0001813914 false Deerfield Healthcare Technology Acquisitions Corp. 0001813914 2021-06-08 2021-06-08 0001813914 us-gaap:CommonClassAMember 2021-06-08 2021-06-08 0001813914 us-gaap:WarrantMember 2021-06-08 2021-06-08 iso4217:USD xbrli:shares iso4217:USD xbrli:shares

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(D)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): June 8, 2021

 

CareMax, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware   001-39391   85-0992224
(State or other jurisdiction
of incorporation) 		  (Commission File Number)   (I.R.S. Employer
Identification No.)

 

 

1000 NW 57 Court, Suite 400

Miami, FL 33126

 
(Address of principal executive offices, including zip code)

 

(786) 360-4768

(Registrant’s telephone number, including area code)

 

(Former name or former address, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

        Name of each exchange on
Title of each class   Trading Symbols   which registered
Class A common stock, par value $0.0001 per share   CMAX   The Nasdaq Stock Market LLC
Warrants, each whole warrant exercisable for one share of Class A common stock, each at an exercise price of $11.50 per share   CMAXW   The Nasdaq Stock Market LLC

 

Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

  ¨ Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

  ¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

  ¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

  ¨ Pre-commencements communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company x

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

 

 

 

Class A common stock

Warrants

 

 

 

INTRODUCTORY NOTE

 

As previously disclosed, on June 8, 2021 (the “Closing Date”), Deerfield Healthcare Technology Acquisitions Corp. (“DFHT”), a Delaware corporation, completed the transactions contemplated by that certain Business Combination Agreement, dated as of December 18, 2020 (the “Business Combination Agreement”), by and among DFHT, the entities listed in Annex I to the Business Combination Agreement, IMC Holdings, LP, a Delaware limited partnership (“IMC Parent”), CareMax Medical Group, L.L.C., a Florida limited liability company (“CMG”), IMC Medical Group Holdings, LLC, a Delaware limited liability company (“IMC”), and, solely for the limited purposes specified therein, Deerfield Partners, L.P. (“Deerfield Partners”), pursuant to which DFHT acquired (a) 100% of the equity interests in CMG and (b) 100% of the equity interests in IMC, with CMG and IMC becoming wholly owned subsidiaries of the combined company. The transactions contemplated by the Business Combination Agreement and the related financing transactions collectively are referred to herein as the “Business Combination.”

 

Immediately upon the completion of the Business Combination (the “Closing”), DFHT as the registrant changed its name to “CareMax, Inc.”

 

Unless the context otherwise requires, the terms “we,” “us,” “our,” and the “Company” refer to CareMax, Inc. and its consolidated subsidiaries following the Closing and references to “DFHT” refer to Deerfield Healthcare Technology Acquisitions Corp. at or prior to the Closing. All references herein to the “Board” refer to the board of directors of the Company.

 

Item 1.01. Entry into a Material Definitive Agreement.

 

Credit Agreement

 

On the Closing Date, the Company entered into a Credit Agreement (the “Credit Agreement”), by and among the Company, Royal Bank of Canada, as Administrative Agent (in such capacity, the “Agent”), Collateral Agent, Swing Line Lender and Issuing Bank, RBC Capital Markets, LLC and Truist Securities, Inc., as Syndication Agents, Joint Lead Arrangers and Joint Book Runners, and certain other banks and financial institutions serving as lenders (collectively with their successors and assigns, the “Lenders”). The Credit Agreement provides for (i) initial term loans in an aggregate principal amount of $125.0 million (the “Initial Term Loans”), which was fully drawn on the Closing Date to finance the Business Combination and the other transactions on the Closing Date, (ii) a revolving credit facility in an aggregate principal amount of $40.0 million, which may be drawn after the Closing Date for working capital and other general corporate purposes, and (iii) a delayed draw term loan facility in an aggregate principal amount of $20.0 million, which will be available to be drawn from and after the Closing until the six (6) month anniversary of the Closing Date to finance permitted acquisitions and similar permitted investments (collectively, the “Credit Facilities”).

 

Interest is payable on the outstanding loans under the Credit Facilities based on either: (a) LIBOR (with a floor of 0.75% per annum) plus variable spreads ranging from 2.75% to 3.50% per annum based on first lien net leverage ratio levels or (b) the Alternate Base Rate (defined as the highest of (i) the Prime Rate (as defined in the Credit Agreement and established by the Agent), (ii) the Federal Funds Rate (as defined in the Credit Agreement) plus 0.50% per annum, and (iii) the LIBOR Quoted Rate (as defined in the Credit Agreement) plus 1.00% per annum, in each case, with a floor of 1.75% per annum), plus variable spreads ranging from 1.75% to 2.50% per annum based on first lien net leverage ratio levels. Accrued and unpaid interest is payable (x) with respect to LIBOR loans, on the last day interest period as selected by the Company but no later than three (3) months, and (y) with respect to Alternate Base Rate Loans, quarterly on the last business day of each of March, June, September and December. An unused commitment fee is also payable with respect to the revolving credit facility and the delayed draw term loan facility ranging between 0.35% and 0.50% depending on the Company’s first lien net leverage ratio, and is payable (x) quarterly in arrears with respect to the revolving credit facility and (y) on the earliest of the termination of the delayed draw term loan facility, the six (6) month anniversary of the Closing Date with respect to any delayed draw term loan commitments that have expired and otherwise after the end of the first full fiscal quarter after the Closing Date.

 

Amortization payments with respect to the Initial Term Loans will be payable in quarterly installments, commencing with the last business day of the first full fiscal quarter ending after the Closing Date, in aggregate principal amounts equal to (i) 1.25% of the aggregate principal amount of the Initial Term Loans outstanding on the Closing Date from the Closing Date until June 7, 2024, (ii) 1.875% of the aggregate principal amount of the Initial Term Loans outstanding on the Closing Date from June 8, 2024 to June 7, 2025 and (iii) 2.50% of the aggregate principal amount of the Initial Term Loans outstanding on the Closing Date from June 8, 2025 to June 7, 2026. All amounts owed under the Credit Facilities are due and payable upon the five year anniversary of the Closing Date, unless otherwise extended in accordance with the terms of the Credit Agreement.

 

The Credit Agreement contains certain covenants that limit, among other things, the ability of the Company and its subsidiaries to incur additional indebtedness or liens, to make certain investments, to enter into sale-leaseback transactions, to make certain restricted payments, including dividends, to enter into consolidations, mergers or sales of material assets and other fundamental changes, or to transact with affiliates subject to exceptions, materiality and other qualifications as provided in the Credit Agreement. The Credit Agreement also contains customary events of default and also includes an equity cure right.

 

All obligations under the Credit Agreement are guaranteed by the Company and substantially all of its subsidiaries, and all obligations under the Credit Agreement, including the guarantees of those obligations, are secured by substantially all of the assets of the Company and its subsidiaries subject to customary exceptions and qualifications.

 

Certain of the Lenders and other parties to the Credit Agreement, and their affiliates, have in the past provided, and may in the future provide, investment banking, underwriting, lending, commercial banking and other advisory services to the Company and its subsidiaries. Such Lenders and other parties have received, and in the future may receive, customary compensation from the Company and its subsidiaries for such services. 

 

 

 

The foregoing description of the Credit Agreement is not complete and is qualified in its entirety by reference to the full text of the Credit Agreement, which is filed as Exhibit 10.7 to this Current Report on Form 8-K and is incorporated herein by reference.

 

Indemnification Agreements

 

In connection with the Closing, the Company entered into indemnification agreements (each, an “Indemnification Agreement”) with its directors and executive officers. Each Indemnification Agreement provides for indemnification and advancements by the Company of certain expenses and costs if the basis of the indemnitee’s involvement in a matter was by reason of the fact that the indemnitee is or was a director, officer, employee or agent of the Company or any of its subsidiaries or was serving at the Company’s request in an official capacity for another entity, in each case to the fullest extent permitted by the laws of the State of Delaware.

 

The foregoing description of the Indemnification Agreements does not purport to be complete and is qualified in its entirety by reference to the full text of the Indemnification Agreements, a form of which is filed as Exhibit 10.8 to this Current Report on Form 8-K and is incorporated herein by reference.

 

Escrow Agreements

 

On the Closing Date, DFHT, DFHTA Sponsor LLC (the “Sponsor”), O.M. Investment Group, Inc. (“O.M.”), in its capacity as representative of the members of CMG (the “CMG Sellers”), and Continental Stock Transfer & Trust Company, in its capacity as escrow agent (the “Continental”), entered into an escrow agreement (the “CMG Escrow Agreement”), and DFHT, the Sponsor, IMC Parent and Continental entered into an escrow agreement (the “IMC Escrow Agreement” and together with the CMG Escrow Agreement, the “Escrow Agreements”). The Escrow Agreements provided for the deposit of the Adjustment Escrow Amounts (as defined below) with Continental for the purpose of securing certain post-closing adjustment obligations of the CMG Sellers and IMC Parent, respectively. Each Escrow Agreement also provides that the Company, as successor to in interest DFHT, shall pay and reimburse all fees and expenses of Continental and shall be subject to customary indemnification obligations.

 

In addition to its duties as escrow agent, Continental acts as the Company’s transfer agent and registrar and as warrant agent for the Company’s warrants, and Continental acted as the trustee for net proceeds of DFHT’s initial public offering and for certain of the proceeds of a private placement offering conducted by DFHT. O.M. is controlled by Carlos de Solo, our President and Chief Executive Officer.

 

The foregoing descriptions of the Escrow Agreements do not purport to be complete and are qualified in their entirety by reference to the full texts of the Escrow Agreements, which are filed as Exhibit 10.3 and Exhibit 10.4, respectively, to this Current Report on Form 8-K and are incorporated herein by reference.

 

  Item 2.01. Completion of Acquisition or Disposition of Assets.

 

As previously disclosed, on June 8, 2021, the parties to the Business Combination Agreement completed the Business Combination. At the Closing, the CMG Sellers and IMC Parent were paid consideration valued in the aggregate at approximately $364 million and $250 million, respectively, less repayment of net debt and further subject to the purchase price adjustments set forth in the Business Combination Agreement (the “Closing Consideration”). The net Closing Consideration was comprised of 68% ($229.4 million) and 45% ($85.2 million) in cash for the CMG Sellers and IMC Parent, respectively, with the remainder of the Closing Consideration comprised of 10,796,069 and 10,412,023 shares Class A common stock of the Company, par value 0.0001 per share (“Class A Common Stock”), issued to the CMG Sellers and IMC Parent, respectively, at a reference price of $10.00 per share.

 

An additional 3,500,000 and 2,900,000 shares of Class A Common Stock (the “Earnout Shares”) are payable after the Closing to the CMG Sellers and IMC Parent, respectively, upon satisfaction of the following conditions: (i) if within the first year after the Closing the trading price of Class A Common Stock equals or exceeds $12.50 on any 20 trading days in any 30-day trading period (the “First Share Price Trigger”), then 1,750,000 and 1,450,000 of the Earnout Shares will be released to the CMG Sellers and IMC Parent, respectively, or (ii) if within the second year after the Closing the trading price of Class A Common Stock equals or exceeds $15.00 on any 20 trading days in any 30-day trading period (the “Second Share Price Trigger”), then 1,750,000 and 1,450,000 of the Earnout Shares will be released to the CMG Sellers and IMC Parent, respectively. Notwithstanding the foregoing, if the First Share Price Trigger is not satisfied, but the Second Share Price Trigger is satisfied, the Company will issue 3,500,000 and 2,900,000 shares of Class A Common Stock to the CMG Sellers and IMC Parent, respectively.

 

The Class A Common Stock issued in connection with the Business Combination was not registered under the Securities Act of 1933, as amended (the “Securities Act”), and was issued in reliance on the exemption from registration requirements thereof provided by Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder as a transaction by an issuer not involving a public offering.

 

At the Closing, pursuant to the terms of the CMG Escrow Agreement and the IMC Escrow Agreement, DFHT deposited $500,000 and $1,000,000, respectively, into adjustment escrow accounts (the “Adjustment Escrow Amounts”) for the purpose of securing certain post-closing adjustment obligations of the CMG Sellers and IMC Parent, respectively. Of such $500,000 amount securing the post-closing adjustment obligations of the CMG Sellers, 68% ($0.34 million) was in cash and 32% was in the form of 16,000 shares of Class A Common Stock, and of such $1,000,000 amount securing the post-closing adjustment obligations of IMC Parent, 45% ($0.45 million) was in cash and 55% was in the form of 55,000 shares of Class A Common Stock (such shares collectively, the “Adjustment Escrow Shares”). Following the date on which the Closing Consideration is finally determined pursuant to the Business Combination Agreement, all or a portion of the applicable Adjustment Escrow Amounts and Adjustment Escrow Shares will either be released to the CMG Sellers or to IMC Parent, as applicable, or to the Company in accordance with certain adjustment mechanisms in the Business Combination Agreement.

 

Immediately following the Closing, all of the issued and outstanding shares of Class B common stock of the Company, par value 0.0001 per share (“Class B Common Stock”), automatically converted, on a one-for-one basis, into shares of Class A Common Stock in accordance with DFHT’s second amended and restated certificate of incorporation.

 

 

 

 

FORM 10 INFORMATION

Cautionary Statement Regarding Forward-Looking Statements

 

This Current Report on Form 8-K and the documents incorporated herein contain forward-looking statements. Forward-looking statements provide the Company’s current expectations or forecasts of future events, and include statements the Company’s expectations, beliefs, plans, objectives, intentions, assumptions and other statements that are not historical facts. These statements are based on management’s current beliefs and assumptions about future events and are based on currently available information as to the outcome and timing of future events. Although we believe our plans, intentions and expectations reflected in or suggested by these forward-looking statements are reasonable, we cannot assure you that we will achieve or realize these plans, intentions or expectations. Forward-looking statements are inherently subject to risks, uncertainties and assumptions. Generally, statements that are not historical facts, including statements concerning possible or assumed future actions, business strategies, events or results of operations, are forward-looking statements. The words “anticipates,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predicts,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking.

 

Forward-looking statements contained in this Current Report on Form 8-K and the documents incorporated by reference herein include, but are not limited to, statements about:

 

  · the benefits of the Business Combination;

 

  · the future financial performance of the Company following the Business Combination, including any projected financial information;

 

  ·

the liquidity and trading of our securities;

     
  · expansion plans and opportunities, including any expected acquisitions or the opening of any new medical centers;
     
  · market conditions and global and economic factors beyond the Company’s control, including the potential adverse effects of the global coronavirus (COVID-19) pandemic;

 

  · our growth strategy, including organic growth of members or Medicare members, or otherwise, and growth by acquisition, and our ability to realize expected results following the Business Combination;

 

  · our ability to obtain and maintain enrollment, licensure, certification and accreditation for the provision of healthcare services;

 

  · our marketing, customer retention and ability to attract new patients;

 

  · the impact of reductions in Medicare reimbursement rates or changes in the rules governing the Medicare program, including the Medicare Advantage program;

 

  · our ability to adapt to changes in the healthcare industry, including changes to laws and regulations;

 

  · our competitive position and expectations regarding developments and projections relating to our competitors;

 

  · changes in the market for our services;

 

  · the timing, scope and likelihood of regulatory filings;
     
  · litigation and the ability to adequately protect the combined company’s intellectual property rights; and

 

  · other factors detailed under the section titled “Risk Factors” beginning on page 39 of DFHT’s Definitive Proxy Statement on Schedule 14A, filed with the United States Securities and Exchange Commission (the “SEC”) on May 14, 2021 (the “Proxy Statement”), which are incorporated herein by reference.

 

These forward-looking statements are based on information available as of the date of this Current Report on Form 8-K, and current expectations, forecasts and assumptions, and involve a number of risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

 

In addition, statements that we “believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Current Report on Form 8-K, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete involve a number of assumptions and limitations. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

 

You should not place undue reliance on these forward-looking statements. As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause actual results to differ include:

 

 

 

 

  · the occurrence of any event, change or other circumstances that could give rise to a claim under the Business Combination Agreement;

 

  · the outcome of any legal proceedings that may be instituted following the Business Combination;

 

  · the risk that the Business Combination disrupts our current plans and operations or impacts our expected de novo growth;

 

  · our ability to recognize the anticipated benefits of the Business Combination, which may be affected by, among other things, the ability of the Company to grow and manage growth profitably, maintain relationships with customers, compete within its industry and retain its key employees, and the ability to integrate CMG and IMC;

 

  · costs related to the proposed Business Combination;

 

  · the possibility that we may be adversely impacted by other economic, business, and/or competitive factors;

 

  · the timing of the completion of any currently expected acquisitions or of the opening of any new medical centers;

 

  · future exchange and interest rates; and

 

  · other risks and uncertainties indicated in this Current Report on Form 8-K, including under the caption "Risk Factors" below, and in the Proxy Statement, including those under the section titled “Risk Factors” beginning on page 39 thereof, and other filings that the Company has made or will make with the SEC.

 

Business

 

Information about the business of the Company, accounting for the combined businesses of CMG and IMC following the Business Combination, is described in the Proxy Statement in the section titled “Industry of the Combined Company” beginning on page 176 thereof, which is incorporated herein by reference. The businesses of CMG and IMC prior to the Business Combination are described in the Proxy Statement in the sections titled “Business of CareMax” beginning on page 181 thereof and “Business of IMC” beginning on page 214 thereof, respectively, which are incorporated herein by reference. The business of DFHT prior to the Business Combination is described in the Proxy Statement in the section titled “Other Information Related to DFHT” beginning on page 162 thereof, which is incorporated herein by reference.

 

Risk Factors

 

The risks associated with the Company’s business and operations and the Business Combination are described in the Proxy Statement in the section titled “Risk Factors” beginning on page 39 thereof, which is incorporated herein by reference and are supplemented by the following risk factor.

 

The COVID-19 pandemic continues to impact our operations and, in the future, the COVID-19 pandemic or another pandemic, epidemic or outbreak of infectious disease, could materially adversely affect our financial condition and results of operations.

 

The COVID-19 pandemic continues to impact our business and could materially adversely affect our business in the future. Numerous state and local jurisdictions, including all markets where we operate, have imposed, and others in the future may impose, “shelter-in-place” orders, quarantines, executive orders and similar government orders and restrictions for their residents to control the spread of COVID-19. While CMG resumed opening new centers and resumed normal medical center and limited wellness services as of the third quarter of 2020, in the first nine months of 2020, in response to the COVID-19 pandemic, CMG implemented daily temperature monitoring of its employees and implemented mandatory face masks allowing its corporate offices to remain open to support its centers, while allowing employees to work remotely when necessary. During the second quarter of 2020, CMG made operational changes to the staffing and operations of our centers to minimize potential exposure to COVID-19. Although IMC did not close its facilities, it restricted in-center visits to those patients with the most urgent needs, resulting in fewer fee-for-services visits and lower dollar values of claims. IMC has also suspended community-based outreach events and scaled back central marketing efforts.

 

COVID-19 has also diverted or limited the resources of personnel that would otherwise be focused on the operations of the CMG and IMC businesses. This may be the result of sickness of personnel or their families, disruptive activities and business closures in areas where we operate, potential delays in hiring and onboarding of new employees and other factors that have impacted employee productivity. We may take further actions that alter our business operations as may be required by local, state, or federal authorities or that we determine are in the best interests of our employees. Such measures could negatively affect our sales and marketing efforts, sales cycles, employee productivity, or customer retention, any of which could harm our financial condition and business operations.

 

 

 

 

Executive orders and similar government orders and restrictions have also resulted in work stoppages among some vendors and suppliers, slowdowns and delays that have impacted the ability of our suppliers to manufacture goods and to deliver these to us on a timely basis, or at all; inventory shortages or obsolescence; delays in actions of regulatory bodies; and other business adjustments or disruptions of certain third parties upon whom we rely. During 2020, our businesses had to acquire greater quantities of medical supplies at significantly higher prices to ensure the safety of our employees and our patients. CMG’s medical supply costs were up 34% during the year ended December 31, 2020 compared to the year ended December 31, 2019. IMC’s medical supply cost was up 26% during the year ended December 31, 2020 compared to the year ended December 31, 2019. Continued disruptions to these businesses could have an adverse effect on our operations.

 

In addition, the COVID-19 virus disproportionately impacts older adults, especially those with chronic illnesses, which describes many of our patients. Patients have been and may continue to be reluctant to seek necessary care given the risks of the COVID-19 pandemic. This could have the effect of deterring healthcare costs to later periods and may also affect the health of patients who defer treatment, which may cause our costs to increase in the future. Further, as a result of the COVID-19 pandemic, we may experience slowed growth or a decline in new patient demand. We also may experience increased internal and third-party medical costs as we provide care for patients suffering from COVID-19. A material increase in costs may adversely affect our financial results given the number of our patients who are under capitation agreements.

 

Due to the COVID-19 pandemic, we may not be able to document the health conditions of our patients as completely as we have in the past. Medicare pays capitation using a “risk adjustment model,” which compensates Medicare Advantage (“MA”) health plans based on the health status (acuity) of each individual patient. Payors and their contracted providers with higher acuity patients receive more, and those with lower acuity patients receive less. Medicare requires that a patient’s health issues be documented annually regardless of the permanence of the underlying causes. Historically, this documentation was required to be completed during an in-person visit with a patient. As part of the Coronavirus Aid, Relief and Economic Security Act, or CARES Act, which was signed into law on March 27, 2020 and was designed to provide financial support and resources to individuals and businesses affected by the COVID-19 pandemic, Medicare is allowing documentation for conditions identified during video visits with patients. While we utilized telehealth to document the health conditions of our patients and increased our efforts to return our patients to our centers for in-person visits during the latter half of 2020 and beginning of 2021, it is unclear whether we will be able to adequately document the acuity of our patients with respect to the 2020 fiscal year, which could adversely affect the risk adjustment payments for the 2020 fiscal year that we receive during the 2021 fiscal year, which could result in lower than expected revenue for the 2021 fiscal year.  We currently believe that any such effect would be limited to the risk adjustment payments that we receive during the 2021 fiscal year and would not affect subsequent periods.

 

The COVID-19 pandemic could also cause our third-party data center hosting facilities and cloud computing platform providers, which are critical to our infrastructure, to shut down their business, experience security incidents that impact our business, delay or disrupt performance or delivery of services, or experience interference with the supply chain of hardware required by their systems and services, any of which could materially adversely affect our business. Further, the COVID-19 pandemic has resulted in our employees and those of many of our vendors working from home and conducting work via the internet, and if the network and infrastructure of internet providers becomes overburdened by increased usage or is otherwise unreliable or unavailable, our employees’, and our customers’ and vendors’ employees’, access to the internet to conduct business could be negatively impacted. Limitations on access or disruptions to services or goods provided by or to some of our suppliers and vendors upon which our platform and business operations relies, could interrupt our ability to provide our platform, decrease the productivity of our workforce, and significantly harm our business operations, financial condition, and results of operations.

 

Our platform and the other systems or networks used in our business may experience an increase in attempted cyber-attacks, targeted intrusion, ransomware, and phishing campaigns seeking to take advantage of shifts to employees working remotely using their household or personal internet networks and to leverage fears promulgated by the COVID-19 pandemic. The success of any of these unauthorized attempts could substantially impact our platform, the proprietary and other confidential data contained therein or otherwise stored or processed in our operations, and ultimately our business. Any actual or perceived security incident also may cause us to incur increased expenses to improve our security controls and to remediate security vulnerabilities.

 

 

 

 

With the availability of vaccines against the COVID-19 virus, there may be a reduction in the incidence of the virus. Should we elect to deliver vaccines, COVID-19 vaccine doses are to be provided by the government without charge so we will only bill for the vaccine administration. Initially, the Medicare payment rates for COVID-19 vaccine administration will be $28.39 to administer single-dose vaccines; for a COVID-19 vaccine requiring a series of two or more doses, the initial dose(s) administration payment rate will be $16.94 and $28.39 for the administration of the final dose in the series. This amount may not cover the real and potential costs to us of the COVID-19 vaccine, including vaccine storage and handling, monitoring the timing and spacing of vaccine doses, observation of precautions and contraindications, management of vaccine side effects and reporting of such suspected side effects, evaluating contraindications and precautions to vaccination indicating when vaccines should not be given and recording vaccine and administration information, including lot numbers and injection sites, in the patient’s record. MA plans are eligible to submit COVID-19 claims to Medicare for all patients enrolled in MA in 2020 and 2021. This unique billing mechanism may increase our costs of administering the vaccine.

 

The extent and continued impact of the COVID-19 pandemic on our business will depend on certain developments, including: the duration and spread of the outbreak; government responses to the pandemic; the impact on our customers and our sales cycles; the impact on customer, industry, or employee events; and the effect on our partners and supply chains, all of which are uncertain and cannot be predicted. Even after the COVID-19 pandemic has subsided, we may experience adverse impacts to our business as a result of any economic recession or depression that has occurred or may occur in the future. The COVID-19 pandemic may also have the effect of heightening many of the other risks described in this “Risk Factors” section, including but not limited to those relating to cyber-attacks and security vulnerabilities and interruptions or delays due to third-parties. The full impact of the COVID-19 pandemic may not be fully reflected in our results of operations and overall financial condition until future periods.

 

Another pandemic, epidemic, or outbreak of an infectious disease could occur in the United States or worldwide, and such an event could adversely affect our business in ways that are similar to or different from the COVID-19 pandemic. We may be unable to properly anticipate or prepare for these events and, as a result, our business may be materially adversely impacted.

 

Financial Information

 

Reference is made to the disclosure set forth in Item 9.01 of this Current Report on Form 8-K concerning the financial information of CMG, IMC and DFHT. Reference is further made to the disclosure contained in the Proxy Statement in the sections titled “Summary Historical Financial Information Of CareMax” on page 36 thereof, “Summary Historical Financial Information Of IMC,” on page 37 thereof, “Summary Historical Financial Information Of DFHT,” on page 35 thereof, “Comparative Share Information” on page 113 thereof, “Unaudited Pro Forma Condensed Combined Financial Information of DFHT” beginning on page 93 thereof and “Notes to Unaudited Pro Forma Condensed Combined Financial Statements” beginning on page 97 thereof, which are incorporated herein by reference.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Reference is made to CMG’s Management’s Discussion and Analysis of Financial Condition and Results of Operations as of and for the three months ended March 31, 2021, included in Exhibit 99.1 to this Current Report on Form 8-K, and IMC’s Management’s Discussion and Analysis of Financial Condition and Results of Operations as of and for the three months ended March 31, 2021, included in Exhibit 99.2 to this Current Report on Form 8-K, which are incorporated herein by reference. Reference is further made to the disclosure contained in the Proxy Statement in the sections titled “CareMax Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on page 198 thereof, “IMC Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on page 231 thereof and “DFHT Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on page 170 thereof, which are incorporated herein by reference.

 

Quantitative and Qualitative Disclosures about Market Risk

 

Reference is made to CMG’s Management’s Discussion and Analysis of Financial Condition and Results of Operations as of and for the three months ended March 31, 2021, included in Exhibit 99.1 to this Current Report on Form 8-K, and IMC’s Management’s Discussion and Analysis of Financial Condition and Results of Operations as of and for the three months ended March 31, 2021, included in Exhibit 99.2 of this Current Report on Form 8-K, which are incorporated herein by reference. Reference is further made to the disclosure contained in the Proxy Statement in the sections titled “CareMax Management’s Discussion and Analysis of Financial Condition and Results of Operations – Quantitative and Qualitative Disclosures About Market Risk” beginning on page 214 thereof, “IMC Management’s Discussion and Analysis of Financial Condition and Results of Operations – Quantitative and Qualitative Disclosures About Market Risk” beginning on page 247 thereof and “DFHT Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on page 170 thereof, which are incorporated herein by reference.

 

 

 

 

Properties

 

The properties of CMG and IMC are described in the Proxy Statement in the sections titled “Business of CareMax – Properties” on page 197 thereof and “Business of IMC – Properties” on page 230 thereof, respectively, which are incorporated herein by reference.

 

Beneficial Ownership of Securities

 

The following table sets forth information known to the Company regarding the beneficial ownership of the Class A Common Stock as of the Closing, after giving effect to the Closing and the PIPE Investments (as defined below), by:

 

  ·   each person who is known by the Company to be the beneficial owner of more than five percent (5%) of the outstanding shares of the Class A Common Stock;

 

  ·   each of the Company’s executive officers and directors; and

 

  ·   all executive officers and directors of the Company as a group.

 

Beneficial ownership for the purposes of the following table is determined according to the rules and regulations of the SEC, which generally provide that a person has beneficial ownership of a security if he, she or it possesses sole or shared voting or investment power over that security, including options and warrants that are currently exercisable or exercisable within 60 days.

 

The beneficial ownership of the Class A Common Stock immediately following the Closing is based on an aggregate of 80,247,842 shares of Class A Common Stock outstanding as follows: (i) 3,593,750 shares of Class B Common Stock that converted into shares of Class A Common Stock on a one-for-one basis in connection with the Closing, (ii) 21,208,092 shares of Class A Common Stock issued as stock consideration to the members of the CMG Sellers and IMC Parent, subject to cash and net working capital adjustments as provided in the Business Combination Agreement, (iii) 10,000,000 shares of Class A Common Stock issued in the Deerfield PIPE Investments (as defined below), (iv) 31,000,000 shares of Class A Common Stock issued in the Third-Party PIPE Investments (as defined below) and (v) the Adjustment Escrow Shares, and excludes any Earnout Shares to which the persons below may become entitled to pursuant to the Business Combination Agreement. In accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), any securities which are subject to options, warrants, rights or conversion privileges exercisable or convertible into shares of Class A Common Stock within 60 days are deemed to be outstanding solely for the purpose of computing the percentage of outstanding Class A Common Stock owned by the beneficial owner of such securities but shall not be deemed to be outstanding for the purpose of computing the percentage of Class A Common Stock owned by any other person.

 

Unless otherwise indicated, the Company believes that all persons named in the table have sole voting and investment power with respect to all shares of Class A Common Stock beneficially owned by them.

 

 

 

 

Name of Beneficial Owners(1)   Number of
Shares of
Class A Common
Stock
Beneficially
Owned 		    Percentage
of
Outstanding
Class A Common
Stock 		 
Directors and Executive Officers:                
Richard Barasch     50,000       *  
Carlos A. de Solo (2)     5,456,108       6.80 %
Alberto de Solo(3)     2,459,958       3.07 %
William C. Lamoreaux(4)     —       — %
Kevin Wirges(5)     —       —  
Hon. Dr. David J. Shulkin     25,000       *  
Randy Simpson(6)     421,063       *  
Dr. Jennifer Carter     —       —  
Jose R. Rodriguez     —       —  
All directors and executive officers as a group (14 individuals)     8,396,129       10.44 %
                 
Five Percent Holders:                
Entities affiliated with Deerfield Management Company, L.P., including Deerfield Partners, L.P. and DFHTA Sponsor LLC(7)     20,367,417       24.29 %
DFHTA Sponsor LLC(8)     6,685,417       8.04 %
IMC Holdings, L.P.(9)     10,467,023       13.04 %
O.M. Investment Group, Inc.(2), (10)     5,456,108       6.80 %

 

 
   
* Less than one percent
   
(1) Unless otherwise indicated, the business address of each of the individuals and entities is 1000 NW 57 Court, Suite 400, Miami, FL 33126.

 

(2) Represents the aggregate number of shares of Class A Common Stock held indirectly by Carlos de Solo, his spouse and family trusts through an investment vehicle, O.M. Includes 16,000 shares Class A Common Stock (the “Escrow Shares”) held in escrow immediately following the Closing of the Business Combination, which are subject to forfeiture in connection with the post-closing adjustment obligations of the CMG Sellers in accordance with the Business Combination Agreement. O.M. and Mr. de Solo may be deemed to beneficially own the Escrow Shares, and each disclaims beneficial ownership of the Escrow Shares except to the extent of O.M. and Mr. de Solo’s pecuniary interest therein.

 

(3) Represents the aggregate number of shares of Class A Common Stock held indirectly by Alberto de Solo, his spouse and a family trust through an investment vehicle, C.G.D. Investment Group, Inc. (“C.D.G.”).
   
(4)

Represents (i) 281,309 shares of Class A Class A Common Stock held by Mr. Simpson prior to Closing and (ii) 139,754 shares of Class A Common Stock underlying an equal number of warrants that will become exercisable 30 days following the Closing.

 

(5) Excludes the shares of Class A Common Stock held by IMC Parent. Mr. Lamoreax has a pecuniary interest in 327,351 shares of Class A Common Stock held by IMC Parent but does not have beneficial ownership over any such shares.
   
(6) Excludes the shares of Class A Common Stock held by IMC Parent. Mr. Wirges has a pecuniary interest in 120,451 shares of Class A Common Stock held by IMC Parent but does not have beneficial ownership over any such shares.

 

(7) Represents 12,960,000 shares of Class A Common Stock held directly by Deerfield Partners, L.P; (ii) 672,000 shares of Class A Common Stock underlying an equal number of warrants held directly by Deerfield Partners; (iii) 3,768,750 shares of Class A Common Stock held directly by the Sponsor; (iv) 2,916,667 shares of Class A Common Stock underlying an equal number of warrants held directly by the Sponsor that will become exercisable 30 days following the Closing; and (v) 50,000 shares of Class A Common Stock held directly by Steven Hochberg, a partner in Deerfield Management Company, L.P. (“Deerfield Management”), for the benefit, and at the direction, of Deerfield Management. The address of all entities affiliated with Deerfield Management is 345 Park Avenue South, 12th Floor, New York, New York 10010.
   
(8) Shares held by the Sponsor consists of (i) 3,368,750 shares of Class A Common Stock acquired upon the conversion of shares of Class B Common Stock at the Closing, (ii) 400,000 shares of Class A Common Stock purchased in the Deerfield PIPE Investments and (iii) 2,916,667 shares of Class A Common Stock underlying an equal number of warrants that will become exercisable 30 days following the Closing. Richard Barasch, through an investment vehicle, is among the members of the Sponsor and may be entitled to distributions of securities held by the Sponsor.

 

(9)

IMC Holdings, L.P. is a partnership, which to the knowledge of the Company is controlled by Comvest Investment Partners Holdings, LLC. The Address of IMC Holdings, L.P. is 525 Okeechobee Boulevard, Suite 1010, West Palm Beach, Florida 33401.

 

(10) O.M. is an investment vehicle beneficially owned by Carlos de Solo, his spouse and family trusts.

 

Directors and Executive Officers

 

Information with respect to the Company’s directors and executive officers immediately following the Closing is set forth in the Proxy Statement in the section titled “Management of the Company Following the Business Combination” beginning on page 248 thereof, which is incorporated herein by reference.

 

 

 

 

Independence of Directors

 

Nasdaq listing standards require that a majority of the board of directors of a company listed on Nasdaq be composed of “independent directors,” which is defined generally as a person other than an executive officer or employee of the company or its subsidiaries or any other individual having a relationship that, in the opinion of the Board, would interfere with the director’s exercise of independent judgment in carrying out the responsibilities of a director. Based on information provided by each director concerning his or her background, employment and affiliations, including family relationships, the Board has determined that each of Drs. Carter and Shulkin and Messrs. Rodriguez and Simpson is an “independent director” under the Nasdaq listing standards.

 

Committees of the Board of Directors

 

The standing committees of the Board currently include an audit committee, a compensation committee and a nominating and corporate governance committee and a compliance committee. Each of the committees will report to the Board as they deem appropriate and as the Board may request. The initial composition, duties and responsibilities of these committees are set forth below.

 

Audit Committee

 

The principal functions of the audit committee include, among other things:

 

· the appointment, compensation, retention, replacement and oversight of the work of the independent registered public accounting firm engaged by us;
· pre-approving all audit and permitted non-audit services to be provided by the independent registered public accounting firm engaged by us, and establishing pre-approval policies and procedures;
· reviewing and discussing with the independent auditors all relationships the auditors have with us in order to evaluate their continued independence;
· setting clear hiring policies for employees or former employees of the independent registered public accounting firm, including but not limited to, as required by applicable laws and regulations;
· setting clear policies for audit partner rotation in compliance with applicable laws and regulations;
· obtaining and reviewing a report, at least annually, from the independent registered public accounting firm describing (i) the independent registered public accounting firm’s internal quality-control procedures, (ii) any material issues raised by the most recent internal quality-control review, or peer review, of the audit firm, or by any inquiry or investigation by governmental or professional authorities within the preceding five years respecting one or more independent audits carried out by the firm and any steps taken to deal with such issues and (iii) all relationships between the independent registered public accounting firm and us to assess the independent registered public accounting firm’s independence;
· reviewing and approving any related party transaction required to be disclosed pursuant to Item 404 of Regulation S-K promulgated by the SEC prior to us entering into such transaction; and
· reviewing with management, the independent registered public accounting firm, and our legal advisors, as appropriate, any legal, regulatory or compliance matters, including any correspondence with regulators or government agencies and any employee complaints or published reports that raise material issues regarding our financial statements or accounting policies and any significant changes in accounting standards or rules promulgated by the Financial Accounting Standards Board, the SEC or other regulatory authorities.

 

The audit committee consists of Messrs. Rodriguez and Simpson and Dr. Shulkin, with Mr. Rodriguez serving as the chair of the audit committee. The Board has determined that each of Messrs. Rodriguez and Simpson and Dr. Shulkin qualify as independent directors according to the rules and regulations of the SEC and Nasdaq with respect to audit committee membership. We also believe that each of Messrs. Rodriguez and Simpson qualify as an “audit committee financial expert,” as that term is defined in Item 401(h) of Regulation S-K. The Board has adopted a written charter for the Audit Committee, which is available free of charge on our corporate website (www.caremax.com). The information on our website is not part of this Current Report on Form 8-K.

 

Compensation Committee

 

The principal functions of the compensation committee include, among other things:

 

· reviewing and approving on an annual basis the corporate goals and objectives relevant to our Chief Executive Officer’s compensation, evaluating our Chief Executive Officer’s performance in light of such goals and objectives and determining and approving the remuneration of our Chief Executive Officer based on such evaluation;
· reviewing and approving on an annual basis the compensation of all of our other executive officers;

 

 

 

 

· reviewing on an annual basis our executive compensation policies and plans;
· implementing and administering our incentive compensation equity-based remuneration plans;
· assisting management in complying with our proxy statement and annual report disclosure requirements;
· approving all special perquisites, special cash payments and other special compensation and benefit arrangements for our officers and employees;
· if required, producing a report on executive compensation to be included in our annual proxy statement; and
· reviewing, evaluating and recommending changes, if appropriate, to the remuneration for directors.

 

The compensation committee consists of Drs. Carter and Shulkin, with Dr. Shulkin serving as the chair of the compensation committee. The Board has determined that each of Drs. Carter and Shulkin qualify as independent directors according to the rules and regulations of the SEC and Nasdaq with respect to compensation committee membership. The Board has adopted a written charter for the compensation committee, which is available free of charge on our corporate website (www. caremax.com). The information on our website is not part of this Current Report on Form 8-K.

 

Nominating and Corporate Governance Committee

 

The principal functions of the nominating and corporate governance committee include, among other things:

 

· identifying and screening individuals qualified to become Board members;
· selecting, or recommending to the Board, director nominees for each election of directors;
· reviewing, evaluating and recommending changes, if appropriate, to the remuneration for directors;
· developing and recommending to the Board criteria for selecting qualified director candidates;
· considering committee member qualifications, appointment and removal;
· overseeing our corporate governance policies and reporting;
· making recommendations to the Board concerning governance matters; and
· providing oversight in the evaluation of the Board and each committee.

 

The nominating and corporate governance committee consists of Dr. Carter and Messrs. Barasch and Simpson, with Mr. Barasch serving as the chair of the nominating and corporate governance committee. The Board has determined that each of Dr. Carter and Mr. Simpson qualify as independent directors according to the rules and regulations of the SEC and Nasdaq. In reliance on the exemption set forth in Nasdaq Rule 5605(e)(3), which allows for a nominating committee comprised of at least three members to have one member of such committee that does not qualify as an independent director under certain circumstances, the Board has determined that in light of his experience as a founder of the Company, it is in the best interests of the Company and its stockholders for Mr. Barasch to serve on the nominating and corporate governance committee. The Board has adopted a written charter for the nominating and corporate governance committee, which is available free of charge on our corporate website (www. caremax.com). The information on our website is not part of this Current Report on Form 8-K.

 

Compliance Committee

 

The principal functions of the compliance committee include, among other things:

 

· overseeing our activities in the area of compliance with applicable laws and regulations related to the provision of healthcare or healthcare-related services;
· assessing management’s implementation of a compliance program;
· evaluating the adequacy and effectiveness of policies and procedures to ensure our compliance with applicable laws and regulations;
· overseeing the organization, responsibilities, plans, budget, staffing and performance of our compliance department, including its independence, authority and reporting obligations;
· overseeing the appointment and review of members of our compliance department, including a review of reports and summaries related to compliance matters;
· monitoring any significant internal and external investigations;
· monitoring our actions in response to applicable legislative, regulatory and legal developments;
· determining the appropriate mechanisms for employees to seek guidance to report compliance concerns; and
· overseeing our compliance risk assessment activities and efforts to promote an ethical culture.

 

 

 

 

The compliance committee consists of Dr. Carter and Mr. Rodriguez, with Dr. Carter serving as the chair of the compliance committee.

 

Executive Compensation

 

A description of the compensation of the named executive officers of CMG and of IMC before the consummation of the Business Combination is set forth in the Proxy Statement in the sections titled “Executive Compensation – CareMax Executive Compensation” beginning on page 254 thereof and “Executive Compensation – IMC Executive Compensation” beginning on page 256 thereof, respectively, which are incorporated herein by reference.

 

As previously disclosed, at DFHT’s special meeting of stockholders held on June 4, 2021, DFHT’s stockholders approved the Incentive Plan. The description of the Incentive Plan is set forth in the Proxy Statement in section titled “Proposal No. 4 – Approval of The Incentive Plan Proposal” beginning on page 153 thereof, which is incorporated herein by reference. A copy of the full text of the Incentive Plan is filed as Exhibit 10.9 to this Current Report on Form 8-K and is incorporated herein by reference.

 

Director Compensation

 

A description of the compensation of the managers or directors of CMG before the consummation of the Business Combination is set forth in the Proxy Statement in the section titled “Executive Compensation – CareMax Executive Compensation – Compensation of Directors” on page 256 thereof. A description of the compensation of the directors of IMC before the consummation of the Business Combination is set forth in the Proxy Statement in the section titled “Executive Compensation – IMC Executive Compensation – Compensation of Directors” on page 259 thereof.

 

Certain Relationships and Related Transactions

 

The certain relationships and related party transactions of CMG, IMC and DFHT are described in the Proxy Statement in the section titled “Certain Relationships and Related Transactions” beginning on page 264 thereof, which is incorporated herein by reference. Reference is further made to the notes to the unaudited condensed combined financial statements of CMG and affiliates and the notes to the unaudited condensed combined financial statements of IMC, in each case, as of and for the three months ended March 31, 2021, which are filed as Exhibits as Exhibit 99.3 and Exhibit 99.4, respectively, to this Current Report on Form 8-K and are incorporated herein by reference.

 

Legal Proceedings

 

Information about legal proceedings is set forth in the Proxy Statement in the sections titled “Business of CareMax – Legal Proceedings” on page 196 thereof, “Business of IMC – Legal Proceedings” on page 229 thereof and “Other Information Related to DFHT – Legal Proceedings” on page 169 thereof, which are incorporated herein by reference.

 

Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters

 

As of the Closing Date, there were approximately 79 holders of record of the Class A Common Stock, excluding beneficial owners holding shares through nominee holders of record, and 0 holders of record of the Class B Common Stock, which automatically converted into Class A Common Stock on a one-for-one basis immediately following the Closing.

 

The Class A Common Stock and warrants began trading on Nasdaq Global Select Market under the symbols “CMAX” and “CMAXW,” respectively, on June 9, 2021. In connection with the Closing, each of the DFHT’s publicly traded units automatically separated into their component securities upon consummation of the Business Combination and, as a result, no longer trade as a separate security and were delisted from Nasdaq.

 

The Company has not paid any cash dividends on the Class A Common Stock to date and does not intend to pay any cash dividends in the foreseeable future. The payment of cash dividends in the future will be dependent upon the Company’s revenue and earnings, if any, capital requirements, liabilities and related reserves, and general financial condition. The payment of any cash dividends will be within the discretion of the Board from time to time and subject to applicable Delaware law. It is the present intention of the Company’s Board to retain all earnings, if any, for use in business operations and, accordingly, the Board does not anticipate declaring any dividends in the foreseeable future. Further, the Company’s ability to declare dividends is currently limited by restrictive covenants in connection with the Credit Agreement.

 

Recent Sales of Unregistered Securities

 

Reference is made to the disclosure set forth in Item 3.02 of this Current Report on Form 8-K, which is incorporated herein by reference.

 

 

 

 

Description of Registrant’s Securities

 

The description of the Company’s securities is contained in the Proxy Statement in the section titled “Description of Securities” beginning on page 268 thereof, which is incorporated herein by reference.

 

Immediately following the Closing, there were 80,247,842 shares of the Class A Common Stock issued and outstanding, held of record by approximately 79 holders, and 5,791,667 warrants to purchase shares of Class A Common Stock outstanding held of record by two holders, in each case excluding beneficial owners holding shares through nominee holders of record.

 

Indemnification of Directors and Officers

 

Reference is made to the disclosure set forth in Item 1.01 of this Current Report on Form 8-K under the caption “Indemnification Agreements,” which is incorporated herein by reference. Reference is further made to the disclosure set forth in the Proxy Statement in the section titled “Management of the Company Following The Business Combination – Limitation on Liability and Indemnification Matters” on page 253, which is incorporated herein by reference.

 

Financial Statements and Supplementary Data

 

Reference is made to the disclosure set forth in Item 9.01 of this Current Report on Form 8-K, which is incorporated herein by reference.

 

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant

 

Reference is made to the disclosure set forth in Item 1.01 of this Current Report on Form 8-K under the caption “Credit Agreement”, which is incorporated herein by reference.

 

Item 3.02 Unregistered Sales of Equity Securities

 

Transaction Consideration

 

Reference is made to the disclosure set forth in Item 2.01 of this Current Report on Form 8-K, which is incorporated herein by reference.

 

Deerfield PIPE Investments

 

In connection with the Business Combination, Deerfield Partners and the Sponsor purchased an aggregate of 10,000,000 shares of Class A Common Stock (the “Deerfield PIPE Investments”), consisting of 9,600,000 shares of Class A Common Stock purchased by Deerfield Partners and 400,000 shares of Class A Common Stock purchased by the Sponsor, for a purchase price of $10.00 per share and an aggregate purchase price of $100,000,000, pursuant to certain subscription agreements, each dated December 18, 2020, with each of Deerfield Partners and the Sponsor, the form of which is filed as Exhibit 10.6 to this Current Report on Form 8-K and is incorporated herein by reference.

 

Third-Party PIPE Investments

 

In connection with the Business Combination, certain investors purchased an aggregate of 31,000,000 shares of Class A Common Stock (the “Third-Party PIPE Investments,” and together with the Deerfield PIPE Investments, the “PIPE Investments”), for a purchase price of $10.00 per share, for an aggregate purchase price of $310,000,000, pursuant to certain subscription agreements, each dated December 18, 2020, the form of which is filed as Exhibit 10.5 to this Current Report on Form 8-K and is incorporated herein by reference.

 

Each of the foregoing issuances of Class A Common Stock in connection with Business Combination were issued in reliance on the exemption from registration requirements thereof provided by Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder as a transaction by an issuer not involving a public offering.

 

 

 

 

Item 3.03 Material Modification to Rights of Security Holders

 

At Closing, the Company acquired 100% of the equity interests in CMG and IMC, as a result of which CMG and IMC became wholly-owned subsidiaries of the Company, the Company changed its name to “CareMax, Inc.”, and the Company adopted the third amended and restated certificate of incorporation, dated June 8, 2021 (the “Amended and Restated Charter”), and the amended and restated bylaws (the “Amended and Restated Bylaws”), each as further described below.

 

The Class A Common Stock and public warrants are listed for trading on the Nasdaq Global Select Market under the symbols “CMAX” and “CMAXW,” respectively. Upon consummation of the Business Combination, the CUSIP numbers relating to the Class A Common Stock and warrants changed to 14171W103 and 14171W111, respectively.

 

Amended and Restated Articles of Incorporation

 

On the Closing Date, DFHT’s second amended and restated certificate of incorporation, dated July 16, 2020, was replaced by the Amended and Restated Charter, to, among other things:

 

·       increase the total number of authorized shares of all classes of capital stock, par value of $0.0001 per share, from (a) 111,000,000 shares, consisting of (i) 110,000,000 shares of common stock, including 100,000,000 shares of Class A Common Stock and 10,000,000 shares of Class B Common Stock, and (ii) 1,000,000 shares of preferred stock, to (b) 261,000,000 shares, consisting of (i) 260,000,000 shares of common stock, including 250,000,000 shares of Class A Common Stock and 10,000,000 shares of Class B Common Stock, and (ii) 1,000,000 shares of preferred stock;

 

·       provide that no holder of shares of common stock will be entitled to preemptive, subscription, conversion or redemption rights;

 

·       provide that any director may resign at any time upon written notice to the Company;

 

·       provide that, to the fullest extent permitted by the General Corporate Law of Delaware as it now exists or may be amended (but, in the case of any such amendment, only to the extent such amendment permits the Company to provide broader exculpation than permitted prior thereto), no director will be liable to the Company or its stockholders for monetary damages arising from a breach of fiduciary duty as a director; and

 

·       provide for certain additional amendments, including, among other things, the following:

 

·             changing the post-Business Combination Company’s corporate name from “Deerfield Healthcare Technology Acquisitions Corp.” to “CareMax, Inc.;” and

 

·             eliminating references to effecting “a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or similar business combination” from the purposes, powers and privileges provisions.

 

This summary is qualified in its entirety by reference to the text of Amended and Restated Charter, which is filed as Exhibit 3.1 to this Current Report on Form 8-K and is incorporated herein by reference.

 

Amended and Restated Bylaws

 

On the Closing Date, DFHT’s bylaws were amended and restated to account for the structure of the Board following the Business Combination and to conform to the Amended and Restated Charter. This summary is qualified in its entirety by reference to the text of the Amended and Restated Bylaws, which are filed as Exhibit 3.2 to this Current Report on Form 8-K and are incorporated herein by reference.

 

Item 5.01 Changes in Control of the Registrant

 

Reference is made to the disclosure in the Proxy Statement in the section titled “Proposal No. 1 – Approval of the Business Combination Proposal” beginning on page 122 thereof, which is incorporated herein by reference. Further reference is made to the information set forth above under “Introductory Note,” Items 1.01 and 2.01 to this Current Report on Form 8-K, including under the caption “Form 10 Information,” which are incorporated herein by reference.

 

 

 

 

Immediately after giving effect to the Closing, there were 80,247,842 shares of Class A Common Stock outstanding. Pursuant to the Business Combination Agreement, an aggregate of 10,796,069 shares of Class A Common Stock were issued to the CMG Sellers at the Closing, which was comprised of 5,440,108 shares of Class A Common Stock issued to O.M., 2,459,958 shares of Class A Common Stock issued to C.D.G., 1,156,311 shares of Class A Common Stock issued to Mouquin Trotter, Inc.,1,145,186 shares of Class A Common Stock issued to Joseph N. De Vera, Inc. and 594,506 shares of Class A Common Stock issued to NKP Caremax, LLC, and 10,412,023 shares of Class A Common Stock were issued to IMC Parent.

 

Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

 

Effective upon the Closing, and in accordance with the terms of the Business Combination Agreement, (i) each executive officer of DFHT ceased serving in such capacities, (ii) Steven Hochberg, Dr. Peter J. Fitzgerald and Dr. Linda Grais ceased serving on the Company’s board of directors, (iii) Carlos A. de Solo, Randy Simpson, Dr. Jennifer Carter and Jose R. Rodriguez were appointed as directors of the Company and (iv) Richard Barasch was appointed the Executive Chair of the Board.

 

Following the Closing, the non-employee directors of the Company are entitled to the following compensation for their service on the Board: (i) an annual cash retainer of $70,000, paid quarterly; (ii) an equity retainer of restricted stock with a grant date fair value equal to $135,000, granted annually upon election; (iii) an annual retainer of $30,000 for the chair of the audit committee, payable quarterly in cash or, if elected by such director upon annual election to the Board or in advance thereof, in restricted stock on the same terms as such director’s annual equity retainer; and (iv) an annual retainer of $20,000 for chair of each other committee of the Board, payable quarterly in cash or, if elected by such director upon annual election to the Board or in advance thereof, in restricted stock on the same terms as such director’s annual equity retainer. Each grant of restricted stock described above will vest in full on the first anniversary of the grant date subject to continued service on the Board. Reference is made to the disclosure set forth in Item 1.01 of this Current Report on Form 8-K under the caption “Indemnification Agreements,” which is incorporated herein by reference.

 

Additionally, effective upon the Closing, Carlos A. de Solo was appointed as President and Chief Executive Officer, Kevin Wirges was appointed as Executive Vice President, Treasurer and Chief Financial Officer, Alberto R. de Solo was appointed as Executive Vice President and Chief Operating Officer, William C. Lamoreaux was appointed as Executive Vice President, Benjamin Quirk was appointed as Senior Vice President and Chief Strategy Officer and Joseph N. De Vera was appointed as Senior Vice President, General Counsel and Secretary.

 

As previously disclosed, at DFHT’s special meeting of stockholders on June 4, 2021, DFHT’s stockholders approved the Incentive Plan. The description of the Incentive Plan is set forth in the Proxy Statement in section titled “Proposal No. 4 – Approval of The Incentive Plan Proposal” beginning on page 153 thereof, which is incorporated herein by reference. A copy of the full text of the Incentive Plan is filed as Exhibit 10.9 to this Current Report on Form 8-K and is incorporated herein by reference.

 

Reference is made to the disclosure described in the Proxy Statement in the section titled “Management of the Company Following the Business Combination” beginning on page 248 thereof and to Item 1.01 of this Current Report on Form 8-K, which are incorporated herein by reference.

 

Item 5.03 Amendments to Articles of Incorporation or Bylaws

 

Reference is made to the disclosure set forth in Item 3.03 of this Current Report on Form 8-K, which is incorporated herein by reference.

 

Item 5.05 Amendments to the Registrant’s Code of Ethics, or Waiver of a Provision of the Code of Ethics

 

Effective as of the Closing, the Board adopted a new Code of Business Conduct and Ethics, which is applicable to all employees, officers and directors of the Company, which is available on the Company’s website at www.caremax.com. The information on the Company’s website does not constitute part of this Current Report on Form 8-K and is not incorporated by reference herein.

 

Item 5.06. Change in Shell Company Status.

 

As a result of the Business Combination, which fulfilled the definition of a business combination set forth in the second amended and restated certificate of incorporation of DFHT, the Company ceased to be a shell company (as defined in Rule 12b-2 of the Exchange Act) as of the Closing Date. The material terms of the Business Combination are described in the Proxy Statement in the section titled “Proposal No. 1 – Approval of the Business Combination Proposal” beginning on page 122, which is incorporated herein by reference.

 

 

 

 

Item 7.01 Regulation FD Disclosure

 

In connection with the Closing, the Company provided the following business update regarding the pro forma combined business of CMG, IMC and DFHT (the “Pro Forma Business”).

 

Pro Forma Results of Operations for the Quarter Ended March 31, 2021

 

For the quarter ended March 31, 2021, net revenue for Pro Forma Business was approximately $88.4 million and net income of the Pro Forma Business was approximately $5.8 million. Adjusted EBITDA for the Pro-Forma Business, as defined and reconciled below, for the quarter ended March 31, 2021 was approximately $7.7 million.

 

Outlook for Fiscal Year 2021

 

The Company is providing the following outlook for the balance of fiscal year 2021.  The Company currently expects pro-forma net revenue for fiscal year 2021 to be between $490 million and $525 million and Adjusted EBITDA for fiscal year 2021 to be between $62 million and $70 million, including acquisitions that the Company reasonably expects to be consummated.

 

Acquisitions

 

The Company has recently signed definitive agreements for four acquisitions, which it believes will be accretive, covering approximately 3,600 full and partial risk Medicare lives.  Two of these acquisitions recently closed and the remaining two acquisitions are subject to customary closing conditions and are expected to close during the second quarter of this year.

 

In addition, the Company believes its pipeline for acquisitions remains robust, including signed letters of intent, which gives the Company confidence that it will add substantial additional Medicare lives through acquisitions by the end of 2021.

 

Medical Centers

 

Immediately following the Closing, the Pro Forma Business owned and operated 26 multi-specialty medical centers throughout South Florida. 

 

If substantially all currently expected acquisitions are completed, the Company expects that it will own and operate between 40 and 45 medical centers as of December 31, 2021, based on both expected de novo growth and currently expected acquisitions through December 31, 2021.

 

Members

 

As of March 31, 2021, the Pro Forma Business had approximately 54,500 members, including approximately 16,500 Medicare members.

 

The Company currently expects that total members as of December 31, 2021 will be between 68,000 and 72,000, including approximately 30,000-34,000 Medicare members, in each case based on both expected de novo growth and currently expected acquisitions through December 31, 2021.

 

Future Growth

 

The integration of CMG and IMC is underway following the Closing and is currently proceeding smoothly. The Company continues to work with its payor and other partners to plan the opening of multiple de novo centers in fiscal year 2022 and beyond. The Company currently plans to provide an update on this activity in connection with its earnings report for the quarter ending June 30, 2021 in August 2021.

 

 

 

 

Non-GAAP Financial Measures

 

This business update includes certain non-GAAP financial measures that are unaudited and do not conform to United States generally accepted accounting principles (“GAAP”), including EBITDA and Adjusted EBITDA. The Company defines EBITDA as net income or net loss before interest expense, income tax expense or benefit, and depreciation and amortization. The Company defines Adjusted EBITDA as EBITDA adjusted for the items listed below:

 

· Non-recurring expenses, such as legal, consulting, and actuarial costs associated with the Business Combination and legacy board fees;

 

· Expenses related to acquisitions, including transaction costs and certain development payroll costs;

 

· Costs associated with the change in fair value of warrant liabilities;

 

· Bad debt expense;

 

· Pro forma adjustments relating to synergies;

 

· Losses associated with de novo clinics, which are incurred in the first twelve months post opening; and

 

· Costs associated with issuance and repayment debt.

 

For fiscal year 2021, the Company includes the annualized impact of the following items in Adjusted EBITDA:

 

· Anticipated run-rate of synergies expected to be achieved during the fiscal year; and

 

· Anticipated run-rate of revenues and expenses of closed and certain expected tuck-in and scaled acquisitions.

 

Accordingly, such information may not be included in, may be adjusted in, or may be presented differently in, any information filed or to be filed by the Company with the SEC. A reconciliation of Adjusted EBITDA for the quarter ended March 31, 2021 to net income for the quarter ended March 31, 2021, the most comparable GAAP measure, appears below.

 

The non-GAAP financial measure of Adjusted EBITDA for fiscal year 2021 is provided in this business update only on a non-GAAP basis because a reconciliation to the most comparable GAAP financial measure, net income, is not available without unreasonable effort. The Company believes that such item and, accordingly, the other items of the reconciliation, would require an unreasonable effort to predict with reasonable certainty the amount or timing of non-GAAP adjustments used to calculate these non-GAAP financial measures. The Company believes that any such forecast would result in a broad range of projected values that would not be meaningful to investors.

 

 

 

 

The Company believes these non-GAAP measures of financial results provide useful information to management and investors regarding certain financial and business trends relating to the financial condition and results of operations of the Company. The Company believes that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends in and in comparing the financial measures of the Company with other similar companies, many of which present similar non-GAAP financial measures to investors. Management does not consider these non-GAAP measures in isolation or as an alternative to financial measures determined in accordance with GAAP. The principal limitation of these non-GAAP financial measures is that they exclude significant expenses and income that are required by GAAP to be recorded in the financial statements of the Company. In addition, they are subject to inherent limitations as they reflect the exercise of judgments by management about which expense and income are excluded or included in determining these non-GAAP financial measures. In order to compensate for these limitations, management presents non-GAAP financial measures in connection with GAAP results. You should review the audited combined financial statements of CareMax and IMC for fiscal year 2020 included in the Proxy Statement on pages F-31 through F-128, the unaudited condensed combined financial statements of CareMax and IMC of and for the quarter ended March 31, 2021, which are filed as Exhibits 99.3 and 99.4, respectively, to this Current Report on Form 8-K, and the unaudited pro forma condensed combined financial statements of DFHT for the quarter ended March 31, 2021, which are filed as Exhibit 99.5 to this Current Report on Form 8-K, and not rely on any single financial measure to evaluate the business of the Company.

 

DFHT Pro Forma Statement of Operations - GAAP to Adjusted EBITDA Reconciliation

 

Three-Months Ended      
(in thousands)   March 31, 2021  
Net Income (Loss)   $ 5,789  
Definitional Items        
Income Tax Expense     1,881  
Interest Expense     1,302  
Depreciation & Amortization     3,261  
Change in fair value of warrant liabilities     (10,894 )
Other Expenses     212  
Total Definitional Items     (4,238 )
EBITDA   $ 1,551  
Non-Recurring Expenses   $ 3,221  
Acquisitions Costs     1,168  
Pro Forma Adjustments     923  
Bad Debt Expense     676  
De Novo Costs     184  
Discontinued Operations     (1 )
Total Management Adjustments   $ 6,170  
Adjusted EBITDA   $ 7,721  

 

Item 9.01 Financial Statements and Exhibits

 

(a)       Financial statements of businesses acquired.

 

 

 

 

Reference is made to the financial statements included in the Proxy Statement on pages F-31 through F-128, which are incorporated herein by reference. Reference is further made to the unaudited condensed combined financial statements of CMG and affiliates and the unaudited condensed combined financial statements of IMC, in each case, as of and for the three months ended March 31, 2021, and the related notes thereto, are filed as Exhibits 99.3 and 99.4, respectively, to this Current Report on Form 8-K and are incorporated herein by reference.

 

(b)       Pro forma financial information.

 

Reference is made to the unaudited pro forma condensed combined financial information of the Company as of and for the year ended December 31, 2020 included in the Proxy Statement beginning on page 93, which is incorporated herein by reference. Reference is further made to the unaudited pro forma condensed combined financial information of the Company as of and for the three months ended March 31, 2021, which is filed as Exhibit 99.5 and is incorporated herein by reference.

 

(d)       Exhibits.

 

Exhibit Number   Description
2.1†   Business Combination Agreement, dated as of December 18, 2020, by and among DFHT, the Sellers, the Companies and Deerfield Partners (Incorporated by reference to the corresponding exhibit to the Company’s Current Report on Form 8-K/A (File No. 001-39391), filed with the SEC on December 21, 2020).
     
3.1   Third Amended and Restated Certificate of Incorporation. (Incorporated by reference to Exhibit 3.1 to the Company’s Amendment No. 1 to the Registration Statement on Form 8-A (File No. 001-39391) filed by the Company with the SEC on June 9, 2021).
     
3.2   Amended and Restated Bylaws. (Incorporated by reference to Exhibit 3.2 to the Company’s Amendment No. 1 to the Registration Statement on Form 8-A (File No. 001-39391) filed by the Company with the SEC on June 9, 2021).
     
4.1   Specimen Class A Common Stock Certificate. (Incorporated by reference to Exhibit 4.1 to the Company’s Amendment No. 1 to the Registration Statement on Form 8-A (File No. 001-39391) filed by the Company with the SEC on June 9, 2021).
     
4.2   Specimen Warrant Certificate. (Incorporated by reference to Exhibit 4.2 to the Company’s Amendment No. 1 to the Registration Statement on Form 8-A (File No. 001-39391) filed by the Company with the SEC on June 9, 2021).
     
4.3   Warrant Agreement, dated as of July 16, 2020, by and between the Company and Continental Stock Transfer & Trust Company, as warrant agent (Incorporated by reference to Exhibit 4.1 the Company’s Current Report on Form 8-K (File No. 001-39391), filed with the SEC on July 21, 2020).
     
10.1   Amended and Restated Registration Rights Agreement, dated as of December 18, 2020, by and among DFHT, the Sellers, DFHTA Sponsor LLC, Deerfield Partners and the other parties thereto (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K/A (File No. 001-39391), filed with the SEC on December 21, 2020).
     
10.2   Lock-Up Agreement, dated as of December 18, 2020, by and among DFHT, DFHTA Sponsor LLC, Deerfield Partners, certain other shareholders of DFHT and the Sellers (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K/A (File No. 001-39391), filed with the SEC on December 21, 2020).
     
10.3†   Escrow Agreement, dated as of June 8, 2021, by and among the Company, DFHTA Sponsor LLC, O.M. Investment Group, Inc. and Continental Stock Transfer & Trust Company. (Incorporated by reference to Exhibit 10.3 to the Company’s Amendment No. 1 to the Registration Statement on Form 8-A (File No. 001-39391) filed by the Company with the SEC on June 9, 2021).
     
10.4†   Escrow Agreement, dated as of June 8, 2021, by and among the Company, DFHTA Sponsor LLC, IMC Holdings, LP and Continental Stock Transfer & Trust Company. (Incorporated by reference to Exhibit 10.4 to the Company’s Amendment No. 1 to the Registration Statement on Form 8-A (File No. 001- 39391) filed by the Company with the SEC on June 9, 2021).

 

 

 

 

10.5   Form of Subscription Agreement (Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K/A (File No. 001-39391), filed with the SEC on December 21, 2020).
     
10.6   Form of Deerfield Subscription Agreement (Incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K/A (File No. 001-39391), filed with the SEC on December 21, 2020).
     
10.7*†   Credit Agreement, dated as of June 8, 2021, by and among the Company, Royal Bank of Canada, as Administrative Agent, Collateral Agent, Swing Line Lender and Issuing Bank, RBC Capital Markets, LLC and Truist Securities, Inc., as Syndication Agents, Joint Lead Arrangers and Joint Book Runners, and certain other banks and financial institutions serving as lenders.
     
10.8*   Form of Indemnification Agreement.
     
10.9*   CareMax, Inc. 2021 Long-Term Incentive Plan.
     
10.10*†   MSO Risk Agreement, dated as of July 1, 2009, by and among Healthsun Health Plans, Inc. and Managed Healthcare Partners, LLC.
     
10.11*†+   First Amendment to MSO Risk Agreement, dated as of December 17, 2015, by and among Healthsun Health Plans, Inc. and Managed Healthcare Partners, LLC.
     
21.1*   List of Subsidiaries.
     
99.1*   Management's Discussion and Analysis of Financial Condition and Results of Operations of CareMax Medical Group, L.L.C. as of and for the three months ended March 31, 2021.
     
99.2*   Management’s Discussion and Analysis of Financial Condition and Results of Operations of IMC Medical Group Holdings, LLC as of and for the three months ended March 31, 2021.
     
99.3*   Unaudited condensed combined financial statements of CareMax Medical Group, L.L.C. and Affiliates as of and for the three months ended March 31, 2021.
     
99.4*   Unaudited condensed combined financial statements of IMC Medical Group Holdings, LLC and Subsidiaries as of and for the three months ended March 31, 2021.
     
99.5*   Unaudited pro forma condensed combined financial information of the Company as of and for the three months ended March 31, 2021.
     
104   Cover Page Interactive Data File (formatted as Inline XBRL)
     
+   Certain portions of this exhibit have been omitted pursuant to Regulation S-K, Item (601)(b)(10).
     
†   Certain of the exhibits and schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601(a)(5). The Registrant agrees to furnish a copy of all omitted exhibits and schedules to the SEC upon its request.
*   Filed herewith.

 

 

 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Dated: June 14, 2021

 

  Deerfield Healthcare Technology Acquisitions Corp.
       
  By: /s/ Kevin Wirges
    Name: Kevin Wirges
    Title: Executive Vice President, Chief Financial Officer and Treasurer

 

 

 

 

Exhibit 10.7

 

 

$185,000,000

 

CREDIT AGREEMENT

 

dated as of June 8, 2021,

 

by and among

 

CAREMAX, INC.

(F/K/A/ DEERFIELD HEALTHCARE TECHNOLOGY ACQUISITIONS, CORP.),

 

as Borrower,

 

THE LENDERS AND ISSUING BANKS PARTY HERETO

 

and

 

ROYAL BANK OF CANADA,

 

as Administrative Agent, Collateral Agent, Swing Line Lender and Issuing Bank

 

_______________________________

 

RBC CAPITAL MARKETS, LLC1 and TRUIST SECURITIES, INC.,

 

as Joint Lead Arrangers and Joint Bookrunners,

 

CITIZENS BANK NA, REGIONS BANK, CAPITAL ONE, N.A. and FIFTH THIRD BANK, NATIONAL ASSOCIATION,

 

as Senior Managing Agents,

 

DEUTSCHE BANK SECURITIES INC. and KEYBANK NATIONAL ASSOCIATION,

 

as Co-Managers

 

and

 

BANKUNITED, N.A.,

 

as Transaction Participant

 

 

 

 

1 RBC Capital Markets is a brand name for the capital markets activities of Royal Bank of Canada and its affiliates

 

 

 

 

ARTICLE I

 

Definitions

 

Section 1.01    Defined Terms 2
Section 1.02    Terms Generally 68
Section 1.03    Accounting Terms; GAAP 69
Section 1.04    Effectuation of Transfers 69
Section 1.05    Currencies 69
Section 1.06    Required Financial Statements 69
Section 1.07    Certain Calculations and Tests 70
Section 1.08    Classification of Loans and Borrowings 71
Section 1.09    Reclassification 71
Section 1.10    Calculation of Baskets and Ratios 72
Section 1.11    Certifications 72
Section 1.12    Available Amount Transactions 72
Section 1.13    Divisions 72

 

ARTICLE II

 

The Credits

 

Section 2.01    Commitments 72
Section 2.02    Loans and Borrowings 73
Section 2.03    Request for Borrowing 75
Section 2.04    Swing Line Loans 75
Section 2.05    Letters of Credit 78
Section 2.06    Funding of Borrowings 86
Section 2.07    Interest Elections 87
Section 2.08    Termination and Reduction of Commitments 88
Section 2.09    Promise to Pay; Evidence of Debt. 89
Section 2.10    Repayment of Term Loans. 90
Section 2.11    Optional Prepayment of Loans 91
Section 2.12    Mandatory Prepayment of Loans 92
Section 2.13    Fees 95
Section 2.14    Interest 97
Section 2.15    Inability to Determine Rates 98
Section 2.16    Increased Costs 100
Section 2.17    Break Funding Payments 101
Section 2.18    Taxes 102
Section 2.19    Payments Generally; Pro Rata Treatment; Sharing of Set-offs 106
Section 2.20    Mitigation Obligations; Replacement of Lenders 108
Section 2.21    Illegality 109
Section 2.22    Incremental Facilities 109
Section 2.23    Other Loans 114
Section 2.24    Extensions of Term Loans and Revolving Facility Commitments 115
Section 2.25    Defaulting Lenders 118

 

i

 

 

ARTICLE III

 

Representations and Warranties

 

Section 3.01    Organization; Powers 120
Section 3.02    Authorization 121
Section 3.03    Enforceability 121
Section 3.04    Governmental Approvals 122
Section 3.05    Title to Properties 122
Section 3.06    Subsidiaries 122
Section 3.07    Litigation; Compliance with Laws 123
Section 3.08    Federal Reserve Regulations 123
Section 3.09    Investment Company Act 123
Section 3.10    Use of Proceeds 123
Section 3.11    Tax Returns 124
Section 3.12    No Material Misstatements 124
Section 3.13    Environmental Matters 125
Section 3.14    Security Documents 125
Section 3.15    Financial Statements. 126
Section 3.16    Solvency 126
Section 3.17    No Material Adverse Effect 127
Section 3.18    Beneficial Ownership Certificate 127
Section 3.19    USA PATRIOT Act; Anti-Corruption Laws; OFAC; Anti-Terrorism 127
Section 3.20    Intellectual Property; Licenses, Material Agreements, Etc. 128
Section 3.21    Employee Benefit Plans 128
Section 3.22    Labor Matters 129
Section 3.23    Insurance 129
Section 3.24    No Default 129
Section 3.25    Senior Indebtedness 129

 

ARTICLE IV

 

Conditions of Lending

 

Section 4.01    Conditions Precedent to Credit Extensions on the Closing Date 129
Section 4.02    Conditions Precedent to Additional Credit Extensions 132
Section 4.03    Conditions Precedent to DDTLs 133

Article V

 

Affirmative Covenants

Section 5.01    Existence; Businesses and Properties 133
Section 5.02    Insurance 134
Section 5.03    Taxes 135
Section 5.04    Financial Statements, Reports, etc 135
Section 5.05    Litigation and Other Notices 137
Section 5.06    Compliance with Laws 137
Section 5.07    Maintaining Books and Records; Access to Properties and Inspections; Material Agreements 137
Section 5.08    Use of Proceeds 138
Section 5.09    USA PATRIOT Act; Anti-Corruption Laws; OFAC; Anti-Terrorism 138
Section 5.10    Lender Conference Calls 139
Section 5.11    Further Assurances; Additional Security 139
Section 5.12    Accounts 144
Section 5.13    Post-Closing Matters 144

 

ii

 

 

Article VI
Negative Covenants
Section 6.01    Indebtedness 145
Section 6.02    Liens 149
Section 6.03    Sale and Lease-Back Transactions 154
Section 6.04    Investments, Loans and Advances 154
Section 6.05    Mergers, Consolidations, Sales of Assets and Acquisitions 158
Section 6.06    Restricted Payments 163
Section 6.07    Transactions with Affiliates 166
Section 6.08    Business of the Borrower, the Restricted Subsidiaries 168
Section 6.09    Limitation on Payments; etc 168
Section 6.10    Changes in Accounting and Fiscal Year. 169
Section 6.11    Amendments to Organizational Documents and Certain Junior Financing 170
Section 6.12    Financial Performance Covenants 170
Section 6.13    Burdensome Agreements 171
Section 6.14    Management Services Agreements 172

Article VII

 

Events of Default

Section 7.01    Events of Default 172
Section 7.02    Right to Cure 175

Article VIII

 

The Agents

Section 8.01    Appointment 176
Section 8.02    Delegation of Duties 179
Section 8.03    Exculpatory Provisions 179
Section 8.04    Reliance by Administrative Agent 180
Section 8.05    Notice of Default 180
Section 8.06    Non-Reliance on Agents and Other Lenders 180
Section 8.07    Indemnification 181
Section 8.08    Agent in Its Individual Capacity 181
Section 8.09    Successor Agent 181
Section 8.10    Additional Titles 182
Section 8.11    Certain ERISA Matters 182
Section 8.12    Flood Certificate 183
Section 8.13    Certain Payments 183
Article IX
Miscellaneous
Section 9.01    Notices; Communications 185
Section 9.02    Survival of Agreement 186
Section 9.03    Binding Effect 186
Section 9.04    Successors and Assigns 186
Section 9.05    Expenses; Indemnity 195
Section 9.06    Right of Set-off 197

 

iii

 

 

Section 9.07    Applicable Law 198
Section 9.08    Waivers; Amendment 198
Section 9.09    Interest Rate Limitation 201
Section 9.10    Entire Agreement 201
Section 9.11    WAIVER OF JURY TRIAL 202
Section 9.12    Severability 202
Section 9.13    Counterparts; Electronic Execution 202
Section 9.14    Headings 202
Section 9.15    Jurisdiction; Consent to Service of Process 202
Section 9.16    Confidentiality 203
Section 9.17    Platform; Borrower Materials 204
Section 9.18    Release of Liens and Guarantees 204
Section 9.19    USA PATRIOT Act and Beneficial Ownership Regulation Notice 205
Section 9.20    Acceptable Intercreditor Agreements 205
Section 9.21    No Liability of the Issuing Banks 205
Section 9.22    No Advisory or Fiduciary Responsibility 205
Section 9.23    Cashless Settlement 206
Section 9.24    Acknowledgement and Consent to Bail-In of Affected Financial Institutions 206
Section 9.25    Acknowledgement Regarding Any Supported QFCs 206

 

Exhibits and Schedules

 

Exhibit A Form of Assignment and Acceptance
Exhibit B Form of Solvency Certificate
Exhibit C-1 Form of Borrowing Request
Exhibit C-2 Form of Letter of Credit Request
Exhibit D Form of Interest Election Request
Exhibit E Form of Non-Debt Fund Affiliate Assignment and Acceptance
Exhibit F-1 Form of U.S. Tax Compliance Certificate (Non-U.S. Lenders; not
  partnerships)
Exhibit F-2 Form of U.S Tax Compliance Certificate (Non-U.S. participants; not
  partnerships)
Exhibit F-3 Form of U.S Tax Compliance Certificate (Non-U.S. participants;
  partnerships)
Exhibit F-4 Form of U.S Tax Compliance Certificate (Non-U.S. Lenders;
  partnerships)
Exhibit G Form of Acceptable Intercreditor Agreement (Junior Secured
  Indebtedness)
Exhibit H Form of Prepayment Notice
 
Schedule 2.01 Commitments
Schedule 3.04 Governmental Approvals
Schedule 3.06 Subsidiaries
Schedule 3.07 Litigation
Schedule 3.11 Taxes
Schedule 3.20 Intellectual Property
Schedule 5.13 Post-Closing Matters
Schedule 6.04 Investments
 

iv

 

 

Schedule 6.07 Transactions with Affiliates
Schedule 9.01 Notice Information

 

v

 

 

 

CREDIT AGREEMENT, dated as of June 8, 2021 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, this “Agreement”), by and among CareMax, Inc. (f/k/a Deerfield Healthcare Technology Acquisitions Corp.), a Delaware corporation (the “Borrower”), the Lenders and Issuing Banks party hereto from time to time and Royal Bank of Canada, as administrative agent (in such capacity, and as further defined in Section 1.01, the “Administrative Agent”), as collateral agent (in such capacity, and as further defined in Section 1.01, the “Collateral Agent”), as Swing Line Lender and as an Issuing Bank.

 

RECITALS

 

(1)           Pursuant to that certain Business Combination Agreement, dated as of December 18, 2020 (including all annexes, schedules and exhibits thereto, the “Acquisition Agreement”), by and among, inter alios, the Borrower, the sellers party thereto, CareMax Medical Group, LLC, a Florida limited liability company (“CareMax”), IMC Medical Group Holdings, LLC, a Delaware limited liability company (“IMC” and, together with CareMax, each a “Company” and, collectively, the “Companies”), and Deerfield Partners, L.P. (“Deerfield Partners”), on or prior to the Closing Date (as defined below), the Borrower will acquire (such transactions, collectively, the “Acquisition”), directly or indirectly, all of the issued and outstanding equity interests of the Companies and their respective subsidiaries (collectively, the “Acquired Businesses”) in accordance with terms and subject to the conditions set forth in the Acquisition Agreement, such that, after giving effect to the Acquisition, each Company will be a direct or indirect Wholly-Owned Subsidiary (as defined below) of the Borrower.

 

(2)           Immediately prior to the consummation of the Acquisition, Deerfield Partners, together with certain other co-investors, will subscribe for and purchase for cash common equity of the Borrower in an aggregate amount equal to $410,000,000 (the “PIPE Transaction”).

 

(3)           In connection with the consummation of the Transactions (as defined below), the Borrower has requested and the Lenders have agreed to extend credit to the Borrower on the Closing Date (as defined below) in the form of (a) Initial Term Loans (as defined below) in an aggregate principal amount equal to $125,000,000, (b) DDTL Facility Commitments (as defined below) in an aggregate principal amount equal to $20,000,000 and (c) Revolving Facility Commitments (as defined below) in an aggregate amount of $40,000,000.

 

(4)           The proceeds of the Initial Term Loans funded on the Closing Date, together with the proceeds of (a) any Revolving Loan Borrowing (as defined below) funded on the Closing Date and (b) the PIPE Transaction, will be applied on the Closing Date (i) to pay the consideration in connection with the Acquisition, (ii) to pay the fees, costs and expenses incurred in connection with the Transactions (such fees and expenses, the “Transaction Costs”), (iii) to pay for the Closing Date Refinancing (as defined below) and (iv) for working capital and other general corporate purposes of the Borrower and its Subsidiaries (as defined below).

 

(5)           The applicable Lenders have indicated their willingness to lend, each Issuing Bank has indicated its willingness to issue Letters of Credit, and the Swing Line Lender has indicated its willingness to make Swing Line Loans, in each case, on the terms and subject to the conditions set forth herein.

 

AGREEMENT

 

In consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree as follows:

  

 

 

ARTICLE I

 

Definitions

 

Section 1.01          Defined Terms.

 

As used in this Agreement (including in the preamble and the recitals above), the following terms shall have the meanings specified below:

 

“ABR” means, for any day, a fluctuating rate per annum equal to the highest of:

 

(a)                the Federal Funds Rate plus 0.50%;

 

(b)                the Prime Rate; and

 

(c)                the LIBOR Quoted Rate plus 1.00%.

 

Any change in the ABR due to a change in the Federal Funds Rate, the Prime Rate or the LIBOR Quoted Rate will be effective on the effective date of such change in the Federal Funds Rate, the Prime Rate or the LIBOR Quoted Rate, as the case may be; provided that, in no event shall the ABR be less than 1.75% per annum.

 

“ABR Borrowing” means a Borrowing comprised of ABR Loans.

 

“ABR Loan” means any Loan bearing interest at a rate determined by reference to the ABR.

 

“Acceptable Intercreditor Agreement” an intercreditor agreement substantially in the form of Exhibit G (as such form may be modified in a manner (i) reasonably acceptable to the Borrower and the Administrative Agent, (ii) where such modifications are posted for review by the Lenders, and the Lenders constituting the Required Lenders do not object in writing within three (3) Business Days after such agreement is posted or (iii) the terms of which are consistent with market terms (as determined by the Borrower and the Administrative Agent in good faith) governing arrangements for the sharing and subordination of liens and/or arrangements relating to the distribution of payments, as applicable, at the time the intercreditor agreement is proposed to be established in light of the type of indebtedness subject thereto).

 

Upon the request of the Borrower, the Administrative Agent and the Collateral Agent will execute and deliver an Acceptable Intercreditor Agreement with the Loan Parties and one or more Debt Representatives for Indebtedness permitted hereunder.

 

“Accounting Change” has the meaning assigned to such term in Section 1.03.

 

“Acquired Business” has the meaning assigned to such term in the recitals hereof.

 

“Acquisition” has the meaning assigned to such term in the recitals hereof.

 

“Acquisition Agreement” has the meaning assigned to such term in the recitals hereof.

 

“Additional Lender” means, at any time, any bank, financial institution or other institutional lender or investor (other than a natural person) that is not an existing Lender and that agrees to become a Lender in connection with an Incremental Term Loan, Incremental Revolving Facility Commitment (and corresponding Incremental Revolving Loan), Other Revolving Commitment or Other Refinancing Loan; provided that no Disqualified Institution may be an Additional Lender.

 

“Adjusted Eurocurrency Rate” means, with respect to any Eurocurrency Borrowing for any Interest Period, an interest rate per annum equal to the Eurocurrency Rate in effect for such Interest Period

 

2

 

 

divided by one minus the Statutory Reserves applicable to such Eurocurrency Borrowing, if any; provided that, in no event shall the Adjusted Eurocurrency Rate be less than 0.75% per annum.

 

“Administrative Agent” means Royal Bank of Canada in its capacity as administrative agent for itself and the Lenders hereunder, and any duly appointed successor in such capacity.

 

“Administrative Agent Fees” has the meaning assigned to such term in Section 2.14(3).

 

“Administrative Questionnaire” means an Administrative Questionnaire in a form supplied by the Administrative Agent.

 

“Affected Financial Institution” means (a) any EEA Financial Institution or (b) any UK Financial Institution.

 

“Affiliate” means, when used with respect to a specified Person, any other Person that directly, or indirectly through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such specified Person.

 

“Affiliated Lender” means, at any time, any Lender that is an Affiliate of the Borrower (other than (1) the Borrower and any of its Subsidiaries and (2) any natural person) at such time.

 

“After Year End Payment” has the meaning assigned to such term in Section 2.12(3)(b).

 

“Agents” means the Administrative Agent and the Collateral Agent, in their respective capacities as such.

 

“Agreement” has the meaning assigned to such term in the introductory paragraph hereof.

 

“ALTA” has the meaning assigned to such term in Section 5.11(2)(d).

 

“AML Laws” has the meaning assigned to such term in Section 3.19(3)(a).

 

“Annual Financial Statements” has the meaning assigned to such term in Section 5.04(1).

 

“Anti-Corruption Laws” means the U.S. Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder, and all similar laws, rules, and regulations of any jurisdiction applicable to the Borrower and its Restricted Subsidiaries from time to time concerning or relating to bribery or corruption.

 

“Applicable Period” has the meaning assigned to such term in the definition of “Applicable Rate”.

 

“Applicable Rate” means a percentage per annum equal to:

 

(1)                with respect to Initial Term Loans, DDTLs, Revolving Loans and Swing Line Loans (which Swing Line Loans are to be maintained solely as ABR Loans), (i) until delivery of financial statements for the first full fiscal quarter commencing on or after the Closing Date pursuant to Section 5.04(2), (A) 2.00% in the case of ABR Loans and (B) 3.00% in the case of Eurocurrency Loans, and (ii) thereafter, the following percentages per annum, based upon the First Lien Net Leverage Ratio as set forth in the most recent certificate received by the Administrative Agent pursuant to Section 5.04(3) as of the end of the Test Period to which such certificate relates:

 

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Pricing Level First Lien Net Leverage Ratio Applicable Rate for
ABR Loans 		Applicable Rate for
Eurocurrency Loans
1 < 2.25:1.00 1.75% 2.75%
2 > 2.25:1.00 but < 2.50:1.00 2.00% 3.00%
3 > 2.50:1.00 but < 3.00:1.00 2.25% 3.25%
4 > 3.00:1.00 2.50% 3.50%

 

Any increase or decrease in the Applicable Rate resulting from a change in the First Lien Net Leverage Ratio shall become effective as of the first Business Day immediately following the date a certificate is delivered pursuant to Section 5.04(3); provided that the highest pricing level shall apply (i) following the occurrence and during the continuation of a Specified Event of Default, and shall continue to so apply to but excluding the date on which such Specified Event of Default is cured or waived (and thereafter the pricing level otherwise determined in accordance with this definition shall apply) and (ii) as of the first (1st) Business Day after the date on which a certificate pursuant to Section 5.04(3) was required to have been delivered but was not delivered, and shall continue to so apply to and including the date on which such certificate is so delivered (and thereafter the pricing level otherwise determined in accordance with this definition shall apply); and

 

(2)                with respect to the DDTL Facility Commitment Fee, (i) until delivery of financial statements for the first full fiscal quarter commencing on or after the Closing Date pursuant to Section 5.04(2), 0.40% per annum based upon the average daily undrawn amount of all DDTL Facility Commitments and (ii) thereafter, the following percentages per annum based upon the First Lien Net Leverage Ratio as set forth in the most recent certificate received by the Administrative Agent pursuant to Section 5.04(3) as of the end of the Test Period to which such certificate relates:

 

Fee Level First Lien Net Leverage Ratio Applicable Rate for DDTL Facility Commitment Fee
1 < 2.25:1.00 0.35%
2 > 2.25:1.00 but < 2.50:1.00 0.40%
3 > 2.50:1.00 but < 3.00:1.00 0.45%
4 > 3.00:1.00 0.50%

 

Any increase or decrease in the DDTL Facility Commitment Fee resulting from a change in the First Lien Net Leverage Ratio shall become effective as of the first (1st) Business Day immediately following the date a certificate is delivered pursuant to Section 5.04(3); provided that the highest fee level shall apply (i) following the occurrence and during the continuation of a Specified Event of Default, and shall continue to so apply to but excluding the date on which such Specified Event of Default is cured or waived (and thereafter the pricing level otherwise determined in accordance with this definition shall apply) and (ii) as of the first (1st) Business Day after the date on which a certificate pursuant to Section 5.04(3) was required to have been delivered but was not delivered, and shall continue to so apply to and including the date on which such certificate is so delivered (and thereafter the fee level otherwise determined in accordance with this definition shall apply); and

 

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(3)                with respect to the Revolving Facility Commitment Fee, (i) until delivery of financial statements for the first full fiscal quarter commencing on or after the Closing Date pursuant to Section 5.04(2), 0.40% per annum based upon the average daily undrawn amount of all Revolving Facility Commitments and (ii) thereafter, the following percentages per annum based upon the First Lien Net Leverage Ratio as set forth in the most recent certificate received by the Administrative Agent pursuant to Section 5.04(3) as of the end of the Test Period to which such certificate relates:

 

Fee Level First Lien Net Leverage Ratio Applicable Rate for Revolving Facility Commitment Fee
1 < 2.25:1.00 0.35%
2 > 2.25:1.00 but < 2.50:1.00 0.40%
3 > 2.50:1.00 but < 3.00:1.00 0.45%
4 > 3.00:1.00 0.50%

 

Any increase or decrease in the Revolving Facility Commitment Fee resulting from a change in the First Lien Net Leverage Ratio shall become effective as of the first (1st) Business Day immediately following the date a certificate is delivered pursuant to Section 5.04(3); provided that the highest fee level shall apply (i) following the occurrence and during the continuation of a Specified Event of Default, and shall continue to so apply to but excluding the date on which such Specified Event of Default is cured or waived (and thereafter the pricing level otherwise determined in accordance with this definition shall apply) and (ii) as of the first (1st) Business Day after the date on which a certificate pursuant to Section 5.04(3) was required to have been delivered but was not delivered, and shall continue to so apply to and including the date on which such certificate is so delivered (and thereafter the fee level otherwise determined in accordance with this definition shall apply).

 

In the event that any financial statements under Section 5.04 or a certificate delivered pursuant to Section 5.04(3) are, to the knowledge of the Borrower, or are shown to be, inaccurate at any time that this Agreement is in effect and any Loans or Commitments are outstanding hereunder when such inaccuracy is discovered and such inaccuracy, if corrected, would have led to the application of a higher Applicable Rate for the applicable Loans for any period (an “Applicable Period”) than the Applicable Rate applied for such Applicable Period, then (i) the Borrower shall promptly (and in no event later than five (5) Business Days thereafter) deliver to the Administrative Agent a correct certificate pursuant to Section 5.04(3) for such Applicable Period, (ii) if, as a consequence of such re-calculation, the Applicable Rate was lower that it would have been, the Applicable Rate for the applicable Loans shall be determined as if such higher Pricing Level for such Loans were retroactively applicable for such Applicable Period, (iii) the Administrative Agent shall notify the Borrower of the amount of interest and fees that would have been due in respect of any outstanding Obligations during such Applicable Period had the Applicable Rate been calculated based on the correct First Lien Net Leverage Ratio and (iv) the Borrower shall pay to the Administrative Agent promptly upon demand (and in no event later than five (5) Business Days after demand) any additional interest, DDTL Facility Commitment Fee or Revolving Facility Commitment Fee owing as a result of such increased Applicable Rate for such Applicable Period, which payment shall be promptly applied by the Administrative Agent for the benefit of the applicable Lenders and/or other Persons in accordance with the terms hereof. Any additional interest or fees under this paragraph shall not be due and payable until such demand is made for such payment by the Administrative Agent and accordingly, any nonpayment of such interest or fees as result of any such demand not having been made shall not constitute a Default (whether

 

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retroactively or otherwise) or Event of Default, and none of such additional amounts shall be deemed overdue or accrue interest at the rate set forth in Section 2.14(3), in each case at any time on or prior to the date that is five (5) Business Days following such demand.

 

Notwithstanding the foregoing, the Applicable Rate in respect of Incremental Facilities, Other Refinancing Loans, Other Revolving Commitments, Extended Term Loans and Extended Revolving Commitments (and corresponding Extended Revolving Loans) shall be the rate per annum specified in the amendment or definitive documentation, as applicable, establishing such facilities.

 

“Approved Fund” has the meaning assigned to such term in Section 9.04(2).

 

“Asset Sale” means any sale, transfer or other disposition (including any Sale and Lease-Back Transaction) to any Person of, any asset or assets of the Borrower or any Restricted Subsidiary and including any disposition of property to a Delaware Divided LLC pursuant to a Delaware LLC Division.

 

“Asset Sale Threshold” shall have the meaning assigned to such term in Section 2.12(2).

 

“Assignee” has the meaning assigned to such term in Section 9.04(2).

 

“Assignment and Acceptance” means an assignment and acceptance entered into by a Lender, as Assignor, and any eligible Person, as Assignee, and accepted by the Administrative Agent and the Borrower (if required by Section 9.04), substantially in the form of Exhibit A or such other form that is approved by the Administrative Agent and reasonably satisfactory to the Borrower.

 

“Assignor” has the meaning assigned to such term in Section 9.04(2).

 

“Audited Financial Statements” means the audited consolidated balance sheets and related statements of income, changes in equity and cash flows of each of the Acquired Businesses for the two (2) most recently completed fiscal years ended at least ninety (90) days prior to the Closing Date.

 

“Available Amount” means, as of any date, an amount, not less than zero, determined on a cumulative basis, equal to the sum, without duplication, of:

 

(1)                the greater of (x) $13,500,000 and (y) 30.0% of Consolidated EBITDA for the most recently ended Test Period at the time of determination; plus

 

(2)                the Cumulative Retained Excess Cash Flow Amount as of such date (measured annually); plus

 

(3)                the cumulative amount of cash proceeds and the fair market value of property (other than cash) received by the Borrower in connection with the sale or issuance of Equity Interests of the Borrower after the Closing Date and on or prior to such date (including upon exercise of warrants or options or in connection with a Permitted Acquisition or other Permitted Investment), other than (a) the proceeds of Disqualified Stock, (b) the proceeds of Excluded Contributions, (c) any net cash proceeds that are used prior to such date (I) for Restricted Payments under Section 6.06(1) or Section 6.06(2)(b) or (II) to make a payment in respect of Junior Financing under Section 6.09(1)(g) and (d) the proceeds of Specified Equity Contributions; plus

 

(4)                100% of the aggregate amount of cash contributions to the capital of the Borrower and the fair market value of property (other than cash) contributed to the capital of the Borrower after the Closing Date, other than (a) the proceeds of Disqualified Stock, (b) the proceeds of Excluded Contributions, (c) any net cash proceeds that are used prior to such date for Restricted Payments under Section 6.06(1) or Section 6.06(2)(b) and (d) the proceeds of Specified Equity Contributions; plus

 

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(5)                100% of the aggregate principal amount of any Indebtedness (including the liquidation preference or maximum fixed repurchase price, as the case may be, of any Disqualified Stock) of the Borrower or any Restricted Subsidiary issued after the Closing Date that is secured on a pari passu basis with the Obligations (other than Indebtedness (including Disqualified Stock) issued to the Borrower or a Restricted Subsidiary), which has been converted into or exchanged for Equity Interests (other than Disqualified Stock) of the Borrower; plus

 

(6)                100% of the aggregate amount of cash (and the fair market value of property other than cash) received by the Borrower or any of its Restricted Subsidiaries after the Closing Date from (i) the sale or disposition (other than to the Borrower or any Restricted Subsidiary) of the Equity Interests of any Unrestricted Subsidiary or (ii) any dividend or other distribution (including any payment on intercompany Indebtedness) by any such Unrestricted Subsidiary; provided that, any amounts added to the Available Amount pursuant to this clause (6) shall not, in any event, exceed the lesser of (i) the fair market value of the Investments of the Borrower and the Restricted Subsidiaries in the applicable Unrestricted Subsidiary at the time of any such sale, disposition, dividend or distribution and (ii) the amount of the original Investments by the Borrower and the Restricted Subsidiaries in such Unrestricted Subsidiary, in each case, as determined by a Responsible Officer of the Borrower in good faith, plus

 

(7)                in the event any Unrestricted Subsidiary becomes a Restricted Subsidiary or has been merged, consolidated or amalgamated with or into, or transfers or conveys all or substantially all of its assets to, or is liquidated into, the Borrower or any Restricted Subsidiary, the lesser of (i) the fair market value of the Investments of the Borrower and the Restricted Subsidiaries in such Unrestricted Subsidiary at the time such Unrestricted Subsidiary becomes a Restricted Subsidiary or at the time of such merger, consolidation, amalgamation, transfer or liquidation (or of the assets transferred or conveyed, as applicable) and (ii) the amount of the original Investments by the Borrower and the Restricted Subsidiaries in such Unrestricted Subsidiary, in each case, as determined by a Responsible Officer of the Borrower in good faith; plus

 

(8)                100% of the aggregate Net Cash Proceeds received by the Borrower and its Restricted Subsidiaries of any sale or disposition of Investments (other than to the Borrower or any Restricted Subsidiary) made using the Available Amount; provided that, any amounts added to the Available Amount pursuant to this clause (8) shall not, in any event, exceed the amount of the original Investments by the Borrower and the Restricted Subsidiaries made using the Available Amount, plus

 

(9)                100% of the aggregate returns, profits, distributions and similar amounts received in cash or Cash Equivalents by the Borrower and its Restricted Subsidiaries on any Investments made using the Available Amount; provided that, any amounts added to the Available Amount pursuant to this clause (9) shall not, in any event, exceed the amount of the original Investments by the Borrower and the Restricted Subsidiaries made using the Available Amount, plus

 

(10)              100% of the aggregate mandatory prepayments of Term Loans declined by Lenders; minus

 

(11)              the use of such Available Amount pursuant to Section 6.04(3), 6.06(8) or Section 6.09(1)(a) since the Closing Date.

 

“Available Tenor” means, as of any date of determination and with respect to the then-current Benchmark, as applicable, any tenor for such Benchmark or payment period for interest calculated with reference to such Benchmark, as applicable, that is or may be used for determining the length of an Interest Period pursuant to this Agreement as of such date and not including, for the avoidance of doubt, any tenor for such Benchmark that is then-removed from the definition of “Interest Period” pursuant to Section 2.15(6).

 

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“Available Unused DDTL Facility Commitment” means, with respect to a DDTL Lender at any time, an amount equal to the amount by which (1) the DDTL Facility Commitment of such DDTL Lender at such time exceeds (2) the aggregate DDTL Facility Credit Exposure of such DDTL Lender at such time.

 

“Available Unused Revolving Facility Commitment” means, with respect to a Revolving Lender at any time, an amount equal to the amount by which (1) the Revolving Facility Commitment of such Revolving Lender at such time exceeds (2) the aggregate Revolving Facility Credit Exposure of such Revolving Lender at such time.

 

“Bail-In Action” means the exercise of any Write-Down and Conversion Powers by the applicable EEA Resolution Authority in respect of any liability of an Affected Financial Institution.

 

“Bail-In Legislation” means, with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule.

 

“Bankruptcy Code” has the meaning assigned to such term in the definition of “Obligations”.

 

“Below Threshold Asset Sale Proceeds” means the cash proceeds of any Asset Sale involving, as of the date of such Asset Sale, aggregate consideration of an amount equal to or less than the Asset Sale Threshold.

 

“Benchmark” means, initially, USD LIBOR; provided that if a Benchmark Transition Event or an Early Opt-in Election or a Term SOFR Transition Event, as applicable, and its related Benchmark Replacement Date have occurred with respect to USD LIBOR or the then-current Benchmark, then “Benchmark” means the applicable Benchmark Replacement to the extent that such Benchmark Replacement has replaced such prior benchmark rate pursuant to Section 2.15(2) or Section 2.15(3).

 

“Benchmark Replacement” means:

 

(a) in the case of any Benchmark Transition Event or Early Opt-in Election, for any Available Tenor, the first alternative set forth in the order below that can be determined by the Administrative Agent for the applicable Benchmark Replacement Date:

 

(1)                the sum of: (a) Term SOFR and (b) the related Benchmark Replacement Adjustment;

 

(2)                the sum of: (a) Daily Simple SOFR and (b) the related Benchmark Replacement Adjustment;

 

(3)                the sum of: (a) the alternate benchmark rate that has been selected by the Administrative Agent and the Borrower as the replacement for the then-current Benchmark for the applicable Corresponding Tenor giving due consideration to (i) any selection or recommendation of a replacement benchmark rate or the mechanism for determining such a rate by the Relevant Governmental Body or (ii) any evolving or then-prevailing market convention for determining a benchmark rate as a replacement for the then-current Benchmark for U.S. dollar-denominated syndicated credit facilities at such time and (b) the related Benchmark Replacement Adjustment;

 

provided that, in the case of clause (1), such Unadjusted Benchmark Replacement is displayed on a screen or other information service that publishes such rate from time to time as selected by the Administrative Agent in its reasonable discretion or

 

(b) in the case of a Term SOFR Transition Event, the sum of (x) Term SOFR and (y) the related Benchmark Replacement Adjustment.

 

8

 

 

If the Benchmark Replacement as determined pursuant to clause (a) (1), (2) or (3) or (b) above would be less than the Floor, the Benchmark Replacement will be deemed to be the Floor for the purposes of this Agreement and the other Loan Documents.

 

“Benchmark Replacement Adjustment” means, with respect to any replacement of the then-current Benchmark with an Unadjusted Benchmark Replacement for any applicable Interest Period and Available Tenor for any setting of such Unadjusted Benchmark Replacement:

 

(1)                for purposes of clauses (a) (1) and (2) and clause (b) of the definition of “Benchmark Replacement”, the first alternative set forth in the order below that can be determined by the Administrative Agent:

 

(a)                the spread adjustment, or method for calculating or determining such spread adjustment, (which may be a positive or negative value or zero) as of the Reference Time such Benchmark Replacement is first set for such Interest Period that has been selected or recommended by the Relevant Governmental Body for the replacement of such Benchmark with the applicable Unadjusted Benchmark Replacement for the applicable Corresponding Tenor;

 

(b)                the spread adjustment (which may be a positive or negative value or zero) as of the Reference Time such Benchmark Replacement is first set for such Interest Period that would apply to the fallback rate for a derivative transaction referencing the ISDA Definitions to be effective upon an index cessation event with respect to such Benchmark for the applicable Corresponding Tenor; and

 

(2)                for purposes of clause (a) (3) of the definition of “Benchmark Replacement”, the spread adjustment, or method for calculating or determining such spread adjustment, (which may be a positive or negative value or zero) that has been selected by the Administrative Agent and the Borrower for the applicable Corresponding Tenor giving due consideration to (i) any selection or recommendation of a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of such Benchmark with the applicable Unadjusted Benchmark Replacement by the Relevant Governmental Body on the applicable Benchmark Replacement Date or (ii) any evolving or then-prevailing market convention for determining a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of such Benchmark with the applicable Unadjusted Benchmark Replacement for U.S. dollar-denominated syndicated credit facilities;

 

provided that, in the case of clause (1) above, such adjustment is displayed on a screen or other information service that publishes such Benchmark Replacement Adjustment from time to time as selected by the Administrative Agent in its reasonable discretion.

 

“Benchmark Replacement Conforming Changes” means, with respect to any Benchmark Replacement, any technical, administrative or operational changes (including changes to the definition of “ABR,” the definition of “Business Day,” the definition of “Interest Period,” timing and frequency of determining rates and making payments of interest, timing of borrowing requests or prepayment, conversion or continuation notices, length of lookback periods, the applicability of breakage provisions, and other technical, administrative or operational matters) that the Administrative Agent decides may be appropriate to reflect the adoption and implementation of such Benchmark Replacement and to permit the administration thereof by the Administrative Agent in a manner substantially consistent with market practice (or, if the Administrative Agent decides that adoption of any portion of such market practice is not administratively feasible or if the Administrative Agent determines that no market practice for the administration of such Benchmark Replacement exists, in such other manner of administration as the Administrative Agent decides is reasonably necessary in connection with the administration of this Agreement and the other Loan Documents).

 

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“Benchmark Replacement Date” means the earliest to occur of the following events with respect to the then-current Benchmark:

 

(1)                in the case of clause (1) or (2) of the definition of “Benchmark Transition Event”, the later of (a) the date of the public statement or publication of information referenced therein and (b) the date on which the administrator of such Benchmark (or the published component used in the calculation thereof) permanently or indefinitely ceases to provide all Available Tenors of such Benchmark (or such component thereof);

 

(2)                in the case of clause (3) of the definition of “Benchmark Transition Event”, the date of the public statement or publication of information referenced therein; or

 

(3)                in the case of a Term SOFR Transition Event, the date that is ten Business Days after the Administrative Agent has provided the Term SOFR Notice to the Lenders and the Borrower pursuant to Section 2.15(3), or

 

(4)                in the case of an Early Opt-in Election, the sixth (6th) Business Day after the date notice of such Early Opt-in Election is provided to the Lenders, so long as the Administrative Agent has not received, by 5:00 p.m., New York City time, on the fifth (5th) Business Day after the date notice of such Early Opt-in Election is provided to the Lenders, written notice of objection to such Early Opt-in Election from Lenders comprising the Required Lenders.

 

For the avoidance of doubt, (i) if the event giving rise to the Benchmark Replacement Date occurs on the same day as, but earlier than, the Reference Time in respect of any determination, the Benchmark Replacement Date will be deemed to have occurred prior to the Reference Time for such determination and (ii) the “Benchmark Replacement Date” will be deemed to have occurred in the case of clause (1) or (2) with respect to any Benchmark upon the occurrence of the applicable event or events set forth therein with respect to all then-current Available Tenors of such Benchmark (or the published component used in the calculation thereof).

 

“Benchmark Transition Event” means the occurrence of one or more of the following events with respect to the then-current Benchmark:

 

(1)                a public statement or publication of information by or on behalf of the administrator of such Benchmark (or the published component used in the calculation thereof) announcing that such administrator has ceased or will cease to provide all Available Tenors of such Benchmark (or such component thereof), permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide any Available Tenor of such Benchmark (or such component thereof);

 

(2)                a public statement or publication of information by the regulatory supervisor for the administrator of such Benchmark (or the published component used in the calculation thereof), the Board of Governors of the Federal Reserve System, the Federal Reserve Bank of New York, an insolvency official with jurisdiction over the administrator for such Benchmark (or such component), a resolution authority with jurisdiction over the administrator for such Benchmark (or such component) or a court or an entity with similar insolvency or resolution authority over the administrator for such Benchmark (or such component), which states that the administrator of such Benchmark (or such component) has ceased or will cease to provide all Available Tenors of such Benchmark (or such component thereof) permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide any Available Tenor of such Benchmark (or such component thereof); or

 

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(3)                a public statement or publication of information by the regulatory supervisor for the administrator of such Benchmark (or the published component used in the calculation thereof) announcing that all Available Tenors of such Benchmark (or such component thereof) are no longer representative.

 

For the avoidance of doubt, a “Benchmark Transition Event” will be deemed to have occurred with respect to any Benchmark if a public statement or publication of information set forth above has occurred with respect to each then-current Available Tenor of such Benchmark (or the published component used in the calculation thereof).

 

“Benchmark Unavailability Period” means the period (if any) (x) beginning at the time that a Benchmark Replacement Date pursuant to clauses (1) or (2) of that definition has occurred if, at such time, no Benchmark Replacement has replaced the then-current Benchmark for all purposes hereunder and under any Loan Document in accordance with Section 2.15 and (y) ending at the time that a Benchmark Replacement has replaced the then-current Benchmark for all purposes hereunder and under any Loan Document in accordance with Section 2.15.

 

“Beneficial Owner” has the meaning given to that term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular “person” (as that term is used in Section 13(d)(3) of the Exchange Act), such “person” will not be deemed to have beneficial ownership of any securities that such “person” has the right to acquire or vote only upon the happening of any future event or contingency (including the passage of time) that has not yet occurred. The terms “Beneficially Own”, “Beneficially Owned” and “Beneficial Ownership” each shall have a corresponding meaning.

 

“Beneficial Ownership Certificate” means a certificate regarding Beneficial Ownership as required by the Beneficial Ownership Regulation.

 

“Beneficial Ownership Regulation” means 31 C.F.R. § 1010.230.

 

“Benefit Plan” means any of (a) an “employee benefit plan” (as defined in ERISA) that is subject to Title I of ERISA, (b) a “plan” as defined in and subject to Section 4975 of the Code or (c) any Person whose assets include (for purposes of ERISA Section 3(42) or otherwise for purposes of Title I of ERISA or Section 4975 of the Code) the assets of any such “employee benefit plan” or “plan”.

 

“BHC Act Affiliate” of a party means an “affiliate” (as such term is defined under, and interpreted in accordance with, 12 U.S.C. 1841(k)) of such party.

 

“Board” means the Board of Governors of the Federal Reserve System of the United States of America.

 

“Board of Directors” means, as to any Person, the board of directors, board of managers or other governing body of such Person, or if such Person is owned or managed by a single entity, the board of directors, board of managers or other governing body of such entity. The term “directors” means the members of the Board of Directors.

 

“Borrower” has the meaning assigned to such term in the recitals to this Agreement.

 

“Borrower Materials” has the meaning assigned to such term in Section 9.17(1).

 

“Borrowing” means Loans of the same Class and Type, made, converted or continued on the same date and, in the case of Eurocurrency Loans, as to which a single Interest Period is in effect.

 

“Borrowing Minimum” means $500,000 or such lower amount reasonably agreed by the Administrative Agent.

 

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“Borrowing Multiple” means $250,000 or such lower amount reasonably agreed by the Administrative Agent.

 

“Borrowing Request” means a request by the Borrower in accordance with the terms of Section 2.03 and substantially in the form of Exhibit C-1.

 

“Budget” has the meaning assigned to such term in Section 5.04(5).

 

“Business Day” means any day that is not a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to remain closed and, if such day relates to any fundings, disbursements, settlements or payments in connection with a Eurocurrency Loan or Letter of Credit, any such day that is also a day for trading by and between banks in Dollar deposits in the London interbank currency markets.

 

“Capital Expenditures” means, for any period, the aggregate of all expenditures (whether paid in cash or accrued as liabilities and including in all events all amounts expended or capitalized under Capitalized Leases) incurred by the Borrower, the Restricted Subsidiaries and the Physician-Owned Practices during such period that, in accordance with GAAP, are or should be included as capital expenditures on the consolidated statement of cash flows of the Borrower, the Restricted Subsidiaries and the Physician-Owned Practices for such period; provided that Capital Expenditures will not include:

 

(1)                expenditures to the extent they are made with (a) Equity Interests of the Borrower or (b) proceeds of the issuance of Equity Interests of, or a cash capital contribution to, the Borrower after the Closing Date;

 

(2)                expenditures with proceeds of insurance settlements, condemnation awards and other settlements in respect of lost, destroyed, damaged or condemned assets, equipment or other property to the extent such expenditures are made to replace or repair such lost, destroyed, damaged or condemned assets, equipment or other property or otherwise to acquire, maintain, develop, construct, improve, upgrade or repair assets or properties useful in the business of the Borrower, the Restricted Subsidiaries and the Physician-Owned Practices;

 

(3)                interest capitalized during such period;

 

(4)                expenditures that are accounted for as capital expenditures of such Person and that actually are paid for by a third party (excluding the Borrower, any Restricted Subsidiary and any Physician-Owned Practice) and for which none of the Borrower, any Restricted Subsidiary or any Physician-Owned Practice has provided or is required to provide or incur, directly or indirectly, any consideration or obligation to such third party or any other Person (whether before, during or after such period) (it being understood that notwithstanding the foregoing, landlord financed improvements to leased Real Properties shall be excluded from “Capital Expenditures” pursuant to this clause (4));

 

(5)                the book value of any asset owned by the Borrower, any Restricted Subsidiary or any Physician-Owned Practice prior to or during such period to the extent that such book value is included as a Capital Expenditure during such period as a result of such Person reusing or beginning to reuse such asset during such period without a corresponding expenditure actually having been made in such period; provided that any expenditure necessary in order to permit such asset to be reused will be included as a Capital Expenditure during the period that such expenditure is actually made;

 

(6)                the purchase price of equipment purchased during such period to the extent the consideration therefor consists of any combination of (a) used or surplus equipment traded in at the time of such purchase or (b) the proceeds of a concurrent sale of used or surplus equipment, in each case, in the ordinary course of business;

 

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(7)                Investments in respect of a Permitted Acquisition;

 

(8)                the Acquisition;

 

(9)                the purchase of property, plant or equipment to the extent purchased with the proceeds of Asset Sales that are not applied to prepay Term Loans pursuant to Section 2.12; or

 

(10)            Capitalized Software Expenditures.

 

“Capitalized Software Expenditures” shall mean, for any period, the aggregate of all expenditures (whether paid in cash or accrued as liabilities) by a Person and its Restricted Subsidiaries and, in the case of the Borrower, the Physician-Owned Practices, during such period in respect of purchased software or internally developed software and software enhancements that, in conformity with GAAP, are or are required to be reflected as capitalized costs on the consolidated balance sheet of the Borrower, the Restricted Subsidiaries and the Physician-Owned Practices.

 

“Capital Lease” means, with respect to any Person, any lease of, or other arrangement conveying the right to use, any Property by such Person as lessee that has been or is required to be accounted for as a capital lease on a balance sheet of such Person prepared in accordance with GAAP; provided that for all purposes hereunder the amount of obligations under any Capitalized Lease shall be the amount thereof accounted for as a liability in accordance with GAAP.

 

“Capital Lease Obligations” means, with respect to any Capital Lease of any Person, the amount of all obligations of such Person that would be required to be capitalized on a balance sheet of such Person prepared in accordance with GAAP.

 

“Capital Stock” means:

 

(1)                in the case of a corporation, corporate stock;

 

(2)                in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock;

 

(3)                in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); and

 

(4)                any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person.

 

“Captive Insurance Company” means a Wholly Owned Subsidiary of the Borrower created solely for providing self-insurance for the Borrower and its Subsidiaries and engaging in no other activities other than activities ancillary thereto and necessary for the maintenance of corporate existence.

 

“CareMax” has the meaning assigned to such term in the recitals hereof.

 

“CareMax Representative” has the meaning assigned to such term in the definition of “PPP Escrow Agreement”.

 

“cash collateralize” means to deposit, or designate funds previously deposited, in a deposit account subject to control of the Administrative Agent or the Collateral Agent or the applicable Issuing Bank, solely for the benefit of the applicable Issuing Bank or the Revolving Lenders, as collateral for Letters of Credit or obligations of Revolving Lenders to fund participations in respect of Letters of Credit, cash, Cash Equivalents or deposit account balances in an aggregate amount equal to 103% of the maximum amount available to be drawn under such Letters of Credit, in each case pursuant to documentation in form and

 

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substance reasonably satisfactory to the applicable Issuing Bank (which documents are hereby consented to by the Lenders). “cash collateral” shall have a meaning correlative to the foregoing.

 

“Cash Equivalents” means:

 

(1)                Dollars or, in the case of any Foreign Subsidiary, any local currencies held by it from time to time in the ordinary course of business and not for speculation;

 

(2)                direct obligations of the United States of America or obligations guaranteed by the United States of America, in each case, with maturities not exceeding two years;

 

(3)                time deposits, eurodollar time deposits, certificates of deposit and money market deposits, in each case, with maturities not exceeding one year from the date of acquisition thereof, and overnight bank deposits, in each case, with any commercial bank having capital, surplus and undivided profits of not less than $250,000,000;

 

(4)                repurchase obligations for underlying securities of the types described in clause (2) or (3) above or clause (6) below entered into with a bank meeting the qualifications described in clause (3) above;

 

(5)                commercial paper or variable or fixed rate notes maturing not more than one year after the date of acquisition issued by a corporation rated at least “P-1” by Moody’s or “A-1” by S&P (or reasonably equivalent ratings of another internationally recognized rating agency);

 

(6)                securities with maturities of two (2) years or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, having one of the two highest rating categories obtainable from either Moody’s or S&P (or reasonably equivalent ratings of another internationally recognized rating agency);

 

(7)                Indebtedness issued by Persons with a rating of at least “A-2” by Moody’s or “A” by S&P (or reasonably equivalent ratings of another internationally recognized rating agency), in each case, with maturities not exceeding one year from the date of acquisition, and marketable short-term money market and similar securities having a rating of at least “P-2” or “A-2” from either Moody’s or S&P (or reasonably equivalent ratings of another internationally recognized rating agency);

 

(8)                Investments in money market funds with average maturities of twelve (12) months or less from the date of acquisition that are rated “Aaa3” by Moody’s and “AAA” by S&P (or reasonably equivalent ratings of another internationally recognized rating agency);

 

(9)                instruments equivalent to those referred to in clauses (1) through (8) above denominated in any foreign currency comparable in credit quality and tenor to those referred to above customarily utilized in the countries where any such Restricted Subsidiary is located or in which such Investment is made; and

 

(10)            shares of mutual funds whose investment guidelines restrict 95% of such funds’ investments to those satisfying the provisions of clauses (1) through (9) above.

 

“Cash Management Bank” means any provider of Cash Management Services that, at the time such Cash Management Obligations were entered into or, if entered into prior to the Closing Date, on the Closing Date, was an Agent, a Lead Arranger or a Lender or an Affiliate of the foregoing, whether or not such Person subsequently ceases to be an Agent, a Lead Arranger or a Lender or an Affiliate of the foregoing.

 

“Cash Management Obligations” means obligations owed by any Loan Party to any Cash Management Bank in respect of or in connection with Cash Management Services and designated by the

 

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Cash Management Bank and the Borrower in writing to the Administrative Agent as “Cash Management Obligations” under this Agreement (which designation shall include a certification by such Cash Management Bank that it is eligible to be a Cash Management Bank in accordance with the definition thereof and such Cash Management Bank’s agreement to be bound by Section 8.01, 8.03 and 8.07 hereof).

 

“Cash Management Services” means any treasury or cash management services (including, without limitation, controlled disbursement, automated clearing house transactions, return items, overdrafts and interstate depository network services), depository, pooling, netting, stored value card, purchase card (including so called “procurement card” or “P-card”), debit card, credit card, Worldwide Interbank Financial Telecommunication transfers, operational foreign exchange management, dealer incentive, supply chain finance services (including, without limitation, trade payable services and supplier accounts receivables purchases) and similar services.

 

“Cash Netting Cap” means $30,000,000.

 

“Cash Receipts” shall mean all cash received by or on behalf of the Loan Parties, including, without limitation: (a) cash representing operating revenue earned or to be earned by the Loan Parties; (b) proceeds from Loans and (c) any other cash received by the Loan Parties from whatever source (including amounts received in respect of the liquidation of any Hedge Agreements and amounts received in respect of any disposition of assets), other than amounts described in the definition of “Excluded Accounts” which are deposited in Excluded Accounts.

 

“Casualty Event” means any event that gives rise to the receipt by the Borrower or any Restricted Subsidiary of any insurance proceeds or condemnation awards in respect of any equipment, fixed assets or Real Property (including any improvements thereon) to replace or repair such equipment, fixed assets or Real Property.

 

“Certain Funds Provision” has the meaning given to such term in the Commitment Letter.

 

“CFC” means a controlled foreign corporation within the meaning of Section 957 of the Code.

 

A “Change in Control” will be deemed to occur if any person or “group” (within the meaning of Rules 13d-3 and 13d-5 under the Exchange Act, but excluding any employee benefit plan of such Person and its subsidiaries and any Person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan), other than the Permitted Holders, acquires Beneficial Ownership of Voting Stock of the Borrower representing (a) more than 35% of the aggregate ordinary voting power for the election of directors represented by the issued and outstanding Equity Interests of the Borrower (determined on a fully diluted basis but without giving effect to contingent voting rights that have not yet vested) and (b) more than the percentage of the aggregate ordinary voting power for the election of directors that is at the time Beneficially Owned, directly or indirectly, by the Permitted Holders, taken together (determined on a fully diluted basis but without giving effect to contingent voting rights that have not yet vested).

 

“Change in Law” means:

 

(1)                the adoption of any law, rule or regulation (including, without limitation, any rule or regulation adopted by the NAIC or its Securities Valuation Office) after the Closing Date;

 

(2)                any change in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority (including, without limitation, any rule or regulation adopted by the NAIC or its Securities Valuation Office) after the Closing Date; or

 

(3)                compliance by any Lender (or, for purposes of Section 2.16(2), by any Lending Office of such Lender or by such Lender’s holding company, if any) with any written request, guideline or directive (whether or not having the force of law) of any Governmental Authority (including, without limitation, any rule or regulation adopted by the NAIC or its Securities Valuation Office), made or issued after the Closing Date; provided that, notwithstanding anything herein to the contrary, (a) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives promulgated thereunder or issued in connection therewith and (b) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States of America or foreign regulatory authorities, in each case pursuant to Basel III, in each case will be deemed to be a “Change in Law,” regardless of the date enacted, adopted, promulgated or issued.

 

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“Charges” has the meaning assigned to such term in Section 9.09.

 

“Class” means, with respect to an Initial Term Loan Facility, DDTL Facility or Revolving Facility, (a) when used with respect to Lenders, the Lenders under such Initial Term Loan Facility, DDTL Facility or Revolving Facility, as applicable and (b) when used with respect to Loans, Commitments or Borrowings, Loans, Commitments or Borrowings under such Initial Term Loan Facility, DDTL Facility or Revolving Facility, as applicable.

 

“Closing Date” means June 8, 2021.

 

“Closing Date Refinancing” means the repayment, redemption, defeasance, discharge, refinancing or termination in full of all of the existing indebtedness of the Acquired Businesses (excluding certain indebtedness permitted to remain outstanding after the Closing Date in accordance with this Agreement and the other Loan Documents), the termination of all commitments in respect thereof, and the discharge and release all security and guaranties in respect thereof.

 

“Code” means the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and rulings issued thereunder.

 

“Collaboration Agreement” means a collaboration agreement to be entered into on or after the Closing Date between the Borrower or one or more of its Restricted Subsidiaries and a commercial health insurance payor (“Payor”) pursuant to which Payor will make unsecured loans, defer rent obligations or make other unsecured credit extensions to the Borrower or one or more of its Restricted Subsidiaries to finance the establishment of de novo facilities, including costs and expenses incurred in connection with entering into a Management Services Agreement and other similar agreements in respect of any Physician-Owned Practice which will operate such facilities.

 

“Collateral” means the “Collateral” as defined in the Collateral Agreement and also includes all other property that is subject to any Lien in favor of the Collateral Agent for the benefit of the Secured Parties pursuant to any Security Document (but in any event excluding the Excluded Assets).

 

“Collateral Agent” means Royal Bank of Canada, in its capacity as Collateral Agent for itself and the other Secured Parties, and any duly appointed successor in that capacity.

 

“Collateral Agreement” means the Guarantee and Collateral Agreement dated as of the Closing Date, among the Loan Parties and the Collateral Agent.

 

“Co-Managers” means Deutsche Bank Securities Inc. and Keybank National Association, each in its capacity as a co-manager.

 

“Commitment” means a Term Commitment or a Revolving Facility Commitment, as the context may require.

 

“Commitment Fees” means, collectively, the DDTL Facility Commitment Fees together with the Revolving Facility Commitment Fees.

 

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“Commitment Letter” means that certain Amended and Restated Commitment Letter, dated as of March 8, 2021, by and among the Borrower, Royal Bank of Canada, RBC Capital Markets, LLC, Truist Bank, Truist Securities, Inc., Citizens Bank NA, Regions Bank, Capital One, N.A., Fifth Third Bank, National Association, Deutsche Bank AG New York Branch, Deutsche Bank Securities Inc., Keybank National Association and BankUnited, N.A.

 

“Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. § 1 et seq.), as amended from time to time, and any successor statute.

 

“Company” and “Companies” each has the meaning assigned to such term in the recitals hereto.

 

“Connection Income Taxes” means Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes.

 

“Consolidated Cash Interest Expense” means, for any period, the cash Consolidated Interest Expense of the Borrower, the Restricted Subsidiaries and the Physician-Owned Practices for such period, including all cash commissions, discounts and other fees and charges owed with respect to letters of credit and bankers’ acceptance financings and net cash costs under Hedge Agreements, but excluding:

 

(1)                amortization of deferred financing costs, debt issuance costs, commissions, fees and expenses and any other amounts of non-cash interest (including as a result of the effects of acquisition method accounting or pushdown accounting);

 

(2)                any fees (including any periodic agency fees) and expenses associated with the Transactions, any Asset Sale or other disposition, acquisition, Investment, equity issuances or debt issuances (in each case, whether such transaction is consummated or not);

 

(3)                non-cash interest expense attributable to the movement of the mark-to-market valuation of obligations under Hedging Transactions or other derivative instruments pursuant to FASB Accounting Standards Codification No. 815-Derivatives and Hedging;

 

(4)                any one-time cash costs associated with breakage in respect of Hedge Agreements for interest rates;

 

(5)                any “additional interest” owing pursuant to a registration rights agreement with respect to any securities;

 

(6)                any payments with respect to make-whole premiums or other breakage costs of any Indebtedness, including, without limitation, any Indebtedness issued in connection with the Transactions;

 

(7)                penalties and interest relating to taxes;

 

(8)                accretion or accrual of discounted liabilities not constituting Indebtedness;

 

(9)                any expense resulting from the discounting of Indebtedness in connection with the application of recapitalization or purchase accounting;

 

(10)            pay-in-kind interest expense of the Borrower, the Restricted Subsidiaries and the Physician-Owned Practices payable pursuant to the terms of the agreements governing such debt for borrowed money;

 

(11)            commissions, discounts, yield and other fees and charges (including any interest expense) related to any inventory financing agreement;

 

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(12)            any interest expense attributable to the exercise of appraisal rights and the settlement of any claims or actions (whether actual, contingent or potential) with respect thereto and with respect to any acquisition or Investment not prohibited by the terms of the Loan Documents; and

 

(13)            any other non-cash items included in determining Consolidated Interest Expense,

 

in each case, as calculated on a consolidated basis in accordance with GAAP, provided that only cash interest items shall be taken into account in determining Consolidated Cash Interest Expense for the purposes of this definition.

 

“Consolidated Debt” means, as of any date, the sum (without duplication) of all outstanding Indebtedness (other than letters of credit or bank guarantees, to the extent undrawn) consisting of Indebtedness for borrowed money, Capital Lease Obligations, purchase money Indebtedness, deferred purchase price, similar payment obligations and earnouts of the Borrower, the Restricted Subsidiaries and the Physician-Owned Practices and all Guarantees of the foregoing, in each case, to the extent the same would be required to be shown as a long-term liability on a balance sheet prepared on a consolidated basis in accordance with GAAP, based upon the financial statements for the most recent four fiscal quarter period for which Required Financial Statements have been delivered (or were required to be delivered), in each case, calculated on a Pro Forma Basis, as such amount may be adjusted to reflect the effect (as determined by the Borrower in good faith) of any Hedge Agreement or other derivative instrument entered into in respect of the currency exchange risk relating to such Indebtedness, calculated on a mark-to-market basis; provided, however, Consolidated Debt shall exclude (a) deferred purchase price, similar payment obligations and earnouts of the Borrower, the Restricted Subsidiaries and the Physician-Owned Practices (including those incurred or created in connection with a Permitted Acquisition or other permitted Investment (excluding any obligations in connection with employment or severance arrangements)), in each case, to the extent not overdue by five (5) or more Business Days and the amount payable is not subject to good faith dispute and, for the avoidance of doubt, excluding working capital or other purchase price adjustments, true-up payments, holdbacks, expense reimbursements or indemnification obligations and (b) the principal amount of any PPP Loans outstanding on the Closing Date to the extent the Borrower shall have deposited cash collateral in respect of the unpaid principal of, and interest on such PPP Loans into one or more escrow accounts subject to the control of the PPP Escrow Agent on behalf of the PPP Lender of such PPP Loans.

 

“Consolidated EBITDA” means, for any period, the Consolidated Net Income of the Borrower, the Restricted Subsidiaries and the Physician-Owned Practices on a consolidated basis for such period:

 

(1)                increased, in each case to the extent deducted in calculating such Consolidated Net Income (other than in respect of clause (k)) (and without duplication), by:

 

(a)                provision for taxes based on income, profits or capital, including foreign, federal, state, local, provincial, territorial, franchise, excise, property, value added, withholding and similar taxes and foreign withholding taxes paid or accrued, including any penalties and interest relating to any tax examinations, and state taxes in lieu of business fees (including business license fees) and payroll tax credits, income tax credits and similar tax credits, and including an amount equal to the amount of tax distributions actually made to the holders of Equity Interests of the Borrower in respect of such period (in each case, to the extent attributable to the operations of the Borrower and its Subsidiaries), which will be included as though such amounts had been paid as income taxes directly by the Borrower; plus

 

(b)                Consolidated Interest Expense; plus

 

(c)                all depreciation and amortization losses, charges and expenses; plus

 

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(d)           all

 

(i)                 losses, charges and expenses relating to the Transactions;

 

(ii)               transaction fees, costs and expenses incurred in connection with the consummation of any transaction that is out of the ordinary course of business (or any transaction proposed but not consummated and including any such transaction consummated prior to the Closing Date) permitted under this Agreement, including equity issuances (including any expense relating to enhanced accounting functions or other transaction costs associated with being a public company, including Public Company Costs), investments, acquisitions, asset sales or other dispositions, recapitalizations, consolidations, mergers, amalgamations, option buyouts and the incurrence, modification or repayment of Indebtedness permitted to be incurred under this Agreement (including any Permitted Refinancing Indebtedness in respect thereof) or any amendments, waivers or other modifications under the agreements relating to such Indebtedness or similar transactions; provided, that, that the aggregate amount added back under this clause (d)(ii), clauses (i), (k) and (l)(II) below and clause (2) of the definition of “Pro Forma Basis” shall not exceed 25.0% of Consolidated EBITDA of the Borrower, the Restricted Subsidiaries and the Physician-Owned Practices for the four fiscal quarter period ending on the last day of such period (the “Expenses and Synergies Cap”) (calculated on a Pro Forma Basis and after giving effect to any such add-backs);

 

(iii)             transaction fees, costs and expenses incurred in connection with any amendments, waivers or other modifications to the Credit Documents;

 

(iv)              without duplication of any of the foregoing, non-operating or non-recurring professional fees, costs and expenses for such period;

 

(v)                costs and expenses related to, or incurred in connection with, business or facilities (including de novo facilities) start-up, opening, pre-opening, transition, consolidation, shut-down and closing, including costs and expenses incurred in connection with entering into Management Services Agreements and other similar agreements in respect of Physician-Owned Practices and/or to ensure that such agreements comply with all applicable laws; provided that the aggregate amount added back under this clause (d)(v) shall not exceed 25.0% of Consolidated EBITDA of the Borrower, the Restricted Subsidiaries and the Physician-Owned Practices for the four fiscal quarter period ending on the last day of such period (calculated on a Pro Forma Basis and after giving effect to any such add-backs);

 

(vi)              fees and expenses (including, but not limited to, travel expenses) of, and indemnification payments paid to, board members, board advisors and board observers, and all fees, costs and expenses relating to directors and officers insurance; and

 

(vii)            proceeds from business interruption insurance (to the extent not reflected as revenue or income in Consolidated Net Income and to the extent that the related loss was deducted in the determination of Consolidated Net Income); plus

 

(e)                minority interest expense or deduction attributable to minority Equity Interests or non-controlling interests of third parties in any non-Wholly Owned Restricted Subsidiary; plus

 

(f)                 non-cash earn-out obligations, deferred purchase price or other adjustments of purchase price or, in each case, similar obligations and expenses related thereto incurred in connection with any Permitted Acquisition or other Investment; plus

 

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(g)                all charges, costs, expenses, accruals or reserves in connection with the rollover, acceleration or payout of Equity Interests held by officers or employees of the Borrower and all losses, charges and expenses related to payments made to holders of options or other derivative Equity Interests in the common equity of the Borrower in connection with, or as a result of, any distribution being made to equityholders of such Person or any of its direct or indirect parents, which payments are being made to compensate such option holders as though they were equityholders at the time of, and entitled to share in, such distribution; plus

 

(h)                all non-cash charges, expenses or losses, including, without limitation, any non-cash expense relating to the vesting of warrants (provided that if any such non-cash charges, expenses or losses represent an accrual or reserve for potential cash items in any future period, (I) the Borrower may determine not to add back such non-cash charges in the current period or (II) to the extent the Borrower decides to add back such non-cash charges, the cash payment in respect thereof in such future period shall be subtracted from Consolidated EBITDA to such extent, and excluding amortization of a prepaid cash item that was paid in a prior period);

 

(i)                 all losses, charges, expenses, costs, accruals or reserves of any kind (i) attributable to the planning, undertaking and/or implementation of cost savings or strategic initiatives, business optimization, cost rationalization programs, operating expense reductions and/or other initiatives, actions or synergies (including, without limitation, in connection with any integration, restructuring or transition), (ii) relating to the closure or consolidation of any facility and/or discontinued operations (including but not limited to severance, rent termination costs, moving costs and legal costs), any systems implementation, any software development, any expansion and/or relocation or any entry into a new market, or (iii) relating to any severance, any signing, retention or completion bonus, or any modification to any pension and post-retirement employee benefit plan, indemnities and expenses, including, without limitation, any one time expense relating to enhanced accounting function or other transaction costs, including those associated with becoming a standalone entity or a public company (including, for the avoidance of doubt, any one time Public Company Cost and any one time cost related to any Permitted Acquisition); provided that the aggregate amount added back under this clause (i), clause (d)(ii) above, clauses (k) and (l)(II) below and clause (2) of the definition of “Pro Forma Basis” shall not exceed the Expenses and Synergies Cap for the four fiscal quarter period ending on the last day of such period (calculated on a Pro Forma Basis and after giving effect to any such add-backs); plus

 

(j)                 all non-cash losses, charges and expenses, including any write-offs or write-downs; provided that if any such non-cash charge represents an accrual or reserve for potential cash items in any future four-fiscal quarter period (i) the Borrower may determine not to add back such non-cash charge in the period for which Consolidated EBITDA is being calculated and (ii) to the extent the Borrower does decide to add back such non-cash charge, the cash payment in respect thereof in such future four-fiscal quarter period will be subtracted from Consolidated EBITDA for such future four-fiscal quarter period; plus

 

(k)                (i) pro forma “run rate” cost savings, operating expense reductions, restructuring charges and synergies related to operational efficiencies, strategic and cost saving initiatives, purchasing improvements, contract arbitrage, acquisitions, divestitures, other specified transactions, restructurings, cost savings initiatives and other initiatives and actions that are related to or resulting from the Transactions, reasonably expected by the Borrower, the Restricted Subsidiaries and the Physician-Owned Practices to be realized within 18 months of the date of such calculation (without duplication of the amount of actual benefits realized during such period from such actions), which cost savings, operating expense reductions, restructuring charges and synergies are factually supportable and reasonably identifiable in the good faith determination of the Borrower, as certified in writing by a Financial Officer of the Borrower plus (ii) pro forma “run rate” cost savings, operating expense reductions, restructuring charges and synergies related to operational efficiencies, strategic and cost saving initiatives, purchasing improvements, acquisitions, divestitures, other specified transactions, restructurings and other initiatives and actions, in each case, reasonably expected by the Borrower, the Restricted Subsidiaries and the Physician-Owned Practices to be realized within 18 months of the date of such calculation (without duplication of the amount of actual benefits realized during such period from such actions), which cost savings, operating expense reductions, restructuring charges and synergies are factually supportable and reasonably identifiable in the good faith determination of the Borrower, as certified in writing by a Financial Officer of the Borrower; provided that the aggregate amount added back under this clause (k), clauses (d)(ii) and (i) above, clause (l)(II) below and clause (2) of the definition of “Pro Forma Basis” shall not exceed the Expenses and Synergies Cap for the four fiscal quarter period ending on the last day of such period (calculated on a Pro Forma Basis and after giving effect to any such add-backs);

 

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(l)                 without duplication, adjustments and add-backs (which add-backs and adjustments shall not, for the avoidance of doubt, be limited to the time periods in respect of which such add-backs and adjustments were reflected therein) (I) reflected in the Financial Model and/or (II) other adjustments and add-backs that are of the type contained in a quality of earnings report made available to the Administrative Agent prepared by financial advisors (which financial advisors are (A) nationally recognized or (B) reasonably acceptable to the Administrative Agent (it being understood and agreed that any of the “Big Four” accounting firms are acceptable)) and retained by a Loan Party; provided that the aggregate amount added back under this clause (l)(II), clauses (d)(ii), (i) and (k) above and clause (2) of the definition of “Pro Forma Basis” shall not exceed the Expenses and Synergies Cap for the four fiscal quarter period ending on the last day of such period (calculated on a Pro Forma Basis and after giving effect to any such add-backs); and

 

(2)                decreased, without duplication and to the extent increasing such Consolidated Net Income for such period, by non-cash gains (excluding any non-cash gains that represent the reversal of any accrual of, or cash reserve for, anticipated cash charges that were deducted (and not added back) in the calculation of Consolidated EBITDA for any prior period ending after the Closing Date).

 

Notwithstanding the foregoing, the Consolidated EBITDA of the Borrower, the Restricted Subsidiaries and the Physician-Owned Practices for the fiscal quarters ended:

 

(i)                June 30, 2020 will be deemed to be $13,000,000;

 

(ii)              September 30, 3020 will be deemed to be $14,500,000;

 

(iii)             December 31, 2020 will be deemed to be $13,200,000; and

 

(iv)             March 31, 2021 will be deemed to be $7,300,000.

 

it being understood that the amounts listed in the foregoing clauses (i), (ii), (iii) and (iv) do not give effect to the adjustments provided for in the definition of Pro Forma Basis for any transactions or events occurring after the Closing Date.

 

“Consolidated First Lien Net Debt” means, as of any date, all Consolidated Debt as of such date that is secured by a Lien on the Collateral (or in the case of Consolidated Debt of the Borrower, the Restricted Subsidiaries and the Physician-Owned Practices consisting of purchase money Indebtedness or Capital Lease Obligations, assets of the Borrower, the Restricted Subsidiaries and the Physician-Owned Practices secured thereby) that is pari passu with the Lien securing the Obligations (or, as applicable, secured on a “first priority” basis), minus all Unrestricted Cash of the Borrower, the Restricted Subsidiaries and the Physician-Owned Practices as of such date in an amount not to exceed the Cash Netting Cap, in each case, determined based upon the financial statements for the most recent four fiscal quarter period for which Required Financial Statements have been delivered (or were required to be delivered), in each case, calculated on a Pro Forma Basis; provided that for purposes of calculating the amount of Consolidated First Lien Net Debt with respect to any Indebtedness being incurred in reliance on compliance with any financial ratio-based incurrence test, Unrestricted Cash will not include any proceeds received from such Indebtedness.

 

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“Consolidated Interest Expense” means, for any period, with respect to the Borrower, the Restricted Subsidiaries and the Physician-Owned Practices on a consolidated basis, the sum, without duplication, of:

 

(1)                the aggregate interest expense of the Borrower, the Restricted Subsidiaries and the Physician-Owned Practices for such period, calculated on a consolidated basis in accordance with GAAP, to the extent such expense was deducted in computing Consolidated Net Income (including pay-in-kind interest payments, amortization of original issue discount, the interest component of Capital Lease Obligations and net payments and receipts (if any) pursuant to Hedge Agreements relating to interest rates (other than in connection with the early termination thereof) but excluding any non-cash interest expense attributable to the movement in the mark-to-market valuation of hedging obligations, all amortization and write-offs of deferred financing fees, debt issuance costs, commissions, fees and expenses and expensing of any bridge, commitment or other financing fees); plus

 

(2)                consolidated capitalized interest of the Borrower, the Restricted Subsidiaries and the Physician-Owned Practices for such period, whether paid or accrued; plus

 

(3)                any amounts paid or payable in respect of interest on Indebtedness the proceeds of which have been contributed to the Borrower and that has been Guaranteed by the Borrower, the Restricted Subsidiaries and/or any of the Physician-Owned Practices; less

 

(4)                interest income of the Borrower, the Restricted Subsidiaries and the Physician-Owned Practices for such period;

 

provided that when determining Consolidated Interest Expense in respect of any four-quarter period ending prior to the first anniversary of the Closing Date, Consolidated Interest Expense will be calculated by multiplying the aggregate Consolidated Interest Expense accrued since the Closing Date by 365 and then dividing such product by the number of days from and including the Closing Date to and including the last day of such period. For purposes of this definition, interest on Capital Lease Obligations will be deemed to accrue at the interest rate reasonably determined by a Responsible Officer of the Borrower to be the rate of interest implicit in such Capital Lease Obligations in accordance with GAAP.

 

“Consolidated Net Income” means, for any period, the aggregate amount of the net income (or loss) of the Borrower, the Restricted Subsidiaries and the Physician-Owned Practices for such period, calculated on a consolidated basis in accordance with GAAP and before any deduction for preferred stock dividends; provided that:

 

(1)                all net after-tax extraordinary, exceptional, nonrecurring or unusual gains, losses, income, expenses, costs, accruals, charges and reserves of any kind, and in any event including all Transaction Costs, restructuring (whether or not classified as restructuring expense on the consolidated financial statements) (other than restructuring charges and synergies related to operational efficiencies), severance, rent, relocation, retention, consolidation or other similar charges and expenses, one-time charges (including compensation charges), contract termination costs, litigation and other legal and arbitration costs, excess pension charges, system establishment charges, expenses related to any reconstruction, decommissioning, recommissioning or reconfiguration of fixed assets for alternative uses, fees, expenses or charges relating to curtailments or modifications to pension and post-retirement employee benefit plans in connection with the Transactions or otherwise, and any fees, expenses, charges or change in control payments related to the Transactions or otherwise (including any transition-related expenses incurred before, on or after the Closing Date), will be excluded;

 

(2)                all net after-tax income, loss, expense or charge from abandoned, closed or discontinued operations and any net after tax gain or loss on the disposal of abandoned, closed or discontinued operations will be excluded;

 

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(3)                all net after-tax gain, loss, expense or charge attributable to business dispositions (including Equity Interests of any Person), asset dispositions, abandonments or the designation of an Unrestricted Subsidiary other than in the ordinary course of business (as determined in good faith by a Responsible Officer of the Borrower) will be excluded;

 

(4)                all net after-tax income, loss, expense or charge attributable to the early extinguishment, conversion or cancellation of Indebtedness, Hedge Agreements or other derivative instruments (including deferred financing costs written off, premiums paid or other expenses incurred) will be excluded;

 

(5)                all non-cash gain, loss, expense or charge attributable to the movement in the mark-to-market valuation of Hedge Agreements or other derivative instruments, including any ineffectiveness recognized in earnings related to hedge transactions or the fair value of changes therein recognized in earnings for derivatives that do not qualify as hedge transactions, will be excluded;

 

(6)                (a) the net income for such period of any Person that is not a Restricted Subsidiary of the referent Person, or that is accounted for by the equity method of accounting, will be included only to the extent of the amount of dividends or distributions or other payments that are or are permitted to be paid in cash (or converted into cash) to the referent Person or a Restricted Subsidiary thereof in respect of such period; and (b) the net income for such period will include any ordinary course dividends, distributions or other payments in cash received from any such Person during such period in excess of the amounts included in clause (a) hereof, in each case will be excluded;

 

(7)                the cumulative effect of a change in law, regulation or accounting principles and changes as a result of the adoption or modification of accounting policies, in each case during such period will be excluded;

 

(8)                the effects of purchase accounting, fair value accounting or recapitalization accounting adjustments (including the effects of such adjustments pushed down to the referent Person and its Restricted Subsidiaries) resulting from the application of purchase accounting, fair value accounting or recapitalization accounting in relation to the Transactions or any acquisition consummated before or after the Closing Date, and the amortization, write-down or write-off of any amounts thereof, net of taxes, will be excluded;

 

(9)                all impairment charges and asset write-ups, write-downs and write-offs or write-downs will be excluded;

 

(10)            all equity-based or non-cash compensation or similar charge, cost or expense or reduction of revenue, realized in connection with or resulting from stock option plans, employee benefit plans or agreements or post-employment benefit plans or agreements, or grants or sales of stock, stock appreciation or similar rights, stock options, restricted stock, preferred stock or similar rights will be excluded;

 

(11)            any costs or expenses incurred in connection with the payment of dividend equivalent rights to option holders pursuant to any management equity plan, stock option plan or any other management or employee benefit plan or agreement or post-employment benefit plan or agreement will be excluded;

 

(12)            accruals and reserves for liabilities (including contingent liabilities) or expenses that are established or adjusted as a result of the Transactions within eighteen (18) months after the Closing Date will be excluded;

 

(13)            all amortization and write-offs of deferred financing fees, debt issuance costs, commissions, fees and expenses and expensing of any bridge, commitment or other financing fees;

 

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(14)            any non-cash currency translation gains and losses related to changes in currency exchange rates (including remeasurements of Indebtedness and any net loss or gain resulting from Hedge Agreements for currency exchange risk), will be excluded;

 

(15)            (a) the non-cash portion of “straight-line” rent expense will be excluded and (b) the cash portion of “straight-line” rent expense that exceeds the amount expensed in respect of such rent expense will be included;

 

(16)            expenses and lost profits with respect to liability or Casualty Events or business interruption will be disregarded to the extent covered by insurance (including business interruption insurance) and actually reimbursed, or, so long as such Person has made a determination that there exists reasonable evidence that such amount will in fact be reimbursed by the insurer, but only to the extent that such amount (a) has not been denied by the applicable insurer in writing and (b) is in fact paid or reimbursed within 365 days of the date on which such liability was discovered or such Casualty Event or business interruption occurred (with a deduction for any amounts so added back that are not reimbursed within such 365-day period); provided that any proceeds of such reimbursement when received will be excluded from the calculation of Consolidated Net Income to the extent the expense or lost profit reimbursed was previously disregarded pursuant to this clause (16);

 

(17)            losses, charges and expenses that are covered by indemnification or other reimbursement provisions in connection with any investment or any sale, conveyance, transfer or other asset disposition will be excluded to the extent actually reimbursed, or, so long as such Person has made a determination that a reasonable basis exists for indemnification or reimbursement, but only to the extent that such amount is in fact paid or reimbursed within 365 days of such determination (with a deduction in the applicable future period for any amount so added back to the extent not so indemnified or reimbursed within such 365 days);

 

(18)            non-cash charges, expenses, accruals or reserves related to adjustments to historical tax exposures and any deferred tax expense associated with tax deductions or net operating losses arising as a result of the Transactions, or the release of any valuation allowances will be excluded; and

 

(19)            any income or gain resulting from the forgiveness of any PPP Loans will be excluded.

 

In addition, to the extent not already included in the Consolidated Net Income of such Person and its Restricted Subsidiaries, notwithstanding anything to the contrary in the foregoing, Consolidated Net Income shall include the amount of: (i) proceeds actually received or reimbursed from business interruption insurance and (ii) reimbursements of any losses, charges and expenses pursuant to indemnification or other reimbursement provisions in connection with any Investment or any sale, conveyance, transfer or other disposition of assets, in each case, permitted under the terms hereof.

 

“Consolidated Total Net Debt” means, as of any date, all Consolidated Debt as of such date minus all Unrestricted Cash of the Borrower, the Restricted Subsidiaries and the Physician-Owned Practices as of such date in an amount not to exceed the Cash Netting Cap, in each case, determined based upon the financial statements for the most recent four fiscal quarter period for which Required Financial Statements have been delivered (or were required to be delivered), and calculated on a Pro Forma Basis; provided that for purposes of calculating the Consolidated Total Net Debt with respect to any Indebtedness being incurred in reliance on compliance with any financial ratio-based incurrence test, Unrestricted Cash will not include any proceeds received from such Indebtedness.

 

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“continuing” means, with respect to any Default or Event of Default, that such Default or Event of Default has not been cured or waived.

 

“Contractual Obligation” means, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.

 

“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise, and the terms “Controlling” and “Controlled” will have correlative meanings.

 

“Control Agreement” means a deposit account control agreement, a securities account control agreement or a commodity account control agreement, as applicable, in form and substance reasonably satisfactory to the Collateral Agent, which provides the Collateral Agent with springing Control of a Deposit Account after the occurrence of an Event of Default, executed and delivered by the Borrower or another Loan Party, as applicable, and the applicable bank or securities intermediary at which such relevant account is maintained. As used in this definition of “Control Agreement”, “Control” shall have the meaning set forth in Article 8 or, if applicable, in Section 9-104, 9-105, 9-106 or 9-107 of Article 9 of the UCC.

 

“Corresponding Tenor” with respect to any Available Tenor means, as applicable, either a tenor (including overnight) or an interest payment period having approximately the same length (disregarding business day adjustment) as such Available Tenor.

 

“Covered Entity” means any of the following:

 

(1)                a “covered entity” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 252.82(b);

 

(2)                a “covered bank” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 47.3(b); or

 

(3)                a “covered FSI” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 382.2(b).

 

“Covered Party” has the meaning assigned to such term in Section 9.25.

 

“Credit Agreement Refinancing Indebtedness” means secured or unsecured Indebtedness of the Borrower in the form of one or more series of term loans, revolving commitments (and corresponding revolving loans) or notes; provided that:

 

(1)                such Indebtedness is incurred or otherwise obtained (including by means of the extension or renewal of existing Indebtedness) in exchange for, or to extend, renew, replace or refinance, in whole or part (and such exchange, extension, renewal, replacement or refinancing occurs substantially concurrently with such incurrence or obtainment), Indebtedness (“Refinanced Debt”) that is existing Term Loans, Revolving Loans or Revolving Facility Commitments or other Credit Agreement Refinancing Indebtedness;

 

(2)                such Indebtedness is in an original aggregate principal amount not greater than the principal amount of the Refinanced Debt (plus the amount of unpaid accrued or capitalized interest and premiums thereon (including tender premiums), underwriting discounts, defeasance costs, fees, commissions and expenses);

 

(3)                other than with respect to Customary Bridge Loans, (A) the Weighted Average Life to Maturity of such Indebtedness may not be shorter than the longest remaining Weighted Average Life to Maturity of the Refinanced Debt at the time of incurrence thereof unless the Lenders under any then existing Term Facility are also offered by the Borrower the same percentage amortization prepayments for each year at the corresponding times (less any amounts of any existing amortization for such applicable loans), provided that, for purposes of this clause (3), each such individual Lender will be deemed to have rejected such offer unless such Lender notifies the Administrative Agent that it has accepted such offer by 11:00 a.m., New York City time, three (3) Business Days (or such longer period which the Borrower agrees) after the date of such offer, and (B) the final maturity date of such Indebtedness is not earlier than the maturity date of the Refinanced Debt;

 

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(4)                such Indebtedness may participate on a pro rata basis or on a less than pro rata basis (but not on a greater than pro rata basis) in any mandatory prepayments hereunder;

 

(5)                such Indebtedness is not secured by any assets or property of the Borrower or any Restricted Subsidiary that does not constitute Collateral (subject to customary exceptions for cash collateral in favor of an agent, letter of credit issuer or similar “fronting” lender);

 

(6)                such Indebtedness is not guaranteed by any Restricted Subsidiary that is not a Loan Party;

 

(7)                if such Indebtedness is secured:

 

(a)                if such Indebtedness is secured by Collateral on a pari passu basis with the Loans, a Debt Representative acting on behalf of the holders of such Indebtedness has become party to or is otherwise subject to the provisions of an Acceptable Intercreditor Agreement;

 

(b)                if such Indebtedness is secured by Collateral on a junior basis to the Loans, a Debt Representative, acting on behalf of the holders of such Indebtedness, has become party to or is otherwise subject to the provisions of an Acceptable Intercreditor Agreement;

 

(c)                the terms and conditions (except as otherwise provided in this definition) of such Indebtedness (including pricing and optional prepayment or redemption terms) shall be as otherwise agreed between the Borrower and the applicable Lenders of such Indebtedness; provided that, to the extent such terms and conditions of such Credit Agreement Refinancing Indebtedness are not consistent with the terms of the Initial Term Loans, the DDTLs and/or the Revolving Loans, as applicable, such terms and conditions shall either, at the option of the Borrower, (A) be reasonably satisfactory to the Administrative Agent or (B) reflect market terms and conditions, taken as a whole, at the time of incurrence, issuance or effectiveness thereof (as reasonably determined by the Borrower) (it being understood and agreed that (i) terms differing from those with respect to the relevant Facilities applicable solely to periods after the Latest Maturity Date existing at the time of such incurrence or issuance shall be deemed to be acceptable and (ii) if any more favorable provision is added for the benefit of any Credit Agreement Refinancing Indebtedness, such provision shall be deemed to be acceptable to the extent such provision is added for the benefit of the Initial Term Loan Facility, the DDTL Facility and/or the Revolving Facility, as applicable); and

 

(d)                such Indebtedness will include any Registered Equivalent Notes issued in exchange therefor.

 

“Credit Extension” means, as the context may require, (i) the making of a Loan by any Lender or (ii) the issuance of any Letter of Credit, or the amendment or extension of any outstanding Letter of Credit, by the applicable Issuing Bank.

 

“Cumulative Retained Excess Cash Flow Amount” means, as of any date, an amount determined on a cumulative basis, equal to the product of (i) the Excess Cash Flow for all Excess Cash Flow Periods ending after the Closing Date and prior to such date (with any negative Excess Cash Flow amount for any Excess Cash Flow Period deemed to be zero for such purposes) times (ii) a percentage equal to 100% minus the Required ECF Percentage.

 

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“Cure Expiration Date” has the meaning assigned to such term in Section 7.02.

 

“Cure Right” has the meaning assigned to such term in Section 7.02.

 

“Current Assets” means, as of any date, all assets (other than cash, Cash Equivalents or other cash equivalents) that would, in accordance with GAAP, be classified on a consolidated balance sheet of the Borrower, the Restricted Subsidiaries and the Physician-Owned Practices as “current assets” (other than amounts related to current or deferred Taxes based on income or profits), determined based upon the then most recently ended Test Period and calculated on a Pro Forma Basis, but excluding: (i) Hedge Agreements to the extent that the mark-to-market Swap Termination Value would be reflected as an asset on the consolidated balance sheet of the Borrower and (ii) deferred financing fees.

 

“Current Liabilities” means, as of any date, all liabilities that would, in accordance with GAAP, be classified on a consolidated balance sheet of the Borrower, the Restricted Subsidiaries and the Physician-Owned Practices as “current liabilities,” other than:

 

(1)                any Revolving Facility Credit Exposure, Revolving Loans, Revolving L/C Exposure, Swing Line Loans or other revolving loans;

 

(2)                the current portion of any Indebtedness (including the Swap Termination Value of any Hedge Agreements);

 

(3)                accruals of Consolidated Interest Expense (excluding Consolidated Interest Expense that is due and unpaid);

 

(4)                accruals for current or deferred Taxes based on income or profits;

 

(5)                accruals, if any, of transaction costs resulting from the Transactions;

 

(6)                accruals of any costs or expenses related to (a) severance or termination of employees prior to the Closing Date or (b) bonuses, pension and other post-retirement benefit obligations or (c) restructuring reserves; and

 

(7)                any earn-out obligations, purchase price adjustments, deferred purchase money amounts, milestone and/or bonus payments (whether performance or time-based), in each case, characterized as such and, arising expressly out of purchase and sale contracts;

 

in each case, calculated on a Pro Forma Basis.

 

“Customary Bridge Loans” means customary bridge loans with a maturity date of no longer than one year that provides for an automatic extension or conversion into permanent loans or notes; provided that (a) the Weighted Average Life to Maturity of any loan or note which is exchanged for or otherwise replaces such bridge loans (including by way of automatic conversion) is not shorter than the Weighted Average Life to Maturity of the then existing Term Loans at the time of incurrence of such bridge loans and (b) the final maturity date of any loan or note which is exchanged for or otherwise replaces such bridge loans (including by way of automatic conversion) is not earlier than the Latest Maturity Date of the Term Loans on the date of the incurrence of such bridge loans.

 

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“Daily Simple SOFR” means, for any day, SOFR, with the conventions for this rate (which will include a lookback) being established by the Administrative Agent in accordance with the conventions for this rate selected or recommended by the Relevant Governmental Body for determining “Daily Simple SOFR” for syndicated business loans; provided, that if the Administrative Agent decides that any such convention is not administratively feasible for the Administrative Agent, then the Administrative Agent may establish another convention in its reasonable discretion.

 

“DDTL Facility” means the DDTL Facility Commitments and the extensions of credit made hereunder by the DDTL Lenders.

 

“DDTL Facility Commitment” has the meaning assigned to such term in Section 2.01(2).

 

“DDTL Facility Commitment Expiration Date” means, with respect to the DDTL Facility Commitment of any DDTL Lender, the earliest of (a) the date on which the entire amount of the DDTL Facility Commitments has been drawn, (b) the date on which the DDTL Facility Commitments have been terminated in full or reduced to zero pursuant to Section 2.08(2) and (c) the six (6) month anniversary of the Closing Date.

 

“DDTL Facility Commitment Fee” has the meaning assigned to such term in Section 2.13(1)(b).

 

“DDTL Facility Credit Exposure” means, at any time, the aggregate principal amount of the DDTLs outstanding at such time. The DDTL Facility Credit Exposure of any DDTL at any time will be, subject to adjustment as expressly provided in Section 2.25, the product of (a) such DDTL Lender’s DDTL Facility Percentage and (b) the aggregate DDTL Facility Credit Exposure of all DDTLs, collectively, at such time.

 

“DDTL Facility Percentage” means, with respect to any DDTL, the percentage of the total DDTL Facility Commitments represented by such DDTL’s DDTL Facility Commitment. If the DDTL Facility Commitments have terminated or expired, the DDTL Facility Percentages will be determined based upon the DDTL Facility Commitments most recently in effect, giving effect to any assignments pursuant to Section 9.04.

 

“DDTL Lender” means each Lender with a DDTL Facility Commitment or who otherwise holds DDTLs.

 

“DDTLs” has the meaning assigned to such term in Section 2.01(2).

 

“Debt Fund Affiliate” means:

 

(1)                any Affiliate of the Borrower (other than (a) the Borrower and any of its Subsidiaries and (b) any natural person) that is a bona fide bank, diversified debt fund, distressed asset fund, hedge fund, mutual fund, insurance company, financial institution or an investment vehicle that is engaged in the business of making, purchasing, holding or otherwise investing in commercial loans, bonds and similar extensions of credit in the ordinary course, in each case, that is not organized primarily for the purpose of making equity investments;

 

(2)                any Affiliate, division or internal group of a Permitted Investor that has the principal purpose of investing in, acquiring or trading commercial loans, bonds or similar extensions of credit in the ordinary course;

 

(3)                any investment fund or account of a Permitted Investor managed by third parties (including by way of a managed account, a fund or an index fund in which a Permitted Investor has invested) or a division or internal group within a Permitted Investor that is not organized or used primarily for the purpose of making equity investments in portfolio companies, in each case, in the case of clauses (1), (2) and (3) with respect to which the Borrower does not, directly or indirectly, possess the power to direct or cause the direction of the investment policies of such entity; and

 

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(4)                any fund or vehicle managed or advised by Deerfield Partners or any Affiliates thereof, that are not organized primarily for the purpose of making equity investments.

 

“Debtor Relief Laws” means the Bankruptcy Code and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief laws of the United States or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.

 

“Debt Representative” means, with respect to any Indebtedness that is secured on a pari passu basis with, or on a junior basis to, the Loans, the trustee, administrative agent, collateral agent, security agent or similar agent under the indenture or agreement pursuant to which such Indebtedness is issued, incurred or otherwise obtained, as the case may be, and each of their successors in such capacities.

 

“Deerfield Partners” has the meaning assigned to such term in the recitals hereof.

 

“Default” means any event or condition which, but for the giving of notice, lapse of time or both (if not cured, waived or otherwise remedied hereunder during such time), would constitute an Event of Default.

 

“Default Right” has the meaning assigned to that term in, and shall be interpreted in accordance with, 12 C.F.R. §§ 252.81, 47.2 or 382.1, as applicable.

 

“Defaulting Lender” means any Lender whose acts or failure to act, whether directly or indirectly, constitutes a Lender Default.

 

“Delaware Divided LLC” means any Delaware LLC which has been formed upon consummation of a Delaware LLC Division.

 

“Delaware LLC” means any limited liability company organized or formed under the laws of the State of Delaware.

 

“Delaware LLC Division” means the statutory division of any Delaware LLC into two or more Delaware LLCs pursuant to Section 18-217 of the Delaware Limited Liability Company Act.

 

“Deposit Account” shall have the meaning assigned to such term in the UCC; provided that, as used herein and in the other Loan Documents, the term “Deposit Account” shall include any “money market” or similar account into which Cash Receipts of one or more Loan Parties is deposited in the ordinary course of business, irrespective of whether any such account would otherwise constitute a “Securities Account” pursuant to the UCC.

 

“Designated Non-Cash Consideration” means the fair market value of non-cash consideration received by the Borrower or any Restricted Subsidiary in connection with an Asset Sale that is designated in writing as Designated Non-Cash Consideration, less the amount of cash or Cash Equivalents received in connection with a subsequent payment, redemption, retirement, sale or other disposition of such Designated Non-Cash Consideration. A particular item of Designated Non-Cash Consideration will no longer be considered to be outstanding when and to the extent it has been paid, redeemed, retired, sold or otherwise disposed of in compliance with Section 6.05 hereof.

 

“Disinterested Director” means, with respect to any Person and transaction, a member of the Board of Directors of such Person who does not have any material direct or indirect financial interest in or with respect to such transaction. A member of the Board of Directors shall be deemed not to have such a financial interest by reason of such member’s holding Equity Interests of the Borrower.

 

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“Disqualified Institution” means:

 

(1)                any Person that is a competitor of the Borrower, any of its Subsidiaries or the Acquired Business and identified by the Borrower to the Lead Arrangers in writing from time to time;

 

(2)                any bank, financial institution or other Person that is identified by the Borrower in writing from time to time to the Lead Arrangers (if prior to the Closing Date) or to the Administrative Agent; and

 

(3)                any Affiliate of the entities described in the foregoing clauses (1) and (2), to the extent such Affiliate is clearly identifiable as such on the basis of such Affiliate’s name or has been identified as such by the Borrower to the Lead Arrangers in writing, in each case other than any such Affiliate that is a bona fide bank, diversified debt fund, distressed asset fund, hedge fund, mutual fund, insurance company, financial institution or an investment vehicle that is engaged in the business of making, purchasing, holding or otherwise investing in commercial loans, bonds and similar extensions of credit in the ordinary course of business.

 

Notwithstanding anything in the Loan Documents to the contrary, the Administrative Agent shall not be responsible (or have any liability) for, or have any duty to ascertain, inquire into, monitor or enforce, compliance with the provisions hereof relating to Disqualified Institutions. Without limiting the generality of the foregoing, the Administrative Agent shall not (1) be obligated to ascertain, monitor or inquire as to whether any Lender or participant or prospective Lender or participant is a Disqualified Institution or (2) have any liability with respect to or arising out of any assignment or participation of Loans or Commitments, or disclosure of confidential information, to any Disqualified Institution. The list of Disqualified Institutions shall be available to Lenders upon request but shall not otherwise be posted to the Lenders without the Borrower’s consent.

 

“Disqualified Stock” means, with respect to any Person, any Equity Interests of such Person that, by their terms (or by the terms of any security or other Equity Interests into which they are convertible or for which they are redeemable or exchangeable at the option of the holder thereof), or upon the happening of any event or condition:

 

(1)                mature or are mandatorily redeemable (other than solely for Qualified Equity Interests), pursuant to a sinking fund obligation or otherwise (except as a result of a change of control or asset sale so long as any rights of the holders thereof upon the occurrence of a change of control or asset sale are subject to the prior repayment in full of the Loans and all other Obligations that are accrued and payable and the termination of the Commitments);

 

(2)                are redeemable at the option of the holder thereof (other than solely for Qualified Equity Interests), in whole or in part;

 

(3)                provide for the scheduled payments of dividends in cash; or

 

(4)                either mandatorily or at the option of the holders thereof, are or become convertible into or exchangeable for Indebtedness or any other Equity Interests that would constitute Disqualified Stock, in each case, prior to the date that is 91 days after the earlier of:

 

(a)                the Latest Maturity Date at the time of issuance thereof; and

 

(b)                the Termination Date;

 

provided that only the portion of the Equity Interests that so mature or are mandatorily redeemable, are so convertible or exchangeable or are so redeemable at the option of the holder thereof prior to such date will be deemed to be Disqualified Stock; provided, further, that if such Equity Interests are issued to any employee or to any plan for the benefit of employees of the Borrower or its Subsidiaries or by any such plan to such employees, such Equity Interests will not constitute Disqualified Stock solely because they may be required to be repurchased by the Borrower or any of its Subsidiaries in order to satisfy applicable statutory or regulatory obligations or as a result of such employee’s termination, death or disability; and provided, further, that any class of Equity Interests of such Person that by its terms authorizes such Person to satisfy its obligations thereunder by delivery of Equity Interests that is not Disqualified Stock will not be deemed to be Disqualified Stock.

 

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“Distressed Person” has the meaning assigned to such term in the definition of “Lender-Related Distress Event.”

 

“DNF” has the meaning assigned to such term in the definition of “DNF Acquisition”.

 

“DNF Acquisition” means the acquisition by CareMax of substantially all of the assets of Unlimited Medical Services of Florida, LLC, a Florida limited liability company (“DNF”), dba DNF Medical Centers, from DNF’s existing equity holders (the “DNF Sellers”), pursuant to a purchase agreement to be entered into by and among CareMax, DNF and the DNF Sellers.

 

“DNF Sellers” has the meaning assigned to such term in the definition of “DNF Acquisition”.

 

“Dollars” or “$” means lawful money of the United States of America.

 

“Domestic Subsidiary” means any Subsidiary of the Borrower that is organized under the laws of the United States or any political subdivision thereof, and “Domestic Subsidiaries” means any two or more of them. Unless otherwise indicated in this Agreement, all references to Domestic Subsidiaries will mean Domestic Subsidiaries of the Borrower.

 

“Dutch Auction” means an auction of Term Loans conducted:

 

(1)                pursuant to Section 9.04(10) to allow an Affiliated Lender to acquire Term Loans at a discount to par value and on a pro rata basis; or

 

(2)                pursuant to Section 9.04(14) to allow a Purchasing Borrower Party to prepay Term Loans at a discount to par value and on a pro rata basis,

 

in each case, in accordance with the applicable Dutch Auction Procedures.

 

“Dutch Auction Procedures” means, with respect to a purchase of Term Loans in a Dutch Auction, Dutch Auction procedures as reasonably agreed upon by the applicable Affiliated Lender or Purchasing Borrower Party, as the case may be, and the Administrative Agent; provided that the Administrative Agent shall have no obligation to act as the manager in any Dutch Auction and any such Dutch Auction may instead be managed by any other bank or another investment bank of recognized standing selected by the Borrower in consultation with the Administrative Agent.

 

“Early Opt-in Election” means, if the then-current Benchmark is USD LIBOR, the occurrence of:

 

(1)                a notification by the Administrative Agent to (or the request by the Borrower to the Administrative Agent to notify) each of the other parties hereto that at least five currently outstanding U.S. dollar-denominated syndicated credit facilities at such time contain (as a result of amendment or as originally executed) a SOFR-based rate (including SOFR, a term SOFR or any other rate based upon SOFR) as a benchmark rate (and such syndicated credit facilities are identified in such notice and are publicly available for review), and

 

(2)                the joint election by the Administrative Agent and the Borrower to trigger a fallback from USD LIBOR and the provision by the Administrative Agent of written notice of such election to the Lenders.

 

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“ECF De Minimis Amount” means, for any Excess Cash Flow Period, the greater of (x) $4,500,000 and (y) 10.0% of Consolidated EBITDA for the Test Period ending on the last day of such Excess Cash Flow Period.

 

“EEA Financial Institution” means (a) any credit institution or investment firm established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition, or (c) any financial institution established in an EEA Member Country which is a subsidiary of an institution described in clauses (a) or (b) of this definition and is subject to consolidated supervision with its parent.

 

“EEA Member Country” means any of the member states of the European Union, Iceland, Liechtenstein, and Norway.

 

“EEA Resolution Authority” means any public administrative authority or any person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.

 

“Electronic Transmission” means each document, instruction, authorization, file, information and any other communication transmitted, posted or otherwise made or communicated by e-mail or E-Fax, or otherwise to or from an E-System.

 

“Environment” means ambient and indoor air, surface water and groundwater (including potable water, navigable water and wetlands), the land surface or subsurface strata, and natural resources such as flora and fauna.

 

“Environmental Laws” means all applicable laws (including common law), statutes, rules, regulations, codes, ordinances, orders, binding agreements and final, binding decrees or judgments, in each case, promulgated or entered into by or with any Governmental Authority, relating in any way to the environment, preservation or reclamation of natural resources, the generation, management, Release or threatened Release of, or exposure to, any Hazardous Material or to occupational health and safety matters (to the extent relating to the environment or exposure to Hazardous Materials).

 

“Environmental Liability” means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities) directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the Release or threatened Release of any Hazardous Materials into the Environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

 

“Equity Interests” means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock, which shall not be deemed to be Equity Interests unless and until such instrument is so converted or exchanged).

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as the same may be amended from time to time, and any final regulations promulgated and the rulings issued thereunder.

 

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“ERISA Affiliate” means any trade or business (whether or not incorporated) that, together with the Borrower or any of its Restricted Subsidiaries, is treated as a single employer under Section 414(b) or (c) of the Code or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code.

 

“ERISA Event” means:

 

(1)                a Reportable Event, or the requirements of Section 4043(b) of ERISA apply, with respect to a Plan;

 

(2)                a withdrawal by the Borrower or any of its Subsidiaries or, to the knowledge of the Borrower, any ERISA Affiliate from a Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations by the Borrower or any of its Subsidiaries or, to the knowledge of the Borrower, any ERISA Affiliate that is treated as a termination under Section 4062(e) of ERISA;

 

(3)                a complete or partial withdrawal by the Borrower or any of its Subsidiaries or, to the knowledge of the Borrower, any ERISA Affiliate from a Multiemployer Plan, receipt of written notification by the Borrower or any of its Restricted Subsidiaries or, to the knowledge of the Borrower, any ERISA Affiliate concerning the imposition of Withdrawal Liability or written notification that a Multiemployer Plan is, or is expected to be, insolvent within the meaning of Title IV of ERISA or endangered or in critical status within the meaning of Section 305 of ERISA;

 

(4)                the provision by a Plan administrator or the PBGC of notice of intent to terminate a Plan, to appoint a trustee to administer a Plan, the treatment of a Plan or Multiemployer Plan amendment as a termination under Sections 4041 or 4041A of ERISA or the commencement of proceedings by the PBGC to terminate a Plan or Multiemployer Plan;

 

(5)                the incurrence by the Borrower or any of its Restricted Subsidiaries or, to the knowledge of the Borrower, any ERISA Affiliate of any liability under Title IV of ERISA with respect to the termination of any Plan or Multiemployer Plan, other than for the payment of plan contributions or PBGC premiums due but not delinquent under Section 4007 of ERISA;

 

(6)                the application for a minimum funding waiver under Section 302(c) of ERISA with respect to a Plan;

 

(7)                the imposition of a lien under Section 303(k) of ERISA with respect to any Plan; and

 

(8)                a determination that any Plan is in “at risk” status (within the meaning of Section 303 of ERISA).

 

“Erroneous Payment” has the meaning assigned to such term in Section 8.13(a).

 

“Erroneous Payment Return Deficiency” has the meaning assigned to such term in Section 8.13(d).

 

“EU Bail-In Legislation Schedule” means the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor person), as in effect from time to time.

 

“Eurocurrency Borrowing” means a Borrowing comprised of Eurocurrency Loans.

 

“Eurocurrency Loan” means any Loan bearing interest at a rate determined by reference to the Adjusted Eurocurrency Rate.

 

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“Eurocurrency Rate” means with respect to any Eurocurrency Borrowing for any Interest Period, the rate per annum equal to the arithmetic mean of the offered rates for deposits in the relevant currency with a term equivalent to such Interest Period that appears on the applicable Reuters page (or any service selected by the Administrative Agent that has been nominated by ICE Benchmark Administration Limited (or any successor service or entity that has been authorized by the U.K. Financial Conduct Authority to administer the London interbank offered rate)) at approximately 11:00 a.m., London time, two (2) Business Days prior to the commencement of such Interest Period (unless market practice differs in the relevant market where the Eurocurrency Rate for such currency is to be determined, in which case the date of quotation will be determined by the Administrative Agent in accordance with market practices in such market (and if quotations would normally be given on more than one day, then the date of quotation will be the last of those days)) (as applicable, the “Screen Rate”); provided that if the applicable Screen Rate is not available at such time for any reason, “Eurocurrency Rate” shall be the interest rate per annum equal to the Interpolated Screen Rate.

 

“Eurocurrency Revolving Loan” has the meaning assigned to such term in Section 1.09.

 

“Eurocurrency Revolving Loan Borrowing” has the meaning assigned to such term in Section 1.09.

 

“Event of Default” has the meaning assigned to such term in Section 7.01.

 

“Event of Loss” means, with respect to any property, any of the following: (a) any loss, damage or destruction of such property; or (b) any condemnation, seizure or taking, by exercise of the power of eminent domain or otherwise, of such property, or confiscation of such property or the requisition of the use of such property.

 

“Excess Cash Flow” means, for any Excess Cash Flow Period, the Consolidated Net Income of the Borrower, the Restricted Subsidiaries and the Physician-Owned Practices for such period, minus, without duplication:

 

(1)                cash repayments, cash prepayments and other cash payments made with respect to the principal of any Indebtedness or the principal component of any Capital Lease Obligations of the Borrower, any Restricted Subsidiary or any Physician-Owned Practice during such period (excluding voluntary and mandatory prepayments of Term Loans, voluntary prepayments of Indebtedness described in Section 2.12(3)(b) and prepayments of other revolving Indebtedness (except to the extent accompanied by a corresponding reduction in commitments), but including all premium, make-whole or penalty payments paid in cash (to the extent such payments were not already deducted in calculating Consolidated Net Income and are not otherwise prohibited under this Agreement)); minus

 

(2)                an amount equal to the aggregate net non-cash gain on acquisitions or dispositions by the Borrower, the Restricted Subsidiaries and the Physician-Owned Practices during such period (other than dispositions in the ordinary course of business) to the extent included in arriving at such Consolidated Net Income; minus

 

(3)                to the extent not otherwise deducted in calculating Consolidated Net Income, cash payments made by the Borrower, any Restricted Subsidiary or any Physician-Owned Practice during such period in respect of (a) long-term liabilities other than Indebtedness or (b) items for which an accrual or reserve was established in a prior period; minus

 

(4)                (a) cash payments made by the Borrower, any Restricted Subsidiary or any Physician-Owned Practice during such period in respect of Taxes, to the extent such payments exceed the amount of tax expense deducted in calculating such Consolidated Net Income, and (b) at the option of the Borrower, cash payments that the Borrower, any Restricted Subsidiary or any Physician-Owned Practice will be required to make in respect of Taxes within 365 days after the end of such period; provided that amounts described in this clause (b) will not reduce Excess Cash Flow in subsequent periods; minus

 

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(5)                all cash payments and other cash expenditures made by the Borrower, any Restricted Subsidiary or any Physician-Owned Practice during such period (a) with respect to items that were excluded in the calculation of such Consolidated Net Income pursuant to clauses (1) through (18) of the definition of Consolidated Net Income or (b) that were not expensed during such period in accordance with GAAP; minus

 

(6)                all non-cash credits included in calculating such Consolidated Net Income (including insured or indemnified losses referred to in clauses (16) and (17) of Consolidated Net Income to the extent not reimbursed in cash during such period); provided that any cash reimbursement of any such non-cash credit in any future period will be added to Excess Cash Flow in such future period to the extent previously deducted pursuant to this clause (7); minus

 

(7)                an amount equal to the increase in the Working Capital of the Borrower, the Restricted Subsidiaries and the Physician-Owned Practices during such period, if any, (other than any such increases contemplated by this clause (8) that are directly attributable to acquisitions of a Person or business unit by the Borrower, the Restricted Subsidiaries and the Physician-Owned Practices during such period); minus

 

(8)                the aggregate principal amount of all mandatory prepayments pursuant to Section 2.12(2), or reinvestments of Net Cash Proceeds in lieu thereof, to the extent that the applicable Net Cash Proceeds were taken into account in calculating Consolidated Net Income for such period; plus

 

(9)                all non-cash charges, losses and expenses of the Borrower, any Restricted Subsidiary or any Physician-Owned Practice that were deducted in calculating such Consolidated Net Income; plus

 

(10)            an amount equal to the aggregate net non-cash loss on acquisitions or dispositions by the Borrower, the Restricted Subsidiaries and the Physician-Owned Practices during such period (other than dispositions in the ordinary course of business) to the extent deducted in arriving at such Consolidated Net Income; plus

 

(11)            all cash payments received by the Borrower, any Restricted Subsidiary or any Physician-Owned Practice during such period pursuant to Hedge Agreements that were not treated as revenue or net income under GAAP; plus

 

(12)            an amount equal to the decrease in Working Capital of the Borrower during such period, if any; plus

 

(13)            all amounts referred to in clauses (1) and (3) above to the extent funded with the proceeds of the issuance or the incurrence of long-term Indebtedness (other than proceeds of revolving loans), the sale or issuance of Equity Interests or any loss, damage, destruction or condemnation of, or any sale, transfer or other disposition to any Person of, any assets.

 

“Excess Cash Flow Period” means each fiscal year of the Borrower, commencing with and including the fiscal year ending December 31, 2021.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“Excluded Accounts” means “Excluded Accounts” as defined in the Collateral Agreement.

 

“Excluded Assets” means “Excluded Assets” as defined in the Collateral Agreement.

 

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“Excluded Contributions” means, as of any date, the aggregate amount of the net cash proceeds and Cash Equivalents, together with the aggregate fair market value of other assets that are used or useful in a business permitted under Section 6.08, received by the Borrower after the Closing Date from:

 

(1)                contributions to its common equity capital; or

 

(2)                the sale of Capital Stock of the Borrower;

 

in each case, designated as Excluded Contributions, less the aggregate amount of Investments made pursuant to Section 6.04(24), in each case prior to such date; provided that the proceeds of Disqualified Stock, Specified Equity Contributions or any net cash proceeds that are used prior to such date (A) to make Restricted Payments under Section 6.06(1) or Section 6.06(2)(b) or (B) to make an Investment under Section 6.04(3), a Restricted Payment under Section 6.06(8) or a payment in respect of Junior Financing under Section 6.09(1)(a), in each case in reliance on clause (3) or (4) of the definition of Available Amount.

 

“Excluded Equity Interests” means “Excluded Equity Interests” as defined in the Collateral Agreement.

 

“Excluded Indebtedness” means all Indebtedness not incurred in violation of Section 6.01.

 

“Excluded Subsidiary” means any:

 

(1)                Immaterial Subsidiary;

 

(2)                Subsidiary that is not a Wholly Owned Subsidiary of the Borrower;

 

(3)                Unrestricted Subsidiary;

 

(4)                Foreign Subsidiary or CFC;

 

(5)                direct or indirect Subsidiary of a direct or indirect Foreign Subsidiary;

 

(6)                direct or indirect Domestic Subsidiary that has no material assets other than cash, Cash Equivalents, direct or indirect Equity Interests (including, for this purpose, any debt or other instrument treated as equity for U.S. federal income tax purposes) or direct or indirect Equity Interests (including, for this purpose, any debt or other instrument treated as equity for U.S. federal income tax purposes) and indebtedness (including, for this purpose, any debt or other instrument treated as equity for U.S. federal income tax purposes) in one or more direct or indirect Foreign Subsidiaries that are CFCs;

 

(7)                Subsidiary if acting as a Guarantor, or its Guarantee, would, and only so long as it would, (a) be prohibited or restricted by applicable law, rule or regulation or by any contractual obligation (with respect to any such contractual obligations, only to the extent existing on the Closing Date or on the date such Person becomes a direct or indirect Subsidiary of the Borrower (to the extent not created or entered into in contemplation of the Transactions or the acquisition thereof) or (b) require a governmental or regulatory consent, approval, license or authorization (unless such consent, approval, license or authorization has been received);

 

(8)                Subsidiary that is treated as a disregarded entity or partnership for U.S. federal income tax purposes the assets of which consist of direct or indirect Equity Interests or direct or indirect Equity Interests and Indebtedness of one or more CFCs;

 

(9)                Subsidiary for which the provision of a Guarantee would result in material adverse tax consequences (including as a result of the operation of Section 956 of the Code, or any similar law or regulation in any applicable jurisdiction) to the Borrower or one of its Subsidiaries (as reasonably determined by the Borrower);

 

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(10)            acquired Restricted Subsidiary, acquired pursuant to a Permitted Acquisition or similar investment, the purchase of which is financed with Excluded Indebtedness constituting assumed indebtedness and any Restricted Subsidiary thereof that guarantees such indebtedness, in each case to the extent, and so long as, such Indebtedness prohibits or therein prevents such Restricted Subsidiary from becoming a Guarantor and such prohibition or prevention was not entered into in contemplation of such acquisition;

 

(11)            any Subsidiary that is a captive insurance subsidiary (including any Captive Insurance Company), any not-for-profit Subsidiary or any Subsidiary which is a special purpose entity for any receivables or other securitization transaction; and

 

(12)            Subsidiary in circumstances where the Borrower and the Administrative Agent reasonably agree that any of the cost, difficulty, burden or consequences of providing a Guarantee is excessive in relation to the value to the Lenders afforded thereby.

 

in each case, unless the Borrower determines in its sole discretion, from time to time, upon notice to the Administrative Agent, that any of the foregoing Persons that is a Restricted Subsidiary should not be an Excluded Subsidiary; provided that (x) such Restricted Subsidiary shall comply with Section 5.11 upon such designation and shall provide a guaranty and credit support that is substantially similar to the guarantees and credit support provided by the Subsidiary Guarantors party hereto on the Closing Date and (y) such designation shall remain in effect until the date on which the Borrower has informed the Administrative Agent in writing that it elects to have such Restricted Subsidiary redesignated as an Excluded Subsidiary, and such redesignation shall be permitted so long as, after giving effect thereto, (A) such Restricted Subsidiary would qualify as an Excluded Subsidiary pursuant to one of the above provisions and (B) if immediately after such designation it shall be a Restricted Subsidiary any Investments made by a Loan Party into such Restricted Subsidiary after the Closing Date while it is a Loan Party shall be deemed made for purposes of Section 6.04 immediately following such redesignation (net of Returns actually received in respect of such Investments), and any incurrence of Indebtedness by such Restricted Subsidiary and the incurrence of Liens on the assets of such Restricted Subsidiary, in each case, after the Closing Date that remains outstanding on the date of such designation shall be deemed incurred for purposes hereof immediately following such redesignation, and no Event of Default would result from such designation.

 

“Excluded Swap Obligation” means, with respect to any Guarantor, any Swap Obligation if, and to the extent that, all or a portion of the guarantee of such Guarantor of, or the grant by such Guarantor of a security interest to secure, such Swap Obligation (or any Guarantee thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of such Guarantor’s failure for any reason to constitute an “eligible contract participant” as defined in the Commodity Exchange Act and the regulations thereunder at the time the guarantee of such Guarantor or the grant of such security interest becomes effective with respect to such Swap Obligation. If a Swap Obligation arises under a master agreement governing more than one swap, such exclusion shall apply only to the portion of such Swap Obligation that is attributable to swaps for which such Guarantee or security interest is or becomes illegal.

 

“Excluded Taxes” means, with respect to any Recipient of any payment to be made by or on account of any obligation of any Loan Party hereunder:

 

(1)                Taxes imposed on or measured by its net income (however denominated), franchise Taxes or branch profits Taxes, in each case, (a) imposed as a result of such Recipient being organized under the laws of, or having its principal office or, in the case of any Lender, its applicable Lending Office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (b) that are Other Connection Taxes;

 

(2)                any U.S. federal withholding Tax imposed on amounts payable hereunder to or for the account of a Recipient under any law applicable at the time such Recipient becomes a party to this Agreement (or in the case of a Lender, under any law applicable at the time such Lender changes its Lending Office), in each case except to the extent that the Recipient’s assignor (if any), immediately before the assignment (or such Lender, immediately before it changed its Lending Office), was entitled to receive additional amounts from the Loan Party with respect to any withholding Tax pursuant to Section 2.18(1) or Section 2.18(3);

 

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(3)                Taxes that are attributable to such Lender’s or Administrative Agent’s failure to comply with Section 2.18(4); and

 

(4)                any withholding Taxes imposed under FATCA.

 

“Executive Order” has the meaning assigned to such term in Section 3.19(3)(a).

 

“Expenses and Synergies Cap” has the meaning assigned to such term in clause (d)(ii) of the definition of “Consolidated EBITDA”.

 

“Extended Revolving Commitments” has the meaning assigned to such term in Section 2.24(1), as such amount may be adjusted from time to time in accordance with this Agreement.

 

“Extended Revolving Loans” has the meaning assigned to such term in Section 2.24(1).

 

“Extended Term Loan Installment Date” has the meaning assigned to such term in Section 2.10(3).

 

“Extended Term Loans” has the meaning assigned to such term in Section 2.24(1).

 

“Extending Lender” has the meaning assigned to such term in Section 2.24(1).

 

“Extending Revolving Lender” has the meaning assigned to such term in Section 2.24(1).

 

“Extending Term Lender” has the meaning assigned to such term in Section 2.24(1).

 

“Extension” has the meaning assigned to such term in Section 2.24(1).

 

“Extension Amendment” has the meaning assigned to such term in Section 2.24(2).

 

“Extension Offer” has the meaning assigned to such term in Section 2.24(1).

 

“Facilities” means the Initial Term Loan Facility, the DDTL Facility, the Revolving Facility, the Letter of Credit Sublimit and/or the Swing Line Sublimit, as the context may require.

 

“fair market value” means, with respect to any asset or group of assets on any date of determination, the value of the consideration obtainable in a sale of such asset or group of assets at such date of determination assuming a sale by a willing seller to a willing purchaser dealing at arm’s length and arranged in an orderly manner over a reasonable period of time taking into account the nature and characteristics of such assets, as determined in good faith by a Responsible Officer of the Borrower (which determination shall be conclusive absent manifest error).

 

“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof, any agreements entered into pursuant to Section 1471(b)(1) of the Code, any intergovernmental agreements entered into in connection with the foregoing and any treaty, law, fiscal or regulatory legislation, rules or official practices adopted pursuant to any such intergovernmental agreement.

 

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“Federal Funds Rate” means, for any day, the rate per annum (rounded upward, if necessary, to a whole multiple of 1/100 of 1.00%) equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided that:

 

(1)                if such day is not a Business Day, the Federal Funds Rate for such day will be such rate on such transactions on the next succeeding Business Day as so published on such next succeeding Business Day;

 

(2)                if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day will be the average rate (rounded upward, if necessary, to a whole multiple of 1/100 of 1.00%) of the quotations for such day on such transactions received by the Administrative Agent from three (3) federal funds brokers of recognized standing selected by the Administrative Agent; and

 

(3)                in no event will the Federal Funds Rate be less than zero.

 

“Fee Letter” means that certain Amended and Restated Fee Letter, dated as of March 8, 2021, by and among the Borrower, Royal Bank of Canada, RBC Capital Markets, LLC, Truist Bank, Truist Securities, Inc., Citizens Bank NA, Regions Bank, Capital One, N.A., Fifth Third Bank, National Association, Deutsche Bank AG New York Branch, Deutsche Bank Securities Inc., Keybank National Association and BankUnited, N.A.

 

“Fees” means the Commitment Fees, the L/C Participation Fees, the Issuing Bank Fees, Administrative Agent Fees and all other fees set forth in the Fee Letter and payable to any Lender, the Administrative Agent, or any Lead Arranger, in each case, with respect to Loans.

 

“Financial Model” means the financial model delivered on behalf of the Borrower to RBCCM on November 25, 2020.

 

“Financial Officer” means, with respect to any Person, the chief financial officer, president, principal accounting officer, director of financial services, treasurer, assistant treasurer or controller of such Person.

 

“Financial Performance Covenants” has the meaning assigned to such term in Section 6.12(2).

 

“First Lien Net Leverage Ratio” means, as of any date, the ratio of (a) Consolidated First Lien Net Debt as of the last day of the then most recently ended Test Period, to (b) Consolidated EBITDA for the then most recently ended Test Period, calculated on a Pro Forma Basis.

 

“Fixed Amounts” has the meaning assigned to such term in Section 1.07(2).

 

“Fixed Charge Coverage Ratio” means, as of any date of determination, the ratio of:

 

(1)                (a) Consolidated EBITDA of the Borrower, the Restricted Subsidiaries and the Physician-Owned Practices for the most recently ended Test Period, minus (b) the unfinanced portion of all Capital Expenditures (excluding any Capital Expenditures made with the proceeds of any Reinvestment Deferred Amounts), minus (c) federal, state and foreign income taxes paid in cash by the Borrower, the Restricted Subsidiaries and the Physician-Owned Practices (net of refunds received) for the most recently ended Test Period, minus (d) Restricted Payments made paid by the Borrower during the most recently ended Test Period pursuant to Section 6.06(11)(ii); to

 

(2)                (a) Consolidated Cash Interest Expense of the Borrower, the Restricted Subsidiaries and the Physician-Owned Practices for the most recently ended Test Period, plus (b) scheduled payments of principal on Consolidated Debt paid or payable in cash for the most recently ended Test Period, plus (c) Restricted Payments made paid by the Borrower during the most recently ended Test Period pursuant to Sections 6.06(9) and (10);

 

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provided that, for purposes of calculating the Fixed Charge Coverage Ratio, for each component (other than Consolidated EBITDA) for each date of determination ending prior to the first anniversary of the Closing Date, (i) all Capital Expenditure amounts pursuant to clause (1)(b) above, all tax amounts pursuant to clause (1)(c) above and all Restricted Payments pursuant to clause (1)(d) above and (ii) all amounts under clause (2) of this definition shall, in each case, be measured from the Closing Date through such date of determination, divided by the number of days in such period, and multiplied by 365.

 

“Flood Certificate” means a life of loan “Standard Flood Hazard Determination Form” of the U.S. Federal Emergency Management Agency or any successor Governmental Authority performing a similar function.

 

“Flood Insurance Laws” means, collectively, (i) National Flood Insurance Reform Act of 1994 (which comprehensively revised the National Flood Insurance Act of 1968 and the Flood Disaster Protection Act of 1973) as now or hereafter in effect or any successor statute thereto, (ii) the Flood Insurance Reform Act of 2004 as now or hereafter in effect or any successor statue thereto and (iii) the Biggert-Waters Flood Insurance Reform Act of 2012 as now or hereafter in effect or any successor statute thereto and any and all official rulings, regulations and interpretations thereunder or thereof.

 

“Flood Program” means the National Flood Insurance Program created by the U.S. Congress pursuant to the Flood Insurance Laws.

 

“Flood Zone” means areas designated as having special flood hazards as determined by the U.S. Federal Emergency Management Agency or any successor Governmental Authority performing a similar function, and as described in the Flood Insurance Laws.

 

“Floor” means the benchmark rate floor, if any, provided in this Agreement initially (as of the execution of this Agreement, the modification, amendment or renewal of this Agreement or otherwise) with respect to USD LIBOR.

 

“Foreign Lender” means any Lender that is organized under the laws of a jurisdiction other than the United States of America. For purposes of this definition, the United States of America, each state thereof and the District of Columbia will be deemed to constitute a single jurisdiction.

 

“Foreign Subsidiary” means any Subsidiary that is not a Domestic Subsidiary.

 

“Fronting Exposure” means, at any time there is a Defaulting Lender, (a) with respect to each applicable Issuing Bank, such Defaulting Lender’s Revolving Facility Percentage of the outstanding Revolving L/C Exposure, other than Revolving L/C Exposure as to which such Defaulting Lender’s participation obligation has been reallocated to Revolving Lenders that are not Defaulting Lenders or cash collateralized in accordance with the terms hereof and (b) with respect to the Swing Line Lender, such Defaulting Lender’s Revolving Facility Percentage of the aggregate principal amount of outstanding Swing Line Loans, other than Swing Line Loans as to which such Defaulting Lender’s participation obligation has been reallocated to Revolving Lenders that are not Defaulting Lenders in accordance with the terms thereof.

 

“GAAP” means generally accepted accounting principles in the United States of America as in effect from time to time, including those set forth in (i) the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and (ii) the statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as approved by a significant segment of the accounting profession (or agencies with similar functions and comparable stature and authority within the accounting profession (but excluding the policies, rules and regulations of the SEC applicable only to public companies)) that are applicable to the circumstances as of the date of determination.

 

Notwithstanding anything to the contrary contained in this definition, in the event of an Accounting Change requiring all leases to be capitalized, only those leases (assuming for purposes hereof that they were in existence on the date hereof) that would constitute capital leases as of December 31, 2017 shall be considered capital leases and all calculations and deliverables under this Agreement or any other Loan Document shall be made or delivered, as applicable, in accordance therewith (provided, that together with all financial statements delivered to the Administrative Agent in accordance with the terms of this Agreement after the date of such Accounting Change the Borrower shall deliver a schedule showing the adjustments necessary to reconcile such financial statements with GAAP as in effect immediately prior to such Accounting Change).

 

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“Governmental Authority” means any federal, state, local or foreign court or governmental agency, authority, instrumentality or regulatory or legislative body (including any supra-national bodies such as the European Union or the European Central Bank).

 

“Guarantee” of or by any Person (the “guarantor”) means:

 

(1)                any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation payable or performable by another Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect:

 

(a)                to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation (whether arising by virtue of partnership arrangements, by agreement to keep well, to purchase assets, goods, securities or services, to take or pay or otherwise) or to purchase (or to advance or supply funds for the purchase of) any security for the payment of such Indebtedness or other obligations;

 

(b)                to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof;

 

(c)                to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation;

 

(d)                entered into for the purpose of assuring in any other manner the holders of such Indebtedness or other obligation of the payment thereof or to protect such holders against loss in respect thereof (in whole or in part); or

 

(e)                as an account party in respect of any letter of credit, bank guarantee or other letter of credit guaranty issued to support such Indebtedness or other obligation;

 

provided, that the term “Guarantee” will not include endorsements of instruments for deposit or collection in the ordinary course of business or customary and reasonable indemnity obligations in effect on the Closing Date or entered into after the Closing Date in connection with any acquisition or disposition of assets permitted by this Agreement (other than such obligations with respect to Indebtedness).

 

The amount of any Guarantee will be deemed to be an amount equal to the stated or determinable amount of the related primary obligation or portion thereof, in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder) as determined by such Person in good faith. The term “Guarantee” as a verb has a corresponding meaning.

 

“Guarantor” means (1) the Borrower (other than with respect to its own Obligations); (2) each Subsidiary Loan Party; and (3) each Restricted Subsidiary that the Borrower may elect, in its sole discretion, from time to time, upon written notice to the Administrative Agent, to cause to Guarantee the Obligations until the date on which the Borrower has informed the Administrative Agent that it elects not to have such Person Guarantee the Obligations; provided that, in the case of this clause (3), such Restricted Subsidiary shall provide a guaranty and credit support that is substantially similar to the guarantees and credit support provided by the Subsidiary Guarantors party hereto on the Closing Date.

 

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“Hazardous Materials” means all pollutants, contaminants, wastes, chemicals, materials, substances and constituents, including explosive or radioactive substances or petroleum or petroleum byproducts or distillates, friable asbestos or friable asbestos-containing materials, polychlorinated biphenyls or radon gas, in each case, that are regulated or would reasonably be expected to give rise to liability under any Environmental Law.

 

“Heat” has the meaning assigned to such term in the definition of “Heat Acquisition”.

 

“Heat Acquisition” means the acquisition by Interamerican Medical Center Group, LLC, a Florida limited liability company (“IMCG”), of 100% of the issued and outstanding equity interests of Senior Medical Associates, LLC, a Florida limited liability company (“SMA”) and Stallion Medical Management, LLC, a Florida limited liability company (“SMM” and, together with SMA, collectively, “Heat”), from Moshin Jaffer (the “Heat Seller”), pursuant to that certain Securities Purchase Agreement, dated as of March 8, 2021, by and among IMCG, Heat and the Heat Seller.

 

“Heat Seller” has the meaning assigned to such term in the definition of “Heat Acquisition”.

 

“Hedge Agreement” means any agreement with respect to any swap, forward, future or derivative transaction or option or similar agreement involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions, in each case, not entered into for speculative purposes; provided that no phantom stock or similar plan providing for payments only on account of services provided by current or former directors, officers, employees or consultants of the Borrower or any of its Subsidiaries will be a Hedge Agreement.

 

“IMC” has the meaning assigned to such term in the recitals hereof.

 

“IMCG” has the meaning assigned to such term in the definition of “Heat Acquisition”.

 

“Immaterial Subsidiary” means, as of any date, any Restricted Subsidiary that (i) did not, as of the last day of the most recent fiscal quarter of the Borrower for which Required Financial Statements have been delivered (or were required to be delivered), have either net revenues on a Pro Forma Basis with a value in excess of 5.0% of the consolidated net revenues of the Borrower and the Restricted Subsidiaries for the most recent four quarter fiscal period or net assets on a Pro Forma Basis with a value in excess of 5.0% of the consolidated net assets of the Borrower and the Restricted Subsidiaries for the most recent four quarter fiscal period; and (ii) taken together with all Immaterial Subsidiaries designated pursuant to the preceding clause (i) (or re-designated pursuant to the definition of “Excluded Subsidiary”) as of the last day of the most recent fiscal quarter of the Borrower for which Required Financial Statements have been delivered (or were required to be delivered), did not have either net revenues on a Pro Forma Basis with a value in excess of 10.0% of the consolidated net revenues of the Borrower and the Restricted Subsidiaries for the most recent four quarter fiscal period or net assets on a Pro Forma Basis with a value in excess of 10.0% of the consolidated net assets of the Borrower and the Restricted Subsidiaries for the most recent four quarter fiscal period.

 

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“Incremental Facility” has the meaning assigned to such term in Section 2.22(1).

 

“Incremental Facility Amendment” has the meaning assigned to such term in Section 2.22(5).

 

“Incremental Lenders” has the meaning assigned to such term in Section 2.22(5).

 

“Incremental Loans” has the meaning assigned to such term in Section 2.22(1).

 

“Incremental Revolving Facility Commitment” has the meaning assigned to such term in Section 2.22(1).

 

“Incremental Revolving Lender” has the meaning assigned to such term in Section 2.22(9).

 

“Incremental Revolving Loan” has the meaning assigned to such term in Section 2.22(1).

 

“Incremental Term Facility” has the meaning assigned to such term in Section 2.22(1).

 

“Incremental Term Loan Installment Date” has the meaning assigned to such term in Section 2.10(2).

 

“Incremental Term Loans” has the meaning assigned to such term in Section 2.22(1).

 

“Incremental Yield” has the meaning assigned to such term in Section 2.22(8).

 

“Incurrence Based Amounts” has the meaning assigned to such term in Section 1.07(2).

 

“Indebtedness” means, with respect to any Person, without duplication:

 

(1)                all obligations of such Person for borrowed money;

 

(2)                all obligations of such Person evidenced by bonds, debentures, notes or similar instruments;

 

(3)                all obligations of such Person under conditional sale or title retention agreements relating to property or assets purchased by such Person;

 

(4)                all obligations of such Person issued or assumed as the deferred purchase price of property or services, to the extent the same would be required to be shown as a long-term liability on a balance sheet prepared in accordance with GAAP;

 

(5)                all Capital Lease Obligations of such Person;

 

(6)                all net payments that such Person would have to make in the event of an early termination, on the date Indebtedness of such Person is being determined, in respect of outstanding Hedge Agreements;

 

(7)                the principal component of all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and bank guarantees;

 

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(8)                the principal component of all obligations of such Person in respect of bankers’ acceptances;

 

(9)                all Guarantees by such Person of Indebtedness described in clauses (1) through (8) above; and

 

(10)            the amount of all obligations of such Person with respect to the redemption, repayment or other repurchase of any Disqualified Stock (excluding accrued dividends that have not increased the liquidation preference of such Disqualified Stock);

 

provided that Indebtedness will not include:

 

(a)                trade payables, accrued expenses and intercompany liabilities arising in the ordinary course of business;

 

(b)                prepaid or deferred revenue arising in the ordinary course of business;

 

(c)                purchase price holdbacks arising in the ordinary course of business in respect of a portion of the purchase prices of an asset to satisfy unperformed obligations of the seller of such asset;

 

(d)                earn-out, purchase price or working capital adjustment obligation, non-compete agreement obligations, consulting obligations and deferred compensation obligations until any such obligation is not paid within five (5) Business Days after becoming due and payable and such obligation becomes a liability on the balance sheet of such Person in accordance with GAAP;

 

(e)                royalty payments made in the ordinary course of business in respect of licenses (to the extent such licenses are not prohibited hereby); or

 

(f)                 obligations in respect of warrants or similar Equity Interests not otherwise constituting Disqualified Stock, regardless whether such obligations are required to be shown as a liability on the balance sheet of such Person in accordance with GAAP or otherwise.

 

The Indebtedness of any Person will include the Indebtedness of any partnership in which such Person is a general partner, other than to the extent that the instrument or agreement evidencing such Indebtedness expressly limits the liability of such Person in respect thereof.

 

“Indemnified Taxes” means (1) all Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of any Loan Party under any Loan Document; and (2) to the extent not otherwise described in clause (1), Other Taxes.

 

“Indemnitee” has the meaning assigned to such term in Section 9.05(2).

 

“Initial Term Loan Commitment” has the meaning assigned to such term in Section 2.01.

 

“Initial Term Loans” means the Term Loans incurred on the Closing Date pursuant to Section 2.01(1).

 

“Initial Term Loan Facility” means the facility and commitments utilized in incurring Initial Term Loans hereunder.

 

“Intellectual Property Rights” has the meaning assigned to such term in Section 3.20(1).

 

“Intellectual Property Security Agreements” shall have the meaning set forth in the Collateral Agreement.

 

“Interest Election Request” means a request by the Borrower to convert or continue a Borrowing in accordance with Section 2.07.

 

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“Interest Payment Date” means (1) with respect to any Eurocurrency Loan, the last day of each Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Eurocurrency Borrowing with an Interest Period of more than three months’ duration, each day that would have been an Interest Payment Date had successive Interest Periods of three months’ duration been applicable to such Borrowing; (2) with respect to any ABR Loan, the last Business Day of each March, June, September and December commencing with the last Business Day of March 2021 and the Maturity Date of the Facility under which such Loan was made; and (3) to the extent necessary to create a fungible Class of Revolving Loans or Term Loans, on any Business Day that any Incremental Term Loan, Incremental Revolving Facility Commitment or DDTL, as applicable, is incurred or part of such Class.

 

“Interest Period” means, as to any Eurocurrency Borrowing, the period commencing on the date of such Borrowing or on the last day of the immediately preceding Interest Period applicable to such Borrowing, as applicable, and ending on the numerically corresponding day (or, if there is no numerically corresponding day, on the last day) in the calendar month that is one, three or six months thereafter (or, if agreed to by all Lenders under such applicable Class, 12 months or any other period not provided for above, which rate in such case shall be calculated using the Interpolated Screen Rate) (or such other periods as agreed to by the Administrative Agent to facilitate the alignment of interest payments with other borrowings under the Facilities or the end of a fiscal or calendar period, which rate in such case shall be calculated using the Interpolated Screen Rate or such other manner as reasonably agreed between the Administrative Agent and the Borrower), as the Borrower may elect, or the date any Eurocurrency Borrowing is converted to an ABR Borrowing in accordance with Section 2.07 or repaid or prepaid in accordance with Section 2.11, 2.12 or 2.13; provided that:

 

(1)                if any Interest Period would end on a day other than a Business Day, such Interest Period will be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period will end on the next preceding Business Day;

 

(2)                any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) will end on the last Business Day of the calendar month at the end of such Interest Period;

 

(3)                no Interest Period will extend beyond the applicable Maturity Date;

 

(4)                Interest will accrue from and including the first day of an Interest Period to but excluding the last day of such Interest Period; and

 

(5)                the initial Interest Period(s), commencing on the Closing Date, will be as specified in the Borrowing Request(s) delivered by the Borrower to the Administrative Agent on or prior to the Closing Date.

 

“Interpolated Screen Rate” means, with respect to any Eurocurrency Loan for any Interest Period, a rate per annum which results from interpolating on a linear basis between (a) the applicable Screen Rate for the longest maturity for which a Screen Rate is available that is shorter than such Interest Period and (b) the applicable Screen Rate for the shortest maturity for which a Screen Rate is available that is longer than such Interest Period, in each case as such Screen Rates are determined as of approximately 11:00 a.m., London time, two (2) Business Days prior to the commencement of such Interest Period.

 

“Investment” means, as to any Person, the acquisition or investment by such Person, by means of (a) the purchase or other acquisition (including by merger or otherwise) of Equity Interests of another Person, (b) a loan, advance or capital contribution to, Guarantee or assumption of Indebtedness of, or purchase or other acquisition of any other debt or equity participation or interest in, another Person, including any partnership or joint venture interest in such other Person (excluding, in the case of the Borrower and the Restricted Subsidiaries, intercompany loans, advances, or Indebtedness, in each case (x) having a term not exceeding 364 days (inclusive of any roll-over or extensions of terms) and (y) made in the ordinary course of business) or (c) the purchase or other acquisition (in one transaction or a series of transactions, including by merger or otherwise) of all or substantially all of the property and assets of another Person or assets constituting a line of business or division or business or operating unit of such Person; provided that, in the event that any Investment is made by the Borrower or any Restricted Subsidiary in any Person through substantially concurrent interim transfers of any amount through the Borrower or any Restricted Subsidiaries, then such other substantially concurrent interim transfers shall be disregarded for purposes of Section 6.04. For purposes of covenant compliance, the amount of any Investment at any time shall be the amount actually invested (measured at the time made (which, in the case of any Investment constituting the contribution of an asset or property, shall be based on the Borrower’s good faith estimate of the fair market value of such asset or property at the time such Investment is made)), without adjustment for subsequent changes in the value of such Investment, net of any Returns with respect to such Investment.

 

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“Investment Grade Rating” means a rating equal to or higher than Baa3 (or the equivalent) by Moody’s and BBB- (or the equivalent) by S&P (or reasonably equivalent ratings of another internationally recognized rating agency).

 

“Investment Grade Securities” means:

 

(1)                securities issued or directly and fully Guaranteed or insured by the U.S. government or any agency or instrumentality thereof (other than Cash Equivalents);

 

(2)                securities that have an Investment Grade Rating, but excluding any debt securities or debt instruments constituting loans or advances among the Borrower and its Restricted Subsidiaries;

 

(3)                corresponding instruments in countries other than the United States customarily utilized for high quality investments and in each case with maturities not exceeding two years from the date of acquisition; and

 

(4)                investments in any fund that invests at least 95.0% of its assets in investments of the type described in clauses (1) and (2) above which fund may also hold immaterial amounts of cash pending investment and/or distribution.

 

“ISDA Definitions” means the 2006 ISDA Definitions published by the International Swaps and Derivatives Association, Inc. or any successor thereto, as amended or supplemented from time to time, or any successor definitional booklet for interest rate derivatives published from time to time by the International Swaps and Derivatives Association, Inc. or such successor thereto.

 

“Issuing Bank” means (1) those Lenders listed on Schedule 2.01 hereto and (2) each other Revolving Lender designated as an Issuing Bank pursuant to Section 2.05(12), in each case, in its capacity as an issuer of Letters of Credit hereunder, and its successors in such capacity as provided in Section 2.05(10). An Issuing Bank may, in its discretion, arrange for one or more Letters of Credit to be issued by one or more Affiliates or designees of such Issuing Bank, in which case the term “Issuing Bank” will include any such Affiliate or designee with respect to Letters of Credit issued by such Affiliate or designee for all purposes of the Loan Documents. Royal Bank of Canada may cause Letters of Credit to be issued by unaffiliated financial institutions and such Letters of Credit shall be treated as issued by Royal Bank of Canada, as applicable, for all purposes under the Loan Documents. On the Closing Date, the only Issuing Bank shall be Royal Bank of Canada.

 

“Issuing Bank Fees” has the meaning assigned to such term in Section 2.13(2)(b).

 

“Junior Financing” means (1) (A) any Indebtedness permitted to be incurred hereunder that is contractually subordinated in right of payment to the Obligations, (B) any Indebtedness for borrowed money secured by Liens on Collateral that are contractually subordinated or junior to the Liens securing the Obligations and (C) any unsecured Indebtedness for borrowed money (in each case other than Indebtedness among the Borrower, the Restricted Subsidiaries and the Physician-Owned Practices permitted hereunder) or (2) any Permitted Refinancing Indebtedness for borrowed money in respect of any of the foregoing.

 

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“L/C Disbursement” means a payment or disbursement made by an Issuing Bank pursuant to a Letter of Credit.

 

“L/C Participation Fee” has the meaning assigned such term in Section 2.13(2)(a).

 

“Latest Maturity Date” means, as of any date of determination, the latest Maturity Date of the applicable Facilities in effect on such date.

 

“LCA Election” has the meaning assigned to such term in Section 1.07(1).

 

“LCA Test Date” has the meaning assigned to such term in Section 1.07(1).

 

“Lead Arrangers” means RBC Capital Markets, LLC and Truist Securities, Inc., each in its capacity as a joint lead arranger and joint bookrunner.

 

“Lender” means each financial institution listed on Schedule 2.01 (other than any such Person that has ceased to be a party hereto pursuant to an Assignment and Acceptance in accordance with Section 9.04) as a Lender, any Person that becomes a Lender hereunder pursuant to Section 9.04 and any Additional Lender.

 

“Lender Default” means:

 

(1)                the refusal (which may be given verbally or in writing and so long as such refusal has not been retracted) or failure of any Lender to make available its portion of any Borrowing or reimbursement obligations hereunder, which refusal or failure is not cured within one (1) Business Day after the date of such refusal or failure, unless such Lender notifies the Administrative Agent and the Borrower in writing that such failure is the result of such Lender’s good faith determination that one or more conditions precedent to funding (each of which conditions precedent, together with any applicable Default, shall be specifically identified in such writing) has not been satisfied;

 

(2)                the failure of any Lender to pay over to the Administrative Agent, each applicable Issuing Bank, the Swing Line Lender or any other Lender any other amount required to be paid by it hereunder within one (1) Business Day of the date when due;

 

(3)                any Lender has notified the Borrower or the Administrative Agent that it does not intend to comply with its funding obligations or has made a public statement to that effect with respect to its funding obligations hereunder or under other similar agreements in which it commits to extend credit, unless such notification or public statement relates to such Lender’s obligation to fund a Loan hereunder and states that such position is based on such Lender’s determination that a condition precedent to funding (which condition precedent, together with any applicable default, shall be specifically identified in such public statement) cannot be satisfied;

 

(4)                the failure of any Lender within two (2) Business Days after request by the Administrative Agent, to confirm that it will comply with its funding obligations hereunder (provided that such Lender will cease to be a Defaulting Lender pursuant to this clause (d) upon timely receipt of such written confirmation by the Administrative Agent and the Borrower);

 

(5)                any Lender or a direct or indirect parent company of such Lender becoming subject to a Bail-In Action; or

 

(6)                the admission in writing by any Lender that it is insolvent or such Lender becoming subject to a Lender-Related Distress Event.

 

“Lender-Related Distress Event” means, with respect to any Lender or any Person that directly or indirectly controls a Lender (each, a “Distressed Person”), as the case may be, a voluntary or involuntary case with respect to such Distressed Person under any debt relief law, or a custodian, conservator, receiver or similar official is appointed for such Distressed Person or any substantial part of such Distressed Person’s assets, or such Distressed Person or any Person that directly or indirectly controls such Distressed Person is subject to a forced liquidation, or such Distressed Person makes a general assignment for the benefit of creditors or is otherwise adjudicated as, or determined by any Governmental Authority having regulatory authority over such Distressed Person or its assets to be, insolvent or bankrupt; provided that a Lender-Related Distress Event will not be deemed to have occurred solely by virtue of the ownership or acquisition of any Equity Interests in any Lender or any Person that directly or indirectly controls such Lender by a Governmental Authority or an instrumentality thereof.

 

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“Lending Office” means, as to any Lender, the applicable branch, office or Affiliate of such Lender designated by such Lender to make Loans.

 

“Letter of Credit” has the meaning assigned to such term pursuant to Section 2.05.

 

“Letter of Credit Commitment” means, with respect to each Issuing Bank, the commitment of such Issuing Bank to issue Letters of Credit pursuant to Section 2.05. The Letter of Credit Commitments of each of the Issuing Banks on the Closing Date shall be those Commitments listed on Schedule 2.01 hereto. Any Issuing Bank shall be permitted at any time to increase its Letter of Credit Commitment with the written consent of the Borrower and notice to the Administrative Agent of such increase, so long as such Issuing Bank’s Letter of Credit Commitment does not exceed the Letter of Credit Sublimit.

 

“Letter of Credit Request” means a request by the Borrower substantially in the form of Exhibit C-2 (or such other form as may be agreed between the Borrower and the applicable Issuing Bank).

 

“Letter of Credit Sublimit” means the aggregate Letter of Credit Commitments of the Issuing Banks, in an amount not to exceed $7,500,000.

 

“LIBOR Quoted Rate” means, for any day (or if such day is not a Business Day, the immediately preceding Business Day), a fluctuating rate per annum equal to the Adjusted Eurocurrency Rate for an interest period of one month available as of 11:00 a.m., London time, on such day by reference to the ICE Benchmark Administration Interest Settlement Rates (or by reference to the rates provided by any Person that takes over the administration of such rate if the ICE Benchmark Administration is no longer making a “Eurocurrency Rate” rate available) for deposits in dollars (as set forth by the Screen Rate); provided that if such Screen Rate is not available at such time for any reason, “LIBOR Quoted Rate” shall be the interest rate per annum equal to the Interpolated Screen Rate.

 

“Lien” means, with respect to any asset (1) any mortgage, deed of trust, lien, hypothecation, pledge, charge, security interest or similar encumbrance in or on such asset; or (2) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset; provided that in no event will an operating lease, any capital lease in respect of Real Property permitted hereunder, or an agreement to sell be deemed to constitute a Lien.

 

“Limited Condition Transaction” means any acquisition or other investment, including by way of merger, whose consummation is not conditioned on the availability of, or on obtaining, third party financing, in each case by the Borrower or one or more Restricted Subsidiaries permitted pursuant to the Loan Documents.

 

“Loan Documents” means this Agreement, the Security Documents, any Acceptable Intercreditor Agreement, any Incremental Facility Amendment, any Extension Amendment, any Refinancing Amendment, any Note and, solely for the purposes of Section 3.01, 3.02, and 7.01(3) hereof, the Fee Letter.

 

“Loan Parties” means the Borrower and the other Guarantors.

 

“Loans” means the Term Loans, the Revolving Loans, the Swing Line Loans and any other loans made by any Lenders to the Borrower pursuant to this Agreement, any Incremental Facility Amendment and/or any Refinancing Amendment.

 

“Management Group” means the group consisting of (i) the directors, executive officers and other management personnel of the Borrower, the Companies, the Acquired Businesses or the Restricted Subsidiaries on the Closing Date that have, after giving effect to the Transactions on the Closing Date, direct or indirect Equity Interests in the Borrower as of the Closing Date, (ii) any trust, partnership, limited liability company, corporate body or other entity established by any such current or former director, officer, employee, or member of management of the Borrower or any Person described in the succeeding clauses (iii) and (iv), as applicable, to hold a direct or indirect investment in the Borrower in connection with such Person’s estate or tax planning, (iii) any current or former spouse, current or former qualified domestic partner, siblings, parents or grandparents or any descendant (including adopted children and step-children), father-in-law, mother-in-law, son-in-law, daughter-in-law or current or former spouse or qualified domestic partner of the foregoing of those Persons described in clause (i) above, who is transferred Equity Interests of the Borrower by any Person described in clause (i) (or by any vehicle described in clause (ii) above), in connection with such Person’s estate or tax planning, and (iv) any Person who acquires an investment in the Borrower by will or by the laws of intestate succession as a result of the death of any of the Persons described in clauses (i) or (iii) above.

 

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“Management Services Agreement” means a management services agreement (x) in substantially the same form provided to the Lenders prior to the Closing Date (other than any changes to the form required by applicable law or any applicable rule, regulation or order of any Governmental Authority) or (y) in any other form reasonably acceptable to the Required Lenders, in each case, between the Borrower, any other Loan Party or any Wholly Owned Subsidiary of a Loan Party and a Physician-Owned Practice, pursuant to which the Borrower, such other Loan Party or such other Wholly Owned Subsidiary of a Loan Party shall manage such Physician-Owned Practice; provided that, if a Management Services Agreement is entered into with a Wholly Owned Subsidiary of a Loan Party, such Wholly Owned Subsidiary becomes a Loan Party in accordance with Section 5.11 within sixty (60) days after the date such Management Services Agreement is entered into.

 

“Margin Stock” has the meaning assigned to such term in Regulation U.

 

“Material Adverse Effect” means (a) on the Closing Date, a Material Adverse Effect (as defined in the Acquisition Agreement) and (b) after the Closing Date, a circumstance, event or condition that would reasonably be expected to have a material adverse effect on:

 

(1)                the consolidated business, financial condition or results of operations, in each case, of the Borrower and its Restricted Subsidiaries (taken as a whole);

 

(2)                the ability of the Borrower and the Guarantors (taken as a whole) to perform their material payment obligations under the Loan Documents; or

 

(3)                the material rights and remedies of the Administrative Agent and the Lenders (taken as a whole) under the Loan Documents.

 

“Material Agreement” means any agreement, contract or similar instrument to which any Loan Party is a party or to which any of its property or assets may be subject to or bound for, which breach, non-performance, cancellation or failure to renew would reasonably be expected to result in a Material Adverse Effect.

 

“Material Indebtedness” means Indebtedness (other than the Loans) of the Borrower or any Subsidiary Loan Party in an aggregate outstanding principal amount exceeding $12,500,000 at the time of any determination.

 

“Material Real Property” means any Real Property located in the United States (other than Excluded Assets) owned in fee by any Loan Party that has a fair market value (as of the Closing Date or, with respect to fee-owned Real Property acquired after the Closing Date, at the time of acquisition thereof by a Loan Party) of at least the greater of (x) $2,250,000 and (y) 5.0% of Consolidated EBITDA for the most recently ended Test Period at such time.

 

“Maturity Date” means, as the context may require:

 

(1)                with respect to the Initial Term Loans and the DDTLs, the fifth anniversary of the Closing Date;

 

(2)                with respect to the Revolving Facility Commitments, any Revolving Loans and any Letters of Credit in respect thereof that have not been extended pursuant to Section 2.24, the fifth anniversary of the Closing Date;

 

(3)                with respect to any Incremental Term Loans or any Incremental Revolving Facility Commitments (and corresponding Incremental Revolving Loans), the final maturity date specified therefor in the applicable Incremental Facility Amendment;

 

(4)                with respect to any Other Term Loans or any Other Revolving Commitments (and/or any corresponding Other Revolving Loans), the final maturity date specified therefor in the applicable Refinancing Amendment; and

 

(5)                with respect to any Extended Term Loans or any Extended Revolving Commitments and any Extended Revolving Loans and any Letters of Credit in respect thereof, the final maturity date specified therefor in the applicable Extension Amendment;

 

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provided that, in each case, if such day is not a Business Day, the Maturity Date shall be the Business Day immediately preceding such day.

 

 

“Maturity Provision” has the meaning assigned to such term in Section 2.22(7)(a).

 

“Maximum Rate” has the meaning assigned to such term in Section 9.09.

 

“Maximum Total Net Leverage Ratio Financial Covenant” has the meaning assigned to such term in Section 6.12(1).

 

“Minimum Fixed Charge Coverage Ratio Financial Covenant” has the meaning assigned to such term in Section 6.12(2).

 

“MNPI” means any material Non-Public Information regarding the Borrower and its Subsidiaries that has not been disclosed to the Lenders generally (other than Lenders who elect not to receive such information). For purposes of this definition, “material Non-Public Information” means Non-Public Information that would reasonably be expected to be material to a decision by any Lender whether to assign or acquire any Term Loans or whether to enter into any of the transactions contemplated thereby.

 

“Moody’s” means Moody’s Investors Service, Inc.

 

“Mortgaged Properties” means all Material Real Property as to which the Collateral Agent for the benefit of the Secured Parties shall be granted a Mortgage pursuant to this Agreement.

 

“Mortgages” means each of the mortgages and deeds of trust creating a Lien on Mortgaged Property or any interest in Material Real Property made by any Loan Party, reasonably acceptable to the Administrative Agent, in favor of, or for the benefit of, the Collateral Agent for the benefit of the Secured Parties, as the same may be amended, restated, amended and restated, supplemented or otherwise modified from time to time.

 

“Multiemployer Plan” means a multiemployer plan as defined in Section 4001(a)(3) of ERISA to which the Borrower or any Restricted Subsidiary or any ERISA Affiliate (other than one considered an ERISA Affiliate only pursuant to subsection (m) or (o) of Code Section 414) is making or accruing an obligation to make contributions, or has within any of the preceding five plan years made or accrued an obligation to make contributions.

 

“NAIC” shall mean The National Association of Insurance Commissioners, and any successor thereto.

 

“Net Cash Proceeds” means the aggregate cash proceeds (using the fair market value of any Cash Equivalents) received by the Borrower or any Restricted Subsidiary in respect of any Asset Sale (including any cash received in respect of or upon the sale or other disposition of any Designated Non-Cash Consideration received in any Asset Sale and any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or otherwise, but only as and when received, and including any proceeds received as a result of unwinding any related Hedge Agreements in connection with such transaction but excluding the assumption by the acquiring Person of Indebtedness relating to the disposed assets or other consideration received in any other non-cash form) or any Event of Loss, net of the direct cash costs relating to such Asset Sale or Event of Loss and the sale or disposition of such Designated Non-Cash Consideration (including legal, accounting and investment banking fees, and brokerage and sales commissions), and any relocation expenses incurred as a result thereof, taxes paid or payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements related thereto), amounts required to be applied to the repayment of principal, premium (if any) and interest on Indebtedness required to be paid as a result of such transaction that is secured by a Permitted Lien (provided that, in the case of Collateral, such Lien is prior or senior to the Lien securing the Obligations), any costs associated with unwinding any related Hedge Agreements in connection with such transaction and any deduction of appropriate amounts to be provided by the Borrower or any of the Restricted Subsidiaries as a reserve in accordance with GAAP against any liabilities associated with the asset disposed of in such transaction and retained by the Borrower or any of the Restricted Subsidiaries after such sale or other disposition thereof, including pension and other post-employment benefit liabilities and liabilities related to environmental matters or against any indemnification obligations associated with such transaction; provided that such reserved amounts will be deemed to be Net Cash Proceeds to the extent and at the time of any reversal thereof (to the extent not applied to the satisfaction of any applicable liabilities in cash in a corresponding amount).

 

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“New DDTLs” has the meaning assigned to such term in Section 2.10(2).

 

“New York Courts” has the meaning assigned to such term in Section 9.15(1).

 

“Non-Consenting Lender” has the meaning assigned to such term in Section 2.20(3).

 

“Non-Debt Fund Affiliate” means any Affiliated Lender other than a Debt Fund Affiliate.

 

“Non-Debt Fund Affiliate Assignment and Acceptance” has the meaning assigned to such term in Section 9.04(10)(b).

 

“Non-Public Information” means information that is (i) not publicly available and (ii) material with respect to a Person or its securities for purposes of United States Federal and State securities laws.

 

“Note” has the meaning assigned to such term in Section 2.09(5).

 

“Obligations” means:

 

(1)                all advances to, and debts, liabilities, obligations, covenants and duties of, any Loan Party arising under any Loan Document or otherwise with respect to any Loan or Letter of Credit, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and all amounts owing to any Agent, any Issuing Bank, any Lender, any Swing Line Lender or any beneficiary of any indemnification obligation undertaken by any Loan Party, in each case pursuant to the terms of this Agreement or any other Loan Document, including all interest, fees, expenses and other amounts accrued or accruing (or that would, absent the commencement of an insolvency or liquidation proceeding, accrue) after the commencement by or against any Loan Party of any proceeding under Title 11 of the United States Code, as now constituted or hereafter amended (the “Bankruptcy Code”), or any other federal, state or foreign bankruptcy, insolvency, receivership or similar law naming such Loan Party as the debtor in such proceeding, in accordance with and at the rate specified in this Agreement, whether or not the claim for such interest or expense is allowed or allowable as a claim in such proceeding;

 

(2)                any Specified Hedge Obligations; and

 

(3)                any Cash Management Obligations;

 

provided that:

 

(a)                the Specified Hedge Obligations and Cash Management Obligations will be secured and Guaranteed pursuant to the Security Documents only to the extent that, and for so long as, the other Obligations are so secured and Guaranteed;

 

(b)                any release of Collateral or Guarantors effected in the manner permitted by this Agreement or any Security Document will not require the consent of any Cash Management Bank or Qualified Counterparty; and

 

(c)                Obligations shall not, in any event, include any Excluded Swap Obligation.

 

“OFAC” has the meaning assigned to such term in Section 3.19(3)(a).

 

“Organizational Documents” means, (a) for any corporation, the certificate or articles of incorporation, the bylaws, any certificate of determination or instrument relating to the rights of preferred shareholders of such corporation, (b) for any partnership, the certificate of limited partnership (if any) and partnership agreement, (c) for any limited liability company, the articles or certificate of formation or organization and operating agreement or limited liability company agreement or (d) for any other entity, the applicable certificate, articles or other document of formation or organization and any agreement, instrument or other document setting forth the manner of election or duties of the officers, directors, managers or other similar persons, or the designation, amount or relative rights, limitations and preference of the Equity Interests of such entity.

 

“Original Term Loan Installment Date” has the meaning assigned to such term in Section 2.10(1).

 

“Other Connection Taxes” means, with respect to any Recipient, Taxes imposed as a result of a present or former connection between such Recipient and the jurisdiction imposing such Tax (other than connections arising solely from such Recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in any Term Loan or Loan Document).

 

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“Other Refinancing Loans” has the meaning assigned to such term in Section 2.23(1).

 

“Other Revolving Commitments” has the meaning assigned to such term in Section 2.23(1).

 

“Other Revolving Loans” has the meaning assigned to such term in Section 2.23(1).

 

“Other Taxes” means all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Loan Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment (other than an assignment made pursuant to Section 2.20(2)).

 

“Other Term Loan Installment Date” has the meaning assigned to such term in Section 2.11(2).

 

“Other Term Loans” has the meaning assigned to such term in Section 2.23(1).

 

“Participant” has the meaning assigned to such term in Section 9.04(4)(a).

 

“Participant Register” has the meaning assigned to such term in Section 9.04(4)(a).

 

“Payment Notice” has the meaning assigned to such term in Section 8.13(a).

 

“Payment Office” means the office of the Administrative Agent located at Royal Bank of Canada, 20 King Street West, 4th Floor, Toronto, Ontario, Canada, M5H 1C4, Attention: Manager, Agency Services, Fax: (416) 842-4023 or such other office or account as the Administrative Agent may designate to the Borrower and the Lenders from time to time.

 

“Payment Recipient” has the meaning assigned to such term in Section 8.13(a).

 

“Payor” has the meaning assigned to such term in the definition of “Collaboration Agreement”.

 

“PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in ERISA, or any successor thereto.

 

“Permitted Acquisition” means any acquisition of all or substantially all the assets of, or a majority of the Equity Interests (or any acquisition of Equity Interests of a Person if, following the acquisition of such Equity Interests, a majority of the Equity Interests of such Person is owned and such Person is, or becomes, a Restricted Subsidiary) in, or merger, consolidation or amalgamation with, a Person (in the case of a merger, consolidation or amalgamation, so long as such Person is, or becomes, the Borrower or a Restricted Subsidiary), or any acquisition of assets constituting a division or line of business or business or operating unit of a Person (or any subsequent investment made in a Person, division or line of business or business or operating unit previously acquired in a Permitted Acquisition); provided that (1) immediately following such acquisition after giving Pro Forma Effect thereto, (a) no Event of Default shall have occurred and be continuing; provided, further, that if such Permitted Acquisition is in connection with a Limited Condition Transaction, no Event of Default shall have occurred and be continuing as of the LCA Test Date and no Specified Event of Default shall have occurred and be continuing on the date of consummation of such Permitted Acquisition and (b) the Borrower shall be in compliance, on a Pro Forma Basis, with a Total Net Leverage Ratio that is 0.25:1.00 below the then applicable Maximum Total Net Leverage Ratio Financial Covenant as set forth in Section 6.12(1) and (2) the portion of the total consideration paid (except to the extent consisting of, or financed with the proceeds of, Equity Interests of, or capital contributions to, the Borrower (other than Disqualified Stock) issued or made substantially contemporaneously with such acquisition) in connection with such acquisition allocable to acquisitions of entities which are not, or in the case of asset acquisitions, are not owned by, any Loan Party, in each case shall not, when aggregated with the amount of any Investments made by the Borrower and the Guarantors in Restricted Subsidiaries that are not Guarantors pursuant to Section 6.04(5), exceed the greater of (i) $15,750,000 and (ii) 35.0% of Consolidated EBITDA for the most recently ended Test Period; provided that, for the avoidance of doubt, such limitation shall not apply to any Physician-Owned Practice.

 

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“Permitted Amendment” means any Incremental Facility Amendment, Refinancing Amendment or Extension Amendment.

 

“Permitted Debt” has the meaning assigned thereto in Section 6.01.

 

“Permitted Holders” means each of:

 

(1)                Deerfield Partners;

 

(2)                any member of the Management Group (or any controlled Affiliate thereof);

 

(3)                any other holder of a direct or indirect Equity Interest in the Borrower that holds such interest as of the Closing Date and is disclosed to the Lead Arrangers prior to the Closing Date; and

 

(4)                any group (within the meaning of Rules 13d-3 and 13d-5 under the Exchange Act) of which Persons described in the foregoing clauses (1), (2) or (3) are members; provided that, without giving effect to the existence of such group or any other group, the Persons described in clauses (1), (2) and (3), collectively, Beneficially Own Voting Stock representing 50% or more of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests of the Borrower (determined on a fully diluted basis but without giving effect to contingent voting rights not yet vested) then held by such group.

 

“Permitted Investment” has the meaning assigned to such term in Section 6.04.

 

“Permitted Investor” means:

 

(1)                Deerfield Partners or any fund or account managed thereby;

 

(2)                any employee benefit plan of the Borrower or any of its Subsidiaries and any Person acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan; and

 

(3)                investment vehicles of members of management of the Borrower that invest in, acquire or trade commercial loans but excluding natural persons.

 

“Permitted Liens” has the meaning assigned to such term in Section 6.02.

 

“Permitted Refinancing Indebtedness” means any Indebtedness issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease, retire, discharge, repurchase, exchange or refund (collectively, “Refinance”) the Indebtedness being Refinanced (or previous refinancings thereof constituting Permitted Refinancing Indebtedness); provided that:

 

(1)                the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness so Refinanced (plus unpaid accrued interest and premium (including tender premiums) thereon and underwriting discounts, defeasance costs, fees, commissions and other costs and expenses incurred in connection with such Refinancing);

 

(2)                other than with respect to Customary Bridge Loans, (i) the Weighted Average Life to Maturity of such Permitted Refinancing Indebtedness may not be shorter than the longest remaining Weighted Average Life to Maturity of the Refinanced Debt at the time of incurrence thereof and (ii) the final maturity date of such Permitted Refinancing Indebtedness is not earlier than the maturity of the Indebtedness being Refinanced;

 

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(3)                if the Indebtedness being Refinanced is subordinated in right of payment or lien priority to any Obligations under this Agreement, such Permitted Refinancing Indebtedness is subordinated in right of payment or lien priority to such Obligations on terms at least as favorable to the Lenders (as determined in good faith by a Responsible Officer of the Borrower) as those contained in the documentation governing the Indebtedness being Refinanced;

 

(4)                no Permitted Refinancing Indebtedness may have different obligors, or greater Guarantees or security, than the Indebtedness being Refinanced; and

 

(5)                in the case of a Refinancing of Indebtedness that is secured on a pari passu basis with, or on a junior basis to, the Loans with Indebtedness that is secured on a junior basis to the Loans, a Debt Representative acting on behalf of the holders of such Indebtedness has become party to or is otherwise subject to the provisions of an Acceptable Intercreditor Agreement.

 

Indebtedness constituting Permitted Refinancing Indebtedness will not cease to constitute Permitted Refinancing Indebtedness as a result of the subsequent extension of the Latest Maturity Date after the date of original incurrence thereof.

 

“Person” means any natural person, corporation, business trust, joint venture, association, company, partnership, limited liability company, government, individual or family trust, Governmental Authority or other entity of whatever nature.

 

“Physician-Owned Practice” means with respect to any facility located in any jurisdiction in which ownership of the relevant medical practice(s) to be provided at such facility by non-licensed medical professionals is prohibited by applicable law, any entity (i) 100% of the Equity Interests of which is owned by one or more physicians or other licensed medical professionals who provide services in connection with the applicable medical practice and (ii) that has entered into and continues to be subject to a Management Services Agreement.

 

“PIPE Transaction” has the meaning assigned to such term in the recitals hereof.

 

“Plan” means any “employee pension benefit plan” as defined in Section 3(2) of ERISA (other than a Multiemployer Plan) that is (1) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA; and (2) either (a) sponsored or maintained (at the time of determination or at any time within the five years prior thereto) by the Borrower or any of its Subsidiaries or any ERISA Affiliate or (b) in respect of which the Borrower or any of its Subsidiaries or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.

 

“Plan of Reorganization” has the meaning assigned to such term in Section 8.01(5).

 

“Platform” has the meaning assigned to such term in Section 9.17(1).

 

“Pledged Collateral” means “Pledged Collateral” as defined in the Collateral Agreement.

 

“PPP Escrow Agent” means JPMorgan Chase Bank., N.A., in its capacity as the escrow agent under the PPP Escrow Agreement.

 

“PPP Escrow Agreement” means a Security Agreement re: Deposit Account in a form agreed upon between the PPP Escrow Agent, the Borrower and O.M. Investment Group, Inc. as the CareMax Representative (the “CareMax Representative”), which form shall include joint instructions from the CareMax Representative and the Borrower to release any funds being held in escrow with the PPP Escrow Agent.

 

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“PPP Lender” means JPMorgan Chase Bank., N.A., in its capacity as the lender in connection with the PPP Loans.

 

“PPP Loans” means those certain outstanding loans as set forth on Section 6.30 of the Company Disclosure Schedules annexed to the Acquisition Agreement.

 

“Prime Rate” means the rate of interest per annum determined by the Administrative Agent from time to time as its prime commercial lending rate for United States Dollar loans in the United States for such day, changing effective on the date of announcement of changes to such prime commercial lending rate. The Prime Rate is not necessarily the lowest rate that the Administrative Agent is charging any corporate customer.

 

“Pro Forma Basis”, “Pro Forma Compliance” and “Pro Forma Effect” mean, with respect to the calculation of the First Lien Net Leverage Ratio, the Total Net Leverage Ratio, the Fixed Charge Coverage Ratio, Consolidated EBITDA, or any other calculation (including, without limitation, of any basket, threshold, test, financial ratio or covenant hereunder (including, for the avoidance of doubt, the Financial Performance Covenants), required by the terms of this Agreement or the other Loan Documents to be made on a Pro Forma Basis, as of any date, that (1) pro forma effect will be given to Specified Transactions, in each case that have occurred during the four consecutive fiscal quarter period of the Borrower being used to calculate such financial ratio (the “Reference Period”), or, other than with respect to the calculation of any Required ECF Percentage (other than in respect of any permanent payments of Indebtedness on or prior to the date any Excess Cash Flow mandatory payment is made for which such Required ECF Percentage is being calculated (including any such Excess Cash Flow mandatory payment) not funded with long term indebtedness (other than revolving indebtedness)), Applicable Rate and actual compliance with the Financial Performance Covenants, subsequent to the end of the Reference Period but prior to such date or prior to or simultaneously with the event for which a determination under this definition is made (including any such event occurring at a Person who became a Restricted Subsidiary after the commencement of the Reference Period), as if each such event occurred on the first day of the Reference Period, and (2) without duplication with any addback in the definition of Consolidated EBITDA, pro forma effect will be given to (i) pro forma “run rate” cost savings, operating expense reductions, restructuring charges and synergies related to operational efficiencies, strategic initiatives, purchasing improvements, acquisitions, divestitures, other specified transactions, restructurings, cost savings initiatives and other initiatives and actions that are related to or resulting from the Transactions, reasonably expected by the Borrower, the Restricted Subsidiaries and the Physician-Owned Practices to be realized within 18 months of the date of such calculation (without duplication of the amount of actual benefits realized during such period from such actions), which cost savings, operating expense reductions, restructuring charges and synergies are factually supportable and reasonably identifiable in the good faith determination of the Borrower, as certified in writing by a Financial Officer of the Borrower plus (ii) factually supportable and identifiable pro forma “run rate” cost savings, operating expense reductions, restructuring charges and synergies related to operational efficiencies, strategic and cost savings initiatives, purchasing improvements, acquisitions, divestitures, other specified transactions, restructurings, Permitted Acquisitions or any other acquisition that constitutes a Permitted Investment and other initiatives and actions, in each case, reasonably expected by the Borrower, the Restricted Subsidiaries and the Physician-Owned Practices to be realized based upon actions that have been taken as of such date of such calculation or are reasonably expected to be taken within 18 months of the date of such calculation (without duplication of the amount of actual benefit realized during such period from such actions), which cost savings, operating expense reductions, restructuring charges, improvements and synergies can be reasonably computed, as certified in writing by a Financial Officer of the Borrower; provided that the aggregate amount added back under this clause (2) and clauses (d)(ii), (i), (k) and (l)(II) of the definition of “Consolidated EBITDA” shall not exceed the Expenses and Synergies Cap for the four fiscal quarter period ending on the last day of such period (calculated on a Pro Forma Basis and after giving effect to any such add-backs).

 

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“Pro Forma Financial Statements” means the unaudited pro forma consolidated balance sheet of the Borrower and its Subsidiaries as of the date of the most recent consolidated balance sheet delivered pursuant to Section 4.01(4) and a pro forma statement of operations and Consolidated EBITDA for the twelve-month period ending on such balance sheet date, in each case adjusted to give effect to the Transactions, the other transactions related thereto and such other adjustments as are reflected in the Financial Model.

 

“Projections” means all projections (including financial estimates, financial models, forecasts and other forward-looking information) furnished to the Lenders or the Administrative Agent by or on behalf of the Borrower or any of its Subsidiaries on or prior to the Closing Date.

 

“PTE” means a prohibited transaction class exemption issued by the U.S. Department of Labor, as any such exemption may be amended from time to time.

 

“Public Company Costs” means, as to any Person, costs associated with, or in anticipation of, or preparation for, compliance with the requirements of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated in connection therewith and costs relating to compliance with the provisions of the Securities Act and the Exchange Act or other comparable body of laws, rules or regulations, as companies with listed equity, directors’ compensation, fees and expense reimbursement, costs relating to enhanced accounting functions and investor relations, stockholder meetings and reports to stockholders, directors’ and officers’ insurance and other executive costs, legal and other professional fees, listing fees and other transaction costs, in each case to the extent arising solely by virtue of the listing of such Person’s equity securities on a national securities exchange or issuance of public debt securities.

 

“Public Lender” has the meaning assigned to such term in Section 9.17(2).

 

“Purchase Documents” means the collective reference to the Acquisition Agreement, all exhibits and schedules thereto and all agreements expressly contemplated thereby.

 

“Purchasing Borrower Party” means the Borrower or any Subsidiary of the Borrower that becomes an Assignee or Participant pursuant to Section 9.04(14).

 

“QFC” has the meaning assigned to the term “qualified financial contract” in, and shall be interpreted in accordance with, 12 U.S.C. 5390(c)(8)(D).

 

“QFC Credit Support” has the meaning assigned to such term in Section 9.25.

 

“Qualified Counterparty” means any counterparty to any Specified Hedge Agreement that, at the time such Specified Hedge Agreement was entered into or on the Closing Date, was an Agent, a Lead Arranger or a Lender or an Affiliate of the foregoing, whether or not such Person subsequently ceases to be an Agent, a Lead Arranger or a Lender or an Affiliate of the foregoing.

 

“Qualified Equity Interests” means any Equity Interests other than Disqualified Stock.

 

“Quarterly Financial Statements” has the meaning assigned to such term in Section 5.04(2).

 

“Real Property” means, collectively, all right, title and interest (including any leasehold estate) in and to any and all parcels of or interests in real property owned in fee or leased by any Loan Party, together with, in each case, all easements, hereditaments and appurtenances relating thereto, and all improvements and appurtenant fixtures incidental to the ownership or lease thereof.

 

“Recipient” means the Administrative Agent and any Lender, as applicable.

 

“Reference Time” with respect to any setting of the then-current Benchmark means (1) if such Benchmark is USD LIBOR, 11:00 a.m., London time, on the day that is two (2) London banking days preceding the date of such setting, and (2) if such Benchmark is not USD LIBOR, the time determined by the Administrative Agent in its reasonable discretion.

 

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“Refinance” has the meaning assigned to such term in the definition of “Permitted Refinancing Indebtedness,” and the terms “Refinanced” and “Refinancing” will have correlative meanings.

 

“Refinanced Debt” has the meaning assigned to such term in the definition of “Credit Agreement Refinancing Indebtedness”.

 

“Refinancing Amendment” means an amendment to this Agreement (and, as necessary, each other Loan Document) executed by each of (1) the Borrower; (2) the Administrative Agent; and (3) each Lender that agrees to provide any portion of the Other Refinancing Loans in accordance with Section 2.23.

 

“Refunded Swing Line Loans” has the meaning assigned to such term in Section 2.04(2)(d).

 

“Register” has the meaning assigned to such term in Section 2.04(2)(d).

 

“Registered Equivalent Notes” means, with respect to any notes originally issued in a Rule 144A or other private placement transaction under the Securities Act, substantially identical notes (having the same Guarantees and collateral provisions) issued by the Borrower in a dollar-for-dollar exchange therefor pursuant to an exchange offer registered with the SEC.

 

“Regulation T” means Regulation T of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.

 

“Regulation U” means Regulation U of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.

 

“Regulation X” means Regulation X of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.

 

“Reinvestment Deferred Amount” means, with respect to any Reinvestment Event, the aggregate amount of Net Cash Proceeds received by the Borrower or a Restricted Subsidiary in connection therewith that are not applied to prepay the Term Loans as a result of the delivery of a Reinvestment Notice.

 

“Reinvestment Event” means any Asset Sale or Event of Loss in respect of which the Borrower has delivered a Reinvestment Notice.

 

“Reinvestment Notice” means a written notice executed by a Responsible Officer stating that the Borrower or any Restricted Subsidiary intends and expects to use the amount of Net Cash Proceeds of an Asset Sale or Event of Loss to restore, rebuild, repair, construct, improve, replace or otherwise acquire assets used or useful in the Borrower’s or a Restricted Subsidiary’s business.

 

“Reinvestment Prepayment Amount” means, with respect to any Reinvestment Event, the Reinvestment Deferred Amount relating thereto that would be required to be prepaid under Section 2.12(2) less any amount expended by the Borrower or a Restricted Subsidiary prior to the relevant Reinvestment Prepayment Date to restore, rebuild, repair, construct, improve, replace or otherwise acquire assets used or useful in the Borrower’s or a Restricted Subsidiary’s business.

 

“Reinvestment Prepayment Date” means, with respect to any Reinvestment Event, the date occurring twelve (12) months after such Reinvestment Event or, if the Borrower or a Restricted Subsidiary has entered into a legally binding commitment within one year after such Reinvestment Event to restore, rebuild, repair, construct, improve, replace or otherwise acquire assets used or useful in the Borrower’s or a Restricted Subsidiary’s business, the date occurring eighteen (18) months after such Reinvestment Event.

 

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“Related Parties” means, with respect to any specified Person, such Person’s Affiliates and the respective directors, officers, employees, agents, advisors, controlled Affiliates and controlling Persons of such Person and such Person’s Affiliates.

 

“Related Persons” means, in respect of an Indemnitee, (a) any controlling Person or controlled Affiliate of such Person, (b) the respective directors, officers and employees of such Person or any of its controlling Persons or controlled Affiliates and (c) the respective agents of such Person or any of its controlling Persons or controlled Affiliates, in the case of this clause (c), acting on behalf of or at the express instructions of such Person, controlling Person or controlled Affiliate.

 

“Release” means any spilling, leaking, seepage, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, disposing, depositing or migrating in, into, upon, onto or through the Environment.

 

“Relevant Governmental Body” means the Board of Governors of the Federal Reserve System or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the Board of Governors of the Federal Reserve System or the Federal Reserve Bank of New York, or any successor thereto.

 

“Remaining Present Value” means, as of any date with respect to any lease, the present value as of such date of the scheduled future lease payments with respect to such lease, determined with a discount rate equal to a market rate of interest for such lease reasonably determined at the time such lease was entered into.

 

“Reportable Event” means any reportable event as defined in Section 4043(c) of ERISA or the regulations issued thereunder, other than those events as to which the 30 day notice period referred to in Section 4043(c) of ERISA has been waived, with respect to a Plan (other than a Plan maintained by an ERISA Affiliate that is considered an ERISA Affiliate only pursuant to subsection (m) or (o) of Section 414 of the Code).

 

“Required DDTL Lenders” means, at any time, DDTL Lenders (other than Defaulting Lenders) then holding DDTL Facility Commitments (and after such DDTL Facility Commitments are terminated, DDTL Facility Credit Exposures) representing more than 50% of the DDTL Facility Commitments (and after the DDTL Facility Commitments are terminated, DDTL Facility Credit Exposures) at such time. The DDTL Facility Commitments (and after such DDTL Facility Commitments are terminated, DDTL Facility Credit Exposures) of any Defaulting Lender will be disregarded in determining Required DDTL Lenders.

 

“Required ECF Percentage” means, with respect to any Excess Cash Flow Period, the percentage set forth in the table below based on the First Lien Net Leverage Ratio determined as of the last day of such Excess Cash Flow Period (but after giving Pro Forma Effect to any permanent payments of Indebtedness prior to the date any Excess Cash Flow mandatory payment is made for which such Required ECF Percentage is being calculated:

 

First Lien
Net Leverage Ratio 		  Required Percentage  
Greater than 1.50:1.00     50.0 %
Less than or equal to 1.50:1.00 but greater than 1.00:1.00     25.0 %
Less than 1.00:1.00     0.0 %

 

“Required Financial Statements” has the meaning assigned to such term in Section 5.04(2).

 

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“Required Lender Consent Items” has the meaning assigned to such term in Section 9.04(12)(c).

 

“Required Lenders” means, at any time, Lenders (other than Defaulting Lenders) then holding Revolving Facility Commitments (and after such Revolving Facility Commitments are terminated, Revolving Facility Credit Exposures), Term Commitments and outstanding Term Loans representing more than 50% of the Revolving Facility Commitments (and after the Revolving Facility Commitments are terminated, Revolving Facility Credit Exposures), the DDTL Facility Commitments (and after the DDTL Facility Commitments are terminated, DDTL Facility Credit Exposures) and outstanding Term Loans at such time. The Revolving Facility Commitments (and after such Revolving Facility Commitments are terminated, Revolving Facility Credit Exposures), Term Commitments and outstanding Term Loans of any Defaulting Lender will be disregarded in determining Required Lenders; provided that subject to the Borrower’s right to replace Defaulting Lenders as set forth herein, Defaulting Lenders will be included in determining Required Lenders with respect to any amendment that would disproportionately affect the obligation of the Borrower to make payment of the Loans or Commitments of such Defaulting Lender as compared to other Lenders holding the same Class of Loans or Commitments in a manner that is adverse to such Defaulting Lender.

 

“Required Prepayment Asset Sale” has the meaning assigned to such term in Section 2.12(2).

 

“Required Revolving Lenders” means, at any time, Revolving Lenders (other than Defaulting Lenders) having Revolving Facility Commitments (and after such Revolving Facility Commitments are terminated, Revolving Facility Credit Exposures) representing more than 50% of the Revolving Facility Commitments (and after the Revolving Facility Commitments are terminated, Revolving Facility Credit Exposures) at such time. The Revolving Facility Commitments (and after such Revolving Facility Commitments are terminated, Revolving Facility Credit Exposures) of any Defaulting Lender will be disregarded in determining Required Revolving Lenders.

 

“Resolution Authority” means an EEA Resolution Authority or, with respect to any UK Financial Institution, a UK Resolution Authority.

 

“Responsible Officer” means, with respect to any Loan Party, the chief executive officer, vice president, chief administrative officer, secretary, assistant secretary or any Financial Officer or other similar officer of such Loan Party, or any other individual designated in writing to the Administrative Agent by an existing Responsible Officer of such Loan Party as an authorized signatory of any certificate or other document to be delivered hereunder. Any document delivered hereunder that is signed by a Responsible Officer of a Loan Party will be conclusively presumed to have been authorized by all necessary corporate, partnership or other action on the part of such Loan Party and such Responsible Officer will be conclusively presumed to have acted on behalf of such Loan Party.

 

“Restricted Payments” has the meaning assigned to such term in Section 6.06.

 

“Restricted Subsidiary” means any Subsidiary of a Person other than an Unrestricted Subsidiary of such Person. Unless otherwise indicated in this Agreement, all references to Restricted Subsidiaries will mean Restricted Subsidiaries of the Borrower.

 

“Return” means, with respect to any Investment, any dividend, distribution, interest, fee, premium, return of capital, repayment of principal, income, profit (from a disposition or otherwise) and any other amount received or realized in respect in cash (or the fair market value of property and assets received as determined by the Borrower in good faith) thereof.

 

“Revolving Facility” means the Revolving Facility Commitments and the extensions of credit made hereunder by the Revolving Lenders. Following the establishment of any Other Revolving Commitments or Extended Revolving Commitments, such Other Revolving Commitments or Extended Revolving Commitments will be considered a separate Revolving Facility hereunder.

 

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“Revolving Facility Commitment” means, as to each Revolving Lender, its obligation to (a) make Revolving Loans to the Borrower pursuant to Section 2.01(3), (b) purchase participations in Letter of Credit Commitments and (c) make (or acquire participations in) Swing Line Loans, in an aggregate principal amount at any one time outstanding not to exceed the amount set forth opposite such Revolving Lender’s name on Schedule 2.01 under the caption “Revolving Facility Commitment” or in the Assignment and Acceptance pursuant to which such Lender becomes a party hereto, as applicable, as such amount may be adjusted from time to time in accordance with this Agreement and includes an Extended Revolving Commitment, an Other Revolving Commitment and/or any Incremental Revolving Facility Commitment, as the context may require. References to “Revolving Facility Commitments” shall mean the Revolving Facility Commitment of each Revolving Lender taken together in the aggregate. The initial aggregate amount of Revolving Facility Commitments of all Revolving Lenders is $40,000,000.

 

“Revolving Facility Commitment Fee” has the meaning assigned to such term in Section 2.13(1)(a).

 

“Revolving Facility Commitment Termination Date” means, with respect to the Revolving Facility Commitment of any Revolving Lender, the earliest of (a) the applicable Maturity Date of such Revolving Facility Commitment and (b) the date on which the Revolving Facility Commitments have been terminated in full or reduced to zero pursuant to Section 2.08(2).

 

“Revolving Facility Credit Exposure” means, at any time, the sum of: (a) the aggregate principal amount of the Revolving Loans outstanding at such time, (b) the Revolving L/C Exposure at such time and (c) the aggregate outstanding principal amount of all Swing Line Loans outstanding at such time. The Revolving Facility Credit Exposure of any Revolving Lender at any time will be, subject to adjustment as expressly provided in Section 2.25, the product of (a) such Revolving Lender’s Revolving Facility Percentage and (b) the aggregate Revolving Facility Credit Exposure of all Revolving Lenders, collectively, at such time.

 

“Revolving Facility Percentage” means, with respect to any Revolving Lender, the percentage of the total Revolving Facility Commitments represented by such Lender’s Revolving Facility Commitment. If the Revolving Facility Commitments have terminated or expired, the Revolving Facility Percentages will be determined based upon the Revolving Facility Commitments most recently in effect, giving effect to any assignments pursuant to Section 9.04.

 

“Revolving L/C Exposure” means at any time the sum of (a) the aggregate undrawn amount of all outstanding Letters of Credit at such time and (b) the aggregate amount of all L/C Disbursements that have not yet been reimbursed by or on behalf of the Borrower at such time. The Revolving L/C Exposure of any Revolving Lender at any time will mean its Revolving Facility Percentage of the aggregate Revolving L/C Exposure at such time. For all purposes of this Agreement, if on any date of determination a Letter of Credit has expired by its terms but any amount may still be drawn thereunder by reason of the operation of Rule 3.14 of the International Standby Practices, International Chamber of Commerce No. 590, such Letter of Credit shall be deemed to be “outstanding” in the amount so remaining available to be drawn. Unless otherwise specified herein, the amount of a Letter of Credit at any time shall be deemed to be the stated amount of such Letter of Credit in effect at such time; provided, that with respect to any Letter of Credit that, by its terms or the terms of any document related thereto, provides for one or more automatic increases in the stated amount thereof, the amount of such Letter of Credit shall be deemed to be the maximum stated amount of such Letter of Credit after giving effect to all such increases, whether or not such maximum stated amount is in effect at such time.

 

“Revolving Lender” means each Lender with a Revolving Facility Commitment or outstanding Revolving Facility Credit Exposure.

 

“Revolving Loan Borrowing” has the meaning assigned to such term in Section 1.09.

 

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“Revolving Loans” means the revolving loans made by the Revolving Lenders pursuant to Section 2.01(3).

 

“S&P” means Standard & Poor’s Ratings Services or any successor entity thereto.

 

“Sale and Lease-Back Transaction” has the meaning assigned to such term in Section 6.03.

 

“Sanctioned Country” has the meaning assigned to such term in Section 3.19(3)(b).

 

“Sanctioned Persons” has the meaning assigned to such term in Section 3.19(3)(b).

 

“Sanctions” has the meaning assigned to such term in Section 3.19(3)(a).

 

“Screen Rate” has the meaning assigned to such term in the definition of “Eurocurrency Rate.”

 

“SEC” means the Securities and Exchange Commission or any successor thereto.

 

“Secured Parties” means the collective reference to the “Secured Parties” as defined in the Collateral Agreement.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Security Documents” means the collective reference to the Collateral Agreement, the Mortgages (if any), the Intellectual Property Security Agreements and each of the security agreements and other instruments and documents executed and delivered by any Loan Party pursuant hereto, thereto or pursuant to which a Loan Party grants a Lien on Collateral to secure the Obligations.

 

“Senior Managing Agents” means Citizens Bank NA, Regions Bank, Capital One, N.A. and Fifth Third Bank, National Association, each in its capacity as a senior managing agent.

 

“SMA” has the meaning assigned to such term in the definition of “Heat Acquisition”.

 

“SMM” has the meaning assigned to such term in the definition of “Heat Acquisition”.

 

“SOFR” means, with respect to any Business Day, a rate per annum equal to the secured overnight financing rate for such Business Day published by the SOFR Administrator on the SOFR Administrator’s Website on the immediately succeeding Business Day.

 

“SOFR Administrator” means the Federal Reserve Bank of New York (or a successor administrator of the secured overnight financing rate).

 

“SOFR Administrator’s Website” means the website of the Federal Reserve Bank of New York, currently at http://www.newyorkfed.org, or any successor source for the secured overnight financing rate identified as such by the SOFR Administrator from time to time.

 

“Specified Acquisition Agreement Representations” means such of the representations and warranties made by or with respect to the Acquired Business in the Acquisition Agreement as are material to the interests of the Lenders, but only to the extent that the accuracy of such representations and warranties is a condition to the Borrower or any of its Affiliates’ obligation to consummate the Acquisition under the Acquisition Agreement or to the extent that the Borrower has the right to terminate all of its (or any of the Borrower’s Affiliates has the right to terminate its) obligations under the Acquisition Agreement (without giving effect to notice or lapse of time or both) as a result of a breach of such representations and warranties in the Acquisition Agreement.

 

“Specified Equity Contribution” has the meaning assigned to such term in Section 7.02(1).

 

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“Specified Event of Default” means any Event of Default under Section 7.01(2), 7.01(3), 7.01(8) or 7.01(9).

 

“Specified Hedge Agreement” means any Hedge Agreement entered into or assumed between or among the Borrower or any other Restricted Subsidiary and any Qualified Counterparty and designated by the Qualified Counterparty and the Borrower in writing to the Administrative Agent as a “Specified Hedge Agreement” under this Agreement (which designation shall include a certification by such Qualified Counterparty that it is eligible to be a Qualified Counterparty in accordance with the definition thereof).

 

“Specified Hedge Obligations” means all amounts owing to any Qualified Counterparty under any Specified Hedge Agreement.

 

“Specified Representations” means the representations and warranties of each of the Borrower and the other Loan Parties set forth in the following sections of this Agreement:

 

(1)                Section 3.01(1) and (4) (but solely with respect to its organizational existence and status and organizational power and authority as to the execution, delivery and performance of this Agreement and the other Loan Documents to which it is a party);

 

(2)                Section 3.02(1) (but solely with respect to its authorization of this Agreement and the other Loan Documents to which it is a party);

 

(3)                Section 3.02(2)(a)(i) (but solely as it relates to the execution, delivery and performance of this Agreement and the other Loan Documents to which it is a party, and solely with respect to non-conflict of this Agreement and the other Loan Documents to which it is a party with its Organizational Documents);

 

(4)                Section 3.03 (but solely with respect to execution and delivery by it, and enforceability against them, of this Agreement and the other Loan Documents to which it is a party);

 

(5)                Section 3.08(2);

 

(6)                Section 3.09;

 

(7)                Section 3.14 (subject to Permitted Liens and subject to the Certain Funds Provision);

 

(8)                Section 3.16;

 

(9)                Section 3.19(1) and 3.19(3)(a); and

 

(10)              Section 3.25.

 

To the extent any of the Specified Representations with respect to the Companies and any of their respective Subsidiaries are qualified by or subject to “Material Adverse Effect,” the definition thereof shall be “Material Adverse Effect” as defined in and construed in accordance with the Acquisition Agreement for purposes of any representations and warranties made or to be made on, or as of, the Closing Date (or a date prior thereto).

 

“Specified Transaction” means the Transactions, any Permitted Acquisition or Investment (including any Limited Condition Transaction), any fundamental changes, any issuance, incurrence, assumption or permanent repayment of Indebtedness (including Indebtedness issued, incurred or assumed as a result of, or to finance, any relevant transaction and for which any such financial ratio or other calculation is being calculated), all sales, transfers and other dispositions of any Subsidiary, line of business or division, or any conversion of a Restricted Subsidiary to an Unrestricted Subsidiary or of an Unrestricted Subsidiary to a Restricted Subsidiary, any Restricted Payment, any incurrence of Liens or any restructuring, strategic and other cost savings initiatives, in each case, in connection with an acquisition or Investment or any other event that by the terms of this Agreement requires Pro Forma Compliance with a test or covenant hereunder or requires a test or covenant to be calculated on a Pro Forma Basis or after giving Pro Forma Effect; provided that any increase in the Commitments (including, for this purpose, any Commitment in respect of any incurrence of DDTLs, any Incremental Facility or Extended Term Loan or Extended Revolving Commitment) above the amount of Commitments in effect immediately prior to such calculation, for purposes of this “Specified Transaction” definition, shall be deemed to be fully drawn solely on the date of any such increase in connection with determining if such increase is permitted hereunder; provided, further, that, at the Borrower’s election, any such Specified Transaction (other than a Restricted Payment) having an aggregate value of less than or equal to the greater of (x) $2,250,000 and (y) 5.0% of Consolidated EBITDA shall not be calculated on a “Pro Forma Basis.”

 

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“Standby Letters of Credit” has the meaning assigned to such term in Section 2.05(1).

 

“Statutory Reserves” means the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) established by the Board and any other banking authority, domestic or foreign, to which the Administrative Agent or any Lender (including any branch, Affiliate or other fronting office making or holding a Loan) is subject for Eurocurrency Liabilities (as defined in Regulation D of the Board). Eurocurrency Loans shall be deemed to constitute Eurocurrency Liabilities and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D. Statutory Reserves shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.

 

“Subagent” has the meaning assigned to such term in Section 8.02.

 

“Subsidiary” means, with respect to any Person, any corporation, partnership, limited liability company, joint venture, association or other entity of which (1) Equity Interests having ordinary voting power (other than Equity Interests having such power only by reason of the happening of a contingency) to elect a majority of the Board of Directors of such corporation, partnership, limited liability company, joint venture, association or other entity are at the time owned by such Person; or (2) more than 50.0% of the Equity Interests are at the time owned by such Person. Unless otherwise indicated in this Agreement, all references to Subsidiaries will mean Subsidiaries of the Borrower. For the avoidance of doubt, no Physician-Owned Practice is a Subsidiary of the Borrower or any Restricted Subsidiary.

 

“Subsidiary Loan Parties” means (1) each Wholly Owned Domestic Subsidiary (other than any Excluded Subsidiary) of the Borrower on the Closing Date and (2) each Wholly Owned Domestic Subsidiary (other than any Excluded Subsidiary) of the Borrower that becomes a party to the Collateral Agreement after the Closing Date.

 

“Successor Company” has the meaning assigned to such term in Section 6.05(1)(a).

 

“Supported QFC” has the meaning assigned to such term in Section 9.25.

 

“Swap Obligation” means, with respect to any Guarantor, any obligation to pay or perform under any agreement, contract or transaction that constitutes a “swap” within the meaning of section 1a(47) of the Commodity Exchange Act.

 

“Swap Termination Value” means, in respect of any one or more Hedge Agreements, after taking into account the effect of any legally enforceable netting agreement relating to such Hedge Agreements, (a) for any date on or after the date such Hedge Agreements have been closed out and termination value(s) determined in accordance therewith, such termination value(s), and (b) for any date prior to the date referenced in clause (a), the amount(s) determined as the mark-to-market value(s) for such Hedge Agreements, as determined based upon one or more mid-market or other readily available quotations provided by any recognized dealer in such Hedge Agreements (which may include a Lender or any Affiliate of a Lender).

 

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“Swing Line Lender” means Royal Bank of Canada in its capacity as provider of Swing Line Loans, or any successor swing line lender pursuant to Section 2.04(3).

 

“Swing Line Loan” has the meaning assigned to such term in Section 2.04.

 

“Swing Line Sublimit” means $7,500,000. The Swing Line Sublimit is part of, and not in addition to, the Revolving Facility.

 

“Taxes” means any and all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding) or similar charges imposed by any Governmental Authority and any and all interest and penalties related thereto.

 

“Term Commitment” means, as to each Term Lender, its obligation to make Term Loans to the Borrower hereunder, expressed as an amount representing the maximum principal amount of the Term Loans to be made by such Lender under this Agreement, as such commitment may be (a) reduced from time to time pursuant to this Agreement and (b) reduced or increased from time to time pursuant to (i) assignments by or to such Lender pursuant to an Assignment and Acceptance, (ii) an Incremental Facility Amendment, (iii) a Refinancing Amendment or (iv) an Extension Amendment. The amount of each Lender’s initial Term Commitment is set forth on Schedule 2.01 under the captions “Initial Term Loan Commitment” and “DDTL Facility Commitment” and the amount of each Lender’s other Term Commitments shall be as set forth in the Assignment and Acceptance, Extension Amendment, Incremental Facility Amendment or Refinancing Amendment pursuant to which such Term Lender shall have assumed or made its Term Commitment, as the case may be, as such amounts may be adjusted from time to time in accordance with this Agreement. The initial aggregate amount of (i) Initial Term Loan Commitments is $125,000,000 and (ii) DDTL Facility Commitments is $20,000,000.

 

“Term Facility” means the facility and commitments utilized in making Term Loans hereunder. Following the establishment of any Incremental Term Loans (other than an increase to an existing Term Facility), Other Term Loans or Extended Term Loans, such Incremental Term Loans, Other Term Loans or Extended Term Loans will be considered a separate Term Facility hereunder.

 

“Term Lender” means any Lender that holds Term Loans and/or Term Commitments at such time.

 

“Term Loan Installment Date” means, as the context requires, an Original Term Loan Installment Date, an Incremental Term Loan Installment Date, an Other Term Loan Installment Date or an Extended Term Loan Installment Date.

 

“Term Loans” means, collectively, any term loan made hereunder pursuant to Section 2.01 (including the Initial Term Loans and any DDTLs), including, unless the context otherwise requires, any Incremental Term Loans, any Other Term Loans and any Extended Term Loans.

 

“Term SOFR” means, for the applicable Corresponding Tenor as of the applicable Reference Time, the forward-looking term rate based on SOFR that has been selected or recommended by the Relevant Governmental Body.

 

“Term SOFR Notice” means a notification by the Administrative Agent to the Lenders and the Borrower of the occurrence of a Term SOFR Transition Event.

 

“Term SOFR Transition Event” means the determination by the Administrative Agent that (a) Term SOFR has been recommended for use by the Relevant Governmental Body, and is determinable for each Available Tenor and (b) the administration of Term SOFR is administratively feasible for the Administrative Agent.

 

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“Termination Date” means the date the Commitments have been terminated and the Obligations (other than (i) Specified Hedge Obligations and Cash Management Obligations that are not then due and payable and (ii) contingent indemnification and reimbursement obligations that are not yet due and payable and for which no claim has been asserted) have been paid in full and all Letters of Credit have expired, terminated or been cash-collateralized or back stopped or grandfathered into another facility on terms satisfactory to the applicable Issuing Bank.

 

“Test Period” means at any time, the most recent period of four (4) consecutive fiscal quarters of the Borrower for which Required Financial Statements have been delivered (or were required to have been delivered) pursuant to Section 5.04(1) or (2)).

 

“Third Party Material” has the meaning assigned to such term in Section 3.12(i).

 

“Title Company” has the meaning assigned to such term in Section 5.11(2)(c).

 

“Title Policy” has the meaning assigned to such term in Section 5.11(2)(c).

 

“Total Net Leverage Ratio” means, as of any date, the ratio of (a) Consolidated Total Net Debt as of the last day of the then most recently ended Test Period, to (b) Consolidated EBITDA for the then most recently ended Test Period, calculated on a Pro Forma Basis.

 

“Trade Date” has the meaning assigned to such term in Section 9.04(8).

 

“Trade Letters of Credit” has the meaning assigned to such term in Section 2.05(1).

 

“Transaction Costs” has the meaning assigned to such term in the recitals hereof.

 

“Transaction Documents” means the Purchase Documents and the Loan Documents.

 

“Transaction Participant” means BankUnited, N.A., in its capacity as a participant.

 

“Transactions” means, collectively, the transactions to occur pursuant to the Transaction Documents, including:

 

(1)                the consummation of the Acquisition;

 

(2)                the execution and delivery of the Loan Documents, the creation of the Liens pursuant to the Security Documents and the initial Borrowings and other initial Credit Extensions hereunder on the Closing Date;

 

(3)                the consummation of the PIPE Transaction;

 

(4)                the closing of the Closing Date Refinancing;

 

(5)                the de-SPAC process, including, without limitation, the preparation, SEC review, printing and circulation of the proxy statement with respect to the Acquisition, the meeting of the shareholders of the Borrower to approve the Acquisition and the preparation and filing of the Borrower’s other filings with the SEC pursuant to the Securities Act and the Exchange Act in connection therewith and the PIPE Transaction; and

 

(6)                the payment of the Transaction Costs.

 

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“Type” means, when used in respect of any Loan or Borrowing, the Rate by reference to which interest on such Loan or on the Loans comprising such Borrowing is determined. For purposes hereof, the term “Rate” means Adjusted Eurocurrency Rate or ABR, as applicable.

 

“UK Financial Institution” means any BRRD Undertaking (as such term is defined under the PRA Rulebook (as amended from time to time) promulgated by the United Kingdom Prudential Regulation Authority) or any person subject to IFPRU 11.6 of the FCA Handbook (as amended from time to time) promulgated by the United Kingdom Financial Conduct Authority, which includes certain credit institutions and investment firms, and certain affiliates of such credit institutions or investment firms.

 

“UK Resolution Authority” means the Bank of England or any other public administrative authority having responsibility for the resolution of any UK Financial Institution.

 

“Unadjusted Benchmark Replacement” means the applicable Benchmark Replacement excluding the related Benchmark Replacement Adjustment.

 

“Unaudited Financial Statements” means the unaudited consolidated balance sheets and related statements of income, changes in equity and cash flows of each of the Acquired Businesses, in each case, for each subsequent fiscal quarter ended at least forty-five (45) days prior to the Closing Date.

 

“Uniform Commercial Code” or “UCC” means the Uniform Commercial Code as the same may from time to time be in effect in the State of New York or the Uniform Commercial Code (or similar code or statute) of another jurisdiction, to the extent it may be required to apply to any item or items of Collateral.

 

“Unrestricted Cash” means, as of any date, the amount of (x) all cash and Cash Equivalents of the Borrower, the Restricted Subsidiaries and the Physician-Owned Practices as of such date that would not appear as “restricted” on the Required Financial Statements and (y) all cash and Cash Equivalents of the Borrower, the Restricted Subsidiaries and the Physician-Owned Practices that are restricted in favor of (i) the Collateral Agent on behalf of the Secured Parties in respect of any of the Facilities and/or (ii) in the case of the Physician-Owned Practices, that are restricted in favor of the Loan Parties, in each case, whether or not held in a pledged account, determined on a consolidated basis in accordance with GAAP based upon the financial statements for the then most recently ended Test Period as of such date, and calculated on a Pro Forma Basis; provided that, other than in the case of determining compliance with the Financial Performance Covenants, cash funded to the balance sheet on the Closing Date shall be deemed to be “restricted” for all purposes hereunder.

 

“Unrestricted Subsidiary” means any Subsidiary of the Borrower (a) designated by the Borrower as an Unrestricted Subsidiary hereunder by written notice to the Administrative Agent and (b) any Subsidiary of an Unrestricted Subsidiary, in the case of clause (a) above, until such Subsidiary is redesignated as a Restricted Subsidiary in accordance with the terms of this Agreement; provided that the Borrower will only be permitted to so designate a new Unrestricted Subsidiary after the Closing Date or subsequently re-designate any such Unrestricted Subsidiary as a Restricted Subsidiary (by written notice to the Administrative Agent) if:

 

(1)                no Default or Event of Default is continuing;

 

(2)                such designation or re-designation would not cause a Default or Event of Default;

 

(3)                immediately after giving effect to such designation, the Borrower shall be in compliance, on a Pro Forma Basis, with the Financial Performance Covenants for the Test Period then last ended; and

 

(4)                such Subsidiary designated as an Unrestricted Subsidiary is not the owner of Intellectual Property Rights or other assets which, after giving effect to such designation, would be material to the business of the Borrower and its Restricted Subsidiaries (taken as a whole).

 

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The designation of any Restricted Subsidiary as an Unrestricted Subsidiary will constitute an Investment for purposes of Section 6.04 at the date of designation in an amount equal to the fair market value thereof. Subject to the provisos in clauses (1) and (2) above, the designation of any Unrestricted Subsidiary as a Restricted Subsidiary will constitute the incurrence at the time of such designation of Indebtedness of such Unrestricted Subsidiary and the Liens on the assets of such Unrestricted Subsidiary, in each case outstanding on the date of such redesignation, as applicable. No Unrestricted Subsidiary shall be subject to, or included within the scope of, any provision herein or in any other Loan Document, including, without limitation, any representation, warranty, covenant or Event of Default herein or in any other Loan Document, and the results of operations, cash and Indebtedness of Unrestricted Subsidiaries will not be taken into account for purposes of determining compliance with any financial tests contained in the Loan Documents.

 

“USA PATRIOT Act” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Title III of Pub. L. No. 107-56 (signed into law October 26, 2001)).

 

“USD LIBOR” means the London interbank offered rate for U.S. dollars.

 

“U.S. Person” means any Person that is a “United States Person” as defined in Section 7701(a)(30) of the Code.

 

“U.S. Special Resolution Regimes” has the meaning assigned to such term in Section 9.25.

 

“Voting Stock” means, as of any date, all classes of Capital Stock of any Person then outstanding that is at the time entitled to vote in the election of the Board of Directors (or similar governing body) of such Person, other than Capital Stock having such power only by reason of the happening of a contingency.

 

“Weighted Average Life to Maturity” means, when applied to any Indebtedness as of any date, the number of years obtained by dividing: (1) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payment of principal (excluding nominal amortization), including payment at final maturity, in respect thereof by (b) the number of years (calculated to the nearest 1/12) that will elapse between such date and the making of such payment; by (2) the then outstanding principal amount of such Indebtedness; provided that for purposes of determining the Weighted Average Life to Maturity of any Indebtedness that is being modified, refinanced, refunded, renewed, replaced or extended, the effects of any prepayments made on such Indebtedness prior to the date of the applicable extension shall be disregarded.

 

“Wholly Owned Domestic Subsidiary” means, with respect to any Person, a Domestic Subsidiary of such Person that is a Wholly Owned Subsidiary. Unless otherwise indicated in this Agreement, all references to Wholly Owned Domestic Subsidiaries will mean Wholly Owned Domestic Subsidiaries of the Borrower.

 

“Wholly Owned Subsidiary” means, with respect to any Person as of any date, any subsidiary of such Person of which 100% of the Equity Interests (other than directors’ qualifying shares or nominal or other similar shares issued to foreign nationals to the extent required by applicable laws) are, as of such date, owned by such Person, or one or more Wholly Owned Subsidiaries of such Person or by such Person and one or more Wholly Owned Subsidiaries of such Person. Unless otherwise indicated in this Agreement, all references to Wholly Owned Subsidiaries will mean Wholly Owned Subsidiaries of the Borrower.

 

“Withdrawal Liability” means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.

 

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“Working Capital” means, with respect to the Borrower, the Restricted Subsidiaries and the Physician-Owned Practices on a consolidated basis as of any date of determination, their Current Assets at such date of determination minus their Current Liabilities at such date of determination; provided that, for purposes of calculating Excess Cash Flow, increases or decreases in Working Capital will exclude, without duplication, (a) the impact of any of the items adjusted for in the definition of “Consolidated EBITDA” and (b) be calculated without regard to any changes in Current Assets or Current Liabilities as a result of (i) any reclassification after the Closing Date in accordance with GAAP of assets or liabilities, as applicable, between current and non-current or (ii) the effects of purchase accounting adjustments; provided, further, that, to the extent that the Borrower, any Restricted Subsidiary or any Physician-Owned Practice consummates an acquisition or Asset Sale or experiences an Event of Loss (outside the ordinary course) during such period, Working Capital shall be adjusted to eliminate any distortion resulting from such acquisitions, Asset Sales and Events of Loss occurring during the applicable period.

 

“Write-Down and Conversion Powers” means, (a) with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule, and (b) with respect to the United Kingdom, any powers of the applicable Resolution Authority under the Bail-In Legislation to cancel, reduce, modify or change the form of a liability of any UK Financial Institution or any contract or instrument under which that liability arises, to convert all or part of that liability into shares, securities or obligations of that person or any other person, to provide that any such contract or instrument is to have effect as if a right had been exercised under it or to suspend any obligation in respect of that liability or any of the powers under that Bail-In Legislation that are related to or ancillary to any of those powers.

 

Section 1.02          Terms Generally. Unless otherwise specified herein or therein, all terms defined in this Agreement or in any other Loan Document shall have the defined meanings set forth in Section 1.01 of this Agreement when used in any certificate or other document made or delivered pursuant hereto. The definitions set forth or referred to in Section 1.01 will apply equally to both the singular and plural forms of the terms defined. Terms (including uncapitalized terms) not otherwise defined herein and that are defined in the UCC shall have the meanings therein described. Whenever the context may require, any pronoun will include the corresponding masculine, feminine and neuter forms. Unless the context requires otherwise,

 

(1) the words “include,” “includes” and “including” will be deemed to be followed by the phrase “without limitation”;

 

(2) in the computation of periods of time from a specified date to a later specified date, (i) the word “from” means “from and including”, (ii) the words “to” and “until” each mean “to but excluding” and (iii) the word “through” means “to and including”;

 

(3) the word “will” will be construed to have the same meaning and effect as the word “shall”;

 

(4) the word “incur” will be construed to mean incur, create, issue, assume, become liable in respect of or suffer to exist (and the words “incurred” and “incurrence” will have correlative meanings);

 

(5) any reference to any Person will be construed to include such Person’s legal successors and permitted assigns (subject to any restriction on assignment set forth herein) and, in the case of any Governmental Authority, any other Governmental Authority that shall have succeeded to any or all of the functions thereof; and

 

(6) the words “asset” and “property” will be construed to have the same meaning and effect.

 

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All references herein to Articles, Sections, Exhibits and Schedules will be deemed references to Articles and Sections of, and Exhibits and Schedules to, this Agreement unless the context otherwise requires. Except as otherwise expressly provided herein, any reference in this Agreement to any Loan Document or Organizational Document of the Loan Parties means such document as amended, restated, amended and restated, supplemented or otherwise modified from time to time (subject to any restrictions on such amendments, restatements, amendments and restatements, supplements or modifications set forth herein or in any other Loan Document). Any reference to any law will include all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting such law and any reference to any law or regulation means, unless otherwise specified, such law or regulation as amended, modified or supplemented from time to time. Whenever this Agreement refers to the “knowledge” of the Borrower or any Loan Party, such reference will be construed to mean the actual knowledge of a Responsible Officer of such Person.

 

Section 1.03          Accounting Terms; GAAP. Except as otherwise expressly provided herein, all terms of an accounting or financial nature will be construed in accordance with GAAP, as in effect from time to time; provided that, notwithstanding anything to the contrary herein, all accounting or financial terms used herein will be construed, and all financial computations pursuant hereto will be made, without giving effect to any election under Statement of Financial Accounting Standards Board Accounting Standards Codification 825-10 (or any other Statement of Financial Accounting Standards Board Accounting Standards Codification having a similar effect) to value any Indebtedness or other liabilities of the Borrower or any Subsidiary at “fair value,” as defined therein. In the event that any Accounting Change (as defined below) occurs and such change results in a change in the method of calculation of financial covenants, standards or terms in this Agreement, then upon the written request of the Borrower or the Administrative Agent (acting upon the request of the Required Lenders), the Borrower, the Administrative Agent and the Lenders will enter into good faith negotiations in order to amend such provisions of this Agreement so as to equitably reflect such Accounting Change with the desired result that the criteria for evaluating the Borrower’s financial condition will be the same after such Accounting Change as if such Accounting Change had not occurred; provided that such Accounting Change shall be disregarded for purposes of this Agreement until the effective date of such amendment. “Accounting Change” means (1) any change in accounting principles required by the promulgation of any rule, regulation, pronouncement or opinion by the Financial Accounting Standards Board of the American Institute of Certified Public Accountants or (2) any change in the application of GAAP by the Borrower. Notwithstanding anything to the contrary above or in the definition of “Capital Lease Obligations” or “Capital Expenditures”, all obligations of any Person that are or would have been treated as operating leases for purposes of GAAP prior to the effectiveness of Accounting Standards Codification 842 shall continue to be accounted for as operating leases hereunder or under any other Loan Documents (whether or not such operating lease obligations were in effect on such date) notwithstanding the fact that such obligations are required in accordance with Accounting Standards Codification 842 (on a prospective or retroactive basis or otherwise) to be treated as Capital Leases.

 

Section 1.04         Effectuation of Transfers. Each of the representations and warranties of the Borrower contained in this Agreement (and all corresponding definitions) is made after giving effect to the Transactions, unless the context otherwise requires.

 

Section 1.05          Currencies. Unless otherwise specifically set forth in this Agreement, monetary amounts are in Dollars.

 

Section 1.06          Required Financial Statements. With respect to the determination of Consolidated EBITDA, the First Lien Net Leverage Ratio, the Total Net Leverage Ratio, the Fixed Charge Coverage Ratio or any determination under any other applicable provision of the Loan Documents (including the definition of Immaterial Subsidiary) made on or prior to the date on which Required Financial Statements have been delivered (or were required to have been delivered pursuant to Section 5.04(1) or (2)), for the first fiscal quarter ending on or after the Closing Date, such calculation will be determined for the period of four (4) consecutive fiscal quarters ended March 31, 2021, and calculated on a Pro Forma Basis. Notwithstanding anything to the contrary herein, for purposes of determining compliance with any test contained in this Agreement with respect to any period during which any Specified Transaction occurs, the First Lien Net Leverage Ratio, the Total Net Leverage Ratio or any determination under any other applicable provision of the Loan Documents (including the definition of Immaterial Subsidiary) shall be calculated with respect to such period and such Specified Transaction on a Pro Forma Basis.

 

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Section 1.07          Certain Calculations and Tests.

 

(1) Notwithstanding anything in this Agreement or any Loan Document to the contrary, when calculating any applicable ratio or determining other compliance with this Agreement (including the determination of compliance with any provision of this Agreement which requires that no Default or no Event of Default has occurred, is continuing or would result therefrom or the accuracy of representations and warranties) in connection with any action (including a Specified Transaction) undertaken in connection with the consummation of a Limited Condition Transaction, the date of determination of such ratio and determination of compliance with this Agreement (including whether any Default or Event of Default has occurred, is continuing or would result therefrom or the accuracy of such representations and warranties or other applicable covenant shall be determined, or any Default or Event of Default blocker shall be tested, in each case, at the option of the Borrower (the Borrower’s election to exercise such option in connection with any Limited Condition Transaction, an “LCA Election” and such date selected, the “LCA Test Date”), in the case of any acquisition or other Investment (including with respect to any Indebtedness contemplated or incurred in connection therewith), either, at the option of the Borrower, (x) as of the date the definitive agreement for such acquisition or other Investment is entered into (or prior to the effectiveness of such definitive agreement, as of the date any documentation or agreement is entered into with a substantially similar effect as a binding definitive agreement), (y) at the time that binding commitments to provide any Indebtedness contemplated or incurred in connection therewith are provided or at the time such Indebtedness is incurred or (z) at the time of the consummation of the relevant acquisition or other Investment, in each case, after giving effect to the relevant transaction, any related Indebtedness (including the intended use of proceeds thereof) and all other permitted pro forma adjustments on a Pro Forma Basis and if, after such applicable ratios and other provisions are measured on a Pro Forma Basis after giving effect to such Limited Condition Transaction and such other related and specified actions to be entered into in connection therewith (including any incurrence of Indebtedness and the use of proceeds thereof) as if they occurred at the beginning of the four (4) consecutive fiscal quarter period being used to calculate such financial ratio ending prior to the LCA Test Date, the Borrower could have taken such action on the relevant LCA Test Date in compliance with such applicable ratios and provisions, such applicable ratios and provisions shall be deemed to have been complied with. For the avoidance of doubt, (i) if any of such ratios or other financial test are not complied with as a result of fluctuations in such ratio or other financial measurement (including due to fluctuations in Consolidated EBITDA of the Borrower) at or prior to the consummation of the relevant Limited Condition Transaction, such ratios and other provisions will nevertheless be deemed to have been complied with solely for purposes of determining whether the Limited Condition Transaction is permitted hereunder; provided that if such ratios or other financial test improve as a result of such fluctuations, such improved ratios and other financial measurements, as the case may be, may be utilized and (ii) such ratios and other provisions shall not be tested at the time of consummation of such Limited Condition Transaction or related and specified actions. If the Borrower has made an LCA Election for any Limited Condition Transaction, then in connection with any subsequent calculation of any ratio or basket availability with respect to any other Limited Condition Transaction and related and specified actions on or following the relevant LCA Test Date and prior to the earlier of the date on which such Limited Condition Transaction is consummated or the date that the definitive agreement for such Limited Condition Transaction is terminated or expires or irrevocable notice is rescinded, as applicable, without consummation of such Limited Condition Transaction, any such ratio or basket shall be calculated on a Pro Forma Basis assuming such Limited Condition Transaction and other related and specified actions in connection therewith (including any incurrence of Indebtedness and the use of proceeds thereof) have been consummated.

 

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(2) Notwithstanding anything to the contrary herein, with respect to any amounts incurred or transactions entered into (or consummated) in reliance on a provision of this Agreement under any covenant that does not require compliance with a financial ratio or test (including, without limitation, Pro Forma Compliance with any First Lien Net Leverage Ratio test, Total Net Leverage Ratio test and/or Fixed Charge Coverage Ratio test, but excluding any Consolidated EBITDA test) (any such amounts, the “Fixed Amounts”) substantially concurrently with any amounts incurred or transactions entered into (or consummated) in reliance on a provision of this Agreement under the same covenant as such Fixed Amount that requires compliance with any such financial ratio or test (any such amounts, the “Incurrence Based Amounts”), it is understood and agreed that the Fixed Amounts being substantially concurrently incurred (other than, in the case of any Fixed Amounts contained in Section 6.01 or Section 6.02, any refinancings of any Indebtedness that was previously incurred) shall be disregarded in the calculation of the financial ratio or test applicable to the Incurrence Based Amounts in connection with such substantially concurrent incurrence, except that incurrences of Indebtedness and Liens constituting Fixed Amounts shall be taken into account for purposes of any Incurrence Based Amounts under any covenant other than Incurrence Based Amounts contained in Section 6.01 or Section 6.02.

 

Section 1.08          Classification of Loans and Borrowings. For purposes of this Agreement, Loans may be classified and referred to by Class (e.g., a “Revolving Loan”) or by Type (e.g., a “Eurocurrency Loan”) or by Class and Type (e.g., a “Eurocurrency Revolving Loan”). Borrowings also may be classified and referred to by Class (e.g., a “Revolving Loan Borrowing”) or by Type (e.g., a “Eurocurrency Borrowing”) or by Class and Type (e.g., a “Eurocurrency Revolving Loan Borrowing”).

 

Section 1.09          Reclassification. For purposes of determining compliance at any time with Section 6.01, Section 6.02, Section 6.03, Section 6.04, Section 6.05, Section 6.06, Section 6.07 and Section 6.09, in the event that any Lien, Indebtedness, Asset Sales and other dispositions, Permitted Investments, Restricted Payment, Affiliate transaction or prepayment of Indebtedness meets the criteria of more than one of the categories of transactions or items (or any combination of one or more thereof) in the same covenant permitted pursuant to any clause of such Section 6.01, Section 6.02, Section 6.03, Section 6.04, Section 6.05, Section 6.06, Section 6.07 and Section 6.09, the Borrower, in its sole discretion, may classify and/or reclassify or divide such transaction or item (or portion thereof) in the same covenant from time to time and will only be required to include the amount and type of such transaction (or portion thereof) in any one category in the same covenant.

 

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Section 1.10          Calculation of Baskets and Ratios. If any of the baskets set forth in Article VI of this Agreement are exceeded solely as a result of fluctuations to Consolidated EBITDA for the most recently completed fiscal quarter after the last time such baskets were calculated for any purpose under Article VI, such baskets will not be deemed to have been exceeded solely as a result of such fluctuations.

 

Section 1.11          Certifications. All certificates and other statements required to be made by any director, officer, employee or member of management or other Responsible Officer of a Loan Party pursuant to any Loan Document are and will be made on the behalf of such Loan Party and not in such officer’s, director’s, employee’s, or Responsible Officer’s or member of management’s individual capacity.

 

Section 1.12          Available Amount Transactions. If more than one action occurs on any given date the permissibility or the taking of which is determined hereunder by reference to the Available Amount immediately prior to the taking of such action, the permissibility of the taking of each such action shall be determined independently and in no event may any two or more such actions be treated as occurring simultaneously but shall instead occur in the order determined by the Borrower, i.e., each transaction must be permitted under Available Amount as so calculated.

 

Section 1.13          Divisions. For all purposes under the Loan Documents, in connection with any Delaware LLC Division (or any comparable event under a different jurisdiction’s laws): (a) if any asset, right, obligation or liability of any Person becomes the asset, right, obligation or liability of a different Person, then it shall be deemed to have been transferred from the original Person to the subsequent Person, and (b) if any new Person comes into existence, such new Person shall be deemed to have been organized on the first date of its existence by the holders of its Equity Interests at such time.

 

Article II

The Credits

 

Section 2.01          Commitments.

 

(1) Subject to the terms and express conditions set forth herein, each Term Lender severally and not jointly agrees to make an Initial Term Loan available to the Borrower on the Closing Date in one (1) single drawing concurrently with the consummation of the Acquisition and the Closing Date Refinancing, in an aggregate principal amount equal to the amount set forth opposite such Term Lender’s name on Schedule 2.01 under the caption “Initial Term Loan Commitments” (such amount being referred to herein as such Term Lender’s “Initial Term Loan Commitment”). As of the Closing Date, the aggregate Initial Term Loan Commitments of the Term Lenders shall be in the amount of $125,000,000. Amounts borrowed as an Initial Term Loan that are repaid or prepaid may not be reborrowed.

 

(2) Subject to the terms and express conditions set forth herein, each DDTL Lender severally and not jointly agrees to make DDTLs available to the Borrower from and after the Closing Date from time to time until the DDTL Facility Commitment Expiration Date on not more than two (2) occasions, in an aggregate principal amount not to exceed the amount set forth opposite such DDTL Lender’s name on Schedule 2.01 under the caption “DDTL Facility Commitments” or in the Assignment and Acceptance pursuant to which such DDTL Lender becomes a party hereto, as applicable, as such amount may be adjusted from time to time in accordance with this Agreement (including Section 2.22) (such amount being referred to herein as such DDTL Lender’s “DDTL Facility Commitment”). Amounts borrowed under this Section 2.01(2) are referred to as a “DDTLs”. References to “DDTL Facility Commitments” shall mean the DDTL Facility Commitment of each DDTL Lender taken together in the aggregate. As of the Closing Date, the aggregate DDTL Facility Commitments of all of the DDTL Lenders shall be in the amount of $20,000,000, as such amount may be adjusted as permitted by this Agreement. The DDTL Facility Commitment of each DDTL Lender shall be reduced by the aggregate amount of DDTLs funded by such DDTL Lender. Amounts borrowed as a DDTL that are repaid or prepaid may not be reborrowed.

 

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(3) Subject to the terms and express conditions set forth herein, each Revolving Lender severally and not jointly agrees to make Revolving Loans available to the Borrower on or after the Closing Date from time to time until the Revolving Facility Commitment Termination Date, in an aggregate principal amount that will not result in (i) such Lender’s Revolving Facility Credit Exposure exceeding such Lender’s Revolving Facility Commitment or (ii) the Revolving Facility Credit Exposure exceeding the Revolving Facility Commitments then in effect. Within the foregoing limits and subject to the terms and express conditions set forth herein, the Borrower may borrow, prepay and reborrow Revolving Loans (without premium or penalty).

 

Section 2.02          Loans and Borrowings.

 

(1) Each Loan shall be made as part of a Borrowing consisting of Loans of the same Class and Type, in Dollars, made to the Borrower by the Lenders ratably in accordance with their respective Commitments of the applicable Class. The failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder, provided that the Commitments of the Lenders are several and not joint, and no Lender shall be responsible for any other Lender’s failure to make Loans as required.

 

(2) Subject to Section 2.15, each Revolving Loan Borrowing and Term Loan Borrowing shall be comprised entirely of ABR Loans or Eurocurrency Loans as the Borrower may request in accordance herewith. Each Lender at its option may make any Eurocurrency Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of this Agreement, and such Lender will not be entitled to any amounts payable under Section 2.16 or 2.18 solely in respect of increased costs resulting from, and existing at the time of such exercise.

 

(3) At the commencement of each Interest Period for any Eurocurrency Borrowing, such Borrowing shall be in an aggregate principal amount that is an integral multiple of the applicable Borrowing Multiple and not less than the applicable Borrowing Minimum. At the time that each ABR Borrowing is made, such Borrowing will be in an aggregate principal amount that is an integral multiple of the applicable Borrowing Multiple and not less than the applicable Borrowing Minimum. Borrowings of more than one Type and Class may be outstanding at the same time; provided that there shall not at any time be more than a total of ten (10) Eurocurrency Borrowings outstanding. Notwithstanding anything to the contrary herein, the Revolving Loans comprising any Borrowing may be in an aggregate amount that is equal to the entire unused balance of the Revolving Facility Commitments.

 

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(4) Notwithstanding any other provision of this Agreement, the Borrower will not be entitled to request, or to elect to convert or continue, any Borrowing if the Interest Period requested with respect thereto would end after the applicable Maturity Date applicable to such Borrowing.

 

(5) All DDTLs, once funded, shall be added to, become part of, and be deemed to be of the same Class as, the outstanding Initial Term Loans. All DDTLs that are funded, if any, are, to the extent permissible, intended to be fungible with the outstanding Initial Term Loans and, except with respect to amortization as set forth below, shall have the same terms as the outstanding Initial Term Loans (and, unless the context otherwise requires, shall constitute Term Loans). Each of the parties hereto hereby agrees that the Administrative Agent may, in consultation with the Borrower, take any and all actions as may be reasonably necessary to ensure that all DDTLs, when originally made, are included in each Borrowing of the outstanding Initial Term Loan on a pro rata basis. Without limiting the generality of the foregoing, this may be accomplished by requiring each outstanding Borrowing of the Initial Term Loans that are Eurocurrency Loans to be converted into ABR Loans on the date each such DDTLs are incurred, or by allocating a portion of each such DDTL to each outstanding Borrowing of the Initial Term Loans that are Eurocurrency Loans on a pro rata basis. Any conversion of Eurocurrency Loans to ABR Loans required by the preceding sentence shall be subject to Section 2.17. In addition, each scheduled amortization payment under Section 2.10(1) required to be made after the making of any DDTLs which (as of the date of such scheduled amortization payment) is of the same Class as the outstanding Initial Term Loans shall be ratably increased by the aggregate principal amount of such DDTLs for all Lenders on a pro rata basis to the extent necessary, including, to avoid any reduction in the amortization payments to which the Term Lenders are entitled in respect of such DDTLs. To the extent any installment under Section 2.10(1) that is scheduled to be made in respect of the Initial Term Loans on any day shall have been reduced or eliminated due to the application thereto of a prepayment prior to the date on which DDTLs are funded and as of which day is of the same Class as the Initial Term Loans, then notwithstanding the provisions of Section 2.19 hereof to the contrary, Lenders who hold such funded DDTLs on such day shall be entitled to receive the entire portion of each payment of, or application to, the installment with respect to such funded DDTLs scheduled to be made on such day.

 

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Section 2.03          Request for Borrowing. To request a Borrowing, the Borrower will deliver to the Administrative Agent a Borrowing Request not later than: (a) in the case of an ABR Borrowing, 2:00 p.m., New York City time, one (1) Business Day before the date of the proposed Borrowing, (or such later time as the Administrative Agent may agree in its sole discretion); provided that any such notice of an ABR Borrowing to finance the reimbursement of an L/C Disbursement as contemplated by Section 2.05(5) may be given not later than 12:00 noon, New York City time, on the date of the proposed Borrowing, (b) in the case of a Eurocurrency Borrowing, 2:00 p.m., New York City time, three (3) Business Days before the date of the proposed Borrowing, (or such later time as the Administrative Agent may agree in its sole discretion); provided that any notice of a Eurocurrency Borrowing to be made on the Closing Date may be given not later than 12:00 noon, New York City time, one (1) Business Day prior to the date of the proposed Eurocurrency Borrowing (or such later time as the Administrative Agent may reasonably agree), which notice may be subject to the effectiveness of this Agreement. Each Borrowing Request must specify:

 

(1) whether such Borrowing is to be comprised of an Initial Term Loan Borrowing, DDTL Borrowing, Revolving Loan Borrowing or a Borrowing of any other Class (specifying the Class thereof);

 

(2) the principal amount of the requested Borrowing;

 

(3) the requested date of the Borrowing (which will be a Business Day);

 

(4) whether such Borrowing is to be an ABR Borrowing or a Eurocurrency Borrowing;

 

(5) in the case of a Eurocurrency Borrowing, the initial Interest Period to be applicable thereto, which will be a period contemplated by the definition of the term “Interest Period”; and

 

(6) the location and number of the Borrower’s account to which funds are to be disbursed.

 

If no election as to the Type of Borrowing is specified in the applicable Borrowing Request, then the requested Borrowing shall be an ABR Borrowing. If no Interest Period with respect to any Eurocurrency Borrowing is specified in the applicable Borrowing Request, then the Borrower will be deemed to have selected an Interest Period of one-month’s duration. Upon receipt of such Borrowing Request, the Administrative Agent will promptly notify each Lender of such Borrowing Request and of the amount (if any) of such Lender’s pro rata share of the requested Borrowing. The proceeds of the Loans requested under this Section 2.03 will be disbursed by the Administrative Agent in immediately available funds by wire transfer to such bank account or accounts as designated by the Borrower in each Borrowing Request.

 

Section 2.04          Swing Line Loans.

 

(1) At any time prior to the Revolving Facility Commitment Termination Date, subject to the terms and express conditions hereof, the Swing Line Lender agrees to make Swing Line Loans in Dollars to the Borrower in an aggregate principal amount up to but not exceeding the Swing Line Sublimit; provided that after giving effect to the making of any Swing Line Loan, in no event shall the Revolving Facility Credit Exposure exceed the Revolving Facility Commitments then in effect. The Swing Line Lender’s obligation to make Swing Line Loans shall expire on the Maturity Date and all Swing Line Loans and all other amounts owed hereunder with respect to the Swing Line Loans shall be paid in full no later than such date. Within the foregoing limits, and subject to the other terms and conditions hereof, the Borrower may borrow, prepay and reborrow Swing Line Loans (without premium or penalty). Immediately upon the making of a Swing Line Loan, each Revolving Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the Swing Line Lender a risk participation in such Swing Line Loan in an amount equal to the product of such Revolving Lender’s Revolving Facility Percentage times the amount of such Swing Line Loan.

 

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(2) Borrowing Mechanics for Swing Line Loans.

 

(a) Swing Line Loans shall be made in an aggregate minimum amount of $250,000 and integral multiples of $100,000 in excess of that amount (or such other amount as agreed to by the Swing Line Lender).

 

(b) Subject to Section 4.02, to request the making of a Swing Line Loan hereunder, the Borrower shall notify the Swing Line Lender by telephone (with written notice to promptly follow prior to such Borrowing, along with a copy to the Administrative Agent) in the form of a Borrowing Request signed by the Borrower (by hand, facsimile or email) not later than 1:00 p.m., New York City time, on the date of the proposed Borrowing.

 

(c) The Swing Line Lender shall make the amount of its Swing Line Loan available to the Borrower not later than 4:00 p.m., New York City time, on the date specified in the Borrowing Request by wire transfer of same day funds in Dollars to be credited to the account of the Borrower at the principal office designated by the Administrative Agent or such other account as may be designated in writing to the Swing Line Lender by the Borrower.

 

(d) With respect to any Swing Line Loans which have not been prepaid by the Borrower pursuant to Section 2.11, the Swing Line Lender may at any time in its sole and absolute discretion, deliver to the Administrative Agent (with a copy to the Borrower), no later than 1:00 p.m., New York City time, at least one (1) Business Day in advance of the proposed Borrowing, a notice (which shall be deemed to be a Borrowing Request given by the Borrower) requesting that each Lender holding a Revolving Facility Commitment make Revolving Loans that are ABR Loans to the Borrower on the date of such Borrowing in an amount equal to the amount of such Swing Line Loans (the “Refunded Swing Line Loans”) outstanding on the date such notice is given which the Swing Line Lender requests Lenders to prepay. Anything contained in this Agreement to the contrary notwithstanding, (A) the proceeds of such Revolving Loans made by the Lenders other than the Swing Line Lender shall be immediately delivered to the Swing Line Lender (and not to the Borrower) and applied to repay a corresponding portion of the Refunded Swing Line Loans and (B) on the day such Revolving Loans are made, the Swing Line Lender’s Revolving Facility Percentage of the Refunded Swing Line Loans shall be deemed to be paid with the proceeds of a Revolving Loan made by the Swing Line Lender to the Borrower, and such portion of the Swing Line Loans deemed to be so paid shall no longer be outstanding as Swing Line Loans but shall instead constitute part of the Swing Line Lender’s outstanding Revolving Loans to the Borrower. The Borrower hereby authorizes the Swing Line Lender to charge the Borrower’s accounts with the Swing Line Lender (up to the amount available in each such account) in order to immediately pay the Swing Line Lender the amount of the Refunded Swing Line Loans to the extent the proceeds of such Revolving Loans made by the Lenders, including the Revolving Loans deemed to be made by the Swing Line Lender, are not sufficient to repay in full the Refunded Swing Line Loans. If any portion of any such amount paid (or deemed to be paid) to the Swing Line Lender should be recovered by or on behalf of any Borrower from the Swing Line Lender in bankruptcy or insolvency, by assignment for the benefit of creditors or otherwise, the loss of the amount so recovered shall be ratably shared among all Revolving Lenders in the manner contemplated by Section 2.19.

 

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(e) If for any reason Revolving Loans are not made pursuant to Section 2.04(2)(d) in an amount sufficient to repay in full any amounts owed to the Swing Line Lender in respect of any outstanding Swing Line Loans on or before the third (3rd) Business Day after demand for payment thereof by the Swing Line Lender, each Revolving Lender shall be deemed to, and hereby agrees to, have purchased a participation in such outstanding Swing Line Loans, in an amount equal to its Revolving Facility Percentage of the applicable unpaid amount together with accrued interest thereon. Upon one (1) Business Day’s notice from the Administrative Agent, each Revolving Lender shall deliver to the Administrative Agent (for the account of the Swing Line Lender) an amount equal to its respective participation in the applicable unpaid amount in same day funds at the principal office of the Administrative Agent. In order to evidence such participation, each Revolving Lender agrees to enter into a participation agreement at the request of the Swing Line Lender or the Administrative Agent in form and substance reasonably satisfactory to the Swing Line Lender and the Administrative Agent. In the event any Revolving Lender fails to make available to the Administrative Agent (for the account of the Swing Line Lender) the amount of such Revolving Lender’s participation as provided in this paragraph, the Swing Line Lender shall be entitled to recover such amount on demand from such Revolving Lender together with interest thereon at the rate customarily used by the Swing Line Lender for the correction of errors among banks and thereafter at the ABR. A certificate of the Swing Line Lender submitted to any Lender with respect to amounts owing under this Section 2.04(2)(e) shall be conclusive absent manifest error. No funding of risk participations hereunder shall relieve or otherwise impair the obligation of the Borrower to repay Swing Line Loans, together with interest, as provided for in this Agreement.

 

(f) Notwithstanding anything contained herein to the contrary, (A) each Revolving Lender’s obligation to make Revolving Loans for the purpose of repaying any Refunded Swing Line Loans pursuant to Section 2.04(2)(d) and each Revolving Lender’s obligation to purchase a participation in any unpaid Swing Line Loans pursuant to Section 2.04(2)(e) shall be absolute and unconditional and shall not be affected by any circumstance, including (1) any set-off, counterclaim, recoupment, defense or other right which such Revolving Lender may have against the Swing Line Lender, any Loan Party or any other Person for any reason whatsoever; (2) the occurrence or continuation of a Default or Event of Default; (3) any adverse change in the business, operations, properties, assets, condition (financial or otherwise) or prospects of any Loan Party; (4) any breach of this Agreement or any other Loan Document by any party thereto; or (5) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing; provided that such obligations of each Revolving Lender to make Revolving Loans hereunder (but not to purchase and fund risk participations in Swing Line Loans pursuant Section 2.04(2)(e) above) are subject to the condition that the Swing Line Lender had not received prior notice from the Borrower or the Required Lenders that any of the conditions under Section 4.02 to the making of the applicable Refunded Swing Line Loans or other unpaid Swing Line Loans, were not satisfied at the time such Refunded Swing Line Loans or unpaid Swing Line Loans were made; and (B) the Swing Line Lender shall not be obligated to make any Swing Line Loans (1) if it does not in good faith believe that all conditions under Section 4.02 to the making of such Swing Line Loan have been satisfied or waived by the Required Lenders or (2) at a time when any Revolving Lender is a Defaulting Lender unless the Swing Line Lender (A) is satisfied in its reasonable discretion that the related exposure will be 100% covered by the Commitments of the non-Defaulting Lenders pursuant to Section 2.25(1) or (B) has otherwise entered into arrangements reasonably satisfactory to it and the Borrower to eliminate the applicable Fronting Exposure.

 

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(3) The Swing Line Lender may be replaced at any time by written agreement among the Borrower, the Administrative Agent, the replaced Swing Line Lender (provided that no consent of the replaced Swing Line Lender will be required if the replaced Swing Line Lender has no Swing Line Loans outstanding or such Swing Line Loans will be prepaid on or prior to the effective date of such removal) and the successor Swing Line Lender. The Administrative Agent shall promptly notify the Lenders of any such replacement of the Swing Line Lender. At the time any such replacement shall become effective, the Borrower shall prepay any outstanding Swing Line Loans made by the removed Swing Line Lender. From and after the effective date of any such replacement, (x) any successor Swing Line Lender shall have all the rights and obligations of a Swing Line Lender under this Agreement with respect to Swing Line Loans made thereafter and (y) references herein to the term “Swing Line Lender” shall be deemed to refer to such successor or to any previous Swing Line Lender, or to such successor and all previous Swing Line Lenders, as the context shall require.

 

Section 2.05          Letters of Credit.

 

(1) General. Subject to the terms and conditions set forth herein, the Borrower may request the issuance of (a) trade or commercial letters of credit in support of trade or commercial obligations of the Borrower or any of its Restricted Subsidiaries incurred in the ordinary course of business (such letters of credit issued for such purposes, “Trade Letters of Credit”) and (b) standby letters of credit issued for any other lawful purposes of the Borrower or any of its Restricted Subsidiaries (such letters of credit issued for such purposes, “Standby Letters of Credit”), in each case for the Borrower’s own account or for the account of any Restricted Subsidiary in a form reasonably acceptable to the applicable Issuing Bank, at any time and from time to time prior to the date that is five (5) Business Days prior to the Revolving Facility Commitment Termination Date; provided that no Issuing Bank shall be required to issue a Trade Letter of Credit without its consent. In the event of any inconsistency between the terms and conditions of this Agreement and the terms and conditions of any form of letter of credit application or other agreement submitted by the Borrower to, or entered into by the Borrower with, an Issuing Bank relating to any Letter of Credit, the terms and conditions of this Agreement will control. “Letters of Credit” will include Trade Letters of Credit and Standby Letters of Credit.

 

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(2) Notice of Issuance, Amendment, Renewal, Extension.

 

(a) To request the issuance of a Letter of Credit (or the amendment, renewal (other than an automatic extension in accordance with paragraph (3) of this Section 2.05) or extension of an outstanding Letter of Credit), the Borrower will deliver by hand, facsimile or e-mail to the applicable Issuing Bank and the Administrative Agent three (3) Business Days in advance of the requested date of issuance, amendment or extension (or such shorter period as the Administrative Agent and the applicable Issuing Bank may agree in their sole discretion) a Letter of Credit Request requesting the issuance of a Letter of Credit, or identifying the Letter of Credit to be amended, renewed or extended, and specifying the date of issuance, amendment, renewal or extension (which will be a Business Day), the date on which such Letter of Credit is to expire (which will comply with paragraph (3) of this Section 2.05), the amount of such Letter of Credit, the name and address of the beneficiary thereof, whether such Letter of Credit constitutes a Standby Letter of Credit or Trade Letter of Credit, and such other information as required by the applicable Issuing Bank to issue, amend, renew or extend such Letter of Credit. If requested by the applicable Issuing Bank, the Borrower will also submit a letter of credit application on such Issuing Bank’s standard form in connection with any request for a Letter of Credit. A Letter of Credit will be issued, amended, renewed or extended only if (and upon issuance, amendment, renewal or extension of each Letter of Credit, the Borrower will be deemed to represent and warrant that), after giving effect to such issuance, amendment or extension (i) the Revolving L/C Exposure will not exceed the Letter of Credit Sublimit and (ii) the Revolving Facility Credit Exposure will not exceed the Revolving Facility Commitments then in effect.

 

(b) Notwithstanding anything to the contrary contained herein, the Issuing Bank will not issue (or be obligated to issue) any Letter of Credit if:

 

(i) any order, judgment or decree of any Governmental Authority or arbitrator by its terms purports to enjoin or restrain the Issuing Bank from issuing such Letter of Credit;

 

(ii) any applicable law or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over the Issuing Bank prohibits the issuance of letters of credit generally;

 

(iii) such Letter of Credit imposes upon the Issuing Bank any restriction, reserve or capital requirement (for which the Issuing Bank is not otherwise compensated hereunder) not in effect on the Closing Date;

 

(iv) such Letter of Credit imposes upon the Issuing Bank any unreimbursed loss, cost or expense which was not applicable on the Closing Date and which the Issuing Bank in good faith deems material to it;

 

(v) any Lender is at such time a Defaulting Lender, unless the Issuing Bank (A) is satisfied in its reasonable discretion that the related exposure will be 100% covered by the Commitments of the non-Defaulting Lenders pursuant to Section 2.25(1) or (B) has otherwise entered into satisfactory arrangements with the Borrower or such Defaulting Lender to eliminate the Issuing Bank’s applicable Fronting Exposure with respect to such Defaulting Lender;

 

(vi) issuance of such Letter of Credit would cause (x) the aggregate undrawn Dollar Equivalent amount of all outstanding Letters of Credit issued by such Issuing Bank at such time plus (y) the aggregate amount of L/C Disbursements made by such Issuing Bank that have not yet been reimbursed by or on behalf of the Borrower at such time to exceed its Letter of Credit Commitments; or

 

(vii) in the case of Trade Letters of Credit, such Issuing Bank has not consented thereto.

 

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(3) Expiration Date.

 

(a) Each Standby Letter of Credit will expire at or prior to the close of business on the earlier of (i) the date one year (unless otherwise agreed upon by the Issuing Bank in its sole discretion) after the date of issuance of such Standby Letter of Credit (or, in the case of any extension thereof, one year (unless otherwise agreed upon the Issuing Bank in its sole discretion) after such renewal or extension) and (ii) the date that is five (5) Business Days prior to the Maturity Date; provided that any Standby Letter of Credit with a one-year tenor may provide for the automatic extension thereof for additional one-year periods (which will in no event extend beyond the date referred to in the preceding clause (ii)) so long as such Standby Letter of Credit permits the Issuing Bank to prevent any such extension at least once in each 12-month period (commencing with the date of issuance of such Standby Letter of Credit) by giving prior notice to the beneficiary thereof within a time period during such 12-month period to be agreed upon at the time such Standby Letter of Credit is issued; provided, further, that if the Issuing Bank and the Administrative Agent each consent in their sole discretion, the expiration date of any Standby Letter of Credit may extend beyond the date referred to in clause (ii) above; and, provided, further, that (A) if any such Standby Letter of Credit is outstanding or is issued after the date that is five (5) Business Days prior to the applicable Maturity Date, the Borrower will provide cash collateral pursuant to documentation reasonably satisfactory to the Administrative Agent and the relevant Issuing Bank in an amount equal to 103.0% of the face amount of each such Standby Letter of Credit on or prior to the applicable Maturity Date or, if later, such date of issuance, and (B) each Revolving Lender’s participation in any undrawn Letter of Credit that is outstanding on the applicable Maturity Date will terminate on the applicable Maturity Date.

 

(b) Each Trade Letter of Credit will expire on the earlier of (A) 180 days after such Trade Letter of Credit’s date of issuance or (B) the date that is five (5) Business Days prior to the Maturity Date.

 

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(4) Participations. By the issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing the amount thereof) and without any further action on the part of the applicable Issuing Bank or the Revolving Lenders, such Issuing Bank hereby grants to each Revolving Lender, and each Revolving Lender hereby acquires from such Issuing Bank, a participation in such Letter of Credit equal to such Revolving Lender’s Revolving Facility Percentage of the aggregate amount available to be drawn under such Letter of Credit. Each Revolving Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for the account of the Issuing Bank, its Revolving Facility Percentage of each L/C Disbursement made by such Issuing Bank and not reimbursed by the Borrower on the date due as provided in paragraph (5) of this Section 2.05, or of any reimbursement payment required to be refunded to the Borrower for any reason. Each Revolving Lender acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Letters of Credit is absolute and unconditional and will not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit or the occurrence and continuance of a Default or Event of Default or reduction or termination of the Revolving Facility Commitments, and that each such payment will be made without any offset, abatement, withholding or reduction whatsoever.

 

(5) Reimbursement.

 

(a) If the applicable Issuing Bank makes any L/C Disbursement in respect of a Letter of Credit, the Borrower will reimburse such L/C Disbursement by paying to the Administrative Agent an amount equal to the L/C Disbursement, not later than 2:00 p.m., New York City time, within one (1) Business Day of the Borrower’s receipt of notice under paragraph (8) of this Section 2.05 of such L/C Disbursement or the second (2nd) Business Day, if such notice is received after 2:00 p.m., New York City time), together with accrued interest thereon from the date of such L/C Disbursement at the rate applicable to ABR Loans; provided that the Borrower may, subject to the conditions to Borrowings set forth herein, request in accordance with Section 2.03 that such payment be financed with a Revolving Loan Borrowing in an amount equal to such L/C Disbursement and, to the extent so financed, the Borrower’s obligations to make such payment will be discharged and replaced by the resulting Revolving Loan Borrowing.

 

(b) If the Borrower fails to reimburse any L/C Disbursement when due, then the Administrative Agent will promptly notify the applicable Issuing Bank and each other Revolving Lender of the applicable L/C Disbursement, the payment then due from the Borrower in respect thereof and, in the case of a Revolving Lender, such Lender’s Revolving Facility Percentage thereof. Promptly following receipt of such notice, each Revolving Lender will pay to the Administrative Agent its Revolving Facility Percentage of the payment then due from the Borrower in the same manner as provided in Section 2.06 with respect to Revolving Loans made by such Lender (and Section 2.06 will apply, mutatis mutandis, to the payment obligations of the Revolving Lenders), and the Administrative Agent will promptly pay to the applicable Issuing Bank the amounts so received by it from the Revolving Lenders. Any payment made by a Revolving Lender pursuant to this paragraph (5) to reimburse an Issuing Bank for any L/C Disbursement (other than the funding of a Revolving Loan Borrowing as contemplated above) will not constitute a Revolving Loan and will not relieve the Borrower of its obligations to reimburse such L/C Disbursement.

 

(c) Promptly following receipt by the Administrative Agent of any payment from the Borrower pursuant to paragraph (5)(a), the Administrative Agent will distribute such payment to the applicable Issuing Bank or, to the extent that Revolving Lenders have made payments pursuant to paragraph (5)(b) to reimburse such Issuing Bank, then to such Revolving Lenders and such Issuing Bank as their interests may appear.

 

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(6) Obligations Absolute. The obligations of the Borrower to reimburse L/C Disbursements as provided in paragraph (5) of this Section 2.05 will be absolute, unconditional and irrevocable, and will be performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever and irrespective of:

 

(a) any lack of validity or enforceability of any Letter of Credit or this Agreement, or any term or provision therein;

 

(b) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect;

 

(c) payment by the applicable Issuing Bank under a Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Letter of Credit; or

 

(d) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section 2.05, constitute a legal or equitable discharge of, or provide a right of setoff against the Borrower’s obligations hereunder.

 

(7) Limited Liability. None of the Administrative Agent, the Lenders, any Issuing Bank, or any of their Related Parties, will have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of such Issuing Bank, or any of the circumstances referred to in clauses (a), (b) or (c) of Section 2.05(6); provided that the foregoing will not be construed to excuse the applicable Issuing Bank from liability to the Borrower to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Borrower to the extent permitted by applicable law) suffered by the Borrower that are determined by a final and binding decision of a court of competent jurisdiction to have been caused by such Issuing Bank’s failure to exercise care when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree that, in the absence of gross negligence, bad faith or willful misconduct on the part of the applicable Issuing Bank, such Issuing Bank will be deemed to have exercised care in each such determination. In furtherance of the foregoing and without limiting the generality thereof, the parties agree that, with respect to documents presented which appear on their face to be in substantial compliance with the terms of a Letter of Credit, the applicable Issuing Bank may, in its sole discretion, either accept and make payment upon such documents without responsibility for further investigation, regardless of any notice or information to the contrary, or refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit.

 

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(8) Disbursement Procedures. The applicable Issuing Bank will, promptly following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit. Such Issuing Bank will promptly notify the Administrative Agent and the Borrower by telephone (promptly confirmed in writing by facsimile or e-mail) of any such demand for payment under a Letter of Credit and whether such Issuing Bank has made or will make an L/C Disbursement thereunder; provided that any failure to give or delay in giving such notice will not relieve the Borrower of its obligations to reimburse such Issuing Bank and/or the Revolving Lenders with respect to any such L/C Disbursement.

 

(9) Interim Interest. If an Issuing Bank makes any L/C Disbursement, then, unless the Borrower reimburses such L/C Disbursement in full on the date such L/C Disbursement is made, the unpaid amount thereof will bear interest, for each day from and including the date such L/C Disbursement is made to but excluding the date that the Borrower reimburses such L/C Disbursement, at the rate per annum then applicable to ABR Revolving Loans; provided that, if such L/C Disbursement is not reimbursed by the Borrower when due pursuant to paragraph (5) of this Section 2.05, then Section 2.14(3) will apply. Interest accrued pursuant to this paragraph will be for the account of the applicable Issuing Bank, except that interest accrued on and after the date of payment by any Revolving Lender pursuant to paragraph (5) of this Section 2.05 to reimburse such Issuing Bank will be for the account of such Revolving Lender to the extent of such payment.

 

(10) Replacement of an Issuing Bank. An Issuing Bank may be replaced at any time by written agreement between the Borrower, the Administrative Agent, the replaced Issuing Bank and the successor Issuing Bank. The Administrative Agent will promptly notify the Lenders of any such replacement of an Issuing Bank. At the time any such replacement becomes effective, the Borrower will pay all unpaid fees accrued for the account of the replaced Issuing Bank pursuant to Section 2.13. From and after the effective date of any such replacement, (a) the successor Issuing Bank will have all the rights and obligations of the replaced Issuing Bank under this Agreement with respect to Letters of Credit to be issued thereafter and (b) references herein to the term “Issuing Bank” will be deemed to refer to such successor or to any previous Issuing Bank, or to such successor and all previous Issuing Banks, as the context will require. After the replacement of an Issuing Bank hereunder, the replaced Issuing Bank will remain a party hereto and will continue to have all the rights and obligations of such Issuing Bank under this Agreement with respect to Letters of Credit issued by it prior to such replacement but will not be required to issue additional Letters of Credit.

 

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(11) Cash Collateralization. If any Event of Default occurs and is continuing, (a) in the case of an Event of Default described in Section 7.01(8) or (9), on the Business Day (or such later date as agreed by the Administrative Agent in its sole discretion), or (b) in the case of any other Event of Default, on the third (3rd) Business Day (or such later date as agreed by the Administrative Agent in its sole discretion), in each case, following the date on which the Borrower receives notice from the Administrative Agent demanding the deposit of cash collateral pursuant to this paragraph (11), the Borrower will deposit in an account with or at the direction of the Administrative Agent, in the name of the Administrative Agent and for the benefit of the Revolving Lenders, an amount in cash equal to the Revolving L/C Exposure as of such date plus any accrued and unpaid interest thereon; provided that upon the occurrence of any Event of Default with respect to the Borrower described in Section 7.01(8) or (9), the obligation to deposit such cash collateral will become effective immediately, and such deposit will become immediately due and payable, without demand or other notice of any kind. Each such deposit pursuant to this paragraph will be held by the Collateral Agent as collateral for the payment and performance of the obligations of the Borrower under this Agreement. The Administrative Agent will have exclusive dominion and control, including the exclusive right of withdrawal, over such account. Other than any interest earned on the investment of such deposits, which investments will be made at the option and sole discretion of (i) for so long as an Event of Default is continuing, the Administrative Agent and (ii) at any other time, the Borrower, in each cash, in Cash Equivalents and at the risk and expense of the Borrower, such deposits will not bear interest. Interest or profits, if any, on such investments will accumulate in such account. Moneys in such account will be applied by the Administrative Agent to reimburse each Issuing Bank for L/C Disbursements for which such Issuing Bank has not been reimbursed and, to the extent not so applied, will be held for the satisfaction of the reimbursement obligations of the Borrower for the Revolving L/C Exposure at such time or, if the maturity of the Loans has been accelerated (but subject to the consent of the Required Lenders), be applied to satisfy other obligations of the Borrower under this Agreement. If the Borrower is required to provide an amount of cash collateral hereunder as a result of the occurrence of an Event of Default, such amount (to the extent not applied as aforesaid) will be returned to the Borrower within three (3) Business Days after all Events of Default have been cured or waived.

 

(12) Additional Issuing Banks. From time to time, the Borrower may, by notice to the Administrative Agent, designate any Revolving Lender to act as an Issuing Bank; provided that such Lender agrees in its sole discretion to act as such and such Lender is reasonably satisfactory to the Administrative Agent as an Issuing Bank. Each such additional Issuing Bank will execute a counterpart of this Agreement upon the approval of the Administrative Agent (which approval will not be unreasonably withheld, delayed or conditioned) and will thereafter be an Issuing Bank hereunder for all purposes. The Borrower may, in its sole discretion, request issuance of a Letter of Credit from any Issuing Bank.

 

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(13) Reporting. Unless otherwise requested by the Administrative Agent, each Issuing Bank will (a) provide to the Administrative Agent copies of any notice received from the Borrower pursuant to Section 2.05(2) no later than the next Business Day after receipt thereof and (b) report in writing to the Administrative Agent as follows:

 

(a) on or prior to each Business Day on which such Issuing Bank expects to issue, amend or extend any Letter of Credit, the date of such issuance, amendment or extension, and the aggregate face amount of the Letters of Credit to be issued, amended or extended by it and outstanding after giving effect to such issuance, amendment or extension occurred (and whether the amount thereof changed), and the Issuing Bank will be permitted to issue, amend or extend such Letter of Credit if the Administrative Agent will not have advised the Issuing Bank that such issuance, amendment or extension would not be in conformity with the requirements of this Agreement;

 

(b) on each Business Day on which such Issuing Bank makes any L/C Disbursement, the date of such L/C Disbursement and the amount of such L/C Disbursement;

 

(c) on any other Business Day, such other information with respect to the outstanding Letters of Credit issued by such Issuing Bank as the Administrative Agent reasonably requests, including but not limited to prompt verification of such information as may be requested by the Administrative Agent; and

 

(d) to the extent that the Issuing Bank is not a Lender on the Closing Date, on the first Business Day of each month.

 

(14) Reallocation. If the applicable Maturity Date in respect of any class of Revolving Facility Commitments occurs prior to the expiration of any Letter of Credit, then (i) if one or more other classes of Revolving Facility Commitments in respect of which the applicable Maturity Date shall not have occurred are then in effect, such Letters of Credit shall automatically be deemed to have been issued (including for purposes of the obligations of the Revolving Lenders to purchase participations therein and to make Revolving Loans and payments in respect thereof pursuant to Section 2.05(5)) under (and ratably participated in by Lenders pursuant to) the Revolving Facility Commitments in respect of such non-terminating classes up to an aggregate amount not to exceed the aggregate principal amount of the unutilized Revolving Facility Commitments thereunder at such time (it being understood that no partial face amount of any Letter of Credit may be reallocated); provided, in no event shall such reallocation cause a Lender’s share of the Revolving Facility Commitment to exceed such Lender’s Revolving Facility Commitment, and (ii) to the extent not reallocated pursuant to the immediately preceding clause (i), the Borrower shall cash collateralize any such Letter of Credit in a manner reasonably acceptable to the applicable Issuing Bank. If, for any reason, such cash collateral is not provided or reallocation does not occur, the Revolving Lenders under the maturing tranche shall continue to be responsible for their participating interests in the Letters of Credit. Except to the extent of reallocations of participations pursuant to clause (i) of the second preceding sentence, the occurrence of a Maturity Date with respect to a given tranche of Revolving Facility Commitments shall have no effect upon (and shall not diminish) the percentage participations of the Revolving Lenders in any Letter of Credit issued before such applicable Maturity Date. Unless otherwise previously agreed, commencing with the Maturity Date of any tranche of Revolving Facility Commitments, the sublimit for Letters of Credit shall be agreed with the Revolving Lenders under the extended tranches.

 

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(15) Governing Law. Unless otherwise agreed by the applicable Issuing Bank and the Borrower, each Letter of Credit shall be governed by, and shall be construed in accordance with, the laws of the State of New York, and to the extent not prohibited by such laws, the rules of the “International Standby Practices 1998” published by the Institute of International Banking Law & Practice, Inc. (or such later version thereof as may be in effect at the time of issuance) (the “ISP”) or the rules of the Uniform Customs and Practice for Documentary Credits, as most recently published by the International Chamber of Commerce at the time of issuance (the “Uniform Customs”) (as determined in good faith by the Issuing Bank for such Letter of Credit) shall apply to each Standby Letter of Credit, and the Uniform Customs shall apply to each Trade Letter of Credit. For the avoidance of doubt, except as otherwise set forth in this Section 2.05(15) with respect to Standby Letters of Credit, the ISP shall not apply to the terms of this Agreement.

 

(16) Letters of Credit Issued for Restricted Subsidiaries. Notwithstanding that a Letter of Credit issued or outstanding hereunder may be in support of any obligations of, or for the account of, a Restricted Subsidiary, the Borrower shall be obligated to reimburse the applicable Issuing Bank hereunder for any and all drawings under such Letter of Credit. The Borrower hereby acknowledges that the issuance of Letters of Credit for the account of Restricted Subsidiaries inures to the benefit of the Borrower, and that the Borrower’s business derives substantial benefits from the businesses of such Restricted Subsidiaries. If required by the applicable Issuing Bank, the Borrower shall be a co-applicant on any Letter of Credit issued or outstanding hereunder in support of any obligations of, or is for the account of, a Restricted Subsidiary and shall be jointly and severally liable with respect to any obligations of the applicant thereunder.

 

Section 2.06          Funding of Borrowings.

 

(1) Each Lender will make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds by 10:00 a.m., New York City time, to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders. The Administrative Agent will make such Loans available to the Borrower by promptly crediting the amounts so received, in like funds, to an account of the Borrower as specified in the Borrowing Request (or as otherwise directed by the Borrower); provided that Revolving Loans made to finance the reimbursement of an L/C Disbursement and reimbursements as provided in Section 2.05(5) will be remitted by the Administrative Agent to the applicable Issuing Bank.

 

(2) Unless the Administrative Agent has received notice from a Lender prior to the proposed date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender’s share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with paragraph (1) of this Section 2.06 and may, in reliance upon such assumption, make available to the Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then the applicable Lender and the Borrower severally agree to pay to the Administrative Agent, forthwith on demand (without duplication) such corresponding amount with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent at (a) in the case of such Lender, the greater of (i) the Federal Funds Rate and (ii) a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation or (b) in the case of the Borrower, the interest rate applicable to ABR Loans at such time. If such Lender pays such amount to the Administrative Agent, then such amount will constitute such Lender’s Loan included in such Borrowing.

 

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(3) The foregoing notwithstanding, the Administrative Agent, in its sole discretion, may from its own funds make any Revolving Loan on behalf of any Revolving Lender. In such event, such Revolving Lender, on behalf of whom the Administrative Agent has made such Revolving Loan, will reimburse the Administrative Agent for all or any portion of such Revolving Loan made on its behalf upon written notice given to such Revolving Lender not later than 12:00 noon, New York City time, on the same Business Day such reimbursement is requested. On each such settlement date, the Administrative Agent will pay to any Revolving Lender the net amount owing to such Revolving Lender in connection with such settlement, including amounts relating to Revolving Loans, fees, interest and other amounts payable hereunder. The entire amount of interest attributable to such Revolving Loan for the period from and including the date on which such Revolving Loan is made on such Revolving Lender’s behalf, to but excluding the date the Administrative Agent is reimbursed in respect of such Revolving Loan by such Revolving Lender, will be paid to the Administrative Agent for its own account.

 

Section 2.07          Interest Elections.

 

(1) Each Borrowing initially will be of the Type specified in the applicable Borrowing Request and, in the case of a Eurocurrency Borrowing, will have an initial Interest Period as specified in such Borrowing Request. Thereafter, the Borrower may elect to convert such Borrowing to a different Type or to continue such Borrowing and, in the case of a Eurocurrency Borrowing, may elect Interest Periods therefor, all as provided in this Section 2.07. The Borrower may elect different options with respect to different portions of the affected Borrowing, in which case each such portion will be allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion will be considered a separate Borrowing.

 

(2) To make an election pursuant to this Section 2.07 following the Closing Date, the Borrower will notify the Administrative Agent of such election by telephone or in writing in the same manner as telephonic notice is to be confirmed as provided below (a) in the case of an election to convert to or continue a Eurocurrency Borrowing, not later than 2:00 p.m., New York City time, three (3) Business Days before the effective date of such election or (b) in the case of an election to convert to or continue an ABR Borrowing, not later than 2:00 p.m., New York City time, one (1) Business Day before the date of such election. Each such telephonic Interest Election Request will be confirmed promptly by hand delivery, facsimile transmission or e-mail to the Administrative Agent of a written Interest Election Request substantially in the form of Exhibit D and signed by the Borrower.

 

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(3) Each telephonic and written Interest Election Request will be irrevocable and will specify the following information:

 

(a) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (c) and (d) below will be specified for each resulting Borrowing);

 

(b) the effective date of the election made pursuant to such Interest Election Request, which will be a Business Day;

 

(c) whether the resulting Borrowing is to be an ABR Borrowing or a Eurocurrency Borrowing; and

 

(d) if the resulting Borrowing is a Eurocurrency Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which will be a period contemplated by the definition of “Interest Period.”

 

(4) If any such Interest Election Request requests a Eurocurrency Borrowing but does not specify an Interest Period, then the Borrower will be deemed to have selected a Eurocurrency Borrowing having an Interest Period of one month’s duration.

 

(5) Promptly following receipt of an Interest Election Request, the Administrative Agent will advise each applicable Lender of the details thereof and of such Lender’s portion of each resulting Borrowing.

 

(6) If the Borrower fails to timely deliver an Interest Election Request with respect to a Eurocurrency Borrowing prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period, such Borrowing shall be converted to an ABR Borrowing. Notwithstanding any contrary provision hereof, if a Specified Event of Default has occurred and is continuing and the Administrative Agent, at the request of the Required Lenders, so notifies the Borrower, then, so long as such Specified Event of Default is continuing, (i) no outstanding Borrowing may be converted to or continued as a Eurocurrency Borrowing and (ii) unless repaid, each Eurocurrency Borrowing will be converted to an ABR Borrowing at the end of the Interest Period applicable thereto.

 

Section 2.08          Termination and Reduction of Commitments.

 

(1) Unless previously terminated, (x) the Initial Term Loan Commitments will terminate on the Closing Date (after giving effect to any Borrowings on such date), (y) the DDTL Facility Commitments will terminate on the DDTL Facility Commitment Expiration Date and (z) the Revolving Facility Commitments will terminate on the Revolving Facility Commitment Termination Date.

 

(2) The Borrower may at any time terminate, or from time to time reduce, the Revolving Facility Commitments or any Term Commitments; provided that (i) each such reduction shall be in an amount that is an integral multiple of $1,000,000 and not less than $5,000,000 (or, if less, the remaining amount of the applicable Commitments) (or such other amount as agreed by the Administrative Agent), (ii) with respect to the Revolving Facility Commitments, (a) the Borrower will not terminate or reduce the Revolving Facility Commitments if, after giving effect to any concurrent prepayment of the Revolving Loans in accordance with Section 2.12, the aggregate Revolving Facility Credit Exposure would exceed the Revolving Facility Commitments, (b) any reduction of the Revolving Facility Commitments shall be allocated pro rata among all Revolving Lenders with a Revolving Facility Commitment and (c) any reduction of the Revolving Facility Commitments shall not require a corresponding pro rata reduction in the Letter of Credit Sublimit or the Swing Line Sublimit; provided that the Letter of Credit Sublimit and/or the Swing Line Sublimit, as applicable, shall be permanently reduced by the amount thereof (if any) in excess of the Revolving Facility Commitments and (iii) with respect to the DDTL Facility Commitments, any reduction of the DDTL Facility Commitments shall be allocated pro rata among all DDTL Lenders with a DDTL Facility Commitment.

 

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(3) The Borrower will notify the Administrative Agent in writing (which may be by hand, facsimile or email) of any election to terminate or reduce the Revolving Facility Commitments or any Term Commitments under paragraph (2) of this Section 2.08 at least three (3) Business Days prior to the date of such termination or reduction, specifying such election and the date thereof. Promptly following receipt of any notice, the Administrative Agent will advise the Lenders of the contents thereof. Each notice delivered by the Borrower pursuant to this Section 2.08 will be irrevocable; provided that a notice of termination of the Revolving Facility Commitments or any Term Commitments delivered by the Borrower may be revocable or conditioned on a refinancing of all or any portion of the applicable Facility, in which case such notice may be revoked or postponed by the Borrower (by notice to the Administrative Agent prior to 2:00 p.m., New York City time, on the specified effective date) if such condition is not satisfied. Any termination or reduction of the Revolving Facility Commitments or any Term Commitments will be permanent. Each reduction of the Revolving Facility Commitments or any Term Commitments will be made ratably among the Lenders in accordance with their respective Revolving Facility Commitments or applicable Term Commitments.

 

Section 2.09          Promise to Pay; Evidence of Debt.

 

(1) The Borrower hereby unconditionally promises to pay to the Administrative Agent for the account of each (a) Revolving Lender the then unpaid principal amount of each Revolving Loan of such Revolving Lender to the Borrower on the applicable Maturity Date and (b) Term Lender the then unpaid principal amount of each Term Loan of such Lender as provided in Section 2.10.

 

(2) Each Lender will maintain in accordance with its usual practice an account or accounts evidencing the Indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder.

 

(3) The Administrative Agent will maintain accounts in which it will record (a) the amount of each Loan made hereunder, the Type thereof and the Interest Period (if any) applicable thereto, (b) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (c) any amount received by the Administrative Agent hereunder for the account of the Lenders and each Lender’s share thereof.

 

(4) The entries made in the accounts maintained pursuant to paragraph (2) or (3) of this Section 2.09 will be prima facie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein will not in any manner affect the obligation of the Borrower to repay the Loans in accordance with the terms of this Agreement; provided, further, that to the extent there is a conflict between the entries in the accounts maintained pursuant to paragraph (2) or (3) of this Section 2.09, the records of the Administrative Agent shall control.

 

(5) Any Lender may request that Loans of any Class made by it be evidenced by a promissory note (a “Note”). In such event, the Borrower will prepare, execute and deliver to such Lender a Note payable to such Lender (or, if requested by such Lender, to such Lender and its registered assigns) and in a form approved by the Administrative Agent and reasonably acceptable to the Borrower. Thereafter, the Loans evidenced by such Note and interest thereon will at all times (including after assignment pursuant to Section 9.04) be represented by one or more Notes in such form payable to the payee named therein (or, if requested by such payee, to such payee and its registered assigns).

 

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Section 2.10          Repayment of Term Loans.

 

(1) The Borrower will repay to the Administrative Agent for the ratable account of the applicable Lenders holding Initial Term Loans on the last Business Day of each March, June, September and December, commencing with the last Business Day of the first full fiscal quarter ending after the Closing Date, in an aggregate principal amount equal to the applicable percentage of the aggregate principal amount of Initial Term Loans outstanding on the Closing Date set forth in the following grid:

 

Year   Percentage  
Closing Date – June 7, 2022 (i.e., Year 1)     1.25 %
         
June 8, 2022 – June 7, 2023 (i.e., Year 2)     1.25 %
         
June 8, 2023 – June 7, 2024 (i.e., Year 3)     1.25 %
         
June 8, 2024 – June 7, 2025 (i.e., Year 4)     1.875 %
         
June 8, 2025 – June 7, 2026 (i.e., Year 5)     2.50 %

 

provided that, such payments for the Initial Term Loans will be (x) reduced as a result of the application of prepayments of Initial Term Loans in accordance with the order of priority set forth in Section 2.11 or 2.12, as applicable and (y) subject to adjustments as set forth in any Incremental Facility Amendment that increases the aggregate principal amount of the Initial Term Loans (each such date being referred to as an “Original Term Loan Installment Date”).

 

(2) To the extent that any DDTLs are not “fungible” with the Initial Term Loans, the principal amount of each DDTL funded after the Closing Date shall be paid in quarterly installments on the last Business Day of each March, June, September and December, commencing on the last Business Day of the first full fiscal quarter to occur after the date that the first such DDTL is funded hereunder, and continuing on the last Business Day of each March, June, September and December. Each such installment shall be in an aggregate principal amount equal to the applicable percentage of the aggregate principal amount of such initial funded amount of each such DDTL, in each case as set forth in the grid in Section 2.10(1) above. The Administrative Agent and the Borrower may, in their reasonable discretion, make any appropriate adjustments as may be necessary or advisable to cause any DDTLs incurred after the Closing Date (the “New DDTLs”) to be treated as the same Class of Loans as the existing Initial Term Loans and/or existing DDTLs that were incurred by the Borrower prior to the date of incurrence of such New DDTLs, and to permit “fungibility” with such existing Initial Term Loans and/or existing DDTLs. The remaining outstanding principal amount of each DDTL shall be due and payable in full on the Maturity Date for Initial Term Loans.

 

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(3) (a) In the event that any Incremental Term Loans are made, the Borrower will repay Borrowings consisting of Incremental Term Loans on the dates (each an “Incremental Term Loan Installment Date”) and in the amounts set forth in the applicable Incremental Facility Amendment, (b) in the event that any Other Term Loans are made, the Borrower will repay Borrowings consisting of Other Term Loans on the dates (each an “Other Term Loan Installment Date”) and in the amounts set forth in the applicable Refinancing Amendment and (c) in the event that any Extended Term Loans are made, the Borrower will repay Borrowings consisting of Extended Term Loans on the dates (each an “Extended Term Loan Installment Date”) and in the amounts set forth in the applicable Extension Amendment; and

 

(4) to the extent not previously paid, all outstanding Term Loans will be due and payable on the applicable Maturity Date;

 

together, in each case, with accrued and unpaid interest on the principal amount to be paid to but excluding the date of such payment.

 

Section 2.11          Optional Prepayment of Loans. The Borrower may at any time and from time to time prepay the Loans of any Class, in whole or in part, without premium or penalty (subject to Section 2.17), in an aggregate principal amount, (1) in the case of Eurocurrency Loans, that is an integral multiple of $500,000 and not less than $1,000,000, and (2) in the case of ABR Loans, that is an integral multiple of $500,000 and not less than $1,000,000, or, in each case, if less, the amount outstanding or as may be otherwise agreed with the Administrative Agent. The Borrower will notify the Administrative Agent in writing (substantially in the form attached hereto as Exhibit H) by hand delivery, facsimile transmission or e-mail of such election not later than 2:00 p.m., New York City time, (a) in the case of a Eurocurrency Borrowing, three (3) Business Days before the anticipated date of such prepayment, (b) in the case of an ABR Borrowing, one (1) Business Day before the anticipated date of such prepayment and (c) in the case of a prepayment of Swing Line Loans, not later than 2:00 p.m., New York City time, on the date of prepayment, in each case, or such shorter period as is acceptable to the Administrative Agent; provided that prior written notice shall not be required and no minimum shall apply in respect of Revolving Loans and Swing Line Loans. Each such notice of prepayment will specify the relevant Borrowing to be prepaid, the prepayment date and the principal amount of each Borrowing (or portion thereof) to be prepaid. All prepayments under this Section 2.11 will be accompanied by accrued and unpaid interest on the principal amount to be prepaid to but excluding the date of payment. Any such notice may be revocable or conditioned on a refinancing of all or any portion of any Facility, in which case such notice may be revoked or postponed by the Borrower (by notice to the Administrative Agent prior to 2:00 p.m., New York City time, on the specified effective date) if such condition is not satisfied; provided that the provisions of Section 2.17 shall apply with respect to any such revocation or extension. Any optional prepayments of Term Loans pursuant to this Section 2.11 shall be applied among the Classes of Term Loans as directed by the Borrower (or, in the case of no such direction, pro rata to each of the Classes of Term Loans) and within each Class of Term Loans subject to such prepayment will be applied to the remaining scheduled amortization payments of such applicable Class of Term Loans as directed by the Borrower (or in the absence of such direction, in direct order of maturity, to the amortization payments of such applicable Class of Term Loans) and will be applied ratably to the Term Loans of such Class included in the prepaid Borrowing.

 

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Section 2.12          Mandatory Prepayment of Loans.

 

(1) In the event and on such occasion that the Revolving Facility Credit Exposure exceeds the Revolving Facility Commitments, the Borrower shall prepay (no later than one (1) Business Day after written notice from the Administrative Agent to the Borrower) first, Swing Line Loans (if any) and second, Revolving Loans (or, if no such Revolving Loans are outstanding, cash collateralize Letters of Credit in accordance with Section 2.05(11)) in an aggregate amount equal to the amount by which the Revolving Facility Credit Exposure exceeds the Revolving Facility Commitments.

 

(2) The Borrower will apply 100% of the Net Cash Proceeds received by the Borrower and its Restricted Subsidiaries in respect of an Asset Sale made pursuant to Section 6.05(2), Section 6.05(4) or on account of an Event of Loss (each a “Required Prepayment Asset Sale”), to prepay Term Loans within ten (10) Business Days following receipt of such Net Cash Proceeds, unless the Borrower has delivered a Reinvestment Notice on or prior to the end of such Business Day; provided that, subject to the other provisions of this Section 2.12(2), within ten (10) Business Days of each Reinvestment Prepayment Date the Borrower will apply an amount equal to the Reinvestment Prepayment Amount with respect to the relevant Reinvestment Event to the prepayment of the Term Loans; provided, further, that no such prepayment shall be required under this clause (2) for any Required Prepayment Asset Sales, to the extent Net Cash Proceeds of such Required Prepayment Asset Sale required to be prepaid under this clause (2) do not exceed the greater of (1) $2,250,000 or (2) 5.0% of Consolidated EBITDA for the most recently ended Test Period (the “Asset Sale Threshold”), and if greater than the Asset Sale Threshold, only amounts in excess of the Asset Sale Threshold shall be required to be prepaid in accordance with this Section 2.12(2);

 

(3) Commencing with the fiscal year ending December 31, 2021, not later than the tenth (10th) Business Day following the date on which Annual Financial Statements have been delivered or are required to be delivered pursuant to Section 5.04(1) and the related certificate has been delivered or was required to be delivered pursuant to Section 5.04(3), the Borrower will calculate Excess Cash Flow for such Excess Cash Flow Period and will apply the following amount to the prepayment of Term Loans (if positive):

 

(a) the Required ECF Percentage of such Excess Cash Flow (provided that, if the applicable First Lien Net Leverage Ratio used in calculating the Required ECF Percentage (after taking into account any such prepayment and any reductions pursuant to (b) below) falls into a lower threshold, then the relevant percentage shall be reduced accordingly for any further prepayments to be made); minus

 

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(b) the amount of any voluntary prepayments or repurchases (including those made through debt buybacks made by the Borrower or any of its Restricted Subsidiaries pursuant to Section 9.04(14) and, solely to the extent made below par, in an amount equal to the discounted amount of cash actually paid in respect of such debt buyback) during such Excess Cash Flow Period and, at the option of the Borrower, on or prior to the day that is the tenth (10th) Business Day following the date on which Annual Financial Statements have been delivered or are required to be delivered pursuant to Section 5.04(1) and the related certificate has been delivered or was required to be delivered pursuant to Section 5.04(3) of:

 

(i) Term Loans (including Initial Term Loans, DDTLs, Incremental Term Loans, Other Term Loans and Extended Term Loans, in each case, solely to the extent such Term Loans rank pari passu to the Initial Term Loans);

 

(ii) Revolving Loans, Incremental Revolving Loans and Other Revolving Loans (in each case, to the extent accompanied by a corresponding permanent reduction in the Commitments); or

 

(iii) Credit Agreement Refinancing Indebtedness and other Permitted Refinancing Indebtedness incurred to Refinance any of the foregoing Indebtedness (or Credit Agreement Refinancing Indebtedness or Permitted Refinancing Indebtedness described in this clause (iii)) (in the case of any revolving indebtedness, to the extent accompanied by a corresponding reduction in the commitments);

 

in each case, (i) made during the applicable fiscal year or after year-end and prior to the time such prepayment pursuant to this Section 2.12(3)(b) is due (any payments described in this sub-clause (i) made after the end of the applicable fiscal year but prior to the time such prepayment pursuant to this Section 2.12(3) is due in respect of such fiscal year, an “After Year End Payment”; provided that no such After Year End Payment applied in respect of any Excess Cash Flow Period may be applied in any succeeding Excess Cash Flow Period) and (ii) not financed with the proceeds of the issuance or the incurrence of long-term Indebtedness (other than proceeds of revolving loans); minus

 

(c) (i) cash payments made by the Borrower or any Restricted Subsidiary during such period in respect of Capital Expenditures, Capitalized Software Expenditures, Permitted Acquisitions, Investments (including, without limitation, any purchase of, or Investment in, intellectual property, any purchase price adjustments (including working capital adjustments), deferred purchase consideration, earn-out payments (and payments of seller notes converted from earn-outs), holdback amounts and indemnity payments with respect thereto) and Restricted Payments (excluding Restricted Payments made pursuant to Section 6.06(8) in reliance on clause (2) of the definition of Available Amount, Investments made pursuant to Section 6.04(3) in reliance on clause (2) of the definition of Available Amount, Investments in Cash Equivalents and other items (including Investments and Restricted Payments) that are eliminated in consolidation) and (ii) at the option of the Borrower, cash payments that the Borrower or any Restricted Subsidiary has made or is required to make in respect of Capital Expenditures, Capitalized Software Expenditures, Permitted Acquisitions, Investments (including, without limitation, any purchase of, or Investment in, intellectual property, any purchase price adjustments (including working capital adjustments), deferred purchase consideration, earn-out payments (and payments of seller notes converted from earn-outs), holdback amounts and indemnity payments with respect thereto) and Restricted Payments, in each case of sub-clauses (i) and (ii) hereof, made during the applicable fiscal year or as an After Year End Payment and, in the case of Permitted Acquisitions, other Investments and capital expenditures, at the Borrower’s option, consideration required to paid in cash pursuant to binding obligations entered into by the Borrower or any of its Restricted Subsidiaries; provided that amounts described in this clause (ii) will not reduce Excess Cash Flow in subsequent periods and, to the extent not so paid, will increase Excess Cash Flow in the subsequent period; minus

 

(d) the ECF De Minimis Amount.

 

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Not later than the date on which the Borrower is required to deliver financial statements with respect to the end of each Excess Cash Flow Period under Section 5.04(1), the Borrower will deliver to the Administrative Agent a certificate signed by a Financial Officer of the Borrower setting forth the amount, if any, of Excess Cash Flow for such fiscal year and the calculation thereof in reasonable detail.

 

(4) The Borrower will apply 100% of the net cash proceeds from the incurrence, issuance or sale by the Borrower or any Restricted Subsidiary of any Indebtedness that is not Excluded Indebtedness to the prepayment of Term Loans, on or prior to the date which is five (5) Business Days after the receipt of such net cash proceeds.

 

(5) Notwithstanding anything in this Section 2.12 to the contrary, any Lender may elect, by notice to the Administrative Agent in writing by hand delivery, facsimile transmission or e-mail at least two (2) Business Days prior to the required prepayment date, to decline all (but not less than all) of any mandatory prepayment of its Term Loans pursuant to this Section 2.12 (other than clause (4) of this Section 2.12), in which case the aggregate amount of the prepayment that would have been applied to prepay Term Loans but was so declined will be retained by the Borrower and will be added to the Available Amount as set forth in clause (8) of the definition thereof. Such mandatory prepayments of Term Loans will be applied, subject to clause (6) below, on a pro rata basis to the then outstanding Term Loans of all Classes being prepaid irrespective of whether such outstanding Term Loans are ABR Loans or Eurocurrency Loans; provided that if no Lenders exercise the right to decline a given mandatory prepayment of the Term Loans pursuant to this Section 2.12(5), then, with respect to such mandatory prepayment, the amount of such mandatory prepayment will be applied first to Term Loans that are ABR Loans to the full extent thereof before application to Term Loans that are Eurocurrency Loans in a manner that minimizes the amount of any payments required to be made by the Borrower pursuant to Section 2.17.

 

(6) The Borrower will deliver to the Administrative Agent, at the time of each prepayment of Term Loans required under Section 2.12 (other than Section 2.12(1)), (a) a certificate signed by a Financial Officer of the Borrower setting forth in reasonable detail the calculation of the amount of such prepayment and (b) to the extent practicable, at least three (3) Business Days prior written notice of such prepayment. Each notice of prepayment shall specify the prepayment date, the Type of each Term Loan being prepaid and the principal amount of each Term Loan (or portion thereof) to be prepaid. Prepayment of the Term Loans pursuant to this Section 2.12 will be made without premium or penalty, in the case of Eurocurrency Loans, accompanied by accrued and unpaid interest on the principal amount to be prepaid to but excluding the date of payment, and applied as directed by the Borrower or, absent such direction, to reduce scheduled amortization payments of Term Loans under Section 2.10(1) in direct order of maturity; provided that any prepayment of Incremental Term Loans, Other Term Loans or Extended Term Loans will be applied in the order specified in the applicable Permitted Amendment. No payments under Section 2.17 will be required in connection with a prepayment of Term Loans pursuant to this Section 2.12. In the event of any prepayment of Term Loans pursuant to this Section 2.12 at a time when Term Loans of more than one Class remain outstanding, the aggregate amount of such prepayment will be allocated between each Class of Term Loans pro rata based on the aggregate principal amount of outstanding Term Loans of each such Class (except as otherwise provided in the applicable Permitted Amendment, in each case with respect to the applicable Class of Term Loans).

 

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Section 2.13          Fees.

 

(1) The Borrower agrees to pay to the Administrative Agent, a fee for the account of:

 

(a) each Revolving Lender (other than a Defaulting Lender) in accordance with its Revolving Facility Percentage, on or prior to the fifth (5th) Business Day after the end of each fiscal quarter of the Borrower, commencing with the first full fiscal quarter of the Borrower ending after the Closing Date, and on the Revolving Facility Commitment Termination Date, a commitment fee (the “Revolving Facility Commitment Fee”) based on the average daily amount of the aggregate Available Unused Revolving Facility Commitments during the preceding fiscal quarter (or in the case of the first full fiscal quarter, the period commencing on the Closing Date and ending with the end of the first full fiscal quarter, or ending with the Revolving Facility Commitment Termination Date, as applicable) at a rate equal to the Applicable Rate. The total Revolving Facility Commitment Fee paid by the Borrower will be equal to the sum of all of the Revolving Facility Commitment Fees due to the Revolving Lenders. The Revolving Facility Commitment Fees will (i) begin to accrue on the Closing Date and will cease to accrue on the Revolving Facility Commitment Termination Date, (ii) be payable quarterly in arrears on the fifth (5th) Business Day after the end of the first full fiscal quarter following the Closing Date and each fiscal quarter thereafter and (iii) computed on the basis of the actual number of days elapsed in a year of 360 days. Notwithstanding anything to the contrary herein, Swing Line Loans shall not constitute utilization of the Revolving Facility Commitments for purposes of calculating the Revolving Facility Commitment Fee.

 

(b) each DDTL Lender (other than a Defaulting Lender) in accordance with its DDTL Facility Percentage, on or prior to the fifth (5th) Business Day after the end of each fiscal quarter of the Borrower, commencing with the first full fiscal quarter of the Borrower ending after the Closing Date, and on the DDTL Facility Commitment Expiration Date, a commitment fee (the “DDTL Facility Commitment Fee”) based on the average daily amount of the aggregate Available Unused DDTL Facility Commitments during the preceding fiscal quarter (or in the case of the first full fiscal quarter, the period commencing on the Closing Date and ending with the end of the first full fiscal quarter, or ending with the DDTL Facility Commitment Expiration Date, as applicable) at a rate equal to the Applicable Rate. The total DDTL Facility Commitment Fee paid by the Borrower will be equal to the sum of all of the DDTL Facility Commitment Fees due to the DDTL Lenders. The DDTL Facility Commitment Fees will (i) begin to accrue on the Closing Date and will cease to accrue on the DDTL Facility Commitment Expiration Date, (ii) be payable on the earliest of (x) the date on which any DDTL Facility Commitments have been terminated pursuant to Section 2.08(2) (solely with respect to any accrued DDTL Facility Commitment Fees payable on account of such terminated amounts), (y) the six month anniversary of the Closing Date (solely with respect to any accrued DDTL Facility Commitment Fees payable on account of DDTL Facility Commitments that have expired on such date) and (z) with respect to any other then-accrued and unpaid DDTL Facility Commitment Fees, in arrears on the fifth (5th) Business Day after the end of the first full fiscal quarter following the Closing Date and (iii) computed on the basis of the actual number of days elapsed in a year of 360 days.

 

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(2) The Borrower agrees to pay to:

 

(a) the Administrative Agent for the account of each Revolving Lender (other than any Defaulting Lender, it being understood that at any time any Issuing Bank has Fronting Exposure to such Defaulting Lender, the letter of credit participation fee with respect to such Fronting Exposure (an “L/C Participation Fee”) will be payable to such Issuing Bank for its own account) in accordance with its Revolving Facility Percentage, on or prior to the fifth (5th) Business Day after the end of each fiscal quarter of the Borrower in each year, commencing with the first full fiscal quarter of the Borrower ending after the Closing Date, and on the Revolving Facility Commitment Termination Date, an L/C Participation Fee on the daily aggregate Revolving L/C Exposure (excluding the portion thereof attributable to unreimbursed L/C Disbursements), during the preceding fiscal quarter (or in the case of the first full fiscal quarter, the period commencing on the Closing Date and ending with the end of the first full fiscal quarter, or ending with the Revolving Facility Commitment Termination Date, as applicable) at the rate per annum equal to the Applicable Rate for Eurocurrency Revolving Loans effective for each day in such period; and

 

(b) each Issuing Bank, for its own account (i) on or prior to the fifth (5th) Business Day after the end of each fiscal quarter of the Borrower, commencing with the first full fiscal quarter of the Borrower ending after the Closing Date, and the Revolving Facility Commitment Termination Date, a fronting fee in respect of each Letter of Credit issued by, or the term of which is extended by, such Issuing Bank for the period from and including the date of issuance, renewal or extension of such Letter of Credit to and including the termination of such Letter of Credit, computed at a rate equal to 0.125 % per annum of the daily stated amount of such Letter of Credit (or as may otherwise be agreed with such Issuing Bank) plus (ii) such Issuing Bank’s customary issuance fees and customary documentary and processing fees and charges (collectively, “Issuing Bank Fees”). All L/C Participation Fees and Issuing Bank Fees will be (i) payable quarterly in arrears on the last day of the first full fiscal quarter following the Closing Date and each fiscal quarter thereafter and (ii) computed on the basis of the actual number of days elapsed in a year of 360 days.

 

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(3) The Borrower agrees to pay to the Administrative Agent, for its own account, the agency fee set forth in the Fee Letter at the times and on the terms specified therein (the “Administrative Agent Fees”).

 

(4) All Fees will be paid on the dates due and payable, in immediately available funds, to the Administrative Agent at the Payment Office for distribution, if and as appropriate, among the Lenders, except that Issuing Bank Fees will be paid directly to the applicable Issuing Banks. Once paid, none of the Fees will be refundable under any circumstances.

 

Section 2.14          Interest.

 

(1) The Loans comprising each ABR Borrowing will bear interest at ABR plus the Applicable Rate.

 

(2) The Loans comprising each Eurocurrency Borrowing will bear interest at the Adjusted Eurocurrency Rate for the Interest Period in effect for such Borrowing plus the Applicable Rate.

 

(3) Following the occurrence and during the continuation of a Specified Event of Default, the Borrower will pay interest on overdue amounts hereunder at a rate per annum equal to (i) in the case of overdue principal of any Loan, 2.00% plus the rate otherwise applicable to such Loan as provided in the preceding paragraphs of this Section 2.14 or (ii) in the case of overdue interest or any other overdue amount, 2.00% plus the rate applicable to ABR Loans as provided in clause (1) of this Section 2.14.

 

(4) Accrued interest on each Loan will be payable in arrears (i) on each Interest Payment Date for such Loan, (ii) on the applicable Maturity Date and (iii) with respect to Revolving Loans, upon termination of the Revolving Facility Commitments; provided that (A) interest accrued pursuant to paragraph (3) of this Section 2.14 will be payable on demand, (B) in the event of any repayment or prepayment of any Loan (other than a repayment of an ABR Loans), accrued interest on the principal amount repaid or prepaid will be payable on the date of such repayment or prepayment and (C) in the event of any conversion of any Eurocurrency Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan will be payable on the effective date of such conversion.

 

(5) All interest hereunder will be computed on the basis of a year of 360 days, except that interest computed by reference to the ABR at times when the ABR is based on the prime rate will be computed on the basis of a year of 365 days (or 366 days in a leap year), and, in each case, will be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable ABR, Adjusted Eurocurrency Rate or Eurocurrency Rate will be determined by the Administrative Agent, and such determination will be conclusive absent manifest error.

 

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Section 2.15          Inability to Determine Rates.

 

(1) If the Administrative Agent (in the case of clause (a) or (b) below) or the Required Lenders (in the case of clause (c) below) reasonably determine that for any reason in connection with any request for a Eurocurrency Loan or a conversion to or continuation thereof that:

 

(a) deposits are not being offered to banks in the London interbank eurocurrency market for Dollars for the applicable amount and Interest Period of such Eurocurrency Loan,

 

(b) adequate and reasonable means do not exist for determining the Eurocurrency Rate for any requested Interest Period with respect to a proposed Eurocurrency Loan or in connection with an existing or proposed ABR Loan, or

 

(c) the Eurocurrency Rate for any requested Interest Period with respect to a proposed Eurocurrency Loan does not adequately and fairly reflect the cost to such Lenders of funding such Loan,

 

then the Administrative Agent shall give notice thereof to the Borrower and the Lenders by facsimile transmission or e-mail as promptly as practicable thereafter and, until the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a Eurocurrency Borrowing shall be ineffective, and any Eurocurrency Borrowing that is requested to be continued, shall be converted to an ABR Borrowing on the last day of the Interest Period applicable thereto and (ii) if any Borrowing Request requests a Eurocurrency Borrowing, such Borrowing shall be made as an ABR Borrowing.

 

(2) Notwithstanding anything to the contrary herein or in any other Loan Document, if a Benchmark Transition Event or an Early Opt-in Election, as applicable, and its related Benchmark Replacement Date have occurred prior to the Reference Time in respect of any setting of the then-current Benchmark, then such Benchmark Replacement will replace such Benchmark for all purposes hereunder and under any Loan Document in respect of such Benchmark setting and subsequent Benchmark settings at or after 5:00 p.m., New York City time, on the fifth (5th) Business Day after the date notice of such Benchmark Replacement is provided to the Lenders without any amendment to, or further action or consent of any other party to, this Agreement or any other Loan Document so long as the Administrative Agent has not received, by such time, written notice of objection to such Benchmark Replacement from Lenders comprising the Required Lenders of each Class.

 

(3) Notwithstanding anything to the contrary herein or in any other Loan Document, (a) if a Term SOFR Transition Event has occurred after a Benchmark Replacement and the applicable Reference Time in respect of any setting of the then-current Benchmark or (b) with the prior written consent of the Borrower (such consent not to be unreasonably withheld, conditioned or delayed), in each case, then Term SOFR will replace the then-current Benchmark for all purposes hereunder or under any Loan Document in respect of such Benchmark setting and subsequent Benchmark settings, without any amendment to, or further action or consent of any other party to, this Agreement or any other Loan Document; provided that this clause (3) shall not be effective unless the Administrative Agent has delivered to the Lenders and the Borrower a Term SOFR Notice.

 

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(4) In connection with the implementation of a Benchmark Replacement (including, for the avoidance of doubt, in connection with the occurrence of a Term SOFR Transition Event and in accordance with Section 2.15(3) above), the Administrative Agent will have the right, in consultation with the Borrower, to make Benchmark Replacement Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Loan Document, any amendments implementing such Benchmark Replacement Conforming Changes will become effective without any further action or consent of any other party to this Agreement or any other Loan Document.

 

(5) The Administrative Agent will promptly notify the Borrower and the Lenders of (i) any occurrence of a Benchmark Transition Event, a Term SOFR Transition Event or an Early Opt-in Election, as applicable, and its related Benchmark Replacement Date, (ii) the implementation of any Benchmark Replacement, (iii) the effectiveness of any Benchmark Replacement Conforming Changes, (iv) the removal or reinstatement of any tenor of a Benchmark pursuant to clause (6) below and (v) the commencement or conclusion of any Benchmark Unavailability Period. Any determination, decision or election that may be made by the Administrative Agent or, if applicable, any Lender (or group of Lenders) pursuant to this Section 2.15, including any determination with respect to a tenor, rate or adjustment or of the occurrence or non-occurrence of an event, circumstance or date and any decision to take or refrain from taking any action or any selection, will be conclusive and binding absent manifest error and may be made in its or their sole discretion and without consent from any other party to this Agreement or any other Loan Document, except, in each case, as expressly required pursuant to this Section 2.15.

 

(6) Notwithstanding anything to the contrary herein or in any other Loan Document, at any time (including in connection with the implementation of a Benchmark Replacement), (i) if the then-current Benchmark is a term rate (including Term SOFR or USD LIBOR) and either (A) any tenor for such Benchmark is not displayed on a screen or other information service that publishes such rate from time to time as selected by the Administrative Agent in its reasonable discretion or (B) the regulatory supervisor for the administrator of such Benchmark has provided a public statement or publication of information announcing that any tenor for such Benchmark is or will be no longer representative, then the Administrative Agent may modify the definition of “Interest Period” for any Benchmark settings at or after such time to remove such unavailable or non-representative tenor and (ii) if a tenor that was removed pursuant to clause (i) above either (A) is subsequently displayed on a screen or information service for a Benchmark (including a Benchmark Replacement) or (B) is not, or is no longer, subject to an announcement that it is or will no longer be representative for a Benchmark (including a Benchmark Replacement), then the Administrative Agent may modify the definition of “Interest Period” for all Benchmark settings at or after such time to reinstate such previously removed tenor.

 

(7) Upon the Borrower’s receipt of notice of the commencement of a Benchmark Unavailability Period, the Borrower may revoke any request for a Eurocurrency Borrowing of, conversion to or continuation of Eurocurrency Loans to be made, converted or continued during any Benchmark Unavailability Period and, failing that, the Borrower will be deemed to have converted any such request into a request for a Borrowing of or conversion to ABR Loans. During any Benchmark Unavailability Period or at any time that a tenor for the then-current Benchmark is not an Available Tenor, the component of ABR based upon the then-current Benchmark or such tenor for such Benchmark, as applicable, will not be used in any determination of ABR.

 

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Section 2.16          Increased Costs.

 

(1) If any Change in Law:

 

(a) imposes, modifies or deems applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender (except any such reserve requirement reflected in the Adjusted Eurocurrency Rate) or any Issuing Bank;

 

(b) imposes on any Lender or Issuing Bank or the London interbank market any other condition (other than Taxes) affecting this Agreement or Eurocurrency Loans made by such Lender or any Letter of Credit or participation therein; or

 

(c) subjects any Recipient to any Taxes (other than (i) Indemnified Taxes, (ii) Taxes described in clauses (2) through (4) of the definition of Excluded Taxes and (iii) Connection Income Taxes) on its loans, loan principal, letters of credit, commitments or other obligations, or deposits, reserves, other liabilities or capital attributable thereto;

 

and the result of any of the foregoing is to increase the cost to such Lender of making or maintaining any Eurocurrency Loan (or of maintaining its obligation to make any such Loan) or to increase the cost to such Lender or Issuing Bank of participating in, issuing or maintaining any Letter of Credit or to reduce the amount of any sum received or receivable by such Lender or Issuing Bank hereunder (whether of principal, interest or otherwise), the Borrower will pay to such Lender or Issuing Bank, as applicable, such additional amount or amounts as will compensate such Lender or Issuing Bank, as applicable, for such additional costs incurred or reduction suffered; provided that the Borrower shall not be liable for such compensation if (x) the relevant Change in Law occurs on a date prior to the date such Lender becomes a party hereto, (y) any Lender invokes Section 2.21 or (z) in the case of requests for reimbursement under clause (b) above resulting from a market disruption, (A) such circumstances are not generally affecting the banking market or (B) such request has not been made by Lenders constituting the Required Lenders.

 

(2) If any Lender or Issuing Bank determines that any Change in Law regarding capital or liquidity requirements has or would have the effect of reducing the rate of return on such Lender’s or Issuing Bank’s capital or on the capital of such Lender’s or Issuing Bank’s holding company, if any, as a consequence of this Agreement or the Loans made by, or participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by such Issuing Bank, to a level below that which such Lender or such Issuing Bank or such Lender’s or such Issuing Bank’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s or such Issuing Bank’s policies and the policies of such Lender’s or such Issuing Bank’s holding company with respect to capital adequacy or liquidity), then from time to time the Borrower will pay to such Lender or such Issuing Bank, as applicable, such additional amount or amounts as will compensate such Lender or such Issuing Bank or such Lender’s or such Issuing Bank’s holding company for any such reduction suffered.

 

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(3) A certificate of a Lender or an Issuing Bank setting forth the amount or amounts necessary to compensate such Lender or Issuing Bank or its holding company, as applicable, as specified in paragraph (1) or (2) of this Section 2.16 and setting forth in reasonable detail the manner in which such amount or amounts was determined and certifying that such Lender or Issuing Bank is generally charging such amounts to similarly situated borrowers will be delivered to the Borrower and will be conclusive absent manifest error. The Borrower will pay to such Lender or Issuing Bank, as applicable, the amount shown as due on any such certificate within thirty (30) days after receipt thereof.

 

(4) Promptly after any Lender or any Issuing Bank has determined that it will make a request for increased compensation pursuant to this Section 2.16, such Lender or Issuing Bank will notify the Borrower thereof. Failure or delay on the part of any Lender or Issuing Bank to demand compensation pursuant to this Section 2.16 will not constitute a waiver of such Lender’s or such Issuing Bank’s right to demand such compensation; provided that the Borrower will not be required to compensate a Lender or an Issuing Bank pursuant to this Section 2.16 for any increased costs or reductions incurred more than 180 days prior to the date that such Lender or Issuing Bank, as applicable, notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender’s or Issuing Bank’s intention to claim compensation therefor; provided, further, that if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 180-day period referred to above will be extended to include the period of retroactive effect thereof.

 

Section 2.17          Break Funding Payments. Except as otherwise set forth herein, the Borrower will compensate each Lender for the actual out-of-pocket loss, cost and expense (excluding loss of anticipated profits) attributable to the following events:

 

(1) the payment of any principal of any Eurocurrency Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default);

 

(2) the conversion of any Eurocurrency Loan other than on the last day of the Interest Period applicable thereto;

 

(3) the failure to borrow, convert, continue or prepay any Eurocurrency Loan on the date specified in any notice delivered pursuant hereto; or

 

(4) the assignment of any Eurocurrency Loan other than on the last day of the Interest Period applicable thereto as a result of a request by the Borrower pursuant to Section 2.20.

 

Such loss, cost or expense to any Lender will be deemed to be the amount determined by such Lender to be the excess, if any, of (i) the amount of interest which would have accrued on the principal amount of such Loan had such event not occurred, at the Adjusted Eurocurrency Rate that would have been applicable to such Loan (but not including the Applicable Rate applicable thereto), for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or continue a Eurocurrency Loan, for the period that would have been the Interest Period for such Loan) over (ii) the amount of interest which would accrue on such principal amount for such period at the interest rate which such Lender would bid were it to bid, at the commencement of such period, for deposits in Dollars of a comparable amount and period from other banks in the London interbank market; it being understood that such loss, cost or expense shall in any case exclude any interest rate floor and all administrative, processing or similar fees.

 

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A certificate of any Lender setting forth in reasonable detail any amount or amounts that such Lender is entitled to receive pursuant to this Section 2.17 and the basis therefor and setting forth in reasonable detail the manner in which such amount or amounts were determined will be delivered to the Borrower and will be conclusive absent manifest error. The Borrower will pay such Lender the amount shown as due on any such certificate within thirty (30) days after receipt thereof.

 

Section 2.18          Taxes.

 

(1) All payments by or on account of any obligation of any Loan Party hereunder will be made without deduction or withholding for any Taxes, except as required by applicable law; provided that if any Taxes are required to be deducted or withheld under any applicable law from such payments (as determined in the good faith discretion of the Loan Party or the applicable withholding agent), then (a) such Loan Party or applicable withholding agent will make such deductions or withholding; (b) such Loan Party or applicable withholding agent will timely pay the full amount deducted or withheld to the relevant Governmental Authority in accordance with applicable law, and (c) if such Tax is an Indemnified Tax, the sum payable by the Loan Party will be increased as necessary so that after making all required deductions and withholding (including deductions and withholding applicable to additional sums payable under this Section 2.18) the applicable Recipient receives an amount equal to the amount it would have received had no such deductions or withholding been made.

 

(2) The Loan Parties will pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.

 

(3) The Loan Parties will indemnify each Recipient, within ten (10) days after written demand therefor, for the full amount of any Indemnified Taxes paid by such Recipient and any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to such Loan Party by a Lender, or by the Administrative Agent on its own behalf or on behalf of a Lender, will be conclusive absent manifest error.

 

(4) As soon as practicable after any payment of Taxes by a Loan Party to a Governmental Authority pursuant to this Section 2.18, such Loan Party will deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.

 

(5) (a) Any Lender that is entitled to an exemption from or reduction of withholding Tax with respect to payments made under any Loan Document will deliver to the Borrower and the Administrative Agent, at the time or times reasonably requested by the Borrower or the Administrative Agent, such properly completed and executed documentation reasonably requested by the Borrower or the Administrative Agent as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if reasonably requested by the Borrower or the Administrative Agent, will deliver such other documentation prescribed by applicable law or reasonably requested by the Borrower or the Administrative Agent as will enable the Borrower or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements. Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation (other than such documentation set forth in Section 2.18(5)(b)(ii)(i), (ii), and (iv) below) will not be required if in the Lender’s reasonable judgment such completion, execution or submission would subject such Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Lender.

 

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(b) Without limiting the generality of Section 2.18(5) above,

 

(i) each Lender that is a U.S. Person will deliver to the Borrower and the Administrative Agent on or prior to the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), duly completed and executed original copies of Internal Revenue Service Form W-9 certifying that such Lender is exempt from U.S. federal backup withholding tax;

 

(ii) each Foreign Lender will, to the extent it is legally entitled to do so, deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), two original copies of whichever of the following is applicable:

 

(A)              In the case of a Foreign Lender claiming the benefits of an income tax treaty to which the United States is a party (x) with respect to payments of interest under any Loan Document, executed copies of Internal Revenue Service Form W-8BEN or Internal Revenue Service Form W-8BEN-E establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “interest” article of such tax treaty and (y) with respect to any other applicable payments under any Loan Document, Internal Revenue Service Form W-8BEN or Internal Revenue Service Form W-8BEN-E establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “business profits” or “other income” article of such tax treaty;

 

(B)              duly completed and executed copies of Internal Revenue Service Form W-8ECI (or any subsequent versions thereof or successors thereto);

 

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(C)              in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Section 871(h) or 881(c) of the Code,

 

(x) a certificate substantially in the form of the applicable Exhibit F to the effect that such Foreign Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a “10 percent shareholder” of the Borrower within the meaning of Section 871(h)(3) or 881(c)(3)(B) of the Code; or a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code; and

 

(y) duly completed and executed copies of Internal Revenue Service Form W-8BEN or W-8BEN-E, as applicable (or any subsequent versions thereof or successors thereto); or

 

(D)              to the extent a Foreign Lender is not the Beneficial Owner, duly completed and executed copies of Internal Revenue Service Form W-8IMY, accompanied by Internal Revenue Service Form W-8ECI, Internal Revenue Service Form W-8BEN, Internal Revenue Service Form W-8BEN-E, a certificate substantially in the form of the applicable Exhibit F, Internal Revenue Service Form W-9, and/or other certification documents from each Beneficial Owner, as applicable; provided that if the Foreign Lender is a partnership and one or more direct or indirect partners of such Foreign Lender are claiming the portfolio interest exemption, such Foreign Lender may provide a certificate substantially in the form of the applicable Exhibit F on behalf of each such direct and indirect partner;

 

(iii) any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), executed copies of any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in U.S. federal withholding tax, duly completed, together with such supplementary documentation as may be prescribed by applicable law to permit the Borrower or the Administrative Agent to determine the withholding or deduction required to be made; and

 

(iv) if a payment made to a Recipient under any Loan Document would be subject to U.S. federal withholding Tax imposed by FATCA if such Recipient were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Recipient will deliver to the Borrower and the Administrative Agent at the time or times prescribed by law and at such time or times reasonably requested by the Borrower or the Administrative Agent such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Borrower or the Administrative Agent as may be necessary for the Borrower and the Administrative Agent to comply with their obligations under FATCA and to determine that such Recipient has complied with such Recipient’s obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this 0, “FATCA” will include any amendments made to FATCA after the date of this Agreement.

 

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In addition, each Lender agrees that if any form or certification it previously delivered expires or becomes obsolete, invalid, or inaccurate in any respect, it shall update such form or certification or promptly notify the Borrower and the Administrative Agent in writing of its legal inability to do so.

 

(c) On or before the date of this Agreement (and on or before the date any successor or replacement Administrative Agent becomes the Administrative Agent hereunder), to the extent copies thereof have not previously been so delivered, the Administrative Agent shall deliver to the Borrower, to the extent it is legally able to do so, two duly executed copies of either (i) Internal Revenue Service Form W-9 (or any subsequent versions thereof or successors thereto) or (ii) Internal Revenue Service Form W-8IMY (or any subsequent versions thereof or successors thereto) certifying that it is a “U.S. branch” of a foreign bank and evidencing its agreement with the Borrower to be treated as a U.S. Person with respect to payments made to it by the Borrower.

 

(6) If the Administrative Agent or any Lender determines, in its sole discretion exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified by a Loan Party or with respect to which such Loan Party has paid additional amounts pursuant to this Section 2.18, it will pay over promptly an amount equal to such refund to such Loan Party (but only to the extent of indemnity payments made, or additional amounts paid, by such Loan Party under this Section 2.18 with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses of the Administrative Agent or such Lender (including any Taxes imposed with respect to such refund), and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund); provided that such Loan Party, upon the request of the Administrative Agent or such Lender, agrees to repay as soon as reasonably practicable the amount paid over to such Loan Party pursuant to this Section 2.18(6) (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Administrative Agent or such Lender in the event the Administrative Agent or such Lender is required to repay such refund to such Governmental Authority. Notwithstanding anything to the contrary in this Section 2.18(6), in no event will the Administrative Agent or any Lender be required to pay any amount to a Loan Party pursuant to this Section 2.18(6) the payment of which would place the Administrative Agent or any Lender in a less favorable net after-Tax position than the Administrative Agent or any Lender would have been in if the Tax subject to indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with respect to such Tax had never been paid. This Section 2.18(6) will not be construed to require the Administrative Agent or any Lender to make available its Tax returns (or any other information relating to its Taxes which it deems, in good faith, to be confidential) to the Loan Parties or any other Person.

 

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(7) Notwithstanding any other provision of this Agreement, any Loan Party may deduct and withhold any Taxes required by any law to be deducted and withheld from any payment under any of the Loan Documents, subject to the provisions of this Section 2.18.

 

(8) Each party’s obligations under this Section 2.18 will survive the resignation or replacement of the Administrative Agent or any assignment of rights by, or the replacement of, a Lender, the termination of this Agreement, the Commitments and the repayment, satisfaction or discharge of all obligations under any Loan Document.

 

(9) For purposes of this Section 2.18, the term “applicable law” includes FATCA and the “Recipient” includes any Issuing Bank.

 

Section 2.19          Payments Generally; Pro Rata Treatment; Sharing of Set-offs.

 

(1) Unless otherwise specified, (a) the Borrower will make each payment required to be made by it hereunder (whether of principal, interest, fees, reimbursement of L/C Disbursements or otherwise) prior to 2:00 p.m., New York City time, at the Payment Office, except payments to be made directly to the applicable Issuing Banks as expressly provided herein and except that payments pursuant to Section 2.16, 2.17, 2.18 and 9.05 will be made directly to the Persons entitled thereto; and (b) each such payment will be made, on the date when due, in immediately available funds, without condition or deduction for any defense, recoupment, set-off or counterclaim. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. The Administrative Agent will distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof and will make settlements with the Lenders with respect to other payments at the times and in the manner provided in this Agreement. Except as otherwise provided herein, if any payment hereunder is due on a day that is not a Business Day, the date for payment will be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon will be payable for the period of such extension. Any payment required to be made by the Administrative Agent hereunder will be deemed to have been made by the required time if the Administrative Agent, at or before such time, has taken the necessary steps to make such payment in accordance with the regulations or operating procedures of the clearing or settlement system used by the Administrative Agent to make such payment.

 

(2) Except as otherwise provided in this Agreement, if (a) at any time insufficient funds are received by and available to the Administrative Agent from the Borrower to pay fully all amounts of principal, unreimbursed L/C Disbursements, interest and fees and other Obligations then due from the Borrower hereunder or (b) at any time an Event of Default shall have occurred and be continuing and the Administrative Agent will receive proceeds of Collateral in connection with the exercise of remedies, such funds will be applied in accordance with Section 5.02 of the Collateral Agreement (subject to the application of proceeds provisions contained in an Acceptable Intercreditor Agreement).

 

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(3) Except as otherwise provided in this Agreement, if any Lender, by exercising any right of set-off or counterclaim or otherwise, obtains payment in respect of any principal of or interest on any of its Class of Loans or participations in L/C Disbursements resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Class of Loans and participations in L/C Disbursements than the proportion received by any other Lender in such Class, then the Lender receiving such greater proportion will purchase (for cash at face value) participations in L/C Disbursements and the Loans of such Class of other Lenders in such Class to the extent necessary so that the benefit of all such payments will be shared by the Lenders in such Class ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Loans of such Class and participations in L/C Disbursements; provided that (a) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations will be rescinded and the purchase price restored to the extent of such recovery, without interest, and (b) the provisions of this paragraph (3) will not be construed to apply to any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement (including the application of funds arising from the existence of a Defaulting Lender or a Disqualified Institution) or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans or participations in L/C Disbursements to any assignee or participant. The Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against the Borrower rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Borrower in the amount of such participation.

 

(4) Unless the Administrative Agent has received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders or the applicable Issuing Banks hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or the applicable Issuing Banks, as applicable, the amount due. In such event, if the Borrower has not in fact made such payment, then each of the Lenders or the applicable Issuing Banks, as applicable, severally and not jointly agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or such Issuing Banks with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.

 

(5) If any Lender fails to make any payment required to be made by it pursuant to Section 2.06(1), 2.19(3), 2.05(4) or 2.05(5), then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for the account of such Lender to satisfy such Lender’s obligations under Section 2.06(1), 2.19(3), 2.05(4) and/or 2.05(5) as applicable, until all such unsatisfied obligations are fully paid.

 

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Section 2.20          Mitigation Obligations; Replacement of Lenders.

 

(1) If any Lender requests compensation under Section 2.16, or if the Borrower is required to pay any Indemnified Taxes or additional amounts to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.18, or if any Lender determines it can no longer make or maintain Eurocurrency Loans pursuant to Section 2.21, then such Lender will, if requested by the Borrower, use commercially reasonable efforts to designate a different Lending Office for funding or booking any of its Loans hereunder that are affected by such event or assign its rights and obligations hereunder to another of its offices, branches or Affiliates if, in the reasonable judgment of such Lender, such designation or assignment (a) would eliminate or reduce amounts payable pursuant to Section 2.16, 2.18 or 2.21, as applicable, in the future; provided that such efforts would not subject such Lender to any material unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender in any material respect. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.

 

(2) If any Lender requests compensation under Section 2.16 or Section 2.18, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.18, or if any Lender determines it cannot make Eurocurrency Loans pursuant to Section 2.21, or if any Lender becomes a Defaulting Lender or Disqualified Institution, then the Borrower may, at its sole expense and effort, (a) terminate the unused Revolving Facility Commitment of such Lender and repay the Loans of such Lender on a non-pro rata basis without premium or penalty (including with respect to the processing and recordation fee referred to in Section 9.04(2)(b)(ii)) or (b) require such Lender (and such Lender shall be obligated) to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 9.04), all its interests, rights and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and funded participations in L/C Disbursements and, other than in the case of a Defaulting Lender, accrued interest thereon, accrued fees and all other amounts payable to it hereunder from (x) in the case of clause (a) above, the Borrower or (y) in the case of clause (b) above, the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts), and (ii) in the case of any such assignment resulting from a claim for compensation under Section 2.16 or payments required to be made pursuant to Section 2.18, such assignment will result in a reduction in such compensation or payments thereafter. Nothing in this Section 2.20 will be deemed to prejudice any rights that the Borrower may have against any Lender that is a Defaulting Lender.

 

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(3) If any Lender (such Lender, a “Non-Consenting Lender”) has failed to consent to a proposed amendment, waiver, discharge or termination that, pursuant to the terms of Section 9.08, requires the consent of such Lender and with respect to which the Required Lenders have granted their consent, then the Borrower may (unless such Non-Consenting Lender grants such consent), at its sole expense and effort, (a) terminate the unused Revolving Facility Commitment of such Lender and repay the Loans of such Lender on a non-pro rata basis without premium or penalty (including with respect to the processing and recordation fee referred to in Section 9.04(2)(b)(ii)) or (b) replace such Non-Consenting Lender by deeming such Non-Consenting Lender to have assigned (in accordance with and subject to the restrictions contained in Section 9.04), all its interests, rights and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) all Obligations of the Borrower owing to such Non-Consenting Lender (including accrued Fees and any amounts due under Section 2.16, 2.17, 2.18 or 2.25) being removed or replaced will be paid in full to such Non-Consenting Lender concurrently with such removal or assignment and (ii) in the case of clause (b) above, the replacement Lender will purchase the foregoing by paying to such Non-Consenting Lender a price equal to the principal amount thereof plus accrued and unpaid interest thereon. No action by or consent of the Non-Consenting Lender will be necessary in connection with such removal or assignment, in the case of clause (b) above, which shall be immediately and automatically effective upon payment of such purchase price. In connection with any such assignment, the Borrower, the Administrative Agent, such Non-Consenting Lender and the replacement Lender will otherwise comply with Section 9.04; provided that if such Non-Consenting Lender does not comply with Section 9.04 within three (3) Business Days after the Borrower’s request, compliance with Section 9.04 will no longer be required to effect such assignment.

 

Section 2.21          Illegality. If any Lender reasonably determines that any Change in Law has made it unlawful, or if any Governmental Authority has asserted after the Closing Date that it is unlawful, for any Lender or its applicable Lending Office to make or maintain any Eurocurrency Loans, then, upon notice thereof by such Lender to the Borrower through the Administrative Agent, any obligations of such Lender to make or continue Eurocurrency Loans or to convert ABR Borrowings to Eurocurrency Borrowings will be suspended until such Lender notifies the Administrative Agent and the Borrower that the circumstances giving rise to such determination no longer exist. Upon receipt of such notice, the Borrower will upon demand from such Lender (with a copy to the Administrative Agent), convert all Eurocurrency Borrowings of such Lender to ABR Borrowings, either on the last day of the applicable Interest Period therefor, if such Lender may lawfully continue to maintain such Eurocurrency Borrowings to such day, or immediately, if such Lender may not lawfully continue to maintain such Loans. Upon any such prepayment or conversion, the Borrower will also pay accrued interest on the amount so prepaid or converted.

 

Section 2.22          Incremental Facilities.

 

(1) Notice. At any time and from time to time, on one or more occasions, subject to the terms and conditions set forth herein, the Borrower may, by notice to the Administrative Agent, (a) increase the aggregate principal amount of any outstanding Class of Term Loans (including, for the avoidance of doubt, DDTLs) or add one or more additional Classes of Term Loans (including, for the avoidance of doubt, delayed draw term loans) under the Loan Documents (any such new Class or increase of Term Loans, an “Incremental Term Facility” and any loans made pursuant to an Incremental Term Facility, “Incremental Term Loans”) and/or (ii) increase the Revolving Facility Commitments or any other existing Revolving Facility (any such new Classes or increase, an “Incremental Revolving Facility Commitment” and, together with any Incremental Term Facility, “Incremental Facilities”, or either thereof, an “Incremental Facility”; and the loans thereunder, “Incremental Revolving Loans” and, together with any Incremental Term Loans, “Incremental Loans”).

 

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(2) Ranking. Incremental Facilities will rank pari passu in right of payment and security with the Facilities.

 

(3) Size. The principal amount of Incremental Facilities incurred pursuant to this Section 2.22 will not exceed at the time of such incurrence, in the aggregate, a principal amount equal to the greater of (A) $45,000,000 and (B) 100.0% of Consolidated EBITDA for the most recently ended Test Period on the date of such incurrence, calculated on a Pro Forma Basis.

 

The Borrower may, in the case of any such Incremental Term Loans, elect to incur such Incremental Facilities as a separate tranche or as an increase to any existing tranche of Loans. Each tranche of Incremental Term Loans or Incremental Revolving Facility Commitment will be in an integral multiple of $1,000,000 and in an aggregate principal amount that is not less than $5,000,000 (or such lesser minimum amount approved by the Administrative Agent in its reasonable discretion); provided that such amount may be less than the applicable minimum amount or integral multiple amount if such amount represents all the remaining availability under this clause (3) at such time.

 

(4) Incremental Lenders. Incremental Facilities may be provided by any existing Lender (it being understood that (i) no existing Lender will have an obligation to provide Incremental Facilities and (ii) there is no obligation to approach any existing Lenders to provide Incremental Facilities) or any Additional Lender; provided that in the case of Incremental Revolving Facility Commitments, the Administrative Agent, each Issuing Bank and the Swing Line Lender shall have consented (in each case, such consent not to be unreasonably withheld, delayed or conditioned) to any Additional Lender’s providing such Incremental Facilities if such consent by the Administrative Agent, the Issuing Banks or the Swing Line Lender would be required under Section 9.04 for an assignment of Term Loans or Revolving Facility Commitments, as applicable, to such Additional Lender.

 

(5) Incremental Facility Amendments. Each Incremental Facility will become effective pursuant to an amendment (each, an “Incremental Facility Amendment”) to this Agreement and, as appropriate, the other Loan Documents, executed by the Borrower, each Lender or each Additional Lender that agrees, in its sole discretion, to provide such Incremental Facility (the “Incremental Lenders”) and the Administrative Agent. The Administrative Agent will promptly notify each Lender as to the effectiveness of each Incremental Facility Amendment. An Incremental Facility Amendment may, without the consent of any other Lenders, effect such amendments to any Loan Documents as may be necessary, advisable or appropriate, in the reasonable opinion of the Administrative Agent and the Borrower, to reflect the existence and terms of the Incremental Facility and the Loans evidenced thereby, including such amendments that are not adverse to the interests of the Lenders and are reasonably necessary, advisable or appropriate to have such Incremental Facility be fungible with any then existing Facility.

 

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(6) Conditions. The availability of any Incremental Facility will be subject solely to the following conditions:

 

(a) no Default or Event of Default shall have occurred and be continuing on the date such Incremental Facility is incurred or would exist immediately after giving effect thereto; provided, that if the Incremental Facility is being incurred in connection with a Limited Condition Transaction and an LCA Election is made, the date of determination of whether this condition is satisfied shall be the LCA Test Date; provided, further, that if such an LCA Election is made, no Specified Event of Default shall have occurred and be continuing on the date such Incremental Facility is incurred or would exist immediately after giving effect thereto;

 

(b) each of the representations and warranties made by any Loan Party set forth in Article III hereof and in any other Loan Document shall be true and correct in all material respects (except that any representation and warranty that is qualified as to “materiality” or “Material Adverse Effect” shall be true and correct in all respects) on the date such Incremental Facility is incurred with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date, in which case such representations and warranties shall be true and correct in all material respects (in all respects, as the case may be) as of such earlier date; provided, that if the Incremental Facility is being incurred in connection with a Limited Condition Transaction and an LCA Election is made, the date of determination of whether this condition is satisfied shall be the LCA Test Date; and

 

(c) such other conditions (if any) as may be required by the Incremental Lenders providing such Incremental Facilities.

 

(7) Terms. Each notice delivered pursuant to this Section 2.22 will set forth the amount and proposed terms of the relevant Incremental Facility. The terms applicable to any Incremental Revolving Facility Commitment shall be the same as those applicable to the Revolving Facility and any Incremental Revolving Facility Commitment shall be structured as an increase in the Revolving Facility. The terms applicable to any Incremental Term Facility shall be determined by the Borrower and the Incremental Lenders providing such Incremental Facility; provided that:

 

(a) other than in connection with Customary Bridge Loans, (x) the final maturity date of such Incremental Term Loans will be no earlier than the Latest Maturity Date of the Term Loans and (y) the Weighted Average Life to Maturity of such Incremental Term Loans will be no shorter than the longest remaining Weighted Average Life to Maturity of the Term Loans (this clause (a), the “Maturity Provision”);

 

(b) such Incremental Term Loans may participate on a pro rata basis or a less than pro rata basis (but not greater than pro rata basis) in any voluntary or mandatory prepayments of the Term Loans and in the case of any voluntary prepayments the Term Loans, participate on a greater than pro rata basis;

 

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(c) subject to clause (a) above, the amortization schedules applicable to such Incremental Term Loans will be as determined by the Borrower and the Incremental Lenders providing such Incremental Term Loans;

 

(d) to the extent secured, such Incremental Loans shall not be secured by any assets or property of any Loan Party that does not constitute Collateral (subject to customary exceptions for cash collateral in favor of an agent or similar “fronting” lender or in connection with any funding into escrow arrangements);

 

(e) such Incremental Loans shall not be guaranteed by any Restricted Subsidiary that is not a Loan Party; and

 

(f) if the terms and documentation in respect of any Incremental Term Facility are not consistent with the terms of the Term Loans (except to the extent permitted by the Maturity Provision above or sub-clause (8) below), such terms shall either, at the option of the Borrower, (1) be reasonably satisfactory to the Administrative Agent or (2) reflect market terms and conditions, taken as a whole, at the time of incurrence, issuance or effectiveness thereof (as reasonably determined by the Borrower) (it being understood that (A) terms differing from those with respect to the Facilities applicable only after the Maturity Date of the comparable Facilities are acceptable and (B) if any more favorable provision is added for the benefit of any Incremental Term Facility, such provision shall be deemed to be acceptable to the extent such provision is added for the benefit of the Initial Term Loans established on the Closing Date).

 

(8) Pricing.

 

(a) Subject to clause (b) below, the interest rate, fees and original issue discount for any Incremental Facility will be as determined by the Borrower and the Incremental Lenders providing such Incremental Facility;

 

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(b) If the yield (as determined below) on any Incremental Term Loans in the form of term loans that are incurred after the Closing Date, in each case, (such yield, the “Incremental Yield”) exceeds the yield (as determined below) on the applicable Initial Term Loans by more than 50 basis points, then the interest margins for such Initial Term Loans will automatically be increased to a level such that the yield on such Initial Term Loans will be 50 basis points below the Incremental Yield on such Incremental Term Loans. Any increase in yield on the Initial Term Loans required pursuant to this Section 2.22(8) and resulting from the application of an Adjusted Eurocurrency Rate or ABR “floor” on any Incremental Term Loans will be effected solely through an increase in such “floor” (or an implementation thereof, as applicable) in respect of the Initial Term Loans. In determining whether the Incremental Yield on Incremental Term Loans secured on a pari passu basis with the Initial Term Loans exceeds the yield on the Initial Term Loans by more than 50 basis points, (A) such determination will take into account interest margins (and any coupon payable, if applicable), minimum Adjusted Eurocurrency Rate, minimum ABR, upfront fees and original issue discount on the Term Loans or such other Indebtedness in the primary syndication thereof, with upfront fees and original issue discount being equated to interest margins or coupon based on an assumed four-year life to maturity, but will exclude any arrangement, syndication, structuring, commitment, placement, underwriting or other fees payable in connection therewith that is not customarily shared among the applicable lenders or holders of such Indebtedness on a pro rata basis (regardless of whether any such fees are paid to or shared in whole or in part with any Lender) and excluding the effect of any fluctuations in the Eurocurrency Rate or any other applicable base rate and (B)(x) with respect to the Initial Term Loans, to the extent the Eurocurrency Rate on the closing date of the Incremental Facility is less than any Eurocurrency Rate floor then applicable to the Initial Term Loans, the amount of such difference shall be deemed added to the applicable rate for such Initial Term Loans solely for the purposes of determining whether an increase in the interest margins for such Initial Term Loans shall be required and (y) with respect to any Incremental Term Loans, to the extent that the Eurocurrency Rate or any equivalent definition thereof on the closing date of the Incremental Facility is less than any interest rate floor, if any, applicable to the Incremental Term Loans, the amount of such difference shall be deemed added to the applicable rate for such Incremental Term Loans solely for the purposes of determining the Incremental Yield; provided, that for purposes of calculating the Eurocurrency Rate or any such equivalent definition for this clause (B), such rate shall be for the same interest period, which shall be determined by the Borrower from the interest periods available to it under this Agreement and such Indebtedness, respectively. In addition to the foregoing, for purposes of calculating the Incremental Yield for any Incremental Term Loans that constitutes fixed-rate Indebtedness, the fixed rate coupon of such Indebtedness shall be swapped to a floating rate on a customary matched-maturity basis, and the Incremental Yield of such fixed-rate Indebtedness on a floating rate basis shall be reasonably determined in a customary manner by the Administrative Agent based on customary financial methodology in consultation with the Borrower (or, if the Administrative Agent declines (or is unable) to determine such Incremental Yield or the appropriate floating rate swap on a matched maturity basis, as reasonably determined in a customary manner based on customary financial methodology by a financial institution reasonably acceptable to the Administrative Agent and the Borrower).

 

(9) Incremental Revolving Facility Commitment. Upon each increase in the revolving commitments under any Revolving Facility pursuant to this Section 2.22, each Revolving Lender immediately prior to such increase will automatically and without further act be deemed to have assigned to each Additional Lender providing a portion of the Incremental Revolving Facility Commitment (each, an “Incremental Revolving Lender”) in respect of such increase, and each such Incremental Revolving Lender will automatically and without further act be deemed to have assumed, a portion of such Revolving Lender’s participations hereunder in outstanding Swing Line Loans and Letters of Credit under such Revolving Facility such that, after giving effect to each such deemed assignment and assumption of participations, the percentage of the aggregate outstanding participations hereunder in such Swing Line Loans and Letters of Credit under such Revolving Facility held by each Revolving Lender (including each such Incremental Revolving Lender), as applicable, will equal the percentage of the aggregate revolving commitments of all Revolving Lenders under such Revolving Facility. Additionally, if any revolving loans are outstanding under a Revolving Facility at the time any Incremental Revolving Facility Commitments are established as an increase to such Revolving Facility, the applicable Revolving Lenders immediately after effectiveness of such Incremental Revolving Facility Commitments shall purchase and assign at par such amounts of the revolving loans outstanding under such Revolving Facility at such time as the Administrative Agent may require such that each Revolving Lender holds its pro rata percentage of all revolving loans outstanding under such Revolving Facility immediately after giving effect to all such assignments. The Administrative Agent and the Lenders hereby agree that the minimum borrowing, pro rata borrowing and pro rata payment requirements contained elsewhere in this Agreement shall not apply to the transactions effected pursuant to the immediately preceding sentence.

 

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(10) Fungible Tranches. Notwithstanding anything herein to the contrary, the Borrower and the Administrative Agent may effectuate changes to the amortization schedule of any class of existing Term Loans to the extent (but only to the extent) necessary to allow for the Incremental Term Loans to be treated as “fungible” with such class of existing Term Loans, including by having such Incremental Term Loans have modestly higher amortization payments.

 

Section 2.23          Other Loans.

 

(1) Other Refinancing Loans. Credit Agreement Refinancing Indebtedness may, at the election of the Borrower, take the form of new Term Loans under an additional Term Facility hereunder (“Other Term Loans”) and/or new revolving commitments under an additional Revolving Facility hereunder (“Other Revolving Commitments” and the loans thereunder, “Other Revolving Loans”; and together with Other Term Loans, “Other Refinancing Loans”) pursuant to a Refinancing Amendment.

 

(2) Refinancing Amendments. The effectiveness of any Refinancing Amendment will be subject only to the satisfaction on the date thereof of such of the conditions set forth in Section 4.01 as may be requested by the providers of Other Refinancing Loans. The Administrative Agent will promptly notify each Lender as to the effectiveness of each Refinancing Amendment.

 

(3) Required Consents. Any Refinancing Amendment may, without the consent of any Person other than the Administrative Agent, the Borrower and the Lenders or Additional Lenders providing Other Refinancing Loans, effect such amendments to this Agreement and the other Loan Documents as may be necessary, advisable or appropriate, in the reasonable opinion of the Administrative Agent and the Borrower, to effect the provisions of this Section 2.23. This Section 2.23 supersedes any provisions in Section 9.08 to the contrary.

 

(4) Providers of Other Refinancing Loans. Any Lender approached to provide all or a portion of Other Refinancing Loans may elect or decline, in its sole discretion, to provide such Other Refinancing Loans (it being understood that there is no obligation to approach any existing Lenders to provide Other Refinancing Loans). The consent of the Administrative Agent, and, in the case of Other Revolving Commitments, the Issuing Banks and the Swing Line Lender (in each case, such consent not to be unreasonably withheld, delayed or conditioned) will be required in respect of any Person providing Other Refinancing Loans if such consent would be required under Section 9.04 for an assignment of such Loans to such Person.

 

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(5) Other Revolving Commitments. Notwithstanding anything to the contrary in this Section 2.23 or otherwise, the borrowing and repayment (except for (A) payments of interest and fees at different rates on Other Revolving Commitments (and related outstandings), (B) repayments required upon the maturity date of the Other Revolving Commitments and (C) repayment made in connection with a permanent repayment and termination of commitments) of Loans with respect to Other Revolving Commitments after the date of obtaining any Other Revolving Commitments shall be made on at least a pro rata basis with all other Revolving Facilities.

 

Section 2.24          Extensions of Term Loans and Revolving Facility Commitments.

 

(1) Extension Offers. Pursuant to one or more offers (each, an “Extension Offer”) made from time to time by (i) the Borrower to all Lenders of Term Loans of the applicable Class with a like maturity date or (ii) the Borrower to all Lenders with Revolving Facility Commitments of the applicable Class with a like maturity date, in each case on a pro rata basis (based on the aggregate outstanding principal amount of the respective Term Loans or Revolving Facility Commitments with a like maturity date, as the case may be) and offered on the same terms to each such Lender, the Borrower is hereby permitted to consummate from time to time transactions with individual Lenders that accept the terms contained in such Extension Offers to extend the maturity date of each such Lender’s Term Loans and/or Revolving Facility Commitments and otherwise modify the terms of such Term Loans and/or Revolving Facility Commitments pursuant to the terms of the relevant Extension Offer (including, without limitation, by increasing the interest rate, premiums or fees payable in respect of such Term Loans and/or Revolving Facility Commitments (and related outstandings) and/or modifying the amortization schedule, optional prepayment terms, required prepayment dates and participation in prepayments in respect of such Lender’s Term Loans) (each, an “Extension”, and each group of Term Loans or Revolving Facility Commitments, as applicable, in each case as so extended, being a separate Class; any Extended Term Loans shall constitute a separate Class of Term Loans from the Class of Term Loans from which they were converted, and any Extended Revolving Commitments shall constitute a separate Class of Revolving Facility Commitments from the Class of Revolving Facility Commitments from which they were converted). Each Extension Offer will specify the minimum amount of Revolving Facility Commitments or Term Loans, as applicable, with respect to which an Extension Offer may be accepted, which will be an integral multiple of $1,000,000 and an aggregate principal amount that is not less than (i) $5,000,000, in the case of Revolving Facility Commitments and (ii) $25,000,000 in the case of Term Loans (or (a) if less, the aggregate principal amount of such Revolving Facility Commitments or Term Loans or (b) such lesser minimum amount as is approved by the Administrative Agent (such consent not to be unreasonably withheld, conditioned or delayed). If the aggregate (x) outstanding principal amount of Term Loans in respect of which Lenders have accepted an Extension Offer exceeds the maximum aggregate principal amount of Term Loans offered to be extended pursuant to an Extension Offer, then the Term Loans of such Lenders will be extended ratably up to such maximum amount based on the Term Loans of the Lender or the respective principal amounts (but not to exceed actual holdings of record) with respect to which such Lenders have accepted such Extension Offer and (y) outstanding amount of Revolving Facility Commitments in respect of which Lenders have accepted an Extension Offer exceeds the maximum aggregate principal amount of Revolving Facility Commitments offered to be extended pursuant to an Extension Offer, then the Revolving Facility Commitments of such Lenders will be extended ratably up to such maximum amount based on the Revolving Facility Commitments of the Lender or the respective principal amounts (but not to exceed actual holdings of record) with respect to which such Lenders have accepted such Extension Offer. There is no requirement that any Extension Offer or Extension Amendment be subject to any “most favored nation” pricing provisions. Each Lender accepting an Extension Offer with respect to Term Loans of the applicable Class is referred to herein as an “Extending Term Lender” and the Term Loans held by such Lender (and so extended) accepting an Extension Offer is referred to herein as “Extended Term Loans”. Each Lender accepting an Extension Offer with respect to Revolving Facility Commitments of the applicable Class is referred to herein as an “Extending Revolving Lender” (and together with any Extending Term Lender, the “Extending Lenders”) and the Revolving Facility Commitment held by such Lender (and so extended) accepting an Extension Offer is referred to herein as “Extended Revolving Commitments” (and the revolving loans made pursuant thereto, the “Extended Revolving Loans”).

 

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(2) Extension Amendments. The Lenders hereby irrevocably authorize the Administrative Agent to enter into amendments to this Agreement and the other Loan Documents (an “Extension Amendment”) with the Borrower as may be necessary in order to establish new classes in respect of the Extended Revolving Commitments or Extended Term Loans, as applicable. Any Extension Amendment may, without the consent of any Person other than the Administrative Agent, the Borrower and the applicable Extending Lenders, effect such amendments to this Agreement and the other Loan Documents as may be necessary, advisable or appropriate, in the reasonable opinion of the Borrower, to effect the provisions of this Section 2.24. This Section 2.24 supersedes any provisions in Section 9.08 to the contrary. Except as otherwise set forth in an Extension Offer, there will be no conditions to the effectiveness of an Extension Amendment. Extensions will not constitute a voluntary or mandatory payment or prepayment for purposes of this Agreement.

 

(3) Terms of Extended Term Loans. The terms of any Extended Term Loans will be set forth in an Extension Offer and as agreed between the Borrower and the Extending Term Lenders accepting such Extension Offer; provided that:

 

(a) the final maturity date of such Extended Term Loans will be no earlier than the Latest Maturity Date of the Term Loans subject to such Extension Offer;

 

(b) the Weighted Average Life to Maturity of such Extended Term Loans will be no shorter than the remaining Weighted Average Life to Maturity of the Term Loans subject to such Extension Offer; provided that notwithstanding the foregoing, scheduled amortization shall be permitted if the Lenders of other then existing Classes of Term Loans are also offered by the Borrower the same percentage amortization prepayment for each year at the corresponding times (less any amounts of any existing amortization for such applicable loans) (provided that, each individual Lender will be deemed to have rejected such offer unless such Lender notifies the Administrative Agent that it has accepted such offer by 11:00 a.m., New York City time, three (3) Business Days (or such longer period which the Borrower agrees) after the date of such offer);

 

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(c) such Extended Term Loans may participate on a pro rata basis or a less than pro rata basis (but not on a greater than pro rata basis) in any voluntary or mandatory prepayments of Term Loans and in the case of any voluntary prepayments of Term Loans, participate on a greater than pro rata basis;

 

(d) such Extended Term Loans shall not be secured by any assets or property of any Loan Party that does not constitute Collateral (subject to customary exceptions for cash collateral in favor of an agent, letter of credit issuer or similar “fronting” lender or in connection with any funding into escrow arrangements); and

 

(e) such Extended Term Loans shall not be guaranteed by any Restricted Subsidiary that is not a Loan Party.

 

(4) Terms of Extended Revolving Commitments. The terms of any Extended Revolving Commitments will be set forth in an Extension Offer and as agreed between the Borrower and the Extending Revolving Lenders accepting such Extension Offer; provided that:

 

(a) (1) the borrowing and repayment (except for (A) payments of interest and fees at different rates on Extended Revolving Commitments (and related outstandings), (B) repayments required upon the maturity date of the Extended Revolving Commitments and (C) repayment made in connection with a permanent repayment and termination of commitments) of Loans with respect to Extended Revolving Commitments after the date of obtaining any Extended Revolving Commitments shall be made on at least a pro rata basis with all other Revolving Facilities;

 

(b) such Extended Revolving Commitments shall not be secured by any assets or property of any Loan Party that does not constitute Collateral (subject to customary exceptions for cash collateral in favor of an agent, letter of credit issuer or similar “fronting” lender or in connection with any funding into escrow arrangements); and

 

(c) such Extended Revolving Commitments shall not be guaranteed by any Restricted Subsidiary that is not a Loan Party.

 

(5) Required Consents. No consent of any Lender or any other Person will be required to effectuate any Extension, other than the consent of the Administrative Agent (such consent not to be unreasonably withheld, delayed or conditioned), the Borrower and each applicable Extending Lender; provided that the Letter of Credit Commitment of any Issuing Bank shall not be extended in connection with any Extension of Revolving Facility Commitments unless such Issuing Bank shall have consented thereto. The transactions contemplated by this Section 2.24 (including, for the avoidance of doubt, payment of any interest, fees or premium in respect of any Extended Term Loans on such terms as may be set forth in the relevant Extension Offer) will not require the consent of any other Lender or any other Person, and the requirements of any provision of this Agreement (including Sections 2.12 and 2.19) or any other Loan Document that may otherwise prohibit any such Extension or any other transaction contemplated by this Section 2.24 will not apply to any of the transactions effected pursuant to this Section 2.24.

 

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Section 2.25          Defaulting Lenders.

 

(1) Adjustments. Notwithstanding anything to the contrary contained in this Agreement, if any Lender becomes a Defaulting Lender, then, until such time as such Lender is no longer a Defaulting Lender, to the extent permitted by applicable law:

 

(a) Waivers and Amendments. Such Defaulting Lender’s right to approve or disapprove any amendment, waiver or consent with respect to this Agreement is restricted as set forth in the definition of Required Lenders, Required DDTL Lenders and Required Revolving Lenders.

 

(b) Reallocation of Payments. Any payment of principal, interest, fees or other amounts received by the Administrative Agent for the account of such Defaulting Lender (whether voluntary or mandatory, at maturity, pursuant to Article VII or otherwise), will be applied at such time or times as may be determined by the Administrative Agent as follows:

 

(i) first, to the payment of any amounts owing by such Defaulting Lender to the Administrative Agent hereunder;

 

(ii) second, to the payment on a pro rata basis of any amounts owing by such Defaulting Lender to the Issuing Banks or the Swing Line Lender hereunder;

 

(iii) third, if so determined by the Administrative Agent or requested by the Issuing Banks or the Swing Line Lender, to be held as cash collateral for future funding obligations of such Defaulting Lender of any participation in any Letter of Credit or any Swing Line Loan;

 

(iv) fourth, as the Borrower may request, to the funding of any Revolving Loan in respect of which such Defaulting Lender has failed to fund its portion thereof as required by this Agreement;

 

(v) fifth, if so determined by the Administrative Agent and the Borrower, to be held in a non-interest bearing deposit account and released in order to satisfy obligations of such Defaulting Lender to fund Loans under this Agreement;

 

(vi) sixth, to the payment of any amounts owing to the Lenders or the Issuing Banks as a result of any judgment of a court of competent jurisdiction obtained by any Lender or any Issuing Bank against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement;

 

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(vii) seventh, to the payment of any amounts owing to the Borrower as a result of any judgment of a court of competent jurisdiction obtained by the Borrower against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement; and

 

(viii) eighth, to such Defaulting Lender or as otherwise directed by a court of competent jurisdiction; provided that if such payment is a payment of the principal amount of any Loans or L/C Disbursements in respect of which such Defaulting Lender has not fully funded its appropriate share, such payment shall be applied solely to pay the Loans of, and L/C Disbursements owed to, all non-Defaulting Lenders on a pro rata basis prior to being applied to the payment of any Loans of, or L/C Disbursements owed to, such Defaulting Lender. Any payments, prepayments or other amounts paid or payable to a Defaulting Lender that are applied (or held) to pay amounts owed by a Defaulting Lender or to post cash collateral pursuant to this Section 2.25(1)(b) will be deemed paid to and redirected by such Defaulting Lender, and each Lender irrevocably consents hereto.

 

(c) Certain Fees. Such Defaulting Lender (i) will not be entitled to receive any Commitment Fee pursuant to Section 2.13(1) for any period during which that Lender is a Defaulting Lender and (ii) will not be entitled to receive any L/C Participation Fee pursuant to Section 2.13(2) for any period during which that Lender is a Defaulting Lender (although the Borrower will be required to pay any such L/C Participation Fee that otherwise would have been required to have been paid to such Defaulting Lender to the non-Defaulting Lenders or the Issuing Banks, in accordance with any reallocation of Fronting Exposure to non-Defaulting Lenders or as may be retained by the Issuing Banks, as the case may be).

 

(d) Reallocation of Applicable Percentages to Reduce Fronting Exposure. During any period in which there is a Defaulting Lender, for purposes of computing the amount of the obligation of each non-Defaulting Lender to acquire, refinance or fund participations in Letters of Credit or Swing Line Loans pursuant to Section 2.04 and 2.05, the Revolving Facility Percentage of each non-Defaulting Lender will be computed without giving effect to the Revolving Facility Commitment of such Defaulting Lender, and such obligation to so acquire, refinance or fund participations in such Letters of Credit or Swing Line Loans shall automatically be reallocated among the non-Defaulting Lenders with Revolving Facility Commitments upon such Defaulting Lender becoming a Defaulting Lender; provided, that, each such reallocation will be given effect only to the extent such that the aggregate obligation of each non-Defaulting Lender to acquire, refinance or fund participations in Letters of Credit or Swing Line Loans will not exceed the positive difference, if any, of (i) the Revolving Facility Commitment of such non-Defaulting Lender minus (ii) the aggregate outstanding amount of the Revolving Loans of such non-Defaulting Lender.

 

(e) Elimination of Remaining Fronting Exposure. At any time that there exists a Defaulting Lender, promptly upon the reasonable request of the Administrative Agent or the Issuing Bank, the Borrower will deliver to the Administrative Agent cash collateral in an amount sufficient to cover all Fronting Exposure of the Revolving L/C Exposure (after giving effect to Section 2.25(1)(d)) which will be held as security for the reimbursement obligations of the Borrower with respect to the Revolving L/C Exposure.

 

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(2) Defaulting Lender Cure. If the Borrower, the Administrative Agent and the Issuing Banks agree in writing in their sole discretion that a Defaulting Lender should no longer be deemed to be a Defaulting Lender, the Administrative Agent will so notify the parties hereto, whereupon as of the effective date specified in such notice and subject to any conditions set forth therein (which may include arrangements with respect to any cash collateral), such Lender will, to the extent applicable, purchase that portion of outstanding Revolving Loans of the other Lenders or take such other actions as the Administrative Agent may determine to be necessary to cause the Revolving Loans and funded and unfunded participations in Letters of Credit and Swing Line Loans to be held on a pro rata basis by the Lenders in accordance with their Revolving Facility Percentages (without giving effect to Section 2.25(1)(d)), whereupon such Lender will cease to be a Defaulting Lender; provided that no adjustments will be made retroactively with respect to fees accrued or payments made by or on behalf of the Borrower while such Lender was a Defaulting Lender; and provided, further, that, except to the extent otherwise expressly agreed by the affected parties, no change hereunder from Defaulting Lender to Lender will constitute a waiver or release of any claim of any party hereunder arising from such Lender’s having been a Defaulting Lender.

 

Article III

Representations and Warranties

 

Each of the Borrower and the Restricted Subsidiaries represents and warrants to each Agent, to each of the Lenders and to the Issuing Banks, with respect to Credit Extensions made on the Closing Date that, on the Closing Date, the Specified Acquisition Agreement Representations and the Specified Representations are true and correct in all material respects.

 

With respect to any Credit Extensions made after the Closing Date, to the extent required by Section 4.02, the Borrower, with respect to itself and each of the Restricted Subsidiaries, will represent and warrant to each Agent and to each of the Lenders that:

 

Section 3.01          Organization; Powers. Each of the Borrower and each Restricted Subsidiary:

 

(1) is a partnership, limited liability company, corporation or trust duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization (to the extent such status or an analogous concept applies to such an organization), except, in the case of Restricted Subsidiaries that do not constitute Loan Parties, where the failure to so qualify would not reasonably be expected to have a Material Adverse Effect;

 

(2) has all requisite power and authority to own its property and assets and to carry on its business as now conducted, except where the failure to so qualify would not reasonably be expected to have a Material Adverse Effect;

 

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(3) is qualified to do business in each jurisdiction where such qualification is required, except where the failure to so qualify would not reasonably be expected to have a Material Adverse Effect; and

 

(4) has the power and authority to execute, deliver and perform its obligations under each of the Loan Documents and each other agreement or instrument contemplated thereby to which it is a party and, in the case of the Borrower, to borrow and otherwise obtain credit hereunder.

 

Section 3.02          Authorization. The execution, delivery and performance by the Loan Parties of each of the Loan Documents to which it is a party, the Borrowings hereunder and the Transactions:

 

(1) have been duly authorized by all corporate, stockholder, partnership, limited liability company or other applicable action required to be taken by the Loan Parties; and

 

(2) will not:

 

(a) violate:

 

(i) any provision of law, statute, rule or regulation, or of the Organizational Documents of any Loan Party;

 

(ii) any applicable order of any court or any rule, regulation or order of any Governmental Authority; or

 

(iii) any provision of any indenture, certificate of designation for preferred stock, agreement or other instrument to which any Loan Party is a party or by which any of them or any of their property is or may be bound;

 

(b) be in conflict with, result in a breach of, constitute (alone or with notice or lapse of time or both) a default under, or give rise to a right of or result in any cancellation or acceleration of any right or obligation (including any payment) or to a loss of a material benefit under, any such indenture, certificate of designation for preferred stock, agreement or other instrument; or

 

(c) result in the creation or imposition of any Lien upon any property or assets of any Loan Party, other than the Liens created by the Loan Documents and Permitted Liens;

 

except, with respect to clauses (a) and (b) of this Section 3.02(2), as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

Section 3.03          Enforceability. This Agreement has been duly executed and delivered by the Borrower and constitutes, and each other Loan Document when executed and delivered by each Loan Party that is party thereto will constitute, a legal, valid and binding obligation of such Loan Party enforceable against each such Loan Party in accordance with its terms, subject to:

 

(1) the effects of bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance or other similar laws affecting creditors’ rights generally;

 

(2) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law);

 

(3) implied covenants of good faith and fair dealing; and

 

(4) any foreign laws, rules and regulations as they relate to pledges of Equity Interests in Foreign Subsidiaries.

 

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Section 3.04          Governmental Approvals. No action, consent or approval of, registration or filing with or any other action by any Governmental Authority or third party is or will be required in connection with the Transactions, the perfection or maintenance of the Liens created under the Security Documents or the exercise by the Administrative Agent, Collateral Agent or any Lender of its rights under the Loan Documents or the remedies in respect of the Collateral, except for:

 

(1) the filing of Uniform Commercial Code financing statements and equivalent filings in foreign jurisdictions;

 

(2) filings with the United States Patent and Trademark Office and the United States Copyright Office;

 

(3) filings which may be required under Environmental Laws;

 

(4) filings as may be required under the Exchange Act and applicable stock exchange rules in connection therewith;

 

(5) such as have been made or obtained and are in full force and effect;

 

(6) such actions, consents and approvals the failure of which to be obtained or made would not reasonably be expected to have a Material Adverse Effect; or

 

(7) filings or other actions listed on Schedule 3.04.

 

Section 3.05          Title to Properties. Each of the Borrower and the Subsidiary Loan Parties has good fee simple title to, or valid leasehold interests in, all of the Real Property necessary and material to its business as currently conducted, and valid title to its personal property and assets (other than Real Property) (including Intellectual Property Rights), in each case, except for Permitted Liens.

 

Section 3.06          Subsidiaries.

 

(1) Schedule 3.06 sets forth as of the Closing Date the name and jurisdiction of incorporation, formation or organization of the Borrower and each Restricted Subsidiary and, as to each Restricted Subsidiary, the percentage of each class of Equity Interests owned by the Borrower or by any other Subsidiary of the Borrower.

 

(2) As of the Closing Date, there are no outstanding subscriptions, options, warrants, calls, rights or other agreements or commitments of any nature relating to any Equity Interests owned or held by the Borrower or any Restricted Subsidiary.

 

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Section 3.07          Litigation; Compliance with Laws.

 

(1) Except as set forth on Schedule 3.07, there are no actions, suits or proceedings at law or in equity or by or on behalf of any Governmental Authority or in arbitration now pending, or, to the knowledge of the Borrower, threatened in writing against or affecting the Borrower or any Restricted Subsidiary or any business, property or rights of any such Person (but excluding any actions, suits or proceedings arising under or relating to any Environmental Laws, which are subject to Section 3.13), in each case, which would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

(2) To the knowledge of the Borrower, none of the Borrower, any Restricted Subsidiary or their respective properties or assets is in violation of (nor will the continued operation of their material properties and assets as currently conducted violate) any law, rule or regulation (including any zoning, building, ordinance, code or approval, or any building permit, but excluding any Environmental Laws, which are subject to Section 3.13) or any restriction of record or agreement affecting any property, or is in default with respect to any judgment, writ, injunction or decree of any Governmental Authority, where such violation or default would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

Section 3.08          Federal Reserve Regulations.

 

(1) None of the Borrower or any Restricted Subsidiary is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying Margin Stock.

 

(2) No part of the proceeds of any Loan or Letter of Credit will be used, whether directly or indirectly, and whether immediately, incidentally or ultimately, (i) to purchase or carry Margin Stock or to extend credit to others for the purpose of purchasing or carrying Margin Stock or to refund Indebtedness originally incurred for such purpose or (ii) for any purpose that entails a violation of, or that is inconsistent with, the provisions of the Regulations of the Board, including Regulations T, U or X.

 

Section 3.09          Investment Company Act. None of the Borrower or any Guarantor is an “investment company” as defined in, or subject to regulation under, the Investment Company Act of 1940, as amended.

 

Section 3.10          Use of Proceeds.

 

(1) The proceeds of the Initial Term Loans, together with the proceeds of the PIPE Transaction, will be used, directly or indirectly, by the Borrower, to finance the Acquisition and the Closing Date Refinancing, to pay the Transaction Costs and for working capital and other general corporate purposes of the Borrower and its Subsidiaries, including financing of Permitted Acquisitions and other permitted Investments.

 

(2) The proceeds of the Revolving Loans, Letters of Credit and any Loans borrowed after the Closing Date will be used for working capital and other general corporate purposes, including financing of Permitted Acquisitions and other permitted Investments, and any other purpose of the Borrower and its Restricted Subsidiaries not otherwise prohibited under this Agreement.

 

(3) The proceeds of the DDTLs may be used by the Borrower to finance Permitted Acquisitions and other similar permitted Investments.

 

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Section 3.11          Tax Returns. Except as set forth on Schedule 3.11:

 

(1) except as would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, each of the Borrower and the Restricted Subsidiaries has filed or caused to be filed all federal, state, local and non-U.S. Tax returns required to have been filed by it; and

 

(2) each of the Borrower and the Restricted Subsidiaries has timely paid or caused to be timely paid (a) all Taxes shown to be due and payable by it (taking into account any applicable extension) on the returns referred to in clause (1) of this Section 3.11 and (b) all other Taxes or assessments (or made adequate provision (in accordance with GAAP) for the payment of all Taxes due) with respect to all periods or portions thereof ending on or before the Closing Date, in each case of clauses (a) and (b) above, which Taxes, if not paid or adequately provided for, would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, in each case except Taxes or assessments that are being contested in good faith by appropriate proceedings and for which the Borrower or any Restricted Subsidiary (as the case may be) has set aside on its books adequate reserves in accordance with GAAP.

 

Section 3.12          No Material Misstatements.

 

(1) All written factual information and written factual data (other than (i) the Projections, (ii) estimates and information of a general economic or industry specific nature, (iii) third party memorandums or reports furnished to any Lender of the Administrative Agent (“Third Party Material”); it being understood that Third Party Material shall not be deemed to include written information (other than the Projections and information of a general economic or industry specific nature) on which such Third Party Material is based to the extent such written information has been otherwise made available to the Lenders, and (iv) publicly available information concerning the Borrower or any Restricted Subsidiary that has been made available to the Administrative Agent or the Lenders, directly or indirectly, by or on behalf of the Borrower or any Restricted Subsidiary in connection with the Transactions, when taken as a whole and after giving effect to all supplements and updates provided thereto, is correct in all material respects and does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein not materially misleading in light of the circumstances under which such statements are made.

 

(2) The Projections that have been made available to the Administrative Agent or the Lenders by or on behalf of the Borrower in connection with the Transactions, when taken as a whole, have been prepared in good faith based upon assumptions that are believed by the Borrower to be reasonable at the time made and at the time delivered to the Administrative Agent or the Lenders, it being understood by the Administrative Agent and the Lenders that:

 

(a) the Projections are merely a prediction as to future events and are not to be viewed as facts;

 

(b) the Projections are subject to significant uncertainties and contingencies, many of which are beyond the control of the Borrower;

 

(c) no assurance can be given that any particular Projections will be realized; and

 

(d) actual results may differ and such differences may be material.

 

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Section 3.13          Environmental Matters. Except as to matters that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect:

 

(1) the Borrower and each of the Restricted Subsidiaries are in compliance with all Environmental Laws (including having obtained and complied with all permits, licenses and other approvals required under any Environmental Law for the operation of its business);

 

(2) neither the Borrower nor any Restricted Subsidiary has received notice of or is subject to any pending, or to the Borrower’s knowledge, threatened action, suit or proceeding alleging a violation of, or liability under, any Environmental Law that remains outstanding or unresolved;

 

(3) to the Borrower’s knowledge, no Hazardous Material is located at, on or under any property currently or formerly owned, operated or leased by the Borrower or any Restricted Subsidiary in violation of Environmental Laws and no Hazardous Material has been generated, owned, treated, stored, handled or controlled by the Borrower or any Restricted Subsidiary and transported to or Released at any location which, in each case, described in this clause (3), would reasonably be expected to result in an Environmental Liability of the Borrower or any Restricted Subsidiaries; and

 

(4) there are no agreements in which the Borrower or any Restricted Subsidiary has expressly assumed or undertaken responsibility for any known Environmental Liability of any other Person.

 

Section 3.14          Security Documents. The Collateral Agreement is effective to create in favor of the Collateral Agent (for the benefit of the Secured Parties) legal and valid Liens on the Collateral described therein; and when financing statements in appropriate form are filed in the offices specified on Schedule III to the Collateral Agreement, and the Collateral Agreement or a summary thereof or an Intellectual Property Security Agreement (in substantially the form of Exhibit B to the Collateral Agreement (for trademarks), Exhibit C to the Collateral Agreement (for patents) or Exhibit D to the Collateral Agreement (for copyrights)) is properly filed in the United States Patent and Trademark Office or the United States Copyright Office, as applicable, and the Pledged Collateral described in the Collateral Agreement is delivered to the Collateral Agent, the Liens on the Collateral granted pursuant to the Collateral Agreement will constitute fully perfected Liens on all right, title and interest of the applicable Loan Party in such Collateral in which (and to the extent) a security interest can be perfected under Article 9 of the Uniform Commercial Code, in each case prior to and superior in right of the Lien of any other Person (except for Permitted Liens) (it being understood that subsequent recordings in the United States Patent and Trademark Office or the United States Copyright Office may be necessary to perfect a Lien on registered trademarks and patents, trademark and patent applications and registered copyrights later owned, created or acquired by (or, if applicable, on behalf of), and registered copyrights exclusively licensed to, the applicable Loan Party after the Closing Date). Notwithstanding anything herein (including this Section 3.14) or in any other Loan Document to the contrary, neither the Borrower nor any other Loan Party makes any representation or warranty as to the effects of perfection or non-perfection, the priority or the enforceability of any pledge of or security interest in any Equity Interests of any Foreign Subsidiary, or as to the rights and remedies of the Agents or any Lender with respect thereto, under foreign law except in the case of a Foreign Subsidiary that becomes a Guarantor with respect to the laws of the jurisdiction of organization of such Foreign Subsidiary.

 

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Section 3.15          Financial Statements.

 

(1) The Audited Financial Statements and Unaudited Financial Statements fairly present, in all material respects, the financial position as of the respective dates thereof, and results of operations of the Acquired Businesses for each of the periods then ended, in each case on a consolidated basis in accordance with GAAP subject, in the case of the Unaudited Financial Statements, to changes resulting from audit and normal year-end adjustments.

 

(2) The Pro Forma Financial Statements were prepared in good faith after giving effect to the Transactions as if the Transactions had occurred as of such date (in the case of such balance sheet) or at the beginning of such period (in the case of such statement of income), which need not be prepared in accordance with Regulation S-X of the Securities Act of 1933, as amended, and do not include adjustments for purchase accounting (including adjustments of the type contemplated by Financial Accounting Standard Board Accounting Standards Codification 805, Business Combinations (formerly SFAS 141R)).

 

(3) Except as fully reflected in the financial statements described in sub-sections (1) and (2) above and for items disclosed on Schedule 3.07 hereof and the Indebtedness incurred under this Agreement, (i) as of the Closing Date (and after giving effect to any Loans made and Letters of Credit issued on such date), there were no liabilities or obligations (excluding current obligations incurred in the ordinary course of business) with respect to the Borrower or any of its Restricted Subsidiaries of any nature whatsoever (whether absolute, accrued, contingent or otherwise and whether or not due and including obligations or liabilities for taxes, long-term leases and unusual forward or other long-term commitments) and (ii) the Borrower knows of no basis for the assertion against the Borrower or any of its Restricted Subsidiaries of any such liability or obligation which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

Each Lender, each Issuing Bank and the Administrative Agent hereby acknowledges and agrees that the Borrower and its Subsidiaries may be required to restate historical financial statements as the result of the implementation of changes in GAAP or the interpretation thereof, and that such restatements will not result in a Default or Event of Default under the Loan Documents.

 

Section 3.16          Solvency. On the Closing Date, after giving effect to the consummation of the Transactions, including the making of the Loans hereunder and after giving effect to the application of the proceeds thereof:

 

(1) the fair value of the assets of the Loan Parties and their respective Subsidiaries, on a consolidated basis, exceeds, on a consolidated basis, their debts and liabilities (subordinated, contingent or otherwise);

 

(2) the present fair saleable value of the property of the Loan Parties and their respective Subsidiaries, on a consolidated basis, is greater than the amount that will be required to pay the probable liability, on a consolidated basis, of their debts and other liabilities (subordinated, contingent or otherwise) as such debts and other liabilities become absolute and matured;

 

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(3) the Loan Parties and their respective Subsidiaries, on a consolidated basis, are able to pay their debts and liabilities (subordinated, contingent or otherwise) as such liabilities become absolute and matured; and

 

(4) the Loan Parties and their respective Subsidiaries, on a consolidated basis, are not engaged in, and are not about to engage in, business for which they have unreasonably small capital.

 

For purposes of this Section 3.16, the amount of any contingent liability at any time shall be computed as the amount that would reasonably be expected to become an actual and matured liability.

 

Section 3.17          No Material Adverse Effect. Since December 31, 2020, there has been no event that has had, or would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect.

 

Section 3.18          Beneficial Ownership Certificate. As of the Closing Date, the information included in the Beneficial Ownership Certification, if applicable, is true and correct in all respects.

 

Section 3.19          USA PATRIOT Act; Anti-Corruption Laws; OFAC; Anti-Terrorism.

 

(1) To the extent applicable, the Borrower and the Restricted Subsidiaries is in compliance, in all material respects, with (a) the USA PATRIOT Act and (b) the Anti-Corruption Laws.

 

(2) No part of the proceeds of the Loans or any Letter of Credit will be used by the Borrower or any of their respective Subsidiaries, directly or, to the knowledge of the Borrower, indirectly, for any unlawful payments to any governmental official or employee, political party, official of a political party, candidate for political office or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the Anti-Corruption Laws.

 

(3) None of the Borrower or any Restricted Subsidiary is, or, to the knowledge of the Borrower, is owned or controlled, directly or indirectly, by any of the following:

 

(a) a Person with which any Lender is prohibited from dealing or otherwise engaging in any transaction by any economic, financial, or trade sanctions laws administered by (i) the United States, (ii) the United Nations Security Council, (iii) the European Union and its member states (iv) the United Kingdom, or (v) the respective governmental institutions of any of the foregoing including, without limitation, Her Majesty’s Treasury, the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”), the U.S. Department of Commerce, the U.S. Department of State, and any other agency of the U.S. government, (such laws, “Sanctions”), or with respect to terrorism or money laundering laws applicable to the Borrower and its Restricted Subsidiaries (“AML Laws”);

 

(b) a Person that is (i) listed on any list maintained by, or public announcement of Sanctions designation made by the United States government, including but not limited to the List of Specially Designated Nationals and Blocked Person maintained by OFAC; (ii) any Person located, organized or resident in a country or territory that is the subject of comprehensive or territory wide Sanctions (as of the date hereof, Cuba, Iran, North Korea, Syria, and the Crimea Region of Ukraine (“Sanctioned Country”)); or (iii) any Person 50% or more owned by any such Person or Persons described in the foregoing clauses (i) or (ii) (collectively, “Sanctioned Persons”).

 

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(4) In the past five (5) years, none of the Borrower nor any Restricted Subsidiary:

 

(a) has received notice of or is otherwise aware of any claim, action, suit, proceeding, investigation, or other inquiry with respect to compliance with or potential material liability with respect to any Sanctions; or

 

(b) is engaged or has been engaged in any dealings, directly or indirectly, with any Sanctioned Person or in any Sanctioned Country in violation of Sanctions.

 

(5) None of the proceeds of the Loans or any Letter of Credit will be to the knowledge of the Borrower or any of their respective Restricted Subsidiaries, directly or indirectly, used, offered, lent, contributed or otherwise made available to any Restricted Subsidiary, joint venture partner or other Person for the purpose of financing the activities of or with any Sanctioned Person or in any Sanctioned Country in violation of Sanctions.

 

Section 3.20          Intellectual Property; Licenses, Material Agreements, Etc. Except as set forth on Schedule 3.20 and except as would not reasonably be expected to have a Material Adverse Effect:

 

(1) the Borrower and each Restricted Subsidiary owns or possesses the right to use, all of the patents, patent rights, trademarks, service marks, trade names, copyrights, mask works, domain names, software (including source code), trade secrets and other intellectual property rights that are reasonably required for the operation of their respective businesses (collectively, “Intellectual Property Rights”);

 

(2) to the knowledge of the Borrower, neither the Borrower nor any of the Restricted Subsidiaries, nor the use of any Intellectual Property Rights by the Borrower or any of the Restricted Subsidiaries in the conduct of their businesses, is infringing upon, misappropriating or otherwise violating Intellectual Property Rights of any Person;

 

(3) no written claim has been received by the Borrower or any Restricted Subsidiary (and no proceeding or litigation against the Borrower or any Restricted Subsidiary is pending or, to the knowledge of the Borrower, threatened) alleging any of the foregoing; and

 

(4) neither the Borrower nor any Restricted Subsidiary is in material default or breach of, in any respect, nor has any of the Loan Parties received any notice of default or termination under, any Material Agreement or material license, and, to the knowledge of the Borrower, there exists no state of facts which after notice or lapse of time or both would constitute such a material default or breach or would give rise to such a right of termination.

 

Section 3.21          Employee Benefit Plans. Except as would not reasonably be expected to have a Material Adverse Effect, the Borrower and each of its ERISA Affiliates are in compliance with the applicable provisions of ERISA and the Code and the regulations and published interpretations thereunder. No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events, would reasonably be expected to have a Material Adverse Effect. Except as would not reasonably be expected to have a Material Adverse Effect, the present value of all accumulated benefit obligations under all Plans (based on the assumptions used for purposes of Accounting Standards Codification Topic 715) did not, as of the date of the most recent financial statements reflecting such amounts, exceed the fair market value (as determined in good faith by a Responsible Officer of the Borrower) of the assets of such Plans, in the aggregate.

 

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Section 3.22          Labor Matters. As of the Closing Date, except as, in the aggregate, would not reasonably be expected to have a Material Adverse Effect: (a) there are no strikes or other labor disputes against the Borrower or any of its Restricted Subsidiaries pending or, to the knowledge of the Borrower, threatened in writing; (b) the hours worked by and payments made to employees of the Borrower or any of its Restricted Subsidiaries have not been in material violation of the Fair Labor Standards Act or any other applicable law dealing with such matters; and (c) all payments due from the Borrower or any of its Restricted Subsidiaries on account of employee health and welfare insurance have been paid or accrued as a liability on the books of the relevant party. The execution, delivery and performance by the Loan Parties of the Loan Documents to which they are a party and the consummation of the financing contemplated by the Loan Documents will not give rise to any right of termination or right of renegotiation on the part of any union under any material collective bargaining agreement by which any Loan Party is bound.

 

Section 3.23          Insurance. Each of the Loan Parties are insured with insurance companies reasonably believed to be financially sound and reputable, in such amounts and against such risks as are customarily maintained by similarly situated companies engaged in the same or similar businesses of the same size and character and operating in the same or similar locations as the business of the Loan Parties.

 

Section 3.24          No Default. No Default has occurred and is continuing or would result from the consummation of the transactions contemplated by this Agreement or any other Loan Document.

 

Section 3.25          Senior Indebtedness. The Obligations constitute “Senior Indebtedness” (or any comparable term) under and as defined in the documentation governing any Indebtedness that is subordinated in right of payment to the Obligations.

 

Article IV

Conditions of Lending

 

Section 4.01          Conditions Precedent to Credit Extensions on the Closing Date. The agreement of each Lender to make Credit Extensions on the Closing Date is subject solely to the satisfaction or waiver by the Administrative Agent, prior to or concurrently with the making of the Credit Extensions on the Closing Date, of the following conditions precedent (the making of such initial Credit Extensions by a Lender being conclusively deemed to be its satisfaction or waiver of such conditions precedent):

 

(1) Loan Documents. The Administrative Agent shall have received this Agreement, the Collateral Agreement and the Intellectual Property Security Agreements, in each case, dated as of the Closing Date, duly executed and delivered by a Responsible Officer of each of the parties thereto.

 

(2) Borrowing Request. On or prior to the Closing Date, the Administrative Agent shall have received a Borrowing Request and a Letter of Credit Request, if applicable.

 

(3) Acquisition Transactions. The Borrower shall have confirmed to the Administrative Agent that the following transactions each have been consummated, or substantially simultaneously with the initial Credit Extensions under the Facilities, shall be consummated:

 

(a) the Acquisition in all material respects in accordance with the Acquisition Agreement (and no provision of the Acquisition Agreement shall have been waived, amended, supplemented or otherwise modified (including any consents thereunder) in a manner material and adverse to the Lenders without the consent of the Lead Arrangers (such consent not to be unreasonably withheld, delayed or conditioned)) (it being understood that (a) any modification, amendment, consent, waiver or determination in respect of the definition of “Material Adverse Effect” shall be deemed to be material and adverse to the interests of the Lenders and (b) any reduction in the purchase price consideration shall be deemed not to be material or adverse;

 

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(b) the PIPE Transaction (in at least the amount set forth in the definition thereof); and

 

(c) the Closing Date Refinancing.

 

After giving effect to the Acquisition, the Closing Date Refinancing and the other transactions contemplated hereby, the Borrower and its Restricted Subsidiaries shall have no outstanding Indebtedness or Disqualified Stock, other than the Loans and other Credit Extensions under the Facilities and other permitted Indebtedness.

 

(4) Financial Statements; Pro Forma Financial Statements. The Administrative Agent shall have received to the extent provided under the Acquisition Agreement, the Audited Financial Statements, the Unaudited Financial Statements and the Pro Forma Financial Statements.

 

(5) Fees. All accrued costs, fees and expenses (including, without limitation, legal fees and expenses and the fees and expenses of any other advisors) and other compensation due and payable to the Administrative Agent, the Lead Arrangers and the Lenders and required by the Commitment Letter or the Fee Letter to be paid on the Closing Date shall have been paid, in the case of expenses, to the extent a reasonably detailed invoice has been delivered to the Borrower at least two (2) Business Days prior to the Closing Date (provided that the foregoing amounts may, at the Borrower’s option, be offset against the proceeds of the Facilities funded on the Closing Date).

 

(6) Solvency Certificate. The Administrative Agent shall have received a solvency certificate substantially in the form attached hereto as Exhibit B, delivered by the Borrower.

 

(7) Closing Date Certificates. The Administrative Agent shall have received a certificate of a Responsible Officer of the Loan Parties dated the Closing Date and certifying:

 

(a) that attached thereto is a true and complete copy of the Organizational Documents of each Loan Party, and each amendment thereto, certified (as of a date reasonably near the Closing Date) as being a true and correct copy thereof by the Secretary of State or other applicable Governmental Authority of the jurisdiction in which such Loan Party is organized;

 

(b) that attached thereto is a true and complete copy of resolutions duly adopted by the Board of Directors (or similar governing body) of each Loan Party authorizing the execution, delivery and performance of the Loan Documents to which it is a party or any other document delivered in connection herewith on the Closing Date and certifying that such resolutions have not been modified, rescinded or amended and are in full force and effect;

 

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(c) as to the incumbency and specimen signature of each Responsible Officer executing the Loan Documents specified in Section 4.01(1) (together with a certificate of another officer as to the incumbency and specimen signature of the Responsible Officer executing the certificate pursuant to this Section 4.01(7)); and

 

(d) that attached thereto is a good standing certificate (to the extent such concept is known in the relevant jurisdiction) from the applicable Governmental Authority of each Loan Party’s respective jurisdiction of organization dated a recent date prior to the Closing Date.

 

(8) Legal Opinion. The Administrative Agent shall have received a customary legal opinion of (a) White & Case LLP, as New York counsel to the Loan Parties and (b) DLA Piper LLP, as local Florida counsel to the Loan Parties.

 

(9) Pledged Equity Interests. Except as set forth on Schedule 5.13, the Collateral Agent shall have received the certificates representing the Equity Interests (if such Equity Interests are certificated) of any Loan Party, to the extent obtained by the Borrower on or prior to the Closing Date, in each case to the extent such Equity Interests are included in the Collateral and required to be pledged pursuant to the Collateral Agreement, together with an undated stock power for each such certificate executed in blank by a duly authorized officer of the pledgor thereof.

 

(10) Lien and Judgment Searches. The Administrative Agent shall have received the results of a recent search of all effective UCC financing statements (or equivalent filings) made with respect to any personal or mixed property of any Loan Party in the appropriate jurisdictions, tax and judgment lien searches and intellectual property searches, together with copies of all such filings or other records disclosed by such search.

 

(11) Insurance. The Administrative Agent shall have received evidence of insurance coverage in compliance with the terms of Section 5.02.

 

(12) No Material Adverse Effect. Except as set forth in Section 3.05 of the Disclosure Schedules annexed to the Acquisition Agreement, since December 18, 2020, there has not occurred any event, change, state of facts, occurrence or circumstance that has had or would reasonably be expected to have, individually or in the aggregate with all other such events, changes, state of facts, occurrences or circumstances, a Material Adverse Effect (as defined in the Acquisition Agreement) with respect to any Company (as defined in the Acquisition Agreement) that would result in the failure of a condition precedent to the Borrower’s obligations under the Acquisition Agreement.

 

(13) Know Your Customer and Other Required Information. The Borrower and each of the Guarantors shall have provided no less than three (3) Business Days prior to the Closing Date (provided the same are requested at least five (5) Business Days prior thereto) the documentation and other information to the Lenders that are reasonably requested by the Lenders under the applicable “know-your-customer” rules and regulations, including, without limitation, the USA PATRIOT Act and a certification regarding Beneficial Ownership required by the Beneficial Ownership Regulation.

 

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(14) Representations and Warranties. The Specified Representations and the Specified Acquisition Agreement Representations will be true and correct in all material respects (provided that any such representation or warranty that is qualified as to “materiality”, “material adverse effect” or similar language shall be true and correct in all respects (after giving effect to any such qualification therein)).

 

(15) UCC Financing Statements. The Collateral Agent shall have received with respect to the Borrower and each other Loan Party, UCC-1 financing statements in a form appropriate for filing in the state of organization of such Loan Party.

 

(16) Officer’s Certificate. The Administrative Agent shall have received a certificate of a Responsible Officer of the Borrower dated as of the Closing Date and certifying as to the matters set forth in Section 4.01(3)(a) and (b), (12) and (14) (solely in respect of the Specified Representations) above.

 

There are no conditions, implied or otherwise, to the making of Credit Extensions on the Closing Date other than as set forth in the preceding clauses (1) through (15) and upon satisfaction or waiver by the Administrative Agent of such conditions the Credit Extensions will be made by the Lenders. Notwithstanding anything herein to the contrary, to the extent any Collateral (including the creation or perfection of any security interest) cannot be provided on the Closing Date (other than the grant and perfection of security interests (x) in assets with respect to which a lien may be perfected by the filing of a financing statement under the UCC or by the filing of an Intellectual Property Security Agreement agreements with the United States Patent and Trademark Office or United States Copyright Office or (y) in Equity Interests with respect to which a Lien may be perfected by the delivery of a stock (or equivalent) certificate; provided that share certificates of the Companies and their Subsidiaries will only be required to be delivered on the Closing Date to the extent received from the sellers and to the extent not so received shall be required to be delivered within five (5) Business Days of the Closing Date or such later date as the Administrative Agent shall agree) after the Borrower’s use of commercially reasonable efforts to do so, then the delivery of such Collateral shall not constitute a condition precedent to the availability and initial funding of the Facilities on the Closing Date but shall be required to be delivered and/or perfected within ninety (90) days (or such longer period as the Administrative Agent may reasonably agree in its discretion) after the Closing Date pursuant to arrangements to be mutually agreed).

 

Section 4.02          Conditions Precedent to Additional Credit Extensions. The obligation of each Lender to make a Credit Extension after the Closing Date (other than a DDTL) is subject solely to the satisfaction or waiver by the Administrative Agent of the following conditions precedent (the making of any such Credit Extension by a Lender being conclusively deemed to be its satisfaction or waiver of such conditions precedent):

 

(1) The Administrative Agent shall have received, in the case of a Borrowing, a Borrowing Request or, in the case of the issuance, renewal, extension or amendment of a Letter of Credit, the applicable Issuing Bank and the Administrative Agent shall have received a Letter of Credit Request.

 

(2) Except with respect to any Credit Extension pursuant to Section 2.22, the representations and warranties set forth in the Loan Documents will be true and correct in all material respects (provided that any such representation or warranty that is qualified as to “materiality”, “material adverse effect” or similar language shall be true and correct in all respects (after giving effect to any such qualification therein)) as of such date, as applicable, with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date (in which case such representations and warranties will be true and correct in all material respects (provided that any such representation or warranty that is qualified as to “materiality”, “material adverse effect” or similar language shall be true and correct in all respects (after giving effect to any such qualification therein)) as of such earlier date).

 

(3) Except with respect to any Credit Extension pursuant to Section 2.22, at the time of and immediately after any such Credit Extension, no Default or Event of Default shall have occurred and be continuing or would result therefrom.

 

Each such Credit Extension occurring after the Closing Date will be deemed to constitute a representation and warranty by the Borrower on the date of such Credit Extension as to the matters specified in paragraphs (2) and (3) of this Section 4.02 to the extent applicable to such Credit Extension.

 

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Section 4.03          Conditions Precedent to DDTLs. The obligation of each DDTL Lender to make a DDTL after the Closing Date is subject solely to the satisfaction or waiver by the Administrative Agent of the following conditions precedent (the making of any such DDTL by a DDTL Lender being conclusively deemed to be its satisfaction or waiver of such conditions precedent):

 

(1) The satisfaction or waiver by the Administrative Agent of the conditions precedent set forth in Section 4.02 above, as applicable.

 

(2) As of the last day of the most recently ended Test Period, and after giving effect to such DDTL borrowing, the Borrower shall be in Pro Forma Compliance with the Financial Performance Covenants.

 

(3) Payment of fees due and payable to the Lenders and required under the Fee Letter with respect to the DDTL Facility to be paid on the date of any funding of DDTLs shall have been paid.

 

Article V

Affirmative Covenants

 

The Borrower covenants and agrees with each Lender that so long as this Agreement is in effect and until the Termination Date, unless the Required Lenders otherwise consent in writing, the Borrower will, and will cause its Restricted Subsidiaries, to:

 

Section 5.01          Existence; Businesses and Properties.

 

(1) Do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence, except:

 

(a) in the case of a Restricted Subsidiary, where the failure to do so would not reasonably be expected to have a Material Adverse Effect; or

 

(b) in connection with a transaction permitted under Section 6.05.

 

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(2) (a) Do or cause to be done all things necessary to lawfully obtain, preserve, renew, extend and keep in full force and effect the material rights, privileges, licenses, permits, franchises, authorizations and Intellectual Property Rights with respect thereto necessary for the normal conduct of its business and (b) at all times maintain and preserve all property necessary and material to the normal conduct of its business as currently conducted and keep such property in good repair, working order and condition (subject to casualty, condemnation and ordinary wear and tear), in each case, except:

 

(i) as expressly permitted by this Agreement;

 

(ii) such as may expire, be abandoned or lapse in the ordinary course of business; or

 

(iii) where the failure to do so would not reasonably be expected to have a Material Adverse Effect.

 

Section 5.02          Insurance.

 

(1) (A) Maintain, with insurance companies reasonably believed to be financially sound and reputable, insurance in such amounts and against such risks as are customarily maintained by similarly situated companies engaged in the same or similar businesses of the same size and character and operating in the same or similar locations as the business of the Loan Parties, and cause the Collateral Agent to be listed as a lender loss payee on property policies and as an additional insured on liability and casualty policies and (B) if at any time, with respect to any improved Real Property constituting Mortgaged Property with any improvement to the applicable Mortgaged Property that is of the type that triggers a requirement for flood insurance to be maintained under the Flood Insurance Laws, that is located in a Flood Zone and for which flood insurance has been made available under the Flood Program, obtain flood insurance on such terms and in such total amount as required by the Flood Insurance Laws (in accordance with the terms and conditions of this Agreement). The Borrower will furnish to the Administrative Agent or Collateral Agent, upon request, information in reasonable detail as to the insurance so maintained. Notwithstanding the foregoing, it is understood and agreed that no Loan Party will be required to maintain flood insurance for Real Property other than such Real Property constituting Mortgaged Property hereunder.

 

(2) Obtain certificates and endorsements reasonably acceptable to the Collateral Agent with respect to property and casualty insurance; use commercially reasonable efforts to: (a) cause each insurance policy referred to in this Section 5.02 and procured from an insurance company to provide that it shall not be cancelled, modified or not renewed (x) by reason of nonpayment of premium except upon not less than ten (10) days’ prior written notice thereof by the insurer to the Collateral Agent (giving the Collateral Agent the right to cure defaults in the payment of premiums) or (y) for any other reason except upon not less than thirty (30) days’ prior written notice thereof by the insurer to the Administrative Agent, except in connection with any flood insurance policy required by sub-clause 5.02(1)(B) hereof, provide for at least forty-five (45) days’ prior written notice to the Collateral Agent of any cancellation or nonrenewal of such policy; and (b) deliver to the Administrative Agent, upon the reasonable request of the Administrative Agent, a copy of a renewal or replacement policy (or other evidence of renewal of a policy previously delivered to the Administrative Agent, including an insurance binder) together with evidence reasonably satisfactory to the Administrative Agent of payment of the premium therefor.

 

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Section 5.03         Taxes. Pay and discharge promptly when due and payable, all Taxes imposed upon it or its income or profits or in respect of its property, before the same becomes delinquent or in default, except where the failure to do so would not reasonably be expected to have a Material Adverse Effect; provided that such payment and discharge will not be required with respect to any Tax if (1) the validity or amount thereof is being contested in good faith by appropriate proceedings and (2) the Borrower or any affected Restricted Subsidiary, as applicable, has set aside on its books reserves in accordance with GAAP with respect thereto.

 

Section 5.04         Financial Statements, Reports, etc. Furnish to the Administrative Agent (which will promptly furnish such information to the Lenders (or, with respect to clause (6) below, to the Lenders who have requested such information)):

 

(1) within 90 days following the end of each fiscal year ending after the Closing Date, a consolidated balance sheet and related statements of operations, cash flows and owners’ equity showing the financial position of the Borrower, the Restricted Subsidiaries and the Physician-Owned Practices as of the close of such fiscal year and the consolidated results of its operations during such fiscal year and, in each case, starting with the fiscal year following the first full fiscal year ended after the Closing Date, setting forth in comparative form the corresponding figures for the prior fiscal year, which consolidated balance sheet and related statements of operations, cash flows and owners’ equity will be audited by independent public accountants of recognized national standing, or such other accountants as are reasonably acceptable to the Administrative Agent (it being understood and agreed that WithumSmith+Brown, PC and any of the “Big Four” accounting firms are acceptable), and accompanied by an opinion of such accountants (which opinion shall not be subject to any “going concern” statement, explanatory note or like qualification or exception (other than a “going concern” statement, explanatory note or like qualification or exception resulting solely from an upcoming maturity date of indebtedness occurring within one year from the time such opinion is delivered or anticipated or actual financial covenant non-compliance)) to the effect that such consolidated financial statements fairly present, in all material respects, the financial position and results of operations of the Borrower, the Restricted Subsidiaries and the Physician-Owned Practices on a consolidated basis in accordance with GAAP (the applicable financial statements delivered pursuant to this clause (1) being the “Annual Financial Statements”);

 

(2) within 45 days following the end of each of the first three fiscal quarters of each fiscal year ending after the Closing Date, a consolidated balance sheet and related statements of operations and cash flows showing the financial position of the Borrower, the Restricted Subsidiaries and the Physician-Owned Practices as of the close of such fiscal quarter and the consolidated results of its operations during such fiscal quarter and, in each case, the then-elapsed portion of the fiscal year (other than for the fiscal quarter ending June 30, 2021) and setting forth, starting with the fiscal year following the first full fiscal year ended after the Closing Date, in comparative form the corresponding figures for the corresponding periods of the prior fiscal year, which consolidated balance sheet and related statements of operations and cash flows will be certified by a Responsible Officer of the Borrower on behalf of the Borrower as fairly presenting, in all material respects, the financial position and results of operations of the Borrower, the Restricted Subsidiaries and the Physician-Owned Practices on a consolidated basis in accordance with GAAP, subject to normal year-end audit adjustments and the absence of footnotes (the applicable financial statements delivered pursuant to this clause (2) being the “Quarterly Financial Statements” and, together with the Annual Financial Statements, the “Required Financial Statements”);

 

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(3) together with each delivery of Required Financial Statements (but excluding Required Financial Statements for the fiscal quarter ending June 30, 2021), a customary management discussion and analysis with respect to the financial information, signed by a Financial Officer of the Borrower, describing the financial condition and results of operation of the Loan Parties, their Restricted Subsidiaries and the Physician-Owned Practices for the applicable fiscal quarter and the portion of the fiscal year then ended (or for the fiscal year then ended in the case of the Annual Financial Statements);

 

(4) concurrently with any delivery of Required Financial Statements (but excluding Required Financial Statements for the fiscal quarter ending June 30, 2021), a certificate of a Financial Officer of the Borrower:

 

(a) certifying that, to such Financial Officer’s knowledge, no Event of Default has occurred and is continuing or, if an Event of Default has occurred and is continuing, specifying the nature and extent thereof and any corrective action taken or proposed to be taken with respect thereto;

 

(b) setting forth, in reasonable detail, the calculation of the First Lien Net Leverage Ratio, the Total Net Leverage Ratio and the Fixed Charge Coverage Ratio for the most recent period of four (4) consecutive fiscal quarters as of the close of such fiscal year or such fiscal quarter, as applicable; and

 

(c) certifying a list of all Unrestricted Subsidiaries at such time;

 

(5) promptly after the same become publicly available, copies of all periodic and other publicly available reports, proxy statements and, to the extent requested by the Administrative Agent, other materials publicly filed by the Borrower or any Restricted Subsidiary with the SEC or, after an initial public offering, distributed to its stockholders generally, as applicable;

 

(6) within ninety (90) days following the end of each fiscal year commencing with the fiscal year ending December 31, 2021, a consolidated annual budget for such fiscal year in the form customarily prepared by the Borrower (the “Budget”), which Budget will in each case be accompanied by the statement of a Financial Officer of the Borrower on behalf of the Borrower to the effect that the Budget is based on assumptions believed by the Borrower to be reasonable as of the date of delivery thereof; and

 

(7) promptly, from time to time, such other information regarding the operations, business affairs and financial condition of the Borrower, the Restricted Subsidiaries and the Physician-Owned Practices, in each case (a) as the Administrative Agent may reasonably request (for itself or on behalf of any Lender) and (b) to the extent prepared by the Borrower in the ordinary course of business.

 

Anything to the contrary notwithstanding, the obligations in clauses (1), (2), (3), (5) and (6) of this Section 5.04 may be satisfied with respect to financial information of the Borrower, the Restricted Subsidiaries and the Physician-Owned Practices by furnishing the applicable financial statements and Budget (as the case may be) of the Borrower’s Form 10-K or 10-Q, as applicable, filed with the SEC.

 

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Documents required to be delivered pursuant to this Section 5.04 may be delivered electronically in accordance with Section 9.01(5).

 

Section 5.05          Litigation and Other Notices. Furnish to the Administrative Agent (which will promptly thereafter furnish to the Lenders) written notice of the following promptly after any Responsible Officer of the Borrower obtains actual knowledge thereof:

 

(1) any Default or Event of Default, specifying the nature and extent thereof and the corrective action (if any) proposed to be taken with respect thereto;

 

(2) the filing or commencement of, or any threat or notice of intention of any Person to file or commence, any action, suit or proceeding, whether at law or in equity or by or before any Governmental Authority or in arbitration, against the Borrower or any of its Restricted Subsidiaries as to which an adverse determination is reasonably probable and which, if adversely determined, would reasonably be expected to have a Material Adverse Effect;

 

(3) the occurrence of any ERISA Event that, together with all other ERISA Events that have occurred, would reasonably be expected to have a Material Adverse Effect;

 

(4) the occurrence of any other material event, condition or circumstance that has had, or would reasonably be expected to result, either individually or in the aggregate, in a Material Adverse Effect; and

 

(5) any change in the information provided in the Beneficial Ownership Certification (if any) most recently delivered to the Administrative Agent and the Lenders that would result in a change to the list of Beneficial Owners identified in such Beneficial Ownership Certification.

 

Section 5.06         Compliance with Laws. Comply with all laws, rules, regulations and orders of any Governmental Authority applicable to its business or its property (including ERISA, Environmental Laws and laws related to labor matters), except where the failure to do so, individually or in the aggregate, would not reasonably be expected to result in a Material Adverse Effect; provided that this Section 5.06 will not apply to laws related to Taxes, which are the subject of Section 5.03, or laws related to the USA PATRIOT Act, AML Laws, OFAC, Sanctions and Anti-Corruption Laws, which are the subject of Section 5.09.

 

Section 5.07          Maintaining Books and Records; Access to Properties and Inspections; Material Agreements.

 

(1) Maintain proper books of record and account in which full, true and correct entries shall be made of all dealings and transactions in relation to its business and activities to the extent necessary to allow financial statements to be prepared in accordance with GAAP. The Borrower will, and will cause its Restricted Subsidiaries, to permit any Persons designated by the Administrative Agent to visit and inspect the financial books and records and the properties of the Borrower or any Restricted Subsidiary at reasonable times, upon reasonable prior notice to the Borrower, and as often as reasonably requested (subject to the first proviso set forth below), to make extracts from and copies of such financial books and records, and permit any Persons designated by the Administrative Agent, upon reasonable prior notice to the Borrower to discuss the affairs, finances and condition of the Borrower or any Restricted Subsidiary with the officers thereof and independent accountants therefor (subject to such accountant’s policies and procedures); provided that the Administrative Agent may not exercise such rights more often than two (2) times during any calendar year unless an Event of Default is continuing and only such time will be at the Borrower’s expense; and provided, further, that when an Event of Default is continuing, the Administrative Agent or any Lender (or any of their respective representatives or independent contractors) may do any of the foregoing at the expense of the Borrower at any time during normal business hours and upon reasonable prior notice to the Borrower.

 

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(2) Notwithstanding anything to the contrary in this Agreement or any other Loan Document, none of the Loan Parties or any of the Restricted Subsidiaries will be required to disclose, permit the inspection, examination or making copies or abstracts of, or discussion of, any document, information or other matter with any competitor to the Borrower or any of its Subsidiaries or that (a) constitutes non-financial trade secrets or non-financial proprietary information, (b) in respect of which disclosure is prohibited by law or any binding agreement, (c) is subject to attorney-client or similar privilege or constitutes attorney work product or (d) creates an unreasonably excessive expense or burden on the Borrower or any of its Subsidiaries.

 

(3) Prohibit any amendments to any Material Agreement if such amendments would reasonably be expected to have a Material Adverse Effect.

 

(4) Terminate, assign or otherwise dispose of, or permit any of their respective Restricted Subsidiaries to terminate, assign or otherwise dispose of, any material interest in any Material Agreement other than in the ordinary course of business; provided that any material interest in any Material Agreement may be terminated, assigned or otherwise disposed of so long as it is replaced with another Material Agreement.

 

(5) Waive, or permit any of their respective Restricted Subsidiaries to waive, any material default or material breach under any Material Agreement other than in the ordinary course of business.

 

(6) Fail to enforce, forgive or release, or permit any of their respective Restricted Subsidiaries to fail to enforce, forgive or release, any material right or material interest under any Material Agreement other than in the ordinary course of business.

 

Section 5.08          Use of Proceeds. The Borrower will use the proceeds of the Initial Term Loans, the DDTLs, the Revolving Loans and the Letters of Credit in accordance with Section 3.10.

 

Section 5.09          USA PATRIOT Act; Anti-Corruption Laws; OFAC; Anti-Terrorism.

 

(1) The Borrower will not, directly or, to the knowledge of the Borrower, indirectly, use the proceeds of the Loans or the Letters of Credit or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other Person, for the purpose of (i) funding any activities or business of or with any Person, or in any country or territory, that, at the time of such funding, is, or whose government is, the subject of any Sanctions, except where the activity or business is authorized by OFAC or would otherwise be lawful if conducted by a U.S. Person, or (ii) making any unlawful payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, or in any other manner which would result in a violation, in any material respect, of any Anti-Corruption Laws.

 

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(2) The Borrower and its Restricted Subsidiaries will comply with the USA PATRIOT Act (to the extent applicable), applicable AML Laws, and all applicable Anti-Corruption Laws and Sanctions, except where the failure to do so, individually or in the aggregate, would not reasonably be expected to result in a Material Adverse Effect.

 

Section 5.10         Lender Conference Calls. At the reasonable request of the Administrative Agent, no more than once in any fiscal quarter, a Responsible Officer of the Borrower shall participate in a meeting of the Lenders, to be held via teleconference at a date and time to be determined by the Borrower in consultation with the Administrative Agent; provided, however, the provisions of this Section 5.10 may be satisfied by the Borrower hosting customary earning calls with the public.

 

Section 5.11          Further Assurances; Additional Security.

 

(1) If (a) a Restricted Subsidiary (other than an Excluded Subsidiary) of the Borrower is formed or acquired (including, without limitation, upon the formation of any Subsidiary (other than an Excluded Subsidiary) that is a Delaware Divided LLC) after the Closing Date, (b) an Unrestricted Subsidiary is redesignated as a Restricted Subsidiary that does not constitute an Excluded Subsidiary or (c) an Excluded Subsidiary ceases to be an Excluded Subsidiary (including as a result of notice by the Borrower pursuant to the definition of Excluded Subsidiary or ceasing to be an Immaterial Subsidiary as of the date the latest financial statements are delivered pursuant to Section 5.04), in each case, within sixty (60) days after the date of the applicable event described above (or such longer period as the Administrative Agent may agree in its reasonable discretion), the Borrower will or will cause such Restricted Subsidiary to:

 

(i) deliver a joinder to the Collateral Agreement, substantially in the form specified therein, duly executed on behalf of such Restricted Subsidiary;

 

(ii) to the extent required by and subject to the exceptions set forth in the Security Documents, pledge the outstanding Equity Interests (other than Excluded Equity Interests) owned by such Restricted Subsidiary, and cause each Loan Party owning any Equity Interests issued by such Restricted Subsidiary to pledge such outstanding Equity Interests (other than Excluded Equity Interests), and deliver all certificates (if any) representing such Equity Interests, together with stock powers or other instruments of transfer with respect thereto endorsed in blank, to the Collateral Agent (or a designated bailee thereof);

 

(iii) to the extent required by and subject to the exceptions set forth in this Section 5.11 or the Security Documents, deliver to the Collateral Agent (or a designated bailee thereof) Uniform Commercial Code financing statements with respect to such Restricted Subsidiary and such other documents reasonably requested by the Collateral Agent to create the Liens intended to be created under the Security Documents and perfect such Liens to the extent required by or in a manner consistent with the Security Documents;

 

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(iv) except as otherwise contemplated by this Section 5.11 or any Security Document, obtain all consents and approvals required to be obtained by it in connection with (A) the execution and delivery of all Security Documents (or supplements thereto) to which it is a party and the granting by it of the Liens thereunder and (B) the performance of its obligations thereunder; and

 

(v) deliver to the Administrative Agent all documentation and other information required by regulatory authorities under applicable “know your customer” and Anti-Corruption Laws and AML Laws and Beneficial Ownership Certificates with respect to such Restricted Subsidiary as has been reasonably requested in writing by the Administrative Agent.

 

Notwithstanding anything to the contrary contained in this Section 5.11(1), any assets of any such Restricted Subsidiary (if it is a designated Subsidiary) constituting Material Real Property shall be subject to the provisions of clause Section 5.11(2) hereof

 

(2) If (A) any Loan Party (a) acquires any Material Real Property after the Closing Date that constitutes a Material Real Property at the time of the acquisition thereof or (b) enters a joinder pursuant to Section 5.11(1)(i) hereof and owns or leases a Material Real Property, then, in each case, within ninety (90) days (or such longer period as the Administrative Agent may agree in its reasonable discretion) after such acquisition or entry of a joinder (as applicable) or (B) any Loan Party owns any Material Real Property at any time, in each case, other than with respect to any Material Real Property that constitutes an Excluded Asset, the Borrower shall cause any Loan Party that owns any Material Real Property to satisfy the following requirements:

 

(a) notify the Collateral Agent thereof of such acquired or owned Material Real Property (as applicable);

 

(b) cause any such acquired or owned Material Real Property (as applicable) to be subjected to a Mortgage duly executed and delivered to Collateral Agent by the record owner of such Mortgaged Property and securing the Obligations (unless such Material Real Property shall be subject to a Sale and Lease-Back Transaction permitted by Section 6.03 hereunder);

 

(c) with respect to each Mortgage, (A) obtain a fully paid American Land Title Association Lender’s title insurance policy or policies (or marked unconditional title commitment(s) to issue such policy or policies) (each a “Title Policy”) issued by the Title Company (as defined below) and in form and substance reasonably satisfactory to the Collateral Agent, with such customary lender’s endorsements as the Collateral Agent may reasonably request, to the extent available in the related jurisdiction(s) at commercially reasonable rates , and in an amount not to exceed the fair market value (as reasonably determined by the Borrower at the time of the acquisition thereof) of each Mortgaged Property encumbered by such Mortgage, and insuring the Collateral Agent that the relevant Mortgage creates a valid and enforceable first priority Lien on the Mortgaged Property encumbered thereby, subject only to Permitted Liens, each of which  shall provide for such other affirmative insurance and such reinsurance as the Collateral Agent may reasonably request and (B) title report(s) issued by the title company (the “Title Company”) with respect thereto, together with copies of all recorded documents listed as exceptions to title or otherwise referred to therein, each in form and substance reasonably satisfactory to the Collateral Agent;

 

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(d) obtain (i) American Land Title Association (“ALTA”) / National Society of Professional Surveyors, Inc. (successor to the American Congress on Surveying and Mapping) survey(s) for each Mortgaged Property, dated no more than sixty (60) days before the date of their delivery to the Collateral Agent, certified to the Collateral Agent and the issuer of the Title Policies in a manner reasonably satisfactory to the Collateral Agent, or (ii) previously obtained ALTA survey(s) for each Mortgaged Property and affidavits of “no-change” with respect to each such previously obtained ALTA survey(s), in each case, such surveys and/or affidavits to be sufficient for the Title Company to remove the standard survey exception and issue each Title Policy to the Collateral Agent providing all reasonably required survey coverage and survey-related endorsements thereto delivered pursuant to clause (c) above;

 

(e) deliver to the Collateral Agent from each applicable Loan Party: (A) a completed Flood Certificate with respect to each Mortgaged Property, which Flood Certificate shall (1) be addressed to the Collateral Agent, and (2) otherwise comply with the Flood Program, and (3) includes a notice about Flood Zone status and flood disaster assistance and describes whether the community in which each Mortgaged Property is located participates in the Flood Program; (B) if any Flood Certificate states that a Mortgaged Property is located in a Flood Zone, the Borrower’s and the relevant Loan Party’s written acknowledgement of receipt of such written notification from the Collateral Agent (1) as to the Flood Zone status of each such Mortgaged Property, and (2) as to whether the community in which each such Mortgaged Property is located is participating in the Flood Program; and (D) with respect to any improved Mortgaged Property, if any improvement to the applicable Mortgaged Property that is of the type that triggers a requirement for flood insurance to be maintained under the Flood Insurance Laws is located in a Flood Zone and is located in a community that participates in, and for which flood insurance has been made available under the Flood Program, evidence that the applicable Loan Party has obtained a policy of flood insurance or such other flood documentation that is in compliance with the Flood Insurance Laws; provided that, notwithstanding anything herein to the contrary, no Mortgage will be signed unless and until each Lender shall have received and approved the Flood Zone status and other documents described in this clause (e);

 

(f) for each Mortgage delivered pursuant to clause (b), obtain such customary mortgage or deed of trust enforceability opinions as the Collateral Agent may reasonably request, of local counsel for the applicable Loan Parties in the states in which the relevant Mortgaged Properties are located; and

 

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(g) take, or cause the applicable Loan Party to take, such actions as shall be necessary or reasonably requested by the Collateral Agent to perfect such Mortgages and the Liens in the applicable Mortgaged Properties encumbered thereby, in each case, at the expense of the Loan Parties (except as otherwise provided herein), subject to paragraph (5) of this Section 5.11.

 

(3) Within thirty (30) days (or such longer period as the Administrative Agent may agree in its reasonable discretion) of the applicable change, furnish notice to the Collateral Agent of any change in any Loan Party’s:

 

(a) corporate or organization name;

 

(b) entity structure;

 

(c) location (determined as provided in UCC Section 9-307); or

 

(d) organizational identification number (or equivalent) or, solely if required for perfecting a security interest in the applicable jurisdiction, Federal Taxpayer Identification Number.

 

The Borrower will cause all filings to be made within any statutory period, under the Uniform Commercial Code that are required in order for the Collateral Agent to continue at all times following such change to have a valid, legal and perfected security interest, for the benefit of the applicable Secured Parties, in all Collateral held by a Loan Party that can be perfected by such filing in the state of organization of such Loan Party.

 

(4) Execute any and all other documents, financing statements, agreements and instruments, and take all such other actions (including the filing and recording of financing statements and other documents), not described in the preceding clauses (1) through (3) and that the Collateral Agent may reasonably request to satisfy the requirements set forth in this Section 5.11 and in the Security Documents with respect to the creation and perfection of the Liens on the Collateral in favor of the Collateral Agent, for the benefit of the Secured Parties, contemplated herein and in the Security Documents and to cause such requirement to be and remain satisfied, all at the expense of the Borrower, and provide to the Collateral Agent, from time to time upon reasonable request, evidence as to the perfection and priority of the Liens created by the Security Documents to the extent required hereby.

 

(5) Notwithstanding anything to the contrary in this Agreement or any other Loan Document,

 

(a) the other provisions of this Section 5.11 need not be satisfied with respect to any Excluded Assets or Excluded Equity Interests or any exclusions and carve-outs from the perfection requirements expressly set forth in the Collateral Agreement or any other Security Document;

 

(b) neither the Borrower nor the other Loan Parties will be required to grant a security interest in any asset or perfect a security interest in any Collateral to the extent the (i) cost, burden, difficulty or consequence of obtaining or perfecting a security interest therein outweighs the benefit of the security afforded to the Lenders thereby as reasonably determined by the Borrower and the Administrative Agent (it being understood that, in any event, the Administrative Agent shall have the right to waive or modify any requirements relating to title insurance, surveys, legal opinions or other deliverables with respect to any assets or Collateral if, in its reasonable determination, the cost, burden, difficulty or consequence of obtaining such deliverables is excessive in relation to their benefit to the Lenders), or (ii) the granting of a security interest in such asset would be prohibited by enforceable anti-assignment provisions of contracts or applicable law or, in the case of assets consisting of licenses, leases, agreements or similar contracts, to the extent the grant of security therein would violate or invalidate the terms of such license, lease, agreement or similar contract relating to such asset or would trigger termination of any contract pursuant to any “change of control” or similar provision, in each case, after giving effect to any applicable provisions of the Uniform Commercial Code or other applicable law;

 

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(c) the Loan Parties will not be required to seek or obtain any landlord lien waiver, estoppel, warehouseman waiver or other collateral access or similar letter or agreement;

 

(d) any liens on the following Collateral will not be required to be perfected other than by filing of a UCC financing statement in the jurisdiction of organization of the Loan Party owning such Collateral:

 

(i) vehicles and any other assets subject to certificates of title;

 

(ii) individual commercial tort claims below $2,000,000; and

 

(iii) letter of credit rights to the extent not perfected as supporting obligations by the filing of a UCC financing statement on the primary collateral;

 

(e) no actions will be required outside of the United States in order to create or perfect any security interest in any assets and no foreign law security or pledge agreements, foreign law mortgages or deeds or foreign intellectual property filings or searches will be required; and

 

(f) each of the Administrative Agent and the Collateral Agent may grant extensions of time (including after the expiration of any relevant period, which extensions shall apply retroactively) in respect of any time period for the delivery of any item of notification of any event under this Agreement or any other Loan Document related to the guarantee and security interests in respect of the Loan Parties (including for the perfection of security interests in or the obtaining of title insurance, surveys, legal opinions or other deliverables with respect to, any particular assets or Collateral) (including extensions beyond the Closing Date, the timelines set forth in Sections 5.11 or 5.13 or in the Security Documents (as applicable) for the perfection of security interests in or the obtaining of title insurance, surveys, legal opinions or other deliverables with respect to, any the assets of the Loan Parties on such date), in each case, in its reasonable discretion.

 

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Further, notwithstanding any provision of any Loan Document to the contrary, if any mortgage tax or similar tax or charge is owed on the entire amount of the Obligations evidenced hereby in connection with the delivery of a Mortgage or UCC fixture filing pursuant to Section 5.11(2) above, then, to the extent permitted by, and in accordance with, applicable law, the amount of such mortgage tax or similar tax or charge shall be calculated based on the lesser of (x) the amount of the Obligations allocated to the applicable Mortgaged Property and (y) the fair market value of the applicable Mortgaged Property at the time the Mortgage is entered into.

 

Section 5.12          Accounts.

 

(1) The Borrower shall, and shall cause each of the other Loan Parties to, deposit or cause to be deposited directly, all Cash Receipts into one or more Deposit Accounts (other than any Excluded Account) in which the Collateral Agent has been granted a Lien and that, in each case, is listed on Schedule V to the Collateral Agreement and is subject to a Control Agreement; provided that such deposits may be made into an Excluded Account so long as (and solely so long as) such account remains an Excluded Account (in compliance with the definition thereof) immediately following such deposit.

 

(2) The Loan Parties may close Deposit Accounts that are subject to a Control Agreement, and/or open new accounts of the type described in clause (1) above, subject to the contemporaneous execution and delivery to the Collateral Agent of any Control Agreement required by the provisions of this Section 5.12.

 

(3) So long as no an exercise of remedies in accordance with Section 7.01 shall have occurred and be continuing, the Loan Parties shall direct, and shall have sole control over, the manner of disposition of funds in any Deposit Account that is subject to a Control Agreement;

 

provided, it is agreed and understood that (A) the Loan Parties shall have until the date that is ninety (90) days following the Closing Date or the closing date of such Permitted Acquisition, as applicable (or such later date as may be reasonably agreed to by the Collateral Agent in its reasonable discretion) to comply with the provisions of this Section 5.12 with regard to Deposit Accounts (other than Excluded Accounts) of the Loan Parties existing on the Closing Date or acquired in connection with such Permitted Acquisition, as applicable, and (B) during the periods described in clause (A), the absence of a Control Agreement as to cash or Cash Equivalents in the applicable accounts referred to therein shall not (in and of itself) prevent the cash or Cash Equivalents therein from being netted in the calculation of First Lien Net Leverage Ratio or Total Net Leverage Ratio, respectively.

 

Section 5.13          Post-Closing Matters. Deliver to Administrative Agent, in form and substance reasonably satisfactory to the Administrative Agent, the items described on Schedule 5.13 hereof on or before the dates specified with respect to such items on Schedule 5.13 (or, in each case, such later date as may be agreed to by Administrative Agent in its reasonable discretion). All representations and warranties contained in this Agreement and the other Loan Documents will be deemed modified to the extent necessary to effect the foregoing (and to permit the taking of the actions described on Schedule 5.13 within the time periods specified thereon, rather than as elsewhere provided in the Loan Documents).

 

Article VI

Negative Covenants

 

The Borrower covenants and agrees with each Lender that, so long as this Agreement is in effect and until the Termination Date, unless the Required Lenders otherwise consent in writing, it will not and will not permit any of its Restricted Subsidiaries (and, solely in the case of Sections 6.01, 6.02, 6.06, 6.08, 6.09, 6.12 and 6.14, will not permit any of the Physician-Owned Practices) to:

 

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Section 6.01          Indebtedness. Issue, incur or assume any Indebtedness.

 

The limitation in the immediately preceding paragraph will not apply to the following (collectively, “Permitted Debt”):

 

(1) (a) Indebtedness created under the Loan Documents (including Incremental Term Loans, Incremental Revolving Facility Commitments, Incremental Revolving Loans, Other Refinancing Loans, Other Revolving Commitments, Extended Revolving Commitments, Extended Revolving Loans and Extended Term Loans); and (b) Credit Agreement Refinancing Indebtedness;

 

(2) Indebtedness existing on the Closing Date (other than Indebtedness described in clause (1) above);

 

(3) Capital Lease Obligations, Indebtedness with respect to mortgage financings, purchase money Indebtedness to finance all or any part of the purchase, lease, construction, installation, repair or improvement of property (real or personal), plant or equipment or other fixed or capital assets and Indebtedness arising from the conversion of the obligations of the Borrower, any Restricted Subsidiary or any Physician-Owned Practice under or pursuant to any “synthetic lease” transactions to on-balance sheet Indebtedness of the Borrower, such Restricted Subsidiary or such Physician-Owned Practice, as applicable, in an aggregate outstanding principal amount, including all Permitted Refinancing Indebtedness incurred to Refinance any Indebtedness originally incurred pursuant to this clause (3) (and any successive Permitted Refinancing Indebtedness), not to exceed as of any date of incurrence the greater of (a) $6,750,000 and (b) 15.0% of Consolidated EBITDA for the most recently ended Test Period as of the date such Indebtedness is incurred; provided that such Indebtedness is incurred within 270 days after the purchase, lease, construction, installation, repair or improvement of the property that is the subject of such Indebtedness;

 

(4) Indebtedness owed to (including obligations in respect of letters of credit, bank guarantees, other documentary credits and other similar instruments for the benefit of) any Person providing workers’ compensation, health, disability or other employee benefits (whether to current or former employees) or property, casualty or liability insurance or self-insurance in respect of such items, or other Indebtedness with respect to reimbursement-type obligations regarding workers’ compensation claims, health, disability or other employee benefits (whether current or former) or property, casualty or liability insurance;

 

(5) Indebtedness arising from agreements of the Borrower, any Restricted Subsidiary or any Physician-Owned Practice providing for indemnification, earn-outs, adjustment of purchase or acquisition price or similar obligations, in each case, incurred or assumed in connection with the Transactions, any Permitted Acquisition, any Permitted Investment or the disposition of any business, assets or Restricted Subsidiaries not prohibited by this Agreement, other than Guarantees of Indebtedness incurred by any Person acquiring all or any portion of such business, assets or Restricted Subsidiaries for the purpose of financing any such Permitted Acquisition;

 

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(6) intercompany Indebtedness between or among the Borrower, the Restricted Subsidiaries or the Physician-Owned Practices; provided that the aggregate outstanding principal amount of such Indebtedness that is owing by any Restricted Subsidiary that is not a Guarantor to a Loan Party or any Physician-Owned Practice may not exceed the amount, as of the date such Indebtedness is incurred, permitted pursuant to Section 6.04; provided, further, that any such Indebtedness that is owing by any Loan Party to any Restricted Subsidiary that is not a Guarantor or any Physician-Owned Practice shall be subject to a subordination agreement that is reasonably acceptable to the Administrative Agent;

 

(7) Indebtedness pursuant to Hedge Agreements;

 

(8) Indebtedness constituting reimbursement obligations with respect to letters of credit, bank guarantees, other documentary credits or other similar instruments issued in the ordinary course of business (provided that upon the drawing of such letters of credit, bank guarantees, other documentary credits or other similar instruments, such obligations are reimbursed within 45 days following such drawing) or in respect of performance bonds, bid bonds, appeal bonds, surety bonds and completion Guarantees and similar obligations, in each case, provided in the ordinary course of business, including those incurred to secure health, safety and environmental obligations in the ordinary course of business;

 

(9) Guarantees of Indebtedness of the Borrower, the Restricted Subsidiaries or the Physician-Owned Practices permitted to be incurred under this Agreement to the extent such Guarantees are not prohibited by the provisions of Section 6.04 (other than Section 6.04(18));

 

(10) (a) Indebtedness assumed in connection with a Permitted Acquisition or other permitted Investment and Indebtedness of any Person that becomes a Restricted Subsidiary or a Physician-Owned Practice if such Indebtedness was not created in anticipation or contemplation of such Permitted Acquisition or other Investment or such Person becoming a Restricted Subsidiary or a Physician-Owned Practice, (b) Indebtedness incurred or assumed in anticipation or contemplation of a Permitted Acquisition or other permitted Investment and (c) any Permitted Refinancing Indebtedness incurred to Refinance any Indebtedness originally incurred pursuant to this clause (10) (and any successive Permitted Refinancing Indebtedness in respect thereof); provided that, in the case of foregoing sub-clauses (a) and (b):

 

(i) no Specified Event of Default is continuing immediately prior to the execution of the binding agreement governing such Permitted Acquisition or permitted Investment or would result from the making of such Permitted Acquisition or permitted Investment; and

 

(ii) the aggregate principal amount of Indebtedness assumed pursuant to this clause (10) shall not exceed the greater of (a) $22,500,000 and (b) 50.0% of Consolidated EBITDA for the most recently ended Test Period as of the date such Indebtedness is incurred;

 

(11) Indebtedness incurred in connection with any Sale and Lease-Back Transactions permitted by Section 6.03 (and any successive Permitted Refinancing Indebtedness in respect thereof);

 

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(12) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business, so long as such Indebtedness (other than credit or purchase cards) is extinguished within ten (10) Business Days after notification received by the Borrower of its incurrence;

 

(13) Indebtedness supported by a Letter of Credit or letters of credit, bank guarantees, other documentary credits or other similar instruments issued under any credit facility permitted under this Section 6.01, in a principal amount not in excess of the stated amount of such Letter of Credit, letter of credit, bank guarantee or similar instrument, as applicable;

 

(14) Indebtedness consisting of (a) the financing of insurance premiums, (b) take or pay obligations contained in supply arrangements or (c) customs, VAT and other tax guarantees, in each case, in the ordinary course of business;

 

(15) Cash Management Obligations and other Indebtedness in respect of Cash Management Services entered into in the ordinary course of business;

 

(16) Indebtedness issued to future, current or former officers, directors, managers, employees, consultants and independent contractors of the Borrower, any Restricted Subsidiary or any Physician-Owned Practice or any direct or indirect parent thereof, their respective estates, heirs, family members, spouses or former spouses, in each case to finance the purchase or redemption of Equity Interests of the Borrower permitted by Section 6.06, in an aggregate outstanding principal amount not to exceed on any date of incurrence the greater of (x) $3,375,000 and (y) 7.5% of Consolidated EBITDA for the most recently ended Test Period as of the date such Indebtedness is incurred;

 

(17) (a) Indebtedness incurred on behalf of, or representing Guarantees of Indebtedness of, joint ventures; provided that the aggregate outstanding principal amount of such Indebtedness, together with any Permitted Refinancing Indebtedness incurred to Refinance any Indebtedness originally incurred pursuant to this clause (17) (and any successive Permitted Refinancing Indebtedness) may not exceed on any date of incurrence the greater of (x) $6,750,000 and (y) 15.0% of Consolidated EBITDA for the most recently ended Test Period as of the date such Indebtedness is incurred and (b) any Permitted Refinancing Indebtedness incurred to Refinance any Indebtedness originally incurred pursuant to this clause (17) (and any successive Permitted Refinancing Indebtedness in respect thereof);

 

(18) (a) Indebtedness of Foreign Subsidiaries (that are not Guarantors) or Physician-Owned Practices in an aggregate outstanding principal amount, together with any Permitted Refinancing Indebtedness incurred by Foreign Subsidiaries or Physician-Owned Practices to Refinance any Indebtedness originally incurred pursuant to this clause (18) (and any successive Permitted Refinancing Indebtedness), not to exceed on any date of incurrence the greater of (x) $6,750,000 and (y) 15.0% of Consolidated EBITDA for the most recently ended Test Period as of the date such Indebtedness is incurred and (b) any Permitted Refinancing Indebtedness incurred to Refinance any Indebtedness originally incurred pursuant to this clause (18) (and any successive Permitted Refinancing Indebtedness in respect thereof);

 

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(19) unsecured Indebtedness in respect of short-term obligations to pay the deferred purchase price of goods or services or progress payments in connection with such goods and services so long as such obligations are incurred in the ordinary course of business and not in connection with the borrowing of money;

 

(20) Indebtedness representing deferred compensation or other similar arrangements incurred by the Borrower, any Restricted Subsidiary or any Physician-Owned Practice (a) in the ordinary course of business or (b) in connection with the Transactions or any Permitted Investment;

 

(21) any Permitted Refinancing Indebtedness incurred to Refinance Credit Agreement Refinancing Indebtedness, Incremental Loans or Indebtedness incurred under clause (2), (3), (10), (11), (17), (18), this clause (21) or clause (28) or (29) of this Section 6.01, in each case subject to the limit set forth in any such clause with respect to the permitted amount thereof other than as may be increased pursuant to clause (1) of the definition of Permitted Refinancing Indebtedness;

 

(22) customer deposits and advance payments received in the ordinary course of business from customers for goods purchased in the ordinary course of business and guarantees of Indebtedness incurred by customers in connection with the purchase or other acquisition of equipment or supplies in the ordinary course of business;

 

(23) Indebtedness incurred by the Borrower, any Restricted Subsidiary or any Physician-Owned Practice in connection with a Letter of Credit or letters of credit, bank guarantees, other documentary credits and other similar instruments, bankers’ acceptances, discounted bills of exchange, warehouse receipts or similar facilities or the discounting or factoring of receivables for credit management purposes, in each case incurred or undertaken in the ordinary course of business;

 

(24) Indebtedness incurred by the Borrower, any Restricted Subsidiary or any Physician-Owned Practice to the extent that the net proceeds thereof are promptly deposited with a trustee to satisfy and discharge Indebtedness in connection with the indenture or other debt agreement therefor in accordance with the terms thereof;

 

(25) Guarantees incurred in the ordinary course of business in respect of obligations to suppliers, customers, franchisees, lessors, licensees, sub-licensees and distribution partners;

 

(26) unfunded pension fund and other employee benefit plan obligations and liabilities to the extent that they are permitted to remain unfunded under applicable law;

 

(27) Guarantees of Indebtedness by the Borrower, any of its Restricted Subsidiaries or any Physician-Owned Practice secured by Liens permitted by Section 6.02(22) or (34) provided that such Guarantee of Indebtedness is non-recourse to the Borrower, such Restricted Subsidiary or such Physician-Owned Practice, as applicable, other than in respect of the assets secured by such Liens;

 

(28) (a) additional Indebtedness in an aggregate outstanding principal amount, including all Permitted Refinancing Indebtedness incurred to Refinance any Indebtedness originally incurred pursuant to this clause (28) (and any successive Permitted Refinancing Indebtedness), not to exceed as of any date of incurrence the greater of (a) $13,500,000 and (b) 30.0% of Consolidated EBITDA for the most recently ended Test Period as of the date such Indebtedness is incurred and (b) any Permitted Refinancing Indebtedness incurred to Refinance any Indebtedness originally incurred pursuant to this clause (28) (and any successive Permitted Refinancing Indebtedness in respect thereof); provided that Indebtedness for borrowed money incurred pursuant to this clause (28) shall not be permitted to be incurred by any Physician-Owned Practice;

 

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(29) all premium (if any, including tender premiums) expenses, defeasance costs, interest (including post-petition interest), fees, expenses, charges and additional or contingent interest on obligations described in clauses (1) through (29) above or refinancings thereof; and

 

(30) unsecured obligations incurred pursuant to the Collaboration Agreement in connection the establishment of a de novo facility in an amount not to exceed $1,000,000 for each such de novo facility.

 

For purposes of determining compliance with this Section 6.01, in the event that an item of Indebtedness (or any portion thereof) meets the criteria of more than one of the categories of Permitted Debt, the Borrower may, in its sole discretion, at the time of incurrence, divide, classify or reclassify, or at any later time divide, classify or reclassify, such item of Indebtedness (or any portion thereof) in any manner that complies with this covenant; provided that all Indebtedness outstanding under the Loan Documents, will be deemed to have been incurred in reliance on the exception in clause (1) of the definition of Permitted Debt and shall not be permitted to be reclassified pursuant to this paragraph. Accrual of interest, the accretion of accreted value, amortization of original issue discount, the payment of interest or dividends in the form of additional Indebtedness with the same terms, and increases in the amount of Indebtedness outstanding solely as a result of fluctuations in the exchange rate of currencies, will not be deemed to be an incurrence of Indebtedness for purposes of this Section 6.01. All Indebtedness incurred pursuant to clause (10) of the definition of Permitted Debt (other than Indebtedness assumed in connection with such applicable Permitted Acquisition or other Permitted Investment and not incurred in anticipation or contemplation thereof), shall, in each case, comply with the Maturity Provisions. Guarantees of, or obligations in respect of letters of credit relating to, Indebtedness that is otherwise included in the determination of a particular amount of Indebtedness will not be included in the determination of such amount of Indebtedness; provided that the incurrence of the Indebtedness represented by such Guarantee or letter of credit, as the case may be, was in compliance with this Section 6.01.

 

Section 6.02          Liens. Create, incur assume or permit to exist any Lien that secures obligations under any Indebtedness on any property or assets at the time owned by it, except the following (collectively, “Permitted Liens”):

 

(1) Liens securing Indebtedness incurred in accordance with Section 6.01(1);

 

(2) Liens securing Indebtedness existing in accordance with Section 6.01(2); provided that such Liens only secure the obligations that they secure on the Closing Date (and any Permitted Refinancing Indebtedness in respect of such obligations permitted by Section 6.01) and do not apply to any other property or assets of the Borrower, any Restricted Subsidiary or any Physician-Owned Practice other than replacements, additions, accessions and improvements thereto and any income or profits thereof or proceeds thereof or of the foregoing;

 

(3) Liens securing Indebtedness incurred in accordance with Section 6.01(3); provided that such Liens only extend to the assets financed with such Indebtedness (and any replacements, additions, accessions and improvements thereto and any income or profits thereof or proceeds thereof or of the foregoing); provided, further, that individual financings provided by a lender may be cross-collateralized to other financings provided by such lender or its affiliates;

 

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(4) Liens on assets or Equity Interests of Foreign Subsidiaries (that are not Guarantors) or Physician-Owned Practices securing Indebtedness incurred by any Foreign Subsidiaries (that are not Guarantors) in accordance with Section 6.01;

 

(5) Liens securing Permitted Refinancing Indebtedness incurred in accordance with Section 6.01(21); provided that the Liens securing such Permitted Refinancing Indebtedness are limited to all or part of the same property that secured (or, under the written arrangements under which the original Lien arose, could secure) the original Lien (plus any replacements, additions, accessions and improvements thereto and any income or profits thereof or proceeds thereof or of the foregoing) provided, further, that individual financings provided by a lender may be cross-collateralized to other financings provided by such lender or its affiliates;

 

(6) (a) Liens on property or Equity Interests of a Person at the time such Person becomes a Restricted Subsidiary or a Physician-Owned Practice (together with the proceeds or products thereof and other after-acquired property subjected to a Lien securing Indebtedness and other obligations incurred prior to such time and which Indebtedness and other obligations are permitted hereunder that require, pursuant to their terms at such time, a pledge of after-acquired property, it being understood that such requirement shall not be permitted to apply to any property to which such requirement would not have applied but for such acquisition (and together with any replacements, additions, accessions and improvements thereto  and any income or profits thereof or proceeds thereof or of the foregoing)) if such Liens were not created in connection with, or in contemplation of, such other Person becoming a Restricted Subsidiary or a Physician-Owned Practice and (b) Liens on property at the time the Borrower, a Restricted Subsidiary or a Physician-Owned Practice acquired such property, including any acquisition by means of a merger or consolidation with or into the Borrower, any of the Restricted Subsidiaries or any Physician-Owned Practice, if such Liens were not created in connection with, or in contemplation of, such acquisition;

 

(7) Liens on property or assets of any Restricted Subsidiary that is not a Guarantor or any Physician-Owned Practice securing Indebtedness or other obligations of any Restricted Subsidiary that is not a Guarantor or any Physician-Owned Practice, as applicable;

 

(8) Liens for Taxes, assessments or other governmental charges or levies not yet delinquent or that are being contested in compliance with Section 5.03;

 

(9) Liens disclosed by the Title Policies and any replacement, extension or renewal of any such Liens (so long as the Indebtedness and other obligations secured by such replacement, extension or renewal Liens are permitted by this Agreement); provided that such replacement, extension or renewal Liens do not cover any property other than the property that was subject to such Liens prior to such replacement, extension or renewal;

 

(10) (a) Liens securing judgments that do not constitute an Event of Default under Section 7.01(10), (b) Liens arising out of judgments against the Borrower, any of its Restricted Subsidiaries or any Physician-Owned Practice with respect to which an appeal or other proceeding for review is then being pursued and for which adequate reserves have been made with respect thereto on the books of the applicable Person in accordance with GAAP and (c) notices of lis pendens and associated rights related to litigation being contested in good faith by appropriate proceedings and in respect of which the Borrower, any affected Restricted Subsidiary or any affected Physician-Owned Practice, as applicable, has set aside on its books reserves in accordance with GAAP with respect thereto;

 

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(11) Liens imposed by law, including landlord’s, carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s, construction or other like Liens arising in the ordinary course of business securing obligations that are not overdue by more than forty-five (45) days or that are being contested in good faith by appropriate proceedings and in respect of which, if applicable, the Borrower, a Restricted Subsidiary or a Physician-Owned Practice has set aside on its books reserves in accordance with GAAP;

 

(12) (a) pledges and deposits and other Liens made in the ordinary course of business in compliance with the Federal Employers Liability Act or any other workers’ compensation, unemployment insurance and other similar laws or regulations and deposits securing liability to insurance carriers under insurance or self-insurance arrangements in respect of such obligations, (b) pledges and deposits and other Liens securing liability for reimbursement or indemnification obligations of (including obligations in respect of letters of credit or bank guarantees for the benefit of) insurance carriers providing property, casualty or liability insurance to the Borrower, any Restricted Subsidiary or any Physician-Owned Practice and (c) pledges and deposits and other Liens for payment of rent;

 

(13) deposits to secure the performance of bids, trade contracts (other than for Indebtedness), leases (other than Capital Lease Obligations), statutory obligations, surety and appeal bonds, performance and return of money bonds, bids, indemnities, warranties, releases, leases, government contracts, trade contracts, agreements with utilities, and other obligations of a like nature (including letters of credit or bankers acceptances in lieu of any such bonds or to support the issuance thereof) incurred by the Borrower, any Restricted Subsidiary or any Physician-Owned Practice in the ordinary course of business, including those incurred to secure health, safety and environmental obligations in the ordinary course of business;

 

(14) survey exceptions and such matters as an accurate survey would disclose, easements, trackage rights, leases (other than Capital Lease Obligations), ground leases, licenses, special assessments, rights of way covenants, conditions, restrictions, encroachments, protrusions and declarations on or with respect to the use of Real Property, servicing agreements, development agreements, site plan agreements and other similar encumbrances incurred in the ordinary course of business and title defects or irregularities that are of a minor nature and that, in the aggregate, do not materially adversely interfere with the ordinary conduct of the business of the Borrower, any Restricted Subsidiary or any Physician-Owned Practice;

 

(15) any interest or title of a lessor or sublessor under any leases or subleases entered into by the Borrower, any Restricted Subsidiary or any Physician-Owned Practice in the ordinary course of business;

 

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(16) Liens that are contractual rights of set-off (a) relating to the establishment of depository relations with banks or other Persons not given in connection with the issuance of Indebtedness, (b) relating to pooled deposit or sweep accounts of the Borrower or any Restricted Subsidiary to permit satisfaction of overdraft or similar obligations incurred in the ordinary course of business of the Borrower, any Restricted Subsidiary or any Physician-Owned Practice or (c) relating to purchase orders and other agreements entered into with customers of the Borrower, any Restricted Subsidiary or any Physician-Owned Practice in the ordinary course of business;

 

(17) Liens arising solely by virtue of any statutory or common law provision relating to banker’s liens, rights of set-off or similar rights;

 

(18) leases or subleases, licenses or sublicenses (including with respect to intellectual property and software) granted to others in the ordinary course of business that do not materially adversely interfere with the business of the Borrower, the Restricted Subsidiaries and the Physician-Owned Practices, taken as a whole, and the rights of such parties set forth in such agreements;

 

(19) (a) Liens solely on any cash earnest money deposits made by the Borrower, any Restricted Subsidiary or any Physician-Owned Practice in connection with any letter of intent or other agreement in respect of any permitted Investment and Liens on advances of cash or Cash Equivalents in favor of the seller of any property to be acquired in a Permitted Acquisition or permitted Investment to be applied against the purchase price for such Investment or (b) consisting of an agreement to sell, transfer or otherwise dispose of any property to the extent such sale, transfer or disposition is permitted by Section 6.05;

 

(20) the prior rights of consignees and their lenders under consignment arrangements entered into in the ordinary course of business;

 

(21) Liens arising from precautionary Uniform Commercial Code financing statements (or other similar filings in non-U.S. jurisdictions);

 

(22) Liens on Equity Interests of any joint venture (together with assets related thereto and the proceeds or products of any of the foregoing) (a) securing obligations of such joint venture or (b) pursuant to the relevant joint venture agreement or arrangement;

 

(23) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods;

 

(24) Liens on securities that are the subject of repurchase agreements constituting Cash Equivalents under clause (4) of the definition thereof;

 

(25) Liens securing insurance premium financing arrangements and deposits made or other security provided in the ordinary course of business to secure liability to insurance carriers or under self-insurance arrangements in respect of such obligations;

 

(26) Liens on vehicles or equipment of the Borrower, any of the Restricted Subsidiaries or any Physician-Owned Practice granted in the ordinary course of business;

 

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(27) Liens on property or assets used to defease or to satisfy and discharge Indebtedness; provided that such defeasance or satisfaction and discharge is not prohibited by this Agreement;

 

(28) Liens:

 

(a) of a collection bank arising under Section 4-210 of the Uniform Commercial Code, or any comparable or successor provision, on items in the course of collection;

 

(b) attaching to pooling, commodity trading accounts or other commodity brokerage accounts incurred in the ordinary course of business; or

 

(c) in favor of banking or other financial institutions or entities, or electronic payment service providers, arising as a matter of law encumbering deposits (including the right of set-off) and which are within the general parameters customary in the banking or finance industry;

 

(29) Liens on specific items of inventory or other goods and proceeds of any Person securing such Person’s obligations in respect of bankers’ acceptances or letters of credit entered into in the ordinary course of business issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods;

 

(30) Liens securing additional obligations in an aggregate outstanding principal amount not to exceed at the time such Liens are first created the greater of (a) $13,500,000 and (b) 30.0% of Consolidated EBITDA for the most recently ended Test Period as of the date such Liens are first created;

 

(31) Liens securing Specified Hedge Obligations and Cash Management Obligations, which amounts are secured under the Loan Documents;

 

(32) Liens securing Indebtedness incurred in accordance with Section 6.01(11) solely encumbering the assets that are subject of such Indebtedness;

 

(33) Liens on the Equity Interests of Unrestricted Subsidiaries (together with assets related thereto and the proceeds or products of any of the foregoing) that secure Indebtedness or other obligations of such Unrestricted Subsidiary or any Guarantee thereof;

 

(34) Liens arising out of conditional sale, title retention, consignment or similar arrangements for the sale of goods entered into in the ordinary course of business;

 

(35) Liens encumbering reasonable customary initial deposits and margin deposits and similar Liens attaching to commodity trading accounts or other brokerage accounts incurred in the ordinary course of business and not for speculative purposes;

 

(36) Liens that may arise as a result of municipal and zoning codes and ordinances, building and other land use laws imposed by any Governmental Authority which are not violated in any material respect by existing improvements or the present use or occupancy of any Real Property;

 

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(37) receipt of progress payments and advances from customers in the ordinary course of business to the extent the same creates a Lien on the related inventory and proceeds thereof;

 

(38) the right reserved to or vested in any Governmental Authority by any statutory provision or by the terms of any lease, license, franchise, grant or permit of the Person, to terminate any such lease, license, franchise, grant or permit, or to require annual or other payments as a condition to the continuance thereof;

 

(39) Liens in favor of the Borrower, any Restricted Subsidiary or any Physician-Owned Practice securing indebtedness permitted under Section 6.01; and

 

(40) deposit arrangements in the ordinary course of business under which software or source code is placed in escrow with customers on a non-exclusive basis; and

 

(41) Liens on the assets of Physician-Owned Practices in favor of the Loan Parties.

 

For purposes of this Section 6.02, Indebtedness will not be considered incurred under a subsection or clause of Section 6.01 if it is later reclassified as outstanding under another subsection or clause of Section 6.01 (in which event, and at which time, such Indebtedness will be deemed incurred under the subsection or clause to which it is reclassified).

 

Section 6.03          Sale and Lease-Back Transactions. Enter into any arrangement, directly or indirectly, with any Person whereby it sells or transfers any property, real or personal, used or useful in its business, whether now owned or hereafter acquired, and thereafter rents or leases such property or other property that it intends to use for substantially the same purpose or purposes as the property being sold or transferred (a “Sale and Lease-Back Transaction”), except the following:

 

(1) Sale and Lease-Back Transactions with respect to property owned (a) by the Borrower or any of its Domestic Subsidiaries so long as such Sale and Lease-Back Transaction is consummated within 365 days of the acquisition of such property or (b) by any Foreign Subsidiary of the Borrower; and

 

(2) Sale and Lease-Back Transactions with respect to any other property owned by the Borrower or any Restricted Subsidiary, if at the time the lease in connection therewith is entered into, and after giving effect to the entering into of such lease, the Remaining Present Value of such lease would not exceed the greater of (x) $6,750,000 and (y) 15.0% of Consolidated EBITDA for the then most recently ended Test Period; provided that the aggregate Remaining Present Value of all such leases subject to Sale and Lease-Back Transactions permitted pursuant to this clause (2) shall not exceed the greater of (x) $22,500,000 and (y) 50.0% of Consolidated EBITDA for the then most recently ended Test Period.

 

Section 6.04         Investments, Loans and Advances. Make or permit to exist any Investment, except the following (collectively, “Permitted Investments”):

 

(1) the Transactions (including payment of the purchase consideration under the Acquisition Agreement);

 

(2) loans and advances to officers, directors, employees, managers, consultants or independent contractors of the Borrower or any Restricted Subsidiary (i) for business-related travel and entertainment expenses, moving and relocation expenses and other similar expenses, in each case incurred in the ordinary course of business or (ii) not to exceed as of the date such Investment is made the greater of (x) $4,500,000 and (b) 10.0% of Consolidated EBITDA for the most recently ended Test Period, in an aggregate principal amount outstanding as of the date such Investment is made (calculated without regard to write-downs or write-offs thereof after the date made);

 

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(3) Investments in an amount not to exceed the Available Amount as of the date such Investment is made if no Default or Event of Default is continuing immediately prior to execution of the binding agreement governing such Investment or would result therefrom;

 

(4) Permitted Acquisitions and pre-existing Investments held by Persons acquired in Permitted Acquisitions or acquired in connection with Permitted Acquisitions (and not specifically in contemplation thereof);

 

(5) intercompany Investments among the Borrower and the Restricted Subsidiaries (including intercompany Indebtedness); provided that the aggregate fair market value of all such Investments made in such entities since the Closing Date (with all such Investments being valued at their original fair market value and without taking into account subsequent increases or decreases in value) by the Borrower and the Guarantors in Restricted Subsidiaries that are not Guarantors may not exceed, when aggregated with the portion of the total consideration paid in connection with any Permitted Acquisition that is allocable to acquisitions of entities which are not, or in the case of asset acquisitions, are not owned by, any Loan Party, the greater of (i) $15,750,000 and (ii) 35.0% of Consolidated EBITDA for the most recently ended Test Period as of the date such Investment is made, plus an amount equal to any returns of capital or sale proceeds actually received by a Loan Party in respect of any such Investments (which such amount shall not exceed the amount of such Investment (as determined above) at the time such Investment was made);

 

(6) Cash Equivalents and, to the extent not made for speculative purposes, Investment Grade Securities or Investments that were Cash Equivalents or Investment Grade Securities when made;

 

(7) Investments arising out of the receipt by the Borrower or any of the Restricted Subsidiaries of non-cash consideration in connection with any sale of assets permitted under Section 6.05;

 

(8) accounts receivable, security deposits and prepayments and other credits granted or made in the ordinary course of business and any Investments received in satisfaction or partial satisfaction thereof from financially troubled account debtors and others, including in connection with the bankruptcy or reorganization of, or settlement of delinquent accounts and disputes with or judgments against, such account debtors and others, in each case in the ordinary course of business;

 

(9) Investments acquired as a result of a foreclosure by the Borrower or any Restricted Subsidiary with respect to any secured Investments or other transfer of title with respect to any secured Investment in default;

 

(10) Hedge Agreements and Cash Management Services;

 

(11) Investments existing on, or contractually committed as of, the Closing Date and, if in excess of the greater of (i) $6,000,000 and (ii) 12.5% of Consolidated EBITDA for the most recently ended Test Period (other than any intercompany Investments by and among the Borrower or any of its Restricted Subsidiaries), as set forth on Schedule 6.04, and any replacements, extensions, renewals or reinvestments thereof, so long as the aggregate amount of all Investments pursuant to this clause (11) is not increased at any time above the amount of such Investments existing or committed on the Closing Date (other than pursuant to an increase as required by the terms of any such Investment as in existence on the Closing Date);

 

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(12) Investments resulting from pledges and deposits that are Permitted Liens;

 

(13) intercompany loans solely among Restricted Subsidiaries that are Foreign Subsidiaries and Guarantees by Foreign Subsidiaries permitted by Section 6.01(18);

 

(14) acquisitions of obligations of one or more officers or other employees of the Borrower or any Subsidiary of the Borrower in connection with such officer’s or employee’s acquisition of Equity Interests of the Borrower, so long as no cash is actually advanced by the Borrower or any Restricted Subsidiary to such officers or employees in connection with the acquisition of any such obligations;

 

(15) Guarantees of operating leases (for the avoidance of doubt, excluding Capital Lease Obligations) or of other obligations that do not constitute Indebtedness, in each case, entered into by the Borrower or any Restricted Subsidiary in the ordinary course of business;

 

(16) Investments consisting of the redemption, purchase, repurchase or retirement of any Equity Interests permitted under Section 6.06;

 

(17) Investments in the ordinary course of business consisting of Uniform Commercial Code Article 3 endorsements for collection or deposit and Uniform Commercial Code Article 4 customary trade arrangements with customers;

 

(18) Guarantees permitted under Section 6.01;

 

(19) advances in the form of a prepayment of expenses, so long as such expenses are being paid in accordance with customary trade terms of the Borrower or any Restricted Subsidiary;

 

(20) Investments consisting of the leasing or licensing of intellectual property in the ordinary course of business or the contribution of intellectual property pursuant to joint marketing arrangements with other Persons;

 

(21) purchases or acquisitions of inventory, supplies, materials and equipment or purchases or acquisitions of contract rights or intellectual property, in each case in the ordinary course of business;

 

(22) Investments in assets useful in the business of the Borrower or any Restricted Subsidiary made with (or in an amount equal to) any Reinvestment Deferred Amount or Below Threshold Asset Sale Proceeds; provided that if the underlying Asset Sale was with respect to assets of the Borrower or a Subsidiary Loan Party, then such Investment shall be consummated by the Borrower or a Subsidiary Loan Party;

 

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(23) intercompany Current Liabilities owed to Unrestricted Subsidiaries or joint ventures incurred in the ordinary course of business in connection with the cash management operations of the Borrower and its Subsidiaries;

 

(24) Investments that are made with Excluded Contributions;

 

(25) additional Investments (I) so long as the aggregate fair market value of such Investments made since the Closing Date under this clause (I) that remain outstanding (with all such Investments being valued at their original fair market value and without taking into account subsequent increases or decreases in value), will not exceed as of the date such Investment is made the greater of (a) $6,750,000 and (b) 15.0% of Consolidated EBITDA for the most recently ended Test Period as of the date such Investment is made plus (II) so long as the aggregate fair market value of such Investments made since the Closing Date under this clause (II) that remain outstanding (with all such Investments being valued at their original fair market value and without taking into account subsequent increases or decreases in value), in an aggregate amount will not exceed as of the date such Investment is made the aggregate total of all other amounts then available on such date to be utilized for payments made with respect to Junior Financings pursuant to Section 6.09(1), plus (III) so long as the aggregate fair market value of such Investments made since the Closing Date under this clause (III) that remain outstanding (with all such Investments being valued at their original fair market value and without taking into account subsequent increases or decreases in value), in an aggregate amount will not exceed as of the date such Investment is made the aggregate total of all other amounts then available on such date to be utilized for Restricted Payments pursuant to Section 6.06, which the Borrower may, from time to time, in the case of clauses (II) and (III), elect to re-allocate to the making of Investments pursuant to this Section 6.03(28)(II) or (III), as applicable; provided that, in each case, any such reallocated amount shall reduce the applicable basket under Section 6.06 or 6.13 from which availability was reallocated, on a dollar-for-dollar basis, in each case for clauses (I) through (III) above, plus any returns of capital actually received by the Borrower or any of the Restricted Subsidiaries in respect of such Investments;

 

(26) any transaction to the extent it constitutes an Investment that is permitted and made in accordance with Section 6.07 (except transactions described in clauses (1), (5), (7), (8), (10), (12), (16), (17), (18) and (21) thereof);

 

(27) loans and advances relating to indemnification or reimbursement of any officers, directors or employees in respect of customary liabilities relating to their serving in any such capacity or as otherwise specified in Section 6.07;

 

(28) any Investment, if as of the date such Investment is made (a) no Default or Event of Default is continuing immediately prior to making such Investment or would result therefrom (or if, earlier, the execution of a binding agreement governing such Investment) and (b) the Total Net Leverage Ratio, calculated on a Pro Forma Basis, is less than or equal to 1.25:1.00;

 

(29) Investments made in the ordinary course of business in connection with obtaining, maintaining or renewing client and customer contracts and loans or advances made to, and guarantees with respect to obligations of, distributors, suppliers, licensors and licensees in the ordinary course of business;

 

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(30) Investments consisting of purchases and acquisitions of assets or services in the ordinary course of business;

 

(31) advances, loans or extensions of trade credit in the ordinary course of business by the Borrower or any of its Restricted Subsidiaries;

 

(32) Investments in Unrestricted Subsidiaries; provided that the aggregate fair market value of all such Investments (with all such Investments being valued at their original fair market value and without taking into account subsequent increases or decreases in value), may not exceed as of the date such Investment is made, the greater of (i) $9,000,000 and (b) 20.0% of Consolidated EBITDA for the most recently ended Test Period as of the date of such Investment, plus an amount equal to any returns of capital or sale proceeds actually received by a Loan Party in respect of any such Investments (which such amount shall not exceed the amount of such Investment (as determined above) at the time such Investment was made);

 

(33) Investments in the nature of pledges and deposits with respect to leases or utilities provided to third parties in the ordinary course of business;

 

(34) advances of payroll payments to employees in the ordinary course of business;

 

(35) Investments in deposit accounts, securities accounts and commodities accounts maintained by the Borrower or any Restricted Subsidiary; and

 

(36) guarantees by any Loan Party or any Restricted Subsidiary of leases or of obligations that do not constitute Indebtedness, in each case entered into in the ordinary course of business;

 

(37) Investments in Physician-Owned Practices, so long as such Investments are made in accordance with the applicable Management Services Agreement;

 

(38) the DNF Acquisition; and

 

(39) the Heat Acquisition.

 

Notwithstanding anything to the contrary in this Agreement or the other Loan Documents, no Intellectual Property Rights or other assets that are material to the business of the Borrower and its Restricted Subsidiaries (taken as a whole) may be transferred to an Unrestricted Subsidiary.

 

Section 6.05          Mergers, Consolidations, Sales of Assets and Acquisitions. Merge into, or consolidate or amalgamate with, any other Person, or permit any other Person to merge into or consolidate with it, or sell, transfer or otherwise dispose of (in one transaction or in a series of transactions) all or any part of its assets, or issue, sell, transfer or otherwise dispose of any Equity Interests of any Restricted Subsidiary, or purchase, lease or otherwise acquire (in one transaction or a series of transactions) all or substantially all of the assets of any other Person or any division, unit or business of any other Person (including, in each case, pursuant to a Delaware LLC Division), except that this Section 6.05 will not prohibit:

 

(1) if at the time thereof and immediately after giving effect thereto no Specified Event of Default has occurred and is continuing or would result therefrom:

 

(a) the merger, consolidation or amalgamation of any Person into (or with) the Borrower in a transaction in which the Borrower is the survivor or the Person formed by or surviving any such merger, consolidation or amalgamation (if other than the Borrower) or the Person to whom such sale, transfer or other disposition will have been made is organized or existing under the laws of the United States, any state thereof, the District of Columbia (such Person, the “Successor Company”) and such Successor Company expressly assumes all the Obligations of the Borrower pursuant to documentation reasonably satisfactory to the Administrative Agent;

 

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(b) the merger, consolidation or amalgamation of any Person into (or with) a Restricted Subsidiary that is a Loan Party in a transaction in which such Restricted Subsidiary is the survivor or the Person becomes a Successor Company and such Successor Company expressly assumes all the Obligations of such Restricted Subsidiary pursuant to documentation reasonably satisfactory to the Administrative Agent;

 

(c) the merger, consolidation or amalgamation of any Restricted Subsidiary into or with, or the transfer of all or part of its property and assets to, any Restricted Subsidiary that is a Loan Party in a transaction in which the surviving or resulting entity is a Restricted Subsidiary that is a Loan Party;

 

and, in the case of each of the foregoing clauses (a), (b) and (c), no Person other than the Borrower or a Restricted Subsidiary that is a Loan Party receives any consideration;

 

(d) the merger, consolidation or amalgamation of any Restricted Subsidiary that is not a Loan Party into or with, or transfer of all or part of its property and assets to, any other Restricted Subsidiary that is not a Loan Party;

 

(e) any transfer of inventory among the Borrower and its Restricted Subsidiaries or between Restricted Subsidiaries and any other transfer of property or assets among the Borrower and its Restricted Subsidiaries or between Restricted Subsidiaries, in each case, in the ordinary course of business;

 

(f) the liquidation or dissolution or change in form of entity of any Restricted Subsidiary of the Borrower if a Responsible Officer of the Borrower determines in good faith that such liquidation, dissolution or change in form is in the best interests of the Borrower and is not materially disadvantageous to the Lenders; or

 

(g) the merger, consolidation or amalgamation of any Restricted Subsidiary with or into any other Person in order to effect a Permitted Investment so long as the continuing resulting or surviving Person will be a Restricted Subsidiary that is a Loan Party or if the merging, consolidating or amalgamating Subsidiary was a Restricted Subsidiary that is a Loan Party and which, together with each of its Subsidiaries, shall have complied with the requirements of Section 5.11;

 

(2) any sale, transfer or other disposition, not constituting a transfer of all or substantially all of the assets of the Borrower and its Restricted Subsidiaries, taken as a whole, if:

 

(a) the Net Cash Proceeds therefrom are to be applied in accordance with Section 2.12(2) (if applicable);

 

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(b) for any such sale, transfer or disposition in excess of the greater of (x) $2,250,000 and (y) 5.0% of Consolidated EBITDA for the most recently ended Test Period, at least 75% of the consideration therefor is in the form of cash and Cash Equivalents; and

 

(c) such sale, transfer or disposition is made for fair market value;

 

provided that each of the following items will be deemed to be cash for purposes of this Section 6.05(2):

 

(i) any liabilities of the Borrower or the Restricted Subsidiaries (as shown on the most recent Required Financial Statements or in the notes thereto), other than liabilities that are by their terms subordinated in right of payment to the Obligations, that are assumed by the transferee with respect to the applicable disposition and for which the Borrower and the Restricted Subsidiaries have been validly released by all applicable creditors in writing;

 

(ii) any securities received by the Borrower or any Restricted Subsidiary from such transferee that are converted by the Borrower or such Restricted Subsidiary into cash or Cash Equivalents (to the extent of the cash or Cash Equivalents received) within 180 days following the closing of the applicable disposition; and

 

(iii) any Designated Non-Cash Consideration received in respect of such disposition; provided that the aggregate fair market value of all such Designated Non-Cash Consideration, as determined by a Responsible Officer of the Borrower in good faith, taken together with all other Designated Non-Cash Consideration received pursuant to this clause (iii) that is then outstanding, does not exceed as of the applicable date below the greater of (A) $11,250,000 and (B) 25.0% of Consolidated EBITDA for the most recently ended Test Period as of the date any such Designated Non-Cash Consideration is received (or, at the option of the Borrower, at the time a binding agreement is entered into in respect of such sale, transfer or disposition), with the fair market value of each item of Designated Non-Cash Consideration being measured at the time received and without giving effect to subsequent changes in value;

 

(3) (a) the purchase and sale of inventory in the ordinary course of business, (b) the acquisition or lease (pursuant to an operating lease) of any other asset in the ordinary course of business, (c) the sale of surplus, obsolete, damaged, unnecessary, unsuitable or worn out equipment or other property in the ordinary course of business or (d)  a sale, exchange or other disposition of cash, Cash Equivalents or Investment Grade Securities (or Investments that were Cash Equivalents or Investment Grade Securities when made);

 

(4) Sale and Lease-Back Transactions permitted by Section 6.03;

 

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(5) Investments permitted by Section 6.04 (including any Permitted Acquisition or merger, consolidation or amalgamation in order to effect a Permitted Acquisition), provided that, following any such merger, consolidation or amalgamation involving the Borrower, the Borrower is the surviving corporation;

 

(6) Permitted Liens;

 

(7) Restricted Payments permitted by Section 6.06;

 

(8) the sale, lease, discount, assignment, license or sublease of inventory, equipment, accounts receivable, notes receivable, immaterial assets or other Current Assets held for sale in the ordinary course of business or the conversion of accounts receivable to notes receivable or Investments permitted hereunder or disposition of accounts receivable in connection with the collection or compromise or settlement or in bankruptcy or similar proceeding, thereof and not as part of an accounts receivables financing transaction;

 

(9) leases, licenses or subleases or sublicenses of any Real Property or personal property in the ordinary course of business;

 

(10) sales, leases or other dispositions of inventory or other assets of the Borrower or any Restricted Subsidiary determined by the management of the Borrower, in its reasonable good faith judgment, to be no longer useful or necessary or economically profitable to maintain in the operation of the business of the Borrower or such Restricted Subsidiary (including allowing any registrations or any applications for registration of any intellectual property or other intellectual property rights to lapse or become abandoned);

 

(11) acquisitions and purchases made with Below Threshold Asset Sale Proceeds;

 

(12) to the extent allowable under Section 1031 of the Code (or comparable or successor provision), any exchange of like property (excluding any boot thereon permitted by such provision) for use in any business conducted by the Borrower or any Restricted Subsidiary that is not in contravention of Section 6.08; or

 

(13) any sale, transfer or other disposition, in a single transaction or a series of related transactions, of any asset or assets having a fair market value, as determined by a Responsible Officer of the Borrower in good faith, of not more than as of the applicable date below the greater of (x) $4,500,000 and (y) 10.0% of Consolidated EBITDA for the most recently ended Test Period as of the date such sale, transfer or other disposition is made (or, at the option of the Borrower, at the time a binding agreement is entered into in respect of such sale, transfer or disposition); provided that the aggregate amount of all sales, transfers or other dispositions made pursuant to this clause (13) shall not exceed the greater of (x) $13,500,000 and (y) 30.0% of Consolidated EBITDA for the most recently ended Test Period;

 

(14) any transfer or disposition of property or assets or issuance or sale of Equity Interests by a Restricted Subsidiary of the Borrower to the Borrower or by the Borrower or a Restricted Subsidiary of the Borrower to a Restricted Subsidiary of the Borrower, in each case, to the extent not prohibited by Section 6.04;

 

(15) any issuance, sale, pledge or other disposition of Equity Interests in, or Indebtedness or other securities of, an Unrestricted Subsidiary (other than Unrestricted Subsidiaries the primary assets of which are cash and/or Cash Equivalents, except to the extent such cash and/or Cash Equivalents consist of proceeds from the sale of the assets of such Unrestricted Subsidiary);

 

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(16) the Borrower and any Restricted Subsidiary may (i) convert any intercompany Indebtedness to Equity Interests; (ii) settle, discount, write off, forgive or cancel any intercompany Indebtedness or other obligation owing by the Borrower or any Restricted Subsidiary; and (iii) settle, discount, write off, forgive or cancel any Indebtedness owing by any present or former directors, officers, employees, managers, consultants or independent contractors of the Borrower or any Subsidiary or any of their successors or assigns, to the extent made in the ordinary course of business;

 

(17) the surrender or waiver of obligations of trade creditors or customers or other contract rights in the ordinary course of business of the Borrower or any Restricted Subsidiary or pursuant to any Plan of Reorganization or similar arrangement upon the bankruptcy or insolvency of any trade creditor or customer or compromise, settlement, release or surrender of a contract, tort or other litigation claim, arbitration or other disputes;

 

(18) any exchange of assets for assets (including a combination of assets and cash or Cash Equivalents) related to a business permitted under Section 6.08 of comparable or greater market value or usefulness to the business of the Borrower and its Restricted Subsidiaries as a whole, as determined in good faith by the Borrower, or dispositions of property to the extent that (i) such property is exchanged for credit against the purchase price of similar replacement property or (ii) the proceeds of such disposition are promptly applied to the purchase price of such replacement property;

 

(19) condemnations or any similar action on assets not prohibited by this Agreement;

 

(20) dispositions of Investments (including Equity Interests) in joint ventures or any Subsidiary that is not wholly owned to the extent required by, or made pursuant to customary buy/sell arrangements or rights of first refusal between, the joint venture parties set forth in joint venture arrangements and similar binding arrangements;

 

(21) the issuance of directors’ qualifying shares and shares issued to foreign nationals to the extent required by applicable law;

 

(22) dispositions of property to the extent that (i) such property is exchanged for credit against the purchase price of similar replacement property that is purchased within ninety (90) days of such disposition or (ii) the proceeds of such disposition are applied within ninety (90) days of such disposition to the purchase price of such replacement property (which replacement property is purchased within ninety (90) days of such disposition);

 

(23) (i) the sale, lease, assignment, license or sub-lease of any real, intangible or personal property (including the provision of software under an open source license or the licensing of other Intellectual Property Rights) in the ordinary course of business and which do not materially interfere with the business of the Borrower and its Restricted Subsidiaries (taken as a whole) and (ii) inbound and non-exclusive outbound licenses to Intellectual Property Rights, in each case that do not materially interfere with, the business of the Borrower and its Restricted Subsidiaries (taken as a whole);

 

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(24) any disposition by reason of the exercise of termination rights under any lease, sublease, license, sublicense, concession or other agreement;

 

(25) any surrender or waiver of contractual rights or the settlement, release, recovery on or surrender of contractual rights or other claims of any kind in the ordinary course of business;

 

(26) dispositions to be made to comply with the order of any Governmental Authority or applicable Laws and transfers of property subject to Casualty Events; or

 

(27) voluntary terminations, the unwinding or settling of obligations under Hedge Agreements.

 

To the extent any Collateral is sold, transferred or otherwise disposed of in a transaction expressly permitted by this Section 6.05 to any Person other than the Borrower or any Guarantor, such Collateral will be free and clear of the Liens created by the Loan Documents, and the Collateral Agent will take, and each Lender hereby authorizes the Collateral Agent to take, any actions reasonably requested by the Borrower in order to evidence the foregoing, in each case, in accordance with Section 9.18.

 

Section 6.06          Restricted Payments. Declare or pay any dividend or make any other distribution (by reduction of capital or otherwise), directly or indirectly, whether in cash, property, securities or a combination thereof, with respect to any of its Equity Interests (other than dividends and distributions on Equity Interests payable solely by the issuance of additional Equity Interests (other than Disqualified Stock) of the Person paying such dividends or distributions) or directly or indirectly redeem, purchase, retire or otherwise acquire for value any of its Equity Interests or set aside any amount for any such purpose (other than through the issuance of additional Equity Interests (other than Disqualified Stock) of the Person redeeming, purchasing, retiring or acquiring such shares) (the foregoing, “Restricted Payments”) other than:

 

(1) the making of any Restricted Payment in exchange for, or out of or with the net cash proceeds of the substantially concurrent sale (other than to a Restricted Subsidiary of the Borrower or a Physician-Owned Practice) of, Equity Interests of the Borrower (other than Disqualified Stock) or from the substantially concurrent contribution of common equity capital to the Borrower, other than (a) Excluded Contributions, (b) Specified Equity Contributions and (c) any such proceeds that are used prior to the date of determination to (i) make an Investment under Section 6.04(3), a Restricted Payment under Section 6.06(8) or a payment in respect of Junior Financing under Section 6.09(1)(a), in each case in reliance on clause (3) or (4) of the definition of the Available Amount, (ii) make a Restricted Payment under Section 6.06(2)(b) or (iii) to make a payment in respect of Junior Financing under Section 6.09(1)(g);

 

(2) Restricted Payments to the Borrower, the proceeds of which are used to purchase, retire, redeem or otherwise acquire, the Equity Interests of the Borrower (including related stock appreciation rights or similar securities) held directly or indirectly by future, present or former directors, consultants, officers, employees, managers or independent contractors of the Borrower, any of the Restricted Subsidiaries or any Physician-Owned Practice, in each case, or their estates, heirs, family members, spouses or former spouses or permitted transferees (including for all purposes of this clause (2), Equity Interests held by any entity whose Equity Interests are held by any such future, present or former employee, officer, director, manager, consultant or independent contractor or their estates, heirs, family members, spouses or former spouses or permitted transferees) pursuant to any management equity plan or stock option plan or any other management or employee benefit plan or other agreement or arrangement or any stock subscription or shareholder or similar agreement; provided that the aggregate amount of such purchases or redemptions may not exceed:

 

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(a) at the time of such purchase or redemption the greater of (x) $9,000,000 and (y) 20.0% of Consolidated EBITDA for the most recently ended Test Period at the time of such purchase or redemption in any fiscal year (with any unused amounts at the end of any fiscal year (for such purpose determining clause (y) above as of such fiscal year) being carried over to the immediately succeeding fiscal year); plus

 

(b) the amount of net cash proceeds received by the Borrower since the Closing Date from sales of Equity Interests of the Borrower to future, present or former directors, consultants, officers, employees, managers or independent contractors of the Borrower, any Restricted Subsidiary or any Physician-Owned Practice in connection with permitted employee compensation and incentive arrangements, other than (a) Excluded Contributions, (b) Specified Equity Contributions and (c) any such proceeds that are used prior to the date of determination to (1) make an Investment under Section 6.04(3), a Restricted Payment under Section 6.06(8) or a payment in respect of Junior Financing under Section 6.09(1)(a), in each case in reliance on clause (3) or (4) of the definition of the Available Amount, (2) make a Restricted Payment under Section 6.06(1) or (3) make a payment in respect of Junior Financing under Section 6.09(1)(g); plus

 

(c) the amount of net proceeds of any key man life insurance policies received after the Closing Date; plus

 

(d) the amount of any bona fide cash bonuses otherwise payable to directors, consultants, officers, employees, managers or independent contractors of the Borrower, any Restricted Subsidiary or any Physician-Owned Practice that are foregone in return for the receipt of Equity Interests, the fair market value of which is equal to or less than the amount of such cash bonuses, which, if not used in any year, may be carried forward to any subsequent fiscal year;

 

and provided, further, that cancellation of Indebtedness owing to the Borrower, any Restricted Subsidiary or any Physician-Owned Practice from future, present or former directors, consultants, officers, employees, managers or independent contractors or permitted transferees of the Borrower, any Restricted Subsidiary or any Physician-Owned Practice, as applicable, in connection with a repurchase of Equity Interests of the Borrower will not be deemed to constitute a Restricted Payment;

 

(3) Restricted Payments to consummate the Transactions or to pay any amounts pursuant to the Acquisition Agreement;

 

(4) non-cash repurchases of Equity Interests deemed to occur upon exercise of stock options or warrants if such Equity Interests represent a portion of the exercise price of such options or warrants;

 

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(5) Restricted Payments to the Borrower, any Restricted Subsidiary or any Physician-Owned Practice (or, in the case of non-Wholly Owned Subsidiaries, to the Borrower, any Restricted Subsidiary or any Physician-Owned Practice and to each other owner of Equity Interests of such Restricted Subsidiary on a pro rata basis (or more favorable basis from the perspective of the Borrower, such Restricted Subsidiary or such Physician-Owned Practice) based on their relative ownership interests so long as any repurchase of its Equity Interests from a Person that is not the Borrower, a Restricted Subsidiary or a Physician-Owned Practice is permitted under Section 6.04);

 

(6) other than with respect to any dividend or distribution to be made in reliance on clause (8) below, the payment of any dividend or distribution or consummation of any redemption within sixty (60) days after the date of declaration thereof or the giving of a redemption notice related thereto, if at the date of declaration or notice such payment would have complied with the provisions of this Agreement;

 

(7) the distribution, as a dividend or otherwise, of shares of Capital Stock of, or Indebtedness owed to the Borrower, any Restricted Subsidiary or any Physician-Owned Practice by, one or more Unrestricted Subsidiaries (other than Unrestricted Subsidiaries the primary assets of which are cash or Cash Equivalents, except to the extent such cash and/or Cash Equivalents consist of proceeds from the sale of the assets of such Unrestricted Subsidiary);

 

(8) any Restricted Payment in an amount not to exceed the Available Amount on the date such Restricted Payment is made if (i) no Default or Event of Default is continuing immediately prior to making such Restricted Payment or would result therefrom and (ii) solely in the case of any Restricted Payment made in reliance on clause (2) of the definition of the Available Amount, after giving effect to such Restricted Payment, the Total Net Leverage Ratio, on a Pro Forma Basis, is less than or equal to 2.00:1.00;

 

(9) any Restricted Payment, if as of the date such Restricted Payment is made (a) no Default or Event of Default is continuing immediately prior to making such Restricted Payment or would result therefrom and (b) the Total Net Leverage Ratio, on a Pro Forma Basis, is less than or equal to 1.00:1.00;

 

(10) additional Restricted Payments, so long as no Event of Default is continuing immediately prior to making such Restricted Payment or would result therefrom, in an aggregate amount not to exceed, as of the date the Restricted Payment is made, the greater of (i) $13,500,000 and (ii) 30.0% of Consolidated EBITDA for the most recently ended Test Period, at any time outstanding as of the date such Restricted Payment is made;

 

(11) Restricted Payments for (i) repurchases of Equity Interests deemed to occur upon exercise of stock options or warrants if such Equity Interests represent a portion of the exercise price of such options or warrants, (ii) payments made or expected to be made by the Borrower, any Restricted Subsidiary or any Physician-Owned Practice in respect of withholding or similar Taxes payable or expected to be payable by any future, present or former director, officer, employee, manager, consultant or independent contractor of the Borrower, any Subsidiary or any Physician-Owned Practice (or their respective Affiliates, estates or immediate family members or permitted transferees) in connection with the exercise of stock options or the grant, vesting or delivery of Equity Interests and (iii) loans or advances to officers, directors, employees, managers, consultants and independent contractors of the Borrower, any Subsidiary of the Borrower or any Physician-Owned Practice in connection with such Person’s purchase of Equity Interests of the Borrower; provided that no cash is actually advanced pursuant to this sub-clause (iii) other than to pay Taxes due in connection with such purchase, unless immediately repaid;

 

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(12) Restricted Payments that are made with Excluded Contributions; or

 

(13) the payment of cash in lieu of the issuance of fractional shares of Equity Interests in connection with any merger, consolidation, amalgamation or other business combination, or in connection with any dividend, distribution or split of or upon exercise, conversion or exchange of Equity Interests, warrants, options or other securities exercisable or convertible into, Equity Interests of the Borrower.

 

Section 6.07          Transactions with Affiliates. Sell or transfer any property or assets to, or purchase or acquire any property or assets from, or otherwise engage in any other transaction with, any of its Affiliates in a transaction involving aggregate consideration in an amount not to exceed as of the date of such transfer the greater of (i) $4,500,000 and (ii) 10.0% of Consolidated EBITDA for the most recently ended Test Period as of the date of such transaction, unless such transaction is (i) otherwise expressly permitted (or required) under this Agreement or (ii) upon terms no less favorable to the Borrower and the Restricted Subsidiaries than would be obtained in a comparable arm’s length transaction with a Person that is not an Affiliate (as determined by the Borrower in good faith), except that this Section 6.07 will not prohibit:

 

(1) transactions between or among (a) the Borrower and the Restricted Subsidiaries or (b) the Borrower and any Person that becomes a Restricted Subsidiary as a result of such transaction (including by way of a merger, consolidation or amalgamation in which a Loan Party is the surviving entity);

 

(2) any issuance of securities, or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment arrangements, equity purchase agreements, stock options and stock ownership plans approved by the Board of Directors of the Borrower in good faith;

 

(3) payments, loans, advances or guarantees (or cancellation of loans, advances or Guarantees) or advances to future, present or former directors, officers, employees, managers, consultants or independent contractors of the Borrower or any Restricted Subsidiary in accordance with Section 6.04(2);

 

(4) the payment of fees, reasonable out-of-pocket costs and indemnities to future, present or former directors, officers, employees, managers, consultants or independent contractors of the Borrower or any of the Restricted Subsidiaries in the ordinary course of business;

 

(5) the Transactions and transactions pursuant to the Transaction Documents and other transactions, agreements and arrangements in existence on the Closing Date and set forth on Schedule 6.07 or any amendment thereto to the extent such amendment is not adverse to the Lenders in any material respect as determined in good faith by a Responsible Officer of the Borrower;

 

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(6) (a) any employment, consulting, service or termination agreement, or customary indemnification arrangements entered into by the Borrower or any of the Restricted Subsidiaries in the ordinary course of business, (b) any subscription agreement or similar agreement pertaining to the repurchase of Equity Interests pursuant to put/call rights or similar rights with employees, officers or directors and (c) any employee compensation, benefit plan or arrangement, any health, disability or similar insurance plan which covers employees, and any reasonable employment contract and transactions pursuant thereto;

 

(7) Restricted Payments permitted under Section 6.06;

 

(8) the purchase by the Borrower of Equity Interests in any Restricted Subsidiary;

 

(9) transactions with Restricted Subsidiaries for the purchase or sale of goods, products, parts and services entered into in the ordinary course of business;

 

(10) any transaction in respect of which the Borrower delivers to the Administrative Agent (for delivery to the Lenders) a letter addressed to the Board of Directors of the Borrower from an accounting, appraisal or investment banking firm, in each case, of nationally recognized standing that is (a) in the good faith determination of the Borrower qualified to render such letter and (b) reasonably satisfactory to the Administrative Agent, which letter states that such transaction is on terms that are no less favorable to the Borrower or the Restricted Subsidiaries, as applicable, than would be obtained in a comparable arm’s length transaction with a Person that is not an Affiliate;

 

(11) transactions with joint ventures for the purchase or sale of goods, equipment and services entered into in the ordinary course of business;

 

(12) the issuance of Equity Interests to the management of the Borrower or any of the Restricted Subsidiaries in connection with the Transactions;

 

(13) payments by the Borrower or any of the Restricted Subsidiaries pursuant to tax sharing agreements among the Borrower and any of the Restricted Subsidiaries;

 

(14) payments or loans (or cancellation of loans) to future, present or former directors, officers, employees, managers, consultants or independent contractors that are:

 

(a) approved by a majority of the Disinterested Directors of the Borrower in good faith;

 

(b) made in compliance with applicable law; and

 

(c) otherwise permitted under this Agreement;

 

(15) transactions with customers, clients, suppliers or purchasers or sellers of goods or services, in each case, in the ordinary course of business and otherwise in compliance with the terms of this Agreement, that are fair to the Borrower and the Restricted Subsidiaries as determined in good faith by a Responsible Officer of the Borrower;

 

(16) transactions between or among the Borrower and the Restricted Subsidiaries and any Person, a director of which is also a director of the Borrower, so long as (a) such director abstains from voting as a director of the Borrower on any matter involving such other Person and (b) such Person is not an Affiliate of the Borrower for any reason other than such director’s acting in such capacity;

 

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(17) transactions pursuant to, and complying with, the provisions of Section 6.01, Section 6.04 or Section 6.05(1);

 

(18) the existence of, or the performance by any Loan Party of its obligations under the terms of, any customary registration rights agreement to which a Loan Party is a party or becomes a party in the future;

 

(19) intercompany transactions undertaken in good faith (as certified by a Responsible Officer of the Borrower) for the purpose of improving the consolidated tax efficiency of the Borrower and the Restricted Subsidiaries and not for the purpose of circumventing any covenant set forth herein;

 

(20) pledges of Equity Interests of Unrestricted Subsidiaries (together with assets related thereto and the proceeds or products of any of the foregoing) to secure Indebtedness or other obligations of such Unrestricted Subsidiary or Guarantees thereof;

 

(21) investments by any Permitted Holder or Affiliate of a Permitted Holder in securities or Indebtedness permitted hereunder of the Borrower or any Restricted Subsidiary (and payment of reasonable out-of-pocket expenses incurred by any Permitted Holder or Affiliate of a Permitted Holder in connection therewith);

 

(22) leases or subleases, licenses or sublicenses (including with respect to intellectual property and software) or operating agreements granted by any Loan Party to another Loan Party in the ordinary course of business that do not materially adversely interfere with the business of the Borrower and the Restricted Subsidiaries, taken as a whole, or materially impair the security interest granted under the Security Documents therein held by the Collateral Agent; or

 

(23) transactions between or among the Borrower and the Restricted Subsidiaries and any Physician-Owned Practice.

 

Section 6.08          Business of the Borrower, the Restricted Subsidiaries and the Physician-Owned Practices. Notwithstanding any other provisions hereof, engage at any time in any business or business activity other than any business or business activity conducted by the Borrower, the Restricted Subsidiaries and the Physician-Owned Practices on the Closing Date (after giving effect to the Transactions) and any similar, corollary, related, ancillary, incidental, related to or complementary business or business activities or a reasonable extension, development or expansion thereof or ancillary thereto.

 

Section 6.09          Limitation on Payments; etc.

 

(1) Make any cash payment or other distribution in cash in respect of any Junior Financing, or any payment or other distribution (whether in cash, securities or other property), including any sinking fund or similar deposits, on account of the purchase, redemption, retirement, acquisition, cancellation or termination in respect of any Junior Financing; except in the case of this clause (1):

 

(a) payments in respect of Junior Financings in an amount not to exceed the Available Amount on the date the payments are made if (i) no Default or Event of Default is continuing immediately prior to making such payment or would result therefrom and (ii) solely in the case of any payment made in reliance on clause (2) of the definition of the Available Amount, after giving effect to such payment, the Total Net Leverage Ratio, on a Pro Forma Basis, is less than or equal to 2.00:1.00;

 

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(b) payments in respect of Junior Financings so long as (i) on a Pro Forma Basis, the Borrower’s Total Net Leverage Ratio is 1.00:1.00 or less and (ii) no Default or Event of Default is continuing immediately prior to making such payment or would result therefrom;

 

(c) additional payments in respect of (I) Junior Financings so long as such payments under this clause (I) will not exceed as of the date such payment is made the greater of (a) $4,500,000 and (b) 10.0% of Consolidated EBITDA for the most recently ended Test Period as of the date such payment is made plus (II) Junior Financings so long as such payments under this clause (II) will not exceed as of the date such payment is made the aggregate total of all other amounts available to be utilized for Restricted Payments pursuant to Section 6.06, which the Borrower may, from time to time, in the case of this clause (II), elect to re-allocate to the making of payments with respect to Junior Financings pursuant to this Section 6.09(1)(c)(II); provided that any such reallocated amount shall reduce the applicable basket under Section 6.06 from which availability was reallocated, on a dollar-for-dollar basis;

 

(d) (i) the conversion or exchange of any Junior Financing into or for Equity Interests of the Borrower and (ii) any payment that is intended to prevent any Junior Financing from being treated as an “applicable high yield discount obligation” within the meaning of Section 163(i)(1) of the Code;

 

(e) the incurrence of Permitted Refinancing Indebtedness in respect thereof;

 

(f) (i) payments of regularly scheduled principal and interest; (ii) mandatory offers to repay, repurchase or redeem (including in connection with the Net Cash Proceeds of Asset Sales); (iii) mandatory prepayments of principal, premium and interest; and (iv) payments of fees, expenses and indemnification obligations, in each case, with respect to such Junior Financing;

 

(g) payments or distributions in respect of all or any portion of such Junior Financing with the proceeds from the issuance, sale or exchange by the Borrower of Equity Interests made within eighteen (18) months prior thereto;

 

(h) payments in respect of Junior Financings that are made with Excluded Contributions; and

 

(i) payments of unsecured obligations pursuant to the Collaboration Agreement.

 

Section 6.10          Changes in Accounting and Fiscal Year. Make any significant change in accounting treatment or reporting practices, except as permitted or required by GAAP, or change the fiscal year of the Borrower or of any of its Restricted Subsidiaries, except to change the fiscal year of a Restricted Subsidiary to conform its fiscal year to that of the Borrower.

 

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Section 6.11          Amendments to Organizational Documents and Certain Junior Financing. Amend, restate, amend and restate, supplement or otherwise modify any of its Organizational Documents, other than any such amendments, modifications or changes which are not, and could not reasonably be expected to be, materially adverse to the interests of the Lenders in their capacities as such, without obtaining the prior written consent of the Administrative Agent; provided that, for the avoidance of doubt, it is understood and agreed that the Borrower and/or any Loan Party may amend or modify its Organizational Documents to effect a change to its respective organizational form and/or consummate any other transaction that is permitted under Section 6.05. The Borrower will not, and will not permit any Restricted Subsidiary to, approve, authorize or enter into any amendment of or other modification to the intercreditor or subordination provisions of any Junior Financing in any manner that is materially adverse to the interests of the Lenders.

 

Section 6.12          Financial Performance Covenants.

 

(1) Total Net Leverage Ratio. Except with the written consent of the Required Lenders, the Borrower will not permit the Total Net Leverage Ratio, as of any date set forth below to be greater than the maximum ratio set forth in the table below opposite such date under the column labeled “Maximum Total Net Leverage Ratio” (the “Maximum Total Net Leverage Ratio Financial Covenant”):

 

  Date Maximum Total Net Leverage Ratio
  September 30, 2021 – December 31, 2022 4.00:1.00
  March 31, 2023 and the last day of each Fiscal Quarter thereafter 3.75:1.00

 

(2) Fixed Charge Coverage Ratio. Except with the written consent of the Required Lenders, the Borrower will not permit the Fixed Charge Coverage Ratio, as of the last day of any Test Period, to be less than 1.25:1.00 (the “Minimum Fixed Charge Coverage Ratio Financial Covenant” and, together with the Maximum Total Net Leverage Ratio Financial Covenant, collectively, the “Financial Performance Covenants”).

 

The Financial Performance Covenants shall be (i) tested on a quarterly basis on the last day of each fiscal quarter, commencing with the first full fiscal quarter of the Borrower ending after the Closing Date and (ii) calculated on a consolidated basis for the Borrower, its Restricted Subsidiaries and the Physician-Owned Practices for each consecutive four (4) fiscal quarter period.

 

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Section 6.13          Burdensome Agreements. Enter into, or permit to exist, any Contractual Obligation that encumbers or restricts the ability of the Borrower or any Restricted Subsidiary to (i) make Restricted Payments to any Loan Party, (ii) pay any Indebtedness or other obligation owed to any Loan Party, (iii) make loans or advances to any Loan Party, (iv) create, incur, assume or suffer to exist Liens on the Collateral of such Person for the benefit of the Lenders with respect to the Facilities and the Obligations or under the Loan Documents, (v) transfer any of its property to any Loan Party or (vi) act as a Loan Party pursuant to the Loan Documents or any renewals, refinancings, exchanges, refundings or extension thereof, except (in respect of any of the matters referred to in clauses (i)-(vi) above) for (a) this Agreement and the other Loan Documents, (b) Contractual Obligations of the Borrower or any Restricted Subsidiary in effect on the Closing Date, including pursuant to this Agreement and the other Loan Documents and related Hedge Agreements, (c) applicable law or any applicable rule, regulation or order, (d) any agreement or other instrument of a Person acquired by or merged, amalgamated or consolidated with or into the Borrower or any Restricted Subsidiary or an Unrestricted Subsidiary that is designated a Restricted Subsidiary that was in existence at the time of such acquisition (or at the time it merges with or into any Borrower or any Restricted Subsidiary or assumed in connection with the acquisition of assets from such Person (but, in each case, not created in contemplation thereof)), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired or designated; provided that in connection with a merger, amalgamation or consolidation under this clause (d), if a Person other than the Borrower or such Restricted Subsidiary is the successor company with respect to such merger, amalgamation or consolidation, any agreement or instrument of such Person or any Subsidiary of such Person, shall be deemed acquired or assumed, as the case may be, by the Borrower or such Restricted Subsidiary, as the case may be, at the time of such merger, amalgamation or consolidation, (e) customary encumbrances or restrictions contained in contracts or agreements for the sale of assets applicable to such assets pending consummation of such sale, including customary restrictions with respect to a Restricted Subsidiary imposed pursuant to an agreement entered into for the sale or disposition of Capital Stock or assets of such Restricted Subsidiary, (f) restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business, (g) purchase money obligations for property acquired and Capital Lease Obligations entered into in the ordinary course of business, to the extent such obligations impose restrictions of the type described in clause (iv) or (v) in the first paragraph of this Section 6.13 on the property so acquired, (h) customary provisions contained in leases, sub-leases, licenses, sublicenses, contracts and other similar agreements entered into in the ordinary course of business to the extent such obligations impose restrictions of the type described in clause (iv) or (v) in the first paragraph of this Section 6.13 on the property subject to such lease, (i) any encumbrance or restriction in respect of or contained in other Indebtedness of the Borrower or any Restricted Subsidiary that is incurred subsequent to the Closing Date pursuant to Section 6.01, provided that (x) such encumbrances and restrictions in respect of or contained in any agreement or instrument will not materially affect the Borrower’s ability to make anticipated principal or interest payments under this Agreement (as determined by the Borrower in good faith) or (y) such encumbrances and restrictions contained in any agreement or instrument taken as a whole are not materially less favorable to the Lenders than the encumbrances and restrictions contained in this Agreement (as determined by the Borrower in good faith), (j) any encumbrance or restriction contained in secured Indebtedness otherwise permitted to be Incurred pursuant to Sections 6.01 and 6.02 to the extent limiting the right of the debtor to dispose of the assets securing such Indebtedness, (k) any encumbrance or restriction arising or agreed to in the ordinary course of business, not relating to any Indebtedness, and that do not, individually or in the aggregate, (x) detract from the value of the property or assets of the Borrower or any Restricted Subsidiary in any manner material to the Borrowers or any Restricted Subsidiary or (y) materially affect the Borrower’s ability to make future principal or interest payments under this Agreement, in each case, as determined by the Borrower in good faith, (l) customary provisions in joint venture agreements or arrangements and other similar agreements or arrangements relating solely to the applicable joint venture, (m) any licenses, sublicenses or cross-licenses constituting Permitted Liens, (n) customary restrictions and conditions contained in any agreement relating to the sale of any property permitted under Section 6.05 pending the consummation of such sale or which limitations are applicable only to the assets that are the subject of those agreements and (o) any encumbrance or restriction of the type referred to in clauses 6.13(i), (ii), (iii) and (iv) imposed by any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings of the contracts, instruments or obligations referred to in 6.13(a) through (n); provided that such encumbrances and restrictions contained in any such amendment, modification, restatement, renewal, increase, supplement, refunding, replacement or refinancing are, in the good faith judgment of the Borrower, not materially more restrictive, taken as a whole, than the encumbrances and restrictions prior to such amendment, modification, restatement, renewal, increase, supplement, refunding, replacement or refinancing.

 

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For purposes of determining compliance with this Section 6.13, the subordination of loans or advances made to the Borrowers or a Restricted Subsidiary to other Indebtedness incurred by the Borrower or any such Restricted Subsidiary shall not be deemed a restriction on the ability to make loans or advances.

 

Section 6.14          Management Services Agreements. Amend, restate, amend and restate, supplement or otherwise modify any Management Service Agreement, other than any such amendments, restatements, amendments and restatements, supplements or other modifications which would not reasonably be expected to be materially adverse to the interests of the Lenders in their capacities as such; provided that, for the avoidance of doubt, it is understood and agreed that such Management Services Agreements may be amended, restated, amended and restated, supplemented or otherwise modified to the extent required by applicable law or any applicable rule, regulation or order of any Governmental Authority.

 

Article VII

Events of Default

 

Section 7.01          Events of Default. In case of the occurrence of any of the following events (each, an “Event of Default”):

 

(1) any representation or warranty made by the Borrower or any other Loan Party herein or in any other Loan Document or any certificate or document required to be delivered pursuant hereto or thereto proves to have been false or misleading in any material respect when so made or deemed made; provided that, to the extent such representation or warranty is capable of being cured, such default shall continue unremedied for a period of thirty (30) days’ notice thereof from the Administrative Agent to the Borrower;

 

(2) default is made in the payment of any principal of any Loan when and as the same becomes due and payable, whether at the due date thereof, at a date fixed for prepayment thereof, by acceleration thereof or otherwise;

 

(3) default is made in the payment of any (i) interest on any Loan or the reimbursement of any L/C Disbursement or (ii) Fee or any other amount due under any Loan Document (other than an amount referred to in clause (2) of this Section 7.01), in each case when and as the same becomes due and payable, and such default continues unremedied for a period of three (3) Business Days;

 

(4) default is made in the due observance or performance by the Borrower or any Restricted Subsidiary of any covenant, condition or agreement contained in Section 5.01(1) (solely with respect to the Borrower), 5.05(1), 5.08 or in Article VI (in each case solely to the extent applicable to such Person); provided that an Event of Default under Section 6.12 is subject to cure pursuant to Section 7.02;

 

(5) default is made in the due observance or performance by the Borrower or any Restricted Subsidiary of any covenant, condition or agreement contained in any Loan Document (other than those specified in clauses (2), (3) and (4) of this Section 7.01), in each case solely to the extent applicable to such Person, and such default continues unremedied for a period of thirty (30) days after notice thereof from the Administrative Agent to the Borrower;

 

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(6) (a) any event or condition occurs that (i) results in any Material Indebtedness becoming due prior to its scheduled maturity or (ii) enables or permits (with all applicable grace periods having expired) the holder or holders of any Material Indebtedness or any trustee or agent on its or their behalf to cause any Material Indebtedness to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity or (b) the Borrower or any Restricted Subsidiary fails to pay the principal of any Material Indebtedness at the stated final maturity thereof; provided that this clause (6) will not apply to (A) secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness if such sale or transfer is permitted hereunder and under the documents providing for such Indebtedness, (B) any Material Indebtedness if (x) the sole remedy of the holder thereof in the event of the non-payment of such Material Indebtedness or the non-payment or non-performance of obligations related thereto or (y) the sole option is to elect, in each case, to convert such Material Indebtedness into Qualified Equity Interests (or cash in lieu of fractional shares) and (C) in the case of Material Indebtedness which the holder thereof may elect to convert into Qualified Equity Interests, such Material Indebtedness from and after the date, if any, on which such conversion has been effected; provided, further, that such event or condition is unremedied and is not waived or cured by the holders of such Indebtedness prior to any acceleration of the Loans and termination of the Commitments pursuant to the final paragraph of this Section 7.01;

 

(7) a Change in Control occurs;

 

(8) an involuntary proceeding is commenced or an involuntary petition is filed in a court of competent jurisdiction seeking:

 

(a) relief in respect of the Borrower or any of the Restricted Subsidiaries, or of a substantial part of the property or assets of the Borrower or any Restricted Subsidiary, under Title 11 of the United States Code, as now constituted or hereafter amended, or any other federal, state or foreign bankruptcy, insolvency, receivership or similar law;

 

(b) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any of the Restricted Subsidiaries or for a substantial part of the property or assets of the Borrower or any Restricted Subsidiary; or

 

(c) the winding up or liquidation of the Borrower or any Restricted Subsidiary (except, in the case of any Restricted Subsidiary, in a transaction permitted by Section 6.05) and such proceeding or petition continues undismissed for sixty (60) days or an order or decree approving or ordering any of the foregoing is entered;

 

(9) the Borrower or any Restricted Subsidiary:

 

(a) voluntarily commences any proceeding or files any petition seeking relief under Title 11 of the United States Code, as now constituted or hereafter amended, or any other federal, state or foreign bankruptcy, insolvency, receivership or similar law;

 

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(b) consents to the institution of, or fails to contest in a timely and appropriate manner, any proceeding or the filing of any petition described in clause (8) of this Section 7.01;

 

(c) applies for or consents to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any of the Restricted Subsidiary or for a substantial part of the property or assets of the Borrower or any Restricted Subsidiary;

 

(d) files an answer admitting the material allegations of a petition filed against it in any such proceeding;

 

(e) makes a general assignment for the benefit of creditors; or

 

(f) becomes unable or admits in writing its inability or fails generally to pay its debts as they become due;

 

(10) the Borrower or any Restricted Subsidiary fails to pay one or more final judgments aggregating in excess of $12,500,000 at the time of any determination (to the extent not covered by insurance or by an indemnification agreement as to which the indemnifying party has not denied liability), which judgments are not discharged or effectively waived or stayed for a period of forty-five (45) consecutive days, or any action is legally taken by a judgment creditor to levy upon assets or properties of the Borrower or any other Subsidiary Loan Party to enforce any such judgment;

 

(11) (a) a trustee is appointed by a United States district court to administer any Plan or (b) an ERISA Event or ERISA Events occurs with respect to any Plan or Multiemployer Plan, and, in each case, with respect to clauses (a) and (b) above, such event or condition, together with all other such events or conditions, if any, is reasonably expected to have a Material Adverse Effect; or

 

(12) (a) any material provision of any Loan Document ceases to be, or is asserted in writing by the Borrower or any Restricted Subsidiary not to be, for any reason, a legal, valid and binding obligation of any party thereto, (b) any security interest purported to be created by any Security Document and to extend to assets that are not immaterial to the Borrower and the Restricted Subsidiaries on a consolidated basis ceases to be, or is asserted in writing by the Borrower or any other Loan Party not to be, a valid and perfected security interest in the securities, assets or properties covered thereby, except to the extent that any such loss of validity, perfection or priority results from the limitations of foreign laws, rules and regulations as they apply to pledges of Equity Interests in Foreign Subsidiaries or the application thereof, or from the failure of the Collateral Agent to maintain possession of certificates actually delivered to it representing securities pledged under a Security Document or to file Uniform Commercial Code continuation statements and except to the extent that such loss is covered by a lender’s title insurance policy and the Collateral Agent is reasonably satisfied with the credit of such insurer or (c) the Guarantees pursuant to the Security Documents by any Loan Party of any of the Obligations cease to be in full force and effect (other than in accordance with the terms thereof) or are asserted in writing by the Borrower or any other Subsidiary Loan Party not to be in effect or not to be legal, valid and binding obligations, except in the cases of clauses (a) and (b), in connection with an Asset Sale permitted by this Agreement with respect to the assets sold; then, (i) upon the occurrence of any such Event of Default (other than an Event of Default with respect to the Borrower described in clause (8) or (9) of this Section 7.01), and at any time thereafter during the continuance of such Event of Default, the Administrative Agent, at the request of the Required Lenders, will, by prior written notice to the Borrower, take any or all of the following actions, at the same or different times: (A) terminate forthwith the Commitments, (B) declare the Loans then outstanding to be forthwith due and payable in whole or in part, whereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and any unpaid accrued Fees and all other liabilities of the Borrower accrued hereunder and under any other Loan Document, will become forthwith due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Borrower, anything contained herein or in any other Loan Document to the contrary notwithstanding; (C) require that the Borrower cash collateralize any outstanding Letters of Credit pursuant to Section 2.05(11) and (D) exercise all rights and remedies granted to it under any Loan Document and all of its rights under any other applicable law or in equity provided that in the case of an Event of Default under Section 7.01(4) in respect of a failure to observe or perform the covenant under Section 6.12, the actions set forth above may not be taken until the ability to exercise the Cure Right under Section 7.02 has expired, and (ii) in any event with respect to the Borrower described in clause (8) or (9) of this Section 7.01, the principal of the Loans then outstanding, together with accrued interest thereon and any unpaid accrued Fees and all other liabilities of the Borrower accrued hereunder and under any other Loan Document, will automatically become due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Borrower, anything contained herein or in any other Loan Document to the contrary notwithstanding.

 

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Section 7.02          Right to Cure.

 

(1) Notwithstanding anything to the contrary contained in Section 7.01, for purposes of determining whether any Default or Event of Default resulting from the failure to perform or observe any covenant set forth in Section 6.12 has occurred, as of any date, and at any time after the last day of the applicable fiscal quarter and on or prior to the day that is the tenth (10th) Business Day after the date on which financial statements are required to be delivered pursuant to Section 5.04(1) or (2), as applicable, with respect to the applicable fiscal quarter hereunder (the “Cure Expiration Date”), the Permitted Holders (or any other Person) may, directly or indirectly, purchase for cash pursuant to any sale of, or make in cash a contribution to, the equity (which equity shall be (a) common equity or (b) other Qualified Equity Interests or other equity or instruments on terms and conditions reasonably acceptable to the Administrative Agent) (any such equity contribution, a “Specified Equity Contribution”) of the Borrower, and the Borrower may apply the amount of the net cash proceeds thereof to increase Consolidated EBITDA of the Borrower and its Restricted Subsidiaries solely for purposes of determining compliance with the Financial Performance Covenants for the applicable fiscal quarter and any applicable subsequent periods that include such fiscal quarter (the “Cure Right”); provided that such net cash proceeds are actually received by the Borrower as cash, common equity or any other Qualified Equity Interests or other equity or instruments on terms and conditions reasonably acceptable to the Administrative Agent (including through capital contribution of such net cash proceeds to the Borrower) no later than the Cure Expiration Date.

 

(2) The right to make a Specified Equity Contribution is subject to the following conditions: (i) no more than two (2) Specified Equity Contributions may be made in any period of four (4) consecutive fiscal quarters, (ii) no more than five (5) Specified Equity Contributions will be made in the aggregate during the term of the Facilities, (iii) the net cash proceeds of any Specified Equity Contribution shall be no more than the amount required to cause the Borrower to be in Pro Forma Compliance with Section 6.12 for any applicable period, (iv) there shall be no pro forma or other reduction in Indebtedness (via cash netting or otherwise) with the proceeds of any Specified Equity Contribution for determining compliance with Section 6.12 for any four (4) fiscal quarter period that includes the fiscal quarter in which such Specified Equity Contribution is made and (v) all Specified Equity Contributions shall be disregarded for all purposes other than determining compliance with the Financial Performance Covenants, including, without limitation, for purposes of determining pricing, financial ratio-based conditions or availability of any baskets with respect to covenants contained in the Loan Documents.

 

(3) Notwithstanding anything to the contrary contained in Section 7.01, (A) upon receipt of a Specified Equity Contribution by the Borrower or any other Loan Party, the covenant set forth in Section 6.12 shall be deemed satisfied and complied with as of the end of the relevant fiscal quarter with the same effect as though there had been no failure to comply with Section 6.12 and any Default or Event of Default related to any failure to comply with Section 6.12 shall be deemed not to have occurred for any purpose under the Loan Documents and (B) unless the Administrative Agent has received a written notice from the Borrower of its intent not to make a Specified Equity Contribution and exercise its rights under this Section 7.02 prior to the Cure Expiration Date, neither the Administrative Agent nor any Lender shall exercise any rights or remedies under Section 7.01 (or under any other Loan Document) available during the continuance of any Default or Event of Default on the basis of any actual or purported failure to comply with Section 6.12 until such failure is not cured with the proceeds of a Specified Equity Contribution on or prior to the Cure Expiration Date; provided that the Borrower shall not be permitted to borrow Revolving Loans or Swing Line Loans or make any request for the issuance of a Letter of Credit (or the amendment, renewal or extension of an outstanding Letter of Credit) until and unless (x) the Specified Equity Contribution has been received by the Borrower or (y) all such Defaults and Events of Default (or the restrictions contained in this proviso) shall have been waived or cured in accordance with the terms of this Agreement.

 

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Article VIII

The Agents

 

Section 8.01          Appointment.

 

(1) Each Lender (in its capacities as a Lender and on behalf of itself and its Affiliates as Qualified Counterparties and Cash Management Banks) and each Issuing Bank hereby irrevocably designates and appoints the Administrative Agent as agent of such Lender and such Issuing Banks under this Agreement and the other Loan Documents, as applicable, including as the Collateral Agent for such Lender and the other applicable Secured Parties under the applicable Security Documents, and each such Lender and Issuing Bank irrevocably authorizes the Administrative Agent, including as the Collateral Agent, in such capacities, to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to the Administrative Agent, including as the Collateral Agent, by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto. Each reference to the Administrative Agent in this Article VIII shall include the Collateral Agent and the Collateral Agent shall be entitled to all rights, privileges and immunities of the Administrative Agent. In addition, to the extent required under the laws of any jurisdiction other than the United States, each of the Lenders and the Issuing Banks hereby grants to the Administrative Agent any required powers of attorney to execute any Security Document governed by the laws of such jurisdiction on such Lender’s or Issuing Bank’s behalf. Notwithstanding any provision to the contrary elsewhere in this Agreement, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Administrative Agent.

 

(2) To the extent required by any applicable law, the Administrative Agent may withhold from any payment to any Lender an amount equivalent to any applicable withholding Tax. If the Internal Revenue Service or any other Governmental Authority asserts a claim that the Administrative Agent did not properly withhold Tax from amounts paid to or for the account of any Lender because the appropriate form was not delivered or was not properly executed or because such Lender failed to notify the Administrative Agent of a change in circumstance which rendered the exemption from, or reduction of, withholding Tax ineffective or for any other reason, such Lender shall indemnify the Administrative Agent fully for all amounts paid, directly or indirectly, by the Administrative Agent as Tax or otherwise, including any penalties or interest and together with all expenses (including legal expenses, allocated internal costs and out-of-pocket expenses) incurred. Each Lender hereby authorizes the Administrative Agent to set off and apply any and all amounts at any time owing to such Lender under this Agreement or any other Loan Document against any amount due the Administrative Agent under this Section 8.01(2). The agreements in this Section 8.01(2) shall survive the resignation and/or replacement of the Administrative Agent, any assignment of rights by, or the replacement of, a Lender, the termination of the Commitments and the repayment, satisfaction or discharge of all other Obligations. For the avoidance of doubt, no Borrower shall have liability for the actions of the Administrative Agent pursuant to the immediately preceding sentence.

 

(3) In furtherance of the foregoing, each Lender (in its capacities as a Lender and on behalf of itself and its Affiliates as Qualified Counterparties and Cash Management Banks) and each Issuing Bank hereby appoints and authorizes the Administrative Agent to act as the agent of such Lender for purposes of acquiring, holding and enforcing any and all Liens on the Collateral granted by any of the Loan Parties to secure any of the Obligations, together with such powers and discretion as are reasonably incidental thereto. In connection therewith, the Administrative Agent (and any Subagents appointed by the Administrative Agent pursuant to Section 8.02 for purposes of holding or enforcing any Lien on the Collateral (or any portion thereof) granted under the Security Documents, or for exercising any rights or remedies thereunder at the direction of the Administrative Agent) shall be entitled to the benefits of this Article VIII (including Section 8.07) as though the Administrative Agent (and any such Subagents) were an “Agent” under the Loan Documents, as if set forth in full herein with respect thereto.

 

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(4) Each Lender (in its capacities as a Lender and on behalf of itself and its Affiliates as Qualified Counterparties and Cash Management Banks) and each Issuing Bank irrevocably authorizes the Administrative Agent, at its option and in its discretion:

 

(a) to release any Lien on any property granted to or held by the Administrative Agent under any Loan Document:

 

(i) upon the Termination Date or (in respect of any Lien on any property securing solely the Obligations in respect of the Revolving Facility) the Revolving Facility Commitment Termination Date;

 

(ii) that is sold, or disposed of, or to be sold, or disposed of, as part of or in connection with any sale or disposition not prohibited hereunder or under any other Loan Document (to a Person that is not a Loan Party); or

 

(iii) if approved, authorized or ratified in writing in accordance with Section 9.08 hereof;

 

(b) to release any Loan Party from its obligations under the Loan Documents (including the Liens on the assets of such Loan Party and the Equity Interests of such Loan Party) if such Person ceases to be a Restricted Subsidiary (or becomes an Excluded Subsidiary) as a result of a transaction permitted hereunder or upon the Termination Date or (in respect of any Lien on any assets of such Loan Party and the Equity Interests of such Loan Party securing solely the Obligations in respect of the Revolving Facility) the Revolving Facility Commitment Termination Date occurs;

 

(c) to subordinate any Lien on any property granted to or held by the Administrative Agent under any Loan Document to the holder of any Lien on such property that is permitted by Section 6.02(3) (and to the extent required by the terms thereof); and

 

(d) to enter into any Acceptable Intercreditor Agreement and any other intercreditor agreement expressly contemplated by this Agreement.

 

Upon request by the Administrative Agent at any time, the Required Lenders will confirm in writing the Administrative Agent’s authority to release its interest in particular types or items of property, or to release any Loan Party from its obligations under the Loan Documents.

 

The parties hereto acknowledge and agree that the Administrative Agent may rely conclusively as to any of the matters described in this Section 8.01 and Section 9.18 (including as to its authority hereunder and thereunder) on a certificate or similar instrument provided to it by any Loan Party without further inquiry or investigation, which certificate shall be delivered to the Administrative Agent by the Loan Parties upon request.

 

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(5) In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to any Loan Party, (a) the Administrative Agent (irrespective of whether the principal of any Obligation shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on the Borrower) shall be entitled and empowered, by intervention in such proceeding or otherwise (i) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of any or all of the Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders, the Issuing Banks and the Agents and any Subagents allowed in such judicial proceeding and (ii) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same, and (b) any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender and Issuing Bank to make such payments to the Administrative Agent and, if the Administrative Agent shall consent to the making of such payments directly to the Lenders and the Issuing Banks, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent under the Loan Documents. Nothing contained herein shall be deemed to authorize the Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender or Issuing Bank any plan of reorganization, arrangement, adjustment or composition (each, a “Plan of Reorganization”) affecting the Obligations or the rights of any Lender or any Issuing Bank or to authorize the Administrative Agent to vote in respect of the claim of any Lender or Issuing Bank in any such proceeding.

 

(6) The Lenders and each other holder of an Obligation under a Loan Document shall act collectively through the Administrative Agent and, without limiting the delegation of authority to the Administrative Agent set forth herein, the Required Lenders shall direct the Administrative Agent with respect to the exercise of rights and remedies hereunder and under other Loan Documents (including with respect to alleging the existence or occurrence of, and exercising rights and remedies as a result of, any Default or Event of Default in each case that could be waived with the consent of the Required Lenders), and such rights and remedies shall not be exercised other than through the Administrative Agent; provided that the foregoing shall not preclude any Lender from exercising any right of set-off in accordance with the provisions of Section 9.06 or from exercising rights and remedies (other than the enforcement of Collateral) with respect to any payment default of any Loans after the occurrence of the applicable Maturity Date with respect to any Loans made by it.

 

(7) By accepting the benefits of the Security Documents, each Secured Party (other than the Lenders and the Issuing Banks) shall be deemed to have appointed the Collateral Agent as its agent under the Security Documents and to have agreed to the provisions of this Section 8.01.

 

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Section 8.02          Delegation of Duties. The Administrative Agent may execute any of its duties under this Agreement and the other Loan Documents (including for purposes of holding or enforcing any Lien on the Collateral (or any portion thereof)) by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel and other consultants or experts concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of the agents or attorneys-in-fact selected by it with reasonable care. The Administrative Agent may also from time to time, when the Administrative Agent deems it to be necessary or desirable, appoint one or more trustees, co-trustees, collateral co-agents, collateral subagents or attorneys-in-fact, in each case as reasonably acceptable to the Borrower (each, a “Subagent”) with respect to all or any part of the Collateral; provided that no such Subagent shall be authorized to take any action with respect to any Collateral unless and except to the extent expressly authorized in writing by the Administrative Agent. Should any instrument in writing from the Borrower or any other Loan Party be required by any Subagent so appointed by the Administrative Agent to more fully or certainly vest in and confirm to such Subagent such rights, powers, privileges and duties, the Borrower shall, or shall cause such Loan Party to, execute, acknowledge and deliver any and all such instruments promptly upon request by the Administrative Agent. If any Subagent, or successor thereto, shall die, become incapable of acting, resign or be removed, all rights, powers, privileges and duties of such Subagent, to the extent permitted by law, shall automatically vest in and be exercised by the Administrative Agent until the appointment of a new Subagent. The Administrative Agent shall not be responsible for the negligence or misconduct of any agent, attorney-in-fact or Subagent that it selects in accordance with the foregoing provisions of this Section 8.02 in the absence of the Administrative Agent’s gross negligence, bad faith or willful misconduct.

 

Section 8.03          Exculpatory Provisions. None of the Administrative Agent, its Affiliates or any of their respective officers, directors, employees, agents or attorneys-in-fact shall be (1) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement or any other Loan Document (except to the extent that any of the foregoing are found by a final and non-appealable decision of a court of competent jurisdiction to have resulted from its or such Person’s own gross negligence, bad faith or willful misconduct) or (2) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by any Loan Party or any officer thereof contained in this Agreement or any other Loan Document or in any certificate, report, statement or other document referred to or provided for in, or received by the Agents under or in connection with, this Agreement or any other Loan Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document or for any failure of any Loan Party party thereto to perform its obligations hereunder or thereunder. The Agents shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of any Loan Party. The Administrative Agent shall not have any duties or obligations except those expressly set forth herein and in the other Loan Documents. Without limiting the generality of the foregoing, (1) the Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether a Default or Event of Default has occurred and is continuing, and (2) the Administrative Agent shall not, except as expressly set forth herein and in the other Loan Documents, have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Affiliates that is communicated to or obtained by the Administrative Agent or any of its Affiliates in any capacity. The Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into:

 

(1) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document;

 

(2) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith;

 

(3) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default or Event of Default;

 

(4) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document, or the creation, perfection or priority of any Lien purported to be created by the Security Documents;

 

(5) the value or the sufficiency of any Collateral; or

 

(6) the satisfaction of any condition set forth in Article IV or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent.

 

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Section 8.04          Reliance by Administrative Agent. The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message, Internet or intranet website posting or other distribution) or conversation believed in good faith by it to be genuine and to have been signed, sent or otherwise authenticated by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed in good faith by it to have been made by the proper Person, and shall not incur any liability for relying thereon. In determining compliance with any condition hereunder to any Borrowing or issuance of Letter of Credit that by its terms must be fulfilled to the satisfaction of a Lender, the Issuing Banks or the Swing Line Lender, the Administrative Agent may presume that such condition is satisfactory to such Lender, the Issuing Banks or the Swing Line Lender unless the Administrative Agent shall have received notice to the contrary from such Lender, the Issuing Banks or the Swing Line Lender prior to such Borrowing. The Administrative Agent may consult with legal counsel (including counsel to the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts. The Administrative Agent may deem and treat the payee of any Note as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with the Administrative Agent. The Administrative Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Required Lenders (or, if so specified by this Agreement, all or other Lenders) as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense that may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Loan Documents in accordance with a request of the Required Lenders (or, if so specified by this Agreement, all or other Lenders), and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Loans.

 

Section 8.05          Notice of Default. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default unless the Administrative Agent has received written notice from a Lender or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a “notice of default.” In the event that the Administrative Agent receives such a notice, the Administrative Agent shall give notice thereof to the Lenders. The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders (or, if so specified by this Agreement, all or other Lenders); provided that unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders.

 

Section 8.06          Non-Reliance on Agents and Other Lenders. Each Lender expressly acknowledges that neither the Agents nor the Lead Arrangers, nor any of their respective officers, directors, employees, agents, attorneys-in-fact or Affiliates have made any representations or warranties to it and that no act by the Administrative Agent hereafter taken, including any review of the affairs of a Loan Party or any Affiliate of a Loan Party, shall be deemed to constitute any representation or warranty by the Administrative Agent to any Lender. Each Lender represents to the Agents and the Lead Arrangers, that it has, independently and without reliance upon the Administrative Agent or the Lead Arrangers, or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of, and investigation into, the business, operations, property, financial and other condition and creditworthiness of the Loan Parties and their Affiliates and made its own decision to make its Credit Extensions hereunder and enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon the Administrative Agent, the Lead Arrangers, or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Loan Parties and their Affiliates. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent hereunder, the Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of any Loan Party or any Affiliate of a Loan Party that may come into the possession of the Administrative Agent or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates.

 

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Section 8.07          Indemnification. The Lenders agree to indemnify each Agent (to the extent not reimbursed by the Borrower and without limiting the obligation of the Borrower to do so), in the amount of its pro rata share (determined at the time such indemnity is sought), from and against any and all liabilities, losses, claims, damages, reasonable, documented and invoiced out-of-pocket fees and expenses of any kind whatsoever that may at any time (whether before or after the payment of the Loans) be imposed on, incurred by or asserted against the Administrative Agent in any way relating to or arising out of the Commitments, this Agreement, any of the other Loan Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by the Administrative Agent under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of any portion of such liabilities, losses, claims, damages, reasonable, documented and invoiced out-of-pocket fees and expenses that are found by a final and non-appealable decision of a court of competent jurisdiction to have resulted from the Administrative Agent’s gross negligence, bad faith or willful misconduct. The failure of any Lender to reimburse the Administrative Agent promptly upon demand for its ratable share of any amount required to be paid by the Lenders to the Administrative Agent as provided herein shall not relieve any other Lender of its obligation hereunder to reimburse the Administrative Agent for its ratable share of such amount, but no Lender shall be responsible for the failure of any other Lender to reimburse the Administrative Agent for such other Lender’s ratable share of such amount. The agreements in this Section 8.07 shall survive the payment of the Loans and all other amounts payable hereunder.

 

Section 8.08          Agent in Its Individual Capacity. Each Agent and its Affiliates may make loans to, accept deposits from, and generally engage in any kind of business with any Loan Party as though the Administrative Agent were not the Administrative Agent. With respect to its Loans made or renewed by it and with respect to any Letter of Credit issued, or Letter of Credit participated in by it, each Agent shall have the same rights and powers under this Agreement and the other Loan Documents as any Lender and may exercise the same as though it were not the Administrative Agent, and the terms “Lender” and “Lenders” shall include each Agent in its individual capacity.

 

Section 8.09          Successor Agent. The Administrative Agent may resign as Administrative Agent upon thirty (30) days’ notice to the Lenders and the Borrower. Any such resignation by the Administrative Agent hereunder shall also constitute its resignation as Swing Line Lender, in which case the resigning Administrative Agent shall not be required to fund any further Swing Line Loans hereunder upon the effectiveness of such resignation as Administrative Agent as provided below. If the Administrative Agent is subject to a Lender-Related Distress Event, either the Required Lenders or the Borrower may upon ten (10) days’ prior notice remove the Administrative Agent. If the Administrative Agent resigns as the Administrative Agent under this Agreement and the other Loan Documents or is delivered a removal notice, then the Required Lenders shall appoint from among the Lenders a successor agent for the Lenders, which successor agent shall (unless a Specified Event of Default shall have occurred and be continuing) be subject to approval by the Borrower (which approval shall not be unreasonably withheld or delayed), whereupon such successor agent shall succeed to the rights, powers and duties of the Administrative Agent, and the reference to the resigning Administrative Agent means such successor agent effective upon such appointment and approval, and the former Administrative Agent’s rights, powers and duties as Agent shall be terminated, without any other or further act or deed on the part of such former Administrative Agent or any of the parties to this Agreement or any holders of the Loans or Commitments. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within thirty (30) days after the retiring Administrative Agent gives notice of its resignation or the delivery of such removal notice, then the retiring Administrative Agent (or in the case of a removal, the Borrower) may, on behalf of the Lenders, appoint a successor Administrative Agent which shall be a bank with an office in New York, New York, or an Affiliate of any such bank. If no successor agent has accepted appointment as Administrative Agent by the date that is thirty (30) days following a retiring Administrative Agent’s notice of resignation or the delivery of such removal notice, the retiring Administrative Agent’s resignation will nevertheless thereupon become effective, and the Required Lenders will thereafter perform all the duties of such Administrative Agent hereunder and/or under any other Loan Document until such time, if any, as the Required Lenders appoint a successor Administrative Agent (except that in the case of any collateral security held by the Administrative Agent in its capacity as Collateral Agent for the Secured Parties for purposes of maintaining the perfection of the Lien on the Collateral securing the Obligations, the retiring Administrative Agent shall continue to hold such collateral security until such time as a successor Administrative Agent is appointed), which shall (unless a Specified Event of Default shall have occurred and be continuing) be subject to approval by the Borrower (which approval shall not be unreasonably withheld or delayed). After any retiring Administrative Agent’s resignation as Administrative Agent, the provisions of this Section 8.09 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement and the other Loan Documents.

 

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Section 8.10          Additional Titles. The Lead Arrangers, Senior Managing Agents, Co-Managers and Transaction Participant will not have any duties, responsibilities or liabilities hereunder in their respective capacities as such.

 

Section 8.11          Certain ERISA Matters.

 

(1) Each Lender (x) represents and warrants, as of the date such Person became a Lender party hereto, to, and (y) covenants, from the date such Person became a Lender party hereto to the date such Person ceases being a Lender party hereto, for the benefit of, the Administrative Agent and not, for the avoidance of doubt, to or for the benefit of the Borrower or any other Loan Party, that at least one of the following is and will be true:

 

(a) such Lender is not using “plan assets” (within the meaning of Section 3(42) of ERISA or otherwise) of one or more Benefit Plans with respect to such Lender’s entrance into, participation in, administration of and performance of the Loans, the letters of credit, the Commitments or this Agreement,

 

(b) the transaction exemption set forth in one or more PTEs, such as PTE 84-14 (a class exemption for certain transactions determined by independent qualified professional asset managers), PTE 95-60 (a class exemption for certain transactions involving insurance company general accounts), PTE 90-1 (a class exemption for certain transactions involving insurance company pooled separate accounts), PTE 91-38 (a class exemption for certain transactions involving bank collective investment funds) or PTE 96-23 (a class exemption for certain transactions determined by in-house asset managers), is applicable with respect to such Lender’s entrance into, participation in, administration of and performance of the Loans, the letters of credit, the Commitments and this Agreement,

 

(c) (i) such Lender is an investment fund managed by a “Qualified Professional Asset Manager” (within the meaning of Part VI of PTE 84-14), (ii) such Qualified Professional Asset Manager made the investment decision on behalf of such Lender to enter into, participate in, administer and perform the Loans, the letters of credit, the Commitments and this Agreement, (iii) the entrance into, participation in, administration of and performance of the Loans, the letters of credit, the Commitments and this Agreement satisfies the requirements of sub-sections (b) through (g) of Part I of PTE 84-14 and (iv) to the best knowledge of such Lender, the requirements of subsection (a) of Part I of PTE 84-14 are satisfied with respect to such Lender’s entrance into, participation in, administration of and performance of the Loans, the letters of credit, the Commitments and this Agreement, or

 

(d) such other representation, warranty and covenant as may be agreed in writing between the Administrative Agent, in its sole discretion, and such Lender.

 

(2) In addition, unless either (1) sub-clause (a) in the immediately preceding clause (1) is true with respect to a Lender or (2) a Lender has provided another representation, warranty and covenant in accordance with sub-clause (d) in the immediately preceding clause (1), such Lender further (x) represents and warrants, as of the date such Person became a Lender party hereto, to, and (y) covenants, from the date such Person became a Lender party hereto to the date such Person ceases being a Lender party hereto, for the benefit of, the Administrative Agent and not, for the avoidance of doubt, to or for the benefit of the Borrower or any other Loan Party, that the Administrative Agent is not a fiduciary with respect to the assets of such Lender involved in such Lender’s entrance into, participation in, administration of and performance of the Loans, the letters of credit, the Commitments and this Agreement (including in connection with the reservation or exercise of any rights by the Administrative Agent under this Agreement, any Loan Document or any documents related hereto or thereto).

 

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Section 8.12          Flood Certificate. Royal Bank of Canada has adopted internal policies and procedures that address requirements placed on federally regulated lenders under the Flood Insurance Laws. Royal Bank of Canada, as Administrative Agent and Collateral Agent under this Agreement, will post on the Platform (or otherwise distribute to each Lender) documents that it receives in connection with the Flood Laws. However, Royal Bank of Canada hereby notifies each Lender and Participant that, pursuant to the Flood Laws, each federally regulated lender (whether acting as a Lender or a Participant) is responsible for assuring its own compliance with the flood insurance requirements.

 

Section 8.13          Certain Payments.

 

(1) If the Administrative Agent notifies a Lender, Issuing Bank or Secured Party, or any Person who has received funds on behalf of a Lender, Issuing Bank or Secured Party (any such Lender, Issuing Bank, Secured Party or other recipient, a “Payment Recipient”) that the Administrative Agent has determined in its reasonable discretion that any funds received by such Payment Recipient from the Administrative Agent or any of its Affiliates were erroneously transmitted to, or otherwise erroneously or mistakenly received by, such Payment Recipient (whether or not known to such Payment Recipient) (any such funds, whether received as a payment, prepayment or repayment of principal, interest, fees, distribution or otherwise, individually and collectively, an “Erroneous Payment”) and demands the return of such Erroneous Payment (or a portion thereof), such Erroneous Payment shall at all times remain the property of the Administrative Agent and shall be segregated by the Payment Recipient and held in trust for the benefit of the Administrative Agent, and such Payment Recipient shall promptly, but in no event later than one (1) Business Day thereafter, return to the Administrative Agent, in same day funds (in the currency so received), the amount of any such Erroneous Payment (or portion thereof) as to which such a demand was made, together with interest thereon in respect of each day from and including the date such Erroneous Payment (or portion thereof) was received by such Payment Recipient to the date such amount is repaid to the Administrative Agent at the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with prevailing banking industry rules on interbank compensation from time to time in effect. To the extent permitted by applicable law, no Payment Recipient shall assert any right or claim to an Erroneous Payment, and hereby waives, and is deemed to waive, any claim, counterclaim, defense or right of set-off or recoupment with respect to any demand, claim or counterclaim by the Administrative Agent for the return of any Erroneous Payment received, including without limitation waiver of any defense based on “discharge for value” or any similar doctrine. A notice of the Administrative Agent to any Payment Recipient under this clause (1) shall be conclusive, absent manifest error.

 

(2) Without limiting immediately preceding clause (1), each Payment Recipient hereby further agrees that if it receives an Erroneous Payment from the Administrative Agent (or any of its Affiliates) (x) that is in a different amount than, or on a different date from, that specified in a notice of payment sent by the Administrative Agent (or any of its Affiliates) (the “Payment Notice”) with respect to such Erroneous Payment, or (y) that was not preceded or accompanied by a Payment Notice with respect to such Erroneous Payment, then, said Payment Recipient shall be on notice, in each case, that an error has been made with respect to such Erroneous Payment. Each Payment Recipient agrees that, in each such case, or if it otherwise becomes aware an Erroneous Payment (or portion thereof) may have been sent in error, such Payment Recipient shall promptly notify the Administrative Agent of such occurrence and, upon demand from the Administrative Agent, it shall promptly, but in no event later than one (1) Business Day thereafter, return to the Administrative Agent the amount of any such Erroneous Payment (or portion thereof) as to which such a demand was made, in same day funds (in the currency so received), together with interest thereon in respect of each day from and including the date such Payment (or portion thereof) was received by such Payment Recipient to the date such amount is repaid to the Administrative Agent at the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with prevailing banking industry rules on interbank compensation from time to time in effect.

 

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(3) Each Payment Recipient hereby authorizes the Administrative Agent to set off, net and apply any and all amounts at any time owing to such Payment Recipient under any Loan Document, or otherwise payable or distributable by the Administrative Agent to such Payment Recipient from any source, against any amount due to the Administrative Agent under any of the immediately preceding clauses (1) or (2) or under the indemnification provisions of this Agreement.

 

(4) In the event that an Erroneous Payment (or portion thereof) is not recovered by the Administrative Agent for any reason, after demand therefor by the Administrative Agent in accordance with immediately preceding clauses (1) or (2), from any Payment Receipient who has received such Erroneous Payment (or portion thereof) (such unrecovered amount, an “Erroneous Payment Return Deficiency”),  the Borrower and each other Loan Party hereby agrees that (x) the Administrative Agent shall be subrogated to all the rights of such Payment Recipient with respect to such amount (including, without limitation, the right to sell and assign the Loans (or any portion thereof), which were subject to the Erroneous Payment Return Deficiency) and (y) an Erroneous Payment shall not pay, prepay, repay, discharge or otherwise satisfy any Obligations owed by the Borrower or any other Loan Party, except, in each case, to the extent such Erroneous Payment is, and solely with respect to the amount of such Erroneous Payment that is, comprised of funds received by the Administrative Agent from the Borrower or any other Loan Party or from the proceeds of Collateral. For the avoidance of doubt, no assignment of an Erroneous Payment Deficiency will reduce the Commitments of any Lender or Issuing Bank and such Commitments shall remain available in accordance with the terms of this Agreement. In addition, each party hereto agrees that, except to the extent that the Administrative Agent has sold a Loan (or portion thereof) acquired pursuant to the assignment of an Erroneous Payment Deficiency, and irrespective of whether the Administrative Agent may be equitably subrogated, the Administrative Agent shall be contractually subrogated to all the rights and interests of the applicable Payment Recipient under the Loan Documents with respect to each Erroneous Payment Return Deficiency.

 

(5) Each party’s obligations, agreements and waivers under this Section 8.13 shall survive the resignation or replacement of the Administrative Agent, any transfer of rights or obligations by, or the replacement of, a Lender or Issuing Bank, the termination of the Commitments and/or the repayment, satisfaction or discharge of all Obligations (or any portion thereof) under any Loan Document.

 

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Article IX
Miscellaneous

 

Section 9.01          Notices; Communications.

 

(1) Except in the case of notices and other communications expressly permitted to be given by telephone (and except as provided in Section 9.01(2)), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by facsimile or e-mail, and all notices and other communications expressly permitted hereunder to be given by telephone shall be made to the applicable telephone number, in each case, as follows:

 

(a) if to any Loan Party, the Administrative Agent, the Collateral Agent, the Swing Line Lender or any Issuing Bank as of the Closing Date, to the address, facsimile number, e-mail address or telephone number specified for such Person on Schedule 9.01; and

 

(b) if to any other Lender or any other Issuing Bank, to the address, facsimile number, e-mail address or telephone number specified in its Administrative Questionnaire.

 

(2) Notices and other communications to the Lenders and any Issuing Bank hereunder may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved by the Administrative Agent; provided that the foregoing shall not apply to notices to any Lender or any Issuing Bank pursuant to Article II if such Lender or such Issuing Bank, as applicable, has notified the Administrative Agent that it is incapable of receiving notices under such Article by electronic communication. The Administrative Agent or the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it; provided that approval of such procedures may be limited to particular notices or communications.

 

(3) Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received. Notices sent by facsimile shall be deemed to have been given when sent and confirmation of transmission has been received (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next Business Day for the recipient). Notices delivered through electronic communications to the extent provided in Section 9.01(2) shall be effective as provided in such Section 9.01(2).

 

(4) Any party hereto may change its address, facsimile number or e-mail address for notices and other communications hereunder by notice to the other parties hereto.

 

(5) Documents required to be delivered pursuant to Section 5.04 (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically (including as set forth in Section 9.17) and if so delivered, shall be deemed to have been delivered on the date (a) on which the Borrower posts such documents or provides a link thereto on the Borrower’s website on the Internet at the website address listed on Schedule 9.01 or (b) on which such documents are posted on the Borrower’s behalf on an Internet or intranet website, if any, to which each Lender and the Administrative Agent have access (whether a commercial, third-party website or whether sponsored by the Administrative Agent); provided that the Borrower shall notify the Administrative Agent (by facsimile or e-mail) of the posting of any such documents and provide to the Administrative Agent by electronic mail electronic versions (i.e., soft copies) of such documents; provided, further, that, upon reasonable request by the Administrative Agent, the Borrower shall also provide a hard copy to the Administrative Agent of any such document; provided, further, that any documents posted for which a link is provided after normal business hours for the recipient shall be deemed to have been given at the opening of business on the next Business Day for such recipient. The Administrative Agent shall have no obligation to request the delivery or to maintain copies of the documents referred to above, and in any event shall have no responsibility to monitor compliance by the Loan Parties with any such request for delivery, and each Lender shall be solely responsible for requesting delivery to it or maintaining its copies of such documents.

 

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Section 9.02          Survival of Agreement. All covenants, agreements, representations and warranties made by the Loan Parties herein, in the other Loan Documents and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement or any other Loan Document will be considered to have been relied upon by the Lenders and the Issuing Banks and shall survive the making by the Lenders of the Credit Extensions and the execution and delivery of the Loan Documents, regardless of any investigation made by such Persons or on their behalf, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or L/C Disbursement or any Fee or any other amount payable under this Agreement or any other Loan Document is outstanding and unpaid or any Letter of Credit is outstanding and so long as the Commitments have not been terminated. Without prejudice to the survival of any other agreements contained herein, indemnification and reimbursement obligations contained herein (including pursuant to Sections 2.10, 2.16, 2.17, 2.18 and 9.05) shall survive the payment in full of the principal and interest hereunder, the expiration of the Letters of Credit and the termination of the Commitments or this Agreement.

 

Section 9.03          Binding Effect. This Agreement shall become effective when it has been executed by the Borrower and the Administrative Agent and when the Administrative Agent has received copies hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the Borrower, the other Loan Parties, each Agent, each Issuing Bank, each Lender and their respective permitted successors and assigns.

 

Section 9.04          Successors and Assigns.

 

(1) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby (including any Affiliate of any Issuing Bank that issues Letters of Credit), except that (a) other than as permitted under Section 6.05, the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by the Borrower without such consent shall be null and void) and (b) no Lender may assign or otherwise transfer its rights or obligations hereunder except in accordance with this Section 9.04 (and, except as otherwise provided pursuant to Section 9.04(2)(c) below, any attempted assignment, transfer or delegation in contravention of this Section 9.04 shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby (including any Affiliate of any Issuing Bank that issues Letters of Credit), Participants (to the extent provided in paragraph (3) of this Section 9.04) and, to the extent expressly contemplated hereby, the Related Parties of each of the Agents, the Issuing Banks and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement or the other Loan Documents.

 

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(2) (a) Subject to the conditions set forth in paragraph (2)(b) of this Section 9.04 (and, with respect to an assignment to the Borrower, any Subsidiary or any of their respective Affiliates, subject to the limitations set forth in Section 9.04(10) or 9.04(14), as applicable), any Lender may assign (each such assigning lender, an “Assignor”) to one or more assignees (other than a natural person, Defaulting Lender or Disqualified Institution) (each such non-excluded Person, an “Assignee”) all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitments and the Loans (including for purposes of this Section 9.04(2), participations in Revolving L/C Exposure) at the time owing to it) with the prior written consent (such consent not to be unreasonably withheld, delayed or conditioned) of:

 

(i) the Borrower; provided that no consent of the Borrower shall be required (I) in the case of a Term Commitment or a Term Loan (including, for the avoidance of doubt, a DDTL Facility Commitment or a DDTL), for an assignment to a Lender, an Affiliate of a Lender or an Approved Fund, (II) in the case of a Revolving Facility Commitment or a Revolving Loan, for an assignment to a Revolving Lender, an Affiliate of a Revolving Lender or an Approved Fund of a Revolving Lender or (III) if an Event of Default has occurred and is continuing, any other Person; provided, further, that such consent in respect of an assignment of Loans or Commitments shall be deemed to have been given if the Borrower has not objected thereto by written notice to the Administrative Agent within five (5) Business Days after having received a written request therefor by the Administrative Agent;

 

(ii) the Administrative Agent; provided that no consent of the Administrative Agent shall be required for an assignment of all or any portion of a Loan or Commitment to (x) a Lender, an Affiliate of a Lender or an Approved Fund or (y) to the extent assigned in accordance with the provisions in this Section 9.04, to a Debt Fund Affiliate, an Affiliated Lender or a Purchasing Borrower Party; and

 

(iii) in the case of any assignment of a Revolving Facility Commitment or a Revolving Loan, the Swing Line Lender and the Issuing Banks; provided that no consent of the Swing Line Lender and the Issuing Banks shall be required for any assignment of all or any portion of a Revolving Facility Commitment or a Revolving Loan to a Lender, an Affiliate of a Lender or an Approved Fund.

 

(b) Assignments shall be subject to the following additional conditions:

 

(i) except in the case of an assignment (x) to a Lender, an Affiliate of a Lender or an Approved Fund or (y) of the entire remaining amount of an Assignor’s Commitments or Loans in respect of the applicable Facility, the amount of an Assignor’s Commitments or Loans subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall not be less than $2,500,000 (in the case of Revolving Facility Commitments or Revolving Loans) or $1,000,000 (in the case of Term Commitments or Term Loans), unless the Borrower otherwise consents; provided that (1) no such consent of the Borrower shall be required if an Event of Default has occurred and is continuing and (2) such amounts shall be aggregated in respect of each Lender and its Affiliates or Approved Funds (with simultaneous assignments to or by two (2) or more Approved Funds being treated as one assignment for purposes of meeting the minimum assignment amount requirement), if any;

 

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(ii) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance via an electronic settlement system acceptable to the Administrative Agent (or, if previously agreed with the Administrative Agent, manually or via email), and shall pay to the Administrative Agent a processing and recordation fee of $3,500 (which fee may be waived or reduced in the sole discretion of the Administrative Agent); provided that such processing and recordation fee shall not be payable in the case of assignments by a Lead Arranger or any Affiliate of a Lead Arranger;

 

(iii) the Assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire and documentation and other information required by regulatory authorities under applicable Anti-Corruption Laws and AML Laws, including any tax forms required to be delivered pursuant to Section 2.18; and

 

(iv) the Assignor shall deliver to the Administrative Agent any Note issued to it with respect to the assigned Loan or Commitment.

 

For purposes of this Section 9.04, “Approved Fund” means any Person (other than a natural person, Defaulting Lender or Disqualified Institution) that is engaged in making, purchasing, holding or investing in bank loans and similar extensions of credit in the ordinary course and that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender. This paragraph (2) of this Section 9.04 shall not prohibit any Lender from assigning all or a portion of its rights and obligations among separate Facilities on a non-pro rata basis.

 

(c) Subject to acceptance and recording thereof pursuant to paragraph (2)(e) of this Section 9.04, from and after the effective date specified in each Assignment and Acceptance, the Assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement, and the Assignor thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all of an Assignor’s rights and obligations under this Agreement, such Assignor shall cease to be a party hereto, but shall continue to be entitled to the benefits of Sections 2.16, 2.17, 2.18 and 9.05 with respect to facts and circumstances occurring prior to the effective date of such Assignment and Acceptance). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this Section 9.04 shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (4) of this Section 9.04 to the extent such participation would be permitted by such Section 9.04(4).

 

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(d) The Administrative Agent, acting for this purpose as a non-fiduciary agent of the Borrower, shall maintain at one of its offices a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amount (and stated interest with respect thereto) of the Loans and the L/C Disbursements owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive absent manifest error, and the Borrower, the Administrative Agent, the Issuing Banks and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower and any Lender (solely with respect to such Lender’s Loans) at any reasonable time and from time to time upon reasonable prior written notice.

 

(e) Upon its receipt of a duly completed Assignment and Acceptance executed by an assigning Lender and an Assignee, the Assignee’s completed Administrative Questionnaire (unless such Assignee shall already be a Lender hereunder), documentation and other information required by regulatory authorities under applicable Anti-Corruption Laws and AML Laws, including all applicable tax forms, any Note outstanding with respect to the assigned Commitment or Loan, the processing and recordation fee referred to in paragraph (2)(b)(ii) of this Section 9.04 and any written consent to such assignment required by paragraph (2) of this Section 9.04, the Administrative Agent shall promptly accept such Assignment and Acceptance and record the information contained therein in the Register. No assignment, whether or not evidenced by a promissory note, shall be effective for purposes of this Agreement unless and until it has been recorded in the Register as provided in this paragraph (2)(e).

 

(3) By executing and delivering an Assignment and Acceptance, the assigning Lender thereunder and the Assignee thereunder shall be deemed to confirm to and agree with each other and the other parties hereto as follows:

 

(a) such assigning Lender warrants that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim;

 

(b) except as set forth in clause (a) above, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement, or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement, any other Loan Document or any other instrument or document furnished pursuant hereto, or the financial condition of the Borrower or any Restricted Subsidiary or the performance or observance by the Borrower or any Restricted Subsidiary of any of their respective obligations under this Agreement, any other Loan Document or any other instrument or document furnished pursuant hereto;

 

(c) the Assignee represents and warrants that it is legally authorized to enter into such Assignment and Acceptance;

 

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(d) the Assignee confirms that it has received a copy of this Agreement, together with copies of the most recent Required Financial Statements delivered pursuant to Section 5.04, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance;

 

(e) the Assignee will independently and without reliance upon the Administrative Agent or the Collateral Agent, such assigning Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement;

 

(f) the Assignee appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Administrative Agent by the terms of this Agreement, together with such powers as are reasonably incidental thereto; and

 

(g) the Assignee agrees that it will perform in accordance with their terms all the obligations which by the terms of this Agreement are required to be performed by it as a Lender.

 

(4) (a) Any Lender may, without the consent of the Administrative Agent or, subject to Section 9.04(8), the Borrower, sell participations to one or more banks or other entities (other than to a natural person, Defaulting Lender or Disqualified Institution) (a “Participant”) in all or a portion of such Lender’s rights and obligations under this Agreement (including all or a portion of its Commitments and the Loans owing to it); provided that

 

(i) such Lender’s obligations under this Agreement shall remain unchanged;

 

(ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations;

 

(iii) the Borrower, the Administrative Agent, the Issuing Banks, the Swing Line Lender and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement; and

 

(iv) any agreement pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and the other Loan Documents and to approve any amendment, modification or waiver of any provision of this Agreement and the other Loan Documents; provided that (A) such agreement may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver that (1) requires the consent of each Lender directly affected thereby pursuant to clauses (i), (ii), (iii), (iv), (v), (vi), (vii) or (viii) of the first proviso to Section 9.08(2) and (2) directly affects such Participant and (B) no other agreement with respect to amendment, modification or waiver may exist between such Lender and such Participant. Subject to clause (4)(b) of this Section 9.04, the Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.16, 2.17 and 2.18 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (2) of this Section 9.04, provided that such Participant agrees to be subject to the provisions of Sections 2.16(2) and 2.18 (including 2.18(4))) as if it were an assignee pursuant to paragraph (2) of this Section 9.04 and shall not be entitled to receive any greater payment under Sections 2.16, 2.17 or 2.18, with respect to any participation, than its participating Lender would have been entitled to receive, except to the extent such entitlement to receive a greater payment results from a Change in Law that occurs after the Participant acquired the applicable participation. Each Lender that sells a participation agrees, at the Borrower’s request and expense, to use reasonable efforts to cooperate with the Borrower to effectuate the provisions of Section 2.20(2) with respect to any Participant. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 9.06 as though it were a Lender; provided that such Participant shall be subject to Section 2.19(3) as though it were a Lender. Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the Borrower, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participant’s interest in the Loans or other obligations under the Loan Documents (the “Participant Register”); provided that no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant’s interest in any commitments, loans, letters of credit or its other obligations under any Loan Document) to any Person, except to the extent that such disclosure is necessary to establish that such commitment, loan, letter of credit or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations and Section 1.163-5(b) of the United States Proposed Treasury Regulations (or any amended or successor version). The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, the Administrative Agent (in its capacity as Administrative Agent) shall have no responsibility for maintaining a Participant Register.

 

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(b) A Participant shall not be entitled to receive any greater payment under Sections 2.16, 2.17 or 2.18 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, except to the extent such entitlement to receive a greater payment results from a Change in Law that occurs after the Participant acquired the applicable participation. A Participant shall not be entitled to the benefits of Section 2.18 to the extent such Participant fails to comply with Section 2.18(4) as though it were a Lender (it being understood that the documentation required under Section 2.18(4) shall be delivered to the participating Lender).

 

(5) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank and in the case of any Lender that is an Approved Fund, any pledge or assignment to any holders of obligations owed, or securities issued, by such Lender, including to any trustee for, or any other representative of, such holders, and this Section 9.04 shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or Assignee for such Lender as a party hereto.

 

(6) The Borrower, upon receipt of written notice from the relevant Lender, agrees to issue Notes to any Lender requiring Notes to facilitate transactions of the type described in paragraph (5) of this Section 9.04.

 

(7) If the Borrower wishes to replace the Loans or Commitments with ones having different terms, it shall have the option, with the consent of the Administrative Agent and subject to at least three Business Days’ advance notice to the Lenders, instead of prepaying the Loans or reducing or terminating the Commitments to be replaced, to (a) require the Lenders to assign such Loans or Commitments to the Administrative Agent or its designees and (b) amend the terms thereof in accordance with Section 9.08 (with such replacement, if applicable, being deemed to have been made pursuant to Section 9.08(3)(c)). Pursuant to any such assignment, all Loans and Commitments to be replaced shall be purchased at par (allocated among the Lenders in the same manner as would be required if such Loans were being optionally prepaid or such Commitments were being optionally reduced or terminated by the Borrower), accompanied by payment of any accrued interest and fees thereon and any amounts owing pursuant to Section 9.05(2). By receiving such purchase price, the Lenders shall automatically be deemed to have assigned the Loans or Commitments pursuant to the terms of the form of Assignment and Acceptance attached hereto as Exhibit A, and accordingly no other action by such Lenders shall be required in connection therewith. The provisions of this paragraph (7) are intended to facilitate the maintenance of the perfection and priority of existing security interests in the Collateral during any such replacement.

 

(8) (a) No assignment or participation shall be made to any Person that was a Disqualified Institution as of the date (the “Trade Date”) on which the assigning Lender entered into a binding agreement to sell and assign all or a portion of its rights and obligations under this Agreement to such Person (unless the Borrower has consented to such assignment in writing in its sole and absolute discretion, in which case such Person will not be considered a Disqualified Institution for the purpose of such assignment or participation). For the avoidance of doubt, with respect to any Assignee that becomes a Disqualified Institution after the applicable Trade Date, (x) such Assignee shall not retroactively be disqualified from becoming a Lender and (y) the execution by the Borrower of an Assignment and Acceptance with respect to such Assignee will not by itself result in such Assignee no longer being considered a Disqualified Institution. Any assignment in violation of this clause (8)(a) shall not be void, but the other provisions of this clause (8) shall apply.

 

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(b) If any assignment or participation is made to any Disqualified Institution without the Borrower’s prior written consent in violation of clause (a) above, or if any Person becomes a Disqualified Institution after the applicable Trade Date, the Borrower may, at the sole expense and effort of the Disqualified Institution, upon notice to the applicable Disqualified Institution and the Administrative Agent, (A) terminate any Commitment of such Disqualified Institution, (B) in the case of outstanding Loans held by Disqualified Institutions, purchase or prepay such Loan by paying the lowest of (x) the principal amount thereof, (y) the amount that such Disqualified Institution paid to acquire such Loans and (z) the market price of such Loans (as reasonably determined by the Borrower), in each case plus accrued interest, accrued fees and all other amounts (other than principal amounts) payable to it hereunder and/or (C) require such Disqualified Institution to assign, without recourse (in accordance with and subject to the restrictions contained in this Section 9.04), all of its interest, rights and obligations under this Agreement to one or more Assignees at the lowest of (x) the principal amount thereof, (y) the amount that such Disqualified Institution paid to acquire such interests, rights and obligations and (z) the market price of such Loans or Commitments (as reasonably determined by the Borrower), in each case plus accrued interest, accrued fees and all other amounts (other than principal amounts) payable to it hereunder.

 

(c) Notwithstanding anything to the contrary contained in this Agreement, Disqualified Institutions (A) will not (x) have the right to receive information, reports or other materials provided to Lenders by the Borrower or any other Loan Party, the Administrative Agent or any other Lender, (y) attend or participate in meetings attended by the Lenders and the Administrative Agent, or (z) access any electronic site established for the Lenders or confidential communications from counsel to or financial advisors of the Administrative Agent or the Lenders and (B) (x) for purposes of any consent to any amendment, waiver or modification of, or any action under, and for the purpose of any direction to the Administrative Agent or any Lender to undertake any action (or refrain from taking any action) under this Agreement or any other Loan Document, each Disqualified Institution will be deemed to have consented in the same proportion as the Lenders that are not Disqualified Institutions consented to such matter, and (y) for purposes of voting on any Plan of Reorganization, each Disqualified Institution party hereto hereby agrees (1) not to vote on such Plan of Reorganization, (2) if such Disqualified Institution does vote on such Plan of Reorganization notwithstanding the restriction in the foregoing clause (1), such vote will be deemed not to be in good faith and shall be “designated” pursuant to Section 1126(e) of the Bankruptcy Code (or any similar provision in any other Debtor Relief Laws), and such vote shall not be counted in determining whether the applicable class has accepted or rejected such Plan of Reorganization in accordance with Section 1126(c) of the Bankruptcy Code (or any similar provision in any other Debtor Relief Laws) and (3) not to contest any request by any party for a determination by any applicable court of competent jurisdiction, including a bankruptcy court with jurisdiction over any Loan Party in an insolvency or liquidation proceeding effectuating the foregoing clause (2).

 

(d) The Administrative Agent shall have the right, and the Borrower hereby expressly authorizes the Administrative Agent, to provide the list of Disqualified Institutions to each Lender requesting the same; provided that the Lenders shall not be restricted from participating their obligations in all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitments and the Loans (including for purposes of this Section 9.04(8)(d), participations in Revolving L/C Exposure) at the time owing to it) to Disqualified Institutions if the Borrower has not provided the list of Disqualified Institutions within three (3) Business Days of written request.

 

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(9) Notwithstanding anything to the contrary contained herein, no Non-Debt Fund Affiliate shall have any right to:

 

(a) attend (including by telephone) any meeting or discussions (or portion thereof) among the Administrative Agent or any Lender to which representatives of the Borrower are not then present;

 

(b) receive any information or material prepared by the Administrative Agent or any Lender or any communication by or among Administrative Agent and one or more Lenders, except to the extent such information or materials have been made available to the Borrower or its representatives (and in any case, other than the right to receive notices of prepayments and other administrative notices in respect of its Term Loans required to be delivered to Lenders pursuant to this Agreement);

 

(c) receive advice of counsel to the Lenders or challenge their attorney-client privilege; or

 

(d) make or bring (or participate in, other than as a passive participant in or recipient of its pro rata benefits of) any claim, in its capacity as a Lender, against the Administrative Agent or any other Lender with respect to any duties or obligations or alleged duties or obligations of such Agent or any other such Lender under the Loan Documents in the absence, with respect to any such Person, of the gross negligence, bad faith (including a material breach of obligations under the Loan Documents) or willful misconduct by such Person and its Related Parties (as determined by a court of competent jurisdiction by final and non-appealable judgment).

 

(10) Notwithstanding anything to the contrary contained herein, any Lender may assign all or any portion of its Term Loans hereunder to any Person who, after giving effect to such assignment, would be an Affiliated Lender; provided that:

 

(a) such assignment shall be made pursuant to (i) an open market purchase (including, for the avoidance of doubt, any purchase made during the initial funding of the Term Loans) on a non-pro rata basis or (ii) a Dutch Auction open to all Lenders of the applicable Class on a pro rata basis;

 

(b) in the case of an assignment to a Non-Debt Fund Affiliate, the assigning Lender and such Non-Debt Fund Affiliate purchasing such Lender’s Term Loans shall execute and deliver to the Administrative Agent an assignment agreement substantially in the form of Exhibit E (a “Non-Debt Fund Affiliate Assignment and Acceptance”) in lieu of an Assignment and Acceptance;

 

(c) in the case of an assignment to a Non-Debt Fund Affiliate, at the time of such assignment and after giving effect to such assignment, Non-Debt Fund Affiliates shall not, in the aggregate, hold Term Loans (and participating interests in Term Loans) with an aggregate principal amount in excess of 25.0% of the principal amount of all Term Loans (including, for the avoidance of doubt, any Incremental Term Loans, Other Term Loans or Extended Term Loans, if any) then outstanding;

 

(d) in the case of an assignment to a Non-Debt Fund Affiliate, such Non-Debt Fund Affiliate shall not be required to represent or warrant that it is not in possession of material Non-Public Information with respect to the Borrower and/or any Subsidiary thereof and/or their respective securities;

 

(e) no proceeds of Revolving Loans shall be used to fund any such purchases; and

 

(f) all parties to any such assignment shall render customary “big boy” disclaimer letters or any such disclaimers shall be incorporated into the terms of the Assignment and Acceptance.

 

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(11) Notwithstanding the foregoing, any Affiliated Lender shall be permitted to contribute any Term Loan so assigned to such Affiliated Lender pursuant to this Section 9.04(11) to the Borrower or any of its Restricted Subsidiaries for purposes of cancellation, which contribution may be made, subject to Section 6.07, in exchange for Equity Interests (other than Disqualified Stock) of the Borrower or Indebtedness of the Borrower to the extent such Indebtedness is permitted to be incurred pursuant to Section 6.01 at such time; provided that any Term Loans so contributed shall be automatically and permanently canceled upon the effectiveness of such contribution and will thereafter no longer be outstanding for any purpose hereunder.

 

(12) Notwithstanding anything in Section 9.04 or the definition of “Required Lenders” to the contrary, for purposes of determining whether the Required Lenders, all affected Lenders or all Lenders have:

 

(a) consented (or not consented) to any amendment, modification, waiver, consent or other action with respect to any of the terms of any Loan Document or any departure by any Loan Party therefrom;

 

(b) otherwise acted on any matter related to any Loan Document; or

 

(c) directed or required the Administrative Agent or any Lender to undertake any action (or refrain from taking any action) with respect to or under any Loan Document (collectively, “Required Lender Consent Items”):

 

(i) a Non-Debt Fund Affiliate shall be deemed to have voted its interest as a Lender in the same proportion as the allocation of voting with respect to such matter by Lenders that are not Non-Debt Fund Affiliates, unless such Required Lender Consent Item requires the consent of each Lender or each affected Lender or the result of such Required Lender Consent Item would reasonably be expected to deprive such Non-Debt Fund Affiliate of its pro rata share (compared to Lenders that are not Non-Debt Fund Affiliates) of any payments to which such Non-Debt Fund Affiliate is entitled under the Loan Documents without such Non-Debt Fund Affiliate providing its consent or such Non-Debt Fund Affiliate is otherwise adversely affected thereby compared to the Term Lenders that are not Non-Debt Fund Affiliates (in which case for purposes of such vote such Non-Debt Fund Affiliate shall have the same voting rights as other Term Lenders that are not Non-Debt Fund Affiliates); and

 

(ii) Term Loans held by Debt Fund Affiliates may not account for more than 49.9% of the Term Loans of consenting Lenders included in determining whether the Required Lenders have consented to any action pursuant to Section 9.04.

 

(13) Additionally, the Loan Parties and each Non-Debt Fund Affiliate hereby agree that, and each Non-Debt Fund Affiliate Assignment and Acceptance by a Non-Debt Fund Affiliate shall provide a confirmation that, if a case under Title 11 of the United States Code is commenced against any Loan Party, such Loan Party shall seek (and each Non-Debt Fund Affiliate shall consent) to provide that the vote of any Non-Debt Fund Affiliate (in its capacity as a Lender) with respect to any plan of reorganization of such Loan Party shall not be counted except that such Non-Debt Fund Affiliate’s vote (in its capacity as a Lender) may be counted to the extent any such plan of reorganization proposes to treat the Obligations or claims held by such Non-Debt Fund Affiliate in a manner that is less favorable to such Non-Debt Fund Affiliate than the proposed treatment of the Term Loans or claims held by Lenders that are not Affiliates of the Borrower.

 

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(14) Notwithstanding anything to the contrary contained in this Agreement, any Lender may assign all or a portion of its Term Loans to any Purchasing Borrower Party; provided that:

 

(a) the assigning Lender and the Purchasing Borrower Party purchasing such Lender’s Term Loans, as applicable, shall execute and deliver to the Administrative Agent a Non-Debt Fund Affiliate Assignment and Acceptance in lieu of an Assignment and Acceptance;

 

(b) such assignment shall be made pursuant to (i) an open market purchase on a non-pro rata basis or (ii) a Dutch Auction open to all Lenders of the applicable Class on a pro rata basis;

 

(c) any Term Loans assigned to any Purchasing Borrower Party shall be automatically and permanently cancelled upon the effectiveness of such assignment and will thereafter no longer be outstanding for any purpose hereunder;

 

(d) at the time of and immediately after giving effect to any such purchase, no Default or Event of Default shall be continuing or would result therefrom;

 

(e) the applicable Purchasing Borrower Party shall not be required to represent or warrant that it is not in possession of material Non-Public Information with respect to the Borrower and/or any Subsidiary thereof and/or their respective securities and the Assignor will deliver to such Non-Debt Fund Affiliate customary written assurance that it is a sophisticated investor and is willing to proceed with the assignment;

 

(f) the aggregate outstanding principal amount of the Term Loans of the applicable Class shall be deemed reduced by the full par value of the aggregate principal amount of the Term Loans purchased pursuant to this Section 9.04(14) and each principal repayment installment with respect to the Term Loans of such Class shall be reduced by such full par value as directed by the Borrower;

 

(g) no proceeds of Revolving Loans shall be used to fund any such purchases; and

 

(h) all parties to any such assignment shall render customary “big boy” disclaimer letters or any such disclaimers shall be incorporated into the terms of the Assignment and Acceptance.

 

Section 9.05          Expenses; Indemnity.

 

(1) If the Transactions are consummated and the Closing Date occurs, the Borrower agrees to pay, subject to any agreed caps, all reasonable, documented and invoiced out-of-pocket expenses incurred by the Administrative Agent, the Lead Arrangers, the Swing Line Lender and the Issuing Banks in connection with the preparation, execution, delivery and administration of this Agreement and the other Loan Documents, and any amendment, modification, waiver or enforcement of this Agreement and the other Loan Documents (including expenses incurred in connection with due diligence (including third party expenses)) (limited in the case of legal fees and expenses, to the reasonable, documented and invoiced legal fees of a single firm of counsel for the Administrative Agent, the Lead Arrangers, the Swing Line Lender and the Issuing Banks, taken as a whole, and, if necessary, one firm of counsel in each relevant jurisdiction (which may include a single special counsel acting in multiple jurisdictions) for the Administrative Agent, the Lead Arrangers, the Swing Line Lender and the Issuing Banks, taken as a whole, (and, in the case of an actual or perceived conflict of interest, where the party affected by such conflict informs the Borrower of such conflict and thereafter retains its own counsel, of an additional counsel for each group of conflicted persons similarly situated, taken as a whole) and in the case of enforcement, limited to the reasonable, documented and invoiced legal fees of a single firm of counsel for the Administrative Agent, the Lead Arrangers, the Swing Line Lender, the Issuing Banks and the Lenders, taken as a whole, and, if necessary, one firm of counsel in each relevant jurisdiction (which may include a single special counsel acting in multiple jurisdictions) for the Administrative Agent, the Lead Arrangers, the Swing Line Lender, the Issuing Banks and the Lenders, taken as a whole (and, in the case of an actual or perceived conflict of interest, where the party affected by such conflict informs the Borrower of such conflict and thereafter retains its own counsel, of an additional counsel for each group of conflicted persons similarly situated, taken as a whole)).

 

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(2) The Loan Parties will indemnify the Administrative Agent, each Lead Arranger, each Lender, each Issuing Bank, each of their respective Affiliates and each of their and their respective Affiliates’ directors, officers, employees, agents and controlling Persons, and each of their respective successors and permitted assigns (each such Person, an “Indemnitee”) against, and to hold each Indemnitee harmless from and against all costs, liabilities, and reasonable, documented and invoiced out-of-pocket fees and expenses (limited in the case of legal fees and expenses to reasonable, documented and invoiced legal fees of a single firm of counsel for all Indemnitees, taken as a whole, and, if necessary, one firm of counsel in each relevant jurisdiction (which may include a single special counsel acting in multiple jurisdictions) for all Indemnitees, taken as a whole (and, in the case of an actual or perceived conflict of interest, where the Indemnitee affected by such conflict informs the Borrower of such conflict and thereafter retains its own counsel, of an additional counsel for each group of affected Indemnitees similarly situated, taken as a whole)), incurred by or asserted against any Indemnitee arising out of, in any way connected with, or as a result of:

 

(a) the execution, enforcement or delivery of this Agreement or any other Loan Document, the performance by the parties hereto and thereto of their respective obligations thereunder or the consummation of the Transactions and the other transactions contemplated hereby and administration and enforcement of the Loan Documents;

 

(b) the use of the proceeds of the Loans or Letter of Credit;

 

(c) any claim, litigation, investigation or proceeding relating to any of the foregoing, whether or not any Indemnitee is a party thereto and regardless of whether such matter is initiated by a third party or by the Borrower or any of their respective Affiliates, creditors or shareholders; or

 

(d) any Environmental Liability that is related in any way to the Borrower or any of the Restricted Subsidiaries or to any actual or alleged presence, Release or threatened Release of Hazardous Materials at, under, on or from any current or former property of the Borrower or any Restricted Subsidiaries, except for any Environmental Liability related to any act or omission of any Indemnitee or any of its Related Parties or Related Persons or occurring on or after the date of foreclosure on any Collateral;

 

provided that no Indemnitee will be indemnified for any loss, claim, damage, liability or expense to the extent it (i) has been determined by a final, non-appealable judgment of a court of competent jurisdiction to have resulted from (A) the gross negligence, bad faith or willful misconduct of such Indemnitee or any of its Related Persons or (B) a material breach of the obligations of such Indemnitee or any of its Related Persons under the Loan Documents or (ii) relates to any proceeding between or among Indemnitees other than (A) claims against the Administrative Agent or the Lead Arrangers or their respective Affiliates, in each case, in their capacity or in fulfilling their role as the agent or arranger or documentation agent or any other similar role under the Facilities (excluding their role as a Lender) to the extent such Persons are otherwise entitled to receive indemnification under this paragraph (2) or (B) claims arising out of any act or omission on the part of the Borrower or its Restricted Subsidiaries.

 

(3) Any indemnification or payments required by the Loan Parties under this Section 9.05 shall not apply with respect to (a) Taxes other than any Taxes that represent losses, claims, damages, etc. arising from any non-Tax claim or (b) Taxes that are duplicative of any indemnification or payments required by the Loan Parties under Section 2.18.

 

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(4) To the fullest extent permitted by applicable law, none of the Borrower, any Agent, any Lender, the Issuing Banks, any other party hereto or any Indemnitee shall assert, and each hereby waive, any claim against any other such Person, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby, the transactions contemplated hereby or thereby, any Commitment, any Letter of Credit, any Loan or the use of the proceeds thereof; provided that, nothing in this clause (4) shall relieve the Borrower of any obligation it may have to indemnify an Indemnitee against special, indirect, consequential or punitive damages asserted against such Indemnitee by a third party. None of the Borrower or any Indemnitee shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby.

 

(5) Notwithstanding the foregoing, each Indemnitee will be obligated to refund and return promptly any and all amounts paid by the Loan Parties pursuant to clause (2) above to such Indemnitee for any such losses, claims, damages, liabilities and expenses to the extent it has been determined by a court of competent jurisdiction in a final, non-appealable judgment that such Indemnitee is not entitled to payment of such amounts in accordance with the terms of this Section 9.05.

 

(6) None of the Loan Parties will be liable for any settlement of any claim, litigation, investigation or proceeding effected without its written consent (which consent will not be unreasonably withheld, delayed or conditioned), but if settled with such Loan Party’s prior written consent or if there is a final and non-appealable judgment by a court of competent jurisdiction for the plaintiff against any Indemnitee in any such claim, litigation, investigation or proceeding, the Loan Parties agree to indemnify and hold harmless such Indemnitee in the manner set forth in clause (2) above.

 

(7) The agreements in this Section 9.05 shall survive the resignation of the Administrative Agent, the replacement of any Swing Line Lender, Issuing Bank, Lender, the termination of the Commitments and the repayment, satisfaction or discharge of all the other Obligations and the termination of this Agreement. All amounts due under this Section 9.05 shall be payable promptly after written demand therefor, so long as accompanied by reasonable documentation with respect to any reimbursement, indemnification or other amount requested.

 

Section 9.06          Right of Set-off. If an Event of Default shall have occurred and be continuing, each Lender and each Issuing Bank is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held, or other obligations or other Indebtedness at any time owing by such Lender or such Issuing Bank to or for the credit or the account of the Borrower or any Subsidiary Loan Party against any of and all the Obligations of the Borrower or any Subsidiary Loan Party now or hereafter existing under this Agreement or any other Loan Document held by such Lender or such Issuing Bank, as the case may be, irrespective of whether or not such Lender or such Issuing Bank shall have made any demand under this Agreement or such other Loan Document and although the Obligations may be unmatured. The rights of each Lender and each Issuing Bank under this Section 9.06 are in addition to other rights and remedies (including other rights of set-off) that such Lender or such Issuing Bank may have. Each Lender and each Issuing Bank agrees promptly to notify the Administrative Agent and the Loan Parties after any such set-off and any application made by such Lender or such Issuing Bank, as the case may be; provided that the failure to give such notice shall not affect the validity of such set-off and application. Each Lender and each Issuing Bank agrees to apply all amounts collected from any such set-off to the Obligations before applying such amounts to any other obligations or other Indebtedness owed by the Loan Parties and any of their Subsidiaries to such Lender or such Issuing Bank.

 

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Section 9.07          Applicable Law. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (OTHER THAN AS EXPRESSLY SET FORTH IN THE OTHER LOAN DOCUMENTS) AND ANY CLAIM, CONTROVERSY, DISPUTE OR CAUSE OF ACTION (WHETHER IN CONTRACT OR TORT OR OTHERWISE) BASED UPON, ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY, including, but not limited to, the validity, interpretation, construction, breach, enforcement or termination hereof, SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

 

Section 9.08          Waivers; Amendment.

 

(1) No failure or delay of the Administrative Agent, the Collateral Agent, the Issuing Banks or any Lender in exercising any right or power hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of each Agent, each Issuing Bank, the Swing Line Lender and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies provided by law. No waiver of any provision of this Agreement or any other Loan Document or consent to any departure by the Borrower or any other Loan Party therefrom shall in any event be effective unless the same shall be permitted by paragraph (2) of this Section 9.08, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice or demand on the Borrower or any other Loan Party in any case shall entitle such Person to any other or further notice or demand in similar or other circumstances.

 

(2) Neither this Agreement nor any other Loan Document nor any provision hereof or thereof may be waived, amended or modified except:

 

(a) as expressly provided in Sections 2.15, 2.22, 2.23 and 2.24, each as in effect on the date hereof;

 

(b) in the case of this Agreement, pursuant to an agreement or agreements in writing entered into by the Borrower and the Required Lenders (or the Administrative Agent at the direction of the Required Lenders) (other than in the case of clauses (i), (ii), (iii), (iv), (v), (vi) and, solely at the option of the Borrower, (vii) below, which shall only require the consent of the Lenders expressly set forth therein); and

 

(c) in the case of any other Loan Document, pursuant to an agreement or agreements in writing entered into by each party thereto and the Administrative Agent and consented to by the Required Lenders (other than in the case of clauses (i), (ii), (iii), (iv), (v), (vi), (vii), (viii) and, solely at the option of the Borrower, (ix) and (x) below, which shall only require the consent of the Lenders expressly set forth therein) or as otherwise provided therein;

 

provided, however, that except as expressly provided in Sections 2.15, 2.22, 2.23 and 2.24, each as in effect on the date hereof, no such agreement shall:

 

(i) decrease, forgive, waive or excuse the principal amount of, or any interest on, or extend the final maturity of, or decrease the rate of interest on, any Loan or any L/C Disbursement beyond the applicable Maturity Date, or have the effect of any of the foregoing, without the prior written consent of each Lender directly and adversely affected thereby;

 

(ii) increase or extend the Commitment of any Lender or decrease, forgive, waive or excuse the fees of any Lender, Agent or Issuing Bank without the prior written consent of such Lender, Agent or Issuing Bank, as applicable, or have the effect of any of the foregoing (it being understood that waivers or modifications of conditions precedent, covenants, Defaults or Events of Default or of a mandatory reduction in the Revolving Facility Commitments shall not constitute an increase of the Commitments of any Lender);

 

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(iii) extend or waive any Term Loan Installment Date or reduce the amount due on any Term Loan Installment Date or extend any date on which payment of principal or interest on any Loan or any L/C Disbursement or any Fee is due, or have the effect of any of the foregoing, without the prior written consent of each Lender directly and adversely affected thereby;

 

(iv) amend the provisions of Section 2.19(2) or (3) of this Agreement, Section 5.02 of the Collateral Agreement, or any analogous provision of any other Loan Document, in a manner that would by its terms alter the pro rata sharing of payments required thereby or the waterfall provision, without the prior written consent of each Lender directly and adversely affected thereby;

 

(v) amend or modify the provisions of this Section 9.08 or the definition of the term “Required Lenders” or any other provision hereof specifying the number or percentage of Lenders required to waive, amend or modify any rights hereunder or make any determination or grant any consent hereunder, without the prior written consent of each Lender (it being understood that, with the consent of the Required Lenders, additional extensions of credit pursuant to this Agreement may be included in the determination of the Required Lenders on substantially the same basis as the Loans and Commitments are included on the Closing Date);

 

(vi) unless pursuant to a transaction permitted by this Agreement (including Section 6.05), release all or substantially all of the Collateral or release all or substantially all of the value of the Guarantees provided by the Loan Parties under the Collateral Agreement, in each case, without the prior written consent of each Lender;

 

(vii) by its terms, subordinate the right of payment in respect of the Obligations owing to any Lender to any other Indebtedness (other than, for the avoidance of doubt, Indebtedness permitted to have priority of payment under the terms of this Agreement prior to giving effect to such waiver, amendment or modification), without the prior written consent of each Lender;

 

(viii) by its terms, subordinate the Liens on the Collateral for the benefit of any of the Lenders (in its capacity as a Secured Party hereunder) securing any Obligations to any other Lien in respect of any Indebtedness (other than, for the avoidance of doubt, Indebtedness permitted to be secured by Liens on the Collateral that are senior to the Liens securing the Obligations under the terms of this Agreement prior to giving effect to such waiver, amendment or modification), without the prior written consent of each Lender;

 

(ix) amend or waive any condition precedent to any Credit Extension (or deemed extension of credit) under the Revolving Facility without the consent of the Required Revolving Lenders (and, in the case of the issuance of a Letter of Credit, the relevant Issuing Bank, or the issuance of a Swing Line Loan, the Swing Line Lender); or

 

(x) amend or waive any condition precedent to any Credit Extension (or deemed extension of credit) under the DDTL Facility without the consent of the Required DDTL Lenders;

 

provided that no such amendment, waiver or modification shall amend, modify or otherwise affect the rights or duties of the Administrative Agent, the Swing Line Lender or the Issuing Banks hereunder without the prior written consent of the Administrative Agent, the Swing Line Lender or the Issuing Banks acting as such at the effective date of such agreement, as applicable. Each Lender shall be bound by any waiver, amendment or modification authorized by this Section 9.08 and any consent by any Lender pursuant to this Section 9.08 shall bind any assignee of such Lender.

 

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(3) Notwithstanding anything in this Agreement or any other Loan Document to the contrary:

 

(a) without the consent of any Lender, the Swing Line Lender or any Issuing Bank, the Loan Parties and the Administrative Agent may (in their respective sole discretion, or shall, to the extent required by any Loan Document) enter into any amendment, modification or waiver of any Loan Document, or enter into any new agreement or instrument, to effect the granting, perfection, protection, expansion or enhancement of any security interest in any Collateral or additional property to become Collateral for the benefit of the Secured Parties, or as required by local law to give effect to, or protect any security interest for the benefit of the Secured Parties, in any property or so that the security interests therein comply with applicable law;

 

(b) this Agreement may be amended (or amended and restated) without the consent of any Lender (but with the consent of the Loan Parties and the Administrative Agent) if, upon giving effect to such amendment and restatement, such Lender shall no longer be a party to this Agreement (as so amended and restated), the Commitments of such Lender shall have terminated (but such Lender shall continue to be entitled to the benefits of Sections 2.16, 2.17 and 2.18), such Lender shall have no other commitment or other obligation hereunder and such Lender shall have been paid in full all principal, interest and other amounts owing to it or accrued for its account under this Agreement;

 

(c) this Agreement may be amended (or amended and restated) with the written consent of the Required Lenders, the Administrative Agent and the Borrower (i) to add one or more additional credit facilities to this Agreement and to permit the extensions of credit from time to time outstanding thereunder and the accrued interest and fees in respect thereof to share ratably in the benefits of this Agreement and the other Loan Documents with the Loans and the accrued interest and fees in respect thereof, (ii) to include appropriately the Lenders holding such credit facilities in any determination of the Required Lenders and (iii) to change, modify or alter Section 2.19(2) or (3) of this Agreement, Section 5.02 of the Collateral Agreement, or any other provision in the Loan Documents relating to pro rata sharing of payments among the Lenders to the extent necessary to effectuate any of the amendments (or amendments and restatements) enumerated in sub-clause (3)(b) or sub-clause (3)(c)(i) of this Section 9.08;

 

(d) the Borrower may enter into Incremental Facility Amendments in accordance with Section 2.22, Refinancing Amendments in accordance with Section 2.23, Extension Amendments in accordance with Section 2.24, and such Incremental Facility Amendments, Extension Amendments and Refinancing Amendments shall be effective to amend the terms of this Agreement and the other applicable Loan Documents, in each case, without any further action or consent of any other party to any Loan Document;

 

(e) subject to clause (2)(c)(ii) above, any amendment or waiver that by its terms affects the rights or duties of Lenders holding Loans or Commitments of a particular Class (but not the rights or duties of Lenders holdings Loans or Commitments of any other Class) will, solely at the option of the Borrower, require only the requisite percentage in interest of the affected Class of Lenders that would be required to consent thereto if such Class of Lenders were the only Class of Lenders;

 

(f) no Lender consent is required to effect any amendment, modification or supplement to any Acceptable Intercreditor Agreement (or form thereof) and/or any other intercreditor arrangements entered into in connection herewith (i) that is for the purpose of adding the holders of Indebtedness (or any Permitted Refinancing Indebtedness of the foregoing) (or a Debt Representative with respect thereto) as parties thereto, as expressly contemplated by the terms of such Acceptable Intercreditor Agreement or such other intercreditor arrangement, as applicable (it being understood that any such amendment, modification or supplement may make such other changes to the applicable intercreditor agreement as, in the good faith determination of the Administrative Agent, are required to effectuate the foregoing), (ii) that is expressly contemplated by the definition of Acceptable Intercreditor Agreement, any Acceptable Intercreditor Agreement and/or any other intercreditor arrangements entered into in connection herewith or (iii) that effects changes that are not material to the interests of the Lenders; provided that no such agreement shall directly and adversely amend, modify or otherwise affect the rights or duties of the Administrative Agent or the Collateral Agent hereunder or under any other Loan Document without the prior written consent of the Administrative Agent or the Collateral Agent, as applicable;

 

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(g) this Agreement and any other Loan Document may be amended solely with the consent of the Administrative Agent and the Borrower without the need to obtain the consent of any other Lender if such amendment is delivered in order to correct, amend or cure any ambiguity, mistake, omission of a technical nature, inconsistency or defect or correct any typographical or obvious error or other manifest error in any Loan Document or any necessary or desirable technical change (including, without limitation, to effect administrative changes of a technical or immaterial nature or to correct incorrect cross references or similar inaccuracies in this Agreement or the applicable Loan Document) and such amendment shall become effective without any further action or consent of any other party to any Loan Documents if the same is not objected to in writing by the Required Lenders within five (5) Business Days following receipt of notice thereof. Guarantees, collateral documents, security documents, intercreditor agreements, and related documents executed in connection with this Agreement may be in a form reasonably determined by the Administrative Agent or Collateral Agent, as applicable, and may be amended, modified, terminated or waived, and consent to any departure therefrom may be given, without the consent of any Lender if such amendment, modification, waiver or consent is given in order to (x) comply with local law or advice of counsel or (y) cause such guarantee, collateral document, security document or related document to be consistent with this Agreement and the other Loan Documents. The Borrower and the Administrative Agent may, without the consent of any other Lender, effect amendments to this Agreement and the other Loan Documents as may be necessary in the reasonable opinion of the Borrower and the Administrative Agent to effect the provisions of Sections 2.15, 2.22, 2.23 and 2.24;

 

(h) only the consent of the Administrative Agent (but not the Required Lenders, the Required Revolving Lenders, the Required DDTL Lenders or any other Lender or group of Lenders) and the Borrower shall be required to effectuate any amendment to the Loan Documents that adds one or more provisions to the Loan Documents that are, or modifying any then existing provision in a manner that is, in the reasonable judgment of the Administrative Agent, more favorable to the Lenders or any group of Lenders;

 

(i) this Agreement may be amended to effect repricing transactions without the approval or consent of the Lenders other than any Lender holding Loans and Commitments subject to such repricing transaction that will continue as a Lender in respect of the repriced tranche of Loans and/or Commitments or modified Loans and/or Commitments; and

 

(j) no Defaulting Lender shall have any right to approve or disapprove any amendment, waiver or consent hereunder, except that the Commitment of such Lender may not be increased, the Revolving Facility Commitment Termination Date, the DDTL Facility Commitment Expiration Date or the Maturity Date may not be extended and, except as otherwise set forth herein, amounts payable to such Lender hereunder may not be permanently reduced, in each case without the consent of such Lender (other than reductions in fees and interest in which such reduction does not disproportionately affect such Lender).

 

Section 9.09          Interest Rate Limitation. Notwithstanding anything herein to the contrary, if at any time the applicable interest rate applicable to any Loan, together with all fees, charges and other amounts that may be treated as interest on such Loan under applicable law (collectively, the “Charges”), as provided for herein or in any other document executed in connection herewith, or otherwise contracted for, charged, received, taken or reserved by any Lender, shall exceed the maximum lawful rate of interest (the “Maximum Rate”) that may be contracted for, charged, taken, received or reserved by such Lender holding such Loan in accordance with applicable law, the rate of interest payable hereunder in respect of such Loan hereunder, together with all Charges payable to such Lender in respect thereof, shall be limited to the Maximum Rate; provided that such excess amount shall be paid to such Lender on subsequent payment dates to the extent not exceeding the legal limitation. In no event will the total interest received by any Lender exceed the amount which it could lawfully have received and any such excess amount received by any Lender will be applied to reduce the principal balance of the Loans or to other amounts (other than interest) payable hereunder to such Lender, and if no such principal or other amounts are then outstanding, such excess or part thereof remaining will be paid to the Borrower.

 

Section 9.10          Entire Agreement. This Agreement, the other Loan Documents and the agreements regarding certain Fees referred to herein constitute the entire contract between the parties relative to the subject matter hereof. Any previous agreement among or representations from the parties or their Affiliates with respect to the subject matter hereof is superseded by this Agreement and the other Loan Documents. Notwithstanding the foregoing, the Fee Letter shall survive the execution and delivery of this Agreement and remain in full force and effect. Nothing in this Agreement or in the other Loan Documents, expressed or implied, is intended to confer upon any party other than the parties hereto and thereto any rights, remedies, obligations or liabilities under or by reason of this Agreement or the other Loan Documents.

 

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Section 9.11          WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.11.

 

Section 9.12          Severability. In the event any one or more of the provisions contained in this Agreement or in any other Loan Document shall be held to be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby. The parties party hereto from time to time shall endeavor in good faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

 

Section 9.13          Counterparts; Electronic Execution. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same contract, and shall become effective as provided in Section 9.03. Signature pages may be detached from multiple separate counterparts and attached to a single counterpart. Delivery of an executed counterpart to this Agreement by facsimile or other Electronic Transmission (e.g., “PDF” or “TIFF”) shall be as effective as delivery of a manually executed counterpart hereof. The words “execution,” “signed,” “signature,” and words of like import in this Agreement,  in or related to any document to be signed in connection with this Agreement and the transactions contemplated hereby or  in any amendment or other modification hereof (including waivers and consents) shall be deemed to include electronic signatures, the electronic matching of assignment terms and contract formations on electronic platforms approved by the Administrative Agent, or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act.

 

Section 9.14          Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement.

 

Section 9.15          Jurisdiction; Consent to Service of Process.

 

(1) Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of any New York State court or federal court of the United States of America sitting in New York County, and any appellate court from any thereof (collectively, “New York Courts”), in any action or proceeding arising out of or relating to this Agreement or the other Loan Documents, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding shall be heard and determined in such New York State court or, to the extent permitted by law, in such federal court.

 

Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that any party may otherwise have to bring any action or proceeding relating to this Agreement or any of the other Loan Documents in the courts of any jurisdiction, except that each of the Loan Parties agrees that (a) it will not bring any such action or proceeding in any court other than New York Courts (it being acknowledged and agreed by the parties hereto that any other forum would be inconvenient and inappropriate in view of the fact that more of the Lenders who would be affected by any such action or proceeding have contacts with the State of New York than any other jurisdiction), and (b) in any such action or proceeding brought against any Loan Party in any other court, it will not assert any cross-claim, counterclaim or setoff, or seek any other affirmative relief, except to the extent that the failure to assert the same will preclude such Loan Party from asserting or seeking the same in the New York Courts.

 

(2) Each of the parties hereto hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the other Loan Documents in any New York State or federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

 

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Section 9.16          Confidentiality. Each of the Lenders, each of the Issuing Banks and each of the Agents agrees (and agrees to cause each of its Affiliates) to use all information provided to it by or on behalf of the Borrower or its Restricted Subsidiaries under the Loan Documents or otherwise in connection with the Acquisition or the Transactions solely for the purposes of the transactions contemplated by this Agreement and the other Loan Documents and shall not publish, disclose or otherwise divulge such information, (other than information that:

 

(1) has become generally available to the public other than as a result of a disclosure by such party;

 

(2) has been independently developed by such Lender or the Administrative Agent without violating this Section 9.16; or

 

(3) was available to such Lender or the Administrative Agent from a third party having, to such Person’s knowledge, no obligations of confidentiality to the Borrower or any other Loan Party);

 

provided that, each Lender, each Issuing Bank and each Agent agrees that it shall not reveal the same other than to its directors, trustees, officers, employees and advisors with a need to know or to any Person that approves or administers the Loans or Commitments on behalf of such Lender or any numbering, administration or settlement service providers (so long as each such Person shall have been instructed to keep the same confidential in accordance with this Section 9.16), except:

 

(a) to the extent necessary to comply with law or any legal process or the requirements of any Governmental Authority, the National Association of Insurance Commissioners or of any securities exchange on which securities of the disclosing party or any Affiliate of the disclosing party are listed or traded, in which case such Person agrees, to the extent practicable and not prohibited by applicable law, to inform the Borrower promptly thereof prior to disclosure;

 

(b) as part of normal reporting or review procedures to, or examinations by, Governmental Authorities or any bank accountants or bank regulatory authority exercising examination or regulatory authority, in which case (except with respect to any audit or examination conducted by any such bank accountant or bank regulatory authority) such Person agrees, to the extent practicable and not prohibited by applicable law, to inform the Borrower promptly thereof prior to disclosure;

 

(c) to its parent companies, Affiliates or auditors (so long as each such Person shall have been instructed to keep the same confidential in accordance with this Section 9.16);

 

(d) in order to enforce its rights under any Loan Document in a legal proceeding;

 

(e) to any pledgee or assignee under Section 9.04(5) or any other prospective or actual Assignee of, or prospective or actual Participant in, any of its rights under this Agreement (so long as such Person shall have been instructed to keep the same confidential in accordance with this Section 9.16);

 

(f) to any direct or indirect contractual counterparty in Hedge Agreements or such contractual counterparty’s professional advisor (so long as such contractual counterparty or professional advisor to such contractual counterparty agrees to be bound by the provisions of this Section 9.16); and

 

(g) Notwithstanding the foregoing, no such information shall be disclosed to a Disqualified Institution that constitutes a Disqualified Institution at the time of such disclosure without the Borrower’s prior written consent (such consent not to be unreasonably withheld, delayed or conditioned).

 

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Section 9.17          Platform; Borrower Materials. The Borrower hereby acknowledges that (1) the Administrative Agent or the Lead Arrangers will make available to the Lenders materials or information provided by or on behalf of the Borrower hereunder (collectively, “Borrower Materials”) by posting the Borrower Materials on IntraLinks or another similar electronic system (the “Platform”), and (2) certain of the Lenders may be “public-side” Lenders (i.e., Lenders that do not wish to receive MNPI) (each, a “Public Lender”). The Borrower hereby agrees that it will use commercially reasonable efforts to identify that portion of the Borrower Materials that may be distributed to the Public Lenders and that:

 

(a) all such identified Borrower Materials shall be clearly and conspicuously marked “PUBLIC” which, at a minimum, means that the word “PUBLIC” shall appear prominently on the first page thereof;

 

(b) by marking Borrower Materials “PUBLIC,” the Borrower shall be deemed to have authorized the Administrative Agent, the Lead Arrangers and the Lenders to treat the Borrower Materials as not including MNPI;

 

(c) all Borrower Materials marked “PUBLIC” are permitted to be made available through a portion of the Platform designated “Public Investor;” and

 

(d) the Administrative Agent and the Lead Arrangers shall be entitled to treat the Borrower Materials that are not marked “PUBLIC” as being suitable only for posting on a portion of the Platform not designated “Public Investor.”

 

Notwithstanding the foregoing, the following Borrower Materials shall be deemed to be marked “PUBLIC” unless the Borrower notifies the Administrative Agent that any such document contains MNPI and provided that the Borrower shall have been given a reasonable opportunity to review such public-side version and comply with applicable securities laws prior to any distribution thereof: (1) the Loan Documents (other than any schedules hereto or thereto), (2) any notification of changes in the terms of the Term Loans, (3) any notification of the identity of Disqualified Institutions and (4) all information delivered pursuant to clauses (1), (2) and (3) of Section 5.04.

 

Section 9.18          Release of Liens and Guarantees. In the event that (a) any Loan Party conveys, sells, assigns, transfers or otherwise disposes of all or any portion of any of the Equity Interests or assets of any Loan Party (other than Equity Interests of the Borrower) to a Person that is not (and is not required to become) a Loan Party in a transaction not prohibited by the Loan Documents, at the request of the Borrower or (b) any Equity Interests or assets which at any time constitute or otherwise become Excluded Equity Interests or Excluded Assets, as applicable, to the extent such Equity Interests or assets are at such time part of any Collateral, then, in each case of clauses (a) and (b) above, any Liens created by any Loan Document in respect of such Equity Interests or assets shall be automatically released and the Administrative Agent and the Collateral Agent shall promptly (and the Lenders hereby authorize the Administrative Agent and the Collateral Agent to) take such action and execute any such documents as may be reasonably requested by the Borrower and at the Borrower’s expense in connection with such release of any Liens created by any Loan Document in respect of such Equity Interests or assets. In the case of a transaction permitted by the Loan Documents (including through merger, consolidation, amalgamation, re-designation or otherwise) resulting in a Subsidiary Loan Party ceasing to be a Restricted Subsidiary or becoming an Excluded Subsidiary, such Subsidiary Loan Party’s obligations under the Collateral Agreement and any other Loan Document (including any Guarantees and Liens on Collateral, as applicable) shall be automatically terminated and released and the Administrative Agent and the Collateral Agent shall promptly (and the Lenders hereby authorize the Administrative Agent and the Collateral Agent to) and at the Borrower’s expense take such action and execute any such documents as may be reasonably requested by the Borrower to terminate and release such Subsidiary Loan Party’s obligations under the Collateral Agreement and any other Loan Document (including any Guarantees and Liens on Collateral, as applicable); provided that the release of any Subsidiary Loan Party from its obligations under the applicable Guarantee if such Subsidiary Loan Party becomes an Excluded Subsidiary of the type described in clause (2) of the definition thereof pursuant to an Asset Sale of less than all of the Equity Interests of such Subsidiary Loan Party shall only be permitted if at the time such Subsidiary Loan Party becomes an Excluded Subsidiary of such type or at the time the Borrower requests such release (1) no Event of Default shall have occurred and be outstanding, (2) if immediately after such designation it shall be a Restricted Subsidiary any Investments made by a Loan Party into such Restricted Subsidiary after the Closing Date shall be deemed made for purposes of Section 6.04 immediately following such release (net of Returns actually received in respect of such Investments), and any incurrence of Indebtedness by such Restricted Subsidiary and the incurrence of Liens on the assets of such Restricted Subsidiary, in each case, after the Closing Date that remains outstanding on the date of such release shall be deemed incurred for purposes hereof immediately following such release and (3) a Responsible Officer of the Borrower certifies to the Administrative Agent compliance with the preceding clause (1) and (2); provided, further, that the foregoing clause (b) shall not be applicable in the case of any Loan Party no longer being required to provide a guarantee of the Obligations as a result of (i) a transfer of the equity interests of such Loan Party that was done other than for a legitimate business purpose and in contemplation of adversely affecting the Secured Parties’ interests in the Guarantees and Collateral; (ii) a transfer of a portion (but not all) of the equity interest of such Loan Party to an Affiliate of the Borrower or (iii) such Loan Party being designated as (or otherwise becoming) an Immaterial Subsidiary. In addition, the Administrative Agent and the Collateral Agent agree to take such actions as are reasonably requested by the Borrower and at the Borrower’s expense to terminate and release any Guarantees and any Liens on Collateral created by the Loan Documents upon the occurrence of the Termination Date or (in respect of any Lien on any assets of such Loan Party and the Equity Interests of such Loan Party securing solely the Obligations in respect of the Revolving Facility only) the Revolving Facility Commitment Termination Date. Any release hereunder by the Collateral Agent shall be without representation or warranty by or recourse to the Collateral Agent. The Lenders hereby authorize the Administrative Agent and the Collateral Agent, as applicable, to execute and deliver any instruments, documents, and agreements necessary or desirable to evidence and confirm the release of any Guarantor or Collateral pursuant to the foregoing provisions of this paragraph, all without the further consent or joinder of the Administrative Agent, the Collateral Agent, the Issuing Banks or any Lender.

 

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Section 9.19          USA PATRIOT Act and Beneficial Ownership Regulation Notice. Each Lender that is subject to the USA PATRIOT Act and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies the Borrower that pursuant to the requirements of the USA PATRIOT Act and Beneficial Ownership Regulation, it is required to obtain, verify and record information that identifies each Loan Party including Beneficial Ownership, which information includes the name and address of each Loan Party and other information that will allow such Lender or the Administrative Agent, as applicable, to identify each Loan Party and Beneficial Ownership in accordance with the USA PATRIOT Act and applicable Beneficial Ownership Regulation.

 

Section 9.20          Acceptable Intercreditor Agreements.

 

(1) The parties hereto authorize the Administrative Agent to enter into any Acceptable Intercreditor Agreement.

 

(2) The Administrative Agent may from time to time enter into a modification of any Acceptable Intercreditor Agreement, so long as the Administrative Agent reasonably determines that such modification is consistent with the terms of this Agreement or is otherwise permitted under the definition of Acceptable Intercreditor Agreement.

 

(3) The parties hereto (including each Secured Party (by accepting the benefits of the Security Documents) agree that in the event of any conflict between any then in effect Acceptable Intercreditor Agreement and this Agreement or the Security Documents, that the terms of such Acceptable Intercreditor Agreement shall govern and control.

 

Section 9.21          No Liability of the Issuing Banks. The Borrower assumes all risks of the acts or omissions of any beneficiary or transferee of any Letter of Credit with respect to its use of such Letter of Credit. Neither any Issuing Bank nor any of its officers or directors shall be liable or responsible for: (a) the use that any be made of any Letter of Credit or any acts or omissions of any beneficiary or transferee in connection therewith; (b) the validity, sufficiency or genuineness of documents, or of any endorsement thereon, even if such documents should prove to be in any or all respects invalid, insufficient, fraudulent or forged; (c) the payment by such Issuing Bank against presentation of documents that do not comply with the terms of a Letter of Credit, including failure of any documents to bear any reference or adequate reference to the Letter of Credit; or (d) any other circumstances whatsoever in making or failing to make payment under any Letter of Credit, except that the Borrower shall have a claim against such Issuing Bank, and such Issuing Bank shall be liable to the Borrower, to the extent of any direct, but not consequential, damages suffered by the Borrower or any of its Subsidiaries that the Borrower proves were caused by (i) such Issuing Bank’s gross negligence, bad faith or willful misconduct as determined in a final, non-appealable judgment by a court of competent jurisdiction in determining whether documents presented under any Letter of Credit comply with the terms of the Letter of Credit or (ii) such Issuing Bank’s willful failure to make lawful payment under a Letter of Credit after the presentation to it of a draft and certificates strictly complying with the terms and conditions of the Letter of Credit. In furtherance and not in limitation of the foregoing, such Issuing Bank may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary.

 

Section 9.22          No Advisory or Fiduciary Responsibility. In connection with all aspects of each transaction contemplated hereby (including in connection with any amendment, waiver or other modification hereof or of any other Loan Document), the Borrower acknowledges and agrees that: (1) (a) the arranging and other services regarding this Agreement provided by the Agents, the Lead Arrangers and the Lenders are arm’s-length commercial transactions between the Borrower, on the one hand, and the Agents, the Lead Arrangers and the Lenders, on the other hand; (b) the Borrower has consulted its own legal, accounting, regulatory and tax advisors to the extent it deemed appropriate; and (c) the Borrower is capable of evaluating, and understands and accepts, the terms, risks and conditions of the transactions contemplated hereby and by the other Loan Documents; (2) (a) each Agent, each Lead Arranger and each Lender is and has been acting solely as a principal and, except as expressly agreed in writing by the relevant parties, has not been, is not, and will not be acting as an advisor, agent or fiduciary for the Borrower or any other Person and (b) none of the Agents, Lead Arrangers or Lenders has any obligation to the Borrower or any of its Affiliates with respect to the transactions contemplated hereby except those obligations expressly set forth herein and in the other Loan Documents; and (3) the Agents, the Lead Arrangers, the Lenders and their respective Affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Borrower and its Affiliates, and none of the Agents, any Lead Arranger or any Lender has any obligation to disclose any of such interests to the Borrower or any of its Affiliates. To the fullest extent permitted by law, the Borrower hereby waives and releases any claims that it may have against the Agents, the Lead Arrangers and the Lenders with respect to any breach or alleged breach of agency or fiduciary duty in connection with any aspect of any transaction contemplated hereby.

 

205

 

 

Section 9.23          Cashless Settlement. Notwithstanding anything to the contrary contained in this Agreement, any Lender may exchange, continue or rollover all or a portion of its Loans or Commitments in connection with any refinancing, extension, loan modification or similar transaction permitted by the terms of this Agreement, pursuant to a cashless settlement mechanism approved by the Borrower, the Administrative Agent and such Lender.

 

Section 9.24          Acknowledgement and Consent to Bail-In of Affected Financial Institutions. Notwithstanding anything to the contrary in any Loan Document or in any other agreement, arrangement or understanding among any such parties, each party hereto acknowledges that any liability of any Affected Financial Institution arising under any Loan Document, to the extent such liability is unsecured, may be subject to the Write-Down and Conversion Powers of the applicable Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:

 

(1) the application of any Write-Down and Conversion Powers by the applicable Resolution Authority to any such liabilities arising hereunder which may be payable to it by any party hereto that is an Affected Financial Institution; and

 

(2) the effects of any Bail-In Action on any such liability, including, if applicable:

 

(a) a reduction in full or in part or cancellation of any such liability;

 

(b) a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such Affected Financial Institution, its parent undertaking, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such liability under this Agreement or any other Loan Document; or

 

(c) the variation of the terms of such liability in connection with the exercise of the Write-Down and Conversion Powers of the applicable Resolution Authority.

 

Section 9.25          Acknowledgement Regarding Any Supported QFCs. To the extent that the Loan Documents provide support, through a guarantee or otherwise, for Hedge Agreements or any other agreement or instrument that is a QFC (such support “QFC Credit Support” and each such QFC a “Supported QFC”), the parties acknowledge and agree as follows with respect to the resolution power of the Federal Deposit Insurance Corporation under the Federal Deposit Insurance Act and Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act (together with the regulations promulgated thereunder, the “U.S. Special Resolution Regimes”) in respect of such Supported QFC and QFC Credit Support (with the provisions below applicable notwithstanding that the Loan Documents and any Supported QFC may in fact be stated to be governed by the laws of the State of New York and/or of the United States or any other state of the United States):

 

In the event a Covered Entity that is party to a Supported QFC (each, a “Covered Party”) becomes subject to a proceeding under a U.S. Special Resolution Regime, the transfer of such Supported QFC and the benefit of such QFC Credit Support (and any interest and obligation in or under such Supported QFC and such QFC Credit Support, and any rights in property securing such Supported QFC or such QFC Credit Support) from such Covered Party will be effective to the same extent as the transfer would be effective under the U.S. Special Resolution Regime if the Supported QFC and such QFC Credit Support (and any such interest, obligation and rights in property) were governed by the laws of the United States or a state of the United States. In the event a Covered Party or a BHC Act Affiliate of a Covered Party becomes subject to a proceeding under a U.S. Special Resolution Regime, Default Rights under the Loan Documents that might otherwise apply to such Supported QFC or any QFC Credit Support that may be exercised against such Covered Party are permitted to be exercised to no greater extent than such Default Rights could be exercised under the U.S. Special Resolution Regime if the Supported QFC and the Loan Documents were governed by the laws of the United States or a state of the United States. Without limitation of the foregoing, it is understood and agreed that rights and remedies of the parties with respect to a Defaulting Lender shall in no event affect the rights of any Covered Party with respect to a Supported QFC or any QFC Credit Support.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

206

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written.

 

  CAREMAX, INC., as Borrower
     
     
By: /s/ Kevin Wirges
    Name: Kevin Wirges
    Title: Chief Financial Officer

 

[Signature Page to Project Citrus Credit Agreement]

 

 

 

  ROYAL BANK OF CANADA,
  as Administrative Agent and as Collateral Agent
   
   
  By: /s/ Susan Khokher
    Name: Susan Khokher
    Title: Manager, Agency

 

[Signature Page to Project Citrus Credit Agreement]

 

 

 

 

  ROYAL BANK OF CANADA,
  as Lender, an Issuing Bank and the Swing Line Lender
   
   
  By: /s/ Mustafa Topiwalla
    Name: Mustafa Topiwalla
    Title: Authorized Signatory

 

[Signature Page to Project Citrus Credit Agreement]

 

 

 

 

  truist bank,
  as a Lender
   
   
  By: /s/ Ben Cumming
    Name: Ben Cumming
    Title: Managing Director

 

[Signature Page to Project Citrus Credit Agreement]

 

 

 

 

  CITIZENS BANK NA,
  as a Lender
   
   
  By: /s/ Luis Gutierrez
    Name: Luis Gutierrez
    Title: Vice President

 

[Signature Page to Project Citrus Credit Agreement]

 

 

 

 

  REGIONS BANK,
  as a Lender
   
   
  By: /s/ Ned Spitzer
    Name: Ned Spitzer
    Title: Managing Director

 

[Signature Page to Project Citrus Credit Agreement]

 

 

 

 

  CAPITAL ONE, N.A.,
  as a Lender
   
   
  By: /s/ Mathew Corrado
    Name: Mathew Corrado
    Title: Duly Authorized Signatory

 

[Signature Page to Project Citrus Credit Agreement]

 

 

 

 

  FIFTH THIRD BANK, NATIONAL ASSOCIATION,
  as a Lender
   
   
  By: /s/ Thomas Avery
    Name: Thomas Avery
    Title: Executive Director

 

[Signature Page to Project Citrus Credit Agreement]

 

 

 

 

  DEUTSCHE BANK AG NEW YORK BRANCH,
  as a Lender
   
   
  By: /s/ Philip Tancorra
    Name: Philip Tancorra
    Title: Vice President
   
   
  By: /s/ Yumi Okabe
    Name: Yumi Okabe
    Title: Vice President

 

[Signature Page to Project Citrus Credit Agreement]

 

 

 

 

  KEYBANK NATIONAL ASSOCIATION,
  as a Lender
   
   
  By: /s/ James A Gelle
    Name: James A Gelle
    Title: Senior Vice President

 

[Signature Page to Project Citrus Credit Agreement]

 

 

 

 

  BANK UNITED, N.A.,
  as a Lender
   
   
  By: /s/ Jennifer Garcia-Barbon
    Name: Jennifer Garcia-Barbon
    Title: Vice President

 

[Signature Page to Project Citrus Credit Agreement]

 

 

 

 

Exhibit 10.8

 

CAREMAX, INC.

 

INDEMNIFICATION AGREEMENT

 

This Indemnification Agreement, dated June 8, 2021, is made between CareMax, Inc., a Delaware corporation (the “Company”), and [●] (the “Indemnitee”).

 

RECITALS

 

WHEREAS, the Company desires to attract and retain the services of talented and experienced individuals, such as Indemnitee, to serve as directors and officers of the Company and its subsidiaries and wishes to indemnify its directors and officers to the maximum extent permitted by law;

 

WHEREAS, the Company and Indemnitee recognize that corporate litigation in general has subjected directors and officers to expensive litigation risks;

 

WHEREAS, Section 145 (“Section 145”) of the General Corporation Law of the State of Delaware, as amended (“DGCL”), under which the Company is organized, empowers the Company to indemnify its directors and officers by agreement and to indemnify persons who serve, at the request of the Company, as the directors and officers of other corporations or enterprises, and expressly provides that the indemnification provided by Section 145 is not exclusive;

 

WHEREAS, Section 145(g) of the DGCL allows for the purchase of director and officer (“D&O”) liability insurance by the Company, which in theory can cover asserted liabilities without regard to whether they are indemnifiable by the Company or not;

 

WHEREAS, individuals considering service or presently serving expect to be extended market terms of indemnification commensurate with their position, and that entities such as Company will endeavor to maintain appropriate D&O insurance; and

 

WHEREAS, in order to induce Indemnitee to serve or continue to serve as a director or officer of the Company and/or one or more subsidiaries of the Company, or otherwise serve the Company in an indemnifiable capacity as set forth below, the Company and Indemnitee enter into this Agreement.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the mutual covenants made herein and other good and valuable consideration, the receipt and sufficiency of which are mutually acknowledged, Indemnitee and the Company agree as follows:

 

1.             Definitions. As used in this Agreement:

 

(a)           “Agent” means any person who is or was a director, officer, employee or other agent of the Company or a subsidiary of the Company; or is or was serving at the request of, for the convenience of, or to represent the interests of the Company or a subsidiary of the Company as a director, officer, employee, fiduciary, or agent of another foreign or domestic corporation, limited liability company, employee benefit plan, nonprofit entity, partnership, joint venture, trust or other enterprise; or was a director, officer, employee, fiduciary, or agent of a foreign or domestic corporation which was a predecessor corporation of the Company or a subsidiary of the Company, or was a director, officer, employee, fiduciary, or agent of another enterprise at the request of, for the convenience of, or to represent the interests of such predecessor corporation.

 

 

 

 

(b)           “Board” means the Board of Directors of the Company.

 

(c)           “Change in Control” shall be deemed to have occurred if (i) any “person,” as such term is used in Sections 13(d) and 14(d) of the Exchange Act, other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing a majority of the total voting power represented by the Company’s then outstanding voting securities, (ii) during any period of two (2) consecutive years, individuals who at the beginning of such period constituted the Board, together with any new directors whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination was previously so approved, cease for any reason to constitute a majority of the Board, (iii) the stockholders of the Company approve a merger or consolidation or a sale of all or substantially all of the Company’s assets with or to another entity, other than a merger, consolidation or asset sale that would result in the holders of the Company’s outstanding voting securities immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least a majority of the total voting power represented by the voting securities of the Company or such surviving or successor entity outstanding immediately thereafter, or (iv) the stockholders of the Company approve a plan of complete liquidation of the Company.

 

(d)           “ERISA” means Employee Retirement Income Security Act of 1974, as amended.

 

(e)           “Exchange Act” means Securities Exchange Act of 1934, as amended.

 

(f)            “Expenses” shall include all out-of-pocket costs of any type or nature whatsoever (including, without limitation, all attorneys’ fees and related costs and disbursements), actually and reasonably incurred by Indemnitee in connection with either the investigation, defense, or appeal of a Proceeding, or establishing or enforcing a right to indemnification under this Agreement, or Section 145 or otherwise; provided, however, that “Expenses” shall not include any judgments, fines, ERISA excise taxes or penalties, or amounts paid in settlement of a Proceeding.

 

(g)           “Final Adjudication” and “finally adjudged” means a final judgment or other binding determination from which there is no further procedural recourse, including without limitation following exhaustion or expiration of all available appeals.

 

(h)           “Independent Counsel” means a law firm, or a partner (or, if applicable, member) of such a law firm, that is experienced in relevant matters of corporation law and neither currently is, nor in the past five years has been, retained to represent: (i) the Company or Indemnitee in any matter material to either such party or (ii) any other party to or witness in the proceeding giving rise to a claim for indemnification hereunder; provided however, that “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement. Where required by this Agreement, Independent Counsel shall be retained at the Company’s sole expense.

 

(i)            “Proceeding” means any threatened, pending, or completed action, claim, demand, discovery request, subpoena, hearing, suit, arbitration, alternate dispute resolution mechanism, investigation, administrative hearing, or any other proceeding whether formal or informal, civil, criminal, administrative, or investigative, including any such investigation or proceeding instituted by or on behalf of the Company or its Board of Directors, including any appeal of the foregoing, in which Indemnitee is or reasonably may be involved as a party or target, that is associated with Indemnitee’s being an Agent of the Company.

 

(j)            “Securities Act” means the Securities Act of 1933, as amended.

 

(k)          “Subsidiary” means any corporation of which more than 50% of the outstanding voting securities is owned directly or indirectly by the Company, by the Company and/or one or more other subsidiaries.

 

2 

 

 

2.             Agreement to Serve. Indemnitee agrees to serve and/or continue to serve as an Agent of the Company, at its will (or under separate agreement, if such agreement exists), in the capacity Indemnitee currently serves as an Agent of the Company, so long as Indemnitee is duly appointed or elected and qualified in accordance with the applicable provisions of the Bylaws of the Company (“Bylaws”) or any subsidiary of the Company or until such time as Indemnitee tenders Indemnitee’s resignation in writing; provided, however, that nothing contained in this Agreement is intended to create any right to continued employment or other service by Indemnitee.

 

3.             Liability Insurance.

 

(a)           Maintenance of D&O Insurance. The Company covenants and agrees that, so long as Indemnitee shall continue to serve as an Agent of the Company and thereafter so long as Indemnitee shall be subject to any possible Proceeding by reason of the fact that Indemnitee was an Agent of the Company, the Company, subject to Section 3(c), shall promptly obtain and maintain in full force and effect directors’ and officers’ liability insurance (“D&O Insurance”) in reasonable amounts from established and reputable insurers, and as more fully described below. In the event of a Change in Control, the Company shall, as set forth in Section 3(c), either: (i) maintain such D&O Insurance for six (6) years; or (ii) purchase a six (6) year tail for such D&O Insurance.

 

(b)           Rights and Benefits. In all policies of D&O Insurance, Indemnitee shall qualify as an insured in such a manner as to provide Indemnitee the same rights and benefits as are accorded to the most favorably insured of the Company’s Agents of the same standing as Indemnitee.

 

(c)           Limitation on Required Maintenance of D&O Insurance. Notwithstanding the foregoing, the Company shall have no obligation to obtain or maintain D&O Insurance at all, or of any type, terms, or amount, if the Company determines in good faith and after using commercially reasonable efforts that: such insurance is not reasonably available; the premium costs for such insurance are disproportionate to the amount of coverage provided; the coverage provided by such insurance is limited so as to provide an insufficient or unreasonable benefit; Indemnitee is covered by similar insurance maintained by a subsidiary of the Company; or the Company is to be acquired and a tail policy of reasonable terms and duration can be purchased for pre-closing acts or omissions by Indemnitee.

 

3 

 

 

4.             Mandatory Indemnification. Subject to the terms of this Agreement:

 

(a)           Third Party Actions. If Indemnitee is a person who was or is a party or is threatened to be made a party to any Proceeding (other than an action by or in the right of the Company) by reason of the fact that Indemnitee is or was an Agent of the Company, or by reason of anything done or not done by Indemnitee in any such capacity, the Company shall indemnify Indemnitee against all Expenses and liabilities of any type whatsoever (including, but not limited to, judgments, fines, ERISA excise taxes and penalties, and amounts paid in settlement) actually and reasonably incurred by Indemnitee in connection with the investigation, defense, settlement or appeal of such Proceeding; provided that Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or Proceeding, had no reasonable cause to believe Indemnitee’s conduct was unlawful.

 

(b)           Derivative Actions. If Indemnitee is a person who was or is a party or is threatened to be made a party to any Proceeding by or in the right of the Company by reason of the fact that Indemnitee is or was an Agent of the Company, or by reason of anything done or not done by Indemnitee in any such capacity, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by Indemnitee in connection with the investigation, defense, settlement or appeal of such Proceeding; provided that Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company; except that no indemnification under this Section 4(b) shall be made in respect to any claim, issue or matter as to which Indemnitee shall have been finally adjudged to be liable to the Company by a court of competent jurisdiction that the Indemnitee is liable to the Company, unless and only to the extent that the Delaware Court of Chancery or the court in which such Proceeding was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnity for such amounts which the Delaware Court of Chancery or such other court shall deem proper.

 

(c)           Actions where Indemnitee is Deceased. If Indemnitee is a person who was or is a party or is threatened to be made a party to any Proceeding by reason of the fact that Indemnitee is or was an Agent of the Company, or by reason of anything done or not done by Indemnitee in any such capacity, and if, prior to, during the pendency of or after completion of such Proceeding Indemnitee is deceased, the Company shall indemnify Indemnitee’s heirs, executors and administrators against all Expenses and liabilities of any type whatsoever to the extent Indemnitee would have been entitled to indemnification pursuant to this Agreement were Indemnitee still alive.

 

(d)           Certain Terminations. The termination of any Proceeding or of any claim, issue, or matter therein by judgment, order, settlement, or conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself create a presumption that Indemnitee did not act in good faith and in a manner which Indemnitee reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal action or Proceeding, that Indemnitee had reasonable cause to believe that Indemnitee’s conduct was unlawful.

 

(e)           Limitations. Notwithstanding the foregoing provisions of Sections 4(a), 4(b), 4(c) and 4(d), but subject to the exception set forth in Section 13 which shall control, the Company shall not be obligated to indemnify the Indemnitee for Expenses or liabilities of any type whatsoever for which payment (and the Company’s indemnification obligations under this Agreement shall be reduced by such payment) is actually made to or on behalf of Indemnitee, by the Company or otherwise, under a corporate insurance policy, or under a valid and enforceable indemnity clause, right, by-law, or agreement; and, in the event the Company has previously made a payment to Indemnitee for an Expense or liability of any type whatsoever for which payment is actually made to or on behalf of the Indemnitee from any such source, Indemnitee shall return to the Company the amounts subsequently received by the Indemnitee that source.

 

(f)            Witness. In the event that Indemnitee is not a party or threatened to be made a party to a Proceeding, but is subpoenaed (or given a written request to be interviewed by or provide documents or information to a government authority of any jurisdiction) in such a Proceeding by reason of the fact that the Indemnitee is or was an Agent of the Company, or by reason of anything witnessed or allegedly witnessed by the Indemnitee in that capacity, the Company shall indemnify the Indemnitee against all actually and reasonably incurred out of pocket costs (including without limitation legal fees) incurred by the Indemnitee in responding to such subpoena or written request for an interview. As a condition to this right, Indemnitee must provide notice of such subpoena or request to the Company within 14 days, otherwise the Company’s obligation to pay such costs shall only attach for costs incurred from the date of notice.

 

4 

 

 

5.             Indemnification for Expenses in a Proceeding in Which Indemnitee is Wholly or Partly Successful.

 

(a)           Successful Defense. Notwithstanding any other provisions of this Agreement, to the extent Indemnitee has been successful, on the merits or otherwise, in defense of any Proceeding (including, without limitation, an action by or in the right of the Company) in which Indemnitee was a party by reason of the fact that Indemnitee is or was an Agent of the Company at any time, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by or on behalf of Indemnitee in connection with the investigation, defense or appeal of such Proceeding.

 

(b)           Partially Successful Defense. Notwithstanding any other provisions of this Agreement, to the extent that Indemnitee is a party to any Proceeding (including, without limitation, an action by or in the right of the Company) in which Indemnitee was a party by reason of the fact that Indemnitee is or was an Agent of the Company at any time and is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by or on behalf of Indemnitee in connection with each successfully resolved claim, issue or matter.

 

(c)           Dismissal. For purposes of this section and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

 

(d)           Contribution. If the indemnification provided in this Agreement is unavailable and may not be paid to Indemnitee, then to the extent allowed by law, in respect of any threatened, pending or completed Proceeding in which the Company is jointly liable with Indemnitee (or would be if joined in such Proceeding), the Company shall contribute to the amount of expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred and paid or payable by Indemnitee in such proportion as is appropriate to reflect (i) the relative benefits received by the Company on the one hand and Indemnitee on the other hand from the transaction from which such Proceeding arose, and (ii) the relative fault of Company on the one hand and of Indemnitee on the other in connection with the events which resulted in such expenses, judgments, fines or settlement amounts, as well as any other relevant equitable considerations. The relative fault of the Company on the one hand and of Indemnitee on the other shall be determined by reference to, among other things, the parties' relative intent, knowledge, access to information, active or passive conduct, and opportunity to correct or prevent the circumstances resulting in such expenses, judgments, fines or settlement amounts. The Company agrees that it would not be just and equitable if contribution pursuant to this section were determined by pro rata allocation or any other method of allocation which does not take account of the foregoing equitable considerations.

 

(e)           Settlements by Company. The Company may not settle any claim held by Indemnitee without express written consent of Indemnitee, which may be given or withheld in Indemnitee’s sole discretion.

 

5 

 

 

6.             Mandatory Advancement of Expenses.

 

(a)           Subject to the terms of this Agreement and following notice pursuant to Section 7(a) below, the Company shall advance, interest free, all Expenses reasonably incurred by Indemnitee in connection with the investigation, defense, settlement or appeal of any Proceeding to which Indemnitee is a party or is threatened to be made a party by reason of the fact that Indemnitee is or was an Agent of the Company (unless there has been a Final Adjudication such that Indemnitee is not entitled to indemnification for such Expenses) upon receipt satisfactory documentation supporting such Expenses. Such advances are intended to be an obligation of the Company to Indemnitee hereunder and shall in no event be deemed to be a personal loan. Such advancement of Expenses shall otherwise be unsecured and without regard to Indemnitee’s ability to repay. The advances to be made hereunder shall be paid by the Company to Indemnitee within 30 days following delivery of a written request therefore by Indemnitee to the Company, along with such documentation and information as is reasonably available to the Indemnitee and is reasonably necessary to determine whether and to what extent the claimant is entitled to advancement (which shall include without limitation reasonably detailed invoices for legal services, but with disclosure of confidential work product not required if that would work a waiver of privilege as to an adverse party). The Company shall discharge its advancement duty by, at its option, (a) paying such Expenses on behalf of Indemnitee, (b) advancing to Indemnitee funds in an amount sufficient to pay such Expenses, or (c) reimbursing Indemnitee for Expenses already paid by Indemnitee. In the event that the Company fails to pay Expenses as incurred by Indemnitee as required by this paragraph, Indemnitee may seek mandatory injunctive relief (including without limitation specific performance) from any court having jurisdiction to require the Company to pay Expenses as set forth in this paragraph. If Indemnitee seeks mandatory injunctive relief pursuant to this paragraph, it shall not be a defense to enforcement of the Company’s obligations set forth in this paragraph that Indemnitee has an adequate remedy at law for damages.

 

(b)           Undertakings. Indemnitee shall qualify for advances upon the execution and delivery to the Company of this Agreement, which constitutes an undertaking whereby Indemnitee promises to repay any amounts advanced if and to the extent that it shall ultimately be determined that Indemnitee is not entitled to indemnification by the Company.

 

7.             Notice and Other Indemnification Procedures.

 

(a)           Notice by Indemnitee. Promptly after receipt by Indemnitee of notice of the commencement of or the threat of commencement of any Proceeding, Indemnitee shall, if Indemnitee believes that indemnification with respect thereto may be sought from the Company under this Agreement, notify the Company in writing of the commencement or threat of commencement thereof provided, however, that a delay in giving such notice will not deprive Indemnitee of any right to be indemnified under this Agreement unless, and then only to the extent that, the Company did not otherwise learn of the Proceeding and such delay is materially prejudicial to the Company; provided, further, that notice will be deemed to have been given without any action on the part of Indemnitee in the event the Company is a party to the same Proceeding and already has notice of all the matters for which Indemnitee is demanding indemnification and advancement.

 

(b)           Insurance. If the Company receives notice pursuant to Section 7(a) of the commencement of a Proceeding that may be covered under D&O Insurance then in effect, the Company shall give prompt notice of the commencement of such Proceeding to the insurers in accordance with the procedures set forth in the respective policies.

 

(c)           Defense. In the event the Company shall be obligated to pay the Expenses of any Proceeding against Indemnitee, the Company shall be entitled to assume the defense of such Proceeding, with counsel selected by the Company and approved by Indemnitee (which approval shall not be unreasonably withheld), upon the delivery to Indemnitee of written notice of the Company’s election so to do. After delivery of such notice, and the retention of such counsel by the Company, the Company will not be liable to Indemnitee under this Agreement for any fees of counsel subsequently incurred by Indemnitee with respect to the same Proceeding; provided that (i) Indemnitee shall have the right to employ Indemnitee’s own counsel in any such Proceeding at Indemnitee’s expense; and (ii) Indemnitee shall have the right to employ Indemnitee’s own counsel in any such Proceeding at the Company’s expense if (A) the Company has authorized the employment of counsel by Indemnitee at the expense of the Company; (B) Indemnitee shall have reasonably concluded based on the written advice of Indemnitee’s legal counsel that there may be a conflict of interest between the Company and Indemnitee in the conduct of any such defense; or (C) the Company shall not, in fact, have employed counsel to assume the defense of such Proceeding. In addition to all the requirements above, if the Company has D&O Insurance, or other insurance, with a panel counsel requirement that may cover the matter for which indemnity is claimed by Indemnitee, then Indemnitee shall use such panel counsel or other counsel approved by the insurers, unless there is an actual conflict of interest posed by representation by all such counsel, or unless and to the extent Company waives such requirement in writing. Indemnitee and Indemnitee’s counsel shall provide reasonable cooperation with such insurer on request of the Company.

 

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8.             Right to Indemnification.

 

(a)           Right to Indemnification. In the event that Section 5(a) is inapplicable, the Company shall indemnify Indemnitee pursuant to this Agreement unless, and except to the extent that, it shall have been determined by one of the methods listed in Section 8(b) that Indemnitee has not met the applicable standard of conduct required to entitle Indemnitee to such indemnification.

 

(b)           Determination of Right to Indemnification. A determination of Indemnitee’s right to indemnification under this Section 8 shall be made at the election: (i) by a majority vote of directors who are not parties to the Proceeding for which indemnification is being sought, even though less than a quorum; (ii) by a committee of the Board consisting of directors who are not parties to the Proceeding for which indemnification is being sought, who, even though less than a quorum, have been designated by a majority vote of the disinterested directors; (iii) if there are no such disinterested directors or if the disinterested directors so direct, by Independent Counsel chosen by the Company in a written opinion to the Board, a copy of which shall be delivered to Indemnitee; or (iv) by the Company’s stockholders. However, in the event there has been a Change in Control, then the determination shall, at Indemnitee’s sole option, be made by Independent Counsel as in (b)(iii) above, with Company choosing the Independent Counsel subject to Indemnitee’s consent, such consent not to be unreasonably withheld.

 

(c)           Submission for Decision. As soon as practicable, and in no event later than 30 days after Indemnitee’s written request for indemnification, the Board shall select the method for determining Indemnitee’s right to indemnification. Indemnitee shall cooperate with the person or persons or entity making such determination with respect to Indemnitee’s right to indemnification, including providing to such person, persons or entity, upon reasonable advance request, any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. Any Independent Counsel or member of the Board shall act reasonably and in good faith in making a determination regarding Indemnitee’s entitlement to indemnification under this Agreement.

 

(d)           Application to Court. If (i) a claim for indemnification or advancement of Expenses is denied, in whole or in part, (ii) no disposition of such claim is made by the Company within 60 days after the request therefore, (iii) the advancement of Expenses is not timely made pursuant to Section 6 of this Agreement or (iv) payment of indemnification is not made pursuant to Section 5 of this Agreement, Indemnitee shall have the right at Indemnitee’s option to apply to the Delaware Court of Chancery, the court in which the Proceeding is or was pending, or any other court of competent jurisdiction, for the purpose of enforcing Indemnitee’s right to indemnification (including the advancement of Expenses) pursuant to this Agreement. Upon written request by Indemnitee, the Company shall consent to service of process.

 

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(e)           Expenses Related to the Enforcement or Interpretation of this Agreement. The Company shall indemnify Indemnitee against all reasonable Expenses incurred by Indemnitee in connection with any hearing or proceeding under this Section 8 involving Indemnitee, and against all reasonable Expenses incurred by Indemnitee in connection with any other proceeding between the Company and Indemnitee to the extent involving the interpretation or enforcement of the rights of Indemnitee under this Agreement, if and to the extent Indemnitee is successful.

 

(f)            Determination of Final Adjudication. In no event shall Indemnitee’s right to indemnification (apart from advancement of Expenses) be determined prior to a Final Adjudication in a Proceeding at issue if the Proceeding is both ongoing, and of the nature to have a Final Adjudication, unless a Final Adjudication in another Proceeding establishes that Indemnitee is not entitled to indemnification in the first Proceeding

 

(g)          Standard. In any proceeding to determine Indemnitee’s right to indemnification or advancement, Indemnitee shall be presumed to be entitled to indemnification or advancement, with the burden of proof on the Company to prove, by a preponderance of the evidence (or higher standard if required by relevant law) that Indemnitee is not so entitled.

 

(h)           Good Faith. Indemnitee shall be fully indemnified for those matters where, in the performance of Indemnitee’s duties for the Company, he or she relied in good faith upon the records of the Company and upon such information, opinions, reports or statements presented to the Company by any of the Company’s officers or employees, or committees of the board of directors, or by any other person as to matters Indemnitee reasonably believed were within such other person’s professional or expert competence and who was selected with reasonable care by or on behalf of the Company.

 

9.             Exceptions. Any other provision herein to the contrary notwithstanding, the Company shall not be obligated:

 

(a)           Claims Initiated by Indemnitee. To indemnify or advance Expenses to Indemnitee with respect to Proceedings or claims initiated or brought voluntarily by Indemnitee (including cross actions), with a reasonable allocation where appropriate, unless (i) such indemnification is expressly required to be made by law, (ii) the Proceeding was authorized by the Board, (iii) such indemnification is provided by the Company, in its sole discretion, pursuant to the powers vested in the Company under the DGCL or (iv) the Proceeding is brought pursuant to Section 8 specifically to establish or enforce a right to indemnification under this Agreement or any other statute or law or otherwise as required under Section 145 in advance of a Final Adjudication, in which case Section 8(e) provision shall control. For clarity, the raising of defenses by the Company by way of argument or affirmative defenses in an Indemnitee-initiated Proceeding against the Company shall not themselves be deemed to be a Proceeding.

 

(b)           Fees on Fees. To indemnify Indemnitee for any Expenses incurred by Indemnitee with respect to any Proceeding instituted by Indemnitee to enforce or interpret this Agreement, to the extent Indemnitee is not successful in such a Proceeding.

 

(c)           Unauthorized Settlements. To indemnify Indemnitee under this Agreement for any amounts paid in settlement of a Proceeding unless the Company consents to such settlement, which consent shall not be unreasonably withheld.

 

(d)           Claims Under Section 16(b). To indemnify Indemnitee for Expenses associated with any Proceeding related to, or the payment of profits made from the purchase and sale (or sale and purchase) by Indemnitee of securities of the Company within the meaning of Section 16(b) of the Exchange Act, or similar provisions of state statutory law or common law (provided, however, that the Company must advance Expenses for such matters as otherwise permissible under this Agreement).

 

(e)           Payments Contrary to Law. To indemnify or advance Expenses to Indemnitee for which payment is prohibited by applicable law.

 

(f)            Required Reimbursement. To indemnify Indemnitee for any reimbursement of the Company by Indemnitee of any compensation, including bonus or other incentive-based or equity-based compensation or of any profits realized by Indemnitee from the sale of securities of the Company, as required in each case under the Securities Act or the Exchange Act (including without limitation reimbursements that (i) arise from an accounting restatement of the Company pursuant to Section 304 of the Sarbanes-Oxley Act of 2002, as amended (“Sarbanes-Oxley”) or the payment to the Company of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 306 of Sarbanes-Oxley, or (ii) arise pursuant to regulations or policies adopted in compliance with Section 954 of the Investor Protection and Securities Reform Act of 2010, as amended).

 

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10.          Non-Exclusivity. The provisions for indemnification and advancement of Expenses set forth in this Agreement shall not be deemed exclusive of any other rights which Indemnitee may have under any provision of law, the Company’s Certificate of Incorporation or Bylaws, the vote of the Company’s stockholders or disinterested directors, other agreements, or otherwise, both as to action in Indemnitee’s official capacity and as to action in another capacity while occupying Indemnitee’s position as an Agent of the Company. Indemnitee’s rights hereunder shall continue after Indemnitee has ceased acting as an Agent of the Company and shall inure to the benefit of the heirs, executors and administrators of Indemnitee. This Agreement shall supersede all prior indemnification agreements with the Company; provided, Indemnitee is entitled to any advancement or indemnification rights (pursuant to the Company’s Certificate of Incorporation, Bylaws, a prior indemnification agreement, or other agreement) in effect at the time of Indemnitee’s service that is at issue in the matter potentially subject to indemnification, to the extent such rights are more favorable to Indemnitee than those granted herein.

 

11.          Permitted Defenses. It shall be a defense to any action for which a claim for indemnification is made under this Agreement (other than an action brought to enforce a claim for Expenses pursuant to Section 6; provided that the required documents have been tendered to the Company) that Indemnitee is not entitled to indemnification because of the limitations set forth in Sections 4 and 9 . Neither the failure of the Company or an Independent Counsel to have made a determination prior to the commencement of such enforcement action that indemnification of Indemnitee is proper in the circumstances, nor an actual determination by the Company or an Independent Counsel that such indemnification is improper, shall be a defense to the action or create a presumption that Indemnitee is not entitled to indemnification under this Agreement or otherwise. In making any determination concerning Indemnitee’s right to indemnification, there shall be a presumption that Indemnitee has satisfied the applicable standard of conduct. Any determination by the Company concerning Indemnitee’s right to indemnification that is adverse to Indemnitee may be challenged by the Indemnitee in the Court of Chancery of the State of Delaware.

 

12.          Subrogation. Subject to the limitations of Section 13, in the event the Company is obligated to make a payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all documents reasonably required and take all action that may be necessary to secure such rights and to enable the Company effectively to bring suit to enforce such rights (provided that the Company pays Indemnitee’s costs and expenses of doing so), including without limitation by assigning all such rights to the Company or its designee to the extent of such indemnification or advancement of Expenses. Subject to the limitations of Section 13, the Company’s obligation to indemnify or advance expenses under this Agreement shall be reduced by any amount Indemnitee has collected from such other source, and in the event that Company has fully paid such indemnity or expenses, Indemnitee shall return to the Company any amounts subsequently received from such other source of indemnification.

 

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13.          Primacy of Indemnification. The Company acknowledges that Indemnitee may have certain rights to indemnification, advancement of expenses, or liability insurance, neither procured or provided by the Company (including for this section any parent, affiliate, subsidiary, investment vehicle, or joint venture of the Company) nor any entity Indemnitee served or is serving at the direction of the Company, from a third party (collectively, the “Third Party Indemnitors”). The Company agrees that (i) it is the indemnitor of first resort, i.e., its obligations to Indemnitee under this Agreement and any indemnity provisions set forth in its Certificate of Incorporation, Bylaws or elsewhere (collectively, “Indemnity Arrangements”) are primary, and any obligation of the Third Party Indemnitors to advance expenses or to provide indemnification for the same expenses or liabilities incurred by Indemnitee is secondary and excess, (ii) it shall advance the full amount of expenses incurred by Indemnitee and shall be liable for the full amount of all expenses, judgments, penalties, fines and amounts paid in settlement by or on behalf of Indemnitee, to the extent legally permitted and as required by any Indemnity Arrangement, without regard to any rights Indemnitee may have against the Third Party Indemnitors, and (iii) it irrevocably waives, relinquishes and releases the Third Party Indemnitors from any claims against the Third Party Indemnitors for contribution, subrogation or any other recovery of any kind arising out of or relating to any Indemnity Arrangement. The Company further agrees that no advancement or indemnification payment by any Third Party Indemnitor on behalf of Indemnitee shall affect the foregoing, and the Third Party Indemnitors shall be subrogated to the extent of such advancement or payment to all of the rights of recovery of Indemnitee against the Company. The Company and Indemnitee agree that the Third Party Indemnitors are express third party beneficiaries of the terms of this Section 13. The Company, on its own behalf and on behalf of its insurers to the extent allowed by its insurance policies, waives subrogation rights against Indemnitee and Third Party Indemnitors.

 

14.          No Imputation. The knowledge or actions, or failure to act, of any director, officer, employee, or agent of the Company, or the Company itself shall not be imputed to Indemnitee for the purpose of determining Indemnitee’s rights hereunder.

 

15.          Survival of Rights.

 

(a)           All agreements and obligations of the Company contained herein shall continue during the period Indemnitee is an Agent of the Company and shall continue thereafter so long as Indemnitee shall be subject to any possible claim or threatened, pending or completed Proceeding by reason of the fact that Indemnitee was serving in the capacity referred to herein.

 

(b)           The Company shall require any successor to the Company (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.

 

16.          Severability. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever, (i) the validity, legality and enforceability of the remaining provisions of the Agreement (including, without limitation, all portions of any paragraphs of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal, or unenforceable) shall not in any way be affected or impaired thereby, and (ii) to the fullest extent possible, such remaining provisions shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal, or unenforceable.

 

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17.          Modification and Waiver. No supplement, modification, or amendment of this Agreement shall be binding unless it is in a writing signed by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions (even if similar) nor shall such waiver constitute a continuing waiver.

 

18.          Notice. All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given (a) upon delivery if delivered by hand to the party to whom such notice or other communication shall have been directed, (b) if mailed by certified or registered mail with postage prepaid, return receipt requested, on the third business day after the date on which it is so mailed, (c) one (1) business day after the business day of deposit with a nationally recognized overnight delivery service, specifying next day delivery, with written verification of receipt or refusal of delivery, or (d) on the same day as delivered by electronic transmission, upon non-automated confirmation of receipt from the recipient. The address for notice to the Company shall be the principal place of business of the Company and the address for the Indemnitee shall be as shown on the signature page of this Agreement, or to such other address as may have been furnished by either party in the manner set forth above.

 

19.          Governing Law. This Agreement shall be governed exclusively by and construed according to the laws of the State of Delaware as applied to contracts between Delaware residents entered into and to be performed entirely within Delaware. This Agreement is intended to be an agreement of the type contemplated by Section 145(f) of the DGCL.

 

20.          Counterparts. This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement, and electronically transmitted signatures shall be valid.

 

(Signature page follows)

 

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The parties hereto have entered into this Indemnification Agreement, including the undertaking contained herein, effective as of the date first above written.

 

Company:

 

CAREMAX, INC.

 

By:  

Name:

Title:

 

 

 

 

The parties hereto have entered into this Indemnification Agreement, including the undertaking contained herein, effective as of the date first above written.

 

Indemnitee:

 

[●]

 

   

 

Address:  

 

     

 

 

 

 

Exhibit 10.9

 

CAREMAX, INC.
2021 LONG-TERM INCENTIVE PLAN

 

TABLE OF CONTENTS

 

 

 

 

  Page
1. History; Effective Date 1
2. Purposes of the Plan 1
3. Terminology 1
4. Administration 1
  (a) Administration of the Plan 1
  (b) Powers of the Administrator 1
  (c) Delegation of Administrative Authority 2
  (d) Non-Uniform Determinations 2
  (e) Limited Liability; Advisors 3
  (f) Indemnification 3
  (g) Effect of Administrator’s Decision 3
5. Shares Issuable Pursuant to Awards 3
  (a) Initial Share Pool 3
  (b) Adjustments to Share Pool 3
  (c) ISO Limit 4
  (d) Source of Shares 4
6. Participation 4
7. Awards 4
  (a) Awards, In General 4
  (b) Minimum Restriction Period for Awards 4
  (c) Stock Options 4
  (d) Limitation on Reload Options 5
  (e) Stock Appreciation Rights 5
  (f) Repricing 5
  (g) Stock Awards 6
  (h) Stock Units 7
  (i) Performance Shares and Performance Units 7
  (j) Other Stock-Based Awards 8
  (k) Awards to Participants Outside the United States 9
  (l) Limitation on Dividend Reinvestment and Dividend Equivalents 9
8. Withholding of Taxes 9
9. Transferability of Awards 9
10. Adjustments for Corporate Transactions and Other Events. 10
  (a) Mandatory Adjustments 10
  (b) Discretionary Adjustments 10
  (c) Adjustments to Performance Goals 10
  (d) Statutory Requirements Affecting Adjustments 11
  (e) Dissolution or Liquidation 11
11. Change in Control Provisions 11
  (a) Termination of Awards 11
  (b) Continuation, Assumption or Substitution of Awards 12

 

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Page
  (c) Other Permitted Actions 12
  (d) Section 409A Savings Clause 12
12. Substitution of Awards in Mergers and Acquisitions 12
13. Compliance with Securities Laws; Listing and Registration 12
14. Section 409A Compliance 13
15. Plan Duration; Amendment and Discontinuance 14
  (a) Plan Duration 14
  (b) Amendment and Discontinuance of the Plan 14
  (c) Amendment of Awards 14
16. General Provisions 14
  (a) Non-Guarantee of Employment or Service 14
  (b) No Trust or Fund Created 14
  (c) Status of Awards 15
  (d) Subsidiary Employees 15
  (e) Governing Law and Interpretation 15
  (f) Use of English Language 15
  (g) Recovery of Amounts Paid 15
17. Glossary 15

 

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1.   History; Effective Date.

 

CAREMAX, INC., a Delaware corporation (“CareMax”), has established the CAREMAX, INC. 2021 LONG-TERM INCENTIVE PLAN, as set forth herein, and as the same may be amended from time to time (the “Plan”). The Plan was adopted by the Board of Directors of CareMax (the “Board”) on May 12, 2021. The Plan shall become and is effective as of the Effective Date.

 

2.   Purposes of the Plan.

 

The Plan is designed to:

 

(a)   promote the long-term financial interests and growth of CareMax and its Subsidiaries (together, the “Company”) by attracting and retaining management and other personnel and key service providers with the training, experience and ability to enable them to make a substantial contribution to the success of the Company’s business;

 

(b)   motivate management personnel by means of growth-related incentives to achieve long-range goals; and

 

(c)   further the alignment of interests of Participants with those of the stockholders of CareMax through opportunities for increased stock or stock-based ownership in CareMax.

 

Toward these objectives, the Administrator may grant stock options, stock appreciation rights, stock awards, stock units, performance shares, performance units, and other stock-based awards to eligible individuals on the terms and subject to the conditions set forth in the Plan.

 

3.   Terminology.

 

Except as otherwise specifically provided in an Award Agreement, capitalized words and phrases used in the Plan or an Award Agreement shall have the meaning set forth in the glossary at Section 17 of the Plan or as defined the first place such word or phrase appears in the Plan.

 

4.   Administration.

 

(a)   Administration of the Plan.   The Plan shall be administered by the Administrator.

 

(b)   Powers of the Administrator.   The Administrator shall, except as otherwise provided under the Plan, have plenary authority, in its sole and absolute discretion, to grant Awards pursuant to the terms of the Plan to Eligible Individuals and to take all other actions necessary or desirable to carry out the purpose and intent of the Plan. Among other things, the Administrator shall have the authority, in its sole and absolute discretion, subject to the terms and conditions of the Plan to:

 

(i)   determine the Eligible Individuals to whom, and the time or times at which, Awards shall be granted;

 

(ii)   determine the types of Awards to be granted to any Eligible Individual;

 

(iii)   determine the number of shares of Common Stock to be covered by or used for reference purposes for each Award or the value to be transferred pursuant to any Award;

 

(iv)   determine the terms, conditions and restrictions applicable to each Award (which need not be identical) and any shares acquired pursuant thereto, including, without limitation, (A) the purchase price of any shares of Common Stock, (B) the method of payment for shares purchased pursuant to any Award, (C) the method for satisfying any tax withholding obligation arising in connection with any Award, including by the withholding or delivery of shares of Common Stock, (D) subject to Section 7(b), the timing, terms and conditions of the exercisability, vesting or payout of any Award or any shares acquired pursuant thereto, (E) the Performance Goals applicable to any Award and the extent to which such Performance Goals have been attained, (F) the time of the expiration of any Award, (G) the effect of the Participant’s Termination of Service on any of the foregoing, and (H) all other terms, conditions and restrictions applicable to any Award or shares acquired pursuant thereto as the Administrator shall consider to be appropriate and not inconsistent with the terms of the Plan;

 

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(v)   subject to Sections 7(f) and 15, modify, amend or adjust the terms and conditions of any Award;

 

(vi)   subject to Section 7(b), accelerate or otherwise change the time at or during which an Award may be exercised or becomes payable and waive or accelerate the lapse, in whole or in part, of any restriction, condition or risk of forfeiture with respect to such Award; provided, however, that, except in connection with death, disability or a Change in Control, no such change, waiver or acceleration shall be made to any Award that is considered “deferred compensation” within the meaning of Section 409A of the Code if the effect of such action is inconsistent with Section 409A of the Code;

 

(vii)   determine whether an Award will be paid or settled in cash, shares of Common Stock, or in any combination thereof and whether, to what extent and under what circumstances cash or shares of Common Stock payable with respect to an Award shall be deferred either automatically or at the election of the Participant;

 

(viii)   for any purpose, including but not limited to, qualifying for preferred or beneficial tax treatment, accommodating the customs or administrative challenges or otherwise complying with the tax, accounting or regulatory requirements of one or more jurisdictions, adopt, amend, modify, administer or terminate sub-plans, appendices, special provisions or supplements applicable to Awards regulated by the laws of a particular jurisdiction, which sub-plans, appendices, supplements and special provisions may take precedence over other provisions of the Plan, and prescribe, amend and rescind rules and regulations relating to such sub-plans, supplements and special provisions;

 

(ix)   establish any “blackout” period, during which transactions affecting Awards may not be effectuated, that the Administrator in its sole discretion deems necessary or advisable;

 

(x)   determine the Fair Market Value of shares of Common Stock or other property for any purpose under the Plan or any Award;

 

(xi)   administer, construe and interpret the Plan, Award Agreements and all other documents relevant to the Plan and Awards issued thereunder, and decide all other matters to be determined in connection with an Award;

 

(xii)   establish, amend, rescind and interpret such administrative rules, regulations, agreements, guidelines, instruments and practices for the administration of the Plan and for the conduct of its business as the Administrator deems necessary or advisable;

 

(xiii)   correct any defect, supply any omission or reconcile any inconsistency in the Plan or in any Award or Award Agreement in the manner and to the extent the Administrator shall consider it desirable to carry it into effect; and

 

(xiv)   otherwise administer the Plan and all Awards granted under the Plan.

 

(c)   Delegation of Administrative Authority.   The Administrator may designate officers or employees of the Company to assist the Administrator in the administration of the Plan and, to the extent permitted by applicable law and stock exchange rules, the Administrator may delegate to officers or other employees of the Company the Administrator’s duties and powers under the Plan, subject to such conditions and limitations as the Administrator shall prescribe, including without limitation the authority to execute agreements or other documents on behalf of the Administrator; provided, however, that such delegation of authority shall not extend to the granting of, or exercise of discretion with respect to, Awards to Eligible Individuals who are officers under Section 16 of the Exchange Act.

 

(d)   Non-Uniform Determinations.   The Administrator’s determinations under the Plan (including without limitation, determinations of the persons to receive Awards, the form, amount and timing of such Awards, the terms and provisions of such Awards and the Award Agreements evidencing such Awards, and the ramifications of a Change in Control upon outstanding Awards) need not be uniform and may be made by the Administrator selectively among Awards or persons who receive, or are eligible to receive, Awards under the Plan, whether or not such persons are similarly situated.

 

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(e)   Limited Liability; Advisors.   To the maximum extent permitted by law, no member of the Administrator shall be liable for any action taken or decision made in good faith relating to the Plan or any Award thereunder. The Administrator may employ counsel, consultants, accountants, appraisers, brokers or other persons. The Administrator, CareMax, and the officers and directors of CareMax shall be entitled to rely upon the advice, opinions or valuations of any such persons.

 

(f)   Indemnification.   The members of the Administrator and any agent or delegate of the Administrator who is a director, officer or employee of CareMax or an Affiliate shall be indemnified by CareMax against any and all liabilities and expenses to which they may be subjected by reason of any act or failure to act with respect to their duties on behalf of the Plan; provided, that such right to indemnification shall not be available if prohibited by law, by CareMax’s charter or by-laws, or by any directors’ and officers’ liability insurance coverage which may be in effect from time to time.

 

(g)   Effect of Administrator’s Decision.   All actions taken and determinations made by the Administrator on all matters relating to the Plan or any Award pursuant to the powers vested in it hereunder shall be in the Administrator’s sole and absolute discretion, unless in contravention of any express term of the Plan, including, without limitation, any determination involving the appropriateness or equitableness of any action. All determinations made by the Administrator shall be conclusive, final and binding on all parties concerned, including CareMax, its stockholders, any Participants and any other employee, consultant, or director of CareMax and its Affiliates, and their respective successors in interest. No member of the Administrator, nor any director, officer, employee or representative of CareMax shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or Awards.

 

5.   Shares Issuable Pursuant to Awards.

 

(a)   Initial Share Pool.   As of the Effective Date, the number of shares of Common Stock issuable pursuant to Awards that may be granted under the Plan (the “Share Pool”) shall be equal to 7,000,000 shares of Common Stock.

 

(b)   Adjustments to Share Pool.   On and after the Effective Date, the Share Pool shall be adjusted, in addition to any adjustments to be made pursuant to Section 10 of the Plan, as follows:

 

(i)    The Share Pool shall be increased automatically, without further action of the Board, on January 1st of each calendar year commencing after the Effective Date and ending on (and including) January 1, 2031, by a number of shares of Common Stock equal to the lesser of (A) four percent (4%) of the aggregate number of shares of Common Stock outstanding on December 31st of the immediately preceding calendar year, excluding for this purpose any such outstanding shares of Common Stock that were granted under this Plan and remain unvested and subject to forfeiture as of the relevant December 31st, or (B) a lesser number of shares of Common Stock determined by the Board or Compensation Committee prior to the relevant January 1st.

 

(ii)   The Share Pool shall be reduced, on the date of grant, by one share for each share of Common Stock made subject to an Award granted under the Plan;

 

(iii)   The Share Pool shall be increased, on the relevant date, by the number of unissued shares of Common Stock underlying or used as a reference measure for any Award or portion of an Award that is cancelled, forfeited, expired, terminated unearned or settled in cash, in any such case without the issuance of shares;

 

(iv)   The Share Pool shall be increased, on the forfeiture date, by the number of shares of Common Stock that are forfeited back to CareMax after issuance due to a failure to meet an Award contingency or condition with respect to any Award or portion of an Award;

 

For the avoidance of doubt, the Share Pool shall not be increased by (A) shares of Common Stock used as a reference measure for any Award granted under this Plan that are not issued upon settlement of such Award due to a net settlement, (B) shares of Common Stock withheld by or surrendered (either actually or through attestation) to CareMax in payment of the exercise price of any Award, (C) shares of Common Stock withheld by or surrendered (either actually or through attestation) to CareMax in payment of the Tax Withholding Obligation that arises in connection with any Award, or (D) shares of Common Stock have been reacquired by the Company in the open market using the proceeds of amounts received upon the exercise of stock options.

 

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(c)   ISO Limit.   Subject to adjustment pursuant to Section 10 of the Plan, the maximum number of shares of Common Stock that may be issued pursuant to stock options granted under the Plan that are intended to qualify as Incentive Stock Options within the meaning of Section 422 of the Code shall be equal to 7,000,000 shares of Common Stock.

 

(d)   Source of Shares.   The shares of Common Stock with respect to which Awards may be made under the Plan shall be shares authorized for issuance under CareMax’s charter but unissued, or issued and reacquired, including without limitation shares purchased in the open market or in private transactions.

 

6.   Participation.

 

Participation in the Plan shall be open to all Eligible Individuals, as may be selected by the Administrator from time to time. The Administrator may also grant Awards to Eligible Individuals in connection with hiring, recruiting or otherwise, prior to the date the individual first performs services for CareMax or a Subsidiary; provided, however, that such Awards shall not become vested or exercisable, and no shares shall be issued to such individual, prior to the date the individual first commences performance of such services.

 

7.   Awards.

 

(a)   Awards, In General.   The Administrator, in its sole discretion, shall establish the terms of all Awards granted under the Plan consistent with the terms of the Plan. Awards may be granted individually or in tandem with other types of Awards, concurrently with or with respect to outstanding Awards. All Awards are subject to the terms and conditions provided in the Award Agreement, which shall be delivered to the Participant receiving such Award upon, or as promptly as is reasonably practicable following, the grant of such Award. Unless otherwise specified by the Administrator, in its sole discretion, or otherwise provided in the Award Agreement, an Award shall not be effective unless the Award Agreement is signed or otherwise accepted by CareMax and the Participant receiving the Award (including by electronic delivery and/or electronic signature).

 

(b)   Minimum Restriction Period for Awards.   Except as provided below and notwithstanding any provision of the Plan to the contrary, each Award granted under the Plan shall be subject to a minimum Restriction Period of 12 months from the date of grant if vesting of or lapse of restrictions on such Award is based on the Participant’s satisfaction of specified service requirements with the Company or performance conditions. Except as provided below and notwithstanding any provision of the Plan to the contrary, the Administrator shall not have discretionary authority to waive the minimum Restriction Period applicable to an Award, except in the case of death, disability, retirement, termination of employment, or a Change in Control. Notwithstanding any provision of the Plan to the contrary, the provisions of this Section 7(b) shall not apply and/or may be waived, in the Administrator’s discretion, with respect to up to the number of Awards that is equal to five percent (5%) of the aggregate Share Pool as of the Effective Date.

 

(c)   Stock Options.

 

(i)   Grants.   A stock option means a right to purchase a specified number of shares of Common Stock from CareMax at a specified price during a specified period of time. The Administrator may from time to time grant to Eligible Individuals Awards of Incentive Stock Options or Nonqualified Options; provided, however, that Awards of Incentive Stock Options shall be limited to employees of CareMax or of any current or hereafter existing “parent corporation” or “subsidiary corporation,” as defined in Sections 424(e) and 424(f) of the Code, respectively, of CareMax, and any other Eligible Individuals who are eligible to receive Incentive Stock Options under the provisions of Section 422 of the Code. No stock option shall be an Incentive Stock Option unless so designated by the Administrator at the time of grant or in the applicable Award Agreement.

 

(ii)   Exercise.   Stock options shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Administrator; provided, however, that Awards of stock options may not have a term in excess of ten years’ duration unless required otherwise by applicable law. The exercise price per share subject to a stock option granted under the Plan shall not be less than the Fair Market Value of one share of Common Stock on the date of grant of the stock option, except as provided under applicable law or with respect to stock options that are granted in substitution of similar types of awards of a company acquired by CareMax or a Subsidiary or with which CareMax or a Subsidiary combines (whether in connection with a corporate transaction, such as a merger, combination, consolidation or acquisition of property or stock, or otherwise) to preserve the intrinsic value of such awards.

 

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(iii)   Termination of Service.   Except as provided in the applicable Award Agreement or otherwise determined by the Administrator, to the extent stock options are not vested and exercisable, a Participant’s stock options shall be forfeited upon his or her Termination of Service.

 

(iv)   Additional Terms and Conditions.   The Administrator may, by way of the Award Agreement or otherwise, determine such other terms, conditions, restrictions, and/or limitations, if any, of any Award of stock options, provided they are not inconsistent with the Plan.

 

(d)   Limitation on Reload Options.   The Administrator shall not grant stock options under this Plan that contain a reload or replenishment feature pursuant to which a new stock option would be granted automatically upon receipt of delivery of Common Stock to CareMax in payment of the exercise price or any tax withholding obligation under any other stock option.

 

(e)   Stock Appreciation Rights.

 

(i)   Grants.   The Administrator may from time to time grant to Eligible Individuals Awards of stock appreciation rights. A stock appreciation right entitles the Participant to receive, subject to the provisions of the Plan and the Award Agreement, a payment having an aggregate value equal to the product of (i) the excess of (A) the Fair Market Value on the exercise date of one share of Common Stock over (B) the base price per share specified in the Award Agreement, times (ii) the number of shares specified by the stock appreciation right, or portion thereof, which is exercised. The base price per share specified in the Award Agreement shall not be less than the lower of the Fair Market Value on the date of grant or the exercise price of any tandem stock option to which the stock appreciation right is related, or with respect to stock appreciation rights that are granted in substitution of similar types of awards of a company acquired by CareMax or a Subsidiary or with which CareMax or a Subsidiary combines (whether in connection with a corporate transaction, such as a merger, combination, consolidation or acquisition of property or stock, or otherwise) such base price as is necessary to preserve the intrinsic value of such awards.

 

(ii)   Exercise.   Stock appreciation rights shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Administrator; provided, however, that stock appreciation rights granted under the Plan may not have a term in excess of ten years’ duration unless required otherwise by applicable law. The applicable Award Agreement shall specify whether payment by CareMax of the amount receivable upon any exercise of a stock appreciation right is to be made in cash or shares of Common Stock or a combination of both, or shall reserve to the Administrator or the Participant the right to make that determination prior to or upon the exercise of the stock appreciation right. If upon the exercise of a stock appreciation right a Participant is to receive a portion of such payment in shares of Common Stock, the number of shares shall be determined by dividing such portion by the Fair Market Value of a share of Common Stock on the exercise date. No fractional shares shall be used for such payment and the Administrator shall determine whether cash shall be given in lieu of such fractional shares or whether such fractional shares shall be eliminated.

 

(iii)   Termination of Service.   Except as provided in the applicable Award Agreement or otherwise determined by the Administrator, to the extent stock appreciation rights are not vested and exercisable, a Participant’s stock appreciation rights shall be forfeited upon his or her Termination of Service.

 

(iv)   Additional Terms and Conditions.   The Administrator may, by way of the Award Agreement or otherwise, determine such other terms, conditions, restrictions, and/or limitations, if any, of any Award of stock appreciation rights, provided they are not inconsistent with the Plan.

 

(f)   Repricing.   Notwithstanding anything herein to the contrary, except in connection with a corporate transaction involving CareMax (including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, or exchange of shares), the terms of options and stock appreciation rights granted under the Plan may not be amended, after the date of grant, to reduce the exercise price of such options or stock appreciation rights, nor may outstanding options or stock appreciation rights be canceled in exchange for (i) cash, (ii) options or stock appreciation rights with an exercise price or base price that is less than the exercise price or base price of the original outstanding options or stock appreciation rights, or (iii) other Awards, unless such action is approved by CareMax’s stockholders.

 

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(g)   Stock Awards.

 

(i)   Grants.   The Administrator may from time to time grant to Eligible Individuals Awards of unrestricted Common Stock or Restricted Stock (collectively, “Stock Awards”) on such terms and conditions, and for such consideration, including no consideration or such minimum consideration as may be required by law, as the Administrator shall determine, subject to the limitations set forth in Section 7(b). Stock Awards shall be evidenced in such manner as the Administrator may deem appropriate, including via book-entry registration.

 

(ii)   Vesting.   Restricted Stock shall be subject to such vesting, restrictions on transferability and other restrictions, if any, and/or risk of forfeiture as the Administrator may impose at the date of grant or thereafter. The Restriction Period to which such vesting, restrictions and/or risk of forfeiture apply may lapse under such circumstances, including without limitation upon the attainment of Performance Goals, in such installments, or otherwise, as the Administrator may determine. Subject to the provisions of the Plan and the applicable Award Agreement, during the Restriction Period, the Participant shall not be permitted to sell, assign, transfer, pledge or otherwise encumber shares of Restricted Stock.

 

(iii)   Rights of a Stockholder; Dividends.   Except to the extent restricted under the Award Agreement relating to the Restricted Stock, a Participant granted Restricted Stock shall have all of the rights of a stockholder of Common Stock including, without limitation, the right to vote Restricted Stock. Cash dividends declared payable on Common Stock shall be paid, with respect to outstanding Restricted Stock, either as soon as practicable following the dividend payment date or deferred for payment to such later date as determined by the Administrator, and shall be paid in cash or as unrestricted shares of Common Stock having a Fair Market Value equal to the amount of such dividends or may be reinvested in additional shares of Restricted Stock as determined by the Administrator; provided, however, that dividends declared payable on Restricted Stock that is granted as a Performance Award shall be held by CareMax and made subject to forfeiture at least until achievement of the applicable Performance Goal related to such shares of Restricted Stock. Stock distributed in connection with a stock split or stock dividend, and other property distributed as a dividend, shall be subject to restrictions and a risk of forfeiture to the same extent as the Restricted Stock with respect to which such Common Stock or other property has been distributed. As soon as is practicable following the date on which restrictions on any shares of Restricted Stock lapse, CareMax shall deliver to the Participant the certificates for such shares or shall cause the shares to be registered in the Participant’s name in book-entry form, in either case with the restrictions removed, provided that the Participant shall have complied with all conditions for delivery of such shares contained in the Award Agreement or otherwise reasonably required by CareMax.

 

(iv)   Termination of Service.   Except as provided in the applicable Award Agreement, upon Termination of Service during the applicable Restriction Period, Restricted Stock and any accrued but unpaid dividends that are at that time subject to restrictions shall be forfeited; provided that, subject to the limitations set forth in Section 7(b), the Administrator may provide, by rule or regulation or in any Award Agreement, or may determine in any individual case, that restrictions or forfeiture conditions relating to Restricted Stock will be waived in whole or in part in the event of terminations resulting from specified causes, and the Administrator may in other cases waive in whole or in part the forfeiture of Restricted Stock.

 

(v)   Additional Terms and Conditions.   The Administrator may, by way of the Award Agreement or otherwise, determine such other terms, conditions, restrictions, and/or limitations, if any, of any Award of Restricted Stock, provided they are not inconsistent with the Plan.

 

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(h)   Stock Units.

 

(i)   Grants.   The Administrator may from time to time grant to Eligible Individuals Awards of unrestricted stock Units or Restricted Stock Units on such terms and conditions, and for such consideration, including no consideration or such minimum consideration as may be required by law, as the Administrator shall determine, subject to the limitations set forth in Section 7(b). Restricted Stock Units represent a contractual obligation by CareMax to deliver a number of shares of Common Stock, an amount in cash equal to the Fair Market Value of the specified number of shares subject to the Award, or a combination of shares of Common Stock and cash, in accordance with the terms and conditions set forth in the Plan and any applicable Award Agreement.

 

(ii)   Vesting and Payment.   Restricted Stock Units shall be subject to such vesting, risk of forfeiture and/or payment provisions as the Administrator may impose at the date of grant. The Restriction Period to which such vesting and/or risk of forfeiture apply may lapse under such circumstances, including without limitation upon the attainment of Performance Goals, in such installments, or otherwise, as the Administrator may determine. Shares of Common Stock, cash or a combination of shares of Common Stock and cash, as applicable, payable in settlement of Restricted Stock Units shall be delivered to the Participant as soon as administratively practicable, but no later than 30 days, after the date on which payment is due under the terms of the Award Agreement provided that the Participant shall have complied with all conditions for delivery of such shares or payment contained in the Award Agreement or otherwise reasonably required by CareMax, or in accordance with an election of the Participant, if the Administrator so permits, that meets the requirements of Section 409A of the Code.

 

(iii)   No Rights of a Stockholder; Dividend Equivalents.   Until shares of Common Stock are issued to the Participant in settlement of stock Units, the Participant shall not have any rights of a stockholder of CareMax with respect to the stock Units or the shares issuable thereunder. The Administrator may grant to the Participant the right to receive Dividend Equivalents on stock Units, on a current, reinvested and/or restricted basis, subject to such terms as the Administrator may determine provided, however, that Dividend Equivalents payable on stock Units that are granted as a Performance Award shall, rather than be paid on a current basis, be accrued and made subject to forfeiture at least until achievement of the applicable Performance Goal related to such stock Units.

 

(iv)   Termination of Service.   Upon Termination of Service during the applicable deferral period or portion thereof to which forfeiture conditions apply, or upon failure to satisfy any other conditions precedent to the delivery of shares of Common Stock or cash to which such Restricted Stock Units relate, all Restricted Stock Units and any accrued but unpaid Dividend Equivalents with respect to such Restricted Stock Units that are then subject to deferral or restriction shall be forfeited; provided that, subject to the limitations set forth in Section 7(b), the Administrator may provide, by rule or regulation or in any Award Agreement, or may determine in any individual case, that restrictions or forfeiture conditions relating to Restricted Stock Units will be waived in whole or in part in the event of termination resulting from specified causes, and the Administrator may in other cases waive in whole or in part the forfeiture of Restricted Stock Units.

 

(v)   Additional Terms and Conditions.   The Administrator may, by way of the Award Agreement or otherwise, determine such other terms, conditions, restrictions, and/or limitations, if any, of any Award of stock Units, provided they are not inconsistent with the Plan.

 

(i)   Performance Shares and Performance Units.

 

(i)   Grants.   The Administrator may from time to time grant to Eligible Individuals Awards in the form of Performance Shares and Performance Units. Performance Shares, as that term is used in this Plan, shall refer to shares of Common Stock or Units that are expressed in terms of Common Stock, the issuance, vesting, lapse of restrictions on or payment of which is contingent on performance as measured against predetermined objectives over a specified Performance Period. Performance Units, as that term is used in this Plan, shall refer to dollar-denominated Units valued by reference to designated criteria established by the Administrator, other than Common Stock, the issuance, vesting, lapse of restrictions on or payment of which is contingent on performance as measured against predetermined objectives over a specified Performance Period. The applicable Award Agreement shall specify whether Performance Shares and Performance Units will be settled or paid in cash or shares of Common Stock or a combination of both, or shall reserve to the Administrator or the Participant the right to make that determination prior to or at the payment or settlement date.

 

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(ii)   Performance Criteria.   The Administrator shall, prior to or at the time of grant, condition the grant, vesting or payment of, or lapse of restrictions on, an Award of Performance Shares or Performance Units upon (A) the attainment of Performance Goals during a Performance Period or (B) the attainment of Performance Goals and the continued service of the Participant. The length of the Performance Period, the Performance Goals to be achieved during the Performance Period, and the measure of whether and to what degree such Performance Goals have been attained shall be conclusively determined by the Administrator in the exercise of its absolute discretion. Performance Goals may include minimum, maximum and target levels of performance, with the size of the Award or payout of Performance Shares or Performance Units or the vesting or lapse of restrictions with respect thereto based on the level attained. Performance Goals may be applied on a per share or absolute basis and relative to one or more Performance Metrics, or any combination thereof, and may be measured pursuant to U.S. generally accepted accounting principles (“GAAP”), non-GAAP or other objective standards in a manner consistent with CareMax’ or its Subsidiary’s established accounting policies, all as the Administrator shall determine at the time the Performance Goals for a Performance Period are established. The Administrator may, in its sole discretion, provide that one or more objectively determinable adjustments shall be made to the manner in which one or more of the Performance Goals is to be calculated or measured to take into account, or ignore, one or more of the following: (1) items related to a change in accounting principle; (2) items relating to financing activities; (3) expenses for restructuring or productivity initiatives; (4) other non-operating items; (5) items related to acquisitions; (6) items attributable to the business operations of any entity acquired by the Company during the Performance Period; (7) items related to the sale or disposition of a business or segment of a business; (8) items related to discontinued operations that do not qualify as a segment of a business under U.S. generally accepted accounting principles; (9) items attributable to any stock dividend, stock split, combination or exchange of stock occurring during the Performance Period; (10) any other items of significant income or expense which are determined to be appropriate adjustments; (11) items relating to unusual or extraordinary corporate transactions, events or developments, (12) items related to amortization of acquired intangible assets; (13) items that are outside the scope of the Company’s core, on-going business activities; (14) changes in foreign currency exchange rates; (15) items relating to changes in tax laws; (16) certain identified expenses (including, but not limited to, cash bonus expenses, incentive expenses and acquisition-related transaction and integration expenses); (17) items relating to asset impairment charges; (18) items relating to gains or unusual or nonrecurring events or changes in applicable law, accounting principles or business conditions; or (19) other adjustment as determined by the Administrator. An Award of Performance Shares or Performance Units shall be settled as and when the Award vests or at a later time specified in the Award Agreement or in accordance with an election of the Participant, if the Administrator so permits, that meets the requirements of Section 409A of the Code.

 

(iii)   Additional Terms and Conditions.   The Administrator may, by way of the Award Agreement or otherwise, determine such other terms, conditions, restrictions, and/or limitations, if any, of any Award of Performance Shares or Performance Units, provided they are not inconsistent with the Plan.

 

(j)   Other Stock-Based Awards.   The Administrator may from time to time grant to Eligible Individuals Awards in the form of Other Stock-Based Awards. Other Stock-Based Awards in the form of Dividend Equivalents may be (A) awarded on a free-standing basis or in connection with another Award other than a stock option or stock appreciation right, (B) paid currently or credited to an account for the Participant, including the reinvestment of such credited amounts in Common Stock equivalents, to be paid on a deferred basis, and (C) settled in cash or Common Stock as determined by the Administrator; provided, however, that Dividend Equivalents payable on Other Stock-Based Awards that are granted as a Performance Award shall, rather than be paid on a current basis, be accrued and made subject to forfeiture at least until achievement of the applicable Performance Goal related to such Other Stock-Based Awards. Any such settlements, and any such crediting of Dividend Equivalents, may be subject to such conditions, restrictions and contingencies as the Administrator shall establish.

 

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(k)   Awards to Participants Outside the United States.   The Administrator may grant Awards to Eligible Individuals who are foreign nationals, who are located outside the United States or who are not compensated from a payroll maintained in the United States, or who are otherwise subject to (or could cause CareMax or a Subsidiary to be subject to) tax, legal or regulatory provisions of countries or jurisdictions outside the United States, on such terms and conditions different from those specified in the Plan as may, in the judgment of the Administrator, be necessary or desirable in order that any such Award shall conform to laws, regulations, and customs of the country or jurisdiction in which the Participant is then resident or primarily employed or to foster and promote achievement of the purposes of the Plan.

 

(l)   Limitation on Dividend Reinvestment and Dividend Equivalents.   Reinvestment of dividends in additional Restricted Stock at the time of any dividend payment, and the payment of shares of Common Stock with respect to dividends to Participants holding Awards of stock Units, shall only be permissible if sufficient shares are available under the Share Pool for such reinvestment or payment (taking into account then outstanding Awards). In the event that sufficient shares are not available under the Share Pool for such reinvestment or payment, such reinvestment or payment shall be made in the form of a grant of stock Units equal in number to the shares of Common Stock that would have been obtained by such payment or reinvestment, the terms of which stock Units shall provide for settlement in cash and for Dividend Equivalent reinvestment in further stock Units on the terms contemplated by this Section 7(j).

 

8.   Withholding of Taxes.

 

Participants and holders of Awards shall pay to CareMax or its Affiliate, or make arrangements satisfactory to the Administrator for payment of, any Tax Withholding Obligation in respect of Awards granted under the Plan no later than the date of the event creating the tax or social insurance contribution liability. The obligations of CareMax under the Plan shall be conditional on such payment or arrangements. Unless otherwise determined by the Administrator, Tax Withholding Obligations may be settled in whole or in part with shares of Common Stock, including unrestricted outstanding shares surrendered to CareMax and unrestricted shares that are part of the Award that gives rise to the Tax Withholding Obligation, having a Fair Market Value on the date of surrender or withholding equal to the statutory minimum amount required, (or such greater amount permitted under FASB Accounting Standards Codification Topic 718, Compensation — Stock Compensation, for equity-classified awards) to be withheld for tax or social insurance contribution purposes, all in accordance with such procedures as the Administrator establishes. CareMax or its Affiliate may deduct, to the extent permitted by law, any such Tax Withholding Obligations from any payment of any kind otherwise due to the Participant or holder of an Award.

 

9.   Transferability of Awards.

 

(a) General Nontransferability Absent Administrator Permission.   Except as otherwise determined by the Administrator, and in any event in the case of an Incentive Stock Option or a tandem stock appreciation right granted with respect to an Incentive Stock Option, no Award granted under the Plan shall be transferable by a Participant otherwise than by will or the laws of descent and distribution. The Administrator shall not permit any transfer of an Award for value. An Award may be exercised during the lifetime of the Participant, only by the Participant or, during the period the Participant is under a legal disability, by the Participant’s guardian or legal representative, unless otherwise determined by the Administrator. Awards granted under the Plan shall not be subject in any manner to alienation, anticipation, sale, transfer, assignment, pledge, or encumbrance, except as otherwise determined by the Administrator; provided, however, that the restrictions in this sentence shall not apply to the shares of Common Stock received in connection with an Award after the date that the restrictions on transferability of such shares set forth in the applicable Award Agreement have lapsed. Nothing in this paragraph shall be interpreted or construed as overriding the terms of any CareMax stock ownership or retention policy, now or hereafter existing, that may apply to the Participant or shares of Common Stock received under an Award.

 

(b) Administrator Discretion to Permit Transfers Other Than For Value.   Except as otherwise restricted by applicable law, the Administrator may, but need not, permit an Award, other than an Incentive Stock Option or a tandem stock appreciation right granted with respect to an Incentive Stock Option, to be transferred to a Participant’s Family Member (as defined below) as a gift or pursuant to a domestic relations order in settlement of marital property rights. The Administrator shall not permit any transfer of an Award for value. For purposes of this Section 9, “Family Member” means any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships, any person sharing the Participant’s household (other than a tenant or employee), a trust in which these persons have more than fifty percent of the beneficial interest, a foundation in which these persons (or the Participant) control the management of assets, and any other entity in which these persons (or the Participant) own more than fifty percent (50%) of the voting interests. The following transactions are not prohibited transfers for value: (i) a transfer under a domestic relations order in settlement of marital property rights; and (ii) a transfer to an entity in which more than fifty percent of the voting interests are owned by Family Members (or the Participant) in exchange for an interest in that entity.

 

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10.   Adjustments for Corporate Transactions and Other Events.

 

(a)   Mandatory Adjustments.   In the event of a merger, consolidation, stock rights offering, statutory share exchange or similar event affecting CareMax (each, a “Corporate Event”) or a stock dividend, stock split, reverse stock split, separation, spinoff, reorganization, extraordinary dividend of cash or other property, share combination or subdivision, or recapitalization or similar event affecting the capital structure of CareMax (each, a “Share Change”) that occurs at any time after adoption of this Plan by the Board (including any such Corporate Event or Share Change that occurs after such adoption and coincident with or prior to the Effective Date), the Administrator shall make equitable and appropriate substitutions or proportionate adjustments to (i) the aggregate number and kind of shares of Common Stock or other securities on which Awards under the Plan may be granted to Eligible Individuals, (ii) the maximum number of shares of Common Stock or other securities that may be issued with respect to Incentive Stock Options granted under the Plan, (iii) the number of shares of Common Stock or other securities covered by each outstanding Award and the exercise price, base price or other price per share, if any, and other relevant terms of each outstanding Award, and (iv) all other numerical limitations relating to Awards, whether contained in this Plan or in Award Agreements; provided, however, that any fractional shares resulting from any such adjustment shall be eliminated.

 

(b)   Discretionary Adjustments.   In the case of Corporate Events, the Administrator may make such other adjustments to outstanding Awards as it determines to be appropriate and desirable, which adjustments may include, without limitation, (i) the cancellation of outstanding Awards in exchange for payments of cash, securities or other property or a combination thereof having an aggregate value equal to the value of such Awards, as determined by the Administrator in its sole discretion (it being understood that in the case of a Corporate Event with respect to which stockholders of CareMax receive consideration other than publicly traded equity securities of the ultimate surviving entity, any such determination by the Administrator that the value of a stock option or stock appreciation right shall for this purpose be deemed to equal the excess, if any, of the value of the consideration being paid for each share of Common Stock pursuant to such Corporate Event over the exercise price or base price of such stock option or stock appreciation right shall conclusively be deemed valid and that any stock option or stock appreciation right may be cancelled for no consideration upon a Corporate Event if its exercise price or base price equals or exceeds the value of the consideration being paid for each share of Common Stock pursuant to such Corporate Event), (ii) the substitution of securities or other property (including, without limitation, cash or other securities of CareMax and securities of entities other than CareMax) for the shares of Common Stock subject to outstanding Awards, and (iii) the substitution of equivalent awards, as determined in the sole discretion of the Administrator, of the surviving or successor entity or a parent thereof (“Substitute Awards”).

 

(c)   Adjustments to Performance Goals.   The Administrator may, in its discretion, adjust the Performance Goals applicable to any Awards to reflect any unusual or non-recurring events and other extraordinary items, impact of charges for restructurings, discontinued operations and the cumulative effects of accounting or tax changes, each as defined by generally accepted accounting principles or as identified in CareMax’s consolidated financial statements, notes to the consolidated financial statements, management’s discussion and analysis or other CareMax filings with the Securities and Exchange Commission. If the Administrator determines that a change in the business, operations, corporate structure or capital structure of CareMax or the applicable subsidiary, business segment or other operational unit of CareMax or any such entity or segment, or the manner in which any of the foregoing conducts its business, or other events or circumstances, render the Performance Goals to be unsuitable, the Administrator may modify such Performance Goals or the related minimum acceptable level of achievement, in whole or in part, as the Administrator deems appropriate and equitable.

 

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(d)   Statutory Requirements Affecting Adjustments.   Notwithstanding the foregoing: (A) any adjustments made pursuant to Section 10 to Awards that are considered “deferred compensation” within the meaning of Section 409A of the Code shall be made in compliance with the requirements of Section 409A of the Code; (B) any adjustments made pursuant to Section 10 to Awards that are not considered “deferred compensation” subject to Section 409A of the Code shall be made in such a manner as to ensure that after such adjustment, the Awards either (1) continue not to be subject to Section 409A of the Code or (2) comply with the requirements of Section 409A of the Code; (C) in any event, the Administrator shall not have the authority to make any adjustments pursuant to Section 10 to the extent the existence of such authority would cause an Award that is not intended to be subject to Section 409A of the Code at the date of grant to be subject thereto; and (D) any adjustments made pursuant to Section 10 to Awards that are Incentive Stock Options shall be made in compliance with the requirements of Section 424(a) of the Code.

 

(e)   Dissolution or Liquidation.   Unless the Administrator determines otherwise, all Awards outstanding under the Plan shall terminate upon the dissolution or liquidation of CareMax.

 

11.   Change in Control Provisions.

 

(a)   Termination of Awards.   Notwithstanding the provisions of Section 11(b), in the event that any transaction resulting in a Change in Control occurs, outstanding Awards will terminate upon the effective time of such Change in Control unless provision is made in connection with the transaction for the continuation or assumption of such Awards by, or for the issuance therefor of Substitute Awards of, the surviving or successor entity or a parent thereof. Solely with respect to Awards that will terminate as a result of the immediately preceding sentence and except as otherwise provided in the applicable Award Agreement:

 

(i)   the outstanding Awards of stock options and stock appreciation rights that will terminate upon the effective time of the Change in Control shall, immediately before the effective time of the Change in Control, become fully exercisable and the holders of such Awards will be permitted, immediately before the Change in Control, to exercise the Awards;

 

(ii)   the outstanding shares of Restricted Stock the vesting or restrictions on which are then solely time-based and not subject to achievement of Performance Goals shall, immediately before the effective time of the Change in Control, become fully vested, free of all transfer and lapse restrictions and free of all risks of forfeiture;

 

(iii)   the outstanding shares of Restricted Stock the vesting or restrictions on which are then subject to and pending achievement of Performance Goals shall, immediately before the effective time of the Change in Control and unless the Award Agreement provides for vesting or lapsing of restrictions in a greater amount upon the occurrence of a Change in Control, become vested, free of transfer and lapse restrictions and risks of forfeiture in such amounts as if the applicable Performance Goals for the unexpired Performance Period had been achieved at the target level set forth in the applicable Award Agreement;

 

(iv)   the outstanding Restricted Stock Units, Performance Shares and Performance Units the vesting, earning or settlement of which is then solely time-based and not subject to or pending achievement of Performance Goals shall, immediately before the effective time of the Change in Control, become fully earned and vested and shall be settled in cash or shares of Common Stock (consistent with the terms of the Award Agreement after taking into account the effect of the Change in Control transaction on the shares) as promptly as is practicable, subject to any applicable limitations imposed thereon by Section 409A of the Code; and

 

(v)   the outstanding Restricted Stock Units, Performance Shares and Performance Units the vesting, earning or settlement of which is then subject to and pending achievement of Performance Goals shall, immediately before the effective time of the Change in Control and unless the Award Agreement provides for vesting, earning or settlement in a greater amount upon the occurrence of a Change in Control, become vested and earned in such amounts as if the applicable Performance Goals for the unexpired Performance Period had been achieved at the target level set forth in the applicable Award Agreement and shall be settled in cash or shares of Common Stock (consistent with the terms of the Award Agreement after taking into account the effect of the Change in Control transaction on the shares) as promptly as is practicable, subject to any applicable limitations imposed thereon by Section 409A of the Code.

 

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Implementation of the provisions of this Section 11(a) shall be conditioned upon consummation of the Change in Control.

 

(b)   Continuation, Assumption or Substitution of Awards.   The administrator may specify, on or after the date of grant, in an award agreement or amendment thereto, the consequences of a Participant’s Termination of Service that occurs coincident with or following the occurrence of a Change in Control, if a Change in Control occurs under which provision is made in connection with the transaction for the continuation or assumption of outstanding Awards by, or for the issuance therefor of Substitute Awards of, the surviving or successor entity or a parent thereof.

 

(c)   Other Permitted Actions.   In the event that any transaction resulting in a Change in Control occurs, the Administrator may take any of the actions set forth in Section 10 with respect to any or all Awards granted under the Plan.

 

(d)   Section 409A Savings Clause.   Notwithstanding the foregoing, if any Award is considered to be a “nonqualified deferred compensation plan” within the meaning of Section 409A of the Code, this Section 11 shall apply to such Award only to the extent that its application would not result in the imposition of any tax or interest or the inclusion of any amount in income under Section 409A of the Code.

 

12.   Substitution of Awards in Mergers and Acquisitions.

 

Awards may be granted under the Plan from time to time in substitution for assumed awards held by employees, officers, consultants or directors of entities who become employees, officers, consultants or directors of CareMax or a Subsidiary as the result of a merger or consolidation of the entity for which they perform services with CareMax or a Subsidiary, or the acquisition by CareMax of the assets or stock of the such entity. The terms and conditions of any Awards so granted may vary from the terms and conditions set forth herein to the extent that the Administrator deems appropriate at the time of grant to conform the Awards to the provisions of the assumed awards for which they are substituted and to preserve their intrinsic value as of the date of the merger, consolidation or acquisition transaction. To the extent permitted by applicable law and marketplace or listing rules of the primary securities market or exchange on which the Common Stock is listed or admitted for trading, any available shares under a stockholder-approved plan of an acquired company (as appropriately adjusted to reflect the transaction) may be used for Awards granted pursuant to this Section 12 and, upon such grant, shall not reduce the Share Pool. Awards may be issued in connection with a merger or acquisition as permitted by NASDAQ Listing Rule 5635(c) or, if applicable, NYSE Listed Company Manual Section 303A.08, AMEX Company Guide Section 711 or other applicable rule, and such issuance will not reduce the number of shares available for issuance under the Plan.

 

13.   Compliance with Securities Laws; Listing and Registration.

 

(a)   The obligation of CareMax to sell or deliver Common Stock with respect to any Award granted under the Plan shall be subject to all applicable laws, rules and regulations, including all applicable federal, state securities laws, and the obtaining of all such approvals by governmental agencies as may be deemed necessary or appropriate by the Administrator. If at any time the Administrator determines that the delivery of Common Stock under the Plan is or may be unlawful under the laws of any applicable jurisdiction, or Federal, state or foreign (non-United States) securities laws, the right to exercise an Award or receive shares of Common Stock pursuant to an Award shall be suspended until the Administrator determines that such delivery is lawful. If at any time the Administrator determines that the delivery of Common Stock under the Plan would or may violate the rules of any exchange on which CareMax’s securities are then listed for trade, the right to exercise an Award or receive shares of Common Stock pursuant to an Award shall be suspended until the Administrator determines that such delivery would not violate such rules. If the Administrator determines that the exercise or nonforfeitability of, or delivery of benefits pursuant to, any Award would violate any applicable provision of securities laws or the listing requirements of any stock exchange upon which any of CareMax’s equity securities are listed, then the Administrator may postpone any such exercise, nonforfeitability or delivery, as applicable, but CareMax shall use all reasonable efforts to cause such exercise, nonforfeitability or delivery to comply with all such provisions at the earliest practicable date.

 

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(b)   Each Award is subject to the requirement that, if at any time the Administrator determines, in its absolute discretion, that the listing, registration or qualification of Common Stock issuable pursuant to the Plan is required by any securities exchange or under any state, federal or foreign (non-United States) law, or the consent or approval of any governmental regulatory body is necessary or desirable as a condition of, or in connection with, the grant of an Award or the issuance of Common Stock, no such Award shall be granted or payment made or Common Stock issued, in whole or in part, unless listing, registration, qualification, consent or approval has been effected or obtained free of any conditions not acceptable to the Administrator.

 

(c)   In the event that the disposition of Common Stock acquired pursuant to the Plan is not covered by a then current registration statement under the Securities Act of 1933, as amended (the “Securities Act”), and is not otherwise exempt from such registration, such Common Stock shall be restricted against transfer to the extent required by the Securities Act or regulations thereunder, and the Administrator may require a person receiving Common Stock pursuant to the Plan, as a condition precedent to receipt of such Common Stock, to represent to CareMax in writing that the Common Stock acquired by such person is acquired for investment only and not with a view to distribution and that such person will not dispose of the Common Stock so acquired in violation of Federal, state or foreign securities laws and furnish such information as may, in the opinion of counsel for the Company, be appropriate to permit the Company to issue the Common Stock in compliance with applicable Federal, state or foreign securities laws.

 

14.   Section 409A Compliance.

 

It is the intention of CareMax that any Award that constitutes a “nonqualified deferred compensation plan” within the meaning of Section 409A of the Code shall comply in all respects with the requirements of Section 409A of the Code to avoid the imposition of any tax or interest or the inclusion of any amount in income pursuant to Section 409A of the Code, and the terms of each such Award shall be construed, administered and deemed amended, if applicable, in a manner consistent with this intention. Notwithstanding the foregoing, neither CareMax nor any of its Affiliates nor any of its or their directors, officers, employees, agents or other service providers will be liable for any taxes, penalties or interest imposed on any Participant or other person with respect to any amounts paid or payable (whether in cash, shares of Common Stock or other property) under any Award, including any taxes, penalties or interest imposed under or as a result of Section 409A of the Code. Any payments described in an Award that are due within the “short term deferral period” as defined in Section 409A of the Code shall not be treated as deferred compensation unless applicable law requires otherwise. For purposes of any Award, each amount to be paid or benefit to be provided to a Participant that constitutes deferred compensation subject to Section 409A of the Code shall be construed as a separate identified payment for purposes of Section 409A of the Code. For purposes of Section 409A of the Code, the payment of Dividend Equivalents under any Award shall be construed as earnings and the time and form of payment of such Dividend Equivalents shall be treated separately from the time and form of payment of the underlying Award. Notwithstanding any other provision of the Plan to the contrary, with respect to any Award that constitutes a “nonqualified deferred compensation plan” within the meaning of Section 409A of the Code, any payments (whether in cash, shares of Common Stock or other property) to be made with respect to the Award that become payable on account of the Participant’s separation from service, within the meaning of Section 409A of the Code, while the Participant is a “specified employee” (as determined in accordance with the uniform policy adopted by the Administrator with respect to all of the arrangements subject to Section 409A of the Code maintained by CareMax and its Affiliates) and which would otherwise be paid within six months after the Participant’s separation from service shall be accumulated (without interest) and paid on the first day of the seventh month following the Participant’s separation from service or, if earlier, within 15 days after the appointment of the personal representative or executor of the Participant’s estate following the Participant’s death. Notwithstanding anything in the Plan or an Award Agreement to the contrary, in no event shall the Administrator exercise its discretion to accelerate the payment or settlement of an Award where such payment or settlement constitutes deferred compensation within the meaning of Section 409A of the Code unless, and solely to the extent that, such accelerated payment or settlement is permissible under Treasury Regulation section 1.409A-3(j)(4).

 

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15.   Plan Duration; Amendment and Discontinuance.

 

(a)   Plan Duration.   The Plan shall remain in effect, subject to the right of the Board or the Compensation Committee to amend or terminate the Plan at any time, until the earlier of (a) the earliest date as of which all Awards granted under the Plan have been satisfied in full or terminated and no shares of Common Stock approved for issuance under the Plan remain available to be granted under new Awards or (b) May 12, 2031. No Awards shall be granted under the Plan after such termination date. Subject to other applicable provisions of the Plan, all Awards made under the Plan on or before such termination date, or such earlier termination of the Plan, shall remain in effect until such Awards have been satisfied or terminated in accordance with the Plan and the terms of such Awards.

(b)   Amendment and Discontinuance of the Plan.   The Board or the Compensation Committee may amend, alter or discontinue the Plan, but no amendment, alteration or discontinuation shall be made which would materially impair the rights of a Participant with respect to a previously granted Award without such Participant’s consent, except such an amendment made to comply with applicable law or rule of any securities exchange or market on which the Common Stock is listed or admitted for trading or to prevent adverse tax or accounting consequences to CareMax or the Participant. Notwithstanding the foregoing, no such amendment shall be made without the approval of CareMax’s stockholders to the extent such amendment would (A) materially increase the benefits accruing to Participants under the Plan, (B) materially increase the number of shares of Common Stock which may be issued under the Plan or to a Participant, (C) materially expand the eligibility for participation in the Plan, (D) eliminate or modify the prohibition set forth in Section 7(f) on repricing of stock options and stock appreciation rights, (E) lengthen the maximum term or lower the minimum exercise price or base price permitted for stock options and stock appreciation rights, or (F) modify the prohibition on the issuance of reload or replenishment options. Except as otherwise determined by the Board or Compensation Committee, termination of the Plan shall not affect the Administrator’s ability to exercise the powers granted to it hereunder with respect to Awards granted under the Plan prior to the date of such termination.

 

(c)   Amendment of Awards.   Subject to Section 7(f), the Administrator may unilaterally amend the terms of any Award theretofore granted, but no such amendment shall materially impair the rights of any Participant with respect to an Award without the Participant’s consent, except such an amendment made to cause the Plan or Award to comply with applicable law, applicable rule of any securities exchange on which the Common Stock is listed or admitted for trading, or to prevent adverse tax or accounting consequences for the Participant or the Company or any of its Affiliates. For purposes of the foregoing sentence, an amendment to an Award that results in a change in the tax consequences of the Award to the Participant shall not be considered to be a material impairment of the rights of the Participant and shall not require the Participant’s consent.

 

16.   General Provisions.

 

(a)   Non-Guarantee of Employment or Service.   Nothing in the Plan or in any Award Agreement thereunder shall confer any right on an individual to continue in the service of CareMax or any Affiliate or shall interfere in any way with the right of CareMax or any Affiliate to terminate such service at any time with or without cause or notice and whether or not such termination results in (i) the failure of any Award to vest or become payable; (ii) the forfeiture of any unvested or vested portion of any Award; and/or (iii) any other adverse effect on the individual’s interests under any Award or the Plan. No person, even though deemed an Eligible Individual, shall have a right to be selected as a Participant, or, having been so selected, to be selected again as a Participant. To the extent that an Eligible Individual who is an employee of a Subsidiary receives an Award under the Plan, that Award shall in no event be understood or interpreted to mean that CareMax is the Participant’s employer or that the Participant has an employment relationship with CareMax.

 

(b)   No Trust or Fund Created.   Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between CareMax and a Participant or any other person. To the extent that any Participant or other person acquires a right to receive payments from CareMax pursuant to an Award, such right shall be no greater than the right of any unsecured general creditor of CareMax.

 

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(c)   Status of Awards.   Awards shall be special incentive payments to the Participant and shall not be taken into account in computing the amount of salary or compensation of the Participant for purposes of determining any pension, retirement, death, severance or other benefit under (a) any pension, retirement, profit-sharing, bonus, insurance, severance or other employee benefit plan of CareMax or any Affiliate now or hereafter in effect under which the availability or amount of benefits is related to the level of compensation or (b) any agreement between (i) CareMax or any Affiliate and (ii) the Participant, except as such plan or agreement shall otherwise expressly provide.

 

(d)   Subsidiary Employees.   In the case of a grant of an Award to an Eligible Individual who provides services to any Subsidiary, CareMax may, if the Administrator so directs, issue or transfer the shares of Common Stock, if any, covered by the Award to the Subsidiary, for such lawful consideration as the Administrator may specify, upon the condition or understanding that the Subsidiary will transfer the shares of Common Stock to the Eligible Individual in accordance with the terms of the Award specified by the Administrator pursuant to the provisions of the Plan. All shares of Common Stock underlying Awards that are forfeited or canceled after such issue or transfer of shares to the Subsidiary shall revert to CareMax.

 

(e)   Governing Law and Interpretation.   The validity, construction and effect of the Plan, of Award Agreements entered into pursuant to the Plan, and of any rules, regulations, determinations or decisions made by the Administrator relating to the Plan or such Award Agreements, and the rights of any and all persons having or claiming to have any interest therein or thereunder, shall be determined exclusively in accordance with applicable United States federal laws and the laws of the State of Delaware without regard to its conflict of laws principles. The captions of the Plan are not part of the provisions hereof and shall have no force or effect.Except where the context otherwise requires: (i) the singular includes the plural and vice versa; (ii) a reference to one gender includes other genders; (iii) a reference to a person includes a natural person, partnership, corporation, association, governmental or local authority or agency or other entity; and (iv) a reference to a statute, ordinance, code or other law includes regulations and other instruments under it and consolidations, amendments, re-enactments or replacements of any of them.

 

(f)   Use of English Language.   The Plan, each Award Agreement, and all other documents, notices and legal proceedings entered into, given or instituted pursuant to an Award shall be written in English, unless otherwise determined by the Administrator. If a Participant receives an Award Agreement, a copy of the Plan or any other documents related to an Award translated into a language other than English, and if the meaning of the translated version is different from the English version, the English version shall control.

 

(g)   Recovery of Amounts Paid.   Except as otherwise provided by the Administrator, Awards granted under the Plan shall be subject to any and all policies, guidelines, codes of conduct, or other agreement or arrangement adopted by the Board or Compensation Committee with respect to the recoupment, recovery or clawback of compensation (collectively, the “Recoupment Policy”) and/or to any provisions set forth in the applicable Award Agreement under which CareMax may recover from current and former Participants any amounts paid or shares of Common Stock issued under an Award and any proceeds therefrom under such circumstances as the Administrator determines appropriate. The Administrator may apply the Recoupment Policy to Awards granted before the policy is adopted to the extent required by applicable law or rule of any securities exchange or market on which shares of Common Stock are listed or admitted for trading, as determined by the Administrator in its sole discretion.

 

17.  Glossary.

 

Under this Plan, except where the context otherwise indicates, the following definitions apply:

 

“Administrator” means the Compensation Committee, or such other committee(s) or officer(s) duly appointed by the Board or the Compensation Committee to administer the Plan or delegated limited authority to perform administrative actions under the Plan, and having such powers as shall be specified by the Board or the Compensation Committee; provided, however, that at any time the Board may serve as the Administrator in lieu of or in addition to the Compensation Committee or such other committee(s) or officer(s) to whom administrative authority has been delegated. With respect to any Award to which Section 16 of the Exchange Act applies, the Administrator shall consist of either the Board or a committee of the Board, which committee shall consist of two or more directors, each of whom is intended to be, to the extent required by Rule 16b-3 of the Exchange Act, a “non-employee director” as defined in Rule 16b-3 of the Exchange Act and an “independent director” to the extent required by the rules of the national securities exchange that is the principal trading market for the Common Stock; provided, that with respect to Awards made to a member of the Board who is not an employee of the Company, “Administrator” means the Board. Any member of the Administrator who does not meet the foregoing requirements shall abstain from any decision regarding an Award and shall not be considered a member of the Administrator to the extent required to comply with Rule 16b-3 of the Exchange Act.

 

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“Affiliate” means any entity, whether now or hereafter existing, which controls, is controlled by, or is under common control with, CareMax or any successor to CareMax. For this purpose, “control” (including the correlative meanings of the terms “controlled by” and “under common control with”) shall mean ownership, directly or indirectly, of 50% or more of the total combined voting power of all classes of voting securities issued by such entity, or the possession, directly or indirectly, of the power to direct the management and policies of such entity, by contract or otherwise.

 

“Award” means any stock option, stock appreciation right, stock award, stock unit, Performance Share, Performance Unit, and/or Other Stock-Based Award, whether granted under this Plan.

 

“Award Agreement” means the written document(s), including an electronic writing acceptable to the Administrator, and any notice, addendum or supplement thereto, memorializing the terms and conditions of an Award granted pursuant to the Plan and which shall incorporate the terms of the Plan.

 

“Board” means the Board of Directors of CareMax.

 

“Cause” means, with respect to a Participant, except as otherwise provided in the relevant Award Agreement (i) Caremax or an Affiliate having “cause” to terminate a Participant’s employment or service, as defined in any employment or consulting or similar agreement between the Participant and Caremax or an Affiliate in effect at the time of such termination, or (ii) in the absence of any such employment or consulting or similar agreement (or the absence of any definition of “Cause” contained therein), the Participant’s (A) plea of guilty or nolo contendere to, or conviction of, (1) a felony (or its equivalent in a non-United States jurisdiction) or (2) other conduct of a criminal nature that has or is likely to have a material adverse effect on the reputation or standing in the community of CareMax, any of its Affiliates or a successor to CareMax or an Affiliate, as determined by the Administrator in its sole discretion, or that legally prohibits the Participant from working for CareMax, any of its Subsidiaries or a successor to CareMax or a Subsidiary; (B) a breach by the Participant of a regulatory rule that adversely affects the Participant’s ability to perform the Participant’s employment duties to CareMax, any of its Subsidiaries or a successor to CareMax or a Subsidiary, in any material respect; or (C) the Participant’s failure, in any material respect, to (1) perform the Participant’s employment duties, (2) comply with the applicable policies of CareMax, or of its Subsidiaries, or a successor to CareMax or a Subsidiary, or (3) comply with covenants contained in any contract or Award Agreement to which the Participant is a party; provided, however, that the Participant shall be provided a written notice describing in reasonable detail the facts which are considered to give rise to a breach described in this clause (C) and the Participant shall have 15 days following receipt of such written notice (the “Cure Period”) during which the Participant may remedy the condition to the extent remediable, and, if so remedied, no Cause for Termination of Service shall exist.

 

“Change in Control” means the first of the following to occur: (i) a Change in Ownership of CareMax, (ii) a Change in Effective Control of CareMax, or (iii) a Change in the Ownership of Assets of CareMax, as described herein and construed in accordance with Section 409A of the Code.

 

(i)   A “Change in Ownership of CareMax” shall occur on the date that any one Person acquires, or Persons Acting as a Group acquire, ownership of the capital stock of CareMax that, together with the stock held by such Person or Group, constitutes more than 50% of the total fair market value or total voting power of the capital stock of CareMax. However, if any one Person is, or Persons Acting as a Group are, considered to own more than 50%, on a fully diluted basis, of the total fair market value or total voting power of the capital stock of CareMax, the acquisition of additional stock by the same Person or Persons Acting as a Group is not considered to cause a Change in Ownership of CareMax or to cause a Change in Effective Control of CareMax (as described below). An increase in the percentage of capital stock owned by any one Person, or Persons Acting as a Group, as a result of a transaction in which CareMax acquires its stock in exchange for property will be treated as an acquisition of stock.

 

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(ii)   A “Change in Effective Control of CareMax” shall occur on the date either (A) a majority of members of CareMax’s Board is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of CareMax’s Board before the date of the appointment or election, or (B) any one Person, or Persons Acting as a Group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such Person or Persons) ownership of stock of CareMax possessing 50% or more of the total voting power of the stock of CareMax.

 

(iii)   A “Change in the Ownership of Assets of CareMax” shall occur on the date that any one Person acquires, or Persons Acting as a Group acquire (or has or have acquired during the 12-month period ending on the date of the most recent acquisition by such Person or Persons), assets from CareMax that have a total gross fair market value equal to or more than 50% of the total gross fair market value of all of the assets of CareMax immediately before such acquisition or acquisitions. For this purpose, gross fair market value means the value of the assets of CareMax, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.

 

The following rules of construction apply in interpreting the definition of Change in Control:

 

(A)   A “Person” means any individual, entity or group within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended, other than employee benefit plans sponsored or maintained by CareMax and by entities controlled by CareMax or an underwriter, initial purchaser or placement agent temporarily holding the capital stock of CareMax pursuant to a registered public offering.

 

(B)   Persons will be considered to be Persons Acting as a Group (or Group) if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with the corporation. If a Person owns stock in both corporations that enter into a merger, consolidation, purchase or acquisition of stock, or similar transaction, such shareholder is considered to be acting as a Group with other shareholders only with respect to the ownership in that corporation before the transaction giving rise to the change and not with respect to the ownership interest in the other corporation. Persons will not be considered to be acting as a Group solely because they purchase assets of the same corporation at the same time or purchase or own stock of the same corporation at the same time, or as a result of the same public offering.

 

(C)   A Change in Control shall not include a transfer to a related person as described in Section 409A of the Code or a public offering of capital stock of CareMax.

 

(D)   For purposes of the definition of Change in Control, Section 318(a) of the Code applies to determine stock ownership. Stock underlying a vested option is considered owned by the individual who holds the vested option (and the stock underlying an unvested option is not considered owned by the individual who holds the unvested option). For purposes of the preceding sentence, however, if a vested option is exercisable for stock that is not substantially vested (as defined by Treasury Regulation §1.83-3(b) and (j)), the stock underlying the option is not treated as owned by the individual who holds the option.

 

(E)   For the avoidance of doubt, if a Change in Control constitutes a payment event with respect to any Award (or any portion of an Award) that provides for the deferral of compensation that is subject to Section 409A of the Code, to the extent required to avoid the imposition of additional taxes under Section 409A of the Code, the transaction or event described in subsection (i), (ii) or (iii) with respect to such Award (or portion thereof) shall only constitute a Change in Control for purposes of the payment timing of such Award if such transaction also constitutes a “change in control event,” as defined in Treasury Regulation Section 1.409A-3(i)(5).

  

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“Closing Date” means the date of the closing of the transactions contemplated by that certain Business Combination Agreement, dated as of December 18, 2020, as amended, by and among Deerfield Healthcare Technology Acquisitions Corp., CareMax Medical Group, LLC, and the other parties thereto.

 

“Code” means the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto, the Treasury Regulations thereunder and other relevant interpretive guidance issued by the Internal Revenue Service or the Treasury Department. Reference to any specific section of the Code shall be deemed to include such regulations and guidance, as well as any successor section, regulations and guidance.

 

“Common Stock” means shares of Class A common stock of CareMax, par value $0.0001 per share, and any capital securities into which they are converted.

 

“Company” means CareMax and its Subsidiaries, except where the context otherwise requires. For purposes of determining whether a Change in Control has occurred, Company shall mean only CareMax.

 

“Compensation Committee” means the Compensation Committee of the Board.

 

“Dividend Equivalent” means a right, granted to a Participant, to receive cash, Common Stock, stock Units or other property equal in value to dividends paid with respect to a specified number of shares of Common Stock.

 

“Effective Date” means the later of (i) the date on which adoption of the Plan is approved by the stockholders of CareMax and (ii) the Closing Date.

 

“Eligible Individuals” means (i) officers and employees of, and other individuals, including non-employee directors, who are natural persons providing bona fide services to or for, CareMax or any of its Subsidiaries, provided that such services are not in connection with the offer or sale of securities in a capital-raising transaction and do not directly or indirectly promote or maintain a market for CareMax’s securities, and (ii) prospective officers, employees and service providers who have accepted offers of employment or other service relationship from CareMax or a Subsidiary.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, and any successor thereto. Reference to any specific section of the Exchange Act shall be deemed to include such regulations and guidance issued thereunder, as well as any successor section, regulations and guidance.

 

“Fair Market Value” means, on a per share basis as of any date, unless otherwise determined by the Administrator:

 

(i)   if the principal market for the Common Stock (as determined by the Administrator if the Common Stock is listed or admitted to trading on more than one exchange or market) is a national securities exchange or an established securities market, the official closing price per share of Common Stock for the regular market session on that date on the principal exchange or market on which the Common Stock is then listed or admitted to trading or, if no sale is reported for that date, on the last preceding day on which a sale was reported, all as reported by such source as the Administrator may select;

 

(ii)   if the principal market for the Common Stock is not a national securities exchange or an established securities market, but the Common Stock is quoted by a national quotation system, the average of the highest bid and lowest asked prices for the Common Stock on that date as reported on a national quotation system or, if no prices are reported for that date, on the last preceding day on which prices were reported, all as reported by such source as the Administrator may select; or

 

(iii)   if the Common Stock is neither listed or admitted to trading on a national securities exchange or an established securities market, nor quoted by a national quotation system, the value determined by the Administrator in good faith by the reasonable application of a reasonable valuation method, which method may, but need not, include taking into account an appraisal of the fair market value of the Common Stock conducted by a nationally recognized appraisal firm selected by the Administrator.

 

Notwithstanding the preceding, for foreign, federal, state and local income tax reporting purposes and for such other purposes as the Administrator deems appropriate, the Fair Market Value shall be determined by the Administrator in accordance with uniform and nondiscriminatory standards adopted by it from time to time.

 

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“Full Value Award” means an Award that results in CareMax transferring the full value of a share of Common Stock under the Award, whether or not an actual share of stock is issued. Full Value Awards shall include, but are not limited to, stock awards, stock units, Performance Shares, Performance Units that are payable in Common Stock, and Other Stock-Based Awards for which CareMax transfers the full value of a share of Common Stock under the Award, but shall not include Dividend Equivalents.

 

“Incentive Stock Option” means any stock option that is designated, in the applicable Award Agreement or the resolutions of the Administrator under which the stock option is granted, as an “incentive stock option” within the meaning of Section 422 of the Code and otherwise meets the requirements to be an “incentive stock option” set forth in Section 422 of the Code.

 

“Nonqualified Option” means any stock option that is not an Incentive Stock Option.

 

“Other Stock-Based Award” means an Award of Common Stock or any other Award that is valued in whole or in part by reference to, or is otherwise based upon, shares of Common Stock, including without limitation Dividend Equivalents and convertible debentures.

 

“Participant” means an Eligible Individual to whom one or more Awards are or have been granted pursuant to the Plan and have not been fully settled or cancelled and, following the death of any such person, his successors, heirs, executors and administrators, as the case may be.

 

“Performance Award” means a Full Value Award, the grant, vesting, lapse of restrictions or settlement of which is conditioned upon the achievement of performance objectives over a specified Performance Period and includes, without limitation, Performance Shares and Performance Units.

 

“Performance Goals” means the performance goals established by the Administrator in connection with the grant of Awards based on Performance Metrics or other performance criteria selected by the Administrator.

 

“Performance Metrics” means criteria established by the Administrator relating to any of the following, as it may apply to an individual, one or more business units, divisions, or Affiliates, or on a company-wide basis, and in absolute terms, relative to a base period, or relative to the performance of one or more comparable companies, peer groups, or an index covering multiple companies:

 

(i)   Earnings or Profitability Metrics:   any derivative of revenue; earnings/loss (gross, operating, net or adjusted, earnings per share (basic or diluted); earnings/loss before interest and taxes (“EBIT”); earnings/loss before interest, taxes, depreciation and amortization (“EBITDA”); profit margins; operating margins; expense levels or ratios; provided that any of the foregoing metrics may be adjusted to eliminate the effect of any one or more of the following: interest expense, asset impairments or investment losses, legal settlements, early extinguishment of debt or stock-based compensation expense;

 

(ii)   Return Metrics:   any derivative of return on investment, assets, equity or capital (total or invested);

 

(iii)   Investment Metrics:   relative risk-adjusted investment performance; investment performance of assets under management;

 

(iv)   Cash Flow Metrics:   any derivative of operating cash flow; cash flow sufficient to achieve financial ratios or a specified cash balance; free cash flow; cash flow return on capital; net cash provided by operating activities; cash flow per share; working capital; return on sales; costs, reductions in costs and cost control measure;

 

(v)   Liquidity Metrics:   any derivative of debt leverage (including debt to capital, net debt-to-capital, debt-to-EBITDA or other liquidity ratios);

 

(vi)   Stock Price and Equity Metrics:   any derivative of return on stockholders’ equity; total stockholder return; stock price; stock price appreciation; market capitalization; earnings/loss per share (basic or diluted) (before or after taxes); and/or

 

(vii)   Strategic Metrics:   regulatory achievements or compliance; implementation, completion or attainment of objectives relating to research, development, regulatory, commercial, or strategic milestones or developments; acquisition of new customers, including institutional accounts; market share; economic value or economic value added models; division, group or corporate financial goals; customer satisfaction/growth; customer service; employee satisfaction; recruitment and maintenance of personnel; human resources management; supervision of litigation and other legal matters; strategic partnerships and transactions; completion of an identified special project.

 

19

 

 

“Performance Period” means that period established by the Administrator during which any Performance Goals specified by the Administrator with respect to such Award are to be measured.

 

“Performance Shares” means a grant of stock or stock Units the issuance, vesting or payment of which is contingent on performance as measured against predetermined objectives over a specified Performance Period.

 

“Performance Units” means a grant of dollar-denominated Units the value, vesting or payment of which is contingent on performance against predetermined objectives over a specified Performance Period.

 

“Plan” means this CareMax, Inc. 2021 Long-Term Incentive Plan, as set forth herein and as it may be amended from time to time.

 

“Restricted Stock” means an Award of shares of Common Stock to a Participant that may be subject to certain transferability and other restrictions and to a risk of forfeiture (including by reason of not satisfying certain Performance Goals).

 

“Restricted Stock Unit” means a right granted to a Participant to receive shares of Common Stock or cash at the end of a specified deferral period, which right may be conditioned on the satisfaction of certain requirements (including the satisfaction of certain Performance Goals).

 

“Restriction Period” means, with respect to Awards, the period commencing on the date of grant of such Award to which vesting or transferability and other restrictions and a risk of forfeiture apply and ending upon the expiration of the applicable vesting conditions, transferability and other restrictions and lapse of risk of forfeiture and/or the achievement of the applicable Performance Goals (it being understood that the Administrator may provide that vesting shall occur and/or restrictions shall lapse with respect to portions of the applicable Award during the Restriction Period in accordance with Section 7(b)).

 

“Subsidiary” means any corporation or other entity in an unbroken chain of corporations or other entities beginning with CareMax if each of the corporations or other entities, or group of commonly controlled corporations or other entities, other than the last corporation or other entity in the unbroken chain then owns stock or other equity interests possessing 50% or more of the total combined voting power of all classes of stock or other equity interests in one of the other corporations or other entities in such chain or otherwise has the power to direct the management and policies of the entity by contract or by means of appointing a majority of the members of the board or other body that controls the affairs of the entity; provided, however, that solely for purposes of determining whether a Participant has a Termination of Service that is a “separation from service” within the meaning of Section 409A of the Code or whether an Eligible Individual is eligible to be granted an Award that in the hands of such Eligible Individual would constitute a “nonqualified deferred compensation plan” within the meaning of Section 409A of the Code , a “Subsidiary” of a corporation or other entity means all other entities with which such corporation or other entity would be considered a single employer under Sections 414(b) or 414(c) of the Code.

 

“Tax Withholding Obligation” means any federal, state, local or foreign (non-United States) income, employment or other tax or social insurance contribution required by applicable law to be withheld in respect of Awards.

 

“Termination of Service” means the termination of the Participant’s employment or consultancy with, or performance of services for, CareMax and its Subsidiaries. Temporary absences from employment because of illness, vacation or leave of absence and transfers among CareMax and its Subsidiaries shall not be considered Terminations of Service. With respect to any Award that constitutes a “nonqualified deferred compensation plan” within the meaning of Section 409A of the Code, “Termination of Service” shall mean a “separation from service” as defined under Section 409A of the Code to the extent required by Section 409A of the Code to avoid the imposition of any tax or interest or the inclusion of any amount in income pursuant to Section 409A of the Code. A Participant has a separation from service within the meaning of Section 409A of the Code if the Participant terminates employment with CareMax and all Subsidiaries for any reason. A Participant will generally be treated as having terminated employment with CareMax and all Subsidiaries as of a certain date if the Participant and the entity that employs the Participant reasonably anticipate that the Participant will perform no further services for CareMax or any Subsidiary after such date or that the level of bona fide services that the Participant will perform after such date (whether as an employee or an independent contractor) will permanently decrease to no more than 20 percent (20%) of the average level of bona fide services performed (whether as an employee or an independent contractor) over the immediately preceding 36-month period (or the full period of services if the Participant has been providing services for fewer than 36 months); provided, however, that the employment relationship is treated as continuing while the Participant is on military leave, sick leave or other bona fide leave of absence if the period of leave does not exceed six months or, if longer, so long as the Participant retains the right to reemployment with CareMax or any Subsidiary.

 

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“Total and Permanent Disability” means, with respect to a Participant, except as otherwise provided in the relevant Award Agreement, that a Participant is (i) unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to last until the Participant’s death or result in death, or (ii) determined to be totally disabled by the Social Security Administration or other governmental or quasi-governmental body that administers a comparable social insurance program outside of the United States in which the Participant participates and which conditions the right to receive benefits under such program on the Participant being unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to last until the Participant’s death or result in death. The Administrator shall have sole authority to determine whether a Participant has suffered a Total and Permanent Disability and may require such medical or other evidence as it deems necessary to judge the nature and permanency of the Participant’s condition.

 

“Unit” means a bookkeeping entry used by CareMax to record and account for the grant of the following types of Awards until such time as the Award is paid, cancelled, forfeited or terminated, as the case may be: stock units, Restricted Stock Units, Performance Units, and Performance Shares that are expressed in terms of units of Common Stock.

 

“CareMax” means CareMax, Inc., a Delaware corporation.

{end of document}

 

21

 

 

Exhibit 10.10

 

HEALTHSUN HEALTH PLANS, INC.

 

MSO Risk Agreement

 

With

 

MANAGED HEALTHCARE PARTNERS, LLC

 

Effective July 1, 2009

 

 

 

 

MANAGED HEALTHCARE PARTNERS

 

MSO RISK AGREEMENT

 

This MSO Risk Agreement (“Agreement”) is made and entered into as of this 1st day of July, 2009, by and among HealthSun Health Plans, Inc., a Florida corporation (“HealthSun” or “Plan”), and Managed Healthcare Partners, LLC, a Florida limited liability company (“MSO”).

 

WHEREAS, HealthSun is licensed in the State of Florida to operate as a state-licensed Health Maintenance Organization with a Medicare Advantage contract (“Plan”) under which members under an agreement with Plan (“Plan Members”) may be provided with medical services, hospital care and other covered health benefits; and

 

WHEREAS, MSO has an agreement with Plan pursuant to which Plan has engaged MSO to provide and arrange for the provision of Covered Services (as hereinafter defined) to Plan Members; and

 

WHEREAS, Plan has engaged MSO to perform and discharge those duties and responsibilities of Plan that Plan has contracted to perform pursuant to its agreements with CMS, AHCA (each as hereinafter defined) and other applicable entities with which Plan has contracted, or may in the future contract, insofar as it may legally delegate the performance thereof under applicable Florida law, regulation or rule, and subject to any such restriction or limitation on the delegation of same; and

 

WHEREAS, MSO is a staff model provider and provider network that engages and/or employs physicians and ancillary providers to provide health care services to the members of health maintenance organizations, provider sponsored organizations, preferred provider organizations and/or other managed care companies with which MSO contracts; and

 

WHEREAS, Plan, pursuant to its contract with MSO, and in the discharge of its responsibilities thereunder, wishes to engage MSO to provide and arrange for the provision of Covered Services to Plan Members, and MSO agrees to provide and to arrange for the provision of such Covered Services under the terms and conditions set forth in this Agreement; and

 

WHEREAS, Plan, and MSO believe that this Agreement will be mutually beneficial, and, as such, all parties agree to be bound by all terms and conditions contained herein.

 

In consideration of the above, it is mutually agreed as follows:

 

I. Definitions

 

For the purposes of this Agreement, the following words and phrases shall have the meaning specified.

 

1.1 “Admitting Physician” is a Participating Physician who admits Members to a Participating Hospital or to another hospital with the approval of MSO.

 

1.2 “Agreement” means this MSO Risk Agreement between Plan and MSO.

 

1.3 “MICA” means Florida Agency for Health Care Administration.

 

1.4 “CMS” means the Centers for Medicare and Medicaid Services or any successor agency representing Medicare that administers the Medicare Advantage Program.

 

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1.5 “Copayment” means the amount, if any, required to be paid by a Member to Participating Providers as additional payments for Covered Services at the time Covered Services are rendered in accordance with Plan’s schedule of benefits applicable to the particular health services plan in which a Member is enrolled.

 

1.6 “Covered Services” means all medical services required to be provided to Members by Plan under Plan’s agreement(s) with Medicare and under the terms of Plan’s agreements with Subscribers, including, without limitation, Primary Care, specialist medical services, hospital services, ancillary and diagnostic services, and Emergency Services. Covered Services are subject to change at any time as required by applicable law or under Plan’s Medicare agreement(s).

 

1.7 “Credential” or “Credentialing” means the process for verifying that physicians providing services under this Agreement are adequately trained, licensed, of good professional reputation and capable of working with others in the provision of Covered Services to Members. The term shall be construed to include the re-credentialing process.

 

1.8 “DFS” means Florida Department of Financial Services.

 

1.9 “DHHS” means United States Department of Health and Human Services.

 

1.10 “Effective Date” shall mean the effective date of this Agreement which shall be July 1, 2009.

 

1.11 “Emergency Medical Condition” means a medical condition manifesting itself by acute symptoms of sufficient severity (including severe pain) such that a prudent lay person, with an average knowledge of health and medicine, could reasonably expect the absence of immediate medical attention to result in:

 

(a) Serious jeopardy to the health of the individual or, in the case of a pregnant woman, the health of the woman or her unborn child;

 

(b) Serious impairment to bodily functions; or

 

(c) Serious dysfunction of any bodily organ or part.

 

1.12 “Emergency Services” means Covered Services that are (i) furnished by a provider qualified to furnish emergency services; and (ii) needed to evaluate or stabilize an Emergency Medical Condition.

 

1.13 “Individual Subscription Agreement” means an agreement between Plan and an individual subscriber by which such individual is entitled to become a Member of Plan in accordance with the terms of such agreement. Individual Subscription Agreements shall include agreements between Plan and a Subscriber entitled to benefits under the Title XVIII of the Social Security Act, as amended.

 

1.14 “Medical Director” means a physician designated by Plan to monitor and review Covered Services to Members provided or requested by a health care provider.

 

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1.15 “Medical Staff’ means a hospital’s or ambulatory surgery center’s medical staff as the term is defined in the bylaws of the hospital’s or ambulatory surgery center’s medical staff, and as such bylaws may be amended from time to time.

 

1.16 “Medically Necessary” shall be defined by Plan in the exercise of its sole discretion and shall include due consideration of whether services are (i) consistent, specific and individualized with the symptoms or diagnosis and treatment of Member’s condition, disease, ailment or injury; (ii) appropriate with regard to standards of good medical practice within the surrounding community; (iii) not solely for the convenience of the Member, Member’s caretaker, a Participating Provider, or other health care provider, and (iv) the most appropriate supply or level of service which cart be safely provided to the Member.

 

1.17 “Member” or “Plan Member” means an eligible Subscriber who (i) has been enrolled in one of HealthSun’s Medicare health plans covered under this Agreement, as reflected on Attachment “D” hereof, and (ii) has been assigned by Plan to MSO or a MSO Provider or have selected a MSO Provider.

 

1.18 “MSO Provider” means a primary care physician, who or which (i) has entered into an agreement with MSO and/or Plan to provide health care services to Members, (ii) and has successfully completed Plan’s Credentialing process.

 

1.19 “Participating Provider” means a primary care physician, specialty physician hospital, ambulatory surgical center, home health care agency, pharmacy, group practice, or any other health care provider which or who has entered into an agreement with, or is otherwise engaged by, Plan to provide Covered Services to Members. Any such Participating Provider may be designated as a Participating Hospital, Participating Physician, Participating Pharmacy, etc. All MSO Providers shall be deemed to be Participating Providers for purposes of this Agreement.

 

1.20 “Plan Provider Manual” means the HealthSun Health Plans Provider Manual, as amended and revised from time to time by Plan, and provided to MSO.

 

1.21 “Primary Care Physician” means a Participating Provider who has contracted with MSO, or Plan to supervise, coordinate and provide Primary Care Services to Members, including the initiation of their referral to Specialty Physicians and other Participating Providers for non-Primary Care Services, and who meets all the other requirements for Primary Care Physicians contained in Plan Provider Manual and the agreement between Plan, MSO and Primary Care Physician.

 

1.22 “Primary Care Services” means those Covered Services customarily provided by a primary care physician in his or her office as well as services customarily provided by an attending primary care physician to institutionalized patients, and includes, by way of example and not limitation, the Primary Care Services set forth in Attachment “A”.

 

1.23 “Quality Improvement Program” means the program of Quality Improvement established by HealthSun, and/or by MSO on behalf of HealthSun, to assure the proper level and quality of care is provided including, but not limited to, HealthSun’s and MSO’s policies and procedures.

 

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1.24 “Specialty Physician” means a Participating Provider who is appropriately qualified in a certain medical specialty as determined by Plan who provides Covered Services to Members within the range of such specialty, who elects to be designated as a Specialty Physician by Plan and who meets all other requirements for Specialty Physicians contained in HealthSun’s and/or MSO’s rules and regulations, including Plan Provider Manual, and in the Agreement between Plan„ MSO and the Specialty Physician.

 

1.25 “Subscriber means a person who meets the eligibility requirements of Plan, enrolls pursuant to the terms thereof, and for whom premiums are received by or on behalf of HealthSun.

 

1.26 “Urgently Needed Services” means Covered Services that are not Emergency Services, provided when an enrollee is temporarily absent from Plan’s service area (or, under unusual and extraordinary circumstances, provided when the Member is in the service area but Plan’s provider network is temporarily unavailable or inaccessible) when the services are medically necessary and immediately required (a) as a result of an unforeseen illness, injury or condition; and (b) it was not reasonable given the circumstances to obtain the services through Plan.

 

1.27 “Utilization Management/Utilization Management Program” means the evaluation and determination of the appropriateness of patient use of medical care resources, and provision of any needed assistance to clinician and/or Member, to ensure appropriate use of resources. Utilization Management includes prior authorization, concurrent review, retrospective review, discharge planning, case management, and disease management protocols.

 

II. Duties and Responsibilities of Plan

 

2.1 Compensation

 

Plan shall compensate MSO at the rates and in the manner set forth in Attachment “B”. If MSO fails to make timely payments in accordance with Attachment “B,” Plan shall be responsible for making such payments.

 

2.2 Member Eligibility

 

Plan shall provide each Member with an identification card that shall be presented by the Member for purposes of assisting MSO Provider in verifying Member eligibility. In addition, by the first day of each month, Plan shall provide MSO a list of all Members (“Membership List”) listing all Members eligible to receive Covered Services during that month, which Membership List shall be effective for the month. The Membership List shall also specifically identify accretions and deletions from the prior month’s Membership List. In addition, Plan shall arrange for MSO to be able to obtain on-line access to the Membership List so that MSO can obtain at any time a current listing of eligible Members. Plan and MSO shall not be responsible for medical services provided to non-eligible individuals.

 

2.3 Claims Report

 

By the fifteenth (156) day of each month, Plan shall provide MSO a claims report, in written or electronic form, setting forth all claims submitted during the immediately preceding month for services provided to Plan Members for which MSO is responsible, the amount to be paid on account of each such claim (subject to MSO’s contestation rights, as set forth in Section 2.7 below), and the reason(s) for denial for each claim for which payment was denied.

 

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2.4 Marketing

 

It is the understanding of the parties that Plan will use its best efforts to enroll patients of MSO Providers in the Plan. No guarantees are afforded by Plan as to the number of Members who will select MSO or MSO Providers. However, Plan will use commercially reasonable efforts to assign Members to MSO.

 

2.5 Advertising

 

Plan and MSO may include the name, address, telephone number and types of practice of MSO Providers in a roster of Participating Providers. The parties understand that this roster may be inspected by and is intended for the use of current and prospective Members, Subscribers, Participating Providers, and other providers. Neither MSO nor MSO Providers shall engage in any marketing activities with respect to Plan and shall not use the trademarks and trade names employed by Plan without the prior written approval of Plan. MSO and MSO Providers may, however, without prior approval of Plan, engage in marketing activities which do not use the trademarks and trade names employed by Plan, provided such marketing activities comply with applicable federal Medicare Advantage Marketing Requirements.

 

2.6 Administrative Duties

 

Plan and/or MSO, through a Medical Director(s) or such other individuals as Plan designates, shall establish procedures relating to the following:

 

(a) A system for authorization of referrals to Specialty Physicians;

 

(b) Written notification of denied claim for Covered Services;

 

(c) A system of pre-admission certification for all elective hospital admissions;

 

(d) A Member encounter-reporting process to be implemented in accordance with Plan’s policies and procedures;

 

All procedures relating to the foregoing shall be contained in the Plan Provider Manual. The parties to this Agreement agree and acknowledge that although Plan and MSO shall establish procedures regarding the foregoing, MSO shall provide all services and functions with respect to some of the foregoing items, such as authorizing written referrals and providing pre-admission certifications, as agreed to by the parties from time to time, and consistent with Plan’s obligations as a licensed health plan.

 

2.7 Administration by Plan

 

Plan has the sole responsibility and final decision making authority for: (i) payment of claims for health services rendered to Members; (ii) credentialing of all Participating Providers, including MSO Providers; (ii) eligibility for enrollment in Plan; (iii) termination of a Member’s coverage under Plan; (iv) all benefit determinations; and (v) MSO Provider and Member grievance systems established by Plan. MSO agrees to recognize and abide by all state and federal laws, regulations and guidelines including those applicable to HealthSun’s Medicare health plan(s).

 

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Notwithstanding the provisions of Section 2.7(i) immediately above, MSO may contest the payment of any claim for Covered Services rendered to a Member by filing a contestation notice within five (5) days after receipt of the claims report referenced in Section 2.3. Plan shall promptly provide MSO with all relevant documentation supporting payment of the contested claim. Within five (5) days after receipt of such documentation, MSO shall advise Plan of its reasons for contesting the claim. Failure of MSO to file a contestation notice or to provide Plan with reasons for contesting the claim within the prescribed five (5) day period shall be deemed acceptance of Plan’s initial payment determination. Within five (5) days after receipt of Plan’s reasons for contesting the claim, Plan shall make a final decision with respect to payment of the claim, based on the reason set forth in the contestation notice and taking into consideration, medical necessity, whether the appropriate level of care was delivered and whether payment for such care is subject to coordination of benefits.

 

2.8 Right to Approve Participating Providers

 

Plan shall approve all Participating Providers, including the acceptance of MSO Providers as Participating Providers, and shall have the right to approve or disapprove the addition of Primary Care Providers and Primary Care Provider service locations; provided, however, Plan shall not unreasonably withhold approval of Participating Providers or additional locations.

 

2.9 Establishment of Specialty Physician, Hospital and Ancillary MSO

 

Plan and MSO, agree and covenant that they will assume the responsibility for establishing and maintaining agreements with all Participating Providers for the provision of Covered Services, other than primary care providers, including but not limited to, specialty physicians, hospital (inpatient and outpatient), ambulatory surgical center, home health care, pharmacy, and other ancillary services. Plan and MSO shall insure that there is geographic coverage of Participating Providers within the CMS guidelines MSO’s Members and that MSO shall have access to such Participating Providers during the term of this Agreement. In addition, Plan agrees to use its best efforts to enter into Participating Provider Agreements with those physician specialists, hospitals, ambulatory surgical centers, home health agencies, pharmacies and other ancillary providers as requested from time to time by MSO.

 

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III. Duties and Responsibilities of MSO

 

3.1 Provision of Covered Services and Certain Administrative Services

 

MSO shall provide the appropriate personnel, facilities and equipment necessary for the administration of MSO. Pursuant to this Agreement, the parties agree and covenant that MSO will assume all responsibility for the provision of Covered Services to Members enrolled in Medicare plans of HealthSun as such Members are reasonably assigned to MSO by Plan. MSO assumes the risk for the provision of Covered Services to Members whether or not those Covered Services are provided by MSO Providers. In fact, certain Participating Providers that are not MSO Providers, including hospitals and ancillary services providers, will provide Covered Services to Members for which MSO will have financial responsibility hereunder. Even though MSO will not contract with such Participating Providers (e.g. hospitals and ancillary services providers), MSO shall have financial responsibility for Covered Services provided to Members by Participating Providers. In addition, MSO hereby becomes obligated to manage and administer Covered Services, subject to the terms and conditions of this Agreement. MSO agrees to provide or arrange for the provision of Covered Services, including, without limitation those services set forth on Plan’s MedicareAdvantage health benefits, as reflected by HealthSun’s Adjusted Community Rate Proposal (“ACRP”) as filed with and approved by CMS from time to time during the term hereof. Covered Services shall be provided in accordance with the Utilization Management Program (as set forth in Section 3.5 hereof).

 

3.2 Licensure and Participation in Medicare

 

Prior to being assigned a provider number and being eligible to be assigned or treat Members, all MSO Providers must be credentialed by Plan in accordance with its credentialing policies and procedures as amended and in effect from time to time. MSO represents and warrants that MSO Providers, and all other health professionals employed, retained or in professional association with such MSO Providers who will provide services under this Agreement are appropriately trained and qualified, licensed and authorized by the State of Florida and all other applicable governmental entities to practice their profession and to perform procedures which are to be provided pursuant to this Agreement. MSO covenants that MSO Providers and other health professionals employed by or associated with MSO Providers shall maintain their licenses and authorizations at all times during the term of this Agreement. MSO further warrants that MSO Providers are certified as providers in good standing under the Federal Medicare Program (Title XVIII of the Social Security Act, as amended).

 

3.3 Compliance with Plan Programs and Rules

 

MSO agrees, and shall cause MSO Providers to agree, to be bound by and comply with Plan’s policies, procedures and rules as promulgated from time to time, which are now in effect and as hereafter adopted and amended, are incorporated in this Agreement, including without limitation those policies and procedures set forth in the Plan Provider Manual, Plan’s credentialing program, Plan’s quality improvement program, Plan’s grievance program, Plan’s risk management program, Plan’s compliance program and any other program established by Plan from time to time. By executing this Agreement, MSO acknowledges receipt of such policies, procedures and regulations, including the Plan Provider Manual. Plan shall promptly provide MSO with copies of any modification, amendment or any other change to any of such policies, procedures programs or manuals.

 

3.4 Agreements with MSO Providers

 

In the event MSO shall contract with primary care physicians and specialty physicians to arrange for the provision of services to Members under this Agreement, the form of these agreements with such MSO Providers (the “MSO Provider Agreements”) shall contain all CMS, AHCA and DFS required provisions and applicable accrediting standards. MSO shall provide Plan with a copy of each form of MSO Provider Agreement, and upon request of Plan and/or MSO, shall provide copies of each executed MSO Provider Agreement, which shall be subject to Plan’s and MSO’s approval for inclusion as a Participating Provider. Such MSO Provider Agreements shall contain a provision stating that if the terms and conditions contained in MSO Provider Agreement conflict with any terms and conditions contained in this Agreement, the provisions in this Agreement shall control and supersede the terms and conditions contained in MSO Provider Agreement.

 

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3.5 Utilization

 

MSO and MSO Providers shall comply with and be monitored under Plan’s approved Utilization Management Programs as in effect from time to time, including, without limitation, pre-certification of elective admissions and procedures, referral processes and reporting of clinical encounter data. MSO shall ensure proper communication between MSO and Plan regarding Utilization Management decisions to enable Plan to carry on all other functions required to be carried on in connection with the provision of Covered Services to Members, including the approval of referrals. Plan shall have the right to override any Utilization determination reached by MSO and any such determination made by Plan shall be binding on MSO; Plan may pay a claim or claims on the basis of its utilization determinations. Without limiting the generality of the foregoing, Plan may pay any claim included in a claims report provided to MSO if MSO has not objected to the payment of said claim within five (5) business days of the receipt by MSO of said claims report

 

3.6 Verification of Eligibility

 

Subject to Plan complying with its obligations under Section 2.2 above to provide each Member with an identification card and to provide MSO with a Membership List on a monthly basis, MSO is responsible for verifying eligibility of Members before MSO Providers render Covered Services to such individuals (e.g., verifying Member’s inclusion in Membership List).

 

3.7 MSO Provider Training

 

MSO shall cause MSO Providers to receive and participate in any applicable training developed by Plan, the contents of which may be amended from time to time by Plan in its sole and absolute discretion. MSO shall cause MSO Provider to maintain a level of experience through continuing education programs in MSO Provider’s particular discipline and shall maintain the educational standards required by MSO Provider’s licensure board when applicable. MSO Providers shall participate, to the extent feasible, in any continuing education programs established or recommended by Plan appropriate to MSO Provider’s particular practice.

 

3.8 Encounter Information

 

MSO shall cause MSO Providers to submit encounter and clinical information for services rendered to Members on a monthly basis in compliance with Plan’s Quality Improvement Program. The information shall consist of statistical and descriptive medical and patient data as specified by Plan. Encounter information on capitated providers shall be submitted to Plan within thirty (30) days of the date of service to Members. Records shall be maintained for a period of not less than ten (10) years from the termination of this Agreement and shall be retained for an additional period of time if records are under review or audit until such review or audit is complete. MSO shall report to Plan’s risk manager all incidents involving a Member in accordance with Plan’s incident report guidelines, which shall be established in accordance with the provisions of Fla. Stat. Ch. 641.55 and Florida Administrative Code Rule 59A-I2.012. MSO shall designate an individual or individuals who shall make reports of incidents to Plan’s risk manager. MSO shall report all incidents to Plan within three (3) working days of their occurrence; provided that MSO shall immediately report to Plan the occurrence of an incident which results in: (i) the death of Member; (ii) severe brain or spinal damage to a Member; (iii) a surgical procedure being performed on the wrong patient; or (iv) a surgical procedure unrelated to a Member’s diagnosis or medical needs being performed. Receipt of the notices required by this Section shall not constitute an assumption of liability on the part of Plan. Nothing in this Agreement requires either party to disclose any information when applicable law prohibits disclosure.

 

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3.9 MSO Provider Services

 

(a) Professional Standards. MSO shall cause MSO Providers to provide Covered Services to all Members in an ethical and legal manner, in accordance with professional standards of care in the medical community.

 

(b) No Discrimination. MSO shall cause MSO Providers to provide Medically Necessary Covered Services to Members upon referral to MSO Provider by Plan, without regard to race, color, age, place of residence, economic status, health status, health care needs, benefit plan, source of payment, religion, genetic information, national origin or handicap of a Member.

 

(c) Equal Standards. MSO shall cause MSO Providers to render Covered Services to Members in the same manner, in accordance with the same standards of care and with the same time availability as offered MSO Provider’s other patients and without regards to (i) the degree of frequency of utilization of such services by a Member or, (ii) the physical condition or health status of a Member.

 

(d) Hospital Admissions. MSO and/or Plan shall cause MSO Providers or Plan’s Admitting Physician panel to admit to, and provide appropriate services at, a Participating Hospital to Members. MSO and/or Plan shall cause MSO Providers or Plan’s Admitting Physician Panel to maintain clinical privileges at a Participating Hospital. Non-emergency admission to a Participating Hospital must be certified in advance by Plan or MSO in accordance with the approved Utilization Management Program.

 

(e) Availability. MSO shall cause MSO Providers to make available primary care Covered Services twenty four (24) hours per day seven (7) clays per week, including holidays, to comply with the following availability schedule: urgent care - within one day; routine sick care - within one week; and well care - within one month. MSO shall cause MSO Providers to maintain adequate personnel and facilities to fulfill the contracted obligations hereunder. MSO shall cause MSO Providers to be responsible for the provision, authorization, coordination, supervision, monitoring and overall management of all primary care Covered Services to Members in accordance with Plan’s policies and procedures. MSO shall ensure that MSO Providers who are Primary Care Physicians shall be responsible for the making of referrals for Covered Services that are not Primary Care Services when Medically Necessary. In any event, MSO shall cause MSO Providers to maintain a telephone answering service to handle Member calls twenty four (24) hours per day, seven (7) days per week.

 

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(f) Communication with Members. MSO agrees, and shall cause MSO Providers to agree, to make provisions for appropriately communicating with Members in the primary language used by Members, as and when the need arises.

 

3.10 Members’ Medical Records

 

(a) Compliance. MSO shall, and shall cause MSO Providers to:

 

(1) recognize and abide by all applicable state and federal laws, regulations and guidelines, including, without limitation, the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) and those applicable to Plan’s health care plans.

 

(2) maintain appropriate, accurate and complete clinical record entries, as well as to participate in the record-keeping system established by Plan, as may be modified from time to time.

 

(b) Contents and Confidentiality. Medical records of Members will include the recording of services provided by MSO Providers, other health care providers, other reports from referral providers, discharge summaries, records of Emergency Services received by the Members. All such records shall be treated as confidential so as to comply with all federal and state laws and regulations regarding the confidentiality of patient records, including HIPAA.

 

(c) Inspection. Plan and MSO shall have the right to inspect at reasonable times, upon advance written notice, MSO Providers’ facilities and Members’ medical records for compliance with Plan’s policies and procedures. Plan and MSO shall have the right to inspect and to copy, at Plan’s expense, books, records (any and all) maintained by MSO Providers pertaining to claims for Covered Services under this Agreement. Each MSO Provider shall maintain all such records at its principal place of business in the State of Florida. MSO shall cause MSO Providers to permit authorized representatives of any state or federal authority or agency to inspect MSO Providers’ facilities and to review the records of services provided to Members. MSO Providers shall retain such records and provide such access to any governmental agency or to Plan for a period of not less than ten (10) years after the expiration of this Agreement and retain such records for an additional period of time if the records are under review or audit until the review or audit is completed. MSO and MSO Providers shall cooperate, if requested, with any inspection by AHCA and DHHS as a means of evaluation of the quality, appropriateness and timeliness of service provided to Members. These inspections may include inspections of any records pertaining to this Agreement.

 

3.11 Participation in Plan Programs

 

(a) Programs. MSO agrees and shall cause MSO Providers to agree to support and participate in Plan’s programs, including those pertaining to Plan’s policies and procedures, credentialing programs, quality improvement programs, utilization programs, claims payment policies, grievances, continuing education and other similar programs of Plan that may be established from time to time by Plan to promote appropriate standards of medical care and to control the cost and monitor the quality of medical services rendered to Members, including without limitation programs relating to the precertification of elective admissions and procedures, referral process and reporting of clinical encounter data. MSO Providers shall abide by and be bound by Plan’s program determinations.

 

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(b) Information. In conjunction with any such review or program, MSO shall cause MSO Providers to make available at no charge to Plan, information related to treatment of Plan Members as is reasonably requested by Plan. MSO shall, and shall cause MSO Providers to, abide by all of Plan’s applicable rules and regulations, policies and procedures, and acknowledges that failure to do so by a MSO Provider shall be sufficient basis for immediate termination of such MSO Provider.

 

3.12 Compensation and Billing

 

(a) Member Hold Harmless. MSO agrees, and shall assure that MSO Providers agree, that in no event, including but not limited to, nonpayment by Plan, Plan or HealthSun insolvency, or breach of this Agreement by either party, shall MSO or MSO Provider, or any representative or agent, bill, charge, collect a deposit from, seek compensation, remuneration or reimbursement from, or have any recourse against a Member, AHCA, DFS, CMS, or Subscriber, or person acting on their behalf for services provided pursuant to this Agreement. This provision shall not prohibit collection of Copayments on Plan’s behalf made in accordance with the terms of the applicable agreement between Plan and Member. MSO Providers shall use reasonable efforts to collect from Members applicable Copayments. MSO shall cause MSO Providers to agree that (i) this provision shall survive the termination of this Agreement regardless of the cause giving rise to termination and shall be construed to be for the benefit of Members, and that (ii) this provision supersedes any oral or written contrary agreement now existing or hereafter entered into between or among MSO, MSO Provider and Members, or persons on their behalf. MSO shall, and shall cause MSO Providers to, continue providing services to Members through any post insolvency period in the manner set forth in Section 4.3 hereof or through any period after the termination of this Agreement to the extent necessary to complete a plan of care or plan of treatment initiated prior to termination of this Agreement. Plan shall not alter the provisions contained in this paragraph without the prior written approval of the Secretary or a Director, Superintendent or Commissioner of the DHHS.

 

(b) Refunds and Set-offs. MSO shall, and shall cause MSO Providers to, immediately refund to Plan any and all sums collected by MSO Providers from Members to which MSO Providers were not entitled under this Agreement, including the Attachments hereto. Such refunds shall take the form of cash payments or setoffs against amounts owed to MSO by Plan. When appropriate, Plan shall return to Member such sums improperly charged by MSO Providers.

 

(c) Compliance with Plan Provider Manual. MSO Provider shall comply with all billing and reporting procedures established by Plan as set forth in Agreement or the Attachments and Schedules hereto and in Plan Provider Manual.

 

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3.13 Insurance

 

(a) Coverage. MSO shall maintain such policies of general liability, professional liability, and other insurance as shall be necessary to insure MSO and MSO’s employees or agents against any claim for damages arising by reason of personal injury or death occasioned directly or indirectly in connection with the provision of Covered Services to Members by MSO’s employees or agents. MSO shall also require MSO Providers to maintain malpractice insurance in the minimum amount of $250,000 per occurrence, $750,000 per aggregate year or in such greater amounts as required by applicable law, or in lieu thereof, to otherwise comply with provisions of Florida law relating to insolvency protection for patients. MSO shall, and shall cause MSO Providers to, secure and maintain, during the term of this Agreement, worker’s compensation insurance for all of their employees connected with the work under this Agreement, as required by applicable law. Such insurance shall comply with Florida’s Worker’s Compensation law. MSO shall maintain current information and documentation regarding this Section 3.13 and shall advise Plan about such insurance, including the name of insurer, policy number, nature and extent of coverage, and expiration date and/or about other arrangements pertaining to malpractice protection. MSO shall notify plan not less than ten (10) days prior to any reduction, cancellation, termination or expiration of insurance coverage for MSO or MSO Providers.

 

(b) Claims. MSO shall notify Plan of any claim or cause of action by or relating to a Member filed against MSO or a MSO Provider within five (5) working days of MSO’s receipt of notice that such a claim or cause of action has been filed. MSO shall cause each MSO Provider to notify MSO of any claim or cause of action by or relating to a Member filed against such MSO Provider within five (5) working days of MSO Provider’s receipt of notice that such a claim or cause of action has been filed. MSO shall provide Plan with any information regarding such claim or cause of action reasonably requested by Plan.

 

3.14 Referrals

 

MSO shall, and shall cause its MSO Providers to, abide by the referral system approved by Plan and MSO pursuant to the Utilization Management Program, as amended by MSO or Plan from time to time in their sole and unfettered discretion. Except in cases of Emergency or the onset of a condition requiring Urgently Needed Services, MSO Providers shall not make a referral of a Member to a Specialty Physician or a non-Participating Provider for Covered Services without prior approval of Plan or MSO in accordance with the Utilization Management Program. Any such referrals shall be made in accordance with approved policies for the provision of Covered Services. If MSO Provider wishes to refer a Member to a non-Participating Provider, MSO Provider must request a referral in writing and MSO, in accordance with the Utilization Management Program, shall be responsible for arranging the provision of the services. MSO Providers shall furnish to health care providers to whom or to which it has referred a Member complete information on treatment procedures and all pertinent clinical services provided to Member prior to such referral. In the event that non-Emergency services required by a Member are not available from any Participating Provider, non-Participating Providers may be utilized with the prior written consent of Plan only.

 

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3.15 Grievances and Disputes

 

MSO shall, and shall cause MSO Providers to, cooperate with Plan in resolving any Members’ grievance(s) related to the provision or denial of Covered Services. MSO shall notify Plan of any complaints received by MSO and MSO Providers. MSO shall, and shall cause MSO Providers to, use best efforts to resolve any complaints in a fair and equitable manner. MSO shall, and shall cause MSO Providers to, agree to participate in and cooperate with Plan’s Member grievance procedures, as enacted by Plan from time to time, and comply with all final determinations rendered in accordance with those procedures.

 

3.16 Assignment of New Members by Plan

 

By written notice to MSO, Plan’s Medical Director may suspend referral of Members to MSO if it is determined that MSO or MSO Providers are not complying with (i) the terms set forth in this Agreement; (ii) Plan’s policies and procedures; or (iii) Plan’s policy and/or program requirements.

 

3.17 Coordination of Benefits

 

MSO shall, and shall cause MSO Providers to, cooperate in the implementation of any of Plan’s obligations and/or policies and procedures relating to coordination of benefits and other third party claims. MSO Providers shall bill when requested by Plan any third party payer for services rendered to Members. MSO and MSO Providers will, when permitted by law, reimburse Plan in the event that payments are received from such payers for Covered Services provided to Members, or assign to Plan all payments owed by such payers, and execute any further documents that may be required or appropriate to permit Plan to bill and process forms for any third party payer on MSO Provider’s behalf or to bill such payers directly, as determined by Plan.

 

3.18 Provision of Non-Covered Services

 

In the event that MSO Providers shall provide any non-Covered Services to a Member, MSO Providers shall, prior to the provision of such non-Covered Services, inform the Member (a) of the service(s) to be provided, (b) that Plan will not pay for or be liable for said services, and (c) that the Member will be financially liable for such services as permitted by applicable law.

 

3.19 Acceptance and Treatment of Members

 

MSO agrees, and shall cause each MSO Provider to agree, to accept Members as patients.

 

3.20 Transfer of Members and Medical Records

 

(a) Requests to Transfer. As the physician-patient relationship is a personal one and may become unacceptable to either party, MSO Provider may request in writing to Plan that a Member be transferred to another Participating Physician. However, MSO Provider may not seek to have a Member transferred because of the amount of medical services required by the Member or because of the physical condition of the Member. MSO acknowledges that Members have a contractual right to request a transfer to another Participating Provider.

 

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(b) Transfer of Records. In the event of (i) the selection by a Member of another Participating Provider in accordance with Plan procedures, or (ii) the approval by Plan of a MSO Provider’s request to transfer a Member from such MSO Provider’s practice; to another Participating Provider, MSO Providers shall transfer copies of Member’s medical records, x-rays, and any and all other pertinent data to Plan, and to the new Participating Provider as selected by Member, when requested to do so in writing by Plan or Member. This charge shall be billed at a reasonable charge, not to exceed the amount stated in Florida Statute Ch. 395.3025 and shall not be billed to Members, AHCA or CMS.

 

3.21 Facilities and Environment

 

MSO shall, and shall require MSO Providers to, provide a functionally safe and sanitary environment for all Members. The medical service facilities of MSO Providers will: (a) reasonably accommodate handicapped individuals, (b) comply with applicable state and local building code and regulations; (c) comply with applicable state and local fire prevention regulations; (d) comply with applicable federal laws and regulations; (e) are inspected at least annually by the local or state fire control agency; (f) contain fire equipment and illuminated signs for cases of emergency evacuation, (g) offer adequate lighting and ventilation, and (h) shall remain clean and properly maintained. MSO Providers shall have in place appropriate procedures to handle medical and other emergencies that may arise in connection with services provided. By written notice to MSO, Plan’s Medical Director may suspend referral of Members to any MSO Providers if it is determined that the facts presented indicate that health or safety of Members could be endangered by such MSO Provider’s continued participation in Plan.

 

3.22 Formulary

 

MSO shall, and shall cause MSO Providers to, comply with Plan’s Prescription Drug Formulary, which may be amended from time to time, by Plan in its sole discretion. Plan shall promptly notify MSO of any amendment to Plan’s Prescription Drug Formulary.

 

3.23 Signs and Displays

 

MSO Providers shall display in a visible and prominent place any reasonable card, plaque or similar identifying logo provided by Plan to identify MSO Providers to Members.

 

3.24 Notification of Changes

 

MSO shall immediately notify Plan in writing upon the receipt of any verbal or written notice of the occurrence of any of the following:

 

(a) Any changes to the list of current MSO Providers, their addresses and telephone and facsimile numbers. A complete list of MSO Providers is contained in Attachment C;

 

(b) Any MSO Provider’s license to practice medicine in the State of Florida is suspended, revoked, terminated, or subject to terms of probation or other restrictions;

 

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(c) MSO or any MSO Provider has become a defendant in any malpractice action initialed by a Member, receives any pleadings, notices or demands of claim, or service of process relating to alleged malpractice involving a Member, or is required to pay damages in any such action by way of judgment or settlement;

 

(d) MSO or any MSO Provider becomes the subject of any disciplinary proceeding or action before a governmental agency, including any State of Florida department, board, or agency, or a similar entity in any state;

 

(e) Any MSO Provider is convicted of a felony relating directly or indirectly to the practice or conduct of such MSO Provider’s profession;

 

(f) MSO or any MSO Provider is sanctioned or is subject to sanctions by the Medicare programs;

 

(g) Any MSO Provider’s clinical privileges at any hospital are terminated, canceled or suspended;

 

(h) MSO Provider becomes incapacitated;

 

(i) An act of nature or any event beyond a MSO Provider’s reasonable control likely to interrupt all or a portion of a MSO Provider’s practice for a period of sixty (60) consecutive calendar days, or which may have a material adverse effect on MSO Provider’s ability to perform his/her/its obligations for this period;

 

(j) Any change in the nature or extent of services rendered by a MSO Provider;

 

(k) Any material change or addition to the information and disclosures submitted by MSO Provider as part of the application for a contract with Plan or MSO to provide Covered Services to Members;

 

(l) Any other act, event, occurrence or the like that might materially affect a MSO Provider’s ability to carry out his/her/its duties and obligations to Members.

 

(m) If a MSO Provider is a corporation, professional association or partnership, any of the above events with respect to a physician or other health professional who owns, is employed by or is otherwise associated with such MSO Provider.

 

3.25 Corporate Representations

 

MSO represents that it has and shall maintain any and all applicable permits and licenses relating to its business and the performance of its obligations under this Agreement. MSO is a corporation duly organized, validly existing and in good standing under the laws of the State of Florida. MSO has full power and authority to own and operate its properties and assets and to conduct and carry on its business as it is now being conducted and operated by MSO. This Agreement has been validly executed and delivered by MSO and constitutes a legal, valid and binding obligation of MSO. MSO has full power and authority to execute and deliver this Agreement and to perform its obligations under and consummate the transactions contemplated by this Agreement. The execution, delivery and performance of this Agreement by MSO does not, and the consummation by MSO of the transactions contemplated hereby will not, and the compliance by MSO with the provisions hereof will not, (a) conflict with or violate any provision of MSO’s Articles of Incorporation or Bylaws; (b) with or without notice or the passage of time or both, constitute, give rise or result in the breach, default or event of default under, or violation of any obligation under, any note, bond, mortgage, deed, license, franchise, permit, lease, contract, agreement, or other instrument, commitment or obligation to which MSO is a party and will not violate or conflict with any other material restriction of any kind or character to which MSO is subject; (c) violate any order, writ, injunction, decree, judgment or ruling of any court or governmental authority applicable to MSO; or (d) violate any material statute, law, rule or regulation applicable to MSO.

 

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3.26 Professional Corporations or Partnerships

 

In the event that MSO contracts with a MSO Provider or group of providers that is a professional corporation, professional association or partnership rather than an individual Physician or provider, MSO agrees to cause all of the terms set forth herein to apply with equal force to both the professional corporation, professional association or partnership and the individual physicians or providers associated with such entity. Notwithstanding any interpretation of this Agreement to the contrary, MSO agrees, represents and covenants that all of the provisions of this Agreement applicable to MSO, unless expressly inapplicable, shall apply with equal force to MSO Providers. MSO shall represent its MSO Providers in matters pertaining to the provision of Covered Services under this Agreement, and MSO represents that it has obtained the consent to such representation from its MSO Providers.

 

3.27 Other Contractual Commitments

 

MSO represents and assures Plan that MSO’s contractual commitments with other health maintenance organizations, provider sponsored organizations, competitive medical plans and health related entities do not restrict or impair MSO from performing its duties under this Agreement.

 

3.28 Compliance with Laws

 

MSO shall, and shall cause MSO Providers to, comply with all applicable state and federal laws and regulations applicable to MSO and/or Plan, specifically including, without limitation, all such laws and regulations promulgated by the DFS, AHCA, CMS and DHES. MSO shall use its best efforts to assist Plan in complying with all applicable laws and regulations.

 

3.29 Accrediting Organizations

 

MSO shall provide Covered Services and perform obligations hereunder in compliance with all applicable rules, regulations, standards, guidelines and requirements of any accrediting organization from which Plan seeks accreditation as a health plan. MSO shall assist Plan in complying with such accreditation requirements.

 

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3.30 Compliance with Plan’s Confidentiality Obligations

 

MSO shall keep and maintain confidential, and shall cause MSO Providers to agree to keep and maintain confidential, all information provided to MSO by Plan which Plan identifies, in writing, as proprietary or confidential or which is required to be kept confidential by Plan pursuant to Plan’s agreements with other parties, including any agreements relating to proprietary information of such third parties, and which Plan identifies to MSO as being subject to confidentiality requirements, and MSO shall ensure compliance with such obligations by its officers, directors, shareholders, agents, employees, contractors or providers, unless otherwise required by law. Notwithstanding the foregoing, MSO shall not be required to maintain the confidentiality of any information which is generally known to the public at the time of disclosure; becomes known to MSO through disclosure by sources other than Plan or MSO; is independently developed by MSO without reference to or reliance upon the information provided by Plan or MSO; or is required to be disclosed by MSO to comply with applicable laws or regulations; provided that MSO must provide written notice of such disclosure to Plan prior to making any such disclosure.

 

3.31 Credentialing; Composition of MSO

 

Plan shall have primary responsibility for all Credentialing functions under this Agreement, but MSO shall assist Plan in carrying out Plan’s Credentialing program with respect to prospective MSO Providers. MSO shall obtain from prospective MSO Providers and promptly deliver to Plan all information requested by Plan to make its credentialing determination. MSO Providers and all other health professionals employed by, under contract with or associated with MSO Providers will be re-credentialed every three years. MSO agrees to notify Plan immediately of deletions of MSO Providers. All MSO Providers must be fully credentialed prior to treating Members. MSO shall comply with and abide by Plan’s implementation of its Credentialing Program. MSO shall use its best efforts to obtain the agreement of any providers who become affiliated with any MSO Provider to become MSO Providers. Any such providers shall be credentialed in accordance with Plan’s Credentialing Program prior to providing Covered Services to Members. In addition, upon a reasonable showing of good cause by Plan, MSO shall immediately remove any MSO Provider as a provider of Covered Services to Members upon the written demand of Plan.

 

3.32 Information Exchange between MSO and Plan

 

MSO covenants that MSO shall communicate with and transmit data and information to Plan’s management information systems in such a manner as to not cause any disruption in the business of Plan or the performance of Plan’s duties and obligations as set forth in this Agreement.

 

3.33 Reinsurance

 

MSO shall participate in Plan’s reinsurance program for its Members, at MSO’s sole cost and expense. MSO will only be charged the actual cost of the reinsurance. In addition, MSO shall comply with all applicable reinsurance stop/loss requirements under relevant federal and/or state physician incentive plan laws and regulations.

 

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3.34 Performance of MSO’s Obligations by Plan

 

If MSO fails or becomes unable to perform any of its obligations under this Agreement, after receipt of written notice from Plan of such failure and the failure of MSO to cure such alleged breach within thirty (30) days of the written notice from Plan specifying the breach to be cured, Plan, at its option, may itself perform, or cause the performance of, such obligations, in the place of MSO. The option granted to Plan to perform MSO’s obligations under this Agreement in the event MSO fails to do so, is in addition to, and not in lieu of, any other remedies Plan may have pursuant to this Agreement, under the law or in equity. If MSO’s failure to perform its obligations under this Agreement is material and MSO fails to cure such material breach within thirty (30) days after notice thereof, and Plan exercises its option to perform, or cause to be performed, the obligations of MSO under this Agreement, then Plan shall be entitled to exercise all of the rights and remedies of MSO under this Agreement. Such rights and remedies shall include, without limitation, the right to assume MSO’s existing agreements with MSO Providers for the provision of Covered Services to Members, and to retain any amounts that would otherwise be payable to MSO for the performance of its obligations under this Agreement. Plan may, in its sole discretion, in lieu of assuming MSG’s agreements with MSO Providers, seek to enter into new contracts directly with such MSO Providers, for the provision of Covered Services to Members. Termination of this Agreement by Plan for cause as to MSO (as hereinafter defined) shall be considered a de facto failure of performance by MSO, which shall trigger Plan’s option to perform in accordance with the terms of this Section 3.34.

 

3.35 Inclusion of Provision in MSO Provider Agreements Regarding Plan’s Performance Option

 

MSO shall include the following provision in each of its MSO Provider Agreements, to effectuate the terms of Section 3.34, above:

 

Performance of MSO’s Obligations by Plan. If MSO fails or becomes unable to perform any of its obligations under this Agreement, and such failure to perform is material and continuing, then in such event, Plan, at its option, may itself perform, or cause the performance of, such obligations, in the place of MSO. If Plan performs, or causes to be performed, the obligations of MSO hereunder, then Plan shall be entitled to exercise all of the rights and remedies of MSO under this Agreement. Such rights and remedies shall include, without limitation, the right to assume this Agreement. In the event Plan assumes the performance of MSO’s obligations hereunder, Provider shall continue to perform its obligations under this Agreement as if MSO had not failed to perform, and shall thereafter look to Plan for the fulfillment of MSO’s obligations under this Agreement. Plan may, in its sole discretion, in lieu of assuming this Agreement, seek to enter into a new agreement with Provider for the provision of Covered Services to Members by Provider. Termination of the MSO Risk Agreement by and between MSO, Plan and MSO, dated as of July 1, 2009, by Plan or MSO for cause as to MSO, shall be considered a de facto failure of performance by MSO, which shall automatically trigger Plan’s option to perform in the place of MSO under this Agreement, as set forth in this Section.

 

3.36 Amendment of MSO’s Existing MSO Provider Agreements

 

Immediately after the execution of this Agreement, MSO shall cause to be amended all of its existing MSO Provider Agreements, to include the provision set forth in Section 3.35, above, in order to effectuate the terms thereof with respect to MSO’s existing contracts with MSO Providers. MSO shall promptly provide the executed, amended MSO Provider Agreements to Plan.

 

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IV. Governmental Requirements

 

4.1 Maintenance of Records

 

Notwithstanding anything herein to the contrary, MSO shall, and shall cause MSO Providers to, maintain complete and accurate fiscal records, as well as medical and social records applying solely to Members for whom MSO or MSO Providers have claimed and received payment. MSO Provider shall maintain such records as are necessary for evaluation of the quality, appropriateness and timeliness of services performed under this Agreement. Said records will be made available for fiscal audit, medical audit, medical review, utilization management, AHCA audit and other periodic monitoring upon request of authorized representatives of Plan or any governmental agency. MSO shall, and shall cause MSO Providers to, comply with requirements issued as a result of any such inspection or audit. Plan shall withhold from MSO’s compensation under Attachment B any and all amounts determined to be payable to Plan by MSO or MSO Providers as a result of such audits and any state and federal disallowance’s lawfully imposed on Plan as a result of MSO or any MSO Provider’s failure to abide by the terms of this Agreement. Said records shall be retained for a period of at least ten (10) years after starting date of the applicable retention period or until resolution of any ongoing audit occurs.

 

4.2 Indemnification

 

(a) Plan Indemnification. Plan agrees to indemnify, defend and hold harmless MSO, and its employees, agents, independent contractors, officers and directors against any and all claims, damages, causes of action, cost or expense, including court costs and reasonable attorney’s fees which may arise and/or be incurred in connection with or as a result of the negligent or wrongful performance of Plan under this Agreement. This clause shall survive termination of this Agreement regardless of the reason for termination, including breach of this Agreement due to insolvency.

 

(b) MSO Indemnification. MSO shall indemnify, defend and hold harmless Plan, their employees, agents, independent contractors, officers and Board of Directors, AHCA, DFS, CMS and Members from and against all claims, damages, causes of action, cost or expense, including court costs and reasonable attorney’s fees, which may arise from any negligent act or other wrongful conduct by MSO or MSO Providers under this Agreement, including, without limitation, a breach of this Agreement This clause shall survive termination of this Agreement regardless of the reason for termination, including breach of this Agreement due to insolvency.

 

4.3 Continuing Obligation

 

If Plan becomes insolvent, MSO and MSO Providers’ obligations under this Agreement shall continue in full force with respect to Members assigned to Provider for a period equal to the longer of (i) sixty (60) days from the date of Plan’s insolvency, (ii) the period for which premiums have been paid, or (iii) the period during which a Member is continuously confined in an inpatient facility. MSO Providers shall not bill Members for Covered Services provided during such period. MSO agrees, and shall cause MSO Providers to agree, that this provision shall survive the termination of this Agreement regardless of the cause giving rise to termination and shall be construed to be for the benefit of Members. This provision supersedes any oral or written contrary agreement now existing or thereafter entered into between or among MSO, MSO Providers and Members, or persons on their behalf. Plan shall not alter the provisions contained in this paragraph without the prior written approval of CMS.

 

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4.4 Termination by MSO Providers

 

MSO shall cause MSO Providers to provide AHCA and DFS sixty (60) days’ written notice of any intended termination of its agreement with MSO or Plan.

 

4.5 Independent MSO Provider

 

It is expressly agreed that Plan, MSO, and MSO Providers, in the performance of their obligations under this Agreement, are at all times performing as independent contractors. No act, work, commission, or omission by any party, its agents, servants, contractors, or employees, pursuant to the terms and conditions of this Agreement shall be construed to make or render Plan, MSO, or MSO Providers an agent, servant, employee of, or joint venturer with, the other. MSO Providers shall be solely responsible and liable for all medical care, advice and treatments rendered or prescribed to Members.

 

V. Restrictive Covenants

 

5.1 Confidentiality

 

MSO agrees, and shall cause MSO Providers to agree, that all information regarding Members is highly confidential and that the confidentiality of Patient Health Information (as that term is defined in HIPAA) will be maintained in accordance with applicable I IIPAA regulations. Both Plan and MSO agree and acknowledge that this section shall survive the termination of this Agreement

 

5.2 Non-Solicitation of Patients

 

During the term of this Agreement, and for a period of two (2) years following (i) termination of this Agreement by Plan other than for “Cause” (as defined in Section 6.3(a)), (ii) termination of this Agreement by MSO for “Cause” (as defined in Section 6.3(b)), or (iii) expiration of this Agreement at the end of twenty (20) years, if Plan refuses to accept an offer by MSO to extend the Agreement upon the same terms and conditions as set forth herein, then in any such event, Plan may not solicit any patient of any MSO Provider to transfer to another Participating Provider or terminate such patient’s relationship with such MSO Provider or to establish a provider-patient relationship with any other healthcare provider who or which is not a MSO Provider. The restrictions against solicitation following termination of this Agreement set forth immediately above shall not be applicable in the event of a termination or non-renewal by Plan for “Cause.” This Section shall survive the termination of this Agreement.

 

This Section 5.2 shall not prohibit any Member from seeking to transfer to another Participating Providers

 

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5.3 Non-Solicitation of Employees

 

During the time this Agreement is in effect, MSO shall not, without the prior written consent of Plan, as the case may be, solicit any physician or non-physician employee or independent contractor of Plan, or of any of their affiliates, to terminate such person’s employment or engagement by Plan, or any affiliate thereof, and to become an employee or independent contractor of MSO or any of its affiliates, nor shall MSO, or any of its affiliates, hire or engage any such person who, within six (6) months of the time such person is hired or engaged by MSO or any of its affiliates, was an employee or independent contractor of Plan or any of their affiliates.

 

During the time this Agreement is in effect, Plan, nor any of its affiliates, shall, without the prior written consent of MSO, solicit any physician or non-physician employee or independent contractor of MSO, or any of its affiliates, and to become an employee or independent contractor of Plan, or any of its affiliates, nor shall Plan, or any of its affiliates hire or engage any such person who, within six (6) months of the time such person is hired by Plan, or any affiliate thereof, was an employee or independent contractor of MSO or any of its affiliates.

 

VI. Term and Termination

 

6.1 Term

 

The term of this Agreement shall commence on the Effective Date, and shall continue in effect for ten (10) years from such date or if this Agreement is earlier terminated as provided herein. Provided that this Agreement is not earlier terminated, then upon expiration of the initial ten (10) year term, and provided that MSO is not in breach of this Agreement, this Agreement shall automatically be renewed for an additional ten (10) year term, unless MSO gives written notice of its intent not to renew the Agreement not less than ninety (90) days prior to the end of the initial term.

 

6.2 Immediate Automatic Termination

 

This Agreement shall automatically terminate solely with respect to particular MSO Providers immediately upon the occurrence of the following:

 

(a) License Revocation. Such MSO Provider’s license to practice medicine, or the license of any of the principal physicians or other health professionals in association with such MSO Provider, is revoked in any State;

 

(b) Conviction of Felony. If such MSO Provider or any of the physicians or health professionals associated or affiliated with such MSO Provider is convicted of a felony; or

 

(c) Loss of Medicare Provider Status. If such MSO Provider or any of the physicians or health professionals associated or affiliated with such MSO Provider fails to obtain or maintain Medicare approved provider status.

 

21 

 

 

 

6.3 Termination with Cause

 

(a) By Plan. This Agreement may be terminated immediately by Plan with cause. “Cause” for immediate termination is the following:

 

(1) Pertaining to Particular MSO Providers. With respect to a particular MSO Provider, this Agreement may be terminated by Plan for Cause with respect to such MSO Provider upon any of the following occurrences:

 

(i) Failure of such MSO Provider to comply with the medical community standards of medical practice;

 

(ii) Failure of such MSO Provider to meet credentialing standards; or

 

(iii) such MSO Provider engages in any of the conduct listed in Section 6.3(a)(2).

 

For purposes of this Section 6.3(a)(1), if MSO Provider is a corporation, professional association or partnership, the term MSO Provider shall include a physician or other health professional who owns, is employed by or is affiliated with such MSO Provider.

 

(2) Pertaining to MSO. This Agreement may be terminated in its entirety by Plan for cause upon written notice setting forth the grounds for termination. Cause shall constitute the following events:

 

(i) Material breach of terms and conditions of this Agreement by MSO or a breach of a representation, covenant or warranty made by MSO under this Agreement, including, without limitation, the failure to fund the Medicare Operating Fund, as described in Attachment B, and failure of MSO to cure such alleged breach within thirty (30) days of the written notice from Plan specifying the breach to be cured or, if such breach is not reasonably capable of being cured within such thirty (30) day period, failure of MSO to commence actions to cure such breach within such thirty (30) day period;

 

(ii) The willful breach, habitual neglect, or continued failure of MSO or MSO Providers to abide by Plan’s rules, procedures, policies or any other activity for which MSO has received notice, and failure of MSO to cure such breach within thirty (30) days of the written notice from Plan specifying the breach to be cured or, if such breach is not reasonably capable of being cured within such thirty (30) day period, failure of MSO to commence actions to cure such breach within such thirty (30) day period;

 

(iii) MSO acts in a manner which is demonstrably injurious to the goodwill or reputation of Plan, and fails to discontinue such actions after notice from Plan;

 

22 

 

 

(iv) The commission of an act of fraud or theft against Plan;

 

(v) The good faith determination by Plan that continuation of Agreement may result in danger to the health, safety or welfare of any Plan Member; or

 

(vi) The involuntary bankruptcy or insolvency of MSO, if not dismissed within sixty (60) days after fling.

 

(b) By MSO.

 

(i) This Agreement may be terminated immediately by MSO with cause. The non-payment of any undisputed amount required to be paid by Plan hereunder after written demand therefore, and Plan’s failure to cure such non-payment within thirty (30) days after written demand therefor, shall constitute “Cause” for immediate termination.

 

(ii) This Agreement may be terminated by MSO if MSO is required to pay the amount of a Deficit to the Plan pursuant to paragraph 4.c. of Attachment B for four (4) or more months during any consecutive twelve (12) month period; provided, however, upon receipt of a notice of termination from MSO pursuant to this Section 6.3(b)(ii), Plan shall have the option, in its sole and absolute discretion, upon written notice to MSO to convert this Agreement to a non-risk contract, pursuant to which MSO would be paid the capitation payments set forth in Attachment B, Section 4.a and all of the other provisions of Attachment B, shall be void and of no effect. All other provisions of this Agreement to the contrary shall be modified to be consistent with a non-risk contract. If Plan elects to convert this Agreement to a non-risk contract, Plan shall give MSO written notice of its intent to effect such conversion within ten (10) days after receipt of MSO’s notice of termination.

 

6.4 Termination of Medicare Contract

 

This Agreement will automatically terminate upon the termination or non-renewal of the Medicare Advantage contract between CMS/DHHS and HealthSun (the “Medicare Advantage Agreement”), or upon the termination or non-renewal of the contract between HealthSun and MSO. Plan will give notice to MSO of the non-renewal or termination of the Medicare Advantage Agreement or of HealthSun’s agreement with MSO and the date on which such will expire or terminate.

 

6.5 Obligation Upon Termination

 

(a) Provision of Services. Without limiting the provisions of any other sections of this Agreement, in the event this Agreement is terminated for any reason, MSO Providers shall complete the course of treatment of any Member then receiving treatment in accordance with the terms hereof until provision has been made by Plan for the reassignment of such Member to another Participating Provider for further treatment, if appropriate, or until MSO has arranged for transfer of such patient to another insurance plan, it being understood that the obligation of MSO under this Agreement to the extent they pertain to Covered Services provided prior to termination, shall survive termination. MSO Providers shall continue to provide services through any post insolvency period. Payment to MSO for such services beyond termination date shall be made under the same terms and conditions as provided for under this Agreement.

 

23 

 

 

(b) Member Hold Harmless. Upon termination of this Agreement, the rights of each party shall terminate, provided however, that such action shall not release MSO and MSO Providers from the obligation to not seek compensation from Members for services provided prior to termination and completion of treatment of Members then receiving care until continuation of Members’ care can be arranged by Plan. Payment for such continued Covered Services shall be in accordance with the terms of this Agreement. Upon notice of termination, Plan will notify Members and other persons or entities that it deems to have an interest in such termination, through such means as it may choose.

 

(c) Return of Documents. Upon the termination of this Agreement, MSO agrees to return any and all Plan provided materials, provider manuals, or other documentation, related to its business, including all copies thereof, whether authorized or not to Plan.

 

(d) Transfer of Members. The parties hereto acknowledge and agree that substantially all of the MSO Members were existing patients of MSO Providers prior to the effectiveness of this Agreement and/or were subsequently enrolled in the Plan due to the efforts of MSO. For a period of One Hundred Eighty (180) days following termination of this Agreement by Plan without cause, Plan will cooperate with MSO in the orderly transfer of MSO Members out of Plan and into such other managed care arrangements as MSO and MSO Members may specify.

 

6.6 By Order of Department of Insurance

 

This Agreement may be terminated upon issuance of an order by the DFS requiring such termination pursuant to section 641.234, Florida Statute, or any successor statute.

 

24 

 

 

VII. General Terms

 

7.1 Modification and Assignment of this Agreement

 

The terms and sections included hereunto and the Agreement executed by the parties together embody all of the terms and conditions relating to the Agreement between the parties, and all oral and parole representations or statements made by either party prior to the execution of this Agreement are merged herein. The provisions of this Agreement may not be amended, supplemented, waived or changed orally or by course of conduct of the parties, but may be amended only by a written and signed document by the party by whom enforcement is sought and which shall make specific reference to this Agreement. This Agreement, being intended to secure the services of MSO, shall not be assigned, sublet, delegated, or transferred by MSO without the prior written consent of Plan, which consent shall not be unreasonably withheld if (i) this Agreement shall not then be in default in any respect (including any deficits in the operating funds hereunder), the proposed assignee demonstrates that it has the prior management experience, business infrastructure, health delivery system, and financial stability to undertake MSO’s obligations hereunder, and (iii) such assignee, upon approval by Plan of such assignment, undertakes to honor all of the terms and conditions of this Agreement, and to faithfully and fully perform the obligations of MSO hereunder. Plan may assign this Agreement to an entity which will operate under the same Medicare Advantage Plan as Plan and which shall fully assume the obligations of Plan hereunder. If any party decides not to terminate the Agreement, even though it has the right to do so in a particular instance, such decision shall not be considered a waiver of its right to terminate on a future occasion of the same or any other reason. For purposes of this provision, and without limiting the generality of this section, an assignment shall include: (i) a sale or other change of the beneficial and/or legal ownership more than 49% of the issued and outstanding stock or ownership interests (whether in one transaction or a series of similar transactions); (ii) a change in a majority of the members of the Board of Directors or Managers, excluding new directors/managers approved by the incumbent board over any three year period; the sale of all or substantially all of the assets of a party, and/or (iv) any business combination in which the business of party is joined with another person who thereafter would be included as an “affiliate” under the Securities Act of 1933, as amended, shall be deemed an assignment for purposes hereof and shall be subject to the limitations on assignment contained herein.

 

7.2 Non-Exclusivity

 

This Agreement is a non-exclusive agreement. Plan and MSO may enter similar agreements with other MSOs and providers, and MSO may enter into similar agreements with other management service organizations and health plans, including Medicare Advantage Plans; provided, however, MSO may not discriminate with respect to allocation of Members among Plan and other health plans with which MSO may contract based upon a Member’s health status or condition.

 

7.3 Severability

 

The invalidity or unenforceability of any terms or provisions hereof shall in no way affect the validity or enforceability of any other terms or provisions.

 

7.4 Headings

 

All section headings contained in this Agreement are to be considered for reference purposes only, and are not intended to define or limit the scope of any provisions of this Agreement.

 

7.5 Entire Agreement

 

This Agreement supersedes all prior understandings and agreements, whether written or oral, between the parties, and together with all Attachments, Schedules and Addendum and other appendices to it, shall be considered as the Agreement by and between Plan and MSO.

 

7.6 Conformance with Law

 

Each party agrees to carry out all activities undertaken by it pursuant to this Agreement in conformance with all applicable federal, state and local laws, rules and regulations.

 

25 

 

 

7.7 Governing Law and Venue

 

This Agreement has been executed and delivered and shall be construed and enforced in accordance with the laws of the State of Florida, without regard to choice of law. Any action by any party whether at law or in equity, shall be commenced and maintained and venue shall exclusively be in Miami-Dade County, Florida. In the event of an actual or threatened breach by Plan of Section 5.2, Section 5.3, or Section 6.5(d), MSO shall be entitled to seek an injunction restraining the Plan from the prohibited conduct. If the court should hold that the duration and/or scope of the covenant is unreasonable, then, to the extent permitted by law, the court may prescribe duration and/or scope that is reasonable and Plan agrees to accept such determination, subject to their rights of appeal. Nothing herein shall be construed as prohibiting MSO from pursuing any other remedies available for such breach or threatened breach, including the recovery of damages from Plan. In the event of any action or proceeding to enforce the provisions of this Section, the prevailing party shall be reimbursed by other party(s) for all costs and attorneys’ fees incurred in such action or proceeding at all levels of proceedings.

 

7.8 No Third Party Beneficiaries

 

This Agreement shall not be construed to create any third party beneficiaries, including without limitation, Members.

 

7.9 Cumulative Remedies

 

Remedies provided for in this Agreement shall be in addition to and not in lieu of any other remedies available to either party and shall not be deemed waivers or substitutions for any action or remedy the parties may have under law or equity.

 

7.10 Gender and Number

 

When the context of this Agreement requires, the gender of all words shall include the masculine, feminine, neuter and the number of all words shall include the singular and plural.

 

7.11 Execution

 

This Agreement and any amendments may be executed in multiple originals, each counterpart shall be deemed an original, but all counterparts together shall constitute one and the same instrument.

 

7.12 Force Majeure

 

No party to this Agreement shall be liable nor deemed to be in default for any delay or failure in performance under this Agreement or other interruption of service or employment deemed resulting, directly or indirectly, from acts of God, civil or military authority, acts of public enemy, war, accidents, fires, explosions, earthquakes, floods, failure of transportation, strikes or other work interruptions by either party’s employees, or any similar or dissimilar cause beyond the reasonable control of either party; provided, however, in the event the provision of Covered Services is substantially interrupted and alternative provisions acceptable to Plan are not made for the provision of Covered Services to Members within forty-eight hours (or less in the event of an Emergency or Urgently Needed Care), Plan shall have the right to terminate this Agreement upon ten (10) days prior written notice to MSO.

 

26 

 

 

7.13 Authority

 

Each signatory to this Agreement represents and warrants that he/she/it possesses all necessary capacity and authority to act for, sign and bind the respective entity on whose behalf he is signing.

 

7.14 Costs and Fees

 

In the event of any litigation by any party to enforce or defend its rights under the Agreement, the prevailing party, in addition to all other relief, shall be entitled to reasonable attorney’s fees,

 

7.15 Notices

 

Any notices and other communications to be given hereunder shall be in writing and shall be deemed to have been duly given when delivered by hand or five days after such notice is mailed, by registered or certified mail, postage prepaid, return receipt requested, addressed to such party as follows:

 

If to MSO:

 

Managed Healthcare Partners, LLC
2151 S. Le Jeune Road, Suite 202
Coral Gables, Florida 33134
Attn: President

 

If to HealthSun:

 

HealthSun Health Plans, Inc.
1205 SW 37th Avenue, 2nd Floor
Miami, Florida 33135
Attn: President

 

or to such other address as shall be furnished in writing by a party to the other parties.

 

7.16 Recitals

 

The recitals set forth at the beginning of this Agreement are true and correct and are incorporated herein by reference as if fully set forth herein.

 

27 

 

 

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the day and year first written above.

 

MSO:

 

MANAGED HEALTHCARE PARTNERS, LLC

PLAN:

 

HEALTHSUN HEALTH PLANS, INC.

 

 

28 

 

 

ATTACHMENT A

 

PRIMARY CARE SERVICES

 

29 

 

 

ATTACHMENT B

 

COMPENSATION

 

30 

 

 

ATTACHMENT C

 

MSO PROVIDERS

 

31 

 

 

ATTACHMENT D

 

COVERED LINES OF BUSINESS

 

32 

 

 

Exhibit 10.11

 

[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

FIRST AMENDMENT TO MSO RISK AGREEMENT

 

This FIRST AMENDMENT TO MSO RISK AGREEMENT (this “Amendment”), dated December 17, 2015, has been entered into by and between HealthSun Health Plans, Inc., a Florida corporation (“HealthSun” or the “Plan”), and Managed Healthcare Partners, LLC, a Florida limited liability company (“MSO”). HealthSun and MSO are referred to individually as a “Party” and collectively as the “Parties.”

 

RECITALS:

 

WHEREAS, the Parties entered into that certain MSO Risk Agreement (the “Agreement”), dated July 1, 2009. Capitalized terms used but not defined in this Amendment shall have the meanings assigned to them in Agreement.

 

WHEREAS, each of the Parties desire to amend certain provisions of the Agreement as set forth below effective as of June 1, 2015 (the “Effective Date”).

 

NOW, THEREFORE, in consideration of the promises, covenants and conditions contained herein, and other good and valuable consideration, the Parties, intending to be legally bound, hereby agree as follows:

 

TERMS AND CONDITIONS:

 

1.                  AMENDMENTS.

 

(a)                Amendments to Attachment B of the Agreement.

 

(i)             Attachment B of the Agreement is hereby amended by replacing (1) “[***]%” with “[***]%” throughout Attachment B, and (2) “actual AAPCC amount” in Section 2 of Attachment B with “actual amount”.

 

(ii)            Section 1 of Attachment B of the Agreement is hereby amended in its entirety and replaced with the following:

 

“MSO Operating Fund: Plan shall establish a Medicare Operating Fund in a ledger at the Financial Records of Plan from which all medical, hospital (including but not limited to inpatient, outpatient and emergency), reinsurance, premium taxes, prescriptions (net of any applicable rebates), physician and health care professionals, and all other Covered Services are paid for all Medicare Members assigned to MSO, including amounts under capitated agreements between Plan or MSO and a provider. MSO may opt out of any capitated programs that are in place at the time of this Agreement, unless such program is necessary for Plan or MSO to comply with legal requirements.”

 

 

 

 

(iii)          Section 6.1 of the Agreement is hereby amended in its entirety and replaced with the following:

 

“6.1          Term

 

The term of this Agreement shall commence on the Effective Date and shall continue in effect until July I, 2029, unless terminated earlier pursuant to this Agreement.”

 

(iv)          The definition of “Effective Date” is hereby amended in its entirety and replaced with the following:

 

“Effective Date” shall mean the effective date of this Agreement, which shall be June 1, 2015.”

 

(b)                Consideration. On the date hereof, in consideration for the amendments set forth in Section 1(a) and in reliance on the representations, warranties, covenants and agreements of the applicable Parties contained in this Agreement, HealthSun shall pay to MSO an aggregate cash amount equal to $2,627,591.00, minus any amounts paid by HealthSun to MSO on or after the Effective Date in excess of [***]% with respect to any payments to be made under Attachment B of the Agreement, plus the aggregate amount for all salaries paid by MSO to the benefit consultants described in Section 1(d)(vi) during the period commencing on the Effective Date and ending on the date hereof, which shall not exceed $133,028.49 (such net amount, the “Closing Cash Consideration”). The Closing Cash Consideration shall be paid to MSO by HealthSun on the date hereof by wire transfer in immediately available funds pursuant to the wire transfer instructions provided in writing by MSO to HealthSun on or before the date hereof.

 

(c)                Representations, Warranties, and Covenants. The Agreement is hereby amended by adding the following Representations:

 

(i)                 No Violation; Consents and Approvals. The execution and delivery of this Agreement by either Party and the consummation by it of the transactions contemplated hereby will not violate any provision of the organizational documents of such Party. The execution and delivery of this Agreement by either Party and the consummation by it of the transactions contemplated hereby will not (1) violate any Law applicable to, binding upon or enforceable against such Party, (2) result in any material breach of, or constitute a material default (or an event which would, with the passage of time or the giving of notice or both, constitute a material default) under, or give rise to a right of payment under or the right to terminate, amend, modify, abandon or accelerate, any of a Party’s material contracts, (3) result in the creation or imposition of any lien upon any of the material property or material assets of a Party, (4) require the authorization, filing, notice, exemption, consent, approval or other material action by or notice to any governmental authority, or (5) require the consent of any Party’s equity holders and board of directors (or similar governing body) that has not been obtained on or before the date hereof.

 

(ii)               Litigation. Other than as set forth on Schedule 1(c)(ii), there are not, and for the previous twenty-four (24) months there have not been, any actions, suits, proceedings or government investigations pending or, to MSO’s knowledge, threatened in writing against (i) the MSO or (ii) any officer or employee of MSO acting in his or her capacity as such, at law or in equity, before or by any governmental authority or any person or entity, which is reasonably likely to be material to MSO. MSO is not subject to any outstanding settlement, injunction, award, judgment, order or decree of any governmental authority. MSO has not, and to the knowledge of MSO, no officer, director or employee of MSO has, been permanently or temporarily enjoined or otherwise prohibited, precluded, debarred, or restricted by any law or governmental authority from engaging in or continuing any conduct or practice in connection with the business of MSO.

 

 

 

 

(iii)             No Material Adverse Effect. There has not been any material adverse effect on MSO’s business, assets, conditions (financial or otherwise), or operations and, to the knowledge of MSO, no event has occurred which would result in a material adverse effect on MSO’s business, assets, conditions (financial or otherwise), or operations.

 

(iv)              Confidentiality; Publicity. No Party or its respective affiliates, employees, agents and representatives shall disclose to any third party the existence of the Agreement, this Amendment or the subject matter or terms hereof or thereof without the prior consent of the other Party; provided, however that the Parties and their affiliates shall be permitted to disclose such information (1) to their attorneys, advisors, representatives, members or investors who are reasonably required to receive such information and (2) in connection with enforcing their rights under the Agreement or this Amendment or any other agreement entered into in connection with the Agreement or this Amendment.

 

(v)                Press Releases and Public Announcements. No Party shall issue any press release or make any public announcement relating to the subject matter of the Agreement or this Amendment without the prior written approval of the other Party; provided, however, that any Party may make any public disclosure it believes in good faith is required by applicable law (in which case the disclosing Party will use commercially reasonable efforts to advise the other Party prior to making the disclosure).

 

(vi)              Benefit Consultants. Immediately upon execution of this Amendment, HealthSun will employ all of MSO’s full-time benefit consultants who will provide services as exclusive agents for HealthSun on behalf of MSO, in each case on terms and conditions substantially similar to the employees at HealthSun with comparable titles, responsibilities and roles.

 

(vii)            Expenses. Each Party will bear its own costs and expenses (including legal fees and expenses) incurred in connection with the Agreement, this Amendment and the transactions contemplated hereby and thereby.

 

2.                   MISCELLANEOUS.

 

(a)                Ratification and Reaffirmation. Except as expressly provided for in this Amendment, the Agreement shall be unchanged and shall remain in full force and effect.

 

(b)                Amendments. Neither this Amendment nor any term hereof may be amended, changed, waived, discharged or terminated without the prior written consent of both Parties.

 

(c)                Governing Law. This Amendment is to be construed and enforced in accordance with and governed by the laws of the state of Florida and the federal laws applicable therein and without regard to the principles of conflicts of law of such state.

 

(d)                Counterparts. This Amendment may be executed in any number of counterparts (including by means of facsimile and electronically transmitted portable document format (pdf) signature pages), each of which shall be an original but all of which together shall constitute one and the same instrument.

 

(e)                Entire Agreement. This Amendment and the Agreement are intended by the Parties as a final expression of their agreement relating to the subject matter herein and therein and are intended to be a complete and exclusive statement of the agreement and understanding of the Parties hereto in respect of the subject matter contained herein and therein.

 

 

 

 

(f)       Power and Authority. Each Party has all corporate power and authority to execute and deliver this Amendment, to perform its obligations hereunder and to consummate the transactions contemplated hereby. All corporate acts or proceedings required to be taken by each of the Parties to authorize the execution and delivery of this Amendment and the performance of each of the Parties’ obligations hereunder have been properly taken.

 

(g)       Recitals. The Recitals to the Agreement are hereby incorporated as material provisions of this Amendment as if restated in full herein.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

 

 

 

 

IN WITNESS WHEREOF, the Parties have executed this Amendment as of the date hereof and effective as of the Effective Date.

 

  MANAGED HEALTHCARE PARTNERS LLC
   
  By: /s/ Carlos de Solo
  Name: Carlos de Solo
  Its: CEO
   
  HEALTHSUN HEALTH PLANS, INC.
   
  By: /s/ Ronald Schutzen
  Name: Ronald Schutzen
  Its: President

 

 

 

 

Schedule 1(c)(ii)

 

 

 

 

 

 

Exhibit 21.1

 

Subsidiaries

 

        Number of Omitted Subsidiaries Operating  
Name of Subsidiary   State of
Organization 		  In the United States     In Foreign Countries  
CareMax Medical Group, L.L.C.   Florida     22       0  
Managed Healthcare Partners L.L.C.   Florida     0       0  
Care Optimize LLC   Delaware     0       1  
IMC Medical Group Holdings, LLC   Florida     7       0  

 

 

 

 

Exhibit 99.1

 

CAREMAX MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Unless the context otherwise requires, references in this section to “CareMax,” “we,” “us,” “our,” and the “Company” refers to CareMax Medical Group, LLC and its subsidiaries. The following discussion and analysis summarizes the significant factors affecting the consolidated operating results, financial condition, liquidity and cash flows of our company as of and for the periods presented below. The following discussion and analysis should be read in conjunction with our consolidated financial statements and the related notes thereto included elsewhere in this Current Report on Form 8-K. The discussion contains forward-looking statements that are based on the beliefs of management, as well as assumptions made by, and information currently available to, our management. Actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Current Report on Form 8-K, particularly in the sections entitled “Risk Factors” and “Forward-Looking Statements.”

 

Overview

 

CareMax is an at-risk primary-care provider contracted by Medicare Advantage (“MA”) plans to provide care to patients in South Florida, which is one of the largest and fastest growing Medicare and dual-eligible markets in the US. Founded by Carlos and Alberto De Solo, CareMax operates a growing network of physicians and multi-specialty medical and wellness centers. The Company currently has 11 centers open in South Florida with an additional two centers under construction, which are expected to open in 2022. CareMax offers a comprehensive range of medical services, including primary and preventative care, specialist services, diagnostic testing, chronic disease management and dental and optometry services under global capitation contracts.

 

CareMax was founded in 2013 and is a leading health care organization focused on providing high-quality medical services through physicians and health care professionals committed to the overall health and wellness continuum of care for its patients. CareMax utilizes a high touch, comprehensive approach to coordinating care for patients that incorporates both exceptional clinical care and the integration of technology and data analytics to manage risk and drive patient satisfaction, provide value-based care and achieve superior clinical outcomes. CareMax also has a Management Services Organization/Independent Physician Association (“MSO/IPA”), arm Managed Healthcare Partners (“MHP”), that provides managerial support to physicians, allowing them to devote more time to patient care and less time to back-office activities. Through such services, physicians can benefit from the economies of scale, efficient specialty network and negotiated utilization network, dental and optometry services, technology, coding and overall infrastructure that CareMax and MHP have tirelessly built to better serve its network of independent physicians. CareMax has also developed a proprietary platform called CareOptimize that assists the care team in aggregating and curating data from across the care continuum. The CareOptimize platform uses a rules engine, powered by machine learning and artificial intelligence, to manifest cost, quality, and clinical data points at point of care during visits and between visits.

 

CareMax medical centers aim to help members achieve and maintain healthier lives with seminars and classes. We provide personal assistance to members and offer information on numerous health-related topics, as well as programs to enhance personal development. Patients enjoy wellness services on important issues such as:


◾Fall Prevention for Seniors;
◾Preventive Medicine;
◾Physical Activity and Nutrition; and
◾Diabetes Prevention and Control.

 

Transportation is offered to and from the CareMax wellness centers for the patients’ convenience.

 

 

 

 

CareMax centers cater to MA Members. MA (or Medicare Part C) plans are run by private insurance companies, approved by and under contract with Medicare.  With MA, patients get all of the same coverage as original Medicare, including emergency care, and most plans also include prescription drug coverage.  In many cases, MA plans offer even more than original Medicare, including dental, vision, hearing and wellness programs.

 

We believe we can translate the above premium services into economic benefits. By focusing on interventions that keep our patients healthy, we can capture the cost savings that our care model creates and reinvest them in our care model. We believe these investments lead to better outcomes and improved patient experiences, which will drive further cost savings, power patient retention and enable us to attract new patients. We believe increasing cost savings over a growing patient population will deliver an even greater surplus to the organization, enabling us to reinvest to scale and fund new centers, progress our care model and enhance our technology. This virtuous cycle has created compelling economics at the center level, with our twelve centers serving more than 6,380 at-risk patients as of March 31, 2021, operating at 60% weighted average capacity and generating total revenues of $27.9 million and weighted average center-level contribution margins (defined as (i) capitated and other revenue minus (ii) the sum of (a) medical claims expense and (b) cost of care, excluding depreciation and amortization) of 6%.

 

As of March 31, 2021, we employed approximately 393 team members, including approximately 21 primary care providers. For the three months ended March 31, 2021 and 2020, our total revenues were $27.9 million and $25.2 million, respectively, representing a year-over-year growth rate of 10.7%. We believe we have significant growth opportunities available to us, with 40% of our current aggregate center capacity not utilized due to our recent center openings and a substantial opportunity to increase the number of centers we operate in new and existing markets.

 

Key Factors Affecting Our Performance

 

Our Patients

 

Our centers accept only MA and Medicaid patients.

 

MA patients are those individuals enrolled in an MA plan that have contracted with us. As of March 31, 2021, we managed the health and wellbeing for nearly 100% of our MA patients on an at-risk basis, where we have been selected as the patient’s primary care provider and are financially responsible for all of such patient’s medical costs, including but not limited to emergency room (“ER”) and hospital visits, post-acute care admissions, prescription drugs, specialist physician expenditures (e.g., orthopedics) and primary care expenditures. For these patients we receive an agreed percentage of the premium the MA plan receives from the Centers for Medicare and Medicaid Services (“CMS”) (typically the substantial majority of such premium given the risk borne by us). Our value proposition to these patients and their MA plan is to improve these patients’ health and reduce these patients’ healthcare costs by providing a more comprehensive patient experience via the CareMax system, whereby we invest more heavily in primary care to avoid more expensive downstream costs, such as hospital admissions. Because we are at-risk for the entirety of a patient’s medical expense, investing more heavily in preventative primary care makes economic sense given the relative costs to acute, episodic hospital-based care. In the three months ended March 31, 2021, we derived 100% of our revenue from our at-risk patient base and expect at-risk patients to constitute the majority of our revenue going forward. Overall, our at-risk patients are profitable at the center level, with a per-patient center-level contribution of approximately $400 per month overall. Overall, our per-patient center-level contribution for at-risk patients increases after three years as patients have longer experience in our model. The improvement of contribution from the average at-risk patient to a tenured at-risk patient is driven by spreading costs over a larger base of patients, as tenured patients tend to be in more mature centers, and improved results driven by our clinical model.

 

The revenue we generate for our fee-for-service patients is significantly less than the revenue associated with our at-risk MA patients. We count fee-for-service patients as those that have completed a welcome visit at one of our centers and verbally communicated a desired interest in continuing to receive care at our centers. A fee-for-service patient remains active in our system until we are informed by the health plan that the patient is no longer active.

 

Our fee-for-service revenue, on a per patient basis, is lower than our per patient revenue for at-risk patients basis in part because our fee-for-service revenue covers only the primary care services that we directly provide to the patient, while the capitation revenue is intended to compensate us for the services directly performed by us, as well as the financial risk that we assume related to the third-party medical expenses of at-risk patients.

 

 

 

 

In terms of the total expense of services provided internally, approximately 100% of our services were provided to patients covered by MA plans covered by capitation arrangements for the three months ended March 31, 2021 and 2020. Our patients enrolled in MA plans covered by capitation arrangements had on average approximately 12 and 8 visits for the three months ended March 31, 2021 and 2020, respectively.

 

Despite the difference in patient economics between these two groups and the small number of fee-for-service patients, we continue to serve both. We do this for a few reasons: (1) we are focused on providing the best healthcare for and improving the wellbeing of all Medicare patients; (2) we are hopeful that in some future period there will be new programs through CMS that allow us to achieve risk-like patient economics on our traditional Medicare patients and (3) our fee-for-service patients often enroll in MA plans at some point in time. We will educate our patients on the different components of Medicare and how they relate to one another. If patients are interested, we will introduce them to an unaffiliated insurance agent who can help them decide the appropriate plan for them based on their individual health needs. If our fee-for-service patients enroll in MA, we are better positioned to continue to serve them as at-risk patients, as we are already familiar with their health conditions, they are familiar with our care model and we receive additional data from payors and third-party medical providers to help us care for them once they join a capitation arrangement.

 

Medicare provides an annual enrollment period during the fall of each year to allow patients to select an MA program or instead select traditional Medicare, with only limited ability for patients to make that selection during other periods of the year. Once patients have selected MA, they can change the selection of their primary care provider at any time. Accordingly, while the annual enrollment period is important to us, we are able to attract new at-risk patients at any time during the year from the existing pool of MA patients, and we must work to retain our patients throughout the year.

 

Our historical financial performance has been, and we expect our financial performance in the future to be, driven by our ability to:

 

Add New Patients in Existing Centers

 

We believe our ability to add new patients is a key indicator of the market’s recognition of the attractiveness of our care model, both to our patients and payor partners, and a key growth driver for the business. We have a large embedded growth opportunity within our existing center base. With an average capacity of 886 patients, our 11 centers as of March 31, 2021 can support approximately 9,700 patients. We also believe that even after COVID-19 subsides, we will continue to conduct a portion of visits by telehealth based on patient preference and clinical need, which could potentially increase the average capacity of our centers beyond 10,400 patients. Additionally, as we add patients to our existing centers, we expect these patients to contribute significant incremental economics to CareMax as we leverage our fixed cost base at each center.

 

We utilize a proactive strategy to drive growth to our centers. We employ a grassroots approach to patient engagement led by our Outreach Team and supplemented by more traditional marketing, including digital and social media, print, mail and telemarketing. We leverage our Outreach Team to ensure we are connecting with Medicare-eligible patients across a number of channels to make them aware of their healthcare choices and the services we offer. These efforts have historically included hosting events within our centers and participating in community events. Each of our centers has a community room, a space designated and available for our patients’ use whenever the center is open. We also utilize this space to provide fitness and health education classes to our patients and often open up events to any older adults in the community regardless of their affiliation. In 2019, we hosted approximately 60 local events in the communities surrounding our centers, none in 2020 (due to COVID-19) and 10 in the first quarter of 2021. During the global pandemic, we were leveraging our community centers as extra waiting room space as needed which allowed easier social distancing for patients or their companions. We are continuing to leverage our community-based marketing approach with less focus on in-person interactions and more focus on working with our community partners to identify older adults who need our services. It is our belief that the enhanced awareness of the importance of managing chronic illnesses as well as patient varied preferences on preferred method to interact with providers will continue to drive demand for CareMax’s services amongst older adults. We believe our marketing efforts lead to increased awareness of CareMax and to additional patients choosing us as their primary care provider, regardless of whether that patient is covered under MA or traditional Medicare. We believe that our outreach efforts also help to grow our payor partners’ membership base as we grow our own patient base and help educate patients about their choices on Medicare, further aligning our model with that of healthcare payors.

 

 

 

Our payor partners will also direct patients to CareMax. They do this either by assigning patients who have not yet selected a primary care provider to CareMax, or by insurance agents informing their clients about CareMax, which we believe often results in the patient selecting us as their primary care provider when they select an MA plan. Payors dedicate a large share of their internal efforts to reducing medical costs, and they have a nearly unlimited desire to engage with solutions proven to achieve that goal. Due to our care delivery model’s patient-centric focus, we have been able to consistently help payors manage their costs while raising the quality of their plans, affording them quality bonuses that increase their revenue. We believe that we represent an attractive opportunity for payors to meaningfully improve their overall membership growth in a given market without assuming any financial downside.

 

Patient Satisfaction

 

Once we bring on new patients, we focus on engagement around a care plan and satisfaction. The result is high patient satisfaction. Our model provides visibility on our financial and growth trajectory given the recurring nature of the revenue we collect from our MA partners once their members begin utilizing CareMax programs. The following table sets out our growth in patients from 2017 through 2020 on an annual basis and on a three-month basis for the period ended March 31, 2021.

 

      Patients     Increase     %  
  2017       3,027                  
  2018       3,602       575       19 %
  2019       4,821       1,219       34 %
  2020       6,241       1,420       29 %
  2021       6,380       139       2 %

 

CareMax allows for MA enrollees to be risk-adjusted in order to compensate the MA plan for the greater medical costs associated with sicker patients, so long as the health plan appropriately and accurately documents the patients’ health conditions. Often, our patients have not previously engaged with the healthcare system, and therefore their health conditions are poorly documented. Through our care model, we organically determine and assess the health needs of our patients and create a care plan consistent with those needs. We capture and document health conditions as a part of this process. We believe our model aligns best with the risk adjustment framework as we scale the clinical intensity of our care model based upon the needs of the individual patient—we invest more dollars and resources towards our sicker patients.

 

Expand our Center Base within Existing and New Markets

 

We believe that we currently serve less than 1% of the total patients in the markets where we currently have centers. As a result, there is significant opportunity to expand in our existing markets through the acquisition of new patients to existing centers and the addition of new centers. For the long term, these strategically developed new sites allow us to access additional neighborhoods while leveraging our established brand and infrastructure in a market. We believe our existing markets can support approximately 1,000 centers based upon the number of Medicare patients in these markets and the capacity of our current centers. The table below reflects statistics of our current centers.

 

 

 

  

    2018     2019     2020     2021  
Centers     11       11       12       12  
Markets     1       1       1       1  
Patients     3,600       4,800       6,200       6,380  
At-risk     99.3 %     99.5 %     99.7 %     99.7 %
Fee for service     0.7 %     0.5 %     0.3 %     0.3 %

 

The patient numbers are approximations. 2021 data is as of March 31, 2021.

 

We estimate that the core addressable market for our services is approximately 884,000 Medicare eligible patients in our target demographic. We believe this market represents approximately $10.6 billion of annual healthcare expenditures based on multiplying an average annual revenue of $12,000 per member, which is derived from our experience and industry knowledge and which we believe represents a reasonable national assumption, by the number of Medicare eligible patients in our target markets. Our existing markets today represent a small fraction of this massive market opportunity. Based upon our experience to date, we believe our innovative care model can scale nationally, and we therefore expect to selectively and strategically expand into new geographies. As we continue this expansion, our success will depend on the competitive dynamics in those markets, and our ability to attract patients and deploy our care model in those markets. Through CareOptimize’s clients, which are spread across more than 30 states, we already understand the healthcare dynamics in communities we are looking to expand to. This gives management a high degree of confidence that the CareMax care model can have similar clinical and financial outcomes as we have seen in South Florida in other locations.

 

Once we have identified a location for a new center, our typical center takes 12 months to open and, after taking into account tenant improvement allowances, landlord or developer work and similar items, our historical upfront capital expenditures average approximately $90 per square foot inclusive of licensing, center construction, center furnishing, purchase of medical equipment and supplies, talent recruiting and initial marketing efforts. We typically enter into long-term triple net leases with our landlords and do not own any real estate, enabling us to more quickly identify and build new centers with a capital efficient model.

 

By adding new patients to our existing centers, retaining our existing patients, and strategically opening new centers in existing geographies, we have generated significant revenue growth over our competitors. We plan to continue pursuing further strategic acquisitions of medical centers in 2021.

 

Contract with Payors

 

Our economic model relies on our capitated partnerships with payors that manage and market MA plans across the United States. In our short history, we have been able to establish strategic, value-based relationships with nine different payors. These existing contracts and relationships, and our partners’ understanding of the value of our care model, reduces the risk of entering into new markets, as we plan to have payor contracts in place before entering a new market. Maintaining, supporting and growing these relationships, particularly as we enter new geographies, is critical to our long-term success. We believe our care model is well-aligned with our payor partners—we drive better health outcomes for their patients, enhancing patient satisfaction, while driving incremental patient and revenue growth. We believe this alignment of interests and our highly effective care model will ensure our continued success with our payor partners.

 

 

 

 

Effectively Manage the Cost of Care for Our Patients

 

The capitated nature of our contracting with payors requires us to prudently manage the medical expense of our patients. Our medical claims expense is our largest expense category, representing 66% of our total operating expenses for the three months ended March 31, 2021. Our care model focuses on leveraging the primary care setting as a means of avoiding costly downstream healthcare costs, such as acute hospital admissions. The results have been impressive, as we have been able to drive a 56% reduction in hospital admissions (based on our hospital admission rates per thousand patients of 162 as of March 31, 2021, compared to the Medicare benchmark of 370), a reduction in 30-day readmission rates (based on our rate of hospital readmissions within 30 days per thousand patients of 13.6% as of March 31, 2021, compared to the Medicare benchmark of 19%) and an 80% reduction in emergency department visits (based on our rate of emergency department “treat and release” claims per thousand patients of 219 as of March 31, 2021, compared to the Medicare benchmark of 1,091). However, our patients retain the freedom to seek care at ERs or hospitals; we do not restrict their access to care. Therefore, we could be liable for potentially large medical claims should we not effectively manage our patients’ health. We utilize stop-loss insurance for our patients, protecting us for medical claims per episode in excess of certain levels.

 

Center-Level Contribution Margin

 

We endeavor to expand our number of centers and number of patients at each center over time. Due to the significant fixed costs associated with operating and managing our centers, we generate significantly better center-level contribution margins as the patient base within our centers increases and our costs decrease as a percentage of revenue. As a result, the value of a center to our business increases over time.

 

Seasonality to our Business

 

Due to the large number of dual-eligible patients (meaning eligible for both Medicare and Medicaid) we serve, the annual enrollment period doesn’t materially affect our growth during the year. We typically see large increases in Affordable Care Act (“ACA”) patients during the first quarter as a result of the ACA annual enrollment period (October to December). However, this is not a large portion of our business.

 

Our operational and financial results will experience some variability depending upon the time of year in which they are measured. This variability is most notable in the following areas:

 

Per-Patient Revenue

 

The revenue derived from our at-risk patients is a function of the percentage of premium we have negotiated with our payor partners, as well as our ability to accurately and appropriately document the acuity of a patient. We experience some seasonality with respect to our per-patient revenue, as it will generally decline over the course of the year. In January of each year, CMS revises the risk adjustment factor for each patient based upon health conditions documented in the prior year, leading to an overall increase in per-patient revenue. As the year progresses, our per-patient revenue declines as new patients join us, typically with less complete or accurate documentation (and therefore lower risk-adjustment scores), and patient mortality disproportionately impacts our higher-risk (and therefore greater revenue) patients.

 

Medical costs

 

Medical costs will vary seasonally depending on a number of factors, but most significantly the weather. Certain illnesses, such as the influenza virus, are far more prevalent during colder months of the year, which can result in an increase in medical expenses during these time periods. We would therefore expect to see higher levels of per-patient medical costs in the fourth quarter. Medical costs also depend upon the number of business days in a period. Shorter periods will have lesser medical costs due to fewer business days. Business days can also create year-over-year comparability issues if one year has a different number of business days compared to another. We would also expect to experience an impact in the future should there be another pandemic such as COVID-19, which may result in increased or decreased total medical costs depending upon the severity of the infection, the duration of the infection and the impact to the supply and availability of healthcare services for our patients.

 

Investments in Growth

 

We expect to continue to focus on long-term growth through investments in our centers, care model and marketing. In addition, we expect our corporate general and administrative expenses to increase in absolute dollars for the foreseeable future to support our growth and because of additional costs as a public company, including expenses related to compliance with the rules and regulations of the SEC, Sarbanes Oxley Act compliance, the stock exchange listing standards, additional corporate and director and officer insurance expenses, greater investor relations expenses and increased legal, audit and consulting fees. While our net income may decrease in the future because of these activities, we plan to balance these investments in future growth with a continued focus on managing our results of operations and investing judiciously. Accordingly, in the short term, we expect these activities to decrease our net income, but in the longer term we anticipate that these investments will positively impact our business and results of operations.

 

 

 

 

Key Business Metrics

 

In addition to our GAAP financial information, we review a number of operating and financial metrics, including the following key metrics, to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans and make strategic decisions.

 

    2018     2019     2020     2021  
Centers     11       11       12       12  
Markets     1       1       1       1  
Patients (1)     3,600       4,800       6,200       6,380  
At-risk     99.3 %     99.5 %     99.7 %     99.7 %
Fee for service     0.7 %     0.5 %     0.3 %     0.3 %
Patient contribution   $ 7,698     $ 8,018     $ 8,602     $ 4,896  
Platform contribution   $ 994     $ 1,333     $ 1,729     $ 949  

 

 

  1  Patient numbers are approximate.  2021 results are as of March 31, 2021.

 

Centers

 

We define our centers as those primary care centers open for business and attending to patients at the end of a particular period. Our centers are leased by CareMax.

 

Total Patients

 

Total patients includes both at-risk MA patients (those patients for whom we are financially responsible for their total healthcare costs) as well as fee-for-service patients. We define our total at-risk patients as at-risk patients who have selected us as their provider of primary care medical services as of the end of a particular period. We define our total fee-for-service patients as fee-for-service patients who come to one of our centers for medical care at least once per year. A fee-for-service patient remains active in our system until we are informed by the health plan the patient is no longer active.

 

Patient Contribution

 

We define patient contribution as capitated revenue less the sum of medical claims expense. We view patient contribution as all of the dollars available for us to manage our business, including providing care to our patients, investing in marketing to attract new patients to CareMax, and supporting the organization through our central corporate infrastructure. We expect that patient contribution will grow year-over-year in absolute dollars as our at-risk patient base continues to grow. We would also expect that our patient contribution per-patient-per-month economics on our at-risk patients will continue to improve the longer our patients are part of CareMax as we better understand their health conditions and the patients better engage with our care model. We would expect, however, that our aggregate patient contribution per-patient-per-month economics on our at-risk patients may decrease at an aggregate level to the extent our patient growth skews our mix of patients towards patients newer to the CareMax system. We would also expect to experience seasonality in patient contribution with Q1 typically generating the greatest patient contribution and decreasing for the rest of the year. This seasonality is primarily driven by our adding new patients to the CareMax Platform throughout the year, who generally have lower per-patient capitated revenue compared to our existing patient base.

 

 

 

 

Platform Contribution

 

We define platform contribution as total revenues less the sum of (i) medical claims expense and (ii) cost of care, excluding depreciation and amortization. We believe this metric best reflects the economics of our care model as it includes all medical claims expense associated with our patients’ care as well as the costs we incur to care for our patients via the CareMax System. As a center matures, we expect the platform contribution from that center to increase both in terms of absolute dollars as well as a percentage of capitated revenue. This increase will be driven by improving patient contribution economics over time, as well as our ability to generate operating leverage on the costs of our centers. Our aggregate platform contribution may not increase despite improving economics at our existing centers should we open new centers at a pace that skews our mix of centers towards newer centers. We would expect to experience minimal seasonality in platform contribution due to minimal seasonality in our patient contribution.

 

Impact of COVID-19

 

The rapid spread of COVID-19 around the world and throughout the United States altered the behavior of businesses and people, with significant negative effects on federal, state and local economies. The virus disproportionately impacts older adults, especially those with chronic illnesses, which describes many of our patients. To date, we have experienced, or expect to experience, the following impacts on our business model due to COVID-19:

 

  ·  

Care Model. During the pandemic, we transitioned much of our care to telehealth services, while increasing patient visit volume and maintaining continuity of care. Our average daily visits decreased approximately 27% in April 2020 compared to the year ended 2019 as local Governments discouraged elective procedures for elderly patients; our patient base. However, they started to pick back up in the three months ended March 2021, as average visits per patient rose from 8 to 12 comparing the first quarters of 2021 and 2020 due to the success of the COVID-19 vaccine campaign. With the ebbs and flows of COVID-19 and hospitalization rates, our annualized utilization is in-line with historic levels.

 

Our goal in addressing COVID-19 was threefold:

 

1. Keep patients informed;

2. Keep patients safe; and

3. Help patients affected by COVID-19.

 

To achieve these goals, we introduced several new programs:

 

In-home Meal delivery. To address nutritional needs and allow people to shelter in place, we leveraged our transportation infrastructure to provide food delivery to our most at-risk patients to address their social determinants of health, making over 74,000 deliveries from December 31, 2020 through March 31, 2021, since our markets were first impacted in March 2020.

 

Telehealth. We launched telehealth to allow patients to access their PCP. At the height of COVID19, 90% of our visits were done via telehealth or a traditional call. As of March 31, 2021, we still see approximately 25% of our patients through this technology.

 

COVID-19 informed care management monitoring. We created a care management monitoring and outreach program to care for our patients who had a confirmed or suspected case of COVID-19. This includes monitoring daily feeds form the State of Florida’s Encounter Notification Service, which allows us to know about each admission and discharge to a hospital inpatient or ER. All admissions are researched and, if we determine it is COVID-—19 related, we monitor the case and follow up with post-discharge support.

 

As our revenues are not determined or earned based upon the number of times we interact with our patients, and as we were already incurring the cost associated with the employees responsible for assisting our patients across all of these dimensions, these care model changes have not had a material financial impact on our revenue or our costs.

 

 

 

 

  ·   Other Revenue. Other revenue includes revenue received for care we provide and bill on a fee-for-service basis. While our centers remained open during the COVID-19 pandemic, we restricted our in-center visits to those patients with the most urgent needs. These restrictions resulted in our performing fewer fee-for-service visits, resulting in lower dollar values of claims.

 

  ·   Growth. At the end of March 2020, we made the decision to suspend community-based outreach events and scale back our central marketing efforts due to safety concerns for our employees and our communities and to comply with local government ordinances. As a result, we saw our growth adversely impacted in 2020.   We restarted our outreach and held 10 events in the first quarter of 2021.

 

  ·   Medical Claims Expense. Although our patient demographic was disproportionately impacted by the effects of COVID-19, as of March 2021, our annualized external medical services under global capitation appear to be in line with previous periods.  However, hospital admissions and ER visits for our patients due to COVID-19 were 37 and 28, respectively, during the three months ended March 31, 2021.  This represents 27% and 16% of our total hospital admissions and ER visits, respectively. The average expense of a COVID-19 hospital admission was approximately $19,000, compared to a regular hospital admission expense of approximately $17,000. The average expense of a COVID-19 ER visit was approximately $850, compared to approximately $900 for a regular ER visit.  Based on this data, our current estimate of the incremental COVID-19 effect on our income statement for the three months ended March 31, 2021 was an increase in expense of approximately $0.7 million. However, this expense was offset by lower utilization in elective procedures and lower non-COVID-19 utilization.

 

  ·   Risk-adjustment. Medicare Advantage pays capitation using a “risk adjustment model,” which compensates providers based on the health status (acuity) of each individual patient. Payors with higher acuity patients receive more, and those with lower acuity patients receive less. Medicare requires that a patient’s health issues be documented annually regardless of the permanence of the underlying causes. Historically, this documentation was required to be completed during an in-person visit with a patient. As part of the CARES Act, Medicare is allowing documentation for conditions identified during video visits with patients.

 

  ·   Cost of Care, Excluding Depreciation and Amortization (Medical Supplies). During 2020, we had to acquire significantly greater quantities of medical supplies at significantly higher prices to ensure the safety of our employees and our patients. Our medical supply cost was flat for the three months ended March 31, 2021 compared to the three months ended December 31, 2020.  However, this is a relatively small number in terms of dollars and did not create an outsized adverse result to our financial results. While the price of these items may remain higher than historical levels for the foreseeable future, we do not expect these incremental costs to be material.

 

Components of Results of Operations

 

Revenue

 

Capitated Revenue. Our capitated revenue consists primarily of fees for medical services provided by us or managed by our affiliated medical groups under a capitation arrangement made directly with various MA payors. Capitation is a fixed amount of money per patient per month paid in advance for the delivery of health care services, whereby we are generally liable for medical costs in excess of the fixed payment and are able to retain any surplus created if medical costs are less than the fixed payment. A portion of our capitated revenues are typically prepaid monthly to us based on the number of MA patients selecting us as their primary care provider. Our capitated rates are determined as a percentage of the premium the MA plan receives from CMS for our at-risk members. Those premiums are determined via a competitive bidding process with CMS and are based upon the cost of care in a local market and the average utilization of services by the patients enrolled. Medicare pays capitation using a “risk adjustment model,” which compensates providers based on the health status (acuity) of each individual patient. Payors with higher acuity patients receive more in premium, and those with lower acuity patients receive less in premium. Under the risk adjustment model, capitation is paid on an interim basis based on enrollee data submitted for the preceding year and is adjusted in subsequent periods after the final data is compiled. As premiums are adjusted via this risk adjustment model, our capitation payments will change in unison with how our payor partners’ premiums change with CMS. Risk adjustment in future periods (e.g., the second quarter of and beyond) may be impacted by COVID-19 and our inability to accurately document the health needs of our patients in a compliant manner, which may have an adverse impact on our revenue.

 

 

 

 

We measure the incremental cost of our capitation agreements by starting with our center-level expenses, which are calculated based upon actual expenses incurred at a specific center for a given period of time and expenses that are incurred centrally and allocated to centers on a ratable basis. These expenses are allocated to our at-risk patients based upon the number of visit slots these patients utilized compared to the total slots utilized by all of our patients. All visits, however, are not identical and do not require the same level of effort and expense on our part. Certain types of visits are more time and resource intensive and therefore result in higher expenses for services provided internally. Generally, patients who are earlier in their tenure with CareMax utilize a higher percentage of these more intensive visits, as we get to know the patient and properly assess and document such patient’s health condition. Because a significant portion of fee-for-service patients elect to switch to a capitation arrangement as they get more comfortable with our services and care model and learn about the potential benefits of MA, our fee-for-service patients, as a whole, tend to be less tenured and therefore, as a group, higher utilizers of these more intensive visits. This phenomenon explains why the proportionate expense for internally provided services does not follow the same proportion for at-risk visits and fee-for-service visits.

 

Revenues and expenses from our physician groups are consolidated with other clinical and MSO/IPA expenses to determine profitability for our at-risk and fee-for-service arrangements. Physician group economics are not evaluated on a stand-alone basis, as certain non-clinical expenses need to be consolidated to consider profitability.

 

See “—Critical Accounting Policies—Capitated Revenue” for more information. We expect capitated revenue will increase as a percentage of total revenues over time because of the greater revenue economics associated with at-risk patients compared to fee-for-service patients.

 

Other Revenue. Other revenue is comprised of ancillary fees earned under contracts with certain payors for the provision of certain care coordination and other care management services. These services are provided to patients covered by these payors regardless of whether those patients receive their care from our affiliated medical groups.

 

Operating Expenses

 

Medical Expenses.  Medical expenses under global capitation include all services at-risk patients utilize. These include claims paid by the health plan and estimates for unpaid claims. Medical expenses also include our reinsurance premiums and recoveries. Actual claims expense will differ from the estimated liability due to factors in estimated and actual patient utilization of health care services, the amount of charges and other factors. We typically reconcile our medical claims expense with our payor partners on a monthly basis and adjust our estimate of incurred but not paid claims if necessary. To the extent we revise our estimates of incurred but not paid claims for prior periods up or down, there would be a correspondingly favorable or unfavorable effect on our current period results that may or may not reflect changes in long term trends in our performance. We expect our medical claims expense to increase in both absolute dollar terms as well as on a flat capitation per patient per month (“PPPM”) basis given the healthcare spending trends within the Medicare population and the increasing disease burden of our patients as they age.

 

Other Medical Costs. Other medical costs include the costs of additional medical services we provide to our patients that are not paid by the plan. These services include other specialty costs, like dental or vision. In some instances, CareMax has negotiated better rates than the health plans.

 

Direct Medical Salaries, Wages and Benefits. Direct medical salaries, wages and benefits include those paid to medical doctors, nurse practitioners, physician assistants, registered nurses, scribes, medical assistants and phlebotomists. We also include patient support employees such as center administrators, receptionists, activity coordinators, access representatives and patient engagement representatives in direct medical salaries, wages and benefits. As we open new centers, we expect these costs to increase in absolute dollars.

 

Salaries, Wages and Benefits Salaries, wages and benefits include employee-related expenses, including salaries and related costs. We expect these costs to increase in absolute dollars over time as we continue to grow our patient panels.

 

 

 

 

Selling, General and Administrative Expenses. Selling, general and administrative expenses include all corporate technology, sales and marketing expenses, third party professional services and occupancy costs. We expect these expenses to increase over time due to the additional legal, accounting, insurance, investor relations and other costs that we will incur as a public company, as well as other costs associated with continuing to grow our business. We also expect our selling, general and administrative expenses to increase in absolute dollars in the foreseeable future. However, we anticipate selling, general and administrative expenses to decrease as a percentage of revenue over the long term, although they may fluctuate as a percentage of revenue from period to period due to the timing and amount of these expenses.

 

Depreciation and Amortization. Depreciation and amortization expenses are primarily attributable to our capital investment and consist of fixed asset depreciation, amortization of intangibles considered to have definite lives, and amortization of capitalized internal-use software costs.

 

Other Income (Expense)

 

Interest Expense. Interest expense consists primarily of interest payments on our outstanding borrowings under our note payable. See “—Liquidity and Capital Resources—Note Payable.”

 

Results of Operations

 

Three Months Ended March 31, 2021 compared to Three Months Ended March 31, 2020.

 

Capitated Revenue. Capitated revenue was $27.8 million for the three months ended March 31, 2021, an increase of $2.8 million, or 11%, compared to $25.0 million for the three months ended March 31, 2020. This increase was driven primarily by a 30% increase in the total number of at-risk patients.

 

Other Revenue. Other revenue was $0.1 million for the three months ended March 31, 2021 and 2020.

 

The following table sets forth our combined statements of operations data for the periods indicated:

 

    Three Months Ended     Three Months Ended              
    March 31,              
    2021     2020     $ change     % change  
($millions)                                
Operating Expense                             50 %
                                 
Medical expenses   $ 17.4     $ 15.1     $ 2.3       15 %
Other medical expenses     0.8       0.7       0.1       14 %
Direct medical salaries, wages & benefits     0.2       0.3       (0.1 )     -33 %
Salaries, wages & benefits     3.9       2.6       1.3       48 %
Selling,  general & administrative     3.3       2.5       0.8       32 %
Depreciation and amortization     0.5       0.4       0.1       25 %
Total Operating Expense   $ 26.1     $ 21.6     $ 4.5       20 %

 

 Medical expenses. Medical claims expense was $17.4 million for the three months ended March 31, 2021, an increase of $2.3 million, or 15%, compared to $15.1 million for the three months ended March 31, 2020. The increase was primarily due to a 30% increase in total at-risk patients and the inclusion of certain medical service providers expenses previously presented as a component of direct medical salaries, wages and benefits.

 

Other medical expenses. Other medical expenses were $0.8 million for the three months ended March 31, 2021, an increase of $0.1 million or 14%, compared to $0.7 million for the three months ended March 31, 2020. The increase was due to additional membership growth.

 

 

 

 

Direct medical salaries, wages & benefits. Direct medical salaries, wages & benefits were $0.2 million for the three months ended March 31, 2021, a decrease of $0.1 million, or 25%, compared to $0.3 million for the three months ended March 31, 2020. This decrease is attributable to certain medical service providers expenses now presented as a component of medical expenses.

 

Salaries, wages & benefits. Salaries, wages and benefits were $3.9 million for the three months ended March 31, 2021, an increase of $1.3 million or 48%, compared to the three months ended March 31, 2020. The increase was due to a 40% increase in employee headcount.

 

Selling, general & administrative. Selling, general & administrative expense was $3.5 million for the three months ended March 31, 2021, an increase of $0.8 million or 30% compared to the three months ended March 31, 2020. The increase was primarily due to a $0.4 million increase in professional fees in support of the business combination transaction, and a $0.2 million increase in rent expense due to signing leases for 3 additional medical centers.

 

Depreciation and amortization. Depreciation and amortization expense was $0.5 million for the three months ended March 31, 2021, an increase of $0.1 million or 30%, compared to the three months ended March 31, 2020. This was due to amortization of additional intangible assets purchased in the Tamarac and Havana I and II acquisitions.

 

Other Income (Expense)

 

Interest Expense. Interest expense was $0.5 million for the three months ended March 31, 2021, an increase of $0.2 million compared to $0.3 million for the three months ended March 31, 2020. The increase was primarily due to an increase in the balance outstanding under the Loan Commitment agreement and additional accrued interest.

 

Trends

 

We evaluate our medical claims expense as a percentage of our capitated revenue. There are several factors that may drive seasonal variation in medical claims expense as a percentage of capitated revenue, including the benefit design of our patients’ health plans, the number of business days in a period, the seasonal occurrence of influenza and the timing of new patients to CareMax. Benefit design tends to result in greater expenses later in the calendar year, as patients’ financial responsibility for their healthcare tends to decrease over the course of the year as limits such as deductibles and out-of-pocket maximums are met, resulting in us bearing more of these costs. Most outpatient healthcare services are provided during the work week; therefore, depending on the number of business days in a quarter, there may be more or fewer days for our patients to receive care, which will impact the amount of our medical claims expense. Influenza, particularly dangerous for older patients, tends to occur during the colder months of the year, in the first and fourth quarters. Depending upon the severity of influenza in a given year, we may expect medical claims expense as a percentage of capitated revenue to be greater in these periods. Finally, as our patients become more engaged in our care model, we are better able to manage their medical costs incurred outside of our facilities. As the average tenure of our patients declines during the course of the year, we would expect greater medical costs as a percentage of capitated revenue as the year progresses. The combination of these factors creates a general trend where our medical costs as a percentage of capitated revenue increase during the year.

 

We monitor and evaluate our cost of care, excluding depreciation and amortization, as a percentage of total revenues. We expect that our cost of care, excluding depreciation and amortization, as a percentage of total revenues will fluctuate from quarter to quarter, driven by the timing of opening new centers. As our centers age and grow their patient panels, we expect the cost of care, excluding depreciation and amortization as a percentage of total revenues to decline as we leverage fixed and semi-fixed costs. However, given our newer centers represent a large portion of our total centers, that trend may not be visible in our financials. We expect the dollars associated with our cost of care, excluding depreciation and amortization, to continue to grow as we add new centers and new patients to our platform, but we expect these dollars as a percentage of our total revenues to decline.

 

Our sales and marketing expenses fluctuate based on the timing of outreach and advertising campaigns. Given patients typically enroll in MA plans during the annual open enrollment period (from mid-October through early December), we expect to incur greater sales and marketing expenses in the second half of the year to increase patient awareness of CareMax. We will also experience fluctuations in these expenses depending upon our ability to economically attract new patients to the CareMax system.

 

 

 

 

Liquidity and Capital Resources

 

General

 

To date, we have financed our operations principally through operations and a loan commitment facility. As of March 31, 2021, we had cash and cash equivalents of approximately $6.4 million. Our cash and cash equivalents primarily consist of cash maintained in our bank account. Since our inception, we have been profitable, as reflected in our positive members’ equity as of March 31, 2021.

 

We believe our cash and cash equivalents will be sufficient to fund our operating and capital needs for at least the next 12 months. Our assessment of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement and involves risks and uncertainties. Our actual results could vary because of, and our future capital requirements will depend on, many factors, including our growth rate, the timing and extent of spending to open new centers and expand into new markets and the expansion of sales and marketing activities.

 

Loan Commitment

 

We entered into a loan commitment facility dated August 14, 2019 with a third party for a total loan commitment of $18,500,000 (“Loan Agreement”), maturing on August 14, 2024. The loan commitment was split into a $16,000,000 term loan and a fixed $2,500,000 revolving loan commitment. The revolving loan commitment was paid back on December 10, 2020. Interest on the loan commitments are calculated as the greater of 2.25% or the LIBOR Index Rate, plus an applicable margin which is 6% at the effective date and at March 31, 2021. On December 10, 2020, we amended the Loan Agreement and increased the consolidated borrowing by $8.5 million, from $16 million to $24.5 million. Monthly payments began in January 2021 and include principal and interest calculated on the same terms as the original facility. The proceeds of the loan were used to pay off the existing revolving loan commitment of $2.5 million, fund the acquisition of Clinica Las Americas in the amount of approximately $4.0 million and pay debt issuance costs in the amount of approximately $0.4 million. In the future we expect borrowing under the Loan Agreement, as amended, be used to fund acquisitions and/or for other corporate purposes. Under the Loan Agreement, as amended, the Company is subject to various financial and nonfinancial covenants and is in compliance with these covenants as of March 31, 2021. The Company has a requirement to deliver a calculation of consolidated excess cash flow regarding the loan and security agreement to the lender within 120 days of the fiscal year end. The Company met this requirement. Under the terms of the agreement, if certain criteria are met, the Company may be required to make additional principal payments based on a formula calculating excess cash flow.

 

Contractual Obligations and Commitments

 

Our principal commitments consist of obligations under operating leases for our centers and repayments of long-term debt. The Company also has a contractual commitment to complete the construction of the Homestead medical center with an estimated total cost of approximately $1.5 million. Plans have been submitted for the newest medical center, East Hialeah, and opening is projected in the first or second quarter of 2022. The projects are being funded internally.

 

 

 

 

The following table summarizes our contractual obligations as of March 31, 2021:

 

    Payments due by period  
          Less than                 More than  
($ millions)     Total       1 year       1-3 years       3-5 years       5 years  
Notes Payable, principal (1)   $ 27.5     $ 0.8     $ 4.2     $ 22.5     $ -  
Notes Payable, interest (1)     0.2       0.2       -       -       -  
Operating lease obligations     31.5       2.8       6.5       5.9       16.3  
Total   $ 59.2     $ 3.8     $ 10.7     $ 28.4     $ 16.3  
                                         

 

 

 

(1) Represents amounts related to the Loan Agreement and other long-term debt.

 

Off-Balance Sheet Arrangements

 

We did not have any off-balance sheet arrangements as of March 31, 2021 or December 31, 2020.

 

JOBS Act

 

Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies, but any such election to opt out is irrevocable. We have elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, as an emerging growth company, we can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our consolidated financial statements with a public company which is neither an emerging growth company, nor an emerging growth company that has opted out of using the extended transition period, difficult or impossible because of the potential differences in accounting standards used.

 

Critical Accounting Policies

 

The discussion and analysis of our financial condition and results of operations are based upon our unaudited condensed combined financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, revenue and expenses and related disclosures of contingent assets and liabilities at the date of our financial statements. Actual results may differ from these estimates under different assumptions or conditions, impacting our reported results of operations and financial condition.

 

Our unaudited condensed combined financial statements include the accounts of CareMax Medical Group, LLC and Managed Health Care Partners, LLC.

 

All intercompany balances and transactions are eliminated in consolidation.

 

Certain accounting policies involve significant judgments and assumptions by management, which have a material impact on the carrying value of assets and liabilities and the recognition of income and expenses. Management considers these accounting policies to be critical accounting policies. The estimates and assumptions used by management are based on historical experience and other factors, which are believed to be reasonable under the circumstances. The significant accounting policies which we believe are the most critical to aid in fully understanding and evaluating our reported financial results are described below. Refer to Note 2 “Summary of Significant Accounting Policies” to our consolidated financial statements included elsewhere in this Current Report on Form 8-K for more detailed information regarding our critical accounting policies.

 

 

 

 

Capitated Revenue

 

The transaction price for our capitated payor contracts is variable as it primarily includes PPPM fees associated with unspecified membership. PPPM fees can fluctuate throughout the contract based on the health status (acuity) of each individual enrollee. In certain contracts, PPPM fees also include “risk adjustments” for items such as performance incentives, performance guarantees and risk shares. The capitated revenues are recognized based on the estimated PPPM fees earned net of projected performance incentives, performance guarantees, risk shares and rebates because we are able to reasonably estimate the ultimate PPPM payment of these contracts. We recognize revenue in the month in which eligible members are entitled to receive healthcare benefits. Subsequent changes in PPPM fees and the amount of revenue to be recognized are reflected through subsequent period adjustments to properly recognize the ultimate capitation amount.

 

For the three months ended March 31, 2021, we have included an estimate of $1.6 million PPPM fees as a result of expected acuity-related adjustments to be received in subsequent periods.

 

Medical Expenses

 

Medical claims expense includes all costs of caring for our at-risk patients and for third-party healthcare service providers that provide medical care to our patients for which we are contractually obligated to pay (through our full-risk capitation arrangements). The estimated reserve for a liability for unpaid claims is included in the liability for unpaid claims in the consolidated balance sheets. Actual claims expense will differ from the estimated liability due to factors in estimated and actual member utilization of health care services, the amount of charges and other factors. We assess our estimates with an independent actuarial expert to ensure our estimates represent the best, most reasonable estimate given the data available to us at the time the estimates are made. Certain third-party payor contracts include a Medicare Part D payment related to pharmacy claims, which is subject to risk sharing through accepted risk corridor provisions. Under certain agreements the fund risk allocation is established whereby we, as the contracted provider, receive only a portion of the risk and the associated surplus or deficit. We estimate and recognize an adjustment to medical expenses for Part D claims related to these risk corridor provisions based upon pharmacy claims experience to date, as if the annual risk contract were to terminate at the end of the reporting period.

 

We generally expect the range of our medical claims expense estimating risk to be within 10-15% of actual medical claims expense, which could represent as much as approximately 6% to 9% of our total operating expense.

 

We assess the profitability of our capitation arrangements to identify contracts where current operating results or forecasts indicate probable future losses. If anticipated future variable costs exceed anticipated future revenues, a premium deficiency reserve is recognized. No premium deficiency reserves were recorded as of March 31, 2021 or December 31, 2020.

 

Goodwill and Other Intangible Assets

 

Intangible assets consist primarily of risk-based contracts acquired through business acquisitions. Goodwill represents the excess of consideration paid over the fair value of net assets acquired through business acquisitions. Goodwill is not amortized but is tested for impairment at least annually.

 

We test goodwill for impairment annually on or about October 1st or more frequently if triggering events occur or other impairment indicators arise which might impair recoverability. These events or circumstances would include a significant change in the business climate, legal factors, operating performance indicators, competition, sale, disposition of a significant portion of the business or other factors.

 

 

 

 

ASC 350, Intangibles—Goodwill and Other (“ASC 350”) allows entities to first use a qualitative approach to test goodwill for impairment. ASC 350 permits an entity to first perform a qualitative assessment to determine whether it is more likely than not (a likelihood of greater than 50%) that the fair value of a reporting unit is less than its carrying value. We skip the qualitative assessment and proceed directly to the quantitative assessment. When the reporting units where we perform the quantitative goodwill impairment are tested, we compare the fair value of the reporting unit, which we primarily determine using an income approach based on the present value of discounted cash flows, to the respective carrying value, which includes goodwill. If the fair value of the reporting unit exceeds its carrying value, the goodwill is not considered impaired. If the carrying value is higher than the fair value, the difference would be recognized as an impairment loss. There were no goodwill impairments recorded during the three-months ended March 31, 2021.

 

Risk contracts represent the estimated values of customer relationships of acquired businesses and have definite lives. We amortize the risk contracts on a straight-line basis over their eleven-year estimated useful lives. We amortize non-compete agreement intangible assets over five years on a straight-line basis.

 

The determination of fair values and useful lives require us to make significant estimates and assumptions. These estimates include, but are not limited to, future expected cash flows from acquired capitation arrangements from a market participant perspective, patient attrition rates, discount rates, industry data and management’s prior experience. Unanticipated events or circumstances may occur that could affect the accuracy or validity of such assumptions, estimates or actual results.

 

Recent Accounting Pronouncements

 

See Note 2 to our unaudited condensed combined financial statements “Summary of Significant Accounting Policies—Recent Accounting Pronouncements” included elsewhere in this Current Report on Form 8-K for more information.

 

Quantitative and Qualitative Disclosures About Market Risk

 

Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of exposure due to potential changes in inflation or interest rates. We do not hold financial instruments for trading purposes.

 

Interest Rate Risk

 

Our primary market risk exposure is changing prime rate-based interest rates. Interest rate risk is highly sensitive due to many factors, including U.S. monetary and tax policies, U.S. and international economic factors and other factors beyond our control. Our Loan Agreement bears interest at a floating rate equal to the greater of 2.25% or LIBOR, plus an applicable margin between 5.00% and 6.00%. As of March 31, 2021, we had total outstanding debt of $24 million in principal amount under the Loan Agreement. Based on the amount outstanding, a 100-basis point increase or decrease in market interest rates over a twelve-month period would result in a change to interest expense of $0.2 million.

 

Inflation Risk

 

Based on our analysis of the periods presented, we believe that inflation has not had a material effect on our operating results. There can be no assurance that future inflation will not have an adverse impact on our operating results and financial condition.

 

 

 

 

 

 

Exhibit 99.2

 

INTERAMERICAN MEDICAL CENTER GROUP, LLC
AND SUBSIDIARIES

 

Management Discussion & Analysis

 

($ in thousands, except shares/units and per share data)

 

IMC MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Unless the context otherwise requires, references in this section to “IMC,” “we,” “us,” “our,” and the “Company” refers to Interamerican Medical Center Group, LLC and its subsidiaries. The following discussion and analysis summarizes the significant factors affecting the consolidated operating results, financial condition, liquidity and cash flows of IMC as of and for the periods presented below. The following discussion and analysis should be read in conjunction with IMC’s condensed consolidated financial statements and the related notes thereto included elsewhere in this Current Report on Form 8-K. The discussion contains forward-looking statements that are based on the beliefs of management, as well as assumptions made by, and information currently available to, IMC’s management. Actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Current Report on Form 8-K, particularly in the sections entitled “Risk Factors” and “Forward-Looking Statements.”

 

Overview

 

IMC owns and operates medical clinics and wellness centers strategically located in Miami-Dade, Broward and Orange Counties in Florida. IMC utilizes a high touch, comprehensive approach to primary care for patients that incorporates both high quality clinical service and the integration of technology and data analytics to manage patient’s healthcare. By proactively managing patient’s health and working to impact patient wellbeing prior to acute healthcare episodes, IMC is able to maintain high patient satisfaction while also helping to reduce unnecessary healthcare expenses. IMC is able to benefit from this dynamic through value-based payor contracts that provide opportunity for IMC to participate in performance bonuses and surplus sharing agreements.

 

While IMC’s primary focus is providing care to Medicare eligible seniors who are mostly 65+ (63% of revenue comes from these patients), IMC also provides services to children and adults through Medicaid programs as well as through commercial insurance plans. All of IMC’s Medicare patients are enrolled in a Medicare Advantage (“MA”) plan run by private insurance companies on behalf of the Centers for Medicare and Medicaid Services (“CMS”). With MA, the patient receives the same coverage as original Medicare, including emergency care, and most plans also include prescription drug coverage. In many cases, MA plans offer even more than original Medicare, including dental, vision, hearing, and wellness programs.

 

IMC takes a “whole person health” approach to primary care that goes above and beyond the standard levels of care. Its model covers standard primary care and diagnostics as well as specialty care and other general wellness programs. Within the IMC clinics, patients can gain access to primary care, laboratory services, ultrasounds, electrocardiograms, x-rays, joint injections and dental care. Ancillary and specialty services offered include: cardiology, optometry, women’s health, podiatry, pulmonology, neurology, nutrition, mental health, case management, urology and gastroenterology services.

 

Outside of clinical care, IMC also offers wellness and educational services to help members maintain healthier lives independently. Examples of classes and programs provided include nutritional best practices, exercise programs, diabetes prevention and control programs, among others. Patients are also able to congregate in the community spaces of IMC clinics for social activities with peers, an important dynamic for seniors who are frequently isolated in their homes. IMC also helps members address social determinants of care through its representatives who specifically assist patients in maintaining Medicaid eligibility as well as applying for other social service program such as food subsidies. IMC eliminates a common barrier to accessing care by providing transportation to its clinics and wellness centers as well as to specialists outside of IMC’s centers.

 

1

 

 

INTERAMERICAN MEDICAL CENTER GROUP, LLC
AND SUBSIDIARIES

 

Management Discussion & Analysis

 

($ in thousands, except shares/units and per share data)

 

IMC incurred net losses of approximately $1.6 million and $3.0 million for the three-months ended March 31, 2021 and 2020, respectively, as it has focused on investing in technology and an experienced management team in its development of a platform that it believes will be scalable to allow for growth. IMC may continue to incur operating and net losses in the future while it continues to focus on long-term growth through investments in its centers, care model, and marketing even after the business combination. By focusing on interventions that keep its patients healthy, IMC believes that it can capture cost savings and reinvest them in the IMC care model. IMC believes these investments lead to better outcomes and improved patient experiences, which will drive further cost savings, power patient retention and enable it to attract new patients. IMC has established strategic value-based relationships with nine different payors for Medicare Advantage patients, five different payors for Medicaid patients and one payor for Affordable Care Act Exchange (“ACA”) patients. IMC’s three largest payor relationships were Anthem, United, and Centene, which generated 30%, 23% and 26% of IMC’s revenue in the three-months ended March 31, 2021 and 32%, 27% and 18% of IMC’s revenue in the three-months ended March 31, 2020.

 

As of March 31, 2021, IMC employed approximately 569 team members, including 46 primary care providers (“PCP”). Between mid-2017 and 2021, IMC has focused on building a common operating platform across its 13 centers to ensure consistent delivery of results. For the three-months ended March 31, 2021 and 2020, IMC’s total revenues were approximately $59.6 million and $52.5 million, respectively, representing a quarter-over-comparable-quarter growth rate of 13.5%. For the three-months ended March 31, 2021, IMC reported a net loss of $1.6 million, a decrease of $1.4 million over the net loss of $2.9 million reported for the three-months ended March 31, 2020. IMC reported Adjusted Earnings Before Taxes, Interest, Depreciation and Amortization (“Adjusted EBITDA”) of approximately $3.5 million and $2.0 million for three-months ended March 31, 2021 and 2020, respectively, representing a year-over-year earnings growth rate of 70%. IMC believes that it has significant growth opportunities, with about 83% of its current aggregate center capacity utilized and a substantial opportunity to increase the number of centers it operates in new and existing markets.

 

Patients and Line of Business Overview

 

IMC Patients

 

As discussed above, IMC partners with Medicare Advantage, Medicaid, and commercial insurance plans. Currently, IMC does not accept Medicare FFS patients. IMC’s breakdown of membership is below:

 

Patient Count as of ​ ​ Dec-18 ​ ​ Dec-19 ​ ​ Mar-20 ​ ​ Dec-20 ​ ​ Mar-21 ​
Medicare ​ ​ ​ ​ 11,000 ​ ​ ​ ​ ​ 10,500 ​ ​ ​ ​ ​ 10,500 ​ ​ ​ ​ ​ 10,000 ​ ​ ​ ​ ​ 10,500 ​ ​
Medicaid ​ ​ ​ ​ 15,500 ​ ​ ​ ​ ​ 11,500 ​ ​ ​ ​ ​ 12,500 ​ ​ ​ ​ ​ 20,500 ​ ​ ​ ​ ​ 22,500 ​ ​
Commercial ​ ​ ​ ​ 7,000 ​ ​ ​ ​ ​ 5,000 ​ ​ ​ ​ ​ 15,500 ​ ​ ​ ​ ​ 15,000 ​ ​ ​ ​ ​ 15,000 ​ ​
Total Count ​ ​ ​ ​ 33,500 ​ ​ ​ ​ ​ 27,000 ​ ​ ​ ​ ​ 38,500 ​ ​ ​ ​ ​ 45,500 ​ ​ ​ ​ ​ 48,000 ​ ​

 

Because IMC accepts multiple insurance types, it uses a Medicare-Equivalent Member (“MCREM”) value in reviewing key factors of its performance. To determine the Medicare-Equivalent, IMC calculates the amount of support typically received one Medicare patient as equivalent to the level of support received by three Medicaid or Commercial patients. This is due to Medicare patients on average having significantly higher levels of chronic and acute conditions that need higher levels of care. Due to this dynamic, a 3:1 ratio is applied when normalizing membership statistics year over year. IMC’s breakdown of membership using MCREM is below:

 

2

 

 

INTERAMERICAN MEDICAL CENTER GROUP, LLC
AND SUBSIDIARIES

 

Management Discussion & Analysis

 

($ in thousands, except shares/units and per share data)

 

MCREM Count as of ​ ​ Dec-18 ​ ​ Dec-19 ​ ​ Mar-20 ​ ​ Dec-20 ​ ​ Mar-21 ​
Medicare ​ ​ ​ ​ 11,000 ​ ​ ​ ​ ​ 10,500 ​ ​ ​ ​ ​ 10,500 ​ ​ ​ ​ ​ 10,000 ​ ​ ​ ​ ​ 10,500 ​ ​
Medicaid ​ ​ ​ ​ 5,200 ​ ​ ​ ​ ​ 3,800 ​ ​ ​ ​ ​ 4,200 ​ ​ ​ ​ ​ 6,800 ​ ​ ​ ​ ​ 7,500 ​ ​
Commercial ​ ​ ​ ​ 2,300 ​ ​ ​ ​ ​ 1,700 ​ ​ ​ ​ ​ 5,200 ​ ​ ​ ​ ​ 5,000 ​ ​ ​ ​ ​ 5,000 ​ ​
Total MCREM ​ ​ ​ ​ 18,500 ​ ​ ​ ​ ​ 16,000 ​ ​ ​ ​ ​ 19,900 ​ ​ ​ ​ ​ 21,800 ​ ​ ​ ​ ​ 23,000 ​ ​

 

Medicare Advantage Patients

 

As of March 31, 2021, IMC had approximately 10,500 Medicare Advantage patients of which 95% were in value-based, or risk-based, agreements. This means IMC has been selected as the patient’s primary care provider and is financially responsible for all of their medical costs, including but not limited to emergency room and hospital visits, post-acute care admissions, prescription drugs, specialist physician spend (e.g., orthopedics) and primary care spend. For these patients IMC attributed an agreed percentage of the premium the MA plan receives from CMS (typically a substantial majority of such premium given the risk assumed by IMC). IMC’s value proposition to these patients and their MA plan is to improve these patients’ health and reduce these patients’ healthcare costs by providing a more comprehensive patient experience via the IMC system, whereby IMC has invested more heavily in primary care to avoid more expensive downstream costs, such as hospital admissions. Because IMC is at-risk for the entirety of a patient’s medical expense, investing more heavily in preventative primary care makes economic sense given the relative costs to acute, episodic hospital-based care. IMC is not delegated for claims payments and therefore does not receive the agreed percentage of premiums from the MA plan nor does it pay claims. A reconciliation is performed periodically and if premiums exceed costs, IMC receives payment from the MA plan. If costs exceed premiums, IMC is responsible to reimburse the MA plan.

 

Because plan premiums are enhanced when a contracted plan achieves high quality scores (STARS program), it is important for IMC to deliver high quality of care to its members. Through its data analytics and outreach programs, IMC has achieved the highest quality rating possible, 5 STARS, for each of the last two years.

 

Medicare provides an annual enrollment period during the fall of each year to allow patients to select an MA program or traditional Medicare, with only limited ability for patients to make that selection during other periods of the year. Once patients have selected MA, they can change the selection of their primary care provider at any time. Accordingly, while the annual enrollment period is important to us, IMC is able to attract new patients at any time during the year from the existing pool of MA patients and IMC must work to retain its patients throughout the year.

 

Medicaid Patients

 

As of March 31, 2021, IMC had approximately 22,500 Medicaid patients of which approximately 97% were in value-based contracts. Using the MCREM, the level of support required to manage these Medicaid patients equates to that of approximately 7,500 Medicare patients. In Florida, most Medicaid recipients are enrolled in the Statewide Medicaid Managed Care program. The program has three parts of which IMC only accepts one: Managed Medical Assistance (“MMA”). This program provides covered medical services like doctors visits, hospital care, prescription drugs, mental health care, and transportation to these recipients. Most recipients on Medicaid will receive their care from a plan that covers MMA services. IMC contracts with a majority of the plans that cover MMA services in Florida.

 

3

 

 

INTERAMERICAN MEDICAL CENTER GROUP, LLC
AND SUBSIDIARIES

 

Management Discussion & Analysis

 

($ in thousands, except shares/units and per share data)

 

Similar to the risk it takes with Medicare, IMC is attributed an agreed percentage of the premium the Medicaid plan receives from Florida’s Agency for Health Care Administration (“AHCA”) (typically a substantial majority of such premium given the risk assumed by IMC). Its value proposition to these patients and their Medicaid plan is to improve these patients’ health and reduce these patients’ healthcare costs by providing a more comprehensive patient experience via the IMC system, whereby IMC invests more heavily in primary care to avoid more expensive downstream costs, such as hospital admissions. Because IMC is at-risk for the entirety of a patient’s medical expense, investing more heavily in preventative primary care makes economic sense given the relative costs to acute, episodic hospital-based care. IMC is not delegated for claims payments and therefore does not receive the agreed percentage of premiums from the Medicaid plan nor does it pay claims. A reconciliation is performed periodically and if premiums exceed costs, IMC receives payment from the Medicaid plan. If costs exceed premiums, it is responsible to reimburse the Medicaid plan.

 

AHCA provides an annual enrollment period during the fall of each year to allow patients to select a Medicaid plan with only limited ability for patients to make that selection during other periods of the year. Although every enrolling Medicaid patient has the option to select a health plan, most patients do not and are auto assigned to the plans using ACHA’s methodology. Once patients are assigned to a Medicaid plan, they can change the selection of their primary care provider at any time. In the enrollment process, most Medicaid patients do not select a primary care provider either and rely on the auto-assignment logic the plan has in place. IMC leverages its ability to manage risk and provide the highest level of quality care to request their providers be in the top tier of the plan’s auto assignment logic. While the annual enrollment period is important, IMC is able to attract new at-risk patients at any time during the year from the existing pool of Medicaid patients and it must work to retain its patients throughout the year.

 

Commercial Patients

 

As of March 31, 2021, IMC managed approximately 15,000 commercial patients of which 40% were under a value-based arrangement that provided upside only financial incentives for quality and utilization performance. Using the MCREM, the level of support required to manage these commercial patients equates to that of approximately 5,000 Medicare patients. IMC accepts the following insurance policies under commercial insurance: patients covered by the ACA, Florida Healthy Kids and other individual or group insurance coverage. The ACA patients represent 98% of this category.

 

For the patients that are under upside only arrangements, IMC is initially compensated a contractually agreed upon flat capitation per patient per month (“PPPM”) rate for primary care services and care coordination. Like the risk it takes on Medicare, a reconciliation is performed periodically and if premiums exceed costs, IMC receives a percentage of the savings from the commercial plan. However, if costs exceed premiums, IMC is not responsible to reimburse the commercial plan. Because the risk is limited to savings generated by better utilization of medical services, IMC does not recognize these premiums as “at-risk” premiums, nor does IMC recognize the medical expenses. Instead, IMC records the capitation amount and any upside as incentive revenue. IMC also accrues any quality bonuses as incentive revenue as well.

 

IMC counts fee-for-service patients as those that have been assigned by a Health Plan to one of its centers. A fee-for-service patient remains active until IMC is informed by the Health Plan the patient is no longer active. IMC cares for a number of commercial patients (approximately 15% of IMC’s total patients) for whom it is reimbursed on a fee-for-service basis via their health plan in situations where it does not have a capitation relationship with that particular health plan.

 

IMC fees for-service revenue, received directly from commercial plans, on a per patient basis is lower than its per patient revenue for at-risk patients basis in part because its fee-for-service revenue covers only the primary care services that it directly provides to the patient, while the risk revenue is intended to compensate it for the services directly performed by it as well as the financial risk that it assumes related to the third-party medical expenses of at-risk patients.

 

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Key Business Metric Definitions

 

In addition to IMC’s financial information which conforms with accounting principles generally accepted in the United States of America (“GAAP”), IMC reviews a number of operating and financial metrics, including the following key metrics, to evaluate its business, measure its performance, identify trends affecting its business, formulate business plans, and make strategic decisions.

 

EBITDA and Adjusted EBITDA

 

IMC defines “EBITDA” as net income or net loss before interest expense, income tax expense or benefit, and depreciation and amortization. “Adjusted EBITDA” is defined as EBITDA adjusted for special items such as non-recurring professional fees or duplicative systems costs, as determined by management. Adjusted EBITDA is intended to be used as a supplemental measure of IMC’s performance that is neither required by, nor presented in accordance with, GAAP. IMC believes that the use of Adjusted EBITDA provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing its financial measure with those of comparable companies, which may present similar non-GAAP financial measures to investors. However, IMC may incur future expenses similar to those excluded when calculating these measures. In addition, IMC’s presentations of these measures should not be construed as an inference that its future results will be unaffected by unusual or non-recurring items. IMC’s computation of Adjusted EBITDA may not be comparable to other similarly titled measures computed by other companies, because all companies may not calculate Adjusted EBITDA in the same fashion.

 

Due to these limitations, Adjusted EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. IMC compensates for these limitations by relying primarily on its GAAP results and using Adjusted EBITDA on a supplemental basis. Please review the reconciliation of net income (loss) to EBITDA and Adjusted EBITDA below and not rely on any single financial measure to evaluate IMC’s business:

 

IMC — GAAP to Adjusted EBITDA Reconciliation

 

 

Three-Months Ended (in thousands)   Mar-21     Mar-20     Y/Y Change  
Net Income (Loss)   $ (1,599 )   $ (2,961 )   $ 1,362  
Definitional Items     ​       ​       ​  
Interest Expense     1,950       2,486       (536 )
Depreciation & Amortization     1,066       1,273       (207 )
Other Expenses     212       (2 )     214  
Total Definitional Items     3,227       3,757       (530 )
EBITDA   $ 1,629     $ 796     $ 833  
Non-Recurring Expenses   $ 1,372     $ 1,242     $ 129  
Acquisition Costs     483       11       472  
Discontinued Operations     (1 )     (6 )     5  
Total Management Adjustments   $ 1,854     $ 1,247     $ 607  
Adjusted EBITDA   $ 3,483     $ 2,043     $ 1,439  

 

Cost of Care

 

IMC defines cost of care as external medical services under global capitation contracts. This includes costs such as hospitalizations, elective outpatient services, specialty and pharmacy costs. For hospital costs, IMC reviews Key Performance Indicators (“KPI”) such as hospital admission rates, hospital re-admission rates and emergency department visits. IMC uses industry calculations on a “per thousand” basis to evaluate the efficacy of its care management capabilities. Since IMC is financially liable for these costs, these KPIs are critical to the performance of IMC.

 

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Per-Patient Revenue

 

IMC defines per-patient revenue as the amount of monthly revenue earned to manage the cost of care for its patients. This includes the percentage of premium IMC has negotiated with its payor partners. IMC’s ability to accurately and appropriately document the acuity of a patient has a direct impact on per-patient revenue.

 

Key Factors Impacting Financial Performance

 

In the three-months ended March 31, 2021, IMC derived approximately 95% of its revenue from its at-risk patient base. IMC earns significant margin at both a line of business and company-wide level, with a per-patient margin contribution (defined as revenue under global capitation less external medical services under global capitation divided by applicable membership) of approximately $347 per month for MA patients and $58 per month for Medicaid patients and an 5.8% Adjusted EBITDA margin for the three-months ended March 31, 2021 and approximately $355 per month for MA patients and $28 per month for Medicaid patients and an 3.9% Adjusted EBITDA margin for the three-months ended March 31, 2020. Medicaid rate and Medicaid volume offset by operating expense costs.

 

Despite the difference in PPPM economics between the Medicaid and Medicare plan, IMC continues to serve both for the following reasons:

 

• IMC is focused on providing the best healthcare for, and improving the wellbeing of, all patients;

 

• it allows IMC to serve the community around its centers holistically, regardless of insurance coverage; and

 

• a large number of Medicaid and Commercial patients age-in to Medicare monthly, providing a pipeline to grow IMC’s MA base.

 

IMC educates its patients on the different components of Medicare and how they relate to one another. If patients are interested, IMC typically introduces them to an unaffiliated insurance agent who can help them select the appropriate plan for them based on their individual health needs. If IMC’s Medicaid and Commercial patients enroll in MA, it is better positioned to continue to serve them as at-risk patients as IMC is already familiar with their health conditions and they are familiar with its care model.

 

IMC’s historical financial performance has been, and IMC expects its future to be, driven by its ability to:

 

Effectively Manage the Cost of Care for IMC Patients

 

The capitated nature of IMC’s contracting with payors requires it to prudently manage the medical expense of its patients. IMC’s medical claims expense is its largest expense category, representing 84% of IMC’s total expenses for the three-months ended March 31, 2021. IMC’s care model focuses on leveraging the primary care setting as a means of avoiding costly downstream healthcare costs, such as acute hospital admissions. It does this by having a very active outreach process to engage members and have them seen routinely by their PCP to allow the PCP and IMC care team to navigate the patient through the health care system and proactively manage their conditions. The results have been impressive, as IMC has been able to drive an approximately 48% reduction in hospital admissions versus the FFS benchmark (IMC hospital admission rates per thousand patients of 178 as of December 31, 2020, compared to the Medicare benchmark of 370). A 64% reduction in emergency department visits (based on IMC’s rate of emergency department “treat and release” claims per thousand patients of 397 as of December 31, 2020, compared to the Medicare benchmark of 1,091). IMC’s patients, however, retain the freedom to seek care at emergency rooms or hospitals; IMC does not restrict their access to care. Therefore, IMC is liable for potentially large medical claims should IMC not effectively manage its patients’ health. IMC utilizes the protection offered through its agreement with payors for its patients, protecting IMC from medical claims per episode in excess of certain levels.

 

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Per-Patient Revenue

 

IMC’s revenue derived from at-risk patients is a function of the percent of premium it has negotiated with its payor partners as well as its ability to accurately and appropriately document the acuity of a patient. For IMC’s at-risk MA patients, CMS revises the risk adjustment factor in January of each year for each patient based upon health conditions documented in the prior year. IMC experiences some seasonality with respect to its per-patient revenue as it will generally decline over the course of the year, approximate 0.5% per month. This is due to new patients joining IMC with typically less complete or accurate documentation (and therefore lower risk scores) as well as more acute (and therefore greater revenue) patients passing away throughout the year.

 

For IMC’s at-risk Medicaid patients, ACHA revises the contractual premiums annually. The rates are established based on specific cohorts by age and sex and geographical location. AHCA uses a “zero sum” risk adjustment model that establishes acuity for certain cohorts of patients and quarterly, depending on the scoring of that acuity, may shift premiums from health plans with lower acuity members to health plans with higher acuity members.

 

Add New Patients in Existing Centers

 

IMC believes its ability to add new patients is a key indicator of the market’s recognition of the attractiveness of IMC, both to patients and payor partners, and a key growth driver for the business. IMC has been able to demonstrate its ability to grow its patient base increasing it from approximately 18,500 MCREM as of December 31, 2018 to approximately 23,000 MCREM as of March 31, 2021. Further, IMC believes it has a large embedded growth opportunity within its existing center base with room for approximately 4,500 additional MCREM members based within its current footprint. IMC also believes that even after COVID-19 subsides, it will continue to conduct a portion of visits by telehealth based on patient preference and clinical need, which could potentially increase the average capacity of its centers. As IMC adds patients to its existing centers, it expects these patients to contribute significant incremental economics to IMC as it leverages its fixed cost base at each center.

 

IMC utilizes a proactive strategy to drive growth to its centers. IMC employs a grassroots approach to patient engagement led by its Outreach Team and supplemented by more traditional marketing, digital and social media, as well as telemarketing. IMC leverages its Outreach Team to ensure it is connecting with Medicare-eligible patients across a number of channels to make them aware of their healthcare choices and the services IMC offers. These efforts have historically included hosting events within IMC centers and participating in community events. Each IMC center has an activity room; a space designated and available for its patients’ use whenever the center is open. IMC also utilizes this space to provide fitness and health education classes to its patients and often opens up events to any older adults in the community regardless of their affiliation. At the present time, IMC leverages its activity centers as extra waiting room space as needed which allows easier social distancing for patients or their companions. IMC is continuing to leverage its community-based marketing approach with less focus on in-person interactions and more focus on working with community partners to identify older adults who need IMC’s services. It is IMC’s belief that the enhanced awareness of the importance of managing chronic illnesses as well as patient varied preferences on preferred methods to interact with providers will continue to drive demand for IMC services among older adults. IMC believes the ultimate effect of its marketing efforts leads to increased awareness of IMC and additional patients choosing IMC as their primary care provider, regardless of whether that patient is covered under MA, Medicaid or Commercial insurance. IMC believes that its outreach efforts also help to grow its payor partners’ membership base alongside IMC’s patient base growth and helps educate patients about their choices on Medicare, Medicaid or Commercial, further aligning its model with that of healthcare payers.

 

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IMC’s payor partners will also direct patients to IMC by either assigning patients who have not yet selected a primary care provider to IMC or through insurance agents who inform their clients about IMC, which IMC believes results in patients selecting IMC as their primary care provider when selecting an MA plan. Payors dedicate a large share of their internal efforts to improving quality and reducing medical costs and they have a strong desire to engage with solutions proven to achieve that goal. Due to IMC’s care delivery model’s patient-centric focus, it has been able to consistently help payors manage their costs while raising the quality of their plans, affording them quality bonuses that increase their revenue. IMC believes that it represents an attractive opportunity for payors to improve their overall membership growth in a given market without assuming any financial downside.

 

CMS allows for MA enrollees to be risk-adjusted in order to compensate the MA plan for the greater medical costs associated with sicker patients, so long as the health plan appropriately and accurately documents the patients’ health conditions. Newer patients have not engaged with the healthcare system, and therefore their health conditions are not documented. Through its care model, IMC organically determines and assesses the health needs of its patients and creates a care plan consistent with those needs. It captures and documents health conditions as a part of this process. IMC believes its model allows it to align its risk adjustment framework as it scales the clinical intensity of the IMC care model based upon the needs of the individual patient — it invests more dollars and resources towards its sicker patients.

 

Seasonality — Growth and Medical Costs

 

Due to the large number of dual-eligible patients (meaning eligible for both Medicare and Medicaid) it serves, the annual enrollment period doesn’t materially affect IMC’s growth during the year. IMC typically sees large increases in Affordable Care Act (“ACA”) patients during the first quarter as a result of the Annual Enrollment Period (October to December). However, this is not a large portion of IMC’s business.

 

Medical costs will vary seasonally depending on a number of factors, but most significantly the weather. Certain illnesses, such as the influenza virus, are far more prevalent during colder months of the year, which will result in an increase in medical expenses during these time periods. IMC therefore expects to experience higher levels of per-patient medical costs in its first and fourth quarters. Medical costs also depend upon the number of business days in a period. Shorter periods will have lesser medical costs due to fewer business days. Business days can also create year-over-year comparability issues if the number of business days in each of the compared years is not the same. IMC would also expect to experience an impact should there be a pandemic such as COVID-19, which may result in increased or decreased total medical costs depending upon the severity of the infection, the duration of the infection and the impact to the supply and availability of healthcare services for patients.

 

Investments in Growth

 

IMC expects to continue to focus on long-term growth through investments in its centers, care model, and marketing. In addition, IMC expects its corporate, general and administrative expenses to increase in absolute dollars for the foreseeable future to support its growth and because of additional costs as IMC becomes a public company, including expenses related to compliance with the rules and regulations of the SEC and the listing standards of NASDAQ, additional corporate and director and officer insurance expenses, greater investor relations expenses and increased legal, audit and consulting fees. While IMC’s net income may decrease in the future because of these activities, IMC plans to balance these investments in future growth with a continued focus on managing its results of operations and investing judiciously. Accordingly, in the short term IMC expects these activities to decrease its net income, but in the longer term it anticipates that these investments will positively impact its business and results of operations.

 

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Contract with Payors

 

IMC economic model relies on its capitated partnerships with payors which manage and market MA plans across the United States. In IMC’s short history, it has been able to establish strategic value-based relationships with nine different payors for Medicare Advantage patients, five different payors for Medicaid patients and one payor for ACA patients. IMC’s three largest payor relationships were Anthem, United, and Centene, which generated 30%, 23%, 26%, of IMC’s revenue in the three-months ended March 31, 2021 and 32%, 27%, and 18% of IMC’s revenue in March 31,2020. These existing contracts and relationships with IMC’s partners’ understanding of the value of the IMC model reduces the risk of entering into new markets as IMC typically has payor contracts before entering a new market. Maintaining, supporting, and growing these relationships, particularly as IMC’ enters new geographies, is critical to IMC’s long-term success. IMC’s model is well-aligned with its payor partners — to drive better health outcomes for their patients, enhancing patient satisfaction, while driving incremental patient and revenue growth. This alignment of interests and its highly effective care model helps ensures IMC’s continued success with its payor partners.

 

Impact of COVID-19

 

The rapid spread of COVID-19 around the world and throughout the United States has altered the behavior of businesses and people, with significant negative effects on federal, state and local economies, the duration of which is unknown at this time. The virus disproportionately impacts older adults, especially those with chronic illnesses, which describes many of IMC’s patients. To ensure a coordinated response to the pandemic, IMC created a COVID-19 Response Team that is supported by team members from across the organization. To date, IMC has experienced or expects to experience the following impacts on its business model due to COVID-19:

 

• Care Model. IMC has transitioned much of its care to telehealth services, while increasing patient visit volume and maintaining continuity of care. IMC’s average daily visits decreased approximately 5% in the three months ended March 31, 2021 compared to the three months ended March 31, 2020. The decrease is due to the overall ebbs and flows of COVID-19 and hospitalization rates. IMC’s annualized utilization is in line with historic levels.

 

IMC’s goal in addressing COVID-19 was threefold:

 

1. Keep patients informed

 

2. Keep patients safe; and

 

3. Help patients effected by COVID-19

 

To achieve these goals, IMC introduced several new programs:

 

In-home Meal delivery — To address nutritional needs and allow people to shelter in place, IMC leveraged its transportation infrastructure to provide food delivery to its most at-risk patients to address their social determinants of health, making over 350,000 deliveries since its markets were first impacted in March 2020.

 

Telehealth — IMC launched telehealth to allow patients to access their PCP. At the height of COVID-19, 90% of IMC visits were done via telehealth or a traditional call. During the first half of 2021, IMC expects to continue to complete 20% to 30% of its appointments through this technology.

 

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Companionship program — IMC also launched a companionship program called “TeleAmigos” to help address patient fear and loneliness as many remained isolated throughout the pandemic.

 

COVID-19 informed care management monitoring — IMC created a care management monitoring and outreach program to care for its patients who had a confirmed or suspected case of COVID-19. This includes monitoring daily feeds from the State of Florida’s Encounter Notification Service, which allows us to know about each admission and discharge to a hospital inpatient or emergency room. All admissions are researched and, if IMC determines it is COVID-19 related, it monitors the case and follow up with post-discharge support.

 

As IMC’s revenues are not determined or earned based upon the number of times, IMC interacts with its patients, and as it was already incurring the cost associated with the employees responsible for assisting its patients across all of these dimensions, these care model changes have not had a material financial impact on IMC’s revenue or operating costs.

 

• Other Patient Service Revenue. Other patient service revenue includes revenue received for care IMC provides and bills on a fee-for-service basis. While IMC centers remained open during the COVID-19 pandemic, IMC restricted in-center visits to those patients with the most urgent needs. These restrictions resulted in IMC performing fewer fee-for-service visits, resulting in lower dollar values of claims. However, while IMC’s fee-for-service patients represented approximately 15% of its patients as of March 31, 2021, fee-for-service revenue represented less than 2% of IMC’s total revenues.

 

• Growth. At the end of March 2020, IMC made the decision to suspend community-based outreach events and scale back central marketing efforts due to safety concerns for employees and communities and to comply with local government ordinances. As a result, IMC expects growth to continue to be adversely impacted in 2021 as it does not expect to resume community events until later in 2021. However, IMC has used this pause in traditional marketing efforts to reassess and realign its marketing strategy to focus on other growth channels. For example, IMC is engaging community partners, such as senior living facilities and faith-based organizations, through an account management model to gain referrals of older adults who could benefit from IMC services and care model. IMC has also increased its presence and activity on social media outlets popular with seniors

 

• Medical Claims Expense. Although IMC patient demographic has been and continues to be disproportionately impacted by the effects of COVID-19, as of March 31, 2021, IMC’s annualized external medical services under global capitation appear to be in line with previous periods. IMC cannot accurately estimate the future potential impact, positive or negative, to medical claims expense going forward.

 

• Risk-adjustment. Medicare pays capitation using a “risk adjustment model,” which compensates providers based on the health status (acuity) of each individual patient. Payors with higher acuity patients receive more, and those with lower acuity patients receive less. Medicare requires that a patient’s health issues be documented annually regardless of the permanence of the underlying causes. Historically, this documentation was required to be completed during an in-person visit with a patient. As part of the CARES Act, Medicare is allowing documentation for conditions identified during video visits with patients.

 

Components of Results of Operations

 

Revenue

 

Revenues under global capitation.    Global capitation is a fixed amount of money per patient per month paid in advance for the delivery of health care services, whereby IMC is generally liable for medical costs in excess of the fixed payment and are able to retain any surplus created if medical costs are less than the fixed payment. A portion of its capitated revenues are typically prepaid monthly to IMC based on the number of patients selecting IMC as their primary care provider. IMC’s capitated rates are determined as a percentage of the premium the plan receives from CMS or AHCA for IMC’s at-risk members.

 

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For MA, those premiums are determined via a competitive bidding process with CMS and are based upon the cost of care in a local market and the average utilization of services by the patients enrolled. Medicare pays capitation using a “risk adjustment model,” which compensates providers based on the health status (acuity) of each individual patient. Payors with higher acuity patients receive more in premium, and those with lower acuity patients receive less in premium. Under the risk adjustment model, capitation is paid on an interim basis based on enrollee data submitted for the preceding year and is adjusted in subsequent periods after the final data is compiled. As premiums are adjusted via this risk adjustment model, IMC’s capitation payments will change in unison with how its payor partners’ premiums change with CMS. Risk adjustment in future periods (e.g., second quarter of 2021) may be impacted by COVID-19 and its inability to accurately document the health needs of IMC’s patients in a compliant manner, which may have an adverse impact on its revenue.

 

For Medicaid, premiums are determined by Florida’s AHCA and based rates are adjusted annually using historical utilization data projected forward by a third-party actuarial firm. The rates are established based on specific cohorts by age and sex and geographical location. AHCA uses a “zero sum” risk adjustment model that establishes acuity for certain cohorts of patients and quarterly, depending on the scoring of that acuity, may shift premiums from health plans with lower acuity members to health plans with higher acuity members.

 

Revenues under global capitation and external medical services under global capitation are consolidated to determine profitability for IMC’s at-risk arrangements.

 

See “ — Critical Accounting Policies — Capitated Revenue” for more information.

 

Other Managed Care Revenue.    Other managed care revenue includes professional capitation payments. These revenues are a fixed amount of money per patient per month paid in advance for the delivery of primary care services only, whereby IMC is not liable for medical costs in excess of the fixed payment. Capitated revenues are typically prepaid monthly to IMC based on the number of patients selecting IMC as their primary care provider. IMC’s capitated rates are fixed, contractual rates. Incentive payments for Healthcare Effectiveness Data and Information Set (“HEDIS”) and any services paid on a fee for service basis by a health plan are also included in other managed care revenue.

 

Other Revenue.    Other revenue is mostly comprised of cash copayment collections. Certain services under some insurance coverage requires patients to pay a copayment.

 

Operating Expenses

 

External Medical Services under Global Capitation.    External medical services under global capitation includes all services at-risk patients utilize. These include claims paid by the health plan and estimates for unpaid claims. The estimated reserve for incurred but not paid claims is included in accounts receivable (Capitation Receivable on IMC’s balance sheet) as IMC does not pay medical claims. Actual claims expense will differ from the estimated liability due to factors in estimated and actual patient utilization of health care services, the amount of charges, and other factors. IMC typically reconciles its medical claims expense with its payor partners on a monthly basis and adjust its estimate of incurred but not paid claims if necessary. To the extent IMC revises its estimates of incurred but not paid claims for prior periods up or down, there would be a correspondingly favorable or unfavorable effect on its current period results that may or may not reflect changes in long term trends in its performance. IMC expects its medical claims expenses to increase in both absolute dollar terms as well as on a PPPM basis given the healthcare spending trends within the Medicare population and the increasing disease burden of patients as they age.

 

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Other Medical Costs.    Other medical costs includes the costs of additional medical services IMC provides to patients that are not paid by the plan. These services include patient transportation, medical supplies, auto insurance and other specialty costs, like dental or vision. In some instances, IMC has negotiated better rates than the health plans.

 

Direct Medical Salaries, Wages and Benefits.    Direct medical salaries, wages and benefits include those paid to medical doctors, nurse practitioners, physician assistants, registered nurses, scribes, medical assistants, and phlebotomists. IMC also includes patient support employees such as center administrators, receptionist, activity coordinators, access representatives and patient engagement representatives in direct medical salaries, wages, and benefits. As IMC opens new centers, it expects these costs to increase in absolute dollars.

 

Salaries, Wages and Benefits    Salaries, wages and benefits include employee-related expenses, including salaries and related costs and stock-based compensation for IMC’s executive, technology infrastructure, operations, clinical and quality support, finance, legal, human resources, and development departments. IMC expects these costs to increase in absolute dollars over time as it continues to grow patient panels.

 

General and Administrative Expenses.    General and administrative expenses include all corporate technology, sales and marketing expenses, third party professional services and occupancy costs. IMC expects these expenses to increase over time due to the additional legal, accounting, insurance, investor relations and other costs that IMC will incur as a public company, as well as other costs associated with continuing to grow its business. IMC also expects its general and administrative expenses to increase in absolute dollars in the foreseeable future. However, IMC anticipates general and administrative expenses to decrease as a percentage of revenue over the long term, although they may fluctuate as a percentage of revenue from period to period due to the timing and amount of these expenses.

 

Depreciation and Amortization.    Depreciation and amortization expenses are primarily attributable to IMC’s capital investment and consist of fixed asset depreciation, amortization of intangibles considered to have definite lives, and amortization of capitalized internal-use software costs.

 

Other Income (Expense)

 

Interest Expense.    Interest expense consists primarily of interest payments on IMC’s outstanding borrowings under IMC’s note payable. See “— Liquidity and Capital Resources — Note Payable.”

 

Results of Operations

 

The following information sets forth results from IMC’s condensed consolidated statements of operations for the periods indicated:

 

Revenue under global capitation.    Revenue under global capitation was $56.5 million for the three-months ended March 31, 2021, an increase of $7.4 million, or 15.1%, compared to $49.1 million for the three-months ended March 31, 2020.

 

Global capitation revenue for MA patients was $37.6 million and $38.2 million for the three-months ended March 31, 2021 and 2020, respectively; a decrease of $0.7 million, or (1.8%). The decrease is attributable to a (1.9%) decrease in volume, while rate increased 0.1%. Global capitated revenue for Medicaid patients was $18.9 million and $10.8 million for the three-months ended March 31, 2021 and 2020, respectively; an increase of $8.1 million or 75.0%. The increase in Medicaid revenue was driven by an 95.4% increase in volume offset by a (10.5%) decrease in rate.

 

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Other Managed Care Revenue.    Other managed care revenue was $3.1 million for the three-months ended March 31, 2021, a decrease of $0.2 million, or (6.1%), compared to $3.3 million for the three-months ended March 31, 2020. The decrease was primarily driven by decreased volume of partial-risk ACA patients.

 

Operating Expenses 

 

    Three Months Ended
March 31, 		             
    2021     2020     $change     % change  
                         
    (in millions)              
Operating expenses:   ​     ​     ​     ​  
External medical services under global capitation   $ 42.6     $ 37.6     $ 5.0       13.3 %
Other medical expenses     2.0       2.0       —       0.0 %
Direct medical salaries, wages & benefits     5.1       5.4       (0.3 )     (5.6 )%
Salaries, wages & benefits     4.3       3.1       1.2       38.7 %
General & administrative     4.2       3.7       0.5       13.5 %
Depreciation & Amortization     1.1       1.3       (0.2 )     (15.4 )%
Total operating expenses   $ 59.3     $ 53.1     $ 6.2       11.7 %

 

External medical services under global capitation.    External medical services under global capitation was $42.6 million for the three-months ended March 31, 2021, an increase of $5.0 million, or 13.3%, compared to $37.6 million for the three-months ended March 31, 2020.

 

Global medical claims expense for MA patients was $27.4 million and $27.7 million for the three-months ended March 31, 2021, a decrease of $0.3 million, or 1.1%, compared to $27.7 million for the three-months ended March 31, 2020. and 2020, respectively. This is a decrease of $0.3 million or (1.1%). The favorability is attributable to a 1.9% decrease in volume and 0.8% improvement in rates. Global medical claims expense for Medicaid patients was $15.2 million and $9.9 million for the three-months ended March 31, 2021, an increase of $5.3 million, or 53.5%, compared to $9.9 million for the three-months ended March 31, and 2020, respectively. This is an increase of $5.3 million or 53.5%. The increase in Medicaid medical expense was driven by an 95.4% increase in volume, while rates declined by 21.4%.

 

Other medical expense.    Other medical expense was $2.0 million for the three-months ended March 31, 2021 and 2020, respectively. Costs remained constant in the three-months ended March 31 2021 and 2020.

 

Direct medical salaries, wages and benefits.    Direct medical salaries, wages and benefits expense was $5.1 million for the three-months ended March 31, 2021, a decrease of $0.3 million, or 5.6%, compared to $5.4 million for the three-months ended March 31, 2020. The improvement was a result of centralizing certain functions that were historically kept in the centers. This centralization allows IMC to leverage its scale and improve operating results.

 

Salaries, wages and benefits.    Salaries, wages and benefits expense was $4.3 million for the three-months ended March 31, 2021, an increase of $1.2 million, or 38.7%, compared to $3.1 million for the three-months ended March 31, 2020. The increase was a result of incremental staffing of new employees for key positions.

 

General and administrative.    General and administrative expense was $4.2 million for the three-months ended March 31, 2021, an increase of $0.5 million, or 13.5%, compared to $3.7 million for the three-months ended March 31, 2020. The increase in expenses was due to an increase in transaction related expenses.

 

13

 

 

INTERAMERICAN MEDICAL CENTER GROUP, LLC
AND SUBSIDIARIES

 

Management Discussion & Analysis

 

($ in thousands, except shares/units and per share data)

 

Depreciation and Amortization.    Depreciation and amortization expense was $1.1 million for the three-months ended March 31, 2021, a decrease of $0.2 million, or (15.4%) compared to $1.3 million for three-months ended March 31, 2020.

 

Other Income (Expense)

 

Interest Expense.    Interest expense was $2.0 million for the three-months ended March 31, 2021, a decrease of $0.5 million, or (21.6%) compared to $2.5 million for three-months ended March 31, 2020. The decrease in interest expense is due to the reduction in outstanding principal balances due to paydowns on term loans and the conversion of long-term debt to equity, thereby reducing the total outstanding principal balance of long term debt in the 4th quarter 2020.

 

Liquidity and Capital Resources

 

To date, IMC has financed its operations principally through capital contributions from its members. As of March 31, 2021, IMC had cash and cash equivalents of approximately $14.0 million. IMC’s cash and cash equivalents primarily consist of demand deposits maintained in IMC’s bank accounts and cash on hand. IMC incurred operating losses in the three-months ended March 31, 2021 and 2020, respectively. During 2021 IMC has met its liquidity needs through normal business operations.

 

Off-Balance Sheet Arrangements

 

IMC did not have any off-balance sheet arrangements as of March 31, 2021 or December 31, 2020.

 

JOBS Act

 

Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies, but any such election to opt out is irrevocable. IMC has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, IMC, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the IMC’s consolidated financial statements with a public company which is neither an emerging growth company, nor an emerging growth company that has opted out of using the extended transition period, difficult or impossible because of the potential differences in accounting standards used.

 

Critical Accounting Policies

 

The discussion and analysis of its financial condition and results of operations are based upon IMC’s condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, revenue and expenses and related disclosures of contingent assets and liabilities at the date of IMC’s financial statements. Actual results may differ from these estimates under different assumptions or conditions, impacting IMC’s reported results of operations and financial condition.

 

IMC’s condensed consolidated financial statements include the accounts of IMC and subsidiaries.

 

All intercompany balances and transactions are eliminated in consolidation.

 

14

 

 

INTERAMERICAN MEDICAL CENTER GROUP, LLC
AND SUBSIDIARIES

 

Management Discussion & Analysis

 

($ in thousands, except shares/units and per share data)

 

Certain accounting policies involve significant judgments and assumptions by management, which have a material impact on the carrying value of assets and liabilities and the recognition of income and expenses. Management considers these accounting policies to be critical accounting policies. The estimates and assumptions used by management are based on historical experience and other factors, which are believed to be reasonable under the circumstances. The significant accounting policies which IMC believes are the most critical to aid in fully understanding and evaluating IMC’s reported financial results are described below. Refer to Note 2 “Summary of Significant Accounting Policies” to IMC’s condensed consolidated financial statements included elsewhere in this Current Report on Form 8-K for more detailed information regarding IMC’s critical accounting policies.

 

Revenue under Global Capitation

 

IMC provides coordination and facilitation of medical services; transaction processing; customer, consumer and care professional services; and access to contracted networks of physicians, hospitals and other health care professionals under global capitated risk-based arrangements and managed services only contracts. Revenues derived from global capitated risk-based arrangements in which the premium is typically at a fixed rate per individual service for a one-year period, and where IMC assumes the economic risk of funding its customers’ health care and related administrative costs and managed services only contracts are presented as revenue under global capitation in IMC’s condensed consolidated statements of operations for the period ended March 31, 2021.

 

The Centers for Medicare and Medicaid Services (“CMS”) uses a risk adjustment model for its Medicare Advantage enrollees that apportions premiums paid to all health plans according to health severity and certain demographic factors. The CMS risk adjustment model pays more for members whose medical history indicates they have certain medical conditions. Under this risk adjustment methodology, CMS calculates the risk adjustment premium payment using diagnosis data from hospital inpatient, hospital outpatient and physician treatment settings. IMC and other health care providers collect, capture and submit the necessary and available diagnosis data to the plans with which IMC contracts. Plans must submit applicable data to CMS within prescribed deadlines. IMC’s risk-based Medicare contracts contain retrospective adjustment provisions that adjust IMC’s revenue under global capitation for applicable percentages of the risk adjustment amounts. Such amounts are recorded as revenue when the data to reasonably estimate them have been obtained by IMC. Risk adjustment data is subject to regulatory audits via the plans.

 

Payments under both IMC’s global risk contracts (for both Medicare Advantage and Medicaid) are subject to revision based upon premium adjustments, historical patient enrollment data and final settlements. Such revision and final payments are settled over a period ranging from 18 to 24 months after the contractual period. IMC adjusts its revenue for retroactive enrollee additions, terminations and other changes when identified. As such, the retroactive adjustments and final payments discussed are a form of variable consideration estimated at contract inception and updated throughout the measurement period, to the extent that risk of reversal does not exist and the consideration is not constrained.

 

For the three-months ended March 31, 2021 and March 31, 2020, IMC included Medicare risk adjustments of $2.0 million and $1.6 million, respectively, as a result of expected acuity-related adjustments to be received in subsequent periods.

 

Stop loss premium expense was $2.1 million and $0.7 million for the three-months ended March 31, 2021 and 2020, respectively. The increase was due to increases Reinsurance recoveries were $3.8 million and $1.1 million for the three-months ended March 31, 2021 and 2020, respectively.

 

15

 

 

INTERAMERICAN MEDICAL CENTER GROUP, LLC
AND SUBSIDIARIES

 

Management Discussion & Analysis

 

($ in thousands, except shares/units and per share data)

 

External Medical Services under Global Capitation

 

For patients enrolled under risk-based managed care contracts, the cost of specialty services is paid on either a fee-for-service, per diem or capitation basis. Expenses for external medical services are recognized in the period in which enrollees of the health plans receive services and include the actual claims paid and estimates of medical claims payable. Medical services payable are included within capitation receivables and amounts due health plans on IMC’s condensed consolidated balance sheet, as the payables and receivables are settled net pursuant to contractual terms, and represents the liability for medical services reported but not paid and medical services incurred but not reported (collectively, “IBNP”). IMC estimates the liability for IBNP medical services based upon historical data including the period between the date services are rendered and the date claims are received and paid, contract provisions and other relevant factors. The estimate for IBNP medical services is made and adjusted in future periods as required. IMC applies its estimates of medical services payable first against the respective surplus amounts retained by the respective health plans and, if medical services expense exceeds surplus amounts, the liability is recorded in amounts due health plans in IMC’s accompanying condensed consolidated balance sheets for the three months ended March 31, 2021. Estimates of medical services payable are necessarily based on estimates and, while management believes that IMC’s reserves of medical services payable are adequate, the ultimate liability may differ from the amounts estimated, and those differences may be material.

 

When it is probable that expected future health care costs and maintenance costs under a contract or group of existing contracts will exceed anticipated capitated revenue on those contracts, IMC recognizes losses on its prepaid health care services with the plans.

 

Goodwill and Other Intangible Assets

 

IMC records acquired assets and assumed liabilities at their respective fair values under the acquisition method of accounting. Goodwill represents the excess of the purchase price over the fair value of net assets acquired. Intangible assets with finite lives, principally trade names, are recognized apart from goodwill at the time of acquisition based on the contractual-legal and separability criteria established in the accounting guidance.

 

IMC tests goodwill for impairment annually or more frequently if triggering events occur or other impairment indicators arise which might impair recoverability. These events or circumstances would include a significant change in the business climate, legal factors, operating performance indicators, competition, sale, disposition of a significant portion of the business or other factors.

 

ASC 350, Intangibles  —  Goodwill and Other (“ASC 350”) allows entities to first use a qualitative approach to test goodwill for impairment. ASC 350 permits an entity to first perform a qualitative assessment to determine whether it is more likely than not (a likelihood of greater than 50%) that the fair value of a reporting unit is less than its carrying value.

 

In testing for goodwill impairment, IMC first assesses qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, IMC determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then additional impairment testing is not required. However, if IMC concludes otherwise, it performs the first of a two-step impairment test. Based on its assessment of qualitative factors on March 31, 2021, IMC concluded it was more likely than not that IMC’s recorded goodwill balance of $85.5 million was not impaired and did not perform the quantitative test. See “Note 3 — Goodwill and Intangible Assets, Net” to IMC’s condensed consolidated financial statements included elsewhere in this proxy statement.

 

Intangible assets, net, consist of trademarks. Intangible assets with finite lives are amortized on a straight-line basis over their estimated useful lives. Intangible assets with finite lives are amortized over periods of fifteen years.

 

16

 

 

INTERAMERICAN MEDICAL CENTER GROUP, LLC
AND SUBSIDIARIES

 

Management Discussion & Analysis

 

($ in thousands, except shares/units and per share data)

 

Long-lived assets, such as equipment, improvements, and intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the use and eventual disposition of the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value.

 

Recent Accounting Pronouncements

 

See Note 2 to IMC’s condensed consolidated financial statements “Summary of Significant Accounting Policies — Recent Accounting Pronouncements” included elsewhere in IMC’s condensed consolidated financial statements for the three months ended March 31, 2021 for more information.

 

Quantitative and Qualitative Disclosures About Market Risk

 

Market risk represents the risk of loss that may impact IMC’s financial position due to adverse changes in financial market prices and rates. IMC’s market risk exposure is primarily a result of exposure due to potential changes in inflation or interest rates. IMC does not hold financial instruments for trading purposes.

 

Interest Rate Risk

 

IMC’s primary market risk exposure is changing prime rate-based interest rates. Interest rate risk is highly sensitive due to many factors, including U.S. monetary and tax policies, U.S. and international economic factors and other factors beyond its control. IMC’s Term Note bears interest at a floating rate equal to the 3-month LIBOR plus 7.5% through the interest period ended December 31, 2020 and the 3-month LIBOR plus 8.25% for the interest period ended March 31, 2021. As of March 31, 2021, IMC had total outstanding debt of $77.2 million (net of deferred financing fees) in principal and paid-in-kind interest under the Term Note and other Long-Term Debt. Based on the amount outstanding, a 100-basis point increase or decrease in market interest rates over a twelve-month period would result in a change to interest expense of approximately $0.8 million.

 

Inflation Risk

 

Based on its analysis of the periods presented, IMC believes that inflation has not had a material effect on its operating results. There can be no assurance that future inflation will not have an adverse impact on IMC’s operating results and financial condition.

 

17

 

 

Exhibit 99.3 

 

CAREMAX MEDICAL GROUP, LLC AND AFFILIATES

 

UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS

 

AS OF MARCH 31, 2021 AND DECEMBER 31, 2020 AND FOR THE
THREE MONTHS ENDED MARCH 31, 2021 AND 2020

 

 

 

 

CAREMAX MEDICAL GROUP, LLC AND AFFILIATES
TABLE OF CONTENTS
AS OF MARCH 31, 2021 AND DECEMBER 31, 2020 AND FOR THE THREE MONTHS
ENDED MARCH 31, 2021 AND 2020

 

INDEX TO CONDENSED COMBINED FINANCIAL STATEMENTS

 

UNAUDITED CONDENSED COMBINED BALANCE SHEETS 2
UNAUDITED CONDENSED COMBINED STATEMENTS OF OPERATIONS 3

UNAUDITED CONDENSED COMBINED STATEMENTS OF CHANGES IN MEMBERS’ EQUITY

4
UNAUDITED CONDENSED COMBINED STATEMENTS OF CASH FLOWS 5
NOTES TO UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS 6-19

 

1

 

 

CAREMAX MEDICAL GROUP, LLC AND AFFILIATES

 

UNAUDITED CONDENSED COMBINED BALANCE SHEETS AS OF

 

  March 31,2021     December 31, 2020  
ASSETS            
CURRENT ASSETS                
Cash and Cash Equivalents   $ 6,434,884     $ 4,934,426  
Accounts Receivable     8,756,469       9,395,022  
Inventory     15,476       15,475  
Prepaid Expenses     166,932       182,465  
Risk Settlements Due from Providers     —       79,964  
Due from Related Parties     627,044       273,505  
Total Current Assets     16,000,803       14,880,857  
Property and Equipment, net     6,190,959       4,796,382  
Goodwill     10,067,730       10,067,730  
Intangible Assets, net     8,323,460       8,575,235  
Other Assets     388,074       182,944  
Total Assets   $ 40,971,027     $ 38,503,148  
LIABILITIES AND MEMBERS’ EQUITY     ​       ​  
CURRENT LIABILITIES     ​       ​  
Current Maturities of Long-Term Debt, net   $ 992,174     $ 1,004,703  
Accounts Payable     2,171,627       1,044,256  
Due to Related Parties     —       38,888  
Risk Settlements Due to Providers     281,916       642,946  
Accrued Interest Payable     160,726       148,902  
Accrued Expenses     2,437,943       2,572,188  
Total Current Liabilities     6,044,386       5,451,883  
Long-Term Debt, less current maturities, net     26,190,433       26,324,606  
Other Liabilities     707,853       —  
Total Liabilities     32,942,672       31,776,489  
MEMBERS’ EQUITY     ​       ​  
Units (no par value, 200 authorized, issued and outstanding at March 31, 2021 and December 31, 2020)     223,100       223,100  
Members’ Equity     7,805,255       6,503,559  
Total Members’ Equity     8,028,355       6,726,659  
Total Liabilities and Members’ Equity   $ 40,971,027     $ 38,503,148  

 

The accompanying notes are an integral part of these unaudited condensed combined financial statements.

 

2

 

 

CAREMAX MEDICAL GROUP, LLC AND AFFILIATES

 

UNAUDITED CONDENSED COMBINED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED

 

    For the Three Months ended March 31,  
      2021       2020  
Revenue                
Capitated Revenue   $ 27,818,980     $ 25,041,525  
Other Patient Service Revenue     98,691       138,439  
Total Revenue     27,917,672       25,179,964  
Expenses     ​       ​  
Medical Expenses     18,438,612       16,157,366  
Selling, General and Administrative Expenses     7,673,377       5,524,251  
Total Operating Expenses     26,111,989       21,681,617  
Interest expense     503,987       327,470  
Net Income     1,301,696       3,170,877  
Net Income (Loss) Attributable to Noncontrolling Interests     —       (89,932 )
Net Income Attributable to Controlling Interests   $ 1,301,696     $ 3,260,810  
Weighted-average Units Outstanding     200       200  
Net Income per Unit – Basic and Diluted   $ 6,508     $ 16,304  

 

The accompanying notes are an integral part of these unaudited condensed combined financial statements.

 

3

 

 

CAREMAX MEDICAL GROUP, LLC AND AFFILIATES

 

UNAUDITED CONDENSED COMBINED STATEMENTS OF CHANGES IN MEMBERS’ EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

 

    Units     Members’
Units 		    Members’
Equity 		    Total
Controlling
Interest 		    Noncontrolling
Interest 		    Total
Members’
Equity 		 
BALANCE – DECEMBER 31, 2019     200     $ 223,100     $ 4,937,161     $ 5,160,261     $ (214,196 )   $ 4,946,065  
Net income (loss)                     3,260,810       3,260,810       (89,932 )     3,170,877  
Purchase of non-controlling interest                     (400,100 )     (400,100 )     —       (400,100 )
Change in ownership due to change in non-controlling interest                     (43,461 )     (43,461 )     43,461       —  
BALANCE – MARCH 31, 2020     200     $ 223,100     $ 7,754,409     $ 7,977,509     $ (260,667 )   $ 7,716,842  
BALANCE – DECEMBER 31, 2020     200     $ 223,100     $ 6,503,559     $ 6,726,659     $ —     $ 6,726,659  
Net income                     1,301,696       1,301,696       —       1,301,696  
BALANCE – MARCH 31, 2021     200     $ 223,100     $ 7,805,255     $ 8,028,355     $ —     $ 8,028,355  

 

The accompanying notes are an integral part of these unaudited condensed combined financial statements.


4

 

 

CAREMAX MEDICAL GROUP, LLC AND AFFILIATES

 

UNAUDITED CONDENSED COMBINED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31,

 

​   2021     2020  
CASH FLOWS FROM OPERATING ACTIVITIES     ​       ​  
Net Income   $ 1,301,696     $ 3,170,877  
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:     ​       ​  
Depreciation Expense     262,285       216,395  
Amortization Expense     251,775       140,523  
Amortization of Debt Issuance Costs     34,569       —  
(Increase) Decrease in Assets:     ​       ​  
Accounts Receivable     638,553       (1,878,375 )
Inventory     (1 )     —  
Prepaid Expenses     15,533       27,002  
Risk Settlements Due from Providers     79,964       128,419  
Due from Related Parties     (353,539 )     (32,015 )
Other Assets     (205,130 )     5,965  
Increase (Decrease) in Liabilities:     ​       ​  
Accounts Payable     1,160,704       (337,404 )
Due to Related Parties     (38,888 )     (20,457 )
Risk Settlements Due to Providers     (361,030 )     294,230  
Accrued Expenses     (134,245 )     (348,934 )
Other Liabilities     707,853       —  
Accrued Interest     11,824       —  
Net Cash Provided by Operating Activities     3,371,923       1,366,226  
CASH FLOWS FROM INVESTING ACTIVITIES     ​       ​  
Purchase of Property and Equipment     (1,656,862 )     (1,387,742 )
Purchase of Noncontrolling Interest Ownership     (33,333 )     (216,766 )
Net Cash Used in Investing Activities     (1,690,195 )     (1,604,508 )
CASH FLOWS FROM FINANCING ACTIVITIES     ​       ​  
Borrowings under Loan & Security Agreement     —       2,500,000  
Principal Payments on Long-Term Debt     (181,270 )     (30,413 )
Net Cash (Used in) Provided by Financing Activities     (181,270 )     2,469,587  
NET INCREASE IN CASH AND CASH EQUIVALENTS     1,500,458       2,231,305  
Cash and Cash Equivalents – Beginning of Year     4,934,426       4,437,704  
CASH AND CASH EQUIVALENTS – END OF PERIOD   $ 6,434,884     $ 6,669,009  
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES     ​       ​  
Cash Paid for Interest   $ 503,987     $ 327,526  
Purchase of Non-Controlling Interest through Accounts Payable   $ —     $ 183,334  

 

The accompanying notes are an integral part of these unaudited condensed combined financial statements.

 

5

 

 

CAREMAX MEDICAL GROUP, LLC AND AFFILIATES

 

NOTES TO UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

 

NOTE 1   NATURE OF BUSINESS

 

Basis of Presentation and Principles of Combination

 

CareMax Medical Group, LLC (“CareMax” or “CMG”) and Affiliates, collectively referred to as “we” or “us” or “our” or the “Company”, was organized on January 25, 2013 under Florida law with headquarters in Miami, Florida to operate primary medical care centers serving Medicare beneficiaries. Managed Health Care Partners, LLC (“MHP”), an affiliate company, was organized on May 7, 2009 under Florida Law with the same business purpose. The Company and MHP invest resources into primary care to prevent unnecessary acute events and manage chronic illnesses. The Company engages Medicare eligible patients through the use of an innovative community outreach approach. Once patients are engaged, the Company integrates population health analytics, social support services and primary care into the care model to drive improved outcomes. The Company contracts with health plans to generate medical cost savings and realize a return on its investment in primary care. As of March 31, 2021, the Company operated 11 centers in South Florida with two under construction and due to open in the first or second quarter of 2022. These financial statements represent the combined financial results of CMG and MHP.

 

The accompanying unaudited condensed combined financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the Securities and Exchange Commission (the “SEC”). Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP has been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited and condensed combined financial statements include all adjustments of a normal recurring nature, which are necessary for a fair presentation of financial position, operating results and cash flows for the periods presented. Operating results for the three months ended March 31, 2021, including the impact of COVID-19, are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

 

CMG functions as a holding company with 100% ownership of Broward, Hialeah, Homestead, Miami, North Miami, Coral Way, Tamarac, Westchester, Pembroke Pines, Pines Care, Little Havana One and Little Havana Two. Broward, Coral Way, Hialeah, Homestead, Miami, North Miami, Pembroke Pines, Pines Care, Tamarac, Westchester, Little Havana One and Little Havana Two (collectively, the Medical Centers) are medical centers throughout South Florida providing care to residents, specifically Medicare Advantage members attributed to MHP. MHP is a managed services organization (“MSO”) serving Medicare patients both for the combined Medical Centers described above, as well as unrelated contracted health care providers, primarily under capitated contracts. MHP and CMG share common ownership, with the majority of ownership being through organizations controlled by the Company management, which is consistent across MHP and CMG.

 

On December 14, 2020, the Company purchased the remaining 25% non-controlling interest in Hialeah for $1,700,000. A holdback in the amount of $170,000 will be retained until December 14, 2021 and is included in Accounts Payable. The purchase amount was paid in installments with the final payment being made in May 2020. The Company purchased the remaining 40% membership interest in Pembroke Pines in February 2020 for $400,000 which included one lump sum payment of $200,000 and 12 equal monthly installments of $16,667. As of March 31, 2021, this balance has been paid off. Also, in February 2020, the Company purchased the remaining 40% membership interest in Pines Care for $100 which was paid on the closing date.

 

The Company considers itself to control an entity if it is the majority owner of or has voting control over such entity. The Company also assesses whether it has a controlling financial interest through means other than voting rights over potential variable interest entities (or “VIEs”) and determines the primary beneficiary of the VIE. The Company consolidates a VIE if the Company is the primary beneficiary of the VIE. We concluded that there are no entities that CareMax should consolidate based on the VIE model.

 

6

 

 

CAREMAX MEDICAL GROUP, LLC AND AFFILIATES

 

NOTES TO UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

 

NOTE 1   NATURE OF BUSINESS (continued) 

 

The combined financial statements of CareMax include the financial statements of all wholly-owned subsidiaries and majority-owned or controlled companies. For those combined subsidiaries where our ownership is less than 100%, the portion of the net income or loss allocable to the non-controlling interests is reported as “Net income (loss) attributable to non-controlling interests” in the combined statements of operations. Intercompany balances and transactions have been eliminated in consolidation.

 

Sale to Deerfield Healthcare Technology Acquisition Corporation

 

The Company follows the guidance in ASC 805 to determine if an acquisition is an acquisition of a business or a group of assets. We consolidate a business when we obtain a controlling financial interest in it. We use the acquisition method of accounting and identify the acquisition date, recognize and measure the identifiable assets acquired, liabilities assumed and any non-controlling interest at their acquisition date fair values. See Note 5.

 

On December 18, 2020 the Company entered into a definitive business combination agreement with Deerfield Healthcare Technology Acquisition Corporation (“DFHT”), a Delaware Corporation and blank check company. The agreement provides for DFHT to acquire 100% of the equity interests of the Company and Interamerican Medical Center Group, LLC, a Florida limited liability company (“IMC”), in exchange for a combination of cash and Class A common shares of DFHT. The transaction will be regarded as a reverse recapitalization, with the Company being the accounting acquirer and continuing financial reporting entity, due to its control of both DFHT and IMC.

 

On January 20, 2021, DFHT filed a preliminary proxy statement with the U.S. Securities and Exchange Commission (“SEC”) to solicit the approval of its shareholders for the business combination in which it plans to acquire 100% of the equity interests of CareMax. On March 8, April 1, April 28 and May 14 of 2021, DFHT filed amended proxy statements with the SEC. See Note 5.

 

Impact of COVID 19 on our Business

 

On March 11, 2020, the World Health Organization declared the spread of Coronavirus Disease (COVID-19) a worldwide pandemic. The COVID-19 pandemic has had significant effects on global markets, supply chains, businesses, and communities. Specific to the Company, COVID-19 has impacted various parts of its 2020 and 2021 operations and financial results including but not limited to nominal additional costs for emergency preparedness, disease control and containment, personnel shortages, government mandated waivers of member cost sharing for diagnoses and treatment, and increased utilization of member medical benefits. Management believes the Company has taken appropriate actions to mitigate the negative impact. While the COVID-19 vaccination campaign is underway in the United States, the surfacing of virus variants has added a degree of uncertainty to the continuing impact of COVID-19 on the Company’s operations. Certain emergency grant and loan funding options became available for the Company that were evaluated and pursued, as appropriate, to address the financial impact of COVID-19.

 

In April 2020, the Company applied for and received loans through the Small Business Administration (SBA) Paycheck Protection Program (PPP) of approximately $2,164,000 (see Note 7) with a two-year term at an interest rate of 0.98%. There are provisions under the PPP loan program where all or a portion of the loan may be forgiven based on certain criteria like eligible spending thresholds and maintaining full-time equivalent (FTE) employees. The amount of loan forgiveness has yet to be determined.

 

7

 

 

CAREMAX MEDICAL GROUP, LLC AND AFFILIATES

 

NOTES TO UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

 

NOTE 2   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Use of Estimates

 

The preparation of combined financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the combined financial statements and accompanying notes. The areas where significant estimates are used in the accompanying financial statements include the valuation of and related impairment recognition of long-lived assets, including intangibles and goodwill and settlements related to revenue and the revenue accrual. Actual results could differ from those estimates.

 

Concentration of Credit Risk and Significant Customers

 

Financial instruments that potentially subject the Company to concentration of credit risk consist of cash, cash equivalents and accounts receivable. The Company’s cash balances with individual banking institutions might be in excess of federally insured limits from time to time. The Company believes it is not exposed to any significant concentrations of credit risk from these financial instruments. The Company has not experienced any losses on its deposits of cash and cash equivalents.

 

HealthSun Health Plans (“HealthSun”) represented approximately 99% and 100% of the Company’s accounts receivable balance as of March 31, 2021 and December 31, 2020, respectively. HealthSun represented 83% and 95% of the Company’s revenues for the three months ended March 31, 2021 and 2020, respectively.

 

Revenue Recognition

 

Since capitated revenue is received regardless of whether services are performed, the performance obligation is the completion of enrollment of the patient and providing access to care. Fee-for-service revenue generally relates to contracts with patients in which our performance obligation is to provide healthcare services to the patients. Revenues are recorded during the period our obligations to provide healthcare services are satisfied.

 

Capitated revenue consists primarily of capitated fees for medical services provided by us under capitated arrangements directly made with various Medicare Advantage managed care payors. The Company receives a fixed fee per patient under what is typically known as a “risk contract.” Risk contracting, or full risk capitation, refers to a model in which the Company receives from the third-party payor a fixed payment of At-risk premium less an administrative charge for reporting on enrollees on a per patient basis (“PPPM” payment) for a defined patient population, and the Company is then responsible for providing healthcare services required by that patient population. Neither the Company nor any of its affiliates is a registered insurance company because state law in the states in which it operates does not require such registration for risk-bearing providers.

 

The Company’s payor contracts generally have a term of one year or longer, but the contracts between the enrolled members (our customers) and the payor are one calendar year or less. In general, the Company considers all contracts with customers (enrolled members) as a single performance obligation to stand ready to provide managed healthcare services. The Company identified that contracts with customers for capitation arrangements have similar performance obligations and therefore groups them into one portfolio. This performance obligation is satisfied as the Company stands ready to fulfill its obligation to enrolled members.

 

Settlements with third-party payors for retroactive adjustments due to capitation risk adjustment, or claim audits, reviews or investigations are considered variable consideration and are included in the determination of the estimated transaction price for providing patient care. These settlements are estimated based on the terms of the payment agreement with the payor, correspondence from the payor and the Company’s historical settlement activity, including an assessment to ensure that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the retroactive adjustment is subsequently resolved. Estimated settlements are adjusted in future periods as adjustments become known (that is, new information becomes available), or as years are settled or are no longer subject to such audits, reviews, and investigations.

 

8

 

 

CAREMAX MEDICAL GROUP, LLC AND AFFILIATES

 

NOTES TO UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

 

NOTE 2   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 

 

The Company has determined that the nature, amount, timing, and uncertainty of revenue and cash flows are affected by the following factors:

 

• Geography of the service location
• Demographics of members
• Health needs of members
• Method of reimbursement (capitation or fee for service)
• Enrollment changes
• Rate changes
• For fee for service activities, the payors (for example, Medicare, Medicaid, commercial insurance, patient) which have different reimbursement/payment methodologies.

 

The Company has elected the practical expedient allowed under Financial Accounting Standards Board (FASB) ASC 606-10-32-18 and does not adjust the promised amount of consideration from patients and third-party payors for the effects of a significant financing component due to the Company’s expectation that the period between the time the service is provided to a patient and the time that the patient or a third-party payor pays for that service will be one year or less.

 

The Company has applied the practical expedient provided by FASB ASC 340-40-25-4 and all incremental customer contract acquisition costs are expensed as they are incurred as the amortization period of the asset that the Company otherwise would have recognized is one year or less in duration.

 

For the three months ended March 31, 2021 and 2020, substantially all of the revenue recognized by the Company was from goods and services, namely, providing access to physicians and wellness centers.

 

The Company had agreements in place with the payors listed below. Payor sources of capitated revenue for each period presented were as follows:

 

​   Three months ended
March 31, 2021 		    Three months ended
March 31, 2020 		 
HealthSun     83 %     95 %
Simply Healthcare     7 %     5 %
Humana     6 %     0 %
CarePlus     3 %     0 %
Medica     1 %     0 %
      100 %     100 %

 

Other Patient Service Revenue

 

Other patient service revenue is comprised of ancillary fees earned under contracts with certain managed care organizations for the provision of certain care coordination services and care management services and is also comprised of fee-for-service revenue. This is recognized at the time of service for patients who are not covered under capitated arrangements.

 

9

 

 

CAREMAX MEDICAL GROUP, LLC AND AFFILIATES 

 

NOTES TO UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020 

 

NOTE 2   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 

 

Goodwill and Intangible Assets

 

Goodwill, which represents the excess of cost over the fair value of net assets acquired, amounted to $10,067,730 at March 31, 2021 and December 31, 2020. Pursuant to ASC 350, “Intangibles — Goodwill and Other,” we review goodwill annually in the 4th quarter or whenever significant events or changes indicate the possibility of impairment. For purposes of the annual goodwill impairment assessment, the Company has identified a single reporting unit. The most recently completed impairment test of goodwill was performed in the fourth quarter of 2020, and it was determined that no impairment existed. 

 

There were no changes to the carrying amount of goodwill from December 31, 2020 to March 31, 2021. 

 

Identifiable intangible assets with a finite useful life are amortized over their useful lives. The Company has elected to amortize risk contract intangible assets over an 11-year period and non-competition agreement intangible assets over a 5-year period. 

 

We review the recoverability of long-lived intangible assets whenever events or changes in circumstances indicate the carrying amount of such assets may not be recoverable. 

 

Identifiable Intangible Assets

 

The following table summarizes the gross carrying amounts and accumulated amortization of identifiable intangible assets by major class:

 

    Gross Carrying
Amount 		    Accumulated
Amortization 		    Net Book Value     Weighted Average
Amortization Period (years) 		 
                         
March 31, 2021                                
Risk Contracts   $ 8,174,299     $ (867,318 )   $ 7,306,981       11  
Non-compete agreements     1,319,883       (303,404 )     1,016,479       5  
Total   $ 9,494,182     $ (1,170,722 )   $ 8,323,460          

 

    Gross Carrying
Amount 		    Accumulated
Amortization 		    Net Book Value     Weighted Average
Amortization Period (years) 		 
                         
December 31, 2020                                
Risk Contracts   $ 8,174,299     $ (681,538 )   $ 7,492,761       11  
Non-compete agreements     1,319,883       (237,409 )     1,082,474       5  
Total   $ 9,494,182     $ (918,947 )   $ 8,575,235          

 

10

 

 

CAREMAX MEDICAL GROUP, LLC AND AFFILIATES

 

NOTES TO UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

 

NOTE 2   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

The estimated amortization expense related to the fair value of acquired intangible assets for the remainder of 2021 and each of the succeeding five years is:

 

Remainder of 2021   $ 755,321  
2022     1,007,095  
2023     998,291  
2024     944,368  
2025     841,215  
2026     743,118  
    $ 5,289,408  

 

Property and Equipment

 

Property and equipment is recorded at cost. Maintenance and repairs are charged to expense as incurred. Depreciation is provided over the estimated useful life of each class of depreciable asset and is computed on the straight-line method. Leasehold improvements are depreciated over the lesser of the length of the related lease plus any renewal options or the estimated life of the asset.

 

A summary of estimated useful lives is as follows:

 

Leasehold Improvements ​ ​ 15 to 39 Years ​
Furniture and Equipment ​ ​ 5 to 7 Years ​
Vehicles ​ ​ 5 Years ​
Software ​ ​ 3 Years ​

 

Income Taxes

 

All entities of the Company are organized as limited liability companies, or LLCs. As a result, the federal and state income tax consequences of the Company’s operations are the direct responsibility of the unitholders. We record uncertain tax positions on the basis of the two-step process in ASC 740 in which we 1) determine whether it is more likely than not that the tax position will be sustained on the basis of the merits of the position and 2) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.

 

Medical Expenses

 

Medical expenses include capitation payments and fee for service claims paid, claims in process and pending, and an estimate of unreported claims and charges by physicians, hospitals, and other health care providers for services rendered to enrollees during the period. Changes to prior-period estimates of medical expenses are reflected in the current period.

 

Reclassifications

 

Certain prior year amounts have been reclassified for consistency with the current year presentation. The presentation of administrative fees associated with the Company’s capitated revenue previously presented as a component Selling, General and Administrative Expenses in the prior year financial statements has been reclassified to conform to the current year presentation as a reduction of capitated revenue. This reclassification had no effect on the reported results of operations, balance sheets or statements of cash flows.

 

    Three months ended March 31, 2020  
    As Reported     Revised  
Capitated Revenue   $ 29,124,807     $ 25,041,525  
Selling, General and Administrative Expenses   $ 9,607,533     $ 5,524,251  

 

Recently Adopted Accounting Pronouncements

 

In October 2018, the FASB issued ASU 2018-17, Consolidation — Targeted Improvements to Related Party Guidance for Variable Interest Entities (Topic 810) (“ASU 2018-17”). ASU 2018-17 eliminates the requirement that entities consider indirect interests held through related parties under common control in their entirety when assessing whether a decision-making fee is a variable interest. Instead, the reporting entity will consider such indirect interests on a proportionate basis. ASU 2018-17 is effective for a public company for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. All entities are required to apply the adjustments in ASU 2018-17 retrospectively with a cumulative-effect adjustment to members’ equity at the beginning of the earliest period presented. Early adoption is permitted. The Company adopted the standard on January 1, 2021 with no material effect on its combined financial statements and related disclosures.

 

11

 

 

CAREMAX MEDICAL GROUP, LLC AND AFFILIATES

 

NOTES TO UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

 

NOTE 2   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 

 

In August 2018, the FASB issued ASC 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework — Changes to the Disclosure for Fair Value Measurement (“ASU 2018-13”), which modifies the disclosure requirements for fair value measurements. ASU 2018-13 is effective for all entities for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with partial early adoption permitted for eliminated disclosures. The method of adoption varies by the disclosure. The Company adopted the new guidance on January 1, 2020, noting no impact on its combined financial statements and related disclosures.

 

Recent Accounting Pronouncements Not Yet Adopted

 

In February 2016, the FASB issued ASU 2016-02, Leases (“ASU 2016-02”), which amends the accounting for leases, requiring lessees to recognize most leases on their balance sheet with a right-of-use asset and a lease liability. Leases will be classified as either finance or operating leases, which will impact the expense recognition of such leases over the lease term. ASU 2016-02 also modifies the lease classification criteria for lessors and eliminates some of the real estate leasing guidance previously applied for certain leasing transactions. In June 2020, the FASB issued ASU 2020-05 that deferred the required effective date for non-issuers to fiscal years beginning after December 15, 2021 and to interim periods within fiscal years beginning after December 15, 2022. The Company will therefore adopt ASU 2016-02 on January 1, 2022. Because of the number of leases the Company utilizes to support its operations, the adoption of ASU 2016-02 is expected to have a significant impact on the Company’s combined financial position and results of operations. Management is currently evaluating the extent of this anticipated impact on the Company’s combined financial statements, including quantitative and qualitative factors, as well as any changes to its leasing strategy that may be needed.

 

In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 introduces a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses. The guidance is effective for us beginning January 1, 2022. The new current expected credit losses (CECL) model generally calls for the immediate recognition of all expected credit losses and applies to loans, accounts and trade receivables as well as other financial assets measured at amortized cost, loan commitments and off-balance sheet credit exposures, debt securities and other financial assets measured at fair value through other comprehensive income, and beneficial interests in securitized financial assets. The new guidance replaces the current incurred loss model for measuring expected credit losses, requires expected losses on available for sale debt securities to be recognized through an allowance for credit losses rather than as reductions in the amortized cost of the securities, and provides for additional disclosure requirements. The Company plans to adopt this standard on January 1, 2022 and does not believe adoption will have a material effect on its combined financial statements.

 

Recent Accounting Pronouncements Not Yet Adopted

 

In January 2020, the FASB issued ASU 2020-01, Investments — Equity Securities (Topic 321), Investments — Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) —  Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 (“ASU 2020-01”). ASU 2020-01 clarifies the interaction of the accounting for equity securities under Topic 321 and investments accounted for under the equity method of accounting in Topic 323 and the accounting for certain forward contracts and purchased options accounted for under Topic 815. The guidance is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2021. The Company is currently evaluating the impact the adoption of ASU 2020-01 will have on its combined financial statements.

 

12

 

 

CAREMAX MEDICAL GROUP, LLC AND AFFILIATES

 

NOTES TO UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

 

NOTE 2   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 

 

We do not expect that any other recently issued accounting guidance will have a significant effect on our combined financial statements.

 

NOTE 3.   PAYOR AND PROVIDER AGREEMENTS

 

Payor Agreements

 

For the three months ended March 31, 2021 and 2020, 83% and 95% of the Company’s capitated revenue was as a result of one payor agreement, the MSO Risk Agreement we have with HealthSun. Under the MSO Risk Agreement, MHP receives per patient per month Medicare premiums for attributed members passed down from the payor, less related expenses including reductions for sequestration, applicable premium taxes, an administrative fee of 15%, and applicable medical expenses. Funding is provided through capitation payments to MHP of approximately 30% of 85% of the gross premiums, with remaining settle up occurring after reconciliation of applicable medical expenses (capitation and fee for service) and other applicable settlements such as retroactive Medicare risk adjustments, and Medicare Part D Low Income Cost Sharing (LICS), Reinsurance, and Risk Corridor program settlements. With only the capitated premiums paid up front to MHP, the payor maintains a running service fund balance with the remaining withheld funds to cover the other expense and settlement items above, including estimates for incurred but not reported (IBNR) claims, and the CMS risk adjustment and Part D settlements described above. The Company maintains its own estimates for these settlements and tracks the running balance with the payor, with the net estimated amount due from or to the payor recorded in due from/to health plans in the accompanying combined balance sheets.

 

In the accompanying combined statements of operations, the impact from Part D settlements is included with medical expenses. All other medical expenses for both downstream capitation payments to providers, and fee for service expenses, are included in medical expenses.

 

MHP also has other MSO arrangements similar in practice to the agreement explained above, however they make up approximately 17% and 5% or less of total capitated revenue, for the three months ended March 31, 2021 and 2020.

 

Provider Agreements

 

MHP also has downstream provider agreements with all the combined Medical Center entities, as well as unrelated medical providers. These agreements generally have a capitation component with a fixed per patient per month payment provided to the contracted provider. Some providers also share in the risk of the members under the MSO Risk Agreement explained above. All expenses for capitation and other risk sharing arrangements for downstream risk providers are included in medical expenses in the accompanying combined statements of operations. For providers with risk sharing, a running balance is tracked similar to the balance under the MSO Risk Agreement described above, but at an individual entity-level. Any amounts due to or from these at-risk providers are included in risk settlements due from/to providers in the accompanying combined balance sheets. All revenue and expense for combined Medical Center entities and any intercompany balances due under the provider agreements have been eliminated in the combined financial statements.

 

NOTE 4.   REINSURANCE POLICY BETWEEN MSO AND COMPANY, THE BENEFICIARY

 

The Company has a reinsurance policy with an insurance carrier for high-dollar inpatient claims. The reinsurance policy covers most individual claims from an attachment point of $150,000 at 90%, up to an individual member maximum of $2,000,000. Reinsurance recoveries were approximately $363,000 and $133,000 for the three months ended March 31, 2021 and 2020, respectively. Reinsurance premium expense totaled approximately $412,000 and $330,000 for the three months ended March 31, 2021 and 2020, respectively. For the three months ended March 31, 2021 and 2020, both reinsurance premiums and recoveries are routed through the payor under the MSO Risk Agreement, and the impact is included net of medical expenses in the accompanying combined statements of operations. Any estimated or actual reinsurance recoveries due at year-end are included net, with due from/to health plans in the accompanying combined balance sheets.

 

13

 

 

CAREMAX MEDICAL GROUP, LLC AND AFFILIATES

 

NOTES TO UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

 

NOTE 5.   BUSINESS COMBINATIONS

 

Reverse Recapitalization

 

On December 18, 2020, DFHT, CareMax, IMC and Deerfield Partners, LLP (“Deerfield”) entered into a Business Combination agreement. After completion of the closing of the business combination (the “Business Combination”), the combined company will operate under the name CareMax.

 

Pursuant to the Business Combination agreement, DFHT will acquire all of the issued and outstanding equity interests of CareMax and IMC in exchange for a combination of cash and equity consideration in the form of Class A common shares of DFHT. As discussed further in Note 12. Subsequent Events, the Business Combination was consummated on June 8, 2021.

 

An additional 3,500,000 and 2,900,000 shares of DFHT Class A Common Stock (the “Earnout Shares”) are payable after the Closing to the members of the CareMax Group and IMC Parent, respectively, upon satisfaction of certain conditions. The fair value of the Earnout Shares is included in the estimated fair value of the consideration payable at closing.

 

The acquisition of CareMax will be accounted for as a reverse recapitalization in which CareMax has been determined to be the accounting acquirer. The acquisition of IMC will be accounted for as a business combination in accordance with ASC 805, Business Combinations.

 

Completed Business Combinations

 

On December 10, 2020, CareMax purchased the operations of and a 100% controlling financial interest in Clinica Las Americas Inc. which constitutes a business, (now operating as CareMax Medical Center of Little Havana II, LLC) through an agreement with the shareholders of Clinica Las Americas Inc. The purchase price consisted of cash of $4,125,000 plus an additional contingent payment of $875,000 for achieving certain threshold member enrollment and medical loss ratios during the threshold enrollment period. The agreement also calls for up to four additional contingent payments of $175,000 for achieving increasingly higher enrollment thresholds during the threshold enrollment period. This additional consideration is recorded in Accrued Expenses in the combined statement of operations.

 

On July 30, 2020, CareMax purchased the operations of and 100% controlling financial interest in Cardona Medical Center Inc. which constitutes a business, (now operating as CareMax Medical Center of Little Havana, LLC, “Little Havana”) through an agreement with the shareholder of Cardona Medical Center Inc. The purchase price was $3,015,700 which includes a promissory note executed by the Company for $450,000 at 5% interest per annum. The promissory note is included in Long Term Debt on the combined balance sheets. Interest expense was $5,625 for the three months ended March 31, 2021.

 

14

 

 

CAREMAX MEDICAL GROUP, LLC AND AFFILIATES

 

NOTES TO UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

 

NOTE 6.   PROPERTY AND EQUIPMENT

 

A summary of property and equipment at March 31, 2021 and December 31, 2020 is as follows:

 

    March 31, 2021     December 31, 2020  
Leasehold Improvements   $ 2,725,713     $ 2,725,713  
Vehicles     2,823,472       2,823,472  
Furniture and Equipment     2,049,685       1,983,215  
Construction in Progress     1,950,586       360,194  
Total     9,549,456       7,892,594  
Less: Accumulated Depreciation     (3,358,497 )     (3,096,212 )
Total Property and Equipment, Net   $ 6,190,959     $ 4,796,382  

 

Construction in Progress at March 31, 2021 is made up of various leasehold improvements at the medical centers. The Company has a contractual commitment to complete the construction of the Homestead medical center with an estimated total cost of approximately $1.5 million. Plans have been submitted for the newest medical center, East Hialeah, and opening is projected in the first or second quarter of 2022. The projects are being funded internally.

 

Depreciation expense totaled approximately $262,000 and $216,000 for the three months ended March 31, 2021 and 2020, respectively.

 

NOTE 7.   LONG TERM DEBT

 

Long-term debt consisted of the following at March 31, 2021 and December 31, 2020:

 
    2021     2020  
Various vehicle notes payable with Mercedes-Benz Financial Services with monthly principal and interest payments ranging from $607 to $996 and maturing August 2024 through November 2025. Interest rates ranging from 3.99% to 5.75%. Secured by the related vehicles.   $ 237,200     $ 257,023  
Medical equipment note payable with Wells Fargo Equipment Finance with monthly principal and interest payments of $2,961 at an interest rate of 5.71%, matured in March 2021. Secured by the related equipment.     —       6,286  
Medical equipment note payable with Conestoga Equipment Finance Corp. with monthly principal and interest payments of $818 at an interest rate of 7.88%, matured in February 2021. Secured by the related equipment.     —       2,037  
Asset purchase agreement holdback payable in equal principal installments over three years from closing, zero interest, final payment August 2022. Unsecured.     670,087       670,087  
Asset purchase agreement holdback. Balloon payment due July 2023. 5% interest per annum. Unsecured. (see Note 5)     422,404       422,404  
Term loan payable due to White Oak Healthcare Finance with variable interest and principal amortization, maturing with a balloon payment in August 2024. Interest includes a base rate of the greater of 2.25% or LIBOR plus an applicable margin between 5% and 6% depending on consolidated leverage ratio. (see below) Security interest granted on all assets of the borrowing entities     24,031,102       24,184,227  

 

15

 

 

 

CAREMAX MEDICAL GROUP, LLC AND AFFILIATES

 

NOTES TO UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

 

NOTE 7.   LONG TERM DEBT (continued)

 

​   2021     2020  
Payroll Protection Plan loan from Chase Bank. Maturity date April 2022 with annual interest rate of 0.98% Unsecured.     2,164,145       2,164,145  
Less: Unamortized Debt Issuance Costs     (342,331 )     (376,900 )
Total Long-Term Debt     27,182,607       27,329,309  
Less: Current Maturities     (992,174 )     (1,004,703 )
Long-Term Debt, Less Current Maturities   $ 26,190,433     $ 26,324,606  

 

Future maturities of long-term debt outstanding at March 31, 2021 are as follows:

 

​     Amount  
Remainder of 2021     $ 829,211  
2022       3,143,563  
2023       1,056,997  
2024       22,488,676  
2025       6,492  
Total     $ 27,524,939  

 

Certain CMG entities entered into a loan and security agreement dated August 14, 2019 with a third party for a total loan commitment of $18,500,000 (“Loan Agreement”), maturing on August 14, 2024. (see above). The loan commitment was split into a $16,000,000 term loan and a fixed $2,500,000 revolving loan commitment. The revolving loan commitment was paid back on December 10, 2020. Interest on the loan commitments are calculated as the greater of 2.25% or the LIBOR Index Rate, plus an applicable margin which is 6% at the effective date and at December 31, 2020. The LIBOR Index Rate is determined monthly, and the applicable margin may be adjusted down to a floor of 5% in future periods if certain financial metric thresholds are met. Interest payments are due monthly throughout the term of the Loan Agreement. Debt issuance costs associated with the original term loan commitment were $691,395 and are being amortized on a straight-line basis over the term of the loan. Monthly principal payments on the $16 million original term loan commitment began May 1, 2020 based on the outstanding principal amount multiplied by a required amortization percentage ranging from 2.50% to 10.00%, depending on certain financial metrics. All principal amounts outstanding on the term loan are due at maturity.

 

On December 10, 2020, certain CMG entities amended the existing loan and security agreement with the third party and increased the consolidated borrowing by $8.5 million, from $16 million to $24.5 million (see above). Monthly payments began in January 2021 and include principal and interest calculated on the same terms as the original facility. The proceeds of the loan were used to pay off the existing revolving loan commitment of $2.5 million, fund the acquisition of Clinica Las Americas, approximately $4.0 million, pay debt issuance costs, approximately $0.4 million, and in the future will be used to fund acquisitions and/or for other corporate purposes. Interest expense on the amended facility for the three months ended March 31, 2021 and 2020 was approximately $467,000 and $370,000, respectively, and is included in Interest Expense on the combined statements of operations.

 

Under the Loan Agreement, the Company is subject to various financial and nonfinancial covenants and is in compliance with these covenants as of March 31, 2021. The Company has a requirement to deliver a calculation of consolidated excess cash flow regarding the loan and security agreement to the lender within 120 days of the fiscal year end. The Company delivered this calculation in early May 2021. Under the terms of the agreement, if certain criteria are met, the Company may be required to make additional principal payments based on a formula calculating excess cash flow. For the year ending December 31, 2020, no additional principal payments are required to be made.

 

16

 

 

CAREMAX MEDICAL GROUP, LLC AND AFFILIATES

 

NOTES TO UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

 

 

NOTE 7.   LONG TERM DEBT (continued)

 

The borrowers under the amended Loan Agreement include CMG, MHP, Broward, Coral Way, Homestead, Miami, North Miami, Tamarac, Westchester, Havana I and Havana II. They have granted a security interest to the lender in the assets of the companies.

 

As part of the Tamarac asset purchase agreement, a $1,000,000 holdback is to be paid out over the course of three years in equal installments from closing. During the year ended December 31, 2020, one installment payment was made and the remaining balance of approximately $670,000 is included in long-term debt on the accompanying combined balance sheets and bears no interest.

 

NOTE 8.   EQUITY METHOD INVESTMENTS, VARIABLE INTEREST ENTITIES AND RELATED PARTY TRANSACTIONS

 

CMG has a 49% ownership interest in Care Smile, LLC (Care Smile) which is accounted for under the equity method. Care Smile is a dental care organization with majority ownership by the dental provider, who is the spouse of a board member, owner, and management individual of CareMax. The balance of the equity investment in Care Smile was $ – 0- as of March 31, 2021 and December 31, 2020, as a result of accumulated losses. There were no contributions to or distributions from Care Smile during the three months ended March 31, 2021 and the year ended December 31, 2020. Summarized financial information for Care Smile as of March 31, 2021 and December 31, 2020 is as follows:

 

​   March 31, 2021     December 31, 2020  
Total Assets   $ 93,591     $ 93,720  
Total Liabilities   $ 243,833     $ 243,926  

 

Care Smile recorded a net loss of $46 for the three months ended March 31, 2021 and a net profit of $26,752 for the three months ended March 31, 2020.

 

MHP pays for dental services provided to enrollees by Care Smile on a capitated basis. Total capitation payments for the three months ended March 31, 2021 and 2020 were $0 and $182,000, respectively.

 

Care Optimize, LLC (“Care Optimize”) is an affiliate of CMG and is a consulting and technology company that helps physicians move along the valued based care spectrum, from fee for service to the full value-based care model practiced by CMG. During the three months ended March 31, 2021, CMG advanced Care Optimize funds to help further product development of Care Optimize’s proprietary technology platform.

 

NOTE 9.   OPERATING LEASES AND COMMITMENTS

 

The Company has entered into non-cancelable operating lease agreements for office and clinical space expiring at various times through 2031. Future minimum rental payments and related expenses under these lease agreements, including renewal terms if the Company is planning on renewing the leases, consisted of the following at March 31, 2021:

 

17

 

 

CAREMAX MEDICAL GROUP, LLC AND AFFILIATES

 

NOTES TO UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

 

​     Amount  
Remainder of 2021       2,838,066  
2022       3,239,967  
2023       3,229,408  
2024       2,979,123  
2025       2,886,998  
thereafter       16,293,102  
Total     $ 31,466,664  

 

The optional renewal terms for the medical centers that have them in their lease agreements are as follows:

 

​ Legal Entity ​ ​ Optional Renewal Term ​
​ CareMax Medical Group Tamarac ​ ​ One ten year period ​
​ Managed Health Care Partners ​ ​ Two five year periods ​
​ CareMax Medical Group North Miami ​ ​ Two five year periods ​
​ CareMax Medical Group Hialeah ​ ​ One five year period ​
​ CareMax Medical Group Miami ​ ​ One five year period ​
​ CareMax Little Havana 1 ​ ​ Five one year periods ​
​ CareMax East Hiahleah ​ ​ Two five year periods ​

 

The Company also has entered into non-cancelable operating lease or service agreements for office equipment and software. Future minimum commitments under these agreements at March 31, 2021 are approximately $7,000.

 

Rent expense, including other related expenses for property taxes, sale taxes, and utilities, was approximately $700,000 and $468,000 for the three ended months ended March 31, 2021 and 2020, respectively. This expense item is included in the Administrative Expenses line item on the Statements of Operations.

 

NOTE 10.   LITIGATION AND CONTINGENCIES

 

Compliance

 

The health care industry is subject to numerous laws and regulations of federal, state, and local governments. Compliance with these laws and regulations, specifically those related to the Medicare and Medicaid programs, can be subject to government review and interpretation, as well as regulatory actions unknown and not yet asserted at this time. Management believes that the Company is in substantial compliance with current laws and regulations.

 

Risk Management

 

The Company is exposed to various risks of loss from torts; theft of, damage to, and destruction of assets; business interruption; errors and omissions; employment practices; employee injuries; and natural disasters. These risks are covered by commercial insurance purchased from independent third parties.

 

18

 

 

CAREMAX MEDICAL GROUP, LLC AND AFFILIATES

 

 

NOTES TO UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

 

Litigation

 

The Company is involved in various legal actions arising in the normal course of business. In consultation with legal counsel, management estimates that these matters will be resolved without material adverse effect on the Company’s financial position.

 

 

NOTE 11.   SEGMENT FINANCIAL INFORMATION

 

The Company’s chief operating decision maker regularly reviews financial operating results on a combined basis for purposes of allocating resources and evaluating financial performance. The Company identifies operating segments based on this review by its chief operating decision makers and operates in and reports as a single operating segment, which is to care for its patients’ needs. For the periods presented, all of the Company’s long-lived assets were located in the United States, and all revenue was earned in the United States.

 

NOTE 12. SUBSEQUENT EVENTS

 

The Company has evaluated subsequent events occurring after the consolidated balance sheet date of March 31, 2021 through the date of June 14, 2021, which is the date that the unaudited condensed combined financial statements were available to be issued.

 

On May 14, 2021, DFHT issued a press release announcing, among other things, receipt of notification from the U.S. Securities and Exchange Commission (“SEC”) that the SEC had completed its review of DFHT's proxy statement relating to the Business Combination with CareMax and IMC. On June 4, 2021, a special meeting of the stockholders of DFHT was held to facilitate a vote to approve the Business Combination Agreement for the acquisition by DFHT of CareMax and IMC. The Business Combination Agreement provided for the sale and transfer of 100% of the equity interests in CareMax by member of the CareMax Group and IMC Holdings, LLC, a Delaware limited liability company, in favor of DFHT, and as a result of which, upon consummation of the Business Combination, CareMax and IMC legally become wholly-owned subsidiaries of DFHT. The results of the vote were finalized and as of June 8, 2021, the Business Combination was consummated.

 

The Business Combination was funded in part through debt financing provided by an $185 million senior secured credit facility. A portion of the proceeds of the debt financing was used to repay all outstanding borrowings as of June 8, 2021 under the Loan Agreement. The debt financing results in $122 million of senior secured debt of the combined company.

 

NOTE 13. Reclassifications

 

Certain prior year amounts have been reclassified for consistency with the current year presentation. The presentation of administrative fees associated with the Company’s capitated revenue previously presented as a component Selling, General and Administrative Expenses in the prior year financial statements has been reclassified to conform to the current year presentation as a reduction of capitated revenue. This reclassification had no effect on the reported results of operations, balance sheets or statements of cash flows.

 

    Three months ended March 31, 2020  
    As Reported     Revised  
Capitated Revenue   $ 29,124,807     $ 25,041,525  
Selling, General and Administrative Expenses   $ 9,607,533     $ 5,524,251  

 

19

 

 

Exhibit 99.4

 

INTERAMERICAN MEDICAL CENTER GROUP, LLC

AND SUBSIDIARIES

 

 

 

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2021

 

 

 

 

 

INTERAMERICAN MEDICAL CENTER GROUP, LLC

AND SUBSIDIARIES

 

TABLE OF CONTENTS

 

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  
Condensed Consolidated Balance Sheets 2
Condensed Consolidated Statements of Operations 3
Condensed Consolidated Statements of Changes in Member’s Equity 4
Condensed Consolidated Statements of Cash Flows 5
Notes to Condensed Consolidated Financial Statements 6-23
Management’s Discussion & Analysis  

 

1

 

 

INTERAMERICAN MEDICAL CENTER GROUP, LLC
AND SUBSIDIARIES

 

Condensed Consolidated Balance Sheets
($ in thousands, except shares/units and per share data)

 

    March 31,
2021 		    December 31,
2020 		 
    (unaudited)        
ASSETS                
CURRENT ASSETS                
Cash   $ 14,000     $ 15,762  
Capitation receivables, net     12,418       12,741  
Other receivables     5,510       5,213  
Prepaid expenses     1,019       1,377  
TOTAL CURRENT ASSETS     32,947       35,093  
RESERVE FUNDS HELD BY HEALTH PLANS     1,850       1,654  
PROPERTY AND EQUIPMENT, NET     6,509       6,908  
GOODWILL     85,476       85,476  
INTANGIBLES, NET     17,626       18,033  
SECURITY DEPOSITS     411       411  
TOTAL ASSETS   $ 144,819     $ 147,575  
LIABILITIES AND MEMBER’S EQUITY                
CURRENT LIABILITIES                
Accounts payable   $ 2,198     $ 1,864  
Accrued expenses     3,881       4,534  
Current portion of due to sellers     65       465  
Current portion of capital leases     243       393  
Current portion of note payable     15       15  
Amounts due to health plans, net     1,468       1,801  
TOTAL CURRENT LIABILITIES     7,870       9,072  
LONG-TERM DEBT, NET OF DEFERRED FINANCING COSTS     77,212       77,163  
DEFERRED PAYROLL TAXES     1,101       1,101  
CAPITAL LEASES, NET OF CURRENT PORTION     50       54  
TOTAL LIABILITIES     86,233       87,390  
COMMITMENTS AND CONTINGENCIES                
MEMBER’S EQUITY                
MEMBERSHIP UNITS (100 authorized, issued and outstanding as of
    March 31, 2021 and December 31, 2020) 		    —       —  
CONTRIBUTED CAPITAL     160,740       160,740  
RETAINED DEFICIT     (102,154 )     (100,555 )
TOTAL MEMBER’S EQUITY     58,586       60,185  
TOTAL LIABILITIES AND MEMBER’S EQUITY   $ 144,819     $ 147,575  

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

2

 

 

INTERAMERICAN MEDICAL CENTER GROUP, LLC
AND SUBSIDIARIES

 

Condensed Consolidated Statements of Operations
($ in thousands, except shares/units and per share data)

 

    Three Months Ended  
    March 31,
2021 		    March 31,
2020 		 
    (unaudited)     (unaudited)  
REVENUES, NET                
Revenue under global capitation   $ 56,475     $ 49,106  
Other managed care revenue     3,063       3,346  
Other revenues     47       46  
TOTAL REVENUES, NET     59,585       52,498  
MEDICAL SERVICE EXPENSES                
External medical services under global capitation     42,631       37,624  
Other medical expenses     1,952       1,953  
Direct medical salaries, wages and benefits     5,063       5,390  
TOTAL MEDICAL SERVICE EXPENSES     49,646       44,967  
GROSS PROFIT     9,939       7,531  
OPERATING EXPENSES                
Salaries, wages, and benefits     4,268       3,025  
General and administrative     4,258       3,710  
Amortization of intangibles     407       407  
Depreciation and amortization     659       866  
TOTAL OPERATING EXPENSES     9,592       8,008  
INCOME (LOSS) FROM OPERATIONS     347       (477 )
OTHER INCOME (EXPENSE), NET                
Interest expense     (1,950 )     (2,486 )
Other income     4       2  
TOTAL OTHER EXPENSE, NET     (1,946 )     (2,484 )
NET LOSS   $ (1,599 )   $ (2,961 )
EARNINGS (LOSS) PER UNIT                
Basic and Diluted   $ (15,985 )   $ (29,609 )
WEIGHTED AVERAGE NUMBER OF UNITS                
Basic and Diluted     100       100  

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

3

 

 

INTERAMERICAN MEDICAL CENTER GROUP, LLC
AND SUBSIDIARIES

 

Condensed Consolidated Statements of Changes in Member’s Equity
For the three Months Ended March 31, 2021 and 2020
($ in thousands, except shares/units and per share data)
(Unaudited)

 

    Membership
Units 		    Membership
Units (Amount) 		    Capital
Contributions 		    Retained
Deficit 		    Total
Member’s Equity 		 
BALANCE – JANUARY 1, 2020     100     $  —     $ 139,328     $ (101,669 )   $ 37,659  
Net loss     —                    —       —       (2,961 )     (2,961 )
BALANCE – MARCH 31, 2020     100     $  —     $ 139,328     $ (104,630 )   $ 34,698  
BALANCE – JANUARY 1, 2021     100     $  —     $ 160,740     $ (100,555 )   $ 60,185  
Net loss     —       —       —       (1,599 )     (1,599 )
BALANCE – MARCH 31, 2021     100     $ —     $ 160,740     $ (102,154 )   $ 58,586  

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

4

 

 

INTERAMERICAN MEDICAL CENTER GROUP, LLC
AND SUBSIDIARIES

 

Condensed Consolidated Statements of Cash Flows
($ in thousands, except shares/units and per share data)

 

    Three Months Ended  
    March 31,
2021 		    March 31,
2020 		 
    (unaudited)     (unaudited)  
CASH FLOWS FROM OPERATING ACTIVITIES                
Net loss   $ (1,599 )   $ (2,961 )
Reconciliation of net loss to net cash used in operating activities:                
Depreciation and amortization     659       866  
Amortization of intangibles     407       407  
In-kind interest added to long-term debt     —       2,220  
Amortization of deferred financing fees     53       245  
Changes in operating assets and liabilities:                
Capitation receivables     323       (326 )
Other receivables     (297 )     (1,363 )
Prepaid expenses     358       264  
Reserve funds held by health plans     (196 )     84  
Accounts payable     332       300  
Accrued expenses     (30 )     628  
Amounts due to health plans     (333 )     (478 )
NET CASH USED IN OPERATING ACTIVITIES     (323 )     (114 )
CASH FLOWS FROM INVESTING ACTIVITIES                
Purchases of property and equipment     (260 )     (506 )
Acquisition exit fees     (623 )     —  
Payments to Sellers     (400 )     —  
NET CASH USED IN INVESTING ACTIVITIES     (1,283 )     (506 )
CASH FLOWS FROM FINANCING ACTIVITIES                
Repayments on capital leases     (153 )     (140 )
Repayments on notes payable     (3 )     (3 )
NET CASH USED IN FINANCING ACTIVITIES     (156 )     (143 )
NET DECREASE IN CASH     (1,762 )     (763 )
CASH – BEGINNING OF PERIOD     15,762       9,242  
CASH – END OF PERIOD   $ 14,000     $ 8,479  
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                
Interest paid   $ 1,897     $ 21  

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

5

 

 

INTERAMERICAN MEDICAL CENTER GROUP, LLC
AND SUBSIDIARIES

 

Notes to Condensed consolidated financial Statements
($ in thousands, except shares/units and per share data)

 

1.   NATURE OF BUSINESS AND ACQUISITIONS

 

Nature of Business

 

Interamerican Medical Center Group, LLC and Subsidiaries (the “Company”) own and operate medical and specialty clinics strategically located in Miami-Dade, Broward and Orange Counties in Florida. The Company’s clinic operations offer primary care, laboratory services, ultrasounds, electrocardiograms, x-rays, and dental care to members of Medicare, Medicaid and commercial health plans that contract with the Company. The Company also offers ancillary and specialty services capabilities including cardiology, optometry, women’s health, podiatry, pulmonology, urology, neurology, nutrition, mental health, case management, joint injections, acupuncture and gastroenterology services.

 

The Company provides managed healthcare services for its enrollees through capitation contracts with multiple health plans (the “Plans”) and also provides healthcare services to individuals on a fee for service basis.

 

Acquisitions

 

In December 2020, Deerfield Healthcare Technology Acquisitions Corp. (DFHT) announced it is acquiring IMC Medical Group Holdings for $250 million (the “Acquisition”). The closing occurred on June 8, 2021.

 

Emerging Growth Company Status

 

We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The JOBS Act provides that an emerging growth company can take advantage of the extended transition period for complying with new or revised accounting standards. We have elected to avail ourselves of this extended transition period and, as a result, we will not adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies until required by private company accounting standards.

 

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The accompanying unaudited interim condensed consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to such regulations. These financial statements have been prepared on a basis consistent with the accounting principles applied for the fiscal year ended December 31, 2020 filed with that certain Definitive Proxy Statement of DFHT filed with the U.S. Securities and Exchange Commission on May 14, 2021. The accompanying condensed consolidated financial statements are unaudited, however, in the opinion of management, all adjustments (consisting of all normal and recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2021, including the impact of COVID-19, are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

 

The condensed consolidated financial statements of the Company include the financial statements of all wholly owned subsidiaries and majority-owned or controlled companies.

 

6

 

 

INTERAMERICAN MEDICAL CENTER GROUP, LLC
AND SUBSIDIARIES

 

Notes to Condensed consolidated financial Statements
($ in thousands, except shares/units and per share data)

 

The Company evaluates its ownership, contractual and other interests in entities to determine if it has any variable interest in a variable interest entity (“variable interest entities” or “VIEs”). These evaluations are complex, involve judgment and the use of estimates and assumptions based on available historical information, among other factors. The Company considers itself to control an entity if it is the majority owner of or has voting control over such entity. The Company also assesses control through means other than voting rights and determines which business entity is the primary beneficiary of the VIE. The Company consolidates VIEs when it is determined that the Company is the primary beneficiary of the VIE. Management performs ongoing reassessments of whether changes in the facts and circumstances regarding the Company’s involvement with a VIE will cause the consolidation conclusion to change. Changes in consolidation status are applied prospectively.

 

Principles of Consolidation

 

The accompanying condensed consolidated financial statements include the accounts and balances of Interamerican Medical Center Group, LLC (“IMC”) and its wholly-owned subsidiaries: IMC Transport Fleet, LLC (“Transport”), Physician Service Organization, LLC (“PSO”), Sunset Holdings, LLC (“SH”), Sunset Cardiology, LLC (“SC”) and Primary Provider, Inc. (“PPI”). Doctor’s Management Services Group, LLC (“DMS”) and Physician Care Management, LLC (“PCM”) were dissolved on August 13, 2019 and Total Diagnostics Solutions (“TDS”) was dissolved on May 31, 2020. The results of these operations are included in the condensed consolidated financial statements for the years then ended.

 

All material intercompany balances and transactions have been eliminated in consolidation.

 

Use of Estimates

 

Future events and their effects cannot be predicted with certainty; accordingly the preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. The accounting estimates used in the preparation of these condensed consolidated financial statements will change as new events occur, as more experience is acquired, as additional information is obtained, and as the Company’s operating environment changes.

 

Significant estimates and assumptions are used for, but not limited to accounts receivable, revenues, medical claims expense and associated stop loss recoveries, valuation and recoverability of intangible assets and contingent liabilities. The Company bases its estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. The Company evaluates its estimates and assumptions on a regular basis and may employ outside experts to assist in the evaluation, as considered necessary. Actual results may differ from these estimates and assumptions used in preparation of its condensed consolidated financial statements and changes in these estimates may be material and are recorded when known.

 

Segment Reporting

 

The Company’s Chief Operating Decision Maker (“CODM”) is the Company’s Chief Executive Officer. The Company’s Clinical Services reportable segment has been identified based on how the Company’s CODM manages the business, makes resource allocation and operating decisions, and evaluates operating performance. For the three months ended March 31, 2021 and 2020, the results of the Company’s operations are presented as a single reportable segment for purposes of presenting financial information in accordance with the accounting guidance for segment reporting.

 

7

 

 

INTERAMERICAN MEDICAL CENTER GROUP, LLC
AND SUBSIDIARIES

 

Notes to Condensed consolidated financial Statements
($ in thousands, except shares/units and per share data)

 

Business Combinations

 

The Company’s business combinations are accounted for under the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations (“ASC 805”). Under the acquisition method, the Company recognizes the assets acquired and liabilities assumed at their estimated fair values as of the date of acquisition. Any excess of the purchase price over the fair value of the net assets and other identifiable intangible assets acquired is recorded as goodwill. To the extent the fair value of the net assets acquired, including other identifiable intangible assets, exceeds the purchase price, a bargain gain is recognized. The operating results of businesses the Company acquired are included in its consolidated statements of operations from the date of acquisition. Acquisition-related costs are expensed as incurred.

 

Cash

 

The Company’s cash consists of demand deposits in banks and cash on hand.

 

Revenue Recognition

 

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers (“ASC 606”). The ASU and all subsequently clarifying ASUs replaced most existing revenue recognition guidance in U.S. GAAP. The ASU also required expanded disclosures relating to the nature, amount, timing, and uncertainty of revenue and cash flows arising from the contracts with customers. The Company adopted the new standard effective January 1, 2018, the first day of the Company’s fiscal year using the modified retrospective approach. The adoption did not result in any changes to beginning retained earnings as of January 1, 2018, and there were no open balances on contract assets or contract liabilities.

 

Under ASC 606, the Company recognizes revenue when a customer obtains control of the promised goods or services. The amount of revenue that is recorded reflects the consideration that the Company expects to receive in exchange for those goods or services. The Company applies the following five-step model in order to determine this amount: (i) identify the contract (s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services the Company transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, management reviews the contract to determine which performance obligations must be delivered and which of these performance obligations are distinct. The Company recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied.

 

The following table disaggregates revenue based on timing of satisfaction of performance obligations for the three months ended March 31:

 

    2021     2020  
Performance obligations satisfied over time   $ 59,538     $ 52,452  
Performance obligations satisfied at a point in time     47       46  
Total revenues, net   $ 59,585     $ 52,498  

 

Revenue from performance obligations satisfied over time consists of capitation, shared savings and HEDIS and other incentive program revenues. These services are earned over time, and payments are received from insurance carriers, for having providers standing-ready to provide health care services to their respective patient panel.

 

 

8

 

 

INTERAMERICAN MEDICAL CENTER GROUP, LLC
AND SUBSIDIARIES

 

Notes to Condensed consolidated financial Statements
($ in thousands, except shares/units and per share data)

 

Revenue from performance obligations satisfied at a point in time consists of fee for service revenues and copayments. There is no fixed duration for such on demand medical services, and the service can be terminated by the patient or company at any time, therefore fee for service revenue is viewed as a standalone contract, and all specific services ordered on a given health visit are bundled into a single performance obligation for that contract. The Company recognizes fee for service revenues at the net realizable amount at the time the patient is seen by a provider, and the Company’s performance obligations to the patient are complete. The amounts billed are based on those services provided to patients.

 

Revenue Under Global Capitation

 

The Company provides coordination and facilitation of medical services; transaction processing; customer, consumer and care professional services; and access to contracted networks of physicians, hospitals and other health care professionals under global capitated risk-based arrangements and managed services only contracts. Revenues derived from global capitated risk-based arrangements in which the premium is typically at a fixed rate per individual service for a one-year period, and where the Company assumes the economic risk of funding its customers’ health care and related administrative costs and managed services only contracts are presented as revenue under global capitation in the accompanying consolidated statements of operations.

 

The Centers for Medicare and Medicaid Services (“CMS”) uses a risk adjustment model for its Medicare Advantage enrollees that apportions premiums paid to all Plans according to health severity and certain demographic factors. The CMS risk adjustment model pays more for members whose medical history indicates they have certain medical conditions. Under this risk adjustment methodology, CMS calculates the risk adjustment premium payment using diagnosis data from hospital inpatient, hospital outpatient and physician treatment settings. The Company and health care providers collect, capture and submit the necessary and available diagnosis data to the Plans with which the Company contracts. Plans must submit applicable data to CMS within prescribed deadlines. The Company’s risk-based Medicare contracts contain retrospective adjustment provisions that adjust the Company’s revenue under global capitation for applicable percentages of the risk adjustment amounts. Such amounts are recorded as revenue when the data to reasonably estimate them have been obtained by the Company. Risk adjustment data is subject to regulatory audits via the Plans.

 

Payments under both the Company’s global risk contracts (for both Medicare Advantage and Medicaid) are subject to revision based upon premium adjustments, historical patient enrollment data and final settlements. Such revision and final payments are settled over a period ranging from 18 to 24 months after the contractual period. The Company adjusts its revenue for retroactive enrollee additions, terminations and other changes when identified. As such, the retroactive adjustments and final payments discussed are a form of variable consideration estimated at contract inception and updated throughout the measurement period, to the extent that risk of reversal does not exist and the consideration is not constrained.

 

Other Managed Care Revenue

 

The Company provides coordination and facilitation of medical services; transaction processing; customer, consumer and care professional services; and access to contracted networks of physicians, hospitals and other health care professionals under professional risk-based capitation contracts. Revenues derived from these contracts in which the premium is a fixed per member per month rate are presented as other managed care revenue. Incentive payments for Healthcare Effectiveness Data and Information Set (“HEDIS”) and any services paid on a fee-for-service basis by a Plan is also included in other managed care revenue.

 

Other Revenues

 

The Company provides certain ancillary services, such as radiology, to individuals under fee-based arrangements, not paid by Plans. Revenue derived from fee-based customer arrangements are recorded net of associated contractual discounts with applicable third-party payors and estimated uncollectible amounts and are presented as other revenue in the accompanying consolidated statements of operations. There were no bad debts during the three months ended March 31, 2021 and 2020.

 

9

 

 

INTERAMERICAN MEDICAL CENTER GROUP, LLC
AND SUBSIDIARIES

 

Notes to Condensed consolidated financial Statements
($ in thousands, except shares/units and per share data)

 

External Medical Services Under Global Capitation

 

For patients enrolled under risk-based managed care contracts, the cost of specialty services is paid on either a fee-for-service, per diem or capitation basis. Expenses for external medical services are recognized in the period in which enrollees of the Plans receive services and includes the actual claims paid and estimates of medical claims payable. Medical services payable are included within capitation receivables and amounts due to and from health plans on the consolidated balance sheets, as the payables and receivables are settled net pursuant to contractual terms, and represent the liability for medical services reported but not paid and medical services incurred but not reported, collectively, incurred but not paid (“IBNP”). The Company estimates the liability for IBNP medical services based upon historical data including the period between the date services are rendered and the date claims are received and paid, contract provisions and other relevant factors. The estimate for IBNP medical services is made and adjusted in future periods as required. The Company applies its estimates of medical services payable first against the respective surplus amounts retained by the respective Plans and, if medical services expense exceeds surplus amounts, the liability is recorded in amounts due to health plans in the accompanying consolidated balance sheets. Estimates of medical services payable are necessarily based on estimates and, while management believes that the Company’s reserves of medical services payable are adequate, the ultimate liability may differ from the amounts estimated, and those differences may be material.

 

When it is probable that expected future health care costs and maintenance costs under a contract or group of existing contracts will exceed anticipated capitated revenue on those contracts, the Company recognizes losses on its prepaid health care services with the Plans.

 

Capitation Receivables, Net and Other Receivables, Net

 

The Company’s capitation receivables are derived primarily from its risk-based arrangements with the Plans and also include surplus amounts earned under the contracts with the Plans. These amounts are set by contract and the Company does not believe there to be a material risk of being unable to collect these amounts due to its historical collection experience and financial strength of its counterparties. The Company evaluates the creditworthiness of these Plans through periodic review of consolidated financial statements. These Plans are among the nation’s largest publicly traded health and supplemental benefits companies.

 

Fee-for-service receivables are estimated based on a review of all outstanding amounts on a monthly basis. Such amounts are included in other receivables, net in the accompanying consolidated balance sheets. As of March 31, 2021 and December 31, 2020, the Company did not have an allowance for doubtful accounts on its receivables balances.

 

Stop Loss Insurance

 

The Company has acquired insurance on catastrophic costs to limit the exposure on patient losses. Premiums and policy recoveries are reported in external medical services under global capitation in the accompanying consolidated statements of operations.

 

The nature of the Company’s stop loss coverage is to limit the benefits paid for one patient. The Company’s stop loss limits are defined within each health plan contract and range from $30 to $200 per patient per year. Premium expense incurred was approximately $1,959 and $506 for the three months ended March 31, 2021 and 2020, respectively. Physicians under capitation arrangements typically have stop loss coverage so that a Physicians financial risk for any single member is limited to a maximum amount on an annual basis. The Company monitors the financial performance and solvency of its stop loss providers. However, the Company remains financially responsible for health care services to its members in the event the Plans are unable to fulfill their obligations under stop loss contractual terms.

 

10

 

 

 

INTERAMERICAN MEDICAL CENTER GROUP, LLC
AND SUBSIDIARIES

 

Notes to Condensed consolidated financial Statements
($ in thousands, except shares/units and per share data) 

 

Recoveries recognized in the consolidated statements of operations were approximately $3,628 and $850 for the three months ended March 31, 2021 and 2020, respectively. Estimated recoveries under stop loss policies are reported within the capitation receivable or amounts due health plans as the counterparty responsible for the payment of the claims and the stop loss is the respective health plan.

 

Reserve Funds Held by Health Plans

 

Funds withheld in accordance with contractual terms by the Plans represents funds withheld with certain Plans with which the Company does business.

 

Property and Equipment, Net

 

Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method over the life of the assets, ranging from three to fifteen years. Leasehold improvements are amortized over the shorter of the estimated useful life or term of the lease.

 

Repairs and maintenance are expensed as incurred. Expenditures that increase the value or productive capacity of assets are capitalized. When property and equipment are retired, sold, or otherwise disposed of, the asset’s carrying amount and related accumulated depreciation and amortization are removed from the accounts and any gain or loss is included in accompanying consolidated statements of operations.

 

Goodwill

 

The Company records acquired assets and assumed liabilities at their respective fair values under the acquisition method of accounting. Goodwill represents the excess of the purchase price over the fair value of net assets acquired. Intangible assets with finite lives, principally trademarks, are recognized apart from goodwill at the time of acquisition based on the contractual, legal and separability criteria established in the accounting guidance.

 

The Company tests goodwill for impairment annually or more frequently if triggering events occur or other impairment indicators arise which might impair recoverability. These events or circumstances would include a significant change in the business climate, legal factors, operating performance indicators, competition, sale, disposition of a significant portion of the business or other factors.

 

ASC 350, Intangibles  —  Goodwill and Other (“ASC 350”) allows entities to first use a qualitative approach to test goodwill for impairment. ASC 350 permits an entity to first perform a qualitative assessment to determine whether it is more likely than not (a likelihood of greater than 50%) that the fair value of a reporting unit is less than its carrying value.

 

In testing for goodwill impairment, the Company first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, the Company determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then additional impairment testing is not required. However, if the Company concludes otherwise, the Company performs the first of a two-step impairment test. Based on our assessment of qualitative factors on December 31, 2020, the Company concluded it was more likely than not that the Company’s recorded goodwill balance of $85.5 million was not impaired and did not perform the quantitative test. No goodwill impairment was recorded during the three months ended March 31, 2021 and 2020. See “Note 3 — Goodwill and Intangible Assets, Net.”

 

11

 

 

INTERAMERICAN MEDICAL CENTER GROUP, LLC
AND SUBSIDIARIES

 

Notes to Condensed consolidated financial Statements
($ in thousands, except shares/units and per share data)

 

Intangible Assets, Net

 

Intangible assets, net, consist of trademarks. Intangible assets with finite lives are amortized on a straight-line basis over their estimated useful lives. Intangible assets with finite lives are amortized over periods of fifteen years.

 

Impairment of Long-lived Assets (Except Goodwill)

 

Long-lived assets, such as equipment, improvements, and intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the use and eventual disposition of the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value.

 

Advertising Costs

 

Advertising costs are expensed as incurred. Advertising costs incurred were approximately $82 and $29 for the three months ended March 31, 2021 and 2020, respectively, and are included in general and administrative expenses in the accompanying consolidated statements of operations.

 

Earnings per Unit (“EPU”)

 

Basic earnings (loss) per unit, or EPU, is computed by dividing net income (loss) available to unit holders by the weighted average units outstanding during the period.

 

Income Taxes

 

The Company is a single member limited liability company (“LLC”) and is a disregarded entity for federal income tax purposes. On June 4, 2021, the Company's parent (IMC Holdings, LP) was converted from an LLC to a Limited Partnership. The Company’s parent has elected to be taxed as a corporation. The Company recognizes its allocable share of income taxes in these condensed consolidated financial statements.

 

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the condensed consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

 

The Company recognizes positions taken or expected to be taken in a tax return in accordance with existing accounting guidance on income taxes which prescribes a recognition threshold and measurement process. Interest and penalties on tax liabilities, if any, would be recorded in interest expense and general and administrative expense, respectively. For the three months ended March 31, 2021 and 2020, the Company did not have any unrecognized tax benefits as a result of tax positions taken during a prior period or during the current period. No interest or penalties have been recorded as a result of tax uncertainties. The U.S. Federal jurisdiction and Florida are the major tax jurisdictions where the Company files income tax returns with its Parent. The Company is no longer subject to U.S. Federal or State examinations by tax authorities for years before 2017. The Company allocates income tax to the parent company utilizing the separate return method.

 

12

 

 

INTERAMERICAN MEDICAL CENTER GROUP, LLC
AND SUBSIDIARIES

 

Notes to Condensed consolidated financial Statements
($ in thousands, except shares/units and per share data)

 

Recent Accounting Pronouncements

 

Lease Accounting

 

In February 2016, the FASB issued an accounting standards update (“ASU 2016-02”) which amends existing lease guidance. The update requires lessees to recognize a right-of-use asset and related lease liability for many operating leases now currently off-balance sheet under current U.S. GAAP. Also, the FASB has issued amendments to ASU 2016-02 with practical expedients related to land easements, lessor accounting, and transition matters. The Company is currently evaluating the effect the update will have on its condensed consolidated financial statements but expects upon adoption that the update will have a material effect on the Company’s financial condition due to the recognition of a right-of-use asset and related lease liability. The Company does not anticipate the update having a material effect on the Company’s consolidated results of operations or cash flows, though such an effect is possible.

 

ASU 2016-02 originally required transition to the new lease guidance using a modified retrospective approach which would reflect the application of ASU 2016-02 as of the beginning of the earliest comparative period presented. A subsequent amendment to ASU 2016-02 provides an optional transition method that allows entities to initially apply the new lease guidance with a cumulative-effect adjustment to the opening balance of equity in the period of adoption. If this optional transition method is elected, after the adoption of the new lease guidance, the Company’s presentation of comparative periods in the condensed consolidated financial statements will continue to be in accordance with current lease accounting.

 

In June 2020, the FASB issued ASU 2020-05, Effective Dates for Certain Entities. The amendments in this update defer the effective date for one year for small reporting companies that have not yet issued financial statements reflecting the adoption of ASU 2016-02. Therefore, ASU 2016-02 is effective, for the Company, for fiscal years beginning after December 15, 2021. Early application is permitted. The Company is currently evaluating the effect the update will have on its condensed consolidated financial statements and related disclosures.

 

Measurement of Credit Losses on Financial Instruments

 

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments — Credit Losses: Measurement of Credit Losses on Financial Instruments, which is intended to improve financial reporting by requiring earlier recognition of credit losses on certain financial assets. The standard replaces the current incurred loss impairment model that recognizes losses when a probable threshold is met with a requirement to recognize lifetime expected credit losses immediately when a financial asset is originated or purchased. The standard has been further refined through subsequent releases by the FASB, including the extension of the effective date. As amended by ASU No. 2019-10, the standard is effective for the Company for fiscal years beginning after December 15, 2022, including interim periods within those annual periods, with early adoption permitted. The Company expects to adopt the ASU on the effective date. The adoption of this guidance is not expected to have a material effect on the Company’s condensed consolidated financial statements.

 

Simplifying the Accounting for Income Taxes

 

In December 2019, the FASB issued an accounting standards update designed to reduce the complexity in accounting for income taxes by removing certain exceptions and changing or clarifying certain recognition and other requirements. The amendments in ASU 2019-12 are effective for public business entities for fiscal years beginning after December 15, 2020, including interim periods therein. The update is effective for all other entities consolidated financial statements issued for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022, with early application permitted. The Company has not elected early adoption and is currently evaluating the effect the update will have on its condensed consolidated financial statements and related disclosures.

 

13

 

 

INTERAMERICAN MEDICAL CENTER GROUP, LLC
AND SUBSIDIARIES

 

Notes to Condensed consolidated financial Statements
($ in thousands, except shares/units and per share data)

 

Libor Rate Change Disclosure

 

In March 2020, the FASB issued guidance to provide temporary optional expedients and exceptions through December 31, 2022 to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate (SOFR). The amendments are effective for all entities from the beginning of an interim period that includes the issuance date of the ASU. An entity may elect to apply the amendments prospectively through December 31, 2022. The Company is currently evaluating the effect the update will have on its condensed consolidated financial statements and related disclosures.

 

Risk and Uncertainties

 

The majority of the Company’s revenue is from capitation contracts with multiple Plans. These Plans are subject to substantial government regulation and are exposed to risks that may materially adversely affect its business or its willingness or ability to participate in government healthcare programs including, among other things, loss of material government contracts, governmental audits and investigations, potential inadequacy of government determined payment rates, potential restrictions on profitability, or other changes in the governmental programs. These risks at the plan level could have a material adverse effect on the Company’s operating results, financial position and cash flows.

 

If the capitation payments received are insufficient to cover the cost of healthcare services delivered to members, and if the Company is unable to implement clinical initiatives to provide a better healthcare experience for the members, lower costs and appropriately document the risk profile of its members, or if the estimates of benefits expense are inadequate, the Company’s profitability could be materially adversely affected.

 

COVID-19

 

On March 27, 2020, the United States President signed into law the Coronavirus Aid, Relief and Economic Securities Act (“CARES Act”) which provides economic assistance to a wide array of industries, including healthcare. Thus far, the Company has taken the following actions related to this legislation:

 

The spread of COVID-19 underscores certain risks the Company faces, such as the risk that the capitation payments may prove to be insufficient to cover the cost of healthcare services delivered to the members, pharmaceutical costs, and expanded benefit coverage; the potential impact on the Company’s ability to operate effectively, including as a result of complete or partial closure of facilities, labor shortages, disruptions in public and private infrastructure and supply chains; increased cybersecurity and information security risk as a result of the transition of a significant subset of employee populations to a remote work environment; and the severe impact on global economic activity, as well as the significant volatility and negative pressure in the financial markets. Management has taken action to minimize the potential financial impact of COVID-19 and continues to monitor the impacts daily and adjusting as necessary, however the ultimate outcome of these existential issues remain absolutely unpredictable.

 

While the ultimate impact of the COVID-19 pandemic remains uncertain, the Company has estimated no material adverse impact to its financial condition for the three months ended March 31, 2021. The Company estimates the impact of the COVID-19 pandemic in the three months ended March 31, 2021 was an approximately $750 increase to 2021 revenue, which was primarily driven by the CARES Act temporary suspension of the 2% Medicare Sequestration, which was extended to December 31, 2021. The Medicare Sequestration suspension increased premiums to Medicare Advantage Health Plans and subsequently the Company’s revenue for at-risk contracts.

 

14

 

 

INTERAMERICAN MEDICAL CENTER GROUP, LLC
AND SUBSIDIARIES

 

Notes to Condensed consolidated financial Statements
($ in thousands, except shares/units and per share data)

 

The COVID-19 pandemic has led to an increase in the Company’s medical expense of an estimated $750 to $1,000 primarily due to higher COVID-related admissions. Overall, the trend evidenced throughout 2020 of higher cost and more acute COVID-19 admissions partially offset by lower hospital utilization and suppressed planned outpatient procedures continued in the first quarter 2021. The COVID-19 pandemic has also accelerated the usage of telemedicine, which the Company anticipates will have a long-term impact on reducing urgent care and emergency care usage in the future.

 

3.    GOODWILL AND INTANGIBLE ASSETS, NET

 

Goodwill

 

Goodwill consisted of the following as of March 31, 2021 and December 31, 2020:

 

    March 31, 2021     December 31, 2020  
Goodwill – opening balance   $ 85,476     $ 85,476  
Additions to goodwill     —       —  
    $ 85,476     $ 85,476  

 

Intangible Assets

 

Intangible assets, net consisted of the following as of March 31, 2021:

 

    Estimated Life
(Years) 		    Gross Carrying
Amount 		    Accumulated
Amortization 		    Net Book
Value 		 
Trademarks     15     $ 24,405     $ (6,779 )   $ 17,626  
            $ 24,405     $ (6,779 )   $ 17,626  

 

Intangible assets, net consisted of the following as of December 31, 2020

 

    Estimated Life
(Years) 		    Gross Carrying
Amount 		    Accumulated
Amortization 		    Net Book
Value 		 
Trademarks     15     $ 24,405     $ (6,372 )   $ 18,033  
            $ 24,405     $ (6,372 )   $ 18,033  

 

Amortization expense for intangibles was $407 and $407 for the three months ended March 31, 2021 and 2020.

 

The expected future amortization expense for intangible assets as of March 31, 2021 is as follows:

 

Remaining nine months of 2021   $ 1,220  
2022     1,627  
2023     1,627  
2024     1,627  
2025     1,627  
Thereafter     9,898  
Total   $ 17,626  

 

15

 

 

INTERAMERICAN MEDICAL CENTER GROUP, LLC
AND SUBSIDIARIES

 

Notes to Condensed consolidated financial Statements
($ in thousands, except shares/units and per share data)

 

4.    PROPERTY AND EQUIPMENT, NET

 

The following is a summary of property and equipment, net and the related lives as of:

 

    Useful Life   March 31, 2021     December 31, 2020  
Furniture, fixtures and office equipment   5 years   $ 3,022     $ 2,966  
Leasehold improvements   Lesser of lease term or 15 years     4,675       4,593  
Medical equipment   15 years     515       497  
Vehicles   5 years     2,409       2,409  
Software   3 years     5,560       5,456  
          16,181       15,921  
Less: Accumulated Depreciation         (9,672 )     (9,013 )
        $ 6,509     $ 6,908  

 

Depreciation and amortization expense, excluding amortization for intangibles, was approximately $659 and $866 for the three months ended March 31, 2021 and 2020, respectively. Accumulated depreciation as of March 31, 2021 and December 31, 2020, for vehicles acquired under capital leases was approximately $1,109 and $1,013, respectively.

 

5.    COMMITMENTS AND CONTINGENCIES

 

Acquisitions

 

The Company entered into a Securities Purchase Agreement with Jose Orcasita-Ng, M.D. on December 15, 2020. The Company agreed to pay $2,000 less indebtedness, transaction expenses, and a holdback amount at closing. This deal closed on May 26th, 2021.

 

The Company entered into a Securities Purchase Agreement with Jesus Montesano, M.D. on January 19, 2021. The Company agreed to pay $1,600 less indebtedness, transaction expenses, and a holdback amount at closing. This deal closed on May 26th, 2021.

 

The Company entered into an Asset Purchase Agreement with Lyle Gumer, D.O. on February 18, 2021. The Company agreed to pay $375 less indebtedness, transaction expenses, and a holdback amount at closing. This deal is expected to close in the second quarter 2021.

 

The Company entered into a Securities Purchase Agreement with a physicians practice on March 8, 2021. The Company agreed to pay $55,000 less indebtedness, transaction expenses, and a holdback amount at closing. This deal is expected to close in the second quarter 2021.

 

Risk Management

 

The Company is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; errors and omissions; injuries to employees; and natural disasters. These risks are generally covered by commercial insurance purchased from independent third parties.

 

Malpractice Professional Liability Insurance

 

The Company may be a party to claims filed against it in the normal course of business, principally related to malpractice assertions. The Company has professional liability insurance coverage on a claims-made basis. Current per claim coverage is limited to $250 and aggregate annual claims of $1,500. Should this claims-made policy not be renewed or replaced with equivalent insurance, claims based on incidents occurring during the term of the claims-made policy but reported in subsequent periods would be uninsured. The Company has determined that no accrual is necessary for incurred but not reported (“IBNR”) claims as of the three months ended March 31, 2021 and year ended December 31, 2020. The Company has secured coverage through March 31, 2022, and intends to renew coverage beyond this date.

 

16

 

 

INTERAMERICAN MEDICAL CENTER GROUP, LLC
AND SUBSIDIARIES

 

Notes to Condensed consolidated financial Statements
($ in thousands, except shares/units and per share data)

 

Healthcare and Government Regulations

 

The health care industry is subject to numerous laws and regulations of federal, state and local governments. These laws and regulations include, but are not necessarily limited to, matters such as licensure, accreditation, government health care program participation requirements, reimbursement for patient services, and Medicare and Medicaid fraud and abuse. Future changes in Medicare or Medicaid programs and reductions in funding levels could have a material adverse effect on the Company.

 

Recently, government activity has increased with respect to investigations and allegations concerning possible violations of fraud and abuse statutes and regulations by health care providers. Violations of these laws and regulations could result in expulsion from government health care programs, together with the imposition of significant fines and penalties, as well as significant repayments for patient services previously billed. After consultation with legal counsel, management believes that the Company is in compliance with the fraud and abuse regulations, as well as other applicable government laws and regulations. Compliance with such laws and regulations can be subject to future government review and interpretation, as well as regulatory actions unknown or unasserted at this time.

 

Legal and Other Risks

 

The Company may be subject to claims and legal proceedings covering various matters that arise in the normal course of its business activities. The Company vigorously defends any asserted claims. The Company believes that any liability that may ultimately result from the resolution of such matters will not have a material adverse effect on the condensed consolidated financial position or results of operations of the Company.

 

The Company’s business operations are located in a geographical area that is affected by hurricanes. Occurrences of hurricanes can impact Company equipment and improvements, personnel and utilization patterns of the patient populations served. The Company mitigates this risk through adequate insurance coverage of its assets.

 

Concentration Risks

 

Financial instruments that potentially subject the Company to concentration of credit risks consist of cash, cash reserves held by health plans and receivables. At times, cash may include deposits at various financial institutions in excess of federally insured limits. The Company has not experienced any losses in such accounts.

 

The Company was formed to offer a comprehensive solution to Plans which offer risk contracts in South Florida. The Company has receivables due from these Plans, substantially all of whom are national business establishments, based on established industry credit terms and policies. At March 31, 2021 and December 31, 2020, the Company had approximately $12,418 and $12,741, respectively, of capitation receivables due from these Plans. Exposure of loss on accounts receivable is principally dependent on each Plan’s financial condition. The Company does not believe it is exposed to significant credit risk in its capitation receivables.

 

17

 

 

INTERAMERICAN MEDICAL CENTER GROUP, LLC
AND SUBSIDIARIES

 

Notes to Condensed consolidated financial Statements
($ in thousands, except shares/units and per share data)

 

A breakout of capitation receivables as of March 31, 2021 and December 31, 2020 and revenues for the three months ended March 31, 2021 and 2020, are as follows:

 

    March 31, 2021     December 31, 2020  
Plan   Capitated
Plan Receivable 		    Capitated
Plan Receivable 		 
A     6 %     6 %
B     23 %     23 %
C     13 %     13 %
D     10 %     10 %
E     0 %     0 %
F     36 %     36 %
All other     12 %     12 %
      100 %     100 %

 

    March 31,  
    2021     2020  
Plan   Revenue     Revenue  
A     28 %     6 %
B     16 %     23 %
C     10 %     13 %
D     12 %     10 %
E     1 %     0 %
F     26 %     36 %
All other     7 %     12 %
      100 %     100 %

 

Transaction Bonus Agreements

 

In March 2020, IMC Holdings, LLC, the Company’s parent, entered into Transaction Bonus Agreements with certain employees and non-employees of the Company, which provide for bonus payouts calculated based on the enterprise value of the Company upon a Sale of the Company (as defined). No bonus payouts are required under the Transaction Bonus Agreements until the completion of a Sale of the Company.

 

As discussed in Note 1, in December 2020 the Company entered into a definitive agreement to merge with DFHT, a Special Purpose Acquisition Company, and CareMax Medical Group, LLC, a technology-enabled care platform. The merger, which constitutes a Sale of the Company, was voted on by shareholders in a special meeting on June 4th, 2021 and was approved, with the consummation of the transaction occurring on June 8, 2021. The Transaction Bonus agreements were replaced in their entirety by the issuance of Class D Profit Interest Units (see Subsequent Events footnote for further discussion). Therefore, no accrual has been made in the accompanying condensed consolidated financial statements for the Transaction Bonus Agreements for year ended December 31, 2020 as amounts were contingent on the occurrence of future events which are outside of the control of the Company and are not considered probable until the completion of the merger.

 

18

 

 

INTERAMERICAN MEDICAL CENTER GROUP, LLC
AND SUBSIDIARIES

 

Notes to Condensed consolidated financial Statements
($ in thousands, except shares/units and per share data)

 

6.    RELATED PARTY TRANSACTIONS

 

Certain entities under common ownership or related through ownership of relatives of the member of the Company provide various services or facilities to the Company. As of the three months ended March 31, 2021 and year ended December 31, 2020, there were no amounts receivable or accounts payable with these related parties.

 

During the three months ended March 31, 2021 and 2020, the Company paid approximately $108 and $108, respectively, for consulting and management services, and $52 and $369, respectively, for rent expense, which are included in general and administrative expenses in the accompanying consolidated statements of operations.

 

7.    LONG-TERM DEBT

 

On February 1, 2017, the Company entered into an $81,000 term note (the “Term Note”) secured by substantially all the assets of the Company. The Company capitalized deferred financing costs of $1,060 at close of the financing. Interest payments were due quarterly with principal due at maturity on February 1, 2022. In 2018, the Company entered into six amendments that primarily adjusted the interest rate and payment methodology for the quarterly interest payments due, as well as the covenant requirements.

 

On July 30, 2019, the Company entered into a seventh amendment to the Term Note. Under the amendment, the lender waived all defaults, including those related to certain covenant violations and failure to make certain interest payments, which occurred under the agreement prior to the amendment date. The maturity date of the Term Note was extended to July 30, 2024 and certain minimum liquidity and EBITDA covenants were modified. The amended Term Note bears interest on the outstanding principal at a rate per annum equal to (i) three-month LIBOR plus 7.50% through the interest period ending December 31, 2020 and (ii) three-month LIBOR plus 8.25% for the interest period ended March 31, 2021. Interest may be paid in-kind on each interest payment date through December 31, 2020 by adding the paid in-kind interest to the principal amount of the Term Note.

 

At the Company’s option, interest may also be paid in-kind for the interest periods starting January 1, 2021 and through December 31, 2021. If the Company elects to pay interest in-kind, the term notes will bear additional interest on the outstanding principal at a rate per annum equal to 2.00%, which will accrue on a daily basis and will be added to the principal amount of the Term Note. Beginning January 1, 2022, in the event that certain conditions outlined in the agreement are in effect, the Company may continue to pay interest in-kind, in which case the interest rate will increase by an incremental rate defined in the agreement. The Company paid $1,897 and $21 in interest in the three months ended March 31, 2021 and 2020, respectively.

 

Based on the terms of the amended Term Note, the Company may make voluntary prepayments of a minimum principal amount of $5,000 and multiples of $1,000 in excess thereof, which will be applied to accrued interest, all costs, expenses, and other amounts due under the agreement, and thereafter to the payment of principal. The Company may also be required to make mandatory prepayments upon the occurrence of certain events. In addition, the Company has agreed to pay an arrangement fee equal to 1% of the amount of principal repaid or required to be repaid on the Term Note.

 

During the year ended December 31, 2019, the Company entered into a note payable to finance the purchase of property and equipment. This note payable as of March 31, 2021 bears interest at 12.58%, requiring monthly payments of approximately $1.4, and is due in September 2022, secured by certain property and equipment.

 

19

 

 

INTERAMERICAN MEDICAL CENTER GROUP, LLC
AND SUBSIDIARIES

 

Notes to Condensed consolidated financial Statements
($ in thousands, except shares/units and per share data)

 

For the note payable, $11 matures in the remaining nine months ended December 31, 2021, with $12 maturing in 2022. The note payable as of March 31, 2021 and December 31, 2020 was as follows:

 

    March 31, 2021     December 31, 2020  
Note payable   $ 23     $ 26  
Less current portion     (15 )     (15 )
Note payable, net of current portion   $ 8     $ 11  

 

8.    LEASES

 

Operating Leases

 

The Company leases space for its medical centers and the corporate offices under leases expiring through 2026. Additionally, the Company rents certain facility space under month-to-month agreements. Rent expense aggregated to approximately $743 and $896 for the three months ended March 31, 2021 and 2020, respectively, and is included in general and administrative expenses on the accompanying consolidated statements of operations.

 

Included in rent expense above are leases for certain facilities from related parties through common ownership under operating leases expiring through 2022. For the three months ended March 31, 2021 and 2020, total rent expense under related party leases was approximately $52 and $369, respectively, as discussed in Note 6.

 

The Company also leases office and medical equipment under operating leases expiring through 2021. Rent expense for these equipment leases amounted to approximately $57 and $57 for the three months ended March 31, 2021 and 2020, respectively, and is included in general and administrative expenses on the accompanying consolidated statements of operations.

  

Total future minimum rental payments as of March 31, 2021 for the above noncancelable operating leases with initial terms in excess of one year are as follows:

 

      Minimum Rental
Payment 		 
Remaining nine months of 2021   $ 1,938  
2022     1,857  
2023     829  
2024     502  
2025     241  
Thereafter     72  
    $ 5,439  

 

Capital Leases

 

The Company leases two vehicles under capital leases expiring in August 2021 and April 2025. The capital leases require monthly payments of approximately $52 and $2. The following is a schedule of the future minimum lease payments as of December 31, 2020 under capital leases:

 

20

 

 

 

INTERAMERICAN MEDICAL CENTER GROUP, LLC
AND SUBSIDIARIES

 

Notes to Condensed consolidated financial Statements
($ in thousands, except shares/units and per share data)

 

Remaining nine months of 2021   $ 247  
2022     19  
2023     19  
2024     19  
2025     7  
Total minimum lease payments     311  
Less the amount representing interest     (18 )
Present value of minimum lease payments     293  
Less current maturities     (243 )
Capital leases, net of current portion   $ 50  

 

9. PROFIT INTEREST PLANS

 

In July 2018, IMC Holdings, LLC, the parent of the Company’s parent, adopted an executive unit plan and an equity incentive plan (the “Plans”). Under the Plans, profit interest units are granted to employees, executives and board members of the Company which entitle the participant to received distribution(s) of the Company’s profits after defined distribution thresholds are met. As of March 31, 2021, the total number of Class A profit interest units available to be issued under the executive unit plan were 4,519,913 and Class B profit interest units available under the equity incentive plan were 33,958,572. On March 11, 2020, the Company issued 76,807,747 Class C profit interest units, which substantially replaced most issued and outstanding Class B profit interest units. The fair value of the issued Class C profit interest units on March 11, 2020, was de minimis. Of the 76,807,747 authorized Class C Profit interest units, 63,898,882 are Class C-1 and 12,908,865 are Class C-2.

 

Profit interest units granted under the Plans are generally 20% vested within the first year and 80% ratably over the remaining four years, with exceptions. There is an option for accelerated vesting if the Company is sold. The Profit interest units do not expire. The Profit Interest Units are accounted for in the condensed consolidated financial statements of the Company. Forfeitures generally result from the failure to satisfy service or performance conditions. The Company elected to account for forfeitures as they occur; therefore, compensation cost previously recognized for an award that is forfeited because of a failure to satisfy a service condition is reversed in the period of the forfeiture.

 

The Company uses a Black-Scholes option valuation model to estimate the fair value of profit interests. During the three months ended March 31, 2021, there were no additional PIU grants, therefore no additional disclosure of fair value assumptions. The assumptions used to estimate the fair value of the Company’s profit interest grants for the year-ended December 31, 2020 are as follows:

 

​   Class A Units     Class B-1 Units     Class B-2 Units     Class B-3 Units     Class C-1 PIUs     Class C-2 PIUs  
Holding period     5       5       5       5       5       5  
Risk-free rate     0.36 %     0.36 %     0.36 %     0.36 %     0.36 %     0.36 %
Volatility     39.0 %     39.0 %     39.0 %     39.0 %     39.0 %     39.0 %
Dividend yield     0 %     0 %     0 %     0 %     0 %     0 %

 

The Company has estimated volatility based on the historical volatility used by similar companies over a period commensurate with the expected term of the award. The holding period represents an estimate of the time profit interests are expected to remain outstanding. The risk-free rates for the periods within the contractual life of the option is based on the U.S. treasury yield curve in effect at the time of grant.

 

21

 

 

INTERAMERICAN MEDICAL CENTER GROUP, LLC
AND SUBSIDIARIES

 

Notes to Condensed consolidated financial Statements
($ in thousands, except shares/units and per share data)

 

A summary of option activity under the Incentive Plans as of March 31, 2021 and December 31, 2020, and the changes for the periods then ended, is presented below:

 

​   March 31, 2021     December 31, 2020  
Beginning balance     78,076       28,321  
Granted     —       76,808  
Forfeited     —       (27,054 )
Ending balance     78,076       78,075  
Vested balance     35,588       33,834  

 

There were 35,587,575 and 33,834,259 units vested and no compensation expense recorded related to profit interests granted for the three months ended March 31, 2021 and year ended December 31, 2020, respectively. There were no profit interest units granted in the three months ended March 31, 2021. There was no unrecognized compensation cost related to non-vested profit interest units granted totaling 44,241,000 units in the year-ended ended December 31, 2020.

 

10. INCOME TAXES

 

Income tax expense was $0 for the three months ended March 31 2021, compared to $0 for the comparable period in 2020. Our effective income tax rate was 0.0% for the three months ended March 31 2021, compared to 0.0% for the same period in 2020. The effective tax rates for the three months ended March 31, 2021 and 2020 differ from the statutory rate of 21% as a result of a full valuation allowance against the net deferred tax assets of the Company. The Company continues to carry a full valuation allowance on its net deferred tax assets as it believes is not more likely than not to be realized.

 

The income tax provision differs from the amount of income tax determined by applying the U.S. federal income tax rate to pretax income for the Company for the three months ended March 31, 2021 and 2020, due to the following:

 

​   March 31, 2021     March 31, 2020  
Federal taxes at statutory rate   $ (335,695 )   $ 233,952  
State income tax, net of federal tax benefit     (47,668 )     49,051  
Permanent differences     51,461       58,533  
Change in valuation allowance     331,902       (341,536 )
Total income taxes   $ —     $ —  

 

11. SUBSEQUENT EVENTS

 

The Company has evaluated subsequent events occurring after the consolidated balance sheet date of March 31, 2021 through the date of June 14, 2021, which is the date the condensed consolidated financial statements were available to be issued. Based on this evaluation, the Company has determined that the below subsequent events require disclosure in the condensed consolidated financial statements:

 

On June 4, 2021, the Company's Parent, IMC Holdings LLC, converted from a Limited Liability Company to a Limited Partnership with the State of Delaware Division of Corporations.

 

22

 

 

INTERAMERICAN MEDICAL CENTER GROUP, LLC

AND SUBSIDIARIES

 

Notes to Condensed consolidated financial Statements

($ in thousands, except shares/units and per share data)

 

On May 14, 2021, Deerfield Healthcare Technology Acquisitions Corp. (“DFHT”) issued a press release announcing, among other things, receipt of notification from the U.S. Securities and Exchange Commission (“SEC”) that the SEC has completed its review of DFHT’s proxy statement relating to the proposed business combination (the “Business Combination”) with CareMax Medical Group, LLC (“CareMax”) and IMC Medical Group Holdings, LLC (“IMC”). On June 4th, a special meeting of the stockholders of Deerfield Healthcare Technology Acquisitions Corp. (“DFHT”) was held to facilitate a vote to approve the business combinations agreement for the acquisition by DFHT of CareMax Medical Group, LLC and IMC Medical Group Holdings, LLC. The Business Combination Agreement provided for the sale and transfer of 100% of the equity interests in CareMax by members of the CareMax Group and IMC Holdings, LLC, a Delaware limited liability company (“IMC Parent”), in favor of DFHT, and as a result of which, upon consummation of the Business Combination, CareMax and IMC become wholly-owned subsidiaries of DFHT. The results of the vote were finalized and as of June 8, 2021, the business combination was consummated.

 

As of June 8, 2021, the Transaction Bonus Agreements dated March 11, 2020, between IMC Holdings LP and select executives of the Company were cancelled and extinguished in their entirety. The rights and obligations to provided to executives under the Transaction Bonus Agreements were replaced by the issuance of Class D Profit Interest Units in amounts that rendered the executive with substantially equivalent economic entitlements. All Class D Profit Interest Units issued vested simultaneously with the consummation of the Company sale on June 8, 2021.

 

The Business Combination was funded in part through debt financing provided by an $185 million senior secured credit facility. A portion of the proceeds of the debt financing was used to repay all outstanding borrowings as of June 8, 2021 under the Loan Agreement. The debt financing results in $122 million of senior secured debt of the combined company.

 

23

 

 

Exhibit 99.5

 

UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL INFORMATION OF DFHT

 

The following unaudited pro forma condensed combined information presents the unaudited pro forma condensed combined balance sheet as of March 31, 2021 and the unaudited pro forma condensed combined statement of operations for the three months ended March 31, 2021 and the year ended December 31, 2020 based upon the combined historical financial statements of Deerfield Healthcare Technology Acquisitions Corp. (“DFHT”), CareMax Medical Group, LLC (“CareMax”) and IMC Medical Group Holdings, LLC (“IMC”), after giving effect to the business combination (the “Business Combination”) and related adjustments described in the accompanying notes. Under applicable accounting standards, CareMax will be the accounting acquirer in the Business Combination, which will be treated as a reverse recapitalization. The accounting guidance for business combinations, FASB Accounting Standards Codification (ASC) 805, provides that in identifying the acquiring entity in a transaction effected through an exchange of equity interests, all pertinent facts and circumstances must be considered, including: the relative voting rights of the stockholders of the constituent companies in the combined company, the existence of a large minority voting interest in the combined entity if no other owner or organized group of owners has a significant voting interest, the composition of the board of directors and senior management of the combined company, the relative size of each company and the terms of the exchange of equity securities in the transaction, including payment of any premium.

 

Management considered the following quantitative and qualitative factors in the determination that CareMax is the accounting acquirer in the Business Combination:

 

· The consideration in the Business Combination includes both cash and Class A common shares of DFHT. Upon completion of the Business Combination, none of the legacy DFHT shareholders, the DFHT sponsor, Deerfield Management, legacy CareMax equity holders or IMC equity holders will own more than 20% of the common stock of the company post-Business Combination. Management further considered whether there will be an existence of a large minority voting interest in the combined company. Management believes the remaining public shareholders are passive investors which include both institutional and retail investors with varying interests and ownership goals.

 

· The Chief Executive Officer of the combined company is Carlos A. de Solo, Chief Executive Officer of CareMax. The remaining senior management of the combined company is represented by approximately 50% each of the CareMax and IMC senior management team. Upon closing of the Business Combination, the pre-Business Combination DFHT Chief Executive Officer became the Executive Chairman of the combined company and the Chief Financial Officer resigned. None of the officers of DFHT are officers of the Company post-Business Combination.

 

· Upon closing of the Business Combination, the board of directors is comprised of six (6) directors. The Merger Agreement does not provide either DFHT or CareMax with sole discretion to appoint or nominate the independent directors to the board. There are no agreements with pre-Business Combination DFHT shareholders to appoint directors to the board and the continuing voting rights of the pre-Business Combination DFHT shareholders are the same as all shareholders post- Business Combination. Carlos A. de Solo serves as a director of the combined company.

 

· The fair value of the pre-Business Combination equity interests of CareMax, IMC and DFHT are approximately $364 million, $250 million and $190 million, respectively. The fair value of the pre-Business Combination equity interests of CareMax relative to fair value of the pre-Business Combination equity interests of DFHT results in a premium in the exchange of the CareMax equity interests for equity interests of DFHT as part of the Business Combination.

 

 

 

 

· Upon closing of the Business Combination, the Current Charter was amended to, among other matters, provide changing the post-Business Combination Company’s corporate name from “Deerfield Healthcare Technology Acquisitions Corp.” to “CareMax, Inc.” which reflects the value proposition the CareMax name brings as a publicly traded entity and from a customer facing perspective in the marketplace. The Company’s ticker post-Business Combination references CareMax and the Company’s corporate headquarters will be relocated to CareMax current headquarters.

 

In the unaudited pro forma condensed financial statements, CareMax has measured and recognized the assets acquired and liabilities assumed at their acquisition date fair values.

 

The unaudited pro forma condensed combined statement of operations for the three months ended March 31, 2021 and the year ended December 31, 2020 give pro forma effect to the Business Combination as if it had occurred on January 1, 2020. The unaudited pro forma condensed combined balance sheet as of March 31, 2021 gives pro forma effect to the Business Combination as if it were completed on March 31, 2021. The unaudited pro forma condensed combined statement of operations for the fiscal year ended December 31, 2020 gives pro forma effect to the acquisitions by CareMax of Clinica Las Americas (“Little Havana II”) on December 10, 2020 and Care Holdings Group, LLC as if they had occurred on January 1, 2020.

 

The unaudited pro forma condensed combined financial information should be read in conjunction with the audited historical financial statements of each of DFHT, CareMax, and IMC and the notes thereto included in the Company’s Definitive Proxy Statement, filed with the Securities and Exchange Commission (“SEC”) on May 14, 2021, and the unaudited historical financial statements of each of DFHT, CareMax and IMC for the three months ended March 31, 2021 and 2020 included in this Current Report on Form 8-K, as well as the disclosures contained in the Definitive Proxy Statement, the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2021, as filed with the SEC on May 24, 2021, and herein in the sections titled "Management's Discussion and Analysis of Financial Condition and Results of Operations of DFHT" and "Management's Discussion and Analysis of Financial Condition and Results of Operations of CareMax and IMC."

 

The unaudited pro forma condensed combined financial information is provided for informational purposes only and is not necessarily indicative of the operating results or financial position that would have occurred if the Business Combination had been completed as of the dates set forth above, nor is it indicative of the future results or financial position of the combined company. The unaudited pro forma condensed combined financial information also does not give effect to the potential impact, of any anticipated synergies, operating efficiencies or cost savings that may result from the Business Combination, any integration costs or tax deductibility of transaction costs. Furthermore, the unaudited pro forma condensed combined statements of operations do not include certain nonrecurring charges and the related tax effects which result directly from the Business Combination as described in the notes to the unaudited pro forma condensed combined financial information.

 

 

 

 

DEERFIELD HEALTHCARE TECHNOLOGY ACQUISITIONS CORP.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEETS MARCH 31, 2021 

 

    Pro Forma           Interamerican        
  CareMax Medical           Medical Center     Pro Forma           Pro Forma  
(in thousands)   Group, LLC (2) (3)     DFHT (1)     Group, LLC     Adjustments     Note 4     Combined  
Assets                                              
Current assets:                                              
Cash and cash equivalents   $ 7,014     $ 390     $ 14,000     $ 211,313     (a)     $ 232,717  
                              (4,443 )   (d)       (4,443 )
                              206,870             228,274  
Accounts receivable, net     9,089       -       17,928       -             27,017  
Inventory     15       -       -       -             15  
Prepaid Expenses     169       210       1,019       -             1,398  
Due from Related Parties     627       -       -       -             627  
Total current assets     16,915       600       32,947       206,870             257,332  
Property and Equipment, net     6,253       -       6,509       -             12,762  
Goodwill     10,068       -       85,476       187,437     (j)       282,981  
Investments held in Trust Account     -       143,856       -       (143,856 )   (b)       -  
Intangible Asset, net     8,323       -       17,626       15,526     (j)       41,475  
Other Assets     414       -       2,261       -             2,675  
Total assets   $ 41,974     $ 144,456     $ 144,819     $ 265,977           $ 597,226  
                                               
Liabilities and Stockholders'/Members' Equity                                              
Current liabilities:                                              
Accounts payable and accrued expenses   $ 5,274     $ 4,812     $ 7,547     $ -           $ 17,633  
Risk Settlements Due to Providers     282       -       -       -             282  
Current portion of long-term debt, net     992       -       323       -             1,315  
Other current liabilities     51       49       -       -             100  
Total current liabilities     6,599       4,861       7,869       -             19,330  
Derivative warrant liabilities     -       13,870       -       -             13,870  
Long-term debt, less current portion     26,694       -       77,212       (103,402 )   (c)       122,504  
                              125,000     (c)          
                              (3,000 )   (c)          
Other long-term liabilities     708       4,443       1,151       -             1,859  
                              (4,443 )   (d)          
Total liabilities     34,001       23,175       86,233       14,155             157,563  
Stockholders' equity / Commitments and contingencies     7,973       121,282       58,586       251,823     (e)       439,663  
Total Liabilities and Stockholders' Equity   $ 41,974     $ 144,456     $ 144,819     $ 265,977           $ 597,226  

 

(1) Refer to Note 2 for reclassification of DFHT historical information.

(2) Refer to Note 3 for reclassification of CareMax historical information.

(3) Reflects the acquisition of Clinica Las Americas and Care Holdings Group by CareMax as if the transactions occurred on March 31, 2021.

 

 

 

 

DEERFIELD HEALTHCARE TECHNOLOGY ACQUISITIONS CORP.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2021

 

    Pro Forma           Interamerican        
    CareMax Medical           Medical Center     Pro Forma           Pro Forma  
(in thousands, except share data)   Group, LLC (2) (3)     DFHT (1)     Group, LLC     Adjustments     Note 4     Combined  
Revenue:                                              
Capitated Revenue   $ 27,819     $ -     $ 56,475     $ -           $ 84,294  
Other Managed Care Services     99       -       3,063       -             3,161  
Other Revenue     917       -       47       -             964  
Net revenue     28,835       -       59,585       -             88,420  
Costs and expenses:                                              
Medical Expenses     18,439       -       49,645       -             68,084  
Selling, General and Administrative expenses     9,378       1,612       9,593       1,679     (j)       22,262  
Total costs and expenses     27,816       1,612       59,238       1,679             90,346  
Operating (loss) income     1,019       (1,612 )     347       (1,679 )           (1,926 )
Interest (Income) Expense     504       (20 )     1,950       (1,282 )   (f)       1,302  
                              150     (c)          
Other (Income) Expense, net     -       -       (4 )     -             (4 )
Change in fair value of warrant liabilities     -       (10,894 )     -       -             (10,894 )
Income (loss) before income taxes     515       9,302       (1,599 )     (547 )           7,670  
Income Tax expense     -       -       -       1,881     (g)       1,881  
Net Income (loss)   $ 515     $ 9,302     $ (1,599 )   $ (2,428 )         $ 5,789  
Pro forma weighted average common shares outstanding - basic                                   (h)       80,176,840  
Pro forma weighted average common shares outstanding—diluted                                   (h)       81,248,155  
Pro forma net income per common share - basic                                         $ 0.07  
Pro forma net income per common share—diluted                                         $ 0.07  

 

(1) Refer to Note 2 for reclassification of DFHT historical information.

(2) Refer to Note 3 for reclassification of CareMax historical information.

(3) Includes the results of Clinica Las Americas and Care Group Holdings, LLC giving effect to those acquisitions as if they were completed on January 1, 2020.

 

 

 

 

DEERFIELD HEALTHCARE TECHNOLOGY ACQUISITIONS CORP.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS (AS RESTATED)
FOR THE YEAR ENDED DECEMBER 31, 2020

 

    Pro Forma           Interamerican        
    CareMax Medical           Medical Center     Pro Forma           Pro Forma  
(in thousands, except share data)   Group, LLC (2) (3)     DFHT (1)     Group, LLC     Adjustments     Note 4     Combined  
Revenue:                                              
Capitated Revenue   $ 110,155     $ -     $ 216,041     $ -           $ 326,197  
Other Managed Care Services     370       -       10,856       -             11,225  
Other Revenue     4,457       -       204       -             4,661  
Net revenue     114,982       -       227,101       -             342,084  
Costs and expenses:                                              
Medical Expenses     70,973       -       186,315       -             257,288  
Selling, General and Administrative expenses     32,942       4,012       31,136       8,368     (j)       107,457  
                              31,000     (e)          
Total costs and expenses     103,915       4,012       217,451       39,368             364,745  
Operating (loss) income     11,067       (4,012 )     9,650       (39,368 )           (22,662 )
Interest (Income) Expense     1,728       (86 )     9,536       (6,577 )   (f)       5,202  
                              600     (c)          
Other (Income) Expense, net     5               (1,000 )     -             (995 )
Change in fair value of derivative warrant liability             17,585                             17,585  
Income (loss) before income taxes     9,334       (21,511 )     1,114       (33,391 )           (44,454 )
Income Tax benefit   -       -       -       (10,900 )   (g)       (10,900 )
Net income (loss)   $ 9,363     $ (21,511 )   $ 1,114      $ (22,491 )          $ (33,524 )
Pro forma weighted average common shares outstanding - basic and diluted                                   (h)       80,176,840  
Pro forma net income (loss) per common share—basic and diluted                                         $ (0.42 )

 

 

(1) Refer to Note 2 for reclassification of DFHT historical information.

(2) Refer to Note 3 for reclassification of CareMax historical information.

(3) Includes the results of Clinica Las Americas and Care Group Holdings, LLC giving effect to those acquisitions as if they were completed on January 1, 2020.

 

 

 

 

 

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

 

Note 1—Description of the Business Combination

 

Basis of presentation

 

The historical financial information has been adjusted to conform to the presentation rules set forth in Rule 11-02(a)(6) of SEC Regulation S-X regarding the unaudited pro forma condensed combined financial information. Specifically, the pro forma condensed balance sheet and statement of operations must include and be limited to i) transaction accounting adjustments and ii) autonomous entity adjustments, if required and, optionally, management adjustments that capture synergies or dis-synergies from the business combination. Transaction accounting adjustments that affect the pro forma condensed balance sheet have been calculated assuming the transaction took place on March 31, 2021. Transaction accounting adjustments that affect the pro forma condensed statement of operations have been calculated assuming the transaction occurred on January 1, 2020 (the beginning of the fiscal year presented). We have concluded that no autonomous entity adjustments are required.

 

DFHT's historical results reflect the unaudited balance sheet as of March 31, 2021 and unaudited statement of operations for the three months ended March 31, 2021, and the audited statement of operations for the period from May 8, 2020 (inception) through December 31, 2020 under Generally Accepted Accounting Principles in the United States of America (“GAAP”). IMC’s historical results reflect the unaudited consolidated balance sheet as of March 31, 2021, the unaudited consolidated statement of operations for the three months ended March 31, 2021, and the audited consolidated statement of operations for the year ended December 31, 2020, under GAAP. CareMax’s historical results reflect the unaudited combined balance sheet as of March 31, 2021, the unaudited combined statement of operations for the three months ended March 31, 2021 and the audited combined statement of operations for the year ended December 31, 2020 under GAAP.

 

General Description of the Business Combination Agreement

 

On December 18, 2020, Deerfield Healthcare Technology Acquisitions Corp.(“DFHT”), CareMax Medical Group, LLC (“CareMax”), IMC Medical Group Holdings, LLC (“IMC”), the CareMax Group, IMC Holdings, LLC (“IMC Parent”), and Deerfield Partners, LLP (“Deerfield”) entered into a Business Combination agreement. The closing is expected to occur in the first quarter of 2021. Upon completion of the closing of the Business Combination, the combined company now operates under the name CareMax.

 

Pursuant to the agreement, DFHT acquired all of the issued and outstanding equity interests of CareMax and IMC in exchange for a combination of cash and equity consideration in the form of Class A common shares of DFHT.

 

The aggregate consideration payable at the closing of the Business Combination to the members of CareMax and IMC was approximately $364 million and $250 million, respectively, subject to the purchase price adjustments as set forth in the Business Combination Agreement (the “Closing Merger Consideration”). The Closing Merger Consideration was comprised of 68% and 45% in cash for each of the members of CareMax and IMC, respectively, with the remainder of the Closing Merger Consideration comprising DFHT Class A Common Stock, valued at reference price of $10.00 per share.

 

 

 

 

Note 1 (continued)

 

An additional 3,500,000 and 2,900,000 shares of DFHT Class A Common Stock (the “Earnout Shares”) are payable after the Closing to the members of the CareMax Group and IMC Parent, respectively, upon satisfaction of the following conditions: (i) if within the first year after the Closing (the “First Earnout Period”) the trading price of DFHT Class A Common Stock equals or exceeds $12.50 on any 20 trading days in any 30-day trading period (the “First Share Price Trigger”), then 1,750,000 and 1,450,000 of the Earnout Shares will be released to the members of the CareMax Group and IMC Parent, respectively, or (ii) if within the second year after the Closing (the “Second Earnout Period”) the trading price of DFHT Class A Common Stock equals or exceeds $15.00 on any 20 trading days in any 30-day trading period (the “Second Share Price Trigger” and collectively, the “Share Price Triggers”), then 1,750,000 and 1,450,000 of the Earnout Shares will be released to the members of the CareMax Group and IMC Parent, respectively. Notwithstanding the foregoing, if the First Share Price Trigger is not satisfied but the Second Share Price Trigger is satisfied, DFHT will issue 3,500,000 and 2,900,000 shares of DFHT Class A Common Stock to the members of the CareMax Group and IMC Parent, respectively.

 

Upon completion of the Business Combination: (i) CareMax and IMC ownership collectively own approximately 26% of the combined company; (ii) Deerfield Management own approximately 16% of the combined company; (iii) the other DFHT public stockholders (including the PIPE Investors) own approximately 53% of the combined company; and (iv) DFHTA Sponsor LLC (the “sponsor”) own approximately 5% of the combined company. These levels of ownership interest do not take into account the Earnout Shares, the Adjustment Escrow Shares or the public warrants and private placement warrants to purchase DFHT Class A Common Stock that remain outstanding immediately following the Business Combination.

 

The following table sets forth the net assets of DFHT as of March 31, 2021:

 

(in thousands)   DFHT  
Current assets   $ 600  
Cash held in trust     143,856  
Property and Equipment, net     -  
Other Assets     -  
Current liabilities     (4,861 )
Derivative warrant liabilities     (13,870 )
Other long-term liabilities (1)     (4,443 )
Net assets   $ 121,282  

 

(1) These are deferred underwriting commissions related to the Company’s initial public offering and are reflected as a long-term liability on the historical balance sheet of DFHT. For pro forma purposes and on the pro forma condensed balance sheet it has been reclassified as a reduction of cash to the balance sheet as these fees were paid upon closing of the transaction.

 

 

 

 

Note 1 (continued)

 

Sources and Uses (in thousands) 

 

Sources      
DFHT Cash from Trust   $ 143,856  
Deerfield PIPE(1)     410,000  
New Debt     125,000  
         
         
Total Sources   $ 678,856  

 

 

 

Uses      
Cash to balance sheet   $ 206,870  
Cash to CareMax and IMC Shareholders     318,141  
Debt repayment     103,402  
SPAC redemptions     -  
Deal expenses (2)     50,443  
Total Uses   $ 678,856  

 

 

 

(1) Represents the issuance in a private placement to be consummated concurrently with the closing, to Deerfield of up to 41,000,000 shares of Class A common stock.

(2) Comprised of $12,000 PIPE transaction fees, $31,000 acquisition-related costs, $3,000 debt issuance costs and $4,443 underwriting commissions related to our IPO.

 

Basis of the Pro Forma Presentation

 

Upon consummation of the Business Combination, DFHT and IMC will adopt the accounting policies of CareMax. CareMax may identify differences between the accounting policies among the companies, that when conformed, could have a material impact on the consolidated financial statements of the combined entity.

 

 

 

 

Note 2—Reclassifications to Historical Financial Information of DFHT, CareMax, and IMC

 

        Certain balances and transactions presented in the historical financial statements of DFHT, IMC, and CareMax included within the unaudited pro forma condensed combined financial information have been reclassified to conform to the presentation of new group financial statements as indicated in the tables below.

 

DFHT Condensed Combined Balance Sheet

Reclassification as of March 31, 2021

 

    As per Historical            
  Unaudited Financial         As  
(in thousands)   Statements     Reclassifications     Reclassified  
Liabilities                        
Current liabilities:                        
     Accounts payable   $ 457     $ (457 )   $ -  
     Accrued expenses     4,355       (4,355 )     -  
     Accounts payable and accrued expenses     -       4,812       4,812  
     Franchise tax payable     49       (49 )     -  
     Other current liabilities     -       49       49  

 

DFHT Statement of Operations Reclassification for

the Three Months Ended March 31, 2021

 

    As per Historical              
  Unaudited Financial           As  
(in thousands)   Statements     Reclassifications     Reclassified  
General and administrative expenses   $ 1,547     $ 65     $ 1,612  
General and administrative expenses - related party     53       (53 )     -  
Franchise tax expense     13       (13 )     -  

 

 

 

 

Note 2—Reclassifications to Historical Financial Information of DFHT, CareMax, and IMC (continued)

 

DFHT Statement of Operations Reclassification for

the Year Ended December 31, 2020.

 

(in thousands)   As per Historical Audited Financial Statements     Reclassifications     As
Reclassified 		 
General and administrative expenses   $ 3,777     $ -     $ 4,012  
General and administrative expenses - related party            105                   (105 )                  -  
Franchise tax expense     130       (130 )     -  

 

CareMax Condensed Combined Balance Sheet

Reclassification as of March 31, 2021

 

    As per Historical              
    Unaudited Financial           As  
(in thousands)   Statements     Reclassifications     Reclassified  
Liabilities                        
Current liabilities:                        
     Accounts payable   $ 2,172     $ (2,172 )   $ -  
     Accrued expenses     2,438                (2,438 )                   -  
     Accrued interest payable     161       (161 )     -  
     Accounts payable- Care Holdings Group, LLC     504       (504 )        
     Accounts payable and accrued expenses     -       5,274       5,274  

 

 

 

 

Note 2 (continued)

 

CareMax Condensed Combined Statement of Operations Reclassification

for the Three Months Ended March 31, 2021

 

    As per Historical              
    Unaudited Financial           As  
    Statements     Reclassifications     Reclassified  
Selling, General and administrative expenses    $ 7,673      $ (7,673 )    $ -  
General and administrative expenses (Care Holdings)     1,704       (1,704 )     -  
   Selling, general & administrative expenses                     9,378  

 

CareMax Condensed Combined Statement of Operations Reclassification

for the Year Ended December 31, 2020

 

    As per Historical              
    Audited Financial           As  
(in thousands)   Statements     Reclassifications     Reclassified  
Capitated revenue   $ 127,159     $ (17,004 )   $ 110,155  
Administrative fee     17,004       (17,004 )     -  
Selling, General and administrative expenses     27,107       (27,107 )     -  
General and administrative expenses (Care Holdings)     4,172       (4,172 )     -  
General and administrative expenses (Clinica Las Americas)     1,663       (1,663 )     -  
Selling, general & administrative expenses                     32,942  

 

 

 

 

Note 2 (continued)

 

IMC Condensed Consolidated Balance Sheet
Reclassification as of March 31, 2021 		  As per Historical              
  unaudited Financial           As  
(in thousands)   Statements     Reclassifications     Reclassified  
Assets                        
Current assets:                        
Accounts receivable, net   $ -     $ 17,928     $ 17,928  
Capitated plan receivables, net     12,418       (12,418 )     -  
Other receivables, net     5,510       (5,510 )     -  
Liabilities                        
Current liabilities:                        
Accounts payable     2,198       (2,198 )     -  
Accrued expenses     3,881       (3,881 )     -  
Amounts due to health plans, net     1,467       (1,467 )     -  
Accounts payable and accrued expenses                   $ 7,547  

 

 

 

 

Note 2 (continued)

 

IMC Condensed Consolidated Statement of Operations
Reclassification for the Three Months Ended March 31, 2021 		                 
    As per Historical            
    Unaudited Financial         As  
(in thousands)   Statements     Reclassifications     Reclassified  
General and administrative expenses   $ 4,258     $ (4,258 )   $ 9,593  
Non-medical Salaries, wages, and beenfits     4,269       (4,269 )     -  
Amortization of intangibles     407       (407 )     -  
Depreciation Expense     659       (659 )     -  

 

IMC Condensed Consolidated Statement of Operations
Reclassification for the Year Ended December 31, 2020 		                 
    As per Historical            
    Audited Financial         As  
(in thousands)   Statements     Reclassifications     Reclassified  
General and administrative expenses   $ 12,741     $ (12,741 )   $ 31,136  
Non-medical Salaries, wages, and beenfits     13,962       (13,962 )     -  
Amortization of intangibles     1,627       (1,627 )     -  
Depreciation Expense     2,806       (2,806 )     -  

 

 

 

 

Note 3—Reclassifications and Adjustments to Historical Information of CareMax

 

The following table presents the pro forma balance sheet for CareMax as of March 31, 2021

 

    CareMax Medical     Care Holdings     Pro Forma  
(in thousands)   Group, LLC (1)     Group, LLC (2)     Combined  
Assets                        
Current assets:                        
Cash and cash equivalents   $ 6,435     $ 579     $ 7,014  
Accounts receivable, net     8,756       333       9,089  
Inventory     15       -       15  
Prepaid Expenses, net     167       2       169  
Due from Related Parties     627       -       627  
Total current assets     16,001       915       16,915  
Property and Equipment, net     6,191       62       6,253  
Goodwill     10,068       -       10,068  
Investments held in Trust Account     -       -       -  
Intangible Assets, net     8,323       -       8,323  
Other Assets     388       26       414  
Total assets   $ 40,971     $ 1,003     $ 41,974  
                         
Liabilities and Members' Equity                        
Current liabilities:                        
Accounts payable   $ 2,172     $ 504     $ 2,675  
Accrued expenses     2,438       -       2,438  
Accrued Interest Payable     161       -       161  
Risk Settlements Due to Providers     282       -       282  
Current portion of long-term debt, net     992       -       992  
Other current liabilities     -       51       51  
Total current liabilities     6,044       555       6,599  
Long-term debt, less current portion     26,190       504       26,694  
Other Liabilities     708       -       708  
Total liabilities     32,943       1,059       33,293  
                         
Units (no par value, 300 authorized, issued and outstanding as of March 31, 2021)     223       -       223  
Members' equity     7,805       (55 )     7,750  
Members' equity-controlling interest     8,028       (55 )     7,973  
Total Members' equity     8,028       (55 )     7,973  
Total Liabilities and Members' Equity   $ 40,971     $ 1,003     $ 41,974  

 

1) Represents the historical unaudited balance sheet of CareMax Medical Group, LLC.

2) Reflects the acquisition of Care Holdings Group, LLC as if the transaction occurred on March 31, 2021.

 

 

 

  

Note 3 (continued)

 

The following table presents the pro forma statement of operations for CareMax for the three months ended March 31, 2021:

 

  CareMax Medical     Care Holdings     Pro Forma  
(in thousands, except unit data)   Group, LLC (1)     LLC (2)     Combined  
Revenue:                        
Capitated Revenue   $ 27,819     $ -     $ 27,819  
Other Managed Care Services     99       -       99  
Other Revenue     -       917       917  
Net revenue     27,918       917       28,835  
Costs and expenses:                        
Medical Expenses     18,439       -       18,439  
General and administrative expenses     7,673       1,704       9,378  
Total costs and expenses     26,112       1,704       27,816  
Operating (loss) income     1,806       (787 )     1,018  
Interest expense     504       -       504  
Income before income taxes     1,302       (787 )     515  
Income tax expense     -       -       -  
Net Income   $ 1,302     $ (787 )   $ 515  
Weighted-average Common Units Outstanding     200       100       300  
Net Income per Unit - Basic & Diluted                   $ 1,093  

 

(1) Represents the historical unaudited statement of operations for CareMax.

(2) Represents the acquisition of Care Holdings Group, LLC as if the transaction was completed on January 1, 2020.

 

 

 

 

Note 3 (continued)

 

The following table presents the pro forma statement of operations for CareMax for the year ended December 31, 2020:

 

  CareMax Medical     Clinica     Care Holdings      Pro Forma  
(in thousands, except unit data)   Group, LLC (1)     Little Havana II     LLC (2)     Combined  
Revenue:                                
Capitated Revenue   $ 103,051     $ 7,104     $ -     $ 110,155  
Other Managed Care Services     370               -       370  
Other Revenue     -       -       4,457       4,457  
Net revenue     103,421       7,104       4,457       114,982  
Costs and expenses:                                
Medical Expenses     67,015       3,958       -       70,973  
General and administrative expenses     27,107       1,663       4,172       32,942  
Total costs and expenses     94,122       5,621       4,172       103,915  
Operating (loss) income     9,300       1,483       285       11,067  
Interest (income) expense     1,728       -       -       1,728  
Other (income) expense, net     -       -       5       5  
Income before income taxes     7,572       1,483       279       9,334  
Income tax expense     -               -       -  
Net income     7,572       1,483       279       9,334  
Net Income attributable to noncontrolling interest     (29 )     -       -       (29 )
Net Income Attributable to Controlling Interests   $ 7,601     $ 1,483     $ 279     $ 9,363  
Pro Forma Weighted-average Common Units Outstanding     200               100       300  
Pro Forma Net Income per Unit - Basic & Diluted                           $ 31,211  

 

(1) Represents the historical audited statement of operations for CareMax.

(2) Represents the acquisition of Clinica Las Americas and Care Holdings Group, LLC as if the transactions were completed on January 1, 2020.

 

 

 

 

Note 4—Pro Forma Adjustments

 

Adjustments to the Unaudited Pro Forma Condensed Combined Balance Sheet (in thousands)

 

The pro forma adjustments included in the unaudited pro forma condensed combined balance sheet as of March 31, 2021 are as follows:

 

a) Sources of cash include DFHT cash held in trust of $143,856, proceeds from the Deerfield PIPE of $410,000, proceeds of $125,000 of long-term debt off set by cash to CareMax and IMC shareholders of $318,141, repayment of gross debt of $103,402 and acquisition-related costs and debt and equity issuance costs of deal of $50,443 resulting in net cash to the balance sheet of $206,870.

 

b) See Note 1—Sources and Uses for the release of the Investments held in the Trust Account upon consummation of the Business Combination to fund the Closing.

 

c) At the date of closing of the Business Combination, CareMax entered a new long-term debt facility for $125.0 million and CareMax historical debt of $26.2 million (debt outstanding at March 31, 2021) and historical IMC debt of $77.2 million (debt outstanding as of March 31, 2021) was paid off with the proceeds of the new long-term debt facility. The historical IMC debt paid off concurrent with the Business Combination is recognized as a component of the consideration transferred to acquire IMC. See Note 4j for the pro forma adjustment to assume and pay off the IMC historical debt in the amount of $77.2 million.

 

We expect to incur debt issuance costs of approximately $3,000 related to the new long-term debt facility. The deferred debt issuance costs are amortized as a component of interest expense over a 5-year term of the long-term debt facility on the pro forma condensed statement of operations.

 

  Long-term  
(in thousands)   Debt  
Repayment of historical CareMax debt   $ (26,190 )
New long-term debt entered into by CareMax   $ 125,000  
Debt issuance costs   $ (3,000 )
New long-term debt, net   $ 122,000  

 

Proceeds from the Business Combination AND new long-term debt in the amount of $125,000 will be used to fund future acquisitions, repay debt or for other corporate purposes. Given there are no probable acquisitions at this time, the proformas assume proceeds will be used to repay debt in a manner where it can be redrawn when a future acquisition becomes available.

 

 

 

 

Note 4 (continued)

 

d) Represents the payment of $4,443 of deferred underwriting costs incurred as part of DFHT's initial public offering and committed to be paid upon the Closing of the Business Combination and its re-classification from long term liability on the historical books of DFHT to a reduction of cash to the balance sheet as these costs are expected to be paid at closing.
     
e) Below is a presentation of the pro forma adjustments to stockholders’ equity on the pro forma balance sheet.

 

Pro Forma Adjustments to Stockholders' Equity

 

        Historical Equity          
  Historical Equity   and Contingent Shares   Historical Equity   Pro Forma   Pro Forma  
(in thousands)   CareMax   DFHT   IMC   Adjustments   Combined  
    $ 7,973   $ 5,000   $ 58,586         $ 439,663  
Reclassification from contingent shares to Class A shares                       116,281        
Elimination of IMC historical equity to effect acquisition method                       (58,586 )      
Fair value of shares issued in connection with acquisition of IMC                       155,347        
Deemed dividend in connection with reverse merger transaction with CareMax (1)                       (234,087 )      
PIPE investment                       410,000        
Equity-classified contingent consideration                       22,148        
Payment of transaction fees (2)                       (43,000 )      
Cash paid to redeeming shareholders                       -        
                      $ 251,822        

 

(1) Represents the recapitalization of CareMax equity including the issuance of 10,796,067 shares of DFHT Class A Common Stock as part of the purchase consideration for the acquisition of CareMax. The excess of the purchase consideration for CareMax including the 10,796,067 shares of DFHT Class A Common Stock, equity-classified contingent consideration of $26,730 for the 3,500,000 contingently-issuable shares of DFHT Class A common stock and cash of $234,087 over the net assets of DFHT is recorded as an adjustment of CareMax equity.

 

(2) Transaction costs are comprised of approximately $12 million related to the estimated cost of the issuance of equity securities in connection with the PIPE and are recorded as a reduction of additional paid-in-capital within stockholders’ equity on the pro forma condensed balance sheet, acquisition-related costs including advisory, legal, accounting, valuation or other professional fees of approximately $31 million which are reflected on the pro forma condensed statement of operations as a general and administrative expense and as a reduction of retained earnings on the pro forma condensed balance sheet and $3 million of debt issuance costs on the new $125 million long-term debt facility which are reflected as a reduction of debt on the pro forma condensed balance sheet.

 

 

 

 

Note 4f

 

Adjustments to the Unaudited Pro Forma Condensed Combined Statements of Operations

 

The pro forma adjustments included in the unaudited pro forma condensed combined statement of operations for the three months March 31, 2021 and year ended December 31, 2020 are as follows:

 

  Pro Forma     Pro Forma  
    Three Months Ended     Year Ended  
(in thousands)   March 31, 2021     December 31, 2020  
Interest expense from term debt   $ 1,172     $ 4,688  
Reversal of historical interest expense     (2,454 )   $ (11,264 )
Pro forma adjustment   $ (1,282 )   $ (6,577 )

 

Represents interest expense related to the issuance of the new term debt and repayment of old term debt pursuant to the Business Combination, assuming the transaction took place on January 1, 2020.

 

$125 million x 3.75% interest x 3 months= $1.2 million interest expense for the three months ended March 31, 2021.

 

$125 million x 3.75% interest x 12 months= $4.7 million interest expense for the twelve months ended December 31, 2020.

 

The 3.75% interest rate is variable and is based on a commitment from a third-party lender.

 

New CareMax term debt of $125 million minus payoff of old term debt of $103.9 million based upon the old debt outstanding as of March 31, 2021, leaves net remaining term debt of $125 million.

 

A 1/8 % change in the variable interest rate of the debt would result in an approximate change to interest expense of $0.16 million

 

 

 

 

  Note 4 (continued)

 

g) Reflects income tax effect of pro forma adjustments using the estimated statutory tax rate of 24.52%. CareMax is organized as a limited liability company (“LLC”). As an LLC treated as a disregarded entity for income taxes purposes, CareMax has not historically presented an income tax provision and related balance sheet income tax accounts in its financial statements. The pro forma adjustments include an adjustment to reflect income taxes for CareMax, partially offset by the losses before income taxes for DFHT and IMC using an estimated statutory tax rate of 24.52%. In addition, the pro forma adjustments affecting income (loss) before income taxes reflect an income tax benefit effect using an estimated statutory tax rate of 24.52%. The pro forma adjustments do not include the pro forma effect on the combined entity’s deferred tax assets that may result from changes in the valuation allowances recorded on the deferred tax assets in the historical financial statements of DFHT and IMC.

 

h) As a result of the Business Combination and the conversion of the 3,593,750 shares Class B Common Stock, on a one-for-one basis, into shares of Class A Common Stock , the pro forma basic number of shares for the three months ended March 31, 2021 and the year ended December 31, 2020 are reflective of 80,176,840 shares of Class A Common Stock outstanding. The pro forma diluted number of shares for the three months ended March 31, 2021 includes potentially dilutive shares of 1,071,315 related to warrants to purchase an aggregate of 5,791,667 shares of Class A Common Stock at a price of $11.50. The pro forma number of diluted shares for the year ended December 31, 2020 excludes the warrants, since their inclusion would be anti-dilutive under the treasury stock method.

 

i) Reflects the CareMax acquisition of IMC and pro forma adjustments to reflect the opening balance sheet at fair value. See Note 5 for the purchase price allocation to each asset and liability and the excess consideration paid over the fair value of the net assets acquired.

 

 

 

 

Note 4 (continued)

 

    IMC unaudited Condensed              
    Historical Balance Sheet              
(thousands)   as of March 31, 2021     Pro Forma Adjustments     Pro Forma Combined  
Assets                        
  Cash   $ 14,000     $ -     $ 14,000  
  Accounts receivable     17,928       -       17,928  
  Other current assets     1,019       -       1,019  
Total Current Assets     32,947       -       32,947  
  Property, plant & equipment     6,509       -       6,509  
  Intangible Assets, net     17,626       15,526       33,152  
  Goodwill     85,476       187,437       272,913  
  Other assets     2,261       -       2,261  
Total Assets   $ 144,819     $ 202,963     $ 347,782  
Liabilities                        
  Accounts payable and accrued expenses     7,547       -       7,547  
  Short-term debt     323       -       323  
  Other current liabilities     -       -       -  
Total Current Liabilities     7,869       -       7,869  
  Long-term debt     77,212       (77,212 )     -  
  Other long term liabilities     1,151       -       1,151  
Total Liabilities     86,233       (77,212 )     9,021  
Members' Equity                        
  Member contributions     160,740       178,021       338,761  
  Accumulated deficit     (102,154 )     102,154       -  
Total Members' Equity     58,586       280,175       338,761  
Total Liabilities and Members' Equity   $ 144,819     $ 202,963     $ 347,782  

 

 

 

 

Note 4 (continued)

 

j) The below table reflects the pro forma amortization expense related to the IMC tradename/trademark and risk contract intangible assets acquired by CareMax and the reversal of historical trademark amortization expense.

 

  Pro Forma     Pro Forma  
    Three Months Ended     Year Ended  
(in thousands)   March 31, 2021     December 31, 2020  
Amortization expense- trade names/trademarks   $ -     $ 342  
Amortization expense- risk contracts     2,086       9,650  
Reversal of historical amortization expense     (407 )     (1,627 )
Pro forma adjustment   $ 1,679     $ 8,368  

 

Note 5—Business Combination

 

CareMax acquired the net assets of Interamerican Medical Center Group, LLC (“IMC”). The purchase price was approximately $339 million consisting of cash of $162 million (inclusive of $77 million in assumed IMC indebtedness based upon the balance as of March 31, 2021), paid off concurrently with the Business Combination), equity consideration of $155 million and contingent consideration of $22 million. The contingent consideration is included in equity in the pro forma combined condensed balance sheet. IMC constitutes a business and a significant acquisition and was accounted for under the acquisition method of accounting pursuant to ASC 805. The purchase price allocation is preliminary and subject to potential adjustments including updating the fair value of the equity consideration on the date of the completion of the Business Combination and the acquisition date fair value of assets acquired and liabilities assumed in the acquisition of IMC. The estimated fair value of the assets acquired and liabilities assumed, consisted of the following at the acquisition date:

 

 

 

 

Note 5—Business Combination (continued)

 

    Purchase price allocation  
Cash   $ 14,000  
Accounts receivable     17,928  
Other current assets     1,019  
Property, plant & equipment     6,509  
Identifiable Intangible Assets:        
  Tradenames/trademarks     345  
  Risk contracts     32,807  
Other assets     2,261  
Accounts payable and accrued expenses     (7,547 )
Current portion of long term debt     (323 )
Other long term liabilities     (1,151 )
  Net Assets Acquired     65,848  
Excess of Consideration over Net Assets Acquired     273,744  
Total Consideration   $ 272,913  

 

 

 

 

Note 5—Business Combination (continued)

 

The value of DFHT shares as equity consideration was based on the trading price of DFHT Class A Common Stock on the closing of the Business Combination (June 8, 2021) at a price of $14.92 per share.

 

A Monte Carlo simulation was used to value the Contingent Consideration. The traded price of DFHT was simulated in each trial using Geometric Brownian Motion and the simulated path was then analyzed to determine, which, if any, earnout tranches would be payable within the given trial. The estimated payments were calculated by multiplying the shares earned for a given tranche by the trading price of DFHT common stock at March 31, 2021. The average of all trials yielded the valuation conclusion.

 

The fair value of the tradenames/trademarks was determined using the Relief from Royalty Method. In estimating an appropriate royalty rate, we conducted a royalty search through the Intangible Spring Database for tradenames/trademarks in the Medical and Healthcare industries and concluded on a selected net royalty rate of 1.0%. After estimating the appropriate royalty rate, we considered the amount of revenue attributable to the tradenames/trademarks, the annual royalty savings for each discrete period, an effective tax rate of market participants and our plan to incrementally phase out the IMC tradename/trademark beginning in the third quarter of 2021 and completed by the end of 2021.

 

The fair value of risk contracts was determined using the multi-period excess earnings method. In estimating the forecasted excess earnings and in the determination of the estimated useful life, we applied an estimated patient attrition rate of 31% based upon our historical patient attrition. The risk contracts intangible asset is being amortized over six years on an accelerated basis that reflects the pattern in which the economic benefits of the risk contracts intangible asset is consumed or otherwise used up.  The accelerated basis reflects the fact that the Company receives a greater benefit in the earlier years after the acquisition and a lesser benefit over time due to the further attrition of patients that existed at the time of the acquisition.

 

We considered other potential intangible assets including patient relationships, marketing-related and other customer-related, artistic-related, contract-based, and technology-based intangibles. We concluded there were no other significant, identifiable intangible assets that should be valued separately from goodwill. Goodwill was recognized as the excess of the purchase price over the net identifiable assets recognized. The goodwill is primarily attributable to IMC’s assembled workforce and anticipated future economic benefits to be derived from the combination of IMC operations with CareMax.

 

 

 

 

COMPARATIVE SHARE INFORMATION

 

        The following table sets forth the historical comparative share information for DFHT, CareMax and IMC on a stand-alone basis and the unaudited pro forma combined share information for the three months March 31, 2021 and the year ended December 31, 2020, after giving effect to the Business Combination,

 

You should read the information in the following table in conjunction with the selected historical financial information summary included elsewhere in this proxy statement, and the historical financial statements of DFHT, CareMax, and IMC and related notes that are included elsewhere in this proxy statement. The unaudited pro forma combined share information is derived from, and should be read in conjunction with, the unaudited pro forma combined financial statements and related notes included elsewhere in this proxy statement.

 

The unaudited pro forma combined earnings per share information below does not purport to represent the earnings per share which would have occurred had the companies been combined during the periods presented, nor earnings per share for any future date or period. The unaudited pro forma combined book value per share information below does not purport to represent what the value of DFHT, CareMax, and IMC would have been had the companies been combined during the periods presented.

 

 

 

 

(in thousands, except per share information)   DFHT     CareMax     IMC     Pro Forma  
Three Months Ended March 31, 2021                                
Stockholders'/members' equity (deficit) and commitments and contingencies   $ 121,282     $ 7,973     $ 58,586     $ 439,663  
Net income (loss)   $ 9,302     $ 515     $ (1,599 )   $ 5,789  
Weighted average shares outstanding—basic     14,375,000       -       -       80,176,840  
Weighted average shares outstanding—diluted     15,446,315                       81,248,155  
Stockholders'/members' equity per share—basic   $ 8.44     $ -     $ -     $ 5.48  
Stockholders'/members' equity per share— diluted   $ 0.60     $ -     $ -     $ 5.41  
Basic net income per share   $ 0.65     $ -     $ -     $ 0.07  
Diluted net income per share   $ 0.65                     $ 0.07  
Cash dividends per share—basic   $ -     $ -     $ -     $ -  
Cash dividends per share—diluted   $ -     $ -     $ -     $ -  
Year Ended December 31, 2020                                
Net income (loss) attributable to controlling interest   $ (21,511 )   $ 9,363     $ 1,114     $ (33,524 )
Weighted average shares outstanding—basic and diluted     14,375,000       -       -       80,176,840  
Basic and diluted net income (loss) per share   $ (1.50 )   $ -     $ -     $ (0.42 )
Cash dividends per share—basic and diluted   $ -     $ -     $ -     $ -