may be available.

The Buyer, the Seller and each of its Connected Persons and each Recipient also agrees that it shall, if any of the remedies set out in paragraph 9.2 is sought in relation to any threatened or actual breach of the terms of this letter, waive any rights it may have to oppose that remedy on the grounds that damages would be an adequate alternative.

THE SELLER MAY ASSIGN RIGHTS UNDER THIS LETTER

If a third party acquires all, or a material part, of the issued share capital, business or assets of the Company:

the rights of the Seller under this letter may be assigned or transferred in whole or in part to that third party; and

that third party may enforce this letter to the same extent and in the same manner as the Seller may enforce it.

If the rights of the Seller under this letter are assigned or transferred in whole or in part to a third party, the Seller shall notify the Buyer of such assignment or transfer as soon as reasonably practicable.

NO WAIVER BY THE SELLER

No failure or delay by the Seller or the Buyer in exercising any right under this letter shall operate as a waiver of the right, and no single or partial exercise of any right under this letter shall preclude any further exercise of it.

TERM

Unless otherwise expressly limited, the terms of this letter shall continue until the second anniversary of the date of this letter unless the Buyer or one of the Buyer's Affiliates completes the Proposed Transaction in which event the terms of this letter will lapse.

INVALID TERMS TO BE STRUCK OUT

If and to the extent that any provision of this letter is held to be invalid or unenforceable, it shall be given no effect and shall be deemed not to be included in this letter, but everything else in this letter shall continue to be binding.

VARIATION OF TERMS OF THIS LETTER

The Seller and the Buyer may by agreement in writing terminate this letter or vary its terms.

TERMS ON WHICH THIRD PARTIES MAY ENJOY RIGHTS UNDER THIS LETTER

Each of the Seller's Connected Persons and the Buyer's Affiliates may, under the Contracts (Rights of Third Parties) Act 1999, enforce the terms of this letter, as varied from time to time under paragraph 14. To the extent that the terms of this letter are varied, the rights of any person to enforce the terms of this letter under this paragraph 15 shall be qualified accordingly.

Such a person may enforce those terms subject to, and in accordance with the terms of paragraphs 18 and 19.

Other than as provided in paragraph 10 and this paragraph 15, a person who is not a party to this letter shall have no right to enforce any of its terms.

SELLER UNDERTAKINGS

Subject to the requirements of applicable law and regulation, the Seller on behalf of itself and its Connected Persons agrees not to disclose to any third party:

any information about the fact that the Buyer or any of the Buyer's Affiliates is considering the Proposed Transaction (including but not limited to the terms on which it may be willing to conclude the Proposed Transaction and any potential or actual source of financing for the Proposed Transaction); and

any information about the Buyer or the Buyer's Affiliates which is not otherwise publicly available.

In consideration of the Undertakings given by the Buyer and each Recipient in this letter, the Seller on behalf of itself and its Connected Persons agrees that any personal information contained or referred to in the Information has been obtained, maintained and handled and all relevant licences, authorities and consents have been obtained in accordance with all applicable data protection laws, rules and regulations.⁵

ACTING AS PRINCIPAL

The Buyer confirms that in relation to the Proposed Transaction and its entry into this letter it is acting [on behalf of the funds it manages or advises/ as principal]⁶ and not as nominee, agent or broker for any other person and that it will be responsible for its own costs whether incurred by it or its Recipients in connection with the Proposed Transaction (whether or not it proceeds) and in complying with the terms of this letter.

GOVERNING LAW TO BE ENGLISH LAW

Each of this letter and any non-contractual obligations arising out of or in connection with it shall be governed by, and construed in accordance with, English law.

ENGLISH COURTS TO HAVE JURISDICTION

The English courts shall have exclusive jurisdiction in relation to all Disputes. Each party waives any objection to the exercise of that jurisdiction.

BUYER TO MAINTAIN AGENT FOR SERVICE OF PROCEEDINGS

The Buyer shall maintain an agent in England for service of process and any other documents in proceedings in connection with this letter, whether the proceedings are in England or elsewhere.

The agent shall be [•], currently of [•]. The Buyer shall notify the Seller in writing as soon as reasonably practicable of any change.

Any claim form, judgment or other notice of legal process shall be sufficiently served on the Buyer if delivered to [the agent] at its address as stated in paragraph 20.2 or as notified to the Seller by the Buyer pursuant to paragraph 20.2.⁷

WHOLE AGREEMENT

This letter sets out the whole agreement between the Seller and the Buyer in respect of the subject matter of this letter. It supersedes any previous draft, agreement, arrangement or understanding between them, whether in writing or not, relating to its subject matter.

Every term or condition implied by law in any jurisdiction in relation to the subject matter of this letter shall be excluded to the fullest extent possible, and to the extent that it is not possible to exclude any such term or condition, the Seller and the Buyer each irrevocably waives any right or remedy in respect of it.

Nothing in this paragraph shall limit any liability for fraud.

COUNTERPARTS

This letter may be executed in any number of counterparts, and by each party on separate counterparts. Each counterpart is an original, but all counterparts shall together constitute one and the same instrument. Delivery of a counterpart of this letter by email attachment shall be an effective mode of delivery.

Yours faithfully

By.__________________________
for and on behalf of
[seller name]

Agreed and accepted

By.__________________________
for and on behalf of
[buyer name]

SCHEDULE

In this letter, the following words and expressions shall have the following meanings:

OPTION 1: Buyer's Affiliate means any subsidiary undertaking of the Buyer, any parent undertaking of the Buyer (whether direct or indirect) and any subsidiary undertaking of such parent undertaking, in each case from time to time (but excluding any portfolio or investee company in which the Buyer or any funds [managed or advised] by the Buyer or the Buyer's Affiliates have an equity interest);⁸ ⁹

OPTION 2: Buyer's Affiliate means any subsidiary undertaking of the Buyer, any parent undertaking of the Buyer (whether direct or indirect), any subsidiary undertaking of such parent undertaking, [any general partner, limited partner, trustee, nominee, operator or arranger of or investment manager or investment adviser to the buyer] in each case from time to time (but excluding any portfolio or investee company in which the Buyer or the Buyer's Affiliates have an equity interest);¹⁰

Connected Person means, in relation to the relevant person, any person falling within any of the following categories:

a subsidiary undertaking of that person;

a parent undertaking of that person (whether direct or indirect);

a subsidiary undertaking of a parent undertaking within (b);

an adviser, agent or representative of a person within (a), (b), or (c); and

an officer, employee or partner of that person, or of any person within (a), (b), (c) or (d), or of any subsidiary undertaking of any person within (d);¹¹

Derivative Information means all documents, disks or other media created by the Buyer, or by a Recipient or on the Buyer's or a Recipient's behalf, including, without limitation, any analyses, compilations, notes, studies or accountants' or other third party reports which contain or reflect or are generated from the Information;

Disputes means all disputes arising out of, or in connection with, this letter including, without limitation:

claims for set-off and counterclaims;

disputes arising out of, or in connection with, the creation, validity, effect, interpretation, performance or non-performance of, or the legal relationships established by, this letter; and

disputes arising out of, or in connection with, any non-contractual obligations arising out of, or in connection with, this letter.

Finance Provider means a provider or prospective provider of [debt finance/ debt or equity finance/ finance] to the Buyer in connection with the Proposed Transaction¹²;

Group means the Company and its subsidiary undertakings and Group Company and member of the Group shall be construed accordingly;

Information means:

the fact that the Company or the Group [in whole or in part] may be sold, this letter, the existence and contents of the discussions and negotiations between the Buyer and Seller (or their respective Recipients or Connected Persons) relating directly or indirectly to the Proposed Transaction (whether or not in writing or in a visual or electronic form or in magnetic or digital form); and

any information of any nature and in any form, including whether given in writing or orally or in a visual or electronic form or in magnetic or digital form) relating directly or indirectly to the Seller's Group, [the group,] their respective businesses or the Proposed Transaction and supplied by the Seller or any of the Seller's Connected Persons to the Buyer or any Recipient, including (without limitation) all information relating to any member of the Seller's Group disclosed in any way (directly or indirectly on or after the date of this letter) by the Seller or any of the Seller's Connected Persons. Information includes all copies of any such information and all Derivative Information;

Recipient means (i) a director, officer, partner, employee, agent, consultant and professional adviser of the Buyer, (ii) Newco, (iii) the Buyer's Affiliates, (iv) any Finance Provider and (v) each director, officer, partner, agent, employee, consultant or professional adviser of each respective person referred to at (ii) to (iv) inclusive above;

Restricted Person means any director, officer or Senior Employee of any member of the Group or Seller's Group, with whom the Buyer or a Recipient comes into contact, or in respect of whom the Buyer or a Recipient are provided information, in connection with the Proposed Transaction;

Seller means [seller name];

Seller's Group means the Seller and any subsidiary undertaking or parent undertaking of the Seller;

Senior Employee means an employee having a gross salary (excluding bonus) of over £[minimum gross salary] per annum or other employee with a management role in the Group; and

Subsidiary undertaking and parent undertaking are each to be construed in accordance with section 1162 (and Schedule 7) of the Companies Act 2006 and, for the purposes of this definition, a subsidiary undertaking shall include any person the shares or ownership interests in which are subject to security and where the legal title to the shares or ownership interests so secured are registered in the name of the secured party or its nominee pursuant to such security.

RIDER – Additional data protection paragraph

Paragraph 16.2 of the letter currently contains a general catch-all that any personal information contained in the Information has been obtained in accordance with all applicable data protection laws, rules and regulations.

This rider should be used if you require a more detailed data protection clause in the letter to address the concern of having bidders outside the EEA on a transaction receive personal data (via for example an online data room containing management contracts/pension details). The wording includes a provision that such information will not be transferred to a recipient outside the EEA unless an appropriate standard form approved by the European Commission has been entered into.

New paragraph 2.3

If the Information includes Personal Information:

the Buyer and each Recipient acknowledge and agree that the Seller and its Connected Persons will only transfer Personal Information to the Buyer or any Recipient in a Non-Equivalent Country if the proposed transfer is made on the basis of an agreement, entered into between the Seller or that Connected Person and the Buyer or that Recipient, in an appropriate standard form approved by the European Commission under Data Privacy Law to adduce appropriate safeguards in relation to the transfer of personal data to Non-Equivalent Countries, populated as reasonably stipulated by the Seller (and to this end the Buyer and each Recipient shall refrain from downloading any accessible Personal Information from a Non-Equivalent Country until such an agreement is put in place);

the Buyer and each Recipient shall abide by applicable Data Privacy Law (including any applicable restrictions on international transfer) in respect of its processing of that Personal Information; and

the Buyer and each Recipient shall promptly notify the Seller, with reasonable details, if that Personal Information is subject to any unauthorised (including accidental) disclosure or loss.

New Definitions:

Data Privacy Law means (as applicable) the Data Protection Act 1998, General Data Protection Regulation (EU) 2016/679 and/or any other law regulating the processing of information relating to identified or identifiable natural persons having effect in or with respect to a territory in which Personal Information is processed;

Non-Equivalent Country means a country or territory other than (i) a member state of the European Economic Area; or (ii) a country or territory which has at the relevant time been decided by the European Commission in accordance with Data Privacy Law to ensure an adequate level of protection for personal data;

Personal Information means Information relating to one or more identified or identifiable natural persons;