IN THE SUPREME COURT OF THE STATE OF DELAWARE HEARTLAND PAYMENT § SYSTEMS, LLC, § No. 582, 2016 § Defendant/Counterclaim § Cour t Below – Court of Chancery Plaintiff Below-Appellant, § of the State of Delaware § v. § § C.A. No. 11523 INTEAM ASSOCIATES, LLC and § LAWRENCE GOODMAN, III, § § Plaintiff/Counterclaim § Defendants Below-Appellees. §

____________________ __________ § INTEAM ASSOCIATES, LLC, § § Plaintiff/Counterclaim § Defendant Below-Appellee/ § Cross-Appellant, § § v. § § HEARTLAND PAYMENT § SYSTEMS, LLC, § § Defendant/Counterclaim § Plaintiff Below-Appellant/ § Cross-Appellee. § Submitted: June 14, 2017 Decided: August 17, 2017 Before STRINE , Chief Justice; VALIHURA , and SEITZ , Justices. Upon appeal from the Court of Chancery: AFFIRMED in part and REVERSED in part and REMANDED

.Jeffrey L. Moyer, Esquire ( argued ), Travis S. Hunter, Esqui re, and Nicole K. Pedi, Esquire, Richards Layton & Finger, P.A., Wilmington, Delaware for Appellant/Cross-Appellee Heartl and Payments Systems, LLC. Thad J. Bracegirdle, Esquire ( argued ), and Andrea S. Brooks, Esquire, Wilks, Lukoff & Bracegirdle, LLC, Wilmington, Delaware for Appell ees/Cross-Appellant inTEAM Associates, LLC a nd Lawrence Goodman, III.

SEITZ , Justice:In 2010, Congress enacted the Healt hy, Hunger-Free Kids Act which made major changes to the national school lunc h program. The Act required the United States Department of Agriculture (the “U SDA”) to develop new regulations to take effect in 2012 to address new nutritiona l guidelines. In 2011, Heartland Payment Systems, Inc. (“Heartland”), a credit card processing comp any, wanted to expand its school operations. To pursue this strategy, Heartland purchased some of the assets of School Link Technologies, Inc. (“SL-T ech”). SL-Tech marketed software products to schools to manage their foodservice operations. Through the purchase of SL-Tech, Heartland acquired WebSMARTT, a software program that allowed schools to monitor school meal nutrition through point of sale, free and reduc ed meal eligibility tracking, menu planning, nutrient analysis, and recordkeeping. Carved out of the transaction, however, was a consulting division of SL-Tech called in TEAM and its software, Decision Support Toolkit (“DST”), which was still in development at the time of the transaction. inTEAM was designing DST for school dist ricts as a complementary product to WebSMARTT. It was intended to coll ect menu plan data from WebSMARTT and similar applications and then use the data to model the effect of menu plans on staffing, equipment, and other costs. The parties executed three contracts involving Heartland, SL-Tech, and SLTech’s CEO, Lawrence Goodm an. The contracts contained non-compete, non-2 solicitation, exclusivity, cross-marketi ng, and support obligations. Through the carve-out of SL-Tech’s inTEAM business, the parties agreed that inTEAM could continue with the “inTEAM Business as currently conducted” after closing. With the transaction in the rear-view mi rror, the parties quickly lost sight of their post-closing contractual obligations . inTEAM developed a new software program module, Menu Compliance Tool +, with overlapping capabilities with WebSMARTT—specifically, nutrient analys is and menu planning. Goodman tried to solicit one of Heartland’s customers. Heartland paired with one of inTEAM’s biggest competitors to submit a bid to provi de software to the Texas Department of Agriculture. The disputes eventually found their way to the Court of Chancery through breach of contract claims and counterclaims . After a four-day trial, the Court of Chancery found inTEAM did not breach a ny of its contractual obligations, but Goodman and Heartland had breached certain of theirs. According to the court, although WebSMARTT and the Menu Complia nce Tool+ module both analyzed nutrients, the USDA approved each of the software programs for nutrient analysis under different standards. Thus, they did not compete with each other. The Court of Chancery also found that the carve-out for the “inTEAM Business as currently conducted” allowed inTEAM to deve lop software with menu planning3 functionality—the same functionality also present in the WebSMARTT software
program. Turning to Heartland, the Court of Chancery found Heartland breached the non-compete and exclusivity provisions of the co-marketing agreement by working with a known inTEAM competitor. The c ourt decided that Heartland’s breach began on March 17, 2014 and ran until September 8, 2015, and thus extended Heartland’s non-compete restrictions for an additional eighteen months. For Goodman, the court determined that Goodman breached a n on-solicitation provision in the consulting agreement by soliciting one of Heartland’s cust omers. As the court held, Goodman’s breach ran from July 24, 2014 to December 15, 2014, and thus the court extended Goodman’s non-solicitation period by an a dditional six months. The Court of Chancery also ordered Goodman to pay He artland damages equal to the salary he was paid while he was in breach, totali ng $50,003.01. The Court of Chancery did not award inTEAM attorneys’ fees, finding th at a cap on liability in the co-marketing agreement precluded the fee award. Both parties appealed. We reverse the Court of Chancery’s finding that Goodman and inTEAM did not breach their non-compete obligations under the various agreements, but otherwise affirm the court’s decision. Goodman was prohibited from providing any competitive services or products or engaging in any business that SL-Tech conducted as of the closing da te. inTEAM had similar rest rictions. At the time of4 the transaction SL-Tech had a software product, WebSMART T, that was part of SLTech’s business as of the closing date th at performed nutrient analysis and menu planning. inTEAM did not. At closing, inTEAM’s business was data analytics and modeling, not school lunc h program data generation and menu planning for USDA compliance purposes. The transaction agreements prohibited inTEAM from developing a software product that compet ed head to head with WebSMARTT, a product Heartland paid SL-Tec h $17 million to acquire. By changing direction and developing Menu Compliance Tool+ to perform nutrient analysis and menu planning, Goodman and inTEAM compet ed directly with WebSMARTT and breached the transact ion agreements. As for the remaining issues, the Cour t of Chancery properly found that Heartland breached its contractual obligat ions by collaborating with an inTEAM competitor, and Goodman breached by solic iting a customer of Heartland. The court also did not abuse its discretion when it required an extension of the non-competes and assessed damages against Goodman. We therefore affirm in part and revers e in part the decision of the Court of Chancery. We remand the ca se to the Court of Chancery to exercise its broad discretion to craft a remedy sufficient to compensate Heartland for Goodman’s and inTEAM’s breaches of the tr ansaction agreements.5 I.
A. Since Congress passed the National School Lunch Act in 1946, the USDA has regulated and provided federa l subsidies to state school lunch programs. From the mid-1940s into the 1990s, regulations fo cused on four meal components: meat, vegetables/fruit, grains, and milk. In th e mid-1990s, regulations shifted to agedbased nutrient targets, which required schools to track extensive amounts of data to obtain their subsidies. Software devel opers designed programs to assist school districts in managing the data and s ubmitting reimbursement claims to state agencies, which are charged with distributing federal f unds made available by the
USDA. In 2010, Congress passed the Healthy, Hunger-Free Kids Act (“HHFKA” or the “Act”), the first major ch ange to the school lunch progr am in fifteen years. The Act set minimum standards for school welln ess policies, mandated minimum fruit, vegetable, and whole grain servings, a nd set maximum sodium , sugar, and fat content of meals. It also authorized th e USDA to set new standards for the school lunch program, and required the USDA to publish proposed meal pattern regulations within eighteen months of its enactment. 1

1 42 U.S.C. § 1753(b )(3)(A)(ii)(I).6 The newly issued USDA regulations we nt back to food group-based menu planning to replace nutri ent-based menu planning. The new meal pattern requirements were centered around five main food groups: meat/high protein foods; whole grains; vegetables; fruit; and fat free/low-fat milk. Each food group has specified subcategories and nutrient targets fo r calories, saturated fat, trans fat, and sodium. The USDA first proposed the ch ange on January 13, 2011. It became effective July 1, 2012. Although the new meal pattern requi rements were mandatory, the USDA offered schools certified to be in complian ce with the new regulations an additional six cents per meal to incentivize school s to implement the changes quickly. 2 To become certified, the school had to s ubmit documentation to the governing state authority demonstrating its compliance with the meal pattern requirements. The state agency makes an initial certification determination, and th en monitors each school district’s ongoing compliance with the requirements through an administrative review process that occurs ev ery three years. This process is known as “Six Cent Certification.”

2 42 U.S.C. §1753(b)(3)(C)(i); see also Cynthia Long, Child Nutrition Reauthorization 2010: Questions and Answers Related to the Certificat ion of Compliance with Meal Requirements for the National School Lunch Program , U.S. D EP ’ T OF A GRIC ., at 2-3 (Jan. 22, 2013) [hereinafter USDA Memo], available at https://www.fns.usda.gov/sites/default/files/SP31-2012osr3.pdf.7 Schools have three options to obtain Six Cent Certification. Under the first option, schools submit one week of menus , a USDA menu worksheet, and a nutrient analysis with calories and saturated fat fo r each menu type. Schools that choose this option must use USDA-approved nutrient analysis software to compile the information. 3 According to the USDA, “[t]hi s option acknowledges that a large number of [schools] already use nutrient an alysis software to monitor the nutrient levels in their meals.” 4 Under the second option, scho ols submit one week of menus and a USDA menu worksheet, but submit a simplified nutrient assessment instead of the in-depth nutrient analysis. 5 As the USDA has stated, “[t]his option recognizes that not all [schools] use nutrient analysis software. A simplif ied nutrient assessment is intended to be a proxy for the nutrient analysis.” 6 Under the third option, a state agency performs an on-site review to certi fy school compliance with the regulations.
B. Goodman founded SL-Tech in 1985. SL-Tech provide d software products to assist schools in tracking their child nutriti on programs to obtain federal subsidies.

3 7 C.F.R. § 210.10(i). 4 USDA Memo at 7. 5 A simplified nutrient assessment requires schools to track only calories, percent of calories from saturated fat, and sodium. Estimates for calories and saturated fat of milk, fruits, and vegetables are pre-programmed in the simplified nutrient as sessment software. Schools must provide calories and saturated fat information for all main dish it ems, side items with grains, meat, desserts, and condiments. Directions for Simplified Nutrient Assessment for Lunch , U.S. D EP ’ T OF A GRIC ., at 1- 2 (Sept. 2, 2014), available at https://www.fns.usda.gov/sites/default/files/cn/SP34- 2012assessment_directions.pdf. 6 Id .; see also App. to Opening Br. at 2426-27 (Griffin Trial Test.).8 The software included both front-of-hous e and back-of-house ope rations. Front-ofhouse operations means point of sale system s and application processing for free and reduced price meals. Back -of-house operations means purchasing, inventory, and menu planning. Before the transaction, a division of SL-Tech, inTEAM, was a “15 year-old management consulting company known histor ically for its hands-on workshops in financial management for school nutrition programs.” 7 SL-Tech purchased inTEAM in 2004 to complement SL-Tech’ s existing software products. Its consulting services helped customers sta ndardize their processes to collect and use the data generated from school nutrition programs to improve their operations. 8 SL-Tech had three software products re levant to this appeal: WebSMARTT, mylunchmoney.com, and DS T. WebSMARTT was SL -Tech’s “core product.” 9 WebSMARTT was a fully integrated end- to-end foodservice management program that provided point of sale, free and reduced meal application processing, ordering and inventory, and menu planning and production. 10 Menu planning is “the heart” of WebSMARTT. 11

7 App. to Opening Br. at 884 (inTEAM Associates, Inc. 2011 Business Plan). 8 Id

. 9 Id . at 38 (SL-Tech’s Business and I nvestment Plans Summary). 10 Id . at 51 (SL-Tech Feb. 18, 2009 Presentation to New York City Dep’t of Educ.). 11 Id . at 56.9 mylunchmoney.com was an online servi ce that allowed parents to provide money for their children for cafeteria use, check their account balances, and to see what they were purchasing. It was used by over 900 school districts in forty-two states at the time of the transaction in 2011. DST was cloud-based software first deve loped as a prototype in 2007 for use as a modeling tool to collect and analyze the data from point of sale, back-of-house, financial management, and payroll systems. DST soft ware allowed schools to make informed decisions about the opera tion of their school lunch programs. 12 As described in an internal docum ent sent to Goodman in 2009: The DST modeling component utili zes basic foodservice operating principles, recognized by inTEAM consultants as fundamental to achieving high performing school nutrition programs. DST uses a “systems approach” to assess, de velop and refine key foodservice operating processes such as menu pl anning, work methods, equipment selection, employee schedu ling and staff training. DST is not intended to replace the curre nt [point of sale] or back of the house transactional software. It si mply uses data from the current transactional systems to identify limitations in [the] current operating process and allows the User to test the effect of making incremental changes in one or more of these pro cesses. The transactional data sets used to drive the DST models a nd inTEAM consulting services will vary depending on District character istics, however the process will remain consistent.

... It is widely accepted in the industry that the menu is the driving force affecting all other aspects of a qua ntity foodservice operation. Thus,

12 Id . at 884 (inTEAM 2011 Business Plan).10 capturing the current school based menu plans is the first step in initiating the “what if” modeling capabilities of DST. 13
DST relied on sources like WebSMART T to provide the menu plan data. 14 SL-Tech planned to roll out DST in two phases. In Phase, 1 SL-Tech would develop a program to analyze sales and meal count data. In Phase 2, DST would use menu planning data to allow users to create operational models such as work methods, equipment availability, and procurement. 15 In 2009, SL-Tech e ngaged High5LA, LLC 16 to develop and write the functional specifications for DST Phase 2 (the “Functional Design Documents”).

13 Id . at 942. 14 Oral Arg. at 33:22-33:26; App to Openi ng Br. at 2844-45 (Prescott Trial Test.): Q: How would customers use the DST products? A: So they would take data from their source systems, like WebSMARTT, upload that data into DST, and then we would create different analytics and reporting on top of that data that the user could then use to make decisions on their business. Q: Okay. And how was the DST product supposed to function with the WebSMARTT product that we talked about? A: They are meant to work together by exporting the data from WebSMARTT and then importing into DST. Q: Okay. And at your time at SL-Tech, what ability, if a ny, did DST have to generate transactional data that we discussed a few minutes ago? A: It did not. You would use a sour ce system, a tool like WebSMARTT, to create that transactional data. Q: Just to make sure I understand, when you say a “source system,” what do you mean by that? A: So in a data warehouse analytical -type tool, you wouldn’t be expected to produce the data you are going to analyze. That would come from another piece of software. For example, WebSMARTT. 15 App. to Opening Br. at 2057 (Goodman Trial Test.). 16 At the time of the transaction, High5LA was named Startech Global Corporation, but changed its name after continually being confused with the science fiction media franchise “Star Trek.” Id

. at 2509 (Ditch Trial Test.).11 According to the “overview” section of the Functional Design Documents, in DST Phase 2, school systems that had installed DST Phase 1 would [B]e able to leverage menu planning as a tool to project the impact on staffing, equipment, and food/labor cost s. They [would] also be able to model in advance menu plans, work schedules and financials to accurately predict the outcome under a variable set of assumptions. inTEAM philosophy and best practices drive the design of Phase 2, resulting in a product that allows sc hool administrators to accurately model future scenarios and comp are/evaluate it against reality. 17
C. Heartland provided payment processing serv ices to merchants throughout the United States. In 2010, it entered the sc hool services market through its School Solutions division to provide nutrition and payment solutions to K-12 schools. At the end of 2010, Heartland began consider ing opportunities to add to its School Solutions division. Heartland wanted to become the leading K-12 point of sale provider, and ultimately to offer online paymen ts to all schools. To achieve its goal, Heartland believed it “needed to provide the full [point of sale] solution to schools” because schools “were not interested in buying . . . just the front-of-the-house solution that provided the checkout at the e nd of the ordering line. [Schools] also wanted to be able to have all of the back-of-the-house solutions integrated with the front-of-the-house solution. And so in order for [Heartland] to be successful in this

17 Id . at 97 (Functional Design Documents).12 market and selling credit card processing, it also required [Heartland] to enter the food service market with a full solution.” 18 Heartland approached SL-Tech about a pote ntial acquisition. It did not want to purchase SL-Tech’s subsidiary inTE AM because inTEAM was primarily a consulting business, which Hear tland did not view as key to its strategy of “acquiring companies that provided the point-of-sale solutions to K through 12 schools.” 19 As a result, the parties separa ted SL-Tech’s inTEAM division—with its DST software product in development—from the transac tion. The parties eventually reached agreement and documented the transaction through three agreements: (1) the Asset Purchase Agreement; (2) the Co-Marke ting Agreement; and (3) the Consulting Agreement.
i. The Asset Purchase Agreement Under the Asset Purchase Agreem ent (“APA”), Heartland acquired substantially all of SL-Tech’ s assets for $17 million plus earn-out payments on each of the first three anniversaries of closing. Section 5(n) of the APA also included the following non-compete: Covenant Not to Compete . For a period of five (5) years from and after the Closing Date, neither Seller nor the Major Shareholder will engage directly or indirectly, on Seller’s or the Major Shareholder’s own behalf or as a Principal or Representativ e of any Person, in providing any

18 Id . at 2653-54 (Lawler Trial Test.). 19 Id . at 2641.13 Competitive Services or Products or any business that School-Link conducts as of the Closing Date in any of th e Restricted Territory

. . . . 20 Under the APA, the “Seller” is SL-Tech, Goodman is the “Major Shareholder,” the “Closing Date” is September 30, 2011, and the “Restricted Territory” is the United
States. 21 “Competitive Services or Produc ts,” “School-Link,” and “inTEAM Business” are defined unde r the APA as follows:

“ Competitive Services or Products ” means a business that develops, manufactures, sells and services a nd maintains computer software and/or [point of sale] terminal hardware designed to facilitate (i) accounting and (ii) management a nd reporting of transactional datafunctions, of food services operations of K-12 schools (including pointof-sale operations, free and reduced application processing, ordering and inventory, and entry of meal a nd other payments by parents via the Internet or kiosk); provided, however , that for purposes of clarity, Competitive Services or Products shall not include the inTEAM Business as currently conducted. 22

“ School-Link ” means the entirety of Seller’s business, including the business of Seller known as “School-Link,” but excluding the inTEAM Business.” 23

“ inTEAM Business ” means certain Excluded Assets consisting of Seller’s consulting, elearning and DS T segments of the business known as “inTEAM” and including those pr oducts and services described in Exhibit C to the Co-Marketing Agreement. 24

20 Id. at 380. 21 Id. at 420. 22 Id . at 413 (italics in original). 23 Id . at 420. 24 Id . at 416.14 ii. The Co-Marketing Agreement The Co-Marketing Agreement (“CMA” ) was a commission-based contract that gave both Heartland and inTEAM the ri ght to market, advertise, and promote each other’s products. 25 The CMA contained a five-y ear bilateral non-compete: Except as otherwise provided herein , . . . (A) HPS shall not engage, directly or indirectly, on its own behalf or as a principal or representative of any person, in pr oviding any services or products competitive with the inTEAM Busi ness, and HPS he reby grants to inTEAM the exclusive right and licen se under any intellectual property of HPS (other than trademarks) to conduct the inTEAM Business and (B) inTEAM shall not engage, directly or indirectly, on its own behalf or as a principal or representative of any person, in providing any services or products competitive w ith the HPS Business, and inTEAM hereby grants to HPS the exclusive right and license under any intellectual property of inTEAM (oth er than trademarks) to conduct the HPS Business. 26 “HPS Business” is defined under the CMA as: [T]he development, manufacture, or sa le of computer software and/or [point of sale] terminal hardware designed to facilitate (A) accounting and (B) reporting of transactional data functions and ma nagement of [] food service operations of K-12 sc hools (including point-of-sale operations, free and reduced appli cation processing, ordering and inventory, and entry of meal and other payments by parents via the Internet or kiosk). 27 “inTEAM Business” is defined as: [C]ertain Excluded Assets cons isting of inTEAM’s consulting, eLearning and DST segments of th e business known as “inTEAM” and

25 inTEAM assumed and was assigned all of SL-Tech’s rights under the CMA through an Assignment and Assumption Agreement, dated October 31, 2011. 26 App. to Opening Br. at 317. 27 Id . at 303.15 including those products and se rvices described in Exhibit A 28 and those inTEAM products and services described in Exhibit C and Exhibit D. 29 Exhibit C states: Functional Specifications Functional specifications for DS T Phase 1 and add-ons and DST Phase 2 (future release); incl uding unique state value added functionality (attached) Student Rewards functional specifications (attached) Off Campus Merchants Functional specifications (attached) 30 Attached to the CMA and incorporated by reference are th e Functional Design Documents for DST Phase 2. Two Functi onal Design Documents were introduced and discussed at trial: “Milestone A – Menu Item” and “M ilestone B – Menu Planning.” 31 The Milestone A Functional Desi gn Document describes its purpose as the following: In order to support Operational a nd Financial Modeli ng, Milestone A introduces four new information cate gories to DST – Staff, Equipment, Work Method and Menu Item. This design specification is an anchor document that catalogs the functi onal requirements for DST Phase 2 – Milestone A – Menu Item.

28 Exhibit A references the following products and services: inTEAM Consulting Services, inTEAM eLearning, DST Phase 1, and DST Phase 2. Id . at 328. 29 Id . at 303. 30 Id . at 330. Exhibit D states: Interface and Mechanical Specifications DST data interface and content mech anical specifications (attached) Student Rewards data interface and conten t mechanical specifications (attached) Off-Campus Merchants data interface a nd content mechanical specifications (attached). 31 Id . at 93, 144.16 It further states: A Menu Item is a food item that is ultimately served to the student. Milestone A defines the setup of these items, while Milestone B will put collections of items onto menu plans for servicing building programs and generate wo rk schedules that will model how build staffs and equipment will work to produce the items needed. 32 The Functional Design Document for Mile stone B describes its purpose as: A central component to creating an Operational Model is the modeling of menus. This design specificati on is an anchor document that catalogs the functional requirements n eeded to create a subset of the WebSMARTT Menu Planning hierar chy as part of DST Phase 2 Milestone B. This specification c ontains high level workflows, page level design specifications, and page level interactions. This chapter provides a brief overview of each, with rest of the document providing a page level design specifications. 33 iii. The Consulting Agreement Goodman also executed a Consulting Agreement with Heartland under which Goodman agreed to act as “a strategi c advisor and liaison with key industry stakeholders advancing Heartland’s objectives at meetings and conferences,” among other duties. 34 Goodman was to be paid $16, 666.67 per month over the course of three years, totaling $600,000. Under § 3 of the Consul ting Agreement, “[i]n the event the Consultant breaches Sections 7, 8, 9, 10 or 11 of this Agreement, Heartland shall have no obligation to pay the Consultant any comp ensation set forth herein.” 35

32 Id . at 99. 33 Id. at 149. 34 Id . at 290. 35 Id . at 291.17 Section 11(a) of the Consu lting Agreement includes another five year non-compete, and § 11(b) includes a non-solicitation provision.
D.
i. inTEAM Expands the Functionality of Its Software Products After Closing At the time of the transaction, in TEAM had finished developing and was marketing DST Phase 1. After the trans action closed, inTEAM continued to develop DST Phase 2. inTEAM decided to inco rporate the USDA’s simplified nutrient assessment components into the existi ng DST functions to create the “Menu Compliance Tool+” module. 36 Unlike the modeling and forecasting functions contemplated by the Functional Design Docu ments, the module assisted customers with ensuring compliance with the USDA’s meal-planning regulations that had been finalized in 2012. 37 The module can analyze nutrients such as calories, saturated fat, sodium, and carbohydrates—the same an alysis done by WebSMARTT, but on a more limited basis. 38 It was the first USDA-appr oved menu planning tool for Six Cent Certification. It is not currently certified by the USDA as “nutrient analysis

36 inTEAM Assocs., LLC v. Heartland Payment Sys., Inc. , 2016 WL 5660282, at *11 (Del. Ch. Sept. 30, 2016). 37 App. to Opening Br. at 2414 (Griffin Trial Test.). 38 Id . at 2460-61; id . at 1474 (inTEAM Website Pr oducts and Services Page).18 software.” In 2014, inTEAM also added administrative review software to its product line. 39 inTEAM’s employees questioned inTEAM’s decision to create the new module. inTEAM’s former Chief Oper ation Officer, Erik Ramp, wrote to inTEAM’s Vice President of Operations, Ge ri Hughes, “you know [we’re] basically developing a competing product with [Hear tland] now. Chip doesn’t think so . . . but I don’t think an outsider will see it that way.” 40
ii. inTEAM Employees E-mail Potential Customers On July 24, 2014, Goodman sent an e-ma il to Hughes with the subject line “St. Paul Window of Opportu nity.” Goodman wrote in the e-mail “Did Mary Jo recap the opportunity to you?” to which H ughes replied, “Yes. I will discuss with you when we meet this afte rnoon. As you know, Jean’s replacement (Jim) [has] not been as interested in help and this is her new approach.” 41 Below Hughes’ reply is

39 inTEAM’s Administrative Review Module is desi gned to help schools prepare for formal state agency administrative reviews. The software he lps compile and analyze da ta, and present the data in an appropriate format to comply with regulati ons. It also includes “mock reviews” to help districts assess their readiness for the formal administrative review. See Dramatically Improve Your Administrative Review Results with a Mock Review from inTEAM , IN TEAM A SSOCS ., at 1 (2014), available at http://inteam.digitaldogs.com/BI /wp-content/uploads/2014/03/inTEAMAdmin-Reviews.pdf. 40 App. to Opening Br. at 915. Goodman’s nickname is Chip. 41 inTEAM Assocs. , 2016 WL 5660282, at *11 (Del. Ch. Sept. 30, 2016).19 the tagline: “Note to Jim Hemmen rega rding our menu planning tool/production record alternative to WebSMARTT.” 42 On December 15, 2014, Mary Jo Tuckwell 43 sent an e-mail to an administrator at St. Paul Public Schools wh ich said, in pertinent part: Based on the interactions I had with Jim at ANC in July I believe the department was still struggling with automating production records. In August there was discussion of me providing a demo to key central office staff of the inTEAM menu planning and production record modules as an alternative to th e WebSMARTT BOH system. That offer remains open if your team is in terested. I know the challenges of bringing establishing and maintaini ng a traditional BOH system. Yet, I can tell you that the quality of ope rational communication is enhanced tremendously by automated production records to accurately forecast and provide feedback to the menu pl anner on usage combinations. So whether you stay with WebSMARTT or ar e interested in an alternative, I would urge the team to prioritize this activity to achieve financial success. 44 Tuckwell forwarded the e-mail to Hughe s. Hughes forwarded the e-mail to Goodman and Michael Sawicky 45 and wrote “FYI-- we have confirmed that Jim is leaving St Paul and he has been stopping our efforts so that is good. However, Jean is going to bring in a former St Paul direct or at the moment. I give MJ full credit for continuing to nurture this key relationship with Jean and for continuing to push for them to use our tools.” 46

42 Id

. 43 Tuckwell is inTEAM’s Technical Director for Consulting Services. 44 App. to Opening Br. at 970. 45 Sawicky is the Chief Technologist and Business Intelligence Architect at inTEAM. 46 App. to Opening Br. at 970.20 iii. Heartland Collaborates with Colyar On May 12, 2015, the Texa s Department of Agriculture (“TDA”) issued a request for proposals title d, “REQUEST FOR OFFE RS TO PROVIDE Menu Analysis & Planning System (MAPS) Softwa re Solutions,” asking vendors to solicit offers to provide web-base d software to support the USDA’s new meal pattern requirements. 47 On May 27, 2015, inTEAM c ontacted Heartland regarding a possible joint proposal, which Heartland d eclined. On June 19, 2015, Heartland submitted a joint bid with Colyar Technology Solutions, Inc.—an inTEAM competitor since 2014. inTEAM submitted a bi d on the same day. In its proposal, inTEAM stated that its new software woul d be able to meet all of the TDA’s requirements, including point of sale, nutri ent analysis, and menu planning. Neither the inTEAM nor the Heartla nd/Colyar bids were selected by the TDA.
iv. inTEAM Launches CN Central In July 2015, Goodman presented inTEAM’s “Big Rev eal” of its new software, CN Central. CN Central combined all of inTEAM’s modules under one system, including Menu Compliance Tool+, to create “a single destination that includes all of inTEAM’s technology tool s including: Menu Compliance, Menu Costing, Production Records, Administra tive Reviews . . . Data Analytics,

47 Available at , http://www.bidnet.com/closed-governme nt-contracts/menu-analysis---planningsystem--maps--software-solutions?itemId=353530787.21 eLearning and Menu Sharing.” 48 This brought togetherthe ability to analyze nutrients, menu plan, menu search, menu sh are, and generate production records. 49
E. On July 20, 2015, after learning of Heartland’s collaboration with Colyar, inTEAM notified Heartland in writing that it believed Heartland was in breach of the CMA. On September 21, 2015, inTEAM sued Heartland in the Court of Chancery alleging breach of contract cl aims. Heartland responded by asserting breach of contract counterclaims against inTEAM and Goodman. After a four-day trial, on September 30, 2016, the Court of Chancery issued its decision finding that inTEAM did not br each any of its contractual obligations, but Goodman and Heartland breached some of their post-closing obligations. The Court of Chancery found that becaus e inTEAM’s Menu Compliance Tool+ could only conduct a simplified nutrient assess ment, and WebSMARTT could run a full nutrient analysis as defined by USDA guide lines, inTEAM did not violate the noncompete provisions. The Court of Chancery also found inTEAM’s business activities did not breach the non-compete obligations under the APA or the CMA. As the court held, even though the products were directly competitive, the Functional Design Documents—which de fined the carve-out of inTEAM’s business from the

48 App. to Opening Br. at 1473 (inTEAM We bsite Products and Services Page). 49 Id . at 1473-75.22 transaction—described a pr oduct with menu planning func tionality that would allow users to create, edit, copy, and save menu items, menu cat egories, and menus to be placed in menu cycles. Thus, the Court of Chancery determined that the CMA unambiguously included menu planning in the definition of the inTEAM business carved out of the transaction. Next, the Court of Chancery found that Heartland breached its non-compete and exclusivity obligations under the CM A when it collaborated with Colyar, a direct inTEAM competitor, to submit a bi d to the TDA. The Court of Chancery found that Heartland did not breach any obligations under the other agreements. Finally, the Court of Chancery found th at Goodman breached his non-solicitation obligations under the Consulting Agreement by encouraging St. Paul Public Schools to terminate its relations hip with Heartland. According to the Court of Chancery, Heartland’s br each began on March 17, 2014, when its relationship with Colyar fi rst began, and ran un til September 8, 2015, when Heartland announced that the TDA had not selected its proposal. The court thus extended the non-compete for eight een months, beginning September 30, 2016, and ending March 21, 2018. The Court of Chancer y did not award inTEAM attorneys’ fees, finding that there was a cap on liability in the CMA. As the court held, because inTEAM had not paid Hear tland any fees under the CMA and did not argue that an exception applied, inTEAM was not entitled to any costs or fees.23 For Goodman, the court determined th at his breach began on July 24, 2014, when Goodman asked Hughes to work on making St. Paul School District a customer, and ran to December 15, 2014 when Tuckwell’s e-mail chain with a St. Paul Public School official was forw arded to Goodman, among other inTEAM employees. The court ordered a six-month extension of the non-solicitation period to begin on September 30, 2016 and end March 22, 2017. The Court of Chancery also ordered Goodman to pa y Heartland damages equal to the salary he was paid during the three months he was in breach of the Consulting Agreement, totaling $50,003.01. 50 This appeal and cross-appeal followe d. Heartland claims the Court of Chancery erred by: (1) finding that in TEAM and Goodman did not breach theirrespective non-compete provisions; (2) holding that Heartland breached the noncompete provision under the CMA and orde ring an eighteen-month injunction; and (3) requiring Goodman to return only $ 50,003.01 of his $600,0 00 salary. inTEAM argues the Court of Chancery erred by not aw arding it attorneys’ fees. We defer to the Court of Chancery’s factual findings supported by the record, but review the Court of Chancery’s contract interpretation de novo

. 51

50 Under the Consulting Agreement, Goodman was to be paid a salary for three years (through September 2014), however, his non-solicitation obliga tions were extended for an extra two years (five in total). Thus, he was only paid a salary for three months of the six he was in breach. 51 Honeywell Int’l Inc. v. Air Prods. & Chems., Inc. , 872 A.2d 944, 950 (Del. 2005).24 II. Before stepping through the specific contr actual provisions it is helpful to look at the transaction from a distance, because “[i]n giving sensible life to a real-world contract, courts must read the specific provisi ons of the contract in light of the entire
contract.” 52 Heartland paid SL-Tech and Goodman $17 million for a substantial part
of the SL-Tech business so Heartland could expand its pres ence in the school market. By acquiring SL-Tech, Heartland could offe r schools not just a financial product, but, through WebSMARTT, a front to back foodservice solution, which included nutrient analysis and menu planning. WebSMARTT’s nutrient analysis and menu planning features were at the heart of SL-Tech’s business because they allowed schools to demonstrate compliance with USDA guidelines. To protect Heartland from post-closing competition by Goodma n and inTEAM in the same business space, the parties agreed to non-compete and non-so licitation provisions. Heartland was not interested in inTEAM, SL-Tech’s consulting business, or its DST software. SL-Tech marketed DST software as complementary to WebSMARTT. DST Phase 2, which was s till in development, would use the menu planning and nutrient analysis data fro m WebSMARTT and si milar programs to

52 Chicago Bridge & Iron Co. N.V. v. Westinghouse Elec. Co. LLC , __ A.3d __, 2017 WL 2774563, at *1 (Del. June 27, 2017).25 perform data analytics and forecasting. The parties carved out the inTEAM business “as currently conducted,” whic h included the DST software, from the transaction. Because the WebSMARTT and inTEAM businesses were complementary instead of competitive, the parties agre ed to a co-marketing agreement, which allowed each of them to benefit from selling the other party’s services and products. Except for the permitted cross-marketing ac tivities, inTEAM protected its consulting business carve-out and DST software by imposing post-closing non-competition and non-solicitation obligations on Heartland. Because DST had not been fully developed by the time of closing, the partie s described its intende d uses by referring to technical documents. Heartland also pr otected its post-closing business with noncompete obligations. inTEAM’s arguments on appeal in favor of being able to compete with Heartland by providing a software product that performs nutrient analysis and menu planning are in direct conflict with the spir it of the overall transaction. As Heartland points out, it never would have paid SL-Tech and Goodman $17 million for a business that inTEAM could compete with directly right after closing. What’s worse, according to Heartland, is th e CMA. If the Court accepts inTEAM’s interpretation of the transaction agreemen ts, Heartland would have agreed to crossmarket a software program that competes dir ectly with its WebSMARTT product. Like Goodman and inTEAM, Heartland has al so tried to rewrite its non-competition26 obligations following closing. With these tensions in mind, we turn to the transaction agreements to decide whethe r the arguments developed during litigation are supported by the specific language of the transaction agreements.
III.
A

. inTEAM’s Menu Compliance Tool+, late r made a part of CN Central, 53 allows school districts to analyze nutrients in school lunch menus, which they then used to demonstrate USDA regulation comp liance and obtain Six Cent Certification. To decide whether Menu Compliance T ool+’s nutrient analysis functionality violates the transaction agreement non-co mpetes, two main questions must be answered. First, did the parties carve out nutrient analysis from the transaction as a business currently conducted by inTEAM that c ould continue after cl osing? And, if not, did the transaction agreements’ non -competes prohibit Goodman and inTEAM from offering this functionality after closing? 54 The parties agree that nutrient

53 As we understand the record, all of inTEAM’ s software modules, including Menu Compliance Tool+, were combined into one product named CN Central. App. to Opening Br. at 1473 (inTEAM Website Products and Servi ces Page). For purposes of this opinion, we treat CN Central the same as Menu Compliance Tool+. 54 For the purposes of this Opinion, we treat Goodman and inTEAM the same. Because Goodman is the “Major Shareholder” and “Consultant” under the transaction agreements, and is the CEO of inTEAM, inTEAM’s actions are imputed to Goodman. See App. to Opening Br. at 317 (CMA § 9.1.1) (“inTEAM shall not engage, directly or indire ctly, on its own behalf or as a principal or representative of any person . . . .”); id . at 380 (APA § 5(n)) (“[N]eith er the Seller nor the Major Shareholder will engage directly or indirectly, on Seller’s or the Major Shareholder’s own behalf or as a Principal or Representative of any Person . . . .”); id. at 293 (Consulting Agreement § 11(a))27 analysis software was not part of the business carved out for inTEAM after closing. 55 We therefore look to the non-compete obliga tions of the transaction agreements to decide whether a violation occurred. According to the APA non- compete, Goodman could not compete with an SL-Tech business that SL-Tech performed at the time of closing. The parties agree that the software program Heartland purchased from SL-Tech, WebSMARTT, performed nutrient analysis as of closing. Further, the parties also agree that inTEAM’s Menu Compliance Tool + performs a form of nutrient analysis, which would normally end the dispute in Heartla nd’s favor. Goodman argues, however, and the Court of Chancery found, that each of the software programs perform a different form of nutrient analysis as defined by the USDA, and thus do not compete with each other. As explained earlier, the USDA accep ted three methods for demonstrating compliance with its new regulations—legacy software designed to track nutrients in school meals, like WebSMA RTT; a simplified nutrient assessment, like Menu Compliance Tool+; or a manual audit pe rformed by a reviewing state agency.

(“[T]he Consultant shall not directly or indirectl y, on behalf of himself or on behalf of any other person, firm or business entity . . . .”). 55 Id . at 2048 (Goodman Trial Test.) (“Again, built into WebSMAR TT was the capability to do nutrient standard menu planning and was the capability to develop a nutrient analysis. So those were the guiding design principles at the time th at WebSMARTT was built and at the time of the Heartland closing.”); id . at 2149 (“One of the components we didn’t provide through DST was nutrient analysis.”).28 Because inTEAM’s Menu Compliance Tool+ us ed an abbreviated form of nutrient analysis when compared to WebSMARTT, the Court of Chancery determined that inTEAM did not violate the non-compete provisions. The Court of Chancery erred when it strayed from the language of the noncompetes into the USDA regulatory certifica tions. The different paths to Six Cent Certification approved by the USDA do not displace the restrictions of the transaction agreements. Under the APA, Goodman could not e ngage in a business SL-Tech conducted at closing. At clos ing, SL-Tech marketed WebSMARTT to school districts to enable them to demonstrate complia nce with the USDA guidelines. Nutrient analysis was part of the functionality required by the USDA, which was part of the WebSMARTT software platform. Although Menu Compliance Tool+ used a slimmed dow n version of nutrient analysis, 56 it nonetheless used nutrient analysis to accomplish the same result—demonstrating compliance with the USDA guidelines. As the USDA recognized, simplified nutrie nt assessment “is intended to be a proxy for the nutrient analysis.” 57 In our view, any software program that performed

56 Menu Compliance Tool+ track only calories, percent of calories from saturated fat, and sodium. See Answering Br. at 40-41. WebSMARTT can anal yze thirteen different nutrients including calories, percent of calories from saturated fa t, and sodium. App. to Opening Br. at 2402-03. See also note 5. 57 Directions for Simplified Nutrient Assessment for Lunch , U.S. Dep’t of Agric., at 1-2 (Sept. 2, 2014), available at https://www.fns.usda.gov/sites/default/files/cn/SP34- 2012assessment_directions.pdf.29 nutrient analysis, whether partially or fu lly, to demonstrate compliance with USDA regulations, competed directly with WebSMARTT, a product purchased from SLTech at closing. 58 Thus, we find that Goodman breached his non-compete obligations by offering Menu Compliance T ool+ to perform any type of nutrient analysis to assist school districts in complying with the USDA guidelines. Further, inTEAM breached the CM A, and Goodman breached the Consulting Agreement, by offering a product comp etitive with WebSMARTT. Under both agreements, neither Goodman nor inTEAM could offer Competitive Services or Products to the SL-Tech business Heartla nd purchased at closing. A Competitive Product is defined as “the development, ma nufacture, or sale of computer software

58 Goodman admitted Menu Compliance Tool+ and its nutrient analysis capabilities were not included in the Functional Design Documents: Goodman Dep. 263:10-264:20: Counsel: Is it in the function design documents that are attached to the CMA? Goodman: Do you have a magic wa nd? Can you adjust software to regulations that haven’ t yet been written? Counsel: I’ll tell you what, why don’ t I ask the questions. Can you do that? Goodman: We anticipated what w ould be required and moved the design very close to what we e xpected to be the final result as reflected in Exhibits C and D of the CMA dated September 30, 2011. And there were written plans and intentions to do so in the business plan published for inTEAM in 2010. Counsel: Okay. But it’s not in the function design documents.

. . . Goodman: I’m not a magician is th e way I will answer that question. Counsel: How about answering the que stion: Is it in the function design documents to the CMA? Goodman: Because I don’t have ESP, no.30 and/or POS terminal hard ware designed to facilitate (A) accounting and (B) reporting of transactional data functions and management of [] foodservice operations of K-12 schools . . . .” 59 At trial, Tyson Prescott, the former software development manager at SL-T ech, explained that “transactional data functions” is an industry term of art that includes the ability to analyze nutrients, among other functions. 60 inTEAM does not dispute Prescott’ s definition of transactional data functions, except to say that none of the relevant contracts specifically refer to nutrient analysis as a transactional data function. 61 We therefore find that Goodman breached the Consulting Agreement, and inTEAM breached the CMA, by using Menu Compliance Tool+ to perform nutrien t analysis to demonstrate compliance with the USDA regulations for Six Cent Certification.
B

. Turning to menu planning, the parties agree that, without the carve-out for inTEAM’s DST software, the non-compete provi sions of the transaction agreements prohibit Goodman and inTEAM from providi ng a software produc t that competes with the menu planning functionality of th e WebSMARTT software . The scope of the carve-out for inTEAM’s DST software program is set forth in the Functional

59 App. to Opening Br. at 303. 60 Id . at 2836-38 (Prescott Trial Test.). Presco tt is now the senior manager of software development at Heartland. Id . at 2816. 61 Answering Br. at 39.31 Design Documents. Menu planning is re ferred to in the Functional Design Documents. Thus, the dispute boils do wn to whether the references to menu planning in the Functional Design Docume nts were intended to cover the menu planning functionality in Menu Compliance Tool+, such that it could directly compete with Heartland’s WebSMARTT software. The Functional Design Documents for Phase 2 “Milestone B – Menu Planning,” use the words “menu item,” “m enu category,” “menu template,” and “menu cycle.” The menu pla nning functionality allowed th e user to create, copy, and save menu items, menu cat egories, and place menus in to menu cycles. These references led the Court of Chancery to conclude that th e DST software was intended to perform the same type of menu pla nning as the WebSMARTT software. The court did not explore further what menu pl anning actually meant as part of the DST software program. To discern the meaning of menu planni ng within the DST software program, the Court of Chancery should have examined the use of the term “in the context of the contract language and circumstances, in sofar as the parties themselves would have agreed ex ante .” 62 When menu planning is understo od as the term is actually used in the Functional Design Document s, we conclude that Menu Compliance

62 Lorillard Tobacco Co. v. Am. Legacy Found. , 903 A.2d 728, 740 (Del. 2006).32 Tool+ went far beyond what was intended by the Functiona l Design Documents, and thus impermissibly competes with the WebSMARTT software program. First, as a basis for comparison, it is useful to understand how WebSMARTT and Menu Compliance Tool+ perform menu planning. In WebSMARTT, a school district inputs recipes and instructions on how to make a dish. As the school district edits the ingredient list, it can immediately see how the cost and nutrient composition of the dish changed. Sc hool menu planners can then put menu items together to create menu cycles, and can track how many items are sold versus what was originally projected:

63

63 App. to Opening Br. at 59.33 The school district can also call up a screen to assess whether the nutritional value of the meals meets the USDA standards:

64 inTEAM’s Menu Compliance Tool+ performs many of the same functions, which explains the use of the word “complianc e” in its description. The user “enters recipes, menus, documentation and costin g from a shared database. As this information is entered[,] compliance is ch ecked in real time to provide immediate, ongoing feedback to the planner.” 65 It “allow[s] for a qui ck and easy search on ingredients, recipes, and me nus,” and “provide[s] real-tim e nutrient analysis within

64 Id . at 60. 65 Id . at 1117.34 [the] menu planning writing tool as i ngredients are being added to recipes.” 66 The module can also “automatically calculate and display nutrient information for recipes based on ingredients listed.” 67 Completed menu plans appear as follows:

68 When the user opens a menu, the soft ware automatically populates nutrient statistics for that menu:

66 Id . at 1126-27. 67 Id . at 1129. 68 Id . at 1795.35 69 Having established that WebSMARTT and Menu Compliance Tool+ perform many of the same menu planning functions , we turn to the Functional Design Documents for the DST software to see whether the parties agreed to this type of direct competition after closing. DST Ph ase 1, which was already being marketed by inTEAM at closing, provided “data ware housing and analysis tool[s] and related professional, maintenan ce and support services.” 70 DST Phase 2 would build on Phase 1 by adding “modeling and pro-fo rma forecasting tools and related professional maintenanc e and support services.” 71

69 Id . at 1797. 70 Id . at 488 (CMA Recitals). 71 Id

.36 The focus of DST Phase 2 as a modeling and forecasting tool is confirmed by another description of DS T’s future development: [DST] Phase 2 extends th e work that was done in Phase 1. Whereas Phase 1 focuses on historical trans actions, Phase 2 looks forward to future periods. With Phase 2, school systems th at installed DST will be able to leverage menu planning as a tool to project the impact on staffing, equipment, and food/labor costs. They will also be able to mode l in advance menu plans, work schedules and financials to accurately predict the outcome under a variable set of assumptions . inTEAM philosophy and best practices drive the design of Phase 2, resulting in a product that allows school administrators to accurately model future scenarios and compare/evaluate it against reality. 72 A sensible reading of the foregoing DS T software description would lead one to conclude that DST Phase 2 was intended as an analytics and modeling tool, not a functional tool like WebSMARTT that generates menus and monitors USDA compliance. In other word s, menu planning within the DST software was intended to capture current menu plans from program s like WebSMARTT to use as a building block to analyze and model th e data. In this way, the products were complementary to each other, not competitive. The milestones referred to in the Func tional Design Documents also confirm this understanding. Mile stone A states that “[a]t the in TEAM level, all such screens will fall under a new [Modeling] tab.” 73 Milestone B provides that “[i]n Milestone

72 Id . at 148 (emphasis added). 73 Id . (brackets in original).37 B, the screens required for DAs 74 to model real world or hypothetical scenarios in operations will be built. DAs will be able to create Me nu Cycles and combine them with Staff and Equipment to create Opera tional Models that produce work schedules and food/labor costs.” 75 Our interpretation of the Functional Design Documents—that DST Phase 2 was aimed at analytics and modeling, not first level menu planning and USDA compliance—fits well with the overall sc heme of the transaction agreements. 76 It is unreasonable to believe that Heartland would have agreed to let inTEAM market a competitive software program to WebSMA RTT, a software program it paid $17 million to acquire. Further, Heartland wo uld never have agre ed under the CMA to market a competitive software pr ogram to its school district customers. The references to menu planning in th e Functional Design Documents are also better understood by reviewing the user gui de inTEAM created during development of the DST software. 77 The menu plan module contai ns six drop down tabs: Setup, Menu Plan, Staffing Plan, Financial M odel, Input Actual Data, and KPI/s

74 “DAs” means District Administrators. 75 App. to Opening Br. at 148 (Functional Design Documents). 76 See GRT, Inc. v. Marathon GTF Tech., Ltd. , 2011 WL 2682898, at *10 (Del. Ch. July 11, 2011) (Purchase Agreement terms interpreted according to “the commercial realities and business context facing the parties at the time the Purchase Agreement wa s negotiated and consummated.”). 77 The draft user guide is from September 2007, but inTEAM has reli ed on the guide to describe “DST’s menu planning and me nu modeling functions” and DST’ s “menu creation, editing and export functions.” Answering Br. at 18.38 Financial. 78 Under the “Menu Plan” tab, ther e are five options: Work Methods & Productivity; Items; Menu Plan Wizard; U pdate, Delete Menu pl ans; and Menu Plan Reports. 79

80 The “Items” tab under “Menu Plan” refers to menu items. There, the name of the menu item, its code, cost, and price are lis ted, along with whether the item will need to prepared on-site, and if so by what method: 81

78 App. to Answering Br. at 1012. 79 Id . at 991. 80 Id

. 81 Id

.39 82 Under “Menu Plan Wizard,” the user can upl oad menu item data, me nu plan data, or proceed manually. Data can be uploa ded from menu planni ng software, like WebSMARTT:

83

82 Id

. 83 Id . at 994.40 After the data is entere d, DST generates reports. The “Menu Plan Report” shows the quantity of menu items that will theoretically be sold during breakfast, lunch, and a la carte. 84 Unlike the WebSMARTT plat form, the Menu Plan Report generated by DST software doe s not contain recipes, ingredients, directions on how to make the meal, nutrient values, or facilitate USDA compliance:

85 After the menu planning information is imported into the DST software, DST would generate “operati onal models,” like the reports set forth below: 86

84 Id . at 1003. 85 Id . at 1005. 86 “To create an Operational Model, the DA user would first create Menu Cycles such as [Elementary School Breakfast] to [2 Week Cycles High Schools] and then apply them to a time period in order to analyze food and labor costs and efficiencies.” App. to Opening Br. at 150 (Functional Design Documents); id . at 272 (inTEAM Sept. 12, 2011 Presentation to Office of Hawaii Child Nutrition Programs—ART Project) (DST is an “[a]naly tics engine built over a data warehouse with” the ability to “[l]everage[] disparate systems that are already collecting required data.” It also has “[r]obust data mining and repor ting capabilities” with th e ability to “‘slice and41 87 As the foregoing screenshots demonstrate, DST’s primary function was not to generate a first level menu plan similar to a plan generated with the WebSMARTT software. Instead, DST software was inte nded to capture menu planning data from other sources to analy ze and model the data. inTEAM’s internal documents confirm the analytical focus of the DST software. In an internal document rega rding the implementation of DST, DST was described as a different platform than WebSMARTT: DST is not intended to replace the curre nt [point of sale] or back of the house transactional software. It si mply uses data from the current transactional systems to identify limitations in [the] current operating dice’ data in thousands of ways,” “[b]enchmark[] to identify outliers,” a nd “[i]dentify areas where corrective action should be taken.”). 87 Id . at 280.42 process and allows the User to test the effect of making incremental changes in one or more of these processes.

. . . It is widely accepted in the industry that the menu is the driving force affecting all other aspects of a quantity foodservice operation. Thus, capturing the current school based menu plan[] is the first step in initiating the “what if” modeling capabilities of DST. Again, this process will occur with differing levels of inTEAM consultant involvement. 88 The document further explains that: Within the “modeling environment” of DST, the District User can develop new menus or make me nu item changes and immediately observe the impact on other aspect s of the foodservice operation. Changes to item and menu records will be reflected in Financial Models. Here are a few of the ques tions that can be answered in the modeling environment: What happens when raw food costs or labor rates increase? What is the impact of shifting production to a central kitchen? Does staff have e nough time to handle the new menu item preparation tasks? Do all the kitc hens have the equipment needed to produce the menu item? Do all kitche ns have staff with the necessary skills to produce the new menu? Work ing in the simulated environment of DST, the User can find out answers to these questions prior to rolling out the menu in “real life.”

... The DST modeling component allo ws an inTEAM coach and the district foodservice director to examine existing systems, propose incremental changes for improvement and simulate the changes in a “virtual” environment before rolli ng out the plans in real life. Implementing the modeling port ion of DST can begin with an inTEAM coach demonstrating to a director and/or manager on

88 Id . at 942 (inTEAM Internal Docume nt) (emphasis in original).43 how to systematically evaluate options to improve program performance

. 89 inTEAM created an entirely different product from that envisioned by DST, knowing that it was “invading WebSMARTT territory.” 90 The inTEAM carve-out for DST anticipated that DST would use first level menu plan data from other sources, such as WebSMARTT, to create models that would project how staffing, equipment, and other costs w ould be affected based on cha nges to the menu. It did not contemplate the act of first level menu planning itself and its use to establish compliance with USDA regulations. Be cause the Menu Compliance Tool+ in CN Central goes far beyond what is carved ou t for the DST software in the agreements, Goodman and inTEAM breached the non-comp etes in the transaction agreements.

89 Id . at 945-46, 950 (empha sis in original); see also id . at 884 (DST is “d esigned to supplement inTEAM offerings by collecting data from point of sale, back of the house, financial management, and payroll systems to help districts an alyze data from disparate systems.”); id . at 943 (emphasis in original): Select the Import Defaults from CSV button to import a list of food items and corresponding descriptions from a pre-exis ting district food item spreadsheet. Ideally the item list would be obtained by exporting data from the foodservice program’s current [point of sale] system or captu red from cycle menu plans entered in an Excel format. Note: Fo r DST purposes the menu items entered are the generic descriptions of foods on the menu such as cheeseburger, cheese pizza, . . . etc. Since DST does not evaluate specif ic recipes nor does it perform an independent nutritional analysis, the exact manufacturer or com position of the item is not needed. 90 Id . at 966 (Nov. 11, 2012 E-mail from Griffin) (“But then we can’t be strai ght up and say menu planning because that would be invading WebSMARTT territory!”); id . at 2462-64 (Griffin Trial Test.) (admitting menu planning capability was added in 2012).44 IV. Next, Heartland argues that the Court of Chancery erred by finding it breached the non-compete in the CMA when it colla borated with Colyar. Heartland also challenges the length of the injunction th e court ordered to remedy the breach.
A. The Court of Chancery found that H eartland indirectly breached its noncompete and exclusivity obligations under the CMA when it “collaborated with Colyar, a direct competitor of inTEAM, to create an in terface between Heartland’s Mosaic Menu Planning product and Colyar’s administrative review software for the express purposes of ‘provid[in g] state auditors a consistent view of school district menu data so that they can perform audits in a more efficient manner’ and offering ‘access to school district me nu data as needed in perfo rming an audit and providing recommendations.’” 91 According to the court, such action fell within the scope of providing “unique state value added functionality.” 92 Under the CMA, Heartland ca nnot “engage, directly or indirectly . . . in providing services or products co mpetitive with the inTEAM Business.” 93 Within the definition of the inTEAM Business is “unique state value added functionality.” 94

91 inTEAM Assocs. , 2016 WL 5660282, at *17 (inter nal citation omitted). 92 Id . at *17-18. 93 App. to Opening Br. at 317. 94 Id. at 330.45 The Court of Chancery found that “unique state value added functionality” included “the ability to build products that assist state agencies in conducting their administrative review process.” 95 On appeal, Heartland argues that the Court of Chancery impermissibly relied on trial testimony to define “unique state value added functionality.” According to Heartland, it presented contrary testimo ny showing “that administrative review software was not contem plated in the [CMA].” 96 But, it was for the Court of Chancery as the “trier of fact to assess the credibility of the conflicting testimony a nd the weight it was to be given.” 97 The court credited Goodman’s testimony that he understood the phrase “unique state value added functionality” to mean the ab ility to “‘allow [] [state reviewers or auditors] immediate access to records that they needed to review electronically that were created and generated generally at the school di strict level,’ causing ‘a breakthrough in the way audits were co nducted and the value that was added for state agencies.’” 98 The court also cited Goodman’s testimony that he believed the phrase meant “during an admini strative review related to menu plans, in particular,

95 inTEAM Assocs. , 2016 WL 5660282, at *18. 96 Opening Br. at 44. 97 Acme Markets, Inc. v. Revello , 547 A.2d 131, 1988 WL 71448, at *1 (Del. June 20, 1988) (TABLE). 98 inTEAM Assocs. , 2016 WL 5660282, at *16 (inter nal citation omitted).46 the ability to have school districts within th at state either to utilize the third-party systems that they already had, or allo w them to utilize our menu compliance tool directly so that the data feed was always available at the state level.” 99 The court also relied on Janet Luc Griffin, 100 who testified that the “additional state value” of inTEAM’s Menu Compliance Tool+ enabled state agencies to access the districts’ menu information directly and, as a result, they c ould modify the menus within the system to assure the districts are in compliance before the agency comes on-site to do a review. 101 As the Court of Chancery held: Heartland does not rebut this testimony and instead argues that because this functionality did not exist until 2014, three years after the parties signed the Co-Marketing Agreement, it could not be part of the “state value added functionality” described in the agreement. This argument fails because the definition of in TEAM Business, which references Exhibit C and discusses a “future re lease” of DST Phase 2 as defined in the Functional Design Documents, anticipated the development of a product with functionality that did not exist at closing. Heartland also argues “no inTEAM witn ess made any effort to show that the functionality of inTEAM’s administrative review software module was identified in the func tional design documents.” This argument ignores the first part of Goodman’s testimony, which specifically discusses Exhibit C (a nd, by reference, the Functional Design Documents). This argument also fails to address the language of the Functional Design Docume nts, which state “District Administrators [] will configure th eir districts within DST ... State Agency Administrators (SAs) will ... be able to access the new district and building setup screens.” Hear tland offers no testimony or evidence

99 Id

. 100 Griffin is the Director of Business Development at inTEAM. 101 inTEAM Assocs. , 2016 WL 5660282, at *16.47 to rebut these descriptions of the “unique state value added functionality” of the inTEAM Carv e-Out, and inTEAM meets its burden to show it bargained for this functionality at the time of the transaction. By January 2011, inTEAM was contem plating a future release of DST Phase 2 that would have greater functionalities than existed at the time of the agreement. Exhibit C a nd the Functional Design Documents expressly reference those functiona lities, which included the ability to plan menus, generate production r ecords, and assist administrative reviews. Heartland agreed to inco rporate Exhibit C and the Functional Design Documents into the inTEAM Business definition described in the Asset Purchase Ag reement and the Co-Mar keting Agreement, and it cannot now simply ignore what those documents state. 102 The Court of Chancery’s conclusion is supported by the record and thus was

not error. 103
B. Heartland next argues that the length of the injunction is inappropriate. We review the Court of Chancery’s issuance of a permanent injunction for abuse of discretion. 104 An abuse of discretion occurs wh en a court has “exceeded the bounds of reason in view of the circumstances” or has “ignored recognized rules of law or practice so as to produce injustice.” 105

102 Id

. 103 Honeywell Int’l Inc. , 872 A.2d at 950 (“To th e extent the trial court’ s interpretation relies upon findings extrinsic to the contract, or inferences drawn from those findings, this Court will defer to the trial court’s findings unless they are not supported by the record.”). 104 N. River Ins. Co. v. Mine Safety Appliances Co. , 105 A.3d 369, 380 (Del. 2014). 105 Firestone Tire & Rubber Co. v. Adams , 541 A.2d 567, 570 (Del. 1988).48 The Court of Chancery found that H eartland’s breach began on March 17, 2014, when its relationship with Colyar fi rst began, and lasted until September 8, 2015, when Heartland announced the TDA had not selected its proposal. Because the breach lasted roughly eighteen months , the Court of Chancery granted an injunction extending the non-compete agre ement for eighteen months to give inTEAM the full benefit of its bargain. Heartland argues that it was improper to use March 17, 2014 as the start of the breach because that was the date a Coly ar executive reached out to Heartland. According to Heartland, “receiving an unsolicited e-mail from a third party should not constitute a breach of the [CMA].” 106 But the Court of Chancery stated that it “did not rely on one e-mail alone” to determine whether Heartland breached the
CMA. 107 “[R]ather, there was syst emic behavior that led the Court to its conclusion. The [Colyar] e-mail served as an element, among others, to inform the Court of when this breach began . . . .” 108
The court considered the e-mail and th e events thereafter to determine when the breach began. Although Colyar initiate d the first interaction, Heartland did not decline Colyar’s invitation. Instead, Hear tland and Colyar opened the dialogue that

106 Opening Br. at 46. 107 inTEAM Associates, LLC v. Heartland Payment Sys., Inc. , 2016 WL 6819734, at *2 (Del. Ch. Nov. 18, 2016). 108 Id

.49 led to the underlying breach. The inj unction measured Heartland’s breach by reference to its collaborative efforts with Colyar. Thus, the C ourt of Chancery did not “exceed the bounds of reason” or “ignore recognized rules of law” by finding the breach began on March 17, 2014 and ran until September 8, 2015, when Heartland announced the TDA had not selected its joint proposal with Colyar.
V. The Court of Chancery found that Goodman breached the non-solicitation provision in the Consulting Agreement by encouraging St. Paul Public Schools to terminate its relationship with Heartland. 109 Thus, Heartland argues that under the Consulting Agreement, it is entitled to rec over the full amount it paid to Goodman for his consulting services. Heartland agreed to pay Goodman a salary of $16,667.67 per month for threeyears during the Consulting Agreement, totaling $600,000. If Goodman breached certain sections of the Consulting Agre ement, including the non-solicitation provision, Heartland had “no obligation to pay the Consultant any compensation set forth herein.” 110 The Court of Chancery held that G oodman lost his entitlement to his consulting fees when he began breachi ng the agreement in July 2014. Thus,

109 Goodman does not dispute the Court of Chancery’s finding that he breached the Consulting Agreement on appeal. 110 App. to Opening Br. at 291 (Consulting Agreement § 3).50 Heartland was entitled to rec over $50,003.01, representing the fees Heartland paid Goodman from July to September 2014—the last three months of the Consulting Agreement. But, according to Heartland, the use of th e word “any” meant Goodman had to disgorge the entire $600, 000 in compensation he received. We find that the Court of Chancery correctly interpreted the forfeiture provision as prospective only and did not re quire Goodman to return the fees he was paid before the breach occurred. Th e Consulting Agreement does not contain a clawback provision, and at oral argument counsel admitt ed there was no evidence in the record to show such a provision was specifically bargained for. 111 Heartland is thus only entitled to recoup the fees it pa id during the three months Goodman was in breach of the Consulting Agreement.
VI. On cross-appeal, inTEAM argues that the Court of Chancery erred by finding that it was not entitled to fee shifting unde r the CMA. The Court of Chancery found that a cap limiting liability to “the Fees pr eviously paid by the other Party pursuant to this Agreement,” barred inTEAM’s ability to collect attorneys’ fees because inTEAM had not paid Heartla nd any fees under the CMA. Section 6.5 of the CMA includes a fee shifting provision that states “the breaching party shall be liabl e and pay to the non-breaching Party the reasonable and

111 Oral Arg. at 14:42-15:36.51 verifiable legal fees and costs incurre d in connection with such litigation or proceeding, including an appeal therefrom. . . .” 112 Here, we have found that both parties have breached the CMA. At oral ar gument, the parties agreed that if both parties are in breach, the provision is inapplicable. 113 Thus, this argument is moot.
VII. We reverse the Court of Chancery’s determination that Goodman did not breach the non-compete provisions of the APA and the Consulting Agreement, and reverse its determination that inTEAM di d not breach the CMA. Otherwise, the judgment of the Court of Chancery is affirm ed. We remand to the Court of Chancery for further proceedings consistent with this opinion. Because of the passage of time, we leave it to the Court of Chancery to fashion a remedy adequate to compensate Heartland for Goodman’s breach of the APA and Consulting Agreement, and inTEAM’s breach of the CMA. Jurisdiction is not retained. In a footnote, inTEAM and Goodman argue that if we find that they breached the non-compete provision, we must remand to the Court of Chancery to allow it to consider certain affirmative defenses it did not reach because of its original finding that the non-compete was not breached. We agree with this argument but only to a confined extent. For starters, Goodman may not reassert affirmative defenses to the

112 App. to Opening Br. at 315. 113 Oral Arg. at 18:50-20:10.52 Court of Chancery’s finding that he violat ed the second clause of the non-solicitation provision. The Court of Chancery specifica lly addressed and rejected his affirmative defenses to the non-solicitation provision violation. 114 Goodman has not challenged that finding on appeal and it thus stands. But, to the extent that inTEAM and Goodman properly raised and br iefed affirmative defenses at trial addressed to the alleged violation of the non-compete and the Court of Chancery did not reach them because it found no violation, they are free to reassert them in the course of the Court of Chancery’s determination of what re lief, if any, to grant for inTEAM’s and Goodman’s violation of the non-compete.

114 See inTEAM Assocs. , 2016 WL 5660282, at *26.