Affiliates

NDA

Affiliates

A corporate party to an NDA may desire the flexibility of sharing disclosed confidential information to other related parties within its corporate family, including parent companies and subsidiaries, which are generally referred to as “affiliates”:

Exemplar N1-1

The Parties recognize that they are parts of organizations of multiple legal entities in several jurisdictions and that it may be necessary for them to provide Confidential Information to their Affiliates (as defined below). For this purpose, the Parties agree that: a) each Party may disclose Confidential Information to its Affiliates but only to the extent that such Affiliate has a need to know for carrying out the Purpose; and b) disclosure by or to an Affiliate of a Party shall be deemed to be a disclosure by or to that Party, as applicable; and c) each Party shall be responsible for the observance and proper performance by all of its Affiliates of the terms and conditions of this Agreement.

Exemplar N1-2

Company recognizes that Contractor is part of an organization of multiple legal entities in several jurisdictions and that it may be necessary for it to provide Information to its Affiliates. For this purpose, the parties agree that:

(a) Contractor may disclose Information to its Affiliates but only to the extent that such Affiliate has a need to know for the purpose of carrying out the Purpose;

(b) disclosure by or to an Affiliate of Contractor shall be deemed to be a disclosure by or to Contractor, as applicable; and

(c) Contractor shall be responsible for the observance and proper performance by all of its Affiliates of the terms and conditions of this Agreement.

The alternative is to have each related party enter into separate agreements with the disclosing party, which may not be administratively feasible or operationally desirable. Note that the issue of adding affiliates in the context of general commercial contracts is also addressed at length in the Commercial Contracts section entitled “Affiliates” [C3].

Definition of “Affiliate”

Control

The most common element of defining an affiliate is the concept of control, mainly through voting rights or other legal authority:

Exemplar N1-3

“Affiliates” shall mean any entity that directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control of such party, where “control” (including the terms “controlled by” and “under common control with”) shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of an entity, whether through the ownership of voting securities, by contract or otherwise.

Exemplar N1-4

An Affiliate of a party means a body corporate that controls or is controlled by, or is under common control with, that party. For the purposes of this definition, “control” means the ability, whether direct or indirect, to direct or influence the management and policies of a party in any way.

Parties commonly prefer more precision regarding the meaning of “control” by defining that term numerically as a function of voting shares, and specifically, the ability to control a majority of voting shares.

The following exemplar provides for the sharing of information by a receiving party with its subsidiaries:

Exemplar N1-5

For the purpose of this Agreement, "Affiliate" shall mean any company, which, as long as at least fifty percent (50%) of operational control or voting rights are, now or hereafter, directly or indirectly owned by a Party.

The following exemplars provide for disclosure by a receiving party to its corporate parent (who “controls” or “owns” a party), corporate sister entities (who is “under common control with” or “under common ownership with” a party), and subsidiaries (who are “controlled by” or “owned by” a party):

Exemplar N1-6

For the purpose of this Agreement an "Affiliate" of a party shall mean any entity which now are hereafter, directly or indirectly, controls, is controlled by, or is under common control with, that party, where “control” means ownership of at least fifty per cent (50%) of the outstanding shares or securities (representing the right to vote for the election of directors or other managing authority).

Exemplar N1-7

Both parties agree that Confidential Information, as described herein, disclosed by an Affiliate to a party or by a party to an Affiliate will be governed by this Agreement, and that the Recipient is permitted to disclose Confidential Information to any of its Affiliates who have a reasonable need for such information for the Purpose. The parties shall ensure that such Affiliates comply with the provisions of this Agreement. For the purposes of this Agreement, “Affiliate” shall mean any corporation, partnership, or other entity that, directly or indirectly, owns, is owned by, or is under common ownership with, such party hereto, for so long as such ownership exists. For the purposes of the foregoing, "own," "owned," or "ownership" shall mean ownership of more than fifty percent (50%) of the stock or other equity interests entitled to vote for the election of directors or an equivalent governing body

Exemplar N1-8

For the purpose of this Agreement “Affiliate” shall mean, with respect to a Party, either of the following: (i) any company, person or entity which directly or indirectly holds more than fifty percent (50%) of the voting securities, income interest, or a comparable equity interest of such Party or which is directly or indirectly controlled by or under common control with such Party; or (ii) any company, person or entity with respect to which such Party directly or indirectly holds more than fifty percent (50%) of the voting securities, income interest, or comparable equity interest.

The following exemplar permits disclosures only to an affiliate that is a corporate parent or a subsidiary of the receiving party:

Exemplar N1-9

For the purpose of this Agreement a Party’s "Affiliate" shall mean 1) any company in which, at least fifty per cent (50%) of the outstanding shares or securities (representing the right to vote for the election of directors or other managing authority) are, directly or indirectly owned by a Party, or 2) a company, which owns at least fifty per cent (50%) of the outstanding shares or securities (representing the right to vote for the election of directors or other managing authority) of the Party.

The following exemplar permits disclosures only to an affiliate that is a corporate parent or a corporate sister entity (co-owned by the parent):

Exemplar N1-10

For the purpose of this Agreement, the term “Affiliate” shall mean a company: (a) which owns or controls, directly or indirectly, at least 50% of the voting stock of a Party; or (b) of which at least 50% of the voting stock is owned or controlled, directly or indirectly, by any company mentioned in (a) above.

The following exemplar uses different control/ownership metrics for U.S./domestic and foreign/international affiliates:

Exemplar N1-11

Each Party has entered into and has the authority to execute this Agreement as the procurement organization for itself and as agent to bind the Affiliates as set forth in this Agreement. “Affiliate” means any entity that directly or indirectly controls, is controlled by, or is under common control with, a party, where control means direct or indirect ownership of 50% for U.S. domestic entities and 20% for international entities, or more of (a) the stock or shares entitled to vote for the election of the board of directors or other governing body of the entity (for corporate entities), and (b) the equity interest (for non-corporate entities).

The following exemplar adds the requirement of affirmative enforcement as an element of requisite “control”:

Exemplar N1-12

“Affiliates” shall mean the relevant party’s subsidiaries and affiliates, directly or indirectly controlled by or under common control of such party, where “control” shall mean (i) the ownership of at least 50% of the shares and/or voting rights in an entity and (ii) having the legal and practicable ability to procure compliance by the applicable entity with the terms and conditions of this Agreement (competitors of the Disclosing Party, however, are not deemed to be Affiliates of the Recipient and shall be treated as a third party under the terms of this Agreement).

The following exemplar makes clear that the ability to share with an affiliate is lost when requisite control over such affiliate is lost:

Exemplar N1-13

For purposes of this Agreement, “Affiliate” means any corporation or other legal entity that Company now or hereafter Controls or that Controls Company or is under common Control with Company; where “Control” means the direct or indirect ownership of more than fifty percent (>50%) of the shares or similar interests entitled to vote for the election of directors or other persons performing similar functions. An entity may be considered an Affiliate only when such Control exists. Each party shall be liable for any failure of its Affiliates to abide by the provisions of this Agreement as if such failure was the act or omission of such party.

But as the following exemplars illustrate, the subsequent loss of such control does not relieve the receiving party or the affiliate from continued compliance with its confidentiality obligations:

Exemplar N1-14

For purposes of this Agreement, an "Affiliate" shall mean an entity controlled by, controlling or under common control with Contractor or Company, as applicable, but only so long as such control exists. The cessation of such control shall not release an Affiliate of its obligation to comply with the terms and conditions of this Agreement for the period of time stated herein, nor release Company from its obligation to treat the Confidential Information of such Affiliate in accordance with this Agreement.

Exclusions

Competitors

The following exemplar expressly excludes “competitors” of the disclosing party from the universe of companies that otherwise qualify as an affiliate of the receiving party:

Exemplar N1-15

“Affiliates” means any party that controls, is controlled by or under common control with a party hereto. Affiliates which are competitors of a party are not to be deemed Affiliates. “Competitor” means any legal entity currently designing and/or manufacturing and/or marketing, or being able to design or manufacture or market within a short period of time, products or services which may be deemed from a customer perspective to be substitutable to the products or services of a party hereto and/or its Affiliates.

Conditions for Disclosure to Affiliates

Principal or Joint Liability

The ability to share disclosed information within a receiving party’s corporate family is often subject to the condition that the receiving party is and remains liable and responsible for any confidentiality breaches by any affiliate:

Exemplar N1-16

Each Party will be jointly and severally responsible for the acts and omissions of its Affiliates and each of their respective Authorized Recipients. The rights of and damages incurred by a Party’s Affiliate will be deemed to be rights of and damages incurred by such Party.

Exemplar N1-17

The Parties recognise that they are parts of organisations of multiple legal entities in several jurisdictions and that it may be necessary for them to provide Information to their Affiliates (as defined below). For this purpose, the Parties agree that:

(a) each Party may disclose Information to its Affiliates but only to the extent that such Affiliate has a need to know for carrying out the Purpose; and

(b) disclosure by or to an Affiliate of a Party shall be deemed to be a disclosure by or to that Party, as applicable; and

(c) each Party shall be responsible for the observance and proper performance by all of its Affiliates of the terms and conditions of this Agreement as if the Affiliates were themselves a Party to this Agreement.

Exemplar N1-18

Notwithstanding the foregoing, Contractor may pass Confidential Information to its affiliated companies. In such event, these companies may only use the Confidential Information to the same extent as the receiving Party, and the receiving Party hereby warrants that these companies will abide by the terms of this Agreement. The receiving Party shall be liable for any breach of this confidentiality by its affiliates, agents, employees, representatives, former affiliates, former agents, former employees, and former representatives resulting from the Receiving Party’s disclosure.

Exemplar N1-19

CONTRACTOR may disclose COMPANY’s Confidential Information to any related, affiliated and subsidiary company thereof (collectively, the “CONTRACTOR Affiliates”). CONTRACTOR shall remain liable for disclosures by CONTRACTOR Affiliates which if made by CONTRACTOR would constitute a breach hereof.

Exemplar N1-20

Each party agrees that: (a) each party may disclose Confidential Information to its Affiliates but only to the extent that any such Affiliate has a need to know for the purpose of carrying out the Purpose; and (b) disclosure by or to an Affiliate of a party shall be deemed to be a disclosure by or to that party, as applicable; and (c) each party shall be responsible for the observance and proper performance by its Affiliates of the terms and conditions of this Agreement.

Exemplar N1-21

Despite the aforesaid in this section, the Receiving Party may give access to Confidential Information to its Affiliate, provided that 1) such an Affiliate has been advised by the Receiving Party of the obligations and restrictions of this Agreement, 2) prior to the disclosure of Confidential Information to the Affiliate the Receiving Party shall conclude with such an Affiliate an agreement, which obligates the Affiliate to treat Confidential Information with same level of confidentiality as has been agreed in this Agreement and 3) the Receiving Party shall ensure that the Affiliate follows the obligations and restrictions of this Agreement as the Affiliate would itself be a party to this Agreement. For avoidance of doubt, the Receiving Party is responsible for the actions of the Affiliate as for its own.

Exemplar N1-22

As between the Parties hereto, each Party shall be liable and responsible for the acts and omissions of any of its respective affiliates and subcontractors as though they were the acts and omissions of such Party itself.

Accession to Obligations

The ability to share disclosed information within a receiving party’s corporate family may also be subject to the condition that the affiliate is and remains subject to confidentiality obligations on par with those in the NDA:

Exemplar N1-23

An “Affiliate” means any person, partnership, joint venture, corporation or other form of enterprise, domestic or foreign, including but not limited to subsidiaries, that directly or indirectly, control, are controlled by, or are under common control with a party. Prior to the time that any Confidential Information is shared with an Affiliate who has not signed this Agreement, the Receiving Party that executed this Agreement below (the “Undersigned Receiving Party”) shall have entered into an appropriate written agreement with that Affiliate sufficient to enable the Disclosing Party and/or the Undersigned Receiving Party to enforce all of the provisions of this Agreement against such Affiliate.

Exemplar N1-24

Company recognizes that it may be necessary for Contractor to provide Information to its subcontractors. For this purpose, the parties agree that Contractor may disclose Information to its subcontractors but only to the extent that such subcontractor has a need to know for carrying out the Purpose and provided that such subcontractor accepts confidentiality obligations no less restrictive than those contained in this Agreement.

In the following exemplar, the definition of an affiliate includes related parties that make or sell products under a party’s trademarks:

Exemplar N1-25

Receiving Party may disclose confidential information to its affiliated companies to the extent reasonably necessary for the Receiving Party to evaluate the Transaction, provided however that such disclosure is subject to the condition that such affiliated companies assume obligations equivalent to those that the Receiving Party assumes under this Agreement. For purposes of the foregoing, an “affiliated company” refers to a company in which (i) the Receiving Party holds, whether directly or indirectly, over 50% of the voting shares, or (ii) other companies engaged in the development, manufacturing, or sale of products bearing any of the trademarks owned by or registered to the Receiving Company.

Disclosure BY Affiliates

In certain circumstances, an affiliate may also disclose information under an NDA, in which case such disclosure should be protected as if the affiliated party to the NDA made it:

Exemplar N1-26

Each Company Affiliate and each Contractor Affiliate that is a Disclosing Party is an intended third-party beneficiary of this Agreement, and may act to enforce this Agreement with regard to its Confidential Information.

Exemplar N1-27

Each party’s Affiliates disclosing or receiving Confidential Information hereunder are deemed third party beneficiaries of this Agreement and entitled to enforce this Agreement to the same extent as the parties.

No Disclosure TO Affiliates

The parties may agree to allow a receiving party to share disclosed information to one or more parties affiliated with the receiving party, provided that the receiving party remains responsible for its affiliates’ compliance with the receiving party’s confidentiality obligations:

Exemplar N1-28

Each party may involve one or more of its Affiliates in the disclosure of receipt of Confidential Information under this Agreement. Each party is responsible for its Affiliates’ compliance with all of the terms of this Agreement. Confidential Information received from or disclosed to an Affiliate of a Party shall be treated the same as Confidential Information received from or disclosed to a party

Finally, and on the other hand, the prevailing circumstances may require an express prohibition against sharing with affiliates:

Exemplar N1-29

Except as expressly provided herein or unless the Disclosing Party provides prior written consent, the Receiving Party will: (a) not use Confidential Information of the Disclosing Party for any purpose other than that specified in this Agreement; (b) not disclose Confidential Information of the Disclosing Party to any third party (including any affiliated entities of Company).

Integrated Exemplars

The following integrated exemplars encapsulate many of the foregoing topics that are discussed in this section regarding sharing with corporate affiliates, including control, liability, competitors, and accession:

Exemplar N1-30

“Affiliates” shall mean legal entities, (i) which exercise direct or indirect control over a Party of this Agreement (“Parent Companies”), or (ii) which are controlled directly or indirectly by a Party or its Parent Company. For the purpose of this definition “control” shall mean the ownership of at least 50% of the shares and/or voting rights in an entity. The parties will be responsible for compliance with the terms of this Agreement by their employees, agents, contractors, consultants and Affiliates (competitors of the Disclosing Party, however, are not deemed to be Affiliates of the Recipient and shall be treated as a third party under the terms of this Agreement). The parties represent and warrant that they have entered or will enter into agreements (e.g., confidentiality agreements) with any such employees, agents, contractors, consultants and Affiliates as necessary to fulfill their obligations under this Agreement.

Exemplar N1-31

Each party agrees that:

(a) each party may disclose Confidential Information to its Affiliates but only to the extent that any such Affiliate has a need to know for the purpose of carrying out the Purpose; and

(b) disclosure by or to an Affiliate of a party shall be deemed to be a disclosure by or to that party, as applicable; and

(c) each party shall be responsible for the observance and proper performance by its Affiliates of the terms and conditions of this Agreement.

CC

Affiliates

NDA

Table of Contents:

Affiliates

Definition of “Affiliate”

Control

Exclusions

Competitors

Conditions for Disclosure to Affiliates

Principal or Joint Liability

Accession to Obligations

Disclosure BY Affiliates

No Disclosure TO Affiliates

Integrated Exemplars