# Executive Exit Agreement Audit — Ava Soren / Meridian Forge ## 1. Bottom line Ava should **not sign the Meridian draft as written**. The draft contains multiple overbroad covenants, invalid forfeiture and clawback terms, and an improper release mechanism. Under the stated rules, Meridian may protect its legitimate interests through narrower prospective covenants, confidentiality protections, and a valid release, but it cannot use an overbroad “take-it-or-leave-it” package to forfeit Ava’s vested bonus, threaten her future work, or allow unilateral self-help remedies. The predecessor lawyer’s advice is also wrong. Ava should not sign based on the assumption that a court will later “blue-pencil” the agreement into something reasonable. Under the stated rules, a court may sever a distinct unlawful clause, but it may **not rewrite** an overbroad covenant’s duration, territory, business scope, or prohibited role to create a reasonable restraint the parties did not draft. The correct strategy is to redline now. --- ## 2. Correction of the predecessor lawyer’s advice The predecessor’s statement: > “Because you are highly paid, all restraints are enforceable. A court will blue-pencil anything excessive. Take the severance and rely on the judge to narrow it later.” is incorrect in several material respects. ### A. High compensation does not make overbroad restraints enforceable Executive status or high compensation may make a restraint more defensible, but it does not eliminate the substantive limits. Under the stated rules: - A noncompetition covenant is enforceable only for **no more than 12 months** and only as reasonably limited to the products, services, territory, and role in which the employee had material responsibility. - A customer nonsolicitation covenant is enforceable only for **no more than 12 months** and only as to covered customers or active prospects. - An employee nonsolicitation covenant is enforceable only for **12 months** and only as to targeted recruitment of employees the executive directly supervised or worked with materially. - Confidentiality may be permanent only for information that remains a trade secret; other confidential business information is limited to two years. - Invention assignment cannot reach post-employment inventions merely because they broadly relate to the industry. Ava’s compensation is therefore not a reason to accept a 24-month worldwide noncompete covering all Meridian divisions and all work for a competitor. ### B. “Blue-penciling” is not a safety net The predecessor’s advice assumes a court can simply rewrite the covenant. That is not the rule stated here. A court may sever a distinct unlawful clause, but it may **not** rewrite a covenant’s duration, territory, business scope, or prohibited role to manufacture a reasonable restraint the parties did not draft. Meridian’s noncompete is overbroad in all four dimensions: - Duration: 24 months, instead of no more than 12. - Territory: worldwide, instead of Alder and Birch. - Business line: all Meridian divisions, including unrelated medical-device and consumer-electronics lines. - Prohibited role: any capacity for any competitor. Ava should not rely on a judge to save the deal. ### C. The draft’s forfeiture and clawback terms are independently defective Even if some covenants could be narrowed, the draft’s provision allowing Meridian to forfeit Ava’s vested bonus and all severance based on an allegation of breach, with sole discretion to stop payments and demand repayment, is not acceptable. Earned compensation cannot be forfeited for post-employment competition absent a separate lawful plan term making it unvested. The bonus vested on December 31. It must be paid. ### D. The correct advice Ava should: 1. Reject the predecessor’s “sign and hope the court fixes it” approach. 2. Demand that Meridian redraft the covenants to comply with the stated rules. 3. Protect her vested bonus, vested equity, earned salary, and severance from allegation-based forfeiture. 4. Accept only narrow, lawful protections for Meridian’s legitimate interests: confidentiality, trade-secret protection, and limited nonsolicitation covenants. 5. Avoid any noncompetition covenant that would prevent her planned industrial-sensor product role in Alder and Birch. --- ## 3. Issue-by-issue correction and redline positions ### A. Noncompetition covenant #### Meridian draft A 24-month worldwide bar on working in any capacity for any business that competes with any Meridian division. #### Why it is defective This covenant fails on every enforceability dimension: | Dimension | Meridian draft | Problem | |---|---:|---| | Duration | 24 months | Exceeds the 12-month maximum. | | Territory | Worldwide | Ava worked primarily in States Alder and Birch. | | Business line | Any Meridian division | Includes unrelated medical-device and consumer-electronics divisions. | | Prohibited role | Any capacity | Ava had material responsibility for industrial-sensor sales in Alder and Birch, not all possible roles for a competitor. | Under the stated rules, this is overbroad. A court may not rewrite it into a reasonable restraint. #### Correct redline position **Primary position:** Delete the noncompetition covenant entirely. Meridian’s legitimate interests can be protected through: - Trade-secret protection while information remains a trade secret. - Two-year protection for other confidential business information. - A 12-month customer nonsolicitation covenant limited to customers and active prospects with whom Ava had material contact or about whom she received material confidential information. - A 12-month employee nonsolicitation covenant limited to targeted recruitment of employees she directly supervised or worked with materially. #### Fallback if Meridian insists on a noncompete If Meridian insists on a noncompetition covenant, Ava’s fallback should be no broader than: - **Duration:** 12 months. - **Territory:** States Alder and Birch only. - **Business line:** Meridian’s Industrial Sensors products and services only. - **Prohibited role:** Only roles in which Ava had material responsibility, such as sales, business development, or executive leadership for industrial-sensor products or services. - **Express exclusions:** - No restriction on medical-device or consumer-electronics work. - No restriction on passive ownership. - No restriction on product, engineering, or other non-sales/non-executive roles that do not involve the role in which Ava had material responsibility. - No restriction on any work outside Industrial Sensors. Because Ava plans to take a **product role** in Alder and Birch, the fallback must expressly permit that role. If Meridian demands a bar on “any capacity” or any work for an industrial-sensor competitor, Ava should reject it. --- ### B. Customer nonsolicitation covenant #### Meridian draft A 24-month bar on soliciting or accepting business from any Meridian customer or prospect. #### Why it is defective The covenant is overbroad in duration and scope. | Dimension | Meridian draft | Problem | |---|---:|---| | Duration | 24 months | Exceeds the 12-month maximum. | | Scope | Any Meridian customer or prospect | Too broad. It must cover only customers or active prospects with whom Ava had material contact or about whom she received material confidential information during the final year. | | Conduct | Soliciting or accepting business | “Accepting business” is overbroad. Unsolicited inbound business should not be barred. | #### Correct redline position Replace the customer nonsolicitation covenant with a 12-month covenant limited to: - Meridian’s **Industrial Sensors** customers and active prospects. - Individuals located in or primarily serviced in States Alder and Birch. - Customers or active prospects with whom Ava had **material contact** during the final 12 months of employment, or about whom she received **material confidential information** during that period. The covenant should prohibit only **solicitation or inducement** to terminate, reduce, or divert business. It should expressly exclude: - General advertising or public marketing. - Responding to unsolicited inquiries. - Accepting unsolicited business. - Use of public information. - Customers or prospects outside the defined scope. #### Suggested replacement language > For a period of twelve (12) months following separation, Employee shall not, directly or indirectly, solicit or induce to terminate, reduce, or divert any Industrial Sensors customer or active prospect of Meridian with whom Employee had material contact during the final twelve (12) months of employment, or about whom Employee received material Confidential Information during that period. > > This covenant does not prohibit general advertising, public marketing, responding to unsolicited inquiries, accepting unsolicited business, or contacting customers or prospects using only public information. --- ### C. Employee nonsolicitation covenant #### Meridian draft A 24-month prohibition on soliciting, hiring, or employing any current or former Meridian worker. #### Why it is defective The covenant is overbroad in duration and scope. | Dimension | Meridian draft | Problem | |---|---:|---| | Duration | 24 months | Exceeds the 12-month maximum. | | Scope | Any current or former Meridian worker | Too broad. It must be limited to employees Ava directly supervised or worked with materially. | | Conduct | Soliciting, hiring, or employing | A general bar on employing people is overbroad. It may not prohibit general advertising, unsolicited applications, or hiring people unknown to Ava. | #### Correct redline position Replace the employee nonsolicitation covenant with a 12-month covenant limited to: - Current employees of Meridian’s Industrial Sensors division. - Employees Ava directly supervised or worked with materially. - Employees with whom Ava had material contact during the final 12 months of employment. - Targeted recruitment or inducement to leave Meridian. It should expressly exclude: - General job advertisements. - Unsolicited applications. - Hiring individuals unknown to Ava. - Passive hiring. - Former employees, unless Meridian can limit the covenant to targeted recruitment of individuals who were current employees during the restricted period and with whom Ava had the required material relationship. #### Suggested replacement language > For a period of twelve (12) months following separation, Employee shall not directly or indirectly target for recruitment, solicit, or induce to leave Meridian any current employee of Meridian’s Industrial Sensors division whom Employee directly supervised, with whom Employee worked materially, or with whom Employee had material contact during the final twelve (12) months of employment. > > This covenant does not prohibit general job advertisements, unsolicited applications, hiring individuals unknown to Employee, or passive hiring. --- ### D. Confidentiality obligations #### Meridian draft Permanent confidentiality for all information learned during employment, including skills and experience. #### Why it is defective The draft is overbroad in duration and scope. Under the stated rules: - Trade secrets may be protected while they remain trade secrets. - Other confidential business information may be restricted for two years. - Confidentiality does not cover: - Public information. - General skill and experience. - Independently developed information. - Information lawfully received from others. A permanent ban on all information learned, including general skills and experience, is invalid. #### Correct redline position Replace the confidentiality clause with a two-tier structure: 1. **Trade secrets:** protected for as long as they remain trade secrets under applicable law. 2. **Other confidential business information:** protected for two years after separation. Add express exclusions for: - Information that is or becomes publicly available. - Information already known to the recipient before disclosure. - Information independently developed without use of Meridian confidential information. - Information lawfully received from a third party without restriction. - Ava’s general skill, knowledge, experience, and expertise. Ava should expressly reserve the right to use her general skills, experience, and training. #### Suggested replacement language > Employee shall protect Meridian’s Trade Secrets for so long as they remain trade secrets under applicable law. Employee shall protect other Confidential Business Information for two (2) years following separation. > > “Confidential Information” does not include: (a) information that is or becomes publicly available through no fault of Employee; (b) information already known to Employee before disclosure by Meridian; (c) information independently developed by Employee without use of Meridian Confidential Information; (d) information lawfully received from a third party without restriction; or (e) Employee’s general skill, knowledge, experience, and expertise. > > Nothing in this agreement restricts Employee’s right to use her general skill, knowledge, experience, and expertise in future employment. --- ### E. Post-employment invention assignment #### Meridian draft Assignment to Meridian of every invention Ava conceives within one year after departure if it “relates to Meridian’s current or anticipated business.” #### Why it is defective This is overbroad. Under the stated rules, an invention assignment may cover work created during employment using company time, systems, confidential information, or business opportunities. It may not claim inventions created after employment without company resources merely because they relate broadly to the industry. Meridian’s clause does exactly that: - It reaches inventions conceived **after** departure. - It imposes a one-year post-employment claim. - It uses a broad “current or anticipated business” standard. #### Correct redline position Delete the one-year post-employment invention assignment. The invention assignment should be limited to inventions: - Conceived, developed, or reduced to practice **during employment**; and - Made in the course of employment; and - Relating to Meridian’s actual business or research and development during employment; and/or - Made using Meridian’s time, systems, equipment, facilities, confidential information, or business opportunities. It should not assign post-employment inventions merely because they relate to Meridian’s industry or anticipated business. If Ava uses Meridian confidential information or resources after departure to create an invention, the agreement may address disclosure and assignment to the extent made using those protected assets, but it should not create a blanket one-year post-departure claim. #### Suggested replacement language > During the term of employment, Employee hereby assigns to Meridian all inventions conceived, developed, or reduced to practice by Employee to the extent they: (a) relate to Meridian’s actual business or research and development as conducted during employment; (b) result from work performed for Meridian; or (c) are made using Meridian’s time, systems, equipment, facilities, Confidential Information, or business opportunities. > > This assignment does not apply to inventions conceived after employment merely because they relate to Meridian’s industry or anticipated business. If an invention conceived after employment is made using Meridian Confidential Information or Meridian resources, Employee will disclose it and assign it only to the extent it was made using such Confidential Information or resources. --- ### F. Vested bonus, vested equity, and earned salary #### Meridian draft Forfeiture of the $140,000 vested bonus and all severance if Meridian alleges any covenant breach. #### Why it is defective The $140,000 bonus vested under the bonus plan on December 31. It is earned compensation. Under the stated rules, earned salary, vested bonus, and vested equity may not be forfeited for post-employment competition unless a separate lawful plan term expressly makes the compensation unvested. Here, the bonus vested. There is no stated lawful plan term making it unvested upon separation or covenant breach. Therefore, forfeiture is invalid. The draft’s forfeiture trigger is also invalid because it is based on an **allegation**, not a material, adjudicated breach. #### Correct redline position The agreement must state that: 1. All salary earned through the separation date is payable. 2. The $140,000 bonus vested on December 31 and is payable on February 15. 3. No covenant, release, alleged breach, or post-employment competition causes forfeiture, reduction, offset, repayment, or delay of: - Earned salary. - Vested bonus. - Vested equity. 4. Vested equity remains vested. 5. No repurchase, clawback, or forfeiture applies to vested equity. #### Suggested replacement language > All salary earned by Employee through the separation date shall be paid in accordance with Meridian’s payroll practices. The $140,000 bonus vested on December 31 under the bonus plan and shall be paid on February 15. > > No release, covenant, alleged breach, or post-employment activity shall cause forfeiture, reduction, offset, repayment, or delay of earned salary, vested bonus, or vested equity. All vested equity remains vested and is not subject to repurchase, forfeiture, or clawback. --- ### G. Severance #### Meridian offer 12 months of salary, or $360,000, in exchange for a release. #### What is permissible Severance may be conditioned on: - A valid release. - Prospective covenants that are lawful and enforceable. It may not be: - Conditioned on forfeiture of earned compensation. - Subject to unilateral stoppage based on an allegation. - Subject to sole-discretion clawback. #### Correct redline position The severance should be: - $360,000. - Payable in 12 equal monthly installments. - Beginning after the release becomes effective. - Conditioned on the release and valid prospective covenants. - Not subject to forfeiture or suspension based on an allegation. - Subject only to proportionate remedies for a material, uncured breach after proper notice, cure opportunity, and adjudication where necessary. #### Suggested replacement language > As consideration for the Release and the prospective covenants in this agreement, Meridian shall pay Employee severance in the total amount of $360,000, payable in twelve (12) equal monthly installments beginning on the first regular payroll date after the Release Effective Date. > > Severance is not earned compensation. It may be subject only to the proportionate remedies expressly provided for a material uncured breach of a prospective covenant in this agreement. Severance shall not be suspended, reduced, offset, or recovered based on an allegation of breach or Meridian’s unilateral discretion. --- ### H. Breach, notice, cure, materiality, adjudication, repayment, and proportional remedies #### Meridian draft Meridian’s sole discretion to stop payments and demand repayment, with no notice, cure period, materiality threshold, or adjudication. #### Why it is defective This violates the stated rule that a severance agreement may provide proportionate remedies for a material covenant breach, but it may not permit the company, in its sole discretion and without notice, to declare any allegation a breach and claw back earned compensation. The draft gives Meridian unilateral self-help rights. That is unacceptable. #### Correct redline position The agreement should require: 1. **Written notice:** Meridian must identify the specific covenant and the factual basis for the alleged breach. 2. **Materiality:** Only a material breach may trigger remedies. 3. **Cure period:** Ava should have a reasonable opportunity to cure, such as 30 days where cure is possible. 4. **No unilateral determination:** Meridian cannot simply declare a breach and stop payments. 5. **Adjudication for monetary recovery:** Repayment, offset, or monetary recovery should require a final written determination by a court or, if both parties agree, binding arbitration. 6. **Proportional remedies:** Remedies should be proportionate to the breach and may include: - Actual damages. - Injunctive relief where appropriate. - Offset against unpaid severance. - Repayment of severance to the extent proportionate and justified. 7. **No clawback of earned compensation:** Earned salary, vested bonus, and vested equity are excluded from remedies. #### Suggested replacement language > Meridian shall not declare a breach by unilateral discretion or based solely on an allegation. If Meridian claims a breach of a covenant in this agreement, Meridian shall provide Employee written notice describing in reasonable detail the specific covenant allegedly breached and the facts supporting the claim. > > Employee shall have thirty (30) days from receipt of such notice to cure the breach to the extent cure is possible. No remedy shall lie for an immaterial breach. > > Any monetary recovery, offset, or repayment of severance shall be available only after a final written determination by a court of competent jurisdiction, or by binding arbitration if agreed by both parties, that Employee committed a material uncured breach of a prospective covenant. Remedies shall be proportionate to the breach and may include actual damages, injunctive relief, offset against unpaid severance, or repayment of severance to the extent justified. > > No remedy shall permit forfeiture, offset, or repayment of earned salary, vested bonus, or vested equity. During a good-faith dispute over a future severance installment, payments shall continue unless a final order provides otherwise. If Meridian wants a compromise, disputed severance could be placed in escrow by agreement of both parties, but Meridian should not have the right to unilaterally stop payments. --- ### I. Release effectiveness and revocation #### Meridian draft Release effective immediately on signing, with no revocation period. #### Why it is defective Under the stated rules, a release becomes effective after the stated seven-day revocation period. Meridian may condition severance payments on effectiveness, but it may not delay already earned compensation. #### Correct redline position The agreement should provide: 1. The release is not effective until seven days after execution. 2. Ava may revoke the release by written notice before the end of the seven-day period. 3. The release becomes effective only if not revoked. 4. Severance may be conditioned on the release becoming effective. 5. The vested bonus is earned and must be paid on February 15 regardless of whether the release is signed or effective by that date. #### Suggested replacement language > This Release shall not be effective until seven (7) days after Employee’s execution. Employee may revoke this Release by written notice delivered to Meridian before the expiration of the seven-day revocation period. If Employee does not revoke the Release within that period, the Release shall become effective on the eighth day following execution. > > Severance payments may be conditioned on the Release becoming effective. The $140,000 vested bonus is earned compensation and shall be paid on February 15 regardless of whether this Release is executed or effective by that date. --- ## 4. Prioritized redline package The redlines should be organized by priority. The first items are deal-breakers. ### Priority 1: Protect earned compensation These are non-negotiable. 1. **Vested bonus:** - State that the $140,000 bonus vested on December 31. - State that it is payable on February 15. - Delete all forfeiture language. - State that no covenant, release, alleged breach, or post-employment activity causes forfeiture, reduction, offset, or repayment. 2. **Vested equity:** - Add express language that vested equity remains vested. - Add express language that there is no repurchase, clawback, forfeiture, or offset. 3. **Earned salary:** - Add express language that all salary earned through the separation date is payable. 4. **No unilateral clawback:** - Delete Meridian’s sole-discretion right to stop payments and demand repayment. - Replace with notice, cure, materiality, adjudication, and proportional remedies. 5. **Severance:** - Severance may be conditioned on a valid release and lawful prospective covenants. - Severance may not be forfeited based on an allegation. - Severance may not be suspended without process. ### Priority 2: Protect future work This is also a deal-breaker for Ava. 1. **Delete the noncompetition covenant.** 2. If Meridian insists, limit any noncompete to: - 12 months. - Industrial Sensors only. - States Alder and Birch only. - Roles in which Ava had material responsibility, such as sales, business development, or executive leadership. - Expressly exclude Ava’s planned product role. - Exclude medical-device and consumer-electronics lines. - Exclude passive ownership. 3. If Meridian will not permit Ava’s planned product role in an industrial-sensor company in Alder and Birch, Ava should reject the noncompete. ### Priority 3: Limit customer and employee nonsolicitation These covenants can be acceptable if properly narrowed. 1. **Customer nonsolicitation:** - 12 months. - Industrial Sensors customers and active prospects only. - Alder and Birch. - Only customers or active prospects with material contact or material confidential information during the final year. - Prohibit solicitation/inducement, not unsolicited inbound business. 2. **Employee nonsolicitation:** - 12 months. - Targeted recruitment only. - Current Industrial Sensors employees Ava directly supervised or worked with materially. - Exclude general ads, unsolicited applications, unknown candidates, and passive hiring. ### Priority 4: Fix confidentiality and invention assignment These are important but more standard. 1. **Confidentiality:** - Trade secrets: protected while they remain trade secrets. - Other confidential business information: two years. - Exclude public information, general skill and experience, independently developed information, and information lawfully received from others. - Expressly reserve Ava’s general skill, knowledge, experience, and expertise. 2. **Invention assignment:** - Delete the one-year post-departure assignment. - Limit assignment to inventions made during employment using company time, systems, confidential information, or business opportunities. - No broad “current or anticipated business” standard. ### Priority 5: Fix breach process and release mechanics These are necessary to make the agreement legally and practically acceptable. 1. **Breach process:** - Written notice. - Materiality threshold. - Cure period. - No unilateral breach declaration. - Adjudication for monetary recovery. - Proportionate remedies only. 2. **Release:** - Seven-day revocation period. - Release effective only after revocation period. - Severance may begin after release effective date. - Vested bonus not delayed. --- ## 5. Concrete negotiation position for Ava Ava’s negotiation position should be direct and grounded in the legitimate protection Meridian can receive without an overbroad package. ### Opening position Ava should tell Meridian: > I am willing to protect Meridian’s legitimate interests. I will agree to reasonable confidentiality protections, trade-secret protection, and narrow nonsolicitation covenants. But I will not accept a 24-month worldwide noncompete, a bar on accepting unsolicited business, a 24-month hiring bar, permanent confidentiality over my general skills, a post-employment invention assignment, forfeiture of vested compensation, or unilateral clawback rights. ### What Ava should offer in exchange for severance Ava can offer: 1. A valid release of existing claims, effective after the seven-day revocation period. 2. A 12-month customer nonsolicitation covenant limited to Industrial Sensors customers and active prospects with whom she had material contact or about whom she received material confidential information during the final year. 3. A 12-month employee nonsolicitation covenant limited to targeted recruitment of current Industrial Sensors employees she directly supervised or worked with materially. 4. Confidentiality protection for trade secrets while they remain trade secrets and for other confidential business information for two years. 5. Protection of Meridian’s confidential information through return or destruction of materials, as appropriate. 6. No use or disclosure of Meridian trade secrets. That gives Meridian real protection without impairing Ava’s ability to work. ### What Ava should demand in return 1. **Deletion of the noncompete.** 2. If Meridian insists on a noncompete, a fallback limited to 12 months, Industrial Sensors, Alder and Birch, and only roles involving her material responsibility, with an express carve-out for her planned product role. 3. Payment of the $140,000 vested bonus on February 15. 4. No forfeiture of vested equity. 5. Severance of $360,000 paid after release effectiveness. 6. No forfeiture of severance based on an allegation. 7. No sole-discretion stoppage or repayment. 8. Notice, cure, materiality, and adjudication before any monetary remedy. 9. Proportionate remedies only. 10. Seven-day revocation period for the release. ### Fallback position If Meridian refuses to delete the noncompete, Ava’s fallback is: > I will consider a 12-month noncompete only if it is limited to Industrial Sensors products and services in States Alder and Birch and only to roles in which I had material responsibility, such as sales, business development, or executive leadership. It must expressly permit my planned product role, exclude medical-device and consumer-electronics work, and not prohibit passive ownership. If Meridian insists on: - A 24-month noncompete. - A worldwide noncompete. - A bar on working in any capacity for an industrial-sensor competitor. - A bar on work in unrelated Meridian divisions. - Forfeiture of the vested bonus. - Forfeiture of vested equity. - Sole-discretion clawback. - No revocation period for the release. then Ava should decline the severance. ### Walk-away position Ava should not sign if the agreement: 1. Allows Meridian to forfeit her vested bonus. 2. Places her vested equity at risk. 3. Permits Meridian to stop severance payments without notice, cure, materiality, or adjudication. 4. Bars her from taking the planned industrial-sensor product role in Alder and Birch. 5. Contains a 24-month worldwide noncompete. 6. Contains a permanent ban on using her general skills and experience. 7. Assigns post-employment inventions merely because they broadly relate to Meridian’s industry. The 12 months of severance is valuable, but it is not worth an agreement that puts Ava’s vested compensation and future career at risk through overbroad and unenforceable terms. The correct result is a narrowed agreement that protects Meridian’s legitimate confidential and relationship-based interests while preserving Ava’s right to work and her earned compensation.