Calderwood & Harkness LLP One International Place, Suite 3400 Boston, MA 02110
Matter No. 1010-00004
DRAFT — Subject to Further Review and Negotiation
Prepared for discussion purposes only. This draft incorporates comments received from Fielding & Rowe LLP on August 19, 2022.
EMPLOYEE NON-COMPETITION AGREEMENT
Second Draft — August 30, 2022
This EMPLOYEE NON-COMPETITION AGREEMENT (this "Agreement") is entered into as of the Effective Date (as defined below), by and between Arbor Health Technologies Inc., a Delaware corporation with its principal office at 400 Brattle Commerce Park, Suite 1200, Cambridge, MA 02138 (the "Company"), and Dr. Marcus J. Elliston, an individual residing at 87 Laurel Hill Road, Wellesley, MA 02481 (the "Executive"). The Company and the Executive are each referred to herein individually as a "Party" and collectively as the "Parties."
This Agreement is entered into in connection with, and as a material condition to, the commencement of Executive's employment as Chief Operating Officer of the Company pursuant to that certain Executive Employment Agreement of even date herewith by and between the Company and Executive (the "Employment Agreement"). This Agreement is intended to comply in all respects with the Massachusetts Noncompetition Agreement Act, M.G.L. c. 149, § 24L, as amended (the "Act").
RECITALS
WHEREAS, the Company is engaged in the business of providing healthcare services and cloud-based clinical workflow and revenue cycle management software-as-a-service ("SaaS") solutions to healthcare providers, health systems, physician practice groups, and related organizations throughout the United States;
WHEREAS, the Company has offered Executive the position of Chief Operating Officer of the Company, reporting directly to the Company's Chief Executive Officer, Priya Chandrasekaran, pursuant to the terms and conditions set forth in the Employment Agreement;
WHEREAS, in the course of Executive's employment with the Company, Executive will have access to and become familiar with Confidential Information (as defined herein), trade secrets, proprietary business methods, customer and partner relationships, strategic plans, product development roadmaps, and other valuable assets of the Company and the Company Group;
WHEREAS, the Company's majority equity holder, Ridgeline Capital Partners, LP, and minority investor, Helix Ventures Fund III, LP, have significant interests in the protection of the Company's competitive position, intellectual property, and goodwill, and the restrictive covenants contained herein are intended, in part, to protect those interests;
WHEREAS, as a material inducement to the Company to employ Executive and to provide Executive with access to Confidential Information, equity awards under the AHT 2020 Equity Incentive Plan (as amended May 2021), and other valuable consideration, Executive has agreed to enter into the restrictive covenants set forth herein;
WHEREAS, this Agreement is supported by mutually agreed garden-leave consideration as required by M.G.L. c. 149, § 24L(b)(vii), the terms of which are set forth in Section 5 hereof; and
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, including the commencement of Executive's employment with the Company and the consideration described in Section 5 hereof, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
SECTION 1: DEFINITIONS
As used in this Agreement, the following terms shall have the meanings set forth below. Capitalized terms used but not defined in this Agreement shall have the meanings ascribed to them in the Employment Agreement.
1.1 "Board" shall mean the Board of Directors of Arbor Health Technologies Inc., as constituted from time to time.
1.2 "Cause" shall have the meaning ascribed to such term in the Employment Agreement. For the avoidance of doubt, the definition of "Cause" as set forth in Section 6.2 of the Employment Agreement is incorporated herein by reference and shall apply for all purposes of this Agreement.
1.3 "Change in Control" shall have the meaning ascribed to such term in the Employment Agreement, and shall include, without limitation: (i) the acquisition by any person or group (as such terms are used in Section 13(d) of the Securities Exchange Act of 1934, as amended) of more than fifty percent (50%) of the outstanding voting securities of the Company, other than any acquisition by Ridgeline Capital Partners, LP or any of its affiliates; (ii) any merger, consolidation, statutory share exchange, or sale of substantially all of the assets of the Company, in each case where the existing stockholders of the Company immediately prior to such transaction retain less than fifty percent (50%) of the combined voting power of the surviving or resulting entity immediately following such transaction; (iii) the complete liquidation or dissolution of the Company; or (iv) a change in the majority composition of the Board within any twelve (12)-month period, such that individuals who constituted the Board at the beginning of such period (together with any new directors whose election or nomination was approved by a vote of at least a majority of the directors then still in office who were directors at the beginning of such period) cease to constitute a majority of the Board.
1.4 "Company Group" shall mean, collectively, the Company and its direct and indirect subsidiaries, parents, and affiliates, including, without limitation, Ridgeline Capital Partners, LP and its controlled affiliates to the extent such controlled affiliates are operating in the Company's business or any business related thereto. For the avoidance of doubt, the term "Company Group" shall include any entity that directly or indirectly controls, is controlled by, or is under common control with the Company, where "control" means the power to direct the management and policies of such entity through the ownership of voting securities, by contract, or otherwise.
1.5 "Competing Business" shall mean any business, entity, division, or enterprise that is engaged, directly or through any subsidiary or affiliate, in the development, marketing, sale, licensing, or provision of healthcare information technology or healthcare software-as-a-service (SaaS) products or services, including, without limitation, clinical workflow solutions, revenue cycle management platforms, electronic health record systems, healthcare data analytics, or population health management tools, in each case where such business, entity, division, or enterprise has annual revenue in excess of Fifty Million Dollars ($50,000,000) and operates or conducts business within the United States. For purposes of this definition, "annual revenue" shall be determined based on the most recently completed fiscal year for which financial information is publicly available or, if not publicly available, reasonably ascertainable. Notwithstanding the foregoing, a division or business unit of a larger enterprise shall be evaluated independently if such division or business unit operates as a distinct business and generates its own identifiable revenue stream.
1.6 "Confidential Information" shall mean all non-public, proprietary, or confidential information of the Company Group, in whatever form or medium, whether or not marked as "confidential," including, without limitation: (a) trade secrets, as defined under applicable law, including the Massachusetts Trade Secrets Act (M.G.L. c. 93, §§ 42–42A) and the Defend Trade Secrets Act of 2016 (18 U.S.C. § 1836 et seq.); (b) business plans, strategic plans, and corporate development initiatives; (c) financial data, projections, budgets, and forecasts; (d) customer and partner lists, data, pricing, contractual terms, and relationship information; (e) pricing information, pricing models, discount structures, and fee schedules; (f) product development plans, product roadmaps, and technology strategies; (g) software source code, object code, algorithms, data structures, architectures, and technical specifications; (h) clinical workflow methodologies, protocols, and best practices; (i) revenue cycle management processes, techniques, and proprietary methods; (j) marketing strategies, competitive analyses, and go-to-market plans; (k) personnel information, including compensation data, performance evaluations, and organizational structures; (l) information regarding pending or contemplated mergers, acquisitions, divestitures, joint ventures, or other strategic transactions; (m) information regarding the Company's relationships with its equity holders, including Ridgeline Capital Partners, LP and Helix Ventures Fund III, LP; and (n) any other information designated as confidential by the Company, whether disclosed orally, in writing, electronically, or by any other means.
Notwithstanding the foregoing, "Confidential Information" shall not include information that: (i) is or becomes generally available to the public other than as a result of a disclosure by Executive in violation of this Agreement or any other obligation of confidentiality owed to the Company Group; (ii) was in Executive's possession on a non-confidential basis prior to its disclosure to Executive by the Company Group, provided that the source of such information was not bound by a confidentiality agreement with, or other contractual, legal, or fiduciary obligation of confidentiality to, the Company Group; (iii) becomes available to Executive on a non-confidential basis from a source other than the Company Group, provided that such source is not bound by a confidentiality agreement with, or other contractual, legal, or fiduciary obligation of confidentiality to, the Company Group; or (iv) is independently developed by Executive without the use of, or reference to, any Confidential Information of the Company Group.
1.7 "Covered Customer" shall mean any customer, client, or business partner of the Company Group with whom Executive had Material Contact during the last twenty-four (24) months of Executive's employment with the Company, or about whom Executive obtained Confidential Information during such period.
1.8 "Covered Employee" shall mean any individual employed by the Company Group at the manager level or above at any time during the last twelve (12) months of Executive's employment with the Company. For the avoidance of doubt, the term "Covered Employee" includes individuals holding the title of Manager, Senior Manager, Director, Vice President, Senior Vice President, Executive Vice President, or any equivalent or higher title within the Company Group's organizational structure.
1.9 "Effective Date" shall mean the date on which Executive commences employment with the Company pursuant to the Employment Agreement. The anticipated Effective Date is November 1, 2022.
1.10 "Employment Agreement" shall mean the Executive Employment Agreement entered into between the Company and Executive as of the Effective Date, as the same may be amended, restated, or supplemented from time to time in accordance with its terms.
1.11 "Good Reason" shall have the meaning ascribed to such term in the Employment Agreement. For the avoidance of doubt, the definition of "Good Reason" as set forth in Section 6.3 of the Employment Agreement is incorporated herein by reference and shall apply for all purposes of this Agreement.
1.12 "Material Contact" shall mean direct interaction, oversight, or substantive involvement with a customer, client, or business partner in connection with the Company Group's business, whether in person, by telephone, by videoconference, by electronic communication, or otherwise, including, without limitation, participation in sales presentations, contract negotiations, account management activities, service delivery oversight, strategic planning discussions, or executive relationship management.
1.13 "Non-Compete Period" shall mean the period of twelve (12) months immediately following the Termination Date, regardless of the reason for Executive's termination of employment with the Company, subject to the provisions of Sections 9.4 and 11.3 hereof.
1.14 "Non-Solicitation Period (Employees)" shall mean the period of eighteen (18) months immediately following the Termination Date, regardless of the reason for Executive's termination of employment with the Company.
1.15 "Non-Solicitation Period (Customers)" shall mean the period of twelve (12) months immediately following the Termination Date, regardless of the reason for Executive's termination of employment with the Company.
1.16 "Restricted Territory" shall mean the United States of America, including all fifty (50) states and the District of Columbia, and all territories and possessions thereof.
1.17 "Termination Date" shall mean the date on which Executive's employment with the Company terminates for any reason, whether such termination is initiated by the Company, by Executive, or by mutual agreement, and whether with or without Cause or with or without Good Reason.
SECTION 2: NON-COMPETITION COVENANT
2.1 Non-Competition Restriction. During the Non-Compete Period, Executive shall not, directly or indirectly, whether as an employee, officer, director, consultant, advisor, independent contractor, agent, partner, member, manager, stockholder, owner, co-venturer, or in any other capacity, for Executive's own benefit or for the benefit of any other person or entity:
(a) engage in, carry on, manage, operate, control, participate in, or be connected with a Competing Business within the Restricted Territory;
(b) render services to any Competing Business within the Restricted Territory that are the same as or substantially similar to the services Executive provided to the Company during the last two (2) years of Executive's employment, including, without limitation, services related to strategic planning, operational management, business development, product strategy, revenue cycle management oversight, clinical workflow optimization, or executive leadership; or
(c) have any ownership interest in (whether through stock, partnership, membership, or other equity ownership, or through profit-sharing or other financial arrangements) any Competing Business within the Restricted Territory;
provided, however, that nothing in this Section 2.1 shall prohibit Executive from owning, as a passive investment, less than two percent (2%) of the outstanding shares of capital stock of any corporation that is publicly traded on a national securities exchange or in the over-the-counter market.
2.2 Scope Limitations. The Parties acknowledge and agree that the non-competition restriction set forth in Section 2.1 is limited in the following respects:
(a) Industry Scope. The restriction applies only to businesses engaged in healthcare information technology or healthcare SaaS products or services, as further defined in the definition of "Competing Business" in Section 1.5 hereof, and does not extend to general technology companies, consulting firms, or other enterprises unless such enterprises derive a material portion of their revenue from healthcare IT or healthcare SaaS activities that would independently satisfy the definition of Competing Business;
(b) Revenue Threshold. The restriction applies only to Competing Businesses with annual revenue in excess of Fifty Million Dollars ($50,000,000), thereby excluding early-stage startups, small businesses, and other enterprises that do not present a material competitive threat to the Company;
(c) Geographic Scope. The restriction is limited to operations within the United States of America, and does not restrict Executive from engaging in activities outside the Restricted Territory; and
(d) Functional Scope. The restriction on rendering services to a Competing Business under Section 2.1(b) is limited to roles or activities that are the same as or substantially similar to those performed by Executive for the Company, and does not preclude Executive from rendering services to a Competing Business in a capacity unrelated to the Company's business, provided that Executive does not use or disclose any Confidential Information in connection with such services.
2.3 Acknowledgment. Executive acknowledges and agrees that: (i) the restrictions in this Section 2 are reasonable and necessary to protect the Company's legitimate business interests, including its Confidential Information, goodwill, customer and partner relationships, and the substantial investment the Company is making in Executive's employment, compensation, training, and equity awards; (ii) Executive's position as Chief Operating Officer will provide Executive with access to the Company's most sensitive Confidential Information, strategic plans, and key customer relationships; (iii) the scope, duration, and geographic reach of the restrictions in this Section 2 are fair and appropriate in light of Executive's senior executive role and the nature and extent of the Confidential Information to which Executive will have access; and (iv) the Company would not have entered into the Employment Agreement or provided Executive with the compensation, benefits, and equity awards described therein absent Executive's agreement to the covenants set forth in this Section 2.
SECTION 3: NON-SOLICITATION OF EMPLOYEES
3.1 Employee Non-Solicitation Restriction. During the Non-Solicitation Period (Employees), Executive shall not, directly or indirectly, whether for Executive's own account or for the account of any other person, firm, corporation, partnership, limited liability company, association, or other entity:
(a) solicit, recruit, hire, or attempt to solicit, recruit, or hire any Covered Employee to leave the employ of the Company Group or to accept employment or an engagement with any other person or entity;
(b) encourage, induce, or attempt to encourage or induce any Covered Employee to terminate, reduce, or materially alter his or her employment with, or services provided to, the Company Group; or
(c) assist, facilitate, or cooperate with any person or entity in doing or attempting to do any of the foregoing, including by identifying Covered Employees as potential candidates for employment, providing referrals, sharing contact information, or participating in interview or recruitment processes.
3.2 Scope of Employee Non-Solicitation. The restriction set forth in Section 3.1 shall apply to any individual who is a Covered Employee, as defined in Section 1.8 hereof, i.e., any individual employed by the Company Group at the manager level or above at any time during the last twelve (12) months of Executive's employment with the Company. For the avoidance of doubt:
(a) the restriction shall apply regardless of whether the Covered Employee's employment with the Company Group has terminated at the time of Executive's solicitation, so long as such individual was employed by the Company Group at the manager level or above at any time during the twelve (12)-month period described above;
(b) the restriction shall not apply to individuals employed by the Company Group below the manager level; and
(c) nothing in this Section 3 shall restrict Executive from making general public advertisements or postings for employment opportunities (including through newspapers, trade publications, job boards, or social media platforms) that are not specifically targeted at or directed toward Covered Employees; provided, however, that if a Covered Employee responds to such general advertisement or posting, Executive shall not engage in any individualized solicitation or recruitment of such Covered Employee in violation of Section 3.1 above.
SECTION 4: NON-SOLICITATION OF CUSTOMERS AND BUSINESS PARTNERS
4.1 Customer Non-Solicitation Restriction. During the Non-Solicitation Period (Customers), Executive shall not, directly or indirectly, whether for Executive's own account or for the account of any other person, firm, corporation, partnership, limited liability company, association, or other entity:
(a) solicit, divert, take away, or attempt to solicit, divert, or take away any Covered Customer for the purpose of providing products or services that are competitive with, or that are substitutes for, the products or services offered, sold, or provided by the Company Group;
(b) encourage, induce, or attempt to encourage or induce any Covered Customer to cease, reduce, or materially alter its business relationship with the Company Group, including by terminating or failing to renew any contract, subscription, license, or other agreement with the Company Group; or
(c) interfere with, disrupt, or attempt to interfere with or disrupt the Company Group's relationship with any Covered Customer, including by disparaging the Company Group, its products or services, or its personnel to any Covered Customer.
4.2 Limitation to Material Contact. The restrictions set forth in Section 4.1 apply only to customers, clients, and business partners with whom Executive had Material Contact during the last twenty-four (24) months of Executive's employment with the Company, or about whom Executive obtained Confidential Information during such period. This limitation is intended to ensure that the customer non-solicitation restriction is reasonably tailored to protect the Company's legitimate business interests in maintaining the customer relationships and goodwill developed with Executive's involvement, without unreasonably restricting Executive's ability to engage in business activities with customers, clients, or business partners with whom Executive had no material involvement during the course of Executive's employment with the Company.
SECTION 5: GARDEN-LEAVE CONSIDERATION
5.1 Garden-Leave Payment. In consideration of Executive's obligations under Section 2 (Non-Competition), and pursuant to the requirements of M.G.L. c. 149, § 24L(b)(vii), the Company shall, during the Non-Compete Period, pay Executive garden-leave compensation equal to fifty percent (50%) of Executive's highest annualized base salary within the two (2) years preceding the Termination Date (the "Garden-Leave Payment"). Based on the base salary of Five Hundred Seventy-Five Thousand Dollars ($575,000) per annum as set forth in Section 3.1 of the Employment Agreement, and assuming no increase in base salary prior to the Termination Date, the aggregate Garden-Leave Payment shall be Two Hundred Eighty-Seven Thousand Five Hundred Dollars ($287,500). Garden-Leave Payments shall be made in substantially equal installments on the Company's regular payroll schedule during the Non-Compete Period, commencing on the first regular payroll date following the Termination Date, and shall be subject to all applicable federal, state, and local tax withholdings and deductions. Each installment shall be treated as a separate payment for purposes of Section 409A of the Internal Revenue Code of 1986, as amended (the "Code").
5.2 Conditions to Garden-Leave Payment. The Company's obligation to make Garden-Leave Payments under this Section 5 is expressly conditioned upon:
(a) Executive's continued compliance with each of the terms and conditions of this Agreement, including, without limitation, the non-competition, non-solicitation, confidentiality, and invention assignment obligations set forth in Sections 2 through 7 hereof; and
(b) Executive's execution, delivery, and non-revocation of the General Release of Claims in the form attached as Schedule B to the Employment Agreement (the "Release"), within the time period specified therein (and in no event later than sixty (60) days following the Termination Date), provided that the Release has become effective and irrevocable in accordance with its terms prior to the commencement of Garden-Leave Payments.
In the event Executive breaches any provision of this Agreement, the Company's obligation to make Garden-Leave Payments shall terminate immediately and automatically upon the date of such breach, and Executive shall be obligated to repay to the Company all Garden-Leave Payments previously received within thirty (30) days of the Company's written demand therefor, to the extent permitted by applicable law.
5.3 Relationship to Severance. Garden-Leave Payments under this Section 5 are separate from, and in addition to, any severance benefits payable to Executive under the Employment Agreement or any other agreement between Executive and the Company; provided, however, that Garden-Leave Payments shall run concurrently with (and shall not be duplicative of or in addition to) any post-termination base salary continuation payable as severance under the Employment Agreement, to the extent such severance payments are being made during the Non-Compete Period. By way of illustration:
(a) In the event of a termination by the Company without Cause (other than in connection with a Change in Control), Executive is entitled to twelve (12) months of base salary continuation severance ($575,000) under Section 7.1 of the Employment Agreement. During the twelve (12)-month Non-Compete Period, the Garden-Leave Payment of $287,500 shall be paid concurrently with and offset against such severance, such that Executive shall receive the greater of the Garden-Leave Payment and the applicable severance payment for each payroll period.
(b) In the event of a termination by the Company without Cause or by Executive for Good Reason within twelve (12) months following a Change in Control, Executive is entitled to twenty-four (24) months of base salary continuation severance ($1,150,000) under Section 7.2 of the Employment Agreement. During the twelve (12)-month Non-Compete Period, the Garden-Leave Payment shall be paid concurrently with and offset against the severance payments applicable to that period, such that Executive shall receive the greater of the Garden-Leave Payment and the applicable severance payment for each payroll period.
The Parties acknowledge that the coordination provisions in this Section 5.3 are intended to ensure that Executive receives no less than the Garden-Leave Payment required by M.G.L. c. 149, § 24L during the Non-Compete Period, while avoiding duplicative payments to Executive.
5.4 Alternative Consideration. In lieu of Garden-Leave Payments under Section 5.1, the Parties may agree in writing, at or prior to the Termination Date, to other mutually agreed consideration that is sufficient to satisfy the requirements of M.G.L. c. 149, § 24L(b)(vii). Any such alternative consideration shall be documented in a written amendment to this Agreement executed by both Parties in accordance with Section 12.4 hereof.
SECTION 6: CONFIDENTIALITY AND NON-DISCLOSURE
6.1 Confidentiality Obligation. Executive shall not, at any time during or after Executive's employment with the Company, directly or indirectly, use, disclose, publish, disseminate, communicate, transfer, or make available to any third party any Confidential Information, in whole or in part, for any purpose whatsoever, except:
(a) as necessary and appropriate in the faithful performance of Executive's duties and responsibilities for the Company during the term of Executive's employment;
(b) with the prior written consent of the Company, as authorized by the Board or the Company's General Counsel; or
(c) as required by applicable law, regulation, subpoena, civil investigative demand, or other compulsory legal process, subject to Executive's compliance with the notice and cooperation obligations set forth in Section 6.2 hereof.
Executive acknowledges that the Confidential Information is the property of the Company Group and constitutes a valuable, special, and unique asset of the Company Group's business. Executive further acknowledges that the unauthorized use or disclosure of any Confidential Information could cause substantial harm to the Company Group and its business, competitive position, and goodwill.
6.2 Legally Compelled Disclosure. In the event that Executive is required by applicable law, regulation, subpoena, civil investigative demand, court order, or other compulsory legal process to disclose any Confidential Information, Executive shall:
(a) provide the Company with prompt written notice of such requirement, including a description of the Confidential Information sought to be disclosed, as soon as reasonably practicable and in any event sufficiently in advance of any required disclosure to enable the Company to seek a protective order or other appropriate remedy (to the extent such notice is legally permitted and does not itself violate applicable law or a valid court order);
(b) reasonably cooperate with the Company, at the Company's expense, in seeking a protective order, confidential treatment, or other appropriate remedy to prevent or limit the disclosure of Confidential Information; and
(c) disclose only that portion of the Confidential Information that is legally required to be disclosed, and take all reasonable steps to ensure that the disclosed Confidential Information is afforded confidential treatment by the recipient to the maximum extent permitted by law.
6.3 Duration. The obligations of Executive under this Section 6 shall survive the termination of Executive's employment with the Company and this Agreement and shall continue in perpetuity, or for such shorter period as may be required by applicable law.
6.4 Defend Trade Secrets Act Notice. Pursuant to the Defend Trade Secrets Act of 2016 (18 U.S.C. § 1833(b)), Executive is hereby notified that:
(a) An individual shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney, and solely for the purpose of reporting or investigating a suspected violation of law; or (ii) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.
(b) An individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual (i) files any document containing the trade secret under seal; and (ii) does not disclose the trade secret, except pursuant to court order.
Nothing in this Agreement shall be construed to prevent Executive from communicating with, cooperating with, or filing a complaint with any federal, state, or local governmental agency or regulatory authority, including the Securities and Exchange Commission, the Equal Employment Opportunity Commission, the Department of Justice, the National Labor Relations Board, the Occupational Safety and Health Administration, or any similar state or local agency.
6.5 Return of Materials. Upon the Termination Date, or at any time upon the Company's written request, Executive shall promptly return to the Company all documents, files, records, correspondence, notebooks, memoranda, reports, electronic data (including data stored on personal devices, cloud storage services, or external media), computers, mobile devices, access cards, keys, equipment, and all other materials and property belonging to the Company Group or containing or relating to Confidential Information, in any form or medium whatsoever, whether prepared by Executive or otherwise coming into Executive's possession, custody, or control during the course of Executive's employment. Executive shall not retain any copies, summaries, abstracts, or reproductions of any such materials in any form. Executive shall, if requested by the Company, certify in writing that Executive has complied with the requirements of this Section 6.5.
SECTION 7: INVENTION ASSIGNMENT
7.1 Assignment of Inventions. Executive hereby irrevocably assigns, transfers, and conveys to the Company all of Executive's right, title, and interest in and to any and all inventions, discoveries, developments, improvements, enhancements, works of authorship, software, code, databases, designs, ideas, concepts, methods, processes, techniques, know-how, data, formulas, and other intellectual property, whether or not patentable, copyrightable, or subject to other forms of intellectual property protection (collectively, "Inventions"), that are:
(a) conceived, created, developed, or reduced to practice by Executive, alone or jointly with others, during the term of Executive's employment with the Company, whether during or outside of working hours; and
(b) related to the Company's current or reasonably anticipated business, products, research, or services, or developed using Company resources, facilities, equipment, supplies, or Confidential Information.
Executive agrees that all such Inventions shall be the sole and exclusive property of the Company from the time of their conception, creation, development, or reduction to practice.
7.2 Prior Inventions. Executive shall, prior to or contemporaneously with the execution of this Agreement, disclose and describe all inventions, patents, patent applications, copyrights, and other intellectual property that were conceived, created, developed, or reduced to practice by Executive prior to the commencement of Executive's employment with the Company (collectively, "Prior Inventions") on the Prior Inventions Disclosure Form attached as Schedule A to the Employment Agreement. If no Prior Inventions are disclosed on Schedule A, Executive represents and warrants that no Prior Inventions exist as of the Effective Date. Any Prior Inventions listed on Schedule A are expressly excluded from the assignment set forth in Section 7.1 hereof. Executive shall not incorporate any Prior Invention into any Company product, service, process, or technology without the prior written consent of the Company.
7.3 Cooperation. Executive shall, both during and after the term of Executive's employment with the Company, execute all documents, instruments, and applications, and take all actions, as the Company may reasonably request to effectuate, perfect, and protect the assignments and rights contemplated by this Section 7, including, without limitation, assisting the Company in the filing, prosecution, and maintenance of patent applications, copyright registrations, and other intellectual property filings in any jurisdiction. The Company shall reimburse Executive for all reasonable out-of-pocket expenses incurred by Executive in connection with such cooperation after the termination of Executive's employment. If the Company is unable for any reason to secure Executive's signature on any document or instrument necessary to carry out the purposes of this Section 7.3, Executive hereby irrevocably designates and appoints the Company, and its duly authorized officers and agents, as Executive's agent and attorney-in-fact, with full power of substitution and revocation, to act on Executive's behalf to execute and file any such documents and instruments, and to do all other lawfully permitted acts to further the purposes of this Section 7, with the same legal force and effect as if executed by Executive.
7.4 Works Made for Hire. To the extent that any Invention qualifies as a "work made for hire" within the meaning of the Copyright Act of 1976 (17 U.S.C. § 101 et seq.) or any analogous provision of applicable foreign law, such Invention shall be deemed a work made for hire, and all right, title, and interest therein, including all copyrights and related rights, shall vest exclusively in the Company. To the extent that any such Invention does not qualify as a work made for hire, Executive hereby assigns to the Company all right, title, and interest in such Invention, including all copyrights, patent rights, and other intellectual property rights therein.
SECTION 8: REMEDIES
8.1 Injunctive Relief. Executive acknowledges and agrees that a breach or threatened breach of any of the covenants, obligations, or agreements set forth in Sections 2 through 7 of this Agreement would cause the Company irreparable injury and harm for which monetary damages would be an inadequate remedy. Accordingly, Executive agrees that, in the event of any such breach or threatened breach, the Company shall be entitled, in addition to any other remedies available at law or in equity, to seek and obtain temporary, preliminary, and/or permanent injunctive relief, specific performance, and other equitable relief from any court of competent jurisdiction to enforce the terms and provisions of this Agreement and to prevent or restrain any breach or threatened breach thereof, in each case without the necessity of (a) proving actual damages or the inadequacy of monetary damages, (b) posting any bond, surety, or other security, or (c) satisfying any other condition to the granting of equitable relief, to the fullest extent permitted by applicable law. Executive hereby waives any requirement for the posting of a bond or other security in connection with any such injunctive or equitable relief.
8.2 Tolling. In the event that Executive breaches any of the restrictive covenants set forth in Section 2 (Non-Competition), Section 3 (Non-Solicitation of Employees), or Section 4 (Non-Solicitation of Customers and Business Partners), the applicable restricted period shall be automatically tolled during any period of such breach, and such restricted period shall resume running upon the date that Executive ceases to be in breach of such covenant, such that the Company receives the full benefit of the agreed-upon duration of each restricted period.
8.3 Cumulative Remedies. The rights and remedies provided to the Company in this Section 8, and elsewhere in this Agreement, are cumulative and are in addition to, and not in lieu of, any other rights and remedies available to the Company at law, in equity, by statute, or otherwise. The exercise of any one remedy by the Company shall not preclude the exercise of any other remedy, and no single or partial exercise of any remedy shall preclude any further or other exercise of such remedy or the exercise of any other remedy.
8.4 Recovery of Fees. In any action, suit, or proceeding brought by either Party to enforce the terms and provisions of this Agreement, or to obtain damages or equitable relief arising out of a breach or threatened breach thereof, the prevailing party in such action shall be entitled to recover from the non-prevailing party its reasonable attorneys' fees, costs, and expenses (including fees and costs incurred on appeal), in addition to any other relief to which such prevailing party may be entitled.
SECTION 9: MASSACHUSETTS NONCOMPETITION AGREEMENT ACT COMPLIANCE
9.1 Statutory Compliance. This Agreement is intended to comply in all respects with the Massachusetts Noncompetition Agreement Act, M.G.L. c. 149, § 24L, as in effect on the date hereof. The Parties acknowledge and agree that: (a) Executive is not a nonexempt employee classified under the Fair Labor Standards Act of 1938, as amended, and M.G.L. c. 151, § 1A; (b) Executive is not an undergraduate or graduate student engaged in a short-term internship or other short-term employment relationship with the Company; (c) Executive has not been, and is not being, terminated without cause or laid off by the Company (this Agreement is being entered into in connection with the commencement of Executive's employment); (d) Executive is not under eighteen (18) years of age; and (e) Executive is not in any other category of workers prohibited from being subject to a non-competition agreement under the Act or any other applicable law.
9.2 Garden-Leave or Other Mutually Agreed Consideration. The Garden-Leave Payment described in Section 5 hereof constitutes the form of consideration required by M.G.L. c. 149, § 24L(b)(vii), which provides that a non-competition agreement must include either (i) a garden-leave clause whereby the employer agrees to pay the employee during the restricted period on a pro rata basis, at a rate of at least fifty percent (50%) of the employee's highest annualized base salary paid within the two (2) years preceding the employee's termination, or (ii) other mutually agreed-upon consideration. The Company and Executive acknowledge that the Garden-Leave Payment described in Section 5.1 satisfies the statutory requirement set forth in clause (i) above.
9.3 Notice. The Company shall provide Executive with a copy of this Agreement at least ten (10) business days before the commencement of Executive's employment with the Company (or, if this Agreement is entered into during the course of Executive's employment, at least ten (10) business days before the effective date of this Agreement), in compliance with M.G.L. c. 149, § 24L(b)(i). This Agreement shall be accompanied by a written notice expressly advising Executive to consult with an attorney of Executive's own choosing prior to signing this Agreement. The Parties acknowledge that this Agreement was first provided to Executive on or about October 14, 2022, which is more than ten (10) business days before the anticipated Effective Date of November 1, 2022, and that Executive has been advised in writing to consult with legal counsel.
9.4 Maximum Duration. The Non-Compete Period, as defined in Section 1.13 hereof, shall not exceed twelve (12) months following the Termination Date, consistent with M.G.L. c. 149, § 24L(b)(iv), which provides that the restricted period in a non-competition agreement shall not exceed twelve (12) months from the date of cessation of employment, unless the employee has breached his or her fiduciary duty to the employer or has unlawfully taken the employer's property, in which case the restricted period may be extended to a maximum of two (2) years. The Parties acknowledge that the twelve (12)-month Non-Compete Period set forth herein is within the statutory maximum.
9.5 Reformation. If a court of competent jurisdiction determines that any restriction contained in this Agreement, including the scope, duration, or geographic reach of any restrictive covenant, exceeds the limitations permitted under M.G.L. c. 149, § 24L, or is otherwise unenforceable as written, such restriction shall be automatically reformed and construed to the maximum extent permitted by the Act and applicable law, so as to render such restriction valid and enforceable while preserving the Parties' original intent to the greatest extent possible. The Parties intend that each restrictive covenant contained in this Agreement be read and construed independently of every other restrictive covenant, such that the unenforceability of any one restriction shall not affect the enforceability of any other restriction.
SECTION 10: REPRESENTATIONS AND ACKNOWLEDGMENTS
10.1 Executive Representations. Executive represents, warrants, and acknowledges to the Company as follows:
(a) Executive has had a reasonable and adequate opportunity to consult with independent legal counsel of Executive's own choosing regarding the terms, meaning, and effect of this Agreement prior to signing. Executive has been represented in the negotiation and review of this Agreement by Catherine A. Fielding of Fielding & Rowe LLP, 101 Federal Street, Suite 2600, Boston, MA 02110, and Executive has had the opportunity to discuss with counsel all aspects of this Agreement, including the restrictive covenants set forth in Sections 2 through 7 hereof.
(b) Executive has carefully read this Agreement in its entirety, fully understands all of its terms, conditions, and provisions, and has had the opportunity to ask questions and receive satisfactory answers regarding the same.
(c) The restrictions set forth in this Agreement, including the non-competition, non-solicitation, confidentiality, and invention assignment covenants, are reasonable in scope, duration, and geographic extent, and are necessary to protect the Company's legitimate business interests, including its Confidential Information, trade secrets, goodwill, customer relationships, employee workforce, and the substantial investment the Company is making in Executive's employment, training, and equity compensation.
(d) Executive's compliance with the terms of this Agreement will not prevent Executive from earning a livelihood or unreasonably restrict Executive's ability to pursue gainful employment following the termination of Executive's employment with the Company, taking into account Executive's education, experience, skills, and qualifications.
(e) Executive is not a party to any pre-existing employment agreement, non-competition agreement, non-solicitation agreement, confidentiality agreement, or other contractual obligation that would prevent or restrict Executive from performing Executive's duties and responsibilities for the Company or from fully complying with the terms of this Agreement. Without limiting the generality of the foregoing, Executive represents that Executive's prior employment with Pinnacle Care Systems, Inc. does not give rise to any obligation or restriction that would conflict with or limit Executive's ability to perform Executive's role as Chief Operating Officer of the Company or to comply with this Agreement.
(f) Executive is entering into this Agreement voluntarily, knowingly, and without coercion or duress.
10.2 Company Representations. The Company represents and warrants to Executive that: (a) this Agreement has been duly authorized by all necessary corporate action, including approval by the Board; (b) this Agreement constitutes a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, and similar laws affecting creditors' rights generally, and subject, as to enforceability, to general principles of equity; and (c) the execution, delivery, and performance of this Agreement by the Company does not and will not conflict with or violate any provision of the Company's certificate of incorporation or bylaws, or any material agreement to which the Company is a party.
SECTION 11: TERM AND TERMINATION
11.1 Effective Date. This Agreement shall become effective on the Effective Date, i.e., the date on which Executive commences employment with the Company pursuant to the Employment Agreement. If Executive does not commence employment with the Company on or before December 31, 2022, this Agreement shall be null and void and of no force or effect.
11.2 Survival. The obligations of Executive under Sections 2 through 8 of this Agreement shall survive the termination of Executive's employment with the Company for the respective periods specified therein. Without limiting the foregoing:
(a) The non-competition obligations under Section 2 shall survive for the duration of the Non-Compete Period (twelve (12) months following the Termination Date).
(b) The employee non-solicitation obligations under Section 3 shall survive for the duration of the Non-Solicitation Period (Employees) (eighteen (18) months following the Termination Date).
(c) The customer non-solicitation obligations under Section 4 shall survive for the duration of the Non-Solicitation Period (Customers) (twelve (12) months following the Termination Date).
(d) The confidentiality and non-disclosure obligations under Section 6 shall survive the termination of Executive's employment and this Agreement in perpetuity, or for such shorter period as may be required by applicable law.
(e) The invention assignment obligations under Section 7 shall survive the termination of Executive's employment and this Agreement in perpetuity.
(f) The remedies provisions of Section 8 shall survive to the extent necessary to enforce any of the foregoing surviving obligations.
11.3 Termination of Non-Compete Obligation. The Company may, at any time and in its sole discretion, elect to waive, in whole or in part, the non-competition restriction set forth in Section 2 hereof by providing Executive with written notice of such waiver. Upon the effective date of such waiver, the Company's obligation to make Garden-Leave Payments under Section 5 shall cease with respect to the period following the effective date of the waiver, and Executive shall be released from the non-competition obligations set forth in Section 2 to the extent specified in such written notice. Any such waiver shall not affect Executive's obligations under Sections 3, 4, 6, or 7 of this Agreement, which shall remain in full force and effect in accordance with their terms.
SECTION 12: GENERAL PROVISIONS
12.1 Governing Law. This Agreement shall be governed by, and construed and enforced in accordance with, the substantive laws of the Commonwealth of Massachusetts, without giving effect to any choice-of-law or conflict-of-law rules or provisions (whether of the Commonwealth of Massachusetts or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the Commonwealth of Massachusetts.
12.2 Forum Selection. Any action, suit, or proceeding arising out of, relating to, or in connection with this Agreement, or the breach, termination, or validity hereof, shall be brought and maintained exclusively in the state courts of the Commonwealth of Massachusetts sitting in Suffolk County or Middlesex County, or in the United States District Court for the District of Massachusetts, and each Party hereby irrevocably submits to the exclusive jurisdiction of such courts for the purposes of any such action, suit, or proceeding. Each Party irrevocably waives, to the fullest extent permitted by applicable law, any objection that it may now or hereafter have to the laying of venue of any such action, suit, or proceeding in any such court, and any claim that any such action, suit, or proceeding brought in any such court has been brought in an inconvenient forum.
12.3 Entire Agreement. This Agreement, together with the Employment Agreement and the equity award agreements contemplated thereby (including the Stock Option Award Agreement and the Restricted Stock Unit Award Agreement under the AHT 2020 Equity Incentive Plan, as amended May 2021), constitutes the entire agreement and understanding between the Parties with respect to the subject matter hereof, and supersedes all prior and contemporaneous negotiations, discussions, correspondence, representations, warranties, and agreements, whether oral or written, relating to the subject matter hereof. No representations, promises, or inducements have been made by either Party with respect to the subject matter hereof that are not set forth in this Agreement.
12.4 Amendment. This Agreement may not be amended, modified, supplemented, or restated except by a written instrument duly executed by both Parties hereto. No oral agreement, course of dealing, or course of performance shall serve to modify or amend any provision of this Agreement.
12.5 Waiver. No waiver by either Party of any breach or default of any provision of this Agreement shall be deemed to be a waiver of any subsequent or other breach or default, whether of a similar or different nature. No failure or delay by either Party in exercising any right, power, or remedy under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power, or remedy preclude any other or further exercise thereof or the exercise of any other right, power, or remedy.
12.6 Severability. If any provision of this Agreement, or the application of any such provision to any person or circumstance, is held invalid, illegal, or unenforceable by a court of competent jurisdiction, such invalidity, illegality, or unenforceability shall not affect any other provision of this Agreement or the application of such provision to any other person or circumstance, and the remaining provisions of this Agreement shall remain in full force and effect and shall be enforced to the fullest extent permitted by applicable law. If any provision of this Agreement is held to be excessively broad in scope, duration, or geographic reach, or is otherwise held to be unreasonable or unenforceable, the Parties intend that such provision shall be modified and reformed by the court to the minimum extent necessary to render it valid, enforceable, and consistent with the Parties' original intent, rather than being voided or declared unenforceable in its entirety (a "blue pencil" or reformation approach).
12.7 Assignment. Executive may not assign, transfer, or delegate any of Executive's rights, obligations, or duties under this Agreement, and any attempted assignment, transfer, or delegation in violation of this Section 12.7 shall be null and void. The Company may freely assign this Agreement, and all of its rights and obligations hereunder, to any successor entity or assignee that assumes the Company's obligations under this Agreement, including, without limitation, in connection with a Change in Control, merger, consolidation, reorganization, sale of substantially all assets, or other business combination, and this Agreement shall inure to the benefit of and be binding upon the Company's successors and assigns.
12.8 Notices. All notices, requests, demands, consents, and other communications required or permitted under this Agreement shall be in writing and shall be deemed duly given and received: (a) when delivered personally; (b) when sent by confirmed electronic mail (with a copy sent by another method specified herein); (c) one (1) business day after being sent by a nationally recognized overnight courier service (with confirmation of delivery); or (d) three (3) business days after being mailed by certified or registered mail, return receipt requested, postage prepaid, in each case addressed as follows:
If to the Company: Arbor Health Technologies Inc. 400 Brattle Commerce Park, Suite 1200 Cambridge, MA 02138
Attention: Aaron Whitfield, General Counsel
Email: awhitfield@arborhealth.com
With a copy (which shall not constitute notice) to: Calderwood & Harkness LLP One International Place, Suite 3400 Boston, MA 02110
Attention: Bernard Crawford, Esq.
Email: bcrawford@calderwoodharkness.com
If to Executive: Dr. Marcus J. Elliston 87 Laurel Hill Road Wellesley, MA 02481
Email: melliston@personal.net
With a copy (which shall not constitute notice) to: Fielding & Rowe LLP 101 Federal Street, Suite 2600 Boston, MA 02110
Attention: Catherine A. Fielding, Esq.
Email: cfielding@fieldingrowe.com
Either Party may change its address for purposes of this Section 12.8 by giving written notice of such change to the other Party in accordance with this Section.
12.9 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Signatures transmitted by facsimile or by electronic mail in portable document format (.pdf) shall be treated as original signatures for all purposes.
12.10 Section 409A. This Agreement is intended to comply with, or be exempt from, the requirements of Section 409A of the Code and the Treasury Regulations promulgated thereunder ("Section 409A"), and shall be interpreted, construed, and administered in a manner consistent with such intent. Notwithstanding any other provision of this Agreement, each payment made hereunder shall be treated as a separate payment for purposes of Section 409A, and the right to a series of installment payments under this Agreement shall be treated as a right to a series of separate payments for such purposes. In no event shall Executive, directly or indirectly, designate the calendar year of any payment made under this Agreement. If Executive is a "specified employee" within the meaning of Section 409A(a)(2)(B)(i) of the Code at the time of Executive's separation from service (as defined under Section 409A), any payment that constitutes "nonqualified deferred compensation" within the meaning of Section 409A that is payable on account of Executive's separation from service and that is not otherwise exempt from Section 409A shall not be paid until the first business day occurring after the date that is six (6) months after the date of Executive's separation from service (or, if earlier, the date of Executive's death), with all payments that would otherwise have been made during such six (6)-month period being accumulated and paid on such first business day.
12.11 Third-Party Beneficiaries. Except as expressly provided in this Section 12.11, nothing in this Agreement is intended to, or shall be construed to, confer upon any person other than the Parties hereto and their respective successors and permitted assigns any rights, benefits, or remedies of any nature whatsoever under or by reason of this Agreement. Notwithstanding the foregoing, the members of the Company Group, including, without limitation, Ridgeline Capital Partners, LP and Helix Ventures Fund III, LP, are expressly designated as intended third-party beneficiaries of Sections 2 through 6 of this Agreement, and each such member of the Company Group shall have the right to enforce the provisions of such Sections directly against Executive as if such member were a party to this Agreement.
12.12 Construction. The headings and captions used in this Agreement are for convenience of reference only and shall not affect the construction or interpretation of any provision hereof. The Parties acknowledge that each Party and its counsel have reviewed and participated in the drafting and negotiation of this Agreement. Accordingly, no rule of construction resolving ambiguities against the drafter shall apply in the interpretation of this Agreement or any amendments hereto. Unless the context otherwise requires: (a) the term "including" (and correlative terms such as "include" and "includes") shall mean "including, without limitation"; (b) references to "Sections" shall refer to Sections of this Agreement; (c) references to any statute, law, or regulation shall be deemed to refer to such statute, law, or regulation as amended, restated, supplemented, or replaced from time to time; (d) words in the singular shall include the plural and vice versa; and (e) references to "days" shall mean calendar days unless otherwise specified.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the Parties have executed this Employee Non-Competition Agreement as of the date set forth below, to be effective as of the Effective Date.
ARBOR HEALTH TECHNOLOGIES INC.
By: ________
Name: ________
Title: ________
Date: ________
EXECUTIVE
________________________________________
Dr. Marcus J. Elliston
Date: ________
EXHIBIT AND SCHEDULE CROSS-REFERENCE
The following exhibits and schedules, while not attached to this Agreement, are incorporated herein by reference as described in the applicable provisions of this Agreement:
Schedule A to the Employment Agreement — Prior Inventions Disclosure Form. Executive shall list all Prior Inventions (as defined in Section 7.2 of this Agreement) on Schedule A to the Employment Agreement. Any Prior Inventions so listed are excluded from the invention assignment obligations set forth in Section 7.1 of this Agreement. See Section 7.2.
Schedule B to the Employment Agreement — Form of General Release of Claims. Executive's receipt of Garden-Leave Payments under Section 5 of this Agreement is conditioned upon Executive's execution and non-revocation of the General Release of Claims in the form attached as Schedule B to the Employment Agreement. See Section 5.2(b).
SECOND DRAFT — August 30, 2022 — Prepared by Calderwood & Harkness LLP
CONFIDENTIAL — ATTORNEY-CLIENT PRIVILEGED — DRAFT FOR DISCUSSION PURPOSES ONLY
Matter No. 1010-00004