EXECUTIVE EMPLOYMENT AGREEMENT
** **
Calderwood & Harkness LLP
This EXECUTIVE EMPLOYMENT AGREEMENT (this "Agreement") is entered into as of the date last signed below (the "Effective Date"), by and between:
ARBOR HEALTH TECHNOLOGIES INC., a Delaware corporation (the "Company" or "AHT"), with its principal offices located at 400 Brattle Commerce Park, Suite 1200, Cambridge, MA 02138;
and
DR. MARCUS J. ELLISTON, an individual residing at 87 Laurel Hill Road, Wellesley, MA 02481 (the "Executive").
The Company and Executive are each sometimes referred to herein individually as a "Party" and collectively as the "Parties."
RECITALS
WHEREAS, the Company is a Delaware corporation headquartered in Cambridge, Massachusetts, engaged in the business of providing healthcare services and developing, marketing, and licensing cloud-based clinical workflow and revenue cycle management software pursuant to a software-as-a-service ("SaaS") delivery model;
WHEREAS, the Company desires to employ Executive in the capacity of Chief Operating Officer, and Executive desires to accept such employment with the Company, on the terms and conditions set forth herein;
WHEREAS, Executive possesses significant experience in healthcare operations, technology-enabled services, and organizational management, including prior service as Senior Vice President of Operations at Pinnacle Care Systems, Inc., a national healthcare services and technology company;
WHEREAS, the Board of Directors of the Company (the "Board"), including the Compensation Committee thereof (the "Compensation Committee"), has reviewed and approved the terms and conditions of Executive's employment as set forth in this Agreement, and has authorized the Company to enter into this Agreement on the terms set forth herein;
WHEREAS, the equity awards described herein shall be governed by the AHT 2020 Equity Incentive Plan (as amended May 2021) (the "Equity Plan") and the applicable award agreements issued thereunder;
WHEREAS, this Second Draft incorporates certain revisions agreed upon between the Parties following the initial review and markup of the First Draft by Executive's counsel, Fielding & Rowe LLP, including modifications to the definition of Good Reason, the non-competition period, and certain other terms, as reflected herein; and
WHEREAS, as a condition of Executive's employment, Executive shall enter into the Employee Non-Competition Agreement (the "Restrictive Covenant Agreement") concurrently with the execution of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants, promises, and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
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ARTICLE 1 — DEFINITIONS
Section 1.1 — Defined Terms
As used in this Agreement, the following terms shall have the meanings set forth below. Capitalized terms used but not defined in this Section 1.1 shall have the meanings ascribed to them elsewhere in this Agreement.
"Affiliate" means any entity that directly or indirectly controls, is controlled by, or is under common control with the Company. For purposes of this definition, "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of an entity, whether through ownership of voting securities, by contract, or otherwise. Without limiting the generality of the foregoing, the term "Affiliate" shall include Ridgeline Capital Partners, LP and its affiliated investment funds, any successor funds thereto, and any portfolio companies thereof in which the Company holds an equity interest.
"Base Salary" has the meaning set forth in Section 4.1 of this Agreement. As of the Effective Date, the initial Base Salary shall be Five Hundred Seventy-Five Thousand Dollars ($575,000) per annum.
"Board" means the Board of Directors of Arbor Health Technologies Inc., as constituted from time to time.
"Cause" has the meaning set forth in Section 7.2(a) of this Agreement, and shall include each of the following: (i) a material breach by Executive of any provision of this Agreement; (ii) the conviction of, or plea of guilty or nolo contendere by, Executive to a felony or any crime involving moral turpitude; (iii) willful misconduct or gross negligence by Executive in the performance of Executive's duties hereunder that is materially injurious to the Company; (iv) fraud, embezzlement, or misappropriation by Executive of funds, assets, or property of the Company or any Affiliate; (v) a material violation by Executive of written Company policies, as such policies are in effect from time to time and have been provided to Executive; and (vi) the willful and continued failure by Executive to follow lawful written directives of the Chief Executive Officer or the Board that are consistent with Executive's position and duties. Items (i), (v), and (vi) above shall be subject to the notice and cure provisions set forth in Section 7.2(a).
"Change in Control" or "change in control" has the meaning set forth in Section 8.1 of this Agreement.
"COBRA" means the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended from time to time, and the regulations promulgated thereunder.
"Code" means the Internal Revenue Code of 1986, as amended from time to time, and the Treasury Regulations and other authoritative guidance issued thereunder.
"Compensation Committee" means the compensation committee of the Board, as constituted from time to time, or, in the absence of such a committee, the Board itself.
"Confidential Information" has the meaning set forth in Section 9.1 of this Agreement.
"Disability" means Executive's inability to perform the essential functions of Executive's position, with or without reasonable accommodation, for a period of one hundred twenty (120) consecutive calendar days or for an aggregate of one hundred eighty (180) calendar days in any twelve (12)-month period, as certified by a physician selected by the Company and reasonably acceptable to Executive (or Executive's legal representative). Any determination of Disability under this Agreement shall be made in compliance with the Americans with Disabilities Act, as amended, and applicable state law.
"Equity Plan" means the AHT 2020 Equity Incentive Plan (as amended May 2021), together with any successor equity incentive plan adopted by the Company and approved by the Board and the Company's stockholders.
"Good Reason" has the meaning set forth in Section 7.3(a) of this Agreement.
"Person" means any individual, corporation, partnership, limited liability company, joint venture, trust, unincorporated organization, association, governmental authority, or other entity or group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Securities Exchange Act of 1934, as amended).
"Pro-Rata Bonus" means the Annual Bonus for the fiscal year in which Executive's termination of employment occurs, (or, in the case of termination due to death or Disability, at the target level), prorated by multiplying the resulting bonus amount by a fraction, the numerator of which is the number of days during such fiscal year that Executive was actively employed by the Company, and the denominator of which is the total number of days in such fiscal year.
"Release" means the general release of claims in substantially the form attached hereto as Schedule B, which Executive shall be required to execute and not revoke as a condition to receiving severance payments and benefits under Article 7 or Article 8 of this Agreement.
"Restrictive Covenant Agreement" means the Employee Non-Competition Agreement to be entered into by Executive and the Company concurrently with the execution of this Agreement, as it may be amended from time to time in accordance with its terms.
"Section 280G" means Section 280G of the Code, together with the Treasury Regulations and guidance issued thereunder.
"Section 409A" means Section 409A of the Code, together with the Treasury Regulations and guidance issued thereunder.
"Term" has the meaning set forth in Section 3.1 of this Agreement.
ARTICLE 2 — EMPLOYMENT AND POSITION
Section 2.1 — Position and Title
The Company hereby agrees to employ Executive, and Executive hereby accepts employment with the Company, in the position of Chief Operating Officer of Arbor Health Technologies Inc. Executive shall serve in such capacity and shall have such duties, responsibilities, and authority as are customarily associated with the position of Chief Operating Officer of a company of similar size and scope as the Company, and as are more particularly described in Exhibit A attached hereto (Position Description and Reporting Structure). Executive shall report directly to the Company's Chief Executive Officer, currently Priya Chandrasekaran, or to such other individual as the Board may designate from time to time (provided that any change in Executive's direct reporting relationship such that Executive no longer reports to the Chief Executive Officer shall constitute a basis for Good Reason under Section 7.3(a)). Executive shall also cooperate with and assist the Board and the Compensation Committee as reasonably requested in connection with the performance of Executive's duties.
Section 2.2 — Duties
Executive shall devote substantially all of Executive's business time, attention, skill, and energy to the affairs of the Company and the faithful and diligent performance of Executive's duties hereunder. Executive shall perform such duties in accordance with the Company's policies and procedures as in effect from time to time and in compliance with all applicable laws and regulations. Executive shall at all times act in the best interests of the Company and its stockholders.
Notwithstanding the foregoing, Executive may, with the prior written consent of the Chief Executive Officer (which consent shall not be unreasonably withheld, conditioned, or delayed): (a) serve on the boards of directors of up to two (2) outside entities (whether non-profit or for-profit), provided that such entities are not Competitors (as defined in the Restrictive Covenant Agreement) of the Company and that such service does not create an actual or apparent conflict of interest with Executive's duties to the Company; and (b) manage Executive's personal investments and financial affairs. In addition, Executive may engage in civic, charitable, educational, and professional activities, provided that such activities do not, individually or in the aggregate, materially interfere with Executive's performance of duties under this Agreement or create an actual or apparent conflict of interest with Executive's obligations to the Company.
Section 2.3 — Principal Place of Employment
Executive's principal place of employment shall be the Company's offices located at 400 Brattle Commerce Park, Suite 1200, Cambridge, MA 02138, or such other location within thirty-five (35) miles of Cambridge, Massachusetts as the Company may designate from time to time. Executive acknowledges and agrees that the performance of Executive's duties may require reasonable domestic and international business travel, which Executive agrees to undertake as necessary to fulfill Executive's responsibilities.
Section 2.4 — Start Date
Executive's employment under this Agreement shall commence on November 1, 2022 (the "Start Date"), subject to the satisfaction or waiver of the conditions precedent set forth in Article 11 of this Agreement. In the event that the conditions precedent are not satisfied or waived on or before the Start Date, the Parties shall use commercially reasonable efforts to agree upon a mutually acceptable alternative start date; provided, however, that if the conditions precedent are not satisfied or waived by December 1, 2022, either Party may terminate this Agreement by written notice to the other Party, and neither Party shall have any further obligation hereunder.
ARTICLE 3 — TERM OF EMPLOYMENT
Section 3.1 — Initial Term and Renewal
The initial term of Executive's employment under this Agreement shall commence on the Start Date and shall continue for a period of three (3) years, ending on October 31, 2025 (the "Initial Term"). Upon the expiration of the Initial Term, the term of Executive's employment shall automatically renew for successive periods of one (1) year each (each, a "Renewal Term" and, together with the Initial Term, the "Term"), unless either Party provides written notice of non-renewal to the other Party at least ninety (90) days prior to the expiration of the then-current Term.
For the avoidance of doubt, in the event that the Company provides written notice of non-renewal in accordance with this Section 3.1 (other than in circumstances that would constitute a termination for Cause or due to Disability), such non-renewal shall be treated as a termination of Executive's employment by the Company without Cause for purposes of Section 7.4, and Executive shall be entitled to the severance payments and benefits set forth therein, subject to the conditions specified in Section 7.4(e). Non-renewal by Executive shall be treated as a voluntary resignation by Executive under Section 7.6.
Section 3.2 — At-Will Employment
Notwithstanding the provisions of Section 3.1 relating to the Term, Executive's employment with the Company is and shall remain "at-will" at all times during the Term, meaning that either Party may terminate the employment relationship at any time, with or without Cause and with or without advance notice, subject to the terms and conditions of Article 7 of this Agreement. Nothing in this Agreement shall be construed to create a guarantee of employment for any specific period of time or to limit the right of either Party to terminate Executive's employment in accordance with Article 7.
ARTICLE 4 — COMPENSATION
Section 4.1 — Base Salary
During the Term, the Company shall pay Executive an annual base salary of Five Hundred Seventy-Five Thousand Dollars ($575,000) (the "Base Salary"), payable in substantially equal installments in accordance with the Company's regular payroll practices as in effect from time to time (currently semi-monthly). The Base Salary shall be subject to annual review by the Compensation Committee, which review shall ordinarily occur in connection with the Company's annual compensation review cycle. The Compensation Committee may, in its sole discretion, increase the Base Salary from time to time; provided, however, that the Base Salary shall not be decreased below the initial rate of $575,000 per annum (or such higher rate as may then be in effect) without Executive's prior written consent, except as part of an across-the-board reduction in base salaries proportionally affecting all senior executives of the Company. For the avoidance of doubt, any reduction in the Base Salary in excess of ten percent (10%) of the then-current Base Salary (other than an across-the-board reduction proportionally affecting all senior executives) shall constitute Good Reason under Section 7.3(a)(ii). Any increase in the Base Salary shall not serve to limit or reduce any other compensation, benefit, or obligation of the Company under this Agreement, and the increased Base Salary shall thereafter constitute the "Base Salary" for all purposes under this Agreement.
Section 4.2 — Annual Bonus
(a) Target Bonus. For each fiscal year of the Company during the Term, Executive shall be eligible to receive an annual performance bonus (the "Annual Bonus") with a target bonus opportunity equal to seventy-five percent (75%) of Executive's Base Salary (the "Target Bonus"). Based on the initial Base Salary of $575,000, the initial Target Bonus is Four Hundred Thirty-One Thousand Two Hundred Fifty Dollars ($431,250).
(b) Maximum Bonus. The maximum Annual Bonus that Executive may earn in any fiscal year shall be equal to one hundred fifty percent (150%) of the Target Bonus. Based on the initial Target Bonus of $431,250, the initial maximum Annual Bonus is Six Hundred Forty-Six Thousand Eight Hundred Seventy-Five Dollars ($646,875).
(c) Performance Objectives. The Annual Bonus for each fiscal year shall be determined by the Compensation Committee based upon Executive's achievement of individual performance objectives and the Company's achievement of Company-wide performance objectives (which may include, without limitation, revenue targets, EBITDA targets, customer retention and acquisition metrics, and other financial and operational metrics), as established by the Compensation Committee in consultation with the Chief Executive Officer within ninety (90) days after the beginning of each fiscal year. The weighting of individual and Company performance objectives shall be determined by the Compensation Committee in its reasonable discretion.
(d) Payment Timing. The Annual Bonus, if any, for each fiscal year shall be calculated and paid within seventy-five (75) days following the end of the applicable fiscal year, subject to Executive's continued employment with the Company through the (except as otherwise provided in Sections 7.4(b), 7.5, and 8.2(b) of this Agreement).
(e) Prorated Bonus for Initial Fiscal Year. For the fiscal year in which the Start Date occurs, Executive's Annual Bonus shall be prorated based on the number of days during such fiscal year that Executive was employed by the Company, divided by the total number of days in such fiscal year.
Section 4.3 — Signing Bonus
(a) Payment. In consideration of Executive's acceptance of employment with the Company and as an inducement for Executive to commence employment, the Company shall pay Executive a one-time signing bonus of Two Hundred Fifty Thousand Dollars ($250,000) (the "Signing Bonus"), payable within thirty (30) days following the Start Date, subject to applicable tax withholding.
(b) Clawback. In the event that Executive's employment with the Company is terminated (i) by Executive voluntarily (other than for Good Reason) or (ii) by the Company for Cause , in either case within twenty-four (24) months following the Start Date, Executive shall repay the Signing Bonus to the Company on a prorated basis, with the repayment amount calculated by reducing the Signing Bonus by one twenty-fourth (1/24th) for each full calendar month of employment completed by Executive between the Start Date and the date of termination. By way of example, if Executive's employment is terminated for Cause after twelve (12) full months of employment, Executive shall repay one-half (50%) of the Signing Bonus, or $125,000. The Company may, at its election, offset any amounts owed by Executive under this Section 4.3(b) against any amounts otherwise payable to Executive by the Company, to the extent permitted by applicable law.
(c) Survival. Executive's obligation to repay the Signing Bonus pursuant to this Section 4.3 shall survive the termination of this Agreement and Executive's employment hereunder.
Section 4.4 — Equity Awards
Section 4.4(a) — Stock Options
As soon as reasonably practicable following the Start Date (and subject to the approvals described in Section 4.4(c)), the Company shall grant to Executive nonqualified stock options (the "Stock Options") to purchase a number of shares of the Company's common stock equal to one and one-quarter percent (1.25%) of the fully diluted equity of the Company as of the date of grant. The Stock Options shall vest according to the following schedule: twenty-five percent (25%) of the Stock Options shall vest on the first anniversary of the date of grant (the "cliff"), and the remaining seventy-five percent (75%) of the Stock Options shall vest in thirty-six (36) equal monthly installments thereafter, such that the Stock Options shall be fully vested on the fourth anniversary of the date of grant (the "four-year vesting period"), in each case subject to Executive's continued employment with the Company through the applicable vesting date. The exercise price per share of the Stock Options shall be equal to the fair market value per share of the Company's common stock as of the date of grant, as determined by the Board in good faith (which determination may be based on an independent third-party valuation). The Stock Options shall be subject in all respects to the terms and conditions of the Equity Plan and the Stock Option Award Agreement to be entered into by Executive and the Company, which agreement shall be substantially in the form previously provided to Executive's counsel.
Section 4.4(b) — Restricted Stock Units
As soon as reasonably practicable following the Start Date (and subject to the approvals described in Section 4.4(c)), the Company shall grant to Executive restricted stock units (the "RSUs") representing one-half of one percent (0.50%) of the fully diluted equity of the Company as of the date of grant. The RSUs shall vest according to the following schedule: one-third (33.33%) of the RSUs shall vest on each of the first, second, and third anniversaries of the date of grant, such that the RSUs shall be fully vested on the third anniversary of the date of grant (the "three-year vesting period"), in each case subject to Executive's continued employment with the Company through the applicable vesting date. Settlement of vested RSUs shall be made in shares of the Company's common stock (or, at the Company's election and subject to applicable law, in cash or a combination of cash and shares) within thirty (30) days following the applicable vesting date. The RSUs shall be subject in all respects to the terms and conditions of the Equity Plan and the RSU Award Agreement to be entered into by Executive and the Company, which agreement shall be substantially in the form previously provided to Executive's counsel.
Section 4.4(c) — General Equity Provisions
All equity awards granted to Executive under this Section 4.4 shall be subject to the terms and conditions of the AHT 2020 Equity Incentive Plan (as amended May 2021), including without limitation any applicable provisions relating to transferability, forfeiture, and clawback. The grant of equity awards hereunder is subject to any required approvals under the Amended and Restated Stockholders' Agreement among the Company, Ridgeline Capital Partners, LP, Helix Ventures Fund III, LP, and certain other stockholders of the Company (the "Stockholders' Agreement"), including the consent of Ridgeline Capital Partners, LP and, where applicable under the Stockholders' Agreement, the consent of Helix Ventures Fund III, LP. The Company shall use commercially reasonable efforts to obtain all such approvals promptly following the execution of this Agreement. The acceleration of vesting provisions applicable to the Stock Options and RSUs upon certain termination events and upon a Qualifying CIC Termination (as defined herein) are set forth in Sections 7.4(c) and 8.2(d) of this Agreement, respectively. In the event of any conflict between this Agreement and the Equity Plan or the applicable award agreements, the terms of this Agreement shall control with respect to the matters specifically addressed herein; provided, however, that with respect to all other matters, the terms of the Equity Plan and the applicable award agreements shall control.
ARTICLE 5 — EMPLOYEE BENEFITS
Section 5.1 — Health Insurance
During the Term, Executive and Executive's eligible dependents shall be entitled to participate in the Company's executive health plan, which shall include medical, dental, and vision insurance coverage, on the same terms and conditions as are generally made available to the Company's other senior executive officers. The Company's current employer premium contribution toward Executive's health insurance coverage is approximately Two Thousand One Hundred Fifty Dollars ($2,150) per month, subject to the terms of the applicable plan documents and to adjustments based on changes in plan design, carrier pricing, and applicable law. Nothing in this Agreement shall be construed to require the Company to maintain any particular benefit plan or to prevent the Company from amending, modifying, or terminating any benefit plan in accordance with its terms and applicable law, provided that any such amendment, modification, or termination applies generally to the Company's senior executive officers as a group.
Section 5.2 — Life Insurance
During the Term, the Company shall provide Executive with Company-paid life insurance coverage in an amount equal to two times (2×) Executive's Base Salary. Based on the initial Base Salary of $575,000, the initial life insurance coverage amount shall be One Million One Hundred Fifty Thousand Dollars ($1,150,000). Such coverage shall be provided under the Company's group life insurance plan or, if Executive is not eligible for coverage under such plan, through an individual policy procured by the Company on Executive's behalf.
Section 5.3 — Disability Insurance
During the Term, Executive shall be eligible to participate in the Company's executive disability insurance plan, which shall provide long-term disability insurance coverage at a benefit level of sixty percent (60%) of Executive's Base Salary, subject to the terms, conditions, and limitations of the applicable plan documents. The Company shall pay the premiums for such coverage in accordance with the Company's standard practices for its senior executive officers.
Section 5.4 — Retirement Benefits
During the Term, Executive shall be eligible to participate in the Company's 401(k) retirement savings plan on the same terms and conditions as are generally applicable to the Company's other employees. The Company currently provides a matching contribution to the 401(k) plan of up to four percent (4%) of eligible compensation, subject to the terms of the plan document and applicable Internal Revenue Service limitations on annual contributions and eligible compensation. Nothing in this Agreement shall be construed to require the Company to maintain any particular 401(k) plan or matching contribution formula.
Section 5.5 — Paid Time Off
During the Term, Executive shall be entitled to twenty-five (25) days of paid time off ("PTO") per calendar year, in addition to the Company's regularly observed holidays. For the calendar year in which the Start Date occurs, Executive's PTO shall be prorated based on the number of days remaining in such calendar year following the Start Date. PTO shall accrue and be subject to carry-over in accordance with the Company's standard accrual and carry-over policies for senior executives, as in effect from time to time.
Section 5.6 — Executive Perquisites
(a) Professional Development Allowance. During the Term, the Company shall provide Executive with an annual professional development allowance of up to Fifteen Thousand Dollars ($15,000) for reasonable expenses incurred in connection with continuing education programs, professional conferences, executive education seminars, and professional memberships and dues that are relevant to Executive's position and duties with the Company. Such expenses shall be reimbursed in accordance with the Company's expense reimbursement policies.
(b) Executive Physical Examination. During the Term, Executive shall be entitled to participate in the Company's executive physical examination program, which provides for an annual comprehensive physical examination at a Company-designated medical facility, with costs paid by the Company.
Section 5.7 — Relocation
In the event that Executive incurs relocation expenses in connection with the commencement of employment with the Company, the Company shall reimburse Executive for reasonable, documented relocation expenses in an aggregate amount not to exceed Seventy-Five Thousand Dollars ($75,000). Such expenses may include, without limitation, costs associated with the sale and/or purchase of a primary residence, temporary housing, moving and storage of household goods, and travel expenses incidental to the relocation. Relocation expenses shall be reimbursed in accordance with the Company's relocation policy and this Agreement's expense reimbursement provisions. The Parties acknowledge that, as of the date hereof, Executive currently resides in the Commonwealth of Massachusetts, and it is not anticipated that Executive will be required to relocate in connection with the commencement of employment; accordingly, utilization of this relocation allowance is not expected.
Section 5.8 — Indemnification and D&O Insurance
(a) Indemnification. The Company shall indemnify, defend, and hold harmless Executive to the fullest extent permitted by the Company's Amended and Restated Certificate of Incorporation, Amended and Restated Bylaws, and applicable law (including, without limitation, the Delaware General Corporation Law, as amended), against all costs, charges, expenses (including reasonable attorneys' fees), judgments, fines, penalties, and amounts paid in settlement incurred by Executive in connection with any threatened, pending, or completed action, suit, or proceeding (whether civil, criminal, administrative, or investigative) arising out of or related to Executive's service as an officer, director, employee, or agent of the Company or any Affiliate. The Company shall advance expenses to Executive in connection with any such proceeding to the fullest extent permitted by applicable law, subject to Executive's undertaking to repay such advances if it is ultimately determined that Executive is not entitled to indemnification.
(b) Directors' and Officers' Liability Insurance. During the Term and for a period of years following the termination of Executive's employment with the Company for any reason, the Company shall maintain in effect a directors' and officers' liability insurance policy (or policies) providing coverage to Executive on terms and in amounts no less favorable than the coverage provided to the Company's other senior executive officers and directors. In the event of a Change in Control, the Company (or its successor) shall purchase a "tail" or "run-off" policy of directors' and officers' liability insurance providing coverage for a period of years following the date of such Change in Control, with coverage terms and limits no less favorable than those in effect immediately prior to the Change in Control.
ARTICLE 6 — EXPENSE REIMBURSEMENT
Section 6.1 — Business Expenses
During the Term, the Company shall reimburse Executive for all reasonable, documented, out-of-pocket business expenses incurred by Executive in the performance of Executive's duties hereunder, in accordance with the Company's expense reimbursement policies as in effect from time to time. Executive shall submit expense reports and supporting documentation within forty-five (45) days of incurring any such expense, and the Company shall process reimbursement within sixty (60) days of receipt of a properly documented expense report. To the extent that any expense reimbursements or in-kind benefits provided under this Agreement constitute "nonqualified deferred compensation" within the meaning of Section 409A, the following rules shall apply: (a) the amount of expenses eligible for reimbursement, or in-kind benefits provided, during any calendar year shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year; (b) reimbursement of eligible expenses shall be made on or before the last day of the calendar year following the calendar year in which the expense was incurred; and (c) Executive's right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for any other benefit.
ARTICLE 7 — TERMINATION OF EMPLOYMENT
Section 7.1 — Termination Events
Executive's employment under this Agreement may be terminated at any time upon the occurrence of any of the following events:
(a) Executive's death;
(b) Executive's Disability;
(c) Termination by the Company for Cause, in accordance with Section 7.2;
(d) Termination by the Company without Cause, in accordance with Section 7.4;
(e) Resignation by Executive for Good Reason, in accordance with Section 7.3;
(f) Voluntary resignation by Executive without Good Reason, in accordance with Section 7.6; or
(g) Expiration of the Term by reason of non-renewal, in accordance with Section 7.7.
Upon any termination of Executive's employment, the Company shall pay to Executive (or, in the case of Executive's death, to Executive's estate or designated beneficiary) all Accrued Obligations. For purposes of this Agreement, "Accrued Obligations" means: (i) any earned but unpaid Base Salary through the date of termination; (ii) any accrued but unused PTO, to the extent payable under applicable Company policy and law; (iii) any unreimbursed business expenses incurred in accordance with Article 6 that are properly documented and submitted within the applicable time period; and (iv) any vested benefits to which Executive is entitled under the Company's employee benefit plans, payable in accordance with the terms of such plans. The Accrued Obligations shall be paid regardless of the reason for termination and regardless of whether Executive executes or revokes the Release.
Section 7.2 — Termination for Cause
Section 7.2(a) — Definition of Cause
For purposes of this Agreement, "Cause" shall mean the occurrence of any one or more of the following events:
(i) A material breach by Executive of any provision of this Agreement, which breach, if capable of cure, remains uncured for a period of days following written notice from the Company to Executive specifying the nature of such breach in reasonable detail;
(ii) The conviction of Executive of, or Executive's entry of a plea of guilty or nolo contendere to, a felony or any crime involving moral turpitude under federal or state law;
(iii) Willful misconduct or gross negligence by Executive in the performance of Executive's duties and responsibilities hereunder that is materially injurious to the business, operations, assets, reputation, or financial condition of the Company or any Affiliate;
(iv) Fraud, embezzlement, misappropriation, or theft by Executive of funds, assets, or property of the Company or any Affiliate;
(v) A material violation by Executive of the Company's written policies, codes of conduct, or compliance programs, as such policies are in effect from time to time and have been provided or made available to Executive, which violation, if capable of cure, remains uncured for a period of days following written notice from the Company to Executive specifying the nature of such violation in reasonable detail; or
(vi) The willful and continued failure by Executive to follow lawful written directives of the Chief Executive Officer or the Board that are consistent with Executive's title, position, and duties hereunder, which failure remains uncured for a period of days following written notice from the Company to Executive specifying the nature of such failure in reasonable detail.
For purposes of this Section 7.2(a), no act or failure to act on Executive's part shall be considered "willful" unless it is done, or omitted to be done, by Executive in bad faith or without a reasonable belief that Executive's action or omission was in the best interests of the Company. The Company shall provide Executive with written notice of its intention to terminate Executive's employment for Cause, setting forth in reasonable detail the grounds for such termination, and, with respect to items (i), (v), and (vi) above, shall afford Executive the opportunity to cure as provided herein. If the grounds for Cause are subject to a cure period, the Company may not terminate Executive's employment for Cause with respect to such grounds if Executive has effected a cure within the applicable cure period to the reasonable satisfaction of the Board (or a committee thereof).
Section 7.2(b) — Entitlements Upon Cause Termination
In the event that Executive's employment is terminated by the Company for Cause, Executive shall be entitled to receive only the Accrued Obligations. Executive shall not be entitled to any severance payments or benefits, any Pro-Rata Bonus, or any acceleration of vesting of any equity awards. All unvested Stock Options and RSUs shall be immediately forfeited upon a Cause termination, and vested Stock Options shall be exercisable in accordance with the terms of the Equity Plan and the applicable Stock Option Award Agreement. The Signing Bonus clawback provisions of Section 4.3(b) shall apply.
Section 7.3 — Resignation for Good Reason
Section 7.3(a) — Definition of Good Reason
For purposes of this Agreement, "Good Reason" shall mean the occurrence of any one or more of the following events without Executive's prior written consent:
(i) A material diminution in Executive's title, authority, duties, or responsibilities (including a material reduction in the scope of Executive's operational oversight or strategic authority), or a change in Executive's reporting structure such that Executive no longer reports directly to the Chief Executive Officer of the Company;
(ii) A reduction in Executive's Base Salary by more than ten percent (10%) of the then-current Base Salary (other than an across-the-board reduction in base salaries proportionally affecting all senior executives of the Company);
(iii) A reduction in Executive's target Annual Bonus opportunity by more than ten percent (10%) of the then-current target Annual Bonus opportunity;
(iv) The relocation of Executive's principal place of employment to a location more than thirty-five (35) miles from Cambridge, Massachusetts; or
(v) A material breach by the Company of any material provision of this Agreement.
Drafting Note: Item (iii) was added in this Second Draft and item (iv) was revised to reduce the mileage threshold from fifty (50) miles to thirty-five (35) miles, in each case pursuant to the markup provided by Fielding & Rowe LLP on behalf of Executive.
Section 7.3(b) — Good Reason Process
Executive may not resign for Good Reason unless Executive has complied with the following notice and cure procedure:
(A) Executive must provide written notice to the Company of the condition constituting Good Reason within sixty (60) days after Executive first becomes aware of the existence of such condition, specifying in reasonable detail the facts and circumstances constituting Good Reason;
(B) The Company shall have a period of thirty (30) days following its receipt of such written notice (the "Cure Period") within which to cure or remedy the condition constituting Good Reason;
(C) If the Company fails to cure or remedy the condition within the Cure Period, Executive must tender Executive's written resignation within sixty (60) days following the expiration of the Cure Period; and
(D) Executive's failure to provide timely written notice of the Good Reason condition, or Executive's failure to resign within sixty (60) days following the expiration of the Cure Period, shall constitute a waiver of Executive's right to resign for Good Reason with respect to such condition.
Section 7.4 — Termination Without Cause / Resignation for Good Reason (No Change in Control)
In the event that Executive's employment is terminated by the Company without Cause (and other than due to death or Disability) or by Executive for Good Reason, in each case at any time other than during the twenty-four (24)-month period following a Change in Control, Executive shall be entitled to receive the following payments and benefits, in addition to the Accrued Obligations, subject to the conditions set forth in Section 7.4(e):
Section 7.4(a) — Severance Payment — Base Salary Continuation
The Company shall pay Executive an amount equal to twelve (12) months of Executive's Base Salary ($575,000, or such higher rate as may be in effect at the time of termination), payable in substantially equal installments on the Company's regular payroll dates during the twelve (12)-month period following the date of termination. Such installment payments shall commence on the first regularly scheduled payroll date following the sixtieth (60th) day after Executive's date of termination (the "Payment Commencement Date"), and the first installment payment shall include a catch-up payment for any installments that would have been paid during the period between the date of termination and the Payment Commencement Date had the installments commenced immediately following the date of termination.
Section 7.4(b) — Pro-Rata Bonus
The Company shall pay Executive the Pro-Rata Bonus for the fiscal year in which Executive's termination of employment occurs, and prorated for the number of days during such fiscal year that Executive was actively employed by the Company. The Pro-Rata Bonus shall be paid at the time that Annual Bonuses are paid to other senior executives of the Company for such fiscal year, but in no event later than seventy-five (75) days following the end of such fiscal year.
Section 7.4(c) — Equity Acceleration
Upon Executive's termination of employment pursuant to this Section 7.4, twenty-five percent (25%) of the then-unvested Stock Options and RSUs held by Executive shall immediately vest as of the date of termination. With respect to Stock Options that become vested pursuant to this Section 7.4(c), such Stock Options shall remain exercisable for a period of ninety (90) days following the date of termination (or the remainder of the original option term, if shorter), after which they shall expire and be cancelled. With respect to RSUs that become vested pursuant to this Section 7.4(c), settlement shall occur within thirty (30) days following the date of vesting, subject to Section 409A.
Section 7.4(d) — COBRA Continuation
For a period of twelve (12) months following Executive's date of termination (the "COBRA Reimbursement Period"), the Company shall reimburse Executive for the cost of continuation coverage for Executive and Executive's eligible dependents under the Company's group health plan (medical, dental, and vision) pursuant to COBRA, provided that Executive timely elects COBRA coverage and is eligible therefor. Based on the current monthly premium of approximately $2,150, the estimated total reimbursement under this Section 7.4(d) is approximately Twenty-Five Thousand Eight Hundred Dollars ($25,800). The Company's obligation to reimburse COBRA premiums under this Section 7.4(d) shall cease on the earliest of: (i) the expiration of the COBRA Reimbursement Period; (ii) the date on which Executive becomes eligible for coverage under a group health plan maintained by a subsequent employer that provides substantially comparable coverage; or (iii) the date on which Executive ceases to be eligible for COBRA continuation coverage. Executive shall promptly notify the Company in writing if Executive becomes eligible for coverage under a subsequent employer's group health plan during the COBRA Reimbursement Period.
Section 7.4(e) — Conditions to Severance
Executive's right to receive the severance payments and benefits described in Sections 7.4(a) through 7.4(d) shall be conditioned upon and subject to: (i) Executive's timely execution and delivery to the Company, and non-revocation, of the Release (substantially in the form attached hereto as Schedule B), which Release must become effective and irrevocable within sixty (60) days following Executive's date of termination; and (ii) Executive's continued compliance with the terms and conditions of the Restrictive Covenant Agreement and Article 9 of this Agreement. In the event that Executive breaches the Restrictive Covenant Agreement or Article 9 of this Agreement, the Company's obligation to make any remaining severance payments and to provide any remaining severance benefits under this Section 7.4 shall immediately cease, and Executive shall be required to repay to the Company any severance payments previously received, to the extent permitted by applicable law.
Section 7.5 — Termination Due to Death or Disability
In the event that Executive's employment is terminated due to Executive's death or Disability, Executive (or Executive's estate or designated beneficiary, in the case of death) shall be entitled to receive the following, in addition to the Accrued Obligations:
(a) Pro-Rata Bonus. A Pro-Rata Bonus for the fiscal year in which the termination occurs, calculated at the target level (i.e., based on 100% achievement of performance objectives) and prorated for the number of days during such fiscal year that Executive was actively employed by the Company. Such Pro-Rata Bonus shall be payable at the time that Annual Bonuses are paid to other senior executives of the Company for such fiscal year, but in no event later than seventy-five (75) days following the end of such fiscal year.
(b) COBRA Continuation. For a period of twelve (12) months following the date of termination, the Company shall reimburse COBRA continuation coverage premiums for Executive's eligible dependents (in the case of death) or for Executive and Executive's eligible dependents (in the case of Disability), on the same terms and conditions as described in Section 7.4(d).
(c) Equity Acceleration. of the then-unvested Stock Options and RSUs held by Executive shall immediately vest as of the date of termination. With respect to Stock Options, the exercise period following termination due to death or Disability shall be governed by the terms of the Equity Plan and the applicable Stock Option Award Agreement.
No execution of the Release shall be required as a condition to receipt of the payments and benefits described in this Section 7.5.
Section 7.6 — Voluntary Resignation Without Good Reason
In the event that Executive voluntarily resigns from employment without Good Reason, Executive shall provide the Company with at least ninety (90) days' prior written notice of such resignation. The Company may, in its sole discretion, elect to waive all or any portion of the notice period and, in such event, shall pay Executive an amount equal to Executive's Base Salary for the portion of the notice period that is waived (such payment to be made in a lump sum or in installments on regular payroll dates, at the Company's election). Upon a voluntary resignation without Good Reason, Executive shall be entitled to receive only the Accrued Obligations. Executive shall not be entitled to any severance payments or benefits, any Pro-Rata Bonus, or any acceleration of vesting of any equity awards. All unvested Stock Options and RSUs shall be immediately forfeited upon such resignation, and vested Stock Options shall be exercisable in accordance with the terms of the Equity Plan and the applicable Stock Option Award Agreement. The Signing Bonus clawback provisions of Section 4.3(b) shall apply.
Section 7.7 — Expiration of Term / Non-Renewal
In the event that Executive's employment terminates upon expiration of the Term by reason of non-renewal by the Company pursuant to Section 3.1 (other than in circumstances that would constitute a termination for Cause or due to Disability), such termination shall be treated as a termination by the Company without Cause for purposes of Section 7.4, and Executive shall be entitled to the severance payments and benefits set forth therein, subject to the conditions specified in Section 7.4(e). In the event that Executive's employment terminates upon expiration of the Term by reason of non-renewal by Executive pursuant to Section 3.1, such termination shall be treated as a voluntary resignation by Executive without Good Reason under Section 7.6.
ARTICLE 8 — CHANGE IN CONTROL PROVISIONS
Section 8.1 — Definition of Change in Control
For purposes of this Agreement, a "change in control" (or "Change in Control") shall mean the occurrence of any one or more of the following events:
(i) Any Person or group of Persons (other than Ridgeline Capital Partners, LP or any of its Affiliates, or any employee benefit plan or related trust maintained by the Company) acquires beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended) of securities of the Company representing more than fifty percent (50%) of the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors;
(ii) The consummation of a merger, consolidation, statutory share exchange, or similar business combination involving the Company, or a sale, lease, exchange, or other disposition (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company, unless immediately following such transaction or series of related transactions, the holders of the Company's voting securities immediately prior thereto continue to hold (directly or indirectly through one or more intermediary entities) at least fifty percent (50%) of the combined voting power of the outstanding voting securities of the surviving, resulting, or acquiring entity (or the ultimate parent thereof) entitled to vote generally in the election of directors (or the equivalent governing body);
(iii) The approval by the stockholders of the Company of a plan of complete liquidation or dissolution of the Company; or
(iv) During any period of two (2) consecutive years, individuals who at the beginning of such period constituted the Board (the "Incumbent Directors"), together with any new directors whose election by the Board or whose nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who were either Incumbent Directors or whose election or nomination was previously so approved, cease for any reason to constitute a majority of the Board.
Ridgeline Capital Partners Carve-Out. Notwithstanding the foregoing, no Change in Control shall be deemed to have occurred solely by reason of any transaction or series of transactions among or between Ridgeline Capital Partners, LP and/or any of its Affiliates (including, without limitation, portfolio transfers, fund restructurings, continuation vehicle transactions, transfers between affiliated fund entities, and secondary sales among Ridgeline's limited partners), provided that, immediately following any such transaction, Ridgeline Capital Partners, LP (or its Affiliates, successor funds, or continuation vehicles) continues to hold, directly or indirectly, beneficial ownership of at least a majority of the combined voting power of the Company's outstanding voting securities.
Section 8.2 — Enhanced Severance Upon Qualifying Termination Following Change in Control (Double-Trigger)
The provisions of this Section 8.2 shall apply in the event that Executive's employment is terminated by the Company without Cause (and other than due to death or Disability) or by Executive for Good Reason, in either case within the twenty-four (24)-month period immediately following a Change in Control (a "Qualifying CIC Termination"). In the event of a Qualifying CIC Termination, Executive shall be entitled to receive the following payments and benefits, in addition to the Accrued Obligations and in lieu of (not in addition to) the severance payments and benefits described in Section 7.4:
Section 8.2(a) — CIC Severance Payment — Base Salary
The Company (or its successor) shall pay Executive an amount equal to twenty-four (24) months of Executive's Base Salary (as in effect immediately prior to the date of termination or, if greater, as in effect immediately prior to the Change in Control). Based on the initial Base Salary of $575,000, the estimated CIC Base Salary severance is $575,000 × 2 = $1,150,000. Such amount shall be payable in a single lump sum within sixty (60) days following Executive's date of termination, subject to the execution and effectiveness of the Release.
Section 8.2(b) — CIC Bonus Severance
The Company (or its successor) shall pay Executive an amount equal to two times (2×) the target Annual Bonus (as in effect immediately prior to the date of termination or, if greater, as in effect immediately prior to the Change in Control). Based on the initial Target Bonus of $431,250, the estimated CIC Bonus severance is $431,250 × 2 = $862,500. Such amount shall be payable in a single lump sum concurrent with the CIC Base Salary severance payment described in Section 8.2(a).
Section 8.2(c) — COBRA Continuation
For a period of months following Executive's date of termination, the Company (or its successor) shall reimburse Executive for the cost of COBRA continuation coverage for Executive and Executive's eligible dependents under the Company's group health plan (medical, dental, and vision), on the same terms and conditions as described in Section 7.4(d) (except that the reimbursement period shall be months rather than twelve (12) months). Based on the current monthly premium of approximately $2,150, the estimated total reimbursement under this Section 8.2(c) is $2,150 × = approximately ** **.
Section 8.2(d) — Full Equity Acceleration
Upon a Qualifying CIC Termination, one hundred percent (100%) of the then-unvested Stock Options and RSUs held by Executive shall immediately vest in full as of the date of termination. With respect to Stock Options that become vested pursuant to this Section 8.2(d), such Stock Options shall remain exercisable for a period of twelve (12) months following Executive's date of termination, or the remainder of the original option term, whichever is shorter, after which they shall expire and be cancelled. With respect to RSUs that become vested pursuant to this Section 8.2(d), settlement shall occur within thirty (30) days following the date of vesting, subject to Section 409A.
Section 8.2(e) — Total Estimated CIC Severance (Excluding Equity)
For reference purposes only, the total estimated CIC severance payable under Sections 8.2(a) through 8.2(c) (exclusive of equity acceleration and Accrued Obligations) is as follows:
The foregoing estimates are based on the initial Base Salary, initial Target Bonus, and current COBRA premium rates, and are provided for informational purposes only. Actual amounts may vary based on changes in Base Salary, Target Bonus, and COBRA premium rates over time.
Section 8.2(f) — Conditions to CIC Severance
Executive's right to receive the CIC severance payments and benefits described in Sections 8.2(a) through 8.2(d) shall be conditioned upon and subject to the same conditions as set forth in Section 7.4(e), including: (i) Executive's timely execution and delivery to the Company (or its successor), and non-revocation, of the Release, which Release must become effective and irrevocable within sixty (60) days following Executive's date of termination; and (ii) Executive's continued compliance with the terms and conditions of the Restrictive Covenant Agreement and Article 9 of this Agreement. The CIC severance payments and benefits described in this Section 8.2 shall be in lieu of, and not in addition to, the severance payments and benefits described in Section 7.4 of this Agreement. In no event shall Executive be entitled to receive severance under both Section 7.4 and Section 8.2.
Section 8.3 — Section 280G Cutback — Best Net After-Tax Provision
(a) General. In the event that any payments, benefits, or other consideration provided to or for the benefit of Executive under this Agreement or any other plan, program, agreement, or arrangement maintained by the Company or its Affiliates (collectively, the "Total Payments") would constitute "parachute payments" within the meaning of Section 280G of the Code and would be subject to the excise tax imposed by Section 4999 of the Code (the "Excise Tax"), then the Total Payments shall be reduced (but not below zero) to the extent necessary so that no portion of the Total Payments would be subject to the Excise Tax, but only if and to the extent that the net after-tax amount of the Total Payments, as so reduced (after taking into account all applicable federal, state, and local income taxes and employment taxes), would be greater than or equal to the net after-tax amount of the unreduced Total Payments (after giving effect to the Excise Tax and all applicable federal, state, and local income taxes and employment taxes).
(b) No Gross-Up. For the avoidance of doubt, in no event shall the Company be obligated to provide any tax gross-up payment to Executive with respect to any Excise Tax or any other tax imposed in connection with the Total Payments.
(c) Reduction Order. In the event that a reduction of the Total Payments is required pursuant to this Section 8.3,
(d) Determination. The determination of whether any reduction is required pursuant to this Section 8.3 and, if so, the amount of such reduction, shall be made by the Company's independent accounting advisor (which, as of the date hereof, is Hargrove & Sinclair CPAs), in coordination with the Company's outside tax counsel (which, for this purpose, shall be the tax group of Calderwood & Harkness LLP, under the direction of Gregory Tan, or such other tax advisor as the Company may designate). Such determination shall be binding on Executive and the Company, absent manifest error. The costs and expenses of such determination shall be borne by the Company. Executive shall cooperate with the Company and its advisors in connection with any Section 280G analysis, including by providing any information reasonably requested for purposes of the calculation.
ARTICLE 9 — RESTRICTIVE COVENANTS AND CONFIDENTIALITY
Section 9.1 — Confidential Information
(a) Acknowledgment. Executive acknowledges and agrees that, during the course of Executive's employment with the Company, Executive will have access to, will receive, and will be entrusted with Confidential Information (as defined below) that is proprietary to the Company and its Affiliates. Executive further acknowledges that the Confidential Information constitutes valuable, special, and unique assets of the Company's business, the unauthorized disclosure or use of which could cause substantial and irreparable harm to the Company.
(b) Definition. For purposes of this Agreement, "Confidential Information" means all information, data, and materials that are not generally known to the public and that relate to the business, operations, products, services, customers, patients, employees, technology, finances, or strategic plans of the Company or any Affiliate, including without limitation: (i) trade secrets and proprietary technology, algorithms, software, source code, and data architectures; (ii) customer and patient lists, customer and patient data, customer contracts, and customer relationship information; (iii) pricing information, fee schedules, discount structures, and revenue models; (iv) business plans, strategic plans, growth strategies, market analyses, and competitive intelligence; (v) financial data, projections, budgets, and financial models; (vi) marketing strategies, product development plans, and product roadmaps; (vii) research and development information, clinical data, and regulatory submissions; (viii) employee compensation data, organizational structures, and talent acquisition strategies; (ix) information regarding pending or threatened litigation, regulatory inquiries, or government investigations; and (x) any other non-public information relating to the Company's business that the Company treats as confidential or proprietary. Confidential Information may be in any form or medium, including written, oral, electronic, or visual.
(c) Obligations. During Executive's employment and at all times thereafter (in perpetuity), Executive shall: (i) hold all Confidential Information in strict