Aaron,
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 prepared to turn the third draft promptly once we have your direction on the three remaining open items summarized below.
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**STATUS SUMMARY: AGREED TERMS**
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 Plan (as amended May 2021) are in substantially final form. - **Term:** 3-year initial term with automatic 1-year renewals on 90 days' notice of non-renewal. - **Start Date:** November 1, 2022. - **Severance (Non-CIC):** 12 months base salary, pro-rata annual bonus, 12 months COBRA continuation ($2,150/month, ~$25,800), and 25% acceleration of unvested equity. - **Change in Control Severance (Double-Trigger, 24-Month Window):** 24 months base salary ($1,150,000), 2× target bonus ($862,500), 18 months COBRA ($38,700), 100% equity acceleration — including the Ridgeline Capital Partners carve-out in the change in control definition. - **280G Treatment:** Best-net cutback provision (no gross-up), consistent with Gregory Tan's modeling and coordination with Hargrove & Sinclair CPAs. - **Non-Compete:** 12 months post-termination (reduced from original 18-month proposal per F&R's request), limited to healthcare IT/SaaS companies with >$50M annual revenue in the United States, with garden-leave payment of 50% of base salary ($287,500), compliant with the Massachusetts Noncompetition Agreement Act. - **Confidentiality:** Perpetual NDA with standard carve-outs for legally compelled disclosure. - **Invention Assignment and Prior Inventions Disclosure (Schedule A):** Agreed in form. - **Benefits:** Executive health plan, life insurance at 2× base ($1,150,000 coverage), LTD at 60% of base, 401(k) with 4% match, 25 days PTO, $15,000 annual professional development allowance, and executive physical. - **Reporting:** COO reporting to CEO Priya Chandrasekaran, as set forth in Exhibit A.
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**THREE REMAINING OPEN ITEMS**
**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 Dr. Elliston, and (c) the determination of bonus achievement be "based primarily on" those pre-set objectives rather than solely at the Board's discretion.
*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 template, and should not create problematic precedent. We do recommend confirming this approach with Lisa Murakami from an HR policy perspective and with the Ridgeline designees on the compensation committee, given Ridgeline's Board-level approval authority over C-suite compensation terms.
**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 initiates the separation absent misconduct.
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 agreement.
**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 (limited to those with whom the Executive had "material contact" in the last 24 months of employment) is agreed and not at issue.
*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 August 8 enforceability memo), while still providing meaningful protection for AHT's workforce.
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**PROPOSED NEXT STEPS AND TIMELINE**
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.
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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.
Best regards,
**Devon Archer** Associate Calderwood & Harkness LLP One International Place, Suite 3400 Boston, MA 02110 T: (617) 555-4283 E: darcher@calderwoodharkness.com
Matter No. 1010-00004
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