Contract analysis

From: Devon Archer <darcher@calderwoodharkness.com> To: Aaron Whitfield <awhitfield@arborhealthtech.com> Cc: Bernard Crawford <bcrawford@calderwoodharkness.com> Date: Mon, 12 Sep 2022 03:47:00 -0000 Subject: Elliston Employment Agreement — Status Update and Remaining Open Items Following Second F&R Markup

I hope this finds you well. We received Fielding & Rowe's second markup of the Executive Employment Agreement for Dr. Elliston on Friday, September 9, and Bernard and I have now reviewed it in full. I'm pleased to report that negotiations have progressed substantially — the vast majority of terms are now agreed between AHT and Dr. Elliston's counsel (Catherine Fielding and Jonathan Pryce at Fielding & Rowe). We are p

For your comfort that this deal is near the finish line, the following material terms are now fully agreed:

- **Compensation:** Base salary of $575,000; annual bonus target of 75% of base ($431,250); maximum bonus of 150% of target ($646,875); signing bonus of $250,000. - **Equity:** Stock option grant of 1.25% of fully diluted equity (4-year vest, 25% cliff at 12 months, monthly thereafter) and RSU grant of 0.50% of fully diluted equity (3-year vest, 33.33% annually). Award agreements under the AHT 2020 Equity Incentive P

**1. Annual Bonus — Performance Metrics Language**

F&R's second markup proposes that the Agreement include greater specificity around the performance metrics and methodology for determining annual bonus payouts, rather than leaving full discretion with the Board compensation committee. Specifically, F&R requests language requiring that: (a) performance objectives be established within the first 90 days of each fiscal year, (b) objectives be communicated in writing to

*C&H Recommendation:* We suggest a middle-ground approach — agree that objectives will be established and communicated in writing within 90 days of each fiscal year in consultation with the CEO, but preserve the Board compensation committee's discretion to adjust for extraordinary circumstances. This is consistent with the structure in Priya Chandrasekaran's existing CEO agreement, which we used as a precedent templa

**2. Signing Bonus Clawback Mechanics upon Termination Without Cause**

The current draft requires Dr. Elliston to repay a pro-rata portion of the $250,000 signing bonus if he voluntarily resigns or is terminated for Cause within 24 months of his start date. F&R's second markup seeks to add a carve-out so that no clawback applies if AHT terminates Dr. Elliston without Cause — i.e., F&R argues the Executive should not be required to repay any portion of the signing bonus if the Company in

As flagged in my August 1 memo, there are Massachusetts Wage Act considerations here (M.G.L. c. 149, §§ 148–150). A signing bonus, once paid, could be characterized as "wages" under the Wage Act, and a clawback triggered by a without-Cause termination could raise enforcement issues. Treble damages exposure exists for Wage Act violations.

*C&H Recommendation:* We recommend accepting F&R's position on this point — limit the clawback to voluntary resignation and termination for Cause only, and carve out termination without Cause. This reduces Wage Act risk and is a commercially reasonable concession given that the Company controls the without-Cause termination decision. We note this is consistent with the approach in Derek Solano's (CFO) existing agreem

**3. Non-Solicitation — Definitional Refinement**

The 18-month employee non-solicitation covenant currently covers employees "at the manager level and above." F&R's second markup requests that the definition be further narrowed to cover only employees who (a) are at the manager level and above *and* (b) had direct working interaction with Dr. Elliston during the 12 months preceding his termination. For reference, the 12-month customer/partner non-solicitation (limit

*C&H Recommendation:* We propose a compromise — accept the "direct working interaction" qualifier but retain the full 18-month duration and expand the look-back period from F&R's proposed 12 months to 18 months (matching the restriction period). This narrows the population of covered employees in a defensible way, which should improve enforceability under Massachusetts common law (as discussed in Nadia Petrov's Augus

We would appreciate your input — and any feedback from Lisa Murakami — on the three open items, ideally by **Wednesday, September 14**. If any items require Ridgeline or Board-level input (particularly the bonus metrics language given the compensation committee's oversight role), it would be helpful to know so we can factor that into our timing.

Once we have your direction, we will prepare and circulate the third draft to Fielding & Rowe promptly, targeting circulation by **Friday, September 16**. Our goal remains to have a fully executed package in hand well in advance of the November 1 proposed start date.

As a reminder, Gregory Tan remains available for any follow-up questions on the 409A or 280G analysis, and Sandra Okafor can address any equity plan questions that may arise.

Please let me know if it would be helpful to schedule a call to walk through any of this — happy to set something up with you, Lisa, and Bernard at your convenience.

**Devon Archer** Associate Calderwood & Harkness LLP One International Place, Suite 3400 Boston, MA 02110 T: (617) 555-4283 E: darcher@calderwoodharkness.com

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