ATI Physical Therapy, Inc. (Form: 8-K, Received: 11/07/2022 16:22:17)

Exhibit 10.1

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as of November 2, 2022 (the “Signing Date”), between ATI Physical Therapy, Inc. (the “Company”) and Erik L. Kantz (“Employee”).

1.0 RECITALS.

1.1 Employee and the Company are entering into this Agreement to set forth the terms and conditions of Employee’s employment with the Company and to protect the Company’s Trade Secrets or Confidential Information and business relationships. The Company hereby employs Employee and Employee hereby accepts employment with the Company upon the terms and conditions contained in this Agreement.

1.2 As an executive officer of the Company, Employee will have access to and Employee will become familiar with, acquire knowledge of and develop or maintain the Company’s Trade Secrets or Confidential Information (as defined below) and business relationships, whether currently existing or to be developed in the future, which Employee recognizes permits the Company to enjoy a competitive advantage and disclosure and/or use by competitors, potential competitors and/or any third-party would cause irreparable harm to the Company.

NOW, THEREFORE, IN CONSIDERATION of the foregoing facts, the mutual covenants and agreements contained herein, the compensation to be paid in connection with Employee’s continued employment, and other good and valuable consideration, the Company and Employee agree as follows:

2.0 DEFINITIONS.

2.1 Affiliate: “Affiliate” means, with respect to any party, any corporation, limited liability company, partnership, joint venture, firm and/or other entity which Controls, is Controlled by or is under common Control with such party.

2.2 Board of Directors: “Board of Directors” shall mean the board of directors of the Company.

2.3 Business: “Business” means the business of providing physical therapy and/or occupational therapy services, including, without limitation, physical therapy, work conditioning, functional capacity assessment or sports performance enhancement, home healthcare, and occupational health services, and any other business engaged in or service rendered by the Company upon the Effective Date, during the Initial Term, and/or during any Renewal Term.

2.4 Change in Control: “Change in Control” shall have the meaning set forth in the Company’s 2021 Equity Incentive Plan, as amended from time to time.

2.5 [RESERVED]

2.6 Compensation Committee: “Compensation Committee” shall mean a committee of the Board of Directors which has been delegated responsibility for employee compensation matters or, in the absence thereof, the entire Board of Directors.

2.7 Control: “Control” means (i) in the case of a corporate entity, direct or indirect ownership of at least fifty percent (50%) of the stock or securities entitled to vote for the election of directors; and (ii) in the case of a non-corporate entity (such as a limited liability company, partnership or limited partnership), either (A) direct or indirect ownership of at least fifty percent (50%) of the equity interests in such entity, or (B) the power to direct the management and policies of such entity.

2.8 Covered Entity: “Covered Entity” means every Affiliate of Employee, and every business, association, trust, corporation, partnership, limited liability company, proprietorship or other entity in which Employee has an investment (whether through debt or equity securities), or maintains any capital contribution or made any outstanding advances to, or in which any Affiliate of Employee has an ownership interest or profit sharing percentage, or a firm from which Employee or any Affiliate of Employee receives or is entitled to receive income, compensation or consulting fees in which Employee or any Affiliate of Employee has an interest as a lender (other than solely as a trade creditor for the sale of goods or provision of services that do not otherwise violate the provisions of this Agreement). The agreements of Employee contained herein specifically apply to each entity which is presently a Covered Entity (so long as it remains a Covered Entity) or which becomes a Covered Entity subsequent to the date of this Agreement.

2.9 Discharge For Cause: “Discharge For Cause” shall mean termination of employment for any one or more of the following: (i) willful misfeasance or nonfeasance by Employee with respect to Employee’s assigned duties, which includes not following the reasonable written direction of the Board of Directors or any committee thereof or the Company’s Chief Executive Officer (other than by reason of Permanent Disability), or repeated intentional refusal by Employee to perform Employee’s assigned duties (other than by reason of Permanent Disability) which in each case continues uncured for thirty (30) days following receipt of written notice from the Board of Directors or the Compensation Committee thereof; (ii) such Employee personally engaging in illegal conduct or any act of moral turpitude (other than minor traffic violations) which reasonably could be expected to harm the Company; (iii) such Employee breaching in any material respect any provision of this Agreement (other than by reason of Permanent Disability) which continues uncured for thirty (30) days following receipt of written notice of such breach from the Board of Directors or the Compensation Committee thereof, except that any breach of Sections 4.7 or 4.9 shall not require either written notice or an opportunity to cure; or (iv) such Employee’s commencement of employment with another company while he is an employee of the Company without the prior consent of the Board of Directors, other than with respect to Permitted Activities.

2.10 Discharge Without Cause: “Discharge Without Cause” shall mean the Company’s termination of Employee’s employment hereunder during the term hereof for any reason other than a Discharge For Cause or due to Employee’s death or Permanent Disability.

2.11 Effective Date: “Effective Date” shall mean November 4, 2022.

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2.12 [RESERVED].

2.13 Permanent Disability: “Permanent Disability” shall mean the Employee’s inability, with or without reasonable accommodation, to perform the essential duties, responsibilities, and functions of Employee’s position with the Company as a result of any mental or physical disability or incapacity for a length of time that the Company determines is sufficient to satisfy such obligations as it may have to provide leave under applicable family and medical leave laws and/or “reasonable accommodation” under applicable federal, state or local disability laws. Family and medical leave or disability leave provided under federal, state or local law may be unpaid as per the requirements of such laws; provided, however, that the Employee shall be entitled to such payments and benefits under the Company’s vacation, sick leave or disability leave programs as per the terms of such programs. The Company may terminate the Employee’s active employment because of a Permanent Disability by giving written notice to the Employee at any time effective at or within 20 days after the end period of leave as may be required under the family and medical leave laws or under federal, state or local disability laws, but the Company shall retain the Employee as an inactive employee if necessary to maintain the Employee’s eligibility for any disability leave benefits. A reassignment, reduction or elimination of the duties defined in Section 3.1 because of Employee’s inability to perform such duties during any period of a disability leave or during the period Employee is designated as an inactive employee, or the appointment of a temporary or permanent replacement for Employee during any disability leave, shall not constitute the basis for a Termination for Good Reason. In the event of a dispute over the occurrence of a Permanent Disability, the Employee agrees to submit to an examination by a doctor selected by the Company who will determine fitness for duty. If the Employee’s physician disagrees with the Company’s physician’s opinion, a third physician, mutually agreed upon by the Employee and the Company, shall examine the Employee and that physician’s opinion shall be conclusive as to the Employee’s fitness for duty.

2.14 Permitted Activities: “Permitted Activities” shall mean Employee’s service on charitable or civic boards, service on behalf of charitable organizations or foundations, supervision of passive investments, or the professional activities enumerated in Exhibit B, in each case, which do not, individually or in the aggregate, interfere with the performance of Employee’s duties hereunder.

2.15 Subsidiary: “Subsidiary” shall mean any corporation, trust, general or limited partnership, limited liability company, limited liability partnership, firm, company or other business enterprise which is Controlled by the Company thorough direct ownership of the stock or other proprietary interests of such business enterprise or indirectly through the ownership of stock or other proprietary interests in one (1) or more other business enterprises which are connected with the Company by means of one (1) or more chains of business enterprises that are connected by ownership of stock or other proprietary interests.

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2.16 Termination For Good Reason: “Termination For Good Reason” shall mean voluntary termination of this Agreement by Employee if, without the prior written consent of Employee: (i) there is a reduction by the Company in Employee’s annual salary or percentage target bonus opportunity then in effect; (ii) the Company acts in any way that would adversely affect Employee’s participation in or materially reduce Employee’s benefit under any benefit plan of the Company in which Employee is participating, except those changes generally affecting similarly situated employees of the Company; (iii) the Company materially breaches the terms of this Agreement; or (iv) there is a material diminution of Employee’s job title, reporting relationship or job duties or responsibilities that are materially inconsistent with the position or positions listed in Section 3.1. Notwithstanding the foregoing, none of the circumstances described above may serve as the basis for a “Termination for Good Reason” unless (x) Employee notifies the Board of Directors in writing of any event constituting the basis for a “Termination for Good Reason” within thirty (30) days following Employee’s knowledge of the initial existence of such circumstance and (y) the Company fails to cure such circumstance within thirty (30) days following such written notice. Failing such cure, a Termination for Good Reason shall be effective on the day following the expiration of such cure period.

2.17 Territory: “Territory” means the United States.

2.18 Trade Secrets or Confidential Information: “Trade Secrets” means information, without regard to form, including, but not limited to, technical or nontechnical data, a formula, a pattern, a compilation, a program, a device, a method, a technique, a drawing, a process, a prototype, financial data, financial plans, product plans, or a list of actual or potential customers or suppliers which is not commonly known by or available to the public and which information: (A) derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and (B) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. Trade Secrets also include any information or data described above that the Company obtains from another party and that the Company treats as proprietary or designates as a Trade Secrets, whether or not owned or developed by the Company. “Confidential Information” means any data or information, without regard to form, other than Trade Secrets, that is valuable to the Company and is not generally known by the public. To the extent consistent with the foregoing, Trade Secrets or Confidential Information includes, but is not limited to: (a) the names, addresses, phone numbers, accounts, financial information, and other information concerning patients, referral sources, payors (employers, managed care organizations, workers compensation insurers, and other types of payors) and other clients of the Company; (b) non-public information and materials describing or relating to the Company’s business or financial affairs, including but not limited to financial and/or investment performance information, personnel matters, products, operating procedures, organizational responsibilities, marketing matters, or policies or procedures of the Company; or (c) information and materials describing the Company’s existing or new products and services, including analytical data and techniques, and product, service or marketing concepts under development at or for the Company, and the status of such development. Trade Secrets or Confidential Information does not include information that, other than as a result of a breach by Employee of this Agreement, (i) is or becomes generally known within the relevant industry, or (ii) is or becomes known to Employee other than through Employee’s work for the Company, or (iii) is or becomes generally available to the public.

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3.0 CAPACITIES AND DUTIES; INDEMNIFICATION.

3.1 Title: As of the Effective Date, Employee will be employed in the capacity of Chief Legal Officer and Corporate Secretary of the Company. Employee shall report directly to the Chief Executive Officer of the Company and shall be subject to such officer’s supervision, control and direction. Employee will at all times abide by the Company’s written personnel policies applicable to similarly situated employees of the Company as in effect from time to time and previously provided to Employee, and will faithfully, industriously and to the best of Employee’s ability, experience and talents perform all of the duties that may be required of and from Employee pursuant to the terms hereof, consistent with Employee’s status as Chief Legal Officer and Corporate Secretary.

3.2 Exclusive Services: During the Term, Employee agrees to devote Employee’s best efforts and full business time to rendering services to the Company, except with respect to Permitted Activities. Employee is specifically restricted from being employed by any other company, other than a Subsidiary or an Affiliate of the Company, while under the Company’s employ pursuant to this Agreement, other than in connection with any Permitted Activities. Employee shall not be entitled to any additional compensation for services rendered as an officer or director of the Company or any of its Affiliates.

3.3 Indemnification: The Company shall, to the maximum extent permitted by law, indemnify and hold harmless Employee for any loss, injury, damage, expense (including reasonable attorneys’ fees, and costs), and claim or demand, arising out of, connected with, or in any manner related to, any act, omission, or decision made in good faith while performing services for the Company from and after the Effective Date.

4.0 TERM.

4.1 Term: Subject to Sections 4.2, 4.3, 4.4, 4.5 and 4.6 the term of this Agreement shall be three (3) years commencing on the Effective Date, unless terminated earlier pursuant to the terms herein (the “Initial Term”); provided that, unless earlier terminated pursuant to the terms herein, the Initial Term shall be automatically extended for additional one (1) year terms (each, a “Renewal Term”) upon the expiration of the Initial Term or any such Renewal Term unless the Company or Employee delivers to the other at least thirty (30) days prior to the expiration of the Initial Term or the then-current Renewal Term, as the case may be, a written notice specifying that the term of Employee’s employment will not be renewed at the end of the Initial Term or the then-current Renewal Term, as the case may be. The Initial Term or, in the event that Employee’s employment hereunder is terminated earlier pursuant to the terms herein or renewed pursuant to this Section 4.1, such shorter or longer period, as the case may be, is referred to herein as the “Term.” Upon termination of the Term for any reason, Employee agrees to resign, or will be deemed to resign, as of the date of termination or such other date requested by the Company, from all positions and offices that Employee then holds with the Company and its Affiliates.

4.2 Discharge For Cause: Employee’s employment under this Agreement may be terminated by the Company (subject to the notice and cure period set forth in Section 2.9, if applicable), by the Chief Executive Officer and/or the Chief People Officer of the Company specifically finding that an action constituting the basis for a Discharge for Cause has occurred, without further obligation by the Company, except for payment of any base salary compensation and expense reimbursement accrued and unpaid through the effective date of termination and except as otherwise required by law, upon written notice to Employee of a Discharge For Cause. The Company shall provide Employee in such written notification such facts as shall be reasonably necessary to apprise Employee of the basis for such Discharge For Cause of which the Company is actually aware and for Employee to exercise Employee’s right to cure under Section 2.9, if applicable.

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4.3 Discharge Without Cause: Employee’s employment under this Agreement may be immediately terminated by the Company upon written notice to Employee of a Discharge Without Cause.

(a) Upon termination pursuant to this Section 4.3 at any time other than during the 18-month period following a Change in Control, the Company shall (i) pay to Employee an amount equal to 1.25 (one and a quarter) times the sum of (x) Employee’s base salary, as provided in Section 5.1, at the annual rate in effect at the time of termination, and (y) the Target Bonus, in substantially equal installments over a period of fifteen (15) months from the date of such termination, in accordance with the Company’s general payroll practices as the same may exist from time to time, (ii) pay to Employee an Annual Bonus for the then-current fiscal year based on actual performance for such year, pro-rated from the first date of such fiscal year through Employee’s last date of continued active employment, payable at the same time as annual bonuses are paid other senior executives of the Company, (iii) if continued coverage under the Company’s health and welfare plans is timely elected by Employee, pay the employer and employee portion of any COBRA health and welfare premiums for a period equal to twelve (12) months from the date of such termination, or, if earlier, (x) the first date that Employee is no longer eligible for COBRA or (y) the first date that Employee becomes eligible for health benefits from another employer, and (iv) all prior unvested grants of equity incentive compensation made to Employee pursuant to the Wilco Acquisition, LP 2016 Equity Incentive Plan (whether such vesting is time-based or performance-based) shall immediately vest as of the date of such termination.

(b) Upon termination pursuant to this Section 4.3 during the 18-month period following a Change in Control, the Company shall (i) pay to Employee an amount equal to 1.5 (one and a half) times the sum of (x) Employee’s base salary, as provided in Section 5.1, at the annual rate in effect at the time of termination, and (y) the Target Bonus, in a lump sum on the first payroll date following the date the release contemplated by this Section 4.3 (described below) becomes effective and irrevocable, (ii) pay to Employee an Annual Bonus for the then-current fiscal year based on actual performance for such year, pro-rated from the first date of such fiscal year through Employee’s last date of continued active employment, payable at the same time as annual bonuses are paid other senior executives of the Company and, (iii) if continued coverage under the Company’s health and welfare plans is timely elected by Employee, pay the employer and employee portion of any COBRA health and welfare premiums for a period equal to twelve (12) months from the date of such termination, or, if earlier, (x) the first date that Employee is no longer eligible for COBRA or (y) the first date that Employee becomes eligible for health benefits from another employer, and (iv) all prior unvested grants of equity incentive compensation made to Employee pursuant to the Wilco Acquisition, LP 2016 Equity Incentive Plan (whether such vesting is time-based or performance-based) shall immediately vest as of the date of such termination.

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In addition to the foregoing, the Company shall pay to Employee within thirty (30) days of termination of employment all amounts of base salary compensation and expense reimbursements accrued but unpaid through the effective date of termination. Other than the foregoing, Employee shall not be entitled to any payment for subsequent periods upon Employee’s termination of employment upon a Discharge Without Cause. As a condition to receiving severance payments and benefits under this Section 4.3, Employee shall execute a release of claims in the form attached hereto as Exhibit A. Notwithstanding anything in this Agreement to the contrary, receipt of severance payments and benefits under this Section 4.3, shall be subject to the execution (and expiration of any applicable revocation period) of the release within sixty (60) days following termination (the “Release Period”) and the first severance payment shall be made, inclusive of any amounts that would otherwise have been paid prior to such date, on the first payroll date following the date the release becomes effective and irrevocable; provided, that if the Release Period spans two tax years, the first severance payment shall be made in the second tax year.

4.4 Termination For Good Reason: Employee’s employment under this Agreement may be terminated by Employee, subject to the notice and time limitations set forth in Section 2.16, upon written notice to the Company of a Termination For Good Reason.

(a) Upon termination pursuant to this Section 4.4 at any time other than during the 18-month period following a Change in Control, the Company shall provide to Employee the severance payments and benefits set forth in Section 4.3(a).

(b) Upon termination pursuant to this Section 4.4 during the 18-month period following a Change in Control, the Company shall provide to Employee the severance payments and benefits set forth in Section 4.3(b).

In addition to the foregoing, the Company shall pay to Employee within thirty (30) days of termination of employment all amounts of base salary compensation and expense reimbursements accrued but unpaid through the effective date of termination. Other than the foregoing, Employee shall not be entitled to any payment upon Employee’s termination of employment upon a Termination For Good Reason. As a condition to receiving severance payments or benefits under this Section 4.4, Employee shall execute a release of claims in the form attached hereto as Exhibit A. Notwithstanding anything in this Agreement to the contrary, receipt of severance payments or benefits under this Section 4.4, shall be subject to the execution (and expiration of any applicable revocation period) of the release within the Release Period and the first severance payment shall be made, inclusive of any amounts that would otherwise have been paid prior to such date, on the first payroll date following the date the release becomes effective and irrevocable; provided, that if the Release Period spans two tax years, the first severance payment shall be made in the second tax year.

4.5 Termination Upon Death: Employee’s employment under this Agreement shall be immediately terminated without action or notice by either party upon the death of Employee and without further obligation by the Company, except for payment of all amounts of base salary compensation and expense reimbursements accrued but unpaid through the effective date of termination (to be paid to Employee within thirty (30) days of termination of employment), and except as otherwise required by law.

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4.6 Termination Upon Permanent Disability: Employee’s employment under this Agreement may be terminated by the Company, subject to the terms set forth in Section 2.12, upon written notice of a termination for the Permanent Disability of Employee. Upon termination pursuant to this Section 4.6, the Company shall continue to pay to Employee an amount equal to Employee’s base salary, as provided in Section 5.1, at the annual rate in effect at the time of termination, for a period equal to twelve (12) months from the date of such termination (“Permanent Disability Severance Pay”). In addition to the foregoing, the Company shall pay to Employee within thirty (30) days of termination of employment all amounts of base salary compensation and expense reimbursements accrued but unpaid through the effective date of termination. Permanent Disability Severance Pay shall be reduced by the amount of any disability benefits paid during and for the same period to Employee under any disability insurance policy provided by the Company as a benefit to Employee. Permanent Disability Severance Pay shall be payable over the twelve (12) month period following termination of employment under this Section 4.6 in accordance with the Company’s general payroll practices as the same may exist from time to time. As a condition to receiving Permanent Disability Severance Pay, Employee shall execute a release of claims in the form attached hereto as Exhibit A. Notwithstanding anything in this Agreement to the contrary, receipt of the Permanent Disability Severance Pay, shall be subject to the execution (and expiration of any applicable revocation period) of the release within the Release Period and the first severance payment shall be made, inclusive of any amounts that would otherwise have been paid prior to such date, on the first payroll date following the date the release becomes effective and irrevocable; provided, that if the Release Period spans two tax years, the first severance payment shall be made in the second tax year.

4.7 Non-Disclosure and Non-Use of the Company’s Trade Secrets or Confidential Information:

(a) At all times both during employment of Employee with the Company, and after the employment relationship with the Company has ended for any reason, Employee agrees that he will not, either directly or indirectly, and Employee will not permit any Covered Entity which is Controlled by Employee to, either directly or indirectly, (i) divulge, use, disclose (in any way or in any manner, including by posting on the Internet), reproduce, distribute, or reverse engineer or otherwise provide the Company’s Trade Secrets or Confidential Information to any person, firm, corporation, reporter, author, producer or similar person or entity; (ii) take any action that would make available Trade Secrets or Confidential Information to the general public in any form; (iii) take any action that uses Trade Secrets or Confidential Information to solicit any client or prospective client of the Company; or (iv) take any action that uses Trade Secrets or Confidential Information for solicitation or marketing for any service or product or on Employee’s behalf or on behalf of any entity other than the Company with which Employee may become associated, except (i) as required in connection with the performance of such Employee’s duties to the Company, (ii) as required to be included in any report, statement or testimony requested by any municipal, state or national regulatory body having jurisdiction over Employee or any Covered Entity which is Controlled by Employee, (iii) as required in response to any summons or subpoena or in connection with any litigation, (iv) to the extent necessary in order to comply with any law, order, regulation, ruling or governmental request applicable to Employee or any Covered Entity which is Controlled by Employee, (v) as required in connection with an audit by any taxing authority, or (vi) as permitted by the express written consent of the board of directors of the Company. In the event that Employee or any such Covered Entity which is Controlled by Employee is required to disclose Trade Secrets or Confidential Information pursuant to the foregoing exceptions, Employee shall promptly notify the Company of such pending disclosure and assist the Company (at the Company’s expense) in seeking a protective order or in objecting to such request, summons or subpoena with regard to the Trade Secrets or Confidential Information. If the Company does not obtain such relief after a period that is reasonable under the circumstances, Employee (or such Covered Entity) may disclose that portion of the Trade Secrets or Confidential Information which counsel to such party advises such party that they are legally compelled to disclose. In such cases, Employee shall promptly provide the Company with a copy of the Trade Secrets or Confidential Information so disclosed. This provision applies without limitation to unauthorized use of Trade Secrets or Confidential Information in any medium, writings of any kind containing such information or materials, including books, and articles, blogs, websites, or writings of any other kind, or film, videotape, or audiotape.

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(b) Notwithstanding Employee’s confidentiality obligations set forth in this Section 4.7 and Section 4.8, Employee understands that, pursuant to the Defend Trade Secrets Act of 2016, Employee shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a Trade Secret that: (a) is made (1) in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney; and (2) solely for the purpose of reporting or investigating a suspected violation of law; or (b) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Employee understands that in the event it is determined that disclosure of the Trade Secrets of the Company or any of its Subsidiaries or Affiliates was not done in good faith pursuant to the above, Employee shall be subject to substantial damages under federal criminal and civil law, including punitive damages and attorneys’ fees.

(c) Notwithstanding anything to the contrary contained herein, nothing in this Agreement shall limit or interfere with Employee’s right, without notice to or authorization of the Company, to communicate and cooperate in good faith with a Government Agency for the purpose of (i) reporting a possible violation of any U.S. federal, state, or local law or regulation, (ii) participating in any investigation or proceeding that may be conducted or managed by any Government Agency, including by providing documents or other information, or (iii) filing a charge or complaint with a Government Agency. For purposes of this Agreement, “Government Agency” means the Equal Employment Opportunity Commission, the National Labor Relations Board, the Occupational Safety and Health Administration, the U.S. Securities and Exchange Commission, the Financial Industry Regulatory Authority, or any other self-regulatory organization or any other federal, state or local governmental agency or commission.

4.8 Return of Company Property: If Employee ceases to work for the Company for any reason, Employee shall return to the Company all Company property including, but not limited to, all Trade Secrets or Confidential Information (and will not keep in Employee’s possession, recreate or deliver to anyone else) in any form or media and all copies thereof, shall return all Trade Secrets or Confidential Information from any computers Employee owns or uses outside the Company, delete all Trade Secrets or Confidential Information after returning such information to Company from any computers Employee owns or uses outside the Company, and shall participate in an exit interview for the purpose of ensuring that the Trade Secrets or Confidential Information and business relationships will not be put at risk in any new position Employee may assume.

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4.9 Non-Solicitation:

(i) Non-Solicitation: During the term of Employee’s employment with the Company or any Affiliate of the Company and during the Restricted Period, Employee agrees that Employee will not, in any manner, directly or indirectly, solicit any customer or prospective customer of the Company to whom Employee provided services, with or for whom Employee transacted business, or about whom Employee learned Trade Secrets or Confidential Information during the six (6) months prior to Employee’s termination, in each case, for the purpose of providing goods or services competitive with the Business. A “prospective customer” is any person or entity with whom Employee has communicated or whom Employee solicited for the purposes of obtaining or transacting business and/or whom Employee has analyzed concerning potential business at any time prior to the termination of Employee’s employment with the Company.

(ii) Non-Solicitation of Employees: During the Restricted Period, Employee agrees that he will not, in any manner, directly or indirectly, solicit, hire, attempt to solicit or attempt to hire any person who is a non-administrative (i.e., non-clerical) employee of the Company, or an employee under Employee’s control, in each case, during the six (6) months prior to Employee’s termination, to apply for or accept employment with any person or entity that provides goods or services competitive with the Business, unless the Company first terminated the employment of such person.

(iii) Employee agrees that the payment of any severance payments or benefits under Section 4.3 or Section 4.4 is conditioned on Employee’s compliance with Section 4.7 through 4.9 and that the Company will have the right to withhold payment if Employee is in breach of any of these sections.

4.10 Assignment of Inventions:

(a) Employee has attached hereto as Exhibit C a list, if any, describing all inventions, processes, designs, technology, information, software, illustrations, artwork, documentation, photographs, trademarks, materials, original works of authorship, and trade secrets made by him prior to the date of this Agreement that (i) belong solely to Employee or jointly to Employee and another, (ii) relate in any way to the Company’s business or services, and (iii) are not assigned to the Company by this Agreement. If no such list is attached, there are no such Prior Inventions.

(b) Employee hereby assigns to the Company all right, title and interest throughout the world in and to any and all inventions, processes, designs, technology, information, software, illustrations, artwork, documentation, photographs, trademarks, materials, original works of authorship, and trade secrets that Employee may solely or jointly conceive or develop or reduce to practice during Employee’s employment by the Company that

(i) pertain to any business activity of the Company,

(ii) are aided by the use of time, materials, facilities, Trade Secrets, or Confidential Information of the Company, or

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(iii) relate to any of Employee’s work for the Company (collectively referred to as “Inventions”).

(c) Employee assigns to the Company all right, title and interest throughout the world to any and all intellectual property rights associated with such Inventions, including without limitation all patents, copyrights, trademark rights, trade dress rights and trade secret rights. Employee will promptly make full written disclosure to the Company of all Inventions and will hold all Inventions in trust for the sole right and benefit of the Company. All copyrightable works made by the Employee during Employee’s employment by the Company are and will be treated as “works made for hire” to the greatest extent permitted by applicable law. Employee’s assignment of Inventions under this Section 4.10 includes Inventions created during Employee’s employment by the Company prior to the date of this Agreement, if any.

(d) Moral Rights. Employee’s assignment to the Company of Inventions hereunder includes (i) all rights of attribution, paternity, integrity, disclosure and withdrawal, (ii) any rights Employee may have under the Visual Artists Rights Act of 1990 or similar federal, state, foreign or international laws or treaties, and (iii) all other rights throughout the world sometimes referred to as "moral rights" (collectively "Moral Rights"). To the extent that Moral Rights cannot be assigned under applicable law, Employee hereby waives such Moral Rights to the extent permitted under applicable law and consents to any and all actions of the Company that would otherwise violate such Moral Rights.

(e) Employee will assist the Company to secure its rights in the Inventions and any copyrights, patents, trademarks, or other intellectual property rights relating thereto in any and all countries. If the Company is unable for any reason to secure Employee’s signature to apply for or to pursue any application for any United States or foreign patents or copyright registrations covering Inventions assigned to the Company, then Employee hereby irrevocably designates and appoints the Company and its duly authorized officers as Employee’s agent and attorney in fact, to act for and in Employee’s behalf to execute and file any such applications and to do all other lawfully permitted acts to further the application for, prosecution, issuance, maintenance or transfer of letters patent or copyright registrations with the same legal force and effect as if originally executed by Employee.

(f) Limitations. Employee’s assignment of inventions under this Section 4.10 does not apply to an invention for which no equipment, supplies, facility, or trade secret information of the Company was used and which was developed entirely on the Employee’s own time, unless:

(i) The invention relates to (1) the business of the Company, or (2) the Company’s actual or demonstrably anticipated research or development, or

(ii) The invention results from any work performed by the Employee for the Company.

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4.11 Enforcement; Remedies: Employee acknowledges that Employee’s expertise in the Business is of a special and unique character which gives this expertise a particular value, and that a breach of Sections 4.7, 4.8, 4.9 or 4.10 by Employee will cause serious and potentially irreparable harm to the Company. Employee therefore acknowledges that a breach of Sections 4.7, 4.8, 4.9 or 4.10 by Employee cannot be adequately compensated in an action for damages at law, and equitable relief would be necessary to protect the Company from a violation of this Agreement and from the harm which this Agreement is intended to prevent. By reason thereof, Employee acknowledges that the Company is entitled, in addition to any other remedies it may have under this Agreement or otherwise, to preliminary and permanent injunctive and other equitable relief to prevent or curtail any breach of this Agreement. Employee acknowledges, however, that no specification in this Agreement of a specific legal or equitable remedy may be construed as a waiver of or prohibition against the Company pursuing other legal or equitable remedies in the event of a breach of this Agreement by Employee. Employee’s sole and exclusive remedy in the event of a breach of this Agreement by the Company shall be payment of the severance payments and benefits under Section 4.4. For purposes of Sections 4.7, 4.8, 4.9 or 4.10, “Company” shall specifically include ATI Physical Therapy, Inc. and its direct and indirect parent entities, subsidiaries, successors and assigns.

4.12 Prior Agreements. Employee represents and warrants that Employee is not a party to any non-competition agreement or other contractual limitation that would interfere with or hinder Employee’s ability to undertake the obligations and expectations of employment with the Company. Employee represents that Employee’s performance of all of the terms of this Agreement as an employee of the Company has not breached and will not breach any agreement to keep in confidence proprietary information, knowledge, or data acquired by Employee in confidence or trust prior to the commencement of Employee’s employment with the Company, and Employee will not disclose to the Company, or induce the Company to use, any developments, or confidential information or material Employee may have obtained in connection with employment with any prior employer in violation of a confidentiality agreement, nondisclosure agreement, or similar agreement with such prior employer.

5.0 COMPENSATION AND BENEFITS. For Employee’s services, the Company agrees to pay Employee compensation following the Effective Date as follows:

5.1 Salary: During the Term, compensation equal to an annual salary rate of $390,000 to be paid according to the Company’s general payroll practices as same may exist from time to time. For annual periods thereafter, the Compensation Committee shall review and may increase but not decrease Employee’s base compensation.

5.2 Annual Incentive Compensation Program: During the Term, Employee shall be eligible for an annual discretionary performance-based bonus of 75% of base compensation at target level of achievement (the “Target Bonus”). This bonus shall be based upon achievement of such objectives established by the Compensation Committee, which may include financial, operational, strategic and personal objectives. Except as expressly provided in Sections 4.3 and 4.4, Employee shall not be entitled to any bonus or other incentive compensation with respect to the calendar year in which Employee’s employment with the Company is terminated for any reason.

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5.3 Long Term Incentive Compensation. Employee shall be granted a long-term incentive award for 2023 with a grant-date fair market value of $250,000, as determined by the Compensation Committee (the “2023 LTIP Award”). The 2023 LTIP Award shall be comprised of 50% stock options on Company common shares and 50% restricted stock units with respect to Company common shares (with the split between stock options and restricted stock units determined based on the grant date fair market value of such awards, not the number of stock options or restricted stock units granted). Such stock options will vest in three equal tranches on the first three anniversaries of the date of grant, and such restricted stock units will vest in three equal tranches on the first three anniversaries of the date of grant. The 2023 LTIP Award and all terms and conditions thereof shall be subject to the Company’s 2021 Equity Incentive Plan and equity award agreements thereunder. With respect to each year of the Term following 2023, Employee shall be eligible to receive long-term incentive awards on terms and conditions as determined by the Compensation Committee in its discretion after consultation with a compensation consultant

5.4 Reimbursement of Expenses: During the Term, the Company shall reimburse Employee for any reasonable business expenses incurred by Employee in the ordinary course of the Company’s business in accordance with the Company’s reimbursement policies then in effect. All such expenses shall be substantiated by invoices and receipts, to be submitted by Employee within thirty (30) days after incurrence. In addition, Employee shall receive a cell phone allotment in accordance with the Company’s policies then in effect or shall be provided with a Company cell phone, in the Company’s sole discretion, and shall be provided with a Company laptop computer (which shall remain the property of the Company) for use with respect to Company business.

5.5 Benefits: During the Term, Employee shall be entitled to receive all benefits of employment generally available to the Company’s other executive employees when and as such benefits, if any, become available and Employee becomes eligible for them, including any vacation and sick leave, medical, dental, life and disability insurance benefits, long term incentive plan, pension plan and/or profit-sharing plan. Additionally, the Company hereby agrees to provide Employee with annual executive physicals and an annual tax planning benefit.

5.6 Paid Time Off: During the Term, Employee shall be entitled to paid time off accrued at a level consistent with other employees within your classification, currently .0961 per hour up to a maximum of 200 hours per year. Employee will use Employee’s reasonable efforts to schedule vacation periods to minimize disruption of the Company’s business. Paid time off that is not utilized within the calendar year does not carry over and is not paid out. The Company will not reimburse Employee for any unused vacation.

5.7 Withholding: Employee authorizes the Company to make any and all applicable withholdings of federal and state taxes and other items the Company may be required to deduct, as such items may exist under this Agreement or otherwise from time to time.

6.0 CONSIDERATION: As additional consideration for the promises and covenants contained herein, specifically including, but not limited to Sections 4.7, 4.8, 4.9 and 4.10, the Company previously paid Employee adequate consideration. Employee acknowledges this payment and Employee’s continued employment by the Company constitute valuable consideration to which Employee is not otherwise entitled under any preexisting agreement with the Company.

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7.0 SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and inure to the benefit of and be enforceable by Employee, the Company and their respective heirs, successors and assigns, except that Employee shall not have any right to assign or otherwise transfer this Agreement, or any of Employee’s rights, duties or any other interest herein to any party without the prior written consent of the Company, and any such purported assignment shall be null and void.

8.0 SURVIVAL OF RIGHTS AND OBLIGATIONS. The rights and obligations of the parties as stated herein shall survive the termination of this Agreement.

9.0 ENTIRE AGREEMENT.

9.1 Sole Agreement: This Agreement (including any attachments and exhibits hereto) contains the parties’ sole and entire agreement regarding the Employee’s employment by the Company or its Affiliates, and supersedes any and all other agreements, statements and representations of the parties regarding Employee’s employment by the Company or its Affiliates, including but not limited to the Employment Agreement, dated as of April 2016, by and between Employee and ATI Holdings, LLC and Athletic & Therapeutic Institute of Naperville, LLC, and any other employment agreement or other agreement regarding Employee’s base compensation, bonus or terms of employment entered into prior to the Effective Date.

9.2 No Other Representations: The parties acknowledge and agree that no party has made any representations (i) concerning the subject matter hereof, or (ii) inducing the other party to execute and deliver this Agreement, except those representations specifically referenced herein. The parties have relied on their own judgment in entering into this Agreement.

10.0 MODIFICATIONS OR WAIVERS. Waivers or modifications of this Agreement, or of any covenant, condition, or limitation contained herein, are valid only if in writing duly executed by the parties hereto.

11.0 GOVERNING LAW. This Agreement shall be governed pursuant to the laws of the State of Illinois, without giving effect to any principles of conflicts of laws.

12.0 SEVERABILITY. If any part, clause, or condition of this Agreement is held to be partially or wholly invalid, unenforceable, or inoperative for any reason whatsoever, such shall not affect any other provision or portion hereof, which shall continue to be effective as though such invalid, unenforceable or inoperative part, clause or condition had not been made. In the event that any restrictive covenant under this Agreement shall be determined by any court of competent jurisdiction to be unenforceable by reason of its extending for too great a period of time or over too great a geographical area or by reason of its being too extensive in any other respect, it will be interpreted to extend only over the maximum period of time for which it may be enforceable, over the maximum geographical area as to which it may be enforceable, or to the maximum extent in all other respects as to which it may be enforceable, all as determined by such court in such action.

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13.0 INTERPRETATION.

13.1 Section headings: The section and subsection heading of this Agreement are included for purposes of convenience only, and shall not affect the construction or interpretation of any of its provisions.

13.2 Gender and Number: Whenever required by the context, the singular shall include the plural, the plural shall include the singular, and the masculine gender shall include the neuter and feminine genders and vice versa.

14.0 NOTICES. All notices and other communications under or in connection with this Agreement shall be in writing and shall be deemed given (i) if delivered personally, upon delivery, (ii) if delivered by registered or certified mail (return receipt requested), upon the earlier of actual delivery or three (3) days after being mailed, (iii) if given by overnight courier with receipt acknowledgment requested, the next business day following the date sent, or (iv) if given by telecopy, if sent during business hours at the recipient’s location, upon confirmation of transmission by telecopy, otherwise, upon the next business day after such confirmation, in each case to the parties at the following addresses:

	To the Company:	ATI Physical Therapy, Inc.
		790 Remington Boulevard
		Bolingbrook, Illinois 60440
		Attn : CEO

	With a copy to:	Weil, Gotshal & Manges, LP
		100 Federal Street, 34th floor
		Boston, MA 02110
		Attention: Marilyn French Shaw

To Employee:

To the Employee’s current home address on file with the Company.

15.0 JOINT PREPARATION. All parties to this Agreement have negotiated it at length, and have had the opportunity to consult with and be represented by their own competent counsel. This Agreement is therefore deemed to have been jointly prepared by the parties, and any uncertainty or ambiguity existing in it shall not be interpreted against any party, but rather shall be interpreted according to the rules generally governing the interpretation of contracts.

16.0 THIRD-PARTY BENEFICIARIES. No term or provision of this Agreement is intended to be, or shall be, for the benefit of any person, firm, organization or corporation not a party hereto, and no such other person, firm, organization or corporation shall have any right or cause of action hereunder.

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17.0 ARBITRATION.

(i) Any controversy, claim or dispute involving the parties (or their affiliated persons) directly or indirectly concerning this Agreement, or the subject matter thereof, shall be finally settled by arbitration held in Chicago, Illinois by one (1) arbitrator in accordance with the rules of employment arbitration then followed by the American Arbitration Association or any successor to the functions thereof. The arbitrator shall apply Illinois law in the resolution of all controversies, claims and disputes and shall have the right and authority to determine how Employee’s decision or determination as to each issue or matter in dispute may be implemented or enforced. Any decision or award of the arbitrator shall be final and conclusive on the parties to this Agreement and their respective affiliates, and there shall be no appeal therefrom other than from gross negligence or willful misconduct. Notwithstanding the foregoing, claims of employment discrimination, worker’s compensation and unemployment compensation benefits shall not be subject to arbitration under this Agreement. The Company shall bear all costs of the arbitrator in any action brought under this Section 17.0.

(ii) The parties hereto agree that any action to compel arbitration pursuant to this Agreement may be brought in the appropriate Illinois court and in connection with such action to compel the laws of the State of Illinois shall control. Application may also be made to such court for confirmation of any decision or award of the arbitrator, for an order of the enforcement and for any other remedies which may be necessary to effectuate such decision or award. The parties hereto hereby consent to the jurisdiction of the arbitrator and of such court and waive any objection to the jurisdiction of such arbitrator and court.

(iii) Notwithstanding the foregoing provisions of this Section 17.0, nothing contained herein shall be deemed to preclude any party from bringing an action for injunctive relief in any court having jurisdiction.

18.0 COOPERATION AND FURTHER ACTIONS. The parties agree to perform any and all acts and to execute and deliver any and all documents necessary or convenient to carry out the terms of this Agreement.

19.0 ATTORNEYS’ FEES. In the event of any dispute related to or based upon this Agreement, the prevailing party shall be entitled to recover from the other party its reasonable attorneys’ fees and costs.

20.0 COUNTERPARTS. This Agreement may be executed in one or more counterparts, including electronically transmitted counterparts, each of which shall be deemed an original and all of which shall be considered one and the same instrument.

21.0 CONSENT TO JURISDICTION. Each party to this Agreement hereby (a) consents to the jurisdiction of the United States District Court for the Northern District of Illinois or, if such court does not have jurisdiction over such matter, the applicable Illinois State or County Court that has jurisdiction, (b) irrevocably agrees that all actions or proceedings arising out of or relating to this Agreement which are not subject to arbitration as set forth in Section 17.0(i) shall be litigated in such court and (c) consents to personal jurisdiction within the City and County of Chicago, Illinois. Each party to this Agreement accepts for itself and in connection with its properties, generally and unconditionally, the jurisdiction and venue of the aforesaid courts and waives any defense of lack of personal jurisdiction or inconvenient forum or any similar defense, and irrevocably agrees to be bound by any non-appealable judgment rendered thereby in connection with this Agreement.

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22.0 CLAWBACK; RECOUPMENT. Notwithstanding anything in this Agreement to the contrary, all compensation payable under this Agreement shall be subject to (i) any compensation recovery, “clawback” or similar policy, as may be in effect from time to time to which Employee is subject and (ii) any compensation recovery, “clawback” or similar policy made applicable by law including the provisions of Section 945 of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the rules, regulations and requirements adopted thereunder by the Securities and Exchange Commission and/or any national securities exchange on which the Company’s equity securities may be listed.

23.0 EFFECTIVENESS. This Agreement shall be effective upon the Effective Date.

24.0 SECTION 409A PROVISIONS.

24.1 The parties agree that this Agreement shall be interpreted to comply with or be exempt from Section 409A of the Code, and the regulations and authoritative guidance promulgated thereunder to the extent applicable (collectively “Code Section 409A”), and all provisions of this Agreement shall be construed in a manner consistent with the requirements for avoiding taxes or penalties under Code Section 409A. Notwithstanding any provision of this Agreement to the contrary, in the event that the Company determines that any amounts payable hereunder will be taxable currently to Employee under Section 409A(a)(1)(A) of the Code and related Department of Treasury guidance, the Company and Employee shall cooperate in good faith to (i) adopt such amendments to this Agreement and appropriate policies and procedures, including amendments and policies with retroactive effect, that they mutually determine to be necessary or appropriate to preserve the intended tax treatment of the benefits provided by this Agreement, to preserve the economic benefits of this Agreement, and to avoid less-favorable accounting or tax consequences for the Company, and/or (ii) take such other actions as mutually determined to be necessary or appropriate to exempt the amounts payable hereunder from Code Section 409A or to comply with the requirements of Code Section 409A and thereby avoid the application of penalty taxes thereunder; provided, however, that this Section 24.1 does not create an obligation on the part of the Company to modify this Agreement and does not guarantee that the amounts payable hereunder will not be subject to interest or penalties under Code Section 409A, and in no event whatsoever shall the Company or any of its Affiliates be liable for any additional tax, interest, or penalties that may be imposed on Employee as a result of Code Section 409A or any damages for failing to comply with Code Section 409A.

24.2 A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits considered “nonqualified deferred compensation” under Code Section 409A upon or following a termination of employment unless such termination is also a “separation from service” within the meaning of Code Section 409A. For purposes of Code Section 409A, the Employee’s right to receive installment payments pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments.

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24.3 If Employee is deemed on the date of termination to be a “specified employee” within the meaning of that term under Code Section 409A(a)(2)(B), then with regard to any payment or the provision of any benefit that is considered “nonqualified deferred compensation” under Code Section 409A payable on account of a “separation from service,” such payment or benefit shall be made or provided at the date which is the earlier of (i) the expiration of the six (6)-month period measured from the date of such “separation from service” of Employee, and (ii) the date of Employee’s death (the “Delay Period”). Upon the expiration of the Delay Period, all payments and benefits delayed pursuant to this Section 24.3 (whether they would have otherwise been payable in a single sum or in installments in the absence of such delay) shall be paid or reimbursed on the first business day following the expiration of the Delay Period to Employee in a lump sum, and any remaining payments and benefits due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein.

24.4 With regard to any provision herein that provides for reimbursement of costs and expenses or in-kind benefits, except as permitted by Code Section 409A, to the extent that any such reimbursements or in-kind benefits constitute “nonqualified deferred compensation” under Code Section 409A, (x) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit, (y) the amount of expenses eligible for reimbursement, or in-kind benefits, provided during any taxable year shall not affect the expenses eligible for reimbursement, or in-kind benefits, to be provided in any other taxable year, provided, that this clause (y) shall not be violated with regard to any medical expenses subject to a limit as set forth in Treasury Regulations Section 1.409A-3(i)(1)(iv)(B), and (z) such payments shall be made on or before the last day of Employee’s taxable year following the taxable year in which the expense occurred.

[SIGNATURE PAGE FOLLOWS]

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The parties hereto have each executed and delivered this Agreement as of the day and year first above written.

	ATI Physical Therapy, Inc.

	By:
		Name: Sharon Vitti
		Title: CEO

The parties hereto have each executed and delivered this Agreement as of the day and year first above written.

	ATI Holdings, LLC

	By:
		Name: Sharon Vitti
		Title: CEO

	Athletic & Therapeutic Institute of Naperville, LLC

	By:
		Name: Sharon Vitti
		Title: CEO

The parties hereto have each executed and delivered this Agreement as of the day and year first above written.

	EMPLOYEE

	Erik L. Kantz
	7734 Farmingdale Drive
	Darien, IL 60561
	United States of America

EXHIBIT A

FORM OF MUTUAL RELEASE

In exchange for good and valuable consideration set forth in that certain Employment Agreement (the “Employment Agreement”) between the undersigned, Erik L. Kantz (“Employee”) and ATI Physical Therapy, Inc. (the “Company”), the sufficiency of which is hereby acknowledged, Employee, on behalf of Employee, Employee’s executors, heirs, administrators, assigns and anyone else claiming by, through or under Employee, irrevocably and unconditionally, releases, and forever discharges the Company, its predecessors, successors and related and affiliate entities, including, without limitation, parents and subsidiaries, and each of their respective directors, officers, employees, attorneys, insurers, agents and representatives (collectively, the “Released Parties”), from, and with respect to, any and all debts, demands, actions, causes of action, suits, covenants, contracts, wages, bonuses, damages and any and all claims, demands, liabilities, and expenses (including attorneys’ fees and costs) whatsoever of any name or nature both in law and in equity that Employee now has, ever had or may in the future have against the Released Parties with respect to Employee’s employment with, or service as an officer or director of, the Released Parties (severally and collectively, “Claims”), including but not limited to, any and all Claims in tort or contract, whether by statute or common law, and any Claims relating to salary, wages, bonuses and commissions, the breach of an oral or written contract, unjust enrichment, promissory estoppel, misrepresentation, defamation, and interference with prospective economic advantage, interference with contract, wrongful termination, intentional and negligent infliction of emotional distress, negligence, breach of the covenant of good faith and fair dealing, and Claims arising out of, based on, or connected with the termination of that Employee’s employment as set forth in the Employment Agreement, including any Claims for unlawful employment discrimination of any kind, whether based on age, race, sex, disability or otherwise, including specifically and without limitation, claims arising under or based on Title VII of the Civil Rights Act of 1964, as amended; the Age Discrimination in Employment Act, as amended; the Civil Rights Act of 1991; the Family and Medical Leave Act; the Americans with Disabilities Act, as amended; the Employee Retirement Income Security Act of 1974; the Equal Pay Act of 1963; the Illinois Human Rights Act; the Illinois Equal Pay Law; the rules under the Illinois Administrative Code relating to discrimination; the Chicago Ordinance on Human Rights; the Illinois Worker Adjustment and Retraining Notification Act; and the Cook County Ordinance on Human Rights; and any other local, state or federal equal employment opportunity or anti-discrimination law, statute, policy, order, ordinance or regulation affecting or relating to Claims that Employee ever had, now has, or claims to have against the Released Parties; except, in each case, with respect to Claims arising out of or otherwise relating to the purchase, ownership or sale of any equity securities of the Company or any successor thereof; provided, however, the Employee does not release the Released Parties with respect to claims arising out of or relating to their fraud, gross negligence or willful misconduct. The Employee further waives any claims the Employee may have for employment by the Company and agrees not to seek such employment or reemployment by the Company in the future.

Employee warrants and represents that Employee has not assigned or transferred to any person or entity any of the Claims released by this Mutual Release, and Employee agrees to defend (by counsel of the Company’s choosing), and to indemnify and hold harmless, the Released Parties from and against any claims based on, in connection with, or arising out of any such assignment or transfer made, purported or claimed.

Except for obligations created by this Mutual Release and the Employment Agreement, the Company hereby covenants not to sue and fully releases Employee and Employee’s successors and assigns (the “Employee Releasees”), with respect to and from all actions, and claims of any kind, known or unknown, suspected or unsuspected, which the Company may now have or has ever had against any of the Employee Releasees, including all claims arising from Employee’s position as an officer, director or employee of the Company and the termination of that relationship, as of the date of this Mutual Release; except, in each case, with respect to Claims arising out of or otherwise relating to the purchase, ownership or sale of any equity securities of the Company or any successor thereof; provided, however, the Company does not release the Employee Releasees with respect to claims arising out of or relating to their fraud, gross negligence or willful misconduct.

As further consideration for Employee’s entering into the Employment Agreement and this Mutual Release, the Company covenants and agrees that for one (1) year after the date of this Mutual Release, the Company will instruct its directors and executive officers not to disparage Employee in any manner harmful to Employee’s business or personal reputation. As further consideration for the Company entering into the Employment Agreement and this Mutual Release, Employee covenants and agrees that for one year after the date of this Mutual Release, Employee will not disparage the Company in any manner harmful to the Company’s business reputation.

Notwithstanding anything to the contrary in this Mutual Release or the Employment Agreement, the foregoing release shall not cover, and Employee does not intend to release, any rights of indemnification under the Company’s Certificate of Incorporation (the “Certificate”) or Bylaws (the “Bylaws”) or Operating Agreement (the “Operating Agreement”), as applicable, rights to directors and officers liability insurance, or any rights and obligations under the Employment Agreement. Employee further acknowledges that the Company’s obligations under the Certificate, Bylaws or Operating Agreement are, to the extent required therein, conditioned upon receipt by the Company of an undertaking by Employee to repay any applicable indemnification amount if it shall be determined by a court of competent jurisdiction by final judicial determination that Employee is not entitled to be indemnified by the Company under the Certificate, Bylaws or Operating Agreement.

The parties hereto agree that neither this Mutual Release, nor the furnishing of the consideration for this Mutual Release, shall be deemed or construed at any time to be an admission by the any Released Party or the Employee Releasees of any improper or unlawful conduct.

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EMPLOYEE HAS READ THIS MUTUAL RELEASE AND BEEN PROVIDED A FULL AND AMPLE OPPORTUNITY TO STUDY IT, AND EMPLOYEE UNDERSTANDS THAT THIS IS A FULL AND, COMPREHENSIVE AND MUTUAL RELEASE AND INCLUDES ANY CLAIM UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT. EMPLOYEE ACKNOWLEDGES THAT EMPLOYEE HAS BEEN ADVISED IN WRITING TO CONSULT WITH LEGAL COUNSEL BEFORE SIGNING THIS MUTUAL RELEASE AND THE EMPLOYMENT AGREEMENT, AND EMPLOYEE HAS CONSULTED WITH AN ATTORNEY. EMPLOYEE WAS GIVEN A PERIOD OF AT LEAST TWENTY-ONE DAYS TO CONSIDER SIGNING THIS MUTUAL RELEASE, AND EMPLOYEE HAS SEVEN DAYS FROM THE DATE OF SIGNING TO REVOKE EMPLOYEE’S ACCEPTANCE BY DELIVERING TIMELY NOTICE OF EMPLOYEE’S REVOCATION TO THE COMPANY’S HUMAN RESOURCES DEPARTMENT AT ITS PRINCIPAL PLACE OF BUSINESS. EMPLOYEE IS SIGNING THIS MUTUAL RELEASE VOLUNTARILY, WITHOUT COERCION, AND WITH FULL KNOWLEDGE THAT IT IS INTENDED, TO THE MAXIMUM EXTENT PERMITTED BY LAW, AS A COMPLETE AND FINAL RELEASE AND WAIVER OF ANY AND ALL CLAIMS. EMPLOYEE ACKNOWLEDGES AND AGREES THAT THE PAYMENTS SET FORTH IN THE EMPLOYMENT AGREEMENT ARE CONTINGENT UPON EMPLOYEE SIGNING THIS MUTUAL RELEASE AND WILL BE PAYABLE ONLY IF AND AFTER THE REVOCATION PERIOD HAS EXPIRED.

[SIGNATURE PAGE(S) TO FOLLOW]

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Employee has read this Mutual Release, fully understand it and freely and knowingly agree to its terms.

Dated this _____ day of _____________________, 20___.


	Signature

	Erik L. Kantz

AGREED AND ACCEPTED:

ATI Physical Therapy, Inc.

By:
Title:
Date:

EXHIBIT B

Of-counsel relationship with Saul Ewing Arnstein & Lehr LLP

EXHIBIT C

None

Exhibit 99.1

ATI Physical Therapy Reports Third Quarter 2022 Results

BOLINGBROOK, IL – November 7, 2022 – ATI Physical Therapy, Inc. (“ATI” or the “Company”) (NYSE: ATIP), the largest single-branded outpatient physical therapy provider in the United States, today reported financial results for the third quarter ended September 30, 2022.

“Despite a continuing tight labor market and other secular headwinds, we are forging ahead with provider recruitment while other key performance metrics in the third quarter followed seasonal trends. We are not waiting for the external markets to recover and are operating with urgency to increase patient access to timely care,” said Sharon Vitti, Chief Executive Officer of ATI. “Through strong leadership and accountability, we are accelerating our pace of transformation through the launch of immediate term efficiency projects while continuing to map longer-term care delivery strategies.”

Joe Jordan, Chief Financial Officer of ATI, said, “While we navigate the macro labor environment in our industry, we are focused on optimizing the clinic footprint and financial return at the local market level and controlling costs at corporate. Fiscal discipline drove incrementally lower general and administrative expenses in the third quarter compared to prior quarter and prior year. Primarily due to the rising interest rate environment, we recorded non-cash goodwill and intangible asset impairment charges in the quarter totaling approximately $107 million.”

Ms. Vitti continued, “We have a plan, and we are aggressively working to implement the changes. Our talented people and clinical practices continue to be the chassis of ATI, and I am excited to write ATI’s next chapter. This work takes time, and I am confident this dedicated team will deliver the expected results.”

Third Quarter 2022 Results

Supplemental tables of key performance metrics for the first quarter of 2019 through the third quarter of 2022 are presented after the financial statements at the end of this press release. Commentary on performance results in the third quarter of 2022 is as follows:

•

Net operating revenue was $156.8 million compared to $163.3 million in the second quarter of 2022 and $159.0 million in the third quarter of 2021, a decrease of 4% quarter over quarter and 1% year over year.

◾

Net patient revenue was $142.3 million compared to $148.5 million in the second quarter of 2022 and $141.9 million in the third quarter of 2021, a decrease of 4% quarter over quarter and essentially flat year over year. See below for discussion of drivers to net patient revenue i.e., patient visits and Rate per Visit.

◾

Other revenue was $14.5 million compared to $14.8 million in the second quarter of 2022 and $17.2 million in the third quarter of 2021, a decrease of 2% quarter over quarter and 16% year over year. The year over year decrease was primarily due to sale of the Home Health service line on October 1, 2021.

•

Visits per Day (“VPD”) were 21,493 compared to 22,403 in the second quarter of 2022 and 20,674 in the third quarter of 2021, a decrease of 4% quarter over quarter primarily due to seasonality and scheduled vacations and an increase of 4% year over year mostly due to higher clinical FTE.

VPD per Clinic were 23.2 compared to 24.2 in the second quarter of 2022 and 23.1 in the third quarter of 2021, a decrease of 1.0 visit quarter over quarter and an increase of 0.1 visit year over year.

•

Rate per Visit was $103.46 compared to $103.57 in the second quarter of 2022 and $105.56 in the third quarter of 2021, essentially flat quarter over quarter and a decrease of 2% year over year. The year over year decrease was primarily due to the 2022 Medicare Physician Fee Schedule, which introduced a 0.75% decrease in overall rates and an additional 15% decrease in rates paid for services performed by physical therapy assistants, and unfavorable mix shifts in payors and states. This decrease was partially offset by favorable mix shift in services.

•

Salaries and related costs were $90.3 million compared to $89.6 million in the second quarter of 2022 and $86.8 million in the third quarter of 2021, an increase of 1% quarter over quarter due to wage inflation and an increase of 4% year over year due to higher number of clinical FTE and wage inflation.

PT salaries and related costs per Visit were $56.20 compared to $53.64 in the second quarter of 2022 and $53.70 in the third quarter of 2021, an increase of 5% quarter over quarter primarily due to lower labor productivity and wage inflation and an increase of 5% year over year primarily due to wage inflation, adding clinic support staff, and lower labor productivity.

•

Rent, clinic supplies, contract labor and other was $51.4 million compared to $50.4 million in the second quarter of 2022 and $45.8 million in the third quarter of 2021, an increase of 2% quarter over quarter due to higher expenditures on a per clinic basis and an increase of 12% year over year due to more clinics and higher expenditures on a per clinic basis.

PT rent, clinic supplies, contract labor and other per Clinic was $53,945 compared to $53,017 in the second quarter of 2022 and $49,499 in the third quarter of 2021, an increase of 2% quarter over quarter and 9% year over year primarily driven by greater use of contract labor compared to prior respective periods while the Company works to fill open positions.

•

Provision for doubtful accounts was $2.8 million compared to $3.5 million in the third quarter of 2021. PT provision as a percent of net patient revenue was 2% in both quarters.

•

Selling, general and administrative expenses were $25.3 million compared to $31.8 million in the second quarter of 2022 and $30.8 million in the third quarter of 2021. The quarter over quarter decrease of 21% was primarily due to a $3.0 million one-time loss on a probable legal settlement recorded in the second quarter of 2022 and lower non-ordinary legal and regulatory matters expense and reorganization and severance costs. The year over year decrease of 18% was due to lower reorganization and severance costs and transaction costs.

•

Non-cash goodwill and intangible assets charge was approximately $106.7 million. Primarily due to an increase in discount rates and lower public company comparative multiples, it was determined that the fair value amounts of goodwill and intangible assets were below their respective carrying amounts.

•

Income tax benefit was $7.2 million compared to $13.0 million in the second quarter of 2022 and $35.3 million in the third quarter of 2021.

•

Net loss was $116.7 million compared to $135.7 million in the second quarter of 2022 and $326.8 million in the third quarter of 2021.

•

Adjusted EBITDA¹ was $(0.4) million compared to $5.4 million in the second quarter of 2022 and $8.5 million in the third quarter of 2021. Quarter over quarter and year over year, the decreases were primarily driven by lower revenue and higher clinic operating costs partially offset by lower provision for doubtful accounts and selling, general, and administrative expenses as detailed above.

Adjusted EBITDA margin was approximately (0)% compared to 3% in the second quarter of 2022 and 5% in the third quarter of 2021.

•

Net increase (decrease) in cash was approximately $(0.0) million year-to-date 2022 compared to $(76.0) million in the first nine months of 2021.

Operating cash use was $59.1 million year-to-date 2022 compared to $38.7 million in the first nine months of 2021 due to lower earnings and higher net working capital. Cash repaid in connection with the Medicare Accelerated and Advance Payment Program (“MAAPP”) under the CARES Act was $12.3 million year-to-date 2022 compared to $8.5 million in the first nine months of 2021.

Investing cash use was $21.9 million year-to-date 2022, with 33 new clinics opened, compared to $28.7 million in the first nine months of 2021 and 38 new clinics opened.

Financing cash generation (use) was $80.9 million year-to-date 2022 compared to $(8.7) million in the first nine months of 2021. In February 2022, the Company refinanced its first lien term loan with a new credit agreement and issued Series A preferred stock with detachable warrants, adding approximately $77 million to the balance sheet after payment of interest and transaction fees.

Summary of key balance sheet items as of September 30, 2022 is as follows:

•

Cash and cash equivalents totaled $48.6 million, and the revolving credit facility was undrawn with available capacity of $48.2 million, net of usage by letters of credit, equaling $96.8 million in available liquidity.

The Company’s credit agreement includes a minimum liquidity covenant of $30.0 million through the first quarter of 2024. Liquidity, as defined under the Company’s credit agreement, was $99.6 million as of September 30, 2022.

¹ Refer to “Non-GAAP Financial Measures” below.

Other notable achievements in the third quarter of 2022 were as follows:

•

Opened 11 new clinics in existing states, including Alabama, Pennsylvania, and Texas; and 8 clinics were closed. This brings the total number of clinics to 929. The Company continues to capitalize on growth opportunities in individual markets, while optimizing its footprint and financial return in other local markets.

•

Net Promotor Score (“NPS”) of 76 and Google Star Rating of 4.8, reflecting continued high customer satisfaction and brand loyalty.

Third Quarter 2022 Earnings Conference Call

Management will host a conference call at 5:00 p.m. Eastern Time on November 7, 2022 to review second quarter 2022 financial results. The conference call can be accessed via a live audio webcast. To join, please access the following web link, ATI Physical Therapy, Inc. Q3 2022 Earnings Conference Call, on the Company’s investor relations website at https://investors.atipt.com at least 15 minutes early to register, and download and install any necessary audio software. A replay of the call will be available via webcast for on-demand listening shortly after the completion of the call, at the same web link, and will remain available for approximately 90 days.

About ATI Physical Therapy

At ATI Physical Therapy, we are passionate about potential. Every day, we restore it in our patients and activate it in our team members in our more than 900 locations in 25 states. With outcomes from more than 2.5 million unique patient cases, ATI is making strides in the industry by setting quality standards designed to deliver predictable outcomes for our patients with musculoskeletal (MSK) issues. ATI’s offerings span across a broad spectrum for MSK-related issues. From preventative services in the workplace and athletic training support to outpatient clinical services and online physical therapy via our online platform, CONNECT™, a complete list of our service offerings can be found at ATIpt.com. ATI is based in Bolingbrook, Illinois.

Forward-Looking Statements

All statements other than statements of historical facts contained in this communication are forward-looking statements for purposes of the safe harbor provisions under the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements may generally be identified by the use of words such as "believe," "may," "will," "estimate," "continue," "anticipate," "intend," "expect," "should," "would," "plan," "project," "forecast," "predict," "potential," "seem," "seek," "future," "outlook," "target" or other similar expressions (or the negative versions of such words or expressions) that predict or indicate future events or trends or that are not statements of historical matters. These forward-looking statements include, but are not limited to, statements regarding expected clinical FTE, the impact of physical therapist attrition, anticipated visit and referral volumes and other factors that may impact the Company’s overall profitability and estimates and forecasts of other financial and performance metrics and projections of market opportunity. These statements are based on various assumptions, whether or not identified in this communication, and on the current expectations of ATI's management and are not predictions of actual performance. These forward-looking statements are estimates only and are not intended to serve as, and must not be relied on by any investor as, a guarantee, an assurance or a definitive statement of fact or probability. Actual events and circumstances are difficult or impossible to predict and may differ from assumptions, and such differences may be material. Many actual events and circumstances are beyond the control of ATI. These forward-looking statements are subject to a number of risks and uncertainties, including, but not limited to:

(i)

changes in domestic business, market, financial, political and legal conditions, including shifts and trends in payor mix;

(ii)

the ability to execute on our sales and marketing strategies;

(iii)

the ability to maintain the listing of the Company's securities on NYSE;

(iv)

risks related to the execution of ATI's business strategy, including but not limited to ramping of visits, growing clinical headcount, and opening new clinics, and the timing of expected business milestones;

(v)

the effects of competition on ATI's future business and the ability of ATI to grow and manage growth profitably, maintain relationships with patients, payors and referral sources and retain its management and key employees;

(vi)

the ability of the Company to attract and retain physical therapists consistent with its business plan;

(vii)

the ability of the Company to develop new and retain and expand relationships with referral sources;

(viii)

the outcome of any legal proceedings or regulatory investigations that have or may be instituted against the Company or any of its directors or officers and the availability of insurance coverage for such matters;

(ix)

the ability of the company to comply with its covenants in its credit facility and preferred stock financing arrangements or to redeem preferred stock;

(x)

the ability of the company to generate sufficient cash flow to run its business, comply with its covenants in its credit facility, and continue to operate as a going concern;

(xi)

the ability of the Company to issue equity or equity-linked securities or obtain debt financing in the future;

(xii)

risks related to political and macroeconomic uncertainty, including recession, inflation, higher interest rates and the ongoing conflict between Russia and Ukraine;

(xiii)

the impact of the global COVID-19 pandemic (and existing or emerging variants) on any of the foregoing risks;

(xiv)

risks related to the impact on our workforce of mandatory COVID-19 vaccination of employees;

(xv)

risks related to further impairments of goodwill and other intangible assets, which represent a significant portion of the Company’s total assets, especially in view of the Company’s recent market valuation;

(xvi)

risks associated with the Company’s inability to remediate material weaknesses in internal controls over financial reporting related to income taxes and to maintain effective internal controls over financial reporting; and

those factors discussed in our amended S-1 registration statement filed with the SEC on April 12, 2022 under the heading "Risk Factors," our Form 10-K for the fiscal year ended December 31, 2021, the S-3 registration statement and amendments thereto dated August 10, 2022 and other documents filed, or to be filed, by ATI with the SEC.

If any of these risks materialize or our assumptions prove incorrect, actual results could differ materially from the results implied by these forward-looking statements, including our forecast update. There may be additional risks that ATI does not presently know or that ATI currently believes are immaterial that could also cause actual results to differ from those contained in the forward-looking statements. In addition, the forward-looking statements in this communication reflect ATI's expectations, plans or forecasts of future events and views as of the date of this communication. ATI anticipates that subsequent events and developments will cause ATI's assessments with respect to these forward-looking statements to change. However, while ATI may elect to update these forward-looking statements at some point in the future, ATI specifically disclaims any obligation to publicly update any forward-looking statement, whether written or oral, which may be made from time to time, whether as a result of new information, future developments or otherwise, unless required by applicable law. These forward-looking statements should not be relied upon as representing ATI's assessments as of any date subsequent to the date of this press release. Accordingly, undue reliance should not be placed upon the forward-looking statements.

Non-GAAP Financial Measures

To supplement the Company’s financial information presented in accordance with GAAP and aid understanding of the Company’s business performance, the Company uses certain non-GAAP financial measures, namely “Adjusted EBITDA” and “Adjusted EBITDA margin.” We believe Adjusted EBITDA and Adjusted EBITDA margin (i.e. Adjusted EBITDA divided by Net Operating Revenue) assist investors and analysts in comparing our operating performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance.

Management believes these non-GAAP financial measures are useful to investors in highlighting trends in our operating performance, while other measures can differ significantly depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which we operate and capital investments. Management uses these non-GAAP financial measures to supplement GAAP measures of performance in the evaluation of the effectiveness of our business strategies, to make budgeting decisions, to establish discretionary annual incentive compensation and to compare our performance against that of other peer companies using similar measures. Management supplements GAAP results with non-GAAP financial measures to provide a more complete understanding of the factors and trends affecting the business than GAAP results alone.

Adjusted EBITDA and Adjusted EBITDA margin are not recognized terms under GAAP and should not be considered as an alternative to net income (loss) or the ratio of net income (loss) to net revenue as a measure of financial performance, cash flows provided by operating activities as a measure of liquidity, or any other performance measure derived in accordance with GAAP. Additionally, these measures are not intended to be a measure of cash available for management’s discretionary use as they do not consider certain cash requirements such as interest payments, tax payments and debt service requirements. The presentations of these measures have limitations as analytical tools and should not be considered in isolation, or as a substitute for analysis of our results as reported under GAAP. Because not all companies use identical calculations, the presentations of these measures may not be comparable to other similarly titled measures of other companies and can differ significantly from company to company.

Please see “Reconciliation of GAAP to Non-GAAP Financial Measures” below for reconciliations of non-GAAP financial measures used in this release to their most directly comparable GAAP financial measures.

Contacts

Investors:

Joanne Fong

SVP, Treasurer and Head of Investor Relations

ATI Physical Therapy

investors@atipt.com

(630) 296-2222 x 7131

Press Inquiries:

Rob Manker

Director of Customer Marketing & Public Relations

ATI Physical Therapy

warren.manker@atipt.com

630-296-2222 ext. 7432

Sean Leous

ICR Westwicke

Sean.Leous@Westwicke.com

646-866-4012

ATI Physical Therapy, Inc.

Condensed Consolidated Statements of Operations

($ in thousands)

(unaudited)

	Three Months Ended						Nine Months Ended
	September 30, 2022			September 30, 2021			September 30, 2022			September 30, 2021

Net patient revenue	$	142,313		$	141,855		$	429,744		$	420,805
Other revenue		14,479			17,158			44,163			51,303
Net operating revenue		156,792			159,013			473,907			472,108

Cost of services:
Salaries and related costs		90,309			86,838			267,330			248,409
Rent, clinic supplies, contract labor and other		51,417			45,765			153,437			133,140
Provision for doubtful accounts		2,797			3,514			11,408			14,270
Total cost of services		144,523			136,117			432,175			395,819
Selling, general and administrative expenses		25,263			30,795			87,095			81,912
Goodwill and intangible asset impairment charges		106,663			508,972			390,224			962,303
Operating loss		(119,657	)		(516,871	)		(435,587	)		(967,926	)
Change in fair value of warrant liability		(790	)		(15,885	)		(3,651	)		(20,424	)
Change in fair value of contingent common shares liability		(6,930	)		(146,317	)		(32,760	)		(167,265	)
Loss on settlement of redeemable preferred stock		—			—			—			14,037
Interest expense, net		11,780			7,386			31,815			39,105
Interest expense on redeemable preferred stock		—			—			—			10,087
Other expense, net		195			52			3,181			5,831
Loss before taxes		(123,912	)		(362,107	)		(434,172	)		(849,297	)
Income tax benefit		(7,218	)		(35,333	)		(43,532	)		(65,579	)
Net loss	$	(116,694	)	$	(326,774	)	$	(390,640	)	$	(783,718	)

ATI Physical Therapy, Inc.

Condensed Consolidated Balance Sheets

($ in thousands)

(unaudited)

	September 30, 2022			December 31, 2021
Assets:
Current assets:
Cash and cash equivalents	$	48,569		$	48,616
Accounts receivable (net of allowance for doubtful accounts of $50,910 and $53,533 at June 30, 2022 and December 31, 2021, respectively)		82,323			82,455
Prepaid expenses		12,470			9,303
Other current assets		13,765			3,204
Total current assets		157,127			143,578

Property and equipment, net		129,761			139,730
Operating lease right-of-use assets		238,476			256,646
Goodwill, net		338,011			608,811
Trade name and other intangible assets, net		291,767			411,696
Other non-current assets		2,068			2,233
Total assets	$	1,157,210		$	1,562,694

Liabilities, Mezzanine Equity and Stockholders' Equity:
Current liabilities:
Accounts payable	$	11,099		$	15,146
Accrued expenses and other liabilities		52,511			64,584
Current portion of operating lease liabilities		52,366			49,433
Current portion of long-term debt		—			8,167
Total current liabilities		115,976			137,330

Long-term debt, net		479,906			543,799
Warrant liability		690			4,341
Contingent common shares liability		12,600			45,360
Deferred income tax liabilities		23,927			67,459
Operating lease liabilities		229,460			250,597
Other non-current liabilities		1,944			2,301
Total liabilities		864,503			1,051,187
Commitments and contingencies
Mezzanine equity:
Series A Senior Preferred Stock, $0.0001 par value; 1.0 million shares authorized; $1,074.32 stated value per share and 0.2 million shares issued and outstanding at June 30, 2022; none issued and outstanding at December 31, 2021		140,340			—
Stockholders' equity:
Class A common stock, $0.0001 par value; 470.0 million shares authorized; 207.3 million shares issued, 198.1 million shares outstanding at September 30, 2022; 207.4 million shares issued, 197.4 million shares outstanding at December 31, 2021		20			20
Treasury stock, at cost, 0.06 million shares and 0.03 million shares at September 30, 2022 and December 31, 2021, respectively		(136	)		(95	)
Additional paid-in capital		1,377,152			1,351,597
Accumulated other comprehensive income		7,143			28
Accumulated deficit		(1,236,746	)		(847,132	)
Total ATI Physical Therapy, Inc. equity		147,433			504,418
Non-controlling interests		4,934			7,089
Total stockholders' equity		152,367			511,507
Total liabilities, mezzanine equity and stockholders' equity	$	1,157,210		$	1,562,694

ATI Physical Therapy, Inc.

Condensed Consolidated Statements of Cash Flows

($ in thousands)

(unaudited)

	Nine Months Ended
	September 30, 2022			September 30, 2021
Operating activities:
Net loss	$	(390,640	)	$	(783,718	)
Adjustments to reconcile net loss to net cash used in operating activities:
Goodwill and intangible asset impairment charges		390,224			962,303
Depreciation and amortization		30,477			27,990
Provision for doubtful accounts		11,408			14,270
Deferred income tax provision		(43,532	)		(65,579	)
Amortization of right-of-use assets		36,155			33,868
Non-cash share-based compensation		5,830			4,864
Amortization of debt issuance costs and original issue discount		1,934			2,644
Non-cash interest expense		889			—
Non-cash interest expense on redeemable preferred stock		—			10,087
Loss on extinguishment of debt		2,809			5,534
Loss on settlement of redeemable preferred stock		—			14,037
(Gain) loss on disposal and impairment of assets		(42	)		219
Change in fair value of warrant liability		(3,651	)		(20,424	)
Change in fair value of contingent common shares liability		(32,760	)		(167,265	)
Changes in:
Accounts receivable, net		(11,276	)		(8,564	)
Prepaid expenses and other current assets		(5,507	)		(6,580	)
Other non-current assets		52			(269	)
Accounts payable		(2,100	)		151
Accrued expenses and other liabilities		(702	)		(11,820	)
Operating lease liabilities		(36,431	)		(39,084	)
Other non-current liabilities		52			824
Medicare Accelerated and Advance Payment Program Funds		(12,269	)		(8,540	)
Transaction-related amount due to former owners		—			(3,611	)
Net cash used in operating activities		(59,080	)		(38,663	)

Investing activities:
Purchases of property and equipment		(22,091	)		(27,701	)
Purchases of intangible assets		—			(1,375	)
Proceeds from sale of property and equipment		152			125
Proceeds from sale of clinics		77			248
Net cash used in investing activities		(21,862	)		(28,703	)

Financing activities:
Proceeds from long-term debt		500,000			—
Deferred financing costs		(12,952	)		—
Original issue discount		(10,000	)		—
Principal payments on long-term debt		(555,048	)		(454,160	)
Proceeds from issuance of Series A Senior Preferred Stock		144,667			—
Proceeds from issuance of 2022 Warrants		20,333			—
Cash inflow from Business Combination		—			229,338
Payments to Series A Preferred stockholders		—			(59,000	)
Proceeds from shares issued through PIPE investment		—			300,000
Equity issuance costs and original issue discount		(4,935	)		(19,233	)
Taxes paid on behalf of employees for shares withheld		(41	)		—
Distribution to non-controlling interest holders		(1,129	)		(5,615	)
Net cash provided by (used in) financing activities		80,895			(8,670	)

Changes in cash and cash equivalents:
Net decrease in cash and cash equivalents		(47	)		(76,036	)
Cash and cash equivalents at beginning of period		48,616			142,128
Cash and cash equivalents at end of period	$	48,569		$	66,092

Supplemental noncash disclosures:
Derivative changes in fair value	$	(7,115	)	$	(1,378	)
Purchases of property and equipment in accounts payable	$	2,230		$	1,733
Warrant liability recognized upon the closing of the Business Combination	$	—		$	(26,936	)
Contingent common shares liability recognized upon the closing of the Business Combination	$	—		$	(220,500	)
Shares issued to Wilco Holdco Series A Preferred stockholders	$	—		$	128,453

Other supplemental disclosures:
Cash paid for interest	$	29,453		$	35,334
Cash received from hedging activities	$	1,080		$	—
Cash paid for taxes	$	82		$	156

ATI Physical Therapy, Inc.

Supplemental Tables of Key Performance Metrics

	Financial Metrics ($ in 000’s)
	Net Patient Revenue		Other Revenue		Net Operating Revenue		Adjusted EBITDA⁽¹⁾			Adj EBITDA margin⁽¹⁾
Q1 2019	$	170,940	$	16,277	$	187,217	$	25,989			13.9	%
Q2 2019	$	182,757	$	16,015	$	198,772	$	33,342			16.8	%
Q3 2019	$	179,561	$	16,624	$	196,185	$	29,455			15.0	%
Q4 2019	$	184,338	$	18,946	$	203,284	$	39,606			19.5	%
Q1 2020	$	164,939	$	17,799	$	182,738	$	26,487			14.5	%
Q2 2020	$	95,003	$	12,751	$	107,754	$	1,189			1.1	%
Q3 2020	$	132,803	$	15,852	$	148,655	$	17,321			11.7	%
Q4 2020	$	136,840	$	16,266	$	153,106	$	18,622			12.2	%
Q1 2021	$	132,271	$	16,791	$	149,062	$	5,590			3.8	%
Q2 2021	$	146,679	$	17,354	$	164,033	$	23,999			14.6	%
Q3 2021	$	141,855	$	17,158	$	159,013	$	8,539			5.4	%
Q4 2021	$	140,275	$	15,488	$	155,763	$	1,643			1.1	%
Q1 2022	$	138,925	$	14,897	$	153,822	$	(4,695	)		(3.1	)%
Q2 2022	$	148,506	$	14,787	$	163,293	$	5,436			3.3	%
Q3 2022	$	142,313	$	14,479	$	156,792	$	(392	)		(0.3	)%

(1)	Excludes CARES Act Provider Relief Funds of $44.3 million in the second quarter of 2020, $23.1 million in the third quarter of 2020, and $24.1 million in the fourth quarter of 2020.

	Operational Metrics: PT Clinics
	Ending Clinic Count		Visits per Day⁽¹⁾		Clinical FTE⁽²⁾		VPD per cFTE⁽³⁾		Annualized Clinician Adds %⁽⁴⁾			Annualized Clinician Turnover %⁽⁵⁾
Q1 2019		825		24,142		2,833		8.5		20	%		19	%
Q2 2019		836		25,527		2,862		8.9		26	%		21	%
Q3 2019		847		25,229		2,901		8.7		37	%		26	%
Q4 2019		872		25,693		2,936		8.8		17	%		26	%
Q1 2020		868		22,855		2,841		8.0		17	%		22	%
Q2 2020		866		12,643		1,487		8.5		0	%		20	%
Q3 2020		873		18,159		2,004		9.1		9	%		82	%
Q4 2020		875		19,441		2,214		8.8		43	%		34	%
Q1 2021		882		19,520		2,284		8.5		44	%		32	%
Q2 2021		889		21,569		2,325		9.3		44	%		44	%
Q3 2021		900		20,674		2,359		8.8		63	%		41	%
Q4 2021		910		20,649		2,490		8.3		44	%		37	%
Q1 2022		922		21,062		2,466		8.5		39	%		28	%
Q2 2022		926		22,403		2,465		9.1		38	%		37	%
Q3 2022		929		21,493		2,465		8.7		45	%		36	%

(1)	Equals patient visits divided by operating days.

(2)	Represents clinical staff hours divided by 8 hours divided by number of paid days.

(3)	Equals patient visits divided by operating days divided by clinical full-time equivalent employees.

(4)	Represents clinician headcount new hire adds divided by average clinician headcount, multiplied by 4 to annualize.

(5)	Represents clinician headcount separations divided by average clinician headcount, multiplied by 4 to annualize.

	Unit Economics: PT Clinics ($ actual)
	PT Revenue per Clinic⁽¹⁾		VPD per Clinic⁽²⁾		PT Rate per Visit⁽³⁾		PT Salaries per Visit⁽⁴⁾		PT Rent and Other per Clinic⁽⁵⁾		PT Provision as % PT Revenue⁽⁶⁾
Q1 2019	$	208,803		29.5	$	112.39	$	57.21	$	48,682		4.3	%
Q2 2019	$	219,748		30.7	$	111.87	$	55.21	$	48,130		3.2	%
Q3 2019	$	213,255		30.0	$	111.21	$	56.47	$	48,995		2.8	%
Q4 2019	$	213,767		29.8	$	112.10	$	54.65	$	47,843		2.1	%
Q1 2020	$	189,658		26.3	$	112.76	$	55.11	$	50,258		3.6	%
Q2 2020	$	109,872		14.6	$	117.41	$	53.39	$	43,621		4.1	%
Q3 2020	$	152,472		20.8	$	112.51	$	53.83	$	44,140		2.2	%
Q4 2020	$	155,913		22.2	$	109.98	$	52.16	$	47,168		2.4	%
Q1 2021	$	150,536		22.2	$	107.56	$	54.14	$	47,722		5.4	%
Q2 2021	$	165,241		24.3	$	106.26	$	48.22	$	47,857		2.4	%
Q3 2021	$	158,556		23.1	$	105.56	$	53.70	$	49,499		2.5	%
Q4 2021	$	154,772		22.8	$	104.51	$	55.73	$	50,976		1.5	%
Q1 2022	$	151,225		22.9	$	103.06	$	55.47	$	54,472		3.7	%
Q2 2022	$	160,431		24.2	$	103.57	$	53.64	$	53,017		2.4	%
Q3 2022	$	153,410		23.2	$	103.46	$	56.20	$	53,945		2.0	%

(1)	Equals Net Patient Revenue divided by average clinics over the quarter.

(2)	Equals patient visits divided by operating days divided by average clinics over the quarter

(3)	Equals Net Patient Revenue divided by patient visits.

(4)	Equals estimated patient-related portion of Salaries and Related Costs divided by patient visits.

(5)	Equals estimated patient-related portion of Rent, Clinic Supplies, Contract Labor and Other divided by average clinics over the quarter.

(6)	Equals estimated patient-related portion of Provision for Doubtful Accounts divided by Net Patient Revenue.

	Customer Satisfaction Metrics
	Net Promoter Score⁽¹⁾	Google Star Rating⁽²⁾
Q1 2019	77	4.6
Q2 2019	79	4.9
Q3 2019	78	4.9
Q4 2019	79	4.8
Q1 2020	77	4.9
Q2 2020	77	4.9
Q3 2020	78	4.6
Q4 2020	76	4.7
Q1 2021	75	4.9
Q2 2021	77	4.9
Q3 2021	73	4.9
Q4 2021	78	4.8
Q1 2022	74	4.9
Q2 2022	75	4.9
Q3 2022	76	4.8

(1)	NPS measures customer experience from ATI patient survey responses. The score is calculated as the percentage of promoters less the percentage of detractors.

(2)	A Google Star rating is a five-star rating scale that ranks businesses based on customer reviews. Customers are given the opportunity to leave a business review after interacting with a business, which involves choosing from one star (poor) to five stars (excellent).

ATI Physical Therapy, Inc.

Reconciliation of GAAP to Non-GAAP Financial Measures

($ in thousands)

(unaudited)

	Three Months Ended
	September 30, 2022			June 30, 2022			March 31, 2022
	September 30, 2022			June 30, 2022			March 31, 2022
Net loss	$	(116,694	)	$	(135,723	)	$	(138,223	)
Plus (minus):
Net loss attributable to non-controlling interests		376			177			473
Interest expense, net		11,780			11,379			8,656
Income tax benefit		(7,218	)		(13,033	)		(23,281	)
Depreciation and amortization expense		9,907			10,055			9,900
EBITDA	$	(101,849	)	$	(127,145	)	$	(142,475	)
Goodwill and intangible asset impairment charges⁽¹⁾		106,663			127,820			155,741
Goodwill and intangible asset impairment charges attributable to non-controlling interests⁽¹⁾		(457	)		(654	)		(940	)
Changes in fair value of warrant liability and contingent common shares liability⁽²⁾		(7,720	)		(2,680	)		(26,011	)
Loss on debt extinguishment⁽³⁾		—			—			2,809
Loss on legal settlement⁽⁴⁾		—			3,000			—
Share-based compensation		1,920			2,004			1,964
Non-ordinary legal and regulatory matters⁽⁵⁾		772			2,202			2,497
Pre-opening de novo costs⁽⁶⁾		224			286			381
Transaction and integration costs⁽⁷⁾		55			603			1,538
Gain on sale of Home Health service line, net		—			—			(199	)
Adjusted EBITDA	$	(392	)	$	5,436		$	(4,695	)

⁽¹⁾	Represents non-cash charges related to the write-down of goodwill and trade name indefinite-lived intangible assets.

⁽²⁾	Represents non-cash amounts related to the change in the estimated fair value of IPO Warrants, Earnout Shares and Vesting Shares.

⁽³⁾	Represents charges related to the derecognition of the unamortized deferred financing costs and original issuance discount associated with the full repayment of the 2016 first lien term loan.

⁽⁴⁾	Represents estimated charge for probable net settlement liability related to billing dispute.

⁽⁵⁾	Represents non-ordinary course legal costs related to the previously disclosed ATIP shareholder class action complaints, derivative complaint and SEC inquiry.

⁽⁶⁾	Represents expenses associated with renovation, equipment and marketing costs relating to the start-up and launch of new locations incurred prior to opening.

⁽⁷⁾	Represents costs related to the Business Combination with FVAC II and non-capitalizable debt transaction costs.

ATI Physical Therapy, Inc.

Reconciliation of GAAP to Non-GAAP Financial Measures

($ in thousands)

(unaudited)

	Three Months Ended
	December 31,			September 30,			June 30,			March 31,
	2021			2021			2021			2021
Net income (loss)	$	1,690		$	(326,774	)	$	(439,126	)	$	(17,818	)
Plus (minus):
Net (income) loss attributable to non-controlling interests		(869	)		2,109			3,769			(1,309	)
Interest expense, net		7,215			7,386			15,632			16,087
Interest expense on redeemable preferred stock		—			—			4,779			5,308
Income tax benefit		(5,381	)		(35,333	)		(19,731	)		(10,515	)
Depreciation and amortization expense		10,005			9,222			9,149			9,619
EBITDA		12,660			(343,390	)		(425,528	)		1,372
Goodwill and intangible asset impairment charges⁽¹⁾		—			508,972			453,331			—
Goodwill and intangible asset impairment charges attributable to non-controlling interest⁽¹⁾		—			(2,928	)		(5,021	)		—
Changes in fair value of warrant liability and contingent common shares liability⁽²⁾		(10,046	)		(162,202	)		(25,487	)		—
Gain on sale of Home Health service line, net		(5,846	)		—			—			—
Reorganization and severance costs⁽³⁾		—			3,551			—			362
Transaction and integration costs⁽⁴⁾		955			2,335			3,580			2,918
Share-based compensation		905			1,248			3,112			504
Pre-opening de novo costs⁽⁵⁾		543			511			441			434
Non-ordinary legal and regulatory matters⁽⁶⁾		2,472			442			—			—
Loss on debt extinguishment⁽⁷⁾		—			—			5,534			—
Loss on settlement of redeemable preferred stock⁽⁸⁾		—			—			14,037			—
Adjusted EBITDA	$	1,643		$	8,539		$	23,999		$	5,590

(1)	Represents non-cash charges related to the write-down of goodwill and trade name indefinite-lived intangible assets.

(2)	Represents non-cash amounts related to the change in the estimated fair value of Warrants, Earnout Shares and Vesting Shares.

(3)	Represents severance, consulting and other costs related to discrete initiatives focused on reorganization and delayering of the Company’s labor model, management structure and support functions.

(4)	Represents costs related to the Company’s business combination with FVAC II, non-capitalizable debt transaction costs, clinic acquisitions and acquisition-related integration and consulting and planning costs related to preparation to operate as a public company.

(5)	Represents expenses associated with renovation, equipment and marketing costs relating to the start-up and launch of new locations incurred prior to opening.

(6)	Represents non-ordinary course legal costs related to the previously disclosed ATIP shareholder class action complaints, derivative complaint and SEC inquiry.

(7)

Represents charges related to the derecognition of the proportionate amount of remaining unamortized deferred financing costs and original issuance discount associated with the partial repayment of the first lien term loan and derecognition of the unamortized original issuance discount associated with the full repayment of the subordinated second lien term loan.

(8)	Represents loss on settlement of redeemable preferred stock based on the value of cash and equity provided to preferred stockholders in relation to the outstanding redeemable preferred stock liability at the time of the closing of the business combination with FVAC II.

ATI Physical Therapy, Inc.

Reconciliation of GAAP to Non-GAAP Financial Measures

($ in thousands)

(unaudited)

	Three Months Ended
	December 31,			September 30,			June 30,			March 31,
	2020			2020			2020			2020
Net income (loss)	$	2,190		$	1,022		$	4,596		$	(8,106	)
Plus (minus):
Net income attributable to non-controlling interests		(987	)		(901	)		(1,855	)		(1,330	)
Interest expense, net		16,404			17,346			17,683			17,858
Interest expense on redeemable preferred stock		5,154			4,896			4,604			4,377
Income tax (benefit) expense		(2,033	)		2,322			3,568			(1,792	)
Depreciation and amortization expense		10,072			9,880			9,763			9,985
EBITDA		30,800			34,565			38,359			20,992
Reorganization and severance costs⁽¹⁾		679			4,436			1,255			1,142
Transaction and integration costs⁽²⁾		3,747			75			100			868
Share-based compensation		503			473			466			494
Pre-opening de novo costs⁽³⁾		335			368			268			594
Business optimization costs⁽⁴⁾		2,450			519			5,011			2,397
Charges related to lease terminations⁽⁵⁾		4,253			—			—			—
Adjusted EBITDA	$	42,767		$	40,436		$	45,459		$	26,487

(1)	Represents severance, consulting and other costs related to discrete initiatives focused on reorganization and delayering of the Company’s labor model, management structure and support functions.

(2)	Represents costs related to the Company’s business combination with FVAC II, clinic acquisitions and acquisition-related integration and consulting and planning costs related to preparation to operate as a public company.

(3)	Represents expenses associated with renovation, equipment and marketing costs relating to the start-up and launch of new locations incurred prior to opening.

(4)

Represents non-recurring costs to optimize our platform and ATI transformative initiatives. Costs primarily relate to duplicate costs driven by IT and Revenue Cycle Management conversions, labor related costs during the transition of key positions and other incremental costs of driving optimization initiatives.

(5)	Represents charges related to lease terminations prior to the end of term for corporate facilities no longer in use.

ATI Physical Therapy, Inc.

Reconciliation of GAAP to Non-GAAP Financial Measures

($ in thousands)

(unaudited)

	Three Months Ended
	December 31,			September 30,			June 30,			March 31,
	2019			2019			2019			2019
Net income (loss)	$	31,914		$	(6,046	)	$	(4,816	)	$	(11,303	)
Plus (minus):
Net income attributable to non-controlling interests		(1,234	)		(878	)		(933	)		(1,355	)
Interest expense, net		18,022			19,263			19,927			19,760
Interest expense on redeemable preferred stock		4,206			4,000			3,763			3,542
Income tax benefit		(36,095	)		(2,055	)		(1,825	)		(4,044	)
Depreciation and amortization expense		9,884			9,567			9,635			10,018
EBITDA		26,697			23,851			25,751			16,618
Reorganization and severance costs⁽¹⁾		3,401			120			775			4,035
Transaction and integration costs⁽²⁾		3,998			198			310			29
Share-based compensation		(57	)		559			795			525
Pre-opening de novo costs⁽³⁾		438			757			487			593
Business optimization costs⁽⁴⁾		5,129			3,970			5,224			4,189
Adjusted EBITDA	$	39,606		$	29,455		$	33,342		$	25,989

(1)	Represents severance, consulting and other costs related to discrete initiatives focused on reorganization and delayering of the Company’s labor model, management structure and support functions.

(2)	Represents costs related to the Company’s business combination with FVAC II, clinic acquisitions and acquisition-related integration and consulting and planning costs related to preparation to operate as a public company.

(3)	Represents expenses associated with renovation, equipment and marketing costs relating to the start-up and launch of new locations incurred prior to opening.

(4)

Delaware	001-39439	85-1408039
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Class A Common Stock, $0.0001 par value	ATIP	New York Stock Exchange
Redeemable Warrants, each whole warrant exercisable for one share of Class A Common Stock at an exercise price of $11.50 per share	ATIP WS	New York Stock Exchange

EXHIBIT NUMBER		DESCRIPTION
10.1		Employment Agreement effective November 4, 2022 by and between ATI Physical Therapy, Inc. and Erik Kantz.

99.1		Press Release issued by ATI Physical Therapy, Inc. on November 7, 2022.

104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

790 Remington Boulevard Bolingbrook, Illinois	60440
(Address of principal executive offices)	(Zip Code)

Dated: November 7, 2022	ATI Physical Therapy, Inc.

	By:	/s/ Joseph Jordan
	Name:	Joseph Jordan
	Title:	Chief Financial Officer