Delaware
(State or other jurisdiction of
incorporation or organization)
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6770
(Primary Standard Industrial
Classification Code Number)
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84-4117825
(I.R.S. Employer
Identification Number)
|
Steven D. Pidgeon
Andrew D. Ledbetter
DLA Piper LLP (US)
2525 East Camelback Road
Phoenix, Arizona 85016-4232
Telephone: (480) 606-5100
|
Alexandra Plasencia
General Counsel
MSP Recovery, LLC
2701 Le Jeune Road, Floor 10
Coral Gables, Florida 33134
Telephone: (305) 614-2222
|
Michael J. Aiello
Matthew Gilroy
Amanda Fenster
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, NY 10153
Telephone: (212) 310-8000
|
Large accelerated filer
|
☐ |
Accelerated filer
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☐ |
Non-accelerated filer
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☒ |
Smaller reporting company
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☒ |
Emerging growth company
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☒ |
Title of each class of securities
to be registered
|
Amount
to be
registered
|
Proposed
maximum
offering price
per unit
|
Proposed
maximum
aggregate
offering price
|
Amount of
registration fee
|
||||||||||||
Warrants to purchase Class A Common Stock(1)
|
1,029,000,000
|
(2
|
)
|
(2
|
)
|
(2
|
)
|
|||||||||
Class A Common Stock underlying Warrants(3)
|
1,029,000,000
|
$
|
11.50(4
|
)
|
$
|
11,833,500,000(4
|
)
|
$
|
1,096,965.45(5
|
) (6)
|
(1) |
Represents the number of warrants of the Registrant (the “New Warrants”) each to acquire one share of Class A Common Stock of the Registrant (the “Class A Common Stock”) that are anticipated to be distributed on a pro-rata basis to the
holders of the Class A Common Stock that remain outstanding on the closing date of the business combination described in the accompanying proxy statement/prospectus (“Business Combination”) after the Registrant redeems the shares of Class A
Common Stock that the holders thereof have elected to redeem in connection with the Business Combination and after taking into consideration any such holders who have waived their right to receive such distribution.
|
(2) |
No separate fee due in accordance with Rule 457(g).
|
(3) |
Represents shares of Class A Common Stock to be issued upon exercise of the New Warrants.
|
(4) |
Calculated pursuant to Rule 457(g) under the Securities Act, based on the exercise price of the warrants.
|
(5) |
Calculated pursuant to Rule 457 of the Securities Act by multiplying the proposed maximum aggregate offering price of securities to be registered by 0.0000927.
|
(6)
|
The registrant previously paid the registration fee
in connection with a prior filing of this Registration Statement
|
|
(1) |
The Business Combination
Proposal—To consider and vote upon a proposal to approve the Membership Interest Purchase Agreement, dated as of July 11, 2021 (as it may be amended, supplemented or otherwise modified from time to time in accordance with its
terms, the “MIPA”), a copy of which is attached to the accompanying proxy statement/prospectus as Annex A, by and among the Company,
Lionheart II Holdings, LLC, a newly formed wholly owned subsidiary of the Company (“Opco”), the MSP Purchased Companies (as defined in the MIPA) (collectively, “MSP”), the members of MSP (the “Members”), and John H. Ruiz, in his capacity
as the representative of the Members (the “Members’ Representative”), and the transactions contemplated thereby. Pursuant to the MIPA, the Members will sell and assign all of their membership interests in MSP to Opco in exchange for
non-economic voting shares of Class V common stock, par value $0.0001, of the Company (“Class V Common Stock”) and non-voting economic Class B Units of Opco (“Class B Units,” and each pair consisting of one share of Class V Common Stock and one Class B Unit, an “Up-C Unit”) (such transaction, the “Business Combination”). Following the closing of the Business
Combination (the “Closing”), the Company will be organized in an “Up-C” structure in which all of the business of MSP and its subsidiaries will be held directly or indirectly by Opco, and the Company will own all of the voting economic
Class A Units of Opco and the Members and their designees will own all of the non-voting economic Class B Units in accordance with the terms of the first amended and restated limited liability company agreement of Opco (the “LLC
Agreement”). Each Up-C Unit may be exchanged for either, at the Company’s option, (a) cash or (b) one share of Class A common stock, par value $0.0001, of the Company (“Class A Common Stock”), subject to the provisions set forth in the
LLC Agreement. Subject to the terms and conditions set forth in the MIPA, the aggregate consideration to be paid to the Members (or their designees) will consist of (i) 3,250,000,000 Up-C Units and (ii) rights to receive payments under
the tax receivable agreement to be entered into at the Closing. Of the Up-C Units to be issued to certain Members at Closing, 6,000,000 (the “Escrow Units”) will be deposited into an escrow account with Continental Stock Transfer and
Trust Company to satisfy any indemnification claims that may be brought pursuant to the MIPA. Additionally, in connection with the Business Combination, the Company intends, subject to compliance with applicable law, to declare a dividend
comprising approximately 1,029,000,000 newly issued warrants, each to purchase one share of Class A Common Stock for an exercise price of $11.50 per share (the “New Warrants”), conditioned upon the consummation of any redemptions by the
holders of Class A Common Stock and the Closing, to the holders of record of the Class A Common Stock as of the close of business on the date of Closing (the “Closing Date”), after giving effect to the waiver of the right, title and
interest in, to or under, participation in any such dividend by the Members, on behalf of themselves and any of their designees. Following the Closing, the Company will have two classes of authorized common stock. The shares of Class A
Common Stock and Class V Common Stock each will be entitled to one vote per share on matters submitted to a vote of stockholders. Holders of the Class V Common Stock will not have any of the economic rights (including rights to dividends
and distributions upon liquidation) provided to holders of the Class A Common Stock. Following the Closing, assuming no redemptions by Public Stockholders and excluding the impact on any outstanding warrants, John H. Ruiz, the CEO and
founder of MSP, and Frank C. Quesada, the CLO of MSP, will together control approximately 92.6% of the combined voting power of the capital stock of the Company (assuming no attributed ownership based on Messrs. Ruiz and Quesada’s
investment in VRM) (the “Business Combination Proposal”);
|
|
(2) |
The Nasdaq Proposal—To consider and vote upon a proposal to approve, for purposes of complying with applicable listing rules of The Nasdaq Capital Market (“Nasdaq”) the issuance of more than 20%
of the issued and outstanding common stock, par value $0.0001 per share, of the Company and voting power in connection with the Business Combination (the “Nasdaq Proposal”);
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|
(3) |
The Charter Approval Proposal—To consider and vote upon a proposal to
adopt the Second Amended and Restated Certificate of Incorporation (the “Proposed Charter”) in the form attached to the accompanying proxy statement/prospectus as Annex B (the “Charter Approval Proposal”);
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|
(4) |
The Non-Binding Governance Proposals—To consider and vote upon, on a non-binding advisory basis, the separate proposals with respect to certain governance provisions in the Proposed Charter in
accordance with the requirements of the Securities and Exchange Commission (the “Non-Binding Governance Proposals”):
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|
a. |
Proposal No. 4A: Change in
Authorized Shares—To (i) increase the Post-Combination Company’s total number of authorized shares of capital stock from 111,000,000 shares to 8,760,000,000 shares of capital stock, (ii) increase the Post-Combination Company’s
authorized Class A Common Stock from 100,000,000 shares to 5,500,000,000 shares of Class A Common Stock, (iii) create the Class V Common Stock, consisting of 3,250,000,000 authorized shares of Class V Common Stock and (iv) increase the
Post-Combination Company’s authorized shares of Preferred Stock from 1,000,000 to 10,000,000 shares of Preferred Stock.
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|
b. |
Proposal No. 4B: Dual-Class Stock—To provide for a capital
structure pursuant to which there are two classes of common stock and in which, subject to applicable law and the rights, if any, of the holders of any outstanding series of Preferred Stock, the holders of outstanding shares of common
stock of the Post-Combination Company will vote together as a single class on all matters with respect to which stockholders of the Post-Combination Company are entitled to vote under applicable law, the Proposed Charter or the
Amended and Restated Bylaws, or upon which a vote of the stockholders generally entitled to vote is otherwise duly called for by the Post-Combination Company; provided, however, that except as may otherwise be required by applicable
law, each holder of outstanding shares of common stock of the Post-Combination Company will not be entitled to vote on any amendment to the Proposed Charter that relates solely to the terms of one or more outstanding series of
Preferred Stock (including, without limitation, the powers (including voting powers), if any, preferences and relative, participating, optional, special or other rights, if any, and the qualifications, limitations and restrictions, if
any, of such series of Preferred Stock), if the holders of such affected series are entitled, either voting separately as a single class or together as a class with the holders of any other outstanding series of Preferred Stock, to
vote thereon pursuant to the Proposed Charter or the Delaware General Corporation Law. In each such vote, the holders of Class A Common Stock and holders of Class V Common Stock will be entitled to one vote per share of Class A
Common Stock or Class V Common Stock, respectively, including the election of directors and significant corporate transactions (such as a merger or other sale of the Post-Combination Company or its assets).
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|
c. |
Proposal No. 4C: Removal of Directors—To provide that any director or
the entire board of directors of the Post-Combination Company (the “Board”) may be removed (i) at any time prior to the Voting Rights Threshold Date by a simple majority voting together as a single class, with or without cause,
notwithstanding the classification of the Board, and (ii) at any time from and after the Voting Rights Threshold Date, solely for cause and only by the affirmative vote of the holders of at least 66-2/3% of the voting power of all of the
then outstanding shares of the Company generally entitled to vote thereon, voting together as a single class.
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|
d. |
Proposal No. 4D: Required Stockholder Vote to Amend Certain Sections of the
Proposed Charter—To provide that, in addition to any affirmative vote required by applicable law or the Proposed Charter, from and after the Voting Rights Threshold Date, the approval by affirmative vote of the holders of at
least 66-2/3% in voting power of the then outstanding shares of the Post-Combination Company generally entitled to vote is required to make any amendment to Article Seventh (Board of Directors) or Article Eighth (Written Consent of
Stockholders) of the Proposed Charter.
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|
e. |
Proposal No. 4E: Required Stockholder Vote to Amend the Amended and Restated
Bylaws—To provide that, in addition to any affirmative vote required by the Proposed Charter, any bylaw that is to be made, altered, amended or repealed by the stockholders of the Post-Combination Company shall receive, at any
time (i) prior to the Voting Rights Threshold Date, the affirmative vote of the holders of at least a majority in voting power of the then outstanding shares of the Post-Combination Company generally entitled to vote, voting together as a
single class, and (ii) from and after the Voting Rights Threshold Date, the affirmative vote of the holders of at least 66-2/3% in voting power of the then outstanding shares of stock of the Post-Combination Company generally entitled to
vote, voting together as a single class.
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|
(5) |
The Director Election Proposal—To consider and vote upon a proposal to elect seven directors to serve on the Board of Directors of the Post-Combination Company until the first annual meeting of
stockholders following the Business Combination, in the case of Class I directors, the second annual meeting of stockholders following the Business Combination, in the case of Class II directors, and the third annual meeting of stockholders
following the Business Combination, in the case of Class III directors, and, in each case, until their respective successors are duly elected and qualified (the “Director Election Proposal”);
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|
(6) |
The Incentive Plan Proposal—To consider and vote upon a proposal to approve and adopt the MSP Recovery, Inc. 2021 Omnibus Incentive Plan (the “Incentive Plan”) and the material terms thereunder
(the “Equity Incentive Plan Proposal”). A copy of the Incentive Plan is attached to the accompanying proxy statement/prospectus as Annex J; and
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|
(7) |
The Adjournment Proposal—To consider and vote upon a proposal to approve the adjournment of the Special Meeting to a later date or dates, if necessary, (A) to ensure that any supplement or
amendment to the accompanying proxy statement/prospectus that the Board of Directors of the Company (the “LCAP Board”) has determined in good faith is required by applicable law to be disclosed to Company stockholders and for such
supplement or amendment to be promptly disseminated to Company stockholders prior to the Special Meeting, (B) if, as of the time for which the Special Meeting is originally scheduled, there are insufficient shares of common stock
represented (either in person or by proxy) to constitute a quorum necessary to conduct business at the Special Meeting or (C) to permit further solicitation and vote of proxies if there are insufficient votes for, or otherwise in connection
with, the approval of the Business Combination Proposal, the Nasdaq Proposal, the Charter Approval Proposal, the Director Election Proposal or the Incentive Plan Proposal (the “Adjournment Proposal” and, together with the Business
Combination Proposal, the Nasdaq Proposal, the Charter Approval Proposal, the Non-Binding Governance Proposals, the Director Election Proposal and the Equity Incentive Plan Proposal, each, a “Proposal” and collectively, the “Proposals”).
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By Order of the Board of Directors
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|
|
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Ophir Sternberg
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Chairman, President and Chief Executive Officer
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II -1 |
Q: |
WHAT IS THE BUSINESS COMBINATION?
|
A: |
Pursuant to the MIPA, the Members will sell and assign all of their membership interests in MSP to Opco in exchange for Up-C
Units (or shares of Class A Common Stock). Following the Closing, the Company will be organized in an “Up-C” structure in which all of the business of MSP and its subsidiaries will be held directly or indirectly by Opco, and the
Company will own all of the voting economic Class A Units of Opco and the Members or their designees will own all of the non-voting economic Class B Units of Opco in accordance with the terms of the LLC Agreement. Each Up-C Unit may
be exchanged for either, at the Company’s option, (a) cash or (b) one share of Class A Common Stock, subject to the provisions set forth in the LLC Agreement. Subject to the terms and conditions set forth in the MIPA, the aggregate
consideration to be paid to the Members (or their designees) will consist of (i) 3,250,000,000 Up-C Units and (ii) rights to receive payments under the tax receivable agreement to be entered into at the Closing. Of the Up-C Units to
be issued to certain Members at Closing, 6,000,000 will be deposited into an escrow account with Continental Stock Transfer and Trust Company, to satisfy any indemnification claims that may be brought pursuant to the MIPA.
Additionally, in connection with the Business Combination and as an incentive to holders of Class A Common Stock not to redeem their shares of Class A Common Stock, the Company intends, subject to compliance with applicable law, to
declare a dividend comprising an aggregate of approximately 1,029,000,000 New Warrants, conditioned upon the consummation of any redemptions by the holders of Class A Common Stock and the Closing, to the holders of record of the Class
A Common Stock as of the Closing Date, after giving effect to the waiver of the right, title and interest in, to or under, participation in any such dividend by the Members, on behalf of themselves and any of their designees.
Following the Closing, the Company will have two classes of authorized common stock. The shares of Class A Common Stock and Class V Common Stock each will be entitled to one vote per share on matters submitted to a vote of
stockholders. The holders of the Class V Common Stock will not have any of the economic rights (including rights to dividends and distributions upon liquidation) provided to holders of the Class A Common Stock. Following the Closing,
assuming no redemptions by Public Stockholders and excluding the impact on any outstanding warrants, John H. Ruiz, the CEO and founder of MSP, and Frank C. Quesada, the CLO of MSP, will together control approximately 92.6% of the
combined voting power of the capital stock of the Company (assuming no attributed ownership based on Messrs. Ruiz and Quesada’s investment in VRM) (See “Certain Relationships and Related Party Transactions” beginning on page [●]).
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Q: |
WHY AM I RECEIVING THIS DOCUMENT?
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A: |
The Company is sending this proxy statement/prospectus to its stockholders to help them decide how to vote their shares of the Company’s common stock with respect to the matters to be considered at the Special Meeting. The Business
Combination cannot be completed unless Company stockholders approve the Business Combination Proposal, the Nasdaq Proposal, the Charter Approval Proposal, the Incentive Plan Proposal and the Director Election Proposal set forth in this
proxy statement/prospectus for their approval. Information about the Special Meeting, the Business Combination and the other business to be considered by stockholders at the Special Meeting is contained in this proxy statement/prospectus.
This document constitutes a proxy statement of the Company and a prospectus of the Company. It is a proxy statement because the LCAP Board is soliciting proxies from its stockholders using this proxy statement/prospectus. It is a
prospectus because the Company is offering the New Warrants in connection with the Business Combination. See “Membership Interest Purchase Agreement.”
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Q: |
WHAT WILL MSP’S MEMBERS RECEIVE IN THE BUSINESS COMBINATION?
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A: |
Subject to the terms and conditions set forth in the MIPA, the aggregate consideration to be paid to the Members (or their designees) will consist of (i)
3,250,000,000 Up-C Units or, pursuant to notice delivered to the Company, with respect to all or a portion of the Up-C Units to be received by each such Member, one share of Class A Common Stock in lieu of each Up-C Unit and (ii) rights
to receive payments under the tax receivable agreement to be entered into at the Closing. Of the Up-C Units to be issued to certain Members at Closing, 6,000,000 will be deposited into an escrow account with Continental Stock Transfer and
Trust Company to satisfy any indemnification claims that may be brought pursuant to the MIPA.
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Q: |
WHEN DO YOU EXPECT THE BUSINESS COMBINATION TO BE COMPLETED?
|
A: |
It is currently anticipated that the Business Combination will be consummated promptly following the Special Meeting, which is set for [ ], 2022; however, such meeting could be adjourned, as described herein. Neither the Company nor MSP
can assure you of when or if the Business Combination will be completed and it is possible that factors outside of the control of both companies could result in the Business Combination being completed at a different time or not at all.
Prior to the Closing, the Company must obtain the approval of its stockholders for certain of the proposals set forth in this proxy statement/prospectus for their approval and the Company and MSP must obtain certain necessary regulatory
approvals and satisfy other closing conditions. See “The Membership Interest Purchase Agreement — Conditions to the Business Combination” beginning on page [●].
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Q: |
WHAT HAPPENS IF THE BUSINESS COMBINATION IS NOT COMPLETED?
|
A: |
If the Business Combination Proposal is not approved and we do not consummate a business combination by February 18, 2022, or
assuming the Extension is approved, by August 18, 2022, we will be required to dissolve and liquidate our Trust Account, unless we amend our current certificate of incorporation (which requires the affirmative vote of the holders of
65% of all then outstanding shares of common stock) and amend certain other agreements into which we have entered to extend the life of the Company. Pursuant to the MIPA, if either the Members’ Representative (on behalf of the
Members) or the Company reasonably believes that the Closing may not occur by February 18, 2022, but that the parties to the MIPA are reasonably capable of causing the Closing to occur prior to March 31, 2022, then the Company shall,
take all actions reasonably necessary (including pursuant to the provisions of the Existing Charter) to obtain the approval of the Company’s stockholders to extend the deadline for the Company to consummate its initial business
combination beyond February 18, 2022 to a date no earlier than sixty (60) days following March 31, 2022.
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Q: |
HOW WILL THE COMPANY BE MANAGED AND GOVERNED FOLLOWING THE BUSINESS COMBINATION?
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A: |
The Company does not currently have any management-level employees other than Ophir Sternberg, our Chairman, President and Chief Executive Officer, Paul Rapisarda, our Chief Financial Officer, and Faquiry Diaz Cala, our Chief Operating
Officer. Following the Closing, the Company’s executive officers are expected to be the current management team of MSP. See “Management of the Post-Combination Company Following the Business Combination”
for more information.
|
|
Following the Closing, the Board will consist of the following seven members: John H. Ruiz, Frank C. Quesada, Ophir Sternberg and four
additional director-nominees who will be included in a subsequent pre-effective amendment to this proxy statement/prospectus. In addition, following the Closing, we expect that a majority of the directors will be “independent” under
applicable Nasdaq listing rules. See the section entitled “Management of the Post-Combination Company Following the Business Combination”
beginning on page [●] for more information.
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Q: |
WHAT EQUITY STAKE WILL CURRENT STOCKHOLDERS, THE INITIAL STOCKHOLDERS, AND THE MEMBERS HOLD IN THE POST-COMBINATION COMPANY?
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A: |
It is anticipated that, upon completion of the Business Combination, and assuming that (1) no shares of Class A Common Stock
are elected to be redeemed and (2) the holders of the Company’s existing Public Warrants and Private Warrants exercise those warrants, and no New Warrants are exercised: (i) the Public Stockholders will retain approximately 1.1% of
the common stock of the Post-Combination Company; (ii) the Initial Stockholders will retain approximately 0.2% of the common stock of the Post-Combination Company; and (iii) the Members (or their designees) will acquire
approximately 98.7% of the common stock of the Post-Combination Company. See “Summary—Ownership of the Post-Combination Company.”
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Q: |
FOLLOWING THE BUSINESS COMBINATION, WILL THE COMPANY’S COMMON STOCK CONTINUE TO TRADE ON A STOCK EXCHANGE?
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A: |
Yes. We intend to apply to continue the listing of our publicly traded Class A Common Stock and Public Warrants on Nasdaq under the symbols “MSPR” and “LCAPW,” respectively, and apply to list the New Warrants under the symbol “MSPRW,”
upon the closing of the Business Combination. If issued, the New Warrants are expected to trade promptly following their issuance. At the Closing, each Unit will separate into its components, comprising one share of Class A Common Stock and
one-half of one Public Warrant. Following the Closing, we intend to change our name from “Lionheart Acquisition Corporation II” to “MSP Recovery, Inc.”
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Q: |
WHAT ARE THE PRINCIPAL DIFFERENCES BETWEEN THE POST-COMBINATION COMPANY’S CLASS A COMMON STOCK AND CLASS V COMMON STOCK?
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A: |
Each holder of record of Class A Common Stock and Class V Common Stock on the relevant record date will be entitled to cast one vote for each share of Class A Common Stock or Class V Common Stock,
respectively. Holders of the Class V Common Stock will not have any of the economic rights (including rights to dividends and distributions upon liquidation) provided to holders of the Class A Common
Stock. For more information, please see the section entitled “Description of Securities.”
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Q: |
WHAT CONDITIONS MUST BE SATISFIED TO COMPLETE THE BUSINESS COMBINATION?
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A: |
There are a number of closing conditions in the MIPA, including the approval by the stockholders of the Company of the Business Combination Proposal, the Nasdaq Proposal, the Charter Approval Proposal, the Director Election Proposal and
the Incentive Plan Proposal. For a summary of the conditions that must be satisfied or waived prior to completion of the Business Combination, please see the section entitled “Membership Interest Purchase
Agreement.”
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Q: |
WHEN AND WHERE IS THE SPECIAL MEETING?
|
A:
|
The Special Meeting will be held at a.m. Eastern Time, on , 2022 in virtual format. The Special Meeting can be accessed by visiting [●], where Company stockholders will be able to listen to the meeting live and vote during
the meeting. Additionally, Company stockholders have the option to listen to the Special Meeting by dialing [●] (toll-free within the U.S. and Canada) or [●] (outside of the U.S. and Canada, standard rates apply). The passcode for
telephone access is [●], but please note that Company stockholders who choose to participate telephonically cannot vote or ask questions. Company stockholders who wish to join the Special Meeting telephonically may be counted as present,
vote at and examine the list of Company stockholders entitled to vote at the Special Meeting by visiting and entering the control number included in the proxy card, voting instruction form or notice included in their proxy materials.
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|
Company stockholders of record will need their respective control number to join the Special Meeting. Company stockholders may obtain their control number from the proxy card, voting instruction form or notice received from Broadridge
Financial Solutions (“Broadridge”). Any Company stockholder who holds his, her or its position through a bank or broker and would like to join the Special Meeting must contact Broadridge at [●], or www. [●].com to obtain a control number.
In light of ongoing public health concerns regarding the COVID-19 pandemic, the Special Meeting will be held in virtual meeting format only. Company stockholders will not be able to attend the Special Meeting physically.
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Q: |
WHAT AM I BEING ASKED TO VOTE ON AND WHY IS THIS APPROVAL NECESSARY?
|
A: |
Company stockholders are being asked to vote on the following:
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|
• |
A proposal to adopt the MIPA and the transactions contemplated thereby. See the section entitled “Proposal No. 1 — The Business Combination Proposal.”
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|
• |
A proposal to approve, for purposes of complying with applicable listing rules of Nasdaq the issuance of more than 20% of the issued and outstanding common stock of the Company and voting power in connection with the Business
Combination. See the section entitled “Proposal No. 2 — The Nasdaq Proposal.”
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|
• |
A proposal to adopt the Proposed Charter in the form attached hereto as Annex B. See the section entitled “Proposal No. 3 — The Charter Approval Proposal.”
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• |
Five separate proposals with respect to certain governance provisions in the Proposed Charter, which are being separately presented in accordance with SEC requirements and which will be voted upon on a non-binding advisory basis.
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o |
Proposal No. 4A: Change in
Authorized Shares—To (i) increase the Post-Combination Company’s total number of authorized shares of capital stock from 111,000,000 shares to 8,760,000,000 shares of capital stock, (ii) increase the Post-Combination
Company’s authorized Class A Common Stock from 100,000,000 shares to 5,500,000,000 shares of Class A Common Stock, (iii) create the Class V Common Stock, consisting of 3,250,000,000 authorized shares of Class V Common Stock and (iv)
increase the Post-Combination Company’s authorized shares of Preferred Stock from 1,000,000 to 10,000,000 shares of Preferred Stock.
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|
o |
Proposal No. 4B: Dual-Class Stock—To provide for a capital structure pursuant to which, subject to applicable law and the rights, if any, of the holders of any outstanding series of Preferred
Stock, the holders of outstanding shares of common stock of the Post-Combination Company will vote together as a single class on all matters with respect to which stockholders of the Post-Combination Company are entitled to vote under
applicable law, the Proposed Charter or the Amended and Restated Bylaws, or upon which a vote of the stockholders generally entitled to vote is otherwise duly called for by the Post-Combination Company; provided, however, that except as may
otherwise be required by applicable law, each holder of outstanding shares of common stock of the Post-Combination Company will not be entitled to vote on any amendment to the Proposed Charter that relates solely to the terms of one or more
outstanding series of Preferred Stock (including, without limitation, the powers (including voting powers), if any, preferences and relative, participating, optional, special or other rights, if any, and the qualifications, limitations and
restrictions, if any, of such series of Preferred Stock), if the holders of such affected series are entitled, either voting separately as a single class or together as a class with the holders of any other outstanding series of Preferred
Stock, to vote thereon pursuant to the Proposed Charter or the DGCL. In each such vote, the holders of Class A Common Stock and holders of Class V Common Stock will be entitled to one vote per share of Class A Common Stock or Class V
Common Stock, respectively, including the election of directors and significant corporate transactions (such as a merger or other sale of the Post-Combination Company or its assets).
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|
o |
Proposal No. 4C: Removal of Directors—To provide that any director or the entire Board may be removed (i) at any time prior to the Voting Rights Threshold Date by a simple majority voting together
as a single class, with or without cause, notwithstanding the classification of the Board, and (ii) at any time from and after the Voting Rights Threshold Date, solely for cause and only by the affirmative vote of the holders of at least
66-2/3% of the voting power of all of the then outstanding shares of the Corporation generally entitled to vote thereon, voting together as a single class.
|
|
o |
Proposal No. 4D: Required Stockholder Vote to Amend Certain Sections of the Proposed Charter—To provide that, from and after the Voting Rights Threshold Date, in addition to any affirmative vote
required by applicable law, the approval by affirmative vote of the holders of at least 66-2/3% in voting power of the then outstanding shares of the Post-Combination Company generally entitled to vote is required to make any amendment to
Article Seventh (Board of Directors) or Article Eighth (Written Consent of Stockholders) of the Proposed Charter.
|
|
o |
Proposal No 4E: Required Stockholder Vote to Amend the Amended and Restated Bylaws—To provide that, in addition to any affirmative vote required by the Proposed Charter, any bylaw that is to be
made, altered, amended or repealed by the stockholders of the Post-Combination Company shall receive, at any time (i) prior to the Voting Rights Threshold Date, the affirmative vote of the holders of at least a majority in voting power of
the then outstanding shares of the Post-Combination Company generally entitled to vote, voting together as a single class, and (ii) from and after the Voting Rights Threshold Date, the affirmative vote of the holders of at least 66-2/3% in
voting power of the then outstanding shares of stock of the Post-Combination Company generally entitled to vote, voting together as a single class.
|
|
• |
A proposal to elect seven directors to serve on the Board of Directors of the Post-Combination Company until the first annual meeting of stockholders following the Business Combination, in the case of Class I directors, the second annual
meeting of stockholders following the Business Combination, in the case of Class II directors, and the third annual meeting of stockholders following the Business Combination, in the case of Class III directors, and, in each case, until
their respective successors are duly elected and qualified. See the section entitled “Proposal No. 5 — The Director Election Proposal.”
|
|
• |
A proposal to approve and adopt the MSP Recovery, Inc. 2021 Omnibus Incentive Plan, a copy of which is attached hereto as Annex J. See the section entitled “Proposal
No. 6 — The Incentive Plan Proposal.”
|
|
• |
A proposal to approve the adjournment of the Special Meeting to a later date or dates, if necessary, (A) to ensure that any supplement or amendment to the accompanying proxy statement/prospectus that the LCAP Board has determined in good
faith is required by applicable law to be disclosed to Company stockholders and for such supplement or amendment to be promptly disseminated to Company stockholders prior to the Special Meeting, (B) if, as of the time for which the Special
Meeting is originally scheduled, there are insufficient shares of common stock represented (either in person or by proxy) to constitute a quorum necessary to conduct business at the Special Meeting or (C) to permit further solicitation and
vote of proxies if there are insufficient votes for, or otherwise in connection with, the approval of the Business Combination Proposal, the Nasdaq Proposal, the Charter Approval Proposal, the Director Election Proposal or the Incentive
Plan Proposal. See the section entitled “Proposal No. 7 — The Adjournment Proposal.”
|
Q: |
ARE THE PROPOSALS CONDITIONED ON ONE ANOTHER?
|
A: |
Yes. The Closing is conditioned on the approval of each of the Business Combination Proposal, the Nasdaq Proposal, the
Charter Approval Proposal, the Director Election Proposal and the Incentive Plan Proposal at the Special Meeting, subject to the terms of the MIPA. If any of these proposals are not approved, we will not consummate the Business
Combination. If the Business Combination Proposal is not approved, the other Proposals (except the Adjournment Proposal, as described below) will not be presented to the stockholders for a vote. The Adjournment Proposal is not
conditioned on the approval of any other proposal set forth in this proxy statement/prospectus. If we do not consummate the Business Combination and fail to complete an initial business combination by February 18, 2022, or
assuming the Extension is approved, by August 18, 2022, we will be required to dissolve and liquidate our Trust Account by returning the then remaining funds in such account to the Public Stockholders. Pursuant to the MIPA, if
either the Members’ Representative (on behalf of the Members) or the Company reasonably believes that the Closing may not occur by February 18, 2022, but that the parties to the MIPA are reasonably capable of causing the Closing
to occur prior to March 31, 2022, then the Company shall, take all actions reasonably necessary (including pursuant to the provisions of the Existing Charter) to obtain the approval of the Company’s stockholders to extend the
deadline for the Company to consummate its initial business combination beyond February 18, 2022 to a date no earlier than sixty (60) days following March 31, 2022.
|
Q: |
WHAT IS MSP’S BUSINESS?
|
A: |
MSP is a healthcare recovery and data analytics company. MSP has also developed software that solves many of the issues currently being
experienced by doctors, hospitals as well as other healthcare practitioners as well as payers within the healthcare system. The MSP systems provide a platform for providers to identify proper payers at the time of patient encounter
and to collect payment more quickly, at higher amounts. MSP’s agreements allow for MSP to monetize the claims that are processed and properly identified. MSP has also identified systemic issues relating to police reporting at the
time of auto accidents and is developing software to solve these issues. This software system, using blockchain technology, will involve proper capture of data to help first responders to identify health conditions at the scene of
accidents and transmit that data for improved patient care. MSP’s system will also enable individuals to access their health care data, which will be encrypted and stored and accessed through a cloud. Individuals can then choose to
grant immediate data access to their healthcare practitioners, for healthcare services based on up-to-date patient medical information. MSP’s business model includes two principal lines of business: (a) claims recovery and (b) “chase
to pay” services. First, through the claims recovery services, MSP acquires claims from its Assignors and utilizes its data analytics services to identify improper payments for healthcare services. After identifying improper payments,
MSP then seeks to recover the amounts owed to its Assignors against those parties who, under applicable law or contract, were primarily responsible for payment. Second, MSP has been developing the process of a real-time data analytics
platform (“Chase to Pay”) to assist healthcare providers to identify the proper primary insurer at the point of care, thereby helping MSP’s clients avoid making a wrongful payment for services rendered by a provider, as well as
providing more efficient healthcare services. See the section entitled “Information About MSP” beginning on page [●] for more information.
|
Q: |
WHY IS THE COMPANY PROPOSING THE BUSINESS COMBINATION?
|
A: |
The Company was organized to effect a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or other similar business combination with one or more businesses or entities.
|
Q: |
DID THE LCAP BOARD OBTAIN A FAIRNESS OPINION IN DETERMINING WHETHER OR NOT TO PROCEED WITH THE BUSINESS COMBINATION?
|
A: |
No. Neither the LCAP Board nor any committee thereof is required to obtain an opinion from an independent investment banking or accounting firm that the
Business Combination is fair to us from a financial point of view. Neither the LCAP Board nor any committee thereof obtained a third-party valuation in connection with the Business Combination. In analyzing the Business Combination, the
Company and its representatives and professional advisors conducted extensive due diligence on MSP and the financial terms set forth in the MIPA. Based on the foregoing, the LCAP Board unanimously determined that the Business Combination
was fair and advisable to, and in the best interest of, the Company and its stockholders.
|
Q: |
WHY IS THE COMPANY PROVIDING STOCKHOLDERS WITH THE OPPORTUNITY TO VOTE ON THE BUSINESS COMBINATION?
|
A: |
We are seeking approval of the Business Combination for purposes of complying with our Existing Charter and applicable Nasdaq
listing rules requiring stockholder approval of issuances of more than 20% of a listed company’s issued and outstanding common stock and voting power. In addition, pursuant to the Existing Charter, we must provide all Public Stockholders
with the opportunity to redeem all or a portion of their Public Shares upon the consummation of an initial business combination (as defined in our Existing Charter), either in conjunction with a tender offer or in conjunction with a
stockholder vote to approve such initial business combination. If we submit an initial business combination to the stockholders for their approval, our Existing Charter requires us to conduct a redemption offer in conjunction with the
proxy solicitation (and not in conjunction with a tender offer) pursuant to the applicable SEC proxy solicitation rules.
|
Q: |
DO MSP’S MEMBERS NEED TO APPROVE THE BUSINESS COMBINATION?
|
A: |
Although the Closing is subject to various actions by the Members, the Members are each party to the MIPA and, as such, have already provided their approval for the Business Combination in their capacity as equityholders of the MSP
Purchased Companies.
|
Q: |
DO I HAVE REDEMPTION RIGHTS?
|
A: |
If you are a holder of Public Shares, you have the right to demand that the Company redeem such shares for a pro rata portion of the cash held in the Trust Account, which holds the proceeds of the IPO, as of two business days prior to
the consummation of the transactions contemplated by the Business Combination Proposal (including interest earned on the funds held in the Trust Account and not previously released to the Company to pay taxes) upon the Closing (“Redemption
Rights”).
|
|
Notwithstanding the foregoing, a holder of Public Shares, together with any affiliate of such holder or any other person with whom
such holder is acting in concert or as a “group” (as defined in Section 13(d)(3) of the Exchange Act) will be restricted from seeking redemption with respect to more than 15% of the Public Shares without our consent. Accordingly, all
Public Shares in excess of 15% held by a Public Stockholder, together with any affiliate of such stockholder or any other person with whom such holder is acting in concert or as a “group,” will not be redeemed without our consent.
|
Q: |
WILL MY VOTE AFFECT MY ABILITY TO EXERCISE REDEMPTION RIGHTS?
|
A: |
No. You may exercise your redemption rights whether you vote your Public Shares for or against, or whether you abstain from voting
on, the Business Combination Proposal or any other Proposal described in this proxy statement/prospectus. As a result, the Business Combination Proposal can be approved by stockholders who will redeem their Public Shares and no longer
remain stockholders, and the Business Combination may be consummated even though the funds available from the Trust Account and the number of Public Stockholders are substantially reduced as a result of redemptions by Public Stockholders.
|
Q: |
HOW DO I EXERCISE MY REDEMPTION RIGHTS?
|
A: |
In order to exercise your redemption rights, you must (i) if you hold Public Units, separate the underlying Public Shares and Public Warrants, and (ii) prior to 5:00 p.m. Eastern Time on, [●], 2022 (two business days before the Special
Meeting), tender your shares physically or electronically and submit a request in writing that we redeem your Public Shares for cash to Continental Stock Transfer & Trust Company, our transfer agent (“Transfer Agent”), at the following
address:
|
Q: |
DO I HAVE APPRAISAL RIGHTS IF I OBJECT TO THE PROPOSED BUSINESS COMBINATION?
|
A: |
No. The Company’s stockholders do not have appraisal rights in connection with the Business Combination under the DGCL. See the section entitled “Appraisal Rights.”
|
Q: |
WHAT HAPPENS TO THE FUNDS DEPOSITED IN THE TRUST ACCOUNT AFTER CONSUMMATION OF THE BUSINESS COMBINATION?
|
A: |
A total of $230.0 million in net proceeds of the IPO was placed in the Trust Account following the IPO. After consummation of the Business Combination, the funds in the Trust Account will be used to pay holders of the Public Shares who
exercise redemption rights, to pay fees and expenses incurred in connection with the Business Combination (including aggregate fees of up to $8,050,000 as deferred underwriting commissions) and for the Post-Combination Company’s working
capital and general corporate purposes.
|
Q: |
WHAT HAPPENS IF THE BUSINESS COMBINATION IS NOT CONSUMMATED?
|
A: |
There are certain circumstances under which the MIPA may be terminated. Please see the section entitled “Proposal No. 1—Business Combination Proposal—MIPA” for information regarding the parties’
specific termination rights.
|
Q: |
HOW DO THE SPONSOR, AND OUR DIRECTORS AND OFFICERS INTEND TO VOTE ON THE PROPOSALS?
|
A: |
The Sponsor and the Company’s directors and officers are entitled to vote an aggregate of 21.3% of the outstanding shares of common stock (which includes the Founder Shares and the Private Shares). The Company has entered into a letter
agreement with the Sponsor and our directors and officers pursuant to which each such person has agreed to vote all shares of our common stock owned by them in favor of the Proposals. Nomura, the underwriter of our IPO, has agreed to vote any Founder Shares and Private Shares held by it and any Public Shares purchased during or after the IPO (including in open market and privately negotiated transactions) (other than shares of Class A
Common Stock held directly or indirectly by it on behalf of a third-party client) in favor of the Business Combination. As a result, in addition to the shares of common stock held by Nomura, the Sponsor and our officers and directors, we
may need only [●], or [●]% (assuming all outstanding shares are voted), or [●], or approximately [●]% (assuming only the minimum number of shares representing a quorum are voted), of the Public Shares to be voted in favor of the Business
Combination Proposal (assuming only a quorum is present at the Special Meeting) in order to have the Business Combination Proposal approved.
|
Q: |
WHAT CONSTITUTES A QUORUM AT THE SPECIAL MEETING?
|
A: |
A majority of the voting power of the common stock entitled to vote at the Special Meeting must be present, in person or represented by proxy at the Special Meeting to constitute a quorum and in order to conduct business at the Special
Meeting. Abstentions and broker non-votes will be counted as present for the purpose of determining a quorum. Nomura, the Sponsor and our directors and officers, who collectively currently own 21.8% of the issued and outstanding shares of
common stock, will count towards this quorum. In the absence of a quorum, the chairman of the Special Meeting has power to adjourn the Special Meeting. As of the Record Date for the Special Meeting, [●] shares of common stock would be
required to be present in person or represented by proxy to achieve a quorum.
|
Q: |
WHAT VOTE IS REQUIRED TO APPROVE EACH PROPOSAL AT THE SPECIAL MEETING?
|
A: |
The Business Combination Proposal: The approval of the Business Combination Proposal requires the affirmative vote (in person or by proxy) of the holders of a majority of the shares of Class A
Common Stock and Class B Common Stock entitled to vote and actually cast thereon at the Special Meeting, voting as a single class. Accordingly, a stockholder’s failure to submit a proxy or to vote in person at the Special Meeting, as well
as an abstention from voting and a broker non-vote with regard to the Business Combination Proposal, will have no effect on the Business Combination Proposal. Company stockholders must approve the Business Combination Proposal in order for
the Business Combination to occur.
|
Q: |
DO ANY OF THE COMPANY’S OFFICERS OR DIRECTORS HAVE INTERESTS IN THE BUSINESS COMBINATION THAT MAY DIFFER FROM OR BE IN ADDITION TO THE INTERESTS OF STOCKHOLDERS?
|
A: |
The Sponsor and our directors and officers have interests in the Business Combination that are different from or in addition to (and which may conflict with) your interests. You should take these interests into account in deciding
whether to approve the Proposals. These interests include:
|
|
• |
the fact that our Initial Stockholders have agreed not to redeem any of the Founder Shares in connection with a stockholder vote to approve the proposed Business Combination;
|
|
• |
the fact that Ophir Sternberg will serve as a director of the Post-Combination Company;
|
|
• |
the fact that the Sponsor paid an aggregate of $25,000 for 5,000,000 Founder Shares in January 2020 and, in February 2020, the Company declared a stock dividend of 0.15 share for each Founder Share outstanding, resulting in the Sponsor
holding an aggregate of 5,750,000 Founder Shares. After giving effect to the sales or transfer of Founder Shares to Nomura and in connection with the IPO to certain insiders, the remaining 5,667,500 Founder Shares will have a significantly
higher value at the time of the Business Combination, which if unrestricted and freely tradable would be valued at approximately $56,675,000 but, given the restrictions on such shares, we believe such shares have less value;
|
|
• |
the fact that our Initial Stockholders have agreed to waive their rights to liquidating distributions from the Trust Account with
respect to their Founder Shares if we fail to complete an initial business combination by February 18, 2022, or assuming the Extension is approved, by August 18, 2022 (or such later date as may be approved by the Company’s stockholders);
|
|
• |
the fact that our Initial Stockholders, being holders of Class A Common Stock, are eligible to receive the dividend comprised of the New Warrants to be issued upon the automatic conversion of the Founder Shares at Closing, and the fact
that, because our Initial Stockholders have agreed not to redeem their shares in connection with the Business Combination, they may receive a significant number of such New Warrants, if other holders of Class A Common Stock elect to
exercise their redemption rights;
|
|
• |
the fact that the Sponsor paid an aggregate of $5,950,000 for Private Units comprised of 297,500 Private Warrants to purchase
shares of Class A Common Stock and that such Private Warrants will expire worthless if a business combination is not consummated by February 18, 2022, or assuming the Extension is approved, by August 18, 2022;
|
|
• |
the continued right of the Sponsor to hold Class A Common Stock and the shares of Class A Common Stock to be issued to the Sponsor upon exercise of its Private Warrants following the Business Combination, subject to certain lock-up
periods;
|
|
• |
if the Trust Account is liquidated, including in the event we are unable to complete an initial business combination within the required time period, the Sponsor has agreed to indemnify us to ensure that the proceeds in the Trust Account
are not reduced below $10.00 per Public Share, or such lesser per Public Share amount as is in the Trust Account on the liquidation date, by the claims of prospective target businesses with which we have entered into an acquisition
agreement or claims of any third party (other than our independent public accountants) for services rendered or products sold to us, but only if such a vendor or target business has not executed a waiver of any and all rights to seek access
to the Trust Account;
|
|
• |
the Sponsor (including its representatives and affiliates) and the Company directors and officers, are, or may in the future become, affiliated with entities that are engaged in a similar business to the Company. For example, each of the
Company’s officers may be considered an affiliate of the Sponsor, the Sponsor and our directors and officers of the Company are also affiliated with Lionheart III and Lionheart IV, all of which are blank check companies incorporated for the
purpose of effecting their respective initial business combinations. In addition, Mr. Meltzer serves on the board of directors of Haymaker Acquisition Corp. III, a blank check company incorporated for the purpose of effecting a business
combination. The Sponsor and the Company’s directors and officers are not prohibited from sponsoring, or otherwise becoming involved with, any other blank check companies prior to the Company completing its initial business combination.
Moreover, certain of the Company’s directors and officers have time and attention requirements for certain other companies. The Company’s directors and officers also may become aware of business opportunities which may be appropriate for
presentation to the Company, and the other entities to which they owe certain fiduciary or contractual duties, including Lionheart III and Lionheart IV. Accordingly, they may have had conflicts of interest in determining to which entity a
particular business opportunity should be presented. These conflicts may not be resolved in the Company’s favor and such potential business opportunities may be presented to other entities prior to their presentation to the Company, subject
to applicable fiduciary duties. The Existing Charter provides that the Company renounces its interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his
or her capacity as a director or officer of the Company and such opportunity is one the Company is legally and contractually permitted to undertake and would otherwise be reasonable for the Company to pursue, and to the extent the director
or officer is permitted to refer that opportunity to the Company without violating another legal obligation. For more information, see “Management of the Company— Conflicts
of Interests.”
|
• |
the fact that Ophir Sternberg and John Ruiz have certain business dealings tied to shares of the Post-Combination Company. For more information, see “Certain Relationships and Related Party Transactions”;
|
|
• |
the continued indemnification of our existing directors and officers and the continuation of our directors’ and officers’ liability insurance after the Business Combination;
|
|
• |
the fact that the Sponsor and our directors and officers will lose their entire investment in us and will not be reimbursed for
any out-of-pocket expenses if an initial business combination is not consummated by February 18, 2022, or assuming the Extension is approved, by August 18, 2022; and
|
|
• |
that, at the closing of the Business Combination we will enter into the amended and restated registration rights agreement (“Registration Rights Agreement”), substantially in the form attached as Annex
E to this proxy statement/prospectus, with the Sponsor and our directors and officers, which provides for registration rights to such persons and their permitted transferees.
|
Q: |
WHAT DO I NEED TO DO NOW?
|
A: |
The Company urges you to read carefully and consider the information contained in this proxy statement/prospectus, including the Annexes and the other documents referred to herein, and to consider how the Business Combination will
affect you as a stockholder of the Company. Stockholders should then vote as soon as possible in accordance with the instructions provided in this proxy statement/prospectus and on the enclosed proxy card.
|
Q: |
WHAT HAPPENS IF I SELL MY SHARES OF CLASS A COMMON STOCK BEFORE THE SPECIAL MEETING?
|
A: |
The Record Date for the Special Meeting is earlier than the date that the Business Combination is expected to be completed. If you transfer your shares of Class A Common Stock after the Record Date, but before the Special Meeting, unless
the transferee obtains from you a proxy to vote those shares, you will retain your right to vote at the Special Meeting. However, you will not be able to seek redemption of your shares of Class A Common Stock because you will no longer be
able to tender them prior to the Special Meeting in accordance with the provisions described herein. If you transferred your shares of Class A Common Stock prior to the Record Date, you have no right to vote those shares at the Special
Meeting or redeem those shares for a pro rata portion of the proceeds held in the Trust Account.
|
Q: |
HOW DO I VOTE?
|
A: |
If you are a holder of record of common stock on the Record Date, you may vote in person at the Special Meeting by attending the meeting virtually or by submitting a proxy for the Special Meeting. You may submit your proxy by completing,
signing, dating and returning the enclosed proxy card in the accompanying pre-addressed postage paid envelope. You may also vote by telephone or Internet by following the instructions printed on the proxy card.
|
|
If you hold your shares in “street name,” which means your shares are held of record by a broker, bank, or nominee, you should contact your broker, bank, or other nominee to ensure that votes related to the shares you beneficially own
are properly counted. In this regard, you must provide the broker, bank, or nominee with instructions on how to vote your shares or, if you wish to attend the meeting and vote in person, obtain a proxy from your broker, bank, or nominee.
|
Q: |
IF MY SHARES ARE HELD IN “STREET NAME” BY A BROKER, BANK, OR OTHER NOMINEE, WILL MY BROKER, BANK, OR OTHER NOMINEE VOTE MY SHARES FOR ME?
|
A: |
If your shares are held in “street name” in a stock brokerage account or by a broker, bank, or other nominee, you must provide the record holder of your shares with instructions on how to vote your shares. Please follow the voting
instructions provided by your broker, bank, or other nominee. Please note that you may not vote shares held in “street name” by returning a proxy card directly to the Company or by voting in person at the Special Meeting unless you provide
a “legal proxy,” which you must obtain from your broker, bank, or other nominee.
|
|
Under the rules of Nasdaq, brokers who hold shares in “street name” for a beneficial owner of those shares typically have the authority to vote in their discretion on “routine” proposals when they have not received instructions from
beneficial owners. However, brokers are not permitted to exercise their voting discretion with respect to the approval of matters that Nasdaq determines to be “non-routine” without specific instructions from the beneficial owner. It is
expected that all proposals to be voted on at the Special Meeting are “non-routine” matters. Broker non-votes occur when a broker or nominee is not instructed by the beneficial owner of shares to vote on a particular proposal for which the
broker does not have discretionary voting power.
|
Q: |
WHAT IF I ATTEND THE SPECIAL MEETING AND ABSTAIN OR DO NOT VOTE?
|
A: |
For purposes of the Special Meeting, an abstention occurs when a stockholder attends the meeting in person and does not vote or returns a proxy with an “abstain” vote.
|
|
If you are a Company stockholder that attends the Special Meeting virtually and fails to vote on the Charter Approval Proposal, your failure to vote will have the same effect as a vote “AGAINST”
such proposal.
|
Q: |
WHAT WILL HAPPEN IF I RETURN MY PROXY CARD WITHOUT INDICATING HOW TO VOTE?
|
A: |
If you are a holder of record of common stock on the Record Date and you sign and return your proxy card without indicating how to vote on any particular Proposal, the common stock represented by your proxy will be voted “FOR” each of the Proposals presented at the Special Meeting.
|
Q: |
MAY I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
|
A: |
Yes. If you are a holder of record of common stock on the Record Date, you may change your vote at any time before your proxy is exercised by doing any one of the following:
|
|
• |
send another proxy card with a later date;
|
|
• |
notify the Company’s Secretary in writing before the Special Meeting that you have revoked your proxy; or
|
|
• |
attend the Special Meeting and vote electronically by visiting and entering the control number found on your proxy card, voting instruction form or notice you previously received.
|
Q: |
WHAT HAPPENS IF I FAIL TO TAKE ANY ACTION WITH RESPECT TO THE SPECIAL MEETING?
|
A: |
If you fail to take any action with respect to the Special Meeting and the Business Combination is approved by stockholders and consummated, you will become a stockholder of the Post-Combination Company. Failure to take any action with
respect to the Special Meeting will not affect your ability to exercise your redemption rights. If you fail to take any action with respect to the Special Meeting and the Business Combination is not approved, you will continue to be a
stockholder of the Company while the Company searches for another target business with which to complete a business combination. If you fail to vote on the Charter Approval Proposal, your failure to vote will have the same effect as a vote
“AGAINST” such proposal.
|
Q: |
WHAT SHOULD I DO IF I RECEIVE MORE THAN ONE SET OF VOTING MATERIALS?
|
A: |
Stockholders may receive more than one set of voting materials, including multiple copies of this proxy statement/prospectus and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one
brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a holder of record and your shares are registered in more than one name, you will receive more than one
proxy card. Please complete, sign, date and return each proxy card and voting instruction card that you receive in order to cast a vote with respect to all of your shares.
|
Q: |
WHO CAN HELP ANSWER MY QUESTIONS?
|
A: |
If you have questions about the Business Combination or if you need additional copies of the proxy statement/prospectus or the enclosed proxy card you should contact our proxy solicitor, MacKenzie Partners, Inc.:
|
Redemption Threshold (1)(2)
|
||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||
|
No Redemptions (3)
|
25% Redemptions (4)
|
50% Redemptions (5)
|
Maximum Redemptions (6)
|
||||||||||||||||||||||||||||
|
Shares
|
%
|
Shares
|
%
|
Shares
|
%
|
Shares
|
%
|
||||||||||||||||||||||||
Class A - LCAP Public Stockholders
|
23,650,000
|
0.7
|
%
|
17,900,000
|
0.5
|
%
|
12,150,000
|
0.4
|
%
|
7,542,374
|
0.2
|
%
|
||||||||||||||||||||
Class A - LCAP Initial Stockholders (8)
|
5,750,000
|
0.2
|
%
|
5,750,000
|
0.2
|
%
|
5,750,000
|
0.2
|
%
|
5,750,000
|
0.2
|
%
|
||||||||||||||||||||
Class A - LCAP Private and Public Warrantholders
|
11,825,000
|
0.4
|
%
|
11,825,000
|
0.4
|
%
|
11,825,000
|
0.4
|
%
|
11,825,000
|
0.4
|
%
|
||||||||||||||||||||
Total LCAP (8)
|
41,225,000
|
1.3
|
%
|
35,475,000
|
1.1
|
%
|
29,725,000
|
0.9
|
%
|
25,117,374
|
0.8
|
%
|
||||||||||||||||||||
|
||||||||||||||||||||||||||||||||
Class V - MSP Recovery Members (or their designees)
|
2,651,018,662
|
80.5
|
%
|
2,651,018,662
|
80.7
|
%
|
2,651,018,662
|
80.8
|
%
|
2,651,018,662
|
80.9
|
%
|
||||||||||||||||||||
Class V - VRM
|
120,000,000
|
3.6
|
%
|
120,000,000
|
3.7
|
%
|
120,000,000
|
3.7
|
%
|
120,000,000
|
3.7
|
%
|
||||||||||||||||||||
Class V - Other
|
62,681,338
|
1.9
|
%
|
62,681,338
|
1.9
|
%
|
62,681,338
|
1.9
|
%
|
62,681,338
|
1.9
|
%
|
||||||||||||||||||||
Class V - Series MRCS
|
416,300,000
|
12.7
|
%
|
416,300,000
|
12.8
|
%
|
416,300,000
|
12.8
|
%
|
416,300,000
|
12.7
|
%
|
||||||||||||||||||||
Total MSP and Other Unrelated Parties (8)
|
3,250,000,000
|
98.7
|
%
|
3,250,000,000
|
98.9
|
%
|
3,250,000,000
|
99.1
|
%
|
3,250,000,000
|
99.2
|
%
|
||||||||||||||||||||
|
||||||||||||||||||||||||||||||||
Total Shares at Closing (7)
|
3,291,225,000
|
100.0
|
%
|
3,285,475,000
|
100.0
|
%
|
3,279,725,000
|
100.0
|
%
|
3,275,117,374
|
100.0
|
%
|
||||||||||||||||||||
Additional Dilution
|
||||||||||||||||||||||||||||||||
New Warrants (8)
|
--
|
--
|
%
|
--
|
--
|
%
|
--
|
--
|
%
|
--
|
--
|
%
|
||||||||||||||||||||
Incentive Plan (9)
|
98,736,750
|
3.0
|
%
|
98,736,750
|
3.0
|
%
|
98,736,750
|
3.0
|
%
|
98,736,750
|
3.0
|
%
|
||||||||||||||||||||
Total Additional Dilution Sources
|
98,736,750
|
3.0
|
%
|
98,736,750
|
3.0
|
%
|
98,736,750
|
3.0
|
%
|
98,736,750
|
3.0
|
%
|
|
Redemption Threshold
|
|||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||
|
No Redemptions
|
25% Redemptions
|
50% Redemptions
|
Maximum Redemptions
|
||||||||||||||||||||||||||||
|
$/share
|
%
|
Amount
|
%
|
Amount
|
%
|
Amount
|
%
|
||||||||||||||||||||||||
Underwriting fee (inclusive of financial advisor fees)(1)
|
$
|
2.29
|
22.89
|
%
|
$
|
3.05
|
30.52
|
%
|
$
|
4.58
|
45.78
|
%
|
$
|
7.64
|
76.39
|
%
|
|
• |
Following a review of the financial data provided to the Company, including certain unaudited prospective financial information of MSP (including, where applicable, the assumptions underlying such
unaudited prospective financial information) and the Company’s due diligence review of MSP’s business, the LCAP Board determined that the consideration to be paid to the Members was reasonable in light of such data and financial
information.
|
|
• |
The Company’s management and advisors conducted due diligence examinations of MSP, including: commercial, financial, legal and regulatory due diligence, and extensive discussions with MSP’s management
and the Company’s management and legal advisors concerning such due diligence examinations of MSP.
|
|
• |
MSP’s business is based in a serviceable market that has a long-standing history of improper claim reimbursement concerns, and that the LCAP Board considers attractive, and which, following a review of
industry trends and other industry factors (including, among other things, historic and projected market growth), the LCAP Board believes has continued growth potential in future periods.
|
|
• |
Defensive, niche business model, coupled with a first mover advantage has led to MSP identifying more than $15 billion of paid claims value that could be recoverable in the near future.
|
|
• |
The Members (or their designees) will control approximately 98.7% of the Post-Combination Company, assuming (1) no
redemptions, (2) that the holders of the Company’s existing Public Warrants and Private Warrants exercise those warrants, and no New Warrants are exercised and (3) no attributed ownership based on Messrs. Ruiz and Quesada’s
investment in VRM (See “Certain Relationships and Related Party Transactions” beginning on page [●]). The LCAP Board believes
that the Members continuing to own a substantial percentage of the Post-Combination Company on a pro forma basis reflects such equityholders’ belief in and commitment to the continued growth prospects of MSP going forward.
|
|
• |
The agreement by Messrs. Ruiz and Quesada to be subject to a post-Closing lockup in respect of their Up-C Units and shares of Class A
Common Stock, subject to certain exceptions, and to enter into employment agreements with the Post-Combination Company, which is expected to provide important stability to the leadership and governance of MSP.
|
|
• |
Opportunity to introduce an attractive asset class to public investors that has historically been transacted in private market settings.
|
|
• |
Driven MSP management with diverse experience and an entrepreneurial mindset to bring this asset class to the public markets.
|
|
• |
The terms and conditions of the MIPA and the related agreements and the transactions contemplated thereby, each party’s representations, warranties and covenants, the conditions to each party’s
obligation to consummate the Business Combination and the termination provisions, as well as the strong commitment by both the Company and MSP to complete the Business Combination.
|
|
• |
After a review of other business combination opportunities reasonably available to the Company, the LCAP Board believes that the proposed Business Combination represents the best potential business
combination reasonably available to the Company taking into consideration, among other things, the timing and likelihood of accomplishing the goals of any alternatives.
|
|
• |
MSP’s unique social focus on supporting the long-term sustainability of Medicare and Medicaid programs relied upon by over 100 million Americans.
|
|
• |
Proprietary data system that has proven experience aggregating, normalizing and analyzing large volumes of data to identify recoverable healthcare claims.
|
|
• |
John H. Ruiz and Frank C. Quesada are key business drivers of MSP and the success of MSP remains highly dependent on their continued involvement.
|
|
• |
The potential benefits of the Business Combination may not be fully achieved or may not be achieved within the expected timeframe.
|
|
• |
Validity of the claim assignments, legal standing of the MSP claims, penalties and double damages provisions, and several other key legal issues remain subject to continued affirmation in the U.S. court
system.
|
|
• |
Medicare Secondary Payer Act of 1980 still remains subject to legal interpretation and potential revision.
|
|
• |
While the MSP management has modeled the expected operating expenses, they have not previously operated at a scale indicated in the MSP management projections nor executed on the scale of growth
contemplated.
|
|
• |
The Company’s stockholders may fail to approve the proposals necessary to effect the Business Combination.
|
|
• |
The completion of the Business Combination is conditioned on the satisfaction of certain closing conditions that are not within the Company’s control, including the receipt of certain required
regulatory approvals.
|
|
• |
The Public Stockholders will hold a minority position in the Post-Combination Company (approximately 1.1%, assuming
that (1) there are no redemptions by Public Stockholders and (2) the holders of the Company’s existing Public Warrants and Private Warrants exercise those warrants, and no New Warrants are exercised), as such, the Company’s
current stockholders are unlikely to have an influence on the management of the Post-Combination Company.
|
|
• |
Legal due diligence review from the Company’s advisor raised concerns over internal controls and documentation related to HIPAA compliance and data protection.
|
|
• |
Public investors often rely on a PIPE investor for third party validation of valuation. The Business Combination lacks a validating PIPE investor.
|
|
• |
The challenges associated with preparing MSP, which is a private company, for the applicable disclosure and listing requirements to which MSP will be subject as a publicly traded company.
|
|
• |
As of the date the LCAP Board approved the Business Combination, MSP did not have any combined or consolidated historical financial statements, and therefore the LCAP Board could not consider MSP’s
historical financial results or historical and current balance sheet information in conjunction with its consideration of other financial information of MSP in making its determination.
|
|
• |
The possibility that the SPAC market experiences volatility and disruptions, causing deal disruption.
|
|
• |
The risks and costs to the Company if the Business Combination is not completed, including the risk of diverting
management focus and resources from other business combination opportunities, which could result in the Company being unable to effect an initial business combination by February 18, 2022, or assuming the Extension is approved, by
August 18, 2022.
|
|
• |
The LCAP Board did not obtain a third-party valuation or fairness opinion in connection with the Business Combination.
|
|
• |
The fees and expenses associated with completing the Business Combination.
|
|
• |
MSP has entered into certain arrangements with VRM and its affiliates, which include preferred returns on cash distributions and potential anti-dilution protections, which may impact existing and new
investors. (See “Certain Relationships and Related Party Transactions” beginning on page [●]).
|
• |
The Business Combination Proposal: The approval of the Business Combination Proposal requires the affirmative vote (in person or by proxy) of the holders of a
majority of the shares of Class A Common Stock and Class B Common Stock entitled to vote and actually cast thereon at the Special Meeting, voting as a single class. Accordingly, a stockholder’s failure to submit a proxy or to vote in
person at the Special Meeting, as well as an abstention from voting and a broker non-vote with regard to the Business Combination Proposal, will have no effect on the Business Combination Proposal. Company stockholders must approve
the Business Combination Proposal in order for the Business Combination to occur.
|
• |
The Nasdaq Proposal: The approval of the Nasdaq Proposal requires the affirmative vote (in person or by proxy) of the holders of a majority of the shares of
Class A Common Stock and Class B Common Stock entitled to vote and actually cast thereon at the Special Meeting, voting as a single class. Accordingly, a stockholder’s failure to submit a proxy or to vote in person at the Special
Meeting, as well as an abstention from voting and a broker non-vote with regard to the Nasdaq Proposal, will have no effect on the Nasdaq Proposal. The Business Combination is conditioned on the approval of the Nasdaq Proposal,
subject to the terms of the MIPA. If the Business Combination Proposal is not approved, the Nasdaq Proposal will not be presented to the stockholders for a vote.
|
• |
The Charter Approval Proposal: The approval of the Charter Approval Proposal requires the affirmative vote (in person or
by proxy) of (i) the holders of a majority of the Class B Common Stock then outstanding, voting separately as a single class, and (ii) the holders of a majority of the shares of Class A Common Stock and Class B Common Stock entitled
to vote, voting as a single class. Accordingly, a stockholder’s failure to submit a proxy or to vote in person at the Special Meeting, as well as an abstention from voting and a broker non-vote with regard to the Charter Approval
Proposal, will have the same effect as a vote “AGAINST” such proposal. The Business Combination is conditioned on the approval of the Charter Approval Proposal, subject to the terms of the MIPA.
If the Business Combination Proposal is not approved, the Charter Approval Proposal will not be presented to the stockholders for a vote.
|
• |
The Non-Binding Governance Proposals: The approval of the Non-Binding Governance Proposals requires the affirmative vote (in person or by proxy) of the holders of a majority of the shares of Class A Common Stock and Class B Common Stock entitled to vote and actually cast thereon at the Special Meeting,
voting as a single class. Accordingly, a stockholder’s failure to submit a proxy or to vote in person at the Special Meeting, as well as an abstention from voting and a broker non-vote with regard to the Non-Binding Governance Proposals, will have no effect on the Non-Binding Governance Proposals.
The Business Combination is not conditioned on the approval of the Non-Binding Governance Proposals. If the Business Combination Proposal is not approved,
the Non-Binding Governance Proposals will not be presented to the stockholders for a vote.
|
• |
The Director Election Proposal: The
approval of the Director Election Proposal requires the affirmative vote (in person or by proxy) of the holders of a plurality of the outstanding shares of Class A Common Stock and Class B Common Stock entitled to vote and actually
cast thereon at the Special Meeting, voting as a single class. Stockholders may not cumulate their votes with respect to the election of directors. Accordingly, a stockholder’s failure to submit a proxy or to vote in person at the
Special Meeting, as well as an abstention from voting and a broker non-vote with regard to the Director Election Proposal, will have no effect on the election of directors. The Business Combination is conditioned on the approval of
the Director Election Proposal, subject to the terms of the MIPA. If the Business Combination Proposal is not approved, the Director Election Proposal will not be presented to the stockholders for a vote.
|
• |
The Incentive Plan Proposal: The approval of the Incentive Plan Proposal requires the affirmative vote (in person or by proxy) of the holders of a majority of
the shares of Class A Common Stock and Class B Common Stock entitled to vote and actually cast thereon at the Special Meeting, voting as a single class. Accordingly, a stockholder’s failure to submit a proxy or to vote in person at
the Special Meeting, as well as an abstention from voting and a broker non-vote with regard to the Incentive Plan Proposal, will have no effect on the Incentive Plan Proposal. The Business Combination is conditioned on the approval of
the Incentive Plan Proposal, subject to the terms of the MIPA. If the Business Combination Proposal is not approved, the Incentive Plan Proposal will not be presented to the stockholders for a vote.
|
• |
The Adjournment Proposal: The approval of the Adjournment Proposal, if presented, requires the affirmative vote (in person or by proxy) of the holders of a
majority of the shares of Class A Common Stock and Class B Common Stock entitled to vote and actually cast thereon at the Special Meeting, voting as a single class. Accordingly, a stockholder’s failure to submit a proxy or to vote in
person at the Special Meeting, as well as an abstention from voting and a broker non-vote with regard to the Adjournment Proposal, will have no effect on the Adjournment Proposal. The Business Combination is not conditioned on the
approval of the Adjournment Proposal.
|
|
• |
the fact that our Initial Stockholders have agreed not to redeem any of the Founder Shares in connection with a stockholder vote to approve the proposed Business Combination;
|
|
• |
the fact that Ophir Sternberg will serve as a director of the Post-Combination Company;
|
|
• |
the fact that the Sponsor paid an aggregate of $25,000 for 5,000,000 Founder Shares in January 2020 and, in February 2020, the Company declared a stock dividend of 0.15 share for each Founder Share
outstanding, resulting in the Sponsor holding an aggregate of 5,750,000 Founder Shares. After giving effect to the sales or transfer of Founder Shares to Nomura and in connection with the IPO to certain insiders, the remaining
5,667,500 Founder Shares will have a significantly higher value at the time of the Business Combination, which if unrestricted and freely tradable would be valued at approximately $56,675,000 but, given the restrictions on such
shares, we believe such shares have less value;
|
|
• |
the fact that our Initial Stockholders have agreed to waive their rights to liquidating distributions from the Trust
Account with respect to their Founder Shares if we fail to complete an initial business combination by February 18, 2022, or assuming the Extension is approved, by August 18, 2022 (or such later date as may be approved by the
Company’s stockholders);
|
|
• |
the fact that our Initial Stockholders, being holders of Class A Common Stock, are eligible to receive the dividend comprised of the New Warrants to be issued upon the automatic conversion of the
Founder Shares at Closing, and the fact that, because our Initial Stockholders have agreed not to redeem their shares in connection with the Business Combination, they may receive a significant number of such New Warrants, if other
holders of Class A Common Stock elect to exercise their redemption rights;
|
|
• |
the fact that the Sponsor paid an aggregate of $5,950,000 for Private Units comprised of 297,500 Private Warrants to
purchase shares of Class A Common Stock and that such Private Warrants will expire worthless if a business combination is not consummated by February 18, 2022, or assuming the Extension is approved, by August 18, 2022;
|
|
• |
the continued right of the Sponsor to hold Class A Common Stock and the shares of Class A Common Stock to be issued to the Sponsor upon exercise of its Private Warrants following the Business
Combination, subject to certain lock-up periods;
|
|
• |
if the Trust Account is liquidated, including in the event we are unable to complete an initial business combination within the required time period, the Sponsor has agreed to indemnify us to ensure
that the proceeds in the Trust Account are not reduced below $10.00 per public share, or such lesser per public share amount as is in the Trust Account on the liquidation date, by the claims of prospective target businesses with which
we have entered into an acquisition agreement or claims of any third party (other than our independent public accountants) for services rendered or products sold to us, but only if such a vendor or target business has not executed a
waiver of any and all rights to seek access to the Trust Account;
|
|
• |
the Sponsor (including its representatives and affiliates) and the Company directors and officers, are, or may in the future
become, affiliated with entities that are engaged in a similar business to the Company. For example, each of the Company’s officers may be considered an affiliate of the Sponsor, and the directors and officers of the Company are
also affiliated with Lionheart III and Lionheart IV, all of which are blank check companies incorporated for the purpose of effecting their respective initial business combinations. In addition, Mr. Meltzer serves on the board of
directors of Haymaker Acquisition Corp. III, a blank check company incorporated for the purpose of effecting a business combination. The Sponsor and the Company’s directors and officers are not prohibited from sponsoring, or
otherwise becoming involved with, any other blank check companies prior to the Company completing its initial business combination. Moreover, certain of the Company’s directors and officers have time and attention requirements for
certain other companies. The Company’s directors and officers also may become aware of business opportunities which may be appropriate for presentation to the Company, and the other entities to which they owe certain fiduciary or
contractual duties, including Lionheart III and Lionheart IV. Accordingly, they may have had conflicts of interest in determining to which entity a particular business opportunity should be presented. These conflicts may not be
resolved in the Company’s favor and such potential business opportunities may be presented to other entities prior to their presentation to the Company, subject to applicable fiduciary duties. The Existing Charter provides that the
Company renounces its interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of the Company and
such opportunity is one the Company is legally and contractually permitted to undertake and would otherwise be reasonable for the Company to pursue, and to the extent the director or officer is permitted to refer that opportunity to
the Company without violating another legal obligation. For more information, see “Management of the Company— Conflicts of Interests” ;
|
|
• |
the continued indemnification of our existing directors and officers and the continuation of our directors’ and officers’ liability insurance after the Business Combination;
|
|
• |
the fact that the Sponsor and our directors and officers will lose their entire investment in us and will not be
reimbursed for any out-of-pocket expenses if an initial business combination is not consummated by February 18, 2022, or assuming the Extension is approved, by August 18, 2022; and
|
|
• |
that, at the closing of the Business Combination, we will enter into the Registration Rights Agreement with the Sponsor and our directors and officers which provides for registration rights to such
persons and their permitted transferees.
|
|
• |
there not being in force any law, judgment, injunction, decree or order of any court, arbitrator or other governmental authority enjoining, restraining or prohibiting the
consummation of the Closing;
|
|
• |
the approval by the Company’s stockholders of the Business Combination Proposal, the Nasdaq Proposal, the Charter Approval Proposal, the Director Election Proposal, and the Incentive Plan Proposal
(collectively, the “Condition Precedent Proposals”);
|
|
• |
the shares of Class A Common Stock to be issued (i) pursuant to the Business Combination, (ii) upon conversion of the Class B Units of Opco that are included in the Up-C Units, or (iii) upon exercise of
the New Warrants, in each case, being approved for listing on Nasdaq;
|
|
• |
the Company having net tangible assets of at least $5,000,001 upon the consummation of the Business Combination, after giving effect to any Company stockholder redemptions;
|
|
• |
the expiration or termination of any applicable waiting period (including any extension thereof) under the HSR Act;
|
|
• |
the registration statement of which this proxy statement/prospectus forms a part having become effective in accordance with the provisions of the Securities
Act, no stop order having been issued by the SEC which remains in effect with respect to the registration statement, and no proceeding seeking such a stop order having been threatened or
initiated by the SEC which remains pending; and
|
•
|
the cash and cash equivalents of MSP and Opco (after giving effect to any redemptions and the payment of transaction costs, including deferred underwriting fees), as of the Effective Time, not being less than $30.0
million, provided, however, that Messrs. Ruiz and Quesada have agreed to loan (or cause to be loaned) to MSP up to the aggregate amount then-remaining in the Service Fee Account, and such condition will be deemed to be satisfied
if that amount is so loaned, irrespective of the amount of cash actually held by MSP and Opco.
|
|
• |
each of MSP and the Members having performed in all material respects their respective obligations required to be performed under the MIPA at or prior to the Closing Date;
|
|
• |
the representations and warranties of MSP and the Members contained in the MIPA, disregarding all qualifications and exceptions contained therein relating to materiality, being true, correct and
complete at and as of the Closing Date, as if made at and as of such date (except to the extent expressly made as of an earlier date, in which case only as of such date), except where the failure of such representations and warranties
to be so true and correct, has not had, and would not have, a Material Adverse Effect (as defined in the MIPA);
|
|
• |
MSP, the Members and the Members’ Representative, as applicable, having executed and delivered to the Company a copy of certain ancillary agreements to which it is a party;
|
|
• |
the Company having received a certificate signed by the Chief Executive Officer, Chief Financial Officer or other authorized person of MSP stating that the conditions specified in Section 10.2(a) and
Section 10.2(b) of the MIPA have been satisfied;
|
|
• |
no Material Adverse Effect having occurred since the date of the MIPA; and
|
|
• |
the Company having received the Tax Receivable Agreement duly executed by the Company, Opco and certain Members.
|
|
• |
the Company and Opco having performed in all material respects their respective obligations under the MIPA required to be performed at or prior to the Closing Date;
|
|
• |
the representations and warranties of the Company and Opco contained in the MIPA, disregarding all qualifications and exceptions contained therein relating to materiality, being true and correct at and as of the Closing Date, as if
made at and as of such date (except to the extent expressly made as of an earlier date, in which case only as of such date), except where the failure of such representations and warranties to be so true and correct, has not had, and
would not have, a Parent Material Adverse Effect (as defined in the MIPA);
|
|
• |
the Members’ Representative having received a certificate signed by an authorized officer of the Company stating that the conditions specified in Section 10.3(a) and Section 10.3(b) of the MIPA have been satisfied;
|
|
• |
the Company having delivered to the Members’ Representative (i) certified copies of the resolutions duly adopted by each of the Company’s and Opco’s Boards of Directors authorizing the execution, delivery and performance of the
MIPA; and (ii) written resignations, in forms satisfactory to the Members’ Representative, dated as of the Closing Date and effective as of the Closing, executed by (A) all officers of the Company and Opco; and (B) all persons serving
as directors of the Company and Opco immediately prior to the Closing who are not selected as directors in accordance with Section 9.8 of the MIPA;
|
|
• |
the Company and Opco having executed and delivered to the Members’ Representative a copy of certain ancillary agreements to which each is a party;
|
|
• |
no Parent Material Adverse Effect having occurred since the date of the MIPA;
|
|
• |
the Board having been appointed as the board of directors of the Post-Combination Company;
|
|
• |
each of the covenants of the Sponsor required under the Sponsor Agreement to be performed as of or prior to the Closing having been performed in all material respects, and none of the Sponsors having threatened (orally or in
writing) (i) that the Sponsor Agreement is not valid, binding and in full force and effect, (ii) that the Company is in breach of or default under the Sponsor Agreement or (iii) to terminate the Sponsor Agreement; and
|
|
• |
Opco having delivered the Tax Receivable Agreement, duly executed by the Company, Opco and certain Members.
|
(in thousands, except share and per share data)
|
Nine Months Ended
September 30,
|
Year Ended
December 31,
|
For the period from December 23,
2019 to December 31,
|
|||||||||||||
Statement of Operations Data
|
2021
|
2020
|
2020
|
2019
|
||||||||||||
|
(unaudited)
|
(unaudited) |
(as restated)
|
|||||||||||||
Loss from operations
|
$
|
(2,503
|
)
|
$
|
(89
|
)
|
$
|
(1,472
|
)
|
$
|
(1
|
)
|
||||
Other income (expense), net
|
$
|
3,200
|
$
|
(364
|
)
|
$
|
(590
|
)
|
$
|
(1
|
)
|
|||||
Income (loss) before (provision for) benefit from income taxes
|
$
|
697
|
$
|
(453
|
)
|
$
|
(2,062
|
)
|
$
|
(1
|
)
|
|||||
Net Income (loss)
|
$
|
697
|
$
|
(453
|
)
|
$
|
(2,062
|
)
|
$
|
(1
|
)
|
|||||
|
||||||||||||||||
Basic and diluted weighted average shares outstanding, Class A Common Stock
|
23,650,000
|
3,645,803
|
8,674,180
|
-
|
||||||||||||
Basic and diluted net income (loss) per share, Class A Common Stock
|
$
|
0.02
|
$
|
(0.05
|
)
|
$
|
(0.15
|
)
|
$
|
-
|
||||||
|
||||||||||||||||
Basic and diluted weighted average shares outstanding, Class B Common Stock
|
5,750,000
|
4,918,796
|
5,127,732
|
-
|
||||||||||||
Basic and diluted net income (loss) per share, Class B Common Stock
|
$
|
0.02
|
$
|
(0.05
|
)
|
$
|
(0.15
|
)
|
$
|
-
|
||||||
|
||||||||||||||||
Statement of Cash Flows Data
|
||||||||||||||||
Net cash (used in) provided by operating activities
|
$
|
(672
|
)
|
$
|
(183
|
)
|
$
|
(434
|
)
|
$
|
-
|
|||||
Net cash provided by (used in) investing activities
|
$
|
13
|
$
|
(230,000
|
)
|
$
|
(230,000
|
)
|
$
|
-
|
||||||
Net cash (used in) provided by financing activities
|
$
|
(5
|
)
|
$
|
231,452
|
$
|
231,452
|
$
|
-
|
Balance Sheet Data
|
As of
September 30,
|
As of December 31,
|
||||||||||
(in thousands, except share and per share data)
|
2021
|
2020
|
2019
|
|||||||||
|
(unaudited)
|
(as restated)
|
||||||||||
Total assets
|
$
|
230,410
|
$
|
231,153
|
$
|
26
|
||||||
Total liabilities
|
$
|
21,145
|
$
|
22,585
|
$
|
27
|
||||||
Class A common stock subject to possible redemption
|
$
|
230,000
|
$
|
230,000
|
$
|
-
|
||||||
Total equity
|
$
|
(20,735
|
)
|
$
|
(21,431
|
)
|
$
|
-
|
(in thousands, except share and per share data)
|
Nine Months Ended
September 30,
|
Year Ended
December 31,
|
||||||||||||||
Statement of Operations Data
|
2021
|
2020
|
2020
|
2019
|
||||||||||||
(unaudited)
|
(unaudited)
|
|||||||||||||||
Total Claims Recovery
|
$
|
9,276
|
$
|
10,215
|
$
|
13,887
|
$
|
11,448
|
||||||||
Total operating expenses
|
$
|
14,262
|
$
|
10,322
|
$
|
17,216
|
$
|
12,519
|
||||||||
Operating Income / (loss)
|
$
|
(4,986
|
)
|
$
|
(107
|
)
|
$
|
(3,329
|
)
|
$
|
(1,071
|
)
|
||||
Net income (loss)
|
$
|
(23,411
|
)
|
$
|
(14,836
|
)
|
$
|
(24,266
|
)
|
$
|
(16,603
|
)
|
||||
Less: Net income (loss) attributable to non-controlling members
|
$
|
(16
|
)
|
$
|
(2
|
)
|
$
|
18
|
$
|
27
|
||||||
Net loss attributable to Stockholders
|
$
|
(23,427
|
)
|
$
|
(14,838
|
)
|
$
|
(24,248
|
)
|
$
|
(16,576
|
)
|
||||
Statement of Cash Flows Data
|
||||||||||||||||
Net cash (used in) provided by operating activities
|
$
|
(6,256
|
)
|
$
|
(1,180
|
)
|
$
|
(14
|
)
|
$
|
(125
|
)
|
||||
Net cash provided by (used in) investing activities
|
$
|
(1,857
|
)
|
$
|
(134
|
)
|
$
|
986
|
$
|
(570
|
)
|
|||||
Net cash (used in) provided by financing activities
|
$
|
(2,412
|
)
|
$
|
1,252
|
$
|
9,610
|
$
|
25
|
Balance Sheet Data
|
As of
September 30,
|
As of December 31,
|
||||||||||
(in thousands, except share and per share data)
|
2021
|
2020
|
2019
|
|||||||||
(unaudited)
|
||||||||||||
Total assets
|
$
|
14,171
|
$
|
17,843
|
$
|
3,936
|
||||||
Total liabilities
|
$
|
155,841
|
$
|
133,690
|
$
|
104,041
|
||||||
Total Stockholders' Equity Attributable to Stockholders
|
$
|
(146,018
|
)
|
$
|
(120,179
|
)
|
$
|
(104,455
|
)
|
|||
Noncontrolling interest
|
$
|
4,348
|
$
|
4,332
|
$
|
4,350
|
||||||
Total equity
|
$
|
(141,670
|
)
|
$
|
(115,847
|
)
|
$
|
(100,105
|
)
|
•
|
Assuming No Redemptions: this scenario assumes that no shares of
Class A Common Stock are redeemed.
|
•
|
Assuming Maximum Redemptions:
this scenario assumes that 16,107,626 shares of Class A Common Stock are redeemed for an aggregate payment of approximately $161.1 million (based on the estimated per share redemption price of approximately $10.00 per share) from the
Trust Account. The remaining shares not redeemed include 650,000 shares of Class A Common Stock that are not subject to redemption as the shareholders have waived redemption rights. Cash available for maximum redemptions is calculated
as the cash in trust less remaining transaction costs to be paid in cash reflected in the unaudited pro forma condensed combined balance sheet.
|
Unaudited Pro Forma Condensed Combined Statement of Operations Data
|
Nine Months Ended
September 30, 2021
|
Year Ended
December 31, 2020
|
||||||||||||||
(in thousands, except share and per share data)
|
Assuming No Redemptions
|
Assuming Maximum Redemptions
|
Assuming No Redemptions
|
Assuming Maximum Redemptions
|
||||||||||||
Total Claims Recovery
|
$
|
9,276
|
$
|
9,276
|
$
|
13,887
|
$
|
13,887
|
||||||||
Total operating expenses
|
$
|
16,630
|
$
|
16,630
|
$
|
20,425
|
$
|
20,425
|
||||||||
Operating Income / (loss)
|
$
|
(7,354
|
)
|
$
|
(7,354
|
)
|
$
|
(6,538
|
)
|
$
|
(6,538
|
)
|
||||
Loss before provision for income taxes
|
$
|
(22,589
|
)
|
$
|
(23,438
|
)
|
$
|
(28,075
|
)
|
$
|
(29,207
|
)
|
||||
Net loss
|
$
|
(22,615
|
)
|
$
|
(23,286
|
)
|
$
|
(27,708
|
)
|
$
|
(28,602
|
)
|
||||
Less: Net loss attributable to non-controlling members
|
$
|
(19,952
|
)
|
$
|
(20,893
|
)
|
$
|
(25,527
|
)
|
$
|
(26,776
|
)
|
||||
Net loss attributable to Stockholders
|
$
|
(2,663
|
)
|
$
|
(2,393
|
)
|
$
|
(2,181
|
)
|
$
|
(1,826
|
)
|
||||
Basic and diluted pro forma weighted average shares outstanding, Class A Common stock
|
41,225,000
|
25,117,374
|
41,225,000
|
25,117,374
|
||||||||||||
Basic and diluted pro forma income (loss) per share, Class A Common stock
|
$
|
(0.06
|
)
|
$
|
(0.10
|
)
|
$
|
(0.05
|
)
|
$
|
(0.07
|
)
|
Unaudited Pro Forma Condensed Combined Balance Sheet Data
|
As of
September 30, 2021
|
|||||||
(in thousands, except share and per share data)
|
Assuming No Redemptions
|
Assuming
Maximum
Redemptions
|
||||||
Total assets
|
$
|
6,163,456
|
$
|
6,030,667
|
||||
Total liabilities
|
$
|
155,207
|
$
|
189,107
|
||||
Total Stockholders' Equity Attributable to Stockholders
|
$
|
80,578
|
$
|
55,732 | ||||
Noncontrolling interest
|
$
|
5,927,671
|
$
|
5,785,828
|
||||
Total equity
|
$
|
6,008,249
|
$
|
5,841,560
|
|
• |
the benefits of the Business Combination;
|
|
• |
the inability of the parties to successfully or timely consummate the Business Combination;
|
|
• |
the risk that any required regulatory approvals are not obtained, are delayed or are subject to unanticipated conditions that could adversely affect the Post-Combination Company or the expected benefits of
the Business Combination;
|
|
• |
the future financial performance of the Post-Combination Company following the Business Combination;
|
|
• |
the risk that any of the conditions to Closing are not satisfied in the anticipated manner or on the anticipated timeline;
|
|
• |
changes in the market for MSP’s services;
|
|
• |
MSP’s and/or the Company’s ability to successfully defend litigation;
|
|
• |
expansion plans and opportunities;
|
|
• |
MSP’s ability to implement its corporate strategy and the impact of such strategy on its future operations and financial and operational results;
|
|
• |
MSP’s strategic advantages and the impact that those advantages will have on future financial and operational results;
|
|
• |
changes in business, market, financial, political and legal conditions;
|
|
• |
the impact of various interest rate environments on MSP’s future financial results of operations;
|
|
• |
MSP’s evaluation of competition in its markets and its relative position;
|
|
• |
MSP’s ability to successfully recover proceeds related to the Claims it owns or services;
|
|
• |
MSP’s accounting policies;
|
|
• |
upgrading and maintain information technology systems;
|
|
• |
macroeconomic conditions that may affect MSP’s business and the healthcare data and health claims recovery industry in general;
|
|
• |
political and geopolitical conditions that may affect MSP’s business and the healthcare data and health claims recovery industry in general;
|
|
• |
the impact of the COVID-19 pandemic, or any other similar pandemic or public health situation, on MSP’s business and the healthcare data and health claims recovery industry in general; and
|
|
• |
risks relating to the uncertainty of the projected financial information with respect to MSP and the Company.
|
|
• |
the occurrence of any event, change or other circumstances that could delay the Business Combination or give rise to the termination of the MIPA;
|
|
• |
risks related to disruption of management’s time from ongoing business operations due to the proposed transactions;
|
|
• |
litigation, complaints and/or adverse publicity;
|
|
• |
changes in applicable laws or regulations;
|
|
• |
the ability to recognize the anticipated benefits of the Business Combination, which may be affected by, among other things, competition, rulings in the legal proceedings to which MSP is a party and retaining
its management and key employees;
|
|
• |
the inability to meet applicable Nasdaq listing standards;
|
|
• |
privacy and data protection laws, privacy or data breaches, or the loss of data;
|
|
• |
costs related to the Business Combination;
|
|
• |
the outcome of any legal proceedings that may be instituted against MSP or the Company following announcement of the proposed Business Combination;
|
|
• |
the possibility that the business of MSP may be adversely affected by other economic, business, and/or competitive factors; and
|
|
• |
other risks and uncertainties indicated in this proxy statement/prospectus, including those set forth under the section entitled “Risk Factors”.
|
|
• |
MSP has a history of net losses and no substantial revenue to date, and it may not generate recoveries, create significant revenue or
achieve profitability. Its relatively limited operating history makes it difficult to evaluate current business and future prospects and increases the risk of your investment.
|
|
• |
MSP has a limited history of actual recoveries to date as a result of cases that are still in litigation, and there are risks associated
with estimating the amount of revenue that MSP will recognize from potential recoveries. If MSP’s projections are not realized, it would impact the timing and the amount of MSP’s revenue recognition and have a material adverse effect on
its business, results of operations, financial condition and cash flows.
|
|
• |
Under some agreements with Assignors, MSP assumes the risk of failure to recover on the assigned claims, and if it fails to make
recoveries with respect to the assigned claims and therefore is unable to generate recovery proceeds greater than or equal to the expenses it incurred in the limited times where it paid to purchase the assigned claims, such losses
can adversely affect MSP’s business.
|
|
• |
A significant portion of MSP’s recovery collections relies upon its success in individual, class action or mass aggregated claims in
lawsuits brought against third parties, which are inherently unpredictable, as is MSP’s ability to collect on judgments in its favor.
|
|
• |
MSP’s recoveries are dependent upon the court system, and unfavorable court rulings or delays can adversely affect its recovery efforts
and business.
|
|
• |
MSP’s recoveries are materially reduced by its fee sharing arrangement with the Law Firm.
|
|
• |
Litigation outcomes are inherently risky and difficult to predict, and an adverse outcome may result in complete loss of MSP’s claims
associated with that matter (or a complete loss in value associated with those claims).
|
|
• |
Despite MSP’s success as it relates to its assignments in published appellate decisions, MSP’s assignments can be deemed invalid in court,
which could adversely affect its recoveries and its business.
|
|
• |
Courts may find some of MSP’s damages calculations to include claim lines that are unreasonable, unrelated, or unnecessary.
|
|
• |
The Post-Combination Company’s only significant asset will be its ownership interest in Opco. Such ownership may not be sufficient to pay dividends or make distributions or loans to enable it to pay any
dividends on common stock or satisfy other financial obligations.
|
|
• |
The Initial Stockholders have agreed to vote in favor of the Business Combination described in this proxy statement/prospectus, regardless of how Public Stockholders vote.
|
|
• |
A market for the Company’s securities may not continue, which would adversely affect the liquidity and price of our securities.
|
|
• |
If the Business Combination’s benefits do not meet the expectations of investors, stockholders or financial analysts, the market price of the Company’s securities may decline.
|
|
• |
If third parties bring claims against the Company, the proceeds held in the Trust Account could be reduced and the per share redemption amount received by stockholders may be less than $10.00 per share.
|
|
• |
The Company’s independent directors may decide not to enforce the indemnification obligations of the Sponsor, resulting in a reduction in the amount of funds in the Trust Account available for distribution to
Public Stockholders.
|
|
• |
Our assessment that the assigned claims are potentially recoverable claims;
|
|
• |
The achievement of multiples above the paid amount of potentially recoverable claims; and
|
|
• |
The length (and cost) of litigation required to achieve recoveries.
|
|
• |
Dismissal for failure to file within the applicable statute of limitations.
|
|
• |
Dismissal because an assignment did not include the claim that was brought in court (or such assignment was found to be invalid).
|
|
• |
Dismissal for lack of standing to assert claims.
|
|
• |
Dismissal for lack of personal jurisdiction.
|
|
• |
Dismissal for lack of subject matter jurisdiction.
|
|
• |
Dismissal for pleading deficiencies.
|
|
• |
simplification of the U.S. healthcare delivery and reimbursement systems, either through shifts in the commercial healthcare marketplace or through legislative or regulatory changes at the federal or state
level;
|
|
• |
reductions in the scope of private sector or government healthcare benefits (for example, decisions to eliminate coverage of certain services);
|
|
• |
the transition of healthcare beneficiaries from fee-for-service plans to value-based plans;
|
|
• |
the adoption of healthcare plans with significantly higher deductibles;
|
|
• |
limits placed on payment integrity initiatives, including the Medicare RAC program; and
|
|
• |
lower than projected growth in private health insurance or the various Medicare and Medicaid programs, including Medicare Advantage.
|
|
• |
the price, performance and functionality of our solutions;
|
|
• |
the availability, price, performance and functionality of competing solutions;
|
|
• |
our Assignors’ perceived ability to review claims accurately using their internal resources;
|
|
• |
our ability to develop complementary solutions;
|
|
• |
our continued ability to access the data necessary to enable us to effectively develop and deliver new solutions to Assignors;
|
|
• |
the stability and security of our platform;
|
|
• |
changes in healthcare laws, regulations or trends; and
|
|
• |
the business environment of our Assignors.
|
|
• |
power loss, transmission cable cuts and telecommunications failures;
|
|
• |
damage or interruption caused by fire, earthquake and other natural disasters;
|
|
• |
attacks by hackers or nefarious actors;
|
|
• |
human error;
|
|
• |
computer viruses and other malware, or software defects; and
|
|
• |
physical break-ins, sabotage, intentional acts of vandalism, terrorist attacks and other events beyond our control.
|
|
• |
amendment, enactment, or interpretation of laws and regulations that restrict the access and use of personal information and reduce the supply of data available to Assignors;
|
|
• |
changes in cultural and consumer attitudes to favor further restrictions on information collection and sharing, which may lead to regulations that prevent full utilization of our solutions;
|
|
• |
failure of our solutions to comply with current laws and regulations; and
|
|
• |
failure of our solutions to adapt to changes in the regulatory environment in an efficient, cost-effective manner.
|
|
• |
other payment accuracy vendors, including vendors focused on discrete aspects of the healthcare payment accuracy process;
|
|
• |
fraud, waste and abuse claim edit and predictive analysis companies;
|
|
• |
primary claims processors;
|
|
• |
numerous regional utilization management companies;
|
|
• |
in-house payment accuracy capabilities;
|
|
• |
Medicare RACs; and
|
|
• |
healthcare consulting firms and other third-party liability service providers.
|
|
• |
our ability to integrate operational, accounting and technology policies, processes and systems and the implementation of those policies and procedures;
|
|
• |
our ability to integrate personnel and human resources systems as well as the cultures of each of the acquired businesses;
|
|
• |
our ability to implement our business plan for the acquired business;
|
|
• |
transition of operations, users and Assignors to our existing platforms or the integration of data, systems and technology platforms with ours;
|
|
• |
compliance with regulatory requirements and avoiding potential conflicts of interest in markets that we serve;
|
|
• |
diversion of management’s attention and other resources;
|
|
• |
our ability to retain or replace key personnel;
|
|
• |
our ability to maintain relationships with the clients of the acquired business or a strategic partner and further develop the acquired business or the business of our strategic partner;
|
|
• |
our ability to cross-sell our solutions of the acquired businesses or strategic partners to our respective Assignors;
|
|
• |
entry into unfamiliar markets;
|
|
• |
assumption of unanticipated legal or financial liabilities and/or negative publicity related to prior acts by the acquired entity;
|
|
• |
litigation or other claims in connection with the acquired company, including claims from terminated employees, Assignors, former stockholders or third parties;
|
|
• |
misuse of intellectual property by our strategic partners;
|
|
• |
disagreements with strategic partners or a misalignment of incentives within any strategic partnership;
|
|
• |
becoming significantly leveraged as a result of incurring debt to finance an acquisition;
|
|
• |
unanticipated operating, accounting or management difficulties in connection with the acquired entities; and
|
|
• |
impairment of acquired intangible assets, including goodwill, and dilution to our earnings per share.
|
|
• |
underperformance relative to our expectations and the price paid for the claims;
|
|
• |
unanticipated demands on our management and operational resources;
|
|
• |
failure to successfully recover on legal claims;
|
|
• |
difficulty in integrating personnel, operations, and systems;
|
|
• |
maintaining current customers and securing future customers of the combined businesses;
|
|
• |
assumption of liabilities; and
|
|
• |
litigation-related charges.
|
|
• |
the fact that our Initial Stockholders have agreed not to redeem any of the Founder Shares in connection with a stockholder vote to approve the proposed Business Combination;
|
|
• |
the fact that Ophir Sternberg will serve as a director of the Post-Combination Company;
|
|
• |
the fact that the Sponsor paid an aggregate of $25,000 for 5,000,000 Founder Shares in January 2020 and, in February 2020, the
Company declared a stock dividend of 0.15 share for each Founder Share outstanding, resulting in the Sponsor holding an aggregate of 5,750,000 Founder Shares. After giving effect to the sales or transfer of Founder Shares to Nomura
and in connection with the IPO to certain insiders, the remaining 5,667,500 Founder Shares will have a significantly higher value at the time of the Business Combination, which if unrestricted and freely tradable would be valued at
approximately $56,675,000 but, given the restrictions on such shares, we believe such shares have less value. In addition, given the differential in the purchase price that our Sponsor paid for the Founder Shares as compared to the
price of the units sold in the IPO and the substantial number of shares of Class A Common Stock that our Sponsor will receive upon conversion of the Founder Shares in connection with the Business Combination, our Sponsor and its
affiliates may earn a positive rate of return on their investment even if the common stock of the combined company trades below the price initially paid for the units in the IPO and the Public Stockholders experience a negative rate
of return following the completion of the Business Combination;
|
|
• |
the fact that Nomura has contingent fees owing to it upon the successful completion of the Business Combination, consisting of
(a) an M&A fee of $20 million and (b) deferred underwriting fees of approximately $4.4 million;
|
|
• |
the fact that our Initial Stockholders have agreed to waive their rights to liquidating distributions from the Trust Account with
respect to their Founder Shares if we fail to complete an initial business combination by February 18, 2022, or assuming the Extension is approved, by August 18, 2022 (or such later date as may be approved by the Company’s stockholders);
|
|
• |
the fact that our Initial Stockholders, being holders of Class A Common Stock, are eligible to receive the dividend comprised of the New Warrants to be issued upon the automatic conversion of the Founder Shares at Closing, and the fact
that, because our Initial Stockholders have agreed not to redeem their shares in connection with the Business Combination, they may receive a significant number of such New Warrants, if other holders of Class A Common Stock elect to
exercise their redemption rights;
|
|
• |
the fact that the Sponsor paid an aggregate of $5,950,000 for Private Units comprised of 297,500 Private Warrants to purchase
shares of Class A Common Stock and that such Private Warrants will expire worthless if a business combination is not consummated by February 18, 2022, or assuming the Extension is approved, by August 18, 2022;
|
|
• |
the continued right of the Sponsor to hold Class A Common Stock and the shares of Class A Common Stock to be issued to the Sponsor upon exercise of its Private Warrants following the Business Combination, subject to certain lock-up
periods;
|
|
• |
if the Trust Account is liquidated, including in the event we are unable to complete an initial business combination within the required time period, the Sponsor has agreed to indemnify us to ensure that the proceeds in the Trust Account
are not reduced below $10.00 per public share, or such lesser per public share amount as is in the Trust Account on the liquidation date, by the claims of prospective target businesses with which we have entered into an acquisition
agreement or claims of any third party (other than our independent public accountants) for services rendered or products sold to us, but only if such a vendor or target business has not executed a waiver of any and all rights to seek access
to the Trust Account;
|
|
• |
the Sponsor (including its representatives and affiliates) and the Company directors and officers, are, or may in the future become, affiliated with entities that are engaged in a similar business to the Company. For example, each of the
Company’s officers may be considered an affiliate of the Sponsor, and the directors and officers of the Company are also affiliated with Lionheart III and Lionheart IV, all of which are blank check companies incorporated for the purpose of
effecting their respective initial business combinations. In addition, Mr. Meltzer serves on the board of directors of Haymaker Acquisition Corp. III, a blank check company incorporated for the purpose of effecting a business combination.
The Sponsor and the Company’s directors and officers are not prohibited from sponsoring, or otherwise becoming involved with, any other blank check companies prior to the Company completing its initial business combination. Moreover,
certain of the Company’s directors and officers have time and attention requirements for certain other companies. The Company’s directors and officers also may become aware of business opportunities which may be appropriate for presentation
to the Company, and the other entities to which they owe certain fiduciary or contractual duties, including Lionheart III and Lionheart IV. Accordingly, they may have had conflicts of interest in determining to which entity a particular
business opportunity should be presented. These conflicts may not be resolved in the Company’s favor and such potential business opportunities may be presented to other entities prior to their presentation to the Company, subject to
applicable fiduciary duties. The Existing Charter provides that the Company renounces its interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or
her capacity as a director or officer of the Company and such opportunity is one the Company is legally and contractually permitted to undertake and would otherwise be reasonable for the Company to pursue, and to the extent the director or
officer is permitted to refer that opportunity to the Company without violating another legal obligation. For more information, see “Management of the Company— Conflicts
of Interests.”
|
|
• |
the continued indemnification of our existing directors and officers and the continuation of our directors’ and officers’ liability insurance after the Business Combination;
|
|
• |
the fact that the Sponsor and our directors and officers will lose their entire investment in us and will not be reimbursed for
any out-of-pocket expenses if an initial business combination is not consummated by February 18, 2022, or assuming the Extension is approved, by August 18, 2022; and
|
|
• |
that, at the closing of the Business Combination we will enter into the Registration Rights Agreement with the Sponsor and our directors and officers which provides for registration rights to such persons and their permitted transferees.
|
|
• |
a limited availability of market quotations for our securities;
|
|
• |
reduced liquidity for our securities;
|
|
• |
a determination that the Class A Common Stock is a “penny stock” which will require brokers trading in the Class Common A Stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary
trading market for our securities;
|
|
• |
a limited amount of news and analyst coverage; and
|
|
• |
a decreased ability to issue additional securities or obtain additional financing in the future.
|
|
• |
the Company may experience negative reactions from the financial markets, including negative impacts on its stock price (including to the extent that the current market price reflects a market assumption that the Business Combination
will be completed);
|
|
• |
MSP may experience negative reactions from its Assignors (clients) and employees;
|
|
• |
MSP and the Company will have incurred substantial expenses and will be required to pay certain costs relating to the Business Combination, whether or not the Business Combination is completed; and
|
|
• |
since the MIPA restricts the conduct of MSP’s and the Company’s businesses prior to completion of the Business Combination, each of MSP and the Company may not have been able to take certain actions during the pendency of the Business
Combination that would have benefitted it as an independent company, and the opportunity to take such actions may no longer be available (see the section entitled “The Membership Interest Purchase Agreement
— Covenants and Agreements” beginning on page [●] of this proxy statement/prospectus for a description of the restrictive covenants applicable to MSP and the Company).
|
|
• |
changes in the valuation of our deferred tax assets and liabilities;
|
|
• |
expected timing and amount of the release of any tax valuation allowances;
|
|
• |
tax effects of stock-based compensation;
|
|
• |
changes in tax laws, regulations or interpretations thereof; or
|
|
• |
lower than anticipated future earnings in jurisdictions where we have lower statutory tax rates and higher than anticipated future earnings in jurisdictions where we have higher statutory tax rates.
|
|
• |
no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect candidates to serve as a director of the Board;
|
|
• |
a classified board of directors with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of the Board;
|
|
• |
the requirement that, at any time from and after the date on which the voting power of John H. Ruiz and his affiliates represent less than 50% of the voting power of all of the then outstanding shares entitled to vote (“Voting Rights
Threshold Date”), directors elected by the stockholders generally entitled to vote may be removed from the Board solely for cause and only by affirmative vote of the holders of at least 66-2/3% of the voting power of the then outstanding
shares entitled to vote, voting together as a single class;
|
|
• |
the exclusive right of the Board to fill newly created directorships and vacancies with respect to directors elected by the stockholders generally entitled to vote, which prevents stockholders from being able to fill vacancies on the
Board;
|
|
• |
the prohibition on stockholder action by written consent from and after the Voting Rights Threshold Date, which forces stockholder action from and after the Voting Rights Threshold Date to be taken at an annual or special meeting of
stockholders;
|
|
• |
the requirement that special meetings of stockholders may only be called by the Chairperson of the Board, the Chief Executive Officer of the Post-Combination Company or the Board, which may delay the ability of our stockholders to force
consideration of a proposal or to take action, including the removal of directors;
|
|
• |
the requirement that, from and after the Voting Rights Threshold Date, amendments to certain provisions of the Proposed Charter and amendments to the Amended and Restated Bylaws must be approved by the affirmative vote of the holders of
at least 66-2/3% in voting power of the then outstanding shares of the Post-Combination Company generally entitled to vote;
|
|
• |
our authorized but unissued shares of common stock and preferred stock are available for future issuances without stockholder approval and could be utilized for a variety of corporate purposes, including future offerings to raise
additional capital, acquisitions and employee benefit plans; the existence of authorized but unissued and unreserved shares of common stock and preferred stock could render more difficult or discourage an attempt to obtain control of us by
means of a proxy contest, tender offer, merger or otherwise;
|
|
• |
advance notice procedures set forth in the Amended and Restated Bylaws that stockholders must comply with in order to nominate candidates to the Board or to propose other matters to be acted upon at a meeting of stockholders, which may
discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of the Post-Combination Company; and
|
|
• |
an exclusive forum provision which provides that, unless the Post-Combination Company consents in writing to the selection of an alternative forum, (i) any
derivative action brought on behalf of the Post-Combination Company, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer, or employee of the Post-Combination Company to the Post-Combination Company
or the Post-Combination Company’s stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL, the Proposed Charter or the Amended and Restated Bylaws, or (iv) any action asserting a claim governed by the
internal affairs doctrine of the State of Delaware, in each case, will be required to be filed in the Court of Chancery of the State of Delaware (or, if the Court of Chancery of the State of Delaware lacks jurisdiction over any such action
or proceeding, then a state court located within the State of Delaware or the federal district court for the District of Delaware).
|
• |
MSP did not have sufficient accounting and financial reporting resources to address MSP’s financial reporting requirements. Specifically:
|
|
o |
MSP did not have sufficient resources with an appropriate level of knowledge and U.S. generally accepted accounting principles expertise to identify,
evaluate and account for transactions;
|
|
o |
MSP did not have an adequate segregation of duties or appropriate level of review that is needed to comply with financial reporting requirements.
|
• |
MSP did not design, implement or maintain an effective control environment over our financial reporting requirements. Specifically:
|
|
o |
MSP did not have effective controls over the period end financial reporting process and preparation of financial statements due to:
|
|
◾ |
A lack of a sufficient level of formal accounting policies and procedures that define how transactions should be initiated, recorded, processed and reported;
|
|
◾ |
A lack of an effective control environment over period end close procedures.
|
|
o |
MSP did not have appropriate controls or documented segregation of duties over information technology systems used to create or maintain financial reporting
records;
|
|
o |
MSP did not design or maintain the appropriate controls related to the separation of accounting records for each entity included within the combined and
consolidated financial statements of MSP.
|
a)
|
Claims Recovery. MSP Recovery acquires payment claims from its
Assignors, and leverages its data analytics capability to identify payments that were improperly paid by secondary payers, and seek to recover the full amounts owed to its Assignors against those parties who under applicable law or
contract were primarily responsible. In addition, MSP Recovery derives revenues from contracts with customers for claims recovery services arrangements (“claims recovery services”). Claims recovery services include services to related
parties or third parties to assist those entities with pursuit of claims recovery rights; and
|
b)
|
Chase to Pay Services. “Chase to pay” service (“Chase to Pay”), through
which MSP Recovery uses its data analytics to assist its healthcare provider clients to identify in the first instance the proper primary insurer at the point of care and thereby avoid making a wrongful payment. MSP Recovery has yet
to generate revenue from Chase to Pay, nor have they executed any agreements with customers for Chase to Pay services. MSP Recovery is currently in the process of determining the pricing and form of these arrangements.
|
•
|
the reverse recapitalization between LCAP and MSP Recovery, whereby the Post-Combination Company will be organized in an Up-C
structure;
|
•
|
MSP Recovery’s planned purchase of assets from VRM MSP discussed in Note 3;
|
•
|
MSP Recovery’s planned Series MRCS asset acquisitions discussed in Note 3;
|
•
|
the issuance of New Warrants; and
|
•
|
the exercise of the existing LCAP Public and Private Warrants.
|
•
|
Assuming No Redemptions: this scenario
assumes that no shares of Class A Common Stock are redeemed.
|
•
|
Assuming Maximum
Redemptions: this scenario assumes that 16,107,626 shares of Class A Common Stock are redeemed for an aggregate payment of approximately $161.1 million (based on the estimated per share redemption price of approximately
$10.00 per share) from the Trust Account. The remaining shares not redeemed include 650,000 shares of Class A Common Stock that are not subject to redemption as the shareholders have waived redemption rights. Cash available for
maximum redemptions is calculated as the cash in trust less remaining transaction costs to be paid in cash reflected in the unaudited pro forma condensed combined balance sheet.
|
Assuming No Redemptions
|
Assuming Maximum Redemptions
|
|||||||||||||||
Shares
|
%
|
Shares
|
%
|
|||||||||||||
Class A - LCAP Public Stockholders(1)
|
23,650,000
|
0.7
|
%
|
7,542,374
|
0.2
|
%
|
||||||||||
Class A - LCAP Initial Stockholders(1)(2)
|
5,750,000
|
0.2
|
%
|
5.750.000
|
0.2
|
%
|
||||||||||
Class A - LCAP Private and Public Warrantholders(1)(5)
|
11,825,000
|
0.4
|
%
|
11,825,000
|
0.4
|
%
|
||||||||||
Total LCAP
|
41,225,000
|
1.3
|
%
|
25,117,374
|
0.8
|
%
|
||||||||||
Class V - MSP Recovery Members(3)
|
2,651,018,662
|
80.5
|
%
|
2,651,018,662
|
80.9
|
%
|
||||||||||
Class V - Virage Recovery Fund (4)
|
120,000,000
|
3.6
|
%
|
120,000,000
|
3.7
|
%
|
||||||||||
Class V - Other(3)(4)
|
62,681,338
|
1.9
|
%
|
62,681,338
|
1.9
|
%
|
||||||||||
Class V - MRCS (4)
|
416,300,000
|
12.7
|
%
|
416,300,000
|
12.7
|
%
|
||||||||||
Total MSP
|
3,250,000,000
|
98.7
|
%
|
3,250,000,000
|
99.2
|
%
|
||||||||||
Total Shares at Closing(6)(7)
|
3,291,225,000
|
100.0
|
%
|
3,275,117,374
|
100.0
|
%
|
As of September 30, 2021
|
As of September 30, 2021
|
As of September 30, 2021
|
||||||||||||||||||||||||
LCAP
(Historical)
(US GAAP)
|
MSP Recovery
(As Adjusted)
(Note 3)
|
Transaction Accounting
Adjustments
(Assuming No Redemptions)
|
Pro Forma Combined
(Assuming No
Redemptions)
|
Transaction Accounting
Adjustments
(Assuming Maximum
Redemptions)
|
Pro Forma Combined
(Assuming Maximum
Redemptions)
|
|||||||||||||||||||||
ASSETS
|
||||||||||||||||||||||||||
Current assets
|
||||||||||||||||||||||||||
Cash
|
353
|
-
|
(353
|
)
|
(a)
|
-
|
-
|
|||||||||||||||||||
Cash and cash equivalents
|
-
|
1,354
|
353
|
(a)
|
162,789
|
(161,082
|
)
|
(j)
|
30,000
|
|||||||||||||||||
230,008
|
(b)
|
28,293
|
(k)
|
|||||||||||||||||||||||
(68,926
|
)
|
(e)
|
||||||||||||||||||||||||
Affiliate receivable
|
-
|
4,115
|
4,115
|
4,115
|
||||||||||||||||||||||
Prepaid expenses and other current assets
|
49
|
7,053
|
(2,012
|
)
|
(e)
|
5,090
|
5,090
|
|||||||||||||||||||
Total Current Assets
|
402
|
12,522
|
159,070
|
171,994
|
(132,789
|
)
|
39,205
|
|||||||||||||||||||
Property, plant and equipment, net
|
-
|
836
|
836
|
836
|
||||||||||||||||||||||
Intangible assets, net
|
-
|
813
|
813
|
813
|
||||||||||||||||||||||
Investments
|
-
|
3,976,813
|
3,976,813
|
3,976,813
|
||||||||||||||||||||||
Other assets - Excluded Series and MSP Recovery Claim Series 01
|
-
|
2,013,000
|
2,013,000
|
2,013,000
|
||||||||||||||||||||||
Deferred tax asset
|
-
|
(g)
|
-
|
-
|
||||||||||||||||||||||
Marketable securities held in Trust Account
|
230,008
|
-
|
(230,008
|
)
|
(b)
|
-
|
-
|
|||||||||||||||||||
TOTAL ASSETS
|
230,410
|
6,003,984
|
(70,938
|
)
|
6,163,456
|
(132,789
|
)
|
6,030,667
|
||||||||||||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY
|
||||||||||||||||||||||||||
Current liabilities
|
||||||||||||||||||||||||||
Accounts payable
|
-
|
2,739
|
2,739
|
2,739
|
||||||||||||||||||||||
Accrued expenses
|
2,919
|
-
|
(2,919
|
)
|
(e)
|
-
|
-
|
|||||||||||||||||||
Affiliate payable
|
-
|
40,895
|
40,895
|
40,895
|
||||||||||||||||||||||
Note payable
|
-
|
-
|
-
|
-
|
||||||||||||||||||||||
Commission payable
|
-
|
465
|
465
|
465
|
||||||||||||||||||||||
Other current liabilities
|
-
|
1,163
|
(634
|
)
|
(e)
|
529
|
529
|
|||||||||||||||||||
Total Current Liabilities
|
2,919
|
45,262
|
(3,553
|
)
|
44,628
|
-
|
44,628
|
|||||||||||||||||||
Claims financing obligation & notes payable
|
-
|
23,500
|
23,500
|
28,293
|
(k)
|
51,793
|
||||||||||||||||||||
Interest payable
|
-
|
87,079
|
87,079
|
87,079
|
||||||||||||||||||||||
Deferred tax liability
|
-
|
-
|
-
|
5,607 |
(g)
|
5,607 | ||||||||||||||||||||
Warrant liability
|
10,176
|
-
|
(10,176
|
)
|
(h)
|
-
|
-
|
|||||||||||||||||||
Deferred underwriting fee payable
|
8,050
|
-
|
(8,050
|
)
|
(e)
|
-
|
-
|
|||||||||||||||||||
TOTAL LIABILITIES
|
21,145
|
155,841
|
(21,779
|
)
|
155,207
|
33,900
|
189,107
|
|||||||||||||||||||
Class A common stock subject to possible redemption
|
230,000
|
-
|
(230,000
|
)
|
(c)
|
-
|
-
|
|||||||||||||||||||
Stockholders' Equity (Deficit)
|
||||||||||||||||||||||||||
Preferred stock, $0.0001 par value
|
-
|
-
|
-
|
-
|
||||||||||||||||||||||
Class A common stock, $0.0001 par value
|
-
|
-
|
2
|
(c)
|
4
|
(2
|
)
|
(j)
|
2
|
|||||||||||||||||
1
|
(d)
|
|||||||||||||||||||||||||
1
|
(h)
|
|||||||||||||||||||||||||
Class B common stock, $0.0001 par value
|
1
|
-
|
(1
|
)
|
(d)
|
-
|
-
|
|||||||||||||||||||
Class V common stock, $0.0001 par value
|
-
|
-
|
325
|
(i)
|
325
|
325
|
||||||||||||||||||||
Members’ deficit/capital
|
-
|
5,843,795
|
(5,843,795
|
)
|
(i)
|
-
|
-
|
|||||||||||||||||||
Additional paid-in capital
|
-
|
-
|
229,998
|
(c)
|
228,071
|
(5,607
|
)
|
(g)
|
203,227
|
|||||||||||||||||
(34,950
|
)
|
(e)
|
141,843
|
(l)
|
||||||||||||||||||||||
(43,317
|
)
|
(f)
|
(161,080
|
)
|
(j)
|
|||||||||||||||||||||
-
|
(g)
|
|||||||||||||||||||||||||
5,989,488
|
(i)
|
|||||||||||||||||||||||||
(5,923,323
|
)
|
(l)
|
||||||||||||||||||||||||
10,175
|
(h)
|
|||||||||||||||||||||||||
Accumulated deficit
|
(20,736
|
)
|
-
|
(22,581
|
)
|
(e)
|
(147,822
|
)
|
(147,822
|
)
|
||||||||||||||||
(1,804
|
)
|
(e)
|
||||||||||||||||||||||||
43,317
|
(f)
|
|||||||||||||||||||||||||
(146,018
|
)
|
(i)
|
||||||||||||||||||||||||
Stockholders' Equity Attributable to Stockholders
|
(20,735
|
)
|
5,843,795
|
(5,742,482
|
)
|
80,578
|
(24,846
|
)
|
55,732
|
|||||||||||||||||
Noncontrolling interest
|
-
|
4,348
|
5,923,323
|
(l)
|
5,927,671
|
(141,843
|
)
|
(l)
|
5,785,828
|
|||||||||||||||||
TOTAL EQUITY
|
(20,735
|
)
|
5,848,143
|
180,841
|
6,008,249
|
(166,689
|
)
|
5,841,560
|
||||||||||||||||||
TOTAL LIABILITIES AND EQUITY
|
230,410
|
6,003,984
|
(70,938
|
)
|
6,163,456
|
(132,789
|
)
|
6,030,667
|
Nine Months Ended
September 30, 2021
|
Nine Months Ended
September 30, 2021
|
|
Nine Months Ended
September 30, 2021
|
|||||||||||||||||||||||
LCAP
(Historical)
(US GAAP)
|
MSP Recovery
(Historical)
(US GAAP)
|
Transaction
Accounting
Adjustments
(Assuming No
Redemptions)
|
Pro Forma Combined
(Assuming No
Redemptions)
|
Transaction Accounting
Adjustments
(Assuming Maximum
Redemptions)
|
Pro Forma Combined
(Assuming Maximum
Redemptions)
|
|||||||||||||||||||||
Claims recovery income
|
-
|
63
|
63
|
63
|
||||||||||||||||||||||
Claims recovery service income
|
-
|
9,213
|
9,213
|
9,213
|
||||||||||||||||||||||
Total Claims Recovery
|
-
|
9,276
|
-
|
9,276
|
-
|
9,276
|
||||||||||||||||||||
Operating expenses
|
||||||||||||||||||||||||||
Cost of claims recoveries
|
-
|
137
|
137
|
137
|
||||||||||||||||||||||
General and administrative
|
-
|
8,263
|
8,263
|
8,263
|
||||||||||||||||||||||
Professional fees
|
-
|
5,606
|
5,606
|
5,606
|
||||||||||||||||||||||
Depreciation and amortization
|
-
|
256
|
256
|
256
|
||||||||||||||||||||||
Operating and formation costs
|
2,503
|
-
|
(135
|
)
|
(bb)
|
2,368
|
2,368
|
|||||||||||||||||||
Total operating expenses
|
2,503
|
14,262
|
(135
|
)
|
16,630
|
-
|
16,630
|
|||||||||||||||||||
Operating (loss)/income
|
(2,503
|
)
|
(4,986
|
)
|
135
|
(7,354
|
)
|
-
|
(7,354
|
)
|
||||||||||||||||
Interest expense
|
-
|
(19,579
|
)
|
(19,579
|
)
|
(849
|
)
|
(ff)
|
(20,428
|
)
|
||||||||||||||||
Other (expense) income, net
|
-
|
1,154
|
1,154
|
1,154
|
||||||||||||||||||||||
Interest earned on marketable securities held in Trust Account
|
10
|
-
|
(10
|
)
|
(aa)
|
-
|
-
|
-
|
||||||||||||||||||
Change in fair value of warrant liabilities
|
3,190
|
-
|
3,190
|
3,190
|
||||||||||||||||||||||
Income (loss) before provision for income taxes
|
697
|
(23,411
|
)
|
125
|
(22,589
|
)
|
(849
|
)
|
(23,438
|
)
|
||||||||||||||||
(Provision for) Benefit from income taxes
|
-
|
-
|
(26
|
)
|
(dd)
|
(26
|
)
|
178
|
(dd)
|
(152
|
)
|
|||||||||||||||
Net income (loss)
|
697
|
(23,411
|
)
|
99
|
(22,615
|
)
|
(671 |
)
|
(23,286
|
)
|
||||||||||||||||
Net income (loss) attributable to non-controlling members
|
-
|
16
|
(19,968
|
)
|
(ee)
|
(19,952
|
)
|
(941
|
)
|
(ee)
|
(20,893
|
)
|
||||||||||||||
Net income (loss) attributable to Stockholders
|
697
|
(23,427
|
)
|
20,067
|
(2,663
|
)
|
270 |
(2,393
|
)
|
|||||||||||||||||
Basic and diluted weighted average shares outstanding, Class A Common Stock
|
23,650,000
|
|||||||||||||||||||||||||
Basic and diluted net income per share, Class A Common Stock
|
$
|
0.02
|
||||||||||||||||||||||||
Basic and diluted weighted average shares outstanding, Class B Common Stock
|
5,750,000
|
|||||||||||||||||||||||||
Basic and diluted net income per share, Class B Common Stock
|
$
|
0.02
|
||||||||||||||||||||||||
Basic and diluted pro forma weighted average shares outstanding, Class A Common stock
|
41,225,000
|
25,117,374
|
||||||||||||||||||||||||
Basic and diluted pro forma income per share, Class A Common stock
|
$
|
(0.06
|
)
|
$
|
(0.10
|
)
|
Year Ended December 31, 2020
|
Year Ended
December 31, 2020
|
|
Year Ended
December 31, 2020
|
|||||||||||||||||||||||||
LCAP
(Historical)
(US GAAP)
(as restated)
|
MSP Recovery
(Historical)
(US GAAP)
|
Transaction Accounting
Adjustments
(Assuming No
Redemptions)
|
Pro Forma
Combined
(Assuming No
Redemptions)
|
Transaction Accounting
Adjustments
(Assuming Maximum
Redemptions)
|
Pro Forma
Combined
(Assuming
Maximum
Redemptions)
|
|||||||||||||||||||||||
Claims recovery income
|
-
|
255
|
255
|
255
|
||||||||||||||||||||||||
Claims recovery service income
|
-
|
13,632
|
13,632
|
13,632
|
||||||||||||||||||||||||
Total Claims Recovery
|
-
|
13,887
|
-
|
13,887
|
-
|
13,887
|
||||||||||||||||||||||
Operating expenses
|
||||||||||||||||||||||||||||
Cost of claims recoveries
|
-
|
172
|
172
|
172
|
||||||||||||||||||||||||
General and administrative
|
-
|
14,598
|
1,804
|
(cc)
|
16,402
|
16,402
|
||||||||||||||||||||||
Professional fees
|
-
|
2,211
|
2,211
|
2,211
|
||||||||||||||||||||||||
Depreciation and amortization
|
-
|
235
|
235
|
235
|
||||||||||||||||||||||||
-
|
-
|
-
|
-
|
|||||||||||||||||||||||||
Operating and formation costs
|
1,472
|
-
|
(67
|
)
|
(bb)
|
1,405
|
1,405
|
|||||||||||||||||||||
Total operating expenses
|
1,472
|
17,216
|
1,737
|
20,425
|
-
|
20,425
|
||||||||||||||||||||||
Operating Income / (loss)
|
(1,472
|
)
|
(3,329
|
)
|
(1,737
|
)
|
-
|
(6,538
|
)
|
-
|
-
|
(6,538
|
)
|
|||||||||||||||
Interest expense
|
-
|
(20,886
|
)
|
(20,886
|
)
|
(1,132
|
)
|
(ff)
|
(22,018
|
)
|
||||||||||||||||||
Other (expense) income, net
|
-
|
(51
|
)
|
(51
|
)
|
(51
|
)
|
|||||||||||||||||||||
Transaction costs
|
(837
|
)
|
-
|
(837
|
)
|
(837
|
)
|
|||||||||||||||||||||
Interest earned on marketable securities held in Trust Account
|
11
|
-
|
(11
|
)
|
(aa)
|
-
|
-
|
|||||||||||||||||||||
Change in fair value of warrant liabilities
|
237
|
-
|
237
|
237
|
||||||||||||||||||||||||
(Loss)/income before provision for income taxes
|
(2,061
|
)
|
(24,266
|
)
|
(1,748
|
)
|
(28,075
|
)
|
(1,132
|
)
|
(29,207
|
)
|
||||||||||||||||
(Provision for) Benefit from income taxes
|
-
|
-
|
367
|
(dd)
|
367
|
238
|
|
(dd)
|
605
|
|||||||||||||||||||
Net (loss) income
|
(2,061
|
)
|
(24,266
|
)
|
(1,381
|
)
|
-
|
(27,708
|
)
|
(894 |
)
|
(28,602
|
)
|
|||||||||||||||
Net (loss) income attributable to non-controlling members
|
-
|
(18
|
)
|
(25,509
|
)
|
(ee)
|
(25,527
|
)
|
(1,249
|
)
|
(ee)
|
(26,776
|
)
|
|||||||||||||||
Net (loss) income attributable to Stockholders
|
(2,061
|
)
|
(24,248
|
)
|
24,128
|
-
|
(2,181
|
)
|
355
|
(1,826
|
)
|
|||||||||||||||||
Basic and diluted weighted average shares outstanding, Class A Common Stock
|
8,674,180
|
|||||||||||||||||||||||||||
Basic and diluted net income per share, Class A Common Stock
|
$
|
(0.15
|
)
|
|||||||||||||||||||||||||
Basic and diluted weighted average shares outstanding, Class B Common Stock
|
5,127,732
|
|||||||||||||||||||||||||||
Basic and diluted net income per share, Class B Common Stock
|
$
|
(0.15
|
)
|
|||||||||||||||||||||||||
Basic and diluted pro forma weighted average shares outstanding, Class A Common stock
|
41,225,000
|
25,117,374
|
||||||||||||||||||||||||||
Basic and diluted pro forma loss per share, Class A Common stock
|
$
|
(0.05
|
)
|
$
|
(0.07
|
)
|
•
|
LCAP’s unaudited condensed balance sheet as of September 30, 2021 and the related notes included elsewhere in this
proxy statement/prospectus; and
|
•
|
MSP Recovery’s unaudited combined and consolidated balance sheet as of September 30, 2021 and the related notes
included elsewhere in this proxy statement/prospectus.
|
•
|
LCAP’s unaudited condensed statement of operations for the nine months ended September 30, 2021 and the related notes
included elsewhere in this proxy statement/prospectus; and
|
•
|
MSP Recovery’s unaudited combined and consolidated statement of operations for the nine months ended September 30, 2021
and the related notes included elsewhere in this proxy statement/prospectus.
|
•
|
LCAP’s audited statement of operations for the period from December 23, 2019 (date of inception) through December 31, 2020 and the
related notes included elsewhere in this proxy statement/prospectus; and
|
•
|
MSP Recovery’s audited combined and consolidated statement of operations for the year ended December 31, 2020 and the related
notes included elsewhere in this proxy statement/prospectus.
|
As of September 30, 2021
|
As of September 30, 2021
|
|||||||||||||||
MSP Recovery
(Historical)
(US GAAP)
|
MRCS Asset Acquisitions
|
VRM MSP
Asset Acquisition
|
MSP Recovery
(As Adjusted)
|
|||||||||||||
ASSETS
|
(in thousands)
|
|
|
|
||||||||||||
Current assets
|
||||||||||||||||
Cash and cash equivalents
|
1,354
|
626,813
|
1,354
|
|||||||||||||
(626,813
|
)
|
|||||||||||||||
Affiliate receivable
|
4,115
|
4,115
|
||||||||||||||
Prepaid expenses and other current assets
|
7,053
|
7,053
|
||||||||||||||
Total Current Assets
|
12,522
|
-
|
-
|
12,522
|
||||||||||||
Property, plant and equipment, net
|
836
|
836
|
||||||||||||||
Intangible assets, net
|
813
|
813
|
||||||||||||||
Investments
|
-
|
3,976,813
|
3,976,813
|
|||||||||||||
Other assets - Excluded Series and MSP Recovery Claim Series 01
|
2,013,000
|
2,013,000
|
||||||||||||||
TOTAL ASSETS
|
14,171
|
2,013,000
|
3,976,813
|
6,003,984
|
||||||||||||
LIABILITIES AND EQUITY
|
||||||||||||||||
Current liabilities
|
||||||||||||||||
Accounts payable
|
2,739
|
2,739
|
||||||||||||||
Affiliate payable
|
40,895
|
40,895
|
||||||||||||||
Commission payable
|
465
|
465
|
||||||||||||||
Other current liabilities
|
1,163
|
1,163
|
||||||||||||||
Total Current Liabilities
|
45,262
|
-
|
-
|
45,262
|
||||||||||||
Claims financing obligation & notes payable
|
23,500
|
23,500
|
||||||||||||||
Interest payable
|
87,079
|
87,079
|
||||||||||||||
TOTAL LIABILITIES
|
155,841
|
-
|
-
|
155,841
|
||||||||||||
Equity (Deficit)
|
||||||||||||||||
Members’ deficit/capital
|
(146,018
|
)
|
2,013,000
|
626,813
|
5,843,795
|
|||||||||||
3,350,000
|
||||||||||||||||
Equity Attributable to MSP Recovery
|
(146,018
|
)
|
2,013,000
|
3,976,813
|
5,843,795
|
|||||||||||
Noncontrolling interest
|
4,348
|
4,348
|
||||||||||||||
TOTAL EQUITY
|
(141,670
|
)
|
2,013,000
|
3,976,813
|
5,848,143
|
|||||||||||
TOTAL LIABILITIES AND EQUITY
|
14,171
|
2,013,000
|
3,976,813
|
6,003,984
|
a.
|
Reflects balance sheet reclassifications for presentation alignment between MSP Recovery and LCAP;
|
b.
|
Reflects the reclassification of cash and investments held in the Trust Account that becomes available to fund the Business
Combination;
|
c.
|
Reflects the reclassification of common stock subject to possible redemption to permanent equity at $0.0001 par value;
|
d.
|
Reflects the reclassification of Initial Stockholder shares from Class B Common Stock to Class A Common Stock at the Closing;
|
e.
|
Reflects the settlement of $78.3 million of estimated transaction costs expenses expected to be incurred for the
Business Combination, of which $9.2 million was already paid as of Q3 2021 and $2.9 million was already expensed as of Q3 2021. Included in the amount that remains to be settled is $8.1 million for the settlement of LCAP’s
deferred underwriting fee payable incurred during LCAP’s initial public offering due upon completion of the Business Combination, settlement of costs accrued as of the balance sheet date, costs that will be prepaid at the Closing
of the Business Combination, estimated costs for advisory, legal, and other fees that can be deducted against additional paid in capital including those capitalized as prepaids and other current assets, estimates costs that will
be expensed as incurred, and estimated costs to be offset against the net equity of LCAP at the Closing;
|
f.
|
Reflects the reclassification of the historical accumulated deficit of LCAP to additional paid in capital as part of the reverse
recapitalization, which includes the accumulated deficit of LCAP and transaction related costs incurred by LCAP;
|
g.
|
Reflects the net deferred tax asset and deferred tax liability related to an outside basis difference. A corporation
that owns a partnership is required to record the deferred tax related to its outside basis difference, which reflects the book basis compared to tax basis in the investment in the partnership. Under the no redemptions scenario,
there would be a deferred tax asset, which would be fully offset by a valuation allowance since there are no available sources of income that can be used to realize the deferred tax asset. Based on the maximum redemptions
scenario, the Post-Combination Company would record a deferred tax liability. The actual liability may change based on the facts and circumstances at the time of recording the liability in the books and records of the
Post-Combination Company;
|
h.
|
Reflects the issuance of 11.8 million shares of Class A Common Stock underlying LCAP’s Public Warrants and Private
Warrants as they are expected to be in the money as of Closing when the exercise price is expected to be reduced from $11.50 per warrant to $0.0001 after giving effect to the issuance of the New Warrants, pursuant to the terms
of the Existing Warrant Agreement. As such, the pro forma financial statements assume that the exercise price falls to $0.0001, and accordingly that 100% of the Public Warrants and Private Warrants are redeemed for shares of
Class A Common Stock when such warrants become exercisable;
|
i.
|
Reflects the recapitalization of MSP’s equity and issuance of 2,713.7 million shares of Class V Common Stock as
consideration for the reverse recapitalization and 536.3 million shares of Class V Common Stock in connection with the purchase of assets from VRM and Series MRCS under the no redemption and maximum redemption scenarios,
respectively, at $0.0001 par value. The aggregate consideration of 3.25 billion Up-C Units or shares of Class A Common Stock that is payable to the Members in connection with the Business Combination includes 6.0 million Up-C
Units or shares of Class A Common Stock that will be held in escrow to satisfy each of MSP and the Members’ potential indemnification obligations under the MIPA and released for distribution to the Members on the first
anniversary of the Closing and 62.7 million Up-C Units that may be sold to satisfy the Virage Full Return discussed in Note 3. The 536.3 million shares can be in the form of Up-C Units or shares of Class A Common Stock for the
purchase of assets from VRM and Series MRCS as discussed in Note 3. The unaudited pro forma condensed combined balance sheet assumes that consideration will in the form of Up-C units only;
|
j.
|
Reflects the maximum redemption of approximately 16.1 million shares of Class A Common Stock at a redemption price of
$10.00 per share as of September 30, 2021 for $161.1 million held in trust, which is allocated to Class A Common Stock par and additional paid-in capital using $0.0001 par value per share;
|
k.
|
Reflects cash raised from a loan from Messrs. Ruiz and Quesada (or one of their affiliates) at the Closing in
order to satisfy the condition tied to the MSP Minimum Cash Amount (as defined in the MIPA). The loan will have an annual interest rate of 4% and will mature on the day that is six months from the Closing Date (or, if such
day is not a Business Day, the next Business Day). The maturity date may be extended, at the option of the borrower, for up to three successive six month periods (for a total of 24 months). The loan will be prepayable by
the borrower at any time, without prepayment penalties, fees or other expenses. If the cash of the Post-Combination Company after giving effect to the payment of redemptions and transaction costs is less than $30.0
million, such loan will be made. As cash exceeds $30.0 million assuming no redemptions, no adjustment is required under the no redemption scenario; and
|
l.
|
Reflects the recognition of 98.7% and 99.2% non-controlling interests as a result of the Up-C structure under the
no redemption and maximum redemption scenario, respectively. The Post-Combination Company will hold all of the voting Class A Units of Opco, whereas the Members (or their designees) will hold all of the non-voting economic
Class B Units of Opco (these Class B Units represent the non-controlling interest in Opco). The ownership percentage of Class V Common Stock held in the Post-Combination Company by the Members (or their designees) will be
equivalent to the number of Class B Units held in Opco, and as such, the non-controlling interest in Opco is 98.7% and 99.2% under the no redemption and maximum redemption scenario, respectively, which is equivalent to the
Class V Common Stock ownership percentage shown in the capitalization table above.
|
|
aa. |
Reflects the elimination of interest income earned on the Trust Account;
|
bb.
|
Reflects the elimination of the LCAP administrative service fee paid to the Sponsor that will cease upon the Closing;
|
|
cc. |
Reflects the portion of MSP estimated transaction costs for the Business Combination not eligible for capitalization.
Transaction costs are reflected as if incurred on January 1, 2020, the date the Business Combination occurred for the purposes of the unaudited pro forma combined and consolidated statement of operations. This is a non-recurring
item;
|
|
dd. |
Reflects the income tax effect of pro forma adjustments using the current federal corporate tax rate of 21% for the nine
months ended September 30, 2021 and twelve months ended December 31, 2020, respectively. In the historical periods, neither entity was subject to taxes and as such for pro forma purposes, it is assumed that the combined company
would be subject to at least the minimum federal corporate statutory rate;
|
|
ee. |
Reflects the recognition of net income attributable to the 98.7% and 99.2% non-controlling interests as a result of the
Up-C structure under the no redemption and maximum redemption scenarios, respectively. The Post-Combination Company will hold all of the voting Class A Units of Opco, whereas the Members (or their designees) will hold all of the
non-voting economic Class B Units of Opco (these Class B Units represent the non-controlling interest in Opco). The ownership percentage of Class V Common Stock held in the Post-Combination Company by the Members (or their
designees) will be equivalent to the number of Class B Units held in Opco, and as such, the non-controlling interest in Opco is 98.7% and 99.2% under the no redemption and maximum redemption scenario, respectively, which is
equivalent to the Class V Common Stock ownership percentage shown in the capitalization table above. For the periods presented, pro forma net income (loss) of OpCo is allocated to the non-controlling interest based on these
respective pro-rata non-controlling interest percentages in the no redemption and maximum redemption scenarios. The pro forma net income (loss) of OpCo is substantially consistent with the pro forma consolidated net income
(loss) before income taxes, except for certain registrant expenses, including the operating and formation costs of LCAP, and transaction-related expenses allocated to the issuance of the warrants; and
|
|
ff. |
Reflects interest expense related to member loans as noted in tickmark k.
|
Nine Months Ended
September 30, 2021
|
Year Ended
December 31, 2020
|
|||||||||||||||
(in thousands, except share and per share data)
|
Assuming
No Redemptions
|
Assuming Maximum Redemptions
|
Assuming
No Redemptions
|
Assuming Maximum Redemptions
|
||||||||||||
Pro forma net income (loss) attributable to Stockholders
|
$
|
(2,663
|
)
|
$
|
(2,565
|
)
|
$
|
(2,181
|
)
|
$
|
(2,056
|
)
|
||||
Pro forma weighted average Class A Common Stock outstanding - basic and diluted
|
41,225,000
|
25,117,374
|
41,225,000
|
25,117,374
|
||||||||||||
Pro forma Class A Common Stock income (loss) per share
|
$
|
(0.06
|
)
|
$
|
(0.10
|
)
|
$
|
(0.05
|
)
|
$
|
(0.08
|
)
|
||||
Pro forma weighted average Class A Common Stock outstanding -
basic and diluted
|
||||||||||||||||
Class A - LCAP Public Stockholders
|
23,650,000
|
7,542,374
|
23,650,000
|
7,542,374
|
||||||||||||
Class A - LCAP Initial Stockholders
|
5,750,000
|
5,750,000
|
5,750,000
|
5,750,000
|
||||||||||||
Class A - LCAP Private and Public Warrants
|
11,825,000
|
11,825,000
|
11,825,000
|
11,825,000
|
||||||||||||
Total LCAP
|
41,225,000
|
25,117,374
|
41,225,000
|
25,117,374
|
||||||||||||
Total Shares at Closing(1)(2)(3)
|
41,225,000
|
25,117,374
|
41,225,000
|
25,117,374
|
|
• |
A proposal to adopt the MIPA and the transactions contemplated thereby. See the section entitled “Proposal No. 1 — The Business Combination Proposal.”
|
|
• |
A proposal to approve, for purposes of complying with applicable listing rules of Nasdaq the issuance of more than 20% of the issued and outstanding common stock of the Company and voting power in connection with the Business
Combination. See the section entitled “Proposal No. 2 — The Nasdaq Proposal.”
|
|
• |
A proposal to adopt the Proposed Charter in the form attached hereto as Annex B. See the section entitled “Proposal No. 3 — The Charter Approval Proposal.”
|
|
• |
Five separate proposals with respect to certain governance provisions in the Proposed Charter, which are being separately presented in accordance with SEC requirements and which will be voted upon on a non-binding advisory basis.
|
|
o |
Proposal No. 4A: Change in
Authorized Shares—To (i) increase the Post-Combination Company’s total number of authorized shares of capital stock from 111,000,000 shares to 8,760,000,000 shares of capital stock, (ii) increase the Post-Combination
Company’s authorized Class A Common Stock from 100,000,000 shares to 5,500,000,000 shares of Class A Common Stock, (iii) create the Class V Common Stock, consisting of 3,250,000,000 authorized shares of Class V Common Stock and (iv)
increase the Post-Combination Company’s authorized shares of Preferred Stock from 1,000,000 to 10,000,000 shares of Preferred Stock.
|
|
o |
Proposal No. 4B: Dual-Class Stock— To provide for a capital structure pursuant to which, subject to applicable law and the rights, if any, of the holders of any outstanding series of Preferred
Stock, the holders of outstanding shares of common stock of the Post-Combination Company will vote together as a single class on all matters with respect to which stockholders of the Post-Combination Company are entitled to vote under
applicable law, the Proposed Charter or the Amended and Restated Bylaws, or upon which a vote of the stockholders generally entitled to vote is otherwise duly called for by the Post-Combination Company; provided, however, that except as
may otherwise be required by applicable law, each holder of outstanding shares of common stock of the Post-Combination Company will not be entitled to vote on any amendment to the Proposed Charter that relates solely to the terms of one
or more outstanding series of Preferred Stock (including, without limitation, the powers (including voting powers), if any, preferences and relative, participating, optional, special or other rights, if any, and the qualifications,
limitations and restrictions, if any, of such series of Preferred Stock), if the holders of such affected series are entitled, either voting separately as a single class or together as a class with the holders of any other outstanding
series of Preferred Stock, to vote thereon pursuant to the Proposed Charter or the DGCL. In each such vote, the holders of Class A Common Stock and holders of Class V Common Stock will be entitled to one vote per share of Class A
Common Stock or Class V Common Stock, respectively, including the election of directors and significant corporate transactions (such as a merger or other sale of the Post-Combination Company or its assets).
|
|
o |
Proposal No. 4C: Removal of Directors—To provide that any director or the entire Board may be removed (i) at any time prior to the Voting Rights Threshold Date by a simple majority voting
together as a single class, with or without cause, notwithstanding the classification of the Board, and (ii) at any time from and after the Voting Rights Threshold Date, solely for cause and only by the affirmative vote of the holders
of at least 66-2/3% of the voting power of all of the then outstanding shares of the Corporation generally entitled to vote thereon, voting together as a single class.
|
|
o |
Proposal No. 4D: Required Stockholder Vote to Amend Certain Sections of the Proposed Charter—To provide that, from and after the Voting Rights Threshold Date, in addition to any affirmative
vote required by applicable law, the approval by affirmative vote of the holders of at least 66-2/3% in voting power of the then outstanding shares of the Post-Combination Company generally entitled to vote is required to make any
amendment to Article Seventh (Board of Directors) or Article Eighth (Written Consent of Stockholders) of the Proposed Charter.
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Proposal No 4E: Required Stockholder Vote to Amend the Amended and Restated Bylaws—To provide that, in addition to any affirmative vote required by the Proposed Charter, any bylaw that is to
be made, altered, amended or repealed by the stockholders of the Post-Combination Company shall receive, at any time (i) prior to the Voting Rights Threshold Date, the affirmative vote of the holders of at least a majority in voting
power of the then outstanding shares of the Post-Combination Company generally entitled to vote, voting together as a single class, and (ii) from and after the Voting Rights Threshold Date, the affirmative vote of the holders of at
least 66-2/3% in voting power of the then outstanding shares of stock of the Post-Combination Company generally entitled to vote, voting together as a single class.
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A proposal to elect seven directors to serve on the Board of Directors of the Post-Combination Company until the first annual meeting of stockholders following the Business Combination, in the case of Class I directors, the second
annual meeting of stockholders following the Business Combination, in the case of Class II directors, and the third annual meeting of stockholders following the Business Combination, in the case of Class III directors, and, in each
case, until their respective successors are duly elected and qualified. See the section entitled “Proposal No. 5 — The Director Election Proposal.”
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A proposal to approve and adopt the MSP Recovery, Inc. 2021 Omnibus Incentive Plan, a copy of which is attached hereto as Annex J. See the section entitled “Proposal
No. 6 — The Incentive Plan Proposal.”
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A proposal to approve the adjournment of the Special Meeting to a later date or dates, if necessary, (A) to ensure that any supplement or amendment to the accompanying proxy statement/prospectus that the LCAP Board has determined in
good faith is required by applicable law to be disclosed to Company stockholders and for such supplement or amendment to be promptly disseminated to Company stockholders prior to the Special Meeting, (B) if, as of the time for which the
Special Meeting is originally scheduled, there are insufficient shares of common stock represented (either in person or by proxy) to constitute a quorum necessary to conduct business at the Special Meeting or (C) to permit further
solicitation and vote of proxies if there are insufficient votes for, or otherwise in connection with, the approval of the Business Combination Proposal, the Nasdaq Proposal, the Charter Approval Proposal, the Director Election Proposal
or the Incentive Plan Proposal. See the section entitled “Proposal No. 7 — The Adjournment Proposal.”
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by submitting a properly executed proxy card (including via the Internet or by telephone); or
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electronically at the Special Meeting.
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you may send another proxy card with a later date;
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you may notify the Company’s Secretary in writing before the Special Meeting that you have revoked your proxy; or
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you may attend the Special Meeting and vote electronically by visiting and entering the control number found on your proxy card, voting instruction form or notice you previously received. Attendance at the Special Meeting will not,
in and of itself, revoke a proxy.
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change the Post-Combination Company’s name to “MSP Recovery, Inc.”;
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change the purpose of the Post-Combination Company to “engage in any lawful act or activity for which a corporation may be organized under the DGCL”;
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provide that, upon the Closing of the Business Combination, each share of Class B Common Stock outstanding immediately prior to the Closing will automatically be converted into one share of Class A Common Stock without any action on
the part of any person and, concurrently with such conversion, the number of authorized shares of Class B Common Stock will be reduced to zero;
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(i) increase the Post-Combination Company’s total number of authorized shares of capital stock from 111,000,000 shares to
8,760,000,000 shares of capital stock, (ii) increase the Post-Combination Company’s authorized Class A Common Stock from 100,000,000 shares to 5,500,000,000 shares of Class A Common Stock, (iii) create the Class V Common Stock,
consisting of 3,250,000,000 authorized shares of Class V Common Stock and (iv) increase the Post-Combination Company’s authorized shares of Preferred Stock from 1,000,000 to 10,000,000 shares of Preferred Stock;
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provide that each share of Class V Common Stock will automatically be cancelled upon any sale or other transfer of such share to a third party other than as permitted by the Proposed Charter;
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provide that, subject to applicable law and the rights, if any, of the holders of any outstanding series of Preferred Stock, the holders of outstanding shares of common stock of the Post-Combination Company will vote together as a
single class on all matters with respect to which stockholders of the Post-Combination Company are entitled to vote under applicable law, the Proposed Charter or the Amended and Restated Bylaws, or upon which a vote of the stockholders
generally entitled to vote is otherwise duly called for by the Post-Combination Company; provided, however, that except as may otherwise be required by applicable law, each holder of outstanding shares of common stock of the
Post-Combination Company will not be entitled to vote on any amendment to the Proposed Charter that relates solely to the terms of one or more outstanding series of Preferred Stock (including, without limitation, the powers (including
voting powers), if any, preferences and relative, participating, optional, special or other rights, if any, and the qualifications, limitations and restrictions, if any, of such series of Preferred Stock), if the holders of such
affected series are entitled, either voting separately as a single class or together as a class with the holders of any other outstanding series of Preferred Stock, to vote thereon pursuant to the Proposed Charter or the DGCL; in each
such vote, the holders of Class A Common Stock and holders of Class V Common Stock will be entitled to one vote per share of Class A Common Stock or Class V Common Stock, respectively, including the election of directors and significant
corporate transactions (such as a merger or other sale of the Post-Combination Company or its assets);
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provide that, subject to applicable law and the rights, if any, of the holders of any outstanding series of Preferred Stock, the holders of Class A Common Stock will be entitled to receive dividends with respect to shares of Class A
Common Stock, when, as and if declared by the Board, while holders of Class V Common Stock will not be entitled to receive dividends with respect to shares of Class V Common Stock;
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provide that the Board (other than those directors, if any, elected by the holders of any outstanding series of Preferred Stock) will be divided into three classes, as nearly equal in number as possible, designated as Class I, Class
II and Class III, and that with respect to the directors of the Board (i) the directors of each class the term of which then expires will be elected to hold office for a three-year term or until the election and qualification of their
respective successors in office, subject to their earlier death, resignation, disqualification or removal and (ii) in case of any increase or decrease, from time to time, in the number of directors (other than those directors, if any,
elected by the holders of any outstanding series of Preferred Stock), the number of directors in each class will be apportioned by resolution of the Board as nearly equal as possible;
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provide that until any time prior to the Voting Rights Threshold Date, any director elected by the stockholders generally entitled to vote may be removed with or without cause by a simple majority voting together as a single class
and, any time from and after the Voting Rights Threshold Date, any such director may be removed only for cause and only by the affirmative vote of the holders of at least 66-2/3% of the voting power of all of the then outstanding shares
of the Post-Combination Company generally entitled to vote thereon, voting together as a single class;
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provide that, with respect to directors elected by the stockholders generally entitled to vote, newly created directorships resulting from an increase in the authorized number of directors or any vacancies on the Board resulting from
death, resignation, disqualification, removal or other cause will be filled solely and exclusively by a majority of the directors then in office, although less than a quorum, or by the sole remaining director and any director so elected
will hold office until the expiration of the term of office of the director whom he or she has replaced and until his or her successor is elected and qualified, subject to such director’s earlier death, resignation, disqualification or
removal;
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provide that, prior to the Voting Rights Threshold Date, the affirmative vote of the holders of at least a majority in voting power of the then outstanding shares of the Post-Combination Company generally entitled to vote, voting
together as a single class, and, from and after the Voting Rights Threshold Date, the affirmative vote of the holders of at least 66-2/3% in voting power of the then outstanding shares of the Post-Combination Company generally entitled
to vote, is required to alter, amend, make or repeal any provision of the Amended and Restated Bylaws;
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provide that the Post-Combination Company will have no interests or expectancy in, or in being offered an opportunity to participate in, and renounces, to the fullest extent permitted by applicable law, (i) any corporate opportunity
with respect to any lines of business, business activity or business venture conducted by the Relevant Persons and (ii) any corporate opportunity received by, presented to, or originated by, a Relevant Person after the date of the
filing of the Proposed Charter with the Secretary of State of the State of Delaware in such Relevant Person’s capacity as a Relevant Person (and not in his, her or its capacity as a director, officer or employee of the Post-Combination
Company);
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provide that, unless the Post-Combination Company consents in writing to the selection of an alternative forum, (i) any derivative action brought on behalf of
the Post-Combination Company, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer, or employee of the Post-Combination Company to the Post-Combination Company or the Post-Combination Company’s
stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL, the Proposed Charter or the Amended and Restated Bylaws, or (iv) any action asserting a claim governed by the internal affairs doctrine of
the State of Delaware, in each case, will be required to be filed in the Court of Chancery of the State of Delaware (or, if the Court of Chancery of the State of Delaware lacks jurisdiction over any such action or proceeding, then a
state court located within the State of Delaware or the federal district court for the District of Delaware); provided, that the exclusive forum provision does not apply to actions arising under the Securities Act or the Exchange Act;
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require that, from and after the Voting Rights Threshold Date, in addition to any affirmative vote required by applicable law, the affirmative vote of the holders of at least 66-2/3% in voting power of the then outstanding shares of
the Post-Combination Company generally entitled to vote is required to make any amendment to Article Seventh (Board of Directors) or Article Eighth (Written Consent of Stockholders) of the Proposed Charter;
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delete the prior provisions under Article IX (Business Combination Requirements; Existence) of the Proposed Charter relating to our status as a blank check company; and
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provide that, from and after the Voting Rights Threshold Date, stockholders may not take action by consent in lieu of a meeting.
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Amending Article I to change the Post-Combination Company’s name to “MSP Recovery, Inc.” Previously, the Company’s name was “Lionheart Acquisition Corporation II”. The Board believes the name of the Post-Combination Company should
more closely align with the name of the Post-Combination Company’s operating business and therefore has proposed the name change.
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Amending the prior Article II and renumbering such article as Article Third to provide that the purpose of the Post-Combination Company is “to engage in any lawful act or activity for which a corporation may be organized under the
General Corporation Law of the State of Delaware.” The Board believes this change is appropriate to remove language applicable to a blank check company.
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Amending Article IV to remove the provision that any share of Class B Common Stock outstanding immediately prior to the Closing will automatically be converted into one share of Class A Common Stock. The Existing Charter provides for
the automatic conversion of the issued and outstanding Class B Common Stock, which will no longer be required after the automatic conversion occurs at Closing.
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Amending Article IV to (i) increase the Post-Combination Company’s total number of authorized shares of capital stock from
111,000,000 shares to 8,760,000,000 shares of capital stock, (ii) increase the Post-Combination Company’s authorized Class A Common Stock from 100,000,000 shares to 5,500,000,000 shares of Class A Common Stock, (iii) create the
Class V Common Stock, consisting of 3,250,000,000 authorized shares of Class V Common Stock and (iv) increase the Post-Combination Company’s authorized shares of Preferred Stock from 1,000,000 to 10,000,000 shares of Preferred
Stock. The amendment provides for the creation of the Class V Common Stock, which is required in order to effectuate the closing of the Business Combination. In addition, the increase in the total number of authorized shares
provides the Post-Combination Company adequate authorized capital to provide flexibility for future issuances of shares of common stock if determined by the Board to be in the best interests of the Post-Combination Company, without
incurring the risk, delay and potential expense incident to obtaining stockholder approval for a particular issuance.
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Amending Article IV to provide for a capital structure pursuant to which, subject to applicable law and the rights, if any, of the holders of any outstanding series of Preferred Stock, the holders of outstanding shares of common
stock of the Post-Combination Company will vote together as a single class on all matters with respect to which stockholders of the Post-Combination Company are entitled to vote under applicable law, the Proposed Charter or the Amended
and Restated Bylaws, or upon which a vote of the stockholders generally entitled to vote is otherwise duly called for by the Post-Combination Company; provided, however, that except as may otherwise be required by applicable law, each
holder of outstanding shares of common stock of the Post-Combination Company will not be entitled to vote on any amendment to the Proposed Charter that relates solely to the terms of one or more outstanding series of Preferred Stock
(including, without limitation, the powers (including voting powers), if any, preferences and relative, participating, optional, special or other rights, if any, and the qualifications, limitations and restrictions, if any, of such
series of Preferred Stock), if the holders of such affected series are entitled, either voting separately as a single class or together as a class with the holders of any other outstanding series of Preferred Stock, to vote thereon
pursuant to the Proposed Charter or the DGCL. In each such vote, the holders of Class A Common Stock and holders of Class V Common Stock will be entitled to one vote per share of Class A Common Stock or Class V Common Stock,
respectively, including the election of directors and significant corporate transactions (such as a merger or other sale of the Post-Combination Company or its assets). The amendment is intended to align the Post-Combination Company’s
capital structure with that of Opco and enables the Members, including John H. Ruiz and Frank C. Quesada, to maintain their leadership of the Post-Combination Company and execute on the Post-Combination Company’s long-term strategy
while helping alleviate short-term market pressure on the Post-Combination Company.
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Restating the prior Article V and renumbering such article as Article Seventh to provide that the Board be divided into three classes, as nearly equal in number as possible, designated as Class I, Class II and Class III. The
directors of each class the term of which then expires will be elected to hold office for a three-year term or until the election and qualification of their respective successors in office, subject to their earlier death, resignation,
disqualification or removal. In case of any increase or decrease, from time to time, in the number of directors, the number of directors in each class will be apportioned by resolution of the Board as nearly equal as possible. The
amendment is intended to maintain the stability of the Board and to discourage certain types of transactions that may involve an actual or threatened hostile acquisition of the Post-Combination Company.
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Amending Article V and renumbering such article as Article Seventh to provide that any director or the entire Board may be removed (i) at any time prior to the Voting Rights Threshold Date by a simple majority voting together as a
single class, with or without cause, notwithstanding the classification of the Board, and (ii) at any time from and after the Voting Rights Threshold Date, solely for cause and only by the affirmative vote of the holders of at least
66-2/3% of the voting power of all of the then outstanding shares of the Corporation generally entitled to vote thereon, voting together as a single class. The amendment is intended to protect all stockholders against the potential
self-interested actions by one or a few large stockholders after the Voting Rights Threshold Date by changing the standard for removal of a director after the Voting Rights Threshold Date to solely for cause.
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Amending Article V and renumbering such article as Article Seventh to provide that, with respect to directors elected by the stockholders generally entitled to vote, from and after the Voting Rights Threshold Date, (i) newly created
directorships resulting from an increase in the authorized number of directors or any vacancies on the Board resulting from death, resignation, disqualification, removal or other cause will be filled solely and exclusively by a majority
of the directors then in office, although less than a quorum, or by the sole remaining director and (ii) any director so elected will hold office until the expiration of the term of office of the director whom he or she has replaced and
until his or her successor is elected and qualified, subject to such director’s earlier death, resignation, disqualification or removal. The amendment is intended to protect the Board from undue influence from potentially
self-interested actions by one or a few large stockholders after the Voting Rights Threshold Date.
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Amending Article VI and renumbering such article as Article Seventh to provide that, in addition to any affirmative vote required by the Proposed Charter, any bylaw that is to be made, altered, amended or repealed by the stockholders
of the Post-Combination Company shall receive, at any time (i) prior to the Voting Rights Threshold Date, the affirmative vote of the holders of at least a majority in voting power of the then outstanding shares of the Post-Combination
Company generally entitled to vote, voting together as a single class, and (ii) from and after the Voting Rights Threshold Date, the affirmative vote of the holders of at least 66-2/3% in voting power of the then outstanding shares of
stock of the Post-Combination Company generally entitled to vote, voting together as a single class. The amendment is intended to protect all stockholders against the potential self-interested actions by one or more large stockholders
after the Voting Rights Threshold Date. In addition, the LCAP Board believes that following the Voting Rights Threshold Date, a supermajority voting requirement encourages any person seeking control of the Post-Combination Company to
negotiate directly with the Board to reach terms that are appropriate for all stockholders.
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Amending the prior Article X to provide that the Company will have no interests or expectancy in, or in being offered an opportunity to participate in, and renounces, to the fullest extent permissible by law, (i) any corporate
opportunity with respect to any lines of business, business activity or business venture conducted by the Relevant Persons and (ii) any corporate opportunity received by, presented to, or originated by, a Relevant Person after the date
of the filing of the Proposed Charter with the Secretary of State of the State of Delaware in such Relevant Person’s capacity as a Relevant Person (and not in his, her or its capacity as a director, officer or employee of the
Post-Combination Company). The prior Article X provided that the doctrine of corporate opportunity would not apply to the Company or any of its officers or directors where it would conflict with any fiduciary duties or contractual
obligations, unless it was offered to such person solely in his or her capacity as a director or officer of the Post-Combination Company. The LCAP Board believes that this change is appropriate to permit the Members, including John H.
Ruiz and his affiliates, to continue to operate their respective businesses and such provision was negotiated for specifically by the Members.
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Amending the prior Article XI and renumbering such article as Article Thirteenth to require that, from and after the Voting Rights Threshold Date, in addition to any affirmative vote required by applicable law, the approval by
affirmative vote of the holders of at least 66-2/3% in voting power of the then outstanding shares of the Post-Combination Company generally entitled to vote is required to make any amendment to Article Seventh (Board of Directors) or
Article Eighth (Written Consent of Stockholders) of the Proposed Charter. The LCAP Board believes this amendment protects key provisions of the Proposed Charter from arbitrary amendment and prevents a simple majority of stockholders
from taking actions after the Voting Rights Threshold Date that may be harmful to other stockholders or making changes to provisions that are intended to protect all stockholders.
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Amending the prior Article VII and renumbering such article as Article Eighth to provide that, from and after the Voting Rights Threshold Date, stockholders may not take action by consent in lieu of a meeting. The amendment is
intended to protect the Board from undue influence from potentially self-interested actions by one or a few large stockholders after the Voting Rights Threshold Date.
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Name
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Age
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Title
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Ophir Sternberg
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51
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Chairman, President and Chief Executive Officer
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Paul Rapisarda
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67
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Chief Financial Officer
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Faquiry Diaz Cala
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46
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Chief Operating Officer
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James Anderson
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72
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Director
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Thomas Byrne
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59
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Director
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Thomas Hawkins
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60
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Director
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Roger Meltzer
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70
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Director
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the appointment, compensation, retention, replacement, and oversight of the work of the independent auditors and any other independent registered public accounting firm engaged by us;
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pre-approving all audit and permitted non-audit services to be provided by the independent auditors or any other registered public accounting firm engaged by us, and establishing pre-approval policies and procedures;
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reviewing and discussing with the independent auditors all relationships the auditors have with us in order to evaluate their continued independence;
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setting clear hiring policies for employees or former employees of the independent auditors;
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setting clear policies for audit partner rotation in compliance with applicable laws and regulations;
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obtaining and reviewing a report, at least annually, from the independent auditors describing (i) the independent auditor’s internal quality-control procedures and (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;
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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
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reviewing with management, the independent auditors, 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.
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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 (if any) of our Chief Executive Officer based on such evaluation;
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reviewing and approving on an annual basis the compensation of all of our other officers;
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reviewing on an annual basis our executive compensation policies and plans;
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implementing and administering our incentive compensation equity-based remuneration plans;
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assisting management in complying with our proxy statement and annual report disclosure requirements;
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approving all special perquisites, special cash payments and other special compensation and benefit arrangements for our officers and employees;
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if required, producing a report on executive compensation to be included in our annual proxy statement; and
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reviewing, evaluating and recommending changes, if appropriate, to the remuneration for directors.
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None of our officers or directors is required to commit his full time to our affairs and, accordingly, may have conflicts of interest in allocating his time among various business activities.
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In the course of their other business activities, our officers and directors may become aware of investment and business opportunities which may be appropriate for presentation to us as well as the other entities with which they are
affiliated. Our management may have conflicts of interest in determining to which entity a particular business opportunity should be presented.
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Nomura, the Sponsor, our officers and directors and the underwriters have agreed to waive their redemption rights with respect to any Founder Shares, Private Shares and any Public Shares held by them (other than, in the case of
Nomura, Public Shares held directly or indirectly by Nomura on behalf of a third-party client) in connection with the consummation of our initial business combination. Additionally, Nomura, the Sponsor and our officers and directors
have agreed to waive their redemption rights with respect to any Founder Shares and Private Shares held by them if we fail to consummate our initial business combination within 18 months after the IPO Closing Date. If we do not complete
our initial business combination within such applicable time period, the proceeds of the sale of the private securities held in the trust account will be used to fund the redemption of our Public Shares, and the Private Warrants will
expire worthless. With certain limited exceptions, the Founder Shares will not be transferable, assignable by the Sponsor until the earlier of: (A) six months after the completion of our initial business combination or (B) subsequent to
our initial business combination, (x) if the last reported sale price of our Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for
any 20 trading days within any 30-trading day period commencing at least 30 days after our initial business combination, or (y) the date on which we complete a liquidation, merger, capital stock exchange, reorganization or other similar
transaction that results in all of our stockholders having the right to exchange their shares of common stock for cash, securities or other property. With certain limited exceptions, the Private Shares, the Private Warrants and the
Class A Common Stock underlying such warrants, will not be transferable, assignable or saleable by the initial purchaser of the Private Units or their permitted transferees until 30 days after the completion of our initial business
combination. Since the Sponsor and our officers and directors may directly or indirectly own common stock and warrants, our officers and directors may have a conflict of interest in determining whether a particular target business is an
appropriate business with which to effectuate our initial business combination. Permitted transferees of the Founder Shares would be subject to the same restrictions.
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Our officers and directors may have a conflict of interest with respect to evaluating a particular business combination if the retention or resignation of any such officers and directors was included by a target business as a
condition to any agreement with respect to our initial business combination.
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The Sponsor and our officers or directors may have a conflict of interest with respect to evaluating a business combination
and financing arrangements as we may obtain loans from the Sponsor or an affiliate of the Sponsor or any of our officers or directors to finance transaction costs in connection with an intended initial business combination. Up to
$1,000,000 of such loans may be convertible into units, at a price of $10.00 per unit, or warrants, at a price of $1.00 per warrant, at the option of the lender. The units would be identical to the Private Units and the warrants would
be identical to the Private Warrants. The approximate value of the Sponsor’s interest in the Post Combination Company is $56.1 million, consisting of 5,642,000 shares of Class A Common Stock. The
approximate value was calculated based on a trailing 30-day average price of $9.94 per share. The cost basis of this investment was approximately $5,975,000, consisting of 595,000 private placement units at $10.00 per unit, or
$5,950,000, plus the purchase of 5,667,500 shares of Class B Common Stock for $24,641.
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In addition, our independent directors will receive a grant of 10,000 shares of Class A Common Stock at the time of
the consummation of the Business Combination. The approximate value of this grant is $100,000 (10,000 shares at a price of $10.00 per share). These shares will come from the pool of Founder Shares and will not result in any
dilution to Public Stockholders or the Members.
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the corporation could financially undertake the opportunity;
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the opportunity is within the corporation’s line of business; and
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it would not be fair to the company and its stockholders for the opportunity not to be brought to the attention of the corporation.
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Individual
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Entity
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Entity’s Business
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Affiliation
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Ophir Sternberg
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BurgerFi International Inc.
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Restaurant chain company
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Executive Chairman
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Lionheart III Corp
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SPAC
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Chairman, President and Chief Executive Officer
|
||||
Lionheart IV Corp
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SPAC
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Chairman, President and Chief Executive Officer
|
||||
Lionheart Capital LLC
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Real estate investment firm
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Chief Executive Officer
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||||
Lionheart Management LLC
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Real estate holding company
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Manager
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||||
Out of the Box Holdings LLC
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Retail space redevelopment company
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Manager
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||||
Whitecap Lofts, LLC
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Retail space redevelopment company
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Manager
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||||
6610 Mooretown Road, LLC
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Retail real estate company
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Manager
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||||
Contrarian Retail Partners, LLC
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Retail real estate company
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Chairman
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Cigarette Holdings, LLC
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Own and operate Cigarette Racing Team
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Non-controlling Member
|
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RC Lakehouse, LLC
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Residential real estate holding company
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Non-controlling Member
|
|||
Paul Rapisarda
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Lionheart Capital LLC
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Real estate investment firm
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Chief Financial Officer
|
|||
Lionheart Management LLC
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Real estate holding company
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Chief Financial Officer
|
||||
Lionheart III Corp
|
SPAC
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Chief Financial Officer
|
||||
Lionheart IV Corp
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SPAC
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Chief Financial Officer
|
||||
Out of the Box Holdings LLC
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Retail space redevelopment company
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Chief Financial Officer
|
||||
Garrison Capital Advisors LLC
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Financial consulting and advisory services company
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Sole Member
|
||||
Whitecap Lofts, LLC
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Retail space redevelopment company
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Chief Financial Officer
|
||||
6610 Mooretown Road, LLC
|
Retail real estate company
|
Chief Financial Officer
|
||||
Contrarian Retail Partners, LLC
|
Retail real estate company
|
Chief Financial Officer
|
||||
Faquiry Diaz Cala
|
Lionheart Capital LLC
|
Real estate investment firm
|
Chief Operating Officer
|
|||
BurgerFi International, Inc.
|
Restaurant chain company
|
Chief of Mergers and Acquisitions and Corporate Strategy
|
||||
Lionheart III Corp
|
SPAC
|
Chief Operating Officer
|
||||
Lionheart IV Corp
|
SPAC
|
Chief Operating Officer
|
||||
James Anderson
|
Lionheart III Corp
|
SPAC
|
Director
|
|||
Lionheart IV Corp
|
SPAC
|
Director
|
||||
Thomas Byrne
|
Lionheart III Corp
|
SPAC
|
Director
|
|||
Lionheart IV Corp
|
SPAC
|
Director
|
||||
Kaptyn Holding Corp.
|
Electric Vehicle Rideshare Company
|
Co-Founder and Chief Strategy Officer
|
New River Capital Partners, LP
|
Private Equity Fund
|
General Partner
|
||||
Thomas Hawkins
|
Lionheart III Corp
|
SPAC
|
Director
|
|||
Lionheart IV Corp
|
SPAC
|
Director
|
||||
Alumni Association of the University of Michigan
|
Educational Outreach
|
Director
|
||||
Jumptuit Inc.
|
Data Analytics Technology Company
|
Director
|
||||
Roger Meltzer, Esq.
|
DLA Piper LLP (US)
|
Legal services
|
Partner
|
|||
Haymaker Acquisition Corp. III
|
SPAC
|
Director
|
||||
Lionheart III Corp
|
SPAC
|
Director
|
||||
Lionheart IV Corp
|
SPAC
|
Director
|
||||
Ubicquia LLC
|
Smart lighting solutions provider
|
Director
|
• |
each person who is, or is expected to be, the beneficial owner of more than 5% of the outstanding shares of common stock of the Company or the Post-Combination Company, as
applicable;
|
|
• |
each of the Company’s directors and executive officers;
|
• |
each person who will become a director or named executive officer of the Post-Combination Company; and
|
• |
all directors and officers of the Company, as a group, and of the Post-Combination Company, as a group.
|
(1) |
In addition to ownership interests held by Mr. Sternberg in his individual capacity, Mr. Sternberg also beneficially owns Lionheart Investments
and Lionheart Equities, LLC, and, when taken together with his individual holdings, owns the reported percentage of beneficial ownership.
|
(2) |
In addition to ownership interests held by Mr. Ruiz in his individual capacity, Mr. Ruiz also beneficially owns the following Members, and, when
taken together with his individual holdings, owns the reported percentage of beneficial ownership of the MSP Purchased Companies: Jocral Holdings, Jocral Family, and Ruiz Group Holdings Limited, LLC.
|
(3) |
In addition to ownership interests held by Mr. Quesada in his individual capacity, Mr. Quesada also beneficially owns Quesada Group Holdings
LLC, and, when taken together with his individual holdings, owns the reported percentage of beneficial ownership of the MSP Purchased Companies.
|
(4) |
Reported figures do not include any attributed ownership based on Mr. Ruiz’s investment in VRM.
|
(5) |
Reported figures do not include any attributed ownership based on Mr. Quesada’s investment in VRM.
|
(6) |
In connection with the Business Combination and as an incentive to holders of Class A Common Stock not to redeem their
shares of Class A Common Stock, the Company intends, subject to compliance with applicable law, to declare a dividend comprising an aggregate of approximately 1,029,000,000 New Warrants, conditioned upon the consummation of any
redemptions by the holders of Class A Common Stock and the Closing, to the holders of record of the Class A Common Stock as of the Closing Date, after giving effect to the waiver of the right, title and interest in, to or under,
participation in any such dividend by the Members, on behalf of themselves and any of their designees. Further, pursuant to the terms of the LLC Agreement, at least twice a month, to the extent any New Warrants have been exercised
in accordance with their terms, the Post-Combination Company is required to purchase from the MSP Principals, proportionately, the number of Up-C Units or shares of Class A Common Stock owned by such MSP Principal equal to the
Aggregate Exercise Price divided by the Warrant Exercise Price in exchange for the Aggregate Exercise Price. The approximately 1,029,000,000 New Warrants will be exercisable for Class A Common Stock representing approximately
31.3% and 31.4% of total voting power in the no redemption scenario and maximum redemption scenario, respectively, and will be distributed pro rata among each share of unredeemed Class A Common Stock. The number of New Warrants to
be distributed in respect of each share of unredeemed Class A Common Stock is contingent upon, and will vary with, the aggregate number of shares of Class A Common Stock that are redeemed in connection with the Business
Combination, which may, depending on the redemptions made by Public Stockholders, result in certain holders becoming beneficial owners of more than 5% of the total voting power following the Business Combination. As such, the
beneficial ownership of holders of record of the Class A Common Stock on the Closing Date reflecting the exercise of New Warrants is not shown above. Assuming redemptions of Public Stockholders who have not waived their redemption
rights and full exercise of the New Warrants: (i) directors and officers of the Company and beneficial owners of more than 5% of outstanding shares of Class A Common Stock, in each case, pre-Business Combination, are expected to
hold a total of 204,570,000 and 445,580,783 shares of Class A Common Stock, representing approximately 6.2% and 13.6% of total voting power and assuming a no redemption scenario and maximum redemption scenario, respectively, (ii)
Mr. Ruiz would beneficially own approximately 1,422,899,720 shares of Class V Common Stock, representing approximately 43.23% and 43.45% of total voting power, assuming a no redemption scenario and maximum redemption scenario,
respectively and (iii) Mr. Quesada would beneficially own approximately 595,039,663 shares of Class V Common Stock, representing approximately 18.08% and 18.17% of total voting power, assuming a no redemption scenario and maximum
redemption scenario, respectively. For additional impact of such New Warrant Exercise, see “Summary—Ownership of the Post-Closing
Company.”
|
|
• |
Claims
Recovery. Through our claims recovery services, we acquire payment claims from our Assignors, leverage our data analytics capability to identify payments that were improperly paid by our Assignors, and seek to recover
the full amounts owed to our Assignors against those parties who under applicable law or contract were primarily responsible.
|
|
• |
Chase
to Pay Services. Our “chase to pay” service (“Chase to Pay”), through which we use our data analytics to assist our clients who are healthcare providers to identify, in the first instance, the proper primary insurer at
the point of care and thereby avoid making wrongful payments. We are currently developing the Chase to Pay Platform and are in the initial stages of offering these services.
|
•
|
Medicare
Advantage
|
MAOs contract with CMS to administer Medicare benefits to Medicare beneficiaries pursuant to Medicare Advantage plans; and
MAOs, in turn, contract with First Tier and Downstream Entities to assist the MAOs in administering those Medicare benefits.
|
•
|
Medicaid
|
Health coverage provided to eligible low-income adults, children, pregnant women, elderly adults and people with disabilities.
|
•
|
Commercial
Insurance
|
Employer-sponsored purchased health insurance coverage.
|
•
|
Downstream entities (such as MSOs and IPAs) having standing to sue primary plans under the Medicare secondary
payer laws;
|
•
|
A plaintiff under the Medicare secondary payer laws not being required to first transmit a demand letter to a
Primary Payer; and
|
•
|
The entering of a settlement agreement with beneficiaries being an example of an instance when a Primary Payer
has constructive knowledge that they owed the primary payments.
|
• |
Health Maintenance Organizations (HMOs)
|
• |
Accountable Care Organizations (ACOs)
|
• |
Physicians
|
• |
Home Healthcare Facilities
|
• |
Self-Funded Plans
|
• |
States and Municipalities
|
• |
Skilled Nursing Facilities
|
• |
Hospitals / Health Systems
|
|
Nine Months Ended
September 30, 2021 |
Year Ended
December 31, 2020 |
||||||
Total Paid Amount
|
$
|
60,836,805,668.62
|
$
|
58,385,865,547.63
|
||||
Recovery Multiple
|
N/A
|
N/A
|
||||||
Penetration Status of Portfolio
|
76.3
|
%
|
N/A
|
|
Year Ended December 31
|
|||||||||||||||
(In
thousands)
|
2020
|
2019
|
$ Change
|
% Change
|
||||||||||||
Claims recovery income
|
$
|
255
|
$
|
-
|
$
|
255
|
N/A
|
|||||||||
Claims recovery service income
|
13,632
|
11,448
|
2,184
|
19
|
%
|
|||||||||||
Total Claims Recovery
|
$
|
13,887
|
$
|
11,448
|
$
|
2,439
|
21
|
%
|
||||||||
|
||||||||||||||||
Operating expenses
|
||||||||||||||||
Cost of claims recoveries
|
172
|
125
|
47
|
38
|
%
|
|||||||||||
General and administrative
|
14,598
|
9,661
|
4,937
|
51
|
%
|
|||||||||||
Professional fees
|
2,211
|
2,599
|
(388
|
)
|
(15
|
%)
|
||||||||||
Depreciation and amortization
|
235
|
134
|
101
|
75
|
%
|
|||||||||||
Total operating expenses
|
17,216
|
12,519
|
4,697
|
38
|
%
|
|||||||||||
Operating Income/ (Loss)
|
$
|
(3,329
|
)
|
$
|
(1,071
|
)
|
$
|
(2,258
|
)
|
211
|
%
|
|||||
Interest expense
|
(20,886
|
)
|
(16,085
|
)
|
(4,801
|
)
|
30
|
%
|
||||||||
Other income (expense), net
|
(51
|
)
|
553
|
(604
|
)
|
(109
|
%)
|
|||||||||
Net loss
|
$
|
(24,266
|
)
|
$
|
(16,603
|
)
|
$
|
(7,663
|
)
|
46
|
%
|
|||||
Less: Net loss attributable to non-controlling members
|
18
|
27
|
(9
|
)
|
(33
|
%)
|
||||||||||
Net loss attributable to controlling members
|
$
|
(24,248
|
)
|
$
|
(16,576
|
)
|
$
|
(7,672
|
)
|
46
|
%
|
|
Nine Months Ending September 30
|
|||||||||||||||
|
2021
|
2020
|
$ Change
|
% Change
|
||||||||||||
(in thousands)
|
||||||||||||||||
Claims recovery income
|
$
|
63
|
$
|
255
|
$
|
(192
|
)
|
(75
|
%)
|
|||||||
Claims recovery service income
|
9,213
|
9,960
|
(747
|
)
|
(8
|
%)
|
||||||||||
Total Claims Recovery
|
$
|
9,276
|
$
|
10,215
|
$
|
(939
|
)
|
(9
|
%)
|
|||||||
|
||||||||||||||||
Operating expenses
|
||||||||||||||||
Cost of claims recoveries
|
137
|
141
|
(4
|
)
|
(3
|
%)
|
||||||||||
General and administrative
|
8,263
|
8,487
|
(224 |
)
|
(3 |
%)
|
||||||||||
Professional fees
|
5,606
|
1,507
|
4,099
|
272
|
%
|
|||||||||||
Depreciation and amortization
|
256
|
187
|
69
|
37
|
%
|
|||||||||||
Total operating expenses
|
14,262
|
10,181
|
3,944 | 39 |
%
|
|||||||||||
Operating Income/ (Loss)
|
$
|
(4,986
|
)
|
$
|
(107
|
)
|
$
|
(4,879
|
)
|
4,560 |
%
|
|||||
Interest expense
|
(19,579
|
)
|
(14,908
|
)
|
(4,671
|
)
|
31
|
%
|
||||||||
Other income, net
|
1,154
|
179
|
975
|
545
|
%
|
|||||||||||
Net loss
|
$
|
(23,411
|
)
|
$
|
(14,836
|
)
|
$
|
(8,575
|
)
|
58 |
%
|
|||||
Less: Net loss attributable to non-controlling members
|
(16
|
)
|
(2
|
)
|
(14
|
)
|
700
|
%
|
||||||||
Net loss attributable to controlling members
|
$
|
(23,427
|
)
|
$
|
(14,838
|
)
|
$
|
(8,589
|
)
|
58 |
%
|
|
Years ended December 31,
|
Nine Months Ended September 30,
|
||||||||||||||
|
2020
|
2019
|
2021
|
2020
|
||||||||||||
(in thousands)
|
||||||||||||||||
Net cash used in operating activities
|
$
|
(14
|
)
|
$
|
(125
|
)
|
$
|
(6,256
|
)
|
$
|
(1,180
|
)
|
||||
Net cash provided by (used in) investing activities
|
986
|
(570
|
)
|
(1,857
|
)
|
(134
|
)
|
|||||||||
Net cash provided by (used in) financing activities
|
9,610
|
25
|
(2,412
|
)
|
1,252
|
|||||||||||
Net increase (decrease) in cash
|
10,582
|
(670
|
)
|
(10,525
|
)
|
(62
|
)
|
|||||||||
Cash at beginning of period
|
1,297
|
1,967
|
11,879
|
1,297
|
||||||||||||
Cash at end of period
|
$
|
11,879
|
$
|
1,297
|
$
|
1,354
|
$
|
1,235
|
|
Lease Payments
|
|||
Remaining 2021
|
$
|
56
|
||
2022
|
231
|
|||
2023(1)
|
217
|
|||
Total
|
$
|
504
|
Name
|
Age
|
Position
|
|
Director Nominees
|
|||
John H. Ruiz
|
54 |
Class III Director
|
|
Frank C. Quesada
|
41 |
Class III Director
|
|
Ophir Sternberg
|
51
|
Class III Director
|
|
[●]
|
[●]
|
Class I Director
|
|
[●]
|
[●]
|
Class II Director
|
|
[●]
|
[●]
|
Class I Director
|
|
[●]
|
[●]
|
Class II Director
|
|
Executive Officers
|
|||
John H. Ruiz
|
54
|
Chief Executive Officer
|
|
Frank C. Quesada
|
41
|
Chief Legal Officer
|
|
Ricardo Rivera
|
50
|
Chief Operating Officer
|
|
Alexandra Plasencia
|
36
|
General Counsel
|
|
[●]
|
[●]
|
Chief Financial Officer
|
|
• |
the requirement that a majority of its board of directors consist of independent directors;
|
|
• |
the requirement that compensation of its executive officers be determined by a compensation committee comprised solely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and
|
|
• |
the requirement that director nominees be selected, or recommended for the board of directors’ selection, by a nominating committee comprised solely of independent directors with a written charter addressing the committee’s purpose
and responsibilities.
|
|
• |
appointing a registered public accounting firm for the purpose of preparing an audit report or performing other audit, review or attest services for us;
|
|
• |
evaluating the independence and performance of the registered public accounting firm;
|
|
• |
reviewing and discussing with the independent auditors their annual audit plan, including the
|
|
• |
timing and scope of audit activities;
|
|
• |
pre-approving audit and permissible non-audit services;
|
|
• |
overseeing the financial reporting process and discussing with management and our independent registered public accounting firm the quarterly and annual financial statements that we file with the SEC;
|
|
• |
reviewing the adequacy and effectiveness of our accounting and internal control policies and procedures on a regular basis;
|
|
• |
discussing guidelines and policies governing the process by which our senior management assesses and manages our exposure to risk;
|
|
• |
establishing and implementing policies relating to related party transactions;
|
|
• |
establishing procedures for the receipt, retention and treatment of complaints received by us and the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters;
|
|
• |
reviewing our program to monitor compliance with our code of ethics; and
|
|
• |
reviewing significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect our ability to record, process, summarize and report
financial information.
|
|
• |
evaluating and determining, and recommending to our Board, the compensation of our executive officers;
|
|
• |
administering and recommending to our Board the compensation of our directors;
|
|
• |
reviewing our executive compensation plan and recommending that our Board amend these plans if deemed appropriate;
|
|
• |
reviewing our general compensation plan and other employee benefit plans, including incentive compensation and equity-based plans and recommending that our Board amend these plans if deemed appropriate;
|
|
• |
reviewing and approving any severance or termination arrangements to be made with any of our executive officers; and
|
|
• |
reviewing the goals and objectives of our general compensation plans and other employee benefit plans.
|
|
• |
for any transaction from which the director derives an improper personal benefit;
|
|
• |
for any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;
|
|
• |
for any unlawful payment of dividends or redemption of shares; or
|
|
• |
for any breach of a director’s duty of loyalty to the corporation or its stockholders.
|
|
•
|
John H. Ruiz, Chief Executive Officer
|
•
|
Frank C. Quesada, Chief Legal Officer
|
•
|
Ricardo Rivera, Chief Operating Officer
|
Name and Principal
Position
|
Year
|
Salary
($)(1) |
Bonus
($) |
Stock
awards ($) |
Option awards ($)
|
Nonequity
incentive plan compensation ($) |
Nonqualified deferred compensation earnings
($)
|
All other
compensation ($)(3) |
Total
($) |
||||||||||||||||||||||||
John H. Ruiz, Chief Executive Officer
|
2020
|
--
|
--
|
--
|
--
|
--
|
--
|
675,000
|
1,384,090
|
(4)
|
|||||||||||||||||||||||
Frank C. Quesada, Chief Legal Officer
|
2020
|
--
|
--
|
--
|
--
|
--
|
--
|
769,985
|
1,519,985
|
(5)
|
|||||||||||||||||||||||
Ricardo Rivera, Chief Operating Officer(2)
|
2020
|
413,462
|
50,000
|
--
|
--
|
--
|
--
|
150,000
|
613,462
|
(1) |
The 2020 base salary amounts represent the actual amounts paid during fiscal year 2020.
|
(2) |
Mr. Rivera’s title in fiscal year ended December 31, 2020 was Chief of Staff. He became Chief Operating Officer in connection with the Business Combination.
|
(3) |
Amounts reported in the “All Other Compensation” column for 2020 reflect amounts paid to our named executive officers by the Law Firm, including for their services to MSP. The
relationship between the Company and the Law Firm, which is an entity that is not part of the Business Combination, is fully described in “Certain Relationships and Related Party Transactions—MSP and the Post-Combination Company—Legal
Services-MSP Recovery Law Firm.” In 2020, the total amount of perquisites and personal benefits for each of the NEOs.
|
(4) |
This amount includes $709,090 paid by the Law Firm to a limited liability company, which is owned by Mr. Ruiz.
|
(5)
|
This amount includes $750,000 paid by the Law Firm to a limited liability company, which is owned by Mr. Quesada.
|
|
• |
are driving technological innovation across the real estate ecosystem;
|
|
• |
offer innovative software, hardware, products, operations, or services;
|
|
• |
can serve as a platform for expansion, both organically and through further acquisitions, including “roll-ups” of smaller players;
|
|
• |
are established businesses of scale and are poised for continued growth with capable management teams and proven unit economics, but potentially in need of financial,
operational, strategic or managerial enhancement to maximize value; and
|
|
• |
have seasoned, proven business plans.
|
|
• |
businesses that focus on PropTech, a domain in which the Company’s management has a substantial track record, deep experience, and the technical ability to diligence efficiently.
|
|
• |
consider reasonably accepted valuation standards and methodologies to seek businesses, as determined in the sole discretion of the Company’s officers and directors.
|
|
• |
businesses that have generated attractive unit economics at scale, have established and growing revenue streams. The Company did not expect to acquire startup companies, companies with speculative
business plans or companies that are excessively leveraged.
|
|
• |
businesses that have a leading, growing or unique niche market position in their respective sectors. The Company expected to analyze the strengths and weaknesses of target businesses relative to their
competitors and seek to invest in one or more businesses that demonstrate advantages when compared to their competitors, including capable management team, defensible proprietary technology, strong adoption rates and relevant domain
expertise.
|
|
• |
businesses that have experienced management teams or those that provide a platform to assemble an effective and capable management team. The Company expected to focus on management teams with a track
record of driving revenue growth and creating value for their shareholders.
|
|
• |
businesses that will benefit from being publicly listed and can effectively utilize the broader access to capital and the public profile to grow and accelerate shareholder value creation.
|
|
• |
companies that have a leading or niche market position and that demonstrate advantages when compared to their competitors, which may help to create barriers to entry against new competitors.
|
|
• |
businesses that have historically generated, or has the near-term potential to generate, strong and sustainable free cash flow.
|
|
• |
Reasonableness of the aggregate consideration to be paid to the Members under the MIPA. Following a review of the financial data provided to the Company,
including certain unaudited prospective financial information of MSP (including, where applicable, the assumptions underlying such unaudited prospective financial information) and the Company’s due diligence review of MSP’s business,
the LCAP Board determined that the consideration to be paid to the Members was reasonable in light of such data and financial information. Additionally, the issuance of the New Warrants will provide Company stockholders who do not
redeem their shares of Class A Common Stock with additional value, which the LCAP Board considered in conjunction with the reasonableness of the aggregate consideration to be paid to the Members under the MIPA.
In this context “reasonable” means (i) given the uniqueness of the MSP business model, that the work done by the third party due diligence
advisors supported the “reasonableness” of the assumptions used to validate the business model, (ii) that the variables considered by the LCAP Board in relation to the financial analysis for the MSP business and the government
claims were a reasonable basis to compute the valuation, and (iii) given the inherent uncertainties in any long-term projections, particularly in a business like MSP’s where there is limited historical financial information to
extrapolate, the inclusion of the New Warrants as partial consideration to Company Shareholder who do not exercise their redemption rights provides a meaningful counter-balance to the uncertainties in the projections.
|
|
• |
Due Diligence. The Company’s management and advisors conducted due diligence examinations of MSP, including: commercial, financial, legal and regulatory due
diligence, and extensive discussions with MSP’s management and the Company’s management and legal advisors concerning such due diligence examinations of MSP.
|
|
• |
Industry and Trends. MSP’s business is based in a serviceable market that has a long-standing history of improper claim reimbursement concerns, and that the LCAP
Board considers attractive, and which, following a review of industry trends and other industry factors (including, among other things, historic and projected market growth), the LCAP Board believes has continued growth potential in
future periods.
|
|
• |
Defensive, niche business model, coupled with a first mover advantage has led to MSP identifying approximately $15 billion of paid claims value that could be recoverable
in the near future. Based on the Company’s discussions with MSP’s management, the Company’s management understands that MSP has (i) developed over 1,400 proprietary algorithms and has proven experience aggregating,
normalizing and analyzing large volumes of data, which has identified approximately $15 billion in potential recoverable claims and (ii) data assigned from more than 150 Assignors spanning 50 states and Puerto Rico, which include, but
are not limited to: Medicare Advantage Organizations, Management Service Organizations, Accountable Care Organizations, Managed Care Organizations, Physicians, Healthcare Providers and Independent Practice Associations. The Company
believes that MSP is positioned to achieve substantial potential growth on the basis of its assets.
|
|
• |
Commitment of MSP’s
Owners. The Members (or their designees) will own approximately 98.7% of the Post-Combination Company, assuming no redemptions and exercise of the Public Warrants and Private Warrants. The LCAP Board believes that the
Members continuing to own a substantial percentage of the Post-Combination Company on a pro forma basis reflects such equityholders’ belief in and commitment to the continued growth prospects of MSP going forward.
|
|
• |
Lock-Up and Employment Agreements. The LCAP Board considered the agreement by John H. Ruiz and Frank C. Quesada to be subject to a post-Closing lockup in respect
of their Up-C Units and shares of Class A Common Stock, subject to certain exceptions, and to enter into employment agreements with the Post-Combination Company, which is expected to provide important stability to the leadership and
governance of MSP.
|
|
• |
Opportunity to introduce an attractive asset class to public investors that has historically been transacted in private market settings. The Company’s belief
that recent transactions involving SPACs indicate a market trend to bring private companies with novel business models and innovative asset classes to the public markets.
|
|
• |
Driven MSP management with diverse experience and an entrepreneurial mindset to bring this asset class to the public markets. MSP founder, John H. Ruiz, brings
more than 30 years of leadership, information technology innovation and a successful track record in large class actions and multi-district litigation. MSP’s management team has the unique capability to combine data analytics and
legal expertise, including having extensive knowledge of applicable recovery laws and track record of successful class action recoveries related to insurance payments.
|
|
• |
Negotiated Transaction. The LCAP Board considered the terms and conditions of the MIPA and the related agreements and the transactions contemplated thereby,
each party’s representations, warranties and covenants, the conditions to each party’s obligation to consummate the Business Combination and the termination provisions, as well as the strong commitment by both the Company and MSP to
complete the Business Combination. The LCAP Board also considered the financial and other terms of the MIPA and the fact that such terms and conditions are reasonable and were the product of arm’s length negotiations between MSP and
the Company.
|
|
• |
Other Alternatives. After a review of other business combination opportunities reasonably available to the Company, the LCAP Board believes that the proposed
Business Combination represents the best potential business combination reasonably available to the Company taking into consideration, among other things, the timing and likelihood of accomplishing the goals of any alternatives.
|
|
• |
Post-Closing Governance. The fact that the Sponsor had negotiated the right to nominate two members of the Board following the Business Combination, which the
LCAP Board believes will allow for the Post-Combination Company to benefit from the Sponsor’s professional relationships to identify potential board members that will have appropriate industry and/or financial knowledge and
professional experience to oversee the Post-Combination Company and drive returns for stockholders.
|
|
• |
Unique Social Focus. The LCAP Board considered MSP’s unique social focus on supporting the long-term sustainability of Medicare and Medicaid programs relied upon
by over 100 million Americans.
|
|
• |
Proprietary Data System. The LCAP Board’s belief that MSP has a proprietary data system that has proven experience aggregating, normalizing and analyzing large
volumes of data to identify recoverable healthcare claims.
|
|
• |
Key Man Risk: John H. Ruiz and Frank C. Quesada are key business drivers of MSP and the success of MSP remains highly dependent on their continued involvement.
|
|
• |
Benefits May Not Be Achieved. The potential benefits of the Business Combination may not be fully achieved or may not be achieved within the expected timeframe.
|
|
• |
Validity of Claims underlying MSP’s business model, and other risks relating to MSP’s business model. The risks relating to the fact that the validity of MSP’s
claim assignments, legal standing of the MSP claims, penalties and double damages provisions, and other key legal issues remain subject to continued affirmation in the U.S. court system. Additionally, the LCAP Board considered the
risks associated with the fact that healthcare insurers and other Assignors continue to revise expense policies which may limit the size of future pools of claims relevant to MSP’s business.
|
|
• |
Regulation. The risk that changes in the regulatory and legislative landscape or new industry developments may adversely affect the projected financial results
and the other business benefits anticipated to result from the Business Combination, including the risk that the Medicare Secondary Payer Act of 1980 remains subject to legal interpretation and potential revision.
|
|
• |
Scale of Operations. While the MSP
management has modeled the expected expenses, they have not previously operated at a scale indicated in the MSP management projections nor executed on the scale of growth contemplated.
|
|
• |
Stockholder Vote. The Company’s stockholders may fail to approve the proposals necessary to effect the Business Combination.
|
|
• |
Closing Conditions. The completion of the Business Combination is conditioned on the satisfaction of certain closing conditions that are not within the Company’s
control, including the receipt of certain required regulatory approvals.
|
|
• |
The Public Stockholders
Holding a Minority Position in the Post-Combination Company. The Public Stockholders will hold a minority position in the Post-Combination Company approximately 1.1%, assuming that (1) there are no redemptions by Public
Stockholders and (2) the holders of the Company’s existing Public Warrants and Private Warrants exercise those warrants, and no New Warrants are exercised, as such, the Company’s current stockholders are unlikely to have an
influence on the management of the Post-Combination Company
|
|
• |
Due Diligence. Legal due diligence review from the Company’s advisor raised concerns over internal controls and documentation related to HIPAA compliance and data
protection.
|
|
• |
No PIPE Investment. The risk posed by the
fact that there is no PIPE as part of the Business Combination, since public investors often rely on PIPE investors for third-party validation of the valuation of a transaction.
|
|
• |
Litigation Related to the Business Combination. The possibility of litigation challenging the Business Combination or that an adverse judgment granting permanent
injunctive relief could indefinitely enjoin consummation of the Business Combination.
|
|
• |
Listing Risks. The challenges associated with preparing MSP, which is a private company, for the applicable disclosure and listing requirements to which MSP will
be subject as a publicly traded company.
|
|
• |
Financial Condition: As of the date the LCAP Board approved the Business Combination, MSP did not have any combined or consolidated historical financial
statements, and therefore the LCAP Board could not consider MSP’s historical financial results or historical and current balance sheet information in conjunction with its consideration of other financial information of MSP in making
its determination.
|
|
• |
Market Volatility: The possibility that the SPAC market experiences volatility and disruptions, causing deal disruption.
|
|
• |
Liquidation. The
risks and costs to the Company if the Business Combination is not completed, including the risk of diverting management focus and resources from other business combination opportunities, which could result in the Company being
unable to effect an initial business combination by February 18, 2022, or assuming the Extension is approved, by August 18, 2022.
|
|
• |
No Third-Party Valuation. The LCAP Board did not obtain a third-party valuation or fairness opinion in connection with the Business Combination.
|
|
• |
Fees and Expenses. The fees and expenses associated with completing the Business Combination.
|
|
• |
Risks related to VRM: MSP has entered into certain
arrangements with VRM and its affiliates, which include preferred returns on cash distributions, which may impact existing and new investors. (see “Certain
Relationships and Related Party Transactions” beginning on page [●]).
|
|
• |
Interests of Certain Persons. The Sponsor, our officers and certain of our directors may have interests in the Business Combination (see “— Interests of the Company’s Directors and Executive Officers in the Business Combination”).
|
|
• |
Other Risk Factors. Various other risk factors associated with the business of MSP, as described in the section entitled “Risk
Factors” appearing elsewhere in this proxy statement/prospectus.
|
$ in millions
|
2021
|
2022
|
2023
|
2024
|
2025
|
2026
|
||||||||||||||||||
Forecasted New Potentially Recoverable Claims to MSP(2)
|
$
|
5,931
|
$
|
5,862
|
$
|
7,214
|
$
|
6,322
|
$
|
4,683
|
$
|
4,888
|
||||||||||||
Paid Value of Potentially Recoverable Claims(3)
|
$
|
20,993
|
$
|
26,856
|
$
|
34,070
|
$
|
40,392
|
$
|
45,075
|
$
|
49,963
|
||||||||||||
Cumulative %
of Potentially Recoverable Claims Recovered(4)
|
0
|
%
|
2
|
%
|
7
|
%
|
19
|
%
|
35
|
%
|
51
|
%
|
||||||||||||
Cumulative Recoveries(5)
|
$
|
-
|
$
|
535
|
$
|
2,328
|
$
|
7,514
|
$
|
15,915
|
$
|
25,471
|
||||||||||||
Implied Annual Recoveries(6)
|
$
|
-
|
$
|
535
|
$
|
1,793
|
$
|
5,186
|
$
|
8,400
|
$
|
9,556
|
||||||||||||
Recovery Multiple of Annual Recoveries(7)
|
NM
|
1.9
|
x
|
1.7
|
x
|
2.1
|
x
|
2.4
|
x
|
2.5
|
x
|
|||||||||||||
Gross Annual Recoveries(8)
|
NM
|
$
|
992
|
$
|
3,105
|
$
|
10,744
|
$
|
20,371
|
$
|
23,765
|
|||||||||||||
Net Recoveries To MSP(9)
|
$
|
-
|
$
|
342
|
$
|
963
|
$
|
3,252
|
$
|
6,139
|
$
|
7,247
|
||||||||||||
After-Tax Net Income to MSP(10)
|
$
|
(37
|
)
|
$
|
204
|
$
|
632
|
$
|
2,313
|
$
|
4,434
|
$
|
5,232
|
(1) |
This section is a non-GAAP financial projection and reflects all claims of which MSP takes assignment, as well as those claims owned by a third
party but to which MSP is entitled to a recovery percentage. These projections do not include potential recoveries from Government Related Recoveries or interest expense accruals. Totals may not sum due to rounding.
|
(2) |
Forecasted New Potentially Recoverable Claims to MSP (“NPRC”) represents MSP’s good faith estimates of the full Paid Amount in respect of claims
to which MSP would be entitled to receive a portion of recovery proceeds (typically 50%). NPRC is calculated first by estimating the total annual Medicare and Medicaid spend across four modules, representing Accident Claims within the
Medicare Advantage market (reflecting such claims in the private sector of the Medicare Program), Other Claims within Medicare Advantage market (reflecting such claims in the private sector of the Medicare Program), Original Medicare
market (reflecting the public sector of the Medicare Program) and Medicaid market. The total annual Medicare and Medicaid spend is estimated for each year in the forecast period based on historical annual growth rates in Medicare and
Medicaid spend. The total spend in the Accident Claims and Other Claims modules is then adjusted to reflect an assumed level of administrative costs (i.e., the medical loss ratio) of 15%, to account for the private sector nature of
such modules, consistent with the standardized 15% medical loss ratio provided by CMS. The resulting adjusted spend equals the annual total addressable market opportunity within the Accident Claims and Other Claims modules. Of the
annual total addressable market opportunity in each module, MSP management calculates claims that could represent a recovery opportunity within each module, based on the assumption that 8-10% of annual medical claims are accident
related and 2% of claims are related to fraud and misconduct, consistent with historical market data on such claims. MSP then estimates its new market share for each year in each module in good faith, and the new market share is then
multiplied by recoverable opportunities for each module. The resulting amounts for each module are then aggregated to calculate NPRC. NPRC for each of the years shown reflects MSP market penetration of less than 1%.
|
(3) |
Paid Value of Potentially Recoverable Claims (“PVPRC”) represents the cumulative Paid Amount of potentially recoverable claims. PVPRC for the
year ending December 31, 2021 was calculated by adding $15.062 billion of Paid Claims held by MSP as of December 31, 2020 with Forecasted NPRC to MSP for the year ending December 31, 2021. PVPRC for each of the years ending December
31, 2022 through 2026 is calculated by adding NPRC to PVPRC for the prior year.
|
(4) |
Represents MSP management’s good faith estimate of the timing of
reaching recovery settlements or other resolutions. MSP management produced this estimate based on the nature of the claims then held and forecasted to be held in MSP’s claim’s portfolio, the stages of MSP’s claims portfolio
in terms of the recovery process, as well as MSP management’s experience with claims recovery.
|
(5) |
Represents PVPRC multiplied by Cumulative % of Potentially Recoverable Claims Recovered
|
(6) |
Implied Annual Recoveries for a given year is calculated by subtracting the Cumulative Recoveries for the prior year, from the Cumulative
Recoveries for such year.
|
(7) |
Represents MSP management’s good faith estimate of potential upside from claims recoveries that may result from payment to MSP, based on MSP
management’s experience with claims recovery.
|
(8) |
Represents Implied Annual Recoveries multiplied by Recovery Multiple on Annual Recoveries.
|
(9) |
Represents Gross Annual Recoveries after paying assignor interests and contingent legal fees, and represents portion of recoveries that are
forecasted to be recognized as part of MSP’s gross revenues. Assigner interests are equal to 50% of Gross Annual Recoveries through 2025 and 55% of Gross Annual Recoveries in 2026; contingent legal fees (including amounts paid to the
Law Firm) equal 40% of Gross Annual Recoveries net of assignor interests through 2025 and 32.5% of Gross Annual Recoveries net of assignor interests in 2026, reflective of a shift to revenue less dependent on legal process.
|
(10) |
Represents Net Recoveries to MSP minus operating expenses and taxes, and reflects the assumption that MSP will see cost reduction efficiencies
in operating expenses as its claims portfolio grows.
|
|
• |
the fact that our Initial Stockholders have agreed not to redeem any of the Founder Shares in connection with a stockholder vote to approve the proposed Business Combination;
|
|
• |
the fact that Ophir Sternberg will serve as a director of the Post-Combination Company;
|
|
• |
the fact that the Sponsor paid an aggregate of $25,000 for 5,000,000 Founder Shares in January 2020 and, in February 2020,
the Company declared a stock dividend of 0.15 share for each Founder Share outstanding, resulting in the Sponsor holding an aggregate of 5,750,000 Founder Shares. After giving effect to the sales or transfer of Founder Shares to
Nomura and in connection with the IPO to certain insiders, the remaining 5,667,500 Founder Shares will have a significantly higher value at the time of the Business Combination, which if unrestricted and freely tradable would be
valued at approximately $56,675,000 but, given the restrictions on such shares, we believe such shares have less value. In addition, given the differential in the purchase price that our Sponsor paid for the Founder Shares as
compared to the price of the units sold in the IPO and the substantial number of shares of Class A Common Stock that our Sponsor will receive upon conversion of the Founder Shares in connection with the Business Combination, our
Sponsor and its affiliates may earn a positive rate of return on their investment even if the common stock of the combined company trades below the price initially paid for the units in the IPO and the Public Stockholders
experience a negative rate of return following the completion of the Business Combination;
|
|
• |
the fact that our Initial Stockholders have agreed to waive their rights to liquidating distributions from the Trust Account
with respect to their Founder Shares if we fail to complete an initial business combination by February 18, 2022, or assuming the Extension is approved, by August 18, 2022 (or such later date as may be approved by the Company’s
stockholders);
|
|
• |
the fact that our Initial Stockholders, being holders of Class A Common Stock, are eligible to receive the dividend comprised of the New Warrants to be issued upon the automatic conversion of the Founder Shares at Closing, and the
fact that, because our Initial Stockholders have agreed not to redeem their shares in connection with the Business Combination, they may receive a significant number of such New Warrants, if other holders of Class A Common Stock elect
to exercise their redemption rights;
|
|
• |
the fact that the Sponsor paid an aggregate of $5,950,000 for Private Units comprised of 297,500 Private Warrants to
purchase shares of Class A Common Stock and that such Private Warrants will expire worthless if a business combination is not consummated by February 18, 2022, or assuming the Extension is approved, by August 18, 2022;
|
|
• |
the continued right of the Sponsor to hold Class A Common Stock and the shares of Class A Common Stock to be issued to the Sponsor upon exercise of its Private Warrants following the Business Combination, subject to certain lock-up
periods;
|
|
• |
if the Trust Account is liquidated, including in the event we are unable to complete an initial business combination within the required time period, the Sponsor has agreed to indemnify us to ensure that the proceeds in the Trust
Account are not reduced below $10.00 per Public Share, or such lesser per Public Share amount as is in the Trust Account on the liquidation date, by the claims of prospective target businesses with which we have entered into an
acquisition agreement or claims of any third party (other than our independent public accountants) for services rendered or products sold to us, but only if such a vendor or target business has not executed a waiver of any and all
rights to seek access to the Trust Account;
|
|
• |
the Sponsor (including its representatives and affiliates) and the Company directors and officers, are, or may in the future become, affiliated with entities that are engaged in a similar business to the Company. For example, each
of the Company’s officers may be considered an affiliate of the Sponsor and directors and officers of the Company are also affiliated with Lionheart III and Lionheart IV, all of which are blank check companies incorporated for the
purpose of effecting their respective initial business combinations. In addition, Mr. Meltzer serves on the board of directors of Haymaker Acquisition Corp. III, a blank check company incorporated for the purpose of effecting a
business combination. The Sponsor and the Company’s directors and officers are not prohibited from sponsoring, or otherwise becoming involved with, any other blank check companies prior to the Company completing its initial business
combination. Moreover, certain of the Company’s directors and officers have time and attention requirements for certain other companies. The Company’s directors and officers also may become aware of business opportunities which may be
appropriate for presentation to the Company, and the other entities to which they owe certain fiduciary or contractual duties, including Lionheart III and Lionheart IV. Accordingly, they may have had conflicts of interest in
determining to which entity a particular business opportunity should be presented. These conflicts may not be resolved in the Company’s favor and such potential business opportunities may be presented to other entities prior to their
presentation to the Company, subject to applicable fiduciary duties. The Existing Charter provides that the Company renounces its interest in any corporate opportunity offered to any director or officer unless such opportunity is
expressly offered to such person solely in his or her capacity as a director or officer of the Company and such opportunity is one the Company is legally and contractually permitted to undertake and would otherwise be reasonable for
the Company to pursue, and to the extent the director or officer is permitted to refer that opportunity to the Company without violating another legal obligation. For more information, see “Management
of the Company— Conflicts of Interests.”
|
|
• |
the continued indemnification of our existing directors and officers and the continuation of our directors’ and officers’ liability insurance after the Business Combination;
|
|
• |
the fact that our independent directors will receive a grant of 10,000 shares of Class A Common Stock at the time of
the consummation of the Business Combination. The approximate value of this grant is $100,000 (10,000 shares at $10.00 per share). These shares will come from the pool of Founder Shares and will not result in any dilution to
Public Stockholders or the Members;
|
|
• |
the fact that the Sponsor and our directors and officers will lose their entire investment in us and will not be reimbursed
for any out-of-pocket expenses if an initial business combination is not consummated by February 18, 2022, or assuming the Extension is approved, by August 18, 2022; and
|
|
• |
that, at the closing of the Business Combination we will enter into the amended and restated registration rights agreement with the Sponsor and our directors and officers which provides for registration rights to such persons and
their permitted transferees.
|
Sources and Uses
Assuming No Redemptions
(in millions)
|
|||||||||
Sources
|
Uses
|
||||||||
Company Cash in Trust Account(1)
|
$
|
230
|
Remaining Cash to Balance Sheet(1)(4)
|
$
|
152
|
||||
PIPE
|
0
|
Company Estimated Transaction Cost(4)
|
78
|
||||||
Member rollover(2)
|
32,500
|
Member rollover(2)
|
32,500
|
||||||
Total Sources
|
$
|
32,730
|
Total Uses
|
$
|
32,730
|
Sources and Uses
Assuming Maximum Redemptions
(in millions)
|
|||||||||
Sources
|
Uses
|
||||||||
Company Cash in Trust Account(1)
|
$
|
69
|
Remaining Cash to Balance Sheet(1)
|
$
|
19 | ||||
Cash from Members(2)
|
28
|
Company Estimated Transaction Cost(4)
|
78 | ||||||
Member rollover (3)
|
32,500
|
Member rollover(3)
|
32,500
|
||||||
Total Sources
|
$
|
32,597
|
Total Uses
|
$
|
32,597
|
|
• |
amend, modify or supplement its certificate of formation, operating agreement or other organizational documents;
|
|
• |
amend, waive any material rights under or provision of, terminate prior to its scheduled expiration date, or otherwise compromise in any material way, any material contract or enter into any contract
that, if in effect of the date hereof, would constitute a material contract;
|
|
• |
sell, lease, license or otherwise dispose of any material assets of MSP, taken as a whole, except pursuant to existing contracts or commitments disclosed herein and for licenses granted in the ordinary
course of business;
|
|
• |
pay, declare, or agree to pay any distributions with respect to the MSP membership interests, or pay, declare or agree to pay any other payments to any Member;
|
|
• |
except as otherwise required pursuant to any MSP Company Plan (as defined in the MIPA) in effect on the date of the MIPA, grant any material increase in salary to any director or officer of MSP or
change the bonus or profit-sharing policies of MSP, other than changes that do not result in a material increase in the cost of such benefits;
|
|
• |
obtain or incur any loan or other indebtedness, excluding drawings under existing lines of credit;
|
|
• |
grant or incur any material lien, except for certain permitted liens, on the assets of MSP;
|
|
• |
delay, accelerate or cancel any receivables or indebtedness owed to MSP or write off or make further reserves against the same, except, in each case, in the ordinary course of business consistent with
past practice or as required by GAAP;
|
|
• |
except as contemplated by the MIPA and the ancillary agreements, merge or consolidate with or acquire any other entity or be acquired by any other entity or person;
|
|
• |
voluntarily fail to maintain insurance policies covering the assets of MSP in a form and amount consistent with past practices;
|
|
• |
make any material change in its accounting principles or methods or write down the value of any inventory or assets of MSP, in each case, except as required by GAAP;
|
|
• |
change the principal place of business or jurisdiction of organization of MSP;
|
|
• |
make any loans, other than travel or other expense advances to employees in the ordinary course of business not to exceed $10,000 individually or $100,000 in the aggregate and prepayments and deposits
paid to suppliers of MSP in the ordinary course of business; except as contemplated by the MIPA and certain ancillary agreements, issue, redeem or repurchase any MSP membership interests or other securities in MSP or issue any
securities exchangeable for or convertible into MSP membership interests;
|
|
• |
except as otherwise required by applicable law, make or change any material tax election (other than with respect to MSP Recovery of Puerto Rico, LLC), change any annual tax accounting periods, amend
any material tax return, prepare or file any tax return materially inconsistent with past practice or, on any such tax return, take any position, make any election, or adopt any method that is materially inconsistent with positions
taken, elections made or methods used in preparing or filing similar tax returns in prior periods (including materially inconsistent positions, elections or methods that would have the effect of deferring income to periods ending
after the Closing Date or accelerating deductions to periods ending on or before the Closing Date); settle or otherwise compromise any material claim relating to taxes, enter into any closing agreement or similar agreement relating to
taxes, otherwise settle any material dispute relating to taxes, or request any ruling or similar guidance with respect to a material amount of taxes; provided, that the Company’s prior consent is not required with respect to any of
the foregoing actions where a person who is not a party to the MIPA is able to undertake such action with respect to MSP without the consent or any action on the part of any party to the MIPA; or
|
|
• |
agree to do any of the actions above.
|
|
• |
change, modify or amend the Investment Management Trust Agreement, the Sponsor Agreement, or their respective organizational documents;
|
|
• |
declare, set aside or pay any dividends on, or make any other distribution in respect of any outstanding capital stock of, or other equity interests in, the Company or Opco, split, combine or reclassify
any capital stock of, or other equity interests in, the Company or Opco; or other than (x) in connection with the stockholder redemption or (y) as otherwise required by the organizational documents of the Company or Opco in order to
consummate the transactions contemplated by the MIPA, repurchase, redeem or otherwise acquire, or offer to repurchase, redeem or otherwise acquire, any capital stock of, or other equity interests in, the Company or Opco;
|
|
• |
subject to certain exceptions, make, change or revoke any material tax election, adopt or change any material accounting method with respect to taxes, file any amended material tax return, settle or
compromise any material tax liability, enter into any material closing agreement with respect to any tax, surrender any right to claim a material refund of taxes or consent to any extension or waiver of the limitations period
applicable to any material tax claim or assessment or enter into any tax sharing or tax indemnification agreement (except, in each case, for such agreements that are commercial contracts not primarily relating to taxes) or similar
agreement or take any similar action relating to taxes, if such election, change, amendment, agreement, settlement, consent or other action would have the effect of materially increasing the present or future tax liability or
materially decreasing any present or future tax asset of the Company or Opco or MSP in a manner that will disproportionately affect the Members (as compared to the Company’s stockholders) after the Closing;
|
|
• |
enter into, renew or amend in any material respect, any transaction or contract with an affiliate of the Company (including, for the avoidance of doubt, (x) the Sponsors or anyone related by blood,
marriage or adoption to any Sponsor and (y) any Person in which any Sponsor has a direct or indirect legal, contractual or beneficial ownership interest of 5% or greater);
|
|
• |
waive, release, compromise, settle or satisfy any pending or threatened material claim (which shall include, but not be limited to, any pending or threatened action) or compromise or settle any
liability;
|
|
• |
incur, guarantee or otherwise become liable for (whether directly, contingently or otherwise) any indebtedness;
|
|
• |
offer, issue, deliver, grant or sell, or authorize or propose to offer, issue, deliver, grant or sell, any capital stock of, or other equity interests, equity equivalents, stock appreciation rights,
phantom stock ownership interests or similar rights in, the Company or Opco or any securities convertible into, or any rights, warrants or options to acquire, any such capital stock or equity interests, other than issuance of Class A
Common Stock in connection with the exercise of any warrants outstanding on the date hereof or amend, modify or waive any of the terms or rights set forth in, any warrant or the warrant agreement relating thereto, including any
amendment, modification or reduction of the warrant price set forth therein; or
|
|
• |
except as contemplated by certain exceptions, prior to the Closing, (A) adopt or amend any Purchaser Plan (as defined in the MIPA), enter into any employment contract or collective bargaining agreement
or hire any employee.
|
|
• |
MSP delivering to the Company certain financial information and audited and unaudited financial statements specified in the MIPA;
|
|
• |
MSP using commercially reasonable efforts to enter into the Employment and Restrictive Covenant Agreements with certain employees prior to the Closing Date;
|
|
• |
certain tax matters;
|
|
• |
MSP using commercially reasonable efforts to obtain each third-party consent required in connection with the consummation of Business Combination;
|
|
• |
the parties using their reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things reasonably necessary, proper or advisable or as another party may
reasonably request to consummate and make effective as promptly as practicable the transactions contemplated by the MIPA (including the satisfaction, but not waiver, of the closing conditions), (ii) execute and deliver, or cause to be
executed and delivered, such other documents, certificates, agreements and other writings and take such other actions as may be reasonably necessary or desirable in order to consummate or implement expeditiously each of the
transactions contemplated by the MIPA, and (iii) obtain each material third-party consent and approval required to be obtained in order to consummate the Business Combination;
|
|
• |
MSP, subject to certain limitation and restrictions, providing the Company, its legal counsel and other representatives reasonable access, to the offices, properties and books and records and using
commercially reasonable efforts to furnish to the Company, its legal counsel and other representatives such information relating to the business in the possession of MSP as such persons may reasonably request, in each case solely for
purposes of consummating the Business Combination;
|
|
• |
the disbursement of monies from the Trust Account;
|
|
• |
confidentiality and publicity relating to the MIPA and the transactions contemplated thereby;
|
|
• |
Members’ Representative and the Members, on the one hand, and the Company and Opco, on the other hand, promptly notifying the other party of certain events; and
|
|
• |
each party, on the request of any other party, executing such further documents, and performing such further acts, as may be reasonably necessary or appropriate to give full effect to the allocation of
rights, benefits, obligations and liabilities contemplated by the MIPA.
|
|
• |
company organization, good standing and power;
|
|
• |
requisite authority to enter into the MIPA and to complete the contemplated transactions;
|
|
• |
required governmental and regulatory consents necessary in connection with the Business Combination;
|
|
• |
absence of conflicts with organizational documents, applicable laws or certain agreements and instruments as a result of entering into the MIPA or consummating the Business Combination;
|
|
• |
capitalization of MSP and valid issuance of all membership interests;
|
|
• |
organizational documents;
|
|
• |
control by and control of third parties;
|
|
• |
assumed names;
|
|
• |
contracts requiring consent as a result of entering into the MIPA or consummating the Business Combination;
|
|
• |
financial information and absence of undisclosed liabilities;
|
|
• |
accuracy, completeness and authenticity of the books and records;
|
|
• |
absence of a Material Adverse Effect with respect to MSP since December 31, 2020 and absence of certain other changes with respect to MSP;
|
|
• |
title to assets of MSP;
|
|
• |
title to CCRAs;
|
|
• |
litigation;
|
|
• |
material contracts;
|
|
• |
insurance;
|
|
• |
licenses and permits;
|
|
• |
compliance with laws;
|
|
• |
intellectual property;
|
|
• |
privacy and data security;
|
|
• |
employees;
|
|
• |
employee benefits and compensation;
|
|
• |
real property;
|
|
• |
tax matters;
|
|
• |
environmental laws;
|
|
• |
HIPAA compliance;
|
|
• |
healthcare law compliance;
|
|
• |
healthcare laws proceedings;
|
|
• |
broker’s and finder’s fees related to the Business Combination;
|
|
• |
anti-corruption matters;
|
|
• |
compliance with laundering statutes;
|
|
• |
dealings with Office of Foreign Assets Control of the U.S. Treasury Department sanctioned countries;
|
|
• |
non-investment company; and
|
|
• |
lack of untrue statements of a material fact or omissions to state any material fact.
|
|
• |
ownership of the membership interests of MSP and authority to execute the MIPA and consummate the Business Combination;
|
|
• |
no consent, approval, waiver, authorization or novation or notice or filing required to be given or made by any Member in connection with the execution of
the MIPA and consummation of the Business Combination;
|
|
• |
rights or interests of the Members in any person relating to MSP’s business;
|
|
• |
absence of conflicts with organizational documents, applicable laws or certain agreements and instruments as a result of entering into the MIPA or consummating the Business Combination;
|
|
• |
litigation; and
|
|
• |
each Member being an accredited investor.
|
|
• |
company organization, good standing and power;
|
|
• |
requisite authority to enter into the MIPA and to complete the contemplated transactions;
|
|
• |
required governmental and regulatory consents necessary in connection with the Business Combination;
|
|
• |
absence of conflicts with organizational documents, applicable laws or certain agreements and instruments as a result of entering into the MIPA or consummating the Business Combination;
|
|
• |
broker’s and finder’s fees related to the Business Combination;
|
|
• |
due authorization and valid issuance of securities issued as consideration in the Business Combination;
|
|
• |
capitalization of the Company and Opco and valid issuance of all securities;
|
|
• |
the Investment Management Trust Agreement and the Trust Account;
|
|
• |
employees and employee benefit plans;
|
|
• |
lack of untrue statements of a material fact or omissions to state any material fact;
|
|
• |
Nasdaq listing;
|
|
• |
reporting company and registration of Class A Common Stock pursuant to Section 12(b) of the Exchange Act;
|
|
• |
no undisclosed liabilities;
|
|
• |
proper filing of documents with the SEC, the accuracy of information contained in the documents filed with the SEC and SOX certifications, and financial information;
|
|
• |
absence of a Parent Material Adverse Effect (as defined in the MIPA) since December 31, 2020 and conduct of business;
|
|
• |
Sponsor Agreement is in full force and effect;
|
|
• |
related party transactions;
|
|
• |
non-investment company;
|
|
• |
investigations and access to information of MSP; and
|
|
• |
no other representations and warranties.
|
|
• |
there not being in force any law, judgment, injunction, decree or order of any court, arbitrator or other governmental authority enjoining, restraining or prohibiting the
consummation of the Closing;
|
|
• |
the approval by the Company’s stockholders of the Business Combination Proposal, the Nasdaq Proposal, the Charter Approval Proposal, the Director Election Proposal, and the Incentive Plan Proposal;
|
|
• |
the shares of Class A Common Stock to be issued (i) pursuant to the Business Combination, (ii) upon conversion of the Class B Units that are included in the Up-C Units, or (iii) upon exercise of the New
Warrants, in each case, being approved for listing on Nasdaq;
|
|
• |
the Company having net tangible assets of at least $5,000,001 upon the consummation of the Business Combination, after giving effect to any Company stockholder redemptions;
|
|
• |
the expiration or termination of any applicable waiting period (including any extension thereof) under the HSR Act;
|
|
• |
the registration statement of which this proxy statement/prospectus forms a part having become effective in accordance with the provisions of the Securities
Act, no stop order having been issued by the SEC which remains in effect with respect to the registration statement, and no proceeding seeking such a stop order having been threatened or
initiated by the SEC which remains pending; and
|
|
• |
the cash and cash equivalents of MSP and Opco (after giving effect to any redemptions and the payment of transaction
costs, including deferred underwriting fees), as of the Effective Time, not being less than $30.0 million, provided, however, that Messrs. Ruiz and Quesada have agreed to loan (or cause to be loaned) to MSP up to the aggregate
amount then-remaining in the Service Fee Account, and such condition will be deemed to be satisfied if that amount is so loaned, irrespective of the amount of cash actually held by MSP and Opco.
|
|
• |
each of MSP and the Members having performed in all material respects their respective obligations required to be performed under the MIPA at or prior to the Closing Date;
|
|
• |
the representations and warranties of MSP and the Members contained in the MIPA, disregarding all qualifications and exceptions contained therein relating to materiality, being true, correct and
complete at and as of the Closing Date, as if made at and as of such date (except to the extent expressly made as of an earlier date, in which case only as of such date), except where the failure of such representations and warranties
to be so true and correct, has not had, and would not have, a Material Adverse Effect (as defined in the MIPA);
|
|
• |
MSP, the Members and the Members’ Representative, as applicable, having executed and delivered to the Company a copy of certain ancillary agreements to which it is a party;
|
|
• |
the Company having received a certificate signed by the Chief Executive Officer, Chief Financial Officer or other authorized person of MSP stating that the conditions specified in Section 10.2(a) and
Section 10.2(b) of the MIPA have been satisfied;
|
|
• |
no Material Adverse Effect having occurred since the date of the MIPA; and
|
|
• |
the Company having received the Tax Receivable Agreement duly executed by the Company, Opco and certain Members.
|
|
• |
the Company and Opco having performed in all material respects their respective obligations under the MIPA required to be performed at or prior to the Closing Date;
|
|
• |
the representations and warranties of the Company and Opco contained in the MIPA, disregarding all qualifications and exceptions contained therein relating to materiality, being true and correct at and
as of the Closing Date, as if made at and as of such date (except to the extent expressly made as of an earlier date, in which case only as of such date), except where the failure of such representations and warranties to be so true
and correct, has not had, and would not have, a Parent Material Adverse Effect (as defined in the MIPA);
|
|
• |
the Members’ Representative having received a certificate signed by an authorized officer of the Company stating that the conditions specified in Section 10.3(a) and Section 10.3(b) of the MIPA have
been satisfied;
|
|
• |
the Company having delivered to the Members’ Representative (i) certified copies of the resolutions duly adopted by each of the Company’s and Opco’s Boards of Directors authorizing the execution, delivery and performance of the
MIPA; and (ii) written resignations, in forms satisfactory to the Members’ Representative, dated as of the Closing Date and effective as of the Closing, executed by (A) all officers of the Company and Opco; and (B) all persons serving
as directors of the Company and Opco immediately prior to the Closing who are not selected as directors in accordance with Section 9.8 of the MIPA;
|
|
• |
the Company and Opco having executed and delivered to the Members’ Representative a copy of certain ancillary agreements to which each is a party;
|
|
• |
no Parent Material Adverse Effect having occurred since the date of the MIPA;
|
|
• |
the Board having been appointed as the board of directors of the Post-Combination Company;
|
|
• |
each of the covenants of the Sponsor required under the Sponsor Agreement to be performed as of or prior to the Closing having been performed in all material respects, and none of the Sponsors having threatened (orally or in
writing) (i) that the Sponsor Agreement is not valid, binding and in full force and effect, (ii) that the Company is in breach of or default under the Sponsor Agreement or (iii) to terminate the Sponsor Agreement; and
|
|
• |
Opco having delivered the Tax Receivable Agreement, duly executed by the Company, Opco and certain Members.
|
•
|
financial institutions or financial services entities;
|
|
• |
mutual funds;
|
|
• |
qualified plans, such as 401(k) plans, individual retirement accounts, etc.;
|
|
• |
broker-dealers in securities or currencies;
|
|
• |
governments or agencies or instrumentalities thereof;
|
|
• |
persons that directly, indirectly or constructively own 5% or more (by vote or value) of our shares;
|
|
• |
persons that acquired our Class A Common Stock or Existing Warrants pursuant to an exercise of employee share options, in connection with employee share incentive plans or otherwise as compensation in connection with services
provided;
|
|
• |
insurance companies;
|
|
• |
persons that are subject to mark-to-market accounting rules;
|
|
• |
persons holding Class A Common Stock or Existing Warrants as part of a “straddle,” constructive sale, hedge, conversion or other integrated transaction or similar transaction;
|
|
• |
U.S. holders (as defined below) whose functional currency is not the U.S. dollar;
|
|
• |
U.S. expatriates or former long-term residents of the United States;
|
|
• |
regulated investment companies or real estate investment trusts;
|
|
• |
persons subject to the alternative minimum tax provisions of the Code;
|
|
• |
partnerships (or entities or arrangements classified as partnerships or other pass-through entities for U.S. federal income tax purposes) and any beneficial owners of such entities;
|
|
• |
“passive foreign investment companies,” referred to as “PFICs,” or “controlled foreign corporations,” and corporations that accumulate earnings to avoid U.S. federal income tax; and
|
|
• |
tax-exempt entities.
|
|
• |
an individual who is a citizen or resident of the United States for U.S. federal income tax purposes;
|
|
• |
a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) organized in or under the laws of the United States, any state thereof or the District of Columbia;
|
|
• |
an estate, the income of which is includible in gross income for U.S. federal income taxation regardless of its source; or
|
|
• |
a trust, if (i) a U.S. court can exercise primary supervision over the trust’s administration and one or more “United States persons” (within the meaning of Section 7701(a)(30) of the Code) have the authority to control all
substantial decisions of the trust or (ii) it has a valid election in effect under Treasury Regulations to be treated as a United States person.
|
|
• |
the gain is effectively connected with the conduct of a trade or business by the Non-U.S. holder within the U.S. (and, under certain income tax treaties, is attributable to a U.S. permanent establishment or fixed base maintained by
the Non-U.S. holder); or
|
|
• |
we are or have been a “United States real property holding corporation” for U.S. federal income tax purposes at any time during the shorter of the five-year period ending on the date of disposition or the period that the Non-U.S.
holder held our Class A Common Stock, and, in the case where shares of our Class A Common Stock are regularly traded on an established securities market, the Non-U.S. holder has owned, directly or constructively, more than 5% of our
Class A Common Stock at any time within the shorter of the five-year period preceding the disposition or such Non-U.S. holder’s holding period for the shares of our Class A Common Stock.
|
|
• |
5,500,000,000 shares of Class A Common Stock, par value $0.0001 per share;
|
|
• |
3,250,000,000 shares of Class V Common Stock, par value $0.0001 per share; and
|
|
• |
10,000,000 shares of Preferred Stock, par value $0.0001 per share.
|
|
• |
in whole and not in part;
|
|
• |
at a price of $0.01 per warrant;
|
|
• |
upon not less than 30 days’ prior written notice of redemption to each warrant holder; and
|
|
• |
if, and only if, the reported last reported sale price of the Company’s Class A Common Stock equals or exceeds $18.00 per share for any 20 trading days within a 30-trading day period ending the third trading day prior to the date
on which the Company sends the notice of redemption to each warrant holder.
|
|
• |
prior to such time, the Board approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder;
|
|
• |
upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock (as defined below) of the Post-Combination Company
outstanding at the time the transaction commenced, excluding for purposes of determining the voting stock outstanding (but not the outstanding voting stock owned by the interested stockholder) those shares owned by (i) persons who are
directors and also officers and (ii) employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer;
|
|
• |
at or subsequent to such time, the business combination is approved by the Board and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66-2/3% of the
outstanding voting stock of the Post-Combination Company that is not owned by the interested stockholder; or
|
|
• |
the stockholder became an interested stockholder inadvertently and (i) as soon as practicable divested itself of ownership of sufficient shares so that the stockholder ceased to be an interested stockholder and (ii) was not, at any
time within the three-year period immediately prior to a business combination between the Post-Combination Company and such stockholder, an interested stockholder but for the inadvertent acquisition of ownership.
|
|
• |
No Cumulative Voting. The DGCL
provides that stockholders are not entitled to the right to cumulate votes in the election of directors unless a corporation’s certificate of incorporation provides otherwise. The Proposed Charter will not provide for cumulative
voting.
|
|
• |
Classified Board. The Proposed Charter and the Amended and Restated Bylaws will provide that the Board (other than those directors, if
any, elected by the holders of any outstanding series of Preferred Stock) is divided into three classes of directors. For more information on the classified board, see the section entitled “Management of the Post-Combination Company.” The existence of a
classified board of directors could discourage a third-party from making a tender offer or otherwise attempting to obtain control of the Post-Combination Company as the classification of the Board makes it more time consuming for
stockholders to replace a majority of the directors.
|
|
• |
Director Removal.
The Proposed Charter will provide that, any director or the entire Board may be removed (i) at any time prior to the date on which the voting power of John H. Ruiz and his affiliates (the “Founder Holder”) represent less than 50% of
the voting power of all of the then outstanding shares of the Post-Combination Company generally entitled to vote (the “Voting Rights Threshold Date”) by a simple majority voting together as a single class, with or without cause,
notwithstanding the classification of the Board, and (ii) at any time from and after the Voting Rights Threshold Date, solely for cause and only by the affirmative vote of the holders of at least 66-2/3% of the voting power of all
of the then outstanding shares of the Post-Combination Company generally entitled to vote thereon, voting together as a single class.
|
|
• |
Board of Director Vacancies. The Proposed Charter will provide that, with respect to directors elected by the stockholders generally
entitled to vote, (i) newly created directorships resulting from an increase in the authorized number of directors or any vacancies on the Board resulting from death, resignation, disqualification, removal or other cause will be
filled solely and exclusively by a majority of the directors then in office, even if less than a quorum, or by the sole remaining director, and (ii) any director so elected will hold office until the expiration of the term of office
of the director whom he or she has replaced and until his or her successor is elected and qualified, subject to such director’s earlier death, resignation, disqualification or removal, which prevents stockholders from being able to
fill vacancies on the Board.
|
|
• |
Action by Written Consent. The Proposed Charter will provide that, from and after the Voting Rights Threshold Date, stockholder action
can be taken only at an annual or special meeting of stockholders and cannot be taken by consent in lieu of a meeting.
|
|
• |
Supermajority Requirements for Certain Amendments of the Proposed Charter and Amendments of the Amended and Restated Bylaws. The DGCL
generally provides that the affirmative vote of the holders of a majority of the total voting power of the shares entitled to vote is required to amend a corporation’s certificate of incorporation, unless the corporation’s
certificate of incorporation requires a greater percentage. The Proposed Charter and the Amended and Restated Bylaws provide that, from and after the Voting Rights Threshold Date, the affirmative vote of the holders of at least
66-2/3% in voting power of the then outstanding shares of the Post-Combination Company generally entitled to vote, voting together as a single class, will be required to amend, alter, change or repeal the Amended and Restated Bylaws
and certain provisions of the Proposed Charter, including those related to management of the Post-Combination Company and actions by written consent. Such requirement for a super-majority vote to approve certain amendments to the
Proposed Charter and amendments to the Amended and Restated Bylaws could enable a minority of stockholders of the Post-Combination Company to exercise veto power over such amendments.
|
|
• |
Issuance of Common Stock and Undesignated Preferred Stock. The Board will have the authority, without further action by the
stockholders, to issue (i) authorized but unissued shares of common stock and (ii) up to 10,000,000 shares of undesignated Preferred Stock, in the case of a series of Preferred Stock, with rights and preferences, including voting
rights, designated from time to time by the Board. The existence of authorized but unissued shares of common stock and Preferred Stock will enable the Board to render more difficult or to discourage an attempt to obtain control of
the Post-Combination Company by means of a merger, tender offer, proxy contest, or other means.
|
|
• |
Notice Requirements for Stockholder Proposals and Director Nominations. The Amended and Restated Bylaws will provide advance notice
procedures for stockholders seeking to bring business before the annual meeting of stockholders or to nominate candidates for election as directors at the annual meeting of stockholders. The Amended and Restated Bylaws will also
specify certain requirements regarding the form and content of a stockholder’s notice. These provisions might make it more difficult for stockholders to bring matters before the annual meeting.
|
|
• |
Exclusive Forum. The Proposed
Charter will provide that, unless the Post-Combination Company consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if the Court of Chancery lacks jurisdiction, a state
court located within the State of Delaware or the federal district court for the District of Delaware) will, to the fullest extent permitted by law, be the sole and exclusive forum for any (i) derivative action or proceeding
brought on behalf of the Post-Combination Company, (ii) action asserting a claim of breach of a fiduciary duty owed by any director, officer, or employee of the Post-Combination Company to the Post-Combination Company or the
Post-Combination Company’s stockholders, (iii) action asserting a claim arising pursuant to any provision of the DGCL, the Proposed Charter or the Amended and Restated Bylaws, or (iv) action asserting a claim governed by the
internal affairs doctrine of the State of Delaware. The federal district courts of the United States of America shall be the sole and exclusive forum for the resolution of any action asserting a claim arising under the Securities
Act, or the rules and regulations promulgated thereunder. The Proposed Charter will not preclude or contract the scope of exclusive federal jurisdiction for suits brought under the Exchange Act or the rules and regulations
promulgated thereunder. If a stockholder nevertheless seeks to bring a claim (the nature of which is covered by the exclusive forum provisions of the Proposed Charter) in a venue other than those designated in such provisions, we
would expect to vigorously assert the validity and enforceability of the exclusive forum provisions of the Proposed Charter. This may require significant additional costs associated with challenging venue in such other
jurisdictions and there can be no assurance that the exclusive forum provisions of the Proposed Charter will be enforced by a court in those other jurisdictions.
|
|
• |
Amendments. The Proposed Charter will provide that both the Proposed Charter and the Amended and Restated Bylaws may be amended at
any time (i) prior to the Voting Rights Threshold Date, by the affirmative vote of the holders of at least a majority in voting power of the then outstanding shares of the Company generally entitled to vote, voting together as a
single class, and (ii) from and after the Voting Rights Threshold Date, the affirmative vote of the holders of at least 66-2/3% in voting power of the then outstanding shares of stock of the Company generally entitled to vote,
voting together as a single class.
|
|
• |
the issuer of the securities that was formerly a shell company has ceased to be a shell company;
|
|
• |
the issuer of the securities is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act;
|
|
• |
the issuer of the securities has filed all Exchange Act reports and material required to be filed, as applicable, during the preceding 12 months (or such shorter period that the issuer was required to
file such reports and materials), other than Form 8-K reports; and
|
|
• |
at least one year has elapsed from the time that the issuer filed current Form 10 type information with the SEC reflecting its status as an entity that is not a shell company.
|
|
• |
1% of the total number of shares of common stock or warrants, as applicable, then outstanding; or
|
|
• |
the average weekly reported trading volume of the common stock or warrants, as applicable, during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale.
|
Page
|
|
Unaudited Financial Statements of Lionheart Acquisition Corporation II
|
|
F-2
|
|
F-3 | |
F-4 | |
F-5 | |
F-6 to F-25
|
|
Audited Financial Statements of Lionheart Acquisition Corporation II
|
|
F-27
|
|
F-28
|
|
F-29
|
|
F-30
|
|
F-31
|
|
F-32 to F-48
|
Page
|
|
F-50
|
|
F-51
|
|
F-52
|
|
F-53
|
|
F-54 to F-60
|
INDEX TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS
|
|
Page
|
|
F-62
|
|
F-63
|
|
F-64
|
|
F-65
|
|
F-66
|
|
F-67 to F-77
|
September 30,
2021
|
December 31,
2020
|
|||||||
(Unaudited)
|
(As restated)1
|
|||||||
ASSETS
|
||||||||
Current assets
|
||||||||
Cash
|
$
|
353,032
|
$
|
1,017,137
|
||||
Prepaid expenses
|
48,944
|
124,766
|
||||||
Total Current Assets
|
401,976
|
1,141,903
|
||||||
Marketable securities held in Trust Account
|
230,008,192
|
230,011,254
|
||||||
TOTAL ASSETS
|
$
|
230,410,168
|
$
|
231,153,157
|
||||
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
||||||||
Current liabilities
|
||||||||
Accounts payable and accrued expenses
|
$
|
2,918,987
|
$
|
1,163,558
|
||||
Accrued offering costs
|
—
|
5,450
|
||||||
Total Current Liabilities
|
2,918,987
|
1,169,008
|
||||||
Warrant liability
|
10,176,000
|
13,365,500
|
||||||
Deferred underwriting fee payable
|
8,050,000
|
8,050,000
|
||||||
TOTAL LIABILITIES
|
21,144,987
|
22,584,508
|
||||||
Commitments and Contingencies (Note 7)
|
|
|
||||||
Class A common stock subject to possible redemption, 23,000,000
shares at redemption value as of September 30, 2021 and December 31, 2020.
|
230,000,000
|
230,000,000
|
||||||
Stockholders' Deficit
|
||||||||
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none
issued and outstanding
|
—
|
—
|
||||||
Class A common stock, $0.0001 par value; 100,000,000
shares authorized; 650,000 issued and outstanding (excluding 23,000,000 shares subject to possible redemption) as of September 30, 2021 and December 31, 2020.
|
65
|
65
|
||||||
Class B common stock, $0.0001 par value; 10,000,000 shares authorized; 5,750,000
shares issued and outstanding as of September 30, 2021 and December 31, 2020.
|
575
|
575
|
||||||
Accumulated deficit
|
(20,735,459
|
)
|
(21,431,991
|
)
|
||||
Total Stockholders' Deficit
|
(20,734,819
|
)
|
(21,431,351
|
)
|
||||
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
|
$
|
230,410,168
|
$
|
231,153,157
|
(1)
|
As restated due to review of the treatment of common stock subject to redemptions (see Note 2)
|
|
Three Months
Ended
September 30,
|
Nine Months
Ended
September 30,
|
||||||||||||||
|
2021
|
2020(1)
|
2021
|
2020(1)
|
||||||||||||
|
||||||||||||||||
Operating and formation costs
|
$
|
349,966
|
$
|
88,889
|
$
|
2,503,274
|
$
|
88,889
|
||||||||
Loss from operations
|
(349,966
|
)
|
(88,889
|
)
|
(2,503,274
|
)
|
(88,889
|
)
|
||||||||
|
||||||||||||||||
Other income (expense):
|
||||||||||||||||
Interest earned on marketable securities held in Trust Account
|
3,473
|
6,646
|
10,306
|
6,646
|
||||||||||||
Transactions costs associated with the Initial Public Offering
|
—
|
(837,355
|
)
|
—
|
(837,355
|
)
|
||||||||||
Change in fair value of warrant liabilities
|
1,070,750
|
466,500
|
3,189,500
|
466,500
|
||||||||||||
Other income (expense), net
|
1,074,223
|
(364,209
|
)
|
3,199,806
|
(364,209
|
)
|
||||||||||
|
||||||||||||||||
Net Income (Loss)
|
$
|
724,257
|
$
|
(453,098
|
)
|
$
|
696,532
|
$
|
(453,098
|
)
|
||||||
|
||||||||||||||||
Basic and diluted weighted average shares outstanding, Class A Common Stock
|
23,650,000
|
10,858,152
|
23,650,000
|
3,645,803
|
||||||||||||
|
||||||||||||||||
Basic and diluted net income per share, Class A Common Stock
|
$
|
0.02
|
$
|
(0.03
|
)
|
$
|
0.02
|
$
|
(0.05
|
)
|
||||||
|
||||||||||||||||
Basic and diluted weighted average shares outstanding, Class B Common Stock
|
5,750,000
|
5,301,630
|
5,750,000
|
4,918,796
|
||||||||||||
|
||||||||||||||||
Basic and diluted net income per share, Class B Common Stock
|
$
|
0.02
|
$
|
(0.03
|
)
|
$
|
0.02
|
$
|
(0.05
|
)
|
(1)
|
As restated due to review of the treatment of common stock subject to redemptions (see Note 2)
|
|
Class A
|
Class B
|
Additional
|
Total
|
||||||||||||||||||||||||
|
Common Stock
|
Common Stock
|
Paid-in
|
Accumulated
|
Stockholders'
|
|||||||||||||||||||||||
|
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Deficit
|
Deficit
|
|||||||||||||||||||||
Balance — January 1, 2021 (1)
|
650,000
|
$
|
65
|
5,750,000
|
$
|
575
|
$
|
—
|
$
|
(21,431,991
|
)
|
$
|
(21,431,351
|
)
|
||||||||||||||
|
||||||||||||||||||||||||||||
Net income
|
—
|
—
|
—
|
—
|
—
|
4,641,710
|
4,641,710
|
|||||||||||||||||||||
Balance - March 31, 2021 (1)
|
650,000
|
65
|
5,750,000
|
575
|
—
|
$
|
(16,790,281
|
)
|
(16,789,641
|
)
|
||||||||||||||||||
Net loss
|
—
|
—
|
—
|
—
|
—
|
(4,669,435
|
)
|
(4,669,435
|
)
|
|||||||||||||||||||
Balance — June 30, 2021(1)
|
650,000
|
65
|
5,750,000
|
575
|
$
|
—
|
$
|
(21,459,716
|
)
|
$
|
(21,459,076
|
)
|
||||||||||||||||
|
||||||||||||||||||||||||||||
Net income
|
—
|
—
|
—
|
—
|
—
|
724,257
|
724,257
|
|||||||||||||||||||||
Balance - September 30, 2021
|
650,000
|
$
|
65
|
5,750,000
|
$
|
575
|
$
|
—
|
$
|
(20,735,459
|
)
|
$
|
(20,734,819
|
)
|
|
Class A
|
Class B
|
Additional
|
Total
|
||||||||||||||||||||||||
|
Common Stock
|
Common Stock
|
Paid-in
|
Accumulated
|
Stockholders'
|
|||||||||||||||||||||||
|
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Deficit
|
Deficit
|
|||||||||||||||||||||
Balance — January 1, 2020
|
—
|
$
|
—
|
—
|
$
|
—
|
$
|
—
|
$
|
(1,000
|
)
|
$
|
(1,000
|
)
|
||||||||||||||
|
||||||||||||||||||||||||||||
Issuance of Class B common stock to Sponsor
|
—
|
—
|
5,750,000
|
575
|
24,425
|
—
|
25,000
|
|||||||||||||||||||||
Balance - March 31, 2020
|
—
|
—
|
5,750,000
|
575
|
24,425
|
(1,000
|
)
|
24,000
|
||||||||||||||||||||
|
||||||||||||||||||||||||||||
Net income (loss)
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||||||||
Balance — June 30, 2020(1)
|
—
|
—
|
5,750,000
|
575
|
24,425
|
(1,000
|
)
|
24,000
|
||||||||||||||||||||
|
||||||||||||||||||||||||||||
Sale of 23,000,000 Units, net of underwriting discounts and
offering expenses
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||||||||
|
||||||||||||||||||||||||||||
Sale of 650,000 Private Placement Units
|
650,000
|
65
|
—
|
—
|
6,123,809
|
—
|
6,123,874
|
|||||||||||||||||||||
|
||||||||||||||||||||||||||||
Accretion to common stock subject to redemption amount
|
—
|
—
|
—
|
—
|
(6,148,234
|
)
|
(19,369,222
|
)
|
25,517,456
|
|||||||||||||||||||
|
||||||||||||||||||||||||||||
Net loss
|
—
|
—
|
—
|
—
|
—
|
(453,098
|
)
|
(453,098
|
)
|
|||||||||||||||||||
Balance — September 30, 2020(1)
|
650,000
|
$
|
65
|
5,750,000
|
$
|
575
|
$
|
—
|
$
|
(19,823,320
|
)
|
$
|
(19,822,680
|
)
|
(1)
|
As restated due to review of the treatment of common stock subject to redemptions (see Note 2)
|
Nine Months Ended
September 30,
|
||||||||
2021
|
2020(1)
|
|||||||
Cash Flows from Operating Activities:
|
||||||||
Net income (loss)
|
$
|
696,532
|
$
|
(453,098
|
)
|
|||
Adjustments to reconcile net income (loss) to net cash used in operating activities:
|
||||||||
Change in fair value of warrant liability
|
(3,189,500
|
)
|
(466,500
|
)
|
||||
Transaction costs associated with the Initial Public Offering
|
—
|
837,355
|
||||||
Interest earned on marketable securities held in Trust Account
|
(10,306
|
)
|
(6,646
|
)
|
||||
Changes in operating assets and liabilities:
|
||||||||
Prepaid expenses
|
75,822
|
(163,745
|
)
|
|||||
Accounts payable and accrued expenses
|
1,755,429
|
69,833
|
||||||
Net cash used in operating activities
|
(672,023
|
)
|
(182,801
|
)
|
||||
Cash Flows from Investing Activities:
|
||||||||
Investment of cash into Trust Account
|
—
|
(230,000,000
|
)
|
|||||
Cash withdrawn from Trust Account to pay franchise and income taxes
|
13,368
|
—
|
||||||
Net cash provided by (used in) investing activities
|
13,368
|
(230,000,000
|
)
|
|||||
Cash Flows from Financing Activities:
|
||||||||
Proceeds from issuance of Class B common stock to Sponsor
|
—
|
25,000
|
||||||
Proceeds from sale of Units, net of underwriting discounts paid
|
—
|
225,400,000
|
||||||
Proceeds from sale of Private Placement Units
|
—
|
6,500,000
|
||||||
Proceeds from promissory note – related party
|
—
|
140,671
|
||||||
Repayment of promissory note – related party
|
—
|
(140,671
|
)
|
|||||
Payment of offering costs
|
(5,450
|
)
|
(473,487
|
)
|
||||
Net cash (used in) provided by financing activities
|
(5,450
|
)
|
231,451,513
|
|||||
Net Change in Cash
|
(664,105
|
)
|
1,268,712
|
|||||
Cash — Beginning
|
1,017,137
|
—
|
||||||
Cash — Ending
|
$
|
353,032
|
$
|
1,268,712
|
||||
Non-cash investing and financing activities:
|
||||||||
Offering costs included in accrued offering costs
|
$
|
—
|
$
|
5,450
|
||||
Initial classification of Class A common stock subject to possible redemption
|
$
|
—
|
$
|
230,000,000
|
||||
Deferred underwriting fee payable
|
$
|
—
|
$
|
8,050,000
|
(1)
|
As restated due to review of the treatment of common stock subject to redemptions (see Note 2)
|
As Previously
|
||||||||||||
Balance Sheet as of August 18, 2020 (audited)
|
Reported
|
Adjustment
|
As Restated
|
|||||||||
Class A common stock subject to possible redemption
|
$
|
176,443,060
|
$
|
23,556,940
|
$
|
200,000,000
|
||||||
Class A common stock
|
$
|
301
|
$
|
(236
|
)
|
$
|
65
|
|||||
Additional paid-in capital
|
$
|
5,837,483
|
$
|
(5,837,483
|
)
|
$
|
—
|
|||||
Accumulated deficit
|
$
|
(838,356
|
)
|
$
|
(17,719,221
|
)
|
$
|
(18,557,577
|
)
|
|||
Total Stockholders' Equity (Deficit)
|
$
|
5,000,003
|
$
|
(23,556,940
|
)
|
$
|
(18,556,937
|
)
|
||||
Balance Sheet as of September 30, 2020 (unaudited)
|
||||||||||||
Class A common stock subject to possible redemption
|
$
|
205,177,310
|
$
|
24,822,690
|
$
|
230,000,000
|
||||||
Class A common stock
|
$
|
313
|
$
|
(248
|
)
|
$
|
65
|
|||||
Additional paid-in capital
|
$
|
5,453,221
|
$
|
(5,453,221
|
)
|
$
|
—
|
|||||
Accumulated deficit
|
$
|
(454,099
|
)
|
$
|
(19,369,221
|
)
|
$
|
(19,823,320
|
)
|
|||
Total Stockholders' Equity (Deficit)
|
$
|
5,000,010
|
$
|
(24,822,690
|
)
|
$
|
(19,822,680
|
)
|
||||
Balance Sheet as of December 31, 2020 (audited)
|
||||||||||||
Class A common stock subject to possible redemption
|
$
|
203,568,640
|
$
|
26,431,360
|
$
|
230,000,000
|
||||||
Class A common stock
|
$
|
329
|
$
|
(264
|
)
|
$
|
65
|
|||||
Additional paid-in capital
|
$
|
7,061,874
|
$
|
(7,061,874
|
)
|
$
|
—
|
|||||
Accumulated deficit
|
$
|
(2,062,769
|
)
|
$
|
(19,369,222
|
)
|
$
|
(21,431,991
|
)
|
|||
Total Stockholders’ Equity (Deficit)
|
$
|
5,000,009
|
$
|
(26,431,360
|
)
|
$
|
(21,431,351
|
)
|
||||
Balance Sheet as of March 31, 2021 (unaudited)
|
||||||||||||
Class A common stock subject to possible redemption
|
$
|
208,210,350
|
$
|
21,789,650
|
$
|
230,000,000
|
||||||
Class A common stock
|
$
|
283
|
$
|
(218
|
)
|
$
|
65
|
|||||
Additional paid-in capital
|
$
|
2,420,210
|
$
|
(2,420,210
|
)
|
$
|
—
|
|||||
Accumulated deficit
|
$
|
2,578,941
|
$
|
(19,369,222
|
)
|
$
|
(16,790,281
|
)
|
||||
Total Stockholders' Equity (Deficit)
|
$
|
5,000,009
|
$
|
(21,789,650
|
)
|
$
|
(16,789,641
|
)
|
||||
Balance Sheet as June 30, 2021 (unaudited)
|
||||||||||||
Class A common stock subject to possible redemption
|
$
|
203,540,920
|
$
|
26,459,080
|
$
|
230,000,000
|
||||||
Class A common stock
|
$
|
330
|
$
|
(265
|
)
|
$
|
65
|
|||||
Additional paid-in capital
|
$
|
7,089,593
|
$
|
(7,089,593
|
)
|
$
|
—
|
|||||
Accumulated deficit
|
$
|
(2,090,494
|
)
|
$
|
(19,369,222
|
)
|
$
|
(21,459,716
|
)
|
|||
Total Stockholders' Equity (Deficit)
|
$
|
5,000,004
|
$
|
(26,459,080
|
)
|
$
|
(21,459,076
|
)
|
||||
Statement of Operations for the Three Months Ended September 30, 2020 (unaudited)
|
||||||||||||
Basic and diluted weighted average shares outstanding, Class A Common Stock
|
18,952,768
|
(8,094,616
|
)
|
10,858,152
|
||||||||
Basic and diluted net (loss) per share, Class A
|
$
|
—
|
$
|
(0.03
|
)
|
$
|
(0.03
|
)
|
Basic and diluted weighted average shares outstanding, Class B Common Stock
|
3,374,881
|
(1,926,749)
|
5,301,630
|
|||||||||
Basic and diluted net (loss) per share, Class B Common Stock
|
$
|
—
|
$
|
(0.03)
|
$
|
(0.03)
|
||||||
Statement of Operations for the Nine Months Ended September 30, 2020 (unaudited)
|
||||||||||||
Basic and diluted weighted average shares outstanding, Class A Common Stock
|
18,952,768
|
(15,306,965)
|
3,645,803
|
|||||||||
Basic and diluted net (loss) per share, Class A
|
$
|
—
|
$
|
(0.05)
|
$
|
(0.05)
|
Basic and diluted weighted average shares outstanding, Class B Common Stock
|
3,424,425
|
1,494,371
|
4,918,796
|
|||||||||
Basic and diluted net (loss) per share, Class B Common Stock
|
$
|
—
|
$
|
(0.05
|
)
|
$
|
(0.05
|
)
|
||||
Statement of Operations for the Year Ended December 31, 2020 (audited)
|
||||||||||||
Basic and diluted weighted average shares outstanding, Class A Common Stock
|
20,323,974
|
(11,649,794
|
)
|
20,505,492
|
||||||||
Basic and diluted net (loss) per share, Class A
|
$
|
—
|
$
|
(0.15
|
)
|
$
|
(0.08
|
)
|
||||
Basic and diluted weighted average shares outstanding, Class B Common Stock
|
2,318,726
|
2,809,006
|
5,127,732
|
|||||||||
Basic and diluted net (loss) per share, Class B Common Stock
|
$
|
(0.89
|
)
|
$
|
0.74
|
$
|
(0.08
|
)
|
||||
Statement of Operations for the Three Months Ended March 31, 2021 (unaudited)
|
||||||||||||
Basic and diluted weighted average shares outstanding, Class A Common Stock
|
21,693,414
|
1,956,586
|
23,650,000
|
|||||||||
Basic and diluted net (loss) per share, Class A
|
$
|
—
|
$
|
0.16
|
$
|
0.16
|
||||||
Basic and diluted weighted average shares outstanding, Class B Common Stock
|
9,043,136
|
(3,293,136
|
)
|
5,750,000
|
||||||||
Basic and diluted net (loss) per share, Class B Common Stock
|
$
|
0.51
|
$
|
(0.35
|
)
|
$
|
0.16
|
|||||
Statement of Operations for the Three Months Ended June 30, 2021 (unaudited)
|
||||||||||||
Basic and diluted weighted average shares outstanding, Class A Common Stock
|
20,821,035
|
2,828,965
|
23,650,000
|
|||||||||
Basic and diluted net (loss) per share, Class A
|
$
|
—
|
$
|
(0.16
|
)
|
$
|
(0.16
|
)
|
||||
Basic and diluted weighted average shares outstanding, Class B Common Stock
|
8,485,715
|
(2,735,715 | ) |
5,750,000
|
||||||||
Basic and diluted net (loss) per share, Class B Common Stock
|
$
|
(0.54
|
)
|
$
|
0.38
|
$
|
(0.16
|
)
|
||||
Statement of Operations for the Six Months Ended June 30, 2020 (unaudited)
|
||||||||||||
Basic and diluted weighted average shares outstanding, Class A Common Stock
|
21,926,782
|
1,723,218
|
23,650,000
|
|||||||||
Basic and diluted weighted average shares outstanding, Class B Common Stock
|
8,809,768
|
(3,059,768
|
)
|
5,750,000
|
||||||||
Statement of Cash Flows for the Nine Months Ended September 30, 2020 (unaudited)
|
||||||||||||
Initial classification of Class A common stock subject to possible redemption
|
$
|
204,793,060
|
$
|
25,206,940
|
$
|
230,000,000
|
||||||
Change in value of Class A common stock subject to possible redemption
|
$
|
384,250
|
$
|
(384,250
|
)
|
$
|
—
|
|||||
Statement of Cash Flows for the Year Ended December 31, 2020 (audited)
|
||||||||||||
Initial classification of Class A common stock subject to possible redemption
|
$
|
204,793,060
|
$
|
25,206,940
|
$
|
230,000,000
|
||||||
Change in value of Class A common stock subject to possible redemption
|
$
|
(1,224,420
|
)
|
$
|
1,224,420
|
$
|
—
|
Statement of Cash Flows for the Three Months Ended March 31, 2021 (unaudited)
|
||||||||||||
Change in value of Class A common stock subject to possible redemption
|
$
|
4,641,710
|
$
|
(4,641,710
|
)
|
$
|
—
|
|||||
|
||||||||||||
Statement of Cash Flows for the Six Months Ended June 30, 2021 (unaudited)
|
||||||||||||
Change in value of Class A common stock subject to possible redemption
|
$
|
(27,720
|
)
|
$
|
27,720
|
$
|
—
|
|||||
|
||||||||||||
Statement of Changes in Stockholders' Equity (Deficit) for the Period Ended September 30, 2020 (unaudited)
|
||||||||||||
Sale of 23,000,000 Units, net of underwriting discounts
|
204,482,544
|
(204,482,544
|
)
|
—
|
||||||||
Class A common stock subject to possible redemption
|
(205,177,310
|
)
|
205,177,310
|
—
|
||||||||
Accretion to common stock subject to redemption amount
|
—
|
(25,517,456
|
)
|
(25,517,456
|
)
|
|||||||
Total Stockholders' Equity
|
5,000,010
|
(24,822,690
|
)
|
(19,822,680
|
)
|
|||||||
|
||||||||||||
Statement of Changes in Stockholders' Equity (Deficit) for the Year Ended December 30, 2020 (audited)
|
||||||||||||
Change in value of common stock subject to redemption
|
1,608,670
|
(1,608,670
|
)
|
—
|
||||||||
Total Stockholders' Equity
|
5,000,009
|
(26,431,360
|
)
|
(21,431,351
|
)
|
|||||||
|
||||||||||||
Statement of Changes in Stockholders' Equity (Deficit) for the Period Ended March 31, 2021 (unaudited)
|
||||||||||||
Change in value of common stock subject to redemption
|
(4,641,710
|
)
|
(4,641,710
|
)
|
—
|
|||||||
Total Stockholders' Equity
|
5,000,009
|
(21,789,650
|
)
|
(16,789,641
|
)
|
|||||||
|
||||||||||||
Statement of Changes in Stockholders' Equity (Deficit) for the Period Ended June 30, 2021 (unaudited)
|
||||||||||||
Change in value of common stock subject to redemption
|
4,669,430
|
(4,669,430
|
)
|
—
|
||||||||
Total Stockholders' Equity
|
5,000,004
|
(26,459,080
|
)
|
(21,459,076
|
)
|
Gross proceeds
|
$
|
230,000,000
|
||
Less:
|
||||
Proceeds allocated to Public Warrants
|
$
|
(13,225,000
|
)
|
|
Class A common stock issuance costs
|
$
|
12,292,456
|
||
Plus:
|
||||
Accretion of carrying value to redemption value
|
$
|
25,517,456
|
||
Class A common stock subject to possible redemption
|
$
|
230,000,000
|
|
Three Months Ended
|
Three Months Ended
|
Nine Months Ended
|
Nine Months Ended
|
||||||||||||||||||||||||||||
|
September 30, 2021
|
September 30, 2020
|
September 30, 2021
|
September 30, 2020
|
||||||||||||||||||||||||||||
|
(As Restated)
|
(As Restated)
|
||||||||||||||||||||||||||||||
|
Class A
|
Class B
|
Class A
|
Class B
|
Class A
|
Class B
|
Class A
|
Class B
|
||||||||||||||||||||||||
Basic and diluted net income (loss) per common stock
|
||||||||||||||||||||||||||||||||
Numerator:
|
||||||||||||||||||||||||||||||||
Allocation of net income (loss), as adjusted
|
$
|
582,608
|
$
|
141,649
|
$
|
(304,448
|
)
|
$
|
(148,650
|
)
|
$
|
560,306
|
$
|
136,226
|
$
|
(192,876
|
)
|
$
|
(260,222
|
)
|
||||||||||||
Denominator:
|
||||||||||||||||||||||||||||||||
Basic and diluted weighted average stock outstanding
|
23,650,000
|
5,750,000
|
10,858,152
|
5,301,630
|
23,650,000
|
5,750,000
|
3,645,803
|
4,918,796
|
||||||||||||||||||||||||
Basic and diluted net income (loss) per common stock
|
$
|
0.02
|
$
|
0.02
|
$
|
(0.03
|
)
|
$
|
(0.03
|
)
|
$
|
0.02
|
$
|
0.02
|
$
|
(0.05
|
)
|
$
|
(0.05
|
)
|
● |
in whole and not in part;
|
● |
at a price of $0.01 per warrant;
|
● |
upon not less than 30 days’ prior written notice of redemption to each warrant holder; and
|
● |
if, and only if, the reported last reported sale price of the Company’s Class A common stock equals or exceeds $18.00
per share for any 20 trading days within a 30-trading day period ending the third trading day prior to the date on which the
Company sends the notice of redemption to each warrant holder.
|
Level 1: |
Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and
volume to provide pricing information on an ongoing basis.
|
Level 2: |
Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets
that are not active.
|
Level 3: |
Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.
|
|
September 30,
|
December 31,
|
||||||||||
Description
|
Level
|
2021
|
2020
|
|||||||||
Assets:
|
||||||||||||
Marketable securities held in Trust Account
|
1
|
$
|
230,008,192
|
$
|
230,011,254
|
|||||||
|
||||||||||||
Liabilities
|
||||||||||||
Warrant Liability – Public Warrants
|
1
|
9,890,000
|
12,995,000
|
|||||||||
Warrant Liability – Private Warrants
|
3
|
286,000
|
370,500
|
Input
|
September 30, 2021
|
December 31, 2020
|
||||||
Risk-free interest rate
|
|
1.04
|
%
|
0.51
|
%
|
|||
Trading days per year
|
250
|
252
|
||||||
Expected volatility
|
14.0
|
%
|
15.8
|
%
|
||||
Exercise price
|
$
|
11.50
|
$
|
11.50
|
||||
Stock Price
|
$
|
9.91
|
$
|
10.08
|
|
Private Placement
|
Public
|
Warrant liabilities
|
|||||||||
December 31, 2020
|
$
|
370,500
|
$
|
12,995,000
|
$
|
13,365,500
|
||||||
Change in fair value
|
(133,250
|
)
|
(4,715,000
|
)
|
(4,848,250
|
)
|
||||||
Fair value as of March 31, 2021
|
237,250
|
8,280,000
|
8,517,250
|
|||||||||
Change in fair value
|
84,500
|
2,645,000
|
2,729,500
|
|||||||||
Fair value as of June 30, 2021
|
321,750
|
10,925,000
|
11,246,750
|
|||||||||
Change in fair value
|
(35,750
|
)
|
(1,035,000
|
)
|
(1,070,750
|
)
|
||||||
Fair value as of September 30, 2021
|
$
|
286,000
|
$
|
9,890,000
|
$
|
10,176,000
|
F-27
|
||
Financial Statements:
|
||
|
F-28
|
|
|
F-29
|
|
|
F-30
|
|
|
F-31
|
|
|
F-32 to F-48
|
December 31,
|
||||||||
2020
|
2019
|
|||||||
ASSETS
|
(As Restated) | |||||||
Current Assets
|
||||||||
Cash
|
$
|
1,017,137
|
$
|
—
|
||||
Prepaid expenses
|
124,766
|
—
|
||||||
Total Current Assets
|
1,141,903
|
—
|
||||||
Deferred offering costs
|
—
|
26,171
|
||||||
Marketable securities held in Trust Account
|
230,011,254
|
—
|
||||||
TOTAL ASSETS
|
$
|
231,153,157
|
$
|
26,171
|
||||
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
|
||||||||
Current Liabilities
|
||||||||
Accrued expenses
|
$
|
1,163,558
|
$
|
1,000
|
||||
Accrued offering costs
|
5,450
|
26,171
|
||||||
Total Current Liabilities
|
1,169,008
|
27,171
|
||||||
Warrant liability
|
13,365,500
|
—
|
||||||
Deferred underwriting fee payable
|
8,050,000
|
—
|
||||||
Total Liabilities
|
22,584,508
|
27,171
|
||||||
Commitments and Contingencies (Note 7)
|
|
|
||||||
Class A common stock subject to possible redemption, 23,000,000 and no shares at redemption value as of December 31, 2020 and 2019, respectively
|
230,000,000
|
—
|
||||||
Stockholders’ Equity (Deficit)
|
||||||||
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding |
—
|
—
|
||||||
Class A common stock, $0.0001 par value; 100,000,000 shares authorized; 650,000
and no shares issued and outstanding (excluding 23,000,000 and no shares subject to possible redemption) as of
December 31, 2020 and 2019, respectively
|
65
|
—
|
||||||
Class B common stock, $0.0001 par value; 10,000,000 shares authorized; 5,750,000
and no shares issued and outstanding as of December 31, 2020 and 2019
|
575
|
—
|
||||||
Additional paid-in capital
|
—
|
—
|
||||||
Accumulated deficit
|
(21,431,991
|
)
|
(1,000
|
)
|
||||
Total Stockholders’ Equity (Deficit)
|
(21,431,351
|
)
|
(1,000
|
)
|
||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
|
$
|
231,153,157
|
$
|
26,171
|
Year Ended
December 31,
|
For the
Period from
December 23,
2019 (Inception)
Through
December 31,
|
|||||||
2020
|
2019
|
|||||||
(As Restated) | ||||||||
Operating costs
|
$
|
1,472,168
|
$
|
1,000
|
||||
Loss from operations
|
(1,472,168
|
)
|
(1,000
|
)
|
||||
Other income (expenses):
|
||||||||
Change in fair value of warrant liability
|
236,500
|
$
|
—
|
|||||
Transaction costs
|
(837,355
|
)
|
||||||
Interest earned on marketable securities held in Trust Account
|
11,254
|
|||||||
Other income (expenses), net:
|
(589,601
|
)
|
(1,000
|
)
|
||||
Net loss
|
$
|
(2,061,769
|
)
|
$
|
(1,000
|
)
|
||
Basic and diluted weighted average shares outstanding, Class A common stock
|
8,674,180
|
—
|
||||||
Basic and diluted net loss per share, Class A common stock
|
$ | (0.15 | ) |
$
|
0.00
|
|||
Basic and diluted weighted average shares outstanding, Class B common stock
|
5,127,732
|
—
|
||||||
Basic and diluted net loss per share, Class B common stock
|
$ | (0.15 | ) |
$
|
(0.00
|
) |
Class A
Common Stock
|
Class B
Common Stock
|
Additional
Paid-in
|
Accumulated
|
Total
Stockholders’
|
||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Deficit
|
Equity
|
||||||||||||||||||||||
Balance – December 23, 2019 (inception)
|
—
|
$
|
—
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
||||||||||||||||
Net loss
|
—
|
—
|
—
|
—
|
—
|
(1,000
|
)
|
(1,000
|
)
|
|||||||||||||||||||
Balance – December 31, 2019
|
—
|
$
|
—
|
—
|
$
|
—
|
$
|
—
|
$
|
(1,000
|
)
|
$
|
(1,000
|
)
|
||||||||||||||
Issuance of Class B common stock to Sponsor
|
—
|
—
|
5,750,000
|
575
|
24,425
|
—
|
25,000
|
|||||||||||||||||||||
Sale of 650,000 Private Placement Units
|
650,000
|
65
|
—
|
—
|
6,123,809
|
—
|
6,123,874
|
|||||||||||||||||||||
Accretion
to common stock subject to redemption amount
|
—
|
—
|
—
|
—
|
(6,148,234
|
)
|
(19,369,222
|
)
|
(25,517,456
|
)
|
||||||||||||||||||
Net loss
|
—
|
—
|
—
|
—
|
—
|
(2,061,769
|
)
|
(2,061,769
|
)
|
|||||||||||||||||||
Balance – December 31, 2020 (As Restated)
|
650,000
|
$
|
65
|
5,750,000
|
$
|
575
|
$
|
—
|
$
|
(21,431,991
|
)
|
$
|
(21,431,351
|
)
|
Year Ended
December 31,
|
For the
Period from
December 23,
2019
(Inception)
Through
December 31,
|
|||||||
2020
|
2019
|
|||||||
(As Restated) | ||||||||
Cash Flows from Operating Activities:
|
||||||||
Net loss
|
$
|
(2,061,769
|
)
|
$
|
(1,000
|
)
|
||
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||
Change in fair value of warrants
|
(236,500
|
)
|
—
|
|||||
Transaction costs
|
837,355
|
—
|
||||||
Interest earned on marketable securities held in Trust Account
|
(11,254
|
)
|
—
|
|||||
Changes in operating assets and liabilities:
|
||||||||
Prepaid expenses
|
(124,766
|
)
|
—
|
|||||
Accrued expenses
|
1,162,558
|
1,000
|
||||||
Net cash used in operating activities
|
(434,376
|
)
|
—
|
|||||
Cash Flows from Investing Activities:
|
||||||||
Investment of cash into Trust Account
|
(230,000,000
|
)
|
—
|
|||||
Net cash used in investing activities
|
(230,000,000
|
)
|
—
|
|||||
Cash Flows from Financing Activities:
|
||||||||
Proceeds from issuance of Class B common stock to Sponsor
|
25,000
|
—
|
||||||
Proceeds from sale of Units, net of underwriting discounts paid
|
225,400,000
|
—
|
||||||
Proceeds from sale of Private Placement Units
|
6,500,000
|
—
|
||||||
Proceeds from promissory notes – related party
|
140,671
|
—
|
||||||
Repayment of promissory notes – related party
|
(140,671
|
)
|
—
|
|||||
Payment of offering costs
|
(473,487
|
)
|
—
|
|||||
Net cash provided by financing activities
|
231,451,513
|
—
|
||||||
Net Change in Cash
|
1,017,137
|
—
|
||||||
Cash – Beginning
|
—
|
—
|
||||||
Cash – Ending
|
$
|
1,017,137
|
$
|
—
|
||||
Non-cash investing and financing activities:
|
||||||||
Initial classification of common stock subject to redemption
|
$
|
230,000,000
|
$
|
—
|
||||
Deferred underwriting fee payable
|
$
|
8,050,000
|
$
|
—
|
||||
Offering costs included in accrued offering costs
|
5,450
|
26,171
|
Amendment #1
The Company previously accounted for its outstanding Public Warrants (as defined in Note 4) and Private Placement Warrants (collectively, with the Public Warrants, the “Warrants”) issued in connection with its Initial Public Offering as components of equity instead of as derivative liabilities. The warrant agreement governing the Warrants includes a provision that provides for potential changes to the settlement amounts dependent upon the characteristics of the holder of the warrant. In addition, the warrant agreement includes a provision that in the event of a tender offer or exchange offer made to and accepted by holders of more than 50% of the outstanding shares of a single class of stock, all holders of the Warrants would be entitled to receive cash for their Warrants (the “tender offer provision”).
On April 12, 2021, the Acting Director of the Division of Corporation Finance and Acting Chief Accountant of the Securities and Exchange Commission together issued a statement regarding the accounting and reporting considerations for warrants issued by special purpose acquisition companies entitled “Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”)” (the “SEC Statement”). Specifically, the SEC Statement focused on certain settlement terms and provisions related to certain tender offers following a business combination, which terms are similar to those contained in the warrant agreement (the “Warrant Agreement”). Additionally, the Company revised the Statement of Changes in Stockholders’ Equity to present temporary equity separate from permanent equity, which allows for better alignment to the presentation of the Company’s Balance Sheets.
In further consideration of the SEC Statement, the Company’s management further evaluated the Warrants under Accounting Standards Codification (“ASC”) Subtopic 815-40, Contracts in Entity’s Own Equity. ASC Section 815-40-15 addresses equity versus liability treatment and classification of equity-linked financial instruments, including warrants, and states that a warrant may be classified as a component of equity only if, among other things, the warrant is indexed to the issuer’s common stock. Under ASC Section 815-40-15, a warrant is not indexed to the issuer’s common stock if the terms of the warrant require an adjustment to the exercise price upon a specified event and that event is not an input to the fair value of the warrant. Based on management’s evaluation, the Company’s audit committee, in consultation with management, concluded that the Company’s Private Placement Warrants are not indexed to the Company’s common stock in the manner contemplated by ASC Section 815-40-15 because the holder of the instrument is not an input into the pricing of a fixed-for-fixed option on equity shares. In addition, based on management’s evaluation, the Company’s audit committee, in consultation with management, concluded that the tender offer provision fails the “classified in stockholders’ equity” criteria as contemplated by ASC Section 815-40-25.
As a result of the above, the Company should have classified the Warrants as derivative liabilities in its previously issued financial statements. Under this accounting treatment, the Company is required to measure the fair value of the Warrants at the end of each reporting period as well as re-evaluate the treatment of the warrants (including on August 18, 2020, September 30, 2020 and December 31, 2020) and recognize changes in the fair value from the prior period in the Company’s operating results for the current period.
The Company’s accounting for the Warrants as components of equity instead of as derivative liabilities did not have any effect on the Company’s previously reported investments held in trust, operating expenses, cash flows or cash.
As | As Restated | |||||||||||
Previously | Per Amendment | |||||||||||
Reported | Adjustments |
#1
|
||||||||||
Balance sheet as of August 18, 2020 | ||||||||||||
Warrant liability | $ | - | $ | 13,602,000 | $ | 13,602,000 | ||||||
Total Liabilities | 7,176,121 | 13,602,000 | 20,778,121 | |||||||||
Class A Common Stock Subject to Possible Redemption | 190,045,060 | (13,602,000 |
)
|
176,443,060 | ||||||||
Class A Common Stock | 165 | 136 | 301 | |||||||||
Additional Paid-in Capital | 5,000,263 | 837,220 | 5,837,483 | |||||||||
Accumulated Deficit | (1,000 |
)
|
(837,356 |
)
|
(838,356 |
)
|
||||||
5,000,003 | - | 5,000,003 | ||||||||||
Number of Class A common stock subject to redemption | 19,004,506 | (1,360,200 |
)
|
17,644,306 | ||||||||
Balance sheet as of September 30, 2020 (unaudited) | ||||||||||||
Warrant liability | $ | - | $ | 13,135,500 | $ | 13,135,500 | ||||||
Total Liabilities | 8,126,283 | 13,135,500 | 21,261,783 | |||||||||
Class A Common Stock Subject to Possible Redemption | 218,312,810 | (13,135,500 |
)
|
205,177,310 | ||||||||
Class A Common Stock | 182 | 131 | 313 | |||||||||
Additional Paid-in Capital | 5,082,496 | 370,725 | 5,453,221 | |||||||||
Accumulated Deficit | (83,243 |
)
|
(370,856 |
)
|
(454,099 |
)
|
||||||
5,000,010 | - | 5,000,010 | ||||||||||
Number of Class A common stock subject to redemption | 21,831,281 | (1,313,550 |
)
|
20,517,731 | ||||||||
Balance sheet as of December 31, 2020 | ||||||||||||
Warrant liability | $ | - | $ | 13,365,500 | $ | 13,365,500 | ||||||
Total Liabilities | 9,219,008 | 13,365,500 | 22,584,508 | |||||||||
Class A Common Stock Subject to Possible Redemption | 216,934,140 | (13,365,500 |
)
|
203,568,640 | ||||||||
Class A Common Stock | 196 | 133 | 329 | |||||||||
Additional Paid-in Capital | 6,461,152 | 600,722 | 7,061,874 |
Accumulated Deficit | (1,461,914 | ) | (600,855 | ) | (2,062,769 | ) | ||||||
5,000,009 | - | 5,000,009 | ||||||||||
Number of Class A common stock subject to redemption | 21,693,414 | (1,336,550 | ) | 20,356,864 | ||||||||
Statement of Operations for the Three months ended September 30, 2020 (unaudited) | ||||||||||||
Change in fair value of warrant liability | - | 466,499 | 466,499 | |||||||||
Transaction costs | - | (837,355 | ) | (837,355 | ) | |||||||
Net loss | $ | (82,243 | ) | $ | (370,856 | ) | $ | (453,099 | ) | |||
Basic and diluted weighted average shares outstanding, common stock subject to possible redemption | - | 18,952,768 | 18,952,768 | |||||||||
Basic and diluted net earnings per share, common stock subject to possible redemption | 0.00 | - | 0.00 | |||||||||
Weighted average non-redeemable common shares outstanding, basic and diluted | 5,952,197 | (2,577,316 | ) | 3,374,881 | ||||||||
Basic and diluted net loss per non-redeemable common share | $ | (0.02 | ) | 0.02 | 0.00 | |||||||
Statement of Operations for the Nine months ended September 30, 2020 (unaudited) | ||||||||||||
Change in fair value of warrant liability | - | 466,499 | 466,499 | |||||||||
Transaction costs | - | (837,355 | ) | (837,355 | ) | |||||||
Net loss | $ | (82,243 | ) | $ | (370,856 | ) | $ | (453,099 | ) | |||
Basic and diluted weighted average shares outstanding, common stock subject to possible redemption | 15,112,852 | 3,839,915 | 18,952,768 | |||||||||
Basic and diluted net earnings per share, common stock subject to possible redemption | 0.00 | - | 0.00 | |||||||||
Weighted average non-redeemable common shares outstanding, basic and diluted | 3,895,358 | (470,933 | ) | 3,424,425 | ||||||||
Basic and diluted net loss per non-redeemable common share | (0.02 | ) | 0.02 | 0.00 | ||||||||
Statement of Operations for the Year ended December 31, 2020 | ||||||||||||
Change in fair value of warrant liability | - | 236,500 | 236,500 | |||||||||
Transaction costs | - | (837,355 | ) | (837,355 | ) | |||||||
Net loss | $ | (1,460,914 | ) | $ | (600,855 | ) | $ | (2,061,769 | ) | |||
Basic and diluted weighted average shares outstanding, common stock subject to possible redemption | 16,131,141 | 4,192,832 | 20,323,974 | |||||||||
Basic and diluted net earnings per share, common stock subject to possible redemption | 0.00 | - | 0.00 | |||||||||
Weighted average non-redeemable common shares outstanding, basic and diluted | 4,542,198 | (2,223,472 | ) | 2,318,726 | ||||||||
Basic and diluted net loss per non-redeemable common share | $ | (0.32 | ) | (0.57 | ) | (0.89 | ) | |||||
Cash Flow Statement for the Nine months ended September 30, 2020 (unaudited) | ||||||||||||
Net loss | $ | (82,243 | ) | $ | (370,856 | ) | $ | (453,099 | ) | |||
Allocation of initial public offering costs | - | 837,356 | 837,356 | |||||||||
Initial classification of warrant liability | - | 13,602,000 | 13,602,000 | |||||||||
Initial classification of common stock subject to possible redemption | 218,395,060 | (13,602,000 | ) | 204,793,060 | ||||||||
Change in value of common stock subject to possible redemption | (82,250 | ) | 466,500 | 384,250 | ||||||||
Cash Flow Statement for the Year ended December 31, 2020 (audited) | ||||||||||||
Net loss | $ | (1,460,914 | ) | $ | (600,856 | ) | $ | (2,061,770 | ) | |||
Allocation of initial public offering costs | - | 837,356 | 837,356 | |||||||||
Initial classification of warrant liability | - | 13,602,000 | 13,602,000 | |||||||||
Initial classification of common stock subject to possible redemption | 218,395,060 | (13,602,000 | ) | 204,793,060 | ||||||||
Change in value of common stock subject to possible redemption | (1,460,920 | ) | 236,500 | (1,224,420 | ) |
Amendment #2
In connection with the preparation of the Company’s financial statements as of September 30, 2021, management identified errors made in its historical financial statements where, at the closing of the Company’s Initial Public Offering, the Company improperly valued its Class A common stock subject to possible redemption. The Company previously determined the Class A common stock subject to possible redemption to be equal to the redemption value of $10.00 per share of Class A common stock while also taking into consideration a redemption cannot result in net tangible assets being less than $5,000,001. Management determined that the Class A common stock issued during the Initial Public Offering can be redeemed or become redeemable subject to the occurrence of future events considered outside the Company’s control. Therefore, management concluded that the redemption value should include all shares of Class A common stock subject to possible redemption, resulting in the Class A common stock subject to possible redemption being equal to their redemption value. As a result, management has noted a reclassification error related to temporary equity and permanent equity. This resulted in an adjustment to the initial carrying value of the Class A common stock subject to possible redemption with the offset recorded to additional paid-in capital (to the extent available), accumulated deficit and Class A common stock.
In connection with the change in presentation for the Class A common stock subject to redemption, the Company also restated its income (loss) per common stock calculated to allocate net income (loss) evenly to Class A and Class B common stock. This presentation contemplates a Business Combination as the most likely outcome, in which case, both classes of common stock pro rata in the income (loss) of the Company. There is no impact to the reported amounts for total assets, total liabilities, cash flows, or net income (loss).
The impact of the restatement on the Company’s financial statements is reflected in the following table.
As Reported | As Restated | |||||||||||
Per Amendment #1 | Adjustment | Per Amendment #2 | ||||||||||
Balance Sheet as of August 18, 2020 | ||||||||||||
Class A common stock subject to possible redemption | $ | 176,443,060 | $ | 23,556,940 | $ | 200,000,000 | ||||||
Class A common stock | $ | 301 | $ | (236 | ) | $ | 65 | |||||
Additional paid-in capital | $ | 5,837,483 | $ | (5,837,483 | ) | $ | — | |||||
Accumulated deficit | $ | (838,356 | ) | $ | (17,719,221 | ) | $ | (18,557,577 | ) | |||
Total Stockholders' Equity (Deficit) | $ | 5,000,003 | $ | (23,556,940 | ) | $ | (18,556,937 | ) | ||||
Balance Sheet as of September 30, 2020 (unaudited) | ||||||||||||
Class A common stock subject to possible redemption | $ | 205,177,310 | $ | 24,822,690 | $ | 230,000,000 | ||||||
Class A common stock | $ | 313 | $ | (248 | ) | $ | 65 | |||||
Additional paid-in capital | $ | 5,453,221 | $ | (5,453,221 | ) | $ | — | |||||
Accumulated deficit | $ | (454,099 | ) | $ | (19,369,221 | ) | $ | (19,823,320 | ) | |||
Total Stockholders' Equity (Deficit) | $ | 5,000,010 | $ | (24,822,690 | ) | $ | (19,822,680 | ) | ||||
Balance Sheet as of December 31, 2020 | ||||||||||||
Class A common stock subject to possible redemption | $ | 203,568,640 | $ | 26,431,360 | $ | 230,000,000 | ||||||
Class A common stock | $ | 329 | $ | (264 | ) | $ | 65 | |||||
Additional paid-in capital | $ | 7,061,874 | $ | (7,061,874 | ) | $ | — | |||||
Accumulated deficit | $ | (2,062,769 | ) | $ | (19,369,222 | ) | $ | (21,431,991 | ) | |||
Total Stockholders’ Equity (Deficit) | $ | 5,000,009 | $ | (26,431,360 | ) | $ | (21,431,351 | ) | ||||
Statement of Operations for the Three Months Ended September 30, 2020 (unaudited) | ||||||||||||
Basic and diluted weighted average shares outstanding, Class A Common Stock | 18,952,768 | (8,094,616 | ) | 10,858,152 | ||||||||
Basic and diluted net (loss) per share, Class A | $ | — | $ | (0.03 | ) | $ | (0.03 |
)
|
||||
Basic and diluted weighted average shares outstanding, Class B Common Stock | 3,374,881 | (1,926,749 | ) | 5,301,630 | ||||||||
Basic and diluted net (loss) per share, Class B Common Stock | $ | — | $ | (0.03 | ) | $ | (0.03 |
)
|
||||
Statement of Operations for the Nine Months Ended September 30, 2020 (unaudited) | ||||||||||||
Basic and diluted weighted average shares outstanding, Class A Common Stock | 18,952,768 | (15,306,965 | ) | 3,645,803 | ||||||||
Basic and diluted net (loss) per share, Class A | $ | — | $ | (0.05 | ) | $ | (0.05 | ) | ||||
Basic and diluted weighted average shares outstanding, Class B Common Stock | 3,424,425 | 1,494,371 | 4,918,796 | |||||||||
Basic and diluted net (loss) per share, Class B Common Stock | $ | — | $ | (0.05 | ) | $ | (0.05 | ) | ||||
Statement of Operations for the Year Ended December 31, 2020 | ||||||||||||
Basic and diluted weighted average shares outstanding, Class A Common Stock | 20,323,974 | (11,649,794 | ) | 8,674,180 | ||||||||
Basic and diluted net (loss) per share, Class A | $ | — | $ | (0.15 | ) | $ | (0.15 | ) | ||||
Basic and diluted weighted average shares outstanding, Class B Common Stock | 2,318,726 | 2,809,006 | 5,127,732 | |||||||||
Basic and diluted net (loss) per share, Class B Common Stock | $ | (0.89 | ) | $ | 0.74 | $ | (0.15 | ) | ||||
Statement of Cash Flows for the Nine Months Ended September 30, 2020 (unaudited) | ||||||||||||
Initial classification of Class A common stock subject to possible redemption | $ | 204,793,060 | $ | 25,206,940 | $ | 230,000,000 | ||||||
Change in value of Class A common stock subject to possible redemption | $ | 384,250 | $ | (384,250 | ) | $ | — | |||||
Statement of Cash Flows for the Year Ended December 31, 2020 | ||||||||||||
Initial classification of Class A common stock subject to possible redemption | $ | 204,793,060 | $ | 25,206,940 | $ | 230,000,000 | ||||||
Change in value of Class A common stock subject to possible redemption | $ | (1,224,420 | ) | $ | 1,224,420 | $ | — | |||||
Statement of Changes in Stockholders' Equity (Deficit) for the Period Ended September 30, 2020 (unaudited) | ||||||||||||
Sale of 23,000,000 Units, net of underwriting discounts | $ | 204,482,544 | $ | (204,482,544 | ) | $ | — | |||||
Class A common stock subject to possible redemption | $ | (205,177,310 | ) | $ | 205,177,310 | $ | — | |||||
Accretion to common stock subject to redemption amount | $ | — | $ | (25,517,456 | ) | $ | (25,517,456 | ) | ||||
Total Stockholders' Equity | 5,000,010 | (24,822,690 | ) | (19,822,680 | ) | |||||||
Statement of Changes in Stockholders' Equity (Deficit) for the Year Ended December 30, 2020 | ||||||||||||
Change in value of common stock subject to redemption | $ | 1,608,670 | $ | (1,608,670 | ) | $ | — | |||||
Sale of 23,000,000 Units, net of underwriting discounts | $ | 204,482,544 | $ | (204,482,544 | ) | $ | — | |||||
Class A common stock subject to possible redemption | $ | (205,177,310 | ) | $ | 205,177,310 | $ | — | |||||
Accretion to common stock subject to redemption amount | $ | — | $ | (25,517,456 | ) | $ | (25,517,456 | ) | ||||
Total Stockholders' Equity | $ | 5,000,009 | $ | (26,431,360 | ) | $ | (21,431,351 | ) |
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements is presented in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the SEC.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, 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. The Company 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, the Company, 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 Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires the Company’s 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 financial statements and the reported amounts of revenues and expenses during the reporting periods.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents as of December 31, 2020 and December 31, 2019.
Marketable Securities Held in Trust Account
At December 31, 2020, substantially all of the assets held in the Trust Account were held in money market funds which are invested primarily in U.S. Treasury Securities.
Class A Common Stock Subject to Possible Redemption (Restated – See Note 2 – Amendment #2)
The Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance in ASC 480. Class A common stock subject to mandatory redemption are classified as a liability instrument and are measured at fair value. Conditionally redeemable common stock (including common stock that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, common stock is classified as shareholders’ equity. The Company’s Class A common stock feature certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, at December 31, 2020, Class A common stock subject to possible redemption are presented as temporary equity, outside of the stockholders’ equity section of the Company’s condensed consolidated balance sheet.
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value at the end of each reporting period. Immediately upon the closing of the Initial Public Offering, the Company recognized the accretion from initial book value to redemption amount value. The change in the carrying value of redeemable Class A common stock resulted in charges against additional paid-in capital and accumulated deficit.
At December 31, 2020, the Class A common stock reflected in the condensed consolidated balance sheet are reconciled in the following table:
Gross proceeds | $ | 230,000,000 | ||
Less: | ||||
Proceeds allocated to Public Warrants | $ | (13,225,000 | ) | |
Class A common stock issuance costs | $ | (12,292,456 | ) | |
Plus: | ||||
Accretion of carrying value to redemption value | $ | 25,517,456 | ||
Class A common stock subject to possible redemption | $ | 230,000,000 |
Warrant Liability
The Company accounts for the Warrants in accordance with the guidance contained in ASC 815-40-15-7D and 7F under which the Warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, the Company classifies the Warrants as liabilities at their fair value and adjusts the Warrants to fair value at the end of each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our statement of operations. The Private Warrants and the Public Warrants for periods where no observable traded price was available are valued using a Monte Carlo simulation. For periods subsequent to the detachment of the Public Warrants from the Units, the Public Warrant quoted market price was used as the fair value as of each relevant date.
Income Taxes
The Company follows the asset and liability method of accounting for income taxes under ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. 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 included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of December 31, 2020 and 2019. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.
On March 27, 2020, the CARES Act was enacted in response to COVID-19 pandemic. Under ASC 740, the effects of changes in tax rates and laws are recognized in the period which the new legislation is enacted. The CARES Act made various tax law changes including among other things (i) increasing the limitation under Section 163(j) of the Internal Revenue Code of 1986, as amended (the “IRC”) for 2019 and 2020 to permit additional expensing of interest (ii) enacting a technical correction so that qualified improvement property can be immediately expensed under IRC Section 168(k), (iii) making modifications to the federal net operating loss rules including permitting federal net operating losses incurred in 2018, 2019, and 2020 to be carried back to the five preceding taxable years in order to generate a refund of previously paid income taxes and (iv) enhancing the recoverability of alternative minimum tax credits.
Net Loss Per Common Share (Restated – See Note 2 – Amendment #1)
Net income (loss) per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period. The Company has not considered the effect of the warrants sold in the Public Offering and Private Placement to purchase an aggregate of 11,825,000 shares in the calculation of diluted loss per share, since the exercise of the warrants are contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive.
The Company’s statement of operations includes a presentation of income (loss) per share for common shares subject to possible redemption in a manner similar to the two-class method of income (loss) per share. Net income per common share, basic and diluted, for Common stock subject to possible redemption is calculated by dividing the proportionate share of income or loss on marketable securities held by the Trust Account, net of applicable franchise and income taxes, by the weighted average number of Common stock subject to possible redemption outstanding since original issuance.
Net loss per share, basic and diluted, for non-redeemable common stock is calculated by dividing the net loss, adjusted for income or loss on marketable securities attributable to Common stock subject to possible redemption, by the weighted average number of non-redeemable common stock outstanding for the period.
Non-redeemable common stock includes Founder Shares and non-redeemable shares of common stock as these shares do not have any redemption features. Non-redeemable common stock participates in the income or loss on marketable securities based on non-redeemable common stock shares’ proportionate interest.
Year ended
December 31, 2020 |
For the Period
from December 23, 2019 (Inception) through December 31, 2019 |
|||||||
(As Restated) |
||||||||
Common stock subject to possible redemption | ||||||||
Numerator: Earnings allocable to Common stock subject to possible redemption | ||||||||
Interest earned on marketable securities held in Trust Account | ||||||||
Less: Income taxes and franchise fees | $ | (11,254 | ) | $ | — | |||
Net loss allocable to shares subject to possible redemption | $ | — | $ | — | ||||
Denominator: Weighted Average Common stock subject to possible redemption | ||||||||
Basic and diluted weighted average shares outstanding | 21,833,901 | — | ||||||
Basic and diluted net income per share | $ | 0.00 | $ | — | ||||
Non-Redeemable Common Stock | ||||||||
Numerator: Net Loss minus Net Earnings | ||||||||
Net loss | $ | (2,061,769 | ) | $ | (1,000 | ) | ||
Net loss allocable to Common stock subject to possible redemption | — | — | ||||||
Non-Redeemable Net Loss | $ | (2,061,769 | ) | $ | (1,000 | ) | ||
Denominator: Weighted Average Non-Redeemable Common Stock | ||||||||
Basic and diluted weighted average shares outstanding | $ | 2,318,726 | — | |||||
Basic and diluted net loss per share | $ | (0.89 | ) | $ | (0.00 | ) |
Net Income (Loss) Per Common Share (Restated – See Note 2 – Amendment #2)
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share”. Net income (loss) per common stock is computed by dividing net income (loss) by the weighted average number of common stocks outstanding for the period. The Company applies the two-class method in calculating earnings per share. Accretion associated with the redeemable shares of Class A common stocks is excluded from earnings per share as the redemption value approximates fair value.
The calculation of diluted income (loss) per share does not consider the effect of the warrants issued in connection with the (i) Initial Public Offering, and (ii) the private placement since the exercise of the warrants is contingent upon the occurrence of future events. The warrants are exercisable to purchase 11,825,000 Class A common stocks in the aggregate. As of December 31, 2020, the Company did not have any dilutive securities or other contracts that could, potentially, be exercised or converted into common stocks and then share in the earnings of the Company. As a result, diluted net loss per common stock is the same as basic net loss per common stock for the periods presented.
The following table reflects the calculation of basic and diluted net loss per common stock (in dollars, except per share amounts):
For the Year Ended | ||||||||
December 31, 2020 | ||||||||
Class A | Class B | |||||||
Basic and diluted net income (loss) per common stock | ||||||||
Numerator: | ||||||||
Allocation of net income (loss), as adjusted | $ | (1,295,774 | ) | $ | (765,995 | ) | ||
Denominator: | ||||||||
Basic and diluted weighted average stock outstanding | 8,674,180 | 5,127,732 | ||||||
Basic and diluted net income (loss) per common stock | $ | (0.15 | ) | $ | (0.15 | ) |
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times, may exceed the Federal Depository Insurance Coverage of $250,000. The Company has not experienced losses on this account.
Fair value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC 820, “Fair Value Measurement,” approximates the carrying amounts represented in the accompanying balance sheets, primarily due to their short-term nature.
Fair Value Measurements
Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
· | Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; |
· | Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and |
· | Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging”. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value on the grant date and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date.
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective, accounting standards update, if currently adopted, would have a material effect on the Company’s financial statements.
•
|
in whole and not in part;
|
•
|
at a price of $0.01 per warrant;
|
•
|
upon not less than 30 days’ prior written notice of redemption to each warrant holder; and
|
•
|
if, and only if, the reported
last reported sale price of the Company’s Class A common stock equals or exceeds $18.00 per share for any 20 trading days within a 30-trading
day period ending the third trading day prior to the date on which the Company sends the notice of redemption to each warrant holder.
|
December 31,
2020
|
December 31,
2019
|
|||||||
Deferred tax assets (liability)
|
||||||||
Net operating loss carryforward
|
$
|
306,991
|
$
|
210
|
||||
Total deferred tax assets
|
306,991
|
210
|
||||||
Valuation Allowance
|
(306,991
|
)
|
(210
|
)
|
||||
Deferred tax assets (liability)
|
$
|
—
|
$
|
—
|
December 31,
2020
|
December 31,
2019
|
|||||||
Federal
|
||||||||
Current
|
$
|
—
|
$
|
—
|
||||
Deferred
|
(306,781
|
)
|
(210
|
)
|
||||
State and Local
|
||||||||
Current
|
—
|
—
|
||||||
Deferred
|
—
|
—
|
||||||
Change in valuation allowance
|
306,781
|
210
|
||||||
Income tax provision
|
$
|
—
|
$
|
—
|
December 31,
2020
|
December 31,
2019
|
|||||||
Statutory federal income tax rate
|
21.0
|
%
|
21.0%
|
|||||
State taxes, net of federal tax benefit
|
—
|
—
|
||||||
Change in fair value of warrant liability
|
(6.1
|
)%
|
--
|
|||||
Valuation allowance
|
(14.9
|
)
|
(21.0
|
)
|
||||
Income tax provision
|
0.0.0
|
% |
0.0
|
% |
Level 1:
|
Quoted prices in active markets for identical assets or liabilities. An
active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
|
Level 2:
|
Observable inputs other than Level 1 inputs. Examples of Level 2 inputs
include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.
|
Level 3:
|
Unobservable inputs based on our assessment of the assumptions that market
participants would use in pricing the asset or liability.
|
Description
|
Level
|
December 31,
2020
|
December 31,
2019
|
|||||||||
Assets:
|
||||||||||||
Marketable securities held in Trust Account
|
1
|
$
|
230,011,254
|
$
|
—
|
|||||||
Liabilities:
|
||||||||||||
Warrant Liability – Public Warrants
|
1
|
12,995,000
|
||||||||||
Warrant Liability – Private Placement Warrants
|
3
|
370,500
|
Private
Placement
|
Public
|
Warrant
Liabilities
|
||||||||||
Fair value as of December 23, 2019 (inception)
|
$
|
—
|
$
|
—
|
$
|
—
|
||||||
Initial measurement on August 18, 2020 and over-allotment
on August 20, 2020
|
377,000
|
13,225,000
|
13,602,000
|
|||||||||
Change in valuation inputs or other assumptions
|
(6,500
|
)
|
(230,000
|
)
|
(236,500
|
)
|
||||||
Fair value as of December 31, 2020
|
$
|
370,500
|
$
|
12,995,000
|
$
|
13,365,500
|
Page
|
|
F-50
|
|
F-51
|
|
F-52
|
|
F-53
|
|
F-54 to F-60
|
(In thousands)
|
September 30,
2021
|
December 31,
2020
|
||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$
|
1,354
|
$
|
11,879
|
||||
Affiliate receivable (1)
|
4,115
|
4,871
|
||||||
Prepaid expenses and other current assets
|
7,053
|
54
|
||||||
Total current assets
|
12,522
|
16,804
|
||||||
Property, plant and equipment, net
|
836
|
612
|
||||||
Intangible assets, net
|
813
|
427
|
||||||
Total assets
|
$
|
14,171
|
$
|
17,843
|
||||
LIABILITIES AND EQUITY
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
$
|
2,739
|
$
|
398
|
||||
Affiliate payable (1)
|
40,895
|
39,027
|
||||||
Obligation to provide securities
|
-
|
1,577
|
||||||
Commission payable
|
465
|
448
|
||||||
Deferred service fee income
|
249
|
249
|
||||||
Other current liabilities
|
914
|
426
|
||||||
Total current liabilities
|
45,262
|
42,125
|
||||||
Claims financing obligation & notes payable
|
23,500
|
24,043
|
||||||
Interest payable
|
87,079
|
67,522
|
||||||
Total liabilities
|
$
|
155,841
|
$
|
133,690
|
||||
Commitments and contingencies (Note 8)
|
||||||||
Equity:
|
||||||||
Members’ deficit
|
(146,018
|
)
|
(120,179
|
)
|
||||
Noncontrolling interest
|
4,348
|
4,332
|
||||||
Total equity
|
(141,670
|
)
|
(115,847
|
)
|
||||
Total liabilities and equity
|
$
|
14,171
|
$
|
17,843
|
(1)
|
As of September 30, 2021 and December 31, 2020, the total affiliate receivable and affiliate
payable balances are with related parties. See Note 9, Related Party, for further
details.
|
For the nine months ended
September 30,
|
||||||||
(In thousands)
|
2021
|
2020
|
||||||
Claims recovery income
|
$
|
63
|
$
|
255
|
||||
Claims recovery service income (1)
|
9,213
|
9,960
|
||||||
Total Claims Recovery
|
$
|
9,276
|
$
|
10,215
|
||||
Operating expenses
|
||||||||
Cost of claim recoveries
|
137
|
141
|
||||||
General and administrative (2)
|
8,263
|
8,487
|
||||||
Professional fees
|
5,606
|
1,507
|
||||||
Depreciation and amortization
|
256
|
187
|
||||||
Total operating expenses
|
14,262
|
10,322
|
||||||
Operating (Loss) Income
|
$
|
(4,986
|
)
|
$
|
(107
|
)
|
||
Interest expense
|
(19,579
|
)
|
(14,908
|
)
|
||||
Other income, net
|
1,154
|
179
|
||||||
Net loss
|
$
|
(23,411
|
)
|
$
|
(14,836
|
)
|
||
Less: Net loss (income) attributable to non-controlling members
|
(16
|
)
|
(2
|
)
|
||||
Net loss attributable to controlling members
|
$
|
(23,427
|
)
|
$
|
(14,838
|
)
|
(1)
|
For the nine months ended September 30, 2021 and 2020, claims recovery service income included $6,971 thousand and $9,960
thousand, respectively, of claims recovery service income from VRM MSP Recovery Partners LLC (“VRM”). See Note 9, Related Party, for further details.
|
(2)
|
For the nine months ended September 30, 2021 and 2020, general and administrative expenses included $39 thousand and $55
thousand, respectively, of related party expenses. See Note 9, Related Party, for
further details.
|
(In thousands)
|
Members’ Deficit
|
Non- Controlling Interests
|
Total Equity
|
|||||||||
Balance at December 31, 2020
|
$
|
(120,179
|
)
|
$
|
4,332
|
$
|
(115,847
|
)
|
||||
Contributions
|
227
|
-
|
227
|
|||||||||
Distributions
|
(2,639
|
)
|
-
|
(2,639
|
)
|
|||||||
Net Income (loss)
|
(23,427
|
)
|
16
|
(23,411
|
)
|
|||||||
Balance at September 30, 2021
|
$
|
(146,018
|
)
|
$
|
4,348
|
$
|
(141,670
|
)
|
(In thousands)
|
Members’ Deficit
|
Non- Controlling Interests
|
Total Equity
|
|||||||||
Balance at December 31, 2019
|
$
|
(104,455
|
)
|
$
|
4,350
|
$
|
(100,105
|
)
|
||||
Contributions
|
267
|
-
|
267
|
|||||||||
Distributions
|
(100
|
)
|
-
|
(100
|
)
|
|||||||
Net Income (loss)
|
(14,838
|
)
|
2
|
(14,836
|
)
|
|||||||
Balance at September 30, 2020
|
$
|
(119,126
|
)
|
$
|
4,352
|
$
|
(114,774
|
)
|
For the nine months
ended September 30,
|
||||||||
(In thousands)
|
2021
|
2020
|
||||||
Cash flows from operating activities:
|
||||||||
Net loss (1)
|
$
|
(23,411
|
)
|
$
|
(14,836
|
)
|
||
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||
Depreciation and amortization
|
256
|
187
|
||||||
Amortization included in cost of claim recoveries
|
114
|
94
|
||||||
Paid in kind interest
|
19,557
|
14,865
|
||||||
PPP loan forgiveness
|
(1,043
|
)
|
-
|
|||||
Realized gain on equity securities
|
(201
|
)
|
-
|
|||||
Change in operating assets and liabilities:
|
||||||||
Affiliate receivable (1)
|
755
|
(915
|
)
|
|||||
Affiliate payable (1)
|
1,868
|
(72
|
)
|
|||||
Prepaid expenses and other assets
|
(6,999
|
)
|
(9
|
)
|
||||
Accounts payable and accrued liabilities
|
2,848
|
(494
|
)
|
|||||
Net cash used in operating activities
|
(6,256
|
)
|
(1,180
|
)
|
||||
Cash flows from investing activities:
|
||||||||
Additions to property, plant, and equipment
|
(481
|
)
|
(134
|
)
|
||||
Purchases of equity securities
|
(4,056
|
)
|
-
|
|||||
Proceeds from sale of equity securities
|
4,450
|
-
|
||||||
Purchase of securities to cover short position
|
(1,770
|
)
|
-
|
|||||
Net cash used in investing activities
|
(1,857
|
)
|
(134
|
)
|
||||
Cash flows from financing activities:
|
||||||||
Contributions from members
|
227
|
267
|
||||||
Distributions to members
|
(2,639
|
)
|
(100
|
)
|
||||
Proceeds from debt financing
|
-
|
1,085
|
||||||
Net cash (used in) provided by financing activities
|
(2,412
|
)
|
1,252
|
|||||
Decrease in cash and cash equivalents
|
(10,525
|
)
|
(62
|
)
|
||||
Cash and cash equivalents at beginning of year
|
11,879
|
1,297
|
||||||
Cash and cash equivalents at end of year
|
$
|
1,354
|
$
|
1,235
|
||||
Supplemental cash flow information:
|
||||||||
Supplemental disclosure of non-cash investing and financing activities:
|
||||||||
Purchase of intangible asset financed by note payable
|
$
|
500
|
$
|
-
|
||||
Cash paid during the period for:
|
||||||||
Interest
|
$
|
22
|
$
|
43
|
(1)
|
Balances include related party transactions. See Note 9, Related Party, for further
details.
|
Note 1. |
DESCRIPTION OF BUSINESS
|
Entity Name
|
Method
|
MSP Recovery of Puerto Rico LLC (Puerto Rico)
|
Combined
|
MDA Series, LLC
|
Combined
|
MSP Recovery, LLC
|
Combined
|
MAO-MSO Recovery LLC Series FHCP
|
Consolidated (non-wholly owned)
|
MSP Recovery Services, LLC
|
Combined
|
MSPA Claims 1, LLC
|
Consolidated (wholly owned)
|
MSP National, LLC
|
Consolidated (wholly owned)
|
MSP Recovery Claims Prov Series LLC
|
Combined
|
MSP Recovery Claims CAID Series LLC
|
Combined
|
MSP WB LLC
|
Combined
|
MSP Recovery Claims HOSP Series LLC
|
Combined
|
MSP Productions, LLC
|
Combined
|
MSP Recovery Claims HP, Series LLC
|
Combined
|
Note 2. |
BASIS OF
PRESENTATON AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
|
• |
Exemption to not disclose the unfulfilled performance obligation balance for contracts with an original length of one year or less.
|
|
• |
Practical expedient to recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that
the entity otherwise would have recognized is one year or less.
|
|
• |
Election to present revenue net of sales taxes and other similar taxes, if any.
|
|
• |
Practical expedient not requiring the entity to adjust the promised amount of consideration for the effects of a significant financing component if the
entity expects, at contract inception, that the period between when the entity transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less.
|
Note 3. |
INVESTMENT IN EQUITY METHOD INVESTEES
|
Series PMPI
|
Revenue
|
Amortization
|
Other expenses
|
Profit (Loss)
|
||||||||||||
September 30, 2021
|
$
|
1
|
$
|
1,500
|
$
|
-
|
$
|
(1,499
|
)
|
|||||||
September 30, 2020
|
$
|
53
|
$
|
1,500
|
$
|
-
|
$
|
(1,447
|
)
|
Series PMPI
|
Total Assets
|
Total Liabilities
|
||||||
September 30, 2021
|
$
|
5,890
|
$
|
266
|
||||
December 31, 2020
|
$
|
7,393
|
$
|
270
|
Note 4. |
INTANGIBLE ASSETS, NET
|
September 30, 2021
|
||||
CCRAs
|
||||
Gross
|
$
|
1,500
|
||
Accumulated amortization
|
(687
|
)
|
||
Net
|
$
|
813
|
December 31, 2020 | ||||
CCRAs
|
||||
Gross
|
$
|
1,000
|
||
Accumulated amortization
|
(573
|
)
|
||
Net
|
$
|
427
|
From October 1,2021 to December 31, 2021
|
$ 47
|
2022
|
188
|
2023
|
188
|
2024
|
115
|
2025
|
63
|
Thereafter
|
212
|
Total
|
$ 813
|
Note 5. |
VARIABLE INTEREST ENTITIES
|
Note 6. |
CLAIMS FINANCING OBLIGATION AND NOTE PAYABLE
|
Note 7. |
MEMBERS’ EQUITY AND NONCONTROLLING INTEREST
|
Note 8. |
COMMITMENTS AND CONTINGENCIES
|
Year Ending December 31,
|
Lease Payments
|
|||
Remaining 2021
|
$
|
56
|
||
2022
|
231
|
|||
2023 (1)
|
217
|
|||
Total
|
$
|
504
|
Note 9. |
RELATED PARTY
|
Note 10. |
INVESTMENTS IN EQUITY SECURITIES AND OBLIGATIONS TO DELIVER SECURITIES
|
Note 11. |
SUBSEQUENT EVENTS
|
INDEX TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS
|
|
Page
|
|
F-62
|
|
F-63
|
|
F-64
|
|
F-65
|
|
F-66
|
|
F-67 to F-77
|
December 31,
|
||||||||
(In thousands)
|
2020
|
2019
|
||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$
|
11,879
|
$
|
1,297
|
||||
Accounts receivable
|
-
|
8
|
||||||
Affiliate receivable (1)
|
4,871
|
1,524
|
||||||
Prepaid expenses and other current assets
|
54
|
38
|
||||||
Total current assets
|
16,804
|
2,867
|
||||||
Property, plant and equipment, net
|
612
|
517
|
||||||
Intangible assets, net
|
427
|
552
|
||||||
Total assets
|
$
|
17,843
|
$
|
3,936
|
||||
LIABILITIES AND EQUITY
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
$
|
398
|
$
|
453
|
||||
Affiliate payable (1)
|
39,027
|
33,357
|
||||||
Obligation to provide securities
|
1,577
|
-
|
||||||
Commission payable
|
448
|
15
|
||||||
Deferred service fee income
|
249
|
-
|
||||||
Other current liabilities
|
426
|
538
|
||||||
Total current liabilities
|
42,125
|
34,363
|
||||||
Claims financing obligation & notes payable
|
24,043
|
23,000
|
||||||
Interest payable
|
67,522
|
46,678
|
||||||
Total liabilities
|
$
|
133,690
|
$
|
104,041
|
||||
Commitments and contingencies (Note 11)
|
||||||||
Equity:
|
||||||||
Members’ deficit
|
(120,179
|
)
|
(104,455
|
)
|
||||
Noncontrolling interest
|
4,332
|
4,350
|
||||||
Total equity
|
(115,847
|
)
|
(100,105
|
)
|
||||
Total liabilities and equity
|
$
|
17,843
|
$
|
3,936
|
(1)
|
As of December 31, 2020 and 2019, the total affiliate receivable and affiliate payable balances are with related parties. See Note 12,
Related Party for further details.
|
Years ended December 31,
|
||||||||
(In thousands)
|
2020
|
2019
|
||||||
Claims recovery income
|
$
|
255
|
$
|
-
|
||||
Claims recovery service income (1)
|
13,632
|
11,448
|
||||||
Total Claims Recovery
|
$
|
13,887
|
$
|
11,448
|
||||
Operating expenses
|
||||||||
Cost of claim recoveries
|
172
|
125
|
||||||
General and administrative (2)
|
14,598
|
9,661
|
||||||
Professional fees
|
2,211
|
2,599
|
||||||
Depreciation and amortization
|
235
|
134
|
||||||
Total operating expenses
|
17,216
|
12,519
|
||||||
Operating Loss
|
$
|
(3,329
|
)
|
$
|
(1,071
|
)
|
||
Interest expense
|
(20,886
|
)
|
(16,085
|
)
|
||||
Other income, net
|
(51
|
)
|
553
|
|||||
Net loss
|
$
|
(24,266
|
)
|
$
|
(16,603
|
)
|
||
Less: Net loss attributable to non-controlling members
|
18
|
27
|
||||||
Net loss attributable to controlling members
|
$
|
(24,248
|
)
|
$
|
(16,576
|
)
|
(1)
|
For the years ended December 31, 2020 and 2019, claims recovery service income included $13,134 thousand and $11,448 thousand, respectively, of claims
recovery service income from VRM MSP Recovery Partners LLC. See Note 12, Related Party for further details.
|
(2)
|
For the years ended December 31, 2020 and 2019, general and administrative expenses included $773 thousand and $273 thousand,
respectively, of related party expenses. See Note 12, Related Party for further details.
|
(In thousands)
|
Members’ Deficit
|
Non- Controlling Interests
|
Total Equity
|
|||||||||
Balance at January 1, 2019
|
$
|
(85,404
|
)
|
$
|
4,377
|
$
|
(81,027
|
)
|
||||
Contributions
|
6
|
-
|
6
|
|||||||||
Distributions
|
(2,481
|
)
|
-
|
(2,481
|
)
|
|||||||
Net loss
|
(16,576
|
)
|
(27
|
)
|
(16,603
|
)
|
||||||
Balance at December 31, 2019
|
$
|
(104,455
|
)
|
$
|
4,350
|
$
|
(100,105
|
)
|
||||
Contributions
|
8,524
|
-
|
8,524
|
|||||||||
Net loss
|
(24,248
|
)
|
(18
|
)
|
(24,266
|
)
|
||||||
Balance at December 31, 2020
|
$
|
(120,179
|
)
|
$
|
4,332
|
$
|
(115,847
|
)
|
Years ended December 31,
|
||||||||
(In thousands)
|
2020
|
2019
|
||||||
Cash flows from operating activities:
|
||||||||
Net loss (1)
|
$
|
(24,266
|
)
|
$
|
(16,603
|
)
|
||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
|
||||||||
Depreciation and amortization
|
235
|
134
|
||||||
Amortization included in cost of claims recoveries
|
125
|
125
|
||||||
Paid in kind interest
|
20,843
|
16,081
|
||||||
PPP loan forgiveness
|
(44
|
)
|
-
|
|||||
Realized gain on equity securities
|
(18
|
)
|
-
|
|||||
Unrealized losses on investments – short position
|
279
|
-
|
||||||
Change in operating assets and liabilities:
|
||||||||
Accounts receivable
|
7
|
133
|
||||||
Affiliate receivable (1)
|
(3,346
|
)
|
(1,118
|
)
|
||||
Affiliate payable (1)
|
5,670
|
727
|
||||||
Prepaid expenses and other assets
|
(16
|
)
|
16
|
|||||
Accounts payable and accrued liabilities
|
268
|
380
|
||||||
Deferred service fee revenue
|
249
|
-
|
||||||
Net cash used in operating activities
|
(14 |
)
|
(125
|
)
|
||||
Cash flows from investing activities:
|
||||||||
Additions to property, plant, and equipment
|
(330
|
)
|
(570
|
)
|
||||
Proceeds from sale of short positions
|
1,298
|
-
|
||||||
Purchases of equity securities
|
(1,255
|
)
|
-
|
|||||
Proceeds from sale of equity securities
|
1,273
|
-
|
||||||
Net cash provided by (used in) investing activities
|
986
|
(570
|
)
|
|||||
Cash flows from financing activities:
|
||||||||
Contributions from members
|
8,524
|
6
|
||||||
Distributions to members
|
-
|
(2,481
|
)
|
|||||
Proceeds from revenue financing obligation
|
-
|
2,500
|
||||||
Proceeds from note payable
|
1,086
|
-
|
||||||
Net cash provided by financing activities
|
9,610
|
25
|
||||||
Increase (decrease) in cash and cash equivalents
|
10,582
|
(670
|
)
|
|||||
Cash and cash equivalents at beginning of year
|
1,297
|
1,967
|
||||||
Cash and cash equivalents at end of year
|
$
|
11,879
|
$
|
1,297
|
||||
Supplemental cash flow information:
|
||||||||
Cash paid during the period for:
|
||||||||
Interest
|
$
|
43
|
$
|
4
|
(1)
|
Balances include related party transactions. See Note 12, Related Party, for further details.
|
Note 1. |
DESCRIPTION OF BUSINESS
|
Entity Name
|
Method
|
MSP Recovery of Puerto Rico LLC (Puerto Rico)
|
Combined
|
MDA Series, LLC
|
Combined
|
MSP Recovery, LLC
|
Combined
|
MAO-MSO Recovery LLC Series FHCP
|
Consolidated (non-wholly owned)
|
MSP Recovery Services, LLC
|
Combined
|
MSPA Claims 1, LLC
|
Consolidated (wholly owned)
|
MSP National, LLC
|
Consolidated (wholly owned)
|
MSP Productions, LLC
|
Combined
|
Note 2. |
BASIS OF PRESENTATON AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
Office and Computer Equipment
|
3 years
|
Furniture and Fixtures
|
3 years
|
Leasehold Improvements
|
Lesser of lease term or estimated life
|
|
• |
Exemption to not disclose the unfulfilled performance obligation balance for contracts with an original length of one year or less.
|
|
• |
Practical expedient to recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that the entity otherwise would have recognized is one year
or less.
|
|
• |
Election to present revenue net of sales taxes and other similar taxes, if any.
|
|
• |
Practical expedient not requiring the entity to adjust the promised amount of consideration for the effects of a significant financing component if the entity expects, at contract inception, that the period
between when the entity transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less.
|
Note 3. |
INVESTMENT IN EQUITY METHOD INVESTEES
|
December 31,2020
|
Total Assets
|
Total Liabilities
|
Revenue
|
Amortization
|
Other expenses
|
Profit (Loss)
|
||||||||||||||||||
Series PMPI
|
$
|
7,393
|
$
|
270
|
$
|
34
|
$
|
2,000
|
$
|
20
|
$
|
(1,986
|
)
|
December 31,2019
|
Total Assets
|
Total Liabilities
|
Revenue
|
Amortization
|
Other expenses
|
Profit (Loss)
|
||||||||||||||||||
Series PMPI
|
$
|
9,392
|
$
|
283
|
$
|
26
|
$
|
2,000
|
$
|
36
|
$
|
(2,010
|
)
|
Note 4. |
ACCOUNTS RECEIVABLE
|
December 31,
|
||||||||
2020
|
2019
|
|||||||
Accounts receivable, gross
|
$
|
-
|
$
|
8
|
||||
Allowance for doubtful accounts
|
-
|
-
|
||||||
Accounts receivable, net
|
$
|
-
|
$
|
8
|
Note 5. |
PROPERTY, PLANT AND EQUIPMENT, NET
|
December 31,
|
||||||||
2020
|
2019
|
|||||||
Office and computer equipment
|
$
|
305
|
$
|
250
|
||||
Leasehold improvements
|
113
|
93
|
||||||
Internally developed software
|
589
|
335
|
||||||
Other software
|
67
|
67
|
||||||
Property, plant and equipment, gross
|
$
|
1,074
|
$
|
745
|
||||
Less: accumulated depreciation and amortization of software
|
(462
|
)
|
(228
|
)
|
||||
Property, plant and equipment, net
|
$
|
612
|
$
|
517
|
Note 6. |
INTANGIBLE ASSETS, NET
|
December 31, 2020
|
||||
CCRAs
|
||||
Gross
|
$
|
1,000
|
||
Accumulated amortization
|
(573
|
)
|
||
Net
|
$
|
427
|
December 31, 2019
|
||||
CCRAs
|
||||
Gross
|
$
|
1,000
|
||
Accumulated amortization
|
(448
|
)
|
||
Net
|
$
|
552
|
2021
|
$
|
125
|
||
2022
|
125
|
|||
2023
|
125
|
|||
2024
|
52
|
|||
Total
|
$
|
427
|
Note 7. |
OPERATING LEASE
|
Year Ending December 31,
|
Lease Payments
|
|||
2021
|
$
|
224
|
||
2022
|
231
|
|||
2023 (1)
|
217
|
|||
Total
|
$
|
672
|
(1)
|
Operating lease expires before or during the year ending December 31, 2023
|
Year Ending December 31,
|
Lease Payments
|
|||
Remaining 2021
|
$
|
112
|
||
2022
|
231
|
|||
2023 (1)
|
217
|
|||
Total
|
$
|
560
|
(1)
|
Operating lease expires before or during the year ending December 31, 2023
|
Note 8. |
VARIABLE INTEREST ENTITIES
|
Note 9. |
CLAIMS FINANCING OBLIGATION AND NOTE PAYABLE
|
Note 10. |
MEMBERS’ EQUITY AND NONCONTROLLING INTEREST
|
Note 11. |
COMMITMENTS AND CONTINGENCIES
|
Note 12. |
RELATED PARTY
|
Note 13. |
INVESTMENTS IN EQUITY SECURITIES AND OBLIGATIONS TO DELIVER SECURITIES
|
Note 14. |
SUBSEQUENT EVENTS
|
Annex A
MEMBERSHIP INTEREST PURCHASE AGREEMENT
dated
July 11, 2021
by and among
Lionheart Acquisition Corporation II, a Delaware corporation
as Parent,
Lionheart II Holdings, LLC
as Purchaser,
the MSP Purchased Companies listed on Schedule 2.1(a) hereto,
the Members of the MSP Purchased Companies listed on Schedule 2.1(b) hereto,
and John H. Ruiz,
as the Members’ Representative
TABLE OF CONTENTS
Page
ARTICLE I | DEFINITIONS | A-2 | |
ARTICLE II | ACQUISITION | A-16 | |
2.1 | Acquisition | A-16 | |
2.2 | Closing; Effective Time | A-16 | |
2.3 | Closing Deliveries | A-17 | |
2.4 | Post-Closing Board of Directors | A-18 | |
2.5 | Parent Closing Statement | A-18 | |
2.6 | Withholding Rights | A-18 | |
2.7 | Rights Not Transferable | A-19 | |
2.8 | Taking of Necessary Action; Further Action | A-19 | |
ARTICLE III | PURCHASE PRICE | A-19 | |
3.1 | Payment of Purchase Price | A-19 | |
3.2 | Capitalization of Purchaser | A-20 | |
3.3 | Issuance of New Warrants | A-21 | |
3.4 | Updated Schedule 2.1(b) | A-21 | |
ARTICLE IV | REPRESENTATIONS AND WARRANTIES RELATING TO THE MSP COMPANIES | A-21 | |
4.1 | Company Existence and Power | A-21 | |
4.2 | Authorization | A-22 | |
4.3 | Governmental Approvals | A-22 | |
4.4 | Non-Contravention | A-22 | |
4.5 | Capitalization | A-23 | |
4.6 | Articles of Organization; Operating Agreements | A-23 | |
4.7 | Third Parties | A-23 | |
4.8 | Assumed Names | A-23 | |
4.9 | Consents | A-24 | |
4.10 | Financial Statements | A-24 | |
4.11 | Books and Records | A-25 | |
4.12 | Absence of Certain Changes | A-25 | |
4.13 | Properties; Title to the Company’s Assets | A-25 | |
4.14 | CCRAs | A-25 | |
4.15 | Litigation | A-25 | |
4.16 | Contracts | A-26 | |
4.17 | Insurance | A-28 | |
4.18 | Licenses and Permits | A-28 | |
4.19 | Compliance with Laws | A-28 | |
4.20 | Intellectual Property | A-28 | |
4.21 | Privacy and Data Security | A-29 | |
4.22 | Employees | A-31 |
4.23 | Employee Benefits and Compensation | A-31 | |
4.24 | Real Property | A-33 | |
4.25 | Tax Matters | A-34 | |
4.26 | Environmental Laws | A-35 | |
4.27 | HIPAA | A-36 | |
4.28 | Healthcare Laws Compliance | A-36 | |
4.29 | Healthcare Laws Proceedings | A-36 | |
4.30 | Finders’ Fees | A-37 | |
4.31 | Certain Business Practices | A-37 | |
4.32 | Money Laundering Laws | A-37 | |
4.33 | OFAC | A-37 | |
4.34 | Not an Investment Company | A-38 | |
4.35 | Information Supplied | A-38 | |
ARTICLE V | REPRESENTATIONS AND WARRANTIES OF MEMBERS | A-38 | |
5.1 | Ownership of Interests; Authority | A-38 | |
5.2 | Approvals | A-39 | |
5.3 | Medical Insurance and Other Claims | A-39 | |
5.4 | Non-Contravention | A-39 | |
5.5 | Litigation and Claims | A-39 | |
5.6 | Investment Representations | A-39 | |
ARTICLE VI | REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER | A-40 | |
6.1 | Corporate Existence and Power | A-40 | |
6.2 | Corporate Authorization | A-40 | |
6.3 | Governmental Approval | A-41 | |
6.4 | Non-Contravention | A-41 | |
6.5 | Finders’ Fees | A-41 | |
6.6 | Issuance of Equity Consideration | A-41 | |
6.7 | Capitalization. | A-41 | |
6.8 | Trust Fund | A-42 | |
6.9 | Employees; Purchaser Benefit Plans | A-43 | |
6.10 | Information Supplied | A-43 | |
6.11 | Listing | A-43 | |
6.12 | Reporting Company | A-43 | |
6.13 | Undisclosed Liabilities | A-44 | |
6.14 | Parent SEC Documents and Parent Financial Statements | A-44 | |
6.15 | Absence of Certain Changes | A-44 | |
6.16 | [INTENTIONALLY OMITTED] | A-44 | |
6.17 | Sponsor Agreement | A-45 | |
6.18 | Related Party Transactions | A-45 | |
6.19 | Investment Company Act | A-45 | |
6.20 | Parent Stockholders | A-45 | |
6.21 | Parent Investigations | A-45 | |
6.22 | No Other Representations and Warranties | A-45 |
ARTICLE VII | COVENANTS OF THE MSP COMPANIES PENDING CLOSING | A-46 | |
7.1 | Conduct of the Business | A-46 | |
7.2 | Financial Statements; Additional Financial Information | A-48 | |
7.3 | Key Employees of the MSP Companies | A-49 | |
7.4 | Tax Matters | A-49 | |
7.5 | Efforts to Obtain Consents | A-52 | |
ARTICLE VIII | COVENANTS OF THE PARTIES | A-53 | |
8.1 | Reasonable Best Efforts; Further Assurances | A-53 | |
8.2 | Access to Information | A-54 | |
8.3 | Preparation of Form S-4 and Proxy Statement/Prospectus; Other Filings | A-55 | |
8.4 | Trust Account | A-58 | |
8.5 | Confidentiality | A-58 | |
8.6 | Publicity | A-58 | |
8.7 | Notices of Certain Events | A-59 | |
8.8 | Exclusivity | A-60 | |
8.9 | Post-Closing Cooperation; Further Assurances | A-60 | |
ARTICLE IX | COVENANTS OF PARENT AND PURCHASER | A-60 | |
9.1 | Conduct of Parent and Purchaser Pending Closing | A-60 | |
9.2 | Stockholder Vote; Recommendation of the Parent’s Board of Directors | A-62 | |
9.3 | Parent Stockholders’ Meeting | A-62 | |
9.4 | D&O Insurance; Indemnification of Officers and Directors | A-62 | |
9.5 | Listing | A-63 | |
9.6 | Section 16 Matters | A-63 | |
9.7 | Adoption of Equity Incentive Plan | A-63 | |
9.8 | Appointment of Post-Closing Board of Directors and Officers | A-64 | |
9.9 | Parent Charter and Bylaws; Purchaser Organizational Documents | A-64 | |
9.10 | Parent Public Filings | A-64 | |
9.11 | Stockholder Litigation | A-64 | |
9.12 | Extension | A-64 | |
ARTICLE X | CONDITIONS TO CLOSING | A-65 | |
10.1 | Condition to the Obligations of the Parties | A-65 | |
10.2 | Conditions to Obligations of Parent and Purchaser | A-65 | |
10.3 | Conditions to Obligations of the MSP Companies and the Members | A-66 | |
ARTICLE XI | INDEMNIFICATION | A-67 | |
11.1 | Indemnification of Parent | A-67 | |
11.2 | Certain Limitations | A-67 | |
11.3 | Procedure | A-68 | |
11.4 | Escrow of Escrow Consideration by Members | A-70 | |
11.5 | Insurance | A-70 | |
11.6 | Survival of Indemnification Rights | A-71 | |
11.7 | Tax Treatment of Indemnification Payments | A-71 |
11.8 | Exclusive Remedies | A-71 | |
11.9 | NO ADDITIONAL REPRESENTATIONS; NO RELIANCE | A-71 | |
ARTICLE XII | DISPUTE RESOLUTION | A-72 | |
12.1 | Jurisdiction; Waiver of Jury Trial | A-72 | |
ARTICLE XIII | TERMINATION | A-73 | |
13.1 | Termination Without Default | A-73 | |
13.2 | Termination Upon Default | A-73 | |
13.3 | No Other Termination | A-74 | |
13.4 | Effect of Termination | A-74 | |
ARTICLE XIV | MISCELLANEOUS | A-74 | |
14.1 | Notices | A-74 | |
14.2 | Amendments; No Waiver | A-75 | |
14.3 | Arm’s length bargaining; no presumption against drafter | A-76 | |
14.4 | Expenses | A-76 | |
14.5 | No Assignment or Delegation | A-76 | |
14.6 | Governing Law | A-76 | |
14.7 | Counterparts; facsimile and electronic signatures | A-76 | |
14.8 | Entire Agreement | A-77 | |
14.9 | Severability | A-77 | |
14.10 | Construction of Certain Terms and References; Captions | A-77 | |
14.11 | Further Assurances | A-78 | |
14.12 | Third Party Beneficiaries | A-78 | |
14.13 | Reference is made to the Prospectus | A-78 | |
14.14 | Members’ Representative | A-79 | |
14.15 | Specific Performance | A-80 |
Exhibit Index
Exhibit A | Form of SPAC Charter |
Exhibit B | Form of SPAC Bylaws |
Exhibit C | Form of Purchaser A&R LLCA |
Exhibit D | Form of Registration Rights Agreement |
Exhibit E | Form of Tax Receivable Agreement |
Exhibit F | A&R Sponsor Agreement |
Exhibit G | Form of Employment and Restrictive Covenant Agreement |
Exhibit H | Form of Escrow Agreement |
Exhibit I | Form of Equity Incentive Plan |
Exhibit J | Form of Lock-Up Agreement |
Exhibit K | Form of Legal Services Agreement |
Exhibit L | Form of New Warrant Agreement |
Exhibit M | Form of Side Letter Agreement |
Exhibit N | Form of Virage Side Letter Agreement |
MEMBERSHIP INTEREST PURCHASE AGREEMENT
This MEMBERSHIP INTEREST PURCHASE AGREEMENT (the “Agreement”), dated as of July 11, 2021, by and among LIONHEART ACQUISITION CORPORATION II, a Delaware corporation (“Parent”), Lionheart II Holdings, LLC, a newly-formed Delaware limited liability company and a wholly-owned subsidiary of Parent (the “Purchaser”), each limited liability company set forth on Schedule 2.1(a) hereto (individually an “MSP Purchased Company,” and collectively, the “MSP Purchased Companies”), the members of the MSP Purchased Companies listed on Schedule 2.1(b) hereto (each, a “Member” and collectively the “Members”), and John H. Ruiz, an individual, solely in his capacity as the representative of the Members (the “Members’ Representative”). Capitalized terms used and not otherwise defined herein have the meanings set forth in Article I.
RECITALS
WHEREAS, the MSP Companies have developed and operate an integrated platform and data mining and data analytics capabilities, each of which enables the MSP Companies’ clients to recover on any paid medical insurance claims where federal or state law places primary payment responsibility on another party, such as Medicare or Medicaid, and in which the MSP Companies have rights to certain governmental actions relating to whistleblowers (the “Business”);
WHEREAS, Parent is a blank check company incorporated in Delaware and formed for the sole purpose of entering into a share exchange, asset acquisition, share purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities;
WHEREAS, the Members own the membership interests of the MSP Purchased Companies (the “Interests”) set forth next to such Member’s name on Schedule 2.1(b) hereto, and, except as set forth in Section 4.5 hereof, together the Members own 100% of the membership interests of the MSP Purchased Companies;
WHEREAS, the Board of Directors of Parent and the manager(s) of Purchaser, having unanimously determined that the Acquisition is fair and advisable to, and in the best interests of Parent and its stockholders or Purchaser, as applicable, have each unanimously approved this Agreement and the terms of the Acquisition;
WHEREAS, the Board of Directors of Parent has determined to recommend that the stockholders of Parent adopt, authorize and approve this Agreement and the Acquisition;
WHEREAS, prior to the Closing, Parent shall (i) subject to obtaining the approval of the Parent Stockholder Matters, amend and restate the certificate of incorporation of Parent to be substantially in the form of Exhibit A attached hereto (the “SPAC Charter”) and (ii) amend and restate the bylaws of Parent to be substantially in the form of Exhibit B attached hereto (the “SPAC Bylaws”);
WHEREAS, the Parties intend that, effective as of the Closing, Parent, as the sole member of Purchaser, shall amend and restate Purchaser’s limited liability company agreement to be substantially in the form of Exhibit C attached hereto (the “Purchaser A&R LLCA”) to, among other things, increase the capitalization of Purchaser to permit the issuance and ownership of the Purchaser Class B Units set forth in this Agreement and the Purchaser A&R LLCA, and establish the ownership of the Purchaser Class B Units, in each case, as set forth in this Agreement;
WHEREAS, prior to the Closing, Parent intends, subject to compliance with applicable Law, to declare a dividend comprising the New Warrants, the payment of which shall be conditioned upon the consummation of the Parent Stockholder Redemption and the Closing, and which dividend shall be payable to the holders of record of shares of Parent Class A Common Stock as of the close of business on the Closing Date;
WHEREAS, concurrently with the Closing, Lionheart Equities, LLC, a Delaware limited liability company (the “Sponsor”), Parent and certain other parties will enter into a Registration Rights Agreement substantially in the form of Exhibit D attached hereto (as amended, restated, modified, supplemented or waived from time to time, the “Registration Rights Agreement”);
WHEREAS, simultaneously with the Closing, Parent, Purchaser, and certain Members will enter into a Tax Receivables Agreement substantially in the form attached hereto as Exhibit E (the “Tax Receivables Agreement”);
WHEREAS, concurrently with the execution and delivery of this Agreement, the Sponsor and Parent have entered into the Amended and Restated Sponsor Agreement, a copy of which is attached as Exhibit F hereto (the “A&R Sponsor Agreement”); and
WHEREAS, in conjunction with, inter alia, obtaining approval from the stockholders of Parent for the Acquisition, and in accordance with the terms hereof, Parent shall provide an opportunity to its Public Stockholders to have their shares of Parent Common Stock redeemed for the consideration, and on the terms and subject to the conditions and limitations, set forth in the Prospectus and the Certificate of Incorporation of Parent.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
ARTICLE I
DEFINITIONS
The following terms, as used herein, have the following meanings:
1.1 “10% Member” has the meaning set forth in Section 4.7.
1.2 “A&R Sponsor Agreement” has the meaning set forth in the recitals to this Agreement.
1.3 “Action” means any legal action, suit, claim, investigation, hearing or proceeding, including any audit, claim or assessment for Taxes or otherwise.
1.4 “Acquisition” means the purchase of the Interests by Purchaser in accordance with the terms of this Agreement.
1.5 “Additional Agreements” means the Escrow Agreement, the Registration Rights Agreement, the Employment and Restrictive Covenant Agreements, the Legal Services Agreement, the Side Letter Agreement, the Virage Side Letter Agreement, the New Warrant Agreement and the Lock-Up Agreements.
1.6 “Affiliate” means, with respect to any Person, any other Person directly or indirectly Controlling, Controlled by, or under common Control with such Person.
1.7 “Agreement” has the meaning set forth in the preamble to this Agreement.
1.8 “Alternative Proposal” has the meaning set forth in Section 8.8(a).
1.9 “Alternative Transaction” has the meaning set forth in Section 8.8(a).
1.10 “Antitrust Laws” has the meaning set forth in Section 8.1(b).
1.11 “Assignor” means any Person, including a Medicare Advantage Organization, health maintenance organization, maintenance service organization, independent physician association, medical center, hospital, or other health care organization, that contracts with (a) governmental healthcare programs to provide Medicare benefits to persons who are covered under such programs (i.e., Medicare insureds) or (b) Medicare Advantage Organizations, and have a statutory right to recover from a responsible party for conditional payments for healthcare, services or supplies provided to such beneficiary.
1.12 “Assignor Interest” means an interest in all or any portion of Recovery Proceeds to which an Assignor is contractually entitled to under the applicable CCRA.
1.13 “Authority” means any governmental, regulatory or administrative body, agency or authority, any court or judicial authority, any arbitrator, or any public, private or industry regulatory authority, whether international, national, federal, state, or local.
1.14 “Available Closing Parent Cash” means an amount equal to (i) all amounts in the Trust Account as of immediately prior to the Closing after reduction for (A) the aggregate amount of payments required to be made in connection with the Parent Stockholder Redemption, (B) the Business Combination Fees and (C) all other amounts required to be disbursed from the Trust Account at the Closing in accordance with Section 8.2, minus (ii) all fees and expenses of Parent incurred in connection with the Acquisition.
1.15 “Balance Sheet” has the meaning set forth in Section 7.2(a).
1.16 “Board of Directors” means the board of directors of Parent prior to the consummation of the Acquisition.
1.17 “Books and Records” means all books and records, ledgers, employee records, customer lists, files, correspondence, and other records of every kind (whether written, electronic, or otherwise embodied) owned or used by the MSP Companies.
1.18 “Business Combination Fees” means the fees and expenses held in the Trust Account payable to Nomura Securities International, Inc. and Cantor Fitzgerald & Co., the underwriters in the IPO, that they are entitled to receive upon the Closing in accordance with the Underwriting Agreement, dated August 13, 2020, between Parent and the underwriters and the Trust Agreement.
1.19 “Business Combination” has the meaning set forth in Section 8.4.
1.20 “Business Day” means any day other than a Saturday, Sunday or a legal holiday on which commercial banking institutions in New York or Florida are authorized to close for business.
1.21 “Cap” has the meaning set forth in Section 11.2(b).
1.22 “CCRAs” has the meaning set forth in Section 4.14.
1.23 “Certificate of Incorporation” means Parent’s Amended and Restated Certificate of Incorporation dated August 13, 2020, as amended.
1.24 “Closing” and “Closing Date” have the meanings set forth in Section 2.1(a).
1.25 “Closing Cash” means the means all cash and cash equivalents (including marketable securities, bank deposits, checks received but not cleared, and deposits in transit but excluding checks written but not cleared and outgoing payments in transit) of the MSP Companies, as of the Effective Time.
1.26 “Closing Equity Consideration” has the meaning set forth in Section 3.1(a)(i).
1.27 “COBRA” means collectively, the requirements of Sections 601 through 606 of ERISA and Section 4980B of the Code.
1.28 “Company Consent” has the meaning set forth in Section 4.9.
1.29 “Company Financial Statements” has the meaning set forth in Section 7.2(a).
1.30 “Code” means the Internal Revenue Code of 1986, as amended.
1.31 “Confidential Information” means any information that one party discloses, directly or indirectly, to the other party, whether embodied in tangible form or disclosed visually or orally and whether or not designated as “confidential” or “proprietary” or by some similar designation, relating to the prior, current or prospective business of the disclosing party, including, without limitation, business models, business opportunities, business plans, financial information, market research, marketing plans, pricing and cost data, customers, suppliers, employees, contractors, ideas, improvements, products and product plans, technologies, research activities and results, and any other information that should be reasonably understood by the receiving party to be the confidential or proprietary information of the disclosing party. Confidential Information shall not include information (i) that has entered the public domain through no fault of the receiving party, (ii) rightfully known by the receiving party without obligation of confidentiality to any third party prior to receipt of same from the disclosing party, (iii) independently developed by the receiving party without using any Confidential Information of the disclosing party, and (iv) generally made available by the disclosing party without obligation of confidentiality.
1.32 “Continuing Partnership” has the meaning set forth in Section 7.4(a).
1.33 “Contracts” means the Leases and all contracts, agreements, leases (including equipment leases, car leases and capital leases), licenses, commitments, client contracts, franchise agreements, sales and purchase orders and similar instruments, oral or written, to which any MSP Company is a party or by which any of its respective assets are bound and all rights and benefits thereunder.
1.34 “Control” of a Person means ownership of a majority of the voting securities of the applicable Person or the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of the applicable Person, whether through ownership of voting securities, by contract or otherwise. “Controlled”, “Controlling” and “under common Control with” have correlative meanings.
1.35 “COVID-19” means SARS-CoV-2 or COVID-19, and any evolutions thereof or any other epidemics, pandemics or disease outbreaks.
1.36 “COVID-19 Measures” means any quarantine, “shelter in place,” “stay at home,” workforce reduction, social distancing, shut down, closure, sequester or any other Law, Order, Action, directive, guidelines or recommendations by any Authority in connection with or in response to COVID-19, including, but not limited to, the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
1.37 “Cure Period” has the meaning set forth in Section 13.2.
1.38 “D&O Persons” has the meaning set forth in Section 9.4(a).
1.39 “D&O Policy” has the meaning set forth in Section 9.4(a).
1.40 “Data Activities” has the meaning set forth in Section 4.21(a).
1.41 “Direct Claim” has the meaning set forth in Section 11.3(d).
1.42 “Disclosure Schedules” has the meaning set forth in the preamble to Article IV.
1.43 “DGCL” means the Delaware General Corporation Law.
1.44 “Effective Time” has the meaning set forth in Section 2.1(a).
1.45 “Employment and Restrictive Covenant Agreements” means the separate employment agreements between Parent or Purchaser and each of the Key Employees, substantially in the form attached hereto as Exhibit G.
1.46 “Environmental Laws” shall mean all Laws in effect on or prior to the Closing Date that prohibit, regulate or control any Hazardous Material or any Hazardous Material Activity, including, without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, the Resource Recovery and Conservation Act of 1976, the Federal Water Pollution Control Act, the Clean Air Act, the Hazardous Materials Transportation Act, the Clean Water Act and the Occupational Safety and Health Act (but only to the extent it regulates exposure to Hazardous Substances).
1.47 “Equity Consideration” means a number of Up-C Units equal to (a) $32,500,000,000.00 divided by (b) $10.00.
1.48 “Equity Incentive Plan” has the meaning set forth in Section 9.7.
1.49 “ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the regulations thereunder.
1.50 “Escrow Agent” means Continental Stock Transfer & Trust Company.
1.51 “Escrow Agreement” means an agreement substantially in the form attached hereto as Exhibit H between the Members’ Representative, Escrow Agent, Parent and Purchaser with respect to the Escrow Consideration.
1.52 “Escrow Fund” has the meaning set forth in Section 3.1(a)(ii).
1.53 “Escrow Consideration” means an aggregate of 6,000,000 Up-C Units (valued at $10.00 per unit).
1.54 “Exchange Act” means the Securities Exchange Act of 1934, as amended.
1.55 “Federal Securities Laws” has the meaning set forth in Section 8.3(c).
1.56 “Form S-4” means the registration statement on Form S-4 of Parent with respect to the registration of shares of Parent Class A Common Stock and the New Warrants, in each case to be issued in connection with the Acquisition.
1.57 “Governmental Approval” has the meaning set forth in Section 4.3.
1.58 “Hazardous Material” shall mean any material, emission, chemical, substance or waste that has been designated under applicable Environmental Laws to be radioactive, toxic, hazardous, a pollutant or a contaminant.
1.59 “Hazardous Materials Activity” shall mean the knowing transportation, transfer, recycling, storage, use, treatment, manufacture, removal, remediation, release, exposure of others to, sale, labeling, or distribution of any Hazardous Material or product manufactured with ozone depleting substances, including, without limitation, any required labeling, payment of waste fees or charges (including so-called e-waste fees).
1.60 “Healthcare Laws” means all Laws that govern, regulate, restrict or relate to the provision, administration of, or the billing, coding or payment for healthcare or medical procedures, goods, services, diagnoses or treatment, including (a) statutes, rules and regulations relating to self-referral, fee-splitting, anti-kickback, patient brokering, financial relationships and illegal remuneration, or fraud and abuse, (b) Laws prohibiting the defrauding of or making of any false claim, false statement or misrepresentation of material facts to any federal or state health care program or other third-party payor or insurer, and (c) all applicable rules and regulations promulgated under, and interpretations of those Laws by any Authority.
1.61 “HIPAA” means the Health Insurance Portability and Accountability Act of 1996, as amended, and the Health Information Technology for Economic and Clinical Health Act, and all rules and regulations promulgated under such acts.
1.62 “Indebtedness” means with respect to any Person, without duplication, (a) all indebtedness of such Person for borrowed money, or with respect to deposits or advances of any kind (including amounts by reason of overdrafts and amounts owed by reason of letter of credit reimbursement agreements) including with respect thereto, all interests, fees and costs; (b) indebtedness evidenced by bonds, debentures, notes or similar instruments; (c) all obligations of such Person under conditional sale or other title retention agreements relating to property purchased by such Person; (d) all obligations of such Person issued or assumed as the deferred purchase price of property or services (other than accounts payable to creditors for goods and services incurred in the ordinary course of business); (e) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any lien or security interest on property owned or acquired by such Person, whether or not the obligations secured thereby have been assumed; (f) all obligations of such Person as lessee under leases required to be accounted for as capital leases under U.S. GAAP; (g) all guarantees by such Person; and (h) any agreement to incur any of the same.
1.63 “Indemnification Notice” has the meaning set forth in Section 11.3(a).
1.64 “Indemnified Party” has the meaning set forth in the preamble to Section 11.3.
1.65 “Indemnifying Parties” has the meaning set forth in Section 11.1.
1.66 “Intellectual Property Right” means any trademark, service mark, registration thereof or application for registration therefor, trade name, patent, patent application, trade secret, trade dress, copyright, copyrightable materials, copyright registration, application for copyright registration, data bases, u.r.l.s, and any other type of proprietary intellectual property right, and with respect to each of the forgoing items in this definition, whether registered or unregistered or domestic or foreign.
1.67 “Interests” has the meaning set forth in the recitals to this Agreement.
1.68 “Inventory” is defined in the UCC.
1.69 “IPO” means the initial public offering of Parent pursuant to the Prospectus.
1.70 “IT Systems” has the meaning set forth in Section 4.20(g).
1.71 “June Interim Financial Statements” has the meaning set forth in Section 7.2(b).
1.72 “Key Employees” means those individuals listed on Schedule 1.72.
1.73 “knowledge of the MSP Companies” or any other similar knowledge qualification, means the actual knowledge of John H. Ruiz, Frank Quesada and Ricardo Rivera.
1.74 “Law” means any domestic or foreign, federal, state, municipality or local law, statute, ordinance, code, rule, or regulation.
1.75 “Leases” means the real property leases set forth on Schedule 1.75.
1.76 “Legal Services Agreement” means the legal services agreement substantially in the form set forth in Exhibit K, to be entered into by and between Parent, Purchaser and La Ley con John H. Ruiz, P.A. on the Closing Date.
1.77 “Lien” means, with respect to any asset, any mortgage, lien, pledge, charge, hypothecation, right of third Person, assessment, security interest or encumbrance of any kind in respect of such asset, whether consensual, statutory, or otherwise, and any conditional sale or voting agreement or proxy, including any agreement to give any of the foregoing.
1.78 “Lock-Up Agreements” means the Lock-Up Agreements substantially in the form of Exhibit J hereto between Parent and each Key Employee who receives Equity Consideration pursuant to the terms of Article III, pursuant to which certain shares and units comprising the Equity Consideration issuable to such Persons will be locked up as set forth therein.
1.79 “Losses” has the meaning set forth in Section 11.1.
1.80 “Material Adverse Effect” or “Material Adverse Change” means a material adverse change or a material adverse effect (i) upon the assets, liabilities, financial condition, prospects, net worth, management, earnings, cash flows, business, operations or properties of the MSP Companies and the Business, taken as a whole, whether or not arising from transactions in the ordinary course of business; (ii) that is reasonably likely to prevent or materially delay the consummation of the Acquisition or any Member or MSP Purchased Company from performing its obligations under this Agreement or the Additional Agreements to which it is a party or (iii) solely for purposes of measuring Losses under the indemnification provisions of Article XI, and not for purposes of any closing condition set forth in Article X, resulting in Losses indemnifiable hereunder pursuant to any Third-Party Claims or Direct Claims that exceed $20,000,000; provided, however, that Material Adverse Effect or Material Adverse Change shall not include any event, occurrence, fact, condition or change (or effect resulting from any of the foregoing), alone or in combination, arising out of or attributable to: (a) any change, effect or circumstance resulting from an action required or permitted by this Agreement; (b) any change, effect or circumstance resulting from the announcement of this Agreement or the pendency of the transactions contemplated hereby; (c) any strike, embargo, labor disturbance, riot, earthquake, hurricane, tsunami, flood, mudslide, wild fire, other weather-related or meteorological event, epidemic, pandemic, disease outbreak, or any other natural or man-made disaster or acts of God (including any governmental response to any of the foregoing in this clause (c)); (d) factors generally affecting the industries or markets in which the MSP Companies operate; (e) changes in Law or U.S. GAAP or the interpretation thereof; (f) any failure of the MSP Companies to achieve any projected revenue, earnings, expense or other projections, forecasts, predictions or budgets prior to the Closing; (g) changes that are the result of economic factors affecting the national, regional or world economy or financial markets; (h) any change in the financial, banking, or securities markets; (i) any acts of terrorism, war (whether or not declared), or cyber-attacks, including the engagement by the United States in hostilities or the escalation thereof, or the occurrence or the escalation of any military or terrorist attack upon the United States, or any United States territories, possessions or diplomatic or consular offices or upon any United States military installation, equipment or personnel; or (j) any consequences arising from any action required to be taken or not taken by the MSP Companies or any of the Members at the request of Parent.
1.81 “Material Contracts” has the meaning set forth in Section 4.16(a).
1.82 “Member” and “Members” have the meanings set forth in the preamble to this Agreement.
1.83 “Members’ Representative” has the meaning set forth in the preamble to this Agreement.
1.84 “Members’ Representative Losses” has the meaning set forth in Section 14.14(c).
1.85 “Money Laundering Laws” has the meaning set forth in Section 4.32.
1.86 “MSP Companies” means, collectively, the MSP Purchased Companies and each limited liability company set forth on Schedule 2.1(c) hereto.
1.87 “MSP Company Plan” has the meaning set forth in Section 4.22(a).
1.88 “MSP Company Transaction Expenses” means all accrued fees, costs and expenses of the MSP Companies incurred prior to and through the Closing Date in connection with the negotiation, preparation and execution of this Agreement and the Additional Agreements, and the performance and compliance with this Agreement and the Additional Agreements and the conditions contained herein and therein to be performed or complied with at or before Closing, and the consummation of the Acquisition, including the fees, costs, expenses and disbursements of counsel, accountants, advisors and consultants of the MSP Companies, whether paid or unpaid prior to the Closing.
1.89 “MSP Minimum Cash Amount” shall mean $30,000,000.
1.90 “MSP Purchased Company” and “MSP Purchased Companies” have the meanings set forth in the preamble to this Agreement.
1.91 “Nasdaq” means the Nasdaq Capital Market.
1.92 “New Warrants” means approximately 1,029,000,000 newly-issued warrants (subject to rounding, as set forth in Section 3.3(a)) to purchase one (1) share of Parent Class A Common Stock for an exercise price of $11.50 per share, in each case on the terms substantially as set forth in the Form of New Warrant Agreement attached hereto as Exhibit L.
1.93 “OFAC” has the meaning set forth in Section 4.33.
1.94 “Operating Agreement” means the Limited Liability Company Operating Agreement of each MSP Company.
1.95 “Order” means any decree, order, judgment, writ, award, injunction, rule or consent of or by an Authority.
1.96 “Organizational Documents” of a Person that is not an individual shall mean such Person’s articles of organization or certificate of formation, articles of incorporation or certificate of incorporation, bylaws, operating agreement and shareholders’ or stockholders’ agreement, or other or such other comparable charter and governing documents, each as amended to date.
1.97 “Other Filings” has the meaning set forth in Section 8.3(c).
1.98 “Outside Closing Date” has the meaning set forth in Section 13.1(a).
1.99 “Parent Class A Common Stock” means the shares of Class A common stock, par value $0.0001 per share, of Parent.
1.100 “Parent Class B Common Stock” means the shares of Class B common stock, par value $0.0001 per share, of Parent.
1.101 “Parent Class V Common Stock” means the shares of Class V common stock, par value $0.0001 per share, of Parent, as provided for in the SPAC Charter.
1.102 “Parent Closing Statement” has the meaning set forth in Section 2.5.
1.103 “Parent Common Stock” means (a) prior to the Closing, the Parent Class A Common Stock and the Parent Class B Common Stock, and (b) from and after the Closing, the Parent Class A Common Stock and the Parent Class V Common Stock.
1.104 “Parent Financial Statements” means the audited consolidated financial statements of Parent as of and for the fiscal years ended December 31, 2020 and 2019, consisting of the audited consolidated balance sheets as of such dates, the audited consolidated income statements for the twelve (12) month periods ended on such dates, and the audited consolidated cash flow statements for the twelve (12) month periods ended on such dates.
1.105 “Parent Indemnitees” has the meaning set forth in Section 11.1.
1.106 “Parent Material Adverse Effect” means any change, effect, condition or development that, individually or in the aggregate, is or is reasonably likely to (i) be materially adverse to the business, condition (financial or otherwise), assets, liabilities, business plans or results of operations of Parent and Purchaser, taken as a whole or (ii) prevent or materially delay the consummation of any of the transactions contemplated by this Agreement or the Additional Agreements or otherwise prevent or materially delay Parent or Purchaser from performing its obligations under this Agreement or the Additional Agreements to which it is a party; provided, however, that in no event will any changes in general economic conditions or changes in securities markets in general be taken into account in determining whether there has been or will be, a Parent Material Adverse Effect.
1.107 “Parent Party” means Parent, Purchaser and each of their Affiliates.
1.108 “Parent Private Warrants” means each warrant issued in private placements at the time of the consummation of the IPO, entitling the holder thereof to purchase one half of one share of Parent Common Stock at an exercise price of $11.50 per share.
1.109 “Parent Proposals” has the meaning set forth in Section 8.3(a).
1.110 “Parent Public Shares” means Parent Common Stock issued in Parent’s IPO and any securities into which such Parent Common Stock are converted or for which such Parent Common Stock are exchanged.
1.111 “Parent Public Warrants” means one warrant that was included as part of each Parent Unit, entitling the holder thereof to purchase one half of one share of Parent Class A Common Stock at an exercise price of $11.50 per share.
1.112 “Parent Recommendation” has the meaning set forth in Section 9.2.
1.113 “Parent Redemption Price” means the price per share payable to those holders of Parent Public Shares who elect to redeem their Parent Class A Common Stock pursuant to Parent’s Certificate of Incorporation.
1.114 “Parent SEC Documents” has the meaning set forth in Section 6.14(a).
1.115 “Parent Stockholder Approval” has the meaning set forth in Section 10.1(b).
1.116 “Parent Stockholders’ Meeting” has the meaning set forth in Section 9.3.
1.117 “Parent Stockholder Redemption” has the meaning set forth in Section 8.3(a).
1.118 “Parent Transaction Expenses” means all fees, costs and expenses of Parent incurred prior to and through the Closing Date in connection with the negotiation, preparation and execution of this Agreement, the Additional Agreements, the performance and compliance with this Agreement and the Additional Agreements, and the conditions contained herein and therein to be performed or complied with at or before Closing, and the consummation of the Acquisition, including any (i) deferred underwriting fees, (ii) fees, costs and expenses relating to the D&O Policy and (iii) fees, costs, expenses and disbursements of counsel, accountants, advisors and consultants of Parent, whether deferred, paid or unpaid prior to the Closing.
1.119 “Parent Unit” means a unit comprised of (i) one share of Parent Class A Common Stock, and (ii) one Parent Public Warrant.
1.120 “Parent Warrant” shall mean each Parent Private Warrant and Parent Public Warrant.
1.121 “Parties” means the parties to this Agreement.
1.122 “Pass-Through Tax Return” means any Tax Return filed by or with respect to an MSP Company to the extent that (i) such MSP Company is treated as a partnership or disregarded entity for purposes of such Tax Return and (ii) the results of operations reflected on such Tax Return are also reflected on the Tax Returns of the Members or the direct or indirect (if any) owners of the Members.
1.123 “Permits” has the meaning set forth in Section 4.18.
1.124 “Permitted Liens” means (a) all defects, exceptions, restrictions, easements, permits, rights of way, covenants, reservations, encroachments and encumbrances disclosed in policies of title insurance which have been made available to Parent; and (b) mechanics’, carriers’, workers’, repairers’, and similar Liens arising or incurred in the ordinary course of business for amounts (i) that are not delinquent or are being contested in good faith, (ii) that are not material to the business, operations and financial condition of the MSP Companies so encumbered, either individually or in the aggregate, and (iii) not resulting from a breach, default or violation by any of the MSP Companies of any Contract or Law; (c) Liens securing obligations under capital leases; (d) Liens for Taxes, assessments or other governmental charges not yet delinquent or the amount or validity of which is being contested in good faith by appropriate proceedings; (e) Liens in favor of suppliers of goods for which payment is not due or delinquent that arise in the ordinary course of business; (f) Liens arising under workers’ compensation Laws or similar legislation, unemployment insurance or similar Laws; (g) Liens arising under municipal bylaws, development agreements, restrictions or regulations, and zoning, entitlement, land use, building or planning restrictions or regulations, in each case, promulgated by any Authority, which are not violated by the applicable MSP Company’s current use of the Real Property; (h) in the case of leased Real Property, any Liens to which the underlying fee interest in the leased premises (or the land on which or the building in which the leased premises may be located) is subject, including rights of the landlord under the Lease and all superior, underlying and ground Leases and renewals, extensions, amendments or substitutions thereof; (i) Liens arising out of, under or in connection with applicable federal, state and local securities Laws and restrictions on transfer, hypothecation or similar actions contained in any Organizational Documents; (j) licenses of Intellectual Property Rights granted in the ordinary course of business; and (k) the Liens set forth on Schedule 1.124.
1.125 “Permitted Transfer” means the transfer by a Member of Interests as a bona fide gift, by will or intestacy or to a family member or trust for the benefit of a family member; provided that in the case of any transfer or distribution by a Key Employee, each donee or distributee shall sign and deliver a Lock-Up Agreement substantially in the form of Exhibit J hereto.
1.126 “Person” means an individual, corporation, partnership (including a general partnership, limited partnership or limited liability partnership), limited liability company, association, trust or other entity or organization, including a government, domestic or foreign, or political subdivision thereof, or an agency or instrumentality thereof.
1.127 “Personal Data” means all information that identifies an individual person.
1.128 “Pre-Closing Portion” has the meaning set forth in Section 7.4(c).
1.129 “Pre-Closing Tax Period” means any taxable period ending on or before the Closing Date, and, in the case of any Straddle Period, the portion of such period ending on and including the Closing Date.
1.130 “Pre-Closing Tax Return” and “Pre-Closing Tax Returns” have the meanings set forth in Section 7.4(b).
1.131 “Privacy Agreements” has the meaning set forth in Section 4.21(a).
1.132 “Privacy and Data Security Policies” has the meaning set forth in Section 4.21(b).
1.133 “Privacy Laws” has the meaning set forth in Section 4.21(a).
1.134 “Prospectus” means Parent’s prospectus dated August 14, 2020, as filed with the SEC.
1.135 “Proxy Statement/Prospectus” means the Proxy Statement/Prospectus included in the Form S-4, including (a) the proxy statement of Parent to be used for the Parent Stockholders’ Meeting to approve the Parent Proposals and (b) a prospectus with respect to the shares of Parent Class A Common Stock and the New Warrants to be offered and issued to the holders of shares of Parent Class A Common Stock, in each case to be issued in connection with the Acquisition and in all cases in accordance with and as required by the Organizational Documents of Parent, applicable Law and the rules and regulations of Nasdaq.
1.136 “Public Stockholders” means the shareholders of Parent Public Shares.
1.137 “Purchase Price” has the meaning set forth in Section 3.1.
1.138 “Purchase Price Allocation Principles” has the meaning set forth in Section 7.4(a).
1.139 “Purchase Price Allocation Schedule” has the meaning set forth in Section 7.4(a).
1.140 “Purchaser” has the meaning set forth in the preamble to this Agreement.
1.141 “Purchaser A&R LLCA” has the meaning set forth in the recitals to this Agreement.
1.142 “Purchaser Class A Unit” means a membership interest unit of Purchaser that is designated as a Class A unit, as provided for in the Purchaser A&R LLCA.
1.143 “Purchaser Class B Unit” means a newly-issued membership interest unit of Purchaser that is designated as a Class B unit, as provided for in the Purchaser A&R LLCA.
1.144 “Real Property” means, collectively, all real properties and interests therein (including the right to use), together with all buildings, fixtures, trade fixtures, plants and other improvements located thereon or attached thereto; all rights arising out of use thereof (including air, water, oil and mineral rights); and all subleases, franchises, licenses, permits, easements and rights-of-way which are appurtenant thereto.
1.145 “Reasonable Investigation” means the reasonable inquiry, by the persons listed in the definition of “knowledge of the MSP Companies,” of his direct report(s) who have primary responsibility over the applicable matter, as applicable.
1.146 “Recovery Proceeds” means, with respect to any assigned claim under a CCRA, any and all of the gross proceeds recovered by the applicable MSP Company net of any legal fees and costs due pursuant to a legal services agreement, in respect of such assigned claim, including compensation, interest, penalties and fees which may be paid or payable with respect to such assigned claim (including any and all cash, securities, instruments or other property which may be paid or issued by defendants or third parties in litigation proceedings in satisfaction of such assigned claim).
1.147
1.148 “Release Date” has the meaning set forth in Section 11.4(d).
1.149 “Representatives” means, with respect to any Person, such Person’s Affiliates and its and such Affiliates’ respective managers, directors, officers, employees, members, owners, partners, accountants, consultants, advisors, attorneys, agents, and other representatives.
1.150 “Required Financial Statements” has the meaning set forth in Section 7.2(b).
1.151 “Sarbanes-Oxley Act” means the Sarbanes-Oxley Act of 2002, as amended.
1.152 “SEC” means the U.S. Securities and Exchange Commission.
1.153 “SEC Clearance Date” has the meaning set forth in Section 8.3(b).
1.154 “Securities Act” means the Securities Act of 1933, as amended.
1.155 “Side Letter Agreement” means the letter agreement substantially in the form set forth in Exhibit M, to be entered into by and between Parent, Purchaser and John H. Ruiz.
1.156 “SPAC Bylaws” has the meaning set forth in the recitals to this Agreement.
1.157 “SPAC Charter” has the meaning set forth in the recitals to this Agreement.
1.158 “Sponsor” has the meaning set forth in the recitals to this Agreement.
1.159 “Sponsor Agreement” means that certain agreement, dated as of August 13, 2020, among Parent, Sponsor, and certain other Persons listed therein.
1.160 “Stockholder Action” has the meaning set forth in Section 9.11.
1.161 “Straddle Period” has the meaning set forth in Section 7.4(c).
1.162 “Straddle Return” has the meaning set forth in Section 7.4(c).
1.163 “Subsidiary” of any Person means each entity of which at least fifty percent (50%) of the capital stock or other equity or voting securities are Controlled or owned, directly or indirectly, by such Person.
1.164 “Survival Period” has the meaning set forth in Section 11.6.
1.165 “Tax(es)” means any federal, state, local or foreign tax, levy, deficiency, or other assessment of any kind or nature imposed by any Taxing Authority (including any income (net or gross), gross receipts, profits, windfall profit, sales, use, goods and services, ad valorem, franchise, license, withholding, employment, social security, workers compensation, unemployment compensation, employment, payroll, transfer, excise, import, real property, personal property, intangible property, occupancy, recording, minimum, alternative minimum, environmental or estimated tax), including any liability therefor as a transferee or successor, as a result of Treasury Regulation Section 1.1502-6 or similar provision of applicable Law or as a result of any Tax sharing, indemnification or similar agreement, together with any interest, penalty, additions or tax imposed with respect thereto.
1.166 “Taxing Authority” means the Internal Revenue Service and any other Authority responsible for the collection, assessment or imposition of any Tax or the administration of any Law relating to any Tax.
1.167 “Tax Receivables Agreement” has the meaning set forth in the recitals to this Agreement.
1.168 “Tax Return” means any return, information return, declaration, claim for refund or credit, report or any similar statement, and any amendment thereto, including any attached schedule and supporting information, whether on a separate, consolidated, combined, unitary or other basis, that is filed with any Taxing Authority in connection with the determination, assessment, collection or payment of a Tax or the administration of any Law relating to any Tax.
1.169 “Trading Market” means any of the following markets or exchanges on which Parent Common Stock is listed or quoted for trading on the date in question: the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange, OTCQB or OTCQX (or any successors to any of the foregoing).
1.170 “Third-Party Claim” has the meaning set forth in Section 11.3(b).
1.171 “Trust Account” has the meaning set forth in Section 6.8.
1.172 “Trust Agreement” has the meaning set forth in Section 6.8.
1.173 “Trustee” has the meaning set forth in Section 6.8.
1.174 “Trust Fund” has the meaning set forth in Section 6.8.
1.175 “UCC” means the Uniform Commercial Code of the State of Florida or any corresponding or succeeding provisions of Laws of the State of Florida or any corresponding or succeeding provisions of Laws, in each case as the same may have been and hereafter may be adopted, supplemented, modified, amended, restated or replaced from time to time.
1.176 “Up-C Unit” means one Purchaser Class B Unit and one share of Parent Class V Common Stock.
1.177 “U.S. GAAP” means U.S. generally accepted accounting principles, consistently applied.
1.178 “Virage Side Letter Agreement” means the letter agreement substantially in the form set forth in Exhibit N by and between John H. Ruiz, Frank C. Quesada and Parent on the Closing Date.
ARTICLE II
ACQUISITION
2.1 Acquisition.
(a) On the terms and subject to the conditions set forth in this Agreement, at the Closing, each Member shall sell, assign, transfer, deliver and convey to Purchaser, and Purchaser shall purchase, acquire and accept from each such Member, free and clear of all Liens (other than any transfer restrictions arising under applicable securities Laws), all of such Member’s right, title and interest in and to the Interests owned by such Member, in exchange for the consideration set forth in Article III.
(b) For United States federal income Tax purposes, it is the intention of Parent, Purchaser, and the Members, that the Members will be taxed in accordance with the agreed tax treatment as set forth in Section 7.4(a) and no party hereto will take any position inconsistent therewith on any tax return.
2.2 Closing; Effective Time. The closing of the sale and purchase of the Interests (the “Closing”) shall take place electronically at 10:00 a.m. local time but shall be deemed to have occurred for all purposes as of 12:01 a.m. Eastern Time (the “Effective Time”), no later than two Business Days after the last of the conditions to Closing set forth in Article X have been satisfied or waived (other than conditions which, by their nature, are to be satisfied on the Closing Date), or at such other time, date and location as Parent and the Members’ Representative agree to in writing. The Parties shall participate in the Closing via electronic means. The date on which the Closing actually occurs is hereinafter referred to as the “Closing Date.”
2.3 Closing Deliveries. At or prior to the Closing:
(a) Parent and/or Purchaser, as applicable, shall:
(i) issue and deliver the Equity Consideration, in accordance with the provisions set forth in Section 3.1;
(ii) take such action necessary to cause the limited liability company interests of Purchaser issued and outstanding as of immediately following the Closing to be as set forth in Section 3.2;
(iii) deliver to the Members’ Representative the Additional Agreements (other than those that, as of the Closing, have previously been executed by all of the parties thereto), duly executed by Purchaser and the other parties thereto (including, in the case of the Escrow Agreement, by the Escrow Agent);
(iv) deliver to the Key Employees the Employment and Restrictive Covenant Agreements, duly executed by Parent and/or Purchaser, as applicable;
(v) deliver to the Members’ Representative duly executed resignations effective as of the Closing Date of all of Parent’s and Purchaser’s officers and directors who are not appointed in accordance with Section 9.8;
(vi) deliver to the Members’ Representative certificates of good standing, dated not more than five (5) days prior to the Closing Date, with respect to each of Parent and Purchaser, issued by the Secretary of State of the State of Delaware;
(vii) deliver to the Members’ Representative evidence of the termination of any agreements between Parent and any of its directors or officers, except for agreements that provide for continuing obligations of Parent to its directors or officers after the Closing, reasonably satisfactory to the Members’ Representative; and
(viii) deliver to the Members’ Representative the Tax Receivables Agreement duly executed by Parent and Purchaser.
(b) The Members’ Representative and/or the Members, as applicable, shall deliver to Parent each of the following:
(i) membership interest powers or other instruments of transfer duly executed in blank with respect to the Interests;
(ii) certificates of good standing, dated not more than five (5) days prior to the Closing Date, with respect to each MSP Purchased Company, issued by the appropriate government official of each such MSP Purchased Company’s jurisdiction of organization;
(iii) an IRS Form W-9 or a certificate pursuant to Treasury Regulations Section 1.1445-2(b), from each Member, or if a Member is a disregarded entity for U.S. federal income tax purposes, the Person treated as the owner of that Member’s assets for U.S. federal income tax purposes, certifying that such Member (or Person treated as the owner of that Member’s assets) is not a foreign person within the meaning of Section 1445 of the Code;
(iv) the Tax Receivables Agreement, duly executed by certain Members;
(v) the Additional Agreements (other than those that, as of the Closing, have previously been executed by all of the parties thereto), duly executed by the MSP Companies, the Members, and/or the Key Employees, as applicable; and
(vi) subject to Section 10.2(e), deliver to Parent evidence reasonably satisfactory to Parent showing that the Closing Cash is at least the MSP Minimum Cash Amount.
2.4 Post-Closing Board of Directors. Immediately after the Closing, Parent’s board of directors will consist of seven directors, including those individuals listed or described on Schedule 2.4 (the “Post-Closing Board of Directors”). At least a majority of the Post-Closing Board of Directors shall qualify as independent directors under the Securities Act and the rules of any applicable Trading Market.
2.5 Parent Closing Statement. At least two (2) Business Days prior to the Parent Stockholders’ Meeting and in any event not earlier than the time that Public Stockholders may no longer elect redemption in accordance with the Parent Stockholder Redemption, Parent shall prepare and deliver to the Members’ Representative a statement (the “Parent Closing Statement”) setting forth in good faith: (a) the aggregate amount of cash in the Trust Account (prior to giving effect to the Parent Stockholder Redemption); (b) the aggregate amount of all payments required to be made in connection with the Parent Stockholder Redemption; (c) the Available Closing Parent Cash resulting therefrom; and (d) the number of shares of Parent Common Stock to be outstanding as of the Closing after giving effect to the Parent Stockholder Redemption, including reasonable supporting detail therefor. The Parent Closing Statement and each component thereof shall be prepared and calculated in accordance with the definitions contained in this Agreement. From and after delivery of the Parent Closing Statement until the Closing, Parent shall (x) cooperate with and provide the Members’ Representative and his Representatives all information reasonably requested by the Members’ Representative or any of his Representatives and within Parent’s or its Representatives’ possession or control in connection with the Members’ Representative’s review of the Parent Closing Statement and (y) consider in good faith any comments to the Parent Closing Statement provided by the Members’ Representative, which comments the Members’ Representative shall deliver to Parent no less than one (1) Business Day prior to the Closing Date, and Parent shall revise such Parent Closing Statement to incorporate any changes Parent determines are necessary or appropriate given such comments.
2.6 Withholding Rights. Notwithstanding anything to the contrary contained in this Agreement, Purchaser, the MSP Companies or the Members’ Representative shall be entitled to deduct and withhold from any cash otherwise deliverable under this Agreement, and from any other payments otherwise required pursuant to this Agreement or any Additional Agreement, such amounts as Purchaser, the MSP Companies or the Members’ Representative, as the case may be, are required to withhold and pay over to the applicable Authority with respect to any such deliveries and payments under the Code or any provision of state, local, provincial or foreign Tax Law; provided, that prior to making such deduction or withholding Purchaser, the MSP Companies or the Members’ Representative (as applicable) shall provide reasonable notice of any proposed deduction or withholding to the Person in respect of which such deduction or withholding is proposed and shall consult in good faith with such Person to reduce or eliminate the amount of such deduction or withholding (including by providing sufficient opportunity for such Person to provide any relevant forms or other documentation). To the extent that amounts are so withheld and paid over to the applicable Authority, such withheld amounts shall be treated for all purposes of this Agreement as having been delivered and paid to such Person in respect of which such deduction and withholding was made.
2.7 Rights Not Transferable. The rights of the Members holding Interests as of immediately prior to the Effective Time with regard to such Interests are personal to each such Member and shall not be assignable or otherwise transferable for any reason (except for Permitted Transfers). Any attempted transfer of such right by any holder thereof (otherwise than as permitted by the immediately preceding sentence) shall be null and void.
2.8 Taking of Necessary Action; Further Action. If, at any time after the Effective Time, any further action is necessary or desirable to carry out the purposes of this Agreement and to vest Purchaser with full right, title and interest in, to and under, and/or possession of, all assets, property, rights, privileges, powers and franchises of the MSP Companies, the officers and directors of the MSP Companies are fully authorized in the name and on behalf of such MSP Company, to take all lawful action necessary or desirable to accomplish such purpose or acts, so long as such action is not inconsistent with this Agreement.
ARTICLE III
PURCHASE PRICE
3.1 Payment of Purchase Price. The aggregate purchase price for the Interests (the “Purchase Price”) shall be: (i) the Equity Consideration; and (ii) rights under the Tax Receivables Agreement. On the terms and subject to the conditions set forth in this Agreement, the Purchase Price shall be payable as follows:
(a) Equity Consideration. On the Closing Date, Parent and Purchaser shall, and shall direct their transfer agent (as applicable) to:
(i) issue to the Members or their designees the Equity Consideration less the Escrow Consideration (the “Closing Equity Consideration”), which, when issued, shall be fully paid, non-assessable and free and clear of all Liens other than applicable securities Law restrictions and the Lock-Up Agreements. Subject to Section 3.1(b), each Member (or such Member’s designee) shall receive the number of Up-C Units comprising the Closing Equity Consideration set forth opposite such Member’s name on Schedule 2.1(b); and
(ii) deliver the Escrow Consideration to the Escrow Agent (the “Escrow Fund”), to be held in escrow pursuant to the terms of this Agreement and the Escrow Agreement. The number of shares or units comprising the Escrow Consideration to be allocated among each of the Members is set forth opposite each Member’s name on Schedule 2.1(b).
(b) Election to Receive Parent Class A Common Stock. Notwithstanding anything herein to the contrary, a Member may, pursuant to notice delivered to Parent no later than five (5) Business Days prior to Closing, elect with respect to all or a portion of the Up-C Units to be received by such Member (or such Member’s designee) pursuant to Section 3.1(a) to receive one share of Parent Class A Common Stock in lieu of each Up-C Unit for which such an election is made.
(c) No Issuance of Fractional Shares or Units. No certificates or scrip representing fractional shares of Parent Class A Common Stock or Parent Class V Common Stock, or fractional Purchaser Class B Units, will be issued pursuant to the Acquisition, and instead any such fractional share or unit that would otherwise be issued will be rounded to the nearest whole share or unit (with 0.5 being rounded up).
(d) Legend. Each certificate for shares or units of Parent Class A Common Stock, Parent Class V Common Stock and Purchaser Class B Units issued pursuant to the Acquisition to any Member shall bear the legend set forth below, or a legend substantially equivalent thereto, together with any other legends that may be required by any securities laws at the time of the issuance of such shares or units:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL (I) SUCH OFFER, SALE, TRANSFER, PLEDGE OR HYPOTHECATION HAS BEEN REGISTERED UNDER THE SECURITIES ACT OR (II) THE ISSUER OF THE SECURITIES HAS RECEIVED AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER THAT SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE WITH THE SECURITIES ACT.
3.2 Capitalization of Purchaser. At the Closing, Parent and Purchaser shall take all action necessary to cause the limited liability company interests of Purchaser issued and outstanding immediately following the Closing (after giving effect to the Acquisition and the other transactions contemplated by this Agreement and the Additional Agreements), to be converted into, and to consist solely of: (i) a number of Purchaser Class A Units equal to the aggregate number of shares of Parent Class A Common Stock issued and outstanding immediately following the Closing (after giving effect to the Acquisition and the other transactions contemplated by this Agreement and the Additional Agreements), with all such Purchaser Class A Units owned by Parent; and (ii) the Purchaser Class B Units issued in accordance with the terms of Section 3.1(a).
3.3 Issuance of New Warrants.
(a) Prior to the Closing, Parent shall, subject to compliance with applicable Law, declare a dividend comprising the New Warrants (the “New Warrant Dividend”), the payment of which shall be conditioned upon the consummation of the Parent Stockholder Redemption and the Closing. The New Warrant Dividend shall be payable to the holders of record of shares of Parent Class A Common Stock as of the close of business on the Closing Date, pro rata (or on as nearly a pro rata basis as is practicable, subject to the rules of any securities depositary in such a manner, including rounding, as to result in the distribution of whole numbers of warrants and to avoid any distribution of fractional warrants) based on their proportionate ownership of the then-outstanding shares of Parent Class A Common Stock, in each case after giving effect to the New Warrant Waiver (as defined below).
(b) Each applicable Member, on behalf of itself and any of its designees who may receive Closing Equity Consideration in accordance with Section 3.1, does hereby irrevocably and unconditionally waive his, her or its entire right, title and interest in, to or under, any participation in the New Warrant Dividend (the “New Warrant Waiver”).
3.4 Updated Schedule 2.1(b). The Members’ Representative may, but is not required to, deliver an updated Schedule 2.1(b) to Parent and Purchaser (provided, however, that the Members’ Representative shall deliver such updated schedule in the event that any transfers of Interests are made prior to the Closing (each, a “Pre-Closing Transfer”)) no later than five (5) Business Days prior to the Closing (an “Updated Schedule”). In the event that the Members’ Representative delivers an Updated Schedule in accordance with this Section 3.3, the consideration payable to the Members pursuant to this Article III shall be paid in accordance with such Updated Schedule; provided, for the avoidance of doubt, that the aggregate Equity Consideration (including the Escrow Consideration) shall remain unchanged on such Updated Schedule. Any Pre-Closing Transfers shall be made in accordance with applicable Law and shall not modify or reduce any representation, warranty, covenant or agreement of any Member or any MSP Company in this Agreement, in each case in a way that is materially adverse to Parent or Purchaser.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES RELATING TO THE MSP COMPANIES
Except as set forth in the corresponding sections or subsections of the Disclosure Schedules attached hereto (collectively, the “Disclosure Schedules”) (each of which shall qualify the specifically identified Sections or subsections hereof to which such Disclosure Schedule relates and those other Sections and subsections for which the relevance or applicability of such disclosure is reasonably apparent on the face of such disclosure), the MSP Purchased Companies hereby represent and warrant to Parent and Purchaser as follows:
4.1 Company Existence and Power.
(a) Each of the MSP Companies is a limited liability company duly organized, validly existing and in good standing under the Laws of the jurisdiction set forth opposite each such MSP Company’s name on Schedule 4.1. Each of the MSP Companies has (i) all power and authority (limited liability company and otherwise) and (ii) all governmental licenses, franchises, Permits, authorizations, consents and approvals required to own and operate its properties and assets and to carry on the Business as presently conducted, except in the case of clause (ii), where the failure to have any such licenses, franchises, Permits, authorizations, consents or approvals would not reasonably be expected to be material to the MSP Companies, taken as a whole. None of the MSP Companies is qualified to do business as a foreign entity in any jurisdiction, except as set forth on Schedule 4.1, and there is no other jurisdiction in which the character of the property owned or leased by any of the MSP Companies or the nature of its activities make qualification of any such MSP Company in any such jurisdiction necessary, except where the failure to be so qualified would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. The MSP Companies have offices located only at the addresses set forth on Schedule 4.1. Except as contemplated by this Agreement, the MSP Companies have not adopted any plan or made any agreement or commitment in respect of any merger, consolidation, sale of all or substantially all of its assets, reorganization, recapitalization, dissolution or liquidation. The MSP Companies have no Subsidiaries except as set forth on Schedule 4.1.
4.2 Authorization. The execution, delivery and performance by the MSP Companies of this Agreement and the Additional Agreements to which any MSP Company is a party, and the consummation by the MSP Companies of the transactions contemplated hereby and thereby are within the powers of the MSP Companies and have been duly authorized by all necessary action on the part of the MSP Companies as required by applicable Law or under their respective constituent documents, including the approval of their respective Members. This Agreement has been duly executed and delivered by each of the MSP Purchased Companies and it constitutes and, upon their execution and delivery, the Additional Agreements will constitute, a valid and legally binding agreement of each such MSP Company enforceable against each such MSP Company in accordance with their respective terms, as the case may be, except as such may be limited by bankruptcy, insolvency, reorganization or other Laws affecting creditors’ rights generally (if and when such Laws would apply) and by general equitable principles.
4.3 Governmental Approvals. Except as would not reasonably have, individually or in the aggregate, a Material Adverse Effect, the execution, delivery or performance by the MSP Companies of this Agreement or any Additional Agreements to which any MSP Company is a party does not require any consent, approval, license or other action by or in respect of, or registration, declaration or filing with, any Authority as a result of the execution, delivery and performance of this Agreement or any of the Additional Agreements to which any MSP Company is a party or the consummation of the transactions contemplated hereby or thereby (each of the foregoing, a “Governmental Approval”).
4.4 Non-Contravention. Except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect (other than with respect to clause (a) below), the execution, delivery and performance by the MSP Companies of this Agreement or any Additional Agreements to which any of the MSP Companies is a party do not (a) contravene or conflict with the Organizational Documents of any MSP Company; (b) contravene or conflict with or constitute a violation of any provision of any Law or Order binding upon or applicable to any MSP Company; (c) except for the Contracts listed on Schedule 4.9 requiring Company Consents (but only as to the need to obtain such Company Consents), constitute a default under or breach of (with or without the giving of notice or the passage of time or both) or violate or give rise to any right of termination, cancellation, amendment or acceleration of any right or obligation of any MSP Company, or any payment or reimbursement obligation, or to a loss of any material benefit relating to the Business to which any MSP Company is entitled under any provision of any Permit or Contract; or (d) result in the creation or imposition of any Lien (other than Permitted Liens) on any of the assets of the MSP Companies.
4.5 Capitalization. All of the membership interests of each MSP Company have been issued as set forth on Schedule 4.5. Except as set forth on Schedule 4.5, there are no other equity securities of the MSP Companies issued and outstanding. Other than the Interests, no other equity securities of the MSP Purchased Companies are issued and outstanding, and other than as contemplated hereby, there are no agreements by any MSP Company to issue any of its equity securities. Except as set forth on Schedule 4.5, there are no outstanding contractual obligations of any of the MSP Purchased Companies to repurchase, redeem or otherwise acquire any Interests. The Interests have been duly authorized, validly issued and fully paid and nonassessable and are owned by the Persons set forth on Schedule 4.5 free and clear of any Liens (other than Permitted Liens). No MSP Company has any outstanding options to acquire its equity securities or any outstanding securities convertible into membership interests of any MSP Company. None of the MSP Purchased Companies have outstanding or authorized any stock appreciation, phantom stock, profit participation or similar rights. Except as set forth on Schedule 4.5, there are no voting trusts, proxies or other agreements or understandings in effect with respect to the voting or transfer of any Interests. The Interests are the only equity interests of any of the MSP Purchased Companies.
4.6 Articles of Organization; Operating Agreements. True and correct copies of (a) the articles of organization of each MSP Company; and (b) the operating agreement of each MSP Company, have heretofore been made available to Parent, and such copies are each true and complete copies of such instruments in effect on the date hereof (and are listed on Schedule 4.6, if, in the case (b), in effect). Except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, no MSP Company has taken any action in violation or derogation of its articles of organization or operating agreement.
4.7 Third Parties. Other than the Persons listed on Schedule 4.7, the MSP Companies are not Controlled by any Person and, other than the Subsidiaries and the Persons listed on Schedule 4.7, the MSP Companies do not Control any other Person. Except as set forth on Schedule 4.7, to the knowledge of the MSP Companies, no Key Employees (a) engage in any business, except through the MSP Companies, or are employees of or provide any service for compensation to, any other business concern; or (b) own any equity security of any business concern that competes directly with the Business, except for publicly traded securities not in excess of 5% of the issued and outstanding securities with respect to such publicly traded securities. Schedule 4.7 lists each Contract to which any MSP Company, on the one hand, and any Member beneficially owning more than 10% of the Interests of such MSP Company, or any Affiliate of such a Member (collectively, a “10% Member”), on the other hand, is a party. No Member or any Affiliate of a Member (i) owns, directly or indirectly, in whole or in part, any material tangible or intangible property (including Intellectual Property Rights) that any MSP Company uses or the use of which is necessary for the conduct of the Business or the ownership or operation of the assets of the MSP Companies; or (ii) has engaged in any transactions with any MSP Company (other than, for the avoidance of doubt, the Organizational Documents of each MSP Company).
4.8 Assumed Names. Schedule 4.8 is a complete and correct list of all assumed or “doing business as” names currently, or within the last two (2) years, used by any MSP Company, including names on any websites. Within the last two (2) years, the MSP Companies have not used any names other than the names listed on Schedule 4.8 to conduct the Business. The MSP Companies have filed appropriate “doing business as” certificates in all applicable jurisdictions with respect the use of such names, except where the failure to file any such certificate would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
4.9 Consents. Except as would not be material to the MSP Companies, taken as a whole, the Contracts listed on Schedule 4.9 are the only Contracts binding upon the MSP Companies or by which any of the Interests are bound, requiring a consent, approval, authorization, order or other action of or filing with any Person as a result of the execution, delivery and performance of this Agreement or any of the Additional Agreements or the consummation of the transactions contemplated hereby or thereby (each of the foregoing, a “Company Consent”).
4.10 Financial Statements.
(a) The Company Financial Statements, when delivered hereunder, will be prepared in conformity with U.S. GAAP applied on a consistent basis and will be prepared in accordance with the requirements of the Public Company Accounting Oversight Board for public companies. The Company Financial Statements will be complete and accurate in all material respects and fairly present, in all material respects, the financial position of the MSP Companies as of the dates thereof and the results of operations of the MSP Companies for the periods reflected therein. The Company Financial Statements (i) will be prepared from the Books and Records of the MSP Companies; (ii) will contain and reflect all necessary adjustments and accruals for a fair presentation of the MSP Company’s combined and/or consolidated (as determined to be applicable) financial condition as of their dates; and (iii) will contain and reflect adequate provisions for all liabilities for all material Taxes applicable to the MSP Companies with respect to the periods then ended, except, in the case of clauses (ii) and (iii) as would not be material to the MSP Companies, taken as a whole. The MSP Companies agree to deliver to Parent complete and accurate copies of all “management letters” received by them from their accountants and all responses within the last two (2) years by lawyers engaged by the MSP Companies to respond to inquiries from their accountant or any predecessor accountants.
(b) Except (i) as will be specifically disclosed, reflected or fully reserved against on the Balance Sheet, (ii) for liabilities and obligations incurred in the ordinary course of business consistent with past practice, (iii) for liabilities and obligations for future performance under any Contract to which any MSP Company is a party, (iv) arising under this Agreement and/or the performance by the MSP Companies of their obligations hereunder, including transaction expenses, (v) as disclosed in the Disclosure Schedules, and (vi) as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, there are no liabilities, debts or obligations of any nature (whether accrued, fixed or contingent, liquidated or unliquidated, asserted or unasserted or otherwise) of the MSP Companies.
4.11 Books and Records. All Contracts, documents, and other papers or copies thereof delivered to Parent by or on behalf of the MSP Companies are accurate, complete, and authentic in all material respects.
(a) The Books and Records accurately and fairly, in reasonable detail, reflect the transactions and dispositions of assets of and the providing of services by the MSP Companies in all material respects. The MSP Companies maintain a system of internal accounting controls that are designed to provide reasonable assurance that:
(i) transactions are executed only in accordance with the respective management’s authorization;
(ii) all income and expense items are promptly and properly recorded for the relevant periods in accordance with the revenue recognition and expense policies maintained by the MSP Companies;
(iii) access to assets is permitted only in accordance with the respective management’s authorization; and
(iv) recorded assets are compared with existing assets at reasonable intervals, and appropriate action is taken with respect to any differences.
(b) All accounts, books and ledgers of the MSP Companies have been properly and accurately kept and completed in all material respects, and there are no material inaccuracies or discrepancies of any kind contained or reflected therein. To the knowledge of the MSP Companies, the MSP Companies do not have any records, systems controls, data or information, in each case that are material to the MSP Companies, taken as a whole, recorded, stored, maintained, operated or otherwise wholly or partly dependent on or held by any means (including any mechanical, electronic or photographic process, whether computerized or not) which (including all means of access thereto and therefrom) are not under the exclusive ownership (excluding licensed software programs) and control of the MSP Companies.
4.12 Absence of Certain Changes. Since December 31, 2020, except (i) as set forth on Schedule 4.12, (ii) for any actions taken in response to COVID-19 Measures, and (iii) in connection with the transactions contemplated by this Agreement and the Additional Agreements, the MSP Companies have conducted the Business in the ordinary course consistent with past practices. Without limiting the generality of the foregoing, since December 31, 2020, there has not been any Material Adverse Effect, and the MSP Companies have not taken any action nor has any event occurred which would have violated the covenants of the MSP Companies set forth in Section 7.1 herein if such action had been taken or such event had occurred between the date hereof and the Closing Date.
4.13 Properties; Title to the Company’s Assets. Except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, the MSP Companies have good, valid and marketable title in and to, or in the case of the Leases and the assets which are leased or licensed by the MSP Companies pursuant to Contracts, a valid leasehold interest or license in or a right to use, all of the assets reflected on the Balance Sheet and no such asset is subject to any Liens (other than Permitted Liens). The assets of the MSP Purchased Companies constitute all of the material assets of any kind or description whatsoever, including goodwill, reasonably necessary for the MSP Purchased Companies to operate the Business immediately after the Closing in substantially the same manner as the Business is currently being conducted. The MSP Purchased Companies being acquired in the Acquisition own or have rights to use the operations and assets, including intellectual property, contemplated as necessary to achieve the projections provided to Parent and Purchaser and upon which the Equity Consideration is based, provided that nothing herein shall constitute a guarantee that such projections, while made in good faith and upon reasonable assumptions, will be achieved in whole or in part.
4.14 CCRAs. The MSP Companies have good and marketable title to, certain assigned claims, causes of actions, proceeds, products and distributions as set forth in the agreements disclosed on Item 4 of Schedule 4.16(a)(i) (the “CCRAs”), free and clear of Liens, in each case other than Permitted Liens. The MSP Companies have previously provided to Parent their then- current good faith estimates of the calculation of recovery rights or eligible payments or receivables with respect to any CCRAs (other than as would not reasonably be expected to be material to the MSP Companies, taken as a whole). Except for any Assignor Interest due to an Assignor as contemplated in the CCRAs, and any other rights set forth in the CCRAs, none of the MSP Companies or, to the knowledge of the MSP Companies, after Reasonable Investigation, any of their Affiliates has entered into any arrangement that would provide for any set-off or offset against, counterclaim or defense affecting, reduction of, deduction from, or defense against any Recovery Proceeds or other amounts that are receivable or retainable by any MSP Company for its own account under the CCRAs, including any fees allocable or payable to any MSP Company for its own account. Except for any prior recoveries disclosed to Parent prior to the date of this Agreement or rights expressly excluded pursuant to a CCRA, there have been, to the knowledge of the MSP Companies, after Reasonable Investigation, no recoveries against any assigned claims under the CCRAs, or any other abridgement of recovery rights associated with the same.
4.15 Litigation. Except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, there is no Action pending against, or to the knowledge of the MSP Companies, after Reasonable Investigation, threatened against the MSP Companies, any of their respective managers, directors or officers, the Business, or any Interests, or any of the MSP Companies’ assets or any Contract before any court, Authority or official or which in any manner challenges or seeks to prevent, enjoin, alter or delay the transactions contemplated hereby or by the Additional Agreements. To the knowledge of the MSP Companies, after Reasonable Investigation, there are no outstanding judgments against the MSP Companies. Except as set forth on Schedule 4.15 or as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, the MSP Companies are not, and have not been within the last two (2) years, subject to any proceeding with any Authority.
4.16 Contracts.
(a) Schedule 4.16(a) lists all material Contracts, oral or written (collectively, “Material Contracts”), to which any MSP Company is a party and which are currently in effect and constitute the following:
(i) all Contracts that required or require annual payments or expenses by, or annual payments or income to, any MSP Company of $5,000,000 or more in the calendar year ended December 31, 2020 or in any period or periods subsequent to January 1, 2020 (other than standard purchase and sale Contracts entered into in the ordinary course of business consistent with past practice);
(ii) all sales, advertising, agency, lobbying, broker, sales promotion, market research, marketing or similar contracts and agreements, in each case, that required the payment of any commissions by the MSP Companies in excess of $500,000 in the calendar year ended December 31, 2020 or in any other period or periods subsequent to January 1, 2020;
(iii) all employment Contracts, employee leasing Contracts, and consultant and sales representatives Contracts with any current or former officer, director, employee or consultant of any MSP Company or other Person, under which any MSP Company (A) has continuing obligations for payment of annual compensation of at least $5,000,000 (other than oral arrangements for at-will employment), (B) has severance or post termination obligations to such Person (other than COBRA obligations), or (C) has an obligation to make a payment upon consummation of the transactions contemplated hereby or as a result of a change of control of such MSP Company;
(iv) all Contracts creating a joint venture, limited liability company or partnership to which any of the MSP Companies is a party (other than Contracts between any of the MSP Companies) and that are material to the MSP Companies, taken as a whole;
(v) all Contracts relating to any acquisitions or dispositions of any material assets by any of the MSP Companies since December 31, 2019 and involving payments in excess of $20,000,000, other than (A) Contracts for the purchase of inventory in the ordinary course of business and (B) Contracts in which the applicable acquisition or disposition has been consummated and there are no material obligations of any MSP Company ongoing;
(vi) all Contracts pursuant to which any MSP Company: (A) grants to any third Person any license, right or covenant not to sue with respect to any material Intellectual Property Rights owned by the MSP Companies, other than non-exclusive licenses granted (x) in the ordinary course of business, or (y) in non-disclosure agreements that only grant to the applicable party the right to use such party’s confidential information for a specific, limited purpose set forth in the non-disclosure agreement and that does not include any license or any right to use, practice or exploit any Intellectual Property, or; (B) is granted by any third Person any license, right or covenant not to sue with respect to any Intellectual Property Rights material to the Business, taken as a whole, other than inbound license agreements for any software that is made generally or publicly available and licensed or provided to the MSP Companies pursuant to (x) standard terms and conditions for an aggregate license fee of less than $250,000 per year, (y) any open source license or similar licensing or distribution model or (z) non-disclosure agreements that only grant to the applicable party the right to use such party’s confidential information for a specific, limited purpose set forth in the non-disclosure agreement and that does not include any license or any right to use, practice or exploit any Intellectual Property;
(vii) all Contracts containing material secrecy, confidentiality and nondisclosure provisions restricting the conduct of the MSP Companies or substantially limiting the freedom of the MSP Companies to compete in any line of business or with any Person or in any geographic area;
(viii) except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, all Contracts providing for ongoing material guarantees, indemnification arrangements and other hold harmless arrangements made or provided by any MSP Company, including all ongoing agreements for repair, warranty, maintenance, service, indemnification or similar obligations;
(ix) all Contracts with or pertaining to any MSP Company to which any 10% Member is a party;
(x) all Contracts relating to material property or assets (whether real or personal, tangible or intangible) in which any of the MSP Companies holds a leasehold interest (including the Leases) and which involve payments to the lessor thereunder in excess of $20,000 per month;
(xi) all Contracts relating to outstanding Indebtedness of the MSP Companies, including financial instruments of indenture or security instruments such as notes, mortgages, loans and lines of credit, in each case, with an outstanding amount in excess of $10,000,000;
(xii) any Contract relating to the voting or control of the equity interests of the MSP Companies or the election of managers of the MSP Companies (other than the Organizational Documents of the MSP Companies);
(xiii) any Contract not cancellable by the MSP Companies with no more than 60 days’ notice if the effect of such cancellation would result in monetary penalty to the MSP Companies in excess of $1,000,000 per the terms of such Contract; and
(xiv) any Contract listed on Schedule 4.4 or Schedule 4.9.
(b) Each Material Contract is a valid and binding agreement, and is in full force and effect, and neither the applicable MSP Company nor, to the knowledge of the MSP Companies, any other party thereto, is in material uncured breach or default (whether with or without the passage of time or the giving of notice or both) under the terms of any such Material Contract, nor has any event or circumstance occurred that would cause or permit the acceleration or other change of any material right or obligation or the loss of any material benefit thereunder, in each case that would result in a Material Adverse Effect. The MSP Companies have not assigned, delegated, or otherwise transferred any of their rights or obligations with respect to any Material Contracts. No Material Contract (i) requires an MSP Company to post a bond or deliver any other form of security or payment to secure its obligations thereunder or (ii) imposes any material non-competition covenants that are binding on or restrict the Business. As of the date of this Agreement, no Member has received any notice of termination or cancellation under any Material Contract. Other than Contracts made available to Parent prior to or on the date hereof, the MSP Companies shall, within 30 days of the date hereof, provide to Parent true and correct (A) fully executed copies of each written Material Contract and (B) written summaries of each oral Material Contract.
(c) Except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, the MSP Companies are in compliance with all covenants, including all such financial covenants, in all notes, indentures, bonds and other instruments or agreements evidencing any Indebtedness. There are no outstanding contractual obligations of any of the MSP Purchased Companies to provide funds to or make any investment (in the form of a loan, capital contribution or otherwise) in, any other Person.
4.17 Insurance. Schedule 4.17 contains a true, complete and correct list (including the names and addresses of the insurers, the names of the Persons if other than an MSP Company to whom such insurance policies have been issued, the expiration dates thereof, the annual premiums and payment terms thereof, whether it is a “claims made” or an “occurrence” policy and a brief identification of the nature of the policy) of all material liability, property, workers’ compensation and other insurance policies and fidelity bonds currently in effect that insure the Business or property or assets of the MSP Companies. Each as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, each such insurance policy is valid and binding and in full force and effect, all premiums due thereunder have been paid and the MSP Companies have not received any notice of cancellation or termination in respect of any such policy or default thereunder. The MSP Companies believe such insurance policies, in light of the nature of the MSP Companies’ Business, assets and properties, are in amounts and have coverage that are reasonable for Persons engaged in such Business and having such assets and properties. Neither the MSP Companies, nor, to the knowledge of the MSP Companies, the Person to whom any such policy has been issued, has received notice that any insurer under any policy listed on Schedule 4.17 is denying liability with respect to a claim thereunder or defending under a reservation of rights clause. Within the last two (2) years, no MSP Company has filed for any claims exceeding $1,000,000 against any of the insurance policies listed on Schedule 4.17. The MSP Companies have not received written notice from any of its insurance carriers or brokers that any premiums will be materially increased in the future.
4.18 Licenses and Permits. Schedule 4.18 correctly lists each material license, franchise, permit, order or approval or other similar authorization affecting, or relating in any way to, the Business, together with the name of the Authority issuing the same (the “Permits”). Except as indicated on Schedule 4.18 or as would not be material to the MSP Companies, taken as a whole, such Permits are valid and in full force and effect, and none of the Permits will, assuming the consents set forth on Schedule 4.4 have been obtained or waived prior to or on the Closing Date, be terminated or impaired or become terminable as a result of the transactions contemplated hereby.
4.19 Compliance with Laws.
(a) Except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, the MSP Companies are not in violation of and, within the last eighteen (18) months have not violated, and to the knowledge of the MSP Companies, after Reasonable Investigation, are neither under investigation with respect to nor within the last eighteen (18) months have been threatened to be charged with or given notice of any violation or alleged violation of, any Law, or judgment, order or decree entered by any court, arbitrator or Authority, domestic or foreign, and within the last eighteen (18) months, the MSP Companies have not received any subpoenas by any Authority.
(b) Without limiting the foregoing paragraph, except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, the MSP Companies are not in violation of and, within the last eighteen (18) months have not violated, and to the knowledge of the MSP Companies, after Reasonable Investigation, are not under investigation with respect to nor, to the knowledge of the MSP Companies, after Reasonable Investigation, within the last eighteen (18) months, have been threatened or charged with or given notice of any violation of any provisions of:
(i) the Foreign Corrupt Practices Act of 1977 (§§ 78dd-1 et seq.), as amended (the “Foreign Corrupt Practices Act”);
(ii) any comparable or similar Law of any jurisdiction; or
(iii) any Law regulating or covering conduct in, or the nature of, the workplace, including regarding sexual harassment or, on any impermissible basis, a hostile work environment.
4.20 Intellectual Property.
(a) Schedule 4.20 sets forth a true, correct and complete list of all registered, applied for or issued items of Intellectual Property Rights owned by the MSP Companies, specifying as to each, as applicable: (i) the nature of such Intellectual Property Right (i.e., patent, trademark, copyright or Internet domain name); (ii) the owner of such Intellectual Property Right; and (iii) the jurisdictions by or in which such Intellectual Property Right has been issued or registered or in which an application for such issuance or registration has been filed.
(b) Except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, within the last two (2) years, none of the MSP Companies have been sued or charged in writing with or been a defendant in any Action that involves a claim of infringement of any Intellectual Property Rights, and the MSP Companies have no knowledge of any claim of infringement made by any of the MSP Companies against any other Person with respect to any Intellectual Property Rights owned by the MSP Companies.
(c) Except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, to the knowledge of the MSP Companies, the current use by the MSP Companies of the Intellectual Property Rights owned by the MSP Companies does not infringe the Intellectual Property Rights of any other Person. Except as would not be material to the MSP Companies, taken as a whole, no customer of the MSP Companies has obtained any ownership interest in or exclusive rights to any Intellectual Property Rights owned by the MSP Companies pursuant to any services or similar Contract with any MSP Company.
(d) Except as would not be material to the MSP Companies, taken as a whole, all employees, consultants or contractors who have contributed to the creation or development of any material copyrightable, patentable or trade secret works on behalf of the MSP Companies either: (i) are a party to a “work-for-hire” agreement under which an MSP Company is deemed to be the original owner/author of all property rights therein; or (ii) have executed an agreement pursuant to which each such Person assigns or agrees to assign all right, title and interest in such works to one of the MSP Companies (to the extent ownership of such works did not otherwise vest with an MSP Company automatically by operation of Law).
(e) None of the execution, delivery or performance by the MSP Companies of this Agreement or the consummation by the MSP Companies of the transactions contemplated hereby will result, pursuant to a Contract to which an MSP Company is bound, in the loss of any material Intellectual Property Rights owned by or licensed to the MSP Companies.
(f) Except as would not be material to the MSP Companies, taken as a whole, the MSP Companies have taken reasonable measures to safeguard and maintain the confidentiality and value of all trade secrets owned by the MSP Companies and used in the operation of the Business.
(g) To the knowledge of the MSP Companies, the software, computer firmware, computer hardware, electronic data processing, information, record keeping, communications, telecommunications, networks, interfaces, platforms, peripherals and computer systems, including any outsourced systems and processes, that are owned or used by the MSP Companies in the conduct of the Business (collectively, the “IT Systems”) are sufficient for the operation of the Business as currently conducted, except as would not be material to the MSP Companies, taken as a whole. To the knowledge of the MSP Companies, in the last eighteen (18) months, there have been no (i) material unremedied unauthorized intrusions or breaches of security or (ii) material unremedied failures, breakdowns, continued substandard performance or other material and adverse events affecting any such IT Systems that have caused any substantial and material disruption of the Business. The MSP Companies maintain industry-standard security, disaster recovery and business continuity plans. The MSP Companies use commercially reasonable efforts designed to protect the IT Systems from becoming infected by, and to the knowledge of the MSP Companies, the IT Systems are free of, any virus, worm, Trojan horse, automatic restraint, time bomb or any other unintended, malicious feature or function capable of erasing, destroying, or corrupting of any material software, systems, databases, or data on such IT Systems.
(h) The MSP Companies have not used open source software in a manner that has caused the MSP Companies’ material, proprietary software to be required to be licensed under the terms of any copyleft open source licenses. The MSP Companies are in compliance with their obligations under open source licenses except where failure to do so would not be material.
4.21 Privacy and Data Security.
(a) The MSP Companies are, and within the last two (2) years have been, in material compliance with (i) all applicable federal, state, local and foreign laws, rules and regulations pertaining to (A) data security and cyber security and (B) the collection, storage, use, access, disclosure, processing, security, and transfer of personal data (referred to collectively in this Agreement as “Data Activities”) ((A) and (B) together, “Privacy Laws”); and (ii) all Contracts (or portions thereof) to which the MSP Companies are a party that are applicable to Data Activities (collectively, “Privacy Agreements”).
(b) The MSP Companies have implemented written policies relating to Data Activities, including appropriate written information security policies (“Privacy and Data Security Policies”). Within the last two (2) years, the MSP Companies have been and continue to be in material compliance with all such Privacy and Data Security Policies. Neither the execution, delivery, nor performance of this Agreement nor the consummation of any of the transactions contemplated under this Agreement, in each case, by the MSP Companies will violate in any material respect any of the Privacy Agreements, public-facing Privacy and Data Security Policies or, to the knowledge of the MSP Companies, after Reasonable Investigation, any applicable Privacy Laws.
(c) To the knowledge of the MSP Companies, after Reasonable Investigation, there is no pending, nor has there within the last two (2) years been any, written complaint, audit, proceeding, investigation, or written claim against the MSP Companies initiated by (i) any Person or entity; (ii) the United States Federal Trade Commission, any state attorney general or similar state official; or (iii) any other governmental entity, foreign or domestic, or any regulatory or self- regulatory entity, in each case (i) through (iii), alleging that any Data Activity of the MSP Companies: (A) is in violation of any applicable Privacy Laws; (B) is in violation of any Privacy Agreements; or (C) is in violation of any Privacy and Data Security Policies.
(d) Within the last two (2) years, the MSP Companies have taken commercially reasonable steps (including, without limitation, implementing, maintaining, and monitoring compliance with applicable government-issued or industry standard measures with respect to administrative, technical and physical security) designed to ensure that all personal data in its possession or control is protected against damage, loss, and against unauthorized access, acquisition, use, modification, disclosure or other misuse. To the knowledge of the MSP Companies, after Reasonable Investigation, there has been no (i) unauthorized access, use, or disclosure of personal data in the possession or control of the MSP Companies or any entity that processes personal data on behalf of the MSP Companies; or (ii) unauthorized intrusions or breaches of security into the MSP Companies’ IT Systems, in each case (i) and (ii), except as would not be material to the MSP Companies, taken as a whole.
(e) To the extent required by applicable Privacy Laws, the MSP Companies contractually require all third parties, including, without limitation, vendors and other Persons providing services to the MSP Companies, that have access to or receive personal data from or on behalf of the MSP Companies to comply in all material respects with all applicable Privacy Laws, and to take reasonable steps designed to ensure that all such personal data in such third parties’ possession or control is protected against damage, loss, and against unauthorized access, acquisition, use, modification, disclosure or other misuse.
(f) The MSP Companies’ collection of personal data from third parties is in accordance in all material respects with any requirements relating to such personal data from such third parties, including (to the extent applicable) written website terms and conditions. To the knowledge of the MSP Companies, after Reasonable Investigation, the MSP Companies have not (i) received written communication from any website owner or operator that the MSP Companies’ access to such website is unauthorized; (ii) accessed any website’s information through illicitly circumventing a password requirement or similar technological barrier; or (iii) scraped any data from a website that has a clickwrap agreement prohibiting such activity.
4.22 Employees.
(a) Schedule 4.22(a) sets forth a true, correct and complete list of the ten (10) highest paid employees and independent contractors of the MSP Companies, taken as a whole, as of December 31, 2020, including the name, title and current salary or compensation rate for each such person for the fiscal year ended December 31, 2020. Unless indicated in such list, no salaried employee or independent contractor included in such list (i) is currently on leave; (ii) has given written notice of his or her intent to terminate his or her relationship with any MSP Company; or (iii) has received written notice of such termination from any MSP Company. To the knowledge of the MSP Companies, no Key Employee has given written notice of his or her intent to terminate his or her current relationship with any MSP Company or has received written notice of such termination from any MSP Company within six (6) months following the Closing Date.
(b) (i) None of the MSP Companies are party to or subject to collective bargaining agreement or other Contract with a union or labor organization and (ii) there has been no activity or proceeding by a labor union or representative thereof to organize any employees of the MSP Companies.
(c) Except as set forth in Schedule 4.22(c), there are no material pending or, to the knowledge of the MSP Companies, threatened claims or proceedings against the MSP Companies under any worker’s compensation policy or long-term disability policy.
(d) Except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, the MSP Companies has properly classified all of its employees as exempt or non-exempt.
(e) No MSP Company is a party to any collective bargaining agreement, has any material labor relations problems, and there is no pending representation question or union organizing activity respecting employees of any of the MSP Companies.
(f) Except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, each MSP Company is in compliance with applicable Laws governing employment of its workforce.
4.23 Employee Benefits and Compensation.
(a) Schedule 4.23(a) sets forth a true and complete list, as of the date of this Agreement, of each material “employee benefit plan” (as defined in Section 3(3) of ERISA), employment, commission, employee group or executive medical, life, disability, incentive, bonus, profit sharing, retirement, deferred compensation, equity-based or non-equity-based incentive, stock purchase, severance, or other plan or written agreement relating to employee or director benefits or employee or director compensation or fringe benefits, maintained or contributed to by any of the MSP Companies at any time during the three (3) calendar year period immediately preceding the date hereof, or with respect to which any of the MSP Companies could incur or could have incurred direct or indirect, fixed or contingent liability (each an “MSP Company Plan” and collectively, the “MSP Company Plans”).
(b) Except as would not be material to the MSP Companies, taken as a whole, each MSP Company Plan is and has been maintained in substantial compliance with all applicable laws, including but not limited to ERISA, and has been administered and operated in accordance with its terms.
(c) Each MSP Company Plan which is intended to be “qualified” within the meaning of Section 401(a) of the Code, has received a favorable determination letter from the Internal Revenue Service and, to the knowledge of the MSP Companies, no event has occurred and, to the knowledge of the MSP Companies, no condition exists which could reasonably be expected to result in the revocation of any such determination. None of the MSP Companies has or within the last two (2) years have maintained, established, participated in or contributed to, been obligated to contribute to, or incurred any obligation or liability (including any contingent liability) under, an “employee pension benefit plan” (as defined in Section 3(2) of ERISA) subject to Title IV of ERISA, Section 412 of the Code or Section 302 of ERISA (including any “multiemployer plan” within the meaning of Section (3)(37) of ERISA).
(d) None of the MSP Companies, nor to the knowledge of the MSP Companies, any other “disqualified person” or “party in interest” (as defined in Section 4975(e)(2) of the Code and Section 3(14) of ERISA, respectively), has engaged in any transaction in connection with any MSP Company Plan that could reasonably be expected to result in the imposition of a penalty pursuant to Section 502(i) of ERISA, damages pursuant to Section 409 of ERISA or a tax pursuant to Section 4975(a) of the Code. None of the MSP Company Plans provide for post-retiree health, welfare or life insurance benefits for any participant or any beneficiary of a participant, except (i) as may be required under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended or any similar state Law, (ii) for continuation of benefits through the remainder of the month in which a termination of employment occurs, (iii) with respect to the right to convert a group insurance policy of any of the MSP Companies to an individual insurance policy coverage through the end of the month following a termination of service, or (iv) as provided as part of severance benefits.
(e) No employee or director of any MSP Company will accrue or receive additional material benefits or accelerated rights to payment of benefits under any MSP Company Plan as a direct result of the transactions contemplated hereby.
(f) Except as would not be material to the MSP Companies, taken as a whole, no liability, claim, investigation, audit, action or litigation has been incurred, made, commenced or, to the knowledge of the MSP Companies, threatened, by or against any MSP Company Plan or any MSP Company with respect to any MSP Company Plan (other than for benefits payable in the ordinary course). No MSP Company Plan or related trust owns any securities in violation of Section 407 of ERISA.
(g) There is no unfunded non-tax-qualified Plan which provides a pension or retirement benefit.
(h) The MSP Companies have not made any commitment to create or cause to exist any material MSP Company Plan, or to modify, change or terminate any MSP Company Plan (other than as may be necessary for compliance with applicable law or as would not result in a material increase in cost).
(i) With respect to each MSP Company Plan, the MSP Companies have made available to Purchaser and its counsel true and complete copies of the following documents, as applicable, for each respective MSP Company Plan: (i) the MSP Company Plan documents, with all amendments thereto; (ii) the current summary plan description with any applicable summaries of material modifications thereto as well as any other material employee or government communications; (iii) all current trust agreements and/or other documents establishing MSP Company Plan funding arrangements; (iv) the most recent IRS determination letter and, if a request for such a letter has been filed and is currently pending with the IRS, a copy of such filing; (v) the most recently prepared financial statements; and (vi) the two (2) most recent Forms 5500 series.
4.24 Real Property.
(a) Except (i) as set forth on Schedule 4.24(a), (ii) for the Leases, or (iii) as would not be material to the MSP Companies, taken as a whole, the MSP Companies do not own, or otherwise have an interest in, any Real Property, including under any Real Property lease, sublease, space sharing, license or other occupancy agreement. The MSP Companies have good, valid and subsisting title to its respective leasehold estates in the offices described on Schedule 4.24(a), free and clear of all Liens (other than Permitted Liens). To the knowledge of the MSP Companies, the MSP Companies have not materially breached or violated any local zoning ordinance, and no notice from any Person has been received by the MSP Companies or served upon the MSP Companies claiming any violation of any local zoning ordinance.
(b) Except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, with respect to the Leases: (i) they are valid, binding and in full force and effect; (ii) all rents and additional rents and other sums, expenses and charges due thereunder have been paid, accrued for, or are being contested in good faith; (iii) the lessees have been in peaceable possession since the commencement of the original term thereof; (iv) no waiver, indulgence or postponement of the lessees’ obligations thereunder have been granted by the lessors; (v) there exists no default or event of default thereunder by the applicable MSP Company or, to the knowledge of the MSP Companies, by any other party thereto; (vi) to the knowledge of the MSP Company, there exists no occurrence, condition or act which, with the giving of notice, the lapse of time or the happening of any further event or condition, would become a default or event of default by any MSP Company thereunder; and (vii) there are no outstanding claims of breach or indemnification or notices of default or termination thereunder. The MSP Companies hold the leasehold estates on the Leases free and clear of all Liens (other than Permitted Liens) and Liens of mortgagees of the Real Property in which such leasehold estate is located. Except as would not be material to the MSP Companies, taken as a whole, the Real Property leased by the MSP Companies is in a state of maintenance and repair in all material respects adequate and suitable for the purposes for which it is presently being used, and, to the knowledge of the MSP Companies, there are no repair or restoration works required in connection with any of the leased Real Property. Except as would not be material to the MSP Companies, taken as a whole, the MSP Companies are in physical possession and actual and exclusive occupation of the whole of the premises leased pursuant to the Leases for Real Property, none of which are subleased or assigned to another Person. To the knowledge of the MSP Companies, the MSP Companies do not owe any brokerage commission with respect to any Real Property.
4.25 Tax Matters. Except as set forth in Schedule 4.25, and as would not be material to the MSP Companies, taken as a whole, (a) the MSP Companies have duly and timely filed, or have caused to be duly and timely filed on their behalf, all income and other material Tax Returns (taking into account all available extensions) in all jurisdictions in which such Tax Returns are required to be filed by or with respect to the MSP Companies, and have paid all Taxes that are shown as due on such Tax Returns; (b) all such Tax Returns are true, correct and complete in all material respects; (c) there is no Action, pending or proposed or, to the best knowledge of the MSP Companies, threatened, with respect to Taxes of the MSP Companies; (d) no statute of limitations in respect of the assessment or collection of any Taxes of the MSP Companies for which a Lien may be imposed on any of the assets of the MSP Companies has been waived or extended, which waiver or extension is in effect; (e) the MSP Companies have complied in all material respects with all applicable Laws relating to the reporting, payment, collection and withholding of Taxes, including sales and use Taxes and amounts required to be withheld for Taxes of employees, independent contractors, creditors, equityholders (including the Members) or other third parties, and have duly and timely withheld or collected, paid over to the applicable Taxing Authority and reported all material Taxes (including income, social, security and other payroll Taxes) required to be withheld or collected by the MSP Companies; (f) no MSP Company is currently or has been within the prior five (5) taxable years the subject of any Tax proceeding with respect to any Taxes or Tax Returns of or with respect to any MSP Company, no MSP Company has commenced a voluntary disclosure proceeding in any jurisdiction that has not been resolved or settled, and all deficiencies, assessments, claims, or adjustments with respect to a material amount of Taxes asserted or assessed in writing against any MSP Company have been fully and timely (taking into account applicable extensions) paid, settled or withdrawn; (g) there is no Lien for Taxes upon any of the assets of the MSP Companies (other than Permitted Liens); (h) there is no outstanding request for a ruling from any Taxing Authority, request for a consent by a Taxing Authority for a change in a method of accounting, subpoena or request for information by any Taxing Authority, or closing agreement (within the meaning of Section 7121 of the Code or any analogous provision of applicable Law), with respect to any of the MSP Companies; (i) no claim has ever been made by a Taxing Authority in a jurisdiction where the MSP Companies have not paid any Tax or filed Tax Returns, asserting that the MSP Companies are or may be subject to Tax in such jurisdiction; (j) neither the MSP Companies nor any Affiliate are or have ever been, a party to any Tax sharing, Tax allocation or Tax indemnity Contract; (k) the MSP Companies will not be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any: (i) change in method of accounting for a taxable period ending on or prior to the Closing Date; (ii) “closing agreement” as described in Code Section 7121 (or any corresponding or similar provision of state, local or foreign income Tax law) executed on or prior to the Closing Date; (iii) installment sale or open transaction disposition made on or prior to the Closing Date; or (iv) prepaid amount received for a Tax period ending on or prior to the Closing Date; (l) the MSP Companies are and have never been included in any consolidated, combined or unitary Tax Return; (m) each MSP Company is and has been at all times since its formation treated as a partnership or an entity disregarded as separate from its owner(s) for federal income Tax purposes and for all similar or corresponding state and local income Tax purposes; (n) no MSP Company has participated in, and is not currently participating in a “listed transaction” (within the meaning of Treasury Regulations §1.6011-4 or any predecessor thereof) or any transaction requiring disclosure under a corresponding provision of state, local, or foreign Law; (o) no MSP Company uses the cash method of accounting for income Tax purposes; (p) no MSP Company has ever owned (directly or indirectly) an interest in any “controlled foreign corporation” within the meaning of Code Section 957; (q) no MSP Company has any Liability for Taxes of any other Person (other than any MSP Company) as a successor or transferee, by contract, by operation of Law, or otherwise (other than pursuant to an ordinary course Tax sharing agreement); (r) for each MSP Company that is treated as a partnership for federal income Tax purposes, no member or partner of such MSP Company is a foreign person within the meaning of Code Section 1445 or Code Section 1446(f); (s) no election has been made under Treasury Regulations Section 301.9100-22 (or any similar provision of state, local, or non-U.S. Laws) with respect to any MSP Company; (t) for each MSP Company that is treated as a partnership for federal income Tax purposes, such MSP Company has a valid election under Section 754 of the Code (and any similar provision of state, local or non-U.S. Law) in effect, and such elections will remain in effect for any taxable period that includes the Closing Date; and (u) no Section 197 intangible (within the meaning of Code Section 197 of the Code) of any of the MSP Companies existing as of the end of the day on the Closing Date will be excluded from the term “amortizable section 197 intangible” pursuant to Code Section 197(f)(9) and Treasury Regulations Section 1.197-2(h).
Notwithstanding any other provision in this Agreement, (i) the representations and warranties in this Section 4.25 and Section 4.23 are the only representations and warranties in this Agreement with respect to the Tax matters of the MSP Companies, and (ii) none of Parent, Purchaser or any of their Affiliates (including, after the Closing, the MSP Companies) may rely on any of the representations and warranties in this Section 4.25 in connection with any position taken with respect to any Taxes incurred during any Post-Closing Period.
4.26 Environmental Laws.
(a) Within the last two (2) years, the MSP Companies have not (i) received any written notice of any alleged claim, violation of or liability under any Environmental Law which has not heretofore been cured or, to the knowledge of the MSP Companies, after Reasonable Investigation, for which there is any remaining liability; (ii) to the knowledge of the MSP Companies, after Reasonable Investigation, disposed of, emitted, discharged, handled, stored, transported, used or released any Hazardous Materials, arranged for the disposal, discharge, storage or release of any Hazardous Materials, or exposed any employee or other individual to any Hazardous Materials so as to give rise to any liability or corrective or remedial obligation under any Environmental Laws; or (iii) entered into any agreement that requires any MSP Company to guarantee, reimburse, pledge, defend, hold harmless or indemnify any other Person with respect to liabilities arising out of Environmental Laws or the Hazardous Materials Activities of the MSP Companies, except in each case as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
(b) The MSP Companies have delivered to Parent all material records in their possession concerning the Hazardous Materials Activities of the MSP Companies and all environmental audits and environmental assessments in the possession or control of the MSP Companies of any facility currently owned, leased or used by the MSP Companies which identifies the potential for any violations of Environmental Law or the presence of Hazardous Materials on any property currently owned, leased or used by the MSP Companies.
(c) To the knowledge of the MSP Companies, after Reasonable Investigation, there are no Hazardous Materials in, on, or under any properties currently owned, leased or used by the MSP Companies such as could give rise to any material liability or corrective or remedial obligation of the MSP Companies under any Environmental Laws.
4.27 HIPAA. Each of the MSP Companies is, and for the past five (5) years has been, in compliance in all material respects with HIPAA, and has taken commercially reasonable steps, consistent with industry standards and applicable Laws, such that patient, health, protected or personally identifiable information is protected against unauthorized access, use, modification, disclosure or other misuse. None of the MSP Companies (a) has suffered or otherwise experienced any breach of unsecured protected or personally identifiable health information or any ransomware incident, (b) has received any complaint or notice from the U.S. Department of Health and Human Services Office or Civil Rights or any other Authority or Person regarding any allegation regarding failure to comply with HIPAA or made any notification of any such breach or failure to any Authority or Person pursuant to HIPAA, or (c) accesses, receives, transmits, maintains or stores any protected health information outside of the United States of America. The MSP Companies have, solely to the extent required by HIPAA, undertaken surveys, audits, inventories, reviews, analyses and/or risk assessments and remediated any deficiencies identified thereby and provided training with respect to compliance with HIPAA to “workforce” (as defined in HIPAA). Each of the MSP Companies is party to a business associate agreement with each Covered Entity (as defined by HIPAA) or Person acting as its business associate or subcontractor, in each case, in compliance in all material respects with HIPAA, and none of the MSP Companies, nor, to the knowledge of the MSP Companies, after Reasonable Investigation, any counterparty thereto is or has been in breach or default in any material respects of its duties and obligations under any such business associate agreement, nor has any such breach or default been asserted or alleged.
4.28 Healthcare Laws Compliance. Each of the MSP Companies is, and has been for the past five (5) years, in compliance in all material respects with all applicable Healthcare Laws, and none of the MSP Companies has received or been served with any search warrant, subpoena, civil investigative demand, contact letter or notice alleging any violation of Law by any of the MSP Companies or their agents or representatives in their capacity as such or relating to the MSP Companies or the Business. There is, and has been during the past five (5) years, no Action pending, or, to the knowledge of the MSP Companies, after Reasonable Investigation, threatened, alleging noncompliance with any Healthcare Law by any MSP Company or otherwise relating to the Business.
4.29 Healthcare Laws Proceedings. For the past five (5) years, none of the MSP Companies: (a) is or has been a party to a corporate integrity agreement, deferred prosecution agreement or other compliance agreement with a U.S. Attorney’s Office, Department of Health and Human Services, Office of Inspector General, or other Authority; or (b) has been convicted of any criminal offense relating to fraud, theft, embezzlement, or other financial misconduct, and no such agreement or Action is pending or, to the knowledge of the MSP Companies, after Reasonable Investigation, threatened.
4.30 Finders’ Fees. Other than as set forth on Schedule 4.30, there is no investment banker, broker, finder or other intermediary which has been retained by or is authorized to act on behalf of the MSP Companies, the Members or any of their respective Affiliates who is entitled to any fee or commission from Parent or any of its Affiliates (including the MSP Companies following the Closing) in connection with and upon consummation of the transactions contemplated by this Agreement.
4.31 Certain Business Practices. Neither the MSP Companies nor any manager, director, officer or, to the knowledge of the MSP Companies, after Reasonable Investigation, agent or employee of the MSP Companies (in their capacities as such) has (a) used any funds of the MSP Companies for unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity; or (b) made any unlawful payment to foreign or domestic government officials or employees, to foreign or domestic political parties or campaigns or violated any provision of the Foreign Corrupt Practices Act. Neither the MSP Companies nor any manager, director, officer or, to the knowledge of the MSP Companies, agent or employee of the MSP Companies (in their capacities as such) has, directly or indirectly, given or agreed to give any gift in any material amount to any customer, supplier, governmental employee or other Person who is in a position to help or hinder the MSP Companies or assist the MSP Companies in connection with any actual or proposed transaction, which, if not given would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, or which, if not continued in the future, would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
4.32 Money Laundering Laws. The operations of the MSP Companies are and within the last two (2) years have been, conducted in compliance with laundering statutes in all applicable jurisdictions, the rules and regulations thereunder and, to the knowledge of the MSP Companies, after Reasonable Investigation, any related or similar rules, regulations or guidelines, issued, administered or enforced by any Authority (collectively, the “Money Laundering Laws”), and no Action involving the MSP Companies with respect to the Money Laundering Laws is pending or, to the knowledge of the MSP Companies, after Reasonable Investigation, threatened.
4.33 OFAC. Neither the MSP Companies, nor any manager, director or officer of the MSP Companies (nor, to the knowledge of the MSP Companies, after Reasonable Investigation, any agent, employee, Affiliate or Person acting on behalf of the MSP Companies) is currently identified on the specially designated nationals or other blocked person list or otherwise currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”); and the MSP Companies have not used any funds, or loaned, contributed or otherwise made available such funds to any subsidiary, joint venture partner or other Person, in connection with any sales or operations in Cuba, Iran, Syria, Myanmar or any other country sanctioned by OFAC or for the purpose of financing the activities of any Person currently subject to, or otherwise in violation of, any U.S. sanctions administered by OFAC within the last two (2) years.
4.34 Not an Investment Company. No MSP Company is an “investment company” within the meaning of the Investment Company Act of 1940, as amended, and the rules and regulations promulgated thereunder.
4.35 Information Supplied. None of the information supplied or to be supplied by the MSP Companies and/or the Members in writing expressly for inclusion or incorporation by reference in the filings with the SEC and mailings to Parent’s stockholders, in each case, with respect to the solicitation of proxies to approve the transactions contemplated by this Agreement will, at the date of filing and/or mailing, as the case may be, contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading (subject to the qualifications and limitations set forth in the materials provided by the MSP Companies and/or the Members).
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF MEMBERS
Except as set forth in the corresponding sections or subsections of the Disclosure Schedules, each Member, severally and not jointly, as to himself, herself or itself only and solely in such Member’s capacity as a member of one or more of the MSP Purchased Companies, represents to Parent and Purchaser as follows:
5.1 Ownership of Interests; Authority.
(a) Such Member has good and marketable title to such Member’s Interests free and clear of any and all Liens other than restrictions arising from federal and state securities laws and those contained in the Organizational Documents of the applicable MSP Company.
(b) Such Member has full legal capacity, power and authority (including, as applicable, limited liability company or limited liability partnership power and authority) to execute and deliver this Agreement and the Additional Agreements to which such Member is a party, to perform such Member’s obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. This Agreement and the Additional Agreements to which such Member is a party have been, or at Closing will be, duly executed and delivered by such Member and are, or upon their execution and delivery will be, valid and legally binding obligations of such Member, enforceable against such Member in accordance with their respective terms, subject to (i) laws of general application relating to bankruptcy, insolvency and the relief of debtors, or (ii) rules of law governing specific performance, injunctive relief or other equitable remedies.
(c) Neither the execution and delivery by such Member of this Agreement and the Additional Agreements to which such Member is a party, nor the consummation by such Member of the transactions contemplated hereby and thereby, will (i) conflict with, result in a breach of, constitute (with or without due notice or lapse of time or both) a default under, or require any notice, consent or waiver under, any instrument, contract, agreement or arrangement to which such Member is a party, or (ii) result in the imposition of any Lien upon the Member’s Interests.
5.2 Approvals. Except as contemplated by this Agreement and the applicable Additional Agreements, no consent, approval, waiver, authorization or novation is required to be obtained by such Member from, and no notice or filing is required to be given by such Member to or made by any Member with, any Authority in connection with the execution, delivery and performance by such Member of this Agreement and each of the Additional Agreements to which he, she or it is a party.
5.3 Medical Insurance and Other Claims. The Acquisition will result in Purchaser’s ownership all of the rights or interests of the Members in any Person relating to the Business (other than the rights or interests set forth in the Legal Services Agreement). The Interests are the only equity interests owned by the Members in any person engaged in the Business.
5.4 Non-Contravention. The execution, delivery and performance by such Member of this Agreement and each of the Additional Agreements to which such Member is a party, and the consummation of the transactions contemplated hereby and thereby, do not and will not (a) violate any provision of the Organizational Documents of such Member if it is not a natural person; or (b) materially violate or result in a material breach of or constitute a default under any Law, judgment, injunction, Order, decree or other restriction of any Authority to which such Member, or the Member’s Interests owned by such Member, is subject.
5.5 Litigation and Claims. There is no material civil, criminal or administrative action, suit, demand, claim, hearing, proceeding or disclosed investigation pending or, to the knowledge of such Member, threatened, against such Member and such Member is not subject to any Order, writ, judgment, award, injunction or decree of any Authority of competent jurisdiction or any arbitrator in any such case that would prevent the consummation of the transactions contemplated hereby or materially impair the ability of such Member to perform its obligations hereunder.
5.6 Investment Representations.
(a) Such Member is, or is controlled by, an “accredited investor” as such term is defined in Rule 501 of Regulation D promulgated under the Securities Act.
(b) Such Member acknowledges that it has prior investment experience, including investments in non-listed and non-registered securities, or has employed the services of an investment advisory, attorney or accountant to evaluate the merits and risks of such an investment on its behalf, and such Member represents that it, he or she, as the case may be, understands the highly speculative nature of an investment in Parent Class A Common Stock, Parent Class V Common Stock or Purchaser Class B Units, as applicable, which may result in the loss of the total amount of such investment.
(c) Such Member has adequate means of providing for such Member’s current needs and possible personal contingencies, and such Member has no need, and anticipates no need in the foreseeable future, for liquidity in such Member’s investment in Parent Class A Common Stock, Parent Class V Common Stock or Purchaser Class B Units, as applicable. Such Member is able to bear the economic risks of this investment and, consequently, without limiting the generality of the foregoing, such Member is able to hold Parent Class A Common Stock, Parent Class V Common Stock or Purchaser Class B Units, as applicable, for an indefinite period of time and has a sufficient net worth to sustain a loss of the entire investment in the event such loss should occur.
(d) Except as otherwise set forth in Article VI, Parent has not and is not making any representations or warranties to the Members or providing any advice or information to the Members. Such Member acknowledges that it has retained its own professional advisors to evaluate the tax and other consequences of its investment in Parent Class A Common Stock, Parent Class V Common Stock or Purchaser Class B Units, as applicable.
(e) Such Member understands and consents to the placement of a legend as set forth in Section 3.1(d), on any certificate or other document evidencing shares of Parent Class A Common Stock, Parent Class V Common Stock or Purchaser Class B Units, as applicable, delivered to such Member pursuant to the terms of this Agreement.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Parent and Purchaser hereby represent and warrant to the MSP Purchased Companies and the Members that, except as disclosed in Parent SEC Documents:
6.1 Corporate Existence and Power.
(a) Parent is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Parent has (i) all power and authority, corporate and otherwise, and (ii) all governmental licenses, franchises, Permits, authorizations, consents and approvals required to own and operate its properties and assets and to carry on its business as presently conducted, except in the case of clause (ii), where the failure to have any such licenses, franchises, Permits, authorizations, consents or approvals would not reasonably be expected to be material to Parent. Parent has not entered into any definitive agreements with respect to any merger, consolidation, sale of all or substantially all of its assets, reorganization, recapitalization, dissolution or liquidation. Parent has no Subsidiaries other than Purchaser.
(b) Purchaser is a limited liability company duly formed, validly existing and in good standing under the laws of the State of Delaware. Purchaser has all power and authority, corporate and otherwise, and all governmental licenses, franchises, Permits, authorizations, consents and approvals required to own and operate its properties and assets and to carry on its business as presently conducted. Purchaser has not entered into any definitive agreements with respect to any merger, consolidation, sale of all or substantially all of its assets, reorganization, recapitalization, dissolution or liquidation. Purchaser has no Subsidiaries.
6.2 Corporate Authorization. The execution, delivery and performance by Parent and Purchaser of this Agreement and the Additional Agreements and the consummation by Parent and Purchaser of the transactions contemplated hereby and thereby are within the powers of Parent and Purchaser and have been duly authorized by all necessary action on the part of each of Parent and Purchaser, including by each of Parent’s and Purchaser’s respective board of directors and equityholders to the extent required by their Organizational Documents, the DGCL, any other applicable Law or any contract to which Purchaser or any of its Affiliates is a party or by which or its securities are bound. This Agreement has been duly executed and delivered by each of Parent and Purchaser and it constitutes, and upon their execution and delivery, the Additional Agreements will constitute, a valid and legally binding agreement of each of Parent and Purchaser, enforceable against them in accordance with their respective terms, as the case may be, except as such may be limited by bankruptcy, insolvency, reorganization or other Laws affecting creditors’ rights generally (if and when such Laws would apply) and by general equitable principles.
6.3 Governmental Approval. Except as would not reasonably be expected to be, individually or in the aggregate, material to Parent and Purchaser taken as a whole, and other than contemplated by this Agreement, neither the execution, delivery nor performance of this Agreement by Parent or Purchaser requires any consent, approval, license or other action by or in respect of, or registration, declaration or filing with any Authority.
6.4 Non-Contravention. Except as would not reasonably be expected to be, individually or in the aggregate, material to Parent and Purchaser taken as a whole, the execution, delivery and performance by Parent and Purchaser of this Agreement and the Additional Agreements to which they are a party do not and will not, (a) provided that holders of fewer than the number of shares of Parent Common Stock specified in Parent’s Organizational Documents exercise their conversion rights with respect to the Acquisition, contravene or conflict with the organizational or constitutive documents of Parent or Purchaser; or (b) contravene or conflict with or constitute a violation of any provision of any Law, judgment, injunction, order, writ, or decree binding upon Parent or Purchaser.
6.5 Finders’ Fees. Except for the Business Combination Fees, there is no investment banker, broker, finder or other intermediary which has been retained by or is authorized to act on behalf of any Parent Party or its Affiliates who might be entitled to any fee or commission from the MSP Companies or any of their Affiliates upon consummation of the transactions contemplated by this Agreement or any of the Additional Agreements.
6.6 Issuance of Equity Consideration. The Equity Consideration (including the Escrow Consideration), when issued in accordance with this Agreement, will be duly authorized and validly issued, and will be fully paid and nonassessable.
6.7 Capitalization.
(a) As of the date of this Agreement, and as of immediately prior to the adoption of the SPAC Charter, the authorized share capital of Parent consists of 100,000,000 shares of Parent Class A Common Stock, 10,000 shares of Parent Class B Common Stock and 10,000,000 preferred shares, par value $0.0001 per share, of which 23,650,000 shares of Parent Class A Common Stock, 5,750,000 shares of Parent Class B Common Stock and 0 preferred shares are issued and outstanding as of the date hereof. In addition, 11,825,000 Parent Warrants are issued and outstanding as of the date hereof, and will be outstanding as of immediately prior to the Closing, including 11,500,000 Parent Public Warrants and 325,000 Private Placement Warrants. All outstanding shares of Parent Common Stock are duly authorized, validly issued, fully paid and nonassessable. Except as set forth on Schedule 6.7, there are no outstanding contractual obligations of Parent to repurchase, redeem or otherwise acquire any shares of Parent Common Stock or any capital equity of Parent. Other than as set forth in this Section 6.7, there are no outstanding or authorized options, warrants, convertible securities or other rights, agreements, arrangements or commitments of any character relating to the capital stock of Parent or obligating Parent to issue or sell any shares of capital stock of, or any other interest in, Parent. Parent does not have outstanding or authorized any stock appreciation, phantom stock, profit participation or similar rights. Except as set forth on Schedule 6.7, there are no voting trusts, stockholder agreements, proxies or other agreements or understandings in effect with respect to the voting or transfer of any shares of capital stock of Parent. There are no outstanding contractual obligations of Parent to provide funds to or make any investment (in the form of a loan, capital contribution or otherwise) in, any other Person.
(b) Parent owns 100% of the share capital of Purchaser. All outstanding membership interest units of Purchaser are duly authorized, validly issued and nonassessable. Except as set forth on Schedule 6.7 or as contemplated by this Agreement, there are no outstanding contractual obligations of Purchaser to repurchase, redeem or otherwise acquire any membership interests or any capital equity of Purchaser. Other than as set forth in this Section 6.7 or as contemplated by this Agreement, there are no outstanding or authorized options, warrants, convertible securities or other rights, agreements, arrangements or commitments of any character relating to the capital stock of Purchaser or obligating Purchaser to issue or sell any shares of capital stock of, or any other interest in, Purchaser. Purchaser does not have outstanding or authorized any profit participation or similar rights. Except as set forth on Schedule 6.7, there are no voting trusts, member agreements, proxies or other agreements or understandings in effect with respect to the voting or transfer of any equity interests of Purchaser. There are no outstanding contractual obligations of Purchaser to provide funds to or make any investment (in the form of a loan, capital contribution or otherwise) in, any other Person.
6.8 Trust Fund. As of the date of this Agreement, Parent has approximately $230,000,000 in the trust fund established by Parent for the benefit of its Public Stockholders (the “Trust Fund”) in a trust account at J.P. Morgan Chase Bank, N.A (the “Trust Account”), and such monies are invested in “government securities” (as such term is defined in the Investment Company Act of 1940, as amended) and held in trust by Continental Stock Transfer & Trust Company (the “Trustee”) pursuant to the Investment Management Trust Agreement, dated as of August 13, 2020, between Parent and the Trustee (the “Trust Agreement”). The Trust Agreement is valid and in full force and effect and enforceable in accordance with its terms and has not been amended or modified. There are no separate agreements, side letters or other agreements or understandings (whether written or unwritten, express or implied) that would cause the description of the Trust Agreement in the Parent SEC Documents to be inaccurate in any material respect and/or that would entitle any Person (other than the payment of the Business Combination Fees and holders of Parent Public Shares who shall have elected to redeem their shares of Parent Common Stock pursuant to the Certificate of Incorporation), to any portion of the proceeds in the Trust Fund. Prior to the Closing, none of the funds held in the Trust Account may be released except (a) to pay tax obligations from any interest income earned in the Trust Account; or (b) to redeem shares of Parent Common Stock in accordance with the provisions of the Certificate of Incorporation.
6.9 Employees; Purchaser Benefit Plans. Other than as described in the Parent SEC Documents, neither Parent nor Purchaser has ever had any employees. Other than reimbursement of any out-of-pocket expenses incurred by Parent’s or Purchaser’s officers and directors in connection with activities on Parent’s or Purchaser’s behalf in an aggregate amount not in excess of the amount of cash held by Purchaser outside of the Trust Account, there are no Purchaser Plans (as defined below) and neither Parent nor Purchaser has any unsatisfied material liability with respect to any employee. Neither the execution and delivery of this Agreement nor the consummation of the Business Combination alone or with any other event will (a) result in any payment (including severance, unemployment compensation, golden parachute, bonus or otherwise) becoming due to any current or former director, officer, employee or other individual service provider of Parent or Purchaser, or (b) result in the acceleration of the time of payment or vesting of any such benefits. “Purchaser Plan” means each material “employee benefit plan” (as defined in Section 3(3) of ERISA), employment, compensation, retention, relocation, vacation, change in control, transaction bonus, bonus, deferred compensation, equity-based or non-equity- based incentive, severance, health and welfare, retirement or other fringe benefit or compensatory plan, policy, program or written agreement maintained or contributed to, or required to be maintained or contributed to, by any of the MSP Companies in respect of any current or former directors, officers, consultants, independent contractors or employees of any of the MSP Companies, or with respect to which any of the MSP Companies could incur or could have incurred any direct or indirect, fixed or contingent liability (each a “Purchaser Plan” and collectively, the “Purchaser Plans”).
6.10 Information Supplied. None of the information supplied or to be supplied by Parent and Purchaser in writing expressly for inclusion or incorporation by reference in the filings with the SEC and mailings to Parent’s stockholders, in each case with respect to the solicitation of proxies to approve the transactions contemplated by this Agreement will, at the date of filing and/or mailing, as the case may be, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading (subject to the qualifications and limitations set forth in the materials provided by Parent or Purchaser or that is included in Parent SEC Documents).
6.11 Listing. The Parent Units, Parent Class A Common Stock and Parent Public Warrants are listed on Nasdaq, with trading tickers LCAPU, LCAP and LCAPW. There is no action or proceeding pending or, to the knowledge of Parent, threatened against Purchaser by Nasdaq with respect to any intention by such entity to prohibit or terminate the listing of Parent Units, Parent Class A Common Stock and Parent Warrants on Nasdaq.
6.12 Reporting Company. Parent is a publicly-held company subject to reporting obligations pursuant to Section 13 of the Exchange Act, and the shares of Parent Common Stock are registered pursuant to Section 12(b) of the Exchange Act. There is no legal proceeding pending or threatened in writing against Parent by the SEC with respect to the deregistration of Parent Common Stock under the Exchange Act. Parent has taken no action that is designed to terminate the registration of Parent Common Stock under the Exchange Act.
6.13 Undisclosed Liabilities. Parent has no liabilities, debts or obligations of any nature (whether accrued, fixed or contingent, liquidated or unliquidated, asserted or unasserted, or otherwise) of a nature required to be disclosed on a balance sheet or in the related notes to Parent Financial Statements that are, individually or in the aggregate, material to the business, results of operations or financial condition of Parent, except: (a) liabilities provided for in or otherwise disclosed in the balance sheet included in the most recent Parent Financial Statements or in the notes to the most recent Parent Financial Statements, (b) such liabilities arising in the ordinary course of business consistent with past practice since the date of the most recent Purchaser Financial Statements and (c) arising under this Agreement and/or the performance by Parent of its obligations hereunder, including transaction expenses, in each case which would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect. Purchaser has no liabilities.
6.14 Parent SEC Documents and Parent Financial Statements.
(a) Parent has timely filed all forms, reports, schedules, statements and other documents, including any exhibits thereto, required to be filed or furnished by Parent with the SEC since Parent’s formation under the Exchange Act or the Securities Act, together with any amendments, restatements or supplements thereto (the “Parent SEC Documents”). The Parent SEC Documents were prepared in all material respects in accordance with the requirements of the Securities Act, the Exchange Act, and the Sarbanes-Oxley Act, as the case may be, and the rules and regulations thereunder. The Parent SEC Documents did not and will not, at the time they were or are filed, as the case may be, with the SEC (except to the extent that information contained in any Parent SEC Document has been or is revised or superseded by a later filed Parent SEC Document, then on the date of such filing) contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. As used in this Section 6.14(a), the term “file” shall be broadly construed to include any manner in which a document or information is furnished, supplied or otherwise made available to the SEC.
(b) Each of the financial statements (including, in each case, any notes thereto) contained in the Parent SEC Documents was prepared in accordance with U.S. GAAP applied on a consistent basis throughout the periods indicated (except as may be indicated in the notes thereto or, in the case of unaudited statements, as permitted by Form 10-Q of the SEC) and each fairly presents, in all material respects, the financial position, results of operations and cash flows of Parent as at the respective dates thereof and for the respective periods indicated therein. Parent has no off-balance sheet arrangements.
6.15 Absence of Certain Changes. Since December 31, 2020, (a) there has not been any Parent Material Adverse Effect and (b) Parent has not conducted any business other than its formation, the public offering of its securities (and the related private offerings), the filing of public reports under the Exchange Act, the search for, negotiation of, and other preparation for the execution of, a Business Combination and in connection with the execution and delivery of this Agreement and the Additional Agreements, the consummation of the transactions contemplated hereby and thereby and other activities in each case that are incidental thereto.
6.16 [INTENTIONALLY OMITTED].
6.17 Sponsor Agreement. Parent has delivered to the Members’ Representative a true, correct and complete copy of the Sponsor Agreement. The Sponsor Agreement is in full force and effect and has not been withdrawn or terminated, or otherwise amended or modified, in any respect, and no withdrawal, termination, amendment or modification is contemplated by Parent. The Sponsor Agreement is a legal, valid and binding obligation of Parent and, to the knowledge of Parent, each other party thereto and neither the execution or delivery by any party thereto, nor the performance of any party’s obligations under, the Sponsor Agreement violates any provision of, or results in the breach of or default under, or require any filing, registration or qualification under, any applicable Law. No event has occurred that, with or without notice, lapse of time or both, would constitute a default or breach on the part of Parent under any material term or condition of the Sponsor Agreement.
6.18 Related Party Transactions. Except as described in the Parent SEC Documents, there are no transactions, contracts, side letters, arrangements or understandings between Parent or Purchaser, on the one hand, and any director, officer, employee, stockholder, warrant holder or Affiliate of Parent or Purchaser.
6.19 Investment Company Act. Neither Parent nor any of its Subsidiaries is an “investment company” within the meaning of the Investment Company Act of 1940, as amended.
6.20 Parent Stockholders. To the knowledge of Parent and Purchaser, no foreign person (as defined in 31 C.F.R. Part 800.224) in which the national or subnational governments of a single foreign state have a substantial interest (as defined in 31 C.F.R. Part 800.244) will acquire a substantial interest in the MSP Companies as a result of the Acquisition such that a declaration to the Committee on Foreign Investment in the United States would be mandatory under 31 C.F.R. Part 800.401, and no foreign person will have control (as defined in 31 C.F.R. Part 800.208) over the MSP Companies post-Closing.
6.21 Parent Investigations. Parent acknowledges that it and its Representatives have received access to such books and records, facilities, equipment, contracts and other assets of the MSP Companies which they and their Representatives have desired or requested to review, and that they and their Representatives have had full opportunity to meet with the management of the MSP Companies and to discuss the business and assets of the MSP Companies. Parent acknowledges and agrees that it has made its own inquiry and investigation into, and, based thereon, has formed an independent judgment concerning, the MSP Companies and the Business.
6.22 No Other Representations and Warranties. Except as provided in this Article VI, neither Purchaser or any of its Affiliates nor any of their respective managers, directors, officers, employees, equity holders, partners, members or representatives has made, or is making, any representation or warranty whatsoever to the MSP Companies or the Members.
ARTICLE VII
COVENANTS OF THE MSP COMPANIES PENDING CLOSING
The MSP Purchased Companies covenant and agree that:
7.1 Conduct of the Business.
(a) From the date hereof through the earlier of the Closing Date and the termination of this Agreement in accordance with its terms, the MSP Companies shall, except as (i) expressly contemplated by this Agreement, (ii) set forth on Schedule 7.1, or (iii) consented to by Parent (which consent shall not be unreasonably withheld, conditioned, delayed, or denied), use their commercially reasonable efforts to conduct the Business only in the ordinary course (including the payment of accounts payable and the collection of accounts receivable), consistent with past practices (including, for the avoidance of doubt, recent past practice in light of COVID- 19; provided, that any commercially reasonable action taken, or omitted to be taken, that directly relates to, or arises directly out of, COVID-19 shall be deemed to be in the ordinary course of business), and shall not enter into any material transactions without the prior written consent of Parent (such consent not to be unreasonably withheld, conditioned, delayed, or denied), and shall use their commercially reasonable efforts to preserve intact their business relationships with employees, clients, suppliers and other third parties. Notwithstanding anything to the contrary contained herein, nothing herein shall prevent the MSP Companies from taking or failing to take any action, including the establishment of any policy, procedure or protocol, in response to COVID-19 or any COVID-19 Measures and (x) no such actions or failure to take such actions shall be deemed to violate or breach this Agreement in any way, (y) all such actions or failure to take such actions shall be deemed to constitute an action taken in the ordinary course of business and (z) no such actions or failure to take such actions shall serve as a basis for Parent to terminate this Agreement or assert that any of the conditions to the Closing contained herein have not been satisfied.
(b) Without limiting the generality of the foregoing, from the date hereof through the earlier of the Closing Date and the termination of this Agreement in accordance with its terms, without Parent’s prior written consent (which shall not be unreasonably withheld, conditioned, delayed, or denied), each MSP Company shall not undertake the following, except (x) as expressly contemplated by this Agreement, (y) in the ordinary course of business consistent with past practices, (ii) as set forth on Schedule 7.1, or (z) as required by Law (provided, however, that no action listed in subclauses (i) through (xvi) of Section 7.1(b) that is specifically consented to by Parent shall be deemed a breach of (x) Section 7.1(a) or (y) any other subclause of Section 7.1(b)):
(i) amend, modify or supplement its certificate of formation, operating agreement or other Organizational Documents;
(ii) amend, waive any material rights under or provision of, terminate prior to its scheduled expiration date, or otherwise compromise in any material way, any Material Contract or enter into any Contract that, if in effect of the date hereof, would constitute a Material Contact;
(iii) sell, lease, license or otherwise dispose of any material assets of the MSP Companies, taken as a whole, except (A) pursuant to existing Contracts or commitments disclosed herein and (B) for licenses granted in the ordinary course of business;
(iv) pay, declare, or agree to pay any distributions with respect to the Interests, or pay, declare or agree to pay any other payments to any Member of the MSP Companies;
(v) except as otherwise required pursuant to any MSP Company Plan in effect on the date of this Agreement, (A) grant any material increase in salary to any director or officer of any of the MSP Companies or (B) change the bonus or profit-sharing policies of any of the MSP Companies, other than changes that do not result in a material increase in the cost of such benefits;
(vi) obtain or incur any loan or other Indebtedness, excluding drawings under existing lines of credit;
(vii) grant or incur any material Lien, except for Permitted Liens, on the assets of the MSP Companies;
(viii) delay, accelerate or cancel any receivables or Indebtedness owed to the MSP Companies or write off or make further reserves against the same, except, in each case, in the ordinary course of business consistent with past practice or as required by U.S. GAAP;
(ix) except as contemplated by this Agreement and the Additional Agreements, merge or consolidate with or acquire any other Person or be acquired by any other Person;
(x) voluntarily fail to maintain insurance policies covering the assets of the MSP Companies in a form and amount consistent with past practices;
(xi) make any material change in its accounting principles or methods or write down the value of any Inventory or assets of the MSP Companies, in each case, except as required by U.S. GAAP;
(xii) change the principal place of business or jurisdiction of organization of the MSP Companies;
(xiii) make any loans, other than (A) travel or other expense advances to employees in the ordinary course of business not to exceed $10,000 individually or $100,000 in the aggregate and (B) prepayments and deposits paid to suppliers of the MSP Companies in the ordinary course of business;
(xiv) except as contemplated by this Agreement and the Additional Agreements, issue, redeem or repurchase any Interests or other securities in the MSP Companies or issue any securities exchangeable for or convertible into Interests in the MSP Companies;
(xv) make or change any material Tax election (other than with respect to MSP Recovery of Puerto Rico, LLC in which case a Tax election may be made without Parent’s prior consent), change any annual Tax accounting periods, amend any material Tax Return, prepare or file any Tax Return materially inconsistent with past practice or, on any such Tax Return, take any position, make any election, or adopt any method that is materially inconsistent with positions taken, elections made or methods used in preparing or filing similar Tax Returns in prior periods (including materially inconsistent positions, elections or methods that would have the effect of deferring income to periods ending after the Closing Date or accelerating deductions to periods ending on or before the Closing Date); settle or otherwise compromise any material Claim relating to Taxes, enter into any closing agreement or similar agreement relating to Taxes, otherwise settle any material dispute relating to Taxes, or request any ruling or similar guidance with respect to a material amount of Taxes; provided, that Parent’s prior consent shall not be required with respect to any of the foregoing actions in this clause (xv) with respect to any MSP Company where a Person who is not a party to this Agreement is able to undertake such action with respect to such MSP Company without the consent or any action on the part of any party to this Agreement; or
(xvi) agree to do any of the foregoing.
7.2 Financial Statements; Additional Financial Information.
(a) As promptly as practicable following the date of this Agreement, the Members’ Representative shall cause to be delivered to Parent the audited combined and/or consolidated (as determined to be applicable) financial statements of the MSP Companies as of and for the fiscal years ended December 31, 2020 and 2019, consisting of the audited combined and/or consolidated (as determined to be applicable) balance sheets as of such dates, the audited combined and/or consolidated (as determined to be applicable) income statements for the twelve (12) month periods ended on such dates, the audited combined and/or consolidated (as determined to be applicable) cash flow statements for the twelve (12) month periods ended on such dates, and the corresponding notes to such combined and/or consolidated (as determined to be applicable) financial statements, accompanied by a report of an independent public accounting firm qualified to practice before the Public Company Accounting Oversight Board (collectively, the “Company Financial Statements” and the balance sheet as of December 31, 2020 included therein, the “Balance Sheet”).
(b) In addition to the Company Financial Statements to be delivered to the Parent pursuant to Section 7.2(a), the Members’ Representative shall deliver to Parent, as soon as practicable, unaudited interim financial statements for the six (6) month periods ended June 30, 2021 and 2020, consisting of the combined and/or consolidated (as determined to be applicable) balance sheets as of such dates, the combined and/or consolidated (as determined to be applicable) income statements for the six (6) month periods ended on such dates, and the combined and/or consolidated (as determined to be applicable) cash flow statements for the six (6) month periods ended on such dates (collectively, the “June Interim Financial Statements”). The June Interim Financial Statements shall be prepared under U.S. GAAP and in accordance with requirements of the Public Company Accounting Oversight Board for public companies. After the date hereof and prior to the Closing, the Members’ Representative shall provide Parent with combined and/or consolidated (as determined to be applicable) interim financial information of the MSP Companies no later than forty (40) calendar days following the end of each three-month quarterly period, and consolidated annual financial information for the MSP Companies no later than seventy-five (75) calendar days following the end of each fiscal year, as applicable, all prepared under U.S. GAAP in accordance with requirements of the Public Company Accounting Oversight Board for public companies (the “Required Financial Statements”). The Interim Financial Statements and the Required Financial Statements shall fairly present the financial position and results of operations of the MSP Companies as of the date or for the periods indicated, prepared under U.S. GAAP in accordance with requirements of the Public Company Accounting Oversight Board, except as otherwise indicated in such statements, for the absence of certain footnotes and subject to year- end audit adjustments. The Members’ Representative will promptly provide additional financial information reasonably requested by Parent and required for inclusion in the Proxy Statement and any other filings to be made by Parent with the SEC.
7.3 Key Employees of the MSP Companies. The MSP Companies shall use their commercially reasonable efforts to enter into the Employment and Restrictive Covenant Agreements with each of the Key Employees prior to the Closing Date.
7.4 Tax Matters.
(a) The Parties hereby acknowledge and agree that the transfer of the Interests shall be treated for federal and applicable state and local income Tax purposes as follows: (a) the Purchaser shall be treated as a continuation of MSP Recovery LLC (the “Continuing Partnership”); (b) each Member, to the extent receiving Equity Consideration, shall be treated as transferring their Interests to the Purchaser in a transaction governed by Section 721; (c) any gain or loss recognized by a Member in connection with such transactions shall be capital gain or loss (subject to Section 751 of the Code); (d) Parent shall be treated as purchasing the proportionate, undivided interest in the assets of the MSP Companies from each Member; and (e) the Continuing Partnership (or, as applicable, its members) shall be entitled to adjust the basis of the assets of the MSP Purchased Companies to fair market value as provided in, as applicable, Section 734 and Section 743 as determined pursuant to this Section 7.4(a). Each of the parties hereto shall act consistently with the provisions of this Agreement at all times and for all purposes, including for purposes of reporting the transactions contemplated by this Agreement to the IRS and any other state or local taxing authority having jurisdiction over the transactions contemplated by this Agreement. Purchaser and the Members further agree not to take any position on any Tax Return or in any administrative or judicial proceeding with respect to any such Tax Return inconsistent with such treatment except as otherwise required by applicable Law or a determination of the applicable Taxing Authority that is final (including a determination within the meaning of Section 1313(a) of the Code). The Members shall not cause or permit the Members’ Representative to knowingly or voluntarily file any other income or informational Tax Return or statement inconsistent with the provisions of this Agreement except as otherwise required by applicable Law or a determination of the applicable Taxing Authority that is final (including a determination within the meaning of Section 1313(a) of the Code). In furtherance of the foregoing, at least 30 days prior to the Closing Date, Parent and the Members’ Representative shall agree on the form of the Purchase Price Allocation Schedule (as defined below) and the principles on which such allocations shall be made (the “Purchase Price Allocation Principles”). Furthermore, within 90 days after the Closing Date, Purchaser shall allocate the Purchase Price among the undivided interest in the assets of the MSP Companies (the “Purchase Price Allocation Schedule”). The Purchase Price Allocation Schedule will (a) be subject to Members’ Representative’s review and comment; (b) incorporate any reasonable comments made by Members’ Representative; and (c) be prepared in accordance with the Purchase Price Allocation Principles and applicable provisions of the Code. Purchaser, the MSP Companies, and the Members will file all Tax Returns (and cause their respective Affiliates to file all Tax Returns) consistently with the Purchase Price Allocation Schedule (as appropriately adjusted) and will not take any position during the course of any audit or other legal proceeding that is inconsistent with such election, forms or schedule, unless (i) agreed by the Parties or (ii) required by applicable Law or a determination of the applicable Taxing Authority that is final (including a determination within the meaning of Section 1313(a)).
(b) The Members’ Representative shall properly prepare or cause to be properly prepared and timely file or cause to be timely filed, at the cost of the MSP Companies, (i) all Tax Returns of the MSP Companies that are due in the Pre-Closing Tax Period, and (ii) all Pass- Through Tax Returns for any Pre-Closing Tax Period that are due following the Closing Date, including the final Form 1065 partnership return for the MSP Companies for the tax period ending on the Closing Date (each, a “Pre-Closing Tax Return” and, collectively, the “Pre-Closing Tax Returns”). The Members’ Representative shall pay or cause to be paid all Taxes due with respect to the periods covered by such Pre-Closing Tax Returns. Each Pre-Closing Tax Return filed after the Closing Date shall be prepared in a manner consistent with the MSP Companies’ past practices except as otherwise required by applicable Law. Each Pre-Closing Tax Return filed after the Closing Date (taking into account applicable extensions) shall be submitted to Parent no later than thirty (30) days prior to the due date for filing such Tax Return (taking into account applicable extensions) for review. The Members’ Representative shall consider in good faith all reasonable comments received from Parent no later than ten (10) days prior to the due date for filing any such Tax Return (taking into account applicable extensions) and shall not file such Tax Return without the consent of Parent, such consent not to be unreasonably withheld, conditioned, or delayed. Except as otherwise required by law or would not reasonably be expected to have a material effect on Parent, no filed Pre-Closing Tax Return may be amended after the Closing without the prior written consent of Parent, which consent shall not be unreasonably withheld, conditioned or delayed; provided that in all cases the Members’ Representative shall submit to Parent no later than thirty (30) days prior to filing any amended Pre-Closing Tax Return for review and comment by Parent and the Members’ Representative shall consider in good faith all reasonable comments received from Parent within twenty (20) days of delivering any such Tax Returns to Parent.
(c) Parent shall prepare and timely file, or cause to be prepared and timely filed, all Tax Returns of the MSP Companies due after the Closing Date (i) which include taxable periods ending on or prior to the Closing Date or (ii) with respect to any Tax period which begins before or on (and including) the Closing Date and which ends on (and including) the Closing Date (any such period described in (ii), a “Straddle Period,” and any such Tax Return described in (i) or (ii), a “Straddle Return”) other than Pre-Closing Tax Returns. Any Straddle Return shall be prepared and filed in a manner consistent with the most recent past practice of the MSP Companies. For purposes of determining the amount of Taxes allocable to the portion of the Straddle Period ending on (and including) the Closing Date (the “Pre-Closing Portion”), (i) in the case of any Taxes (other than Taxes based upon or related to income or receipts) that are imposed on a periodic basis and are payable for a Tax period that includes (but does not end on) the Closing Date, the portion of such Tax which relates to the portion of the Straddle Period ending on (and including) the Closing Date shall be deemed to be the amount of such Tax for the entire taxable period multiplied by a fraction the numerator of which is the number of days in the taxable period ending on the Closing Date and the denominator of which is the number of days in such Straddle Period; and (ii) in the case of any Taxes based upon or related to income or receipts, be determined based on an “interim closing of the books” as of the close of business on the Closing Date (and for such purpose, the taxable period of any partnership or other pass-through entity in which any MSP Company holds a beneficial interest shall be deemed to terminate at such time). For purposes of preparing any Pass-Through Tax Return that is a Straddle Return, each Member’s and each distributive share of all items of profits, losses and any other items of income, gain, loss or deduction shall be determined by closing the books of the MSP Companies on an interim basis as of the end of the day on the Closing Date and such items shall be allocated to each Member in accordance with Section 706(c)(2) of the Code and Treasury Regulations thereunder using the interim closing method and calendar day convention as described in Treasury Regulations Section 1.706-4(c).
(d) With respect to any Straddle Return, the MSP Companies shall deliver, at least 30 days prior to the due date for the filing of such Straddle Return (taking into account extensions), to Members’ Representative a statement setting forth the amount of the Pre-Closing Portion of such Taxes and a copy of each such Straddle Return for the Members’ Representative’s approval, such approval not to be unreasonably withheld, conditioned or delayed. The Members’ Representative and Purchaser agree to consult and resolve in good faith any issue arising as a result of the review of such Straddle Returns and statements prior to the date on which such Straddle Returns are required to be filed.
(e) Parent, Purchaser, the Members, the Members’ Representative and the MSP Companies shall cooperate fully, as and to the extent reasonably requested by the other party, in connection with the preparation and filing of Tax Returns pursuant to this Section 7.4. Such cooperation shall include the retention and (upon the other party’s request) the provision of records and information which are reasonably relevant to the preparation and filing of any such Tax Return. Purchaser and the Members shall (i) retain all books and records with respect to Tax matters pertinent to the MSP Purchased Companies relating to any taxable period beginning before the Closing Date until the expiration of the applicable statute of limitations of the respective taxable periods, and abide by all record retention agreements entered into with any Taxing Authority; and (ii) give the other party reasonable written notice prior to transferring, destroying or discarding any such books and records and, if the other party so requests, the MSP Purchased Companies, Purchaser or the Members, as the case may be, shall allow the other party to take possession of such books and records.
(f) Within thirty (30) business days after the Purchaser’s, any MSP Companies’, or any Member’s receipt of a notice of audit, assessment or other proceeding respecting a Pre-Closing Tax Return, the Members’ Representative may elect with respect to such audit, by written notice to Parent, to contest the audit or assessment in the name of the MSP Companies. If the Members’ Representative so elects, they shall be solely responsible for the defense of the item or items at issue, except that Parent agrees to cooperate, and Parent will cause the Purchaser and the MSP Companies to cooperate, in the contest of such audit or assessment by making relevant documents and employees available to the Members’ Representative, and to execute such documents (including powers of attorney) as may be reasonably necessary to allow the Members’ Representative to conduct the defense. The Members shall bear all costs relating to such defense. If the Members’ Representative elects to conduct a defense, all decisions with respect to the negotiation, settlement, or litigation of the item or items at issue shall be made by the Members’ Representative and shall be binding upon Parent, except that the Members’ Representative shall be required to obtain the prior written consent of Parent before agreeing to any adjustment, or making any Tax election, that will or may create an increase in Taxes for the MSP Companies or Parent in respect of any period ending after the Closing Date and shall indemnify Parent and/or the MSP Companies or, and hold Parent and/or the MSP Companies harmless against, any such increase. Parent may control and contest any such Tax proceeding (1) for which the Members’ Representative would otherwise have the right to control under this Section 7.4(f) if the Members’ Representative elects in writing not to conduct such Tax proceeding (in which case the cost and expense of such control and contest shall be borne by MSP Companies) and (2) in respect of any MSP Company with respect to any income Tax matters for any Straddle Period; provided, further, however, that if Parent exercises its right to control any such Tax proceeding under the preceding clause, the Members’ Representative shall have the right, at the cost and expense of the MSP Companies, to participate in any such Tax proceeding and Parent shall (x) provide the Members’ Representative with a timely and reasonably detailed account of each stage of such Tax proceeding, (y) not settle, compromise or abandon any such Tax proceeding without obtaining the prior written consent of the Members’ Representative, which consent shall not be unreasonably withheld, conditioned or delayed, and (z) consult with the Members’ Representative in good faith concerning the appropriate strategy for contesting such Tax proceeding.
(g) Without the prior written consent of the Members’ Representative, Parent, Purchaser, and the MSP Companies shall not amend, file, refile, revoke or otherwise modify any Tax Return or Tax election, enter into any closing agreement, settle any claim with respect to Taxes, surrender any right to claim a refund of Taxes, or take any similar action if such action would have the effect of increasing any Tax liability of the Members for any Pre-Closing Tax Period or Straddle Period. Parent shall (and Parent shall cause the Purchaser to), and shall cause all of its respective eligible Subsidiaries, if any, to, make or cause to remain in effect, as applicable, a valid election under Section 754 of the Code (and any similar provision of state, local or non-U.S. Law) for any taxable period that includes the Closing Date (and, with respect to the Purchaser and its eligible Subsidiaries, if any, for any taxable period that includes the date of any Exchange (as defined in the Purchaser A&R LLCA)). Neither the Purchaser, nor any MSP Company shall make a “push-out election” pursuant to Section 6226 of the Code (or pursuant to a comparable state or local audit procedure) for the Pre-Closing Tax Period or the Pre-Closing Portion of the Straddle Period, without the prior written consent of the Members’ Representative.
(h) All transfer, documentary, sales, use, stamp, registration, conveyance or similar Taxes or charges arising out of the transactions contemplated hereby and all charges for or in connection with the recording of any document, instrument or certificate contemplated hereby shall be paid 50% by Purchaser and 50% by the Members if and when due. The Members will file, or cause the Purchaser to file, all necessary Tax Returns and other documentation in connection with the Taxes and charges encompassed in this Section 7.4, and the costs of preparing and making such filing shall be paid 50% by Purchaser and 50% by the Members if and when due.
(i) The Parties acknowledge and agree that any payments made pursuant to the Tax Receivables Agreement shall be treated as an adjustment to the Purchase Price by the Parties for applicable income Tax purposes unless otherwise required by Law.
7.5 Efforts to Obtain Consents. The MSP Companies shall use their commercially reasonable efforts to obtain each third-party consent required in connection with the consummation of the transactions contemplated hereby as promptly as practicable hereafter.
ARTICLE VIII
COVENANTS OF THE PARTIES
8.1 Reasonable Best Efforts; Further Assurances.
(a) Without limiting any covenant contained in this Agreement, from the date hereof until the earlier of the termination of this Agreement and the Closing Date, the Parties hereto shall (i) use their reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things reasonably necessary, proper or advisable or as another Party may reasonably request to consummate and make effective as promptly as practicable the transactions contemplated by this Agreement (including the satisfaction, but not waiver, of the Closing conditions set forth in Article X), (ii) execute and deliver, or cause to be executed and delivered, such other documents, certificates, agreements and other writings and take such other actions as may be reasonably necessary or desirable in order to consummate or implement expeditiously each of the transactions contemplated by this Agreement, and (iii) use their reasonable best efforts to obtain each material third-party consent and approval required to be obtained in order to consummate the transactions set forth under this Agreement as promptly as practicable hereafter.
(b) In furtherance and not in limitation of this Section 8.1, to the extent required under any Laws that are designed to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade, including the HSR Act (“Antitrust Laws”), each Party agrees to promptly make any required filings or application under Antitrust Laws, as applicable, and with respect to the HSR Act make any required filings no later than fifteen (15) Business Days after the date of this Agreement. The applicable filing fees with respect to any and all notifications required under the HSR Act in order to consummate the transactions contemplated hereby shall be paid 100% by Parent when due. The Parties agree to supply as promptly as reasonably practicable any additional information and documentary material that may be requested pursuant to Antitrust Laws and to take all other actions reasonably necessary, proper or advisable to cause the expiration or termination of the applicable waiting periods or obtain required approvals, as applicable under Antitrust Laws as soon as practicable, including by requesting early termination of the waiting period provided for under the HSR Act. Each Party shall, in connection with its efforts to obtain all requisite approvals and authorizations for the Acquisition under any Antitrust Law, use its reasonable best efforts to: (i) cooperate in all respects with each other Party or its Affiliates in connection with any filing or submission and in connection with any investigation or other inquiry, including any proceeding initiated by a private Person; (ii) keep the other Parties reasonably informed of any communication received by such Party or its Representatives from, or given by such Party or its Representatives to, any Authority and of any communication received or given in connection with any proceeding by a private Person, in each case regarding the Acquisition; (iii) permit a Representative of the other Parties and their respective outside counsel to review any communication given by it to, and consult with each other in advance of any meeting or conference with, any Authority or, in connection with any proceeding by a private Person, with any other Person, and to the extent permitted by such Authority or other Person, give a Representative or Representatives of the other Parties the opportunity to attend and participate in such meetings and conferences; (iv) in the event a Party’s Representative is prohibited from participating in or attending any meetings or conferences, the other Parties shall keep such Party promptly and reasonably apprised with respect thereto; and (v) cooperate in the filing of any memoranda, white papers, filings, correspondence or other written communications explaining or defending the transactions contemplated hereby, articulating any regulatory or competitive argument, and/or responding to requests or objections made by any Authority. The Parties shall cooperate in good faith with each other and use reasonable best efforts to undertake promptly all action required to complete lawfully the transactions contemplated by this Agreement as soon as practicable (but in any event prior to the Outside Closing Date). The entry by any Authority in any Action of an Order permitting the consummation of the transactions contemplated hereby but requiring any of the assets or lines of business of Parent to be sold, licensed or otherwise disposed or held separate thereafter (including the business and assets of the MSP Companies and its Subsidiaries) shall not be deemed a failure to satisfy any condition specified in Article X.
(c) No Party hereto shall take any action that could reasonably be expected to adversely affect or materially delay the approval of any Authority of any required filings or applications under Antitrust Laws.
8.2 Access to Information.
(a) From the date hereof through the Closing Date or the earlier termination of this Agreement in accordance with its terms, and subject to confidentiality obligations and similar restrictions that may be applicable to information furnished to the MSP Companies by third parties that may be in the MSP Companies’ possession from time to time, and except for any information which (x) relates to interactions with prospective buyers of the MSP Companies or the negotiation of this Agreement or the Acquisition, (y) is prohibited from being disclosed by applicable Law or (z) on the advice of legal counsel of the MSP Companies would result in the loss of attorney-client privilege or other privilege from disclosure, the Members’ Representative shall and the Members shall cause the MSP Companies to (i) provide Parent, its legal counsel and other representatives reasonable access during normal business hours and with reasonable advance notice, in such manner as to not interfere with the normal operation of the Business and so long as reasonably feasible or permissible under applicable Law, to the offices, properties and Books and Records; and (ii) use its and their commercially reasonable efforts to furnish to Parent, its legal counsel and other representatives such information relating to the Business that are in the possession of the MSP Companies as such Persons may reasonably request, in each case solely for purposes of consummating the Acquisition; provided that no investigation pursuant to this Section (or any investigation prior to the date hereof) shall affect any representation or warranty given by the MSP Companies or the Members and, provided further, that any investigation pursuant to this Section shall be conducted in such manner as not to interfere unreasonably with the conduct of the Business and as not to delay the Closing. No Member makes any representation or warranty as to the accuracy of any information provided pursuant to this Section 8.2, and Parent may not rely on the accuracy of such information.
(b) From the date hereof through the Closing Date or the earlier termination of this Agreement in accordance with its terms, and subject to confidentiality obligations and similar restrictions that may be applicable to information furnished to Parent or its Subsidiaries by third parties that may be in Parent’s or its Subsidiaries’ possession from time to time, and except for any information which (x) relates to interactions with prospective targets of Parent or the negotiation of this Agreement or the Acquisition, (y) is prohibited from being disclosed by applicable Law or (z) on the advice of legal counsel of Parent would result in the loss of attorney- client privilege or other privilege from disclosure, Parent shall and shall cause its Subsidiaries to (i) provide the Members’ Representative, his legal counsel and other representatives reasonable access during normal business hours and with reasonable advance notice, in such manner as to not interfere with the normal business operations of Parent and so long as reasonably feasible or permissible under applicable Law, to their respective properties, books, Contracts, commitments, records and appropriate officers and employees; and (ii) use its and their commercially reasonable efforts to furnish to the Members’ Representative, his legal counsel and other representatives such information relating to Parent that is in the possession of Parent as such Persons may reasonably request, in each case solely for purposes of consummating the Acquisition; provided that no investigation pursuant to this Section (or any investigation prior to the date hereof) shall affect any representation or warranty given by Parent or Purchaser and, provided further, that any investigation pursuant to this Section shall be conducted in such manner as not to interfere unreasonably with the conduct of the business and operations of Parent and as not to delay the Closing. Neither Parent nor Purchaser makes any representation or warranty as to the accuracy of any information provided pursuant to this Section 8.2, and the Members may not rely on the accuracy of such information.
8.3 Preparation of Form S-4 and Proxy Statement/Prospectus; Other Filings.
(a) As promptly as practicable after the delivery of the financial statements pursuant to Section 7.2, Parent and the MSP Companies shall use their respective reasonable best efforts to prepare, and shall mutually agree upon (such agreement not to be unreasonably withheld, conditioned or delayed by either Parent or the MSP Companies, as applicable), and Parent shall file with the SEC, the Form S-4 in connection with the registration under the Securities Act of the shares of Parent Class A Common Stock and the New Warrants to be issued under this Agreement, which Form S-4 will contain the Proxy Statement/Prospectus, which will be included therein as a prospectus and which will be used as a proxy statement for the Parent Stockholders’ Meeting, with respect to, among other things: (A) providing the Public Stockholders with the opportunity to redeem their shares of Parent Common Stock by tendering such shares for redemption not later than 5:00 p.m. Eastern Time on the date that is two (2) Business Days prior to the date of the Parent Stockholders’ Meeting (the “Parent Stockholder Redemption”); and (B) soliciting proxies from holders of Parent Common Stock to vote at the Parent Stockholders’ Meeting, as adjourned or postponed, in favor of: (1) the adoption of this Agreement and approval of the Acquisition; (2) the issuance of shares of Parent Class A Common Stock and the New Warrants in connection with the consummation of the Acquisition (including for purposes of complying with applicable listing rules of the Nasdaq); (3) the amendment and restatement of Parent’s Certificate of Incorporation in the form of the SPAC Charter with effect from the Closing; (4) the approval of the adoption of the Equity Incentive Plan; (5) the election of the directors constituting the Post-Closing Board of Directors; and (6) any other proposals the Parties agree are necessary or desirable to consummate the Acquisition (collectively, the “Parent Proposals”). Without the prior written consent of the Members’ Representative, the Parent Proposals shall be the only matters (other than procedural matters) which Parent shall propose to be acted on by Parent’s stockholders at the Parent Stockholders’ Meeting, as adjourned or postponed.
(b) Each of Parent and the MSP Companies shall use their respective reasonable best efforts to cause the Form S-4 and the Proxy Statement/Prospectus to comply with the rules and regulations promulgated by the SEC, to have the Form S-4 declared effective under the Securities Act as promptly as practicable after such filing and to keep the Form S-4 effective as long as is necessary to consummate the Acquisition. Each of Parent and the MSP Companies shall furnish all information concerning it as may reasonably be requested by the other Party in connection with such actions and the preparation of the Form S-4 and the Proxy Statement/Prospectus. As promptly as practicable after the Form S-4 is declared effective under the Securities Act (the “SEC Clearance Date”), but in no event later than five (5) Business Days thereafter, Parent shall cause the Proxy Statement/Prospectus to be mailed to its stockholders of record, as of the record date to be established by the board of directors of Parent in accordance with Section 9.3. Parent shall promptly commence a “broker search” in accordance with Rule 14a-12 of the Exchange Act.
(c) Except with respect to the information provided by the MSP Companies for inclusion in the Proxy Statement/Prospectus, Parent shall ensure that, when filed, the Proxy Statement/Prospectus will comply in all material respects with the requirements of United States federal securities laws and the rules and regulations of the SEC promulgated thereunder or otherwise (the “Federal Securities Laws”), the DGCL and Nasdaq rules in the preparation, filing and distribution of the Form S-4 and the Proxy Statement/Prospectus, the solicitation of proxies thereunder, and the calling and holding of the Parent Stockholders’ Meeting. The Members’ Representative shall promptly provide to Parent such information concerning the MSP Companies and the Members as is either required by the Federal Securities Laws or reasonably requested by the Parent for inclusion in the Proxy Statement/Prospectus, including, if applicable, the Company Financial Statements and the Required Financial Statements (“Company Information”). Subject to the Members’ Representative’s review and approval of the Proxy Statement/Prospectus, including Company Information and the consent of the MSP Companies’ auditor to the inclusion of the Company Financial Statements and Required Financial Statements in the Proxy Statement/Prospectus (in each case, such approval or consent not to be unreasonably withheld, conditioned or delayed), the Members’ Representative acknowledges and agrees that Company Information (including the Company Financial Statements and the Required Financial Statements), or summaries thereof or extracts therefrom, may be included in the Proxy Statement/Prospectus and any other filings required under the Exchange Act, Securities Act or any other United States federal, foreign or blue sky laws (“Other Filings”). In connection therewith, the Members’ Representative shall instruct the employees, counsel, financial advisors, auditors, and other authorized representatives of the MSP Companies to reasonably cooperate with Parent if required to achieve the foregoing. Parent and the MSP Companies shall each ensure that the Proxy Statement/Prospectus does not, as of the date on which it is first distributed to Parent’s stockholders and as of the date of the Parent Stockholders’ Meeting, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made in light of the circumstances under which they were made, not misleading (provided that no Party shall be responsible for the accuracy or completeness of any information relating to another Party or any other information furnished by another Party for inclusion in the Proxy Statement/Prospectus).
(d) Prior to filing with the SEC, Parent will make available to the Members’ Representative drafts of the Form S-4 and the Proxy Statement/Prospectus, and any other documents to be filed with the SEC, both preliminary and final, and any amendment or supplement to the Form S-4 or the Proxy Statement/Prospectus or such other document and will provide the Members’ Representative with a reasonable opportunity to comment on such drafts and shall consider such comments in good faith. Parent shall not file any such documents with the SEC without the prior written consent of the Members’ Representative (such consent not to be unreasonably withheld, conditioned or delayed). Each of Parent and the MSP Companies shall cooperate and mutually agree upon (such agreement not to be unreasonably withheld, delayed or conditioned), any response to comments of the SEC or its staff with respect to the Form S-4 and the Proxy Statement/Prospectus and any amendment to the Form S-4 and the Proxy Statement/Prospectus filed in response thereto. Parent will advise the Members’ Representative promptly after it receives notice of: (A) the time when the Form S-4 or the Proxy Statement/Prospectus has been filed; (B) the filing of any supplement or amendment to the Form S-4 or the Proxy Statement/Prospectus; (C) any request by the SEC for amendment of the Form S- 4 or the Proxy Statement/Prospectus; (D) any comments from the SEC relating to the Form S-4 or the Proxy Statement/Prospectus and responses thereto; and (E) requests by the SEC for additional information. Parent shall respond to any SEC comments on the Form S-4 or the Proxy Statement/Prospectus as promptly as practicable and shall use its reasonable best efforts to have the Proxy Statement/Prospectus cleared by the SEC under the Exchange Act as promptly as practicable; provided, that prior to responding to any requests or comments from the SEC, Parent will make available to the Members’ Representative drafts of any such response and provide the Members’ Representative with a reasonable opportunity to comment on such drafts.
(e) If at any time prior to the Parent Stockholders’ Meeting, any information relating to Parent, Purchaser, the Members or the MSP Companies, or any of their respective Subsidiaries, Affiliates, managers, directors or officers, should be discovered by the Members’ Representative or Parent, as applicable, that should be set forth in an amendment or supplement to the Proxy Statement/Prospectus, so that the Proxy Statement/Prospectus would not include any misstatement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, the Party which discovers such information shall promptly notify each other Party hereto, and Parent shall promptly file with the SEC an appropriate amendment or supplement describing such information and, to the extent required by law, disseminate such amendment or supplement to Parent’s stockholders. If, at any time prior to the Closing, the Members’ Representative discovers any information, event or circumstance relating to the MSP Companies, the Business or any of the MSP Companies’ Affiliates, officers, directors or employees, that should be set forth in an amendment or a supplement to the Proxy Statement so that the Proxy Statement would not include any misstatement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, then the Members’ Representative shall promptly inform Parent of such information, event or circumstance.
(f) Notwithstanding anything else to the contrary in this Agreement or any Additional Agreements, Parent may make any public filing with respect to the transactions contemplated hereby to the extent required by applicable Law.
8.4 Trust Account. Parent has established the Trust Account from the proceeds of its IPO and from certain private placements occurring simultaneously with the IPO for the benefit of the Public Stockholders and certain parties (including the underwriters of the IPO). Except for a portion of the interest earned on the amounts held in the Trust Account, Parent shall disburse monies from the Trust Account only: (a) to the Public Stockholders in the event they elect to redeem Parent Public Shares in connection with the consummation of Purchaser’s initial business combination (“Business Combination”) or an amendment to the Certificate of Incorporation in accordance with the terms set forth therein; (b) to the Public Stockholders if Purchaser fails to consummate a Business Combination by February 18, 2022 (the “Business Combination Date”), which date may be extended upon approval of the Parent’s stockholders to amend the Certificate of Incorporation; (c) in connection with a Business Combination, expenses owed by Parent to third parties to which they are owed; (d) in connection with a Business Combination, the Business Combination Fees to the underwriters in the IPO; or (e) to, or on behalf of, Parent after or concurrently with the consummation of a Business Combination.
8.5 Confidentiality. Prior to Closing, except as necessary to complete the Proxy Statement or any Other Filings, the MSP Companies and the Members, on the one hand, and Parent and Purchaser, on the other hand, shall hold and shall cause their respective Representatives to hold in strict confidence, unless compelled to disclose by judicial or administrative process or by other requirements of Law, all Confidential Information concerning the other Party furnished to it by such other Party or its representatives in connection with the transactions contemplated by this Agreement (except to the extent that such information can be shown to have been (a) previously known by the Party to which it was furnished, (b) in the public domain through no fault of such Party or (c) later lawfully acquired from other sources, which source is not the agent of the other Party, by the Party to which it was furnished), and each Party shall not release or disclose such Confidential Information to any other Person, except its representatives in connection with this Agreement. In the event that any Party believes that it is required to disclose any such Confidential Information pursuant to applicable Laws, such Party shall give timely written notice to the other Parties so that such Parties may have an opportunity to obtain a protective order or other appropriate relief. Each Party shall be deemed to have satisfied its obligations to hold Confidential Information concerning or supplied by the other Parties if it exercises the same care as it takes to preserve confidentiality for its own similar information. The Parties acknowledge that some Confidential Information will be required to be disclosed by applicable Law in the Proxy Statement or any Other Filings.
8.6 Publicity. None of Parent, Purchaser, the Members, the MSP Purchased Companies or any of their respective Affiliates shall make any public announcement or issue any public communication regarding this Agreement or the transactions contemplated hereby, or any matter related to the foregoing, without first obtaining the prior consent of the Members’ Representative or Parent, as applicable (which consent shall not be unreasonably withheld, conditioned or delayed), except if such announcement or other communication is required by applicable Law or legal process (including pursuant to the Federal Securities Laws or the rules of any national securities exchange), in which case Parent or the Members’ Representative, as applicable, shall use their reasonable best efforts to obtain such consent with respect to such announcement or communication with the other Party, prior to announcement or issuance; provided, however, that, subject to this Section 8.6, each Party and its Affiliates may make announcements regarding the status and terms (including price terms) of this Agreement and the transactions contemplated hereby to their respective directors, officers, employees, direct and indirect current or prospective limited partners and investors or otherwise in the ordinary course of their respective businesses, in each case, so long as such recipients are obligated to keep such information confidential without the consent of any other Party; and provided, further, that the foregoing shall not prohibit any Party from communicating with third parties to the extent necessary for the purpose of seeking any third party consent; provided, further, that notwithstanding anything to the contrary in this Section 8.6, nothing herein shall modify or affect Parent’s obligations pursuant to Section 8.3, Section 9.2 or Section 9.3.
8.7 Notices of Certain Events. The Members’ Representative and the Members, on the one hand, and Parent and Purchaser, on the other hand, shall promptly notify the other Party of:
(a) any notice or other communication from any Person alleging or raising the possibility that the consent of such Person is or may be required in connection with the transactions contemplated by this Agreement or that the transactions contemplated by this Agreement might give rise to any Action or other rights by or on behalf of such Person or result in the loss of any rights or privileges of the MSP Companies or Parent and its Subsidiaries to any such Person or create any Lien on any Interest or any of the assets of the MSP Companies or Parent and its Subsidiaries;
(b) any notice or other communication from any Authority in connection with the transactions contemplated by this Agreement or the Additional Agreements;
(c) any Actions commenced or threatened against, relating to or involving or otherwise affecting Parent and its Subsidiaries, the MSP Companies, any Member, the Interests, or that relate to the consummation of the transactions contemplated by this Agreement or the Additional Agreements;
(d) the occurrence of any fact or circumstance which constitutes or results, or might reasonably be expected to constitute or result, in a Material Adverse Change or a Parent Material Adverse Effect;
(e) the occurrence of any fact or circumstance which results, or might reasonably be expected to result, in any representation made hereunder by the MSP Purchased Companies and the Members, on the one hand, or Parent and Purchaser, on the other hand, to be false or misleading in any respect or to omit or fail to state a material fact; and
(f) if any MSP Purchased Company or any Member, on the one hand, or Parent or Purchaser, on the other hand, becomes aware of any fact or condition that constitutes a breach of any representation or warranty made in Article IV (as it relates to the MSP Purchased Companies), Article V (as it relates to the Members), Article VI (as it relates to Parent and Purchaser), or any covenant that would reasonably be expected to cause the conditions set forth in Article X, as applicable, not to be satisfied as of the Closing Date.
8.8 Exclusivity.
(a) From the date hereof through the earlier of the Closing Date or the date that this Agreement is terminated in accordance with its terms, neither any MSP Purchased Company nor any of the Members shall, and such Persons shall not permit any of any of their respective Affiliates or Representatives to, directly or indirectly, (A) encourage, solicit, initiate, engage, participate, enter into discussions or negotiations with any Person concerning any Alternative Transaction (as hereinafter defined); (B) take any other action intended or designed to facilitate the efforts of any Person relating to a possible Alternative Transaction; or (C) approve, accept, recommend or enter into any Alternative Transaction or any Contract related to any Alternative Transaction. For purposes of this Agreement, the term “Alternative Transaction” shall mean any of the following transactions involving any of the MSP Companies (other than the transactions contemplated by this Agreement): (i) any merger, acquisition consolidation, recapitalization, share exchange, business combination or other similar transaction, possible public investment or public offering; or (ii) any sale, lease, exchange, transfer or other disposition of a material portion of the assets of the MSP Companies or any class or series of the capital stock, or membership interests of any MSP Company in a single transaction or series of transactions. In the event that an unsolicited proposal for an Alternative Transaction is received by any of the Members or any of their respective Representatives (each, an “Alternative Proposal”), such Party shall as promptly as practicable (and in any event within one (1) Business Day after receipt) advise the other Parties to this Agreement in writing of such Alternative Proposal and the material terms and conditions of such Alternative Proposal (including any changes thereto) and the identity of the Person making such Alternative Proposal.
(b) From the date hereof through the earlier of the Closing Date or the date that this Agreement is terminated in accordance with its terms, Parent shall not take, nor shall it permit any of its Affiliates or Representatives to take, whether directly or indirectly, any action to solicit, initiate, continue or engage in discussions or negotiations with, or enter into any agreement with, or encourage, respond, provide information to or commence due diligence with respect to, any Person (other than the MSP Companies, the Members and/or any of their Affiliates or Representatives), concerning, relating to or which is intended or is reasonably likely to give rise to or result in, any offer, inquiry, proposal or indication of interest, written or oral relating to any Business Combination (a “Business Combination Proposal”) other than with MSP Companies, the Members, and their respective Affiliates and Representatives. Parent shall, and shall cause its Affiliates and Representatives to, immediately cease any and all existing discussions or negotiations with any Person conducted prior to the date hereof with respect to, or which is reasonably likely to give rise to or result in, a Business Combination Proposal.
8.9 Post-Closing Cooperation; Further Assurances. Following the Closing, each Party shall, on the request of any other Party, execute such further documents, and perform such further acts, as may be reasonably necessary or appropriate to give full effect to the allocation of rights, benefits, obligations and liabilities contemplated by this Agreement and the transactions contemplated hereby.
ARTICLE IX
COVENANTS OF PARENT AND PURCHASER
9.1 Conduct of Parent and Purchaser Pending Closing.
(a) From the date of this Agreement through the Closing, except as contemplated by this Agreement or as consented to by the Members’ Representative in writing (which consent shall not be unreasonably conditioned, withheld or delayed), Parent and Purchaser shall not:
(i) change, modify or amend the Trust Agreement, the A&R Sponsor Agreement, or the Organizational Documents of Parent or Purchaser;
(ii) (A) declare, set aside or pay any dividends on, or make any other distribution in respect of any outstanding capital stock of, or other equity interests in, Parent or Purchaser; (B) split, combine or reclassify any capital stock of, or other equity interests in, Parent or Purchaser; or (C) other than (x) in connection with the Parent Stockholder Redemption or (y) as otherwise required by the Organizational Documents of Parent or Purchaser in order to consummate the transactions contemplated hereby, repurchase, redeem or otherwise acquire, or offer to repurchase, redeem or otherwise acquire, any capital stock of, or other equity interests in, Parent or Purchaser;
(iii) Subject to Section 7.4(f), make, change or revoke any material tax election, adopt or change any material accounting method with respect to Taxes, file any amended material Tax Return, settle or compromise any material Tax liability, enter into any material closing agreement with respect to any Tax, surrender any right to claim a material refund of Taxes or consent to any extension or waiver of the limitations period applicable to any material Tax claim or assessment or enter into any Tax sharing or Tax indemnification agreement (except, in each case, for such agreements that are commercial contracts not primarily relating to Taxes) or similar agreement or take any similar action relating to Taxes, if such election, change, amendment, agreement, settlement, consent or other action would have the effect of materially increasing the present or future Tax liability or materially decreasing any present or future Tax asset of Parent or any of its Subsidiaries or the MSP Companies in a manner that will disproportionately affect the Members (as compared to the Parent’s stockholders) after the Closing;
(iv) enter into, renew or amend in any material respect, any transaction or Contract with an Affiliate of Parent (including, for the avoidance of doubt, (x) the Sponsors or anyone related by blood, marriage or adoption to any Sponsor and (y) any Person in which any Sponsor has a direct or indirect legal, contractual or beneficial ownership interest of 5% or greater);
(v) waive, release, compromise, settle or satisfy any pending or threatened material claim (which shall include, but not be limited to, any pending or threatened Action) or compromise or settle any liability;
(vi) incur, guarantee or otherwise become liable for (whether directly, contingently or otherwise) any Indebtedness;
(vii) (A) offer, issue, deliver, grant or sell, or authorize or propose to offer, issue, deliver, grant or sell, any capital stock of, or other equity interests, equity equivalents, stock appreciation rights, phantom stock ownership interests or similar rights in, Parent or any of its Subsidiaries or any securities convertible into, or any rights, warrants or options to acquire, any such capital stock or equity interests, other than issuance of Parent Common Stock in connection with the exercise of any Parent Warrants outstanding on the date hereof or (B) amend, modify or waive any of the terms or rights set forth in, any Parent Warrant or the warrant agreement relating thereto, including any amendment, modification or reduction of the warrant price set forth therein; or
(viii) except as contemplated by the proposal set forth in Schedule 9.1(a)(viii), prior to the Closing, (A) adopt or amend any Purchaser Plan, (B) enter into any employment contract or collective bargaining agreement or (C) hire any employee.
(b) From the date of this Agreement through the Closing, Parent shall, and shall cause its Subsidiaries to comply with, and continue performing under, as applicable, the Parent Organizational Documents, the Trust Agreement, the Additional Agreements and all other agreements or Contracts to which Parent or its Subsidiaries may be a party.
9.2 Stockholder Vote; Recommendation of the Parent’s Board of Directors. Parent, through Parent’s Board of Directors, shall recommend that Parent’s stockholders vote in favor of adopting and approving all Parent Proposals, and Parent shall include such recommendation in the Proxy Statement (the “Parent Recommendation”). Parent’s Board of Directors shall not (and no committee or subgroup thereof shall) change, withdraw, withhold, qualify or modify, or publicly propose to change, withdraw, withhold, qualify or modify, the Parent Recommendation, except as necessary, based on an opinion of their outside legal counsel, to comply with their fiduciary duties under Delaware law.
9.3 Parent Stockholders’ Meeting. Parent shall, prior to or as promptly as practicable following the Proxy Clearance Date (and in no event later than the date the Proxy Statement/Prospectus is required to be mailed in accordance with Section 8.3(b)), take all action necessary under applicable Law to, in consultation with the Members’ Representative, establish a record date for, call, give notice of and hold a meeting of the holders of shares of Parent Common Stock to consider and vote on the Parent Proposals (such meeting, the “Parent Stockholders’ Meeting”). The Parent Stockholders’ Meeting shall be held as promptly as practicable, and in any event not more than 25 days after the date on which Parent commences the mailing of the Proxy Statement/Prospectus to its stockholders. Parent shall use its reasonable best efforts to take all actions necessary (in its discretion or at the request of the Members’ Representative) to obtain the approval of the Parent Proposals at the Parent Stockholders’ Meeting, including as such Parent Stockholders’ Meeting may be adjourned or postponed in accordance with this Agreement, including by soliciting proxies as promptly as practicable in accordance with applicable Law for the purpose of seeking the approval of the Parent Proposals. Parent agrees that its obligation to establish a record date for, duly call, give notice of, convene and hold the Parent Stockholders’ Meeting for the purpose of seeking approval of the Parent Proposals shall not be affected by any intervening event or circumstance, and Parent agrees to establish a record date for, duly call, give notice of, convene and hold the Parent Stockholders’ Meeting and submit for the approval of its stockholders the Parent Proposals, in each case in accordance with this Agreement, regardless of any intervening event or circumstance. Notwithstanding anything to the contrary contained herein, Parent shall be entitled to (and, in the case of the following clauses (ii) and (iii), at the request of the Members’ Representative, shall) postpone or adjourn the Parent Stockholders’ Meeting for a period of no longer than 15 days: (i) to ensure that any supplement or amendment to the Proxy Statement that Parent’s Board of Directors has determined in good faith is required by applicable Law is disclosed to Parent’s stockholders and for such supplement or amendment to be promptly disseminated to Parent’s stockholders prior to the Parent Stockholders’ Meeting; (ii) if, as of the time for which the Parent Stockholders’ Meeting is originally scheduled (as set forth in the Proxy Statement/Prospectus), there are insufficient shares of Parent Common Stock represented (either in person or by proxy) to constitute a quorum necessary to conduct the business to be conducted at the Parent Stockholders’ Meeting; (iii) in order to solicit additional proxies from stockholders for purposes of obtaining approval of the Parent Proposals; or (iv) only with the prior written consent of the Members’ Representative, for purposes of satisfying the condition set forth in Section 10.1(b); provided, that, notwithstanding any longer adjournment or postponement period specified at the beginning of this sentence, in the event of any such postponement or adjournment, the Parent Stockholders’ Meeting shall be reconvened as promptly as practicable following such time as the matters described in such clauses have been resolved.
9.4 D&O Insurance; Indemnification of Officers and Directors.
(a) From and after the Closing, Parent, Purchaser, and the MSP Companies agree that, with respect to any acts or omissions occurring on or prior to the Closing, all rights to indemnification, exculpation and advancement of expenses and all limitations on liability existing in favor of any manager, director, officer or employee of any MSP Company or Parent prior to the Closing (collectively, the “D&O Persons”), in each case, as provided in the Organizational Documents of the MSP Companies or Parent, as applicable, the indemnification agreements set forth on Schedule 9.4 or any other similar indemnification arrangement in effect as of the date of this Agreement, shall survive the consummation of the transactions contemplated hereby and continue in full force and effect and be honored by Parent, Purchaser and the MSP Companies in accordance with their terms and to the fullest extent of the Law. For a period of six (6) years following the Closing, such rights shall not be amended or otherwise modified in the Organizational Documents of the MSP Companies or Parent in any manner that would adversely affect the rights of the D&O Persons, unless such amendment or modification is required by Law.
(b) For a period of six (6) years from the Effective Time, Parent shall, or shall cause one or more of its Subsidiaries to, maintain in effect directors’ and officers’ liability insurance covering the D&O Persons on terms not less favorable than the terms of such current insurance coverage for any manager, director, officer or employee of any MSP Company prior to the Closing; provided, however, that (i) Parent may cause coverage to be extended under the current directors’ and officers’ liability insurance by obtaining a six-year “tail” policy containing terms not materially less favorable than the terms of such current insurance coverage with respect to claims existing or occurring at or prior to the Effective Time (the “D&O Policy”) and (ii) if any claim is asserted or made within such six-year period, any insurance required to be maintained under this Section 9.4(b) shall be continued in respect of such claim until the final disposition thereof.
(c) Notwithstanding anything contained in this Agreement to the contrary, this Section 9.4 shall survive the consummation of the Acquisition indefinitely and shall be binding, jointly and severally, on Parent, Purchaser and the MSP Companies following the Closing, and all successors and assigns of Parent, Purchaser and the MSP Companies. In the event that Parent, Purchaser or the MSP Companies or any of their respective successors or assigns consolidates with or merges into any other Person and shall not be the continuing or surviving corporation or entity of such consolidation or merger or transfers or conveys all or substantially all of its properties and assets to any Person, then, and in each such case, proper provision shall be made so that the successors and assigns of Parent, Purchaser or the MSP Companies, as the case may be, shall succeed to the obligations set forth in this Section 9.4.
(d) The provisions of this Section 9.4 are intended to be for the benefit of, and shall be enforceable by, each D&O Person or his or her heirs and his or her Representatives; and are in addition to, and not in substitution for, any other rights to indemnification or contribution that any such person may have by contract or otherwise. The obligations of the Parent, Purchaser or MSP Companies under this Section 9.4 shall not be terminated or modified in such a manner as to adversely affect any D&O Person to whom this Section 9.4 applies without the consent of the affected D&O Person (it being expressly agreed that the D&O Persons to whom this Section 9.4 applies shall be third party beneficiaries of this Section 9.4). Prior to the Closing, Purchaser shall enter into a written agreement reasonably satisfactory to Parent, Purchaser and the Members’ Representative guaranteeing Parent’s indemnification obligations in place immediately prior to the Closing with respect to the D&O Persons who, immediately prior to the Closing, are directors or officers of Parent.
(e) Notwithstanding anything contained in this Section 9.4, any indemnification agreement or arrangements of the MSP Companies or in the Organizational Documents of the MSP Companies, no such D&O Persons will have any right of indemnification, advancement or exculpation from the Parent, the Purchaser or any of their successors or permitted assigns (which shall not include, for the avoidance of doubt, any of the MSP Companies) pursuant to this Section 9.4 in connection with, or related to, any claim for indemnification asserted by any Parent Indemnitees pursuant to Section 11.1.
9.5 Listing. From the date of this Agreement through the Closing, Parent shall use its reasonable best efforts to remain listed as a public company on, and for shares of Parent Class A Common Stock to be tradable over, the applicable Nasdaq market(s). Parent shall take all steps reasonably necessary or advisable to cause the shares of Parent Class A Common Stock and the New Warrants to trade under the symbols “MSPR” and “MSPR W” upon the Closing, or under such other symbols as the Members’ Representative and Parent may otherwise agree prior to the Closing. Parent shall take all steps reasonably necessary or advisable to cause the shares of Parent Class A Common Stock to be issued (x) pursuant to the terms of Article III, if any, and (y) on conversion of the Purchaser Class B Units that are included in the Up-C Units, as provided for in the Purchaser A&R LLCA, in each case to be approved for listing on Nasdaq.
9.6 Section 16 Matters. Prior to the Closing, Parent shall take all commercially reasonable steps as may be required (to the extent permitted under applicable Law) to cause any acquisition or disposition of the Parent Class A Common Stock or any derivative thereof, including the Purchaser Class B Units, that occurs or is deemed to occur by reason of or pursuant to the Acquisition by each Person who is or will be or may be subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to Parent to be exempt under Rule 16b-3 promulgated under the Exchange Act, including by taking steps in accordance with the No-Action Letter, dated January 12, 1999, issued by the SEC regarding such matters.
9.7 Adoption of Equity Incentive Plan. Prior to the Closing Date, Parent shall approve, and subject to approval of the stockholders of Parent, adopt, a management incentive equity plan, including an employee stock purchase plan attached as an addendum thereto, in substantially the form attached hereto as Exhibit I (the “Equity Incentive Plan”).
9.8 Appointment of Post-Closing Board of Directors and Officers. The Parties shall take all necessary action to cause (a) the board of directors of Parent as of immediately following the Closing to consist of the individuals set forth in Section 2.4, and (b) the executive officers of Parent and Purchaser, effective as of the Closing, to be as set forth on Schedule 9.8.
9.9 Parent Charter and Bylaws; Purchaser Organizational Documents. Prior to the Closing, Parent and Purchaser shall (i) subject to obtaining the approval of the Parent Stockholder Matters, amend and restate the certificate of incorporation of Parent to be substantially in the form of the SPAC Charter, (ii) amend and restate the bylaws of Parent to be substantially in the form of the SPAC Bylaws, and (iii) amend and restate the limited liability company agreement of Purchaser to be substantially in the form of the Purchaser A&R LLCA.
9.10 Parent Public Filings. From the date hereof through the Closing, Parent will keep current and timely file all reports required to be filed or furnished with the SEC and otherwise comply in all material respects with its reporting obligations under applicable Federal Securities Laws.
9.11 Stockholder Litigation. Parent shall notify Members’ Representative promptly in connection with any threat to file, or filing of, an Action related to this Agreement or the Acquisition by any of its shareholders or holders of any Parent Warrants against any of the Parent Parties or against any of their respective directors or officers (any such action, a “Stockholder Action”). Parent shall keep Members’ Representative reasonably apprised of the defense, settlement, prosecution or other developments with respect to any such Stockholder Action. Parent shall give Members’ Representative the opportunity to participate in, subject to a customary joint defense agreement, the defense of any such litigation, to give due consideration to Members’ Representative’s advice with respect to such litigation and to not settle any such litigation without the prior written consent of Members’ Representative, such consent not to be unreasonably withheld, conditioned or delayed; provided that, for the avoidance of doubt, Parent shall bear all costs of investigation and all defense and attorneys’ and other professionals’ fees and all settlement payments related to such Stockholder Action incurred by Parent.
9.12 Extension. If either the Members’ Representative (on behalf of the Members) or Parent reasonably believes that the Closing may not occur by the Business Combination Date, but that the Parties are reasonably capable of causing the Closing to occur prior to the Outside Closing Date, then Parent may, and at the request of the Members’ Representative (on behalf of the Members), Parent shall, take all actions reasonably necessary (including pursuant to the provisions of the Certificate of Incorporation of Parent) to obtain the approval of Parent’s stockholders to extend the deadline for Parent to consummate its initial business combination beyond February 18, 2022 to a date no earlier than sixty (60) days following the Outside Closing Date (the “Extension”), and shall use its reasonable best efforts to obtain such approval by no later than December 18, 2021 (the “Extension Approval Date”).
ARTICLE X
CONDITIONS TO CLOSING
10.1 Condition to the Obligations of the Parties. The obligations of all of the Parties to consummate the Closing are subject to the satisfaction of all the following conditions:
(a) There shall not be in force any Law, judgment, injunction, decree or Order of any court, arbitrator or other Authority enjoining, restraining or prohibiting the consummation of the Closing.
(b) The approval of the Parent Proposals shall have been duly obtained in accordance with the DGCL, Parent’s Organizational Documents and the rules and regulations of Nasdaq (“Parent Stockholder Approval”).
(c) The shares of (i) Parent Class A Common Stock to be issued (A) pursuant to the terms of Article III, if any, and (B) on conversion of the Purchaser Class B Units that are included in the Up-C Units, as provided for in the Purchaser A&R LLCA, and (ii) the New Warrants to be issued pursuant to the terms of Article III, in each case (i) and (ii) shall have been approved for listing on Nasdaq.
(d) After giving effect to the Parent Stockholder Redemption, Parent shall have net tangible assets of at least $5,000,001 upon the consummation of the Acquisition.
(e) All required filings under the HSR Act shall have been completed and any applicable waiting period (including any extension thereof) shall have expired or been terminated.
(f) The Form S-4 shall have become effective in accordance with the provisions of the Securities Act, no stop order shall have been issued by the SEC which remains in effect with respect to the Form S-4, and no proceeding seeking such a stop order shall have been threatened or initiated by the SEC which remains pending.
(g) The Closing Cash shall not be less than the MSP Minimum Cash Amount.
10.2 Conditions to Obligations of Parent and Purchaser. The obligation of Parent and Purchaser to consummate the Closing is subject to the satisfaction, or the waiver at Parent’s sole and absolute discretion, of all the following further conditions:
(a) Each of the MSP Companies and the Members shall have performed in all material respects their respective obligations hereunder required to be performed at or prior to the Closing Date.
(b) The representations and warranties of the MSP Companies and the Members contained in this Agreement, disregarding all qualifications and exceptions contained therein relating to materiality, shall be true, correct and complete at and as of the Closing Date, as if made at and as of such date (except to the extent expressly made as of an earlier date, in which case only as of such date), except where the failure of such representations and warranties to be so true and correct, has not had, and would not have, a Material Adverse Effect.
(c) The MSP Companies, the Members and the Members’ Representative, as applicable, shall have executed and delivered to Parent a copy of each Additional Agreement to which it is a party.
(d) Parent shall have received a certificate signed by the Chief Executive Officer, Chief Financial Officer or other authorized person of the MSP Companies stating that the conditions specified in Section 10.2(a) and Section 10.2(b) have been satisfied.
(e) Since the date of this Agreement, no Material Adverse Effect shall have occurred.
(f) Parent shall have received the Tax Receivables Agreement duly executed by Parent, Purchaser, and certain Members.
10.3 Conditions to Obligations of the MSP Companies and the Members. The obligations of the MSP Companies and the Members to consummate the Closing is subject to the satisfaction, or the waiver at Members’ Representative’s discretion, of all of the following further conditions:
(a) Parent and Purchaser shall have performed in all material respects their respective obligations hereunder required to be performed at or prior to the Closing Date.
(b) The representations and warranties of Parent and Purchaser contained in this Agreement, disregarding all qualifications and exceptions contained therein relating to materiality, shall be true and correct at and as of the Closing Date, as if made at and as of such date (except to the extent expressly made as of an earlier date, in which case only as of such date), except where the failure of such representations and warranties to be so true and correct, has not had, and would not have, a Parent Material Adverse Effect.
(c) The Members’ Representative shall have received a certificate signed by an authorized officer of Parent stating that the conditions specified in Section 10.3(a) and Section 10.3(b) have been satisfied.
(d) Parent shall have delivered to the Members’ Representative (i) certified copies of the resolutions duly adopted by each of Parent and Purchaser’s Boards of Directors authorizing the execution, delivery and performance of this Agreement; and (ii) written resignations, in forms satisfactory to the Members’ Representative, dated as of the Closing Date and effective as of the Closing, executed by (A) all officers of Purchaser and Parent; and (B) all persons serving as directors of Purchaser and Parent immediately prior to the Closing who are not selected as directors in accordance with Section 9.8.
(e) Parent and Purchaser shall have executed and delivered to the Members’ Representative a copy of each Additional Agreement to which it is a party.
(f) Since the date of this Agreement, no Parent Material Adverse Effect shall have occurred.
(g) The Post-Closing Board of Directors shall have been appointed as the Board of Directors of Parent.
(h) Each of the covenants of the Sponsor required under the A&R Sponsor Agreement to be performed as of or prior to the Closing shall have been performed in all material respects, and none of the Sponsors shall have threatened (orally or in writing) (i) that the A&R Sponsor Agreement is not valid, binding and in full force and effect, (ii) that Parent is in breach of or default under the A&R Sponsor Agreement or (iii) to terminate the A&R Sponsor Agreement.
(i) Purchaser shall have delivered the Tax Receivables Agreement, duly executed by Parent, Purchaser, and certain Members.
11.1 Indemnification of Parent. Subject to the limitations and other provisions of this Agreement, including this Article XI, the MSP Companies (solely with respect to claims made under this Section 11.1 prior to the Closing), and the Members listed on Schedule 2.1(b) (collectively, the “Indemnifying Parties”) severally and not jointly (in accordance with their pro rata share of Closing Equity Consideration to be received by such Member as set forth on Schedule 2.1(b)), agree to indemnify and hold harmless Parent and Purchaser, and each of their respective Affiliates, managers, directors, officers, employees, attorneys, agents, successors and permitted assignees (the “Parent Indemnitees”), against and in respect of any and all actual out-of-pocket losses, damages, liabilities, costs or expenses, including reasonable attorneys’ fees (including actual costs of investigation and reasonable attorneys’ fees) (all of the foregoing collectively, “Losses”) incurred or sustained by any Parent Indemnitee as a result of or in connection with (a) any breach of or inaccuracy in any of the representations or warranties of the MSP Companies or the Members contained herein, as of the date such representation or warranty was made or as if such representation or warranty was made on and as of the Closing Date (except for representations and warranties that expressly relate to a specified date, the inaccuracy in or breach of which will be determined with reference to such specified date); or (b) any breach or non-compliance of any covenant, agreement or obligation to be performed by the MSP Companies or the Members contained herein to be performed prior to or at the Closing.
11.2 Certain Limitations. The indemnification provided for in Section 11.1 shall be subject to the following limitations:
(a) the Indemnifying Parties shall not be liable to the Parent Indemnitees for indemnification under Section 11.1 until the aggregate amount of all Losses in respect of indemnification under Section 11.1 exceeds $20,000,000, in which event the Indemnifying Parties shall be required to pay or be liable for all such Losses from the first dollar; and
(b) Any liability incurred by the Members pursuant to the terms of this Article XI shall be paid by the return for cancellation of Up-C Units comprising the Escrow Consideration in accordance with the terms of the Escrow Agreement, pursuant to the procedures set forth in Section 11.3. The aggregate amount of all Losses for which the Indemnifying Parties shall be liable pursuant to Section 11.1 shall not exceed the Escrow Consideration (the “Cap”), and the Parties agree that the sole and exclusive recourse for any amount finally determined to be owed in respect of any indemnity obligations pursuant to this Article XI shall be made only by disbursement of the Escrow Consideration out of the Escrow Fund, no other assets shall in any respect be used to satisfy such indemnity obligations, and once the Escrow Fund shall be depleted or released, such indemnity obligations shall terminate.
(c) Notwithstanding anything to contrary in this Agreement, none of the provisions of this Article XI apply to the Employment and Restrictive Covenant Agreements.
11.3 Procedure. The following shall apply with respect to all claims by any Parent Indemnitee (an “Indemnified Party”) for indemnification:
(a) An Indemnified Party shall give the Members’ Representative prompt written notice (an “Indemnification Notice”) of any third-party action with respect to which such Indemnified Party seeks indemnification pursuant to Section 11.1, which shall describe in reasonable detail the Loss that has been or may be suffered by the Indemnified Party. The failure to give the Indemnification Notice shall not impair any of the rights or benefits of such Indemnified Party under Section 11.1, except to the extent such failure adversely affects the ability of Parent and its Affiliates (including the MSP Companies, after the Closing) or the Indemnifying Parties to defend such claim, or increases the amount of such liability.
(b) If any Indemnified Party receives notice of the assertion or commencement of any action, suit, claim or other legal proceeding made or brought by any Person who is not a party to this Agreement or an Affiliate of a party to this Agreement (a “Third-Party Claim”) against such Indemnified Party with respect to which the Indemnifying Party is obligated to provide indemnification under this Agreement, the Indemnified Party shall give the Indemnifying Party prompt written notice thereof. Such notice by the Indemnified Party shall describe the Third- Party Claim in reasonable detail, shall include copies of all material written evidence thereof and shall indicate the estimated amount, if reasonably practicable, of the Loss that has been or may be sustained by the Indemnified Party. The Indemnifying Party shall have the right to participate in, or by giving written notice to the Indemnified Party, to assume the defense of any Third-Party Claim at the Indemnifying Party’s expense and by the Indemnifying Party’s own counsel, and the Indemnified Party shall cooperate in good faith in such defense. In the event that the Indemnifying Party assumes the defense of any Third-Party Claim, subject to Section 11.3(c), the Indemnifying Party shall have the right to take such action as it deems necessary to avoid, dispute, defend, appeal or make counterclaims pertaining to any such Third-Party Claim in the name and on behalf of the Indemnified Party. The Indemnified Party shall have the right, at its own cost and expense, to participate in the defense of any Third-Party Claim with counsel selected by it subject to the Indemnifying Party’s right to control the defense thereof. If the Indemnifying Party elects not to compromise or defend such Third-Party Claim or fails to promptly notify the Indemnified Party in writing of its election to defend as provided in this Agreement, the Indemnified Party may, subject to Section 11.3(c), pay, compromise, or defend such Third-Party Claim and seek indemnification for any and all Losses based upon, arising from or relating to such Third-Party Claim. Parent and the MSP Companies shall cooperate with each other in all reasonable respects in connection with the defense of any Third-Party Claim, including making available records relating to such Third- Party Claim and furnishing, without expense (other than reimbursement of actual out-of-pocket expenses) to the defending party, management employees of the non-defending party as may be reasonably necessary for the preparation of the defense of such Third-Party Claim.
(c) Notwithstanding any other provision of this Agreement, the Indemnifying Party shall not enter into settlement of any Third-Party Claim without the prior written consent of the Indemnified Party (which consent shall not be unreasonably withheld, conditioned or delayed), except as provided in this Section 11.3(c). If a firm offer is made to settle a Third-Party Claim without leading to liability or the creation of a financial or other obligation on the part of the Indemnified Party and provides, in customary form, for the unconditional release of each Indemnified Party from all liabilities and obligations in connection with such Third-Party Claim and the Indemnifying Party desires to accept and agree to such offer, the Indemnifying Party shall give written notice to that effect to the Indemnified Party. If the Indemnified Party fails to consent to such firm offer within 10 calendar days after its receipt of such notice, the Indemnified Party may continue to contest or defend such Third-Party Claim and, in such event, the maximum liability of the Indemnifying Party as to such Third-Party Claim shall not exceed the amount of such settlement offer. If the Indemnified Party fails to consent to such firm offer and also fails to assume defense of such Third-Party Claim, the Indemnifying Party may settle the Third-Party Claim upon the terms set forth in such firm offer to settle such Third-Party Claim. If the Indemnified Party has assumed the defense pursuant to Section 11.3(b), it shall not agree to any settlement without the written consent of the Indemnifying Party (which consent shall not be unreasonably withheld, conditioned or delayed).
(d) Any claim by an Indemnified Party on account of a Loss which does not result from a Third-Party Claim (a “Direct Claim”) shall be asserted by the Indemnified Party giving the Indemnifying Party prompt written notice thereof, which notice shall also be referred to as an “Indemnification Notice.” Such Indemnification Notice by the Indemnified Party shall describe the Direct Claim in reasonable detail, shall include copies of all material written evidence thereof and shall indicate the estimated amount, to the extent such amount is known or is capable of being estimated, of the Loss that has been or may be sustained by the Indemnified Party. The Indemnifying Party shall have 30 days after its receipt of such Indemnification Notice to respond in writing to such Direct Claim. During such 30-day period, the Indemnified Party shall allow the Indemnifying Party and its professional advisors to investigate the matter or circumstance alleged to give rise to the Direct Claim, and whether and to what extent any amount is payable in respect of the Direct Claim and the Indemnified Party shall assist the Indemnifying Party’s investigation by giving such information and assistance (including access to the MSP Companies’ premises and personnel and the right to examine and copy any accounts, documents or records) as the Indemnifying Party or any of its professional advisors may reasonably request. If the Indemnifying Party does not so respond within such 30-day period, the Indemnifying Party shall be deemed to have rejected such claim, in which case the Indemnified Party shall be free to pursue such remedies as may be available to the Indemnified Party on the terms and subject to the provisions of this Agreement.
(e) Other than with respect to Third-Party Claims for which indemnification is provided under the terms of this Agreement, no Indemnifying Party shall be liable to any Indemnified Party for any punitive, incidental, consequential, special or indirect damages, including loss of future revenue or income, loss of business reputation or opportunity relating to the breach or alleged breach of this Agreement, or diminution of value or any damages based on any type of multiple.
(f) Each Indemnified Party shall take, and cause its Affiliates to take, all reasonable steps to mitigate any Loss upon becoming aware of any event or circumstance that would be reasonably expected to, or does, give rise thereto, including incurring costs only to the minimum extent necessary to remedy the breach that gives rise to such Loss.
(g) No Indemnifying Party shall be liable under this Article XI for any Losses based upon or arising out of any inaccuracy in or breach of any of the representations or warranties of the MSP Companies or Members contained in this Agreement if Parent or Purchaser had knowledge of such inaccuracy or breach prior to the Closing.
11.4 Escrow of Escrow Consideration by Members. The holding and disbursement of the Escrow Consideration shall be pursuant to the Escrow Agreement.
(a) Escrow Consideration; Payment of Dividends; Voting. Any dividends, interest payments, or other distributions of any kind made in respect of the Escrow Consideration will be delivered promptly to the Escrow Agent to be held in escrow in accordance with the Escrow Agreement. The Indemnifying Parties shall be entitled to vote any shares of Parent Common Stock comprising the Escrow Consideration (in accordance with their pro rata share set forth on Schedule 2.1(b)) on any matters to come before the stockholders of Parent.
(b) Distribution of Escrow Consideration. At the times provided for in Section 11.4(d), the Escrow Consideration shall be released to the Members’ Representative for distribution to the Members. Purchaser will take such action as may be necessary to cause such certificates to be issued in the names of the appropriate persons. Certificates representing Escrow Consideration so issued that are subject to resale restrictions under applicable securities laws will bear a legend to that effect. No fractional shares shall be released and delivered from the Escrow Fund to the Members’ Representative and all fractional shares shall be rounded to the nearest whole share.
(c) Assignability. No Escrow Consideration or any beneficial interest therein may be pledged, sold, assigned or transferred, including by operation of law, by the Members or be taken or reached by any legal or equitable process in satisfaction of any debt or other liability of the Members, prior to the delivery to such Members by the Members’ Representative of the Escrow Consideration by the Escrow Agent as provided herein.
(d) Release from Escrow Fund. Within five (5) Business Days following expiration of the Survival Period (the “Release Date”), the remaining Escrow Consideration will be released from escrow to the Members’ Representative less the portion of the Escrow Consideration (at an assumed value of $10.00 per Up-C Unit comprising the Escrow Consideration) equal to the amount of any potential Losses set forth in any Indemnification Notice, complying with the requirements and received by the Members’ Representative as set forth in Section 11.3, with respect to any pending but unresolved claim for indemnification. Prior to the Release Date, the Members’ Representative shall issue to the Escrow Agent a certificate executed by it instructing the Escrow Agent to release such number Up-C Units comprising the Escrow Consideration as determined in accordance with this Section 11.4(d). Any Escrow Consideration retained in escrow as a result of the immediately preceding sentence shall be released to the Members’ Representative promptly upon resolution of the related claim for indemnification in accordance with the provisions of this Article XI.
11.5 Insurance. Any indemnification payments hereunder shall take into account any insurance proceeds or other third-party reimbursement actually received.
11.6 Survival of Indemnification Rights. The representations and warranties of the MSP Companies and the Members shall survive until the date that is twelve (12) months following the Closing (the “Survival Period”). Notwithstanding the foregoing, any claims asserted in good faith with reasonable specificity (to the extent known at such time) and in writing by notice from the Indemnified Party to the Indemnifying Party prior to the expiration of the Survival Period shall not thereafter be barred by the expiration of the relevant representation or warranty and such claims shall survive until finally resolved.
11.7 Tax Treatment of Indemnification Payments. All indemnification payments made under this Agreement shall be treated by the Parties as an adjustment to the Purchase Price for Tax purposes, unless otherwise required by Law.
11.8 Exclusive Remedies. The Parties acknowledge and agree that the sole and exclusive remedy of any Parent Indemnitee with respect to any and all claims (other than claims arising from intentional fraud on the part of a party hereto in connection with the transactions contemplated by this Agreement) for any breach of any representation, warranty, covenant, agreement or obligation set forth herein or otherwise relating to the subject matter of this Agreement, shall be pursuant to the indemnification provisions set forth in this Article XI. In furtherance of the foregoing, Parent on behalf of all Parent Indemnitees hereby waives, to the fullest extent permitted under Law, any and all rights, claims and causes of action for any breach of any representation, warranty, covenant, agreement or obligation set forth herein or otherwise relating to the subject matter of this Agreement it may have against the other parties hereto and their Affiliates and each of their respective representatives arising under or based upon any Law, except pursuant to the indemnification provisions set forth in this Article XI. Nothing in this Section 11.8 shall limit any Person’s right to seek and obtain any equitable relief to which any Person shall be entitled pursuant to any other Section of this Agreement or to seek any remedy on account of fraud, intentional misrepresentation or willful misconduct by any Party hereto.
11.9 NO ADDITIONAL REPRESENTATIONS; NO RELIANCE. PARENT AND PURCHASER ACKNOWLEDGE AND AGREE THAT: (A) NOTWITHSTANDING ANY PROVISION OF THIS AGREEMENT TO THE CONTRARY, EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES EXPRESSLY MADE BY THE MSP COMPANIES OR THE MEMBERS IN Article IV AND Article V, NEITHER THE MSP COMPANIES OR THE MEMBERS OR AFFILIATE THEREOF NOR ANY OTHER PERSON HAS MADE ANY REPRESENTATION OR WARRANTY WITH RESPECT TO THE MSP COMPANIES OR THE BUSINESS OR THE MSP COMPANIES’ OPERATIONS, ASSETS, LIABILITIES, CONDITION (FINANCIAL OR OTHERWISE) OR PROSPECTS, NOTWITHSTANDING THE DELIVERY OR DISCLOSURE TO PARENT, OR ANY OF ITS RESPECTIVE AFFILIATES OR REPRESENTATIVES OF ANY DOCUMENTATION, FORECASTS, PROJECTIONS OR OTHER INFORMATION WITH RESPECT TO ANY ONE OR MORE OF THE FOREGOING; (B) PARENT AND PURCHASER HAVE NOT RELIED ON ANY REPRESENTATION OR WARRANTY FROM THE MSP COMPANIES OR THE MEMBERS OR ANY OTHER PERSON IN DETERMINING TO ENTER INTO THIS AGREEMENT, EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT; AND (C) NONE OF THE MEMBERS, THE MSP COMPANIES OR ANY OTHER PERSON WILL HAVE, OR BE SUBJECT TO, ANY LIABILITY TO PARENT OR PURCHASER OR ANY OTHER PERSON RESULTING FROM THE DISTRIBUTION TO PARENT OR PURCHASER, OR THEIR RESPECTIVE USE, OF ANY INFORMATION REGARDING THE MSP COMPANIES OR THE BUSINESS OR MADE AVAILABLE TO PARENT, PURCHASER AND THEIR REPRESENTATIVES, INCLUDING ANY INFORMATION, DOCUMENTS OR MATERIAL MADE AVAILABLE TO PARENT OR PURCHASER IN ANY DATA ROOM, MANAGEMENT PRESENTATIONS OR IN ANY OTHER FORM IN EXPECTATION OF THE TRANSACTIONS CONTEMPLATED HEREBY. EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES EXPRESSLY MADE BY THE MSP COMPANIES AND THE MEMBERS IN Article IV AND Article V, ALL OTHER REPRESENTATIONS AND WARRANTIES, WHETHER EXPRESS OR IMPLIED, ARE EXPRESSLY DISCLAIMED BY THE MSP COMPANIES AND THE MEMBERS.
ARTICLE XII
DISPUTE RESOLUTION
12.1 Jurisdiction; Waiver of Jury Trial.
(a) Any Action based upon, arising out of or related to this Agreement or the Additional Agreements, or the transactions contemplated hereby or thereby, may be brought in federal and state courts located in the State of Delaware, and each of the Parties irrevocably submits to the exclusive jurisdiction of each such court in any such Action, waives any objection it may now or hereafter have to personal jurisdiction, venue or to convenience of forum, agrees that all claims in respect of the Action shall be heard and determined only in any such court, and agrees not to bring any Action arising out of or relating to this Agreement or the transactions contemplated hereby in any other court. Nothing herein contained shall be deemed to affect the right of any Party to serve process in any manner permitted by Law or to commence legal proceedings or otherwise proceed against any other Party in any other jurisdiction, in each case, to enforce judgments obtained in any Action brought pursuant to this Section 12.1.
(b) THE PARTIES TO THIS AGREEMENT HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVE ANY RIGHT EACH SUCH PARTY MAY HAVE TO TRIAL BY JURY IN ANY ACTION OF ANY KIND OR NATURE, IN ANY COURT IN WHICH AN ACTION MAY BE COMMENCED, ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY ADDITIONAL AGREEMENT, OR BY REASON OF ANY OTHER CAUSE OR DISPUTE WHATSOEVER BETWEEN OR AMONG ANY OF THE PARTIES TO THIS AGREEMENT OF ANY KIND OR NATURE.
(c) Each of the Parties to this Agreement acknowledge that each has been represented in connection with the signing of this waiver by independent legal counsel selected by the respective Party and that such Party has discussed the legal consequences and import of this waiver with legal counsel. Each of the Parties to this Agreement further acknowledge that each has read and understands the meaning of this waiver and grants this waiver knowingly, voluntarily, without duress and only after consideration of the consequences of this waiver with legal counsel.
ARTICLE XIII
TERMINATION
13.1 Termination Without Default.
(a) In the event that the Closing has not occurred by March 31, 2022 (the “Outside Closing Date”) and no material breach of this Agreement by the Party seeking to terminate this Agreement shall have occurred or have been made, Purchaser or the Members’ Representative, on behalf of the MSP Companies and the Members shall have the right, at its sole option, to terminate this Agreement without liability to the other Parties. Such right may be exercised by Purchaser or the Members’ Representative, as the case may be, giving written notice to the other at any time after the Outside Closing Date; provided, however, that, the right to terminate under this Section 13.1 shall not be available to any Party that through its inaction, or by its failure to promptly fulfill its covenants or satisfy or waive its closing conditions, has caused unreasonable delays in closing by the Outside Closing Date.
(b) This Agreement may be terminated by the Members’ Representative on behalf of the MSP Purchased Companies and the Members by written notice to Parent if (i) the Board of Directors withdraws (or modifies in any manner adverse to the MSP Companies or the Members), or proposes to withdraw (or modify in any manner adverse to the MSP Companies or the Members), the Board of Directors’ recommendation in favor of the Parent Proposals, or fails to reaffirm such recommendation as promptly as practicable (and in any event within five Business Days) after receipt of any written request to do so by the Members’ Representative; (ii) the Parent Stockholder Approval shall not have been obtained at the Parent Stockholders’ Meeting (or at any adjournment or postponement thereof); or (iii) the Extension shall not have been approved by the requisite majority of Parent’s Stockholders by the Extension Approval Date.
13.2 Termination Upon Default.
(a) Parent may terminate this Agreement by giving notice to the Members’ Representative on or prior to the Closing Date, without prejudice to any rights or obligations Parent may have, if the MSP Companies or the Members shall have materially breached any representation, warranty, agreement or covenant contained herein or in any Additional Agreement to be performed on or prior to the Closing Date and such breach shall not be cured by the earlier of (x) the Outside Closing Date and (y) the expiration of twenty (20) days (the “Cure Period”) following receipt by the Members’ Representative of a notice describing in reasonable detail the nature of such breach.
(b) The Members’ Representative, on behalf of the MSP Companies and the Members, may terminate this Agreement by giving notice to Parent on or prior to the Closing Date, without prejudice to any rights or obligations the MSP Companies or the Members may have, if Parent or Purchaser shall have materially breached any of their respective covenants, agreements, representations, and warranties contained herein to be performed on or prior to the Closing Date and such breach shall not be cured by the earlier of (x) the Outside Closing Date and (y) the expiration of the Cure Period following receipt by Parent of a notice describing in reasonable detail the nature of such breach.
13.3 No Other Termination. Except as otherwise specified herein, neither Parent, on behalf of Parent and Purchaser, nor the Members’ Representative, on behalf of the MSP Companies and the Members, may terminate this Agreement without the prior written consent of the other Party.
13.4 Effect of Termination. In the event of the termination of this Agreement pursuant to Article XIII, all obligations of the Parties hereunder (other than Section 8.5, Article XI, this Article XIII and Article XIV, which will survive the termination of this Agreement) will terminate without any liability of any Party to any other Party; provided, further, that no termination will relieve a Party from any liability arising from or relating to any knowing and intentional breach of a representation, a warranty or a covenant by such Party prior to termination.
ARTICLE XIV
MISCELLANEOUS
14.1 Notices. Any notice hereunder shall be sent in writing, addressed as specified below, and shall be deemed given: (a) if by hand or recognized courier service, by 5:00PM on a Business Day, addressee’s day and time, on the date of delivery, and otherwise on the first Business Day after such delivery; (b) if by email, on the date that transmission is confirmed electronically, if by 5:00PM on a Business Day, addressee’s day and time, and otherwise on the first Business Day after the date of such confirmation; or (c) five days after mailing by certified mail, return receipt requested. Notices shall be addressed to the respective Parties as follows (excluding telephone numbers, which are for convenience only), or to such other address as a party shall specify to the others in accordance with these notice provisions:
if to Parent or Purchaser, to:
4218 NE 2nd Avenue
Miami, Florida 33137
Attn: Ophir Sternberg
Email: o@lheartcapital.com
with a copy to (which shall not constitute notice):
DLA Piper LLP (US)
2525 East Camelback Road
Esplanade II Suite 1000
Phoenix, AZ 85016-4232
Attn: Steven D. Pidgeon
Email: steven.pidgeon@us.dlapiper.com
if to the MSP Companies:
2701 Le Jeune Road, Floor 10
Coral Gables, Florida 33134
Attn: General Counsel
Email: generalcounsel@msprecovery.com
with a copy to (which shall not constitute notice):
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, NY 10153
Attn: Michael J. Aiello
Matthew Gilroy
Email: michael.aiello@weil.com
matthew.gilroy@weil.com
if to the Members’ Representative:
2701 Le Jeune Road, Floor 10
Coral Gables, Florida 33134
Attn: General Counsel
Email: generalcounsel@msprecovery.com
with a copy to (which shall not constitute notice):
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, NY 10153
Attn: Michael J. Aiello
Matthew Gilroy
Email: michael.aiello@weil.com
matthew.gilroy@weil.com
14.2 Amendments; No Waiver.
(a) This Agreement may not be amended, except in writing signed by each Party (subject, in the case of the Members, to Section 14.14(a)), and cannot be terminated orally or by course of conduct. No provision hereof can be waived, except by a writing signed by the Party against whom such waiver is to be enforced, and any such waiver shall apply only in the particular instance in which such waiver shall have been given.
(b) Except as otherwise provided herein, neither any failure or delay in exercising any right or remedy hereunder or in requiring satisfaction of any condition herein nor any course of dealing shall constitute a waiver of or prevent any Party from enforcing any right or remedy or from requiring satisfaction of any condition. No notice to or demand on a Party shall waive or otherwise affect any obligation of that party or impair any right of the Party giving such notice or making such demand, including any right to take any action without notice or demand not otherwise required by this Agreement. No exercise of any right or remedy with respect to a breach of this Agreement shall preclude exercise of any other right or remedy, as appropriate to make the aggrieved Party whole with respect to such breach, or subsequent exercise of any right or remedy with respect to any other breach.
(c) Except as otherwise expressly provided herein, no statement herein of any right or remedy shall impair any other right or remedy stated herein or that otherwise may be available.
(d) Notwithstanding anything else contained herein, neither shall any Party seek, nor shall any Party be liable for, punitive or exemplary damages (except to the extent such punitive or exemplary damages are actually awarded pursuant to a Third-Party Claim and are indemnifiable hereunder), under any tort, contract, equity, or other legal theory, with respect to any breach (or alleged breach) of this Agreement or any provision hereof or any matter otherwise relating hereto or arising in connection herewith.
14.3 Arm’s length bargaining; no presumption against drafter. This Agreement has been negotiated at arm’s-length by Parties of equal bargaining strength, each represented by counsel or having had but declined the opportunity to be represented by counsel and having participated in the drafting of this Agreement. This Agreement creates no fiduciary or other special relationship between the Parties, and no such relationship otherwise exists. No presumption in favor of or against any Party in the construction or interpretation of this Agreement or any provision hereof shall be made based upon which Person might have drafted this Agreement or such provision.
14.4 Expenses. Except as otherwise provided herein, each Party shall bear its own expenses incurred in connection with this Agreement and the transactions herein contemplated whether or not such transactions shall be consummated, including all fees of its legal counsel, financial advisers and accountants; provided that if the Closing occurs, Parent shall bear and pay at or promptly after Closing, (x) all Parent Transaction Expenses in an amount not to exceed $60,000,000 (unless any such excess is agreed to in writing by the Members’ Representative) and (y) all MSP Company Transaction Expenses.
14.5 No Assignment or Delegation. No Party may assign any right or delegate any obligation hereunder, including by merger, consolidation, operation of law, or otherwise, without the written consent of the other Party. Any purported assignment or delegation without such consent shall be void, in addition to constituting a material breach of this Agreement.
14.6 Governing Law. This Agreement shall be construed in accordance with and governed by the laws of the State of Delaware, without giving effect to the conflict of laws principles thereof.
14.7 Counterparts; facsimile and electronic signatures. This Agreement may be executed in counterparts, each of which shall constitute an original, but all of which shall constitute one agreement. This Agreement shall become effective upon delivery to each Party of an executed counterpart or the earlier delivery to each Party of original, photocopied, or electronically transmitted signature pages that together (but need not individually) bear the signatures of all other Parties.
14.8 Entire Agreement. This Agreement together with the Additional Agreements, sets forth the entire agreement of the Parties with respect to the subject matter hereof and thereof and supersedes all prior and contemporaneous understandings and agreements related thereto (whether written or oral), all of which are merged herein. No provision of this Agreement or any Additional Agreement may be explained or qualified by any agreement, negotiations, understanding, discussion, conduct or course of conduct or by any trade usage. Except as otherwise expressly stated herein or any Additional Agreement, there is no condition precedent to the effectiveness of any provision hereof or thereof. No Party has relied on any representation from, or warranty or agreement of, any person in entering into this Agreement, prior hereto or contemporaneous herewith or any Additional Agreement, except those expressly stated herein or therein.
14.9 Severability. A determination by a court or other legal authority that any provision that is not of the essence of this Agreement is legally invalid shall not affect the validity or enforceability of any other provision hereof. The Parties shall cooperate in good faith to substitute (or cause such court or other legal authority to substitute) for any provision so held to be invalid a valid provision, as alike in substance to such invalid provision as is lawful.
14.10 Construction of Certain Terms and References; Captions. In this Agreement:
(a) References to particular sections and subsections, schedules, and exhibits not otherwise specified are cross-references to sections and subsections, schedules, and exhibits of this Agreement.
(b) The words “herein,” “hereof,” “hereunder,” and words of similar import refer to this Agreement as a whole and not to any particular provision of this Agreement, and, unless the context requires otherwise, “Party” means a party signatory hereto.
(c) Any use of the singular or plural, or the masculine, feminine, or neuter gender, includes the others, unless the context otherwise requires; “including” means “including without limitation;” “or” means “and/or;” “any” means “any one, more than one, or all;” and, unless otherwise specified, any financial or accounting term has the meaning of the term under U.S. GAAP as consistently applied heretofore.
(d) Unless otherwise specified, any reference to any agreement (including this Agreement), instrument, or other document includes all schedules, exhibits, or other attachments referred to therein, and any reference to a statute or other law includes any rule, regulation, ordinance, or the like promulgated thereunder, in each case, as amended, restated, supplemented, or otherwise modified from time to time. Any reference to a numbered schedule means the same- numbered section of the disclosure schedule.
(e) If any action is required to be taken or notice is required to be given within a specified number of days following a specific date or event, the day of such date or event is not counted in determining the last day for such action or notice. If any action is required to be taken or notice is required to be given on or before a particular day which is not a Business Day, such action or notice shall be considered timely if it is taken or given on or before the next Business Day.
(f) Captions are not a part of this Agreement, but are included for convenience, only.
(g) The phrases “provided to,” “furnished to,” “made available” and phrases of similar import when used herein, unless the context otherwise requires, means that a copy of the information or material referred to has been provided no later than 5:00 p.m. Eastern time on the day immediately prior to the date of this Agreement to the Party to which such information or material is to be provided or furnished (i) in the virtual “data room” set up by the MSP Companies in connection with this Agreement, or (ii) by delivery to such Party or its legal counsel via electronic mail or hard copy form.
14.11 Further Assurances. Each Party shall execute and deliver such documents and take such action, as may reasonably be considered within the scope of such Party’s obligations hereunder, necessary to effectuate the transactions contemplated by this Agreement.
14.12 Third Party Beneficiaries. Except as provided in Section 9.4, no provision of this Agreement (including the Disclosure Schedules) is intended to confer, or confers, upon any Person other than the Parties any rights, benefits or remedies hereunder. The representations and warranties in this Agreement are the product of negotiations among the Parties and are for the sole benefit of the Parties. Any inaccuracies in such representations and warranties are subject to waiver by the Parties in accordance with Section 14.2 without notice or liability to any other Person. In some instances, the representations and warranties in this Agreement may represent an allocation among the Parties of risks associated with particular matters regardless of the knowledge of any of the Parties. Consequently, Persons other than the Parties may not rely upon the representations and warranties in this Agreement as characterizations of actual facts or circumstances as of the date of this Agreement or as of any other date.
14.13 Reference is made to the Prospectus. The MSP Companies, the Members’ Representative and the Members have read the Prospectus and understand that Purchaser has established the Trust Account for the benefit of the Public Stockholders of Purchaser and the underwriters of the IPO pursuant to the Trust Agreement and that, except for a portion of the interest earned on the amounts held in the Trust Account, Purchaser may disburse monies from the Trust Account only for the purposes set forth in the Trust Agreement. For and in consideration of Purchaser agreeing to enter into this Agreement, the MSP Companies and the Members hereby agree that they do not have any right, title, interest or claim of any kind in or to any monies in the Trust Account and hereby agree that they will not seek recourse against the Trust Account for any claim they may have in the future as a result of, or arising out of, any negotiations, contracts or agreements with Purchaser.
14.14 Members’ Representative.
(a) The Members’ Representative is hereby appointed as agent, proxy and attorney-in-fact for each Member for all purposes of this Agreement and the Additional Agreements, including the full power and authority on each such Member’s behalf (i) to give and receive notices and communications to or by Parent or Purchaser for any purpose under this Agreement and the Additional Agreements; (ii) to agree to, negotiate, enter into settlements and compromises of and demand mediation and comply with orders of courts and awards of arbitrators with respect to any indemnification claims (including Third-Party Claims) under Article XI or other disputes arising under or related to this Agreement or the Additional Agreements; (iii) to enter into and deliver the Escrow Agreement on behalf of each of the Members and to disburse any funds or Equity Consideration received hereunder or pursuant to the Escrow Agreement; (iv) to authorize or object to delivery to Parent of the Escrow Fund, or any portion thereof, in satisfaction of indemnification claims by Parent in accordance with the provisions of the Escrow Agreement; (v) to act on behalf of Members in accordance with the provisions of the Agreement and the Additional Agreements, the securities described herein and any other document or instrument executed in connection with the Agreement and the Acquisition; (vi) to endorse and deliver any certificates or instruments of assignment as Parent or Purchaser shall reasonably request; (vii) to execute and deliver on behalf of each such Member any amendment, waiver, ancillary agreement and documents on behalf of any Member that the Members’ Representative deems necessary or appropriate; and (viii) to take all actions necessary or appropriate in the judgment of the Members’ Representative for the accomplishment of the foregoing and to do each and every act and exercise any and all rights which the Members collectively are permitted or required to do or exercise under this Agreement.
(b) Such agency may be changed by the Members from time to time upon no less than twenty (20) days prior written notice to Parent, provided, however, that the Members’ Representative may not be removed unless holders of at least 51% of all of the Interests outstanding immediately prior to the transactions contemplated by this Agreement agrees to such removal. Any vacancy in the position of Members’ Representative may be filled by approval of the holders of at least 51% of all of the Interests outstanding immediately prior to the transactions contemplated by this Agreement. Any removal or change of the Members’ Representative shall not be effective until written notice is delivered to Purchaser. No bond shall be required of the Members’ Representative, and the Members’ Representative shall not receive any compensation for his services. Notices or communications to or from the Members’ Representative shall constitute notice to or from the Members.
(c) A decision, act, consent or instruction of the Members’ Representative (in his capacity as such) shall, for all purposes hereunder, constitute a decision, act, consent or instruction of all of the Members and shall be final, binding and conclusive upon each of the Members. In connection with this Agreement, the Escrow Agreement and any instrument, agreement or document relating hereto or thereto, and in exercising or failing to exercise all or any of the powers conferred upon the Members’ Representative hereunder (i) the Members’ Representative shall incur no responsibility whatsoever to any Members by reason of any error in judgment or other act or omission performed or omitted hereunder or in connection with the Escrow Agreement or any such other agreement, instrument or document, excepting only responsibility for any act or failure to act which represents willful misconduct, and (ii) the Members’ Representative shall be entitled to rely on the advice of counsel, public accountants or other independent experts experienced in the matter at issue, and any error in judgment or other act or omission of the Members’ Representative pursuant to such advice shall in no event subject the Members’ Representative to liability to any Members. Each Member shall severally (in accordance with their ownership percentages in the MSP Companies as set forth on Schedule 2.1(b)), and not jointly, indemnify the Members’ Representative, against all losses, damages, liabilities, claims, obligations, costs and expenses, including reasonable attorneys’, accountants’ and other experts’ fees and the amount of any judgment against them, of any nature whatsoever (including, but not limited to, any and all expense whatsoever reasonably incurred in investigating, preparing or defending against any litigation, commenced or threatened or any claims whatsoever) (“Members’ Representative Losses”), arising out of or in connection with any actions taken or omitted to be taken by the Members’ Representative pursuant to the terms of this Agreement or the Escrow Agreement (including any claim, investigation, challenge, action or proceeding or in connection with any appeal thereof, relating to the acts or omissions of the Members’ Representative hereunder, or under the Escrow Agreement or otherwise), in each case as such Members’ Representative Loss is incurred or suffered. If not paid directly to the Members’ Representative by the Members, any such Members’ Representative Loss may be recovered by the Members’ Representative from the Escrow Fund otherwise distributable to the Members pursuant to the terms hereof and the Escrow Agreement at the time of distribution in accordance with written instructions delivered by the Members’ Representative to the Escrow Agent; provided that while this section allows the Members’ Representative to be paid from the Escrow Fund, this does not relieve the Members from their obligation to promptly pay such Members’ Representative Losses as they are suffered or incurred, nor does it prevent the Members’ Representative from seeking any remedies available to it at law or otherwise. Notwithstanding anything in this Section 14.14 to the contrary, the Members’ Representative (in his capacity as such) shall have no obligation or authority with respect to any indemnification claims against a Member made by a Parent Indemnitee under Section 11.1, other than with respect to its obligation and authority to deliver to the Escrow Agent certain joint written instructions and certificates under the Escrow Agreement effecting a release of the Escrow Consideration in satisfaction of Third-Party Claims and Direct Claims.
14.15 Specific Performance. The Parties agree that irreparable damage for which monetary damages, even if available, would not be an adequate remedy, would occur in the event that the Parties do not perform their obligations under the provisions of this Agreement (including failing to take such actions as are required of them hereunder to consummate this Agreement) or any Additional Agreement in accordance with its specified terms or otherwise breach such provisions. The Parties acknowledge and agree that (i) the Parties shall be entitled to an injunction, specific performance, or other equitable relief, to prevent breaches of this Agreement or any Additional Agreement and to enforce specifically the terms and provisions hereof and thereof, without proof of damages, prior to the valid termination of this Agreement in accordance with Section 13.1 or Section 13.2, this being in addition to any other remedy to which they are entitled under this Agreement or any Additional Agreement, and (ii) the right of specific enforcement is an integral part of the transactions contemplated by this Agreement and without that right, none of the Parties would have entered into this Agreement. Each Party agrees that it will not oppose the granting of specific performance and other equitable relief on the basis that the other Parties have an adequate remedy at Law or that an award of specific performance is not an appropriate remedy for any reason at Law or equity. The Parties acknowledge and agree that any Party seeking an injunction to prevent breaches of this Agreement or any Additional Agreement and to enforce specifically the terms and provisions of this Agreement or any Additional Agreement in accordance with this Section 14.15 shall not be required to provide any bond or other security in connection with any such injunction. Without limiting the generality of the foregoing, or the other provisions of this Agreement, Parent acknowledges and agrees that the MSP Companies may, without breach of this Agreement, (1) with respect to any Additional Agreement to which any MSP Company is a party or a third party beneficiary thereof, institute or pursue an Action directly against the counterparty(ies) to such Additional Agreement seeking, or seek or obtain a court order against the counterparty(ies) to such Additional Agreement for, injunctive relief, specific performance, or other equitable relief with respect to such Additional Agreement, (2) with respect to any Additional Agreement to which the MSP Companies are not a party or a third party beneficiary thereof, be entitled, upon written notice to Parent, to: (a) require Parent to enforce its rights under any such Additional Agreement through the initiation and pursuit of litigation (including seeking, or seek or obtain a court order against the counterparty(ies) to such Additional Agreement for, injunctive relief, specific performance, or other equitable relief with respect to such Additional Agreement) in the event the counterparty under such Additional Agreement is in breach of its obligations thereunder, (b) have approval rights over Parent’s selection of counsel for any such litigation (such approval not to be unreasonably withheld, conditioned or delayed), (c) select a separate counsel, which may be or include Counsel, to participate alongside Parent’s counsel in any such litigation (at the expense of the MSP Companies); provided that such separate counsel shall not be entitled to control or seek court orders on Parent’s behalf, and/or (d) fund any such litigation and (3) require Parent to promptly execute, and Parent hereby agrees to execute and comply with, any and all documents designed to implement or facilitate the execution of the rights contemplated in this sentence.
[The remainder of this page intentionally left blank; signature pages to follow]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written.
Parent: | |||
LIONHEART ACQUISITION CORPORATION II | |||
By: | /s/ Ophir Sternberg | ||
Ophir Sternberg, Chairman and CEO | |||
Purchaser: | |||
LIONHEART II HOLDINGS, LLC | |||
By: | /s/ Ophir Sternberg | ||
Lionheart Acquisition Corporation II, the sole member | |||
By: | Ophir Sternberg, Chairman and CEO | ||
The Members’ Representative (solely in such capacity and not in any personal capacity): | |||
By: | /s/ John H. Ruiz | ||
Name: John H. Ruiz |
[MSP Purchased Companies signature page begins on next page]
The MSP Purchased Companies: | ||
MDA, SERIES LLC | ||
By: | /s/ John H. Ruiz | |
Name: John H. Ruiz | ||
Title: Manager | ||
By: | /s/ Frank C. Quesada | |
Name: Frank C. Quesada | ||
Title: Manager |
SERIES MRCS | ||
By: | /s/ Frank C. Quesada | |
Name: Frank C. Quesada | ||
Title: Manager | ||
MSP RECOVERY SERVICES LLC | ||
By: | /s/ Sandra Rodriguez | |
Name: Sandra Rodriguez | ||
Title: Manager |
MSP RECOVERY, LLC | ||
By: | /s/ Sandra Rodriguez | |
Name: Sandra Rodriguez | ||
Title: Manager | ||
By: | /s/ John H. Ruiz | |
Name: John H. Ruiz | ||
Title: Manager |
MSP RECOVERY CAID, SERIES LLC | ||
By: | /s/ John H. Ruiz | |
Name: John H. Ruiz | ||
Title: Manager | ||
By: | /s/ Frank C. Quesada | |
Name: Frank C. Quesada | ||
Title: Manager |
MSP RECOVERY COM, SERIES LLC | ||
By: | /s/ John H. Ruiz | |
Name: John H. Ruiz | ||
Title: Manager | ||
By: | /s/ Frank C. Quesada | |
Name: Frank C. Quesada | ||
Title: Manager |
MSP RECOVERY HOSP, SERIES LLC | ||
By: | /s/ John H. Ruiz | |
Name: John H. Ruiz | ||
Title: Manager | ||
By: | /s/ Frank C. Quesada | |
Name: Frank C. Quesada | ||
Title: Manager |
MSP RECOVERY PROV, SERIES LLC | ||
By: | /s/ John H. Ruiz | |
Name: John H. Ruiz | ||
Title: Manager | ||
By: | /s/ Frank C. Quesada | |
Name: Frank C. Quesada | ||
Title: Manager |
MSP RECOVERY OF PUERTO RICO, LLC | ||
By: | /s/ John H. Ruiz | |
Name: John H. Ruiz | ||
Title: Manager | ||
By: | /s/ Frank C. Quesada | |
Name: Frank C. Quesada | ||
Title: Manager | ||
By: | /s/ Sandra Rodriguez | |
Name: Sandra Rodriguez | ||
Title: Manager |
MSP RECOVERY CLAIMS HP, SERIES LLC | ||
By: | /s/ John H. Ruiz | |
Name: John H. Ruiz | ||
Title: Manager | ||
By: | /s/ Frank C. Quesada | |
Name: Frank C. Quesada | ||
Title: Manager |
MSP WB, LLC | ||
By: | /s/ John H. Ruiz | |
Name: John H. Ruiz | ||
Title: Manager | ||
By: | /s/ Frank C. Quesada | |
Name: Frank C. Quesada | ||
Title: Manager |
MSP PRODUCTIONS, LLC | ||
By: | /s/ John H. Ruiz | |
Name: John H. Ruiz | ||
Title: Manager |
[Member signature page begins on next page]
Members:
|
|
/s/ John H. Ruiz | |
Name: John H. Ruiz |
/s/ Frank Quesada | |
Name: Frank Quesada |
/s/ John H. Ruiz, II | |
Name: John H. Ruiz, II |
JOCRAL FAMILY LLLP | ||
John H. Ruiz Revocable Living Trust, General Partner | ||
By: | /s/ John H. Ruiz | |
Name: John H. Ruiz | ||
Title: Trustee |
JOCRAL HOLDINGS, LLC | ||
By: | /s/ Roberto Lizama | |
Name: Roberto Lizama | ||
Title: Manager |
QUESADA GROUP HOLDINGS, LLC | ||
By: | /s/ Frank C. Quesada | |
Name: Frank C. Quesada | ||
Title: Manager |
RUIZ GROUP HOLDINGS LIMITED LLC | ||
By: | /s/ John H. Ruiz | |
Name: John H. Ruiz | ||
Title: Manager |
|
MSP RECOVERY, INC.
|
|
By:
|
Name: [●]
|
|
Office: [●]
|
AMENDED AND RESTATED BYLAWS
OF
MSP RECOVERY, INC.
|
Page
|
||
ARTICLE I MEETINGS OF STOCKHOLDERS
|
C-1
|
|
Section 1.1
|
Annual Meetings
|
C-1
|
Section 1.2
|
Special Meetings
|
C-1
|
Section 1.3
|
Notice of Meetings
|
C-1
|
Section 1.4
|
Adjournments
|
C-1
|
Section 1.5
|
Quorum
|
C-2
|
Section 1.6
|
Organization
|
C-2
|
Section 1.7
|
Voting; Proxies
|
C-2
|
Section 1.8
|
Fixing Date for Determination of Stockholders of Record
|
C-3
|
Section 1.9
|
List of Stockholders Entitled to Vote
|
C-3
|
Section 1.10
|
Action By Consent in Lieu of Meeting
|
C-4
|
Section 1.11
|
Inspectors of Election
|
C-4
|
Section 1.12
|
Conduct of Meetings
|
C-5
|
Section 1.13
|
Notice of Stockholder Business and Nominations
|
C-5
|
ARTICLE II BOARD OF DIRECTORS
|
C-8 | |
Section 2.1
|
General Powers
|
C-8 |
Section 2.2
|
Number; Qualifications
|
C-9
|
Section 2.3
|
Election; Term
|
C-9
|
Section 2.4
|
Resignation; Vacancies
|
C-9
|
Section 2.5
|
Regular Meetings
|
C-9 |
Section 2.6
|
Special Meetings
|
C-9
|
Section 2.7
|
Telephonic Meetings Permitted
|
C-10
|
Section 2.8
|
Quorum; Vote Required for Action
|
C-10
|
Section 2.9
|
Organization
|
C-10
|
Section 2.10
|
Action by Unanimous Consent of Directors
|
C-10
|
Section 2.11
|
Compensation
|
C-10
|
ARTICLE III COMMITTEES
|
C-10
|
|
Section 3.1
|
Committees
|
C-10
|
Section 3.2
|
Committee Rules
|
C-11
|
ARTICLE IV OFFICERS
|
C-11
|
|
Section 4.1
|
Executive Officers; Election; Qualifications; Term of Office, Resignation; Removal; Vacancies
|
C-11
|
|
||
Section 4.2
|
Powers and Duties of Executive Officers
|
C-11
|
Section 4.3
|
Appointing Attorneys and Agents; Voting Securities of Other Entities
|
C-11
|
ARTICLE V STOCK
|
C-12
|
|
Section 5.1
|
Certificates
|
C-12
|
Section 5.2
|
Lost, Stolen or Destroyed Stock Certificates; Issuance of New Certificates or Uncertificated Shares
|
C-12
|
|
||
Section 5.3
|
Transfer Of Shares Of Class A Common Stock
|
C-12
|
Section 5.4
|
Authority for Additional Rules Regarding Transfer
|
C-12
|
ARTICLE VI INDEMNIFICATION
|
C-12
|
|
Section 6.1
|
Limited Liability of Directors
|
C-12
|
Section 6.2
|
Indemnification and Advancement
|
C-13
|
Section 6.3
|
Change in Rights
|
C-13
|
ARTICLE VII MISCELLANEOUS
|
C-14
|
|
Section 7.1
|
Fiscal Year
|
C-14
|
Section 7.2
|
Voting of Stock Owned by the Corporation
|
C-14
|
Section 7.3
|
Seal
|
C-14
|
Section 7.4
|
Manner of Notice
|
C-14
|
Section 7.5
|
Waiver of Notice of Meetings of Stockholders, Directors and Committees
|
C-14
|
Section 7.6
|
Form of Records
|
C-14
|
Section 7.7
|
Amendment of Bylaws
|
C-14
|
Page
|
||
ARTICLE I DEFINITIONS
|
D-2
|
|
ARTICLE II ORGANIZATIONAL MATTERS
|
D-13
|
|
Section 2.01
|
Formation of Company
|
D-13
|
Section 2.02.
|
Name
|
D-13
|
Section 2.03.
|
Purpose
|
D-13
|
Section 2.04.
|
Principal Office; Registered Agent
|
D-13
|
Section 2.05.
|
Term
|
D-14
|
Section 2.06.
|
No State-Law Partnership
|
D-14
|
ARTICLE III MEMBERS; UNITS; CAPITALIZATION
|
D-14
|
|
Section 3.01.
|
Members
|
D-14
|
Section 3.02.
|
Units
|
D-15
|
Section 3.03.
|
Automatic Conversion of Units
|
D-16
|
Section 3.04.
|
Repurchase or Redemption of Shares of Class A Common Stock
|
D-17
|
Section 3.05.
|
Certificates Representing Units; Lost, Stolen or Destroyed Certificates; Registration and Transfer of Units
|
D-18
|
Section 3.06.
|
Negative Capital Accounts
|
D-19
|
Section 3.07.
|
No Withdrawal
|
D-19
|
Section 3.08.
|
Loans From Members
|
D-19
|
Section 3.09.
|
Corporation Stock Incentive Plans
|
D-19
|
Section 3.10.
|
Dividend Reinvestment Plan, Cash Option Purchase Plan, Equity Plan, Stock Incentive Plan or Other Plan
|
D-20
|
ARTICLE IV DISTRIBUTIONS
|
D-21
|
|
Section 4.01.
|
Distributions
|
D-21
|
ARTICLE V CAPITAL ACCOUNTS; ALLOCATIONS; TAX MATTERS
|
D-23
|
|
Section 5.01.
|
Capital Accounts
|
D-23
|
Section 5.02.
|
Allocations
|
D-24
|
Section 5.03.
|
Special Allocations
|
D-25
|
Section 5.04.
|
Other Allocation Rules
|
D-27
|
Section 5.05.
|
Withholding
|
D-28
|
ARTICLE VI MANAGEMENT
|
D-30
|
|
Section 6.01.
|
Authority of Manager
|
D-30
|
Section 6.02.
|
Actions of the Manager
|
D-30
|
Section 6.03.
|
Resignation; Removal
|
D-30
|
Section 6.04.
|
Vacancies
|
D-30
|
Section 6.05.
|
Transactions Between Company and Manager
|
D-30
|
Section 6.06.
|
Reimbursement for Expenses
|
D-30
|
Section 6.07.
|
Delegation of Authority
|
D-31
|
Section 6.08.
|
Duties; Limitation of Liability
|
D-31
|
Section 6.09.
|
Limitation of Liability; Indemnification
|
D-32
|
Section 6.10.
|
Investment Company Act
|
D-33
|
Section 6.11.
|
Outside Activities of the Manager
|
D-33
|
ARTICLE VII RIGHTS AND OBLIGATIONS OF MEMBERS
|
D-34
|
|
Section 7.01.
|
Limitation of Liability and Duties of Members
|
D-34
|
Section 7.02.
|
Lack of Authority
|
D-34
|
Section 7.03.
|
No Right of Partition
|
D-35
|
Section 7.04.
|
Members Right to Act
|
D-35
|
Section 7.05.
|
Inspection Rights
|
D-36
|
ARTICLE VIII BOOKS, RECORDS, ACCOUNTING AND REPORTS, AFFIRMATIVE COVENANTS
|
D-36
|
|
Section 8.01.
|
Records and Accounting
|
D-36
|
Section 8.02.
|
Fiscal Year
|
D-36
|
Section 8.03.
|
Reports
|
D-36
|
ARTICLE IX TAX MATTERS
|
D-37
|
|
Section 9.01.
|
Partnership Representative
|
D-37
|
Section 9.02.
|
Section 754 Election
|
D-38
|
Section 9.03.
|
Debt Allocation
|
D-38
|
Section 9.04.
|
Tax Returns
|
D-38
|
ARTICLE X RESTRICTIONS ON TRANSFER OF UNITS
|
D-38
|
|
Section 10.01.
|
General
|
D-38
|
Section 10.02.
|
Permitted Transfers
|
D-39
|
Section 10.03.
|
Restricted Units Legend
|
D-39
|
Section 10.04.
|
Transfer
|
D-39
|
Section 10.05.
|
Assignee’s Rights
|
D-40
|
Section 10.06.
|
Assignor’s Rights and Obligations
|
D-40
|
Section 10.07.
|
Overriding Provisions
|
D-41
|
ARTICLE XI REDEMPTION AND EXCHANGE
|
D-42
|
|
Section 11.01.
|
Exchange of Class B Paired Interests for Class A Common Stock
|
D-42
|
Section 11.02.
|
Exchange Procedures; Notices and Revocations
|
D-42
|
Section 11.03.
|
Exchange Rate Adjustment
|
D-45
|
Section 11.04.
|
Tender Offers and Other Events with Respect to the Corporation
|
D-45
|
Section 11.05.
|
Listing of Class A Common Stock
|
D-46
|
Section 11.06.
|
Class A Common Stock to be Issued; Class V Common Stock to be Cancelled
|
D-46
|
Section 11.07.
|
Distributions
|
D-47
|
Section 11.08.
|
Withholding; Certification of Non-Foreign Status
|
D-47
|
Section 11.09.
|
Tax Treatment
|
D-48
|
ARTICLE XII WARRANT EXERCISE REPURCHASE
|
D-48
|
|
Section 12.01.
|
Repurchase Upon Exercise of the New Warrants
|
D-48
|
Section 12.02.
|
Warrant Exercise Repurchase Procedures
|
D-49
|
Section 12.03.
|
Covenant regarding the Repurchased Equity Interests
|
D-50
|
Section 12.04.
|
Tax Treatment
|
D-50
|
Section 12.05.
|
Adjustments in New Warrants
|
D-50
|
Section 12.06.
|
Parent Change of Control
|
D-51
|
ARTICLE XIII ADMISSION OF MEMBERS
|
D-51
|
|
Section 13.01.
|
Substituted Members
|
D-51
|
Section 13.02.
|
Additional Members
|
D-51
|
ARTICLE XIV RESIGNATION
|
D-51
|
|
Section 14.01.
|
Resignation of Members
|
D-51
|
ARTICLE XV DISSOLUTION AND LIQUIDATION
|
D-52
|
|
Section 15.01.
|
Dissolution
|
D-52
|
Section 15.02.
|
Liquidation and Termination
|
D-52
|
Section 15.03.
|
Deferment; Distribution in Kind
|
D-53
|
Section 15.04.
|
Certificate of Cancellation
|
D-53
|
Section 15.05.
|
Reasonable Time for Winding Up
|
D-53
|
Section 15.06.
|
Return of Capital
|
D-53
|
ARTICLE XVI VALUATION
|
D-54
|
|
Section 16.01.
|
Determination
|
D-54
|
Section 16.02.
|
Dispute Resolution
|
D-54
|
ARTICLE XVII GENERAL PROVISIONS
|
D-54
|
|
Section 17.01.
|
Power of Attorney
|
D-54
|
Section 17.02.
|
Confidentiality
|
D-55
|
Section 17.03.
|
Amendments
|
D-56
|
Section 17.04.
|
Title to Company Assets
|
D-57
|
Section 17.05.
|
Addresses and Notices
|
D-57
|
Section 17.06.
|
Binding Effect; Intended Beneficiaries
|
D-58
|
Section 17.07.
|
Creditors
|
D-58
|
Section 17.08.
|
Waiver
|
D-58
|
Section 17.09.
|
Counterparts
|
D-58
|
Section 17.10.
|
Applicable Law
|
D-58
|
Section 17.11.
|
Jurisdiction
|
D-59
|
Section 17.12.
|
Severability
|
D-59
|
Section 17.13.
|
Further Action
|
D-59
|
Section 17.14.
|
Delivery by Electronic Transmission
|
D-59
|
Section 17.15.
|
Right of Offset
|
D-60
|
Section 17.16.
|
Effectiveness
|
D-60
|
Section 17.17.
|
Entire Agreement
|
D-60
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Section 17.18.
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Remedies
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D-60
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Section 17.19.
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Descriptive Headings; Interpretation
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D-60
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Exhibit A
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Form of Joinder Agreement
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Exhibit B
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Certificate For Lionheart II Holdings, LLC
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Exhibit C
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Officers
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Exhibit D
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Notice of Exchange
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Exhibit E
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Schedule of Members
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Exhibit F
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Notice of Repurchase
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i.
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a Cash Exchange Payment by the Company; or
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ii.
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a number of shares of Class A Common Stock that is equal to the product of the number of Class B Paired Interests surrendered
multiplied by the Exchange Rate (a “Share Exchange”).
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MSP RECOVERY, INC.,
as a Member and the Corporation
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By: |
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Name: [●]
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Title: [●] |
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[MEMBERS]
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By:
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Name: [●]
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Title: [●] |
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MSP Principals
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By:
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Name: John H. Ruiz
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By:
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Name: Frank Quesada
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1. |
Joinder to the LLC Agreement. Upon the execution of this Joinder by the undersigned and delivery hereof to the Company, the undersigned hereby is and hereafter will be a Member under the LLC Agreement and a party thereto, with all
the rights, privileges and responsibilities of a Member thereunder. The undersigned hereby agrees that it shall comply with and be fully bound by the terms of the LLC Agreement as if it had been a signatory thereto as of the date
thereof.
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2. |
Incorporation by Reference. All terms and conditions of the LLC Agreement are hereby incorporated by reference in this Joinder as if set forth herein in full.
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3. |
Address. All notices under the LLC Agreement to the undersigned shall be directed to:
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[NEW MEMBER]
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By:
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Name: [●]
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Title: [●]
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By: |
MSP Recovery, Inc.
Its manager
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By:
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Name: [●]
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Title: [●]
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Dated:____________, 20__
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Name:
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Title:
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Signature:
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Dated:_____________ , 20__
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(Transferor)
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Address:
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Name: |
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Title:
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[●]
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[●] |
Re: |
Exchange Pursuant to First Amended and Restated Limited Liability Company Agreement of Lionheart II Holdings, LLC dated as of [●], 2021 (the “Agreement”)
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Name and Address of Member
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Class A
Units
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Class B
Units
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Capital
Account
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MSP Recovery, Inc.
[2701 Le Jeune Road, Floor 10,
Coral Gables, Florida 33134]
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[●]
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0
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0
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[Members]
[Addresses of Members]
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0
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[●]
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$[●]
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Total:
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[●]
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[●]
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$[●]
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Name and Address of MSP Principal
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MSP
Principal
Proportion
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[MSP Principal]
[Addresses of MSP Principal]
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[●]
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[MSP Principal]
[Addresses of MSP Principal]
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[●]
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Total:
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100
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a. |
Each MSP Principal (or its designated Affiliate(s)) shall assign, transfer, convey and deliver to the Corporation its Repurchased Equity Interests by [provide any specific instructions]; and
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b. |
the Corporation shall deliver to each MSP Principal (or its designated Affiliate(s)) its share of the Aggregate Exercise Price by wire transfer of immediately available funds, to such account designated by the MSP Principal in
writing not less than two (2) Business Days prior to such Repurchase Closing Date.
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By: | [Name] |
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[Title] |
COMPANY:
MSP RECOVERY, Inc., a Delaware corporation
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By:
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Name:
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Title:
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ORIGINAL HOLDERS:
LIONHEART EQUITIES, LLC, a Delaware limited liability company
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By:
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Name: Ophir Sternberg
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Title: Manager
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Name: Ophir Sternberg
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Name: Paul Rapisarda
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Name: Faquiry Diaz Cala
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Name: Thomas Byrne
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Name: James Anderson
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Name: Roger Meltzer
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Name: Thomas W. Hawkins
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NOMURA SECURITIES INTERNATIONAL, INC.
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By:
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Name: Bryan Finkel
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Title: Managing Director
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ADDITIONAL HOLDERS:
JOHN RUIZ
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By:
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Name: John Ruiz
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Title:
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JOCRAL HOLDINGS, LLC
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By:
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Name:
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Title:
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FRANK QUESADA
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By:
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Name: Frank Quesada
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Title:
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QUESADA GROUP HOLDINGS, LLC
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By:
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Name:
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Title:
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RUIZ GROUP HOLDINGS LIMITED LLC
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By:
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Name:
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Title:
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JOHN H. RUIZ, II
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By:
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Name: John H. Ruiz, II
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Title:
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Page
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Article I
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DEFINITIONS
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F-4 | |
SECTION 1.1 Definitions
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F-4
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Article II
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DETERMINATION OF CERTAIN REALIZED Tax BENEFIT
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F-15
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SECTION 2.1 Basis Schedule
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F-15
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SECTION 2.2 Tax Benefit Schedule
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F-16 | ||
SECTION 2.3 Procedures, Amendments
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F-17 | ||
SECTION 2.4 Section 754 Election
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F-18 | ||
Article III
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TAX BENEFIT PAYMENTS
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F-19
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SECTION 3.1 Payments
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F-19
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SECTION 3.2 No Duplicative Payments
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F-19 | ||
SECTION 3.3 Pro Rata Payments
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F-20
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SECTION 3.4 Payment Ordering
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F-20
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Article IV
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TERMINATION
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F-21
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SECTION 4.1 Early Termination of Agreement; Breach of Agreement
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F-21
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SECTION 4.2 Early Termination Notice
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F-23
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SECTION 4.3 Payment upon Early Termination
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F-24
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Article V
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SUBORDINATION AND LATE PAYMENTS
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F-24
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SECTION 5.1 Subordination
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F-24
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SECTION 5.2 Late Payments by the Corporate Taxpayer
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F-25
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Article VI
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NO DISPUTES; CONSISTENCY; COOPERATION
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F-25
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SECTION 6.1 Participation in the Corporate Taxpayer’s and MSP’s Tax Matters
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F-25
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SECTION 6.2 Consistency
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F-26
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SECTION 6.3 Cooperation
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F-26
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Article VII
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MISCELLANEOUS
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F-26
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SECTION 7.1 Notices
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F-26
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SECTION 7.2 Counterparts
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F-27
|
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SECTION 7.3 Entire Agreement; No Third Party Beneficiaries
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F-27 | ||
SECTION 7.4 Governing Law
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F-28
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SECTION 7.5 Severability
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F-28
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SECTION 7.6 Successors; Assignment; Amendments; Waivers
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F-28
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SECTION 7.7 Interpretation
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F-29
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SECTION 7.8 Waiver of Jury Trial; Jurisdiction
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F-30
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SECTION 7.9 Reconciliation
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F-31
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SECTION 7.10 Withholding
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F-31
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SECTION 7.11 Admission of the Corporate Taxpayer into a Consolidated Group; Transfers of Corporate Assets
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F-32 | ||
SECTION 7.12 Confidentiality
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F-33
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SECTION 7.13 TRA Party Representative
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F-34
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MSP RECOVERY, INC.
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By: |
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Name:
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Title:
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MASTER MSP, LLC
|
||
By:
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Name:
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||
Title:
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||
TRA PARTY REPRESENTATIVE
|
||
By:
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Name:
|
||
Title:
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||
TRA PARTIES:
|
||
[________________]
|
||
By:
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Name:
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||
Title:
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Annex G
EXECUTION VERSION
July 11, 2021
Lionheart Acquisition Corporation II
4218 NE 2nd Avenue
Miami, FL 33137
Re: Sponsor Agreement
Ladies and Gentlemen:
This letter (this “Sponsor Agreement”) is being delivered to you in accordance with that certain Membership Interest Purchase Agreement, dated as of the date hereof (the “MIPA”), by and among Lionheart Acquisition Corporation II, a Delaware corporation (“Parent”), Lionheart II Holdings, LLC, a newly-formed Delaware limited liability company and a wholly-owned subsidiary of Parent, each limited liability company set forth on Schedule 2.1(a) to the MIPA (collectively, the “MSP Purchased Companies”), the members of the MSP Purchased Companies listed on Schedule 2.1(b) to the MIPA (each, a “Member” and collectively the “Members”), and John H. Ruiz, as the representative of the Members, and the other transactions relating thereto (the “Transaction”).
This Sponsor Agreement hereby amends and restates in its entirety that certain letter, dated August 13, 2020, from Lionheart Equities, LLC, a Delaware limited liability company (the “Sponsor”), and the undersigned individuals, each of whom is a member of Parent’s board of directors (the “LCAP Board”) and/or management team (each, an “Insider” and collectively, the “Insiders”), to Parent (the “Prior Letter Agreement”). Capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed to such terms in the MIPA.
In order to induce Parent and the Members to enter into the MIPA and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Sponsor and each Insider hereby agrees with Parent as follows:
1. Support. The Sponsor and each Insider unconditionally and irrevocably agrees that it, he, she or it shall:
(a) vote (or execute and return an action by written consent) any shares of Parent Common Stock owned by it, him or her (all such common stock, the “Covered Shares”) in favor of the Parent Proposals (and any actions required in furtherance thereof) at the Parent Stockholders’ Meeting (or any adjournment or postponement thereof) or any other duly called special meeting of Parent’s stockholders (or any adjournment or postponement thereof) called or requested for the purpose of soliciting the Parent Stockholder Approval in connection with the consummation of the Transaction;
(b) when the Parent Stockholders’ Meeting is held, appear at such meeting, in person or by proxy, or otherwise cause all of the Covered Shares to be counted as present thereat for the purpose of establishing a quorum;
(c) vote (or execute and return an action by written consent), or cause to be voted at any meeting of Parent’s stockholders, in person or by proxy, or validly execute and return and cause such consent to be granted with respect to, all of such Covered Shares against (i) any Business Combination Proposal or any proposal in opposition to approval of the MIPA or in competition with or inconsistent with the MIPA, (ii) any change in the present capitalization of Parent or any amendment of the Certificate of Incorporation, except to the extent expressly contemplated by the MIPA, (iii) any liquidation, dissolution or other change in Parent’s corporate structure or business and (iv) any other action that would reasonably be expected to impede, interfere with, delay, postpone or adversely affect the Transaction or any of the other transactions contemplated by the MIPA or result in a breach of any covenant, representation or warranty or other obligation or agreement of Parent under the MIPA or result in a breach of any covenant, representation or warranty or other obligation or agreement of the Sponsor or the Insiders contained in this Sponsor Agreement;
(d) vote in favor of any other proposals set forth in Parent’s proxy statement to be filed by Parent with the SEC relating to the Transaction (including any proxy supplements thereto, the “Proxy Statement”);
(e) vote for any proposal to adjourn or postpone the applicable stockholder meeting to a later date if (and only if) there are not sufficient votes for approval of the MIPA and any other Parent Proposals or other proposals related thereto as set forth in the Proxy Statement on the dates on which such meetings are held; and
(f) not redeem, elect to redeem or tender or submit any Covered Shares owned by it, him or her for redemption in connection with the transactions contemplated by the MIPA or any vote to amend the Certificate of Incorporation.
Prior to any valid termination of the MIPA, the Sponsor and each Insider shall (x) take, or cause to be taken, all actions and do, or cause to be done, all things reasonably necessary under Parent’s organizational documents and applicable Laws, or reasonably requested by Parent, to consummate the Transaction and the other transactions contemplated by the MIPA on the terms and subject to the conditions set forth therein and (y) be bound by and comply with Sections 8.5 (Confidentiality) and 8.8 (Exclusivity) of the MIPA (and any relevant definitions contained in any such Sections) as if such Person were a signatory to the MIPA with respect to such provisions.
The obligations of the Sponsor and the Insiders specified in this paragraph 1 shall apply irrespective of the Board of Directors’ approval of the Transaction or any action described above.
2. Remedies. The Sponsor and each Insider hereby agrees and acknowledges that: (i) Parent and the Members would be irreparably injured in the event of a breach by the Sponsor or any Insider of its, his or her obligations under this Sponsor Agreement; (ii) monetary damages may not be an adequate remedy for such breach; (iii) the non-breaching party shall be entitled to seek an injunction, specific performance, or other equitable relief, to prevent breaches of this Sponsor Agreement and to enforce specifically the terms and provisions hereof, in addition to any other remedy that such party may have in law or in equity; and (iv) the right to seek specific enforcement is an integral part of the transactions contemplated by this Sponsor Agreement and without that right, Parent would not have entered into this Sponsor Agreement.
3. (a) Lock-Up Agreement; Waiver of Adjustment Rights. The Sponsor and each Insider agree that it, he or she shall not:
(i) transfer any Parent Unit or Parent Common Stock received in connection with the Transaction until the earlier of (A) six (6) months after the consummation of the Transaction or (B) subsequent to the consummation of the Transaction, (x) if the closing price of the Parent Class A Common Stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the consummation of the Transaction or (y) the date on which Parent completes a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of the Parent’s stockholders having the right to exchange their shares of Parent Class A Common Stock for cash, securities or other property (the “Founder Shares Lock-up Period”); or
(ii) transfer any Parent Private Warrants (or shares of Parent Class A Common Stock issued or issuable upon the exercise of the Parent Private Warrants), until 30 days after the consummation of the Transaction (such period, together with the Founder Shares Lock-up Period, the “Lock-up Periods”).
Notwithstanding anything to the contrary in this Sponsor Agreement, (i) the New Warrants and the shares of Parent Class A Common Stock underlying such warrants shall not be subject to any of the restrictions on transfer set forth herein and (ii) following the consummation of the Transaction each Insider shall be permitted to transfer up to ten percent (10%) of the shares of Parent Common Stock beneficially owned by them as of the Closing Date.
(b) Notwithstanding the provisions set forth in paragraphs 3(a)(i) and 3(a)(ii), during the period commencing on the date hereof and ending on the earlier of (x) the expiration of the Lock-Up Periods and (y) the date of any valid termination of the MIPA, transfers of Parent Units, Parent Common Stock, Parent Private Warrants and shares of Parent Class A Common Stock issued or issuable upon the exercise or conversion of the Parent Private Warrants, or the Parent Class B Common Stock and that are held by the Sponsor, any Insider or any of their permitted transferees (that have complied with this paragraph 3(b)), are permitted (A) to the Parent’s officers or directors, any affiliates or family members of any of the Parent’s officers or directors, any members of the Sponsor, or any affiliates of the Sponsor; (B) in the case of an individual, transfers by gift to a member of the individual’s immediate family, to a trust, the beneficiary of which is a member of the individual’s immediate family or an affiliate of such person, or to a charitable organization; (C) in the case of an individual, transfers by virtue of laws of descent and distribution upon death of the individual; or (D) in the case of an individual, transfers pursuant to a qualified domestic relations order; provided, however, that in the case of clauses (A) through (D), these permitted transferees must enter into a written agreement with Parent agreeing to be bound by this Sponsor Agreement.
(c) The Sponsor and each Insider acknowledge and agree as follows:
(i) Section 4.3(b)(i) of the Certificate of Incorporation provides that each share of Parent Class B Common Stock shall automatically convert into one share of Parent Class A Common Stock (the “Initial Conversion Ratio”) at the time of the Transaction, and (B) Section 4.3(b)(ii) of the Certificate of Incorporation provides that the Initial Conversion Ratio shall be adjusted (the “Adjustment”) in the event that additional shares of Parent Class A Common Stock are issued in excess of the amounts offered in the IPO; and
(ii) as of and conditioned upon the Closing, the Sponsor and each Insider hereby irrevocably relinquishes and waives any and all rights the Sponsor and each Insider has or will have under Section 4.3(b)(ii) of the Certificate of Incorporation to receive shares of Parent Class A Common Stock in excess of the number issuable at the Initial Conversion Ratio upon conversion of the existing shares of Parent Class B Common Stock held by him, her or it, as applicable, in connection with the Closing as a result of any Adjustment.
(d) The Sponsor hereby agrees that, to the extent any Indebtedness or other unpaid or contingent liabilities of Parent, including any Parent Transaction Expenses and any loans by the Sponsor to Parent (“Parent Expenses”) as of immediately prior to the Closing (including any such amounts that become payable as a result of the Closing) exceeds $60,000,000 (the “Expense Cap”), then the Sponsor shall, as of and conditioned upon the Closing, forfeit such number of shares of Parent Class B Common Stock or Parent Private Warrants (valued at $10.00 per share of Parent Class B Common Stock and $1.00 per Parent Private Warrant) held by the Sponsor that, in the aggregate, have a value equal to such amount in excess of the Expense Cap (the “Forfeiture”, and such excess, the “Excess”). If the number of shares of Parent Class B Common Stock or Parent Private Warrants available for forfeiture pursuant to this paragraph 3(d) shall be insufficient to satisfy the Sponsor’s obligations under this paragraph 3(d), then the Sponsor shall, as of and conditioned upon the Closing, satisfy any such additional obligations in cash. Notwithstanding the foregoing, in lieu of the Forfeiture, the Sponsor may, at Closing, pay the amount of the Excess in cash. In the event that the amount of any contingent liabilities of Parent as of immediately prior to the Closing are unknown, the Sponsor and MSP Recovery, LLC (“MSP”) will negotiate in good faith in order to reach agreement on the amount thereof and, in the event that the Sponsor and MSP are unable to reach agreement prior to the Closing, such disagreement shall not delay the Closing and the Parent Expenses shall be recalculated each time such contingent liabilities crystallize and if such recalculation results in Parent Expenses exceeding the Expense Cap or an increase in the amount of such excess, this paragraph 3(d) shall apply to such excess.
4. Definitions. As used herein, “transfer” shall mean the (a) sale or assignment of, offer to sell, contract or agreement to sell, hypothecate, pledge, grant of any option to purchase or otherwise dispose of or agreement to dispose of, directly or indirectly, or establishment or increase of a put equivalent position or liquidation with respect to or decrease of a call equivalent position within the meaning of Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the rules and regulations of the SEC promulgated thereunder with respect to, any security, (b) entry into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any security, whether any such transaction is to be settled by delivery of such securities, in cash or otherwise, or (c) public announcement of any intention to effect any transaction specified in clause (a) or (b).
5. Power and Authority. The Sponsor and each Insider has full right and power, without violating any agreement to which it is bound (including, without limitation, any non-competition or non-solicitation agreement with any employer or former employer), to enter into this Sponsor Agreement and, as applicable, to serve as an officer or director of Parent and hereby consents to being named in the Form S-4 as an officer or director of Parent.
6. Entire Agreement; Amendment, Modification, Waiver. This Sponsor Agreement and the other agreements referenced herein constitute the entire agreement and understanding of the parties hereto in respect of the subject matter hereof and supersede all prior understandings, agreements, or representations by or among the parties hereto, written or oral, to the extent they relate in any way to the subject matter hereof or the transactions contemplated hereby, including, without limitation, with respect to the Sponsor, each Insider and the Prior Letter Agreement. This Sponsor Agreement may not be changed, amended, modified or waived (other than to correct a typographical error) as to any particular provision, except by a written instrument executed by all parties hereto and the Members’ Representative, it being acknowledged and agreed that the Members’ Representative’s execution of such an instrument will not be required after any valid termination of the MIPA.
7. Assignment. No party hereto may, except as set forth herein, assign either this Sponsor Agreement or any of its rights, interests, or obligations hereunder, other than in conjunction with transfers permitted by paragraph 3, without the prior written consent of the other parties and the Members’ Representative (except that, following any valid termination of the MIPA, no consent from the Members’ Representative shall be required). Any purported assignment in violation of this paragraph shall be void and ineffectual and shall not operate to transfer or assign any interest or title to the purported assignee. This Sponsor Agreement shall be binding on the Sponsor, each Insider, Parent and their respective successors, heirs, personal representatives and assigns and permitted transferees.
8. No Third-Party Beneficiaries. Nothing in this Sponsor Agreement shall be construed to confer upon, or give to, any person or corporation other than the parties hereto any right, remedy or claim under or by reason of this Sponsor Agreement or of any covenant, condition, stipulation, promise or agreement hereof. All covenants, conditions, stipulations, promises and agreements contained in this Sponsor Agreement shall be for the sole and exclusive benefit of the parties hereto (and, prior to the valid termination of the MIPA, the MSP Companies and the Members) and their successors, heirs, personal representatives and assigns and permitted transferees. Notwithstanding anything herein to the contrary, each of Parent, the Sponsor and each Insider acknowledges and agrees that, until the valid termination of the MIPA, the MSP Companies and the Members are express third-party beneficiaries of this Sponsor Agreement and may directly enforce (including by action for specific performance, injunctive relief or other equitable relief) each of the provisions set forth in this Sponsor Agreement as though directly party hereto.
9. Counterparts. This Sponsor Agreement may be executed in any number of original, electronic or facsimile counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.
10. Severability. This Sponsor Agreement shall be deemed severable, and the invalidity or unenforceability of any term or provision hereof shall not affect the validity or enforceability of this Sponsor Agreement or of any other term or provision hereof. Furthermore, in lieu of any such invalid or unenforceable term or provision, the parties hereto intend that there shall be added as a part of this Sponsor Agreement a provision as similar in terms to such invalid or unenforceable provision as may be possible and be valid and enforceable.
11. Governing Law. This Sponsor Agreement, and all claims or causes of action based upon, arising out of, or related to this Sponsor Agreement or the transactions contemplated hereby, shall be governed by, and construed in accordance with, the Laws of the State of New York, without giving effect to principles or rules of conflict of laws to the extent such principles or rules would require or permit the application of Laws of another jurisdiction. Any Action based upon, arising out of or related to this Sponsor Agreement or the transactions contemplated hereby may be brought in federal and state courts located in the Borough of Manhattan in the State of New York, and each of the parties irrevocably submits to the exclusive jurisdiction of each such court in any such Action, waives any objection it may now or hereafter have to personal jurisdiction, venue or convenience of forum, agrees that all claims in respect of the Action shall be heard and determined only in any such court, and agrees not to bring any Action arising out of or relating to this Sponsor Agreement or the transactions contemplated hereby in any other court. Nothing herein contained shall be deemed to affect the right of any party to serve process in any manner permitted by Law or to commence legal proceedings or otherwise proceed against any other party in any other jurisdiction, in each case, to enforce judgments obtained in any Action brought pursuant to this paragraph. The prevailing party in any such Action (as determined by a court of competent jurisdiction) shall be entitled to be reimbursed by the non-prevailing party for its reasonable expenses, including reasonable attorneys’ fees, incurred with respect to such Action. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY ACTION BASED UPON, ARISING OUT OF OR RELATED TO THIS SPONSOR AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
12. Notices. Any notice, consent or request to be given in connection with any of the terms or provisions of this Sponsor Agreement shall be in writing and shall be sent by express mail or similar private courier service, by certified mail (return receipt requested), by hand delivery or facsimile transmission; provided that any such notice, consent or request to be given to Parent, the MSP Companies or the Members’ Representative shall be given in accordance with the terms of Section 14.1 of the MIPA to the applicable party at its principal place of business.
13. Term. This Sponsor Agreement shall terminate on the earlier of (a) the liquidation of Parent and (b) the expiration of the Lock-up Periods. In the event of a valid termination of the MIPA, this Sponsor Agreement shall be of no force and effect. No such termination or reversion shall relieve the Sponsor, each Insider or Parent from any liability resulting from a breach of this Sponsor Agreement occurring prior to such termination or reversion.
14. Representation and Warranties. The Sponsor and each Insider hereby represents and warrants (severally and not jointly as to itself, himself or herself only) to Parent and the Members as follows (and as applicable): (i) the Sponsor is duly organized, validly existing and in good standing under the laws of the State of Delaware, and the execution, delivery and performance of this Sponsor Agreement and the consummation of the transactions contemplated hereby are within the Sponsor’s limited liability company powers and have been duly authorized by all necessary limited liability company actions on the part of the Sponsor; (ii) each Insider has full legal capacity, right and authority to execute and deliver this Sponsor Agreement and to perform his or her obligations hereunder; (iii) this Sponsor Agreement has been duly executed and delivered by such Person and, assuming due authorization, execution and delivery by the other parties to this Sponsor Agreement, this Sponsor Agreement constitutes a legally valid and binding obligation of such Person, enforceable against such Person in accordance with the terms hereof (except as enforceability may be limited by bankruptcy Laws, other similar Laws affecting creditors’ rights and general principles of equity affecting the availability of specific performance and other equitable remedies); (iv) the execution and delivery of this Sponsor Agreement by such Person does not, and the performance by such Person of his, her or its obligations hereunder will not, (A) with respect to the Sponsor, conflict with or result in a violation of its organizational documents, or (B) require any consent or approval that has not been given or other action that has not been taken by any third party (including under any Contract binding upon such Person or such Person’s Parent Common Stock or Parent Private Warrants, as applicable), in each case, to the extent such consent, approval or other action would prevent, enjoin or materially delay the performance by such Person of his, her or its obligations under this Sponsor Agreement; (v) there are no Actions pending against such Person or, to the knowledge of such Person, threatened against such Person, before (or, in the case of threatened Actions, that would be before) any arbitrator or any Governmental Authority, which in any manner challenges or seeks to prevent, enjoin or materially delay the performance by such Person of its, his or her obligations under this Sponsor Agreement; (vi) except for fees described in Section 6.5 of the MIPA, no financial advisor, investment banker, broker, finder or other similar intermediary is entitled to any fee or commission from such Person, Parent, any of its Subsidiaries or any of their respective Affiliates in connection with the MIPA or this Sponsor Agreement or any of the respective transactions contemplated thereby and hereby, in each case, based upon any arrangement or agreement made by or, to the knowledge of such Person, on behalf of such Person, for which Parent, the Members or any of their respective Affiliates would have any obligations or liabilities of any kind or nature; (vii) such Person has had the opportunity to read the MIPA and this Sponsor Agreement and has had the opportunity to consult with its tax and legal advisors; (viii) such Person has not entered into, and shall not enter into, any agreement that would restrict, limit or interfere with the performance of such Person’s obligations hereunder; (ix) such Person has good title to all such Parent Common Stock and Parent Private Warrants, and there exist no Liens or any other limitation or restriction (including, without limitation, any restriction on the right to vote, sell or otherwise dispose of such Parent Common Stock or Parent Private Warrants (other than transfer restrictions under the Securities Act)) affecting any such Parent Common Stock or Parent Private Warrants, other than pursuant to (A) this Sponsor Agreement, (B) Parent’s Certificate of Incorporation, (C) the MIPA, (D) the Registration Rights Agreement, dated as of August 13, 2020, by and among Parent and certain security holders, or (E) any applicable securities laws; and (x) the total number of shares of Parent Common Stock and Parent Private Warrants identified on Schedule A are the only equity securities in Parent (including, without limitation, any equity securities convertible into, or which can be exercised or exchanged for, equity securities of Parent) owned of record or beneficially owned (within the meaning of Section 13(d) of the Exchange Act) by the Sponsor and the Insiders as of the date hereof, and none of such shares of Parent Common Stock is subject to any proxy, voting trust or other agreement or arrangement with respect to the voting of such Parent Common Stock, except as provided in this Sponsor Agreement and each such Person has the voting authority over or with respect to such shares of Parent Common Stock as disclosed in Parent’s filings with the SEC.
15. Additional Representations and Warranties. During the period commencing on the date hereof and ending on the earlier of (i) the consummation of the Transaction and (ii) the valid termination of the MIPA, the Sponsor and each Insider agrees not to enter into, modify or amend any contract between or among the Sponsor, any Insider, anyone related by blood, marriage or adoption to any Insider or any Affiliate of any such Person (other than Parent or any of its Subsidiaries), on the one hand, and Parent or any of its Subsidiaries, on the other hand, that would contradict, limit, restrict or impair (x) any party’s ability to perform or satisfy any obligation under this Sponsor Agreement or (y) Parent’s ability to perform or satisfy any obligation under the MIPA.
16. Certain Adjustments. If, and as often as, there are any changes in Parent, the Parent Common Stock or the Parent Private Warrants by way of stock split, stock dividend, combination or reclassification, or through merger, consolidation, reorganization, recapitalization or business combination, or by any other means, equitable adjustment shall be made to the provisions of this Sponsor Agreement as may be required so that the rights, privileges, duties and obligations hereunder shall continue with respect to Parent, Parent’s successor or the surviving entity of such transaction, the Parent Common Stock and Parent Private Warrants, each as so changed.
17. Each of the parties hereto agrees to execute and deliver hereafter any further document, agreement or instrument of assignment, transfer or conveyance as may be necessary or desirable to effectuate the purposes hereof and as may be reasonably requested in writing by another party hereto.
[Signature Page Follows]
Sincerely, | ||
SPONSOR: | ||
LIONHEART EQUITIES, LLC | ||
By: | /s/ Ophir Sternberg | |
Name: Ophir Sternberg | ||
Title: Chairman and CEO |
INSIDERS: | |
/s/ Ophir Sternber | |
Ophir Sternberg | |
/s/ Paul Rapisarda | |
Paul Rapisarda | |
/s/ Faquiry Diaz Cala | |
Faquiry Diaz Cala | |
/s/ James Anderson | |
James Anderson | |
/s/ Thomas Byrne | |
Thomas Byrne | |
/s/ Roger Meltzer | |
Roger Meltzer | |
/s/ Thomas W. Hawkins | |
Thomas W. Hawkins |
Acknowledged and Agreed:
PARENT:
LIONHEART ACQUISITION CORPORATION II
By: | /s/ Ophir Sternberg | |
Name: Ophir Sternberg | ||
Title: Chairman and CEO |
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LIONHEART II HOLDINGS, LLC
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By:
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EXECUTIVE
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Name:
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ESCROW AGENT:
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Continental Stock Transfer & Trust Company
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By:
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Name:
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Title:
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PARENT:
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Lionheart Acquisition Corporation II
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By:
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Name:
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Title:
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PURCHASER:
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Lionheart II Holdings, LLC
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By:
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MEMBERS’ REPRESENTATIVE
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(SOLELY IN HIS CAPACITY AS SUCH): | |
John H. Ruiz
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By:
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John H. Ruiz
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Party
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Representative
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Members’ Representative
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PURCHASER:
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LIONHEART II HOLDINGS, LLC
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By:
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Name:
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Title:
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MEMBERS’ REPRESENTATIVE (SOLELY IN HIS CAPACITY AS SUCH):
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JOHN H. RUIZ
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By:
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Name:
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PARENT:
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LIONHEART ACQUISITION CORPORATION II
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1. |
attached is a Release Order pursuant to which the Escrow Agent is authorized to promptly release [●] Up-C Units from the Escrow Fund to [name of applicable recipient] to [insert wire instructions/security remittance instructions] and the Escrow Agent is instructed to comply with such Release Order [and to instruct [●], Purchaser’s transfer agent, to transfer and deliver such Up-C Units on its books];
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the Release Order is final and from a court of competent jurisdiction;
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the Escrow Agent shall be entitled to conclusively rely on the attached Release Order without further investigation; and
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[Purchaser]/[Members’ Representative] [are/is] delivering a copy of this Certificate of Release Order simultaneously to [Purchaser]/[Members’ Representative].
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PURCHASER:
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MEMBERS’ REPRESENTATIVE:
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[●]
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[●]
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By:
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By:
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Name:
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Name:
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Title:
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Title:
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Annex K
AGREED FORM
Lock-Up Agreement
This Lock-Up Agreement (this “Agreement”) is dated as of July [●], 2021, by and between the undersigned (the “Holder”) and Lionheart Acquisition Corporation II, a Delaware corporation (“LCAP”).
Capitalized terms used, but not otherwise defined herein, shall have the meanings ascribed to such terms in the Membership Interest Purchase Agreement, dated as of July 11, 2021 (the “MIPA”) by and among LCAP, Master MSP, LLC, a newly-formed Delaware limited liability company and a wholly-owned subsidiary of LCAP, each limited liability company set forth on Schedule 2.1(a) to the MIPA (collectively, the “MSP Purchased Companies”), the members of the MSP Purchased Companies listed on Schedule 2.1(b) to the MIPA (each, a “Member” and collectively the “Members”), and John H. Ruiz, as the representative of the Members.
BACKGROUND
Whereas, pursuant to the MIPA, each Key Employee who receives Up-C Units as Equity Consideration (the “Units”) shall enter into a Lock-Up Agreement with respect to such Units received in connection with the transactions contemplated by the MIPA.
Now, Therefore, for and in consideration of the mutual covenants and agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties, intending to be legally bound, agree as follows:
AGREEMENT
1. Lock-Up.
(a) During the Lock-up Period (as defined below), the Holder irrevocably agrees that he will not offer, sell, contract to sell or otherwise dispose of, directly or indirectly, any of the Lock-Up Units, enter into a transaction that would have the same effect, enter into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of the Lock-Up Units, whether any of these transactions are to be settled by delivery of any Lock-Up Units, or otherwise, or publicly disclose the intention to make any such offer, sale or disposition; provided that notwithstanding the foregoing, the Holder may pledge any Lock-Up Units in connection with securing financing or otherwise. In this Agreement, any restrictions applicable to “Lock-Up Units” shall also apply to the one Purchaser Class B Unit and the one share of Parent Class V Common Stock included in each of the Lock-Up Units and any shares of Parent Class A Common Stock the Holder elects to receive in lieu of Lock-Up Units pursuant to Section 3.1(b) of the MIPA.
(b) In furtherance of the foregoing, during the Lock-up Period, LCAP will (i) place an irrevocable stop order on all the Lock-Up Units, including those which may be covered by a registration statement, and (ii) notify LCAP’s transfer agent in writing of the stop order and the restrictions on the Lock-Up Units under this Agreement and direct LCAP’s transfer agent not to process any attempts by the Holder to resell or transfer any Lock-Up Units, except in compliance with this Agreement.
(c) “Lock-Up Units” means any Units beneficially owned (as defined in Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) by Holder as of immediately following the Closing, other than (i) any security received pursuant to an equity incentive plan adopted by LCAP on or after the Closing Date, (ii) any shares of Parent Class A Common Stock acquired in open market transactions, (iii) ten percent (10%) of the Units received by the Holder as Equity Consideration pursuant to the MIPA, (iv) any Units that constitute the Escrow Consideration, and (v) any shares of Parent Class A Common Stock or Units that are set forth on Schedule A hereto.
(d) The “Lock-up Period” means the period commencing on the Closing Date and ending on the earlier of the date that is (i) six (6) months after the Closing Date and (ii) LCAP’s consummation of a liquidation, merger, stock exchange or other similar transaction which results in all of LCAP’s stockholders having the right to exchange their shares of Parent Class A Common Stock for cash, securities or other property.
2. Term. This Agreement shall automatically terminate upon the earlier to occur of (a) such date and time as the MIPA is terminated in accordance with its terms and (b) the expiration of the Lock-Up Period. Upon termination of this Agreement, none of the parties hereto shall have any further obligations or liabilities under this Agreement; provided, that nothing in this Section 2 shall relieve any party hereto of liability for any willful material breach of this Agreement prior to its termination.
3. Fiduciary Duties. The covenants and agreements set forth herein shall not prevent any designee of any Holder from serving on the Board of Directors of LCAP or from taking any action, subject to the provisions of the MIPA, while acting in the capacity as a director of LCAP. Each Holder is entering into this Agreement solely in its capacity as the anticipated owner of Lock-Up Units following the consummation of the transactions contemplated by the MIPA.
4. Permitted Transfers. Notwithstanding anything to the contrary contained in this Agreement, subject to the conditions below, the Holder may transfer Lock-Up Units (a) in connection with transfers or distributions to the Holder’s current or former general or limited partners, managers or members, stockholders, other equityholders or direct or indirect affiliates (within the meaning of Rule 405 under the Securities Act of 1933, as amended) (the “Securities Act”) or to the estates of any of the foregoing; (b) transfers by gift or sale to or among the spouse of the Holder, a family member of the Holder, or any trust created and existing for the primary benefit of the Holder, the Holder’s spouse or a family member of the Holder; (c) in connection with transfers by will or intestacy to a family member of the Holder or a trust for the benefit of a family member of the Holder; (d) by virtue of the laws of descent and distribution upon the death of the Holder; (e) pursuant to a qualified domestic relations order; provided, that in the case of any transfer pursuant to the foregoing clauses it shall be a condition to any such transfer that (i) the transferee/donee agrees to be bound by the terms of this Agreement to the same extent as if the transferee/donee were a party hereto; and (ii) each party (donor, donee, transferor or transferee) shall not be required by law (including without limitation the disclosure requirements of the Securities Act and the Exchange Act) to make, and shall agree to not voluntarily make, any filing or public announcement of the transfer or disposition prior to the expiration of the Lock-Up Period; or (f) in connection with the entry into a written plan meeting the requirements of Rule 10b5-1 under the Exchange Act after the date of this Agreement relating to the sale of the Lock-Up Units; provided, that (A) the securities subject to such plan may not be sold until after the expiration of the Lock-Up Period and (B) the Company shall not be required to effect, and the undersigned shall not effect or cause to be effected, any public filing, report or other public announcement regarding the establishment of the trading plan.
5. Representations and Warranties. Each of the parties hereto, by their respective execution and delivery of this Agreement, hereby represents and warrants to the other that (a) such party has the full right, capacity and authority to enter into, deliver and perform its respective obligations under this Agreement, (b) this Agreement has been duly executed and delivered by such party and is a binding and enforceable obligation of such party and is enforceable against such party in accordance with the terms of this Agreement, and (c) the execution, delivery and performance of such party’s obligations under this Agreement will not conflict with or breach the terms of any other agreement, contract, commitment or understanding to which such party is a party or to which the assets or securities of such party are bound. The Holder has independently evaluated the merits of its decision to enter into and deliver this Agreement, and such Holder confirms that it has not relied on the advice of LCAP, LCAP’s legal counsel, or any other person.
6. No Additional Fees/Payment. Other than the consideration specifically referenced herein, the parties hereto agree that no fee, payment or additional consideration in any form has been or will be paid to the Holder in connection with this Agreement.
7. Notices. Any notices required or permitted to be sent hereunder shall be sent in writing, addressed as specified below, and shall be deemed given: (a) if by hand or recognized courier service, by 4:00 PM on a Business Day, addressee’s day and time, on the date of delivery, and otherwise on the first Business Day after such delivery; (b) if by fax or email, on the date that transmission is confirmed electronically, if by 4:00 PM on a Business Day, addressee’s day and time, and otherwise on the first Business Day after the date of such confirmation; or (c) five (5) Business Days after mailing by certified or registered mail, return receipt requested. Notices shall be addressed to the respective parties as follows (excluding telephone numbers, which are for convenience only), or to such other address as a party shall specify to the others in accordance with these notice provisions:
(a) If to LCAP prior to the Closing, to:
4218 NE 2nd Avenue
2nd Floor
Miami, Florida 33137
Attention: Ophir Sternberg
Email: o@lheartcapital.com
with a copy to (which shall not constitute notice):
DLA Piper LLP (US)
2525 East Camelback Road
Esplanade II Suite 1000
Phoenix, AZ 85016-4232
Attention: Steven D. Pidgeon
Email: steven.pidgeon@us.dlapiper.com
(b) If to LCAP following the Closing, to:
2701 Le Jeune Road, Floor 10
Coral Gables, Florida 33134
Attn: General Counsel
Email: [●]
with a copy to (which shall not constitute notice):
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, NY 10153
Attention: Michael Aiello; Matthew Gilroy
Email: michael.aiello@weil.com; matthew.gilroy@weil.com
(c) If to the Holder, to the address set forth on the Holder’s signature page hereto, with a copy, which shall not constitute notice, to:
[●]
or to such other address as any party may have furnished to the others in writing in accordance herewith.
8. Enumeration and Headings. The enumeration and headings contained in this Agreement are for convenience of reference only and shall not control or affect the meaning or construction of any of the provisions of this Agreement.
9. Counterparts. This Agreement may be executed in facsimile and in any number of counterparts, each of which when so executed and delivered shall be deemed an original, but all of which shall together constitute one and the same agreement.
10. Successors and Assigns. Except as expressly provided otherwise in this Agreement, this Agreement and the terms, covenants, provisions and conditions hereof shall be binding upon, and shall inure to the benefit of, the respective heirs, successors and assigns of the parties hereto. The Holder hereby acknowledges and agrees that this Agreement is entered into for the benefit of and is enforceable by LCAP and its successors and assigns.
11. Amendment. This Agreement may be amended or modified only by written agreement executed by each of the parties hereto.
12. Further Assurances. Each of the parties to this Agreement shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as any other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement.
13. No Strict Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.
14. Injunctive Relief. Each of the parties to this Agreement hereby acknowledges that in the event of a breach by any such party of any material provision of this Agreement, the aggrieved party may be without an adequate remedy at law. Each of the parties thereto agrees that, in the event of a breach of any material provision of this Agreement, the aggrieved party may elect to institute and prosecute proceedings to enforce specific performance or to enjoin the continuing breach of such provision, as well as to obtain damages for breach of this Agreement. By seeking or obtaining any such relief, the aggrieved party will not be precluded from seeking or obtaining any other relief to which it may be entitled.
15. Governing Law; Jurisdiction. The terms and provisions of this Agreement shall be construed in accordance with the laws of the State of Delaware. Any legal suit, action or proceeding arising out of or based upon this agreement, the other additional agreements or the transactions contemplated hereby or thereby may be instituted in the Federal courts of the United States of America or the courts of the State of Delaware, and each party irrevocably submits to the exclusive jurisdiction of such courts in any such suit, action or proceeding. the parties irrevocably and unconditionally waive any objection to the laying of venue of any suit, action or any proceeding in such courts and irrevocably waive and agree not to plead or claim in any such court that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.
16. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT. EACH OF THE PARTIES 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 THAT FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 16.
17. Severability. In the event that any term, provision, covenant or restriction of this Agreement, or the application thereof, is held to be illegal, invalid or unenforceable under any present or future Law: (a) such provision will be fully severable; (b) this Agreement will be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof; (c) the remaining provisions of this Agreement will remain in full force and effect and will not be affected by the illegal, invalid or unenforceable provision or by its severance hereof; and (d) in lieu of such illegal, invalid or unenforceable provision, there will be added automatically as a part of this Agreement a legal, valid and enforceable provision as similar in terms of such illegal, invalid or unenforceable provision as may be possible.
18. Waiver. No failure or delay on the part of any party hereto to exercise any power, right, privilege or remedy under this Agreement shall operate as a waiver of such power, right, privilege or remedy; and no single or partial exercise of any such power, right, privilege or remedy shall preclude any other or further exercise thereof or of any other power, right, privilege or remedy. No party hereto shall be deemed to have waived any claim available to such party arising out of this Agreement, or any power, right, privilege or remedy under this Agreement, unless the waiver of such claim, power, right, privilege or remedy is expressly set forth in a written instrument duly executed and delivered on behalf of such waiving party; and any such waiver shall not be applicable or have any effect except in the specific instance in which it is given.
19. Controlling Agreement. To the extent the terms of this Agreement (as amended, supplemented, restated or otherwise modified from time to time) directly conflicts with a provisions in the MIPA, the terms of this Agreement shall control.
[Signature Page Follows]
IN WITNESS WHEREOF, the parties hereto have caused this Lock-up Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.
Lionheart Acquisition Corporation II | ||
By: | ||
Name: Ophir Sternberg | ||
Title: Chairman |
IN WITNESS WHEREOF, the parties hereto have caused this Lock-up Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.
HOLDER | ||
[●] | ||
By: | ||
Name: | ||
Title: | ||
Address: | ||
[●] |
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(a) |
The Law Firm will use reasonable care, skill, knowledge and the resources necessary to pursue all potentially recoverable Assigned Claims. The Law Firm may, in its discretion, engage co-counsel in
connection with the pursuit of recovery of the Assigned Claims. The Client acknowledges that the Law Firm (i) has previously engaged co-counsel in pursuing recovery of Assigned Claims and such co-counsel will continue to provide
services in respect of such Assigned Claims, and (ii) the Law Firm and such co-counsel shall continue to operate under the existing co-counsel agreements between them. The Law Firm shall ensure that any co-counsel engaged to provide
legal services pursuant to this Agreement shall be subject to the same standards set forth in the first sentence of this Section 1.1(a).
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(b) |
Unless otherwise agreed to in writing by the Law Firm (or pursuant to engagement of co-counsel for pursuing Assigned Claims as provided in Section 1.1(a)), the Law Firm will be exclusive counsel
for pursuing Assigned Claims and the Client will not engage any other law firm for such recovery purposes unless this Agreement is terminated in accordance with Section 4.1.
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(a)
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For the services described in this Agreement (“Law Firm Services”), the Law Firm will be entitled to the following (the “Compensation”):
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(i) |
Attorneys’ fees that are awarded to the Law Firm pursuant to a fee shifting statute by agreement or court award in any given case or matter; and
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(ii) |
An amount, if greater than zero, equal to the difference calculated as 40% of the amount due to the Client for its recovered Assigned Claims before deduction of Costs (the “Contingency Fee”) less, to the extent applicable for such case or matter, any amount due to the Law Firm under Section 2.2(a)(i) related to such recovered Assigned Claims.
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(b)
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The Client will have no other obligation to compensate the Law Firm (or any co-counsel) for Law Firm Services and will have no obligation to reimburse the Law Firm (or any
co-counsel) for any costs or expenses incurred by the Law Firm (or any co-counsel) in undertaking Law Firm Services, other than the Costs as set forth in Section 2.1. Any fees payable to any other counsel or co-counsel in
respect of an Assigned Claim that exceed the Compensation are for the account of the Law Firm, and Client will have no liability therefor. Client will have no liability to the Law Firm for the value of any Assigned Claim or the
failure of the Law Firm to recover on any Assigned Claim, and the Law Firm will have no liability to the Client for the value of any Assigned Claim or the failure of the Law Firm to successfully recover on any Assigned Claim absent
conduct referenced in Section 5.2(a) below.
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(a) |
Filed Cases. With respect to Assigned Claims for which the Law Firm has filed suit in any state or federal court of competent jurisdiction (the “Filed
Claims”), the Law Firm will be entitled to, and will have a quantum meruit lien for, Compensation and Costs in an aggregate amount not to exceed the lesser of (i) the Contingency Fee, (ii) any fees awarded to the Law Firm
pursuant to a fee shifting statute by agreement or court award pursuant to Section 2.2(a)(i), and (ii) actual Costs incurred by the Law Firm up to the date of termination (supported by appropriate documentation of such Costs). The
quantum meruit lien will attach solely to recovery amounts received by the Client net of Costs of the Filed or settled Assigned Claims, and if no recovery is made, the Law Firm will not receive any Compensation.
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(b) |
Unfiled Cases. For any Assigned Claims for which the Law Firm has not filed suit or settled out-of-court (the “Pending Claims”), the Law
Firm will be entitled to, and will have a quantum meruit lien for legal services fees related to such Pending Claims in an amount not to exceed the actual Costs incurred by the Law Firm (supported by appropriate documentation of
such Costs). The quantum meruit lien will attach solely to recoveries paid to the Client or a Subsidiary on account of the Pending Claims, and if no recovery is made, the Law Firm will not receive any Compensation.
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(c) |
Settled Cases. For any Claims for which the Law Firm has settled out-of-court (the “Out-of-Court Claims”), legal services fees in an amount
not to exceed the lesser of (i) the Contingency Fee and (ii) any attorneys’ fees negotiated with the settlement counterparty. The quantum meruit lien will attach solely to recoveries paid to the Client or a Subsidiary of the Client
on account of the Pending Claims, and if no recovery is made, the Law Firm will not receive any Compensation.
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(d) |
This Section 2.5 will survive any termination of this Agreement.
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(e) |
Any amounts due from the Law Firm to the Client shall be discharged by operation of a termination of this Agreement by the Client irrespective of the cause of such termination.
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(a)
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Upon the termination of this Agreement, the following will apply, subject to Florida Rules of Professional Conduct (“FL Rules”) 4-1.5 and 4-1.16:
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(i) |
The Law Firm will be entitled to and have a charging lien against the recoveries of any Assigned Claims for the amounts and subject to the limitations set forth in Section 2.5.
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(ii) |
The Parties agree that any recovery by the Law Firm and/or any entitlement by agreement or court order to Compensation from a fee shifting statute or which has been recovered prior to any default will
offset the amount of Compensation payable by the Client to the Law Firm as provided for herein (unless such recovery and/or entitlement has already been taken into consideration in calculating the applicable Compensation).
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(iii) |
The Parties also agree that any disagreement between the Client and the Law Firm may not form the basis for a defense or an opposing party to oppose any fee based on a fee shifting statute.
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(iv) |
The Client will irrevocably assign any and all entitlement to any Compensation by contract, statute, code, court order or otherwise to the Law Firm.
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(b)
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The Law Firm will have no right to terminate the representation of the Client except: (i) with the prior written consent of the Client; (ii) as permitted under FL Rule
4-1.16(b)(2); or (iii) as required under FL Rules. Termination of this Agreement will also terminate the power of attorney provided in Section 6.1.
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(c)
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Upon termination of this Agreement, the Law Firm will be required to request the right to withdraw as counsel to the Client or any Subsidiary of the Client in any filed or
settled Assigned Claim, and in the event such request to withdraw is denied, the Law Firm is required to continue to serve as counsel to the Client and any Subsidiary of the Client, as applicable, and the terms and conditions of
this Agreement will continue to apply to such filed or settled Assigned Claim.
|
(d)
|
This Agreement may be terminated at any time by the Client, with or without cause.
|
(a)
|
Each Party hereto hereby represents and warrants to the other Party as follows: (i) it is duly and validly existing under the laws of the state of its formation, is in good
standing under such laws and has full power and authority to execute, deliver and perform its obligations under this Agreement, (ii) its execution, delivery and performance of this Agreement has been duly authorized by all
appropriate corporate action and this Agreement constitutes a valid, binding and enforceable obligation of such Party, and (iii) its execution, delivery and performance of this Agreement has not resulted, and will not result, in a
breach or violation of any provision of (A) such Party’s organizational documents, (B) any statute, law, writ, order, rule or regulation of any governmental authority, (C) any judgment, injunction, decree or determination
applicable to such Party, or (D) any contract, indenture, mortgage, loan agreement, note, lease or other agreement, document or instrument to which such Party may be a party, may be bound or to which any of such Party’s assets are
subject. The Law Firm will notify the Client promptly upon the occurrence of any event which causes any representation or warranty made by it hereunder to no longer be true.
|
(b)
|
The Law Firm does not make any guarantees regarding the success of Assigned Claims or causes of action, but the attorneys will use their best efforts in attaining the successful
outcome of these matters.
|
|
(a) |
To the fullest extent permitted by law, the Law Firm hereby agrees to and shall defend, indemnify and hold the Client, Client’s Subsidiaries and their affiliates, and their respective employees
(present and former), officers, members, agents, trustees and directors, (collectively, the “Indemnified Persons”), harmless, to the fullest extent permitted by law, from and against any all losses, claims, costs, liabilities
(joint and several), damages and expenses (including reasonable attorneys’ and accountants’ fees and expenses incurred in defense of any demands, claims, arbitrations or lawsuits whether judicial, administrative, investigative or
otherwise) (collectively, “Damages”) sustained by an Indemnified Person provided that any such Damages shall have been sustained by the Indemnified Person by reason of (i) the Law Firm violating its obligations hereunder, or
(ii) gross negligence, malfeasance, willful misconduct, fraud, breach of this Agreement or violation of applicable law, rule or regulation on the part of the Law Firm.
|
|
(b) |
The Law Firm must advance to the Indemnified Person reasonable attorneys’ fees and other costs and expenses incurred in connection with the defense or handling of any Damages. In the event that such
an advance is made pursuant to this Section 5.2, the Indemnified Person agrees to reimburse Law Firm for such fees, costs and expenses to the extent that it is determined that the Indemnified Person was not entitled to
indemnification under this Section 5.2.
|
|
(c) |
The foregoing agreement of indemnity is in addition to, and in no respect limits or restricts, any other remedies which may be available to an Indemnified Party.
|
|
(a) |
Each Party bears its own expenses related to the preparation and negotiation of this Agreement.
|
|
(b) |
In the event of any controversy arising under or relating to the interpretation or implementation of this Agreement or any breach thereof, the prevailing Party will be entitled to payment for all
costs and reasonable attorney’s fees (both trial and appellate) incurred in connection therewith. The terms of this Section 5.4 will survive any termination of this Agreement.
|
LIONHEART II HOLDINGS, LLC
|
La Ley con John H. Ruiz P.A., d/b/a
|
MSP Recovery Law Firm
|
|
|
|
By:
|
|
By:
|
Name:
|
Name:
|
John H. Ruiz | |||
Title:
|
Manager |
Title:
|
President |
|
MSP Law Firm PLLC
|
|
By:
|
|
Name: | John H. Ruiz |
Title:
|
Manager |
|
MSP RECOVERY, INC.
|
By:
|
||
Name: |
|
|
Title:
|
|
|
|
CONTINENTAL STOCK TRANSFER & TRUST
|
COMPANY, as Warrant Agent | |
By:
|
||
Name: |
|
|
Title:
|
|
|
MSP RECOVERY, INC.
|
By:
|
Name: |
|
|
Title:
|
|
|
|
CONTINENTAL STOCK TRANSFER & TRUST
|
COMPANY, as Warrant Agent
|
|
By:
|
Name: |
|
|
Title
|
|
Date: , 20
|
|
|
|
|
(Signature)
|
|
|
|
|
|
|
(Address)
|
|
(Tax Identification Number)
|
Re:
|
Virage Side Letter Agreement
|
Sincerely,
|
||
JOHN H. RUIZ
|
||
|
||
|
||
FRANK C. QUESADA
|
||
LIONHEART ACQUISITION CORPORATION II
|
By: |
|
|
Name: Ophir Sternberg
|
||
Title: Chairman and CEO
|
LIONHEART II HOLDINGS, LLC
|
By: |
|
|
Name: Ophir Sternberg
|
||
Title:
|
Re:
|
Side Letter Agreement
|
|
a. |
Parent’s annual meeting of stockholders in 2022, in respect of the independent director referred to in Section 1 who is appointed to serve as a Class I director,
|
|
b. |
Parent’s annual meeting of stockholders in 2023, in respect of the independent director referred to in Section 1 who is appointed to serve as a Class II director, and
|
|
c. |
Parent’s annual meeting of stockholders in 2024, in respect of Ophir Sternberg,
|
|
Sincerely,
|
|
JOHN H. RUIZ
|
||
LIONHEART ACQUISITION CORPORATION II
|
By: |
|
|
Name: Ophir Sternberg
|
||
Title: President and CEO
|
LIONHEART II HOLDINGS, LLC
|
By: |
|
|
Name: Ophir Sternberg
|
||
Title:
|
1.
|
JOCRAL Family LLLP
|
2.
|
Jocral Holdings, LLC
|
3.
|
Ruiz Group Holdings Limited LLC
|
Exhibit
|
Description
|
|
Membership Interest Purchase Agreement (included as Annex A to this proxy statement/prospectus)
|
||
2.2+
|
Amendment No. 1 to Membership Interest Purchase Agreement
|
|
2.3
|
Amendment No. 2 to Membership Interest Purchase Agreement.
|
|
Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed with the SEC on August 19, 2020)
|
||
Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.2 of the Company’s Current Report on Form 8-K filed with the SEC on August 19, 2020)
|
||
Form of the Post-Combination Company’s Charter (included as Annex B to this proxy statement/prospectus)
|
||
Form of the Post-Combination Company’s Bylaws (included as Annex C to this proxy statement/prospectus)
|
||
Specimen Unit Certificate of the Registrant (incorporated by reference to Exhibit 4.1 to Amendment No. 1 to the Registrant’s registration statement on Form S-1 (File No. 333-240130) filed with the SEC on August 6, 2020)
|
||
Specimen Class A Common Stock Certificate of the Registrant (incorporated by reference to Exhibit 4.2 to Amendment No. 1 to the Registrant’s registration statement on Form S-1 (File No. 333-240130) filed with the SEC on August 6, 2020)
|
||
Specimen Warrant Certificate of the Registrant (incorporated by reference to Exhibit 4.3 to Amendment No. 1 to the Registrant’s registration statement on Form S-1 (File No. 333-240130) filed with the SEC on August 6, 2020)
|
||
Warrant Agreement, dated August 13, 2020, by and between the Registrant and Continental Stock Transfer & Trust Company, LLC (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K filed with the SEC on
August 19, 2020)
|
||
4.5
|
Specimen Class A Common Stock Certificate of the Post-Combination Company**
|
|
Form of New Warrant Agreement (included as Annex M to this proxy statement/prospectus)
|
||
4.7
|
Specimen New Warrant Certificate**
|
|
5.1
|
Opinion of DLA Piper LLP (US) as to the validity of securities being registered**
|
|
8.1
|
Form of Opinion of Weil, Gotshal & Manges LLP regarding certain U.S. tax matters.
|
|
Letter Agreement, dated August 13, 2020, by and among the Registrant and its officers, directors, Nomura and the Sponsor (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on August
19, 2020)
|
||
Investment Management Trust Agreement, dated August 13, 2020, by and between the Registrant and Continental Stock Transfer & Trust Company, LLC (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K
filed with the SEC on August 19, 2020)
|
Registration Rights Agreement, dated August 13, 2020, by and among the Registrant and certain security holders (incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed with the SEC on August 19, 2020)
|
||
Securities Purchase Agreement, dated July 27, 2020, by and between the Sponsor and Nomura (incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K filed with the SEC on August 19, 2020)
|
||
Private Placement Unit Subscription Agreement, dated August 13, 2020, by and between the Registrant and the Sponsor (incorporated by reference to Exhibit 10.5 of the Company’s Current Report on Form 8-K filed with the SEC on August 19,
2020)
|
||
Private Placement Unit Subscription Agreement, dated August 13, 2020, by and between the Registrant and Nomura (incorporated by reference to Exhibit 10.6 of the Company’s Current Report on Form 8-K filed with the SEC on August 19, 2020)
|
||
Indemnity Agreements, each dated as of August 13, 2020, by and between the Registrant and each of the officers and directors of the Registrant (incorporated by reference to Exhibit 10.7 of the Company’s Current Report on Form 8-K filed
with the SEC on August 19, 2020)
|
||
Administrative Support Agreement, dated August 13, 2020, by and between the Registrant and the Sponsor (incorporated by reference to Exhibit 10.8 of the Company’s Current Report on Form 8-K filed with the SEC on August 19, 2020)
|
||
Forward Purchase Agreement, dated August 13, 2020, by and between the Company and Nomura (incorporated by reference to Exhibit 10.9 of the Company’s Current Report on Form 8-K filed with the SEC on August 19, 2020)
|
||
Form of Limited Liability Agreement of Opco (included as Annex D to this proxy statement/prospectus)
|
||
Form of Amended and Restated Registration Rights Agreement (included as Annex E to this proxy statement/prospectus)
|
||
Form of Tax Receivable Agreement (included as Annex F to this proxy statement/prospectus)
|
||
Sponsor Agreement (included as Annex G to this proxy statement/prospectus)
|
||
Form of Employment Agreement (included as Annex H to this proxy statement/prospectus)
|
||
Form of Escrow Agreement (included as Annex I to this proxy statement/prospectus)
|
||
Form of 2021 Omnibus Incentive Plan (included as Annex J to this proxy statement/prospectus)
|
||
Form of Lock-Up Agreement (included as Annex K to this proxy statement/prospectus)
|
||
Form of Legal Services Agreement (included as Annex L to this proxy statement/prospectus)
|
||
Side Letter Agreement (included as Annex N to this proxy statement/prospectus)
|
||
Virage Side Letter Agreement (included as Annex O to this proxy statement/prospectus)
|
||
10.21
|
Form of Indemnification Agreement of the Post-Combination Company**
|
|
10.22
|
Form of VRM Full Return Guaranty Agreement**
|
|
10.23
|
Form of Asset and Interest Transfer Agreement in relation to the Series MRCS Asset Acquisition**
|
|
10.24
|
Form of Transfer Agreement in relation to the VRM MSP Asset Acquisition**
|
Consent of Marcum LLP
|
||
Consent of Deloitte & Touche LLP
|
||
23.3
|
Consent of DLA Piper LLP (US) (included in Exhibit 5.1 hereto)**
|
|
23.4
|
Consent of Weil, Gotshal & Manges LLP (included in Exhibit 8.1 hereto)
|
|
Power of Attorney (included on signature page to this registration statement)
|
||
99.1+
|
Consent of John H. Ruiz to be named as a director of the Post-Combination Company
|
|
99.2+
|
Consent of Frank C. Quesada to be named as a director of the Post-Combination Company
|
|
99.3+
|
Consent of Ophir Sternberg to be named as a director of the Post-Combination Company
|
|
101.INS
|
Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because iXBRL tags are embedded within the Inline XBRL document)
|
|
101.SCH
|
Inline XBRL Taxonomy Extension Schema Document
|
|
101.CAL
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document
|
|
101.DEF
|
Inline XBRL Taxonomy Extension Definition Linkbase Document
|
|
101.LAB
|
Inline XBRL Taxonomy Extension Label Linkbase Document
|
|
101.PRE
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document
|
A. |
To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
|
|
(i) |
To include any prospectus required by section 10(a)(3) of the Securities Act;
|
|
(ii) |
To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement.
|
|
(iii) |
To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;
|
B. |
That, for the purpose of determining any liability under the Securities Ac4, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering thereof.
|
C. |
To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
|
D. |
That, for the purpose of determining liability under the Securities Act to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements
relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no
statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the
registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement
or made in any such document immediately prior to such date of first use.
|
E. |
That, for the purpose of determining liability of the registrant under the Securities Act to any purchaser in the initial distribution of the securities, that in a primary offering of securities of the undersigned registrant pursuant to
this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned
registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
|
|
(i) |
Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
|
|
(ii) |
Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
|
(iii) |
The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
|
(iv) |
Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
|
F. |
That prior to any public reoffering of the securities registered hereunder through use of a prospectus which is a part of this registration statement, by any person or party who is deemed to be an underwriter within the meaning of Rule
145(c), the issuer undertakes that such reoffering prospectus will contain the information called for by the applicable registration form with respect to reofferings by persons who may be deemed underwriters, in addition to the information
called for by the other items of the applicable form.
|
G. |
That every prospectus (i) that is filed pursuant to paragraph (F) immediately preceding, or (ii) that purports to meet the requirements of section 10 (a)(3) of the Securities Act and is used in connection with an offering of securities
subject to Rule 415, will be filed as a part of an amendment to the registration statement and will not be used until such amendment is effective, and that, for purposes of determining any liability under the Securities Act, each such
post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
|
H. |
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
|
I. |
To supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective.
|
LIONHEART ACQUISITION CORPORATION II
|
|||
By:
|
* | ||
Name:
|
Ophir Sternberg
|
||
Title:
|
Chairman, President and Chief Executive Officer
|
Signature
|
Title
|
Date
|
||
*
|
Chairman, President and Chief Executive Officer
(Principal Executive Officer)
|
December 22, 2021
|
||
Ophir Sternberg
|
||||
*
|
Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)
|
December 22, 2021
|
||
Paul Rapisarda
|
||||
*
|
Director
|
December 22, 2021
|
||
Roger Meltzer
|
||||
*
|
Director
|
December 22, 2021
|
||
James Anderson
|
||||
*
|
Director
|
December 22, 2021
|
||
Thomas Byrne
|
||||
*
|
Director
|
December 22, 2021
|
||
Thomas Hawkins
|
*By:
|
|
/s/ Ophir Sternberg
|
|
|
Name: |
Ophir Sternberg
|
|
|
Title: | Attorney-in-Fact |
|
|
a. |
Schedule 2.1(c) of the Disclosure Schedules is hereby
deleted and replaced in its entirety with the disclosure that is attached hereto as Annex A-1.
|
|
b. |
Schedule 1.179 of the Disclosure Schedules is hereby added
with the disclosure that is attached hereto as Annex A-2.
|
Parent:
|
|||
LIONHEART ACQUISITION CORPORATION II
|
|||
By:
|
/s/ Ophir Sternberg
|
||
Ophir Sternberg, Chairman and CEO
|
|||
Purchaser:
|
|||
LIONHEART II HOLDINGS, LLC
|
|||
By:
|
/s/ Ophir Sternberg
|
||
Lionheart Acquisition Corporation II, the sole member
|
|||
By: Ophir Sternberg, Chairman and CEO
|
|||
The Members’ Representative (solely in such capacity and not in any personal capacity):
|
|||
By:
|
/s/ John H. Ruiz
|
||
Name: John H. Ruiz
|
|||
The Members’ Representative (as attorney-in-fact pursuant to Section 14.14(a) of the Agreement on behalf of each Member):
|
|||
By:
|
/s/ John H. Ruiz
|
||
Name: John H. Ruiz
|
The MSP Purchased Companies:
|
|||
MDA, SERIES LLC
|
|||
By:
|
/s/ John H. Ruiz
|
||
Name: John H. Ruiz
|
|||
Title: Manager
|
|||
By:
|
/s/ Frank C. Quesada
|
||
Name: Frank C. Quesada
|
|||
Title: Manager
|
|||
MSP RECOVERY SERVICES LLC
|
|||
By:
|
/s/ Sandra Rodriguez
|
||
Name: Sandra Rodriguez
|
|||
Title: Manager
|
|||
MSP RECOVERY, LLC
|
|||
By:
|
/s/ Sandra Rodriguez
|
||
Name: Sandra Rodriguez
|
|||
Title: Manager
|
MSP RECOVERY CLAIMS PROV, SERIES LLC
|
|||
By:
|
/s/ John H. Ruiz
|
||
Name: John H. Ruiz
|
|||
Title: Manager
|
|||
By:
|
/s/ Frank C. Quesada
|
||
Name: Frank C. Quesada
|
|||
Title: Manager
|
|||
MSP RECOVERY CLAIMS CAID, SERIES LLC
|
|||
By:
|
/s/ John H. Ruiz
|
||
Name: John H. Ruiz
|
|||
Title: Manager
|
|||
By:
|
/s/ Frank C. Quesada
|
||
Name: Frank C. Quesada
|
|||
Title: Manager
|
|||
MSP RECOVERY CLAIMS HOSP, SERIES LLC
|
|||
By:
|
/s/ John H. Ruiz
|
||
Name: John H. Ruiz
|
|||
Title: Manager
|
|||
By:
|
/s/ Frank C. Quesada
|
||
Name: Frank C. Quesada
|
|||
Title: Manager
|
MSP RECOVERY OF PUERTO RICO, LLC
|
|||
By:
|
/s/ John H. Ruiz
|
||
Name: John H. Ruiz
|
|||
Title: Manager
|
|||
By:
|
/s/ Sandra Rodriguez
|
||
Name: Sandra Rodriguez
|
|||
Title: Manager
|
|||
By:
|
/s/ Roberto Lizama
|
||
Name: Roberto Lizama
|
|||
Title: Manager
|
|||
MSP WB, LLC
|
|||
By:
|
/s/ John H. Ruiz
|
||
Name: John H. Ruiz
|
|||
Title: Manager
|
|||
MSP RECOVERY CLAIMS COM, SERIES LLC
|
|||
By:
|
/s/ John H. Ruiz
|
||
Name: John H. Ruiz
|
|||
Title: Manager
|
|||
By:
|
/s/ Frank C. Quesada
|
||
Name: Frank C. Quesada
|
|||
Title: Manager
|
MSP RECOVERY CLAIMS HP, SERIES LLC
|
|||
By:
|
/s/ John H. Ruiz
|
||
Name: John H. Ruiz
|
|||
Title: Manager
|
|||
By:
|
/s/ Frank C. Quesada
|
||
Name: Frank C. Quesada
|
|||
Title: Manager
|
|||
MSP PRODUCTIONS, LLC
|
|||
By:
|
/s/ John H. Ruiz
|
||
Name: John H. Ruiz
|
|||
Title: Manager
|