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Non-Competition Agreement

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NON-COMPETITION AGREEMENT

THIS AGREEMENT is made this the day of 20 by and between (the "Purchaser") and (the "Seller") under the following circumstances:

A. On the day of 20 Purchaser and Seller entered into an Asset Purchase Agreement ("Purchase Agreement") pursuant to which Purchaser agreed to purchase from Seller certain assets devoted to at the facilities of Seller located at:

B. The Purchase Agreement provides that Purchaser and Seller will enter into this Non-competition Agreement at the closing of the transactions contemplated by the Purchase Agreement as an inducement to Seller and Purchaser to enter into the Purchase Agreement.

C. The value of the Business and the value of the Retained Business would be severely affected and materially impaired if the Seller and the Purchaser were to enter into full competition with each other.

D. Execution of this Non-competition Agreement is a material condition to Purchaser's agreement to acquire the Business and to Seller's agreement to sell the Business.

NOW, THEREFORE, the parties agree as follows:

Section 1. Definitions.

Except as otherwise indicated, capitalized terms used herein are defined as set forth in the Purchase Agreement. As used in this Non-competition Agreement, the following terms have the following meanings:

1.1 "Confidential Information" means (i) any information with respect to Purchaser's or Seller's customers, accounts, costs, plans, business policies, programs, formulae, products, know-how, trade secrets, suppliers, pricing policies or rates, marketing techniques, or any other information which may now or in the future be considered by Purchaser or Seller to be confidential or proprietary, (ii) reports, memoranda, correspondence, and other writings belonging to Purchaser or Seller, which may have been produced by or come into the possession of Purchaser or Seller in the course of its ownership or operation of the Business or the Retained Business, excluding any of the foregoing which is in the public domain.

1.2 "Retained Business" means the business and assets of Seller being retained by it.

1.3 "Territory" means the following area:

Section 2. Non-competition.

2.1 In order that Purchaser may obtain the full benefit of the Business and the goodwill related thereto, the Seller does hereby covenant and agree that for a period three (3) years after the Closing Date, Seller shall not, directly or indirectly (as agent, consultant or otherwise) throughout the Territory.

2.2 In order that the Seller may obtain the continued full benefit of the Retained Business and the goodwill related thereto, the Purchaser does hereby covenant and agree that, during the period of three (3) years after the Closing Date, the Purchaser shall not, directly or indirectly, (as agent, consultant or otherwise) compete in any way with the Seller in what the Seller does in the industry now or from time to time in the future, will not make, sell or be involved with within the Territory.

2.3 It is the intent of the parties that the provision of this section 2 shall be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, to the extent that the non-competition restrictions hereunder shall be adjudicated to be invalid or unenforceable in any such jurisdiction, the court making that determination shall have the power to limit, construe or reduce the duration, scope, activity and/or area of such provision, and/or delete specific words or phrases to the extent necessary to render such provision enforceable to the maximum reasonable extent permitted by applicable law, such limited form to apply only with respect to the operation of this section in the particular jurisdiction in which such adjudication is made.

Section 3. Nondisclosure. Seller and Purchaser recognize and acknowledge that they have, and may acquire additional, knowledge of Confidential Information, and that such information constitutes valuable, special, and unique property of Purchaser and/or of Seller. Seller will not, at any time, disclose any such Confidential Information of Purchaser to any person, except as required by law. Purchaser will not, at any time, disclose any such Confidential Information of Seller to any person, except as required by law. Seller acknowledges that the Confidential Information of the Business is material to the value of the Business, and is unique, and agrees that disclosure thereof in violation of this Agreement may irreparably damage the value of the Business. Purchaser acknowledges that the Confidential Information of the Retained Business is material to the value of the Retained Business, and is unique, and agrees that disclosure thereof in violation of this Agreement may irreparably damage the value of the Retained Business.

Section 4. Injunctive Relief. Seller and Purchaser acknowledge that their adherence to the terms of the covenants set forth in Sections 2 and 3 are necessary to protect the value of the Business to Purchaser and the value of the Retained Business to Seller, that a continuing breach of such covenants will result in irreparable and continuing damage to the value of the Business or the value of the Retained Business as the case may be, and that money damages would not adequately compensate Purchaser or Seller for any such breach and, therefore, that Purchaser or Seller as the case may be would not have an adequate remedy at law. In the event any action or proceeding shall be instituted by Purchaser or Seller to enforce any provision of Sections 2 or 3, the other shall waive the claim or defenses in such action that (i) money damages are adequate to compensate the aggrieved party for such breach, and (ii) there is an adequate remedy at law available to the aggrieved party, and shall not urge in any such action or proceeding the claim or defense that such remedy at law exists. Purchaser and Seller shall have, in addition to any and all remedies at law, the right, without posting of bond or other security, to an injunction, both temporary and permanent, specific performance and/or other equitable relief to prevent the violation of any obligation under Sections 2 or 3. The parties agree that the remedies of Purchaser and Seller for breach of Sections 2 or 3 shall be cumulative, and seeking or obtaining injunctive or other equitable relief shall not preclude the making of a claim for damages or other relief. The parties to this Agreement also agree that Purchaser and Seller shall be entitled to such damages as Purchaser or Seller can show it has sustained by reason of such breach and shall not be limited in its damages by any provision of the Purchase Agreement. In any action brought to enforce the covenants set forth in Section 2 or 3, or to recover damages for breach thereof, the prevailing party shall be entitled to recover reasonable attorneys' fees and other expenses of litigation, together with such other and further relief as may be proper.

Section 5. Independent Agreement. The covenants of Purchaser and Seller hereunder shall be construed to be independent of covenants, representations, warranties, and obligations of Purchaser and Seller under the Purchase Agreement or under any agreement, document, or instrument delivered pursuant to the Purchase Agreement and, accordingly, any default by Purchaser or Seller with respect to any such representation, warranty, covenant, or obligation shall not constitute an excuse for any failure of Purchaser or Seller to perform hereunder.

Section 6. Waiver. The failure of any party to insist in any one or more instances upon performance of any of the provisions of this Non-competition Agreement or to take advantage of any of its rights hereunder shall not be construed as a waiver of any such provisions or the relinquishment of any such rights, and the same shall continue and remain in full force and effect. No single or partial exercise by any party of any right or remedy shall preclude other or future exercise thereof or the exercise of any other right or remedy. Waiver by any party of any breach of any provision of this Non-competition Agreement shall not constitute or be construed as a continuing waiver or as waiver of any other breach of any other provision of this Non-competition Agreement.

Section 7. Notice. All notices, requests, demands, and other communications hereunder shall be in writing and shall be made by certified mail or telefax followed by confirmation letter (with first class airmail postage), to the parties at the addresses indicated below:

Seller

Address:

Fax:

Purchaser

Address:

Fax:

All notices, demands and other communications mentioned above shall be deemed to have been given or made on the earlier of the date when received and five (5) days after the date of their dispatch. Any party may change the address to which notices and other communications are to be directed to it by giving notice of such change to the other parties in the manner provided in this Section.

Section 8. Severability. If any provision of this Non-competition Agreement, as applied to any person or to any circumstance, shall be adjudged by a court to be invalid or unenforceable, the same shall in no way affect any other provision of this Non- competition Agreement, the application of such provision in any other circumstances, or the validity or enforceability of this Non-competition Agreement.

Section 9. Amendment. No waiver of any rights, and no modifications or amendment of this Non-competition Agreement shall be effective unless made in writing and duly signed by the party to be bound thereby.

Section 10. Governing Law. This Non-competition Agreement shall be construed according to and the legal relations between the parties shall be governed in accordance with the laws of the State of as applicable to agreements executed and fully performed in the State of

Section 11. Successors of Purchaser and Seller. The terms of this Non- competition Agreement shall inure to the benefit of Purchaser and Seller and their respective successors or assigns.

Section 12. Captions. The captions contained in this Non-competition Agreement are for convenience or reference only and shall not affect the meaning or interpretation of this Non-competition Agreement.

Section 13. Entire Agreement. This Agreement contains the entire understanding of the parties hereto with respect to the subject matter hereof and shall supersede all previous, oral and written understandings of the parties with respect to the subject matter hereof. Notwithstanding the foregoing, this Agreement is additional to and not in lieu of the rights and obligations of the parties under the Consulting Agreement between the parties.

Section 14. Jurisdiction. The parties hereto intend to and do hereby confer jurisdiction to enforce this Non-competition Agreement upon the courts of any state within the geographical scope of the covenants contained herein. If the courts of any one or more of such states or jurisdictions shall hold such covenant wholly unenforceable by reason of the breadth of such scope or otherwise, it is the intention of the parties hereto that such determination shall not bar or in any way affect the right of Purchaser to the relief provided above in the courts of any other state or jurisdiction within the geographical scope of such covenant, as to breaches of such covenants in such other respective states or jurisdictions; the above covenants as they relate to each state or jurisdiction being, for this purpose, severable into diverse and independent covenants.

The undersigned and as the sole shareholders of Seller, and the undersigned, as sole shareholders of Purchaser, have signed this Agreement to indicate and agree that they shall be bound by the same terms and provisions of this Agreement as are the respective corporations of the shares of which they own.

IN WITNESS WHEREOF, the parties have executed this Non-competition Agreement as of the date first written above.

PURCHASER

BY:

TITLE:

SELLER

BY:

TITLE:

Enter text

What a Non-Competition Agreement Does and When Parties Use It

A Non-Competition Agreement is a contract in which one party (typically an employee, contractor, or seller) agrees to limit certain business activities that would compete with the other party for a defined period, in a defined geography, and within specified activities. Typical elements include the restricted activities, geographic scope, duration, consideration, severability, and remedies for breach. These agreements can be executed on paper or electronically; when signed electronically they are generally enforceable under federal and state laws such as the ESIGN Act and state electronic-records statutes, subject to local enforceability rules and statutory exceptions.

Why Organizations Use Non-Competition Agreements

Non-Competition Agreements protect legitimate business interests such as trade secrets, customer relationships, and workforce investment while defining remedies and expectations. They clarify post-employment boundaries, reduce the likelihood of solicitation or direct competition, and support valuation during M&A or financing events when properly drafted and backed by adequate consideration.

Why Organizations Use Non-Competition Agreements

Who Typically Prepares or Signs a Non-Competition Agreement

Common participants include employers, departing owners, contractors, and purchasers who need to protect business value and confidential information.

  • Human resources and legal teams drafting enforceable terms for hires and senior staff.
  • Business buyers and sellers using restrictive covenants in sale or earnout arrangements.
  • Independent contractors or consultants agreeing to limits tied to payment or access to trade secrets.

Parties should consult counsel to tailor scope, duration, and consideration to the jurisdiction and industry risk profile.

Primary Signer Profiles

HR Manager

An HR Manager typically coordinates execution across new hires, ensures consideration is documented in offer letters, and manages storage and access controls for signed agreements.

Founder / CEO

A Founder or CEO signs on behalf of a company, approves restrictive scope for key employees or sale transactions, and may negotiate consideration and enforcement language with counsel.

Essential Information to Include

Parties' Legal Names: Full legal entity or person name
Effective Date: MM/DD/YYYY
Consideration: Payment or benefit described
Restricted Activities: Specific duties and markets
Duration: Fixed time period
Geographic Scope: Defined region or market

Common Risks and Consequences of Poor Drafting

Unenforceability: Overbroad covenants may be struck down
Litigation Costs: Defense and enforcement expenses
Injunction Risk: Court may issue emergency relief
Damages Exposure: Monetary awards or disgorgement
State Restrictions: Some states limit or bar non-competes
Employment Claims: Risk of wrongful termination disputes

Frequent Drafting and Execution Mistakes

  • Using vague descriptions like 'all competitive activities' instead of narrowly defined prohibited conduct increases the chance a court will limit or void the covenant.
  • Failing to document adequate consideration at the time of signing, especially for post-hire agreements, can render the covenant unenforceable.
  • Applying a one-size-fits-all duration or geographic scope without regard to role, seniority, or market makes restraints harder to justify in litigation.
  • Neglecting to confirm signatory authority or to capture clear execution evidence (dates, printed names, IP address) weakens enforcement and attribution of signatures.

Step-by-Step: Preparing and Executing a Non-Competition Agreement

Follow a clear process from drafting to signature to ensure enforceability and proper recordkeeping.

  • 01
    Gather Information: Collect party names, job descriptions, and business risks.
  • 02
    Draft Terms: Define restricted activities, length, and geography precisely.
  • 03
    Set Consideration: Identify compensation, bonus, or other benefit tied to the covenant.
  • 04
    Execute: Obtain signatures, date, and authentication evidence.

Typical Execution and Post-Execution Workflow

A predictable digital workflow reduces errors and preserves evidence of consent and delivery.

  • Draft: Author the agreement and insert signature and date fields.
  • Review: Internal and legal review, redline resolution, final approval.
  • Sign: Parties sign electronically or on paper; capture audit trail.
  • Store: Save executed copies and maintain retention metadata.

Core Clauses to Include in a Professional Non-Competition Agreement

A well-structured agreement balances enforceability with protection of legitimate business interests; each clause should be precise and tied to a defensible purpose.

Non-Compete Clause

Specify prohibited business activities in clear terms, limited to what is necessary to protect trade secrets, goodwill, or client relationships, and avoid blanket language that covers unrelated markets or roles.

Non-Solicitation

Preventing solicitation of customers or employees is often narrower and more likely to be enforced; draft lists of covered contacts or categories where feasible.

Confidentiality

Define confidential information precisely, set permitted uses, and include obligations for return or destruction on termination to protect trade secrets and sensitive data.

Consideration

State the specific consideration supporting the restraint, such as initial employment, a promotion, severance, or purchase price allocation, and document timing of delivery.

Severability

Include a severability clause to permit courts to narrow invalid provisions rather than void the entire agreement, improving enforceability in many jurisdictions.

Governing Law and Remedies

Identify the governing state law and dispute resolution method, and specify remedies such as injunctive relief and damages while being mindful of state-specific limits on enforceability.

Configuring an Electronic Signing Workflow

Key settings ensure proper attribution, reduce signer friction, and create an admissible audit trail for e-signed Non-Competition Agreements.

Field Configuration
Signature Field Required; signer must click or draw signature
Date Field Auto-fill MM/DD/YYYY when signer submits
Initials Field Place at key clause changes or page bottoms
Authentication Level Email + optional SMS code or SSO

Delivery Formats and Integration Considerations

Choose a platform that supports common file formats, audit trails, and your existing business systems to minimize friction and preserve execution evidence.

  • Supported Formats: PDF and DOCX recommended
  • Integrations: CRM and ERP connectors such as Salesforce, NetSuite, and Microsoft 365
  • Authentication Options: Email link, SMS code, SSO, or KBA

Ensure the chosen setup captures signer attribution, timestamps, and an immutable audit trail while matching your security and regulatory requirements.

Important Dates and Timing Considerations

Track effective dates and notice windows carefully; timing affects enforceability and post-termination obligations.

Effective Date:

Date when restrictive obligations commence

Term Length:

Maximum duration of the restraint

Notice Period:

Notice required for termination or material change

Review Window:

Periodic clause review or renewal deadline

Dispute Deadline:

Time limits for initiating claims or arbitration

Key Milestones from Draft to Enforcement

A milestone timeline helps teams coordinate drafting, approval, execution, and post-execution compliance monitoring.

01

Draft Approval

Legal and HR sign-off on final covenant language

02

Signature Execution

Collect signed copies and capture authentication data

03

Record Retention

Store executed agreement in a secure repository

04

Monitoring Period

Track compliance and enforceability during the restraint term

How a Non-Competition Agreement Compares to Other Restrictive Covenants

A basic comparison highlights differences in scope, duration, and enforceability focus between common agreement types.

Criteria Non-Competition Non-Solicitation
Scope broader business activity specific customers or employees
Typical Duration 6–24 months common 6–24 months common
Enforceability Focus market exclusion justification protecting relationships
Common Remedy injunctions and damages injunctions and damages

eSignature Vendor Pricing and Feature Snapshot for Non-Competition Agreements

Common buyer criteria include per-user pricing, trial availability, bulk-send capabilities, audit trails, HIPAA compliance, and envelope limits; signNow is listed first per vendor-comparison conventions.

signNow DocuSign Adobe Sign PandaDoc HelloSign
Starting Price $8/user/mo $15/user/mo $14/user/mo $19/user/mo $15/user/mo
Free Trial 7-day free trial Varies by vendor Varies by vendor Varies by vendor Varies by vendor
Bulk Send Yes Yes Yes Yes No
Audit Trail Yes Yes Yes Yes Yes
HIPAA Compliant Yes Yes Yes No No
Envelope Cap No envelope cap 100 envelopes/user/year Varies by plan Varies by plan Varies by plan

Representative Organizational Experiences with Digital Execution

Organizations report smoother execution and compliance when agreements are routed electronically and stored with an audit trail.

Optica Ventures LLC

Optica used digital workflows for various contractual documents to improve turnaround.

  • "The interface is simple and easy-to-use for our team; more importantly, it is just as easy for our customers."
  • Implementing e-signature reduced execution delays and improved the customer experience while preserving signed copies for compliance purposes.

Martin Properties

A small real estate firm standardized agreement execution across agents and vendors.

  • "I can process and execute all of these documents online with 100% compliance and built-in security."
  • Centralized electronic storage and audit trails reduced administrative time and provided consistent evidence for enforcement or dispute resolution.

Drafting and Execution Best Practices

Adopt consistent drafting habits and execution controls to improve enforceability and reduce litigation risk.

Narrow the Restraint
Limit prohibited activities to those necessary to protect specific business interests, tie restrictions to the employee's role, and avoid broad geographic or functional language that courts often find unreasonable.
Document Consideration
Record the exact consideration provided when the covenant is executed — such as initial employment, a promotion, severance payment, or transaction consideration — and deliver it as promised.
Use Clear Definitions
Define terms such as 'Confidential Information', 'Competing Business', and 'Customer' precisely to reduce ambiguity during enforcement and to facilitate objective application of the covenant.
Capture Execution Evidence
For electronic signatures, preserve the audit trail, signer authentication logs, timestamps, and any consent disclosures required under ESIGN or state law to support admissibility.

Frequently Asked Questions About Non-Competition Agreements

Answers to common questions about enforceability, electronic execution, and state-specific concerns for Non-Competition Agreements.


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