ECONOMIC REVIEW & FORECAST

January 2004

It is now clear, as we stated one year ago, that massive monetary and fiscal stimuli did have the desired effect. As Winston Churchill said upon America's entering World War II: "So we had won after all."

The North American economy continues to be strong and is accelerating. Corporate pricing power and profits are returning. Comments about a "jobless" recovery do not reflect that, although improvement is not yet showing up statistically, employment is a lagging indicator.

In 2004, we expect further growth and increasing employment. This will be fuelled by further tax cuts now taking effect, massive deficit spending and a significant return of confidence to corporate America. This return of confidence is now showing up through greater capital investment.

Increased capital spending, employment and commodity prices will eventually be evident in the broader inflation numbers. What is truly amazing is that the government's published numbers on prices appear low relative to what most of us see in reality. This factor will probably mean some increase in interest rates in the not too distant future.
China still remains the engine powering economic growth throughout much of the world, including America. This should continue through 2004, despite concerns of an economic bubble being created. China has a long, long way to go to catch up with western development.

In summary, despite potential shocks, we anticipate a positive 2004 for both the economy and equity markets.

We wish all of our friends success and peace in the coming year.

Investment Management Committee

Tom Caldwell, Chairman, Caldwell Securities Ltd. (416-862-7755)

CFO, CA, MBA

His former boss who currently heads the Canadian operations of a major technology multinational says of him, "He is a guy that you hire and you can't believe what you got because he is so good. He's not just a finance guy." This individual has industry experience in retail (including franchises) and hi-tech. He is a results oriented person evidenced by a long list of accomplishments such as: authored the strategic plan and developed a 5 year financial plan, identifying $1M in profit improvements; implemented cost control strategies resulting in annualized savings in excess of $300K; reduced capital expenditures by $1.2 M while maintaining operational capabilities. He has outstanding interpersonal attributes - he has a customer service/value added attitude.

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Director, MBA

A Director level individual with strategic planning, financial planning, and analysis. Outstanding interpersonal skills with strong leadership attributes. This individual is looking to make his next career move into a dynamic organization focused on growth. He is a MBA and anticipating a salary of range of $130K - $150K.

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Six Sigma Black Belt Project Manager

• Conducted continuous improvement projects in over 5 plants globally with savings of approximately 2 million dollars in excess.
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• Developed and implemented process flow improvements serving in the role of a re-engineering facilitator.
  

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FEATURE ARTICLE
by Peter Urs Bender

Trust: The Intangible that Builds Empires

Trust. It's a feeling, an emotion, and an intuition.

A chain is as strong as its weakest link. Trust is an intangible but it's the tie that binds. In fact it's at the root of all relationships - personal, corporate, government, national and international.

If you seek a dictionary definition, you'll get information on what trust is about but not on what it is. It will talk about integrity, ability, and character, both personal and corporate. The dictionary will talk about responsibility. It refers to confidence, obligation, and hope for the future. It will outline the importance of trust in credit and the law.

All of these intangibles give the lie to the old saying that "what you can't see can't hurt you." Trust affects the real world of business and affairs in ways too numerous to list. For instance, if you do an Internet search on the word "trust" you will immediately turn up 30 examples of how important trust is in everything from currency to manufacturer-retail relationships, from early childhood education to the security of the Internet itself (an offshoot of lack of trust)!

Trust is the basis of all monetary systems. Think about what happens when a society ceases to believe in, or trust a currency. (Think Argentina). Think what happens when managements don't trust employees (strikes, bankruptcies), and governments don't trust each other (sanctions, wars).

The recent meltdown of the stock market has been described as a failure of "investor confidence". What is confidence but a form of trust? And what happens when banks no longer "trust" consumers to handle credit reliably, or customers distrust bank liquidity?

Without trust, fair and just negotiations are impossible. All agreements become suspect. Confidence is lost. Hope for improvement recedes. Paranoia becomes endemic. These are intangibles that feed stock markets the world over. But stock markets eventually influence what happens to you and me, whether we have jobs or not. The lack of trust can bring down governments, start wars, and cause whole civilizations to fall.

Surely, though, we know more about such a key factor in human relationships than that it's an "intangible"? Yes, we do. Can we do something to affect it? Yes, we can.

Here are three basics to building trust. They're not the only methods for building trust. But I think they're the most important.

First, recognize that trust (like leadership) comes from within. Singer Barbara Streisand said it beautifully: "I learned you have to trust yourself, be what you are, and do what you ought to do the way you should do it. You have got to discover you, what you do, and trust it." And more than 2000 years ago the great Roman orator Cicero, said: "Confidence is that feeling by which the mind embarks in great and honorable courses with a sure hope and trust in itself." It doesn't matter what others think of us. It matters what we think about ourselves.

Second, "investigate before you invest". Think about this in relation to the people you trust. How did you form that trust? What factors went into it?

You needed to get to know that person. You wanted to understand how he or she thinks, and feels, and acts. You asked yourself what that person has said and done that leads you to believe he or she is "trustworthy"? You tried to back your feeling with evidence. You reminded yourself that what that person says about others are the same things he might be saying about you.

Third, look for similarities, not differences. Follow the sage advice of Thomas J. Watson Jr., former CEO and Chairman of IBM who brought the company into the computer era. "The toughest thing about the power of trust is that it's very difficult to build and very easy to destroy. The essence of trust building is to emphasize the similarities between you and the customer."

That's a very wise observation. Building trust depends not only on building confidence in yourself, but on your ability to discover similarities between yourself and the person you're seeking to trust. Don't ignore differences, but don't let them dominate the relationship.

Having done all that, are you still inclined to trust the person? You must now make a judgment and act. You must either trust, or suspend judgment. If you suspend judgment, you do not trust.

It's possible to suspend judgment a great deal of the time. Increasingly, we want trust to be earned, rather than given blindly. You can have contact with others; work well with them, without actually trusting them. But doing so over a long period of time is counter-productive. It means you must always "keep watch" over your thoughts and actions, and that in turn, slows the creative juices and the production process.

Far better to be able to investigate, invest, and trust. That way the energy you must spend to guard your back can be diverted into more productive pursuits. Think about how you can build trust, with yourself, your friends, your colleagues, your company and beyond. Then just do it!

Peter Urs Bender is one of Canada's most dynamic and entertaining business speakers. He lives and works out of Toronto. He is the author of five best-selling business books: Leadership from Within, Secrets of Power Presentations, Secrets of Power Marketing, Secrets of Face-to-Face Communication, and Gutfeeling.
To read excerpts from his books visit www.PeterUrsBender.com.

It is only a non-disclosure agreement, a one-pager, what can it hurt? Such is often the observation when confronted with a simple often one page nondisclosure agreement (NDA). Since it is so simple, one need not contact legal counsel to review the terms, or so the client thinks. Yet an NDA is a critical document that can, by itself, impair rights or reduce risk, depending on the terms. There is no such thing as a standard NDA and many terms may vary widely with significant consequences for the parties. This article provides an insight into a few of these terms and their use.

The NDA creates contractual and confirms equitable rights that provides protection for ideas and information. Information, data, ideas, plans, or concepts, whether technical or business in nature, may be protected under trade secret law under a breach of confidence action. The breach of confidence action gives the person to whom the obligation of confidence is owed (discloser) the right to require the person who owes the obligation (recipient) to maintain the secret.

The elements of the action include a relationship of confidence, existence of specific confidential information and detriment arising from disclosure. The obligation of confidence may arise expressly in an NDA or other agreement, by implication, conduct or operation of law, including in pre-contractual negotiations. A special relationship, such as fiduciary, also implies an obligation of confidence.

Advantages of an NDA include that the scope and extent of these obligations may be set out and displace implied obligations that may otherwise arise. An NDA also provides tangible evidence of the existence of the obligations of confidence as well as defining specific issues in the relationship.

The following discussion introduces a number of the points in a basic NDA.

FORM OF AGREEMENT

The essential elements of an NDA can typically be provided in a short document. Brevity is desired to facilitate establishing a relationship in a timely manner. A shorter document may provide less certainty in respect of other issues and so some NDAs add additional terms to further define the relationship. The decision on the degree of formality of an NDA is a matter of business judgment balancing the advantages of an informal shorter document versus the greater certainty provided in a more formal NDA.

An NDA may be unilateral or mutual. A unilateral NDA deals with the disclosure of confidential information from one party to the other party. A mutual NDA addresses where both parties will disclose confidential information to each other. Normally, consideration is stated to be the agreement to disclose and to the restrictions.

PARTIES

The disclosing party needs to know who will be bound by the obligations of confidence. One must differentiate between individuals to whom disclosure is made and a corporation which may be bound by the obligations. An issue is legal capacity of the signing party to bind an entity for which he purports to sign. While ostensible authority would typically be raised, query whether such an argument is effective where a junior individual in an organization signs on behalf of the organization.

PURPOSE OF THE DISCLOSURE

Many NDAs define a specific purpose for which the confidential information is being disclosed. This seeks to limit other possible uses of the confidential information. Identifying such a purpose may assist in defining the scope of use restriction.

DEFINITION OF INFORMATION

Many NDAs contain a broad definition of "confidential information" or some other term. The definition often contains operative terms that are of significance to the parties. Some issues are coverage of a broad class of information and whether or not the form in which information is expressed or communicated (i.e. written, oral, by demonstration) is relevant.

Some NDAs define the type of information that is being disclosed. A narrower definition of the scope of information disclosed may not limit the obligations between the parties in respect of other confidential information disclosed outside the scope of that relationship. One should be aware of limitations to the type of information that is communicated.

REQUIREMENTS FOR FORMALITY

Some NDAs require certain formalities in order to provide for protection of confidential information. Such formality might require that confidential information only include information that is clearly marked "confidential" or, if disclosed orally, is reduced to writing within a specific period (say 15 days from oral disclosure) and marked "confidential".

Formality requirements seek to provide certainty over what specific information is covered by and to exclude informal or similar disclosures from the obligations of confidence that arise under the NDA.
The use of formalities is desired by the recipient who wishes to define or limit the specific information that is bound. The use of formalities imposes a substantial compliance requirement on the discloser or face risk of loss of some information.

Such clauses may be coupled with a term that the receiving party owes no obligations in respect of confidential information it receives except as provided in the agreement. The effect is to preclude
any obligation in respect of informally disclosed confidential information.

NON-DISCLOSURE OBLIGATION AND
RESTRICTIONS ON USE

Most NDAs provide for obligations of confidence and restrictions on use of the confidential information for purposes other than the indicated activity. One should review an NDA to see that it addresses both issues.

SCOPE OF THE DUTY
An advantage of an NDA is the definition of the scope of the obligations. Some standards found in NDAs, depending on the circumstances, would include:

(a) an obligation to keep confidential information strictly confidential;

(b) an obligation to use reasonable care in keeping confidential information confidential:

(i) sometimes the standard of care is defined as that which the receiving party uses for its own confidential information it does not wish disclosed or disseminated; or

(ii) sometimes the standard is defined as the degree of care taken by the receiving party for its own confidential information provided that this is no less than reasonable care; or

(c) all reasonable precautions to protect the confidentiality of the information (although this approach is criticized because the term "all" could pose a high duty to investigate and determine what precautions might be available).

PERMITTED DISCLOSURE TO OTHERS

Often the recipient must disclose the confidential information that it receives under the NDA to its own employees or, possibly, third party contractors, in order to carry out the contemplated activity. Some NDAs provide a procedure regulating such disclosures to other parties or individuals. Some NDAs restrict disclosure in the receiving party on a "need to know" basis so that the receiving party has a further duty to monitor and manage the extent to which the confidential information is disclosed within the organization.

For disclosure to employees or third parties, some NDAs require an additional process involving each individual to sign a form of NDA acceptable to the discloser. A recipient may resist such terms.

DURATION OF THE OBLIGATIONS

Some NDAs provide that the obligations and restrictions in the agreement terminate on the expiration of a particular time (often measured from the date of disclosure or signing). As obligations of secrecy may be enforceable indefinitely, provided that the information is still secret, such limitation places the specific information at risk of not being protectable beyond the stated period. The discloser will wish no time limit to exist. The recipient may wish to have some certainty about when its obligations have ended.

COMMON EXCLUSIONS

Many NDAs provide for exclusions on the restrictions. Recipient's concerns include if it already knows the information, may be working on similar projects and wishes to prevent its own activities, business opportunities and the like from being "tainted" by receiving the information from the discloser.
Typical exclusions might include if the information:

(a) is in the public domain (i.e. available without restriction to others);

(b) is made available by the discloser to a third party without similar restrictions (the recipient will not wish to be in a worse position than a third party);

(c) is subsequently made available to the public without such disclosure being as a result of a breach of the NDA by the recipient; and

(d) is already known to or is developed by the recipient without access to the information provided. Such an exception may require proof of the allegation either to the reasonable satisfaction of the discloser or as may be required by a court;

(e) must be disclosed as required by law although some NDAs provide that if a court or regulatory body requests disclosure of the confidential information, the recipient may be obligated to notify the discloser who may then seek a protective order.

RETURN OF THE INFORMATION

Many NDAs provide that, on request, the recipient will return the physical form in which the information is expressed.

NO IMPLIED LICENSE

In order to avoid doubt about the limited nature of the rights provided under the NDA, some NDAs indicate that no right or license in the information or any underlying intellectual property rights or
opportunity are implied.

FURTHER READINGS

Cadbury Schweppes Inc. v. FBI Foods Ltd., (1999)
167 D.L.R. (4rth) 577 (S.C.C.).

Seager v. Copydex Ltd. [1967] 1 W.L.R. 923, [1967]
R.P.C. 349, 2 All E.R. 415 (C.A.)

International Corona Resources Ltd. v. Lac Minerals
Ltd. [1989] 44 B.L.R. 1 (S.C.C.).

Boardman v. Phipps [1967] 2 A.C. 46 (H. L.)

Copyright permission granted by the author, Martin P.J. Kratz and Bennett Jones, http://www.bennettjones.ca.

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