Describe the purpose of a nondisclosure agreement. Provide an ...

[jCorn1234]

Describe the purpose of a nondisclosure agreement. Provide an example of when a nondisclosure agreement kicks in.
 
  What will be an ideal response?

Question 2

What is a founders' agreement? Describe the purpose of a buyback clause and why it's important?
 
  What will be an ideal response?

[ashely1112]

Answer to Question 1

A nondisclosure agreement is a promise made by an employee or other party (e.g., a supplier) to not disclose the company's trade secrets. An example would be an employee who is privy to a company's marketing strategy. If the employee quit her job and went to work for a competitor, it would be a violation of her nondisclosure agreement to tell her new employer the details of her previous employer's marketing strategy.

Answer to Question 2

A founders' (or shareholders') agreement is a written document that deals with issues such as the relative split of the equity among the founders of the firm, how individual founders will be compensated for the cash or the sweat equity they put into the firm, and how long the founders will have to remain with the firm for their shares to fully vest. An important issue addressed by most founders' agreements is what happens to the equity of a founder if the founder dies or decides to leave the firm. Most founders' agreements include a buyback clause, which legally obligates the departing founders to sell to the remaining founders their interest in the firm if the remaining founders are interested. In most cases, the agreement also specifies the formula for computing the dollar value to be paid. The presence of a buyback agreement is important for at least two reasons. First, if a founder leaves the firm, the remaining founders may need the shares to offer to a replacement person. Second, if founders leave because they are disgruntled, the buyback clause provides the remaining founders a mechanism to keep the shares of the firm in the hands of people who are fully committed to a positive future for the venture.