Choice-of-Law and Non-Compete Provisions
A longtime client was delighted to receive an acquisition offer from a large, publicly-held company (“Acquirer”). Once the acquisition closed, the client’s founder (“Founder”) would become a management-level employee of Acquirer.
Although Acquirer’s proposed employment agreement generally was acceptable, Founder was concerned about its non-compete provision. That provision stated that for one year following termination of his employment, Founder would not “engage in any business activities that are competitive with the business activities of [Acquirer] or those of its subsidiary or parent companies”. The problem was that the business of Acquirer and its affiliates was so vast, and Founder’s expertise was so industry-specific, that the provision would have limited Founder’s ability to be employed elsewhere.
Acquirer’s General Counsel stated that the non-compete provision was non-negotiable - if founder did not accept that provision, the acquisition would not take place. In addition, the GC said that even though Founder lived in California and would be working at Acquirer’s offices in California, the provision stating that the agreement would be “governed by and construed in accordance with the laws of the State of New York” also was non-negotiable.
Dana Shultz is a business-savvy lawyer with in-depth knowledge of law, business, technology, and the needs of startup and early-stage companies. Located in the San Francisco Bay Area (Northern California), Dana develops close working relationships with clients based on a positive attitude and rock-solid dependability so he can deliver High-touch Legal Services® - thus the name of this blog.