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

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CALDERWOOD & HARKNESS LLP Attorneys at Law

One International Place, Suite 3400 Boston, Massachusetts 02110

Telephone: (617) 854-7000 Facsimile: (617) 854-7001 www.calderwoodharkness.com

August 30, 2022

VIA EMAIL AND HAND DELIVERY

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

Re: Executive Employment Agreement and Related Documents — Dr. Marcus J. Elliston / Arbor Health Technologies Inc. Calderwood & Harkness Matter No. 1010-00004

Dear Catherine:

On behalf of our client, Arbor Health Technologies Inc. ("AHT" or the "Company"), I am writing to transmit second drafts of the following documents in connection with the proposed engagement of Dr. Marcus J. Elliston ("Dr. Elliston" or the "Executive") as Chief Operating Officer of AHT:

1. Executive Employment Agreement — Second Draft, dated August 30, 2022 (the "Employment Agreement"); and

2. Employee Non-Competition Agreement (Massachusetts Compliant) — Second Draft, dated August 30, 2022 (the "Non-Competition Agreement" and, together with the Employment Agreement, the "Agreement Documents").

These second drafts reflect Calderwood & Harkness's and AHT's thorough review of the initial markup submitted by Fielding & Rowe on behalf of Dr. Elliston, which we received on August 19, 2022. As you will recall, the first draft package of the Agreement Documents was transmitted to your office on August 5, 2022.

Please note that Schedule A (Prior Inventions Disclosure Form), Schedule B (Form of General Release Agreement), and Exhibit A (Position Description and Reporting Structure) are unchanged from the first draft package and accordingly are not re-enclosed with this transmittal. Of course, any comments from Dr. Elliston on those documents remain welcome, and we would be happy to incorporate any revisions to the schedules and exhibit as part of the final package.

Summary of Approach

The Company has given careful and thorough consideration to each of Fielding & Rowe's proposed revisions to the Agreement Documents. In an effort to reach a prompt and mutually acceptable resolution, AHT has accepted a number of the proposed changes, offered compromise language on several others, and respectfully maintained its original position on a limited number of points where the Company believes its existing formulation is appropriate and consistent with market practice, AHT's internal precedents, and applicable law.

To facilitate an efficient review of the second drafts and to provide a clear roadmap for our respective clients' further discussions, I have appended to this letter an issues list (the "Issues List") that categorizes each substantive point raised in Fielding & Rowe's August 19 markup into one of three categories:

(A) Agreed Changes — Points on which AHT has accepted Fielding & Rowe's proposed revisions, in whole or with minor clarifying modifications;

(B) Partially Resolved / Compromise Language — Points on which AHT has offered compromise language that differs from both the first draft and Fielding & Rowe's proposed revision; and

(C) Remaining Open Items — Points on which the parties' positions remain apart and which we believe would benefit from further discussion.

We would welcome the opportunity to schedule a call at Fielding & Rowe's convenience to discuss the open items. My colleague Bernard Crawford and I are both available to participate in such a discussion, and we are prepared to be flexible with scheduling to accommodate your and Mr. Pryce's calendars.

Enclosed Documents — Summary of Key Revisions

The following summary highlights the key provisions and revisions reflected in the enclosed second drafts. This summary is intended for convenience of reference only and is qualified in its entirety by the terms of the Agreement Documents themselves.

I. Executive Employment Agreement — Second Draft

Compensation Terms. The core compensation terms remain as proposed in the first draft and are unchanged in the second draft:

• Base Salary: $575,000 per annum, payable in accordance with the Company's standard payroll schedule.

• Annual Bonus: Target annual bonus of 75% of base salary, which at target equals $431,250. The maximum annual bonus shall be 150% of the target bonus amount, or $646,875. The annual bonus will be determined by the Company's Board of Directors (or its compensation committee) based on achievement of individual and Company performance objectives to be established by the Board in consultation with the Executive within sixty (60) days following the commencement of each fiscal year.

• Signing Bonus: A one-time signing bonus of $250,000, payable within thirty (30) days following the Executive's start date, subject to a twenty-four (24) month clawback as further described in the Employment Agreement and as discussed in the Issues List below.

Equity Grants. The equity grant terms are unchanged from the first draft:

• Stock Options: Options to purchase shares of AHT common stock representing 1.25% of the fully diluted equity of the Company, to be granted under the AHT 2020 Equity Incentive Plan (as amended May 2021) (the "Plan"). The stock options will vest over a four (4) year period, with 25% of the total grant vesting on the first anniversary of the grant date (the "cliff") and the remainder vesting monthly over the subsequent thirty-six (36) months. The exercise price shall be set at fair market value as of the date of grant, as determined by the Board in accordance with the Plan and Section 409A of the Internal Revenue Code.

• Restricted Stock Units (RSUs): RSUs representing 0.50% of the fully diluted equity of the Company, granted under the Plan. The RSUs will vest over a three (3) year period, with 33.33% of the total grant vesting on each anniversary of the grant date.

Initial Term and Renewal. The Employment Agreement provides for a three (3) year initial term commencing on the proposed start date, with automatic one (1) year renewal periods thereafter, unless either party provides ninety (90) days' prior written notice of non-renewal. These provisions are unchanged from the first draft.

Proposed Start Date. The proposed start date remains November 1, 2022, and is unchanged.

Reporting Line. Dr. Elliston will serve as Chief Operating Officer, reporting directly to AHT Chief Executive Officer Priya Chandrasekaran. This reporting structure is unchanged from the first draft and is consistent with the organizational chart set forth in Exhibit A.

Good Reason Definition. The definition of "Good Reason" has been revised in the second draft to incorporate certain of Fielding & Rowe's proposed expansions. The specific revisions and remaining open points are addressed in detail in the Issues List at Items A-3, A-4, and B-1 below.

Change in Control Severance. The second draft reflects a revised change in control ("CIC") severance package structured as a double-trigger arrangement. Upon a qualifying termination of employment (i.e., termination without Cause or resignation for Good Reason) occurring within twenty-four (24) months following a Change in Control (as defined in the Employment Agreement), Dr. Elliston would be entitled to the following severance benefits:

• Twenty-four (24) months of base salary: $1,150,000;

• Two times (2×) the target annual bonus: $862,500;

• Eighteen (18) months of employer-paid COBRA continuation coverage: $38,700 (based on current monthly COBRA premium of $2,150); and

• One hundred percent (100%) accelerated vesting of all unvested equity awards.

The total estimated CIC cash severance (excluding equity acceleration) is $2,051,200. Please refer to the Issues List at Item C-1 for a discussion of the remaining open point regarding the CIC severance multiplier.

Non-CIC Severance. In the event of a qualifying termination absent a Change in Control (i.e., termination without Cause or resignation for Good Reason), the second draft provides for the following severance benefits:

• Twelve (12) months of base salary: $575,000;

• Pro-rata annual bonus for the fiscal year in which the termination occurs, based on actual Company performance and payable at the time annual bonuses are otherwise paid to senior executives;

• Twelve (12) months of employer-paid COBRA continuation coverage: $25,800; and

• Twenty-five percent (25%) acceleration of unvested equity awards.

The non-CIC severance provisions are subject to further discussion as noted in the Issues List at Items B-3 and B-4.

Section 280G Treatment. The Company has maintained its position that the Employment Agreement include a "best-net cutback" provision in lieu of a Section 280G/4999 excise tax gross-up. Under the best-net cutback, if any payments or benefits to the Executive would constitute "parachute payments" within the meaning of Section 280G of the Internal Revenue Code, the aggregate amount of such payments shall be reduced to the extent necessary to avoid triggering the excise tax under Section 4999, but only if the after-tax benefit to the Executive would be greater after such reduction than it would be if the full payments were made and the excise tax applied. This position is discussed further at Item C-4 of the Issues List.

Governing Law. The Employment Agreement is governed by and construed in accordance with the laws of the Commonwealth of Massachusetts, without regard to conflict of laws principles. This provision is unchanged.

II. Employee Non-Competition Agreement — Second Draft

Non-Compete Duration. The non-compete period has been reduced from eighteen (18) months to twelve (12) months post-termination, reflecting Fielding & Rowe's comment. AHT has accepted this change, which is consistent with the maximum enforceability standard under the Massachusetts Noncompetition Agreement Act, M.G.L. c. 149, § 24L. This revision is discussed at Item A-1 of the Issues List.

Industry Scope. The competitive activity restriction has been narrowed. The first draft defined the restricted industry broadly as "healthcare services, healthcare technology, and related fields." The second draft adopts Fielding & Rowe's proposed narrower formulation, restricting competitive activity to "healthcare IT/SaaS companies with greater than $50 million in annual revenue operating in the United States." This revision is discussed at Item A-2 of the Issues List.

Garden-Leave Payment. The Non-Competition Agreement provides for a garden-leave payment equal to fifty percent (50%) of the Executive's annualized base salary during the twelve (12) month non-compete period, totaling $287,500 (calculated as $575,000 × 50%). This garden-leave payment is structured to comply with the requirements of the Massachusetts Noncompetition Agreement Act, M.G.L. c. 149, § 24L, which mandates that employers provide either a garden-leave payment or "other mutually-agreed upon consideration" as a condition of enforceability of post-employment non-competition covenants.

Employee Non-Solicitation. The employee non-solicitation period remains at eighteen (18) months following termination of employment and is limited to employees of the Company at the manager level and above. This provision was agreed upon by the parties, as noted in the Issues List.

Customer/Partner Non-Solicitation. The customer and partner non-solicitation period is twelve (12) months following termination, limited to customers and partners with whom the Executive had "material contact" during the last twenty-four (24) months of employment. The scope of this provision remains partially open, as discussed at Item C-3 of the Issues List.

Confidentiality and Non-Disclosure. The confidentiality and non-disclosure obligations remain perpetual, subject to standard carve-outs for legally compelled disclosure (including appropriate Defend Trade Secrets Act notice provisions). These provisions are unchanged from the first draft.

Invention Assignment. All intellectual property developed by the Executive during the period of employment and relating to AHT's business or reasonably anticipated business shall be assigned to the Company. Prior inventions, if any, are excluded pursuant to Schedule A (Prior Inventions Disclosure Form). These provisions are unchanged from the first draft.

Issues List

The following Issues List is organized into three categories for ease of reference: (A) Agreed Changes, (B) Partially Resolved / Compromise Language, and (C) Remaining Open Items. Each item includes cross-references to the relevant section and page numbers of the enclosed second drafts where the issue arises.

Category A: Agreed Changes

The following items have been resolved to the satisfaction of both sides. The second drafts reflect the agreed-upon revisions, and we do not anticipate further discussion on these points.

A-1: Non-Compete Duration (Employment Agreement, Section 9(a), p. 22; Non-Competition Agreement, Section 2(a), p. 3)

Fielding & Rowe proposed reducing the post-termination non-compete period from eighteen (18) months to twelve (12) months. AHT has accepted this change in both the Employment Agreement and the standalone Non-Competition Agreement. This revised duration is consistent with the Massachusetts Noncompetition Agreement Act (M.G.L. c. 149, § 24L), which establishes twelve (12) months as the maximum presumptively enforceable duration for post-employment non-competition covenants, and reflects what the Company believes to be a reasonable and enforceable restriction given the scope of Dr. Elliston's anticipated role.

A-2: Non-Compete Industry Scope (Employment Agreement, Section 9(a), p. 22; Non-Competition Agreement, Section 2(b), p. 3)

Fielding & Rowe proposed narrowing the definition of restricted competitive activity from "healthcare services, healthcare technology, and related fields" to "healthcare IT/SaaS companies with greater than $50 million in annual revenue operating in the United States." AHT has accepted this narrower formulation. The Company believes this revised scope is sufficiently targeted to protect AHT's legitimate business interests while providing Dr. Elliston with reasonable latitude for future employment should his tenure at AHT conclude.

A-3: Good Reason — Material Diminution in Authority (Employment Agreement, Section 5(d)(i), p. 14)

Fielding & Rowe proposed adding "material diminution in Executive's duties, authority, or responsibilities" as a triggering event for a resignation for Good Reason. AHT has accepted this addition, with clarifying language providing that such diminution must be (i) without the Executive's prior written consent and (ii) measured against the duties, authority, and responsibilities described in Exhibit A (Position Description and Reporting Structure) attached to the Employment Agreement. This clarification is intended to establish a clear baseline against which any alleged diminution may be assessed, and to avoid ambiguity arising from organic changes in role responsibilities that may occur over time with the Executive's participation and agreement.

A-4: Good Reason — Office Relocation (Employment Agreement, Section 5(d)(iv), p. 15)

Fielding & Rowe proposed that a relocation of the Executive's principal office by more than thirty (30) miles (without the Executive's prior written consent) constitute a Good Reason trigger. The first draft had set this threshold at fifty (50) miles. AHT has accepted the thirty (30) mile threshold, which the Company acknowledges is more consistent with prevailing market practice for senior executive employment agreements in the greater Boston metropolitan area.

A-5: Paid Time Off (Employment Agreement, Section 4(f), p. 12)

Fielding & Rowe requested confirmation that Dr. Elliston would be entitled to twenty-five (25) days of paid time off per calendar year, in addition to Company-observed holidays. The Company has confirmed this entitlement. Section 4(f) of the second draft has been clarified to reflect that the Executive shall be entitled to twenty-five (25) days of paid time off per calendar year, which shall accrue on a pro-rata basis, in addition to all holidays observed by the Company in accordance with its then-current holiday schedule (currently eleven (11) holidays per calendar year).

A-6: Professional Development Allowance (Employment Agreement, Section 4(g), p. 12)

Fielding & Rowe requested that the $15,000 annual professional development allowance be characterized as non-lapsing within each calendar year (i.e., that unexpended amounts during a given year not expire on a quarterly or semi-annual basis). AHT has accepted this approach. The second draft provides that the $15,000 annual professional development allowance shall be available for use at any time during the applicable calendar year, and shall reset on January 1 of each subsequent calendar year. Unused amounts do not carry over from one calendar year to the next. Eligible expenses include, without limitation, continuing medical education, executive education programs, industry conference attendance and registration, and professional society membership dues.

Category B: Partially Resolved / Compromise Language

The following items reflect areas where AHT has offered compromise language that differs from both the first draft and Fielding & Rowe's proposed revisions. We believe these compromises represent reasonable middle-ground positions and request Fielding & Rowe's feedback.

B-1: Good Reason — Expanded Definition (Remaining Elements) (Employment Agreement, Section 5(d)(ii)–(iii), pp. 14–15)

In addition to the Good Reason triggers addressed in Items A-3 and A-4 above, Fielding & Rowe's August 19 markup proposed two additional Good Reason triggers: (i) the Company's failure to nominate the Executive to the AHT Board of Directors within twelve (12) months of the start date, and (ii) any material breach by the Company of its obligations under the Employment Agreement.

With respect to Board nomination, AHT has not accepted this proposal. Board composition at AHT is governed by the Stockholders' Agreement, dated as of March 15, 2020, by and among the Company, Ridgeline Capital Partners, LP, and certain other stockholders (the "Stockholders' Agreement"), which establishes specific board designation rights and does not contemplate a Board seat for the Chief Operating Officer. The inclusion of a Board nomination requirement as a Good Reason trigger would create a potential conflict with the Company's existing governance arrangements and could require amendments to the Stockholders' Agreement that are beyond the scope of this negotiation. We note that the Company's CEO does not have a Board nomination right under her employment agreement, and extending such a right to the COO role would be inconsistent with the Company's existing executive compensation framework.

With respect to material breach by the Company, AHT has offered compromise language. The second draft includes, as a Good Reason trigger, "a material breach by the Company of its material obligations under this Agreement" — subject to the following conditions: (a) the Executive must provide written notice to the Company specifying the nature of the breach within thirty (30) days after the Executive first becomes aware (or reasonably should have become aware) of the breach; (b) the Company shall have thirty (30) days following receipt of such notice to cure the breach (or, if the breach is not reasonably susceptible to cure within thirty (30) days, to commence cure and diligently pursue completion thereof); and (c) the Executive must resign within fifteen (15) days following the expiration of the cure period if the breach remains uncured.

Fielding & Rowe's markup had proposed a fifteen (15) day cure period for Company breach. AHT proposes a thirty (30) day cure period in order to align with the cure period afforded to the Executive under the definition of "Cause" (Section 5(c) of the Employment Agreement), which also provides for a thirty (30) day cure window. The Company believes symmetry in cure periods is both equitable and administratively practical.

The bracketed language in Section 5(d)(iii) of the second draft reflects the thirty (30) day cure compromise. We request Fielding & Rowe's confirmation that this formulation is acceptable.

B-2: Signing Bonus Clawback — Termination Without Cause (Employment Agreement, Section 4(c)(ii), p. 10)

The first draft provided for full clawback of the $250,000 signing bonus upon the Executive's voluntary resignation or termination for Cause within the twenty-four (24) month period following the payment of the signing bonus. Fielding & Rowe's markup proposed that the clawback not apply in the event of a termination by the Company without Cause, arguing that it would be inequitable to require the Executive to repay the signing bonus in circumstances where the decision to end the employment relationship was the Company's.

AHT acknowledges the reasonableness of this concern and has offered the following compromise in the second draft:

• Voluntary Resignation (Other Than for Good Reason): Pro-rata clawback — the Executive shall repay a proportionate share of the $250,000 signing bonus based on the number of months remaining in the twenty-four (24) month clawback period. For example, if the Executive voluntarily resigns twelve (12) months after receiving the signing bonus, the repayment obligation would be $125,000 (i.e., 12/24 × $250,000).

• Termination for Cause: Full clawback of the $250,000 signing bonus, regardless of when during the clawback period the termination occurs.

• Termination Without Cause or Resignation for Good Reason: No clawback. The Executive shall have no obligation to repay any portion of the signing bonus.

This compromise is reflected in Section 4(c)(ii) of the second draft. We note that this item interacts with the broader bonus clawback mechanics discussed at Item C-2 below, and we would welcome a holistic discussion of both provisions together.

B-3: Equity Acceleration — Non-CIC Termination (Employment Agreement, Section 6(b)(iv), p. 18)

The first draft provided for twenty-five percent (25%) acceleration of unvested equity awards upon a qualifying termination (termination without Cause or resignation for Good Reason) absent a Change in Control. Fielding & Rowe's markup proposed increasing this acceleration to fifty percent (50%) of unvested equity.

AHT has maintained the twenty-five percent (25%) acceleration figure in the second draft. The Company notes that the Employment Agreement already provides for one hundred percent (100%) acceleration of all unvested equity upon a qualifying termination within twenty-four (24) months following a Change in Control, which affords Dr. Elliston substantial protection in the transaction scenario that represents the most likely context for significant equity value realization. The twenty-five percent (25%) non-CIC acceleration, combined with the twelve (12) months of continued base salary and pro-rata bonus, provides what the Company believes to be a meaningful and competitive severance package.

That said, AHT recognizes that this is a point of importance to Dr. Elliston, and the Company remains willing to discuss further. To facilitate such discussion, the second draft includes bracketed alternative language at Section 6(b)(iv) reflecting a fifty percent (50%) acceleration alternative, so that both formulations may be reviewed side by side.

B-4: COBRA Continuation — Non-CIC Termination (Employment Agreement, Section 6(b)(iii), p. 17)

The first draft provided for twelve (12) months of employer-paid COBRA continuation coverage upon a non-CIC qualifying termination, at an estimated monthly cost of $2,150, totaling $25,800. Fielding & Rowe's markup proposed extending this period to eighteen (18) months to match the COBRA continuation period provided in connection with the CIC severance package.

AHT has maintained the twelve (12) month COBRA continuation period in the second draft. The Company notes that the twelve (12) month COBRA period is consistent with the twelve (12) month base salary severance period, creating a coherent non-CIC severance structure in which salary continuation and benefits continuation run concurrently. Additionally, a twelve (12) month COBRA continuation period is consistent with AHT's existing executive employment agreements, including those with CEO Priya Chandrasekaran and CFO David Herrera, and the Company is reluctant to create inconsistencies within its executive compensation framework that could give rise to internal equity concerns.

The Company is, however, open to further discussion on this point and recognizes that reasonable minds may differ on the appropriate duration of post-termination benefits continuation.

Category C: Remaining Open Items

The following items represent areas where the parties' positions remain apart. AHT believes these items would benefit from a direct discussion among counsel, and we suggest addressing them on a call at Fielding & Rowe's earliest convenience.

C-1: Change in Control Severance Multiplier (Employment Agreement, Section 6(c)(i)–(ii), pp. 19–20)

The second draft reflects a two-times (2×) multiplier for both base salary and target annual bonus in the CIC severance calculation, yielding cash severance of $1,150,000 (2 × $575,000) plus $862,500 (2 × $431,250), for total CIC cash severance of $2,012,500. Together with eighteen (18) months of employer-paid COBRA continuation coverage ($38,700), the total estimated CIC severance (excluding equity acceleration) is $2,051,200.

Fielding & Rowe's August 19 markup requested a two-and-one-half-times (2.5×) multiplier for both base salary and target annual bonus, which would yield cash severance of $1,437,500 (2.5 × $575,000) plus $1,078,125 (2.5 × $431,250), for total CIC cash severance of $2,515,625 — an increase of approximately $503,125 over the Company's current proposal.

The Company's position remains at the 2× multiplier for the following reasons:

• The 2× multiplier is consistent with the peer benchmarking data compiled by Broadleaf Compensation Advisors LLC in its June 2022 executive compensation report, which the AHT Board compensation committee commissioned and relied upon in establishing the CIC severance parameters for the COO role. The Broadleaf report surveyed CIC severance multiples at twenty-three (23) peer companies in the healthcare technology sector and found a median CIC cash severance multiple of 2.0× for COO-level positions.

• The 2× multiplier is consistent with the CIC severance multiples provided under AHT's existing C-suite employment agreements, including the agreements with CEO Chandrasekaran (2.5× — reflecting the higher multiplier appropriate for a CEO-level position) and CFO Herrera (2.0×).

• The AHT Board compensation committee, which includes two designees of Ridgeline Capital Partners, LP (one of whom is Board Chair Thomas R. Glenwood), has authorized the 2× multiplier for the COO position. Any increase above the 2× level would require the Company to seek further Board approval, which the Company cannot guarantee would be forthcoming.

We request Fielding & Rowe's updated position on this issue and remain willing to discuss on a call. The Company is prepared to share relevant portions of the Broadleaf benchmarking data on a confidential, outside-counsel-only basis if that would be helpful to the discussion.

C-2: Bonus Clawback Mechanics — Annual Bonus (Employment Agreement, Section 4(b)(iii), p. 9)

Fielding & Rowe's markup proposed that any annual bonus that has been earned and become payable to the Executive should not be subject to any clawback or recoupment other than as required by applicable law (e.g., the Dodd-Frank Act clawback rules, to the extent applicable to AHT).

AHT wishes to preserve a clawback right with respect to annual bonus payments in two specific circumstances: (i) where the Company is required to prepare a financial restatement due to material noncompliance with applicable financial reporting requirements (and the bonus payment would have been lower based on the restated financial results), and (ii) where the Company discovers, following the payment of a bonus, that the Executive engaged in misconduct (as defined in the Employment Agreement) that either contributed to the circumstances requiring the restatement or that constituted a material violation of Company policy.

The second draft includes bracketed clawback language at Section 4(b)(iii). We request Fielding & Rowe's comments on this formulation. In reviewing this provision, we draw your attention to the interaction with the Massachusetts Wage Act (M.G.L. c. 149, §§ 148–150), which broadly defines "wages" to include commissions and certain other forms of compensation. To the extent that an annual bonus that has been earned and become payable may constitute "wages" under Massachusetts law, any clawback provision must be carefully drafted to withstand scrutiny under the Wage Act's prohibition on unauthorized deductions from wages. We believe the bracketed language in the second draft is appropriately tailored to address this concern, but we welcome Fielding & Rowe's analysis of this point.

C-3: Non-Solicitation Scope — Customer/Partner Definition (Employment Agreement, Section 9(c), p. 24; Non-Competition Agreement, Section 3(b), p. 5)

The second draft limits the customer and partner non-solicitation covenant to customers and partners with whom the Executive had "material contact" during the last twenty-four (24) months of employment. Fielding & Rowe's markup proposed further narrowing this restriction in two respects: (i) replacing the "material contact" standard with a "direct and substantial business dealings" standard, which would require a higher threshold of interaction; and (ii) excluding partners from the scope of the non-solicitation covenant entirely, on the grounds that the term "partner" is overly broad and could encompass entities with whom the Executive has only attenuated commercial relationships.

AHT has retained the "material contact" standard in the second draft. The Company believes that a "direct and substantial business dealings" standard is unnecessarily restrictive and could render the non-solicitation covenant ineffective with respect to customer and partner relationships that the Executive has developed or influenced in a material way but that may not have involved direct transactional dealings (for example, strategic partnership relationships, joint development arrangements, or key account management responsibilities that involve oversight rather than day-to-day transactional interaction).

However, AHT is willing to add a definitional clause to both the Employment Agreement and the Non-Competition Agreement clarifying what constitutes "material contact" for purposes of the non-solicitation covenant. We welcome Fielding & Rowe's proposed language for such a definition, or, alternatively, we can circulate a proposed definition for your review.

With respect to the proposed exclusion of partners, AHT believes that partner relationships are within the legitimate scope of the non-solicitation protection, given the significance of AHT's strategic partner ecosystem to its business and the central role the COO is expected to play in managing and developing those relationships. The Company is, however, willing to discuss a narrowing of the definition of "partner" to exclude entities below a specified revenue threshold or to limit the definition to partners with whom the Company has a written strategic partnership or similar agreement.

For completeness, we note that the employee non-solicitation scope (eighteen (18) months, limited to employees at the manager level and above) remains as agreed by the parties, as reflected in Item A-1 above, and is not subject to further discussion.

C-4: Section 280G Best-Net Cutback vs. Gross-Up (Employment Agreement, Section 7(b), pp. 20–21)

Fielding & Rowe's markup requested the inclusion of a full Section 280G/4999 excise tax gross-up in lieu of the best-net cutback provision included in the first draft. Under Fielding & Rowe's proposed approach, the Company would make the Executive whole for any excise tax imposed under Section 4999 of the Internal Revenue Code on "excess parachute payments" (within the meaning of Section 280G), such that the Executive would retain the same after-tax value as if no excise tax had been imposed.

The Company's position on this point is firm: AHT will not offer an excise tax gross-up. The second draft maintains the best-net cutback provision, under which:

• If any payments or benefits payable to the Executive in connection with a Change in Control would constitute "parachute payments" within the meaning of Section 280G, and such payments would be subject to the excise tax imposed by Section 4999, then the aggregate payments shall be reduced (but not below zero) to the largest amount that would not trigger the excise tax — but only if the after-tax amount received by the Executive after such reduction would exceed the after-tax amount the Executive would receive without such reduction (i.e., after payment of the excise tax, applicable income taxes, and employment taxes).

• If the after-tax amount without the reduction (i.e., full payment less excise tax) would be equal to or greater than the after-tax amount with the reduction, no reduction shall be made, and the Executive shall be responsible for any excise tax liability.

This position is consistent with AHT's existing executive employment agreements and with the recommendation of the Company's tax advisors, Hargrove & Sinclair CPAs, as well as Calderwood & Harkness's independent tax analysis. We note that the trend in executive compensation practice, particularly in the private equity-backed company context, has moved decisively away from excise tax gross-ups, which impose significant and unpredictable costs on companies and have been widely criticized by institutional investors, proxy advisory firms, and compensation consultants as poor corporate governance.

Moreover, the best-net cutback modeling prepared by Hargrove & Sinclair demonstrates that in many realistic CIC severance scenarios — particularly those in which the cutback eliminates the excise tax entirely — Dr. Elliston would receive a greater after-tax benefit under the cutback than he would under full payment with excise tax exposure. We would be happy to share the modeling assumptions and results with Fielding & Rowe on a confidential basis if that would be useful.

We request that Fielding & Rowe acknowledge the Company's position on this point. If Dr. Elliston is unable to accept the best-net cutback approach, we invite Fielding & Rowe to propose alternative protective language — short of a full gross-up — that might address Dr. Elliston's concerns, such as a right to engage an independent tax advisor at Company expense to review the Section 280G calculations prior to any cutback being applied.

Request for Response and Next Steps

We respectfully request that Fielding & Rowe provide its markup of, or written comments on, the enclosed second drafts and the Issues List on or before September 9, 2022. Given the volume of material and the number of open items, we believe a ten-day review period is reasonable, but we are happy to discuss an alternative timeline if needed.

AHT remains hopeful of finalizing the Agreement Documents and all related schedules and exhibits promptly, in advance of the proposed November 1, 2022 start date for Dr. Elliston. To that end, we believe it would be productive to schedule a call among Devon Archer and Bernard Crawford of Calderwood & Harkness and Catherine A. Fielding and Jonathan M. Pryce of Fielding & Rowe to discuss the remaining open items identified in Category C of the Issues List, as well as any further comments Fielding & Rowe may have on the compromise language set forth in Category B. We are prepared to schedule such a call at Fielding & Rowe's earliest convenience.

Please feel free to contact me directly to coordinate scheduling:

Devon Archer Direct: (617) 854-7142

Email: darcher@calderwoodharkness.com

CONFIDENTIALITY NOTICE: The enclosed documents and this letter, including the Issues List set forth herein, are confidential and have been prepared in connection with the negotiation of employment terms between Arbor Health Technologies Inc. and Dr. Marcus J. Elliston. This correspondence and the enclosed documents are intended solely for the use of the addressee and the individuals identified on the copy list below, and are subject to all applicable privileges, including the attorney-client privilege and the attorney work product doctrine, to the extent applicable. Any unauthorized use, disclosure, distribution, or copying of this letter or the enclosed documents is strictly prohibited. If you have received this communication in error, please notify the sender immediately and destroy all copies.

Very truly yours,

CALDERWOOD & HARKNESS LLP

By: ________

Devon Archer Partner

One International Place, Suite 3400 Boston, MA 02110 Direct: (617) 854-7142

Email: darcher@calderwoodharkness.com

cc: (via email)

Bernard Crawford, Esq., Calderwood & Harkness LLP Aaron Whitfield, Esq., General Counsel, Arbor Health Technologies Inc. Lisa Murakami, Chief Human Resources Officer, Arbor Health Technologies Inc. Jonathan M. Pryce, Esq., Fielding & Rowe LLP

Enclosures:

1. Executive Employment Agreement — Second Draft (August 30, 2022)

2. Employee Non-Competition Agreement (Massachusetts Compliant) — Second Draft (August 30, 2022)

3. Issues List (as set forth in this letter)

CALDERWOOD & HARKNESS LLP Attorneys at Law
One International Place, Suite 3400 Boston, Massachusetts 02110
Telephone: (617) 854-7000 Facsimile: (617) 854-7001 www.calderwoodharkness.com
August 30, 2022
VIA EMAIL AND HAND DELIVERY
Catherine A. Fielding, Esq. Partner Fielding & Rowe LLP 101 Federal Street, Suite 2600 Boston, MA 02110
Re: Executive Employment Agreement and Related Documents — Dr. Marcus J. Elliston / Arbor Health Technologies Inc. Calderwood & Harkness Matter No. 1010-00004
Dear Catherine:
On behalf of our client, Arbor Health Technologies Inc. ("AHT" or the "Company"), I am writing to transmit second drafts of the following documents in connection with the proposed engagement of Dr. Marcus J. Elliston ("Dr. Elliston" or the "Executive") as Chief Operating Officer of AHT:
1. Executive Employment Agreement — Second Draft, dated August 30, 2022 (the "Employment Agreement"); and
2. Employee Non-Competition Agreement (Massachusetts Compliant) — Second Draft, dated August 30, 2022 (the "Non-Competition Agreement" and, together with the Employment Agreement, the "Agreement Documents").
These second drafts reflect Calderwood & Harkness's and AHT's thorough review of the initial markup submitted by Fielding & Rowe on behalf of Dr. Elliston, which we received on August 19, 2022. As you will recall, the first draft package of the Agreement Documents was transmitted to your office on August 5, 2022.
Please note that Schedule A (Prior Inventions Disclosure Form), Schedule B (Form of General Release Agreement), and Exhibit A (Position Description and Reporting Structure) are unchanged from the first draft package and accordingly are not re-enclosed with this transmittal. Of course, any comments from Dr. Elliston on those documents remain welcome, and we would be happy to incorporate any revisions to the schedules and exhibit as part of the final package.
Summary of Approach
The Company has given careful and thorough consideration to each of Fielding & Rowe's proposed revisions to the Agreement Documents. In an effort to reach a prompt and mutually acceptable resolution, AHT has accepted a number of the proposed changes, offered compromise language on several others, and respectfully maintained its original position on a limited number of points where the Company believes its existing formulation is appropriate and consistent with market practice, AHT's internal precedents, and applicable law.
To facilitate an efficient review of the second drafts and to provide a clear roadmap for our respective clients' further discussions, I have appended to this letter an issues list (the "Issues List") that categorizes each substantive point raised in Fielding & Rowe's August 19 markup into one of three categories:
(A) Agreed Changes — Points on which AHT has accepted Fielding & Rowe's proposed revisions, in whole or with minor clarifying modifications;
(B) Partially Resolved / Compromise Language — Points on which AHT has offered compromise language that differs from both the first draft and Fielding & Rowe's proposed revision; and
(C) Remaining Open Items — Points on which the parties' positions remain apart and which we believe would benefit from further discussion.
We would welcome the opportunity to schedule a call at Fielding & Rowe's convenience to discuss the open items. My colleague Bernard Crawford and I are both available to participate in such a discussion, and we are prepared to be flexible with scheduling to accommodate your and Mr. Pryce's calendars.
Enclosed Documents — Summary of Key Revisions
The following summary highlights the key provisions and revisions reflected in the enclosed second drafts. This summary is intended for convenience of reference only and is qualified in its entirety by the terms of the Agreement Documents themselves.
I. Executive Employment Agreement — Second Draft
Compensation Terms. The core compensation terms remain as proposed in the first draft and are unchanged in the second draft:
• Base Salary: $575,000 per annum, payable in accordance with the Company's standard payroll schedule.
• Annual Bonus: Target annual bonus of 75% of base salary, which at target equals $431,250. The maximum annual bonus shall be 150% of the target bonus amount, or $646,875. The annual bonus will be determined by the Company's Board of Directors (or its compensation committee) based on achievement of individual and Company performance objectives to be established by the Board in consultation with the Executive within sixty (60) days following the commencement of each fiscal year.
• Signing Bonus: A one-time signing bonus of $250,000, payable within thirty (30) days following the Executive's start date, subject to a twenty-four (24) month clawback as further described in the Employment Agreement and as discussed in the Issues List below.
Equity Grants. The equity grant terms are unchanged from the first draft:
• Stock Options: Options to purchase shares of AHT common stock representing 1.25% of the fully diluted equity of the Company, to be granted under the AHT 2020 Equity Incentive Plan (as amended May 2021) (the "Plan"). The stock options will vest over a four (4) year period, with 25% of the total grant vesting on the first anniversary of the grant date (the "cliff") and the remainder vesting monthly over the subsequent thirty-six (36) months. The exercise price shall be set at fair market value as of the date of grant, as determined by the Board in accordance with the Plan and Section 409A of the Internal Revenue Code.
• Restricted Stock Units (RSUs): RSUs representing 0.50% of the fully diluted equity of the Company, granted under the Plan. The RSUs will vest over a three (3) year period, with 33.33% of the total grant vesting on each anniversary of the grant date.
Initial Term and Renewal. The Employment Agreement provides for a three (3) year initial term commencing on the proposed start date, with automatic one (1) year renewal periods thereafter, unless either party provides ninety (90) days' prior written notice of non-renewal. These provisions are unchanged from the first draft.
Proposed Start Date. The proposed start date remains November 1, 2022, and is unchanged.
Reporting Line. Dr. Elliston will serve as Chief Operating Officer, reporting directly to AHT Chief Executive Officer Priya Chandrasekaran. This reporting structure is unchanged from the first draft and is consistent with the organizational chart set forth in Exhibit A.
Good Reason Definition. The definition of "Good Reason" has been revised in the second draft to incorporate certain of Fielding & Rowe's proposed expansions. The specific revisions and remaining open points are addressed in detail in the Issues List at Items A-3, A-4, and B-1 below.
Change in Control Severance. The second draft reflects a revised change in control ("CIC") severance package structured as a double-trigger arrangement. Upon a qualifying termination of employment (i.e., termination without Cause or resignation for Good Reason) occurring within twenty-four (24) months following a Change in Control (as defined in the Employment Agreement), Dr. Elliston would be entitled to the following severance benefits:
• Twenty-four (24) months of base salary: $1,150,000;
• Two times (2×) the target annual bonus: $862,500;
• Eighteen (18) months of employer-paid COBRA continuation coverage: $38,700 (based on current monthly COBRA premium of $2,150); and
• One hundred percent (100%) accelerated vesting of all unvested equity awards.
The total estimated CIC cash severance (excluding equity acceleration) is $2,051,200. Please refer to the Issues List at Item C-1 for a discussion of the remaining open point regarding the CIC severance multiplier.
Non-CIC Severance. In the event of a qualifying termination absent a Change in Control (i.e., termination without Cause or resignation for Good Reason), the second draft provides for the following severance benefits:
• Twelve (12) months of base salary: $575,000;
• Pro-rata annual bonus for the fiscal year in which the termination occurs, based on actual Company performance and payable at the time annual bonuses are otherwise paid to senior executives;
• Twelve (12) months of employer-paid COBRA continuation coverage: $25,800; and
• Twenty-five percent (25%) acceleration of unvested equity awards.
The non-CIC severance provisions are subject to further discussion as noted in the Issues List at Items B-3 and B-4.
Section 280G Treatment. The Company has maintained its position that the Employment Agreement include a "best-net cutback" provision in lieu of a Section 280G/4999 excise tax gross-up. Under the best-net cutback, if any payments or benefits to the Executive would constitute "parachute payments" within the meaning of Section 280G of the Internal Revenue Code, the aggregate amount of such payments shall be reduced to the extent necessary to avoid triggering the excise tax under Section 4999, but only if the after-tax benefit to the Executive would be greater after such reduction than it would be if the full payments were made and the excise tax applied. This position is discussed further at Item C-4 of the Issues List.
Governing Law. The Employment Agreement is governed by and construed in accordance with the laws of the Commonwealth of Massachusetts, without regard to conflict of laws principles. This provision is unchanged.
II. Employee Non-Competition Agreement — Second Draft
Non-Compete Duration. The non-compete period has been reduced from eighteen (18) months to twelve (12) months post-termination, reflecting Fielding & Rowe's comment. AHT has accepted this change, which is consistent with the maximum enforceability standard under the Massachusetts Noncompetition Agreement Act, M.G.L. c. 149, § 24L. This revision is discussed at Item A-1 of the Issues List.
Industry Scope. The competitive activity restriction has been narrowed. The first draft defined the restricted industry broadly as "healthcare services, healthcare technology, and related fields." The second draft adopts Fielding & Rowe's proposed narrower formulation, restricting competitive activity to "healthcare IT/SaaS companies with greater than $50 million in annual revenue operating in the United States." This revision is discussed at Item A-2 of the Issues List.
Garden-Leave Payment. The Non-Competition Agreement provides for a garden-leave payment equal to fifty percent (50%) of the Executive's annualized base salary during the twelve (12) month non-compete period, totaling $287,500 (calculated as $575,000 × 50%). This garden-leave payment is structured to comply with the requirements of the Massachusetts Noncompetition Agreement Act, M.G.L. c. 149, § 24L, which mandates that employers provide either a garden-leave payment or "other mutually-agreed upon consideration" as a condition of enforceability of post-employment non-competition covenants.
Employee Non-Solicitation. The employee non-solicitation period remains at eighteen (18) months following termination of employment and is limited to employees of the Company at the manager level and above. This provision was agreed upon by the parties, as noted in the Issues List.
Customer/Partner Non-Solicitation. The customer and partner non-solicitation period is twelve (12) months following termination, limited to customers and partners with whom the Executive had "material contact" during the last twenty-four (24) months of employment. The scope of this provision remains partially open, as discussed at Item C-3 of the Issues List.
Confidentiality and Non-Disclosure. The confidentiality and non-disclosure obligations remain perpetual, subject to standard carve-outs for legally compelled disclosure (including appropriate Defend Trade Secrets Act notice provisions). These provisions are unchanged from the first draft.
Invention Assignment. All intellectual property developed by the Executive during the period of employment and relating to AHT's business or reasonably anticipated business shall be assigned to the Company. Prior inventions, if any, are excluded pursuant to Schedule A (Prior Inventions Disclosure Form). These provisions are unchanged from the first draft.
Issues List
The following Issues List is organized into three categories for ease of reference: (A) Agreed Changes, (B) Partially Resolved / Compromise Language, and (C) Remaining Open Items. Each item includes cross-references to the relevant section and page numbers of the enclosed second drafts where the issue arises.
Category A: Agreed Changes
The following items have been resolved to the satisfaction of both sides. The second drafts reflect the agreed-upon revisions, and we do not anticipate further discussion on these points.
A-1: Non-Compete Duration (Employment Agreement, Section 9(a), p. 22; Non-Competition Agreement, Section 2(a), p. 3)
Fielding & Rowe proposed reducing the post-termination non-compete period from eighteen (18) months to twelve (12) months. AHT has accepted this change in both the Employment Agreement and the standalone Non-Competition Agreement. This revised duration is consistent with the Massachusetts Noncompetition Agreement Act (M.G.L. c. 149, § 24L), which establishes twelve (12) months as the maximum presumptively enforceable duration for post-employment non-competition covenants, and reflects what the Company believes to be a reasonable and enforceable restriction given the scope of Dr. Elliston's anticipated role.
A-2: Non-Compete Industry Scope (Employment Agreement, Section 9(a), p. 22; Non-Competition Agreement, Section 2(b), p. 3)
Fielding & Rowe proposed narrowing the definition of restricted competitive activity from "healthcare services, healthcare technology, and related fields" to "healthcare IT/SaaS companies with greater than $50 million in annual revenue operating in the United States." AHT has accepted this narrower formulation. The Company believes this revised scope is sufficiently targeted to protect AHT's legitimate business interests while providing Dr. Elliston with reasonable latitude for future employment should his tenure at AHT conclude.
A-3: Good Reason — Material Diminution in Authority (Employment Agreement, Section 5(d)(i), p. 14)
Fielding & Rowe proposed adding "material diminution in Executive's duties, authority, or responsibilities" as a triggering event for a resignation for Good Reason. AHT has accepted this addition, with clarifying language providing that such diminution must be (i) without the Executive's prior written consent and (ii) measured against the duties, authority, and responsibilities described in Exhibit A (Position Description and Reporting Structure) attached to the Employment Agreement. This clarification is intended to establish a clear baseline against which any alleged diminution may be assessed, and to avoid ambiguity arising from organic changes in role responsibilities that may occur over time with the Executive's participation and agreement.
A-4: Good Reason — Office Relocation (Employment Agreement, Section 5(d)(iv), p. 15)
Fielding & Rowe proposed that a relocation of the Executive's principal office by more than thirty (30) miles (without the Executive's prior written consent) constitute a Good Reason trigger. The first draft had set this threshold at fifty (50) miles. AHT has accepted the thirty (30) mile threshold, which the Company acknowledges is more consistent with prevailing market practice for senior executive employment agreements in the greater Boston metropolitan area.
A-5: Paid Time Off (Employment Agreement, Section 4(f), p. 12)
Fielding & Rowe requested confirmation that Dr. Elliston would be entitled to twenty-five (25) days of paid time off per calendar year, in addition to Company-observed holidays. The Company has confirmed this entitlement. Section 4(f) of the second draft has been clarified to reflect that the Executive shall be entitled to twenty-five (25) days of paid time off per calendar year, which shall accrue on a pro-rata basis, in addition to all holidays observed by the Company in accordance with its then-current holiday schedule (currently eleven (11) holidays per calendar year).
A-6: Professional Development Allowance (Employment Agreement, Section 4(g), p. 12)
Fielding & Rowe requested that the $15,000 annual professional development allowance be characterized as non-lapsing within each calendar year (i.e., that unexpended amounts during a given year not expire on a quarterly or semi-annual basis). AHT has accepted this approach. The second draft provides that the $15,000 annual professional development allowance shall be available for use at any time during the applicable calendar year, and shall reset on January 1 of each subsequent calendar year. Unused amounts do not carry over from one calendar year to the next. Eligible expenses include, without limitation, continuing medical education, executive education programs, industry conference attendance and registration, and professional society membership dues.
Category B: Partially Resolved / Compromise Language
The following items reflect areas where AHT has offered compromise language that differs from both the first draft and Fielding & Rowe's proposed revisions. We believe these compromises represent reasonable middle-ground positions and request Fielding & Rowe's feedback.
B-1: Good Reason — Expanded Definition (Remaining Elements) (Employment Agreement, Section 5(d)(ii)–(iii), pp. 14–15)
In addition to the Good Reason triggers addressed in Items A-3 and A-4 above, Fielding & Rowe's August 19 markup proposed two additional Good Reason triggers: (i) the Company's failure to nominate the Executive to the AHT Board of Directors within twelve (12) months of the start date, and (ii) any material breach by the Company of its obligations under the Employment Agreement.
With respect to Board nomination, AHT has not accepted this proposal. Board composition at AHT is governed by the Stockholders' Agreement, dated as of March 15, 2020, by and among the Company, Ridgeline Capital Partners, LP, and certain other stockholders (the "Stockholders' Agreement"), which establishes specific board designation rights and does not contemplate a Board seat for the Chief Operating Officer. The inclusion of a Board nomination requirement as a Good Reason trigger would create a potential conflict with the Company's existing governance arrangements and could require amendments to the Stockholders' Agreement that are beyond the scope of this negotiation. We note that the Company's CEO does not have a Board nomination right under her employment agreement, and extending such a right to the COO role would be inconsistent with the Company's existing executive compensation framework.
With respect to material breach by the Company, AHT has offered compromise language. The second draft includes, as a Good Reason trigger, "a material breach by the Company of its material obligations under this Agreement" — subject to the following conditions: (a) the Executive must provide written notice to the Company specifying the nature of the breach within thirty (30) days after the Executive first becomes aware (or reasonably should have become aware) of the breach; (b) the Company shall have thirty (30) days following receipt of such notice to cure the breach (or, if the breach is not reasonably susceptible to cure within thirty (30) days, to commence cure and diligently pursue completion thereof); and (c) the Executive must resign within fifteen (15) days following the expiration of the cure period if the breach remains uncured.
Fielding & Rowe's markup had proposed a fifteen (15) day cure period for Company breach. AHT proposes a thirty (30) day cure period in order to align with the cure period afforded to the Executive under the definition of "Cause" (Section 5(c) of the Employment Agreement), which also provides for a thirty (30) day cure window. The Company believes symmetry in cure periods is both equitable and administratively practical.
The bracketed language in Section 5(d)(iii) of the second draft reflects the thirty (30) day cure compromise. We request Fielding & Rowe's confirmation that this formulation is acceptable.
B-2: Signing Bonus Clawback — Termination Without Cause (Employment Agreement, Section 4(c)(ii), p. 10)
The first draft provided for full clawback of the $250,000 signing bonus upon the Executive's voluntary resignation or termination for Cause within the twenty-four (24) month period following the payment of the signing bonus. Fielding & Rowe's markup proposed that the clawback not apply in the event of a termination by the Company without Cause, arguing that it would be inequitable to require the Executive to repay the signing bonus in circumstances where the decision to end the employment relationship was the Company's.
AHT acknowledges the reasonableness of this concern and has offered the following compromise in the second draft:
• Voluntary Resignation (Other Than for Good Reason): Pro-rata clawback — the Executive shall repay a proportionate share of the $250,000 signing bonus based on the number of months remaining in the twenty-four (24) month clawback period. For example, if the Executive voluntarily resigns twelve (12) months after receiving the signing bonus, the repayment obligation would be $125,000 (i.e., 12/24 × $250,000).
• Termination for Cause: Full clawback of the $250,000 signing bonus, regardless of when during the clawback period the termination occurs.
• Termination Without Cause or Resignation for Good Reason: No clawback. The Executive shall have no obligation to repay any portion of the signing bonus.
This compromise is reflected in Section 4(c)(ii) of the second draft. We note that this item interacts with the broader bonus clawback mechanics discussed at Item C-2 below, and we would welcome a holistic discussion of both provisions together.
B-3: Equity Acceleration — Non-CIC Termination (Employment Agreement, Section 6(b)(iv), p. 18)
The first draft provided for twenty-five percent (25%) acceleration of unvested equity awards upon a qualifying termination (termination without Cause or resignation for Good Reason) absent a Change in Control. Fielding & Rowe's markup proposed increasing this acceleration to fifty percent (50%) of unvested equity.
AHT has maintained the twenty-five percent (25%) acceleration figure in the second draft. The Company notes that the Employment Agreement already provides for one hundred percent (100%) acceleration of all unvested equity upon a qualifying termination within twenty-four (24) months following a Change in Control, which affords Dr. Elliston substantial protection in the transaction scenario that represents the most likely context for significant equity value realization. The twenty-five percent (25%) non-CIC acceleration, combined with the twelve (12) months of continued base salary and pro-rata bonus, provides what the Company believes to be a meaningful and competitive severance package.
That said, AHT recognizes that this is a point of importance to Dr. Elliston, and the Company remains willing to discuss further. To facilitate such discussion, the second draft includes bracketed alternative language at Section 6(b)(iv) reflecting a fifty percent (50%) acceleration alternative, so that both formulations may be reviewed side by side.
B-4: COBRA Continuation — Non-CIC Termination (Employment Agreement, Section 6(b)(iii), p. 17)
The first draft provided for twelve (12) months of employer-paid COBRA continuation coverage upon a non-CIC qualifying termination, at an estimated monthly cost of $2,150, totaling $25,800. Fielding & Rowe's markup proposed extending this period to eighteen (18) months to match the COBRA continuation period provided in connection with the CIC severance package.
AHT has maintained the twelve (12) month COBRA continuation period in the second draft. The Company notes that the twelve (12) month COBRA period is consistent with the twelve (12) month base salary severance period, creating a coherent non-CIC severance structure in which salary continuation and benefits continuation run concurrently. Additionally, a twelve (12) month COBRA continuation period is consistent with AHT's existing executive employment agreements, including those with CEO Priya Chandrasekaran and CFO David Herrera, and the Company is reluctant to create inconsistencies within its executive compensation framework that could give rise to internal equity concerns.
The Company is, however, open to further discussion on this point and recognizes that reasonable minds may differ on the appropriate duration of post-termination benefits continuation.
Category C: Remaining Open Items
The following items represent areas where the parties' positions remain apart. AHT believes these items would benefit from a direct discussion among counsel, and we suggest addressing them on a call at Fielding & Rowe's earliest convenience.
C-1: Change in Control Severance Multiplier (Employment Agreement, Section 6(c)(i)–(ii), pp. 19–20)
The second draft reflects a two-times (2×) multiplier for both base salary and target annual bonus in the CIC severance calculation, yielding cash severance of $1,150,000 (2 × $575,000) plus $862,500 (2 × $431,250), for total CIC cash severance of $2,012,500. Together with eighteen (18) months of employer-paid COBRA continuation coverage ($38,700), the total estimated CIC severance (excluding equity acceleration) is $2,051,200.
Fielding & Rowe's August 19 markup requested a two-and-one-half-times (2.5×) multiplier for both base salary and target annual bonus, which would yield cash severance of $1,437,500 (2.5 × $575,000) plus $1,078,125 (2.5 × $431,250), for total CIC cash severance of $2,515,625 — an increase of approximately $503,125 over the Company's current proposal.
The Company's position remains at the 2× multiplier for the following reasons:
• The 2× multiplier is consistent with the peer benchmarking data compiled by Broadleaf Compensation Advisors LLC in its June 2022 executive compensation report, which the AHT Board compensation committee commissioned and relied upon in establishing the CIC severance parameters for the COO role. The Broadleaf report surveyed CIC severance multiples at twenty-three (23) peer companies in the healthcare technology sector and found a median CIC cash severance multiple of 2.0× for COO-level positions.
• The 2× multiplier is consistent with the CIC severance multiples provided under AHT's existing C-suite employment agreements, including the agreements with CEO Chandrasekaran (2.5× — reflecting the higher multiplier appropriate for a CEO-level position) and CFO Herrera (2.0×).
• The AHT Board compensation committee, which includes two designees of Ridgeline Capital Partners, LP (one of whom is Board Chair Thomas R. Glenwood), has authorized the 2× multiplier for the COO position. Any increase above the 2× level would require the Company to seek further Board approval, which the Company cannot guarantee would be forthcoming.
We request Fielding & Rowe's updated position on this issue and remain willing to discuss on a call. The Company is prepared to share relevant portions of the Broadleaf benchmarking data on a confidential, outside-counsel-only basis if that would be helpful to the discussion.
C-2: Bonus Clawback Mechanics — Annual Bonus (Employment Agreement, Section 4(b)(iii), p. 9)
Fielding & Rowe's markup proposed that any annual bonus that has been earned and become payable to the Executive should not be subject to any clawback or recoupment other than as required by applicable law (e.g., the Dodd-Frank Act clawback rules, to the extent applicable to AHT).
AHT wishes to preserve a clawback right with respect to annual bonus payments in two specific circumstances: (i) where the Company is required to prepare a financial restatement due to material noncompliance with applicable financial reporting requirements (and the bonus payment would have been lower based on the restated financial results), and (ii) where the Company discovers, following the payment of a bonus, that the Executive engaged in misconduct (as defined in the Employment Agreement) that either contributed to the circumstances requiring the restatement or that constituted a material violation of Company policy.
The second draft includes bracketed clawback language at Section 4(b)(iii). We request Fielding & Rowe's comments on this formulation. In reviewing this provision, we draw your attention to the interaction with the Massachusetts Wage Act (M.G.L. c. 149, §§ 148–150), which broadly defines "wages" to include commissions and certain other forms of compensation. To the extent that an annual bonus that has been earned and become payable may constitute "wages" under Massachusetts law, any clawback provision must be carefully drafted to withstand scrutiny under the Wage Act's prohibition on unauthorized deductions from wages. We believe the bracketed language in the second draft is appropriately tailored to address this concern, but we welcome Fielding & Rowe's analysis of this point.
C-3: Non-Solicitation Scope — Customer/Partner Definition (Employment Agreement, Section 9(c), p. 24; Non-Competition Agreement, Section 3(b), p. 5)
The second draft limits the customer and partner non-solicitation covenant to customers and partners with whom the Executive had "material contact" during the last twenty-four (24) months of employment. Fielding & Rowe's markup proposed further narrowing this restriction in two respects: (i) replacing the "material contact" standard with a "direct and substantial business dealings" standard, which would require a higher threshold of interaction; and (ii) excluding partners from the scope of the non-solicitation covenant entirely, on the grounds that the term "partner" is overly broad and could encompass entities with whom the Executive has only attenuated commercial relationships.
AHT has retained the "material contact" standard in the second draft. The Company believes that a "direct and substantial business dealings" standard is unnecessarily restrictive and could render the non-solicitation covenant ineffective with respect to customer and partner relationships that the Executive has developed or influenced in a material way but that may not have involved direct transactional dealings (for example, strategic partnership relationships, joint development arrangements, or key account management responsibilities that involve oversight rather than day-to-day transactional interaction).
However, AHT is willing to add a definitional clause to both the Employment Agreement and the Non-Competition Agreement clarifying what constitutes "material contact" for purposes of the non-solicitation covenant. We welcome Fielding & Rowe's proposed language for such a definition, or, alternatively, we can circulate a proposed definition for your review.
With respect to the proposed exclusion of partners, AHT believes that partner relationships are within the legitimate scope of the non-solicitation protection, given the significance of AHT's strategic partner ecosystem to its business and the central role the COO is expected to play in managing and developing those relationships. The Company is, however, willing to discuss a narrowing of the definition of "partner" to exclude entities below a specified revenue threshold or to limit the definition to partners with whom the Company has a written strategic partnership or similar agreement.
For completeness, we note that the employee non-solicitation scope (eighteen (18) months, limited to employees at the manager level and above) remains as agreed by the parties, as reflected in Item A-1 above, and is not subject to further discussion.
C-4: Section 280G Best-Net Cutback vs. Gross-Up (Employment Agreement, Section 7(b), pp. 20–21)
Fielding & Rowe's markup requested the inclusion of a full Section 280G/4999 excise tax gross-up in lieu of the best-net cutback provision included in the first draft. Under Fielding & Rowe's proposed approach, the Company would make the Executive whole for any excise tax imposed under Section 4999 of the Internal Revenue Code on "excess parachute payments" (within the meaning of Section 280G), such that the Executive would retain the same after-tax value as if no excise tax had been imposed.
The Company's position on this point is firm: AHT will not offer an excise tax gross-up. The second draft maintains the best-net cutback provision, under which:
• If any payments or benefits payable to the Executive in connection with a Change in Control would constitute "parachute payments" within the meaning of Section 280G, and such payments would be subject to the excise tax imposed by Section 4999, then the aggregate payments shall be reduced (but not below zero) to the largest amount that would not trigger the excise tax — but only if the after-tax amount received by the Executive after such reduction would exceed the after-tax amount the Executive would receive without such reduction (i.e., after payment of the excise tax, applicable income taxes, and employment taxes).
• If the after-tax amount without the reduction (i.e., full payment less excise tax) would be equal to or greater than the after-tax amount with the reduction, no reduction shall be made, and the Executive shall be responsible for any excise tax liability.
This position is consistent with AHT's existing executive employment agreements and with the recommendation of the Company's tax advisors, Hargrove & Sinclair CPAs, as well as Calderwood & Harkness's independent tax analysis. We note that the trend in executive compensation practice, particularly in the private equity-backed company context, has moved decisively away from excise tax gross-ups, which impose significant and unpredictable costs on companies and have been widely criticized by institutional investors, proxy advisory firms, and compensation consultants as poor corporate governance.
Moreover, the best-net cutback modeling prepared by Hargrove & Sinclair demonstrates that in many realistic CIC severance scenarios — particularly those in which the cutback eliminates the excise tax entirely — Dr. Elliston would receive a greater after-tax benefit under the cutback than he would under full payment with excise tax exposure. We would be happy to share the modeling assumptions and results with Fielding & Rowe on a confidential basis if that would be useful.
We request that Fielding & Rowe acknowledge the Company's position on this point. If Dr. Elliston is unable to accept the best-net cutback approach, we invite Fielding & Rowe to propose alternative protective language — short of a full gross-up — that might address Dr. Elliston's concerns, such as a right to engage an independent tax advisor at Company expense to review the Section 280G calculations prior to any cutback being applied.
Request for Response and Next Steps
We respectfully request that Fielding & Rowe provide its markup of, or written comments on, the enclosed second drafts and the Issues List on or before September 9, 2022. Given the volume of material and the number of open items, we believe a ten-day review period is reasonable, but we are happy to discuss an alternative timeline if needed.
AHT remains hopeful of finalizing the Agreement Documents and all related schedules and exhibits promptly, in advance of the proposed November 1, 2022 start date for Dr. Elliston. To that end, we believe it would be productive to schedule a call among Devon Archer and Bernard Crawford of Calderwood & Harkness and Catherine A. Fielding and Jonathan M. Pryce of Fielding & Rowe to discuss the remaining open items identified in Category C of the Issues List, as well as any further comments Fielding & Rowe may have on the compromise language set forth in Category B. We are prepared to schedule such a call at Fielding & Rowe's earliest convenience.
Please feel free to contact me directly to coordinate scheduling:
Devon Archer Direct: (617) 854-7142
Email: darcher@calderwoodharkness.com
CONFIDENTIALITY NOTICE: The enclosed documents and this letter, including the Issues List set forth herein, are confidential and have been prepared in connection with the negotiation of employment terms between Arbor Health Technologies Inc. and Dr. Marcus J. Elliston. This correspondence and the enclosed documents are intended solely for the use of the addressee and the individuals identified on the copy list below, and are subject to all applicable privileges, including the attorney-client privilege and the attorney work product doctrine, to the extent applicable. Any unauthorized use, disclosure, distribution, or copying of this letter or the enclosed documents is strictly prohibited. If you have received this communication in error, please notify the sender immediately and destroy all copies.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Devon Archer Partner
One International Place, Suite 3400 Boston, MA 02110 Direct: (617) 854-7142
Email: darcher@calderwoodharkness.com
cc: (via email)
Bernard Crawford, Esq., Calderwood & Harkness LLP Aaron Whitfield, Esq., General Counsel, Arbor Health Technologies Inc. Lisa Murakami, Chief Human Resources Officer, Arbor Health Technologies Inc. Jonathan M. Pryce, Esq., Fielding & Rowe LLP
Enclosures:
1. Executive Employment Agreement — Second Draft (August 30, 2022)
2. Employee Non-Competition Agreement (Massachusetts Compliant) — Second Draft (August 30, 2022)
3. Issues List (as set forth in this letter)

CALDERWOOD & HARKNESS LLP Attorneys at Law

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