CALDERWOOD & HARKNESS LLP
INTERNAL MEMORANDUM
PRIVILEGED AND CONFIDENTIAL
TO: Bernard Crawford, Responsible Partner, Labor & Employment
FROM: Devon Archer, Lead Associate, Labor & Employment
DATE: October 7, 2022
RE: Matter Dormancy — Arbor Health Technologies Inc. / Dr. Marcus J. Elliston Executive Employment Agreement — Matter No. 1010-00004 / Client No. 81-30294
STATUS: APPROVED by Bernard Crawford, October 7, 2022
This memorandum is an internal communication of Calderwood & Harkness LLP prepared in the course of legal representation and is protected by the attorney-client privilege, the work product doctrine, and any other applicable privileges. This memorandum is intended solely for the internal use of Calderwood & Harkness LLP personnel identified in the distribution list below. No portion of this memorandum should be disclosed to any person outside the firm without prior authorization from the Responsible Partner.
1. Purpose
This memorandum documents the change of matter status from "active" to "dormant" for Matter No. 1010-00004, which pertains to the executive employment agreement engagement undertaken by Calderwood & Harkness LLP on behalf of Arbor Health Technologies Inc. ("AHT" or the "Client"). The matter involved the drafting, negotiation, and anticipated execution of a comprehensive executive-suite employment agreement package for Dr. Marcus J. Elliston, AHT's prospective Chief Operating Officer.
The matter is being placed in dormant status following Dr. Elliston's withdrawal from negotiations and his decision not to accept the Chief Operating Officer position at AHT. Dr. Elliston communicated his decision to decline the offer to AHT on September 28, 2022, and it was subsequently confirmed to Calderwood & Harkness by AHT's General Counsel, Aaron Whitfield, on September 29, 2022. On October 3, 2022, Meridian Digital Health Corp. publicly announced Dr. Elliston as its incoming Chief Operating Officer, confirming the acceptance of an alternative opportunity referenced in Dr. Elliston's withdrawal notice.
This memorandum sets forth the relevant background of the engagement, the circumstances giving rise to dormancy, the document preservation protocol applicable to all work product and correspondence generated in connection with the matter, outstanding billing matters and the status of all invoices, and considerations for potential future reactivation of the matter should AHT elect to engage Calderwood & Harkness for a subsequent C-suite executive employment agreement. This memorandum also addresses the significant template value of the work product generated during this engagement and the anticipated cost savings that AHT may realize if these materials are adapted for a future hire.
2. Matter Background
2.1 Client and Engagement Overview
The Client in this matter is Arbor Health Technologies Inc. ("AHT"), a Delaware corporation headquartered at 400 Brattle Commerce Park, Suite 1200, Cambridge, Massachusetts 02138. AHT's federal Employer Identification Number is 84-3297461.
AHT operates in the healthcare services and software/SaaS industry, offering a cloud-based clinical workflow and revenue cycle management platform to healthcare providers across the United States. For fiscal year 2021, AHT reported annual revenue of approximately $127.4 million and employed approximately 620 individuals across its operations.
AHT's capitalization reflects a private equity-backed ownership structure. Ridgeline Capital Partners, LP ("Ridgeline") holds approximately 68% of AHT's equity, serving as the company's controlling private equity sponsor. Helix Ventures Fund III, LP ("Helix Ventures") holds a minority investment position of approximately 14% of AHT's equity. The remaining approximately 18% is held by management and other individual holders. This ownership structure is governed, in part, by the Ridgeline Capital Partners Stockholders' Agreement, a copy of which is on file in the matter record.
The key personnel at AHT relevant to this engagement are as follows:
• Aaron Whitfield — General Counsel
• Lisa Murakami — Chief Human Resources Officer
• Priya Chandrasekaran — Chief Executive Officer
• Thomas R. Glenwood — Board Chair (Ridgeline Capital Partners designee)
All substantive client communications during this engagement were directed through Aaron Whitfield in his capacity as General Counsel, with certain compensation-related discussions also involving Lisa Murakami and, on occasion, Ms. Chandrasekaran.
2.2 Scope of Engagement
Calderwood & Harkness LLP was engaged by AHT to draft a comprehensive executive-suite employment agreement package for Dr. Marcus J. Elliston, whom AHT had identified as its prospective Chief Operating Officer. Dr. Elliston, a seasoned healthcare technology executive, was the subject of a targeted recruitment effort by AHT's Board and senior management team.
The scope of the engagement encompassed the following work streams:
(a) Executive Employment Agreement. Drafting of a full executive employment agreement covering all material terms of Dr. Elliston's employment, including compensation, benefits, equity incentives, severance protections (both in and outside of a change in control context), termination provisions, and related covenants.
(b) Employee Non-Competition Agreement. Drafting of a standalone non-competition agreement compliant with the Massachusetts Noncompetition Agreement Act, Mass. Gen. Laws ch. 149, § 24L (the "MNAA"), including all notice, consideration, and garden-leave payment requirements.
(c) Equity Award Agreements. Drafting of a Stock Option Award Agreement and a Restricted Stock Unit Award Agreement, each under the AHT 2020 Equity Incentive Plan (as amended May 2021), reflecting the equity compensation terms negotiated between AHT and Dr. Elliston's personal counsel.
(d) Related Schedules and Exhibits. Preparation of Schedule A (Prior Inventions Disclosure Form), Schedule B (Form of General Release Agreement for use in connection with severance provisions), and Exhibit A (Position Description and Reporting Structure).
(e) Negotiation with Executive's Personal Counsel. Conducting negotiations with Dr. Elliston's personal counsel, Fielding & Rowe LLP, through all rounds of markup and revision. Catherine A. Fielding, Partner, and Jonathan M. Pryce, Associate, represented Dr. Elliston throughout the negotiation process.
The governing law for all agreements was the law of the Commonwealth of Massachusetts. Particular attention was given to compliance with the MNAA, the Massachusetts Wage Act (Mass. Gen. Laws ch. 149, §§ 148–150C), and applicable federal tax provisions, including Sections 409A, 280G, and 4999 of the Internal Revenue Code.
2.3 Engagement Team
The following Calderwood & Harkness LLP professionals were staffed on Matter No. 1010-00004:
Bernard Crawford served as the Responsible Partner with overall supervisory authority over the engagement, strategic client interface, and final review of all substantive deliverables. Renata Vasquez served as the Billing Partner and was consulted on certain negotiation strategy matters. Devon Archer served as the Lead Associate responsible for day-to-day management of the engagement, primary drafting of the Employment Agreement and Non-Competition Agreement, coordination with all team members, and direct interface with Fielding & Rowe LLP. Nadia Petrov provided supporting research and drafting assistance, including preparation of the Massachusetts law compliance memoranda and assistance with the 280G modeling analysis. Gregory Tan was engaged on a cross-staffing basis from the Tax practice group to provide specialized advice on equity compensation structuring, Section 409A compliance, and Section 280G/4999 golden parachute analysis. Sandra Okafor was engaged on a cross-staffing basis from the Corporate/M&A practice group to review the AHT 2020 Equity Incentive Plan, advise on change in control provision design, and coordinate with Wentworth & Gage LLP on equity plan capacity matters.
2.4 Related Counsel and Advisors
In addition to Calderwood & Harkness LLP, the following external counsel and advisors were involved in or provided support to the engagement:
Wentworth & Gage LLP (Richard D. Gage, Partner) — Wentworth & Gage serves as AHT's regular outside corporate counsel. In connection with this engagement, Richard Gage provided background documents to Calderwood & Harkness, including the AHT 2020 Equity Incentive Plan (as amended May 2021), existing C-suite employment agreements (for CEO Priya Chandrasekaran and CFO Derek Solano), the Amended & Restated Certificate of Incorporation (Delaware) and Bylaws, and the Ridgeline Capital Partners Stockholders' Agreement. Wentworth & Gage was not actively involved in the drafting or negotiation of the Dr. Elliston employment agreement package but was available for consultation on corporate governance and equity plan administration questions.
Broadleaf Compensation Advisors LLC (Diane K. Holbrook, Lead Consultant) — Broadleaf was retained by the AHT Board's compensation committee to prepare a peer benchmarking analysis for the COO position. Broadleaf's June 2022 report informed the compensation parameters reflected in AHT's internal term sheet. Calderwood & Harkness referenced the Broadleaf report in evaluating the market competitiveness of the proposed compensation package but did not produce or participate in the preparation of the report.
Hargrove & Sinclair CPAs (Malcolm R. Sinclair, CPA) — Hargrove & Sinclair was consulted by Calderwood & Harkness's tax team (Gregory Tan) in connection with the Section 280G/4999 golden parachute analysis and the Section 409A compliance review. Mr. Sinclair provided input on AHT's base amount calculations and historical compensation data necessary for the 280G modeling.
3. Timeline of Key Events
The following is a chronological summary of the principal events in the engagement from matter opening through the date of this memorandum:
4. Status of Negotiations at Time of Withdrawal
At the time of Dr. Elliston's withdrawal on September 28, 2022, the parties had reached substantial agreement on the vast majority of the terms of the employment package. The third (near-final) drafts transmitted on September 16, 2022 reflected a document set that was, in all material respects, ready for execution pending resolution of a small number of remaining open items. This section summarizes the agreed terms and the items that remained open at the time of withdrawal.
4.1 Substantially Agreed Terms (as Reflected in Third Draft, September 16, 2022)
The following terms had been substantively agreed between AHT and Dr. Elliston's counsel as of the third draft circulation on September 16, 2022:
Position and Reporting.
Title: Chief Operating Officer, reporting directly to Chief Executive Officer Priya Chandrasekaran. The position description and reporting structure were set forth in Exhibit A to the Employment Agreement.
Proposed Start Date.
November 1, 2022.
Term.
Initial employment term of three (3) years, with automatic successive one-year renewal periods thereafter, unless either party provided ninety (90) days' prior written notice of non-renewal.
Base Salary.
$575,000 per annum, subject to annual review by the Board's compensation committee (with no obligation to increase). Payment in accordance with AHT's standard payroll practices.
Annual Bonus.
Target annual bonus equal to 75% of base salary ($431,250 at current base salary). Maximum annual bonus equal to 150% of target ($646,875 at current base salary). Bonus determinations to be based on achievement of individual and company performance objectives established by the Board's compensation committee.
Signing Bonus.
$250,000, payable within thirty (30) days of the start date. Subject to a twenty-four (24) month clawback provision requiring full repayment in the event of the Executive's voluntary resignation (other than for Good Reason) or termination by the Company for Cause within the first twenty-four months of employment.
Equity Compensation.
Stock Options: Options to acquire shares representing 1.25% of AHT's fully diluted equity, subject to a four-year vesting schedule with a 25% cliff vest at twelve (12) months and monthly vesting thereafter. Exercise price equal to fair market value per share as of the grant date, as determined by the Board in accordance with a contemporaneous independent valuation.
Restricted Stock Units: RSUs representing 0.50% of AHT's fully diluted equity, subject to a three-year vesting schedule with 33.33% vesting on each anniversary of the grant date.
Both equity awards were to be granted under the AHT 2020 Equity Incentive Plan (as amended May 2021) and were subject to the terms and conditions of the respective award agreements.
Severance (Non-Change in Control).
In the event of a termination by the Company without Cause or by the Executive for Good Reason (in each case, outside of a Change in Control Period), the Executive would be entitled to the following severance benefits, subject to execution and non-revocation of the General Release Agreement attached as Schedule B:
• Twelve (12) months of base salary continuation ($575,000);
• Pro-rata annual bonus for the year of termination, based on actual performance;
• Twelve (12) months of COBRA continuation coverage, with the Company paying the employer portion of the premium ($25,800, calculated at $2,150 per month);
• Twenty-five percent (25%) accelerated vesting of all outstanding equity awards.
Severance (Change in Control).
In the event of a qualifying termination (termination by the Company without Cause or by the Executive for Good Reason) occurring within twenty-four (24) months following a Change in Control (i.e., a "double-trigger" structure), the Executive would be entitled to the following enhanced severance benefits, in lieu of the non-CIC severance described above, subject to execution and non-revocation of the General Release Agreement:
• Twenty-four (24) months of base salary ($1,150,000), payable in a lump sum;
• Two times (2×) target annual bonus ($862,500), payable in a lump sum;
• Eighteen (18) months of COBRA continuation coverage ($38,700, calculated at $2,150 per month);
• One hundred percent (100%) accelerated vesting of all outstanding equity awards.
Total CIC severance (excluding the value of equity acceleration): $2,051,200.
Section 280G Treatment.
The Employment Agreement included a "best-net cutback" provision under which any payments or benefits constituting "parachute payments" within the meaning of Section 280G of the Internal Revenue Code would be reduced to the extent necessary so that no portion thereof would be subject to the excise tax imposed by Section 4999, but only if the after-tax benefit to the Executive of receiving the reduced amount exceeded the after-tax benefit of receiving the unreduced amount (after accounting for the excise tax). No Section 280G gross-up was provided.
Non-Competition Covenant.
Twelve (12) months following the date of termination of employment for any reason. Restricted activity: employment by, or provision of consulting services to, any healthcare IT or SaaS company with annual revenue in excess of $50 million, operating in the United States, in a role that is the same as or substantially similar to the Executive's role at AHT. Garden-leave payment of $287,500 (equal to 50% of base salary), payable during the restricted period in accordance with AHT's standard payroll practices, as required by the MNAA.
Non-Solicitation Covenants.
Employee Non-Solicitation: Eighteen (18) months following the date of termination, applicable to AHT employees at the manager level and above with whom the Executive had material contact during the final twenty-four (24) months of employment.
Customer/Partner Non-Solicitation: Twelve (12) months following the date of termination, applicable to AHT customers and business partners with whom the Executive had material contact during the final twenty-four (24) months of employment.
Confidentiality.
Perpetual confidentiality obligations, with standard carve-outs for information that becomes publicly available through no fault of the Executive, information independently developed by the Executive without reference to confidential information, and disclosures required by law or compelled by legal process (subject to prior notice to the Company where practicable). The confidentiality provisions also included the required Defend Trade Secrets Act (18 U.S.C. § 1833) notice regarding immunity for whistleblower disclosures.
Invention Assignment.
Comprehensive assignment of all inventions, works of authorship, and intellectual property developed during the Executive's employment and relating to the Company's business or resulting from the use of Company resources, with Schedule A providing a form for disclosure of prior inventions excluded from the assignment obligation.
Benefits.
• Executive health plan with employer contribution of $2,150 per month;
• Company-paid life insurance coverage equal to two times (2×) base salary ($1,150,000 coverage);
• Long-term disability insurance at 60% of base salary;
• 401(k) plan participation with Company match of 4% of eligible compensation;
• Twenty-five (25) days of paid time off per year;
• Annual professional development allowance of $15,000;
• Annual executive physical exam program;
• Relocation allowance of up to $75,000 (not applicable in this case, as Dr. Elliston maintained a residence in Massachusetts).
4.2 Remaining Open Items at Time of Withdrawal
At the time of Dr. Elliston's withdrawal on September 28, 2022, only three substantive items remained open for negotiation. Each was expected to be resolved promptly, and the third draft was understood by all parties to be substantially final in all material respects:
(a) Final Bonus Performance Metrics Language. The specific key performance indicators ("KPIs") to be used in determining the Executive's annual bonus had not yet been finalized. The Employment Agreement contemplated that the Board's compensation committee would establish performance objectives for each fiscal year, but Fielding & Rowe had proposed that certain minimum KPI categories (e.g., revenue growth, customer retention, operational efficiency) be enumerated in the Agreement itself. AHT preferred to reserve full discretion for the compensation committee. This was a drafting issue rather than a substantive economic disagreement, and resolution was anticipated to involve the inclusion of illustrative (but non-binding) reference categories.
(b) Minor Definitional Refinements in Non-Solicitation Provisions. Fielding & Rowe had proposed certain refinements to the definition of "material contact" in the employee and customer/partner non-solicitation provisions, seeking to narrow the scope of the restriction to individuals with whom the Executive had direct, substantive interactions (as opposed to incidental or administrative contact). Calderwood & Harkness had recommended that AHT accept a slightly refined definition that remained protective of AHT's interests while addressing the Executive's concern regarding overbreadth.
(c) Signing Bonus Clawback Mechanics Upon Termination Without Cause. The parties had agreed on a full clawback of the $250,000 signing bonus in the event of voluntary resignation (other than for Good Reason) or termination for Cause within twenty-four months of the start date. However, the treatment of the signing bonus upon a termination by the Company without Cause within the twenty-four month period remained unresolved. Fielding & Rowe took the position that no clawback should apply in this circumstance. AHT's initial position was that a prorated clawback should apply (i.e., the Executive would repay the unearned portion based on the number of months remaining in the twenty-four month period). This issue was under active discussion at the time of withdrawal, and Calderwood & Harkness had recommended a compromise under which no clawback would apply upon a termination without Cause after twelve months of employment, with a prorated clawback applying only during the first twelve months.
None of these open items presented a risk of impasse, and in the professional judgment of the engagement team, all three would have been resolved in the ordinary course of negotiation had Dr. Elliston elected to continue the process.
5. Document Preservation Protocol
5.1 Document Index and Preservation
All work product, drafts, correspondence, and internal memoranda generated during the engagement have been indexed and preserved in the Calderwood & Harkness LLP document management system (DMS) under Matter No. 1010-00004. The document index has been reviewed and verified by Devon Archer and Nadia Petrov. All documents are accessible through the DMS using the matter number and may be retrieved by any authorized Calderwood & Harkness professional with appropriate matter access permissions.
The following categories of documents are preserved within the matter file:
5.1.1 Engagement and Administrative Documents.
• Engagement Letter, dated July 13, 2022, executed by Aaron Whitfield on behalf of AHT
• Conflict Check Memorandum, dated July 11, 2022
• New Matter Memorandum, dated July 11, 2022 (prepared by Nadia Petrov; approved by Bernard Crawford)
• All invoices issued during the engagement, including:
• Invoice #SC-AHT-2022-001
• Invoice #SC-AHT-2022-002
• Invoice #SC-AHT-2022-003
• Final Invoice #SC-AHT-2022-004, dated October 7, 2022
5.1.2 Core Employment Agreement Drafts.
• Executive Employment Agreement — First Draft (August 5, 2022)
• Executive Employment Agreement — Blackline of Fielding & Rowe Markup Against First Draft (August 19, 2022)
• Executive Employment Agreement — Second Draft (August 30, 2022)
• Executive Employment Agreement — Blackline of Fielding & Rowe Second Markup Against Second Draft (September 9, 2022)
• Executive Employment Agreement — Third Draft (Near-Final) (September 16, 2022)
• Schedule A — Prior Inventions Disclosure Form (August 5, 2022)
• Schedule B — Form of General Release Agreement (August 5, 2022; revised September 16, 2022)
• Exhibit A — Position Description and Reporting Structure (August 5, 2022)
5.1.3 Non-Competition Agreement Drafts.
• Employee Non-Competition Agreement — First Draft (August 5, 2022)
• Employee Non-Competition Agreement — Second Draft (August 30, 2022)
• Employee Non-Competition Agreement — Third Draft (Near-Final) (September 16, 2022)
5.1.4 Equity Award Documents.
• Stock Option Award Agreement — Draft (August 12, 2022)
• Restricted Stock Unit Award Agreement — Draft (August 12, 2022)
• Memorandum: Equity Award Structuring Under AHT 2020 Equity Incentive Plan (August 10, 2022) (prepared by Sandra Okafor and Devon Archer)
• Memorandum: Section 409A Compliance Analysis (August 22, 2022) (prepared by Gregory Tan)
5.1.5 Change in Control and Severance Analysis.
• Memorandum: Change in Control Provisions — Design and Market Analysis (July 28, 2022) (prepared by Devon Archer)
• Memorandum: Section 280G / Golden Parachute Analysis and Best-Net Cutback Modeling (September 2, 2022) (prepared by Gregory Tan and Nadia Petrov)
• CIC Severance Calculation Spreadsheet (September 2, 2022) (prepared by Gregory Tan and Nadia Petrov)
5.1.6 Massachusetts Law Compliance Memoranda.
• Memorandum: Massachusetts Noncompetition Agreement Act Compliance Checklist (July 25, 2022) (prepared by Nadia Petrov)
• Memorandum: Massachusetts Wage Act Considerations (August 1, 2022) (prepared by Devon Archer)
• Memorandum: Massachusetts Non-Solicitation and Non-Disclosure Enforceability (August 8, 2022) (prepared by Nadia Petrov)
5.1.7 Correspondence with Executive's Counsel (Fielding & Rowe LLP).
• Transmittal of First Draft Package to Catherine A. Fielding and Jonathan M. Pryce (August 5, 2022)
• Email Chain: Non-Compete Scope and Duration Negotiation (August 19 – September 9, 2022) (multiple emails between Devon Archer, Catherine A. Fielding, and Jonathan M. Pryce)
• Transmittal of Second Draft with Issues List (August 30, 2022)
• Transmittal of Third Draft (Near-Final) with Remaining Open Items Summary (September 16, 2022)
• Email: Notice of Executive's Withdrawal from Negotiations (September 28, 2022) (from Catherine A. Fielding to Devon Archer and Bernard Crawford)
5.1.8 Client Correspondence.
• Memorandum: Initial Strategy and Term Sheet Review (July 20, 2022) (to Aaron Whitfield)
• Memorandum: Summary of Fielding & Rowe Markup and Recommended Responses (August 22, 2022) (to Aaron Whitfield)
• Memorandum: Summary of Outstanding Negotiation Points After Second Markup (September 12, 2022) (to Aaron Whitfield)
• Email: Confirmation of Matter Dormancy (October 7, 2022) (from Bernard Crawford to Aaron Whitfield)
5.2 Background Documents Received from Client / Wentworth & Gage LLP
The following client-provided and third-party background documents were received by Calderwood & Harkness during the engagement and are preserved on file under Matter No. 1010-00004. These documents were provided primarily by Aaron Whitfield and Richard D. Gage (Wentworth & Gage LLP) and were used as reference materials during the drafting and negotiation process:
• AHT 2020 Equity Incentive Plan (as amended May 2021)
• AHT Amended & Restated Certificate of Incorporation (Delaware)
• AHT Amended & Restated Bylaws
• Existing Employment Agreement for Priya Chandrasekaran, Chief Executive Officer (used as precedent for structuring the Dr. Elliston agreement)
• Existing Employment Agreement for Derek Solano, Chief Financial Officer (used as precedent for structuring the Dr. Elliston agreement)
• Ridgeline Capital Partners Stockholders' Agreement
• Broadleaf Compensation Advisors LLC Peer Benchmarking Report (June 2022) (referenced by Calderwood & Harkness for market context but not produced by Calderwood & Harkness; the report was prepared by Broadleaf at the direction of the AHT Board compensation committee)
5.3 Retention Policy
All documents listed in Sections 5.1 and 5.2 above shall be retained in accordance with Calderwood & Harkness LLP's standard document retention policy for dormant matters. Under the firm's current policy, dormant matter files are retained for a minimum of seven (7) years from the date of dormancy, after which they are subject to periodic review and potential disposition in accordance with the firm's records management procedures.
No documents in the Matter No. 1010-00004 file shall be destroyed, purged, or removed from the DMS without the prior written approval of the Responsible Partner (Bernard Crawford) and confirmation from AHT's General Counsel (Aaron Whitfield) that AHT does not object to the disposition.
In light of the significant template value of the work product generated during this engagement, all near-final drafts, compliance memoranda, and tax analyses should be flagged in the DMS for potential reuse as templates in connection with future AHT executive employment matters or similar engagements for other clients, subject to appropriate confidentiality safeguards and client consent protocols.
6. Billing Summary
The following is a summary of all fees billed in connection with Matter No. 1010-00004 through the date of dormancy:
Total Fees Billed Through Dormancy: $78,340.00
Total Billable Hours: 70.2 hours
Fee Estimate Per Engagement Letter: $85,000–$125,000. The matter concluded below the low end of the original fee estimate due to the early termination of negotiations prior to execution of the agreement package. Had the negotiations continued to completion and execution, the final fees would have been expected to fall within the estimated range.
Breakdown by Timekeeper:
Note: The total fees billed of $78,340.00 include disbursements and costs of $27,795.00 consisting of Westmark Data Systems and Calderon Systems research charges, document production and courier costs, and the pass-through cost of Hargrove & Sinclair CPA's 280G consulting engagement, which was invoiced through Calderwood & Harkness at AHT's request.
Invoice History:
Outstanding Balance at Dormancy: $12,475.00
All invoices through Invoice #SC-AHT-2022-003 have been paid in full by AHT. The final invoice, Invoice #SC-AHT-2022-004, in the amount of $12,475.00, was transmitted to Aaron Whitfield under cover of Bernard Crawford's dormancy confirmation email dated October 7, 2022. Payment is expected in the ordinary course within AHT's standard thirty (30) day payment cycle.
7. Reactivation Considerations and Template Value
7.1 Future C-Suite Hires
The engagement generated a substantial body of high-quality, near-final documentation and legal analysis that retains significant value for AHT's future use. Specifically, the third (near-final) drafts of the Executive Employment Agreement and Employee Non-Competition Agreement, together with the equity award agreements, schedules, and exhibits, represent substantially negotiated, market-standard terms for a C-suite executive at a PE-backed healthcare services and SaaS company. These documents reflect extensive input from both AHT's internal stakeholders and the arm's-length negotiation process with sophisticated executive-side counsel, resulting in provisions that have been tested and refined through multiple rounds of revision.
These documents can serve as templates for any future Chief Operating Officer or other C-suite hire at AHT, with appropriate modifications to reflect the individual candidate's specific terms, compensation package, and personal circumstances. The structural architecture of the agreements — including the double-trigger CIC severance framework, the MNAA-compliant non-competition covenant with garden-leave payment, the best-net cutback approach to Section 280G, and the equity award vesting and acceleration provisions — represents a carefully considered and market-informed framework that can be readily adapted without the need to reconstruct these structures from the ground up.
In addition, the Massachusetts law compliance memoranda (MNAA compliance checklist, Wage Act considerations, and non-solicitation/non-disclosure enforceability analysis), the Section 409A compliance analysis, the Section 280G golden parachute modeling, and the equity plan capacity analysis all remain current and relevant, subject to updates for any intervening changes in applicable law or amendments to the AHT 2020 Equity Incentive Plan. These analyses provide a solid foundation that would significantly reduce the scope of incremental legal work required for a subsequent engagement.
Reuse of these templates and analyses in connection with a future C-suite hire would result in a significant reduction in legal fees, as the substantial up-front investment in drafting, research, and structural design would not need to be replicated.
7.2 Specific Adaptations Required for Reuse
Should AHT elect to engage Calderwood & Harkness for a future C-suite executive employment agreement, the following specific adaptations and updates would be required to customize the existing templates for a new candidate:
(a) Candidate-Specific Information. All references to Dr. Elliston's name, proposed start date, Massachusetts residence, prior employer, prior inventions (Schedule A), and specific compensation figures would need to be updated to reflect the new candidate's personal and professional circumstances.
(b) Equity Plan Share Reserve. The availability of shares under the AHT 2020 Equity Incentive Plan share reserve would need to be re-confirmed with Sandra Okafor and Wentworth & Gage LLP, particularly if significant time has passed since the date of this memorandum or if additional equity grants have been made to other employees or executives in the interim. If the share reserve has been materially depleted, an amendment to the equity plan or a new equity plan may be necessary.
(c) Investor Consent Requirements. The consent or notification requirements of Ridgeline Capital Partners and Helix Ventures under the Stockholders' Agreement should be re-confirmed for any new equity issuance to a C-suite executive. Depending on the size of the grant and any changes to the Stockholders' Agreement, additional approvals may be required.
(d) Massachusetts Noncompetition Agreement Act Updates. If the Massachusetts Noncompetition Agreement Act is amended subsequent to the date of this memorandum, or if new case law materially affects the interpretation or enforcement of non-competition agreements under Massachusetts law, the MNAA compliance checklist (July 25, 2022) and the non-solicitation and non-disclosure enforceability memorandum (August 8, 2022) should be updated accordingly. As of the date of this memorandum, no pending legislative amendments to the MNAA have been identified.
(e) 280G Analysis and CIC Severance Calculations. The Section 280G golden parachute analysis and the CIC severance calculation spreadsheet would need to be re-run using the new candidate's compensation data, including base amount calculations, and AHT's then-current financial profile. Changes in AHT's revenue, valuation, or equity capitalization would affect the 280G modeling assumptions and the determination of whether any payments would constitute "excess parachute payments" under Section 280G.
(f) Other Legal Developments. Any material changes in federal tax law (including Sections 409A, 280G, and 4999), Massachusetts employment law, or SEC or IRS guidance applicable to executive compensation should be reviewed and incorporated as appropriate.
7.3 Engagement Reactivation Process
If AHT wishes to reactivate Matter No. 1010-00004 for a new COO candidate, or to open a related new matter for a different C-suite position, Aaron Whitfield should contact Bernard Crawford or Devon Archer directly. The following steps would be required to reactivate or initiate the engagement:
(a) Supplemental Conflict Check. A new conflict check will be required with respect to the identity of the prospective executive, including his or her current and former employers and personal counsel (if applicable). This is necessary to ensure that Calderwood & Harkness does not have any conflicts of interest that would preclude representation of AHT in connection with the new hire.
(b) Revised Engagement Letter. Depending on the scope of the new engagement, a revised engagement letter or an amendment to the existing engagement letter may be appropriate. If the scope is substantially similar to the original engagement (i.e., drafting and negotiating a C-suite employment agreement package), a brief amendment letter referencing the original terms may suffice.
(c) Updated Fee Estimate. Based on the significant volume of reusable templates and analysis on file, the anticipated cost for a subsequent C-suite executive employment agreement engagement utilizing the existing work product is estimated to be 40–60% lower than the original fee estimate of $85,000–$125,000. The actual reduction will depend on the complexity of the new candidate's negotiation, the extent of modifications required to the template documents, and whether any significant legal developments have occurred in the interim.
(d) Team Reassembly. The core engagement team (Bernard Crawford, Devon Archer, and Nadia Petrov) would be available to staff a reactivated matter, subject to scheduling. Gregory Tan and Sandra Okafor would be re-engaged as needed for tax and corporate/M&A matters, respectively.
8. Confirmation of Client Communication
Bernard Crawford, Responsible Partner, sent a dormancy confirmation email to Aaron Whitfield, General Counsel of AHT, on October 7, 2022. The email confirmed the following:
(a) Matter No. 1010-00004 has been placed in dormant status in the Calderwood & Harkness matter management system, effective October 7, 2022.
(b) All drafts, memoranda, correspondence, and work product generated during the engagement have been preserved in Calderwood & Harkness's document management system and remain available for AHT's future use, subject to the firm's standard document retention policy.
(c) The final invoice, Invoice #SC-AHT-2022-004, in the amount of $12,475.00, was attached to the email. Payment is requested within AHT's standard payment cycle.