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

letter-transmittal-third-draft-to-fr.docx DOCUMENT Funds

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CALDERWOOD & HARKNESS LLP Attorneys at Law

One International Place, Suite 3400 Boston, Massachusetts 02110 Telephone: (617) 555-8400 Facsimile: (617) 555-8401 www.calderwoodharkness.com

September 16, 2022

Via Email and First-Class Mail

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

Re: Executive Employment Agreement — Arbor Health Technologies Inc. and Dr. Marcus J. Elliston Our Matter No.: 1010-00004

Dear Catherine:

On behalf of our client, Arbor Health Technologies Inc. ("AHT" or the "Company"), we are pleased to transmit herewith the third draft (near-final) of the executive employment agreement package for Dr. Marcus J. Elliston's proposed engagement as Chief Operating Officer of the Company. As discussed during our telephone conference on September 14, 2022, the parties have made substantial progress toward finalizing the terms of Dr. Elliston's engagement, and we believe the enclosed draft reflects a comprehensive and balanced resolution of the principal issues that have been under negotiation.

Since the first draft of the agreement was circulated on August 5, 2022, the parties have engaged in productive and constructive negotiations over the course of more than five weeks. This third draft reflects the resolution of the significant issues raised in your first markup, received on August 19, 2022, as well as the additional comments and revisions submitted with your second markup on September 9, 2022. We have endeavored to incorporate the substance of each of the positions advanced by Fielding & Rowe on behalf of Dr. Elliston, except where we have proposed alternative formulations or compromises, as noted below in our discussion of the limited remaining open items.

We wish to express our appreciation — and that of the Company — for the constructive and collaborative approach that you and your colleagues at Fielding & Rowe have demonstrated throughout this negotiation process. The professionalism of the discussions has materially facilitated the efficient resolution of a number of complex issues, and we are confident that the remaining open items can be addressed promptly.

Enclosed Documents

The following documents are enclosed with this transmittal:

1. Executive Employment Agreement — Third Draft (Near-Final), dated September 16, 2022, between Arbor Health Technologies Inc. and Dr. Marcus J. Elliston (clean copy);

2. Employee Non-Competition Agreement — Third Draft (Near-Final), dated September 16, 2022, between Arbor Health Technologies Inc. and Dr. Marcus J. Elliston (clean copy, drafted in compliance with the Massachusetts Noncompetition Agreement Act, M.G.L. c. 149, § 24L); and

3. Schedule B to Employment Agreement — Form of General Release Agreement (revised September 16, 2022, to conform to the near-final draft terms of the Employment Agreement).

Please note that Schedule A (Prior Inventions Disclosure Form) and Exhibit A (Position Description and Reporting Structure) remain unchanged from the versions previously circulated with the first draft on August 5, 2022. Accordingly, we have not re-enclosed these documents with this transmittal. Should Fielding & Rowe wish to revisit either Schedule A or Exhibit A, or should Dr. Elliston wish to update the Prior Inventions Disclosure Form to reflect any additional prior inventions, please let us know and we will be happy to re-circulate those documents.

Additionally, we note for the record that the Stock Option Award Agreement and Restricted Stock Unit Award Agreement drafts, which were previously circulated separately on August 12, 2022 under the AHT 2020 Equity Incentive Plan (as amended May 2021), remain substantively unchanged. Those award agreements will be conformed to the final terms of the Employment Agreement upon execution and will be presented for Dr. Elliston's signature contemporaneously with the Employment Agreement and the Non-Competition Agreement.

Summary of Agreed Terms Reflected in the Third Draft

For your convenience and to facilitate efficient review, we set forth below a summary of the principal terms reflected in the enclosed third draft, organized by subject matter. Except as expressly noted in the "Remaining Open Items" section below, the Company considers the terms set forth in this draft to be agreed between the parties.

A. Compensation. The compensation package reflected in the third draft is as follows, consistent with the terms agreed upon during the parties' negotiations:

• Base Salary. An annual base salary of $575,000, payable in accordance with AHT's standard payroll practices, subject to annual review by the AHT Board of Directors (or its Compensation Committee) but not subject to reduction below the initial level without Dr. Elliston's consent.

• Annual Performance Bonus. An annual target bonus opportunity equal to 75% of base salary ($431,250 at target), with a maximum annual bonus of 150% of target ($646,875). The annual bonus will be based on the achievement of performance metrics established by the AHT Board of Directors (or its Compensation Committee) in consultation with the Chief Executive Officer, as more fully described in Section 4(b) of the Employment Agreement. Payment of the annual bonus is subject to Dr. Elliston's continued employment through the applicable payment date, except as otherwise provided in connection with qualifying terminations.

• Signing Bonus. A one-time signing bonus of $250,000, payable within thirty (30) days following the commencement of Dr. Elliston's employment, subject to a twenty-four (24) month clawback obligation. Specifically, if Dr. Elliston voluntarily resigns without Good Reason, or if his employment is terminated by the Company for Cause, in either case within twenty-four (24) months following the start date, Dr. Elliston will be required to repay the signing bonus on a pro-rata basis, calculated on a monthly basis over the twenty-four (24) month period.

• Equity Grants. Upon commencement of employment, Dr. Elliston will receive the following equity awards under the AHT 2020 Equity Incentive Plan (as amended May 2021):

(i) Stock Options representing 1.25% of the fully diluted equity of AHT, subject to a four (4) year vesting schedule with a twenty-five percent (25%) cliff vest at the twelve (12) month anniversary of the grant date and monthly vesting thereafter over the remaining thirty-six (36) months, with the per-share exercise price set at the fair market value of AHT's common stock as of the grant date; and

(ii) Restricted Stock Units representing 0.50% of the fully diluted equity of AHT, subject to a three (3) year vesting schedule with thirty-three and one-third percent (33.33%) vesting on each of the first three (3) annual anniversaries of the grant date.

The specific terms of these equity awards are set forth in the Stock Option Award Agreement and the Restricted Stock Unit Award Agreement, as noted above.

B. Severance Protections (No Change in Control)

The severance protections applicable in the absence of a Change in Control event are reflected in Section 6 of the third draft and provide as follows:

• Qualifying Termination. In the event of a termination of Dr. Elliston's employment by the Company without Cause, or a resignation by Dr. Elliston for Good Reason, in either case occurring outside of the Change in Control Period (as defined in Section 7 of the Employment Agreement), Dr. Elliston will be entitled to receive the following severance benefits, subject to his execution and non-revocation of the General Release Agreement attached as Schedule B:

(i) Cash severance equal to twelve (12) months of base salary ($575,000), payable in substantially equal installments in accordance with the Company's regular payroll schedule;

(ii) A pro-rata annual bonus for the fiscal year in which the termination occurs, calculated based on actual performance results for such fiscal year, payable at the same time annual bonuses are paid to other senior executives of the Company;

(iii) Company-paid COBRA continuation coverage for a period of twelve (12) months following the termination date, at an estimated cost of $2,150 per month (totaling approximately $25,800), or, at the Company's election, a lump-sum cash payment equivalent thereto; and

(iv) Acceleration of vesting of twenty-five percent (25%) of all unvested equity awards held by Dr. Elliston as of the termination date, with stock options remaining exercisable for the period specified in the applicable award agreement.

• Good Reason Definition. The definition of "Good Reason" has been revised in the third draft to reflect the parties' negotiations during the second round of markups. As now set forth in Section 5(d) of the Employment Agreement, the Good Reason triggers include, among other items, the specific circumstances discussed and agreed upon by the parties during our September 7, 2022 conference call, including the material diminution of duties trigger, the relocation trigger (expanded to a thirty-five (35) mile radius per Fielding & Rowe's request), and the reporting structure trigger. The Good Reason definition is subject to the standard cure provisions (thirty (30) day notice and thirty (30) day cure period) as previously discussed.

C. Change in Control Severance (Double-Trigger)

The Change in Control severance provisions, set forth in Section 7 of the Employment Agreement, provide enhanced protections in the event of a qualifying termination occurring within the Change in Control Period, as follows:

• Change in Control Qualifying Termination. In the event of a termination of Dr. Elliston's employment by the Company (or its successor) without Cause, or a resignation by Dr. Elliston for Good Reason, in either case occurring within twenty-four (24) months following a Change in Control (the "Change in Control Period"), Dr. Elliston will be entitled to receive the following severance benefits, in lieu of (and not in addition to) the severance benefits described in Section 6, subject to his execution and non-revocation of the General Release Agreement:

(i) A lump-sum cash payment equal to twenty-four (24) months of base salary ($1,150,000);

(ii) A lump-sum cash payment equal to two times (2×) the target annual bonus ($862,500);

(iii) Company-paid COBRA continuation coverage for a period of eighteen (18) months following the termination date (totaling approximately $38,700), or, at the Company's election, a lump-sum cash payment equivalent thereto; and

(iv) Full acceleration of vesting of one hundred percent (100%) of all unvested equity awards held by Dr. Elliston as of the termination date, with stock options remaining exercisable for the period specified in the applicable award agreement.

• Change in Control Definition. The definition of "Change in Control" reflects the terms agreed upon by the parties and includes the negotiated carve-out for transactions involving Ridgeline Capital Partners, LP and its affiliates. Specifically, no transaction or series of related transactions by or involving Ridgeline Capital Partners, LP, or any of its controlled affiliates, investment vehicles, or successor funds, will constitute a "Change in Control" for purposes of the Employment Agreement, regardless of the economic impact of such transaction on the ownership structure of AHT.

• Section 280G Best-Net Cutback. The parties have agreed that the Employment Agreement will include a "best-net cutback" provision in lieu of any Section 280G gross-up. Under this provision, in the event that any payments or benefits provided to Dr. Elliston in connection with a Change in Control would constitute "parachute payments" within the meaning of Section 280G of the Internal Revenue Code, such payments and benefits will be reduced to the extent necessary to avoid the imposition of the excise tax under Section 4999 of the Code, but only if such reduction would result in a greater after-tax benefit to Dr. Elliston than receipt of the full payments and benefits with the application of the excise tax. The determination of whether a reduction is required, and the amount of any such reduction, will be made by an independent accounting firm selected by the Company and reasonably acceptable to Dr. Elliston.

D. Restrictive Covenants

The restrictive covenant package reflected in the Employment Agreement and the separate Non-Competition Agreement is as follows:

• Non-Competition. The non-competition period has been set at twelve (12) months following the termination of Dr. Elliston's employment, reduced from the Company's initial proposal of eighteen (18) months per Fielding & Rowe's request during the first round of negotiations. The scope of the non-competition restriction is limited to healthcare information technology and software-as-a-service ("SaaS") companies with greater than $50 million in annual revenue operating in the United States. This scope reflects the compromise reached during the parties' discussions regarding the appropriate competitive landscape.

• Garden-Leave Payment. In compliance with the Massachusetts Noncompetition Agreement Act (M.G.L. c. 149, § 24L), the Non-Competition Agreement provides for a garden-leave payment equal to fifty percent (50%) of Dr. Elliston's base salary ($287,500) during the twelve (12) month non-competition period, payable in accordance with AHT's standard payroll practices. This garden-leave payment is in addition to any severance benefits payable under the Employment Agreement.

• Non-Solicitation of Employees. Dr. Elliston will be subject to an eighteen (18) month post-termination restriction on soliciting, recruiting, or inducing the resignation of employees of the Company, limited to employees at the manager level and above.

• Non-Solicitation of Customers and Partners. Dr. Elliston will be subject to a twelve (12) month post-termination restriction on soliciting or diverting the business of customers, clients, or business partners of the Company, 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. The definition of "material contact" in this context is one of the minor remaining open items discussed below.

• Confidentiality and Non-Disclosure. Dr. Elliston's obligations regarding the confidentiality of the Company's proprietary information and trade secrets are perpetual in duration, subject to standard carve-outs for information that becomes publicly available through no fault of Dr. Elliston and for disclosures that are legally compelled by court order, subpoena, or applicable law (provided that Dr. Elliston provides prompt notice to the Company and cooperates with any efforts to obtain protective treatment).

• Invention Assignment. The Employment Agreement includes a standard invention assignment provision, pursuant to which Dr. Elliston assigns to the Company all rights in inventions, works of authorship, and intellectual property developed during his employment and related to the Company's business. Prior inventions identified by Dr. Elliston on Schedule A are expressly excluded from this assignment.

E. Other Terms

The following additional terms are reflected in the third draft:

• Title and Reporting. Dr. Elliston will serve as Chief Operating Officer of the Company, reporting directly to CEO Priya Chandrasekaran.

• Proposed Start Date. November 1, 2022, subject to completion of background checks and other standard pre-employment conditions.

• Term. The initial employment term is three (3) years, commencing on the start date, with automatic renewal for successive one (1) year periods unless either party provides at least ninety (90) days' written notice of non-renewal prior to the expiration of the then-current term.

• Employee Benefits. Dr. Elliston will be eligible to participate in the following benefit programs, subject to the terms and conditions of the applicable plan documents:

(i) Executive health plan (medical, dental, and vision coverage for Dr. Elliston and his eligible dependents);

(ii) Company-paid life insurance with a death benefit equal to two times (2×) base salary ($1,150,000 coverage);

(iii) Long-term disability insurance providing benefits equal to sixty percent (60%) of base salary;

(iv) 401(k) retirement savings plan with a four percent (4%) employer matching contribution;

(v) Twenty-five (25) days of paid time off per calendar year, in addition to Company-observed holidays;

(vi) An annual professional development allowance of $15,000 for continuing education, conference attendance, and related expenses; and

(vii) Participation in the Company's executive physical examination program.

F. Form of General Release (Schedule B)

The revised Schedule B (Form of General Release Agreement) has been updated to conform to the near-final terms of the Employment Agreement. The General Release covers claims arising under applicable Massachusetts and federal employment laws, including, without limitation, Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, the Massachusetts Fair Employment Practices Act (M.G.L. c. 151B), the Massachusetts Wage Act (M.G.L. c. 149, §§ 148–150), the Family and Medical Leave Act, and the Age Discrimination in Employment Act. In compliance with the Older Workers Benefit Protection Act, the General Release provides for a twenty-one (21) day consideration period and a seven (7) day revocation period following execution.

Remaining Open Items

As noted above, the parties are very close to reaching final agreement on all terms of the employment agreement package. Only two limited open items remain, neither of which is expected to present a substantive impediment to finalization of the documents. We address each below.

1. Annual Bonus Performance Metrics Language (Section 4(b))

The third draft contains placeholder language in Section 4(b) regarding the establishment of annual performance metrics by the AHT Board of Directors (or its Compensation Committee) in consultation with the Chief Executive Officer. As currently drafted, the provision contemplates that the Board (or its Compensation Committee) will establish performance targets and communicate them to Dr. Elliston within a reasonable period following the commencement of each fiscal year, with the Board retaining discretion over the weighting and composition of individual and corporate performance objectives.

The Company is continuing to finalize the specific framework and internal procedures for how annual performance targets will be set and communicated to Dr. Elliston for each fiscal year. The Broadleaf Compensation Advisors LLC benchmarking report (June 2022), which informed the overall compensation structure for this engagement, also provides guidance regarding the range of performance metrics approaches used by peer companies in the healthcare technology sector. AHT's Compensation Committee — which includes two designees of Ridgeline Capital Partners, LP — will have final approval authority over the annual performance metrics framework.

We would welcome Fielding & Rowe's input on whether Dr. Elliston requires any additional specificity regarding the process or timing for the establishment and communication of performance goals, or whether the current framework — providing for Board discretion with CEO consultation — is acceptable to Dr. Elliston. If Dr. Elliston has particular views regarding the types of metrics (e.g., revenue growth, operational milestones, customer acquisition targets) or the relative weighting of individual versus corporate performance goals, we are happy to discuss whether additional language can be incorporated into Section 4(b) to address those preferences.

2. Minor Definitional Refinements

Several minor definitional refinements remain under discussion between the parties:

• Definition of "Affiliate" (Section 1 of the Employment Agreement). The current draft defines "Affiliate" in a manner consistent with the usage in most standard employment agreements. However, we wish to confirm that this definition is properly aligned with the defined term as used in the Ridgeline Capital Partners, LP Stockholders' Agreement (dated as of March 15, 2021). To the extent there is any divergence, AHT would prefer that the definition in the Employment Agreement be conformed to the Stockholders' Agreement to avoid any inconsistency. We are awaiting a final comparison from our colleagues on the corporate side and expect to have a confirmed position shortly.

• Definition of "Material Contact" (Section 8(c) of the Non-Competition Agreement). The definition of "material contact" in the customer and partner non-solicitation provision was the subject of discussion during the second round of markups. Fielding & Rowe's second markup proposed a narrower formulation that would have required "direct and substantive business interaction" rather than the broader "involvement in or responsibility for" standard initially proposed by the Company. The third draft reflects a compromise formulation that we believe addresses Dr. Elliston's concerns while preserving the Company's legitimate interest in protecting its customer and partner relationships. We invite Fielding & Rowe's confirmation that the compromise language as drafted is acceptable, or, if further refinement is desired, specific alternative language for the Company's consideration.

As noted, neither of these definitional items is expected to present a substantive impediment to the finalization of the agreement package, and we are confident they can be resolved promptly.

Request for Response and Timeline

We respectfully request that Fielding & Rowe review the enclosed third draft and provide any remaining comments, or confirmation of acceptability, by Friday, September 23, 2022. As you are aware, the Company is targeting execution of the complete agreement package well in advance of Dr. Elliston's proposed start date of November 1, 2022, and timely resolution of the remaining open items will facilitate adherence to that timeline. We anticipate that, upon receipt of Fielding & Rowe's response, any remaining issues can be resolved quickly, and a final execution draft can be prepared and circulated within a few business days thereafter.

We remain available for a telephone call or in-person meeting to discuss any remaining points at your convenience. Please do not hesitate to contact either the undersigned or Bernard Crawford at the numbers listed below to schedule a discussion at a time that works for you and your team.

Reservation of Rights

Please note that all drafts circulated in connection with this matter, including the enclosed documents, are transmitted on a without-prejudice basis and remain subject to final review and approval by AHT and its Board of Directors, including any requisite consent of Ridgeline Capital Partners, LP pursuant to the Stockholders' Agreement. The circulation of these drafts does not constitute a binding offer of employment and is not intended to, nor shall it, create any contractual obligation on the part of the Company or any of its affiliates. A binding agreement will arise only upon the execution and delivery of the final agreements in definitive form by both parties.

We look forward to your response and to bringing this matter to a successful conclusion. Thank you again for your and your colleagues' professionalism and cooperation throughout this process.

Very truly yours,

CALDERWOOD & HARKNESS LLP

By: ________

Devon Archer, Associate Direct: (617) 555-8427

Email: darcher@calderwoodharkness.com

cc: Bernard Crawford, Esq., Calderwood & Harkness LLP

cc: Aaron Whitfield, Esq., General Counsel, Arbor Health Technologies Inc.

cc: Lisa Murakami, Chief Human Resources Officer, Arbor Health Technologies Inc.

cc: Jonathan M. Pryce, Esq., Fielding & Rowe LLP

Enclosures (3):

1. Executive Employment Agreement — Third Draft (Near-Final), dated September 16, 2022 (clean copy)

2. Employee Non-Competition Agreement — Third Draft (Near-Final), dated September 16, 2022 (clean copy)

3. Schedule B to Employment Agreement — Form of General Release Agreement (revised September 16, 2022)

CALDERWOOD & HARKNESS LLP Attorneys at Law
One International Place, Suite 3400 Boston, Massachusetts 02110 Telephone: (617) 555-8400 Facsimile: (617) 555-8401 www.calderwoodharkness.com
September 16, 2022
Via Email and First-Class Mail
Catherine A. Fielding, Esq. Fielding & Rowe LLP 101 Federal Street, Suite 2600 Boston, MA 02110
Re: Executive Employment Agreement — Arbor Health Technologies Inc. and Dr. Marcus J. Elliston Our Matter No.: 1010-00004
Dear Catherine:
On behalf of our client, Arbor Health Technologies Inc. ("AHT" or the "Company"), we are pleased to transmit herewith the third draft (near-final) of the executive employment agreement package for Dr. Marcus J. Elliston's proposed engagement as Chief Operating Officer of the Company. As discussed during our telephone conference on September 14, 2022, the parties have made substantial progress toward finalizing the terms of Dr. Elliston's engagement, and we believe the enclosed draft reflects a comprehensive and balanced resolution of the principal issues that have been under negotiation.
Since the first draft of the agreement was circulated on August 5, 2022, the parties have engaged in productive and constructive negotiations over the course of more than five weeks. This third draft reflects the resolution of the significant issues raised in your first markup, received on August 19, 2022, as well as the additional comments and revisions submitted with your second markup on September 9, 2022. We have endeavored to incorporate the substance of each of the positions advanced by Fielding & Rowe on behalf of Dr. Elliston, except where we have proposed alternative formulations or compromises, as noted below in our discussion of the limited remaining open items.
We wish to express our appreciation — and that of the Company — for the constructive and collaborative approach that you and your colleagues at Fielding & Rowe have demonstrated throughout this negotiation process. The professionalism of the discussions has materially facilitated the efficient resolution of a number of complex issues, and we are confident that the remaining open items can be addressed promptly.
Enclosed Documents
The following documents are enclosed with this transmittal:
1. Executive Employment Agreement — Third Draft (Near-Final), dated September 16, 2022, between Arbor Health Technologies Inc. and Dr. Marcus J. Elliston (clean copy);
2. Employee Non-Competition Agreement — Third Draft (Near-Final), dated September 16, 2022, between Arbor Health Technologies Inc. and Dr. Marcus J. Elliston (clean copy, drafted in compliance with the Massachusetts Noncompetition Agreement Act, M.G.L. c. 149, § 24L); and
3. Schedule B to Employment Agreement — Form of General Release Agreement (revised September 16, 2022, to conform to the near-final draft terms of the Employment Agreement).
Please note that Schedule A (Prior Inventions Disclosure Form) and Exhibit A (Position Description and Reporting Structure) remain unchanged from the versions previously circulated with the first draft on August 5, 2022. Accordingly, we have not re-enclosed these documents with this transmittal. Should Fielding & Rowe wish to revisit either Schedule A or Exhibit A, or should Dr. Elliston wish to update the Prior Inventions Disclosure Form to reflect any additional prior inventions, please let us know and we will be happy to re-circulate those documents.
Additionally, we note for the record that the Stock Option Award Agreement and Restricted Stock Unit Award Agreement drafts, which were previously circulated separately on August 12, 2022 under the AHT 2020 Equity Incentive Plan (as amended May 2021), remain substantively unchanged. Those award agreements will be conformed to the final terms of the Employment Agreement upon execution and will be presented for Dr. Elliston's signature contemporaneously with the Employment Agreement and the Non-Competition Agreement.
Summary of Agreed Terms Reflected in the Third Draft
For your convenience and to facilitate efficient review, we set forth below a summary of the principal terms reflected in the enclosed third draft, organized by subject matter. Except as expressly noted in the "Remaining Open Items" section below, the Company considers the terms set forth in this draft to be agreed between the parties.
A. Compensation. The compensation package reflected in the third draft is as follows, consistent with the terms agreed upon during the parties' negotiations:
• Base Salary. An annual base salary of $575,000, payable in accordance with AHT's standard payroll practices, subject to annual review by the AHT Board of Directors (or its Compensation Committee) but not subject to reduction below the initial level without Dr. Elliston's consent.
• Annual Performance Bonus. An annual target bonus opportunity equal to 75% of base salary ($431,250 at target), with a maximum annual bonus of 150% of target ($646,875). The annual bonus will be based on the achievement of performance metrics established by the AHT Board of Directors (or its Compensation Committee) in consultation with the Chief Executive Officer, as more fully described in Section 4(b) of the Employment Agreement. Payment of the annual bonus is subject to Dr. Elliston's continued employment through the applicable payment date, except as otherwise provided in connection with qualifying terminations.
• Signing Bonus. A one-time signing bonus of $250,000, payable within thirty (30) days following the commencement of Dr. Elliston's employment, subject to a twenty-four (24) month clawback obligation. Specifically, if Dr. Elliston voluntarily resigns without Good Reason, or if his employment is terminated by the Company for Cause, in either case within twenty-four (24) months following the start date, Dr. Elliston will be required to repay the signing bonus on a pro-rata basis, calculated on a monthly basis over the twenty-four (24) month period.
• Equity Grants. Upon commencement of employment, Dr. Elliston will receive the following equity awards under the AHT 2020 Equity Incentive Plan (as amended May 2021):
(i) Stock Options representing 1.25% of the fully diluted equity of AHT, subject to a four (4) year vesting schedule with a twenty-five percent (25%) cliff vest at the twelve (12) month anniversary of the grant date and monthly vesting thereafter over the remaining thirty-six (36) months, with the per-share exercise price set at the fair market value of AHT's common stock as of the grant date; and
(ii) Restricted Stock Units representing 0.50% of the fully diluted equity of AHT, subject to a three (3) year vesting schedule with thirty-three and one-third percent (33.33%) vesting on each of the first three (3) annual anniversaries of the grant date.
The specific terms of these equity awards are set forth in the Stock Option Award Agreement and the Restricted Stock Unit Award Agreement, as noted above.
B. Severance Protections (No Change in Control)
The severance protections applicable in the absence of a Change in Control event are reflected in Section 6 of the third draft and provide as follows:
• Qualifying Termination. In the event of a termination of Dr. Elliston's employment by the Company without Cause, or a resignation by Dr. Elliston for Good Reason, in either case occurring outside of the Change in Control Period (as defined in Section 7 of the Employment Agreement), Dr. Elliston will be entitled to receive the following severance benefits, subject to his execution and non-revocation of the General Release Agreement attached as Schedule B:
(i) Cash severance equal to twelve (12) months of base salary ($575,000), payable in substantially equal installments in accordance with the Company's regular payroll schedule;
(ii) A pro-rata annual bonus for the fiscal year in which the termination occurs, calculated based on actual performance results for such fiscal year, payable at the same time annual bonuses are paid to other senior executives of the Company;
(iii) Company-paid COBRA continuation coverage for a period of twelve (12) months following the termination date, at an estimated cost of $2,150 per month (totaling approximately $25,800), or, at the Company's election, a lump-sum cash payment equivalent thereto; and
(iv) Acceleration of vesting of twenty-five percent (25%) of all unvested equity awards held by Dr. Elliston as of the termination date, with stock options remaining exercisable for the period specified in the applicable award agreement.
• Good Reason Definition. The definition of "Good Reason" has been revised in the third draft to reflect the parties' negotiations during the second round of markups. As now set forth in Section 5(d) of the Employment Agreement, the Good Reason triggers include, among other items, the specific circumstances discussed and agreed upon by the parties during our September 7, 2022 conference call, including the material diminution of duties trigger, the relocation trigger (expanded to a thirty-five (35) mile radius per Fielding & Rowe's request), and the reporting structure trigger. The Good Reason definition is subject to the standard cure provisions (thirty (30) day notice and thirty (30) day cure period) as previously discussed.
C. Change in Control Severance (Double-Trigger)
The Change in Control severance provisions, set forth in Section 7 of the Employment Agreement, provide enhanced protections in the event of a qualifying termination occurring within the Change in Control Period, as follows:
• Change in Control Qualifying Termination. In the event of a termination of Dr. Elliston's employment by the Company (or its successor) without Cause, or a resignation by Dr. Elliston for Good Reason, in either case occurring within twenty-four (24) months following a Change in Control (the "Change in Control Period"), Dr. Elliston will be entitled to receive the following severance benefits, in lieu of (and not in addition to) the severance benefits described in Section 6, subject to his execution and non-revocation of the General Release Agreement:
(i) A lump-sum cash payment equal to twenty-four (24) months of base salary ($1,150,000);
(ii) A lump-sum cash payment equal to two times (2×) the target annual bonus ($862,500);
(iii) Company-paid COBRA continuation coverage for a period of eighteen (18) months following the termination date (totaling approximately $38,700), or, at the Company's election, a lump-sum cash payment equivalent thereto; and
(iv) Full acceleration of vesting of one hundred percent (100%) of all unvested equity awards held by Dr. Elliston as of the termination date, with stock options remaining exercisable for the period specified in the applicable award agreement.
• Change in Control Definition. The definition of "Change in Control" reflects the terms agreed upon by the parties and includes the negotiated carve-out for transactions involving Ridgeline Capital Partners, LP and its affiliates. Specifically, no transaction or series of related transactions by or involving Ridgeline Capital Partners, LP, or any of its controlled affiliates, investment vehicles, or successor funds, will constitute a "Change in Control" for purposes of the Employment Agreement, regardless of the economic impact of such transaction on the ownership structure of AHT.
• Section 280G Best-Net Cutback. The parties have agreed that the Employment Agreement will include a "best-net cutback" provision in lieu of any Section 280G gross-up. Under this provision, in the event that any payments or benefits provided to Dr. Elliston in connection with a Change in Control would constitute "parachute payments" within the meaning of Section 280G of the Internal Revenue Code, such payments and benefits will be reduced to the extent necessary to avoid the imposition of the excise tax under Section 4999 of the Code, but only if such reduction would result in a greater after-tax benefit to Dr. Elliston than receipt of the full payments and benefits with the application of the excise tax. The determination of whether a reduction is required, and the amount of any such reduction, will be made by an independent accounting firm selected by the Company and reasonably acceptable to Dr. Elliston.
D. Restrictive Covenants
The restrictive covenant package reflected in the Employment Agreement and the separate Non-Competition Agreement is as follows:
• Non-Competition. The non-competition period has been set at twelve (12) months following the termination of Dr. Elliston's employment, reduced from the Company's initial proposal of eighteen (18) months per Fielding & Rowe's request during the first round of negotiations. The scope of the non-competition restriction is limited to healthcare information technology and software-as-a-service ("SaaS") companies with greater than $50 million in annual revenue operating in the United States. This scope reflects the compromise reached during the parties' discussions regarding the appropriate competitive landscape.
• Garden-Leave Payment. In compliance with the Massachusetts Noncompetition Agreement Act (M.G.L. c. 149, § 24L), the Non-Competition Agreement provides for a garden-leave payment equal to fifty percent (50%) of Dr. Elliston's base salary ($287,500) during the twelve (12) month non-competition period, payable in accordance with AHT's standard payroll practices. This garden-leave payment is in addition to any severance benefits payable under the Employment Agreement.
• Non-Solicitation of Employees. Dr. Elliston will be subject to an eighteen (18) month post-termination restriction on soliciting, recruiting, or inducing the resignation of employees of the Company, limited to employees at the manager level and above.
• Non-Solicitation of Customers and Partners. Dr. Elliston will be subject to a twelve (12) month post-termination restriction on soliciting or diverting the business of customers, clients, or business partners of the Company, 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. The definition of "material contact" in this context is one of the minor remaining open items discussed below.
• Confidentiality and Non-Disclosure. Dr. Elliston's obligations regarding the confidentiality of the Company's proprietary information and trade secrets are perpetual in duration, subject to standard carve-outs for information that becomes publicly available through no fault of Dr. Elliston and for disclosures that are legally compelled by court order, subpoena, or applicable law (provided that Dr. Elliston provides prompt notice to the Company and cooperates with any efforts to obtain protective treatment).
• Invention Assignment. The Employment Agreement includes a standard invention assignment provision, pursuant to which Dr. Elliston assigns to the Company all rights in inventions, works of authorship, and intellectual property developed during his employment and related to the Company's business. Prior inventions identified by Dr. Elliston on Schedule A are expressly excluded from this assignment.
E. Other Terms
The following additional terms are reflected in the third draft:
• Title and Reporting. Dr. Elliston will serve as Chief Operating Officer of the Company, reporting directly to CEO Priya Chandrasekaran.
• Proposed Start Date. November 1, 2022, subject to completion of background checks and other standard pre-employment conditions.
• Term. The initial employment term is three (3) years, commencing on the start date, with automatic renewal for successive one (1) year periods unless either party provides at least ninety (90) days' written notice of non-renewal prior to the expiration of the then-current term.
• Employee Benefits. Dr. Elliston will be eligible to participate in the following benefit programs, subject to the terms and conditions of the applicable plan documents:
(i) Executive health plan (medical, dental, and vision coverage for Dr. Elliston and his eligible dependents);
(ii) Company-paid life insurance with a death benefit equal to two times (2×) base salary ($1,150,000 coverage);
(iii) Long-term disability insurance providing benefits equal to sixty percent (60%) of base salary;
(iv) 401(k) retirement savings plan with a four percent (4%) employer matching contribution;
(v) Twenty-five (25) days of paid time off per calendar year, in addition to Company-observed holidays;
(vi) An annual professional development allowance of $15,000 for continuing education, conference attendance, and related expenses; and
(vii) Participation in the Company's executive physical examination program.
F. Form of General Release (Schedule B)
The revised Schedule B (Form of General Release Agreement) has been updated to conform to the near-final terms of the Employment Agreement. The General Release covers claims arising under applicable Massachusetts and federal employment laws, including, without limitation, Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, the Massachusetts Fair Employment Practices Act (M.G.L. c. 151B), the Massachusetts Wage Act (M.G.L. c. 149, §§ 148–150), the Family and Medical Leave Act, and the Age Discrimination in Employment Act. In compliance with the Older Workers Benefit Protection Act, the General Release provides for a twenty-one (21) day consideration period and a seven (7) day revocation period following execution.
Remaining Open Items
As noted above, the parties are very close to reaching final agreement on all terms of the employment agreement package. Only two limited open items remain, neither of which is expected to present a substantive impediment to finalization of the documents. We address each below.
1. Annual Bonus Performance Metrics Language (Section 4(b))
The third draft contains placeholder language in Section 4(b) regarding the establishment of annual performance metrics by the AHT Board of Directors (or its Compensation Committee) in consultation with the Chief Executive Officer. As currently drafted, the provision contemplates that the Board (or its Compensation Committee) will establish performance targets and communicate them to Dr. Elliston within a reasonable period following the commencement of each fiscal year, with the Board retaining discretion over the weighting and composition of individual and corporate performance objectives.
The Company is continuing to finalize the specific framework and internal procedures for how annual performance targets will be set and communicated to Dr. Elliston for each fiscal year. The Broadleaf Compensation Advisors LLC benchmarking report (June 2022), which informed the overall compensation structure for this engagement, also provides guidance regarding the range of performance metrics approaches used by peer companies in the healthcare technology sector. AHT's Compensation Committee — which includes two designees of Ridgeline Capital Partners, LP — will have final approval authority over the annual performance metrics framework.
We would welcome Fielding & Rowe's input on whether Dr. Elliston requires any additional specificity regarding the process or timing for the establishment and communication of performance goals, or whether the current framework — providing for Board discretion with CEO consultation — is acceptable to Dr. Elliston. If Dr. Elliston has particular views regarding the types of metrics (e.g., revenue growth, operational milestones, customer acquisition targets) or the relative weighting of individual versus corporate performance goals, we are happy to discuss whether additional language can be incorporated into Section 4(b) to address those preferences.
2. Minor Definitional Refinements
Several minor definitional refinements remain under discussion between the parties:
• Definition of "Affiliate" (Section 1 of the Employment Agreement). The current draft defines "Affiliate" in a manner consistent with the usage in most standard employment agreements. However, we wish to confirm that this definition is properly aligned with the defined term as used in the Ridgeline Capital Partners, LP Stockholders' Agreement (dated as of March 15, 2021). To the extent there is any divergence, AHT would prefer that the definition in the Employment Agreement be conformed to the Stockholders' Agreement to avoid any inconsistency. We are awaiting a final comparison from our colleagues on the corporate side and expect to have a confirmed position shortly.
• Definition of "Material Contact" (Section 8(c) of the Non-Competition Agreement). The definition of "material contact" in the customer and partner non-solicitation provision was the subject of discussion during the second round of markups. Fielding & Rowe's second markup proposed a narrower formulation that would have required "direct and substantive business interaction" rather than the broader "involvement in or responsibility for" standard initially proposed by the Company. The third draft reflects a compromise formulation that we believe addresses Dr. Elliston's concerns while preserving the Company's legitimate interest in protecting its customer and partner relationships. We invite Fielding & Rowe's confirmation that the compromise language as drafted is acceptable, or, if further refinement is desired, specific alternative language for the Company's consideration.
As noted, neither of these definitional items is expected to present a substantive impediment to the finalization of the agreement package, and we are confident they can be resolved promptly.
Request for Response and Timeline
We respectfully request that Fielding & Rowe review the enclosed third draft and provide any remaining comments, or confirmation of acceptability, by Friday, September 23, 2022. As you are aware, the Company is targeting execution of the complete agreement package well in advance of Dr. Elliston's proposed start date of November 1, 2022, and timely resolution of the remaining open items will facilitate adherence to that timeline. We anticipate that, upon receipt of Fielding & Rowe's response, any remaining issues can be resolved quickly, and a final execution draft can be prepared and circulated within a few business days thereafter.
We remain available for a telephone call or in-person meeting to discuss any remaining points at your convenience. Please do not hesitate to contact either the undersigned or Bernard Crawford at the numbers listed below to schedule a discussion at a time that works for you and your team.
Reservation of Rights
Please note that all drafts circulated in connection with this matter, including the enclosed documents, are transmitted on a without-prejudice basis and remain subject to final review and approval by AHT and its Board of Directors, including any requisite consent of Ridgeline Capital Partners, LP pursuant to the Stockholders' Agreement. The circulation of these drafts does not constitute a binding offer of employment and is not intended to, nor shall it, create any contractual obligation on the part of the Company or any of its affiliates. A binding agreement will arise only upon the execution and delivery of the final agreements in definitive form by both parties.
We look forward to your response and to bringing this matter to a successful conclusion. Thank you again for your and your colleagues' professionalism and cooperation throughout this process.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Devon Archer, Associate Direct: (617) 555-8427
Email: darcher@calderwoodharkness.com
cc: Bernard Crawford, Esq., Calderwood & Harkness LLP
cc: Aaron Whitfield, Esq., General Counsel, Arbor Health Technologies Inc.
cc: Lisa Murakami, Chief Human Resources Officer, Arbor Health Technologies Inc.
cc: Jonathan M. Pryce, Esq., Fielding & Rowe LLP
Enclosures (3):
1. Executive Employment Agreement — Third Draft (Near-Final), dated September 16, 2022 (clean copy)
2. Employee Non-Competition Agreement — Third Draft (Near-Final), dated September 16, 2022 (clean copy)
3. Schedule B to Employment Agreement — Form of General Release Agreement (revised September 16, 2022)

CALDERWOOD & HARKNESS LLP Attorneys at Law

CALDERWOOD & HARKNESS LLP

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