Contract analysis

I. Introduction and Transmittal This firm represents Arbor Health Technologies Inc. ("Arbor Health" or the "Company"), a corporation organized and existing under the laws of the State of Delaware, as issuer's counsel in connection with the Company's proposed initial public offering (the "Offering") of shares of the Company's common stock, par value $0.001 per share (the "Common Stock"), on the New York Stock Exchange

II. Summary of Key Issuer Positions A. Indemnification Provisions (Article VII of UA Draft) The indemnification and contribution provisions of Article VII are, as in any underwriting agreement, among the most commercially significant provisions of the document. Our mark-up proposes a number of revisions to bring these provisions into alignment with prevailing market practice for healthcare SaaS initial public offerin

1. Scope of Company Indemnification. The UA Draft, as currently drafted, establishes an indemnification obligation on the part of the Company that is, in our view, overly broad and extends meaningfully beyond the scope of indemnification customarily provided by issuers in transactions of this nature. Calderwood & Harkness's mark-up narrows the scope of the Company's indemnification obligation in several respects, eac

2. Scope of Underwriter Indemnification. Our mark-up preserves the reciprocal indemnification obligation of the underwriters in favor of the Company and, in certain respects, proposes strengthening it to ensure clarity and completeness. Specifically, we propose that the underwriters indemnify and hold harmless the Company, each of its directors, each of its officers who signed the Registration Statement, and each per

3. Contribution Provisions. The contribution provisions of Article VII are triggered in circumstances where the indemnification provided therein is unavailable or insufficient. Calderwood & Harkness proposes that the contribution clause follow the relative-fault/relative-benefit standard, as required under applicable case law, including Eichenholtz v. Brennan, 52 F.3d 478 (3d Cir. 1995), and In re WorldCom, Inc. Secu

4. Indemnification Procedures. The notice-and-control procedures set forth in the UA Draft for indemnification claims are, in their general structure, acceptable to the Company. Our mark-up proposes several clarifying edits to ensure that the procedures operate fairly and in accordance with customary practice. First, we have revised the provision addressing the indemnifying party's right to assume the defense of any

1. Materiality and Material Adverse Effect Qualifiers. Calderwood & Harkness's mark-up introduces materiality qualifiers and Material Adverse Effect ("MAE") qualifiers on the following representations, in each case because the flat, unqualified formulation in the UA Draft is overly broad and could expose the Company to disproportionate risk: (a) Compliance with Laws. The representation that the Company is in complian

2. MAE Definition. Calderwood & Harkness proposes the inclusion of a defined term "Material Adverse Effect" in the Underwriting Agreement, as this defined term is referenced in multiple representations, the bring-down condition, and the officers' certificate. We propose the following standard definition: "Material Adverse Effect" shall mean any event, circumstance, development, change, or effect that, individually or

3. Knowledge Qualifier. Certain representations in the UA Draft should, in our view, be qualified by a "to the Company's knowledge" standard, where the underlying factual matters are such that only a knowledge-qualified representation is appropriate. Our mark-up defines "to the Company's knowledge" or "known to the Company" as the actual knowledge of the following executive officers of the Company, in each case after

4. Bring-Down Standard. The UA Draft conditions closing on a bring-down of the Company's representations and warranties to the closing date (which we anticipate will be February 13, 2024, consistent with T+3 settlement following the expected pricing date of February 8, 2024). As currently drafted, the UA Draft requires that the representations and warranties be true and correct in all respects as of the closing date,

5. Specific Representation Comments. In addition to the general comments set forth above, our mark-up includes the following comments on specific representations in Article I of the UA Draft: Financial Statements Representation. Calderwood & Harkness accepts the representation regarding the Company's financial statements and their compliance with Regulation S-X promulgated by the SEC and with GAAP as applied on a con

1. Market-Out Clause. The market-out clause set forth in Article VIII of the UA Draft permits the Representative to terminate the Underwriting Agreement under specified circumstances relating to adverse market conditions. Calderwood & Harkness's mark-up proposes narrowing this provision in certain respects to provide the Company with greater certainty regarding the underwriters' commitment. The standard triggering ev

2. Other Termination Rights. Our mark-up preserves the Company's right to terminate the Underwriting Agreement in the event of a material breach by any underwriter of its obligations thereunder, subject to a reasonable cure period and written notice. The default provisions set forth in Article IX of the UA Draft, which permit the non-defaulting underwriters to assume a defaulting underwriter's commitment (or, in the

1. Lock-Up Duration and Scope. The Company accepts the 180-day lock-up period as proposed in the UA Draft. The lock-up period would commence on the date of the final prospectus (which we anticipate will be February 8, 2024) and expire on August 6, 2024. The lock-up applies to all directors, executive officers, and holders of 1% or more of the Company's pre-IPO shares of Common Stock. We understand that the lock-up pa

2. Lock-Up Exceptions. Calderwood & Harkness's mark-up proposes the following exceptions to the lock-up restrictions, each of which the Company views as market-standard for initial public offerings of this type and size: (i) Estate Planning Transfers. Transfers of locked-up shares for bona fide estate planning purposes, including transfers to family trusts, family members (including spouses, domestic partners, lineal

3. Lock-Up Release Mechanics. Calderwood & Harkness's mark-up proposes several modifications to the lock-up release provisions in the UA Draft to ensure transparency, orderly market conduct, and compliance with applicable regulatory requirements: Notice Requirement. Any early release from or waiver of the lock-up restrictions by the Representative (Whitfield Barrow) should require at least three (3) business days' pr

1. Governing Law. New York governing law is acceptable to the Company for the Underwriting Agreement. This is consistent with market practice for underwriting agreements in connection with public offerings by NYSE-listed companies. The Company also consents to the jurisdiction of the state and federal courts located in New York County, New York, for any action, suit, or proceeding arising out of or relating to the Un

2. Notices. Our mark-up revises the notice provisions to reflect the following addresses for purposes of all notices, requests, demands, and other communications under the Underwriting Agreement: If to the Company: Arbor Health Technologies Inc. 275 Kendall Avenue, Suite 1400 Cambridge, MA 02142 Attention: Rachel Moynihan, General Counsel & Corporate Secretary With a copy (which shall not constitute notice) to: Calde

3. Survival. The indemnification and contribution provisions of Article VII, and the representations and warranties set forth in Article I, should survive the closing of the Offering and any termination of the Underwriting Agreement, in each case without any stated time limit. The obligations of the parties under these provisions shall remain in full force and effect regardless of any investigation made by or on beha

4. Expenses. Consistent with the UA Draft, the Company agrees to bear all costs and expenses incurred in connection with the Offering (exclusive of the underwriting discount), which are currently estimated at approximately $4,200,000 in the aggregate. The principal components of the estimated offering expenses are as follows: In the event that the Offering is terminated prior to closing, the Company's obligation to r

III. Additional Points for Discussion In addition to the foregoing comments on specific provisions of the UA Draft, Calderwood & Harkness wishes to raise the following additional points for the working group's consideration. Use of Proceeds / Credit Facility Repayment. The Company intends to use a portion of the net proceeds from the Offering to repay the outstanding balance of approximately $65,000,000 on its revolv

IV. Process and Next Steps In order to maintain the current offering timeline, Calderwood & Harkness respectfully requests that Meridian Hale & Quivorn circulate any comments on the enclosed mark-up (Enclosure A) by Friday, February 2, 2024. This timeline will permit sufficient opportunity for negotiation and finalization of the Underwriting Agreement terms prior to the anticipated pricing date. Calderwood & Harkness

V. Closing We appreciate your and your colleagues' attention to these matters and look forward to working collaboratively with Meridian Hale & Quivorn and the Whitfield Barrow team toward the prompt resolution of the open points discussed herein and a successful offering for Arbor Health Technologies Inc. Please do not hesitate to contact me or Eric Johannsen at this office with any questions or to schedule a working