Contract analysis

I. Purpose and Summary This memorandum provides a comprehensive compliance checklist under the Massachusetts Noncompetition Agreement Act (the "MNAA"), M.G.L. c. 149, § 24L, as applied to the proposed Employee Non-Competition Agreement (the "Non-Competition Agreement" or the "Agreement") between Arbor Health Technologies Inc. ("AHT" or the "Company") and Dr. Marcus J. Elliston (the "Executive") in connection with his

II. Background on the Proposed Arrangement AHT engaged Calderwood & Harkness LLP on July 13, 2022 to draft a comprehensive executive employment agreement package for Dr. Marcus J. Elliston in connection with his prospective hire as Chief Operating Officer of the Company. The engagement was initiated by Aaron Whitfield, General Counsel of AHT, in coordination with Lisa Murakami, the Company's Chief Human Resources Off

III. Applicability of the MNAA A. Effective Date and Scope The MNAA applies to noncompetition agreements entered into on or after October 1, 2018. The statute was enacted as part of the Massachusetts economic development bill signed by Governor Charles Tarvick on August 10, 2018, and represents the Commonwealth's first comprehensive statutory framework governing noncompetition agreements. Prior to the MNAA, the enfor

IV. Compliance Checklist The following checklist addresses each material requirement of the MNAA as applied to the proposed Non-Competition Agreement with Dr. Elliston. For each checklist item, I have identified the statutory requirement, analyzed its application to the proposed arrangement, and provided drafting recommendations. Checklist Item 1: Prohibited Categories of Workers Statutory Requirement: The MNAA prohi

V. Summary Compliance Matrix The following table summarizes each material MNAA requirement, the proposed treatment in the Non-Competition Agreement with Dr. Elliston, and the current compliance status:

VI. Recommendations and Next Steps Based on the foregoing analysis, we recommend the following action items to ensure full MNAA compliance and to facilitate efficient preparation and negotiation of the Non-Competition Agreement:

1. Revise Duration from 18 Months to 12 Months. Advise AHT (Aaron Whitfield, General Counsel, and Lisa Murakami, CHRO) that the 18-month non-compete period proposed in the July 18, 2022 internal term sheet exceeds the statutory maximum under the MNAA and must be reduced to 12 months. The 18-month (and up to 24-month) period is available only in cases of a demonstrated breach of fiduciary duty or unlawful taking of Co

2. Draft the Standalone Non-Competition Agreement. Prepare the standalone Employee Non-Competition Agreement with a 12-month post-termination restriction, garden-leave at $287,500 (50% × $575,000 base salary), and all required statutory notices and formalities. The Non-Competition Agreement should be included in the first draft employment package to be circulated to Fielding & Rowe LLP on August 5, 2022. The agreemen

3. Coordinate with Gregory Tan on Section 409A. Coordinate with Gregory Tan, Partner in the Tax Practice Group, on the Section 409A treatment of the garden-leave payments. The preliminary view is that the payments should qualify for the short-term deferral exception or the separation pay exception, but a formal Section 409A analysis is required. Gregory Tan's comprehensive Section 409A compliance memorandum is antici

4. Coordinate with Devon Archer on Non-Solicitation and Confidentiality Analysis. Coordinate with Devon Archer on the companion memorandum addressing the enforceability of the non-solicitation and confidentiality covenants under Massachusetts common law. These covenants are not subject to the MNAA, but they must satisfy the common-law reasonableness requirements, and their interaction with the Non-Competition Agreeme

5. Ensure Structural Independence of Restrictive Covenants. Ensure that the separate non-solicitation and confidentiality provisions in the Employment Agreement are clearly distinguishable from the non-compete covenant in the standalone Non-Competition Agreement and are drafted as independent, severable obligations with their own consideration recitals and severability provisions. This structural independence protect

6. Anticipate Fielding & Rowe Negotiation Positions. Anticipate that Catherine A. Fielding of Fielding & Rowe LLP will press for the following positions on behalf of Dr. Elliston: (a) The narrowest possible industry and activity scope — Fielding & Rowe will likely seek to further narrow the restriction beyond "healthcare IT/SaaS companies with >$50M revenue" to something closer t