AGREEMENT AMONG UNDERWRITERS

AGREEMENT AMONG UNDERWRITERS
INITIAL PUBLIC OFFERING OF COMMON STOCK OF ARBOR HEALTH TECHNOLOGIES INC.
Dated as of February 8, 2024
This Agreement Among Underwriters (this "AAU") is entered into as of February 8, 2024, in connection with the Underwriting Agreement of even date (the "Underwriting Agreement") among Arbor Health Technologies Inc., a Delaware corporation (the "Company"), and the several underwriters named therein (collectively, the "Underwriters"), relating to the initial public offering (the "Offering") of shares of common stock, par value $0.001 per share, of the Company (the "Common Stock").
This AAU is entered into among Whitfield Barrow & Co., LLC, a Delaware limited liability company, acting as Representative of the several Underwriters (in such capacity, the "Representative"), and each of the other Underwriters listed on Schedule I hereto. Each Underwriter, by executing this AAU or a counterpart hereof, agrees to be bound by the terms and conditions set forth herein in connection with the Offering, sale, and distribution of the Common Stock as described in the Registration Statement and the Prospectus (each as defined herein).
The parties hereto are entering into this AAU for the purpose of setting forth the respective rights, obligations, and economic arrangements among the Underwriters in connection with the Offering, and to establish the authority of the Representative to act on behalf of the several Underwriters.
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ARTICLE I — DEFINITIONS
Section 1.1 — Defined Terms
As used in this AAU, the following terms shall have the meanings set forth below. Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Underwriting Agreement.
"AAU" means this Agreement Among Underwriters, dated as of February 8, 2024, as the same may be amended, modified, or supplemented from time to time in accordance with its terms.
"Base Shares" means the 20,000,000 shares of Common Stock to be offered and sold pursuant to the Underwriting Agreement (exclusive of any Option Shares).
"Closing Date" means February 13, 2024, or such later date as may be provided in the Underwriting Agreement, being the date on which the closing of the purchase and sale of the Base Shares shall occur.
"Common Stock" means the shares of common stock, par value $0.001 per share, of the Company.
"Company" means Arbor Health Technologies Inc., a corporation organized and existing under the laws of the State of Delaware, with its principal executive offices located at 2400 Bayshore Boulevard, Suite 800, Mountain View, California 94043.
"Gross Spread" means the difference between the Public Offering Price ($20.00 per share) and the Purchase Price ($18.80 per share), equal to $1.20 per share, representing an underwriting discount of 6.0% of the Public Offering Price. The Gross Spread constitutes the aggregate compensation payable to the Underwriters in connection with the Offering and is allocated among the Management Fee, the Selling Concession, and the Underwriting Fee as set forth in Article IV.
"Management Fee" means the portion of the Gross Spread equal to 20% thereof, or $0.24 per share, to be allocated among the Underwriters as set forth in Section 4.3 and Schedule IV hereto, in compensation for the structuring, execution, bookbuilding, and management of the Offering process.
"Option Closing Date" means the date of settlement of the Option Shares purchased upon exercise of the Overallotment Option, which date shall be March 1, 2024, or such other date as may be agreed between the Representative and the Company in accordance with the Underwriting Agreement.
"Option Shares" means up to 3,000,000 additional shares of Common Stock that may be purchased by the Underwriters upon exercise of the Overallotment Option granted by the Company pursuant to the Underwriting Agreement.
"Overallotment Option" means the option granted by the Company to the Representative, on behalf of the several Underwriters, pursuant to Section 2(b) of the Underwriting Agreement, to purchase up to 3,000,000 additional shares of Common Stock at the Purchase Price, exercisable for a period of 30 days following the date of the Prospectus, for the purpose of covering overallotments, if any, made in connection with the Offering.
"Prospectus" means the final prospectus relating to the Offering, filed with the Securities and Exchange Commission (the "SEC") pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended (the "Securities Act"), on February 9, 2024, including all documents incorporated by reference therein and any supplements or amendments thereto.
"Public Offering Price" means $20.00 per share, being the price at which the Shares are offered to the public as set forth on the cover page of the Prospectus.
"Purchase Price" means $18.80 per share, being the Public Offering Price less the Underwriting discount of $1.20 per share, and representing the price payable by the Underwriters to the Company for each Share purchased pursuant to the Underwriting Agreement.
"Registration Statement" means the Registration Statement on Form S-1 (File No. 333-276841) filed by the Company with the SEC under the Securities Act relating to the Offering, including all amendments and exhibits thereto, as declared effective by the SEC on February 8, 2024.
"Representative" means Whitfield Barrow & Co., LLC, acting as lead left bookrunner and representative of the several Underwriters in connection with the Offering, as appointed pursuant to Section 2.1 hereof.
"Selling Concession" means the portion of the Gross Spread equal to 60% thereof, or $0.72 per share, to be earned by each Underwriter on the Shares actually sold by or allocated to such Underwriter for distribution, as more fully described in Section 4.4 hereof.
"Shares" means, collectively, the Base Shares and the Option Shares (to the extent purchased upon exercise of the Overallotment Option).
"Stabilizing Manager" means the Representative, Whitfield Barrow & Co., LLC, in its capacity as the party authorized to conduct stabilization transactions, syndicate covering transactions, and penalty bid arrangements in connection with the Offering, as set forth in Article VII hereof.
"Syndicate Account" means the account established and maintained by the Representative for the purpose of accounting for all syndicate-related transactions, including stabilization transactions, syndicate covering transactions, and the allocation of gains, losses, and expenses among the Underwriters, as described in Article VIII hereof.
"Total Shares" means the Base Shares plus any Option Shares purchased upon exercise of the Overallotment Option, up to a maximum of 23,000,000 shares of Common Stock.
"Underwriters" means, collectively, Whitfield Barrow & Co., LLC; Calloway Pierce Securities LLC; Velthorn Capital Partners Inc.; and Pemberton Wallis LLC, each of which is listed on Schedule I hereto.
"Underwriting Agreement" means the Underwriting Agreement dated as of February 8, 2024, among the Company and the several Underwriters named therein, with the Representative acting on behalf of such Underwriters, as the same may be amended, modified, or supplemented from time to time in accordance with its terms.
"Underwriting Fee" means the portion of the Gross Spread equal to 20% thereof, or $0.24 per share, to be allocated among the Underwriters in proportion to their respective underwriting commitments as set forth in Section 4.5 hereof, in compensation for the underwriting risk assumed by each Underwriter in connection with its several obligation to purchase its committed Shares.
Section 1.2 — Interpretation
(a) Unless the context otherwise requires, references in this AAU to "Sections," "Articles," "Schedules," and "Annexes" are references to sections, articles, schedules, and annexes of this AAU.
(b) The headings and captions used in this AAU are for convenience of reference only and shall not affect the interpretation of any provision hereof.
(c) Words importing the singular include the plural and vice versa, and words importing one gender include all genders, as the context may require.
(d) References to "including" or "includes" shall be deemed to mean "including, without limitation" or "includes, without limitation," as the case may be.
(e) References to any statute, rule, or regulation shall be deemed to refer to such statute, rule, or regulation as amended, modified, supplemented, or replaced from time to time, and to any successor statute, rule, or regulation.
(f) References to "dollars" or "$" shall mean United States dollars.
(g) The terms "hereof," "herein," "hereby," "hereto," and "hereunder" and similar terms refer to this AAU as a whole and not to any particular provision of this AAU.
(h) References to "business days" shall mean days on which commercial banks in New York, New York are open for the transaction of general banking business.
ARTICLE II — APPOINTMENT OF REPRESENTATIVE; AUTHORITY
Section 2.1 — Appointment
Each Underwriter hereby irrevocably appoints Whitfield Barrow & Co., LLC as the Representative of the several Underwriters for all purposes under this AAU and the Underwriting Agreement. The Representative is authorized to act on behalf of the Underwriters in connection with the Offering, sale, and distribution of the Shares, and to exercise such powers and perform such duties as are specifically delegated to the Representative under this AAU and the Underwriting Agreement, together with such other powers and duties as are reasonably incidental thereto.
The Representative's principal office is located at 383 Madison Avenue, New York, New York 10179. The key contacts at the Representative for purposes of the Offering are:
Jonathan Pritchett Managing Director, Equity Capital Markets Whitfield Barrow & Co., LLC 383 Madison Avenue, New York, NY 10179
Email: jpritchett@whitfieldbarrow.com
Telephone: (212) 555-7100
Sarah Langley-Kwan Director, Healthcare ECM Whitfield Barrow & Co., LLC 383 Madison Avenue, New York, NY 10179
Email: slangley-kwan@whitfieldbarrow.com
Telephone: (212) 555-7142
The appointment set forth in this Section 2.1 shall be effective as of the date hereof and shall continue in effect until the termination of this AAU in accordance with Article XII.
Section 2.2 — Scope of Authority
The Representative is hereby granted authority, and each Underwriter hereby consents to the Representative exercising such authority, in the following matters:
(a) Underwriting Agreement. The Representative is authorized to negotiate, execute, and deliver the Underwriting Agreement on behalf of the several Underwriters, and to take all actions and make all determinations contemplated thereby on behalf of the Underwriters, subject to the limitations set forth in Section 2.3.
(b) Pricing and Timing. The Representative is authorized to determine the Public Offering Price (in consultation with the Company and based on the bookbuilding process), the timing of the Offering, the pricing date, and the Closing Date, in each case in accordance with the terms of the Underwriting Agreement and market conditions.
(c) Allocation of Shares. The Representative is authorized to determine the allocation of Shares among the Underwriters, including the reallocation of Shares from one Underwriter to another, as contemplated by this AAU and as may be necessary to facilitate an orderly distribution of the Shares.
(d) Overallotment Option. The Representative is authorized to exercise or decline to exercise the Overallotment Option, in whole or in part, on behalf of the several Underwriters, in its sole discretion, at any time during the 30-day exercise period following the date of the Prospectus. Upon exercise of the Overallotment Option, the Option Shares shall be allocated among the Underwriters as set forth in Section 3.2.
(e) Waiver of Conditions. The Representative is authorized to waive conditions to closing under the Underwriting Agreement on behalf of the several Underwriters; provided, however, that any condition that is personal to a specific Underwriter (including any condition relating to the accuracy of representations and warranties made by a specific Underwriter) may not be waived without the prior written consent of such Underwriter.
(f) Lock-Up Releases. The Representative is authorized, in its sole discretion, to agree to or deny requests for the release or waiver of lock-up restrictions on behalf of the syndicate, subject to the notice and other requirements set forth in Article X of this AAU.
(g) Stabilizing Manager. The Representative is authorized to appoint the Stabilizing Manager for the Offering and hereby appoints itself as the Stabilizing Manager, as set forth in Article VII. The Stabilizing Manager shall have the authority to conduct stabilizing transactions, syndicate covering transactions, and penalty bid arrangements as described therein.
(h) Syndicate Account. The Representative is authorized to establish, manage, and settle the Syndicate Account in accordance with Article VIII, including the authority to make disbursements from and credits to the Syndicate Account as contemplated by this AAU.
(i) Receipt of Notices and Deliverables. The Representative is authorized to receive, on behalf of all Underwriters, all notices and deliverables under the Underwriting Agreement, including, without limitation, legal opinions, officers' certificates, comfort letters from the Company's independent registered public accounting firm, and any other closing deliverables.
(j) Selected Dealer Agreements. The Representative is authorized to enter into selected dealer agreements with non-syndicate dealers for the sale of Shares, as set forth in Section 5.4.
(k) General Authority. The Representative is authorized to take all other actions and make all other determinations as may be necessary or advisable in connection with the Offering, the distribution of the Shares, and the performance of the Underwriters' obligations under this AAU and the Underwriting Agreement, subject to the limitations set forth in Section 2.3.
Section 2.3 — Limitations on Authority
Notwithstanding the broad authority granted to the Representative in Section 2.2, the Representative shall not, without the prior written consent of Underwriters holding at least 66⅔% of the aggregate underwriting commitments (calculated by reference to the number of Base Shares committed by each Underwriter):
(a) materially amend, modify, or supplement the Underwriting Agreement in any manner that would materially alter the obligations, rights, or economic interests of the Underwriters;
(b) agree to a Public Offering Price that is outside the range previously approved by the Underwriters during the bookbuilding process or that would result in a material change to the economics of the Offering;
(c) waive or release the Company's indemnification obligations under the Underwriting Agreement or agree to any material modification of the indemnification or contribution provisions set forth therein; or
(d) terminate the Underwriting Agreement pursuant to the market-out or force majeure provisions thereof, except in circumstances where the Representative reasonably determines that such termination is necessary to protect the interests of the Underwriters and where delay in obtaining the requisite consent would be impracticable under the circumstances.
The Representative shall not be liable to any Underwriter for any action taken or omitted to be taken in good faith within the scope of the authority granted under this Article II, in the absence of gross negligence, willful misconduct, or bad faith on the part of the Representative.
Section 2.4 — Reliance on Representative
Each Underwriter agrees that it shall be bound by any and all actions taken by the Representative within the scope of the authority granted to the Representative under this AAU and the Underwriting Agreement. The Company and other third parties (including the Company's counsel, the Company's independent registered public accounting firm, and the transfer agent) may rely upon the authority of the Representative to act on behalf of the several Underwriters without any obligation to inquire into the internal arrangements among the Underwriters or the scope of the Representative's authority under this AAU. No such third party shall be required to look beyond the face of the Underwriting Agreement or the representations of the Representative to verify that the requisite consents or approvals of the other Underwriters have been obtained.
ARTICLE III — UNDERWRITING COMMITMENTS AND ALLOCATIONS
Section 3.1 — Underwriting Commitments (Base Offering)
Each Underwriter agrees, severally and not jointly, to purchase from the Company the number of Base Shares set forth opposite its name below, at the Purchase Price of $18.80 per share, subject to and in accordance with the terms and conditions of the Underwriting Agreement:
The obligation of each Underwriter to purchase its respective commitment of Base Shares is several and not joint. No Underwriter shall be obligated to purchase more than its committed number of Base Shares except as provided in Section 3.4 hereof (relating to defaults by an Underwriter). The several obligation of each Underwriter is consistent with, and subject to, the terms and conditions of the Underwriting Agreement, including the conditions to closing set forth therein.
Section 3.2 — Overallotment Option Allocation
Upon exercise of the Overallotment Option by the Representative on behalf of the several Underwriters (in whole or in part), the Option Shares so purchased shall be allocated among the Underwriters in the same proportions as the Base Shares set forth in Section 3.1, as follows:
(a) Whitfield Barrow & Co., LLC: 50.0% (up to 1,500,000 Option Shares)
(b) Calloway Pierce Securities LLC: 30.0% (up to 900,000 Option Shares)
(c) Velthorn Capital Partners Inc.: 12.0% (up to 360,000 Option Shares)
(d) Pemberton Wallis LLC: 8.0% (up to 240,000 Option Shares)
If the Overallotment Option is exercised in part, the Option Shares shall be allocated pro rata among the Underwriters in the percentages set forth above, with any fractional shares rounded as determined by the Representative. The Overallotment Option was exercised in full by the Representative on February 27, 2024, with respect to 3,000,000 Option Shares, with settlement on the Option Closing Date, March 1, 2024. Accordingly, each Underwriter's allocation of Option Shares is as set forth above at the maximum amounts.
Section 3.3 — Total Commitment Summary
Upon full exercise of the Overallotment Option, the total commitment of each Underwriter under the Underwriting Agreement is as follows:
The aggregate Purchase Price payable by all Underwriters for the Total Shares (assuming full exercise of the Overallotment Option) is 23,000,000 × $18.80 = $432,400,000.
Section 3.4 — Default by an Underwriter
(a) Default Not Exceeding 10%. If any Underwriter defaults in its obligation to purchase Shares under this AAU and the Underwriting Agreement, and the aggregate number of Shares with respect to which such default occurs does not exceed 10% of the Total Shares to be purchased by all Underwriters at such closing, the non-defaulting Underwriters shall be severally obligated, in proportion to their respective underwriting commitments (as a percentage of the aggregate commitments of all non-defaulting Underwriters), to purchase the Shares that such defaulting Underwriter agreed but failed to purchase.
(b) Default Exceeding 10%. If any Underwriter or Underwriters default and the aggregate number of Shares with respect to which such default or defaults occur exceeds 10% of the Total Shares to be purchased at such closing, then the Representative may, in its sole discretion:
(i) arrange for one or more substitute underwriters or other purchasers reasonably satisfactory to the Company to purchase such Shares on the terms set forth in the Underwriting Agreement, provided that any such arrangement is completed within 36 hours after the time of default;
(ii) exercise the right, on behalf of the non-defaulting Underwriters, to terminate the Underwriting Agreement in accordance with the termination provisions thereof; or
(iii) require the non-defaulting Underwriters to purchase the Shares that the defaulting Underwriter or Underwriters failed to purchase, in proportion to their respective underwriting commitments, provided that such requirement shall not be imposed without the consent of Underwriters representing at least a majority of the aggregate underwriting commitments of all non-defaulting Underwriters.
(c) Liability of Defaulting Underwriter. A defaulting Underwriter shall remain liable for (i) its proportionate share of all Syndicate expenses incurred prior to and after the date of default, (ii) any losses, liabilities, claims, damages, and expenses (including reasonable attorneys' fees) suffered or incurred by the non-defaulting Underwriters as a result of such default, and (iii) its obligations under Article XI (indemnification and contribution) to the extent arising from acts, omissions, or events occurring prior to or in connection with such default. The rights and remedies of the non-defaulting Underwriters under this Section 3.4 are in addition to, and not in limitation of, any other rights and remedies available at law or in equity.
(d) No Effect on Company's Rights. Nothing in this Section 3.4 shall relieve the Company of any of its obligations under the Underwriting Agreement or otherwise affect the rights of the Company thereunder.
ARTICLE IV — COMPENSATION AND ECONOMICS
Section 4.1 — Gross Spread
The Gross Spread payable to the Underwriters in connection with the Offering is $1.20 per share, representing an underwriting discount equal to 6.0% of the Public Offering Price of $20.00 per share. The Gross Spread represents the difference between the Public Offering Price at which the Shares are sold to the public and the Purchase Price of $18.80 per share paid by the Underwriters to the Company.
The aggregate Gross Spread on the Shares is as follows:
Total Gross Spread on Base Shares: 20,000,000 shares × $1.20 = $24,000,000
Total Gross Spread on Option Shares (upon full exercise of the Overallotment Option): 3,000,000 shares × $1.20 = $3,600,000
Maximum Total Gross Spread (Base Shares and Option Shares): 23,000,000 shares × $1.20 = $27,600,000
Section 4.2 — Allocation of Gross Spread
The Gross Spread of $1.20 per share shall be divided into the following three components, each of which is allocated among the Underwriters as set forth in Sections 4.3, 4.4, and 4.5:
Each component of the Gross Spread compensates the Underwriters for distinct aspects of their participation in the Offering, as described below. The allocation of each component among the individual Underwriters reflects the relative roles, responsibilities, and contributions of each Underwriter.
Section 4.3 — Management Fee
The Management Fee constitutes 20% of the Gross Spread, equal to $0.24 per share. The Management Fee compensates the Underwriters for the structuring, execution, bookbuilding, investor marketing, and overall management of the Offering process, including without limitation the coordination of due diligence activities, the preparation and review of the Registration Statement and Prospectus, the organization and execution of the roadshow, the management of the bookbuilding process, and the determination of pricing.
The Management Fee shall be allocated among the Underwriters as follows:
The Management Fee allocation among the Underwriters reflects the differing levels of responsibility assumed by each Underwriter in structuring and managing the Offering. The Representative, as lead left bookrunner, has assumed the primary responsibility for the management and execution of the Offering and accordingly receives the largest share of the Management Fee. The Management Fee allocation set forth above has been agreed upon by all Underwriters and is reflected in Schedule IV hereto.
Section 4.4 — Selling Concession
The Selling Concession constitutes 60% of the Gross Spread, equal to $0.72 per share. The Selling Concession shall be earned by each Underwriter on the Shares actually sold by such Underwriter or allocated to such Underwriter for distribution to investors. The Selling Concession compensates each Underwriter for its sales efforts and distribution capabilities in connection with the Offering.
Each Underwriter shall earn the Selling Concession of $0.72 per share on each Share that is allocated to such Underwriter and sold to an investor by such Underwriter, subject to the following:
(a) Reallowance to Selected Dealers. The Representative may authorize a reallowance of up to $0.36 per share (representing 50% of the Selling Concession) to selected dealers who are not parties to this AAU, provided that such selected dealers agree to the terms of the Selected Dealer Agreement entered into between such selected dealers and the Representative. The form of Selected Dealer Agreement is attached hereto as Annex A.
(b) Reduction for Reallowance. The amount of any reallowance paid to selected dealers shall reduce the Selling Concession otherwise payable to the Underwriter from whose allocation such sales were made. For the avoidance of doubt, if an Underwriter's allocated Shares are sold through a selected dealer and a reallowance of $0.36 per share is paid to such selected dealer, the Selling Concession retained by such Underwriter on those Shares shall be reduced to $0.36 per share ($0.72 less $0.36 reallowance).
(c) Penalty Bids. The Selling Concession is subject to reduction or recapture pursuant to penalty bids imposed by the Representative in accordance with Section 7.4 hereof.
(d) Unsold Shares. No Selling Concession shall be earned on Shares that remain unsold and are returned to the Syndicate Account, reallocated to another Underwriter, or otherwise disposed of through syndicate covering transactions.
Section 4.5 — Underwriting Fee
The Underwriting Fee constitutes 20% of the Gross Spread, equal to $0.24 per share. The Underwriting Fee compensates each Underwriter for the underwriting risk assumed by such Underwriter in connection with its several obligation to purchase its committed Shares at the Purchase Price. The Underwriting Fee shall be allocated among the Underwriters in proportion to their respective underwriting commitments (as a percentage of the total Base Shares), as follows:
The Underwriting Fee allocation is proportionate to each Underwriter's commitment of Base Shares and, accordingly, reflects each Underwriter's share of the underwriting risk in the Offering.
Section 4.6 — Syndicate Expenses
(a) Allocation. All reasonable out-of-pocket expenses of the syndicate incurred in connection with the Offering (collectively, "Syndicate Expenses") shall be borne by the Underwriters in proportion to their respective underwriting commitments (as a percentage of the total Base Shares), unless otherwise agreed in writing by the Underwriters. Syndicate Expenses include, without limitation:
(i) advertising and marketing expenses incurred by the syndicate (to the extent not borne by the Company);
(ii) communication expenses, including conference calls, data room costs, and distribution of syndicate materials;
(iii) travel expenses of syndicate members incurred in connection with the Offering (to the extent not reimbursed by the Company);
(iv) legal fees and expenses of counsel to the Representative (Meridian Hale & Quivorn LLP) in connection with syndicate matters, including the preparation, negotiation, and documentation of this AAU, the Selected Dealer Agreement, and related syndicate documentation;
(v) FINRA-related filing fees and expenses; and
(vi) other costs and expenses reasonably incurred by the Representative in connection with the management and settlement of the Syndicate Account.
(b) Recordkeeping and Accounting. The Representative shall maintain records of all Syndicate Expenses and shall provide a detailed accounting to each Underwriter in connection with the settlement of the Syndicate Account as set forth in Section 8.4.
(c) Company Expenses Distinguished. For the avoidance of doubt, offering expenses of the Company that are borne by the Company pursuant to the Underwriting Agreement are not Syndicate Expenses under this AAU and are not subject to allocation among the Underwriters. Such Company expenses, which are estimated at approximately $4,200,000, include, without limitation:
(i) SEC registration fee: approximately $44,280;
(ii) New York Stock Exchange listing fee: approximately $295,000;
(iii) FINRA filing fee: approximately $68,720;
(iv) printing and EDGAR filing expenses: approximately $385,000;
(v) legal fees and expenses of Company counsel;
(vi) accounting fees and expenses of the Company's independent registered public accounting firm; and
(vii) blue sky fees, transfer agent fees, and miscellaneous expenses.
ARTICLE V — OFFERING AND DISTRIBUTION
Section 5.1 — Offering Terms
(a) The Shares shall be offered to the public at the Public Offering Price of $20.00 per share, as set forth on the cover page of the Prospectus. Each Underwriter agrees that it will offer the Shares only at the Public Offering Price, subject to the reallowance to selected dealers described in Section 4.4.
(b) No Underwriter shall offer or sell Shares at a price below the Public Offering Price without the prior written consent of the Representative, except as may be permitted in the context of stabilization transactions conducted by the Stabilizing Manager in accordance with Article VII or as otherwise agreed by the Representative in connection with an orderly distribution of the Shares.
(c) The Offering shall be conducted in accordance with the Registration Statement (File No. 333-276841) and the Prospectus, and each Underwriter shall ensure that all offers and sales of Shares are made only by means of, and in conformity with, the Registration Statement and the Prospectus.
(d) The Common Stock will be listed for trading on the New York Stock Exchange under the ticker symbol "ARHT." Trading of the Common Stock on the New York Stock Exchange is expected to commence on February 9, 2024, on a "when-issued" basis (subject to the limitations set forth in Section 5.3), with regular-way trading commencing on the Closing Date.
Section 5.2 — Distribution and Sales
(a) Each Underwriter shall use commercially reasonable efforts to sell its allocation of Shares in accordance with all applicable federal and state securities laws, rules and regulations of FINRA, and the terms and conditions of this AAU and the Underwriting Agreement. Each Underwriter shall conduct all sales activities in a manner designed to achieve an orderly distribution of the Shares in the public market.
(b) The Representative may, in its discretion, reallocate Shares among the Underwriters at any time prior to the settlement of the Syndicate Account, in order to facilitate an orderly distribution. Such reallocation may include the transfer of Shares from one Underwriter's allocation to another Underwriter that has demand in excess of its original allocation. Any such reallocation shall be communicated in writing (including by email) to the affected Underwriters.
(c) Each Underwriter shall promptly report to the Representative the number of any unsold Shares remaining in its allocation. The Representative may redistribute unsold Shares to other Underwriters who have the capacity to sell such Shares, or may credit such unsold Shares to the Syndicate Account for disposition through syndicate covering transactions or other means as the Representative may determine.
(d) No Underwriter shall, without the prior consent of the Representative, sell Shares to any account in which such Underwriter or any affiliate, officer, or director of such Underwriter has a beneficial interest, except in compliance with FINRA Rule 5130 (restrictions on the purchase and sale of initial equity public offerings).
Section 5.3 — Restrictions on Sales
(a) When-Issued Trading. No Underwriter shall sell Shares on a "when-issued" basis prior to the effectiveness of the Registration Statement. Following the effectiveness of the Registration Statement, when-issued trading may be conducted in accordance with applicable New York Stock Exchange rules and SEC guidance.
(b) Regulation M. No Underwriter shall engage in any activity that would constitute a "distribution" in violation of Regulation M under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise engage in any directed selling efforts or conditioning of the market for the Common Stock in violation of Regulation M. Each Underwriter shall comply with the restrictions on bids, purchases, and inducements to purchase set forth in Rules 101, 102, and 104 of Regulation M during the applicable restricted period.
(c) FINRA Rules. Each Underwriter represents and agrees that it will comply with all applicable FINRA rules in connection with the Offering, including, without limitation:
(i) FINRA Rule 5110 (Corporate Financing Rule), relating to the underwriting terms and arrangements, including the filing of materials with FINRA and limitations on underwriting compensation;
(ii) FINRA Rule 5121 (Public Offerings of Securities with Conflicts of Interest), to the extent applicable;
(iii) FINRA Rule 5131 (New Issue Allocations and Distributions), including the prohibitions on "spinning" (allocations of IPO shares to executive officers and directors of investment banking clients), quid pro quo arrangements, and the restrictions on allocations directed by issuers; and
(iv) FINRA Rule 5130 (Restrictions on the Purchase and Sale of Initial Equity Public Offerings), relating to restrictions on the sale of IPO shares to restricted persons.
(d) Regulation S. No Underwriter shall engage in any directed selling efforts (as defined in Regulation S under the Securities Act) with respect to the Shares in the United States or to U.S. persons, except in compliance with the registration requirements of the Securities Act and the terms of the Prospectus.
Section 5.4 — Selected Dealer Agreements
(a) The Representative is authorized, on behalf of the syndicate, to enter into selected dealer agreements with broker-dealers who are not parties to this AAU (each, a "Selected Dealer") for the sale of Shares to such Selected Dealers' customers. The form of Selected Dealer Agreement to be used in connection with the Offering is attached hereto as Annex A and incorporated herein by reference.
(b) Selected Dealers shall be entitled to a reallowance of up to $0.36 per share on Shares sold by them, as set forth in Section 4.4, subject to the terms and conditions of the Selected Dealer Agreement.
(c) Each Underwriter may recommend broker-dealers for appointment as Selected Dealers, subject to the Representative's approval. The Representative shall have sole discretion in determining whether to appoint any particular broker-dealer as a Selected Dealer and in determining the terms of any Selected Dealer Agreement.
(d) Selected Dealers are not underwriters within the meaning of the Securities Act and have no underwriting commitment or obligation under this AAU or the Underwriting Agreement. Selected Dealers are not parties to this AAU and shall have no rights hereunder. The appointment of Selected Dealers does not relieve any Underwriter of its obligations under this AAU or the Underwriting Agreement.
Section 5.5 — Confirmation and Prospectus Delivery
(a) Each Underwriter shall deliver a copy of the Prospectus (or make the Prospectus available electronically in accordance with SEC guidance and Rule 172 under the Securities Act) to each purchaser of Shares as required by the Securities Act and applicable SEC rules and regulations. Each Underwriter acknowledges its obligations under Section 5(b)(2) of the Securities Act and Rule 172 thereunder with respect to prospectus delivery.
(b) Confirmations of sale shall be sent to each purchaser in compliance with Rule 10b-10 under the Exchange Act, and shall contain all information required by such rule, including without limitation the identity of the security, the price, the capacity in which the Underwriter acted (as principal or agent), and the amount of any commission or mark-up.
(c) Each Underwriter shall retain records of all confirmations sent and Prospectuses delivered (or deemed delivered) in connection with the Offering for a period of not less than three (3) years from the Closing Date, or such longer period as may be required by applicable law or FINRA rules.
ARTICLE VI — OVERALLOTMENT OPTION AND SHORT POSITION
Section 6.1 — Exercise of Overallotment Option
(a) Pursuant to Section 2(b) of the Underwriting Agreement, the Company has granted to the Representative, on behalf of the several Underwriters, an option to purchase up to 3,000,000 additional shares of Common Stock (the Option Shares), representing 15% of the Base Shares, at the Purchase Price of $18.80 per share (the "Overallotment Option"). The Overallotment Option is exercisable, in whole or in part, at any time and from time to time during the 30-day period following the date of the Prospectus (i.e., from February 9, 2024 through March 10, 2024).
(b) The Representative shall exercise the Overallotment Option by delivering written notice to the Company specifying the number of Option Shares to be purchased and the date of closing for such purchase. The decision to exercise or decline to exercise the Overallotment Option (in whole or in part) shall be made by the Representative in its sole discretion, taking into account market conditions, the syndicate short position, and the interests of the Underwriters.
(c) The Overallotment Option was exercised in full by the Representative on February 27, 2024, with respect to all 3,000,000 Option Shares, with settlement on the Option Closing Date, March 1, 2024.
(d) Upon exercise of the Overallotment Option, the Option Shares shall be allocated among the Underwriters in proportion to their respective underwriting commitments as set forth in Section 3.2 hereof.
Section 6.2 — Overallotment (Short) Position
(a) The Representative is authorized, on behalf of the syndicate, to overallot shares of Common Stock in excess of the Base Shares (i.e., to create a syndicate short position) in connection with the Offering, up to a maximum number of shares equal to the number of Option Shares (3,000,000 shares). The syndicate short position facilitates the stabilization process and provides the Stabilizing Manager with flexibility to support the market price of the Common Stock during the distribution period.
(b) The syndicate short position shall be covered by one or more of the following means:
(i) exercise of the Overallotment Option (in whole or in part) to purchase Option Shares from the Company at the Purchase Price; and/or
(ii) syndicate covering transactions — that is, purchases of shares of Common Stock in the open market by the Stabilizing Manager on behalf of the syndicate, as described in Section 7.3.
(c) Any profits or losses resulting from syndicate covering transactions (calculated as the difference between the price paid for shares purchased in covering transactions and the Public Offering Price at which such shares were originally overallotted) shall be allocated among the Underwriters in proportion to their respective underwriting commitments and shall be reflected in the Syndicate Account settlement pursuant to Section 8.4.
Section 6.3 — Naked Short Position Prohibition
No Underwriter shall, directly or indirectly, engage in "naked short" selling of the Common Stock in connection with the Offering. For purposes of this Section 6.3, "naked short" selling means short sales of Common Stock in excess of the number of shares that may be covered by the exercise of the Overallotment Option (i.e., in excess of the 3,000,000 Option Shares). Any Underwriter that violates this prohibition shall be liable to the other Underwriters and the Representative for any losses, liabilities, or damages arising from such violation.
ARTICLE VII — STABILIZATION ACTIVITIES
Section 7.1 — Appointment of Stabilizing Manager
Whitfield Barrow & Co., LLC is hereby appointed as the Stabilizing Manager for the Offering. In its capacity as Stabilizing Manager, Whitfield Barrow & Co., LLC is authorized, but not obligated, to conduct stabilizing transactions, syndicate covering transactions, and penalty bid arrangements in connection with the Offering, in each case in accordance with Regulation M under the Exchange Act and all other applicable laws, rules, and regulations. The appointment of the Stabilizing Manager shall continue in effect until the earlier of (i) the termination of all stabilizing activities and (ii) the termination of this AAU.
Section 7.2 — Stabilizing Transactions
(a) The Stabilizing Manager may bid for or purchase shares of Common Stock in the open market for the purpose of pegging, fixing, or stabilizing the price of the Common Stock, so long as such transactions are conducted in compliance with Rule 104 of Regulation M under the Exchange Act. Stabilizing transactions may be commenced, modified, or terminated at the sole discretion of the Stabilizing Manager, subject to compliance with applicable law.
(b) Stabilizing bids shall not exceed the Public Offering Price of $20.00 per share. The Stabilizing Manager shall not enter any stabilizing bid or effect any stabilizing purchase at a price higher than the Public Offering Price.
(c) The Stabilizing Manager shall provide prompt notice (which may be by email or other electronic means) to the other Underwriters before commencing stabilizing activities, upon any material modification of stabilizing activities, and upon termination of stabilizing activities. Such notice shall include a general description of the nature and scope of the stabilizing transactions being conducted.
(d) All stabilizing transactions shall be reported to FINRA in accordance with applicable FINRA rules, including the reporting requirements set forth in FINRA's Regulation M-related rules and interpretive guidance.
(e) The Stabilizing Manager shall maintain complete and accurate records of all stabilizing transactions, including the date, time, price, and number of shares involved in each transaction. Such records shall be available for inspection by the other Underwriters upon reasonable request.
Section 7.3 — Syndicate Covering Transactions
(a) The Stabilizing Manager may purchase shares of Common Stock in the open market on behalf of the syndicate to cover the syndicate short position created through overallotments of the Shares in the Offering. Such purchases are referred to as "syndicate covering transactions."
(b) The cost of syndicate covering transactions and any resulting gains or losses shall be for the account of the Syndicate Account and shall be allocated among the Underwriters in proportion to their respective underwriting commitments, as set forth in Section 6.2(c).
(c) Syndicate covering transactions shall be conducted in compliance with Rule 104 of Regulation M and all other applicable laws, rules, and regulations. The Stabilizing Manager shall use its reasonable judgment in determining the timing, pricing, and volume of syndicate covering transactions, taking into account market conditions and the size of the syndicate short position.
Section 7.4 — Penalty Bids
(a) The Representative may, in its discretion, impose penalty bids against any Underwriter (or Selected Dealer) whose customers sell shares of Common Stock purchased in the Offering during the stabilization period. A penalty bid is a mechanism by which the Selling Concession (or, in the case of a Selected Dealer, the reallowance) is recaptured from the Underwriter (or Selected Dealer) with respect to shares that are resold into the market and repurchased by the Stabilizing Manager in syndicate covering transactions or stabilizing transactions.
(b) The Representative shall provide reasonable advance notice (which may be by email or other electronic means) to the affected Underwriter before imposing a penalty bid. Such notice shall identify the shares subject to the penalty bid and the amount of the Selling Concession to be reclaimed.
(c) Penalty bids shall be applied by the Representative in a non-discriminatory manner, consistent with the Representative's obligations under FINRA rules and applicable law.
(d) The imposition of a penalty bid shall reduce the Selling Concession otherwise payable to the affected Underwriter by $0.72 per share for each share subject to the penalty bid. In the case of a Selected Dealer, the reallowance otherwise payable to such Selected Dealer shall be reduced by the applicable amount per share.
Section 7.5 — Regulation M Compliance
(a) Each Underwriter agrees to comply with all applicable provisions of Regulation M under the Exchange Act in connection with the Offering, including, without limitation:
(i) Rule 101 (Activities by Distribution Participants), which restricts bids for, purchases of, and attempts to induce others to purchase covered securities during the applicable restricted period;
(ii) Rule 102 (Activities by Issuers and Selling Security Holders);
(iii) Rule 103 (Nasdaq Passive Market Making), to the extent applicable; and
(iv) Rule 104 (Stabilization and Other Activities in Connection with an Offering), which governs stabilizing transactions, syndicate covering transactions, and penalty bids.
(b) Each Underwriter represents that it is familiar with the requirements of Regulation M and will maintain compliance records sufficient to demonstrate compliance with Regulation M for a period of not less than three (3) years from the date of the final settlement of the Syndicate Account.
(c) Each Underwriter agrees to promptly notify the Representative of any potential violation of Regulation M of which it becomes aware in connection with the Offering.
Section 7.6 — Passive Market Making
Any Underwriter that is a market maker on the Nasdaq Stock Market (or any other national securities exchange or automated quotation system on which the Common Stock may be quoted or traded) and that is otherwise permitted to engage in passive market making under Rule 103 of Regulation M may do so in compliance with such rule, provided that such Underwriter notifies the Representative in advance of its intention to engage in passive market making activities. For the avoidance of doubt, because the Common Stock is listed for trading on the New York Stock Exchange (and not the Nasdaq Stock Market), Rule 103 passive market making is not anticipated to be applicable to the Offering. However, this Section 7.6 shall apply in the event that any Underwriter is otherwise eligible to engage in passive market making with respect to the Common Stock.
ARTICLE VIII — SYNDICATE ACCOUNT AND SETTLEMENT
Section 8.1 — Establishment of Syndicate Account
The Representative shall establish and maintain a Syndicate Account for the purpose of accounting for all syndicate-related transactions in connection with the Offering. The Syndicate Account shall reflect, among other things, all stabilization transactions, syndicate covering transactions, penalty bids, allocations of gains and losses, Syndicate Expenses, and the allocation of compensation among the Underwriters. The Representative shall act as the sole manager of the Syndicate Account and shall have authority to make all credits to and disbursements from the Syndicate Account as contemplated by this AAU.
Section 8.2 — Settlement of Base Offering
(a) Settlement of the purchase and sale of the Base Shares shall occur on the Closing Date, February 13, 2024, which is the third business day following the pricing of the Offering on February 8, 2024 (T+3, in accordance with SEC Rule 15c6-1 under the Exchange Act, as modified for IPO settlement).
(b) On the Closing Date, each Underwriter shall pay for its committed Base Shares by wire transfer of immediately available funds to the account designated by the Representative (or directly to the Company's account as directed by the Representative), against delivery of the Base Shares.
(c) The Purchase Price per share payable by each Underwriter is $18.80, representing the Public Offering Price of $20.00 less the Underwriting discount of $1.20 per share. The aggregate purchase price payable by all Underwriters for the Base Shares is:
20,000,000 shares × $18.80 = $376,000,000
(d) Delivery of the Base Shares shall be made through the facilities of The Depository Trust Company ("DTC") in book-entry form, against payment (delivery versus payment, or "DVP").
(e) Each Underwriter shall provide wire transfer instructions and standing settlement instructions ("SSIs") to the Representative no later than two (2) business days prior to the Closing Date.
Section 8.3 — Settlement of Overallotment Shares
(a) Settlement of the purchase and sale of the Option Shares shall occur on the Option Closing Date, March 1, 2024, being the date specified by the Representative in its notice of exercise of the Overallotment Option delivered to the Company on February 27, 2024.
(b) The Purchase Price per Option Share payable by each Underwriter is $18.80, the same Purchase Price applicable to the Base Shares. The aggregate purchase price payable by all Underwriters for the Option Shares (upon full exercise of the Overallotment Option) is:
3,000,000 shares × $18.80 = $56,400,000
(c) Delivery of the Option Shares shall be made through the facilities of DTC in book-entry form, against payment (DVP), in the same manner as the delivery of the Base Shares.
Section 8.4 — Syndicate Account Settlement
(a) The Representative shall render a final accounting of the Syndicate Account to each Underwriter within 90 days following the later of (i) the Closing Date (or, if applicable, the Option Closing Date) and (ii) the termination of all stabilizing activities conducted by the Stabilizing Manager.
(b) The final accounting shall set forth in reasonable detail:
(i) the Total Gross Spread earned on the Base Shares and the Option Shares;
(ii) the Management Fee allocation among the Underwriters in accordance with Section 4.3;
(iii) the Selling Concession earned by each Underwriter, including any adjustments resulting from penalty bids imposed pursuant to Section 7.4 and any reductions for reallowances paid to Selected Dealers;
(iv) the Underwriting Fee allocation among the Underwriters in accordance with Section 4.5;
(v) all Syndicate Expenses incurred and the allocation thereof among the Underwriters;
(vi) net gains or losses from stabilization transactions and syndicate covering transactions, and the allocation thereof among the Underwriters in proportion to their respective underwriting commitments;
(vii) any other credits or debits to the Syndicate Account; and
(viii) the net amount due to or from each Underwriter after giving effect to all of the foregoing.
(c) Settlement payments reflecting the net amounts due to or from each Underwriter shall be made by wire transfer of immediately available funds within five (5) business days of delivery of the final accounting by the Representative. If any Underwriter disputes any item in the final accounting, such Underwriter shall notify the Representative in writing within ten (10) business days of receipt of the final accounting, specifying in reasonable detail the basis for the dispute. The undisputed portion of any settlement payment shall be made without delay, and the disputed portion shall be resolved in accordance with Section 13.4.
Section 8.5 — Recordkeeping
(a) The Representative shall maintain complete and accurate books and records of all syndicate transactions, including, without limitation, records of all purchases and sales of Shares, stabilization transactions, syndicate covering transactions, penalty bids, Syndicate Expenses, and the allocation of compensation and gains and losses among the Underwriters.
(b) Each Underwriter shall have the right, upon not less than five (5) business days' prior written notice to the Representative, to inspect the Representative's books and records relating to the Syndicate Account during normal business hours at the Representative's principal office. Such inspection rights shall continue for a period of three (3) years following the final settlement of the Syndicate Account.
(c) All records maintained by the Representative in connection with the Syndicate Account shall be retained for a period of not less than three (3) years from the date of the final settlement of the Syndicate Account, or such longer period as may be required by applicable law, FINRA rules, or SEC regulations.
ARTICLE IX — REPRESENTATIONS AND WARRANTIES OF EACH UNDERWRITER
Section 9.1 — Organization and Authority
Each Underwriter represents and warrants that it is a legal entity duly organized, validly existing, and in good standing under the laws of its jurisdiction of organization, as follows:
(a) Whitfield Barrow & Co., LLC is a limited liability company duly organized and validly existing under the laws of the State of Delaware.
(b) Calloway Pierce Securities LLC is a limited liability company duly organized and validly existing under the laws of the State of Delaware.
(c) Velthorn Capital Partners Inc. is a corporation duly organized and validly existing under the laws of the State of Delaware.
(d) Pemberton Wallis LLC is a limited liability company duly organized and validly existing under the laws of the State of Delaware.
Each Underwriter further represents and warrants that it has full power and authority to enter into this AAU and to perform its obligations hereunder, and that the execution and delivery of this AAU and the performance of its obligations hereunder have been duly authorized by all necessary corporate or other organizational action on the part of such Underwriter.
Section 9.2 — Registration and Licensing
Each Underwriter represents and warrants that it is (a) registered as a broker-dealer under Section 15 of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder, and (b) a member in good standing of the Financial Industry Regulatory Authority, Inc. ("FINRA"). Each Underwriter further represents and warrants that it is duly licensed, registered, or qualified under the securities laws of each state or other jurisdiction in which it is required to be so licensed, registered, or qualified in order to offer and sell the Shares in connection with the Offering, and that no such license, registration, or qualification has been suspended or revoked.
Section 9.3 — No Conflicts
Each Underwriter represents and warrants that the execution and delivery of this AAU and the performance of its obligations hereunder do not and will not (a) violate any provision of its certificate of formation, limited liability company agreement, certificate of incorporation, bylaws, or other organizational documents, (b) violate any applicable law, statute, rule, regulation, order, judgment, decree, or governmental or regulatory directive binding on such Underwriter, or (c) result in any breach of, or constitute a default under, any material agreement, indenture, mortgage, deed of trust, loan agreement, lease, license, or other instrument or obligation to which such Underwriter is a party or by which such Underwriter is bound.
Section 9.4 — Compliance with Laws
Each Underwriter covenants and agrees that it shall comply with all applicable federal and state securities laws, rules and regulations of the SEC, FINRA rules (including, without limitation, FINRA Rules 5110, 5121, 5130, and 5131), Regulation M under the Exchange Act, and all other applicable laws, rules, and regulations in connection with the Offering, the distribution of the Shares, and the performance of its obligations under this AAU and the Underwriting Agreement.
Section 9.5 — No Directed Selling Efforts
Each Underwriter represents and warrants that it has not engaged, and agrees that it will not engage, in any "directed selling efforts" (as defined in Regulation S under the Securities Act) with respect to the Shares in violation of Regulation S. To the extent that any component of the Offering involves sales to persons outside the United States, each Underwriter shall ensure that such sales are conducted in compliance with Regulation S, applicable local law, and any selling restrictions established by the Representative.
Section 9.6 — Anti-Money Laundering
Each Underwriter represents and warrants that it has established and maintains an anti-money laundering compliance program in compliance with all applicable anti-money laundering laws and regulations, including, without limitation, the Bank Secrecy Act of 1970, as amended, the USA PATRIOT Act of 2001, and the regulations promulgated thereunder by the U.S. Department of the Treasury's Financial Crimes Enforcement Network ("FinCEN"). Each Underwriter agrees that it shall conduct appropriate customer identification and due diligence procedures in connection with the Offering, as required by applicable anti-money laundering laws and regulations and FINRA Rule 3310 (Anti-Money Laundering Compliance Program).
ARTICLE X — LOCK-UP PROVISIONS
Section 10.1 — Lock-Up Agreements
The Underwriters acknowledge and agree that, as a condition to the Offering, all directors and executive officers of the Company, and all holders of 1% or more of the Company's outstanding shares of Common Stock immediately prior to the Offering (approximately 45 signatories in total, collectively covering approximately 80,000,000 shares of pre-IPO Common Stock), have executed lock-up agreements in favor of the Representative (Whitfield Barrow & Co., LLC) on behalf of the several Underwriters (the "Lock-Up Agreements"). The Lock-Up Agreements provide that the signatories thereto will not, without the prior written consent of the Representative, directly or indirectly, offer, sell, contract to sell, pledge, grant any option to purchase, make any short sale, or otherwise transfer or dispose of any shares of Common Stock, or any securities convertible into, exercisable for, or exchangeable for shares of Common Stock, during the lock-up period.
The lock-up period under the Lock-Up Agreements is 180 days from the date of the final Prospectus (February 8, 2024), expiring on August 6, 2024, inclusive.
Section 10.2 — Lock-Up Exceptions
The Lock-Up Agreements contain customary exceptions permitting the following transactions during the lock-up period, subject to the conditions specified therein:
(i) Transfers for estate planning purposes, including transfers to immediate family members, trusts for the benefit of the lock-up party or immediate family members, or to a partnership, limited liability company, or other entity of which the lock-up party and/or members of the lock-up party's immediate family are the sole members; provided that each donee, transferee, or distributee agrees in writing to be bound by the terms of the Lock-Up Agreement for the remainder of the lock-up period;
(ii) Sales or transfers of shares acquired in the open market after the completion of the Offering;
(iii) Dispositions of shares pursuant to a trading plan established under Rule 10b5-1 under the Exchange Act, to the extent that such plan was entered into prior to the date of the Offering and disclosed in the Registration Statement on Form S-1;
(iv) Transfers of up to 10% of the lock-up party's locked-up shares in connection with the satisfaction of tax withholding obligations arising from the vesting of restricted stock units or similar equity awards, subject to the condition that the transferee or the Company, as applicable, agrees to hold any such shares subject t