Contract analysis

I. Purpose and Summary This memorandum analyzes the design options for the change in control ("CIC") provisions to be included in the proposed Executive Employment Agreement (the "Employment Agreement") between Arbor Health Technologies Inc. ("AHT" or the "Company") and Dr. Marcus J. Elliston (the "Executive"), who will serve as Chief Operating Officer of the Company, reporting directly to Chief Executive Officer Pri

1. The definition of "change in control" — including the appropriate definitional prongs, the treatment of the Company's majority private equity sponsor (Ridgeline Capital Partners, LP), and the relationship between the employment agreement definition and the definition contained in the AHT 2020 Equity Incentive Plan (as amended May 2021);

2. The choice between single-trigger and double-trigger acceleration of equity awards and severance payments, including the appropriate length of the post-CIC qualifying termination window and the definition of "Good Reason" in the CIC context;

3. The appropriate CIC severance multiples for a COO-level executive, informed by peer-group market data and the Company's internal precedent agreements; and

4. The interaction of the CIC provisions with the existing Ridgeline Capital Partners, LP Stockholders' Agreement, including the drag-along provisions applicable to management equity holders, the Helix Ventures Fund III, LP consent rights, and the AHT 2020 Equity Incentive Plan. The analysis set forth in this memorandum is informed by several key sources: (a) the internal term sheet circulated by AHT management on Ju

II. Background A. AHT Ownership Structure Arbor Health Technologies Inc. is a Delaware corporation headquartered at 400 Brattle Commerce Park, Suite 1200, Cambridge, Massachusetts 02138. The Company provides cloud-based clinical workflow management and data analytics solutions to mid-size and large health systems, physician practice groups, and post-acute care facilities across the United States. As described in grea

III. Definition of "Change in Control" The definition of "change in control" is a foundational element of the CIC provisions and must be drafted with precision, particularly given AHT's PE-backed ownership structure. An overly broad definition could be triggered by routine transactions involving the incumbent sponsor, creating unintended obligations for the Company. An overly narrow definition could fail to provide m

1. Acquisition of Voting Securities. The first prong is triggered upon the acquisition by any person or group (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) of beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) of more than 50% of the combined voting power of AHT's then-outstanding voting securities. This prong captures hostile and friendly

2. Merger, Consolidation, or Asset Sale. The second prong is triggered upon the consummation of a merger, consolidation, reorganization, or similar business combination involving AHT, or a sale, transfer, or other disposition of all or substantially all of AHT's assets, in any case where the stockholders of AHT immediately prior to such transaction do not, immediately following such transaction, own (directly or indi

3. Liquidation or Dissolution. The third prong is triggered upon the approval by AHT's stockholders (or the Board of Directors, if stockholder approval is not required) of a plan of complete liquidation or dissolution of the Company. This prong is included as a protective measure and is relatively straightforward. In the event of a liquidation, the Executive would lose his or her position, and the CIC protections sho

4. Board Composition Change. The fourth prong is triggered upon a change in the composition of the Board of Directors such that the individuals who constituted the Board as of the date of the Employment Agreement (the "Incumbent Directors"), together with any new directors whose election or nomination was approved by a vote of at least a majority of the Incumbent Directors then in office (each, an "Approved Director"

IV. Single-Trigger vs. Double-Trigger Acceleration A. Overview of Approaches The choice between single-trigger and double-trigger acceleration is one of the most consequential design decisions in any CIC provision. The terms "single-trigger" and "double-trigger" refer to the number of events that must occur before the Executive becomes entitled to CIC severance and/or equity acceleration benefits. This section descri

1. Material Diminution in Title, Duties, Authority, or Responsibilities. A material diminution in the Executive's title, duties, authority, or responsibilities, including without limitation any change that results in the Executive no longer serving as Chief Operating Officer of the Company (or the surviving or acquiring entity) or no longer reporting directly to the Chief Executive Officer. This trigger is designed t

2. Reduction in Base Salary or Target Bonus Opportunity. Any reduction in the Executive's base salary below $575,000 per annum or any reduction in the Executive's target annual bonus opportunity below 75% of base salary. This trigger protects against economic diminution of the Executive's compensation package following a change in control.

3. Material Change in Principal Work Location. A material change in the geographic location of the Executive's principal place of employment, defined as a relocation of the Executive's principal workplace to a location more than 50 miles from the Company's current headquarters at 400 Brattle Commerce Park, Cambridge, Massachusetts 02138 (or, if the Executive's principal workplace has been relocated prior to the chang

4. Material Breach of the Employment Agreement. Any material breach by the Company (or the successor entity) of any provision of the Employment Agreement that is not cured within the applicable cure period. This is a broad catch-all trigger designed to capture material contractual violations that do not fall within the specific triggers enumerated above.

5. Failure of Successor to Assume the Employment Agreement. The failure of any successor entity to expressly assume and agree to be bound by all of the terms and conditions of the Employment Agreement, whether by operation of law, merger agreement, assignment agreement, or otherwise. This trigger ensures that the CIC protections survive the transaction and are enforceable against the successor entity. Anticipated Neg

V. CIC Severance Multiples — Market Data and Recommendations A. Market Data Overview Broadleaf Compensation Advisors LLC (Diane K. Holbrook, lead consultant) prepared a comprehensive peer benchmarking report in June 2022 analyzing executive compensation practices at a peer group of comparable companies. The peer group was selected based on industry (healthcare services, healthcare technology, and health IT SaaS), own

Section 409A Compliance. The lump-sum payment structure described above must comply with Section 409A of the Internal Revenue Code ("Section 409A"), which governs the timing of payments under nonqualified deferred compensation plans. Section 409A compliance for the CIC severance payments will be addressed in a separate coordination memorandum being prepared by Gregory Tan (Partner, Tax), which is expected by mid-Augu

VI. Interaction with Ridgeline Capital Partners Stockholders' Agreement A. Drag-Along Provisions The Ridgeline Capital Partners Stockholders' Agreement, dated December 16, 2019 (the "Stockholders' Agreement"), contains drag-along provisions that are a standard feature of PE-backed portfolio company governance. The drag-along provisions permit Ridgeline, as the majority stockholder (holding approximately 68% of AHT eq

VII. Section 280G Considerations (Preliminary) The CIC severance package described in Section V above, combined with the equity acceleration, may constitute "parachute payments" within the meaning of Internal Revenue Code Section 280G ("Section 280G"). Section 280G imposes adverse tax consequences on both the recipient and the payor of "excess parachute payments" made in connection with a change in the ownership or e