A Grant Agreement documents funding terms for projects or research initiatives. This playbook explores performance milestones, reporting requirements, and clawback conditions.
Why This Matters: Clear covenants safeguard business integrity and goodwill during transition periods and mitigate risks of asset degradation and competitive harm.
Negotiation strategy
If you're the Grantor:
Negotiate for clear and enforceable covenants that protect your business interests and ensure a smooth transition. Focus on securing non-compete and non-solicitation clauses to prevent competitive harm.
If you're the Grantee:
Ensure that covenants are reasonable and do not overly restrict your future business activities. Aim for balanced terms that allow for operational flexibility while maintaining compliance.
Essential elements
1
Non-Solicitation Covenant
Restricts hiring of the other party's employees.
2
Non-Compete Covenant
Limits competitive business activities post-closing.
3
Operating Covenants
Ensures business continuity until closing.
Action framework
ACCEPT
Propose edits if covenants are too restrictive or vague.
EDIT
Reject clauses that impose unreasonable restrictions.
ADD
Add clauses to address missing protections or obligations.
PRO TIP
Always tailor covenants to the specific transaction context and jurisdictional requirements.
Example clauses
FAVORABLE
Balanced Non-Compete Clause
"Each party covenants that, for a period of three (3) years following the Closing Date, it shall not engage in any business activities that are directly competitive with the business conducted by the other party as of the Closing Date, within the geographic area of [specify geographic area]."
NEUTRAL
Standard Operating Covenant
"From the date hereof until the Closing Date, each party shall conduct its business in the ordinary course consistent with past practice."
UNFAVORABLE
Overly Restrictive Non-Solicitation
"Each party agrees that, for a period of five (5) years following the Closing Date, it shall not, directly or indirectly, solicit for employment any employee of the other party."
Fallbacks
High-Risk Projects
In high-risk projects, covenants should include additional safeguards to protect sensitive information and business interests.
Cross-Border Transactions
Consider jurisdictional differences in enforceability of covenants, especially non-compete clauses.
Technology Transfers
Ensure covenants address intellectual property rights and confidentiality to protect proprietary technology.
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WEEK 2
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WEEK 3
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WEEK 4
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