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PRIVILEGED & CONFIDENTIAL

CALDERWOOD & HARKNESS LLP Attorneys at Law

125 Broad Street New York, NY 10004

Telephone: (212) 558-4000 Facsimile: (212) 558-3588 www.calderwoodharkness.com

January 25, 2024

Graham Neville, Esq. Meridian Hale & Quivorn LLP 51 West 52nd Street New York, NY 10019

Re: Arbor Health Technologies Inc. — Initial Public Offering of Common Stock; Underwriting Agreement Comments SEC File No. 333-276841

Dear Graham:

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 under the ticker symbol "ARHT."

We are transmitting herewith, as Enclosure A to this letter, Calderwood & Harkness's annotated mark-up of the initial draft of the Underwriting Agreement (the "UA Draft") that was circulated by Whitfield Barrow & Co., LLC ("Whitfield Barrow"), in its capacity as Representative of the several underwriters (the "Representative"), to the working group on January 18, 2024. The mark-up reflects the Company's proposed revisions, together with annotations and comments embedded in the margins for ease of reference.

As you are aware, the underwriting syndicate for the Offering consists of the following firms, in their respective capacities:

• Whitfield Barrow & Co., LLC — Lead Left Bookrunner and Representative of the several underwriters;

• Calloway Pierce Securities LLC — Joint Bookrunner;

• Velthorn Capital Partners Inc. — Joint Bookrunner; and

• Pemberton Wallis LLC — Co-Manager.

The base Offering contemplates the sale of 20,000,000 shares of Common Stock, with an overallotment option (the "Overallotment Option") granted to the underwriters to purchase up to 3,000,000 additional shares of Common Stock, representing 15% of the base offering. The preliminary prospectus forming part of the Company's Registration Statement on Form S-1 (File No. 333-276841), as filed with the Securities and Exchange Commission (the "SEC") on January 22, 2024, reflects an initial estimated price range of $17.00 to $19.00 per share.

The purpose of this letter is to summarize the Company's key positions on the material open points in the UA Draft and to provide context and explanation for our mark-up, in order to facilitate efficient negotiation among the parties and their respective counsel. We have endeavored to organize these comments topically, corresponding generally to the article structure of the UA Draft. Our positions on each point have been informed by discussions with Rachel Moynihan, General Counsel and Corporate Secretary, and David Halderman, Chief Financial Officer, of Arbor Health, each of whom has reviewed and approved the substantive positions set forth herein on behalf of the Company.

We note at the outset that many provisions of the UA Draft are consistent with customary market practice for initial public offerings of this type and size, and our mark-up reflects relatively few changes in those areas. Our comments are principally directed to provisions where we believe the UA Draft departs from market norms or where clarification is warranted given the nature of the Company's business as a healthcare SaaS platform. We look forward to discussing these points with you and the Whitfield Barrow team at your earliest convenience.

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 offerings of comparable size. We address each area of comment below.

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, each of which we believe reflects well-settled market practice.

First, we have revised the Company's indemnification obligation so that it is expressly limited to losses, claims, damages, liabilities, and expenses (including reasonable attorneys' fees and expenses) arising out of or based upon (a) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (or any amendment thereto), the Prospectus (including any preliminary prospectus, any amended or supplemented prospectus, or any "free writing prospectus" as defined in Rule 405 under the Securities Act of 1933, as amended (the "Securities Act")), or any "issuer information" filed or required to be filed pursuant to Rule 433(d) under the Securities Act, or (b) any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. This formulation is consistent with the scope of liability under Section 11 and Section 12(a)(2) of the Securities Act and is the standard indemnification formulation in underwriting agreements for registered public offerings.

Second, and critically, our mark-up includes an express carve-out from the Company's indemnification obligation for any losses, claims, damages, liabilities, or expenses to the extent that such losses arise out of or are based upon any untrue statement or alleged untrue statement, or any omission or alleged omission, in reliance upon and in conformity with information furnished in writing by or on behalf of any underwriter through the Representative specifically for use in the Registration Statement or Prospectus (or any amendment or supplement thereto). This is the standard "underwriter information" carve-out, and we understand that the underwriter information consists of the following: (i) the stabilization and overallotment language in the prospectus, (ii) the syndicate participation paragraph identifying the underwriters and their respective commitments, and (iii) the electronic delivery paragraph. We request that Whitfield Barrow confirm in writing the precise paragraphs constituting underwriter information so that the carve-out can be appropriately cross-referenced.

Third, our mark-up adds a clarification providing that the Company's indemnification obligation does not extend to losses that are attributable solely to an underwriter's failure to deliver a final prospectus or prospectus supplement to purchasers of the shares as and when required by Section 5 of the Securities Act. To the extent that any underwriter fails to deliver the prospectus in accordance with its obligations under the Securities Act and the rules and regulations thereunder, the resulting liability should not be shifted to the Company through the indemnification mechanism.

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 person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), against any and all losses, claims, damages, liabilities, and expenses arising out of or based upon any untrue statement or alleged untrue statement, or any omission or alleged omission, made in the Registration Statement or Prospectus in reliance upon and in conformity with information furnished by or on behalf of such underwriter in writing specifically for inclusion therein. Our mark-up requests clarification that this indemnification covers all information furnished by or on behalf of the underwriters, whether furnished by the Representative on behalf of the syndicate or by any individual underwriter, so as to eliminate any ambiguity as to coverage.

We note that the "several and not joint" formulation for the underwriters' indemnification obligation, as set forth in the UA Draft, is acceptable to the Company. The proportionate allocation of the several indemnification obligation among the underwriters should, however, be based upon each underwriter's respective underwriting commitment as a percentage of the total offering, which we understand to be as follows:

This proportionate allocation is reflected in our mark-up and should be confirmed by the Representative.

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. Securities Litigation, 388 F. Supp. 2d 319 (S.D.N.Y. 2005), rather than a pure relative-benefit test. A contribution provision that looks solely to relative benefit, without regard to relative fault, risks being held unenforceable as inequitable. Accordingly, our mark-up revises the contribution clause to provide that the relative fault of the Company, on the one hand, and the underwriters, on the other, shall be determined by reference to, among other things, whether the untrue statement or omission relates to information supplied by the Company or by the underwriters, and the parties' relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission, in addition to the relative benefit received by each party from the Offering.

With respect to contribution caps, we propose that the maximum contribution obligation of each underwriter be set at the total underwriting discount actually received by such underwriter — that is, $1.20 per share multiplied by the total number of shares purchased by such underwriter (including any shares purchased pursuant to the Overallotment Option). The UA Draft, in its current form, contains language that could be read to limit the underwriters' contribution obligation to a lesser amount, which is not consistent with market practice and is not acceptable to the Company. We have revised this provision accordingly.

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 claim or proceeding. As drafted, the UA Draft conditions the indemnifying party's right to assume defense upon an acknowledgment of the indemnifying party's liability for such claim. We believe that the right to assume defense should not be so conditioned, as this could create a practical impediment to efficient claims management. Our mark-up removes this condition, while preserving the indemnified party's right to withhold consent to the assumption of defense where the indemnifying party and the indemnified party have conflicting interests that would make joint representation inappropriate.

Second, our mark-up clarifies that, even after the indemnifying party has assumed the defense of a claim, the indemnified party retains the right to engage separate counsel of its own choosing, at its own expense, to monitor and participate in the defense. This is a standard protective provision and does not alter the allocation of defense costs, but it ensures that the indemnified party is not left without representation in circumstances where its interests may diverge from those of the indemnifying party.

Third, we have added a restriction on settlements without the consent of the indemnified party. Specifically, no settlement of any claim may be effected by the indemnifying party without the prior written consent of the indemnified party (which consent shall not be unreasonably withheld, conditioned, or delayed), unless such settlement (a) includes an unconditional release of the indemnified party from all liability on claims that are the subject matter of such proceeding, (b) does not include any statement or admission of fault, culpability, or failure to act by or on behalf of the indemnified party, and (c) does not impose any non-monetary obligations on the indemnified party. This formulation protects both parties and is consistent with prevailing practice in underwriting agreements for offerings of this size.

B. Representations and Warranties (Article I of UA Draft)

The representations and warranties set forth in Article I of the UA Draft are extensive and cover a broad range of matters relating to the Company's business, operations, financial condition, and legal compliance. While the Company is prepared to make robust and comprehensive representations in connection with the Offering, a number of the representations as currently drafted are stated in flat, unqualified terms that are commercially unreasonable and inconsistent with market practice. Our mark-up introduces appropriate qualifiers and makes clarifying revisions, as described below.

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 compliance with all applicable federal, state, local, and foreign laws, rules, regulations, and ordinances has been qualified by materiality. Given the breadth of laws applicable to a healthcare SaaS company with operations touching 42 states, a flat compliance representation is not commercially reasonable. Our mark-up provides that the Company is in compliance with all applicable laws, except where the failure to be in compliance would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

(b) Absence of Litigation. The litigation representation has been qualified by materiality as to undisclosed proceedings. The Company has disclosed all material pending and threatened legal proceedings in the risk factors section of the Registration Statement on Form S-1, and our mark-up cross-references those disclosures. As to any proceedings not specifically disclosed, the representation is qualified by a materiality standard, providing that no such proceedings exist that would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

(c) Tax Matters. The tax representations have been qualified by materiality. The Company has nexus in, and files income, franchise, and/or other tax returns in, ten states — Massachusetts, New York, California, Texas, Illinois, Florida, Pennsylvania, Ohio, New Jersey, and Georgia — as well as at the federal level. Given this multi-state filing profile, a flat representation that the Company has filed all required tax returns and paid all taxes due and owing is commercially unreasonable. Our mark-up provides the customary materiality qualification.

(d) intellectual Property. The representations relating to the Company's intellectual property have been qualified by materiality, and a knowledge qualifier has been added with respect to representations concerning third-party infringement claims. The Company owns or licenses a substantial portfolio of intellectual property, including proprietary software platforms, patents, trademarks, and trade secrets, and a flat representation with respect to the absence of infringement claims by third parties is not appropriate absent a knowledge qualifier. Our mark-up addresses this in a manner consistent with market practice.

(e) Employee Matters and ERISA. The representations relating to employment matters and compliance with ERISA and the Code have been qualified by materiality. The Company employs approximately 4,800 employees across its operations, and a flat representation regarding compliance with all employment and benefit plan laws and regulations is not commercially reasonable.

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 in the aggregate, has had, or would reasonably be expected to have, a material adverse effect on (i) the business, properties, assets, liabilities, results of operations, or financial condition of the Company and its subsidiaries, taken as a whole, or (ii) the ability of the Company to consummate the transactions contemplated by this Agreement; provided, however, that none of the following, individually or in the aggregate, shall be deemed to constitute, or shall be taken into account in determining whether there has been or would reasonably be expected to be, a Material Adverse Effect:

(a) changes in general economic, business, financial, or market conditions;

(b) changes or developments generally affecting the healthcare services industry or the software-as-a-service industry;

(c) changes in applicable law or regulation, or in generally accepted accounting principles ("GAAP"), or the interpretation or enforcement thereof;

(d) effects arising from or relating to the public announcement or pendency of the Offering or the other transactions contemplated hereby; and

(e) pandemics, epidemics, natural disasters, acts of terrorism, or other force majeure events;

provided, further, that the exceptions set forth in clauses (a), (b), (c), and (e) above shall not apply to the extent that any such event, circumstance, development, change, or effect has a disproportionate adverse effect on the Company and its subsidiaries, taken as a whole, relative to other companies operating in the healthcare technology sector of comparable size and scope.

This definition is consistent with the prevailing standard in recent healthcare technology IPOs and provides appropriate protections for both the Company and the underwriters.

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 reasonable inquiry of their direct reports and review of the Company's books and records:

• Dr. Nathaniel Rourke, Chief Executive Officer and Co-Founder;

• Margaret Tsujimoto, President and Chief Operating Officer;

• David Halderman, Chief Financial Officer;

• Rachel Moynihan, General Counsel and Corporate Secretary; and

• Dr. Priya Subramanian, Chief Technology Officer.

We have proposed the addition of knowledge qualifiers to the following specific representations: (i) representations concerning the existence or absence of third-party intellectual property infringement claims, (ii) representations concerning undisclosed governmental investigations or inquiries, and (iii) representations concerning cybersecurity breaches and incidents. In each case, the underlying subject matter involves facts and circumstances that may not be within the actual or constructive knowledge of the Company despite the exercise of reasonable diligence, and a flat, unqualified representation would be inappropriate.

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, without giving effect to any materiality or MAE qualifiers embedded in the representations themselves.

We believe this "double materiality scrub" issue should be resolved in favor of a standard that requires the representations and warranties to be true and correct as of the closing date to the same extent as they were made as of the date of the Underwriting Agreement — that is, subject to the same materiality and MAE qualifications that apply to the underlying representations. This is the prevailing standard in healthcare technology IPOs and avoids the anomalous result of requiring a bring-down to a higher standard of accuracy than was required when the representations were originally given. Our mark-up revises both the closing condition and the form of officers' certificate accordingly.

The same bring-down standard should apply to any overallotment closing, if the Overallotment Option is exercised.

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 consistent basis throughout the periods involved. We note that the Company's audited financial statements for the fiscal years ended December 31, 2023 and December 31, 2022, included in the Registration Statement, have been examined by Kellerman & Associates LLP, the Company's independent registered public accounting firm, and that comfort letters in customary form (SAS 72 / AU-C 920 format) will be delivered by Kellerman & Associates at pricing and at closing.

Capitalization Representation. Our mark-up updates the capitalization representation to reflect the Company's capital structure as of the date of the Registration Statement. As of January 22, 2024, the Company had 80,000,000 shares of Common Stock outstanding on a pre-IPO basis. In addition, the Company has the following equity compensation arrangements, each of which should be fully disclosed in the capitalization representation:

• 2014 Stock Incentive Plan: 11,200,000 shares of Common Stock subject to outstanding options, of which 8,400,000 are vested and exercisable, with a weighted average exercise price of $3.25 per share;

• 2024 Equity Incentive Plan: 10,300,000 shares of Common Stock reserved for future issuance, adopted by the Board of Directors and approved by the stockholders on January 15, 2024, and effective upon the completion of the Offering; and

• 2024 Employee Stock Purchase Plan ("ESPP"): 2,060,000 shares of Common Stock reserved for issuance, adopted by the Board of Directors and approved by the stockholders on January 15, 2024, and effective upon the completion of the Offering.

The mark-up revises the capitalization table in the representation accordingly and provides that, except as set forth in the Registration Statement, there are no outstanding options, warrants, rights, or commitments to issue shares of capital stock or other securities of the Company.

No Undisclosed Liabilities. Calderwood & Harkness proposes that the representation concerning the absence of undisclosed liabilities be qualified to exclude liabilities incurred in the ordinary course of business consistent with past practice since the date of the Company's most recent audited balance sheet, which is December 31, 2023. This is a standard qualification, as it would be impracticable for the Company to represent on a flat basis that no liabilities of any kind have arisen in the interim period.

HIPAA / Data Privacy. The UA Draft includes a broad representation regarding the Company's compliance with the Health Insurance Portability and Accountability Act of 1996 ("HIPAA"), the Health Information Technology for Economic and Clinical Health Act ("HITECH"), and applicable state data privacy and security laws and regulations. Given that Arbor Health's healthcare SaaS platform currently serves more than 1,200 hospital systems across 42 states and processes substantial volumes of protected health information ("PHI") and other sensitive data, this representation is of particular importance. Our mark-up qualifies this representation with (i) a materiality qualifier, (ii) a knowledge qualifier with respect to representations concerning third-party data breaches (i.e., breaches occurring at the Company's customers, business associates, or third-party vendors that have not been reported to the Company), and (iii) a cross-reference to the risk factor disclosures relating to data privacy, cybersecurity, and HIPAA compliance set forth in the Registration Statement on Form S-1. These qualifications are appropriate given the inherent complexity of data privacy compliance in the healthcare technology sector and do not diminish the Company's commitment to robust data protection practices.

C. Conditions Precedent to Closing (Article VI of UA Draft)

Calderwood & Harkness's mark-up is generally consistent with the structure and substance of the conditions precedent to closing set forth in Article VI of the UA Draft. The conditions are typical for an initial public offering of this nature, and our comments are limited to clarifications and supplemental provisions as described below.

Legal Opinions. The closing is conditioned upon the delivery of the following legal opinions and letters of Calderwood & Harkness LLP, as counsel to the Company:

(i) A legal opinion addressing the valid issuance, due authorization, and full payment and non-assessability of the shares of Common Stock to be sold in the Offering;

(ii) A Delaware law opinion addressing the corporate existence and good standing of the Company under the laws of the State of Delaware;

(iii) A negative assurance letter (commonly referred to as a "10b-5 letter") stating that, based on our review of the Registration Statement and Prospectus and our participation in the preparation thereof, nothing has come to our attention that causes us to believe that the Registration Statement or Prospectus contains an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading; and

(iv) A tax opinion addressing certain U.S. federal income tax consequences of the Offering.

Calderwood & Harkness requests that the UA provide that the forms of these opinions will be "substantially in the form agreed upon by the Company, the Representative, and their respective counsel and attached as exhibits to this Agreement." We will circulate draft forms of these opinions and letters under separate cover, and we believe it is important that the parties agree on the scope and form of the opinions prior to execution of the Underwriting Agreement, rather than leaving these matters open for negotiation at closing.

Comfort Letters. The closing is conditioned upon the delivery of a comfort letter from Kellerman & Associates LLP, the Company's independent registered public accounting firm, at pricing (anticipated to be February 8, 2024) and a bring-down comfort letter at closing (anticipated to be February 13, 2024). We understand that the comfort letters will be in customary form consistent with the Statement on Auditing Standards No. 72 (AU-C Section 920) and will address, among other things, the financial data derived from the Company's accounting records, selected financial data, and certain statistical data included in the Registration Statement and Prospectus. Calderwood & Harkness has no material comments on the comfort letter condition as set forth in the UA Draft.

Officers' Certificate. The closing is conditioned upon the delivery of a certificate executed by the Company's Chief Executive Officer, Dr. Nathaniel Rourke, and the Company's Chief Financial Officer, David Halderman, certifying as to (i) the accuracy of the Company's representations and warranties as of the closing date, (ii) the Company's compliance with all covenants and agreements to be performed prior to closing, and (iii) the absence of any Material Adverse Effect since the date of the most recent financial statements included in the Registration Statement. Calderwood & Harkness accepts this condition, subject to the bring-down materiality standard discussed in Section II.B.4 above. Our mark-up revises the form of officers' certificate to be consistent with that standard.

Secretary's Certificate. The closing is conditioned upon the delivery of a certificate executed by Rachel Moynihan, in her capacity as General Counsel and Corporate Secretary of the Company, attaching certified copies of (i) the Amended and Restated Certificate of Incorporation of the Company (as filed with the Secretary of State of the State of Delaware in connection with the IPO), (ii) the Amended and Restated Bylaws of the Company, and (iii) all resolutions of the Board of Directors and the stockholders of the Company authorizing the Offering, the execution and delivery of the Underwriting Agreement, and the related transactions. Calderwood & Harkness accepts this condition.

Good Standing Certificates. The closing is conditioned upon the delivery of certificates of good standing (or the equivalent) from (i) the Secretary of State of the State of Delaware and (ii) the Secretary of the Commonwealth of Massachusetts, each dated within five (5) business days of the closing date. Calderwood & Harkness accepts this condition as drafted.

Lock-Up Agreements. The closing is conditioned upon receipt by the Representative, Whitfield Barrow, of executed lock-up agreements from all directors, executive officers, and holders of 1% or more of the Company's pre-IPO Common Stock (approximately 45 signatories, covering approximately 80,000,000 shares of pre-IPO Common Stock, representing 100% of the pre-IPO shares outstanding). Calderwood & Harkness accepts this condition, subject to our comments on the substantive terms of the lock-up agreements as set forth in Section II.E below.

FINRA No-Objections Letter. The closing is conditioned upon receipt of a letter from the Financial Industry Regulatory Authority ("FINRA") confirming that it has no objection to the terms and arrangements of the underwriting. Calderwood & Harkness accepts this condition. We note that the FINRA filing was made in connection with the public filing of the Registration Statement and that the Company anticipates receipt of the no-objections letter prior to the anticipated pricing date.

NYSE Listing Approval. The closing is conditioned upon receipt of an approval letter from the New York Stock Exchange confirming the listing of the Common Stock on the NYSE under the ticker symbol "ARHT," subject only to official notice of issuance. Calderwood & Harkness accepts this condition.

DTC Eligibility. The closing is conditioned upon the Company's Common Stock being eligible for book-entry transfer and settlement through The Depository Trust Company ("DTC"). Continental Share Services, Inc., the Company's transfer agent and registrar, has confirmed DTC eligibility for shares of the Company's Common Stock (CUSIP No. 039217105). Calderwood & Harkness accepts this condition.

D. Market-Out and Termination Provisions (Article VIII of UA Draft)

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 events for market-out termination — including (i) any suspension of trading in the Company's securities or in securities generally on the New York Stock Exchange or the Nasdaq Stock Market, (ii) a material disruption in securities settlement, payment, or clearance services in the United States, (iii) any declaration of a banking moratorium or any suspension of payments in respect of banks by federal or state authorities, and (iv) any outbreak or escalation of hostilities or other calamity or crisis the effect of which on the financial markets of the United States is such as to make it, in the judgment of the Representative, impracticable or inadvisable to proceed with the Offering — are generally acceptable in form.

However, Calderwood & Harkness objects to the breadth of certain additional provisions in the market-out clause. Specifically:

First, the UA Draft includes a broadly worded provision permitting the Representative to terminate the Agreement if, "in the reasonable judgment of the Representative," market conditions are such that the marketing, sale, or delivery of the shares would be "impracticable or inadvisable." We believe that a purely subjective "reasonable judgment" standard is inappropriate and creates undue uncertainty for the Company. Our mark-up proposes replacing this subjective standard with an objective standard requiring that the triggering event or condition "materially and adversely" affect the financial markets of the United States generally. This revision preserves the underwriters' legitimate protection against genuine market disruptions while preventing termination based on subjective assessments that are difficult to evaluate or challenge.

Second, the UA Draft contains a broad force majeure clause that would permit termination for any "calamity, crisis, or change in political, financial, or economic conditions" that renders it "impracticable" to market the shares. This provision is duplicative of the specific market-out triggers enumerated above and is unduly broad in its potential application. Our mark-up proposes deletion of this catch-all provision. To the extent a specific, identifiable market disruption event occurs, the enumerated triggers provide adequate protection; a duplicative catch-all is unnecessary and would introduce substantial ambiguity into the termination framework.

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 alternative, to terminate the Agreement if the aggregate commitment of the defaulting underwriter or underwriters exceeds 10% of the total number of shares to be purchased), are standard provisions and are acceptable to the Company. We note, however, that any assumption of a defaulting underwriter's commitment by the non-defaulting underwriters should not result in any change to the purchase price per share, the total underwriting discount, or any other material economic term of the Underwriting Agreement, and our mark-up includes a clarifying provision to that effect.

E. Lock-Up Provisions (Article V / Exhibit B of UA Draft)

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 parties will total approximately 45 signatories, covering approximately 80,000,000 shares of pre-IPO Common Stock — representing 100% of the Company's outstanding pre-IPO shares. The key lock-up signatories, and their respective shareholdings, are as follows:

The remaining approximately 8,400,000 shares are held by other directors, officers, and 1%+ holders who will also execute lock-up agreements.

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 descendants, and siblings), or charitable organizations, provided that the transferee or donee executes and delivers a lock-up agreement on substantially the same terms and conditions as the original lock-up agreement prior to or simultaneously with such transfer.

(ii) Pre-Existing Rule 10b5-1 Trading Plans. Transactions effected pursuant to trading plans established in compliance with Rule 10b5-1 under the Exchange Act that were in existence prior to the date of the Underwriting Agreement and that have been disclosed in the Registration Statement on Form S-1. We note that Dr. Nathaniel Rourke and Margaret Tsujimoto each have pre-existing Rule 10b5-1 trading plans in place. The Company requests that Whitfield Barrow, as Representative, execute a side letter confirming the parameters under which these pre-existing plans may operate during the lock-up period — including the dates, volume limits, and price thresholds of such plans — without requiring separate underwriter consent for each individual transaction executed thereunder. Absent such a side letter, the practical operation of these plans during the lock-up period will be impeded.

(iii) Open Market Purchases. Shares of Common Stock acquired in the open market after the completion of the Offering shall not be subject to the lock-up restrictions. This exception is intended to ensure that shares purchased by lock-up parties in the secondary market are freely tradable, consistent with market convention.

(iv) Tax Withholding. Transfers of up to 10% of a lock-up party's locked-up shares (measured as of the closing date of the Offering) for the purpose of satisfying tax withholding obligations arising in connection with the vesting of restricted stock units or other equity awards during the lock-up period. This exception is necessary to permit the Company's employees and executives to meet their tax obligations without being forced to borrow funds or sell non-locked-up assets.

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' prior written notice to the Company and to all other lock-up parties, before such release or waiver becomes effective. This notice period is necessary to permit orderly market activity and to ensure compliance with FINRA Rule 5131, which imposes research publication blackout requirements in connection with lock-up releases. The three-business-day notice period is consistent with FINRA Rule 5131(d)(2) and has become standard in recent IPO underwriting agreements.

Equal Treatment. If the Representative grants an early release or waiver of the lock-up restrictions to any lock-up party holding more than 1% of the Company's outstanding Common Stock (on a fully diluted basis), a proportionate release should be offered to all other lock-up parties, on a pro rata basis, so that no single lock-up party receives preferential treatment. This "pro rata release" provision ensures fairness among the lock-up parties and avoids the perception of selective favoritism.

Board Approval. Our mark-up provides that any request by a Company insider (including any director or executive officer) for an early release from the lock-up restrictions must be submitted to and approved by the Company's Board of Directors (or a designated committee thereof) prior to submission of such request to the Representative. This requirement ensures that the Board has visibility into and control over the release of insider shares and is consistent with the Company's governance framework and insider trading policies.

No Automatic Release for Mergers/Acquisitions. The UA Draft, as currently drafted, contains a provision that automatically releases the lock-up restrictions upon the execution by the Company of a definitive agreement providing for a change of control transaction (defined broadly to include mergers, consolidations, or sales of all or substantially all assets) during the lock-up period. We believe this provision is overly broad. An automatic release of 80,000,000 shares upon the mere signing of a definitive agreement — before any stockholder vote, regulatory approval, or consummation of the transaction — could create significant market disruption and would not serve the interests of the Company's public stockholders.

Our mark-up proposes narrowing this provision so that the automatic release applies only in circumstances where (i) the acquiror has made a tender offer or exchange offer for all outstanding shares of Common Stock, (ii) the Company's Board of Directors has approved the transaction and recommended that stockholders accept the offer, and (iii) the consideration per share offered in the transaction equals or exceeds the initial public offering price. This revision balances the lock-up parties' legitimate interest in participating in a change-of-control transaction against the need to maintain market stability during the lock-up period.

F. Covenants (Article IV of UA Draft)

Calderwood & Harkness's mark-up is generally consistent with the pre-closing operating covenants set forth in Article IV of the UA Draft, which are typical for initial public offerings. Our comments are limited to the following clarifications and supplemental provisions:

Interim Operating Covenant. The Company requests that the ordinary-course-of-business exception contained in the interim operating covenant be broadly construed, consistent with the Company's growth trajectory and operational needs. Arbor Health generated revenues of $612.4 million for the fiscal year ended December 31, 2023, representing a 28% increase over the prior fiscal year, and continues to make significant investments in product development, customer acquisition, and infrastructure. The interim covenant should not be interpreted in a manner that constrains the Company's ability to operate its business in the ordinary course or pursue strategic initiatives during the pre-closing period.

No Issuance of Securities Covenant. The UA Draft includes a covenant restricting the Company from issuing, selling, or granting any securities during the period between execution of the Underwriting Agreement and the closing date. Calderwood & Harkness proposes a carve-out from this covenant for (i) equity awards granted under the Company's 2014 Stock Incentive Plan in the ordinary course of business consistent with past practice, (ii) equity awards granted under the Company's 2024 Equity Incentive Plan (which becomes effective upon completion of the Offering) in the ordinary course of business, and (iii) purchases of Common Stock by employees under the Company's 2024 Employee Stock Purchase Plan in the ordinary course of business. Without this carve-out, the Company's ability to retain and incentivize its employees during a critical transition period would be unduly restricted.

MNPI Representation and Covenant. Calderwood & Harkness accepts the representation that no material non-public information has been provided to potential investors in connection with the Offering outside of the Registration Statement and Prospectus (and any permitted free writing prospectus), and the Company's covenant not to issue any press release or public statement during the restricted period (from execution through 40 days after the closing date) without the prior written consent of the Representative. We note that this covenant is subject to an exception for disclosures required by applicable law, SEC regulations, or NYSE listing standards, and our mark-up clarifies that this exception includes, without limitation, the Company's obligation to file current reports on Form 8-K and to make disclosures required by Regulation FD.

G. Miscellaneous Provisions

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 Underwriting Agreement.

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:

Calderwood & Harkness LLP 125 Broad Street New York, NY 10004

Attention: Theodore Langston

If to the Representative:

Whitfield Barrow & Co., LLC 383 Madison Avenue New York, NY 10179

Attention: Jonathan Pritchett, Managing Director, Equity Capital Markets

With a copy (which shall not constitute notice) to:

Meridian Hale & Quivorn LLP 51 West 52nd Street New York, NY 10019

Attention: Graham Neville

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 behalf of any indemnified party and shall be subject only to applicable statutes of limitation.

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 reimburse the underwriters for their reasonable out-of-pocket expenses (exclusive of the fees of the underwriters' own counsel, Meridian Hale & Quivorn LLP) should be capped at $250,000. This cap is consistent with market practice for offerings of this size and provides the underwriters with reasonable assurance of expense recovery while protecting the Company from open-ended exposure in a terminated deal.

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 revolving credit facility (the "Credit Facility") with Keypoint National Bank, N.A. (as Administrative Agent) and Stonemill Capital Bank (as Lender). The First Amendment to the Credit Agreement governing the Credit Facility was executed on January 18, 2024, to address IPO-related matters, including amendments to the change of control definition and the addition of a permitted equity issuance carve-out that specifically contemplates the Offering. This use of proceeds is fully disclosed in the "Use of Proceeds" section of the Prospectus. Calderwood & Harkness requests that the Underwriting Agreement not impose any additional conditions, restrictions, or covenants on the Company's use of the net proceeds from the Offering beyond those described in the Prospectus. Any such additional restrictions would be inconsistent with market practice and unnecessary in light of the comprehensive disclosure already provided to investors.

Pricing and Execution Timeline. Calderwood & Harkness anticipates that the final pricing and execution of the Underwriting Agreement will occur promptly upon the declaration of effectiveness of the Registration Statement by the SEC, with closing to follow at T+3 settlement thereafter. Based on the current SEC review timeline and the anticipated commencement of the roadshow on January 29, 2024, the Company currently expects effectiveness on or about February 8, 2024, with closing on or about February 13, 2024. The Company expects to circulate the Pricing Committee Resolutions, authorizing the Board's designated pricing committee (consisting of Dr. Nathaniel Rourke and Margaret Tsujimoto) to determine the final offering price within the range set forth in the final prospectus, promptly upon determination of the final offering price at the conclusion of the roadshow.

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 will circulate, under separate cover, draft forms of the following closing deliverables for the working group's review and comment: (i) the issuer's counsel legal opinion, (ii) the Delaware law opinion, (iii) the negative assurance letter (10b-5 letter), (iv) the tax opinion, (v) the officers' certificate, and (vi) the secretary's certificate. We anticipate distributing these drafts by January 30, 2024.

The Company, together with Calderwood & Harkness, is available for a working group call at Meridian Hale's convenience to discuss any or all of the positions outlined in this letter. We believe that a call early in the week of January 29 would be productive, given the density of the open issues and the desirability of resolving the key points prior to the commencement of the roadshow.

We note that the Company's Registration Statement on Form S-1 (File No. 333-276841) was publicly filed with the SEC on January 22, 2024, and the investor roadshow is currently scheduled to commence on January 29, 2024. Timely resolution of the Underwriting Agreement terms is therefore critical to maintaining the Offering timeline, and we urge the parties to give priority attention to these matters in the coming days.

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 group call.

Very truly yours,

CALDERWOOD & HARKNESS LLP

By: ________

Theodore Langston Partner

Telephone: (212) 558-4127

Email: tlangston@calderwoodharkness.com

cc: Rachel Moynihan, General Counsel & Corporate Secretary, Arbor Health Technologies Inc.

cc: David Halderman, Chief Financial Officer, Arbor Health Technologies Inc.

cc: Jonathan Pritchett, Managing Director, Equity Capital Markets, Whitfield Barrow & Co., LLC

cc: Eric Johannsen, Calderwood & Harkness LLP

cc: Kathryn Brennan, Meridian Hale & Quivorn LLP

Enclosures:

Enclosure A: Calderwood & Harkness Annotated Mark-Up of the Underwriting Agreement (blackline against Whitfield Barrow initial draft dated January 18, 2024)

Underwriter	Commitment (%)
Whitfield Barrow & Co., LLC	50%
Calloway Pierce Securities LLC	30%
Velthorn Capital Partners Inc.	12%
Pemberton Wallis LLC	8%
Lock-Up Party	Shares of Common Stock
Dr. Nathaniel Rourke, CEO & Co-Founder	12,800,000
Margaret Tsujimoto, President & COO	9,600,000
David Halderman, CFO	2,400,000
Rachel Moynihan, General Counsel & Corporate Secretary	1,200,000
Dr. Priya Subramanian, CTO	1,600,000
Brindoval Trelvon Partners Fund IV, L.P.	28,000,000
Ridgeline Growth Equity Fund III, LLC	16,000,000
Expense Category	Estimated Amount
SEC registration fee	~$44,280
NYSE listing fee	~$295,000
FINRA filing fee	~$68,720
Printing and EDGAR costs (Toppan Donnelley)	~$385,000
Legal fees — issuer's counsel (Calderwood & Harkness LLP)	~$1,800,000
Accounting fees (Kellerman & Associates LLP)	~$950,000
Blue sky fees, transfer agent fees, and miscellaneous	~$657,000
Total estimated offering expenses	~$4,200,000

PRIVILEGED & CONFIDENTIAL
CALDERWOOD & HARKNESS LLP Attorneys at Law
125 Broad Street New York, NY 10004
Telephone: (212) 558-4000 Facsimile: (212) 558-3588 www.calderwoodharkness.com
January 25, 2024
Graham Neville, Esq. Meridian Hale & Quivorn LLP 51 West 52nd Street New York, NY 10019
Re: Arbor Health Technologies Inc. — Initial Public Offering of Common Stock; Underwriting Agreement Comments SEC File No. 333-276841
Dear Graham:
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 under the ticker symbol "ARHT."
We are transmitting herewith, as Enclosure A to this letter, Calderwood & Harkness's annotated mark-up of the initial draft of the Underwriting Agreement (the "UA Draft") that was circulated by Whitfield Barrow & Co., LLC ("Whitfield Barrow"), in its capacity as Representative of the several underwriters (the "Representative"), to the working group on January 18, 2024. The mark-up reflects the Company's proposed revisions, together with annotations and comments embedded in the margins for ease of reference.
As you are aware, the underwriting syndicate for the Offering consists of the following firms, in their respective capacities:
• Whitfield Barrow & Co., LLC — Lead Left Bookrunner and Representative of the several underwriters;
• Calloway Pierce Securities LLC — Joint Bookrunner;
• Velthorn Capital Partners Inc. — Joint Bookrunner; and
• Pemberton Wallis LLC — Co-Manager.
The base Offering contemplates the sale of 20,000,000 shares of Common Stock, with an overallotment option (the "Overallotment Option") granted to the underwriters to purchase up to 3,000,000 additional shares of Common Stock, representing 15% of the base offering. The preliminary prospectus forming part of the Company's Registration Statement on Form S-1 (File No. 333-276841), as filed with the Securities and Exchange Commission (the "SEC") on January 22, 2024, reflects an initial estimated price range of $17.00 to $19.00 per share.
The purpose of this letter is to summarize the Company's key positions on the material open points in the UA Draft and to provide context and explanation for our mark-up, in order to facilitate efficient negotiation among the parties and their respective counsel. We have endeavored to organize these comments topically, corresponding generally to the article structure of the UA Draft. Our positions on each point have been informed by discussions with Rachel Moynihan, General Counsel and Corporate Secretary, and David Halderman, Chief Financial Officer, of Arbor Health, each of whom has reviewed and approved the substantive positions set forth herein on behalf of the Company.
We note at the outset that many provisions of the UA Draft are consistent with customary market practice for initial public offerings of this type and size, and our mark-up reflects relatively few changes in those areas. Our comments are principally directed to provisions where we believe the UA Draft departs from market norms or where clarification is warranted given the nature of the Company's business as a healthcare SaaS platform. We look forward to discussing these points with you and the Whitfield Barrow team at your earliest convenience.
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 offerings of comparable size. We address each area of comment below.
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, each of which we believe reflects well-settled market practice.
First, we have revised the Company's indemnification obligation so that it is expressly limited to losses, claims, damages, liabilities, and expenses (including reasonable attorneys' fees and expenses) arising out of or based upon (a) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (or any amendment thereto), the Prospectus (including any preliminary prospectus, any amended or supplemented prospectus, or any "free writing prospectus" as defined in Rule 405 under the Securities Act of 1933, as amended (the "Securities Act")), or any "issuer information" filed or required to be filed pursuant to Rule 433(d) under the Securities Act, or (b) any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. This formulation is consistent with the scope of liability under Section 11 and Section 12(a)(2) of the Securities Act and is the standard indemnification formulation in underwriting agreements for registered public offerings.
Second, and critically, our mark-up includes an express carve-out from the Company's indemnification obligation for any losses, claims, damages, liabilities, or expenses to the extent that such losses arise out of or are based upon any untrue statement or alleged untrue statement, or any omission or alleged omission, in reliance upon and in conformity with information furnished in writing by or on behalf of any underwriter through the Representative specifically for use in the Registration Statement or Prospectus (or any amendment or supplement thereto). This is the standard "underwriter information" carve-out, and we understand that the underwriter information consists of the following: (i) the stabilization and overallotment language in the prospectus, (ii) the syndicate participation paragraph identifying the underwriters and their respective commitments, and (iii) the electronic delivery paragraph. We request that Whitfield Barrow confirm in writing the precise paragraphs constituting underwriter information so that the carve-out can be appropriately cross-referenced.
Third, our mark-up adds a clarification providing that the Company's indemnification obligation does not extend to losses that are attributable solely to an underwriter's failure to deliver a final prospectus or prospectus supplement to purchasers of the shares as and when required by Section 5 of the Securities Act. To the extent that any underwriter fails to deliver the prospectus in accordance with its obligations under the Securities Act and the rules and regulations thereunder, the resulting liability should not be shifted to the Company through the indemnification mechanism.
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 person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), against any and all losses, claims, damages, liabilities, and expenses arising out of or based upon any untrue statement or alleged untrue statement, or any omission or alleged omission, made in the Registration Statement or Prospectus in reliance upon and in conformity with information furnished by or on behalf of such underwriter in writing specifically for inclusion therein. Our mark-up requests clarification that this indemnification covers all information furnished by or on behalf of the underwriters, whether furnished by the Representative on behalf of the syndicate or by any individual underwriter, so as to eliminate any ambiguity as to coverage.
We note that the "several and not joint" formulation for the underwriters' indemnification obligation, as set forth in the UA Draft, is acceptable to the Company. The proportionate allocation of the several indemnification obligation among the underwriters should, however, be based upon each underwriter's respective underwriting commitment as a percentage of the total offering, which we understand to be as follows:
This proportionate allocation is reflected in our mark-up and should be confirmed by the Representative.
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. Securities Litigation, 388 F. Supp. 2d 319 (S.D.N.Y. 2005), rather than a pure relative-benefit test. A contribution provision that looks solely to relative benefit, without regard to relative fault, risks being held unenforceable as inequitable. Accordingly, our mark-up revises the contribution clause to provide that the relative fault of the Company, on the one hand, and the underwriters, on the other, shall be determined by reference to, among other things, whether the untrue statement or omission relates to information supplied by the Company or by the underwriters, and the parties' relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission, in addition to the relative benefit received by each party from the Offering.
With respect to contribution caps, we propose that the maximum contribution obligation of each underwriter be set at the total underwriting discount actually received by such underwriter — that is, $1.20 per share multiplied by the total number of shares purchased by such underwriter (including any shares purchased pursuant to the Overallotment Option). The UA Draft, in its current form, contains language that could be read to limit the underwriters' contribution obligation to a lesser amount, which is not consistent with market practice and is not acceptable to the Company. We have revised this provision accordingly.
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 claim or proceeding. As drafted, the UA Draft conditions the indemnifying party's right to assume defense upon an acknowledgment of the indemnifying party's liability for such claim. We believe that the right to assume defense should not be so conditioned, as this could create a practical impediment to efficient claims management. Our mark-up removes this condition, while preserving the indemnified party's right to withhold consent to the assumption of defense where the indemnifying party and the indemnified party have conflicting interests that would make joint representation inappropriate.
Second, our mark-up clarifies that, even after the indemnifying party has assumed the defense of a claim, the indemnified party retains the right to engage separate counsel of its own choosing, at its own expense, to monitor and participate in the defense. This is a standard protective provision and does not alter the allocation of defense costs, but it ensures that the indemnified party is not left without representation in circumstances where its interests may diverge from those of the indemnifying party.
Third, we have added a restriction on settlements without the consent of the indemnified party. Specifically, no settlement of any claim may be effected by the indemnifying party without the prior written consent of the indemnified party (which consent shall not be unreasonably withheld, conditioned, or delayed), unless such settlement (a) includes an unconditional release of the indemnified party from all liability on claims that are the subject matter of such proceeding, (b) does not include any statement or admission of fault, culpability, or failure to act by or on behalf of the indemnified party, and (c) does not impose any non-monetary obligations on the indemnified party. This formulation protects both parties and is consistent with prevailing practice in underwriting agreements for offerings of this size.
B. Representations and Warranties (Article I of UA Draft)
The representations and warranties set forth in Article I of the UA Draft are extensive and cover a broad range of matters relating to the Company's business, operations, financial condition, and legal compliance. While the Company is prepared to make robust and comprehensive representations in connection with the Offering, a number of the representations as currently drafted are stated in flat, unqualified terms that are commercially unreasonable and inconsistent with market practice. Our mark-up introduces appropriate qualifiers and makes clarifying revisions, as described below.
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 compliance with all applicable federal, state, local, and foreign laws, rules, regulations, and ordinances has been qualified by materiality. Given the breadth of laws applicable to a healthcare SaaS company with operations touching 42 states, a flat compliance representation is not commercially reasonable. Our mark-up provides that the Company is in compliance with all applicable laws, except where the failure to be in compliance would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(b) Absence of Litigation. The litigation representation has been qualified by materiality as to undisclosed proceedings. The Company has disclosed all material pending and threatened legal proceedings in the risk factors section of the Registration Statement on Form S-1, and our mark-up cross-references those disclosures. As to any proceedings not specifically disclosed, the representation is qualified by a materiality standard, providing that no such proceedings exist that would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(c) Tax Matters. The tax representations have been qualified by materiality. The Company has nexus in, and files income, franchise, and/or other tax returns in, ten states — Massachusetts, New York, California, Texas, Illinois, Florida, Pennsylvania, Ohio, New Jersey, and Georgia — as well as at the federal level. Given this multi-state filing profile, a flat representation that the Company has filed all required tax returns and paid all taxes due and owing is commercially unreasonable. Our mark-up provides the customary materiality qualification.
(d) intellectual Property. The representations relating to the Company's intellectual property have been qualified by materiality, and a knowledge qualifier has been added with respect to representations concerning third-party infringement claims. The Company owns or licenses a substantial portfolio of intellectual property, including proprietary software platforms, patents, trademarks, and trade secrets, and a flat representation with respect to the absence of infringement claims by third parties is not appropriate absent a knowledge qualifier. Our mark-up addresses this in a manner consistent with market practice.
(e) Employee Matters and ERISA. The representations relating to employment matters and compliance with ERISA and the Code have been qualified by materiality. The Company employs approximately 4,800 employees across its operations, and a flat representation regarding compliance with all employment and benefit plan laws and regulations is not commercially reasonable.
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 in the aggregate, has had, or would reasonably be expected to have, a material adverse effect on (i) the business, properties, assets, liabilities, results of operations, or financial condition of the Company and its subsidiaries, taken as a whole, or (ii) the ability of the Company to consummate the transactions contemplated by this Agreement; provided, however, that none of the following, individually or in the aggregate, shall be deemed to constitute, or shall be taken into account in determining whether there has been or would reasonably be expected to be, a Material Adverse Effect:
(a) changes in general economic, business, financial, or market conditions;
(b) changes or developments generally affecting the healthcare services industry or the software-as-a-service industry;
(c) changes in applicable law or regulation, or in generally accepted accounting principles ("GAAP"), or the interpretation or enforcement thereof;
(d) effects arising from or relating to the public announcement or pendency of the Offering or the other transactions contemplated hereby; and
(e) pandemics, epidemics, natural disasters, acts of terrorism, or other force majeure events;
provided, further, that the exceptions set forth in clauses (a), (b), (c), and (e) above shall not apply to the extent that any such event, circumstance, development, change, or effect has a disproportionate adverse effect on the Company and its subsidiaries, taken as a whole, relative to other companies operating in the healthcare technology sector of comparable size and scope.
This definition is consistent with the prevailing standard in recent healthcare technology IPOs and provides appropriate protections for both the Company and the underwriters.
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 reasonable inquiry of their direct reports and review of the Company's books and records:
• Dr. Nathaniel Rourke, Chief Executive Officer and Co-Founder;
• Margaret Tsujimoto, President and Chief Operating Officer;
• David Halderman, Chief Financial Officer;
• Rachel Moynihan, General Counsel and Corporate Secretary; and
• Dr. Priya Subramanian, Chief Technology Officer.
We have proposed the addition of knowledge qualifiers to the following specific representations: (i) representations concerning the existence or absence of third-party intellectual property infringement claims, (ii) representations concerning undisclosed governmental investigations or inquiries, and (iii) representations concerning cybersecurity breaches and incidents. In each case, the underlying subject matter involves facts and circumstances that may not be within the actual or constructive knowledge of the Company despite the exercise of reasonable diligence, and a flat, unqualified representation would be inappropriate.
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, without giving effect to any materiality or MAE qualifiers embedded in the representations themselves.
We believe this "double materiality scrub" issue should be resolved in favor of a standard that requires the representations and warranties to be true and correct as of the closing date to the same extent as they were made as of the date of the Underwriting Agreement — that is, subject to the same materiality and MAE qualifications that apply to the underlying representations. This is the prevailing standard in healthcare technology IPOs and avoids the anomalous result of requiring a bring-down to a higher standard of accuracy than was required when the representations were originally given. Our mark-up revises both the closing condition and the form of officers' certificate accordingly.
The same bring-down standard should apply to any overallotment closing, if the Overallotment Option is exercised.
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 consistent basis throughout the periods involved. We note that the Company's audited financial statements for the fiscal years ended December 31, 2023 and December 31, 2022, included in the Registration Statement, have been examined by Kellerman & Associates LLP, the Company's independent registered public accounting firm, and that comfort letters in customary form (SAS 72 / AU-C 920 format) will be delivered by Kellerman & Associates at pricing and at closing.
Capitalization Representation. Our mark-up updates the capitalization representation to reflect the Company's capital structure as of the date of the Registration Statement. As of January 22, 2024, the Company had 80,000,000 shares of Common Stock outstanding on a pre-IPO basis. In addition, the Company has the following equity compensation arrangements, each of which should be fully disclosed in the capitalization representation:
• 2014 Stock Incentive Plan: 11,200,000 shares of Common Stock subject to outstanding options, of which 8,400,000 are vested and exercisable, with a weighted average exercise price of $3.25 per share;
• 2024 Equity Incentive Plan: 10,300,000 shares of Common Stock reserved for future issuance, adopted by the Board of Directors and approved by the stockholders on January 15, 2024, and effective upon the completion of the Offering; and
• 2024 Employee Stock Purchase Plan ("ESPP"): 2,060,000 shares of Common Stock reserved for issuance, adopted by the Board of Directors and approved by the stockholders on January 15, 2024, and effective upon the completion of the Offering.
The mark-up revises the capitalization table in the representation accordingly and provides that, except as set forth in the Registration Statement, there are no outstanding options, warrants, rights, or commitments to issue shares of capital stock or other securities of the Company.
No Undisclosed Liabilities. Calderwood & Harkness proposes that the representation concerning the absence of undisclosed liabilities be qualified to exclude liabilities incurred in the ordinary course of business consistent with past practice since the date of the Company's most recent audited balance sheet, which is December 31, 2023. This is a standard qualification, as it would be impracticable for the Company to represent on a flat basis that no liabilities of any kind have arisen in the interim period.
HIPAA / Data Privacy. The UA Draft includes a broad representation regarding the Company's compliance with the Health Insurance Portability and Accountability Act of 1996 ("HIPAA"), the Health Information Technology for Economic and Clinical Health Act ("HITECH"), and applicable state data privacy and security laws and regulations. Given that Arbor Health's healthcare SaaS platform currently serves more than 1,200 hospital systems across 42 states and processes substantial volumes of protected health information ("PHI") and other sensitive data, this representation is of particular importance. Our mark-up qualifies this representation with (i) a materiality qualifier, (ii) a knowledge qualifier with respect to representations concerning third-party data breaches (i.e., breaches occurring at the Company's customers, business associates, or third-party vendors that have not been reported to the Company), and (iii) a cross-reference to the risk factor disclosures relating to data privacy, cybersecurity, and HIPAA compliance set forth in the Registration Statement on Form S-1. These qualifications are appropriate given the inherent complexity of data privacy compliance in the healthcare technology sector and do not diminish the Company's commitment to robust data protection practices.
C. Conditions Precedent to Closing (Article VI of UA Draft)
Calderwood & Harkness's mark-up is generally consistent with the structure and substance of the conditions precedent to closing set forth in Article VI of the UA Draft. The conditions are typical for an initial public offering of this nature, and our comments are limited to clarifications and supplemental provisions as described below.
Legal Opinions. The closing is conditioned upon the delivery of the following legal opinions and letters of Calderwood & Harkness LLP, as counsel to the Company:
(i) A legal opinion addressing the valid issuance, due authorization, and full payment and non-assessability of the shares of Common Stock to be sold in the Offering;
(ii) A Delaware law opinion addressing the corporate existence and good standing of the Company under the laws of the State of Delaware;
(iii) A negative assurance letter (commonly referred to as a "10b-5 letter") stating that, based on our review of the Registration Statement and Prospectus and our participation in the preparation thereof, nothing has come to our attention that causes us to believe that the Registration Statement or Prospectus contains an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading; and
(iv) A tax opinion addressing certain U.S. federal income tax consequences of the Offering.
Calderwood & Harkness requests that the UA provide that the forms of these opinions will be "substantially in the form agreed upon by the Company, the Representative, and their respective counsel and attached as exhibits to this Agreement." We will circulate draft forms of these opinions and letters under separate cover, and we believe it is important that the parties agree on the scope and form of the opinions prior to execution of the Underwriting Agreement, rather than leaving these matters open for negotiation at closing.
Comfort Letters. The closing is conditioned upon the delivery of a comfort letter from Kellerman & Associates LLP, the Company's independent registered public accounting firm, at pricing (anticipated to be February 8, 2024) and a bring-down comfort letter at closing (anticipated to be February 13, 2024). We understand that the comfort letters will be in customary form consistent with the Statement on Auditing Standards No. 72 (AU-C Section 920) and will address, among other things, the financial data derived from the Company's accounting records, selected financial data, and certain statistical data included in the Registration Statement and Prospectus. Calderwood & Harkness has no material comments on the comfort letter condition as set forth in the UA Draft.
Officers' Certificate. The closing is conditioned upon the delivery of a certificate executed by the Company's Chief Executive Officer, Dr. Nathaniel Rourke, and the Company's Chief Financial Officer, David Halderman, certifying as to (i) the accuracy of the Company's representations and warranties as of the closing date, (ii) the Company's compliance with all covenants and agreements to be performed prior to closing, and (iii) the absence of any Material Adverse Effect since the date of the most recent financial statements included in the Registration Statement. Calderwood & Harkness accepts this condition, subject to the bring-down materiality standard discussed in Section II.B.4 above. Our mark-up revises the form of officers' certificate to be consistent with that standard.
Secretary's Certificate. The closing is conditioned upon the delivery of a certificate executed by Rachel Moynihan, in her capacity as General Counsel and Corporate Secretary of the Company, attaching certified copies of (i) the Amended and Restated Certificate of Incorporation of the Company (as filed with the Secretary of State of the State of Delaware in connection with the IPO), (ii) the Amended and Restated Bylaws of the Company, and (iii) all resolutions of the Board of Directors and the stockholders of the Company authorizing the Offering, the execution and delivery of the Underwriting Agreement, and the related transactions. Calderwood & Harkness accepts this condition.
Good Standing Certificates. The closing is conditioned upon the delivery of certificates of good standing (or the equivalent) from (i) the Secretary of State of the State of Delaware and (ii) the Secretary of the Commonwealth of Massachusetts, each dated within five (5) business days of the closing date. Calderwood & Harkness accepts this condition as drafted.
Lock-Up Agreements. The closing is conditioned upon receipt by the Representative, Whitfield Barrow, of executed lock-up agreements from all directors, executive officers, and holders of 1% or more of the Company's pre-IPO Common Stock (approximately 45 signatories, covering approximately 80,000,000 shares of pre-IPO Common Stock, representing 100% of the pre-IPO shares outstanding). Calderwood & Harkness accepts this condition, subject to our comments on the substantive terms of the lock-up agreements as set forth in Section II.E below.
FINRA No-Objections Letter. The closing is conditioned upon receipt of a letter from the Financial Industry Regulatory Authority ("FINRA") confirming that it has no objection to the terms and arrangements of the underwriting. Calderwood & Harkness accepts this condition. We note that the FINRA filing was made in connection with the public filing of the Registration Statement and that the Company anticipates receipt of the no-objections letter prior to the anticipated pricing date.
NYSE Listing Approval. The closing is conditioned upon receipt of an approval letter from the New York Stock Exchange confirming the listing of the Common Stock on the NYSE under the ticker symbol "ARHT," subject only to official notice of issuance. Calderwood & Harkness accepts this condition.
DTC Eligibility. The closing is conditioned upon the Company's Common Stock being eligible for book-entry transfer and settlement through The Depository Trust Company ("DTC"). Continental Share Services, Inc., the Company's transfer agent and registrar, has confirmed DTC eligibility for shares of the Company's Common Stock (CUSIP No. 039217105). Calderwood & Harkness accepts this condition.
D. Market-Out and Termination Provisions (Article VIII of UA Draft)
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 events for market-out termination — including (i) any suspension of trading in the Company's securities or in securities generally on the New York Stock Exchange or the Nasdaq Stock Market, (ii) a material disruption in securities settlement, payment, or clearance services in the United States, (iii) any declaration of a banking moratorium or any suspension of payments in respect of banks by federal or state authorities, and (iv) any outbreak or escalation of hostilities or other calamity or crisis the effect of which on the financial markets of the United States is such as to make it, in the judgment of the Representative, impracticable or inadvisable to proceed with the Offering — are generally acceptable in form.
However, Calderwood & Harkness objects to the breadth of certain additional provisions in the market-out clause. Specifically:
First, the UA Draft includes a broadly worded provision permitting the Representative to terminate the Agreement if, "in the reasonable judgment of the Representative," market conditions are such that the marketing, sale, or delivery of the shares would be "impracticable or inadvisable." We believe that a purely subjective "reasonable judgment" standard is inappropriate and creates undue uncertainty for the Company. Our mark-up proposes replacing this subjective standard with an objective standard requiring that the triggering event or condition "materially and adversely" affect the financial markets of the United States generally. This revision preserves the underwriters' legitimate protection against genuine market disruptions while preventing termination based on subjective assessments that are difficult to evaluate or challenge.
Second, the UA Draft contains a broad force majeure clause that would permit termination for any "calamity, crisis, or change in political, financial, or economic conditions" that renders it "impracticable" to market the shares. This provision is duplicative of the specific market-out triggers enumerated above and is unduly broad in its potential application. Our mark-up proposes deletion of this catch-all provision. To the extent a specific, identifiable market disruption event occurs, the enumerated triggers provide adequate protection; a duplicative catch-all is unnecessary and would introduce substantial ambiguity into the termination framework.
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 alternative, to terminate the Agreement if the aggregate commitment of the defaulting underwriter or underwriters exceeds 10% of the total number of shares to be purchased), are standard provisions and are acceptable to the Company. We note, however, that any assumption of a defaulting underwriter's commitment by the non-defaulting underwriters should not result in any change to the purchase price per share, the total underwriting discount, or any other material economic term of the Underwriting Agreement, and our mark-up includes a clarifying provision to that effect.
E. Lock-Up Provisions (Article V / Exhibit B of UA Draft)
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 parties will total approximately 45 signatories, covering approximately 80,000,000 shares of pre-IPO Common Stock — representing 100% of the Company's outstanding pre-IPO shares. The key lock-up signatories, and their respective shareholdings, are as follows:
The remaining approximately 8,400,000 shares are held by other directors, officers, and 1%+ holders who will also execute lock-up agreements.
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 descendants, and siblings), or charitable organizations, provided that the transferee or donee executes and delivers a lock-up agreement on substantially the same terms and conditions as the original lock-up agreement prior to or simultaneously with such transfer.
(ii) Pre-Existing Rule 10b5-1 Trading Plans. Transactions effected pursuant to trading plans established in compliance with Rule 10b5-1 under the Exchange Act that were in existence prior to the date of the Underwriting Agreement and that have been disclosed in the Registration Statement on Form S-1. We note that Dr. Nathaniel Rourke and Margaret Tsujimoto each have pre-existing Rule 10b5-1 trading plans in place. The Company requests that Whitfield Barrow, as Representative, execute a side letter confirming the parameters under which these pre-existing plans may operate during the lock-up period — including the dates, volume limits, and price thresholds of such plans — without requiring separate underwriter consent for each individual transaction executed thereunder. Absent such a side letter, the practical operation of these plans during the lock-up period will be impeded.
(iii) Open Market Purchases. Shares of Common Stock acquired in the open market after the completion of the Offering shall not be subject to the lock-up restrictions. This exception is intended to ensure that shares purchased by lock-up parties in the secondary market are freely tradable, consistent with market convention.
(iv) Tax Withholding. Transfers of up to 10% of a lock-up party's locked-up shares (measured as of the closing date of the Offering) for the purpose of satisfying tax withholding obligations arising in connection with the vesting of restricted stock units or other equity awards during the lock-up period. This exception is necessary to permit the Company's employees and executives to meet their tax obligations without being forced to borrow funds or sell non-locked-up assets.
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' prior written notice to the Company and to all other lock-up parties, before such release or waiver becomes effective. This notice period is necessary to permit orderly market activity and to ensure compliance with FINRA Rule 5131, which imposes research publication blackout requirements in connection with lock-up releases. The three-business-day notice period is consistent with FINRA Rule 5131(d)(2) and has become standard in recent IPO underwriting agreements.
Equal Treatment. If the Representative grants an early release or waiver of the lock-up restrictions to any lock-up party holding more than 1% of the Company's outstanding Common Stock (on a fully diluted basis), a proportionate release should be offered to all other lock-up parties, on a pro rata basis, so that no single lock-up party receives preferential treatment. This "pro rata release" provision ensures fairness among the lock-up parties and avoids the perception of selective favoritism.
Board Approval. Our mark-up provides that any request by a Company insider (including any director or executive officer) for an early release from the lock-up restrictions must be submitted to and approved by the Company's Board of Directors (or a designated committee thereof) prior to submission of such request to the Representative. This requirement ensures that the Board has visibility into and control over the release of insider shares and is consistent with the Company's governance framework and insider trading policies.
No Automatic Release for Mergers/Acquisitions. The UA Draft, as currently drafted, contains a provision that automatically releases the lock-up restrictions upon the execution by the Company of a definitive agreement providing for a change of control transaction (defined broadly to include mergers, consolidations, or sales of all or substantially all assets) during the lock-up period. We believe this provision is overly broad. An automatic release of 80,000,000 shares upon the mere signing of a definitive agreement — before any stockholder vote, regulatory approval, or consummation of the transaction — could create significant market disruption and would not serve the interests of the Company's public stockholders.
Our mark-up proposes narrowing this provision so that the automatic release applies only in circumstances where (i) the acquiror has made a tender offer or exchange offer for all outstanding shares of Common Stock, (ii) the Company's Board of Directors has approved the transaction and recommended that stockholders accept the offer, and (iii) the consideration per share offered in the transaction equals or exceeds the initial public offering price. This revision balances the lock-up parties' legitimate interest in participating in a change-of-control transaction against the need to maintain market stability during the lock-up period.
F. Covenants (Article IV of UA Draft)
Calderwood & Harkness's mark-up is generally consistent with the pre-closing operating covenants set forth in Article IV of the UA Draft, which are typical for initial public offerings. Our comments are limited to the following clarifications and supplemental provisions:
Interim Operating Covenant. The Company requests that the ordinary-course-of-business exception contained in the interim operating covenant be broadly construed, consistent with the Company's growth trajectory and operational needs. Arbor Health generated revenues of $612.4 million for the fiscal year ended December 31, 2023, representing a 28% increase over the prior fiscal year, and continues to make significant investments in product development, customer acquisition, and infrastructure. The interim covenant should not be interpreted in a manner that constrains the Company's ability to operate its business in the ordinary course or pursue strategic initiatives during the pre-closing period.
No Issuance of Securities Covenant. The UA Draft includes a covenant restricting the Company from issuing, selling, or granting any securities during the period between execution of the Underwriting Agreement and the closing date. Calderwood & Harkness proposes a carve-out from this covenant for (i) equity awards granted under the Company's 2014 Stock Incentive Plan in the ordinary course of business consistent with past practice, (ii) equity awards granted under the Company's 2024 Equity Incentive Plan (which becomes effective upon completion of the Offering) in the ordinary course of business, and (iii) purchases of Common Stock by employees under the Company's 2024 Employee Stock Purchase Plan in the ordinary course of business. Without this carve-out, the Company's ability to retain and incentivize its employees during a critical transition period would be unduly restricted.
MNPI Representation and Covenant. Calderwood & Harkness accepts the representation that no material non-public information has been provided to potential investors in connection with the Offering outside of the Registration Statement and Prospectus (and any permitted free writing prospectus), and the Company's covenant not to issue any press release or public statement during the restricted period (from execution through 40 days after the closing date) without the prior written consent of the Representative. We note that this covenant is subject to an exception for disclosures required by applicable law, SEC regulations, or NYSE listing standards, and our mark-up clarifies that this exception includes, without limitation, the Company's obligation to file current reports on Form 8-K and to make disclosures required by Regulation FD.
G. Miscellaneous Provisions
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 Underwriting Agreement.
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:
Calderwood & Harkness LLP 125 Broad Street New York, NY 10004
Attention: Theodore Langston
If to the Representative:
Whitfield Barrow & Co., LLC 383 Madison Avenue New York, NY 10179
Attention: Jonathan Pritchett, Managing Director, Equity Capital Markets
With a copy (which shall not constitute notice) to:
Meridian Hale & Quivorn LLP 51 West 52nd Street New York, NY 10019
Attention: Graham Neville
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 behalf of any indemnified party and shall be subject only to applicable statutes of limitation.
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 reimburse the underwriters for their reasonable out-of-pocket expenses (exclusive of the fees of the underwriters' own counsel, Meridian Hale & Quivorn LLP) should be capped at $250,000. This cap is consistent with market practice for offerings of this size and provides the underwriters with reasonable assurance of expense recovery while protecting the Company from open-ended exposure in a terminated deal.
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 revolving credit facility (the "Credit Facility") with Keypoint National Bank, N.A. (as Administrative Agent) and Stonemill Capital Bank (as Lender). The First Amendment to the Credit Agreement governing the Credit Facility was executed on January 18, 2024, to address IPO-related matters, including amendments to the change of control definition and the addition of a permitted equity issuance carve-out that specifically contemplates the Offering. This use of proceeds is fully disclosed in the "Use of Proceeds" section of the Prospectus. Calderwood & Harkness requests that the Underwriting Agreement not impose any additional conditions, restrictions, or covenants on the Company's use of the net proceeds from the Offering beyond those described in the Prospectus. Any such additional restrictions would be inconsistent with market practice and unnecessary in light of the comprehensive disclosure already provided to investors.
Pricing and Execution Timeline. Calderwood & Harkness anticipates that the final pricing and execution of the Underwriting Agreement will occur promptly upon the declaration of effectiveness of the Registration Statement by the SEC, with closing to follow at T+3 settlement thereafter. Based on the current SEC review timeline and the anticipated commencement of the roadshow on January 29, 2024, the Company currently expects effectiveness on or about February 8, 2024, with closing on or about February 13, 2024. The Company expects to circulate the Pricing Committee Resolutions, authorizing the Board's designated pricing committee (consisting of Dr. Nathaniel Rourke and Margaret Tsujimoto) to determine the final offering price within the range set forth in the final prospectus, promptly upon determination of the final offering price at the conclusion of the roadshow.
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 will circulate, under separate cover, draft forms of the following closing deliverables for the working group's review and comment: (i) the issuer's counsel legal opinion, (ii) the Delaware law opinion, (iii) the negative assurance letter (10b-5 letter), (iv) the tax opinion, (v) the officers' certificate, and (vi) the secretary's certificate. We anticipate distributing these drafts by January 30, 2024.
The Company, together with Calderwood & Harkness, is available for a working group call at Meridian Hale's convenience to discuss any or all of the positions outlined in this letter. We believe that a call early in the week of January 29 would be productive, given the density of the open issues and the desirability of resolving the key points prior to the commencement of the roadshow.
We note that the Company's Registration Statement on Form S-1 (File No. 333-276841) was publicly filed with the SEC on January 22, 2024, and the investor roadshow is currently scheduled to commence on January 29, 2024. Timely resolution of the Underwriting Agreement terms is therefore critical to maintaining the Offering timeline, and we urge the parties to give priority attention to these matters in the coming days.
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 group call.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Theodore Langston Partner
Telephone: (212) 558-4127
Email: tlangston@calderwoodharkness.com
cc: Rachel Moynihan, General Counsel & Corporate Secretary, Arbor Health Technologies Inc.
cc: David Halderman, Chief Financial Officer, Arbor Health Technologies Inc.
cc: Jonathan Pritchett, Managing Director, Equity Capital Markets, Whitfield Barrow & Co., LLC
cc: Eric Johannsen, Calderwood & Harkness LLP
cc: Kathryn Brennan, Meridian Hale & Quivorn LLP
Enclosures:
Enclosure A: Calderwood & Harkness Annotated Mark-Up of the Underwriting Agreement (blackline against Whitfield Barrow initial draft dated January 18, 2024)
Underwriter | Commitment (%)
Whitfield Barrow & Co., LLC | 50%
Calloway Pierce Securities LLC | 30%
Velthorn Capital Partners Inc. | 12%
Pemberton Wallis LLC | 8%
Lock-Up Party | Shares of Common Stock
Dr. Nathaniel Rourke, CEO & Co-Founder | 12,800,000
Margaret Tsujimoto, President & COO | 9,600,000
David Halderman, CFO | 2,400,000
Rachel Moynihan, General Counsel & Corporate Secretary | 1,200,000
Dr. Priya Subramanian, CTO | 1,600,000
Brindoval Trelvon Partners Fund IV, L.P. | 28,000,000
Ridgeline Growth Equity Fund III, LLC | 16,000,000
Expense Category | Estimated Amount
SEC registration fee | ~$44,280
NYSE listing fee | ~$295,000
FINRA filing fee | ~$68,720
Printing and EDGAR costs (Toppan Donnelley) | ~$385,000
Legal fees — issuer's counsel (Calderwood & Harkness LLP) | ~$1,800,000
Accounting fees (Kellerman & Associates LLP) | ~$950,000
Blue sky fees, transfer agent fees, and miscellaneous | ~$657,000
Total estimated offering expenses | ~$4,200,000

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