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NON-COMPETE AND NON-SOLICITATION AGREEMENT
This Non-Compete and Non-Solicitation Agreement (this “Agreement”) is entered into as of [DATE] (the “Effective Date”), by and between [COMPANY NAME], a [STATE OF INCORPORATION] [corporation/limited liability company] with its principal place of business at [COMPANY ADDRESS] (the “Company”), and [INDIVIDUAL NAME], an individual residing at [INDIVIDUAL ADDRESS] (the “Restricted Party”).
The Company and the Restricted Party are sometimes referred to herein individually as a “Party” and collectively as the “Parties.”
RECITALS
WHEREAS, the Company is engaged in the business of [DESCRIPTION OF BUSINESS] (the “Business”);
WHEREAS, the Restricted Party is [employed by / engaged as a consultant to / an officer of / a key holder of equity in] the Company, and in such capacity has had and will continue to have access to the Company’s trade secrets, proprietary information, confidential business strategies, customer relationships, and other goodwill of the Company;
WHEREAS, the Restricted Party acknowledges that the Company has invested substantial time, resources, and capital in developing its customer relationships, workforce, proprietary technology, business methods, and competitive position in the marketplace;
WHEREAS, the Restricted Party acknowledges that the restrictions contained herein are reasonable and necessary to protect the Company’s legitimate business interests, including without limitation its trade secrets, confidential information, customer relationships, and workforce stability;
WHEREAS, the Restricted Party is receiving good and valuable consideration in connection with this Agreement, including [employment / continued employment / equity compensation / access to Confidential Information / the compensation set forth in that certain [Employment Agreement / Consulting Agreement / Equity Grant] of even date herewith] (the “Underlying Agreement”); and
WHEREAS, the Restricted Party desires to enter into this Agreement as a condition of [employment / continued employment / the receipt of such consideration];
NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
1. Definitions
As used in this Agreement, the following terms shall have the meanings set forth below:
“Competing Business” — means any person, entity, business, or enterprise that is engaged in, or is preparing to engage in, any business activity that is the same as, substantially similar to, or competitive with the Business, including without limitation [DESCRIPTION OF COMPETING ACTIVITIES]. For purposes of clarity, a Competing Business shall include any division, subsidiary, or affiliate of a larger enterprise if such division, subsidiary, or affiliate is itself engaged in activities competitive with the Business.
“Confidential Information” — means all non-public information, in any form or medium, that relates to the Company or its business, including without limitation: trade secrets; inventions; patent applications; research and development activities; algorithms, software code, and technical data; customer lists, customer data, and customer preferences; pricing strategies, financial projections, and cost structures; marketing plans and business strategies; vendor and supplier relationships and terms; employee compensation data and organizational information; and any other information that derives independent economic value from not being generally known to or readily ascertainable by persons who could obtain economic value from its disclosure or use.
“Covered Employee” — means any individual who is or was an employee, independent contractor, consultant, or agent of the Company at any time during the twelve (12) month period immediately preceding the date of termination of the Restricted Party’s relationship with the Company, or any individual about whom the Restricted Party obtained Confidential Information during the course of the Restricted Party’s relationship with the Company.
“Covered Customer” — means any person or entity that (a) was a customer or client of the Company at any time during the twenty-four (24) month period immediately preceding the date of termination, (b) was actively solicited by the Company to become a customer or client during such period, or (c) was a prospective customer or client with whom the Restricted Party had material contact or about whom the Restricted Party received Confidential Information.
“Restricted Period” — means the period commencing on the Effective Date and ending on the date that is [DURATION — e.g., 12 months] following the date on which the Restricted Party’s employment or engagement with the Company terminates for any reason, whether voluntarily or involuntarily, with or without cause.
“Restricted Territory” — means [GEOGRAPHIC AREA — e.g., the United States / a radius of fifty (50) miles from any office of the Company / the following states: ____________ / any geographic area in which the Company conducts or has conducted business during the twenty-four (24) month period preceding the date of termination].
2. Non-Competition Covenant
2.1 Non-Competition Restriction. During the Restricted Period and within the Restricted Territory, the Restricted Party shall not, directly or indirectly, whether as an employee, employer, consultant, advisor, agent, partner, member, manager, stockholder, officer, director, or in any other individual or representative capacity, engage in, assist, or have any active interest in any Competing Business. For purposes of this Section, the term “indirectly” includes, without limitation, acting through a spouse, family member, trust, or any other person or entity on behalf of or for the benefit of the Restricted Party.
2.2 Passive Investment Exception. Notwithstanding the foregoing, the ownership of not more than two percent (2%) of the outstanding securities of any class of any publicly traded company shall not, by itself, be deemed a violation of this Section 2, provided that the Restricted Party does not otherwise participate in the management, operations, or affairs of such company in any capacity.
2.3 Scope of Activities. Without limiting the generality of Section 2.1, during the Restricted Period, the Restricted Party shall not, directly or indirectly: (a) establish, operate, manage, or control a Competing Business; (b) join, become an employee or consultant of, or otherwise affiliate with a Competing Business in any capacity in which the Restricted Party would perform duties or render services that are the same as or substantially similar to those performed or rendered by the Restricted Party for the Company; (c) recruit, organize, or solicit the formation of a Competing Business; or (d) provide financial backing, lend the Restricted Party’s name, or otherwise support a Competing Business.
3. Non-Solicitation of Employees
3.1 Employee Non-Solicitation. During the Restricted Period, the Restricted Party shall not, directly or indirectly, whether on the Restricted Party’s own behalf or on behalf of any other person or entity: (a) solicit, recruit, induce, or encourage any Covered Employee to leave the employ or engagement of the Company; (b) hire, engage, or retain the services of any Covered Employee; or (c) assist any other person or entity in doing any of the foregoing.
3.2 Scope of Restriction. The restrictions set forth in this Section 3 shall apply regardless of whether the Covered Employee would leave the Company voluntarily or was terminated, and regardless of who initiates the contact. For the avoidance of doubt, the Restricted Party shall be deemed to have violated this Section 3 if a Covered Employee is hired by any entity with which the Restricted Party is associated, provided that the Restricted Party directly or indirectly influenced or facilitated such hiring.
3.3 General Advertising Exception. The restrictions in this Section 3 shall not prohibit general advertising or solicitations of employment not specifically directed at Covered Employees, including job postings on public job boards, company websites, or through recruiters, provided that the Restricted Party does not identify or target Covered Employees through such general solicitations.
4. Non-Solicitation of Customers and Clients
4.1 Customer Non-Solicitation. During the Restricted Period, the Restricted Party shall not, directly or indirectly, whether on the Restricted Party’s own behalf or on behalf of any other person or entity: (a) solicit, contact, or communicate with any Covered Customer for the purpose of providing, offering, or selling products or services that are competitive with those offered by the Company; (b) induce, encourage, or attempt to persuade any Covered Customer to reduce, terminate, or otherwise alter its business relationship with the Company; (c) divert or attempt to divert business or revenue from the Company by interfering with the Company’s relationships with its customers, clients, or accounts; or (d) assist any other person or entity in doing any of the foregoing.
4.2 Restriction on Acceptance. The Restricted Party shall not, during the Restricted Period, accept business from any Covered Customer that is competitive with the Business, even if such Covered Customer initiates the contact or solicitation, unless the Restricted Party can demonstrate that the Covered Customer independently sought out the Restricted Party without any direct or indirect encouragement or solicitation by the Restricted Party.
4.3 Customer Relationships. The Restricted Party acknowledges and agrees that the Company’s relationships with its customers and clients are among its most valuable assets, that such relationships have been developed at significant cost and effort over extended periods of time, and that the restrictions in this Section 4 are essential to protecting the Company’s legitimate interest in preserving such relationships.
5. Confidentiality Obligations
5.1 Protection of Confidential Information. The Restricted Party acknowledges that during the course of the Restricted Party’s relationship with the Company, the Restricted Party has had and will continue to have access to Confidential Information. The Restricted Party agrees that at all times during and after the Restricted Party’s relationship with the Company, the Restricted Party shall hold all Confidential Information in strict confidence and shall not, without the prior written consent of the Company, disclose, publish, or otherwise disseminate any Confidential Information to any third party, or use any Confidential Information for any purpose other than the performance of the Restricted Party’s duties for the Company.
5.2 Return of Materials. Upon the termination of the Restricted Party’s relationship with the Company for any reason, or at any time upon the Company’s request, the Restricted Party shall promptly return to the Company all documents, files, records, data, and other materials (in any form or medium, including electronic) containing or reflecting Confidential Information, and shall permanently delete or destroy all copies thereof in the Restricted Party’s possession or control. The Restricted Party shall certify in writing to the Company that the Restricted Party has complied with this Section 5.2.
5.3 Exceptions. The obligations set forth in this Section 5 shall not apply to information that: (a) is or becomes generally available to the public other than as a result of a disclosure by the Restricted Party in violation of this Agreement; (b) is obtained by the Restricted Party from a third party who is not known by the Restricted Party to be bound by a confidentiality obligation to the Company; or (c) is independently developed by the Restricted Party without use of or reference to any Confidential Information.
5.4 Permitted Disclosures. Nothing in this Agreement shall prohibit the Restricted Party from: (a) reporting possible violations of law or regulation to any governmental agency or self-regulatory organization; (b) making disclosures protected under the whistleblower provisions of applicable law; (c) providing truthful testimony in response to a lawful subpoena or court order; or (d) exercising rights under Section 7 of the National Labor Relations Act. The Restricted Party is hereby notified that, pursuant to the Defend Trade Secrets Act of 2016 (18 U.S.C. § 1833(b)), the Restricted Party will not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret made (i) in confidence to a government official or to an attorney solely for the purpose of reporting or investigating a suspected violation of law; or (ii) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.
6. Reasonableness of Restrictions
6.1 Acknowledgment. The Restricted Party acknowledges and agrees that: (a) the restrictions contained in this Agreement are reasonable and necessary to protect the Company’s legitimate business interests, including its trade secrets, Confidential Information, customer relationships, and workforce stability; (b) the Restricted Period, Restricted Territory, and scope of activities restricted herein are fair and reasonable in light of the nature of the Company’s business and the Restricted Party’s role within the Company; (c) the restrictions will not impose undue hardship on the Restricted Party and will not prevent the Restricted Party from earning a livelihood; (d) the Restricted Party has had sufficient time and opportunity to consult with legal counsel regarding this Agreement; and (e) the consideration provided to the Restricted Party is adequate and sufficient to support the covenants contained herein.
6.2 Independent Covenants. Each of the covenants set forth in Sections 2, 3, 4, and 5 of this Agreement shall be construed as independent of any other covenant or provision of this Agreement or any other agreement between the Parties. The existence of any claim or cause of action of the Restricted Party against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of any such covenant.
7. Remedies
7.1 Irreparable Harm. The Restricted Party acknowledges and agrees that any breach or threatened breach of this Agreement would cause the Company irreparable harm for which monetary damages alone would be an inadequate remedy. The Restricted Party further acknowledges that the exact amount of damages attributable to any such breach would be difficult or impossible to ascertain.
7.2 Injunctive Relief. In the event of any breach or threatened breach of this Agreement by the Restricted Party, the Company shall be entitled to seek temporary, preliminary, and permanent injunctive relief and specific performance, in addition to any other remedies available at law or in equity, without the necessity of proving actual damages or posting any bond or other security. The Restricted Party hereby consents to the issuance of such injunctive relief and waives any requirement for the posting of a bond in connection therewith to the fullest extent permitted by applicable law.
7.3 Cumulative Remedies. The rights and remedies of the Company under this Agreement are cumulative and shall be in addition to, and not in lieu of, any other rights and remedies available to the Company at law, in equity, or under any other agreement.
7.4 Attorneys’ Fees. In the event that any action, suit, or proceeding is commenced to enforce the terms of this Agreement, the prevailing Party shall be entitled to recover its reasonable attorneys’ fees, costs, and expenses incurred in connection therewith from the non-prevailing Party.
8. Severability and Blue Pencil
8.1 Severability. If any provision of this Agreement, or the application thereof to any person or circumstance, is held by a court of competent jurisdiction to be invalid, illegal, or unenforceable for any reason, such invalidity, illegality, or unenforceability shall not affect any other provision of this Agreement, and the remaining provisions shall continue in full force and effect.
8.2 Blue Pencil Doctrine. If any court of competent jurisdiction determines that any covenant contained in this Agreement is unenforceable because of its duration, geographic scope, or scope of activity, such court shall have the power to reduce the duration, geographic scope, or scope of activity of such covenant to the maximum extent permissible, and, in its reduced form, such covenant shall be enforceable. The Parties intend that the covenants contained herein shall be reformed and enforced to the maximum extent permitted by applicable law.
8.3 Consent to Modification. The Restricted Party hereby agrees that the Restricted Party will not challenge the enforceability of this Agreement on the ground that the restrictions are overbroad, and the Restricted Party consents in advance to any judicial modification of such restrictions as may be necessary to render them enforceable.
9. Tolling
In the event that the Restricted Party breaches any covenant set forth in Sections 2, 3, or 4 of this Agreement, the Restricted Period applicable to such covenant shall be extended by a period of time equal to the duration of such breach. The Parties agree that such tolling is necessary to ensure that the Company receives the full benefit of the restrictive covenants to which it bargained.
10. Assignment
10.1 Assignment by the Company. The Company may assign this Agreement, and its rights and obligations hereunder, to any successor in interest to substantially all of the business or assets of the Company, whether by merger, consolidation, sale of assets, or otherwise, without the consent of the Restricted Party. This Agreement shall inure to the benefit of the Company’s successors and assigns.
10.2 No Assignment by the Restricted Party. The Restricted Party may not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Company. This Agreement is personal to the Restricted Party and shall be binding upon the Restricted Party and the Restricted Party’s heirs, executors, administrators, and legal representatives.
11. Governing Law and Jurisdiction
11.1 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of [GOVERNING LAW STATE], without regard to any conflict of laws principles that would require the application of the laws of any other jurisdiction.
11.2 Exclusive Jurisdiction. Each Party irrevocably submits to the exclusive jurisdiction of the state and federal courts located in [JURISDICTION — e.g., the County of [COUNTY], State of [STATE]] for the purpose of any action, suit, or proceeding arising out of or relating to this Agreement, and each Party waives any objection it may now or hereafter have to the laying of venue in such courts, including any claim that any such action, suit, or proceeding has been brought in an inconvenient forum.
11.3 Waiver of Jury Trial. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
12. Entire Agreement
12.1 Entire Agreement. This Agreement, together with the Underlying Agreement and any exhibits or schedules attached hereto, constitutes the entire agreement between the Parties with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements, negotiations, representations, warranties, and understandings, whether written or oral, relating to such subject matter.
12.2 Amendments. This Agreement may not be amended, modified, or supplemented except by a written instrument signed by both Parties.
12.3 Waivers. No waiver of any provision of this Agreement shall be effective unless set forth in a written instrument signed by the Party against whom such waiver is to be enforced. No waiver of any breach of this Agreement shall constitute a waiver of any subsequent breach, whether of the same or a different provision.
12.4 Notices. All notices, requests, demands, and other communications required or permitted hereunder shall be in writing and shall be deemed to have been duly given when: (a) delivered personally; (b) sent by certified or registered mail, return receipt requested, postage prepaid; (c) sent by a nationally recognized overnight courier service; or (d) transmitted by electronic mail with confirmation of receipt, in each case addressed to the applicable Party at the address set forth in the preamble hereof or at such other address as such Party may designate by written notice to the other Party.
12.5 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. Execution and delivery of this Agreement by exchange of electronic signatures (including PDF) shall be deemed effective for all purposes.
SIGNATURES
IN WITNESS WHEREOF, the Parties have executed this Non-Compete and Non-Solicitation Agreement as of the date first written above.
COMPANY:
[COMPANY NAME]
By: ___________________________________
Name: [AUTHORIZED SIGNATORY NAME]
Title: [TITLE]
Date: [DATE]
RESTRICTED PARTY:
___________________________________
Name: [INDIVIDUAL NAME]
Date: [DATE]