[sheet: Cover]

Field	Value
Document Title	Change in Control Severance Calculation — Working Paper
Date	September 2, 2022
Prepared By	Nadia Petrov, Associate — Calderwood & Harkness LLP
Reviewed By	Gregory Tan, Partner (Tax) — Calderwood & Harkness LLP
Matter	Arbor Health Technologies Inc. — Executive Employment Agreement (Dr. Marcus J. Elliston, Prospective COO)
Matter Number	1010-00004
Client Number	81-30294
Client	Arbor Health Technologies Inc.
Purpose	Supporting analysis for Section 280G / Golden Parachute memorandum; models change in control severance scenarios, 280G safe harbor calculations, and best-net cutback threshold analysis
Status	DRAFT — Attorney Work Product / Privileged & Confidential
Governing Law	Commonwealth of Massachusetts
Related Memo	Section 280G / Golden Parachute Analysis and Best-Net Cutback Modeling (September 2, 2022)
Tax Advisor Coordination	Hargrove & Sinclair CPAs (Malcolm R. Sinclair, CPA)

[sheet: Executive Comp Summary]

Compensation Element	Annual / One-Time Value	Notes
Base Salary	$575,000	Per annum
Annual Bonus — Target (75% of Base)	$431,250	$575,000 × 75%
Annual Bonus — Maximum (150% of Target)	$646,875	$431,250 × 150%
Signing Bonus	$250,000	One-time; 24-month clawback on voluntary resignation or termination for Cause
Stock Options — 1.25% Fully Diluted Equity	TBD (see Equity Valuation tab)	4-year vesting; 25% cliff at 12 months, monthly thereafter; exercise price at FMV as of grant date
Restricted Stock Units — 0.50% Fully Diluted Equity	TBD (see Equity Valuation tab)	3-year vesting; 33.33% annually
Employer Health Insurance Premium (Monthly)	$2,150	Executive health plan (medical, dental, vision)
Employer Health Insurance Premium (Annual)	$25,800	$2,150 × 12
Life Insurance Coverage	$1,150,000	2× base salary ($575,000 × 2)
LTD Insurance	60% of Base Salary	Long-term disability
401(k) Company Match	Up to 4% of eligible compensation
Professional Development Allowance	$15,000	Annual
Relocation Allowance (Cap)	$75,000	Not utilized — Executive resides in MA
Proposed Start Date	November 1, 2022
Initial Employment Term	3 years	Automatic 1-year renewals; 90-day notice of non-renewal
Reporting To	Priya Chandrasekaran, CEO
First-Year Total Cash at Target	$1,256,250	= $575,000 + $431,250 + $250,000

[sheet: CIC Definition]

Trigger Category	Description	Notes / Carve-Outs
(i) Acquisition of Voting Securities	Acquisition of >50% of AHT voting securities by any person or group	Excludes Ridgeline Capital Partners, LP and its affiliates (currently ~68% owner)
(ii) Merger / Consolidation / Asset Sale	Merger, consolidation, or sale of substantially all assets where existing stockholders retain <50% of surviving entity
(iii) Liquidation / Dissolution	Complete liquidation or dissolution of AHT
(iv) Board Composition Change	Change in majority composition of the Board (incumbent directors and their approved successors)	Ridgeline designees on compensation committee; Thomas R. Glenwood serves as Board Chair

[sheet: Severance — No CIC]

Severance Component	Calculation Basis	Amount	Duration / Notes
Cash Severance — Base Salary Continuation	12 months × Base Salary	$575,000	12 months
Pro-Rata Annual Bonus	Based on actual performance for year of termination	$431,250	Proxy using target; actual amount depends on performance metrics
COBRA Continuation — Employer-Paid Premiums	$2,150/month × 12 months	$25,800	12 months employer-paid medical, dental, vision
Accelerated Equity Vesting	25% of unvested equity awards	See Equity Valuation tab	25% of unvested options and RSUs
Total Estimated Severance (excl. equity)	Cash + Bonus Proxy + COBRA	$1,032,050	$575,000 + $431,250 + $25,800
Condition to Payment	Execution of General Release (Schedule B)	—	21-day review / 7-day revocation (ADEA)

[sheet: Severance — CIC]

Severance Component	Calculation Basis	Amount	Duration / Notes
Cash Severance — Base Salary	24 months × Base Salary	$1,150,000	$575,000 × 2 = $1,150,000; double-trigger: qualifying termination must occur within 24 months following change in control
Bonus Severance — 2× Target Annual Bonus	2 × Target Bonus	$862,500	$431,250 × 2 = $862,500
COBRA Continuation — Employer-Paid Premiums	$2,150/month × 18 months	$38,700	18 months employer-paid premiums
Accelerated Equity Vesting — Stock Options	100% of unvested options (1.25% fully diluted)	See Equity Valuation tab	Full acceleration upon qualifying CIC termination
Accelerated Equity Vesting — RSUs	100% of unvested RSUs (0.50% fully diluted)	See Equity Valuation tab	Full acceleration upon qualifying CIC termination
Total CIC Cash Severance (excl. equity)	Sum of cash + bonus + COBRA	$2,051,200	$1,150,000 + $862,500 + $38,700 = $2,051,200
Garden-Leave Payment (Non-Compete)	50% of Base Salary × 12 months	$287,500	MA Noncompetition Agreement Act; 12-month non-compete period; paid in addition to severance
Total CIC Package (excl. equity, incl. garden leave)	CIC severance + garden leave	$2,338,700	$2,051,200 + $287,500
Condition to Payment	Execution of General Release (Schedule B)	—	21-day review / 7-day revocation (ADEA)

[sheet: Equity Valuation]

Item	Scenario A — Current EV	Scenario B — 1.5× EV	Scenario C — 2× EV	Notes
Assumed Enterprise Value	$340,000,000	$510,000,000	$680,000,000	Base case = 2019 acquisition EV; Scenarios B/C reflect potential CIC transaction premiums
Assumed Net Debt / Adjustments	$0	$0	$0	Simplified; assumes equity value ≈ enterprise value for illustration
Fully Diluted Equity Value	$340,000,000	$510,000,000	$680,000,000
Stock Options — 1.25% of Fully Diluted	$4,250,000	$6,375,000	$8,500,000	Gross value before exercise price
Stock Options — Exercise Price (FMV at grant)	$4,250,000	$4,250,000	$4,250,000	Assumed FMV at grant = current EV basis
Stock Options — Intrinsic (Spread) Value	$0	$2,125,000	$4,250,000	= Gross value − Exercise price
RSUs — 0.50% of Fully Diluted	$1,700,000	$2,550,000	$3,400,000	Full value upon vesting
Total Equity Value (Options spread + RSUs)	$1,700,000	$4,675,000	$7,650,000
% Unvested at Hypothetical CIC (Year 1)	~75% Options / ~66.67% RSUs	—	—	Assumes CIC in first year of employment; cliff not yet met on options
Accelerated Value — 25% (Non-CIC)	$425,000	$1,168,750	$1,912,500	25% of total equity value
Accelerated Value — 100% (CIC)	$1,700,000	$4,675,000	$7,650,000	Full acceleration of all unvested equity
Total CIC Package incl. Equity (100% accel.)	$3,751,200	$6,726,200	$9,701,200	= $2,051,200 CIC cash severance + Accelerated equity value

[sheet: Cover]
Field | Value
Document Title | Change in Control Severance Calculation — Working Paper
Date | September 2, 2022
Prepared By | Nadia Petrov, Associate — Calderwood & Harkness LLP
Reviewed By | Gregory Tan, Partner (Tax) — Calderwood & Harkness LLP
Matter | Arbor Health Technologies Inc. — Executive Employment Agreement (Dr. Marcus J. Elliston, Prospective COO)
Matter Number | 1010-00004
Client Number | 81-30294
Client | Arbor Health Technologies Inc.
Purpose | Supporting analysis for Section 280G / Golden Parachute memorandum; models change in control severance scenarios, 280G safe harbor calculations, and best-net cutback threshold analysis
Status | DRAFT — Attorney Work Product / Privileged & Confidential
Governing Law | Commonwealth of Massachusetts
Related Memo | Section 280G / Golden Parachute Analysis and Best-Net Cutback Modeling (September 2, 2022)
Tax Advisor Coordination | Hargrove & Sinclair CPAs (Malcolm R. Sinclair, CPA)
[sheet: Executive Comp Summary]
Compensation Element | Annual / One-Time Value | Notes
Base Salary | $575,000 | Per annum
Annual Bonus — Target (75% of Base) | $431,250 | $575,000 × 75%
Annual Bonus — Maximum (150% of Target) | $646,875 | $431,250 × 150%
Signing Bonus | $250,000 | One-time; 24-month clawback on voluntary resignation or termination for Cause
Stock Options — 1.25% Fully Diluted Equity | TBD (see Equity Valuation tab) | 4-year vesting; 25% cliff at 12 months, monthly thereafter; exercise price at FMV as of grant date
Restricted Stock Units — 0.50% Fully Diluted Equity | TBD (see Equity Valuation tab) | 3-year vesting; 33.33% annually
Employer Health Insurance Premium (Monthly) | $2,150 | Executive health plan (medical, dental, vision)
Employer Health Insurance Premium (Annual) | $25,800 | $2,150 × 12
Life Insurance Coverage | $1,150,000 | 2× base salary ($575,000 × 2)
LTD Insurance | 60% of Base Salary | Long-term disability
401(k) Company Match | Up to 4% of eligible compensation
Professional Development Allowance | $15,000 | Annual
Relocation Allowance (Cap) | $75,000 | Not utilized — Executive resides in MA
Proposed Start Date | November 1, 2022
Initial Employment Term | 3 years | Automatic 1-year renewals; 90-day notice of non-renewal
Reporting To | Priya Chandrasekaran, CEO
First-Year Total Cash at Target | $1,256,250 | = $575,000 + $431,250 + $250,000
[sheet: CIC Definition]
Trigger Category | Description | Notes / Carve-Outs
(i) Acquisition of Voting Securities | Acquisition of >50% of AHT voting securities by any person or group | Excludes Ridgeline Capital Partners, LP and its affiliates (currently ~68% owner)
(ii) Merger / Consolidation / Asset Sale | Merger, consolidation, or sale of substantially all assets where existing stockholders retain <50% of surviving entity
(iii) Liquidation / Dissolution | Complete liquidation or dissolution of AHT
(iv) Board Composition Change | Change in majority composition of the Board (incumbent directors and their approved successors) | Ridgeline designees on compensation committee; Thomas R. Glenwood serves as Board Chair
[sheet: Severance — No CIC]
Severance Component | Calculation Basis | Amount | Duration / Notes
Cash Severance — Base Salary Continuation | 12 months × Base Salary | $575,000 | 12 months
Pro-Rata Annual Bonus | Based on actual performance for year of termination | $431,250 | Proxy using target; actual amount depends on performance metrics
COBRA Continuation — Employer-Paid Premiums | $2,150/month × 12 months | $25,800 | 12 months employer-paid medical, dental, vision
Accelerated Equity Vesting | 25% of unvested equity awards | See Equity Valuation tab | 25% of unvested options and RSUs
Total Estimated Severance (excl. equity) | Cash + Bonus Proxy + COBRA | $1,032,050 | $575,000 + $431,250 + $25,800
Condition to Payment | Execution of General Release (Schedule B) | — | 21-day review / 7-day revocation (ADEA)
[sheet: Severance — CIC]
Severance Component | Calculation Basis | Amount | Duration / Notes
Cash Severance — Base Salary | 24 months × Base Salary | $1,150,000 | $575,000 × 2 = $1,150,000; double-trigger: qualifying termination must occur within 24 months following change in control
Bonus Severance — 2× Target Annual Bonus | 2 × Target Bonus | $862,500 | $431,250 × 2 = $862,500
COBRA Continuation — Employer-Paid Premiums | $2,150/month × 18 months | $38,700 | 18 months employer-paid premiums
Accelerated Equity Vesting — Stock Options | 100% of unvested options (1.25% fully diluted) | See Equity Valuation tab | Full acceleration upon qualifying CIC termination
Accelerated Equity Vesting — RSUs | 100% of unvested RSUs (0.50% fully diluted) | See Equity Valuation tab | Full acceleration upon qualifying CIC termination
Total CIC Cash Severance (excl. equity) | Sum of cash + bonus + COBRA | $2,051,200 | $1,150,000 + $862,500 + $38,700 = $2,051,200
Garden-Leave Payment (Non-Compete) | 50% of Base Salary × 12 months | $287,500 | MA Noncompetition Agreement Act; 12-month non-compete period; paid in addition to severance
Total CIC Package (excl. equity, incl. garden leave) | CIC severance + garden leave | $2,338,700 | $2,051,200 + $287,500
Condition to Payment | Execution of General Release (Schedule B) | — | 21-day review / 7-day revocation (ADEA)
[sheet: Equity Valuation]
Item | Scenario A — Current EV | Scenario B — 1.5× EV | Scenario C — 2× EV | Notes
Assumed Enterprise Value | $340,000,000 | $510,000,000 | $680,000,000 | Base case = 2019 acquisition EV; Scenarios B/C reflect potential CIC transaction premiums
Assumed Net Debt / Adjustments | $0 | $0 | $0 | Simplified; assumes equity value ≈ enterprise value for illustration
Fully Diluted Equity Value | $340,000,000 | $510,000,000 | $680,000,000
Stock Options — 1.25% of Fully Diluted | $4,250,000 | $6,375,000 | $8,500,000 | Gross value before exercise price
Stock Options — Exercise Price (FMV at grant) | $4,250,000 | $4,250,000 | $4,250,000 | Assumed FMV at grant = current EV basis
Stock Options — Intrinsic (Spread) Value | $0 | $2,125,000 | $4,250,000 | = Gross value − Exercise price
RSUs — 0.50% of Fully Diluted | $1,700,000 | $2,550,000 | $3,400,000 | Full value upon vesting
Total Equity Value (Options spread + RSUs) | $1,700,000 | $4,675,000 | $7,650,000
% Unvested at Hypothetical CIC (Year 1) | ~75% Options / ~66.67% RSUs | — | — | Assumes CIC in first year of employment; cliff not yet met on options
Accelerated Value — 25% (Non-CIC) | $425,000 | $1,168,750 | $1,912,500 | 25% of total equity value
Accelerated Value — 100% (CIC) | $1,700,000 | $4,675,000 | $7,650,000 | Full acceleration of all unvested equity
Total CIC Package incl. Equity (100% accel.) | $3,751,200 | $6,726,200 | $9,701,200 | = $2,051,200 CIC cash severance + Accelerated equity value

[sheet: Cover]

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