1010-00004 · Arbor Health Technologies Inc · Correspondence/Executive's Counsel

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CALDERWOOD & HARKNESS LLP Counselors at Law

One International Place, Suite 3400 Boston, Massachusetts 02110

Telephone: (617) 542-8800 Facsimile: (617) 542-8801 www.calderwoodharkness.com

Devon Archer, Esq. Direct Dial: (617) 542-8834 darcher@calderwoodharkness.com

August 5, 2022

Via Email and First-Class Mail

Catherine A. Fielding, Esq. Fielding & Rowe LLP 101 Federal Street, Suite 2600 Boston, MA 02110

Re: Proposed Employment of Dr. Marcus J. Elliston as Chief Operating Officer of Arbor Health Technologies Inc. Our Matter No.: 1010-00004

Dear Ms. Fielding:

This firm represents Arbor Health Technologies Inc. ("AHT" or the "Company"), a Delaware corporation headquartered at 400 Brattle Commerce Park, Suite 1200, Cambridge, Massachusetts 02138, in connection with the proposed employment of your client, Dr. Marcus J. Elliston, as Chief Operating Officer of AHT. I am writing on behalf of the engagement team led by Bernard Crawford, the Responsible Partner on this matter, to transmit the initial draft package of employment-related agreements for Dr. Elliston's review with the benefit of your counsel.

As you know, the Company — acting through its General Counsel, Aaron Whitfield, and its Chief Human Resources Officer, Lisa Murakami — has been engaged in productive discussions with Dr. Elliston over the past several weeks regarding the proposed COO role, and both sides have expressed a strong desire to formalize the terms of the anticipated engagement. We are pleased to report that the AHT Board of Directors Compensation Committee (the "Compensation Committee"), which includes designees of AHT's majority stockholder, Ridgeline Capital Partners, LP ("Ridgeline"), has reviewed and authorized the proposed compensation terms reflected in the enclosed drafts. Accordingly, on behalf of AHT, we are transmitting the initial draft package described below for Dr. Elliston's and your review, comment, and consideration.

The enclosed draft package consists of seven documents, each of which is described in greater detail below.

1. Executive Employment Agreement — First Draft

The Executive Employment Agreement (the "Employment Agreement") is by and between Arbor Health Technologies Inc. and Dr. Marcus J. Elliston and sets forth the principal terms and conditions of Dr. Elliston's proposed employment as Chief Operating Officer of AHT. The key terms reflected in the initial draft are summarized as follows:

Title and Reporting. Dr. Elliston would serve as Chief Operating Officer, reporting directly to AHT's Chief Executive Officer, Priya Chandrasekaran.

Start Date and Term. The proposed effective date of employment is November 1, 2022. The Employment Agreement provides for an initial term of three (3) years, with automatic successive one-year renewal periods, subject to the right of either party to provide ninety (90) days' advance written notice of non-renewal prior to the expiration of the then-current term.

Base Salary. An annual base salary of Five Hundred Seventy-Five Thousand Dollars ($575,000), payable in accordance with AHT's standard payroll practices, subject to annual review by the Compensation Committee.

Annual Bonus. An annual performance bonus target equal to seventy-five percent (75%) of base salary (i.e., $431,250 at the initial base salary), with a maximum annual bonus opportunity of one hundred fifty percent (150%) of the target bonus amount (i.e., $646,875 at the initial base salary). Bonus determinations are made by the Compensation Committee based on the achievement of individual and Company performance objectives established at the beginning of each fiscal year.

Signing Bonus. A one-time signing bonus of Two Hundred Fifty Thousand Dollars ($250,000), payable within thirty (30) days following the start date, subject to a twenty-four (24) month clawback provision requiring full or prorated repayment in the event of a voluntary resignation without Good Reason (as defined in the Employment Agreement) or a termination for Cause (as defined in the Employment Agreement) during the clawback period.

Equity Compensation. Equity grants as further described in the separate Stock Option Award Agreement and Restricted Stock Unit Award Agreement enclosed herewith and summarized below.

Benefits. Participation in AHT's executive benefits package, including the Company's executive health plan, life insurance coverage at two times (2×) base salary ($1,150,000 in coverage at the initial base salary), long-term disability insurance, the Company's 401(k) plan with an employer matching contribution of four percent (4%) of eligible compensation, twenty-five (25) days of paid time off per calendar year (pro-rated for any partial year of employment), a professional development allowance of Fifteen Thousand Dollars ($15,000) per annum, and eligibility for AHT's executive physical examination program.

Relocation. A relocation allowance of up to Seventy-Five Thousand Dollars ($75,000). It is our understanding that this provision is unlikely to be utilized given Dr. Elliston's current residence in the Commonwealth of Massachusetts; however, the provision has been included to address any relocation-related expenses that may arise.

Severance — Qualifying Termination (Non-Change in Control). In the event of a termination of Dr. Elliston's employment by the Company without Cause or Dr. Elliston's resignation for Good Reason, in either case not occurring within twenty-four (24) months following a Change in Control (as defined in the Employment Agreement), the Employment Agreement provides for the following severance benefits, subject to execution of a General Release of Claims (described below): (a) twelve (12) months of continued base salary; (b) a pro-rata annual bonus for the year of termination based on actual Company and individual performance; (c) twelve (12) months of employer-paid COBRA continuation coverage at an estimated monthly cost of $2,150 (based on AHT's current premium rates); and (d) acceleration of vesting of twenty-five percent (25%) of the then-unvested portion of outstanding equity awards.

Severance — Change in Control Qualifying Termination (Double-Trigger). In the event of a termination of Dr. Elliston's employment by the Company without Cause or Dr. Elliston's resignation for Good Reason, in either case occurring within twenty-four (24) months following a Change in Control, the Employment Agreement provides for enhanced severance benefits, subject to execution of a General Release of Claims: (a) twenty-four (24) months of continued base salary ($1,150,000 at the initial base salary); (b) two times (2×) the target annual bonus ($862,500 at the initial base salary); (c) eighteen (18) months of employer-paid COBRA continuation coverage ($38,700 at current premium rates); and (d) full acceleration of vesting of one hundred percent (100%) of then-unvested outstanding equity awards.

Section 280G. The Employment Agreement includes a Section 280G "best net" cutback provision. Under this provision, in the event that any payments or benefits provided to Dr. Elliston would constitute "parachute payments" within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended, such payments and benefits will be reduced to the extent necessary to avoid the imposition of the excise tax under Section 4999, but only if and to the extent that such reduction would result in a greater after-tax benefit to Dr. Elliston. The Employment Agreement does not include a tax gross-up provision.

Governing Law. The Employment Agreement is governed by the laws of the Commonwealth of Massachusetts.

2. Employee Non-Competition Agreement (Massachusetts Compliant) — First Draft

Enclosed as a separate standalone agreement is the Employee Non-Competition Agreement (the "Non-Competition Agreement"), which has been drafted to comply with the requirements of the Massachusetts Noncompetition Agreement Act, M.G.L. c. 149, § 24L (the "MNAA"). The key restrictive covenants and related terms reflected in the draft are as follows:

Non-Competition Restriction. The draft Non-Competition Agreement provides for a non-competition period of eighteen (18) months following termination of employment, during which Dr. Elliston would be restricted from engaging in, or providing services to, any business that competes directly with AHT in the healthcare information technology and software-as-a-service sectors operating in the United States. We acknowledge that the eighteen-month duration represents AHT's initial bargaining position and anticipate that this may be a subject of further discussion between the parties.

Employee Non-Solicitation. An eighteen (18) month post-termination restriction on the solicitation or recruitment of AHT employees at the manager level and above.

Customer and Partner Non-Solicitation. A twelve (12) month post-termination restriction on the solicitation of AHT customers and business partners, limited to those customers and partners with whom Dr. Elliston had material contact during the last twenty-four (24) months of his employment with the Company.

Confidentiality. A perpetual confidentiality obligation with respect to AHT's confidential information and trade secrets, subject to standard carve-outs for information that is or becomes publicly available through no fault of Dr. Elliston, information independently developed by Dr. Elliston without use of AHT's confidential information, and legally compelled disclosures (provided that prompt notice is given to the Company and reasonable cooperation is extended to permit the Company to seek protective relief).

Garden-Leave Payment. Consistent with the requirements of the MNAA, the Non-Competition Agreement provides for a garden-leave payment during the non-competition period equal to fifty percent (50%) of Dr. Elliston's highest base salary within the two (2) years preceding the date of termination, which, at the initial base salary, would equal Two Hundred Eighty-Seven Thousand Five Hundred Dollars ($287,500), paid in substantially equal installments in accordance with AHT's standard payroll schedule.

Invention Assignment. The Non-Competition Agreement includes an invention assignment provision pursuant to which all intellectual property and inventions developed by Dr. Elliston during the course of his employment with AHT and relating to the Company's business, actual or demonstrably anticipated, would be assigned to the Company. Inventions properly disclosed on Schedule A to the Employment Agreement (the Prior Inventions Disclosure Form) are excluded from this assignment obligation.

3. Stock Option Award Agreement — Draft

The enclosed Stock Option Award Agreement provides for the grant of incentive stock options to Dr. Elliston to purchase a number of shares of AHT common stock representing one and one-quarter percent (1.25%) of the fully diluted equity of the Company. The options are to be issued under the Arbor Health Technologies Inc. 2020 Equity Incentive Plan, as amended in May 2021 (the "Plan"). The key terms of the option grant are as follows:

Vesting Schedule. The options are subject to a four (4) year vesting schedule, with twenty-five percent (25%) of the total option shares cliff-vesting on the first anniversary of the grant date and the remaining seventy-five percent (75%) vesting in equal monthly installments over the succeeding thirty-six (36) months, in each case subject to Dr. Elliston's continued employment with the Company on the applicable vesting date.

Exercise Price. The per-share exercise price will be set at the fair market value of a share of AHT common stock as of the grant date, as determined by the Board of Directors in accordance with the Plan and, where applicable, a then-current independent valuation report prepared pursuant to Section 409A of the Internal Revenue Code.

Acceleration. The Stock Option Award Agreement includes provisions for acceleration of vesting upon a Change in Control and qualifying termination events that are consistent with and cross-referenced to the corresponding provisions of the Employment Agreement.

4. Restricted Stock Unit Award Agreement — Draft

The enclosed Restricted Stock Unit Award Agreement provides for the grant of restricted stock units ("RSUs") to Dr. Elliston representing one-half of one percent (0.50%) of the fully diluted equity of the Company, also issued under the Plan. The key terms are as follows:

Vesting Schedule. The RSUs are subject to a three (3) year vesting schedule, with one-third (33.33%) of the RSUs vesting on each of the first three (3) anniversaries of the grant date, in each case subject to Dr. Elliston's continued employment with the Company on the applicable vesting date.

Change in Control Acceleration. The RSU Award Agreement provides for full acceleration of vesting of one hundred percent (100%) of then-unvested RSUs upon a qualifying termination of employment (without Cause or for Good Reason) occurring within twenty-four (24) months following a Change in Control, consistent with the double-trigger acceleration provisions of the Employment Agreement.

5. Schedule A to Employment Agreement — Prior Inventions Disclosure Form

Enclosed is a blank Prior Inventions Disclosure Form, designated as Schedule A to the Employment Agreement. This form provides Dr. Elliston with the opportunity to identify and disclose any prior inventions, patents, patent applications, copyrights, or other intellectual property that was conceived, developed, or reduced to practice by Dr. Elliston prior to his employment with AHT. Any items properly identified and described on Schedule A will be excluded from the invention assignment provisions of the Employment Agreement and the Non-Competition Agreement. We would ask that Dr. Elliston complete this form with reasonable specificity, including any relevant patent numbers or application identifiers where applicable, and return the completed form with the executed agreements or, if additional time is required, at a mutually agreed-upon date prior to the start of employment.

6. Schedule B to Employment Agreement — Form of General Release Agreement

The enclosed form of General Release of Claims (the "Release"), designated as Schedule B to the Employment Agreement, is the form of release that Dr. Elliston would be required to execute as a condition precedent to receiving any severance payments or benefits under the Employment Agreement following a qualifying termination of employment. The Release covers the release of claims arising under applicable Massachusetts and federal employment laws, including, without limitation, claims under Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, the Family and Medical Leave Act, the Massachusetts Fair Employment Practices Act (M.G.L. c. 151B), the Massachusetts Wage Act (M.G.L. c. 149, §§ 148-150), and the Age Discrimination in Employment Act of 1967, as amended by the Older Workers Benefit Protection Act (the "ADEA/OWBPA"). Consistent with the requirements of the ADEA and OWBPA, the Release provides Dr. Elliston with a twenty-one (21) day period in which to review and consider the Release and a seven (7) day revocation period following execution. The Release is presented at this time in draft form for your review, and Dr. Elliston should, of course, be advised of his right to consult with counsel of his choosing before executing the Release at the applicable time — a consideration that is inherently addressed by your engagement.

7. Exhibit A to Employment Agreement — Position Description and Reporting Structure

The enclosed Exhibit A to the Employment Agreement sets forth a detailed description of the Chief Operating Officer role, including the position's primary duties and responsibilities, Dr. Elliston's direct reports and organizational reporting lines, and the scope of the COO's authority and interaction with the Board of Directors. As reflected in Exhibit A, Dr. Elliston would report directly to CEO Priya Chandrasekaran and would be expected to maintain a regular working relationship with the members of the AHT Board of Directors, including the Board Chair, Thomas R. Glenwood, and other Ridgeline Capital Partners designees on the Board, in connection with strategic planning, operational reviews, and such other matters as may be directed by the CEO or the Board from time to time.

Key Points for Counsel's Attention

We wish to draw your attention to several points that may be of particular relevance as you and Dr. Elliston review the enclosed materials:

Cross-Reference of Agreements. The draft Employment Agreement and the Non-Competition Agreement are intended to be read together. The restrictive covenants set forth in the Non-Competition Agreement are cross-referenced in the Employment Agreement and constitute a material condition of Dr. Elliston's employment with the Company. Compliance with the Non-Competition Agreement is a continuing obligation during and after the term of employment.

Equity Incentive Plan. The Stock Option Award Agreement and the Restricted Stock Unit Award Agreement are each governed by and subject to the terms and conditions of the AHT 2020 Equity Incentive Plan, as amended in May 2021 (the "Plan"). A copy of the Plan is maintained by AHT's corporate counsel, Wentworth & Gage LLP, and can be made available upon request. We understand that Richard D. Gage of Wentworth & Gage intends to provide a copy of the Plan under separate cover. Should you wish to receive a copy directly from this office, please do not hesitate to contact me.

Change in Control Definition. The definition of "Change in Control" in the Employment Agreement and the equity award agreements includes a carve-out for transactions involving Ridgeline Capital Partners, LP and its affiliates. This carve-out reflects AHT's current ownership structure, which is approximately as follows: Ridgeline Capital Partners, LP holds approximately sixty-eight percent (68%) of the outstanding equity of the Company; Helix Ventures Fund III, LP holds approximately fourteen percent (14%); and the remaining approximately eighteen percent (18%) is held by management and other stockholders. The carve-out is designed to ensure that internal recapitalizations, secondary sales between existing institutional investors, or similar transactions involving Ridgeline and its affiliates do not inadvertently trigger the Change in Control provisions.

Section 280G and Section 409A Compliance. As noted above, the Employment Agreement contains a Section 280G "best net" cutback provision and does not include a tax gross-up. The Employment Agreement has also been drafted with the intent to comply with, or be exempt from, the requirements of Section 409A of the Internal Revenue Code. AHT's tax advisors, Hargrove & Sinclair CPAs, are available to coordinate with you or with Dr. Elliston's personal tax advisors on any questions related to Section 280G modeling or Section 409A compliance that may arise during the review process.

Compensation Benchmarking. AHT has engaged Broadleaf Compensation Advisors LLC to prepare a peer benchmarking analysis of chief operating officer compensation at comparable healthcare technology companies. The compensation terms reflected in the enclosed drafts — including base salary, target and maximum bonus, equity grant sizes, and severance multiples — were informed by that analysis and have been reviewed and approved by the Compensation Committee. Should you wish to review the benchmarking analysis or discuss the methodology with Broadleaf, we are happy to facilitate that discussion.

Requested Next Steps

We respectfully request that you and Dr. Elliston review the enclosed drafts and provide any comments, markups, or counterproposals at your earliest convenience. Both parties have expressed an interest in finalizing these agreements in advance of the proposed November 1, 2022 start date, and we believe that an efficient exchange of comments will allow us to meet that timeline.

We are available and happy to schedule a call at a mutually convenient time to discuss the enclosed drafts and to address any preliminary questions that Dr. Elliston or your firm may have. Please feel free to contact me directly at (617) 542-8834 or by email at darcher@calderwoodharkness.com. Bernard Crawford, the Responsible Partner on this engagement, is also available for substantive discussions and may be reached at (617) 542-8812 or bcrawford@calderwoodharkness.com.

On behalf of the Company, I wish to convey AHT's continued enthusiasm about the prospect of Dr. Elliston joining the leadership team as Chief Operating Officer. The Company's management and Board alike are confident that Dr. Elliston's experience and leadership would make a significant and lasting contribution to the Company, and they look forward to bringing this process to a successful conclusion.

Confidentiality Notice

The enclosed documents and this communication are transmitted on a confidential and privileged basis for the sole purpose of facilitating ongoing negotiations between AHT and Dr. Elliston regarding the terms of the proposed employment relationship. The enclosed drafts are for settlement and negotiation purposes only, are provided pursuant to Federal Rule of Evidence 408 and corresponding Massachusetts evidentiary rules, and are not intended to create, and shall not be construed as creating, any binding legal obligation on the part of AHT or Dr. Elliston unless and until definitive agreements have been fully executed and delivered by all parties. We respectfully request that you treat these materials as confidential and refrain from disclosing or distributing them to any person or entity other than Dr. Elliston and members of your firm who require access to the materials in connection with this matter.

Very truly yours,

CALDERWOOD & HARKNESS LLP

By: ________

Devon Archer Associate, Labor & Employment Calderwood & Harkness LLP One International Place, Suite 3400 Boston, MA 02110 Tel: (617) 542-8834

Email: darcher@calderwoodharkness.com

cc: Bernard Crawford, Partner, Calderwood & Harkness LLP Aaron Whitfield, General Counsel, Arbor Health Technologies Inc. Lisa Murakami, Chief Human Resources Officer, Arbor Health Technologies Inc.

Enclosures (7):

1. Executive Employment Agreement — First Draft

2. Employee Non-Competition Agreement (MA Compliant) — First Draft

3. Stock Option Award Agreement — Draft

4. Restricted Stock Unit Award Agreement — Draft

5. Schedule A to Employment Agreement — Prior Inventions Disclosure Form

6. Schedule B to Employment Agreement — Form of General Release Agreement

7. Exhibit A to Employment Agreement — Position Description and Reporting Structure

This letter and any documents accompanying it may contain information that is privileged, confidential, or otherwise exempt from disclosure under applicable law. If you are not the intended recipient, you are hereby notified that any dissemination, distribution, or copying of this communication is strictly prohibited. If you have received this communication in error, please notify the sender immediately by telephone and return the original materials by mail without making any copies.

CALDERWOOD & HARKNESS LLP Counselors at Law
One International Place, Suite 3400 Boston, Massachusetts 02110
Telephone: (617) 542-8800 Facsimile: (617) 542-8801 www.calderwoodharkness.com
Devon Archer, Esq. Direct Dial: (617) 542-8834 darcher@calderwoodharkness.com
August 5, 2022
Via Email and First-Class Mail
Catherine A. Fielding, Esq. Fielding & Rowe LLP 101 Federal Street, Suite 2600 Boston, MA 02110
Re: Proposed Employment of Dr. Marcus J. Elliston as Chief Operating Officer of Arbor Health Technologies Inc. Our Matter No.: 1010-00004
Dear Ms. Fielding:
This firm represents Arbor Health Technologies Inc. ("AHT" or the "Company"), a Delaware corporation headquartered at 400 Brattle Commerce Park, Suite 1200, Cambridge, Massachusetts 02138, in connection with the proposed employment of your client, Dr. Marcus J. Elliston, as Chief Operating Officer of AHT. I am writing on behalf of the engagement team led by Bernard Crawford, the Responsible Partner on this matter, to transmit the initial draft package of employment-related agreements for Dr. Elliston's review with the benefit of your counsel.
As you know, the Company — acting through its General Counsel, Aaron Whitfield, and its Chief Human Resources Officer, Lisa Murakami — has been engaged in productive discussions with Dr. Elliston over the past several weeks regarding the proposed COO role, and both sides have expressed a strong desire to formalize the terms of the anticipated engagement. We are pleased to report that the AHT Board of Directors Compensation Committee (the "Compensation Committee"), which includes designees of AHT's majority stockholder, Ridgeline Capital Partners, LP ("Ridgeline"), has reviewed and authorized the proposed compensation terms reflected in the enclosed drafts. Accordingly, on behalf of AHT, we are transmitting the initial draft package described below for Dr. Elliston's and your review, comment, and consideration.
The enclosed draft package consists of seven documents, each of which is described in greater detail below.
1. Executive Employment Agreement — First Draft
The Executive Employment Agreement (the "Employment Agreement") is by and between Arbor Health Technologies Inc. and Dr. Marcus J. Elliston and sets forth the principal terms and conditions of Dr. Elliston's proposed employment as Chief Operating Officer of AHT. The key terms reflected in the initial draft are summarized as follows:
Title and Reporting. Dr. Elliston would serve as Chief Operating Officer, reporting directly to AHT's Chief Executive Officer, Priya Chandrasekaran.
Start Date and Term. The proposed effective date of employment is November 1, 2022. The Employment Agreement provides for an initial term of three (3) years, with automatic successive one-year renewal periods, subject to the right of either party to provide ninety (90) days' advance written notice of non-renewal prior to the expiration of the then-current term.
Base Salary. An annual base salary of Five Hundred Seventy-Five Thousand Dollars ($575,000), payable in accordance with AHT's standard payroll practices, subject to annual review by the Compensation Committee.
Annual Bonus. An annual performance bonus target equal to seventy-five percent (75%) of base salary (i.e., $431,250 at the initial base salary), with a maximum annual bonus opportunity of one hundred fifty percent (150%) of the target bonus amount (i.e., $646,875 at the initial base salary). Bonus determinations are made by the Compensation Committee based on the achievement of individual and Company performance objectives established at the beginning of each fiscal year.
Signing Bonus. A one-time signing bonus of Two Hundred Fifty Thousand Dollars ($250,000), payable within thirty (30) days following the start date, subject to a twenty-four (24) month clawback provision requiring full or prorated repayment in the event of a voluntary resignation without Good Reason (as defined in the Employment Agreement) or a termination for Cause (as defined in the Employment Agreement) during the clawback period.
Equity Compensation. Equity grants as further described in the separate Stock Option Award Agreement and Restricted Stock Unit Award Agreement enclosed herewith and summarized below.
Benefits. Participation in AHT's executive benefits package, including the Company's executive health plan, life insurance coverage at two times (2×) base salary ($1,150,000 in coverage at the initial base salary), long-term disability insurance, the Company's 401(k) plan with an employer matching contribution of four percent (4%) of eligible compensation, twenty-five (25) days of paid time off per calendar year (pro-rated for any partial year of employment), a professional development allowance of Fifteen Thousand Dollars ($15,000) per annum, and eligibility for AHT's executive physical examination program.
Relocation. A relocation allowance of up to Seventy-Five Thousand Dollars ($75,000). It is our understanding that this provision is unlikely to be utilized given Dr. Elliston's current residence in the Commonwealth of Massachusetts; however, the provision has been included to address any relocation-related expenses that may arise.
Severance — Qualifying Termination (Non-Change in Control). In the event of a termination of Dr. Elliston's employment by the Company without Cause or Dr. Elliston's resignation for Good Reason, in either case not occurring within twenty-four (24) months following a Change in Control (as defined in the Employment Agreement), the Employment Agreement provides for the following severance benefits, subject to execution of a General Release of Claims (described below): (a) twelve (12) months of continued base salary; (b) a pro-rata annual bonus for the year of termination based on actual Company and individual performance; (c) twelve (12) months of employer-paid COBRA continuation coverage at an estimated monthly cost of $2,150 (based on AHT's current premium rates); and (d) acceleration of vesting of twenty-five percent (25%) of the then-unvested portion of outstanding equity awards.
Severance — Change in Control Qualifying Termination (Double-Trigger). In the event of a termination of Dr. Elliston's employment by the Company without Cause or Dr. Elliston's resignation for Good Reason, in either case occurring within twenty-four (24) months following a Change in Control, the Employment Agreement provides for enhanced severance benefits, subject to execution of a General Release of Claims: (a) twenty-four (24) months of continued base salary ($1,150,000 at the initial base salary); (b) two times (2×) the target annual bonus ($862,500 at the initial base salary); (c) eighteen (18) months of employer-paid COBRA continuation coverage ($38,700 at current premium rates); and (d) full acceleration of vesting of one hundred percent (100%) of then-unvested outstanding equity awards.
Section 280G. The Employment Agreement includes a Section 280G "best net" cutback provision. Under this provision, in the event that any payments or benefits provided to Dr. Elliston would constitute "parachute payments" within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended, such payments and benefits will be reduced to the extent necessary to avoid the imposition of the excise tax under Section 4999, but only if and to the extent that such reduction would result in a greater after-tax benefit to Dr. Elliston. The Employment Agreement does not include a tax gross-up provision.
Governing Law. The Employment Agreement is governed by the laws of the Commonwealth of Massachusetts.
2. Employee Non-Competition Agreement (Massachusetts Compliant) — First Draft
Enclosed as a separate standalone agreement is the Employee Non-Competition Agreement (the "Non-Competition Agreement"), which has been drafted to comply with the requirements of the Massachusetts Noncompetition Agreement Act, M.G.L. c. 149, § 24L (the "MNAA"). The key restrictive covenants and related terms reflected in the draft are as follows:
Non-Competition Restriction. The draft Non-Competition Agreement provides for a non-competition period of eighteen (18) months following termination of employment, during which Dr. Elliston would be restricted from engaging in, or providing services to, any business that competes directly with AHT in the healthcare information technology and software-as-a-service sectors operating in the United States. We acknowledge that the eighteen-month duration represents AHT's initial bargaining position and anticipate that this may be a subject of further discussion between the parties.
Employee Non-Solicitation. An eighteen (18) month post-termination restriction on the solicitation or recruitment of AHT employees at the manager level and above.
Customer and Partner Non-Solicitation. A twelve (12) month post-termination restriction on the solicitation of AHT customers and business partners, limited to those customers and partners with whom Dr. Elliston had material contact during the last twenty-four (24) months of his employment with the Company.
Confidentiality. A perpetual confidentiality obligation with respect to AHT's confidential information and trade secrets, subject to standard carve-outs for information that is or becomes publicly available through no fault of Dr. Elliston, information independently developed by Dr. Elliston without use of AHT's confidential information, and legally compelled disclosures (provided that prompt notice is given to the Company and reasonable cooperation is extended to permit the Company to seek protective relief).
Garden-Leave Payment. Consistent with the requirements of the MNAA, the Non-Competition Agreement provides for a garden-leave payment during the non-competition period equal to fifty percent (50%) of Dr. Elliston's highest base salary within the two (2) years preceding the date of termination, which, at the initial base salary, would equal Two Hundred Eighty-Seven Thousand Five Hundred Dollars ($287,500), paid in substantially equal installments in accordance with AHT's standard payroll schedule.
Invention Assignment. The Non-Competition Agreement includes an invention assignment provision pursuant to which all intellectual property and inventions developed by Dr. Elliston during the course of his employment with AHT and relating to the Company's business, actual or demonstrably anticipated, would be assigned to the Company. Inventions properly disclosed on Schedule A to the Employment Agreement (the Prior Inventions Disclosure Form) are excluded from this assignment obligation.
3. Stock Option Award Agreement — Draft
The enclosed Stock Option Award Agreement provides for the grant of incentive stock options to Dr. Elliston to purchase a number of shares of AHT common stock representing one and one-quarter percent (1.25%) of the fully diluted equity of the Company. The options are to be issued under the Arbor Health Technologies Inc. 2020 Equity Incentive Plan, as amended in May 2021 (the "Plan"). The key terms of the option grant are as follows:
Vesting Schedule. The options are subject to a four (4) year vesting schedule, with twenty-five percent (25%) of the total option shares cliff-vesting on the first anniversary of the grant date and the remaining seventy-five percent (75%) vesting in equal monthly installments over the succeeding thirty-six (36) months, in each case subject to Dr. Elliston's continued employment with the Company on the applicable vesting date.
Exercise Price. The per-share exercise price will be set at the fair market value of a share of AHT common stock as of the grant date, as determined by the Board of Directors in accordance with the Plan and, where applicable, a then-current independent valuation report prepared pursuant to Section 409A of the Internal Revenue Code.
Acceleration. The Stock Option Award Agreement includes provisions for acceleration of vesting upon a Change in Control and qualifying termination events that are consistent with and cross-referenced to the corresponding provisions of the Employment Agreement.
4. Restricted Stock Unit Award Agreement — Draft
The enclosed Restricted Stock Unit Award Agreement provides for the grant of restricted stock units ("RSUs") to Dr. Elliston representing one-half of one percent (0.50%) of the fully diluted equity of the Company, also issued under the Plan. The key terms are as follows:
Vesting Schedule. The RSUs are subject to a three (3) year vesting schedule, with one-third (33.33%) of the RSUs vesting on each of the first three (3) anniversaries of the grant date, in each case subject to Dr. Elliston's continued employment with the Company on the applicable vesting date.
Change in Control Acceleration. The RSU Award Agreement provides for full acceleration of vesting of one hundred percent (100%) of then-unvested RSUs upon a qualifying termination of employment (without Cause or for Good Reason) occurring within twenty-four (24) months following a Change in Control, consistent with the double-trigger acceleration provisions of the Employment Agreement.
5. Schedule A to Employment Agreement — Prior Inventions Disclosure Form
Enclosed is a blank Prior Inventions Disclosure Form, designated as Schedule A to the Employment Agreement. This form provides Dr. Elliston with the opportunity to identify and disclose any prior inventions, patents, patent applications, copyrights, or other intellectual property that was conceived, developed, or reduced to practice by Dr. Elliston prior to his employment with AHT. Any items properly identified and described on Schedule A will be excluded from the invention assignment provisions of the Employment Agreement and the Non-Competition Agreement. We would ask that Dr. Elliston complete this form with reasonable specificity, including any relevant patent numbers or application identifiers where applicable, and return the completed form with the executed agreements or, if additional time is required, at a mutually agreed-upon date prior to the start of employment.
6. Schedule B to Employment Agreement — Form of General Release Agreement
The enclosed form of General Release of Claims (the "Release"), designated as Schedule B to the Employment Agreement, is the form of release that Dr. Elliston would be required to execute as a condition precedent to receiving any severance payments or benefits under the Employment Agreement following a qualifying termination of employment. The Release covers the release of claims arising under applicable Massachusetts and federal employment laws, including, without limitation, claims under Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, the Family and Medical Leave Act, the Massachusetts Fair Employment Practices Act (M.G.L. c. 151B), the Massachusetts Wage Act (M.G.L. c. 149, §§ 148-150), and the Age Discrimination in Employment Act of 1967, as amended by the Older Workers Benefit Protection Act (the "ADEA/OWBPA"). Consistent with the requirements of the ADEA and OWBPA, the Release provides Dr. Elliston with a twenty-one (21) day period in which to review and consider the Release and a seven (7) day revocation period following execution. The Release is presented at this time in draft form for your review, and Dr. Elliston should, of course, be advised of his right to consult with counsel of his choosing before executing the Release at the applicable time — a consideration that is inherently addressed by your engagement.
7. Exhibit A to Employment Agreement — Position Description and Reporting Structure
The enclosed Exhibit A to the Employment Agreement sets forth a detailed description of the Chief Operating Officer role, including the position's primary duties and responsibilities, Dr. Elliston's direct reports and organizational reporting lines, and the scope of the COO's authority and interaction with the Board of Directors. As reflected in Exhibit A, Dr. Elliston would report directly to CEO Priya Chandrasekaran and would be expected to maintain a regular working relationship with the members of the AHT Board of Directors, including the Board Chair, Thomas R. Glenwood, and other Ridgeline Capital Partners designees on the Board, in connection with strategic planning, operational reviews, and such other matters as may be directed by the CEO or the Board from time to time.
Key Points for Counsel's Attention
We wish to draw your attention to several points that may be of particular relevance as you and Dr. Elliston review the enclosed materials:
Cross-Reference of Agreements. The draft Employment Agreement and the Non-Competition Agreement are intended to be read together. The restrictive covenants set forth in the Non-Competition Agreement are cross-referenced in the Employment Agreement and constitute a material condition of Dr. Elliston's employment with the Company. Compliance with the Non-Competition Agreement is a continuing obligation during and after the term of employment.
Equity Incentive Plan. The Stock Option Award Agreement and the Restricted Stock Unit Award Agreement are each governed by and subject to the terms and conditions of the AHT 2020 Equity Incentive Plan, as amended in May 2021 (the "Plan"). A copy of the Plan is maintained by AHT's corporate counsel, Wentworth & Gage LLP, and can be made available upon request. We understand that Richard D. Gage of Wentworth & Gage intends to provide a copy of the Plan under separate cover. Should you wish to receive a copy directly from this office, please do not hesitate to contact me.
Change in Control Definition. The definition of "Change in Control" in the Employment Agreement and the equity award agreements includes a carve-out for transactions involving Ridgeline Capital Partners, LP and its affiliates. This carve-out reflects AHT's current ownership structure, which is approximately as follows: Ridgeline Capital Partners, LP holds approximately sixty-eight percent (68%) of the outstanding equity of the Company; Helix Ventures Fund III, LP holds approximately fourteen percent (14%); and the remaining approximately eighteen percent (18%) is held by management and other stockholders. The carve-out is designed to ensure that internal recapitalizations, secondary sales between existing institutional investors, or similar transactions involving Ridgeline and its affiliates do not inadvertently trigger the Change in Control provisions.
Section 280G and Section 409A Compliance. As noted above, the Employment Agreement contains a Section 280G "best net" cutback provision and does not include a tax gross-up. The Employment Agreement has also been drafted with the intent to comply with, or be exempt from, the requirements of Section 409A of the Internal Revenue Code. AHT's tax advisors, Hargrove & Sinclair CPAs, are available to coordinate with you or with Dr. Elliston's personal tax advisors on any questions related to Section 280G modeling or Section 409A compliance that may arise during the review process.
Compensation Benchmarking. AHT has engaged Broadleaf Compensation Advisors LLC to prepare a peer benchmarking analysis of chief operating officer compensation at comparable healthcare technology companies. The compensation terms reflected in the enclosed drafts — including base salary, target and maximum bonus, equity grant sizes, and severance multiples — were informed by that analysis and have been reviewed and approved by the Compensation Committee. Should you wish to review the benchmarking analysis or discuss the methodology with Broadleaf, we are happy to facilitate that discussion.
Requested Next Steps
We respectfully request that you and Dr. Elliston review the enclosed drafts and provide any comments, markups, or counterproposals at your earliest convenience. Both parties have expressed an interest in finalizing these agreements in advance of the proposed November 1, 2022 start date, and we believe that an efficient exchange of comments will allow us to meet that timeline.
We are available and happy to schedule a call at a mutually convenient time to discuss the enclosed drafts and to address any preliminary questions that Dr. Elliston or your firm may have. Please feel free to contact me directly at (617) 542-8834 or by email at darcher@calderwoodharkness.com. Bernard Crawford, the Responsible Partner on this engagement, is also available for substantive discussions and may be reached at (617) 542-8812 or bcrawford@calderwoodharkness.com.
On behalf of the Company, I wish to convey AHT's continued enthusiasm about the prospect of Dr. Elliston joining the leadership team as Chief Operating Officer. The Company's management and Board alike are confident that Dr. Elliston's experience and leadership would make a significant and lasting contribution to the Company, and they look forward to bringing this process to a successful conclusion.
Confidentiality Notice
The enclosed documents and this communication are transmitted on a confidential and privileged basis for the sole purpose of facilitating ongoing negotiations between AHT and Dr. Elliston regarding the terms of the proposed employment relationship. The enclosed drafts are for settlement and negotiation purposes only, are provided pursuant to Federal Rule of Evidence 408 and corresponding Massachusetts evidentiary rules, and are not intended to create, and shall not be construed as creating, any binding legal obligation on the part of AHT or Dr. Elliston unless and until definitive agreements have been fully executed and delivered by all parties. We respectfully request that you treat these materials as confidential and refrain from disclosing or distributing them to any person or entity other than Dr. Elliston and members of your firm who require access to the materials in connection with this matter.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Devon Archer Associate, Labor & Employment Calderwood & Harkness LLP One International Place, Suite 3400 Boston, MA 02110 Tel: (617) 542-8834
Email: darcher@calderwoodharkness.com
cc: Bernard Crawford, Partner, Calderwood & Harkness LLP Aaron Whitfield, General Counsel, Arbor Health Technologies Inc. Lisa Murakami, Chief Human Resources Officer, Arbor Health Technologies Inc.
Enclosures (7):
1. Executive Employment Agreement — First Draft
2. Employee Non-Competition Agreement (MA Compliant) — First Draft
3. Stock Option Award Agreement — Draft
4. Restricted Stock Unit Award Agreement — Draft
5. Schedule A to Employment Agreement — Prior Inventions Disclosure Form
6. Schedule B to Employment Agreement — Form of General Release Agreement
7. Exhibit A to Employment Agreement — Position Description and Reporting Structure
This letter and any documents accompanying it may contain information that is privileged, confidential, or otherwise exempt from disclosure under applicable law. If you are not the intended recipient, you are hereby notified that any dissemination, distribution, or copying of this communication is strictly prohibited. If you have received this communication in error, please notify the sender immediately by telephone and return the original materials by mail without making any copies.

CALDERWOOD & HARKNESS LLP Counselors at Law

CALDERWOOD & HARKNESS LLP

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