Draft Issues List Restrictive Covenant

Skill: Draft Issues List for Restrictive Covenant Agreement

1. Subject-matter triage

• Treat the requested output as an issues memorandum, not a rewrite of the agreements.
• If there are two draft restrictive covenant agreements, analyze each separately and keep the sections distinct.
• Start by mapping the source set: playbook, deal summary, client emails, operations overview, and each draft agreement.
• Identify which law, forum, and transaction documents govern the covenant analysis before evaluating substance.
• If a source document identifies the governing authority, use that authority in the memo and align the analysis to it.

2. Failure modes the skill is correcting

• Failing to connect the transaction consideration to enforceability analysis for duration and scope; the memo must explain how the full consideration package bears on reasonableness.
• Identifying issues without citing the specific section of the draft agreement that contains the problematic language.
• Collapsing multiple agreements, covenantors, or scope variants into one generic critique instead of analyzing each separately.
• Stating that a provision is overbroad or unenforceable without naming the legal rule that supports that conclusion.
• Listing issues without grading their relative importance or giving a practical next step.
• Omitting the downstream effect on closing, integration, enforcement, or litigation posture.

3. Legal frameworks / domain conventions that apply

• Non-compete enforceability is typically assessed under a reasonableness framework tied to legitimate business interests, duration, geographic reach, and the economic consideration supporting the covenant.
• Consideration analysis should account for the full deal package, not just any single cash component, when evaluating whether the restraint is proportionate.
• Geographic scope should track the target’s actual operating footprint, customer reach, and competitive threat area.
• Restricted activities should be tailored to the buyer’s protectable interests and not sweep in ordinary, noncompetitive conduct.
• Customer and employee non-solicitation provisions should be checked for definitional breadth, time period, and overlap with other restrictive covenants.
• Non-disparagement clauses should preserve truthful statements, legally compelled disclosures, and other standard carve-outs.
• Passive investment carve-outs should allow ownership of publicly traded securities held for passive investment purposes.
• Enforcement provisions should be checked for injunctive relief, specific performance, and other remedies that may be sought in equity.
• Blue-pencil or judicial modification language should be checked against the governing law’s treatment of overbroad restraints.
• Governing law, venue, and forum provisions should be consistent with the merger agreement and the deal structure.
• Cite the controlling authority for each legal proposition relied on, whether it appears in the source materials or is supplied from general legal knowledge.

4. Analytical scaffolds

• Begin with an executive summary that identifies the most consequential issues across the reviewed agreements and states the practical risk each creates.
• Use an ordinal severity scale and define it once at the top of the memo; apply it consistently to every issue.
• For each issue, include:
  • the agreement name or label,
  • the specific section reference,
  • the severity level,
  • a concise issue statement,
  • the governing legal rule or authority,
  • the reason the provision is problematic in context,
  • the consequence for the client,
  • a recommended fix or follow-up.
• For duration analysis, connect the covenant term to the consideration package and any state-law constraints identified in the sources.
• For geographic scope analysis, cross-check the draft against the operations overview and any customer geography in the source set.
• For activity restrictions, test whether the prohibited conduct is narrower than, or broader than, the buyer’s actual protectable interests.
• For non-solicitation and non-disparagement, assess definitional scope, exceptions, and any mismatch with the rest of the restrictive covenant package.
• For enforcement and modification provisions, test whether the draft provides adequate remedial flexibility if a restraint is challenged.
• If multiple agreements are in scope, run the full scaffold for each one rather than combining them into a single pass.

5. Vertical / structural / temporal relationships

• Compare the restrictive covenant agreement against the merger agreement and any related transaction document for consistency in governing law, venue, remedies, and defined terms.
• Cross-check the covenant’s duration and restricted scope against the timing of the closing, the earnout or payment structure if relevant, and any post-closing transition period.
• If the source set contains different covenantors or different business roles, analyze the vertical relationship between each person’s role and the breadth of restraint imposed.
• Note any dependency between a restrictive covenant clause and another clause that either narrows it, expands it, or creates an interpretive conflict.
• Where the agreements are not identical, identify the structural differences and explain why they matter for enforceability or negotiation leverage.

6. Output structure conventions

• Draft as an issues memorandum with an executive summary at the top.
• Use separate sections for each draft agreement, with issue-by-issue analysis beneath each section.
• Define severity levels once, then assign a severity to every issue.
• Include the specific section reference for every issue.
• Tie each legal conclusion to the controlling authority supporting it.
• Close each issue with the practical consequence to the client and a concrete recommended action.
• End with a Recommended Actions block that assigns the next step to the appropriate role and ties it to the transaction timeline or another source-based milestone.
• Keep the memo operational: prefer actionable edits, negotiation points, and diligence follow-ups over abstract commentary.