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Table of Contents
As filed with the U.S. Securities and Exchange Commission May 17, 2022.
Registration
No. 333-264654
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
Amendment No. 1
to
FORM
S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
 
 
CareMax, Inc.
(Exact name of registrant as specified in its charter)
 
 
 
Delaware
  
8000
  
85-0992224
(State or other jurisdiction of
incorporation or organization)
  
(Primary Standard Industrial
Classification Code Number)
  
(I.R.S. Employer
Identification Number)
1000 NW 57 Court, Suite 400
Miami, FL 33126
(786)
360-4768
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
 
 
Carlos A. de Solo
Chief Executive Officer
CareMax, Inc.
1000 NW 57 Court, Suite 400
Miami, FL 33126
(786)
360-4768
(Name, address, including zip code, and telephone number, including area code, of agent for service)
 
 
Copies to:
Kevin Wirges
Chief Financial Officer
CareMax, Inc.
1000 NW 57 Court, Suite 400
Miami, FL 33126
(786)
360-4768
  
Joshua M. Samek, Esq.
DLA Piper LLP (US)
200 South Biscayne Boulevard, Suite 2500
Miami, Florida
 33131
(305)
423-8500
 
 
Approximate date of commencement of proposed sale to the public:
From time to time after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box.  ☒
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in
Rule 12b-2
of the Exchange Act.
 
    Large accelerated filer    ☐   Accelerated filer   ☐
         
    Non-accelerated filer    ☐   Smaller reporting company   ☒
         
             Emerging growth company   ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.  ☐
 
 
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until this registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
 
 
 
Table of Contents
EXPLANATORY NOTE
Pursuant to Rule 429 under the Securities Act of 1933, as amended (the “Securities Act”), the company filed a prospectus as part of its Registration Statement on Form S-1 (File No. 333-264654), filed with the Securities and Exchange Commission on May 4, 2022 (the “Registration Statement”) as a combined prospectus (the “Combined Prospectus”) with respect to (a) certain securities previously registered under the registration statement on Form
S-1
(Registration
No. 333-257574)
filed by CareMax, Inc. (“CareMax”, the “Company”, “we” or “us”), a Delaware corporation, with the Securities and Exchange Commission (the “SEC”) on June 30, 2021 and declared effective by the SEC on July 15, 2021 (the “Prior Registration Statement”), which remain unsold, including up to (i) 60,221,530 shares of our Class A common stock, par value $0.0001 per share (“Class A Common Stock”), which consisted of (A) an aggregate of 10,000,000 shares of Class A Common Stock (the “Deerfield PIPE Investments”) purchased by Deerfield Partners, L.P. (“Deerfield Partners”) and DFHTA Sponsor LLC (the “Sponsor”) in connection with the Closing (as defined below) on June 8, 2021 (the “Closing Date”), (B) 18,635,073 shares of Class A Common Stock purchased by certain investors at the Closing, (C) 3,593,750 shares of Class A Common Stock that were converted into shares of Class A Common Stock from shares of Class B common stock, par value $0.0001 per share, on a
one-for-one
basis at the Closing, (D) 21,208,092 shares of Class A Common Stock issued as consideration for the Business Combination (as defined below) at Closing, (E) up to 3,200,000 Earnout Shares (as defined below) that may be issued in the form of Class A Common Stock pursuant to the earnout provisions in the Business Combination Agreement (as defined below), (F) 3,200,000 shares of Class A Common Stock issued pursuant to the earnout provisions in the Business Combination Agreement and (G) 384,615 shares of Class A Common Stock issued in the SMA Transaction (as defined below) and (ii) 2,916,667 warrants (the “Private Warrants”) originally issued in a private placement to the Sponsor in connection with our initial public offering, which closed on July 21, 2020 (the “IPO”); and (b) the resale of 3,360,000 shares of Class A Common Stock purchased by Deerfield Partners as a part of units in the IPO, which resale is newly registered hereunder.
In addition, the Combined Prospectus also includes the offer and sale of up to (i) 2,916,667 shares of Class A Common Stock issuable upon the exercise of the Private Warrants and (ii) 2,875,000 shares of Class A Common Stock that are issuable by us upon the exercise of 2,875,000 warrants originally issued as part of units in the IPO at an exercise price of $11.50 per share of Class A Common Stock (the “Public Warrants” and together with the Private Warrants, the “Warrants”), all of which were registered under the Prior Registration Statement.
We are filing this Amendment No. 1 to the Registration Statement to (i) include the Company’s unaudited financial statements as of and for the three months ended March 31, 2022 and 2021; and (ii) amend the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Company’s financial statements and notes related thereto, in each case, solely to make appropriate changes to reflect the update described in clause (i) and the effects of related matters.
Pursuant to Rule 429, this registration statement constitutes Post-Effective Amendment No. 1 to the Prior Registration Statement (Registration
No. 333-257574)
with respect to the offering of such unsold shares thereunder, which is not currently being terminated by the registrant. No other changes shall be deemed to be made to the Prior Registration Statement other than with respect to the specific shares being sold hereunder. Such post-effective amendment will become effective concurrently with the effectiveness of this registration statement in accordance with Section 8(a) of the Securities Act.
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CareMax, Inc.
Up to 63,581,530 Shares of Class A Common Stock
Up to 5,791,667 Shares of Class A Common Stock Issuable Upon Exercise of Warrants and
Up to 2,916,667 Warrants
 
 
This prospectus relates to the offer and sale from time to time by the selling securityholders named in this prospectus (the “Selling Securityholders”) of up to (A) 63,581,530 shares of our Class A common stock, par value $0.0001 per share (“Class A Common Stock”), which consists of (i) an aggregate of 10,000,000 shares of Class A Common Stock (the “Deerfield PIPE Investments”) purchased by Deerfield Partners, L.P. (“Deerfield Partners”) and DFHTA Sponsor LLC (the “Sponsor”) in connection with the Closing (as defined below) on June 8, 2021 (the “Closing Date, (ii) 18,635,073 shares of Class A Common Stock purchased by certain investors at the Closing (the “Third-Party PIPE Investments,” and together with the Deerfield PIPE Investments, the “PIPE Investments”), (iii) 3,593,750 shares of Class A Common Stock, that were converted into shares of Class A Common Stock from shares of Class B common stock par value $0.0001 per share (“Class B Common Stock”) on a
one-for-one
basis at the Closing, (iv) 21,208,092 shares of Class A Common Stock issued as consideration for the Business Combination (as defined below) at Closing), (v) up to 3,200,000 Earnout Shares (as defined below) that may be issued in the form of Class A Common Stock pursuant to the earnout provisions in the Business Combination Agreement (as defined below), (vi) 3,200,000 shares of Class A Common Stock issued pursuant to the earnout provisions in the Business Combination Agreement, (vii) 384,615 shares of Class A Common Stock issued in the SMA Transaction (as defined below) and (viii) 3,360,000 shares of Class A Common Stock purchased by Deerfield Partners as a part of units in our initial public offering, which closed on July 21, 2020 (the “IPO”), and (B) 2,916,667 warrants (the “Private Warrants”) originally issued in a private placement to the Sponsor in connection with the IPO.
In addition, this prospectus relates to the offer and sale of up to (i) 2,916,667 shares of Class A Common Stock issuable upon the exercise of the Private Warrants and (ii) 2,875,000 shares of Class A Common Stock that are issuable by us upon the exercise of 2,875,000 warrants originally issued in connection with the IPO at an exercise price of $11.50 per share of Class A Common Stock (the “Public Warrants” and together with the Private Warrants, the “Warrants”).
See “Selling Securityholders” beginning on page 118 of this prospectus for the price that the Selling Securityholders paid for the Class A Common Stock and Warrants that are being registered for resale with this prospectus. Additionally, the shares being registered for resale will constitute a considerable percentage of our public float. Certain of the shares being registered for resale were purchased by the corresponding selling securityholders for prices considerably below the current market price of our common stock. See
“Risk Factors—Risks Related to Ownership of Our Securities and Being a Public Company—The future sales of shares of Class
 A Common Stock by existing stockholders, including the sales of shares of Class
 A Common Stock pursuant to this prospectus, may adversely affect the market price of the Company’s Class
 A Common Stock.”
With respect to our warrants, we do not believe it is likely that a warrant holder would elect to exercise its warrants when our common stock is trading below $11.50. See
“Summary of the Prospectus
,
”
“
Risk Factors—Risks Related to Ownership of Our Securities and Being a Public Company—The exercise price for our Warrants is higher than in many similar blank check company offerings in the past, and, accordingly, the Warrants are more likely to expire worthless,”
“Management’s Discussion and Analysis of Financial Condition and Results of Operations”
and
“Use of Proceeds”
for further details.
The Selling Securityholders may offer, sell or distribute all or a portion of the securities hereby registered publicly or through private transactions at prevailing market prices or at negotiated prices. We will not receive any of the proceeds from such sales of the shares of Class A Common Stock or any warrants, except with respect to amounts received by us upon the exercise of any such warrants. We will bear all costs, expenses and fees in connection with the registration of these securities, including with regard to compliance with state securities or “blue sky” laws. The Selling Securityholders will bear all commissions and discounts, if any, attributable to their sale of shares of Class A Common Stock or warrants. See “Plan of Distribution” beginning on page 140 of this prospectus.
Our registration of the securities covered by this prospectus does not mean that either we or the Selling Securityholders, will issue, offer or sell, any of the securities. The 3,593,750 shares of Class A Common Stock registered hereunder that were converted into shares of Class A Common Stock from shares of Class B Common Stock are subject to
lock-up
agreements prohibiting the sale of such shares for a period of up to twelve months after the Closing Date. For more details, please see page 126 of this prospectus under the caption “Certain Relationships with Selling Securityholders”
.
Our Class A Common Stock and Public Warrants are listed on the Nasdaq Global Select Market under the symbols “CMAX” and “CMAXW,” respectively. On May 16, 2022, the last reported sales price of our Class A Common Stock was $4.27 per share and the last reported sales price of our Public Warrants on May 16, 2022 was $0.75 per warrant.
 
 
We are an “emerging growth company” and “smaller reporting company” under applicable federal securities laws and will be subject to reduced public company reporting requirements. Investing in our securities involves risks. See “Risk Factors” beginning on page 5
.
Neither the SEC nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The date of this prospectus is May 17, 2022.
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You should rely only on the information provided in this prospectus, as well as the information incorporated by reference into this prospectus and any applicable prospectus supplement. Neither we nor the Selling Securityholders have authorized anyone to provide you with different information. Neither we nor the Selling Securityholders are making an offer of these securities in any jurisdiction where the offer is not permitted. You should not assume that the information in this prospectus, any applicable prospectus supplement or any documents incorporated by reference is accurate as of any date other than the date of the applicable document. Since the date of this prospectus and the documents incorporated by reference into this prospectus, our business, financial condition, results of operations and prospects may have changed.
 
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ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement on Form
S-1
that we filed with the Securities and Exchange Commission (the “SEC”) using the “shelf” registration process. Under this shelf registration process, the Selling Securityholders may, from time to time, sell the securities offered by them described in this prospectus. We will not receive any proceeds from the sale by such Selling Securityholders of the securities offered by them described in this prospectus. This prospectus also relates to the issuance by us of the shares of Class A Common Stock issuable upon the exercise of any Warrants. We will receive proceeds from any exercise of the Warrants for cash.
Neither we nor the Selling Securityholders have authorized anyone to provide you with any information or to make any representations other than those contained in this prospectus or any applicable prospectus supplement or any free writing prospectuses prepared by or on behalf of us or to which we have referred you. Neither we nor the Selling Securityholders take responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. Neither we nor the Selling Securityholders will make an offer to sell these securities in any jurisdiction where the offer or sale is not permitted.
We may also provide a prospectus supplement or post-effective amendment to the registration statement to add information to, or update or change information contained in, this prospectus. You should read both this prospectus and any applicable prospectus supplement or post-effective amendment to the registration statement together with the additional information to which we refer you in the sections of this prospectus entitled “
Where You Can Find Additional Information
.”
On the Closing Date, Deerfield Healthcare Technology Acquisitions Corp. (“DFHT”), a Delaware corporation, completed the transactions contemplated by that certain Business Combination Agreement, dated as of December 18, 2020 (the “Business Combination Agreement”), by and among DFHT, the entities listed in Annex I to the Business Combination Agreement, IMC Holdings, LP, a Delaware limited partnership (“IMC Parent”), CareMax Medical Group, L.L.C., a Florida limited liability company (“CMG”), IMC Medical Group Holdings, LLC, a Delaware limited liability company (“IMC”), and, solely for the limited purposes specified therein, Deerfield Partners, pursuant to which DFHT acquired (a) 100% of the equity interests in CMG and (b) 100% of the equity interests in IMC, with CMG and IMC becoming wholly owned subsidiaries of the combined company. The transactions contemplated by the Business Combination Agreement and the related financing transactions collectively are referred to herein as the “Business Combination.”
Immediately upon the completion of the Business Combination (the “Closing”), DFHT as the registrant changed its name to “CareMax, Inc.”
Unless the context otherwise requires, the terms “we,” “us,” “our,” “CareMax” and the “Company” refer to CareMax, Inc. and its consolidated subsidiaries following the Closing and references to “DFHT” refer to Deerfield Healthcare Technology Acquisitions Corp. at or prior to the Closing. All references herein to the “Board” refer to the board of directors of the Company.
 
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CERTAIN DEFINED TERMS
Unless the context indicates otherwise, the following terms have the following meanings when used in this prospectus:
“
Adjustment Escrow Amounts
” means the $1,500,000 in cash and the Escrow Shares that DFHT placed into an adjustment escrow account at the Closing.
“
Amended and Restated Bylaws
” means the amended and restated bylaws of the Company, dated June 8, 2021.
“
Amended and Restated Charter
” means the third amended and restated certificate of incorporation of the Company, dated June 8, 2021.
“
Amended and Restated Registration Rights Agreement
” means the Amended and Restated Registration Rights Agreement, dated as of December 18, 2020, which amended and restated in its entirety the registration rights agreement, dated July 16, 2020, by and between DFHT and the parties thereto.
“
Business Combination
Lock-up
Agreement
” means that certain
lock-up
agreement, dated December 18, 2020, by and between DFHT, the Sponsor, Deerfield Partners, certain other stockholders of DFHT, the CMG Sellers and IMC Parent.
“
C.G.D.
” means C.G.D. Investment Group, Inc.
“
Closing Consideration
” means the consideration paid to CMG Sellers and IMC Parent in connection with the Business Combination, as set forth in the Business Combination Agreement.
“
CMG Earnout Shares
” means up to an additional 3,500,000 shares of Class A Common Stock payable to the CMG Sellers, subject to certain post-Closing conditions.
“
CMG Escrow Agreement
” means that certain Escrow Agreement, dated as of June 8, 2021, by and among DFHT, the Sponsor, O.M., the CMG Sellers, and Continental Stock Transfer & Trust Company, in its capacity as escrow agent.
“
CMG Sellers
” means O.M. Investment Group, Inc., C.G.D. Investment Group, Inc., Joseph N. De Vera, Inc., NKP Caremax, LLC and Mouquin Trotter, Inc.
“
Code
” means the Internal Revenue Code of 1986, as amended.
“
Consent and Waiver Letter
” means that certain consent and waiver letter, by and among DFHT, the Sponsor and Deerfield Partners, dated December 18, 2020.
“
Deerfield Management
” means Deerfield Management Company, L.P., a Delaware series limited partnership (Series C) and its affiliates.
“
Deerfield Subscription Agreements
” means certain subscription agreements, each dated December 18, 2020, with each of Deerfield Partners and the Sponsor, pursuant to which such investors have agreed to purchase the Deerfield PIPE Investments.
“
DGCL
” means the General Corporation Law of the State of Delaware.
“
Earnout Shares
” means the CMG Earnout Shares and the IMC Earnout Shares.
“
Escrow Agreements
” means the CMG Escrow Agreement and the IMC Escrow Agreement.
 
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“
Escrow Shares
” means the 71,000 shares of Class A Common Stock that DFHT placed into an adjustment escrow account at the Closing.
“
Exchange Act
” means the Securities Exchange Act of 1934, as amended.
“
Founder Shares
” means the shares of Class B Common Stock initially purchased by the Sponsor in a private placement prior to the IPO and the shares of Class A Common Stock that were issued upon the automatic conversion of the shares of Class B Common Stock at the time of the Closing.
“IMC
” means IMC Medical Group Holdings, LLC, a Delaware corporation, and its subsidiaries.
“
IMC Earnout Shares
” means up to an additional 2,900,000 shares of Class A Common Stock payable to IMC Parent, subject to certain post-Closing conditions.
“
IMC Escrow Agreement
” means that certain Escrow Agreement, dated June 8, 2021, by and among DFHT, the Sponsor, IMC Parent and Continental Stock Transfer & Trust Company, in its capacity as escrow agent.
“
Initial Stockholders
” means the Sponsor and its executive officers and directors, who were the holders of the Founder Shares prior to the IPO.
“
Interamerican
” means Interamerican Medical Center Group, LLC, an indirect wholly-owned subsidiary of the Company.
“
management
” or our “
management team
” are the Company’s executive officers and directors.
“
Nasdaq
” means The Nasdaq Stock Market.
“
O.M.
” means O.M. Investment Group, Inc.
“
SEC
” means the United States Securities and Exchange Commission.
“
Securities Act
” means the Securities Act of 1933, as amended.
“
Sellers
” means the CMG Sellers and IMC Parent.
“
Selling Securityholders
” means the selling securityholders covered by this prospectus.
“
SMA Shares
” means the 384,615 shares of Class A Common Stock issued to SMA Seller as partial consideration for the SMA Transaction.
“
SMA Transaction
” means the acquisition of 100% of the issued and outstanding equity interests of Senior Medical Associates, LLC, a Florida limited liability company (“SMA”), and Stallion Medical Management, LLC, a Florida limited liability company (“SMM” and together with SMA, the “SMA Entities”), pursuant to that certain securities purchase agreement, dated as of March 8, 2021 (the “SMA Purchase Agreement”), by and among Interamerican, the SMA Entities and Mohsin Jaffer (the “SMA Seller”).
“
Third-Party Subscription Agreements
” means certain subscription agreements, each dated December 18, 2020, with certain third-party investors pursuant to which such investors have agreed to purchase the Third-Party PIPE Investments.
“
Trust Account
” means the trust account of the Company that holds the proceeds from DFHT’s IPO.
“
Units
” means the units sold in the IPO, each of which consisted of one share of Class A Common Stock and
one-fifth
of one warrant.
 
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This registration statement contains forward-looking statements. Forward-looking statements provide the Company’s current expectations or forecasts of future events, and include statements the Company’s expectations, beliefs, plans, objectives, intentions, assumptions and other statements that are not historical facts. These statements are based on management’s current beliefs and assumptions about future events and are based on currently available information as to the outcome and timing of future events. Although we believe our plans, intentions and expectations reflected in or suggested by these forward-looking statements are reasonable, we cannot assure you that we will achieve or realize these plans, intentions or expectations. Forward-looking statements are inherently subject to risks, uncertainties and assumptions. Generally, statements that are not historical facts, including statements concerning possible or assumed future actions, business strategies, events or results of operations, are forward-looking statements. The words “anticipates,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predicts,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking.
Forward-looking statements contained in this registration statement include, but are not limited to, statements about:
 
 
•
 
the benefits of the Business Combination and any subsequent acquisitions;
 
 
•
 
the effects of the restatement of the Company’s past financial statements;
 
 
•
 
the future financial performance of the Company, including any projected financial information;
 
 
•
 
the liquidity and trading of our securities;
 
 
•
 
expansion plans and opportunities, including any expected acquisitions or the opening of any new medical centers;
 
 
•
 
market conditions and global and economic factors beyond the Company’s control, including the potential adverse effects of the
COVID-19
pandemic;
 
 
•
 
our growth strategy, including organic growth of members or Medicare members, or otherwise, and growth by acquisition, and our ability to realize expected results following the Business Combination;
 
 
•
 
our ability to obtain and maintain enrollment, licensure, certification and accreditation for the provision of healthcare services;
 
 
•
 
our marketing, customer retention and ability to attract new patients;
 
 
•
 
the impact of reductions in Medicare reimbursement rates or changes in the rules governing the Medicare program, including the Medicare Advantage program;
 
 
•
 
our ability to adapt to changes in the healthcare industry, including changes to laws and regulations;
 
 
•
 
our competitive position and expectations regarding developments and projections relating to our competitors;
 
 
•
 
changes in the market for our services;
 
 
•
 
the timing, scope and likelihood of regulatory filings; and
 
 
•
 
litigation and the ability to adequately protect the combined company’s intellectual property rights.
These forward-looking statements are based on information available as of the date of this registration statement, and current expectations, forecasts and assumptions, and involve a number of risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events
 
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or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
In addition, statements that we “believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this registration statement, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete involve a number of assumptions and limitations. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
You should not place undue reliance on these forward-looking statements. As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause actual results to differ include:
 
 
•
 
the impact of the
COVID-19
pandemic or any other pandemic, epidemic or outbreak of an infectious disease in the United States or worldwide on our business, financial condition and results of operation;
 
 
•
 
our ability to grow and manage growth profitably, maintain relationships with customers, compete within its industry and retain our key employees;
 
 
•
 
our ability to integrate the businesses of CMG, IMC , SMA, DNF, Advantis Physician Alliance, LLC, d/b/a Advantis Medical Centers (“Advantis”) and other acquisitions;
 
 
•
 
our ability to complete acquisitions and to open new medical centers and the timing of such acquisitions and openings;
 
 
•
 
the viability of our growth strategy, including both organic and de novo growth and growth by acquisition, and our ability to realize expected results, as well as our ability to access the capital necessary for such growth;
 
 
•
 
our ability to attract new patients;
 
 
•
 
the dependence of our revenue and operations on a limited number of key payors;
 
 
•
 
the risk of termination,
non-renewal
or renegotiation of the Medicare Advantage (“MA”) contracts held by the health plans with which we contract, or the termination,
non-renewal
or renegotiation of our contracts with those plans;
 
 
•
 
the impact on our business from changes in the payor mix of our patients and potential decreases in our reimbursement rates;
 
 
•
 
our ability to manage our growth effectively, execute our business plan, maintain high levels of service and patient satisfaction and adequately address competitive challenges;
 
 
•
 
the impact of restrictions on our current and future operations contained in certain of our agreements;
 
 
•
 
competition from primary care facilities and other healthcare services providers;
 
 
•
 
competition for physicians and nurses, and shortages of qualified personnel;
 
 
•
 
the impact on our business of reductions in Medicare reimbursement rates or changes in the rules governing the Medicare program, including the MA program;
 
 
•
 
the impact on our business of state and federal efforts to reduce Medicaid spending;
 
 
•
 
a shift in payor mix to Medicare payors as well as an increase in the number of Medicaid patients may result in a reduction in the average rate of reimbursement;
 
 
•
 
our assumption under most of our agreements with health plans of some or all of the risk that the cost of providing services will exceed our compensation;
 
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•
 
risks associated with estimating the amount of revenues and refund liabilities that we recognize under our risk agreements with health plans;
 
 
•
 
the impact on our business of security breaches, loss of data, or other disruptions causing the compromise of sensitive information or preventing us from accessing critical information;
 
 
•
 
the impact of our existing or future indebtedness and any associated debt covenants on our business and growth prospects;
 
 
•
 
the impact on our business of disruptions in our disaster recovery systems or management continuity planning;
 
 
•
 
the potential adverse impact of legal proceedings and litigation;
 
 
•
 
the impact of reductions in the quality ratings of the health plans we serve;
 
 
•
 
our ability to maintain and enhance our reputation and brand recognition;
 
 
•
 
our ability to effectively invest in, implement improvements to and properly maintain the uninterrupted operation and data integrity of our information technology and other business systems;
 
 
•
 
our ability to obtain, maintain and enforce intellectual property protection for our technology;
 
 
•
 
the potential adverse impact of claims by third parties that we are infringing on or otherwise violating their intellectual property rights;
 
 
•
 
our ability to protect the confidentiality of our trade secrets,
know-how
and other internally developed information;
 
 
•
 
the impact of any restrictions on our use of or ability to license data or our failure to license data and integrate third-party technologies;
 
 
•
 
our ability to protect data, including personal health data, and maintain our information technology systems from cybersecurity breaches and data leakage;
 
 
•
 
our ability to adhere to all of the complex government laws and regulations that apply to our business;
 
 
•
 
our reliance on strategic relationships with third-parties to implement our growth strategy;
 
 
•
 
the impact on our business if we are unable to effectively adapt to changes in the healthcare industry, including changes to laws and regulations regarding or affecting U.S. healthcare reform
;
 
 
•
 
that estimates of market opportunity and forecasts of market and revenue growth included in prospectus may prove to be inaccurate, if at all;
 
 
•
 
our operating results and stock price may be volatile;
 
 
•
 
risks associated with estimating the amount of revenues that we recognize under our risk agreements with health plans;
 
 
•
 
our ability to navigate rules and regulations that govern our licensing and certification, as well as credentialing processes with private payors, before we can receive reimbursement for their services, and
 
 
•
 
our ability to develop and maintain proper and effective internal control over financial reporting; and
 
 
•
 
other risks and uncertainties indicated in this registration statement, including those under “Risk Factors” herein, and other filings that have been made or will be made with the SEC.
 
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PROSPECTUS SUMMARY
The following summary highlights selected information contained elsewhere in this prospectus and does not contain all of the information that you should consider in making your investment decision. Before investing in our securities, you should carefully read this entire prospectus, including our consolidated financial statements and the related notes included in this prospectus and the information set forth under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Our Company
As of December 31, 2021, CareMax owned and operated 45 multi-specialty medical care centers throughout Florida, primarily serving the Medicare Advantage population. In addition, CareMax recently opened two additional medical care centers in Memphis, Tennessee and one additional medical care center in New York City, New York for a total of 48 centers.
CareMax’s medical centers offer 24/7 access to care through employed providers and provide a comprehensive suite of high-touch health care and social services to its patients, including primary care, specialty care, telemedicine, health & wellness, optometry, dental, pharmacy and transportation. CareMax’s differentiated healthcare delivery model is focused on care coordination with vertically integrated ambulatory care and community-centric services. The goal of CareMax is to intercede as early as possible to manage chronic conditions for its patient members in a proactive, holistic, and tailored manner to provide a positive influence on patient outcomes and a reduction in overall healthcare costs. CareMax specifically focuses on providing access to high quality care in underserved communities, with approximately 60% of its Medicare Advantage patients being dual-eligible and
low-income
subsidy eligible as of December 31, 2021.
While CareMax’s primary focus is providing care to Medicare-eligible seniors who are mostly over the age of 65, CareMax also provides services to children and adults through Medicaid programs as well as through commercial insurance plans. Nearly all of CareMax’s Medicare patients are enrolled in a Medicare Advantage plan run by private insurance companies on behalf of the Centers for Medicare and Medicaid Services (“CMS”). With Medicare Advantage, the patient receives the same coverage as original Medicare, including emergency care, and most plans also include prescription drug coverage. In many cases, Medicare Advantage plans offer even more than original Medicare, including dental, vision, hearing, and wellness programs.
CareMax’s comprehensive, high touch approach to health care delivery is powered by its CareOptimize technology platform. CareOptimize is a proprietary
end-to-end
technology platform that aggregates data and analyzes that data using artificial intelligence and machine learning to support more informed care delivery decisions and to focus care decisions on preventative chronic disease management and the social determinants of health. CareMax believes that CareOptimize is designed to drive better outcomes and lower costs. The CareOptimize technology platform also provides CareMax with a national reach beyond Florida. As of December 31, 2021, the CareOptimize platform was used by approximately 20,000 providers in more than 30 states. CareOptimize was also used by IMC prior to the Business Combination, which CareMax believes will support the integration and operation of the combined company. CareMax has shifted from selling the CareOptimize platform to outside customers for a software subscription fee and is instead providing the software to affiliated practices of its managed service organization (“MSO”) to further improve financial, clinical, and quality outcomes from the affiliated providers. As of December of 2021, this MSO services more than 30 independent physician associations (“IPAs”).
 
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Corporate Information
We were incorporated in the State of Delaware in May 2020 as a special purpose acquisition company under the name Deerfield Healthcare Technology Acquisitions Corp. On July 21, 2020, we completed our initial public offering (the “IPO”). On June 8, 2021, we consummated the Business Combination with CMG, and IMC. In connection with the Business Combination, we changed our name from Deerfield Healthcare Technology Acquisitions Corp. to CareMax, Inc.
Emerging Growth Status
We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a registration statement under the Securities Act declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to
non-emerging
growth companies but any such an election to opt out is irrevocable. We have elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of the IPO, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our Class A common stock held by
non-affiliates
equaled or exceeded $700 million as of the prior June 30, and (2) the date on which we have issued more than $1.0 billion in
non-convertible
debt securities during the prior three-year period.
Additionally, we are a “smaller reporting company” as defined in Item 10(f)(1) of
Regulation S-K.
Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of our common stock held by
non-affiliates
equaled or exceeded $250 million as of the end of the prior June 30th, and (2) our annual revenues equaled or exceeded $100 million during such completed fiscal year or the market value of our common stock held by
non-affiliates
equaled or exceeded $700 million as of the prior June 30th.
 
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THE OFFERING
 
Issuer
CareMax, Inc. (f/k/a Deerfield Healthcare Technology Acquisitions Corp.)
Issuance of Class A Common Stock
 
Shares of Class A Common Stock offered by us
5,791,667 shares of Class A Common Stock issuable upon the exercise of the Warrants, consisting of (i) 2,916,667 shares of Class A Common Stock issuable upon the exercise of 2,916,667 Private Warrants, and (ii) 2,875,000 shares of Class A Common Stock issuable upon the exercise of 2,875,000 Public Warrants.
 
Shares of Class A Common Stock outstanding prior to exercise of all Warrants
87,367,972 shares of Class A Common Stock
 
Shares of Class A Common Stock outstanding assuming cash exercise of all Warrants
93,159,639 shares of Class A Common Stock
 
Use of proceeds
We will receive up to an aggregate of approximately $66.6 million from the exercise of the Warrants, assuming the exercise in full of all of the Warrants for cash. We do not believe it is likely that a warrant holder would elect to exercise its warrants when our Class A Common Stock is trading below $11.50. See “
Risk Factors— Risks Related to Ownership of Our Securities and Being a Public Company—The exercise price for our Warrants is higher than in many similar blank check company offerings in the past, and, accordingly, the Warrants are more likely to expire worthless
.,” “
Management’s Discussion and Analysis of Financial Condition and Results of Operations
” and “
Use of Proceeds
” for further detail. We expect to use any net proceeds from the exercise of the Warrants for working capital and general corporate purposes, which may include potential acquisitions. See “Use of Proceeds.”
 
Exercise Price of Warrants
$11.50 per share, subject to adjustments as described herein.
Resale of Class A Common Stock and Warrants
 
Securities offered by the Selling Securityholders
63,581,530 shares of Class A Common Stock consisting of (i) an aggregate of 10,000,000 shares of Class A Common Stock initially purchased by Deerfield Partners, and the Sponsor in the Deerfield PIPE Investments (ii) 18,635,073 shares of Class A Common Stock purchased by certain investors in the Third-Party PIPE Investments (iii) 3,593,750 Founder Shares, (iv) 21,208,092 shares of Class A Common Stock issued as consideration for the Business Combination at Closing, (v) up to 3,200,000 Earnout Shares that may be issued in the form of Class A Common Stock pursuant to the earnout
 
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provisions in the Business Combination Agreement, (vi) 3,200,000 Earnout Shares that were issued in the form of Class A Common Stock pursuant to the earnout provisions in the Business Combination Agreement, (vii) 384,615 shares of Class A Common Stock issued in the SMA Transaction and (viii) 3,360,000 shares of Class A Common Stock purchased by Deerfield Partners as a part of units in our initial public offering.
 
Terms of the offering
The Selling Securityholders will determine when and how they will dispose of the shares of Class A Common Stock and Warrants registered under this prospectus for resale.
 
Use of proceeds
We will not receive any proceeds from the sale of shares of Class A Common Stock or Private Warrants by the Selling Securityholders.
 
Lock-Up
Restrictions
Certain of our stockholders are subject to certain restrictions on transfer until the termination of applicable
lock-up
periods. See “Certain Relationships with Selling Securityholders” for further discussion.
 
Risk Factors
Any investment in the securities offered hereby is speculative and involves a high degree of risk. You should carefully consider the information set forth under “Risk Factors” and elsewhere in this prospectus.
 
Nasdaq Stock Market Symbols
Our Class A Common Stock and Public Warrants are listed on the Nasdaq Global Select Market under the symbols “CMAX” and “CMAXW,” respectively.
 
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RISK FACTORS
Investing in our securities involves risks. You should consider carefully the risks and uncertainties described below, together with all of the other information in this prospectus, including the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our condensed consolidated financial statements and related notes, before deciding whether to purchase any of our securities. These risk factors are not exhaustive and we may face additional risks and uncertainties that are not presently known to us, or that we currently deem immaterial, which may also impair our business, prospects, financial condition or operating results. If any of these risks actually occur, our business, results of operations, financial condition, and prospects could be materially and adversely affected. Unless otherwise indicated, references in these risk factors to our business being harmed will include harm to our business, reputation, brand, financial condition, results of operations, and prospects. In such event, the market price of our securities could decline, and you could lose all or part of your investment.
Summary of Risk Factors Related to Our Business
The following is a summary of the risk factors our business faces. The list below is not exhaustive, and investors should read this “Risk Factors” section in full. Some of the risks we face include:
 
  •  
the impact of the
COVID-19
pandemic or any other pandemic, epidemic or outbreak of an infectious disease in the United States or worldwide on our business, financial condition and results of operation;
 
  •  
our ability to integrate the businesses of CareMax Medical Group, L.L.C., a Florida limited liability company (“CMG”), IMC Medical Group Holdings, LLC, a Delaware limited liability company (“IMC”), Senior Medical Associates, LLC, a Florida limited liability company (“SMA”), Unlimited Medical Services of Florida, LLC, a Florida limited liability company, d/b/a DNF Medical Centers (“DNF”), Advantis and other acquisitions;
 
  •  
our ability to complete acquisitions and to open new medical centers and the timing of such acquisitions and openings;
 
  •  
the viability of our growth strategy, including organic growth and growth by acquisition, and our ability to realize expected results, as well as our ability to access the capital necessary for such growth;
 
  •  
our ability to attract new patients;
 
  •  
the dependence of our revenue and operations on a limited number of key payors;
 
  •  
the risk of termination,
non-renewal
or renegotiation of the Medicare Advantage (“MA”) contracts held by the health plans with which we contract, or the termination,
non-renewal
or renegotiation of our contracts with those plans;
 
  •  
the impact on our business from changes in the payor mix of our patients and potential decreases in our reimbursement rates;
 
  •  
our ability to manage our growth effectively, execute our business plan, maintain high levels of service and patient satisfaction and adequately address competitive challenges;
 
  •  
competition from primary care facilities and other healthcare services providers;
 
  •  
competition for physicians and nurses, and shortages of qualified personnel;
 
  •  
the impact on our business of reductions in Medicare reimbursement rates or changes in the rules governing the Medicare program, including the MA program;
 
  •  
the impact on our business of state and federal efforts to reduce Medicaid spending;
 
  •  
a shift in payor mix to Medicare payors as well as an increase in the number of Medicaid patients may result in a reduction in the average rate of reimbursement;
 
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  •  
our assumption under most of our agreements with health plans of some or all of the risk that the cost of providing services will exceed our compensation;
 
  •  
risks associated with estimating the amount of revenues and refund liabilities that we recognize under our risk agreements with health plans;
 
  •  
the impact on our business of security breaches, loss of data, or other disruptions causing the compromise of sensitive information or preventing us from accessing critical information;
 
  •  
the impact of our existing or future indebtedness on our business and growth prospects;
 
  •  
the impact on our business of disruptions in our disaster recovery systems or management continuity planning;
 
  •  
the potential adverse impact of legal proceedings and litigation;
 
  •  
the impact of reductions in the quality ratings of the health plans we serve;
 
  •  
our ability to maintain and enhance our reputation and brand recognition;
 
  •  
our ability to effectively invest in, implement improvements to and properly maintain the uninterrupted operation and data integrity of our information technology and other business systems;
 
  •  
our ability to obtain, maintain and enforce intellectual property protection for our technology;
 
  •  
the potential adverse impact of claims by third parties that we are infringing on or otherwise violating their intellectual property rights;
 
  •  
our ability to protect the confidentiality of our trade secrets,
know-how
and other internally developed information;
 
  •  
the impact of any restrictions on our use of or ability to license data or our failure to license data and integrate third-party technologies;
 
  •  
our ability to adhere to all of the complex government laws and regulations that apply to our business;
 
  •  
the impact on our business if we are unable to effectively adapt to changes in the healthcare industry, including changes to laws and regulations regarding or affecting U.S. healthcare reform;
 
  •  
our ability to navigate rules and regulations that govern our licensing and certification, as well as credentialing processes with private payors, before we can receive reimbursement for their services; and
 
  •  
other risk factors listed in this “Risk Factors” section.
Risks Related to Our Business and Industry
The
COVID-19
pandemic continues to impact our operations and, in the future, the
COVID-19
pandemic or another pandemic, epidemic or outbreak of infectious disease, could materially adversely affect our financial condition and results of operations.
The
COVID-19
pandemic continues to impact our business and could materially adversely affect our business in the future. During 2021, CareMax resumed normal operation in both its medical and wellness centers. We established a
COVID-19
rapid response program that created operational initiatives throughout the various spikes and variants. That team was also responsible for high-touch member initiatives with our members including
in-person
home visits,
COVID-19
testing services, and vaccinations. Our internal processes and protocols were designed to ensure the safety and well-being of our employees and continuous access to care for our patients. Our centers have provided continuous service to our members by remaining open throughout the duration of the pandemic.
 
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COVID-19
has also diverted or limited the resources of personnel that would otherwise be focused on the operations of our business. This may be the result of sickness of personnel or their families, disruptive activities and business closures in areas where we operate, potential delays in hiring and onboarding of new employees and other factors that have impacted employee productivity. We may take further actions that alter our business operations as may be required by local, state, or federal authorities or that we determine are in the best interests of our employees in response to
COVID-19
or any new variants that have emerged. Such measures could negatively affect our sales and marketing efforts, sales cycles, employee productivity, or patient retention, any of which could harm our financial condition and business operations.
Executive orders and similar government orders and restrictions have also resulted in work stoppages among some vendors and suppliers, slowdowns and delays that have impacted the ability of our suppliers to manufacture goods and to deliver these to us on a timely basis, or at all; inventory shortages; delays in actions of regulatory bodies; and other business adjustments or disruptions of certain third parties upon whom we rely. During 2021, our businesses had to acquire greater quantities of medical supplies at significantly higher prices to ensure the safety of our employees and our patients.
In addition, the
COVID-19
virus disproportionately impacts older adults, especially those with chronic illnesses, which describes many of our patients. Patients have been and may continue to be reluctant to seek necessary care given the risks of the
COVID-19
pandemic. This could have the effect of deferring healthcare costs to later periods and may also affect the health of patients who defer treatment, which may cause our costs to increase in the future. We have and may continue to experience increased internal and third-party medical costs as we provide care for patients suffering from
COVID-19.
A material increase in costs has and may continue to adversely affect our financial results given the number of our patients who are under capitation agreements.
Due to the
COVID-19
pandemic, during 2020 we were not able to document the health conditions of our patients as completely as we have in the past. Medicare pays capitation using a “risk adjustment model,” which compensates MA health plans based on the health status (acuity) of each individual patient. Payors and their contracted providers with higher acuity patients receive more, and those with lower acuity patients receive less. Medicare requires that a patient’s health issues be documented annually regardless of the permanence of the underlying causes. Historically, this documentation was required to be completed during an
in-person
visit with a patient. As part of the Coronavirus Aid, Relief and Economic Security Act the “CARES Act”), which was signed into law on March 27, 2020 and was designed to provide financial support and resources to individuals and businesses affected by the
COVID-19
pandemic, Medicare allowed documentation for conditions identified during video visits with patients. While we utilized telehealth to document the health conditions of our patients and increased our efforts to return our patients to our centers for
in-person
visits during the latter half of 2020 and the beginning of 2021, based on the difference between the risk adjusted PPPM revenue expected by our historical models and the actual risk adjusted PPPM rates in 2021, we believe our 2021 revenue was negatively impacted by approximately $11.5 million due to our inability to adequately document the acuity of our patients during 2020. In the event we are unable to adequately document the acuity of our patients in subsequent years, our revenues and financial performance could be significantly affected.
During 2021, we also experienced increased costs directly related to
COVID-19
claims of approximately $11.6 million.
COVID-19
related spikes in hospital utilization could continue to occur for the foreseeable future during the duration of the pandemic, which could negatively impact our revenues and financial performance during any period in which such hospital utilization spikes occur.
The extent and continued impact of the
COVID-19
pandemic on our business will depend on certain developments, including: the duration and spread of the outbreak; government responses to the pandemic; the impact on our sales cycles; and the effect on our partners and supply chains, all of which are uncertain and cannot be predicted. Even after the
COVID-19
pandemic has subsided, we may experience adverse impacts to our business as a result of any economic recession or depression that has occurred or may occur in the future. The
COVID-19
pandemic may also have the effect of heightening many of the other risks described in this “
Risk
 
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Factors
” section, including but not limited to those relating to cyber-attacks and security vulnerabilities and interruptions or delays due to third-parties. The full impact of the
COVID-19
pandemic may continue to significantly affect our results of operations and overall financial condition even in future periods.
Another pandemic, epidemic, or outbreak of an infectious disease could occur in the United States or worldwide, and such an event could adversely affect our business in ways that are similar to or different from the
COVID-19
pandemic. We may be unable to properly anticipate or prepare for these events and, as a result, our business may be materially adversely impacted.
Our growth strategy, including organic growth and growth by acquisition, will include integration and other risks and, as a result, our growth strategy may not prove viable and we may not realize expected results.
We seek growth opportunities organically through growth of de novo centers and geographic expansion, through acquisitions and through alliances with payors or other primary care providers. Our business strategy is to grow by expanding our network of primary medical centers and wellness centers and may include opening new medical centers or acquiring medical centers in our existing markets, expanding into new markets, recruiting new patients and partnering or contracting with payors, existing medical practices or other healthcare providers to provide primary care services. Our ability to grow organically depends upon a number of factors, including recruiting new patients, entering into contracts with additional payors, identifying appropriate facilities, obtaining leases, completing internal build-outs of new facilities within proposed timelines and budgets and hiring or engaging care teams and other personnel. We cannot guarantee that we will be successful in pursuing our strategy for organic growth. We have and may continue to enter into leases for new medical centers in markets where we do not currently have a presence, and there is considerable uncertainty related to the success of these new centers and their impact on our results of operations.
We also intend to continue to acquire primary care medical centers and wellness centers, and some of these acquisitions may be large or in markets where we do not currently operate. When we evaluate a potential acquisition target, we might overestimate the target’s value and, as a result, pay too much for it. We also cannot be certain that we will be able to successfully integrate acquired assets or the operations of the acquired target with our operations. We may engage in large acquisitions, which could be much more difficult to integrate. Difficulties with integration could cause material disruption, which could in turn reduce the efficiency of our operations. Additionally, we may not be able to integrate acquired primary care medical centers and wellness centers in a manner that permits us to realize the cost efficiencies and revenue improvements we anticipate in the time, manner, or amount we currently expect, or at all.
Our growth strategy involves a number of risks and uncertainties, including that:
 
  •  
we may not be able to successfully enter into contracts with payors on terms favorable to us or at all;
 
  •  
competition for payor relationships may intensify due to the ongoing consolidation in the healthcare industry, which may increase our costs to pursue such opportunities;
 
  •  
we may not be able to meet our goals for enrolling new patients to enable us to execute our growth strategy, we may incur substantial costs to enroll new patients and we may be unable to enroll a sufficient number of new patients to offset those costs;
 
  •  
we may not be able to successfully maintain and enforce uniform standards, controls, procedures and policies;
 
  •  
we may incur additional debt to assist in the funding of acquisitions, which may increase our leverage;
 
  •  
when expanding our business into new states, we may be required to comply with laws and regulations that may differ from states in which we currently operate; and
 
  •  
depending upon the nature of the local market, we may not be able to implement our business model in every local market that we enter, which could negatively impact our revenues and financial condition.
 
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If we are unable to attract new patients, our revenue growth will be adversely affected.
To increase our revenue, our business strategy is to expand the number of primary care and wellness centers in our network. To support such growth, we must continue to attract and retain a sufficient number of new patients. Although some of our facilities accept Medicaid-eligible patients, we are focused on the Medicare-eligible population and face competition from other primary healthcare providers for those Medicare-eligible patients. If we are unable to effectively promote to the Medicare-eligible population the benefits of our model or if potential or existing patients prefer the care provider model of one of our competitors, we may not be able to effectively implement our growth strategy, which depends on our ability to increase our patient census. In addition, our growth strategy is dependent on patients selecting us as their primary care provider under their MA plan.
MA is a federally funded health insurance program administered by private health plans and offered to Medicare beneficiaries as an alternative to
fee-for-service
Medicare. CMS, the federal agency that administers Medicare, contracts with private health plans, such as health maintenance organizations (“HMO”), to offer
“all-in-one”
coverage to Medicare beneficiaries for a fixed monthly amount per enrollee (i.e., a capitated payment model) paid by Medicare. MA plans also in turn contract with providers like us under which the providers deliver care to patients at negotiated rates.
Patients may elect an MA plan during an annual enrollment period from November into December of each year. Therefore, our ability to grow our patient population with capitation arrangements is dependent in part on our ability to successfully enroll MA patients during the annual enrollment period. During the annual enrollment period, we must convince new MA patients to select us as their primary care provider and existing patients to not select another provider. An inability to enroll new patients and retain existing patients, particularly those under managed care arrangements, would harm our ability to execute our growth strategy and may have a material adverse effect on our business operations and financial position.
Our revenues and operations are dependent upon a limited number of key payors, the loss of any of which could adversely affect our business.
Our operations are dependent on a concentrated number of payors with whom we contract to provide services to patients. CareMax has established relationships with eleven different payors for MA patients. On a pro forma basis giving effect to the Business Combination with IMC as of January 1, 2020, when aggregating the revenue associated with each payor through its local affiliates, Simply Healthcare, WellCare and HealthSun accounted for approximately 43% of CareMax’s capitated revenue for the twelve months ended December 31, 2021.
Our current agreement with HealthSun began on June 1, 2015 and continues in effect until July 1, 2029 unless terminated earlier pursuant to the terms of the agreement. Under the agreement, HealthSun agrees to pay us fees for primary care services provided by our providers to HealthSun’s members enrolled in HealthSun’s Medicare Advantage plans. Our agreement with HealthSun terminates automatically with respect to particular physicians if a physician loses applicable licenses, is convicted of a felony or fails to obtain or maintain Medicare-approved provider status. HealthSun may also terminate the agreement with respect to a particular physician if the physician fails to comply with medical standards of practice, meet credentialing standards or abide by HealthSun’s policies. The agreement may also be terminated in its entirety by HealthSun upon: a material breach by us and failure by us to cure such breach within a cure period; our failure to abide by HealthSun’s policies and failure to cure such failure within a cure period; if we act in a manner that harms HealthSun’s reputation; fraud or theft against HealthSun; a determination by HealthSun that continuation of the agreement might result in danger to the health, safety or welfare of HealthSun’s members; or our involuntary bankruptcy or insolvency. The agreement will also automatically terminate upon the termination or
non-renewal
of HealthSun’s Medicare Advantage contract with CMS and may be terminated if required under applicable law. In the event the agreement is terminated for any reason, we will be paid for services provided through
 
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termination. There are no termination costs or penalties applicable to either party in the event the agreement is terminated.
We believe that a majority of our revenues will continue to be derived from a limited number of key payors, which may terminate their contracts with us or our providers credentialed by them upon the occurrence of certain events. The sudden loss of any of our payor partners or the renegotiation of any of our payor contracts could adversely affect our operating results. In the ordinary course of business, we engage in active discussions and renegotiations with payors in respect of the services we provide and the terms of our payor agreements. As the payors’ businesses respond to market dynamics and financial pressures, and as payors make strategic business decisions in respect of the lines of business they pursue and programs in which they participate, certain of our payors have previously sought to renegotiate or terminate their agreements with us and may attempt to do so in the future. These discussions could result in reductions to the fees and changes to the scope of services contemplated by our payor contracts and consequently could negatively impact our revenues, business and prospects.
Because we rely on a limited number of payors for a significant portion of our revenues, we depend on the creditworthiness of these payors. Our payors are subject to a number of risks, including reductions in payment rates from governmental programs, higher than expected health care costs and lack of predictability of financial results when entering new lines of business, particularly with high-risk populations. If the financial condition of our payor partners declines, our credit risk could increase. Should one or more of our significant payor partners declare bankruptcy, be declared insolvent, or otherwise be restricted by state or federal laws or regulation from continuing in some or all of their operations, this could adversely affect our ongoing revenues, the collectability of our accounts receivable, our bad debt reserves and our net income.
The termination or
non-renewal
of the MA contracts held by the health plans with which we contract, or the termination or
non-renewal
of our contracts with those plans, could have a material adverse effect on our revenue and our results of operations.
In addition to contracting directly with the CMS to participate in Medicare, we also contract with other health plans to provide capitated care services with respect to certain of their MA members. If a plan with which we contract for these services loses its Medicare contracts with CMS, receives reduced or insufficient government reimbursement under the Medicare program, decides to discontinue its MA plans, decides to contract with another provider to render capitated care services to its members, or decides to directly provide care, our contract with that plan could be at risk and we could lose revenue. We have also entered into contracts with some of these same plans relating to Medicaid Managed Care. Termination of a contract relating to MA could also lead to, or occur concurrently with, termination of a contract relating to Medicaid.
Under most of our capitation agreements with health plans, the health plan is generally permitted to modify the benefit and risk obligations and compensation rights from time to time during the terms of the agreements. If a health plan exercises its right to amend its benefit and risk obligations and compensation rights, we are generally allowed a period of time to object to such amendment. If we so object, under some of the risk agreements, the relevant health plan may terminate the applicable agreement upon 90 to 180 days written notice. If we enter into capitation contracts with unfavorable economic terms, or a capitation contract is amended to include unfavorable terms, we could suffer losses with respect to such contract.
Certain of our contracts may be terminated immediately by the health plan if we lose applicable licenses, go bankrupt, lose our liability insurance, or receive an exclusion, suspension, or debarment from state or federal government authorities. In addition, certain of our contracts with health plans are terminable without cause. If any of these contracts were terminated, we may not be able to recover all fees due under the terminated contract, which may adversely affect our operating results. In addition, certain patients covered by such plans in the past have shifted to another primary care provider within their health plan’s network and patients may continue to do so in the future. Moreover, our inability to maintain our agreements with health plans, in particular with key
 
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payors such as HealthSun with respect to our MA members, or to renegotiate favorable terms for those agreements in the future, could result in the loss of patients and could have a material adverse effect on our profitability and business. Depending on the health plan at issue and the amount of revenue associated with the health plan’s capitation agreement, the renegotiated terms or termination could have a material adverse effect on our business, results of operations, financial condition and cash flows.
Changes in the payor mix of patients and potential decreases in our reimbursement rates as a result of consolidation among plans could adversely affect our revenues and results of operation.
We have previously been negatively affected, and may continue to be negatively affected, if third-party payors take cost-containment measures, including lowering reimbursement rates or changing patient
co-payments
and deductibles. Any of these risks, among other economic factors, could have a material adverse effect on our financial condition.
The amounts we receive for services provided to patients are determined by a number of factors, including the payor mix of our patients and the reimbursement methodologies and rates utilized by our patients’ plans. Reimbursement revenue is generally higher under capitation agreements than it is under
fee-for-service
arrangements, and capitation agreements provide us with an opportunity to capture any additional surplus we create by investing in preventive care to keep a particular patient’s third-party medical expenses low. Under a capitation agreement such as with MA plans, we receive a fixed fee per member per month for services and, in some cases, additional compensation based on quality of care and other patient care metrics. Under a
fee-for-service
payor arrangement, we collect fees directly from the payor as services are provided. A decrease in the number of capitation arrangements could adversely affect our revenues and results of operations.
In addition, a shift in payor mix toward Medicaid payors as well as an increase in the number of uninsured patients may result in a reduction in our average rate of reimbursement or an increase in uncollectible receivables or uncompensated care, with a corresponding decrease in our net revenue. Changes in the eligibility requirements for governmental programs such as the Medicaid program and state decisions on whether to participate in any expansion of such programs also could impact the number of patients who participate in such programs and the number of uninsured patients. For those patients in private insurance plans, changes to those plans could increase patient financial responsibility, resulting in a greater risk of uncollectible receivables. These factors and events could have a material adverse effect on our business, financial condition, and results of operations.
Following the Business Combination, we experienced a shift in payor mix toward Medicaid due to more significant Medicaid membership in IMC. Acquisitions subsequent to the Business Combination have resulted in growth weighted more toward Medicare.
The healthcare industry has also experienced consolidation, resulting in fewer but larger payors that have significant bargaining power, given their market share. Payments from payors are the result of negotiated rates. These rates have declined in the past and may decline in the future based on renegotiations as larger payors have significant bargaining power to negotiate higher discounted fee arrangements with healthcare providers. As a result, payors increasingly are demanding discounted fee structures or the assumption by healthcare providers of all or a portion of the financial risk related to paying for care provided through capitation agreements. A decrease in the number of capitation arrangements could adversely affect our revenues and results of operation.
If we fail to manage our growth effectively, we may be unable to execute our business plan, maintain high levels of service and patient satisfaction or adequately address competitive challenges.
We have experienced, and may continue to experience, rapid growth and organizational change, which has placed, and may continue to place, significant demands on our management and our operational and financial resources. Additionally, our organizational structure may become more complex as we improve our operational, financial and management controls, as well as our reporting systems and procedures. We may require significant
 
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capital expenditures and the allocation of valuable management resources to grow and change in these areas. We must effectively increase our headcount and continue to effectively train and manage our employees. We will be unable to manage our business effectively if we are unable to alleviate the strain on resources caused by growth in a timely and successful manner. If we fail to effectively manage our anticipated growth and change, the quality of our services may suffer, which could negatively affect our brand and reputation and harm our ability to attract and retain patients and employees.
In addition, as we expand our business, it is important that we continue to maintain a high level of patient service and satisfaction. As our patient base continues to grow, we will need to expand our medical, patient services and other personnel, and our network of partners, to provide personalized patient service. If we are not able to continue to provide high quality medical care with high levels of patient satisfaction, our reputation, as well as our business, results of operations and financial condition could be adversely affected.
We are reliant on strategic relationships with third-parties to implement our growth strategy, and any failure to realize the expected benefits of such strategic relationships could adversely affect our business.
As part of our growth strategy, we have partnered with third parties to expand our operations and to open medical centers in new markets. For example, we have entered into a collaboration agreement with Anthem, a national health benefits company, through which we plan to open approximately 50 centers across eight priority states. Additionally, we have entered into a collaboration with Related, pursuant to which Related will advise us on opening new medical centers nationwide, including, but not limited to, within and proximate to affordable housing communities that may be owned by Related.
Additionally, Anthem previously indicated that it would work with CareMax and other providers to help bring New York based retirees into value based agreements with its affiliate, Empire BlueCrossBlueShield, in partnership with the nonprofit insurer Emblem Health, being awarded the City of New York group Medicare Advantage retiree contract to serve up to approximately 250,000 retired workers. However, the implementation of the New York City retirees’ contract has been delayed and may be reduced or canceled. The delay in the implementation of the New York City retirees’ contract has had an impact on our expected growth in New York City and the reduction or cancellation of such contract may further impact our prospects for growth in that market or in other markets.
Our ability to realize the benefits of the arrangements with Anthem or Related is not certain. There are many factors that could delay or ultimately prevent us from opening new centers in collaboration with Anthem or Related, including that Anthem or Related does not perform its obligations under each of their respective agreements. Should any other expected benefits of the arrangements with Anthem or Related fail to materialize, our prospects for growth of our de novo expansion strategy could be adversely affected, and we may not be able to effectively expand outside of our core markets in Florida. Additionally, we may be at a disadvantage to our competition, which in some cases already has a wider geographical presence, without assistance from our strategic partners. If we are not able to grow and expand outside of our core markets in Florida, our future business, results of operations and financial condition could be adversely affected.
We face significant competition from primary care facilities and other healthcare services providers. Our failure to adequately compete could adversely affect our business.
We compete directly with national, regional and local providers of healthcare for patients and physicians. There are many other companies and individuals currently providing healthcare services, many of which have been in business longer and/or have substantially more resources. Other companies could enter the healthcare industry in the future and divert some or all of our business. If we expand to other geographies, we expect competition may change based on a number of factors, including the number of competing primary care facilities in the local market and the types of services available at those facilities, our local reputation for quality care of patients, the commitment and expertise of our medical staff, our local service offerings and community
 
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programs, the cost of care in each locality, and the physical appearance, location, age and condition of our facilities. If we are unable to attract patients to our centers, our revenue and profitability will be adversely affected. Some of our competitors may have greater recognition and be more established in their respective communities than we are, and may have greater financial and other resources than we have. Competing primary care providers may also offer larger facilities or different programs or services than we do, which, combined with the foregoing factors, may result in our competitors being more attractive to our current patients, potential patients and referral sources. Furthermore, while we budget for routine capital expenditures at our facilities to keep them competitive in their respective markets, to the extent that competitive forces cause those expenditures to increase in the future, our financial condition may be negatively affected. In addition, our relationships with governmental and private third-party payors are not exclusive and our competitors have established or could seek to establish relationships with such payors to serve their covered patients. Additionally, as we expand into new geographies, we may encounter competitors with stronger relationships or recognition in the community in such new geography, which could give those competitors an advantage in obtaining new patients. Individual physicians, physician groups and companies in other healthcare industry segments, including those with which we have contracts, and some of which have greater financial, marketing and staffing resources, may become competitors in providing health care services, and this competition may have a material adverse effect on our business operations and financial position.
Competition for physicians and nurses, shortages of qualified personnel or other factors could increase our labor costs and adversely affect our revenue, profitability and cash flows.
Our operations are dependent on the efforts, abilities and experience of our physicians and other clinical personnel. We compete with other healthcare providers, primarily hospitals and other facilities, in attracting physicians, nurses and other medical staff to support our centers, recruiting and retaining qualified management and support personnel responsible for the daily operations of each of our centers and in contracting with payors. We have employment contracts with physicians and other health professionals that include provisions preventing these physicians and other health professionals from competing with us both during and after the term of our contract with them. There can be no assurance that our
non-compete
agreements related to physicians and other health professionals will be found enforceable if challenged. In such event, we would be unable to prevent physicians and other health professionals formerly employed by us from competing with us, potentially resulting in the loss of some of our patients.
Key primary care physicians with large patient enrollment could retire, become disabled, terminate their provider contracts, or otherwise become unable or unwilling to continue practicing medicine or continue working with our practices. We may not be able to attract new physicians to replace the services of terminating physicians or to service our growing membership. Some patients may have loyalty to these physicians and have a desire to shop for new physicians upon one of ours leaving the practice for any reason. In some markets, the lack of availability of clinical personnel, such as nurses and mental health professionals, has become a significant operating issue facing all healthcare providers. This shortage may require us to continue to enhance wages and benefits to recruit and retain qualified personnel or to contract for more expensive temporary personnel. We also depend on the available labor pool of semi-skilled and unskilled workers in each of the markets in which we operate.
If we are unable to recruit or retain our skilled, semi-skilled and unskilled personnel, our patients could choose to enroll with competitors’ physician organizations or could seek medical care elsewhere, which could reduce our revenues and profits. If our labor costs increase, we may not be able to raise rates to offset these increased costs. Because a significant percentage of our revenue consists of fixed, prospective payments, our ability to pass along increased labor costs is limited. In particular, if labor costs rise at an annual rate greater than our net annual consumer price index basket update from Medicare, our results of operations and cash flows will likely be adversely affected. Any union activity at our facilities that may occur in the future could contribute to increased labor costs. Certain proposed changes in federal labor laws and the National Labor Relations Board’s modification of its election procedures could increase the likelihood of employee unionization attempts.
 
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Although none of our employees are currently represented by a collective bargaining agreement, to the extent a significant portion of our employee base unionizes, it is possible our labor costs could increase materially. Our failure to recruit and retain qualified management and medical personnel, or to control our labor costs, could have a material adverse effect on our business, prospects, results of operations and financial condition.
Reductions in Medicare reimbursement rates or changes in the rules governing the Medicare program could have a material adverse effect on our financial condition and results of operations.
We receive the majority of our revenue from MA plans, and revenue from Medicare accounted for approximately 78.9% and 99.6% of our revenue for the twelve months ended December 31, 2021 and 2020, respectively. In addition, many private payors base their reimbursement rates on the published Medicare rates or are themselves MA plans reimbursed by Medicare for the services we provide. As a result, our results of operations are, in part, dependent on government funding levels for Medicare programs, particularly MA programs. Any changes that limit or reduce MA or general Medicare reimbursement levels, such as reductions in or limitations of reimbursement amounts or rates under programs, reductions in funding of programs, expansion of benefits without adequate funding, elimination of coverage for certain benefits, or elimination of coverage for certain individuals or treatments under programs, could have a material adverse effect on our business, results of operations, financial condition and cash flows.
The Medicare program and its reimbursement rates and rules are subject to frequent change. These include statutory and regulatory changes, rate adjustments (including retroactive adjustments), administrative or executive orders and government funding restrictions, all of which may materially adversely affect the rates at which Medicare reimburses us for our services. Budget pressures may lead the federal government to reduce or place limits on reimbursement rates under Medicare. Implementation of these and other types of measures has in the past and could in the future result in substantial reductions in our revenue and operating margins.
For example, under provisions in the Budget Control Act of 2011, an initiative to reduce the federal deficit also known as “sequestration,” discretionary spending caps were originally enacted that would impose spending cuts of $1.2 trillion, including reduced Medicare payments to plans and providers by two percent (2%). The CARES Act temporarily suspended these reductions from May 1, 2020 through December 31, 2020, and extended the sequester by one year, through 2030. The Protecting Medicare and American Farmers from Sequester Cuts Act, extended the suspension of sequestration for Medicare payments until March 31, 2022. There is no guarantee that sequester will be suspended further or that further action will be taken to reverse or suspend reductions in Medicare payments.
Each year, CMS issues a final rule to establish the MA benchmark payment rates for the following calendar year. Any reduction to MA rates impacting us that is greater compared to the industry average rate may have a material adverse effect on our business, results of operations, financial condition and cash flows. The final impact of the MA rates can vary from any estimate we may have and may be further impacted by the relative growth of our MA patient volumes across markets as well as by the benefit plan designs submitted. It is possible that we may underestimate the impact of the MA rates on our business and that our MA revenues may continue to be volatile in the future, each of which could have a material adverse effect on our business, results of operations, financial condition and cash flows.
In addition, CMS often changes the rules governing the Medicare program, including those governing reimbursement. Changes that could adversely affect our business include:
 
  •  
administrative or legislative changes to base rates or the bases of payment;
 
  •  
limits on the services or types of providers for which Medicare will provide reimbursement;
 
  •  
changes in methodology for patient assessment and/or determination of payment levels;
 
  •  
the reduction or elimination of annual rate increases; or
 
  •  
a change in
co-payments
or deductibles payable by beneficiaries.
 
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Recent legislative, judicial and executive efforts to enact further healthcare reform legislation have caused the future state of the exchanges, other reforms under the ACA, and many core aspects of the current U.S. health care system to be unclear. While specific changes and their timing are not yet apparent, enacted reforms and future legislative, regulatory, judicial, or executive changes, particularly any changes to the MA program, could have a material adverse effect on our business, results of operations, financial condition and cash flows.
There is also uncertainty regarding both MA payment rates and beneficiary enrollment, which, if reduced, would reduce our overall revenues and net income. For example, although the Congressional Budget Office (“CBO”) predicted in 2010 that MA participation would drop substantially by 2020, the CBO has more recently predicted, without taking into account potential future reforms, that enrollment in MA (and other contracts covering Medicare Parts A and B) could reach 31 million people by 2027. Although MA enrollment increased by approximately 5.6 million people, or by 50%, between the enactment of the ACA in 2010 and 2015, there can be no assurance that this trend will continue. Further, fluctuation in MA payment rates are evidenced by CMS’s annual announcement of the expected average change in revenue from the prior year: for 2018, CMS announced an average increase of 0.45%; for 2019, 3.4%, for 2020, 2.53%, for 2021, 0.93% and an expected 2.82% for 2022. Uncertainty over MA enrollment and payment rates present a continuing risk to our business.
According to KFF, MA enrollment continues to be highly concentrated among a few payors, both nationally and in local regions. In 2021, two payors accounted for 45% of MA enrollment and four payors accounted for 76% of MA enrollment. Further consolidation among MA plans in certain regions, or the Medicare program’s failure to attract additional plans to participate in the MA program, could have a material adverse effect on our business, results of operations, financial condition and cash flows.
Reductions in reimbursement rates or the scope of services being reimbursed could have a material adverse effect on our financial condition and results of operations or even result in reimbursement rates that are insufficient to cover our operating expenses. Additionally, any delay or default by the government in making Medicare reimbursement payments could materially and adversely affect our business, financial condition and results of operations.
State and federal efforts to reduce Medicaid spending could adversely affect our financial condition and results of operations.
Medicaid is a joint federal-state program purchasing healthcare services for the low income and indigent as well as certain higher-income individuals with significant health needs. Under broad federal criteria, states establish rules for eligibility, services and payment. Medicaid is a state-administered program financed by both state funds and matching federal funds. Medicaid spending has increased rapidly in recent years, becoming a significant component of state budgets. This, combined with slower state revenue growth, has led both the federal government and many states to institute measures aimed at controlling the growth of Medicaid spending, and in some instances reducing aggregate Medicaid spending.
For example, a number of states have adopted or are considering legislation designed to reduce their Medicaid expenditures, such as financial arrangements commonly referred to as provider taxes. Under provider tax arrangements, states collect taxes from healthcare providers and then use the revenue to pay the providers as a Medicaid expenditure, which allows the states to then claim additional federal matching funds on the additional reimbursements. Current federal law provides for a cap on the maximum allowable provider tax as a percentage of the provider’s total revenue. There can be no assurance that federal law will continue to provide matching federal funds on state Medicaid expenditures funded through provider taxes, or that the current caps on provider taxes will not be reduced. Any discontinuance or reduction in federal matching of provider
tax-related
Medicaid expenditures could have a significant and adverse effect on states’ Medicaid expenditures, and as a result could have an adverse effect on our business.
As part of the movement to repeal, replace or modify the ACA and as a means to reduce the federal budget deficit, there are renewed congressional efforts to move Medicaid from an open-ended program with coverage
 
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and benefits set by the federal government to one in which states receive a fixed amount of federal funds, either through block grants or per capita caps, and have more flexibility to determine benefits, eligibility or provider payments. If those changes are implemented, we cannot predict whether the amount of fixed federal funding to the states will be based on current payment amounts, or if it will be based on lower payment amounts, which would negatively impact those states that expanded their Medicaid programs in response to the ACA.
We expect these state and federal efforts to continue for the foreseeable future. The Medicaid program and its reimbursement rates and rules are subject to frequent change at both the federal and state level. These include statutory and regulatory changes, rate adjustments (including retroactive adjustments), administrative or executive orders and government funding restrictions, all of which may materially adversely affect the rates at which our services are reimbursed by state Medicaid plans.
We primarily depend on reimbursements by third-party payors, as well as payments by individuals, which could lead to delays and uncertainties in the reimbursement process.
The reimbursement process is complex and can involve lengthy delays. Although we recognize revenue when we provide services to our patients, we may from time to time experience delays in receiving the associated capitation payments or, for our patients on
fee-for-service
arrangements, the reimbursement for the service provided. In addition, third-party payors may disallow, in whole or in part requests for reimbursement based on determinations that the patient is not eligible for coverage, certain amounts are not reimbursable under plan coverage or were for services provided that were not medically necessary or additional supporting documentation is necessary. Retroactive adjustments may change amounts realized from third-party payors. As described below, we are subject to audits by such payors, including governmental audits of our Medicare claims, and may be required to repay these payors if a finding is made that we were incorrectly reimbursed. Delays and uncertainties in the reimbursement process may adversely affect accounts receivable, increase the overall costs of collection and cause us to incur additional borrowing costs. Third-party payors are also increasingly focused on controlling healthcare costs, and such efforts, including any revisions to reimbursement policies, may further complicate and delay our reimbursement claims.
In addition, certain of our patients are covered under health plans that require the patient to cover a portion of their own healthcare expenses through the payment of copayments or deductibles. There also may be instances where physicians provide services to uninsured individuals. To the extent permitted by law, amounts not covered by third-party payors are the obligations of individual patients. Despite reasonable efforts, we may not be able to collect all, or any, of those amounts that are the patient’s financial responsibility. Any increase in cost shifting from third-party payors to individual patients, including as a result of high deductible plans for patients, increases our collection costs and reduces overall collections. We have a financial assistance policy in which we assess patients for financial hardship and other criteria that are used to make a good-faith determination of financial need. If a patient is deemed to meet these criteria, we will waive or reduce that patient’s obligation to pay copayments, coinsurance or deductible amounts owed for the services we provide to them. If we were to experience a substantial increase in the number of patients qualifying for such waivers or reductions or in the volume of patient receivables deemed uncollectible, our costs could increase significantly and we may not be able to offset such additional costs with sufficient revenue.
In response to the
COVID-19
pandemic, CMS has made several changes in the manner in which Medicare will pay for telehealth visits, many of which relax previous requirements, including site requirements for both the providers and patients, telehealth modality requirements and others. State law applicable to telehealth, particularly licensure requirements, has also been relaxed in many jurisdictions as a result of the
COVID-19
pandemic. These relaxed regulations have allowed us to continue operating our business and delivering care to our patients through telehealth modalities. It is unclear which, if any, of these changes will remain in place permanently and which will be rolled-back following the
COVID-19
pandemic. If regulations change to restrict our ability to or prohibit us from delivering care through telehealth modalities, our financial condition and results of operations may be adversely affected.
 
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Under most of our agreements with health plans, we assume some or all of the risk that the cost of providing services will exceed our compensation.
Approximately 95% and 99% of the Company’s revenue for the twelve months ended December 31, 2021 and 2020, respectively is derived from fixed fees paid by health plans under capitation agreements with us. While there are variations specific to each agreement, we generally contract with health plans to receive a fixed fee per month for professional services and assume the financial responsibility for the healthcare expenses of our patients. This type of contract is referred to as a “capitation” contract. To the extent that patients require more care than is anticipated and/or the cost of care increases, aggregate fixed compensation amounts, or capitation payments, may be insufficient to cover the costs associated with treatment. If medical costs and expenses exceed estimates, except in very limited circumstances, we will not be able to increase the fee received under these risk agreements during their then-current terms and we could suffer losses with respect to such agreements.
Changes in our anticipated ratio of medical expense to revenue can significantly impact our financial results. Accordingly, the failure to adequately predict and control medical costs and expenses and to make reasonable estimates and maintain adequate accruals for incurred but not paid claims, could have a material adverse effect on our business, results of operations, financial condition and cash flows. Additionally, the Medicare expenses of our patients may be outside of our control in the event that patients take certain actions that increase such expenses, such as unnecessary hospital visits.
Historically, our medical costs and expenses as a percentage of revenue have fluctuated. Factors that may cause medical expenses to exceed estimates include:
 
  •  
the health status of patients and higher levels of hospitalization;
 
  •  
higher than expected utilization of new or existing healthcare services or technologies;
 
  •  
an increase in the cost of healthcare services and supplies, whether as a result of inflation or otherwise;
 
  •  
changes to mandated benefits or other changes in healthcare laws, regulations and practices;
 
  •  
increased costs attributable to specialist physicians, hospitals and ancillary providers;
 
  •  
changes in the demographics of our patients and medical trends;
 
  •  
contractual or claims disputes with providers, hospitals or other service providers within and outside a health plan’s network;
 
  •  
the occurrence of catastrophes, major epidemics, or pandemics; and
 
  •  
the reduction of health plan premiums.
The estimates of market opportunity and forecasts of market and revenue growth included in this prospectus may prove to be inaccurate, and even if the market in which we compete achieves the forecasted growth, our business could fail to grow at similar rates, if at all.
Market opportunity estimates and growth forecasts are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate. In particular, the size and growth of the overall U.S. healthcare market is subject to significant variables, including a changing regulatory environment and population demographic, which can be difficult to measure, estimate or quantify. Our business depends on member acquisition and retention, which further drives revenue from our contracts with health network partners. Estimates and forecasts of these factors in any given market is difficult and affected by multiple variables such as population growth, concentration of enterprise clients and population density, among other things. Further, we cannot assure you that we will be able to sufficiently penetrate certain market segments included in our estimates and forecasts, including due to limited deployable capital, ineffective marketing efforts or the inability to develop sufficient presence in a given market to gain members or contract with employers and health network partners in that market. Once we acquire a member, apart from fixed annual membership fees and payments from health
 
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care partners, we primarily derive revenue from patient
in-office
visits, which may be difficult to forecast over time, particularly as our billable service mix continues to expand, including due to the
COVID-19
pandemic. Finally, our contractual arrangements with health network partners typically have highly tailored capitation and other fee structures which vary across health network partners and are dependent on the number of members that receive healthcare services in a health network partner’s network. As a result, we may not be able to accurately forecast revenue from our health network partners. For these reasons, the estimates and forecasts in this prospectus relating to the size and expected growth of our target markets may prove to be inaccurate. Even if the markets in which we compete meet our size estimates and forecasted growth, our business could fail to grow at similar rates, if at all.
There are significant risks associated with estimating the amount of revenue that we recognize under our risk agreements with health plans, and if our estimates of revenue are materially inaccurate, it could impact the timing and the amount of our revenue recognition or have a material adverse effect on our business, results of operations, financial condition and cash flows.
There are significant risks associated with estimating the amount of revenues that we recognize under our risk agreements with health plans in a reporting period. The billing and collection process is complex due to ongoing insurance coverage changes, geographic coverage differences, differing interpretations of contract coverage and other payor issues, such as ensuring appropriate documentation. Determining applicable primary and secondary coverage for our patients, together with the changes in patient coverage that occur each month, requires complex, resource-intensive processes. Errors in determining the correct coordination of benefits may result in refunds to payors. Revenues associated with Medicare and Medicaid programs are also subject to estimating risk related to the amounts not paid by the primary government payor that will ultimately be collectible from other government programs paying secondary coverage, the patient’s commercial health plan secondary coverage or the patient. Collections, refunds and payor recoupments typically continue to occur for up to three years and longer after services are provided. If our estimates of revenues are materially inaccurate, it could impact the timing and the amount of our revenues recognition and have a material adverse impact on our business, results of operations, financial condition and cash flows.
We are dependent on information technology and our systems and infrastructure face certain risks, including from cybersecurity breaches and data leakage.
We rely extensively on information technology systems, networks and services, including internet sites, data hosting and processing facilities and tools, physical security systems and other hardware, software and technical applications and platforms, some of which are managed, hosted provided and/or used for third-parties or their vendors, to assist in conducting our business. A significant breakdown, invasion, corruption, destruction or interruption of critical information technology systems or infrastructure, by our workforce, others with authorized access to our systems or unauthorized persons could negatively impact operations. The ever-increasing use and evolution of technology, including cloud-based computing, creates opportunities for the unintentional dissemination or intentional destruction of confidential information stored in our, or our third-party providers’ systems, portable media or storage devices. We could also experience a business interruption, theft of confidential information or reputational damage from industrial espionage attacks, malware or other cyber-attacks, which may compromise our system infrastructure or lead to data leakage, either internally or at our third-party providers. Although the aggregate impact on our operations and financial condition has not been material to date, we have been the target of events of this nature and expect them to continue as cybersecurity threats have been rapidly evolving in sophistication and becoming more prevalent in the industry. We have invested in industry appropriate protections and monitoring practices of our data and IT to reduce these risks and continue to monitor our systems on an ongoing basis for any current or potential threats. While we maintain cyber insurance, this insurance may not be sufficient to cover the financial, legal, business or reputational losses that may result from an interruption or breach of our systems. There can be no assurance that our continuing efforts will prevent breakdowns or breaches to our or our third-party providers’ databases or systems that could adversely affect our business.
 
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Security breaches, loss of data and other disruptions could compromise sensitive information related to our business or our patients, or prevent us from accessing critical information and expose us to liability, which could adversely affect our business and our reputation.
In the ordinary course of our business, we collect, store, use and disclose sensitive data, including protected health information (“PHI”), and other types of personal data or personally identifiable information (“PII”) relating to our employees, patients and others. We also process and store, and use third-party service providers to process and store, sensitive information, including intellectual property, confidential information and other proprietary business information. We manage and maintain such sensitive data and information utilizing a combination of
on-site
systems, managed data center systems and cloud-based computing center systems.
We are highly dependent on information technology networks and systems, including the internet, to securely process, transmit and store this sensitive data and information. Security breaches of this infrastructure, including physical or electronic
break-ins,
computer viruses, attacks by hackers and similar breaches, and employee or contractor error, negligence or malfeasance, can create system disruptions, shutdowns or unauthorized disclosure or modifications of such sensitive data or information, causing PHI or other PII to be accessed or acquired without authorization or to become publicly available. We utilize third-party service providers for important aspects of the collection, storage, processing and transmission of employee, user and patient information, and other confidential and sensitive information, and therefore rely on third parties to manage functions that have material cybersecurity risks. Because of the sensitivity of the PHI, other PII and other sensitive information we and our service providers collect, store, transmit and otherwise process, the security of our technology platform and other aspects of our services, including those provided or facilitated by our third-party service providers, are important to our operations and business strategy. We take certain administrative, physical and technological safeguards to address these risks, such as by requiring contractors and other third-party service providers who handle this PHI, other PII and other sensitive information for us to enter into agreements that contractually obligate them to use reasonable efforts to safeguard such PHI, other PII, and other sensitive information. Measures taken to protect our systems, those of our contractors or third-party service providers, or the PHI, other PII, or other sensitive information we or contractors or third-party service providers process or maintain, may not adequately protect us from the risks associated with the collection, storage, processing and transmission of such sensitive data and information. We may be required to expend significant capital and other resources to protect against security breaches or to alleviate problems caused by security breaches. Despite our implementation of security measures, cyber-attacks are becoming more sophisticated and frequent. As a result, we or our third-party service providers may be unable to anticipate these techniques or to implement adequate protective measures.
A security breach or privacy violation that leads to disclosure or unauthorized use or modification of, or that prevents access to or otherwise impacts the confidentiality, security, or integrity of, patient information, including PHI or other PII, or other sensitive information we or our contractors or third-party service providers maintain or otherwise process, could harm our reputation, compel us to comply with breach notification laws, cause us to incur significant costs for remediation, fines, penalties, notification to individuals and for measures intended to repair or replace systems or technology and to prevent future occurrences, potential increases in insurance premiums, and require us to verify the accuracy of database contents, resulting in increased costs or loss of revenue. If we are unable to prevent or mitigate such security breaches or privacy violations or implement satisfactory remedial measures, or if it is perceived that we have been unable to do so, our operations could be disrupted, we may be unable to provide access to our systems, and we could suffer a loss of patients, and we may as a result suffer loss of reputation, adverse impacts on patient and investor confidence, financial loss, governmental investigations or other actions, regulatory or contractual penalties, and other claims and liability. In addition, security breaches and other inappropriate access to, or acquisition or processing of, information can be difficult to detect, and any delay in identifying such incidents or in providing any notification of such incidents may lead to increased harm.
Any such breach or interruption of our systems or those of any of our third-party service providers could compromise our networks or data security processes and sensitive information could be made inaccessible or
 
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could be accessed by unauthorized parties, publicly disclosed, lost, or stolen. Any such interruption in access, improper access, disclosure, or other loss of information could result in legal claims or proceedings, liability under laws and regulations that protect the privacy of member information or other personal information, such as the Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, and their implementing regulations (collectively known as “HIPAA”), and regulatory penalties. Unauthorized access, loss, or dissemination could also disrupt our operations, including our ability to perform our services, access patient health information, collect, process and prepare company financial information, provide information about our current and future services and engage in other patient and clinician education and outreach efforts. Any such breach could also result in the compromise of our trade secrets and other proprietary information, which could adversely affect our business and competitive position. While we maintain insurance covering certain security and privacy damages and claim expenses, we may not carry insurance or maintain coverage sufficient to compensate for all liability and in any event, insurance coverage would not address the reputational damage that could result from a security incident.
Our existing or future indebtedness could adversely affect our business and growth prospects.
As of December 31, 2021, we have $121.9 million of senior secured debt under the Credit Agreement, dated as of June 8, 2021, by and among CareMax, Royal Bank of Canada, as Administrative Agent, Collateral Agent, Swing Line Lender and Issuing Bank, RBC Capital Markets, LLC and Truist Securities, Inc., as Syndication Agents, Joint Lead Arrangers and Joint Book Runners, and certain other banks and financial institutions serving as lenders, as amended by the First Amendment to Credit Agreement, dated December 30, 2021 (as amended, the “Credit Agreement”). Our indebtedness under the Credit Agreement, or any additional indebtedness we may incur, could require us to divert funds identified for other purposes for debt service and impair our liquidity position. If we cannot generate sufficient cash flow from operations to service our debt, we may need to refinance our debt, dispose of assets or issue equity to obtain necessary funds. We do not know whether we will be able to take any of these actions on a timely basis, on terms satisfactory to us or at all.
Our indebtedness and the cash flow needed to satisfy our debt have important consequences, including:
 
  •  
limiting funds otherwise available for financing our capital expenditures by requiring us to dedicate a portion of our cash flows from operations to the repayment of debt and the interest on this debt;
 
  •  
making us more vulnerable to rising interest rates; and
 
  •  
making us more vulnerable in the event of a downturn in our business.
Our level of indebtedness may place us at a competitive disadvantage to our competitors that are not as highly leveraged. Fluctuations in interest rates can increase borrowing costs. Increases in interest rates may directly impact the amount of interest we are required to pay and reduce earnings accordingly. In addition, developments in tax policy, such as the disallowance of tax deductions for interest paid on outstanding indebtedness, could have an adverse effect on our liquidity and our business, financial conditions and results of operations.
The ability to make these payments depends on our financial and operating performance, which is subject to prevailing economic, industry and competitive conditions and to certain financial, business, economic and other factors beyond our control.
The terms of the Credit Agreement and certain of our other agreements restrict our current and future operations, particularly our ability to respond to changes in our business or to take certain actions.
The Credit Agreement and long-term leases we enter into in connection with certain of our medical centers contain restrictive covenants that impose significant operating and financial restrictions on us and may limit our
 
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ability to engage in acts that may be in our long-term best interests. For example, the Credit Agreement contains restrictions on our ability to:
 
  •  
incur or guarantee additional indebtedness, other than certain permitted debt;
 
  •  
incur liens, other than certain permitted liens;
 
  •  
pay dividends and distributions on, or redeem, repurchase or retire our capital stock;
 
  •  
make investments, acquisitions, loans, or advances;
 
  •  
engage in mergers, consolidations, liquidations or dissolutions;
 
  •  
sell, transfer or otherwise dispose of assets, including capital stock of subsidiaries;
 
  •  
engage in certain transactions with affiliates;
 
  •  
make changes in accounting treatment or reporting practices;
 
  •  
prepay, redeem or repurchase certain indebtedness; and
 
  •  
amend our organizational documents.
Under certain circumstances, the restrictive covenants in the Credit Agreement require us to satisfy certain financial maintenance tests. Our ability to satisfy those tests can be affected by events beyond our control. If our operating performance declines, we may in the future need to obtain waivers from the required lenders under our facilities or lines of credit to avoid being in default. Certain of our long-term leases contain similar covenants to the Credit Agreement and are subject to provisions that provide for a cross default in the event any of our covenants under the Credit Agreement are breached. If we breach our covenants under the Credit Agreement or any other agreement that contains similar covenants, we may be required to seek one or more waivers, we may not be able to obtain such waivers.
As a result of the restrictions described above, we will be limited as to how we conduct our business and we may be unable to raise additional debt or equity financing to compete effectively or to take advantage of new business opportunities. The terms of any future indebtedness we may incur could include more restrictive covenants. We cannot assure you that we will be able to maintain compliance with these covenants in the future and, if we fail to do so, that we will be able to obtain waivers from the lenders and/or amend the covenants.
A breach of the covenants or restrictions under the Credit Agreement could result in an event of default thereunder. In the event the holders of our indebtedness accelerate the repayment, we may not have sufficient assets to repay that indebtedness or be able to borrow sufficient funds to refinance it. Even if we are able to obtain new financing, it may not be on commercially reasonable terms or on terms acceptable to us. As a result of these restrictions, we may be:
 
  •  
limited in how we conduct our business;
 
  •  
unable to raise additional debt or equity financing to operate during general economic or business downturns; or
 
  •  
unable to compete effectively or to take advantage of new business opportunities.
These restrictions, along with restrictions that may be contained in agreements evidencing or governing other future indebtedness, may affect our ability to grow in accordance with our growth strategy.
Any future credit facilities or debt instruments we may issue will likely contain similar, or potentially more expansive, events of default as compared to those set forth in the terms of the Credit Agreement, including those breaches or defaults with respect to any of our other outstanding debt instruments.
 
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We may be subject to legal proceedings and litigation, including intellectual property and privacy disputes, which are costly to defend and could materially harm our business and results of operations.
We may be party to lawsuits and legal proceedings in the normal course of business. We may face allegations, lawsuits and regulatory inquiries, audits and investigations regarding data privacy, security, labor and employment, consumer protection and intellectual property infringement, including claims related to privacy, patents, publicity, trademarks, copyrights and other rights. We may also face allegations or litigation related to our acquisitions or business practices. Certain of these matters may include speculative claims for substantial or indeterminate amounts of damages and include claims for injunctive relief. We may also become subject to periodic audits, which would likely increase our regulatory compliance costs and may require us to change our business practices, which could negatively impact our revenue growth.
The results of regulatory proceedings, litigation, claims and audits cannot be predicted with certainty, and determining reserves for pending litigation and other legal, regulatory and audit matters requires significant judgment. There can be no assurance that our expectations will prove correct, and even if these matters are resolved in our favor or without significant cash settlements, these matters, and the time and resources necessary to litigate or resolve them, could harm our reputation, business, financial condition and results of operations.
If federal or state government officials audit or investigate our operations or arrangements with third parties, the challenge could potentially disrupt our business operations and we may incur substantial defense costs, even if we successfully defend our interpretation of applicable laws, rules and regulations. In addition, if the government successfully challenges our interpretation as to the applicability of laws, rules and regulations as they relate to our operations and arrangements with third parties, that may have a material adverse effect on our business, financial condition and results of operations. In the event regulatory action were to limit or prohibit us from carrying on our business as we presently conduct it or from expanding our operations to certain jurisdictions, we may need to make structural, operational and organizational modifications to our business and/or our contractual arrangements with third party payers. Our operating costs could increase significantly as a result.
We believe that audits, inquiries and investigations from government agencies will continue to occur from time to time in the ordinary course of our business, which could result in substantial defense costs to us and a diversion of management’s time and attention. Such pending or future audits, inquiries or investigations, or the public disclosure of such matters, may have a material adverse effect on our business, financial condition and results of operations.
We also may be subject to lawsuits under the federal False Claims Act (the “FCA”) and comparable state laws for submitting allegedly fraudulent or otherwise inappropriate bills for services to the Medicare and Medicaid programs. These lawsuits, which may be initiated by government authorities as well as private party relators, can involve significant monetary damages, fines, attorney fees and the award of bounties to private plaintiffs who successfully bring these suits, as well as to the government programs. In recent years, government oversight and law enforcement have become increasingly active and aggressive in investigating and taking legal action against potential fraud and abuse
Furthermore, our business exposes us to potential medical malpractice, professional negligence, or other related actions or claims that are inherent in the provision of healthcare services. These claims, with or without merit, could cause us to incur substantial costs and could place a significant strain on our financial resources, divert the attention of management from our core business, harm our reputation and adversely affect our ability to attract and retain patients, any of which could have a material adverse effect on our business, financial condition and results of operations.
Managing legal proceedings, litigation and audits, even if we achieve favorable outcomes, is time-consuming and diverts management’s attention from our business. Additionally, these matters are often
 
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expensive and disruptive to normal business operations and the costs of litigating these matters could be significant. Litigation and regulatory proceedings may be protracted and the results are difficult to predict. Adverse outcomes with respect to litigation or any of these legal proceedings may result in significant settlement costs or judgments, penalties and fines, or require us to modify our services or require us to stop serving certain patients or geographies, all of which could negatively impact our geographical expansion and revenue growth.
Although we maintain third-party professional liability insurance coverage, it is possible that claims against us may exceed the coverage limits of our insurance policies. Even if any professional liability loss is covered by an insurance policy, these policies typically have substantial deductibles for which we are responsible. Professional liability claims in excess of applicable insurance coverage could have a material adverse effect on our business, financial condition and results of operations. In addition, any professional liability claim brought against us, with or without merit, could result in an increase of our professional liability insurance premiums. Insurance coverage varies in cost and can be difficult to obtain, and we cannot guarantee that we will be able to obtain insurance coverage in the future on terms acceptable to us or at all. If our costs of insurance and claims increase, then our earnings could decline.
We may be subject to claims that our employees, consultants, or advisors have wrongfully used or disclosed alleged trade secrets of their current or former employers or claims asserting ownership of what we regard as our own intellectual property.
Many of our employees, consultants and advisors are currently or were previously employed at other companies in our field, including our competitors or potential competitors. Although we try to ensure that our employees, consultants, and advisors do not use the proprietary information or
know-how
of others in their work for us, we may be subject to claims that we or these individuals have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such individual’s current or former employer. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management.
In addition, while it is our policy to require our employees and contractors who may be involved in the conception or development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who, in fact, conceives or develops intellectual property that we regard as our own. The assignment of intellectual property rights may not be self-executing, or the assignment agreements may be breached, and we may be forced to bring claims against third parties, or defend claims that they may bring against us, to determine the ownership of what we regard as our intellectual property. Any of the foregoing could harm our competitive position, business, financial condition, results of operations and prospects.
We face inspections, reviews, audits and investigations under federal and state government programs and contracts. These audits could have adverse findings that may negatively affect our business, including our results of operations, liquidity, financial condition and reputation.
As a result of our participation in the Medicare and Medicaid programs, we are subject to various governmental inspections, reviews, audits and investigations to verify our compliance with these programs and applicable laws and regulations. Payors may also reserve the right to conduct audits. We also periodically conduct internal audits and reviews of our regulatory compliance. An adverse inspection, review, audit or investigation could result in:
 
  •  
refunding amounts we have been paid pursuant to the Medicare or Medicaid programs or from payors;
 
  •  
state or federal agencies imposing fines, penalties and other sanctions on us;
 
  •  
temporary suspension of payment for new patients to the facility or agency;
 
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  •  
decertification or exclusion from participation in the Medicare or Medicaid programs or one or more payor networks;
 
  •  
self-disclosure of violations to applicable regulatory authorities;
 
  •  
damage to our reputation;
 
  •  
the revocation of a facility’s or agency’s license; and
 
  •  
loss of certain rights under, or termination of, our contracts with payors.
We have in the past and will likely in the future be required to refund amounts we have been paid and/or pay fines and penalties as a result of these inspections, reviews, audits and investigations. If adverse inspections, reviews, audits or investigations occur and any of the results noted above occur, it could have a material adverse effect on our business and operating results. Furthermore, the legal, document production and other costs associated with complying with these inspections, reviews, audits or investigations could be significant.
Reductions in the quality ratings of the health plans we serve could have a material adverse effect on our business, results of operations, financial condition and cash flows.
As a result of the ACA, the level of reimbursement each health plan receives from CMS is dependent, in part, upon the quality rating of the Medicare plan. Such ratings impact the percentage of any cost savings rebate and any bonuses earned by such health plan. Since a significant portion of our revenue is expected to be calculated as a percentage of CMS reimbursements received by these health plans with respect to our patients, reductions in the quality ratings of a health plan that we serve could have a material adverse effect on our business, results of operations, financial condition and cash flows.
Given each health plan’s control of its plans and the many other providers that serve such plans, we believe that we will have limited ability to influence the overall quality rating of any such plan. The Balanced Budget Act that passed in February 2018 implemented certain changes to prevent artificial inflation of star ratings for MA plans offered by the same organization. In addition, CMS has terminated plans that have had a rating of less than three stars for three consecutive years, whereas MA plans with five stars are permitted to conduct enrollment throughout almost the entire year. Because low quality ratings can potentially lead to the termination of a plan in which we participate, we may not be able to prevent the potential termination of a contracting plan or a shift of patients to other plans based upon quality issues which could, in turn, have a material adverse effect on our business, results of operations, financial condition and cash flows.
If we are not able to maintain and enhance our reputation and brand recognition, including through the maintenance and protection of trademarks, our business and results of operations may be harmed.
We believe that maintaining and enhancing our reputation and brand recognition is critical to our relationships with both patients and payors and to our ability to attract new patients. The promotion of our brand may require us to make substantial investments and we anticipate that, as our market becomes increasingly competitive, these marketing initiatives may become increasingly difficult and expensive. Our marketing activities may not be successful or yield increased revenue, and to the extent that these activities yield increased revenue, the increased revenue may not offset the expenses we incur and our results of operations could be harmed. In addition, any factor that diminishes our reputation or that of our management, including failing to meet the expectations of or provide quality medical care for our patients, or any adverse publicity or litigation involving or surrounding us, one of our centers or our management, could make it substantially more difficult for us to attract new patients. Similarly, because our existing patients often act as references for us with prospective new patients, any existing patient that questions the quality of our care could impair our ability to secure additional new patients. In addition, negative publicity resulting from any adverse government payor audit could injure our reputation. If we do not successfully maintain and enhance our reputation and brand recognition, our business may not grow and we could lose our relationships with patients, which would harm our business, results of operations and financial condition.
 
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The registered or unregistered trademarks or trade names that we own or license may be challenged, infringed, circumvented, declared generic, lapsed or determined to be infringing on or dilutive of other marks. We may not be able to protect our rights in these trademarks and trade names, which we need in order to build name recognition with patients, payors and other partners. In addition, third parties may in the future file for registration of trademarks similar or identical to our trademarks. If they succeed in registering or developing common law rights in such trademarks, and if we are not successful in challenging such third-party rights, we may not be able to use these trademarks to commercialize our technologies in certain relevant jurisdictions. If we are unable to establish name recognition based on our trademarks and trade names, we may not be able to compete effectively and our brand recognition, reputation and results of operations may be adversely affected.
Our business depends on our ability to effectively invest in, implement improvements to and properly maintain the uninterrupted operation and data integrity of our information technology and other business systems.
Our business is highly dependent on maintaining effective information systems as well as the integrity and timeliness of the data we use to serve our patients, support our care teams and operate our business. Because of the large amount of data that we collect and manage, it is possible that hardware failures or errors in our systems could result in data loss or corruption or cause the information that we collect to be incomplete or contain inaccuracies that our partners regard as significant. If our data were found to be inaccurate or unreliable due to fraud or other error, or if we, or any of the third-party service providers we engage, were to fail to maintain information systems and data integrity effectively, we could experience operational disruptions that may impact our patients and care teams and hinder our ability to provide services, establish appropriate pricing for services, retain and attract patients, manage our patient risk profiles, establish reserves, report financial results timely and accurately and maintain regulatory compliance, among other things.
Our information technology strategy and execution are critical to our continued success. We must continue to invest in long-term solutions that will enable us to anticipate patient needs and expectations, enhance the patient experience, act as a differentiator in the market and protect against cybersecurity risks and threats. Our success is dependent, in large part, on maintaining the effectiveness of existing technology systems and continuing to deliver and enhance technology systems that support our business processes in a cost-efficient and resource-efficient manner. Increasing regulatory and legislative changes will place additional demands on our information technology infrastructure that could have a direct impact on resources available for other projects tied to our strategic initiatives. In addition, recent trends toward greater patient engagement in health care require new and enhanced technologies, including more sophisticated applications for mobile devices. Connectivity among technologies is becoming increasingly important. We must also develop new systems to meet current market standards and keep pace with continuing changes in information processing technology, evolving industry and regulatory standards and patient needs. Failure to do so may present compliance challenges and impede our ability to deliver services in a competitive manner. Further, because system development projects are long-term in nature, they may be more costly than expected to complete and may not deliver the expected benefits upon completion. Our failure to effectively invest in, implement improvements to and properly maintain the uninterrupted operation and data integrity of our information technology and other business systems could adversely affect our results of operations, financial position and cash flow.
If we are unable to obtain, maintain and enforce intellectual property protection for our technology or if the scope of our intellectual property protection is not sufficiently broad, particularly with respect to the CareOptimize platform, others may be able to develop and commercialize technology substantially similar to ours, and our ability to successfully commercialize our technology may be adversely affected.
Our business depends on internally developed technology and content, including software, databases, confidential information and
know-how,
the protection of which is crucial to the success of our business. We rely on a combination of trademark, trade-secret, and copyright laws and confidentiality procedures and contractual provisions to protect our intellectual property rights in our internally developed technology and content. We may, over time, increase our investment in protecting our intellectual property through additional trademark, patent
 
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and other intellectual property filings that could be expensive and time-consuming. Effective trademark, trade-secret and copyright protection is expensive to develop and maintain, both in terms of initial and ongoing registration requirements and the costs of defending our rights. These measures, however, may not be sufficient to offer us meaningful protection. Additionally, CareMax does not currently hold a patent or other registered or applied for intellectual property protection for the CareOptimize platform, and instead relies upon
non-registered
rights, including trade secrets, contractual provisions and restrictions on access, to protect our intellectual property rights in CareOptimize. Furthermore, because CareMax does not currently have a patent portfolio, if a competitor sues CareMax for patent infringement, our ability to counterclaim or settle through patent cross-licenses may be diminished. If we are unable to protect our intellectual property and other rights, particularly with respect to the CareOptimize platform, our competitive position and our business could be harmed, as third parties may be able to commercialize and use technologies and software products that are substantially the same as ours without incurring the development and licensing costs that we have incurred. Any of our owned or licensed intellectual property rights could be challenged, invalidated, circumvented, infringed, or misappropriated, our trade secrets and other confidential information could be disclosed in an unauthorized manner to third parties, or our intellectual property rights may not be sufficient to permit us to take advantage of current market trends or otherwise to provide us with competitive advantages, which could result in costly redesign efforts, discontinuance of certain offerings or other competitive harm.
Monitoring unauthorized use of our intellectual property is difficult and costly. From time to time, we seek to analyze our competitors’ services, and may in the future seek to enforce our rights against potential infringement. However, the steps we have taken to protect our intellectual property rights may not be adequate to prevent infringement or misappropriation of our intellectual property. We may not be able to detect unauthorized use of, or take appropriate steps to enforce, our intellectual property rights. Any inability to meaningfully protect our intellectual property rights could result in harm to our ability to compete and reduce demand for our technology. Moreover, our failure to develop and properly manage new intellectual property could adversely affect our market positions and business opportunities. Also, some of our services rely on technologies and software developed by or licensed from third parties, and we may not be able to maintain our relationships with such third parties or enter into similar relationships in the future on reasonable terms or at all.
Uncertainty may result from changes to intellectual property legislation and from interpretations of intellectual property laws by applicable courts and agencies. Accordingly, despite our efforts, we may be unable to obtain and maintain the intellectual property rights necessary to provide us with a competitive advantage. Our failure to obtain, maintain and enforce our intellectual property rights could therefore have a material adverse effect on our business, financial condition and results of operations.
Third parties may initiate legal proceedings alleging that we are infringing or otherwise violating their intellectual property rights, the outcome of which would be uncertain and could have a material adverse effect on our business, financial condition and results of operations.
Our commercial success depends on our ability to develop and commercialize our services and use our internally developed technology without infringing the intellectual property or proprietary rights of third parties. Intellectual property disputes can be costly to defend and may cause our business, operating results and financial condition to suffer. As the market for healthcare in the United States expands and more patents are issued, the risk increases that there may be patents issued to third parties that relate to our technology of which we are not aware or that we must challenge to continue our operations as currently contemplated. Whether merited or not, we may face allegations that we, our partners or parties indemnified by us have infringed or otherwise violated the patents, trademarks, copyrights or other intellectual property rights of third parties. Such claims may be made by competitors seeking to obtain a competitive advantage or by other parties. Additionally, in recent years, individuals and groups have begun purchasing intellectual property assets for the purpose of making claims of infringement and attempting to extract settlements from companies like ours. We may also face allegations that our employees have misappropriated the intellectual property or proprietary rights of their former employers or other third parties. It may be necessary for us to initiate litigation to defend ourselves in order to determine the
 
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scope, enforceability and validity of third-party intellectual property or proprietary rights, or to establish our respective rights. We may not be able to successfully settle or otherwise resolve such adversarial proceedings or litigation. If we are unable to successfully settle future claims on terms acceptable to us we may be required to engage in or to continue claims, regardless of whether such claims have merit, which can be time-consuming, divert management’s attention and financial resources and can be costly to evaluate and defend. Results of any such litigation are difficult to predict and may require us to stop commercializing or using our technology, obtain licenses, modify our services and technology while we develop
non-infringing
substitutes or incur substantial damages, settlement costs or face a temporary or permanent injunction prohibiting us from marketing or providing the affected services. If we require a third-party license, it may not be available on reasonable terms or at all, and we may have to pay substantial royalties, upfront fees or grant cross-licenses to intellectual property rights for our services. We may also have to redesign our services so they do not infringe third-party intellectual property rights, which may not be possible or may require substantial monetary expenditures and time, during which our technology may not be available for commercialization or use. Even if we have an agreement to indemnify us against such costs, the indemnifying party may be unable to uphold its contractual obligations. If we cannot or do not obtain a third-party license to the infringed technology at all, license the technology on reasonable terms or obtain similar technology from another source, our revenue and earnings could be adversely impacted.
From time to time, we may be subject to legal proceedings and claims in the ordinary course of business with respect to intellectual property. We are not currently subject to any claims from third parties asserting infringement of their intellectual property rights. Some third parties may be able to sustain the costs of complex litigation more effectively than we can because they have substantially greater resources. Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses, and could distract our technical and management personnel from their normal responsibilities. Moreover, any uncertainties resulting from the initiation and continuation of any legal proceedings could have a material adverse effect on our ability to raise the funds necessary to continue our operations. Assertions by third parties that we violate their intellectual property rights could therefore have a material adverse effect on our business, financial condition and results of operations.
If we are unable to protect the confidentiality of our trade secrets,
know-how
and other proprietary and internally developed information, the value of our technology could be adversely affected.
We may not be able to protect our trade secrets,
know-how
and other internally developed information, including in relation to our CareOptimize platform, adequately. Although we use reasonable efforts to protect this internally developed information and technology, our employees, consultants and other parties (including independent contractors and companies with which we conduct business) may unintentionally or willfully disclose our information or technology to competitors. Enforcing a claim that a third party illegally disclosed or obtained and is using any of our internally developed information or technology is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, courts outside the United States are sometimes less willing to protect trade secrets,
know-how
and other proprietary information. We rely, in part, on
non-disclosure,
confidentiality and
assignment-of-invention
agreements with our employees, independent contractors, consultants and companies with which we conduct business to protect our trade secrets,
know-how
and other intellectual property and internally developed information. These agreements may not be self-executing, or they may be breached and we may not have adequate remedies for such breach. Moreover, third parties may independently develop similar or equivalent proprietary information or otherwise gain access to our trade secrets,
know-how
and other internally developed information.
Any restrictions on our use of, or ability to license, data, or our failure to license data and integrate third-party technologies, could have a material adverse effect on our business, financial condition and results of operations.
We depend upon licenses from third parties for some of the technology and data used in our CareOptimize platform. We expect that we may need to obtain additional licenses from third parties in the future in connection
 
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with the development of our services. In addition, we obtain a portion of the data that we use from government entities, public records and from our partners for specific partner engagements. We believe that we have all rights necessary to use the data that is incorporated into our services. We cannot, however, assure you that our licenses for information will allow us to use that information for all potential or contemplated applications.
In the future, data providers could withdraw their data from us or restrict our usage for any reason, including if there is a competitive reason to do so, if legislation is passed restricting the use of the data, or if judicial interpretations are issued restricting use of the data that we currently use to support our services. In addition, data providers could fail to adhere to our quality control standards in the future, causing us to incur additional expense to appropriately utilize the data. If a substantial number of data providers were to withdraw or restrict their data, or if they fail to adhere to our quality control standards, and if we are unable to identify and contract with suitable alternative data suppliers and integrate these data sources into our service offerings, our ability to provide appropriate services to our patients would be materially adversely impacted, which could have a material adverse effect on our business, financial condition and results of operations.
We also integrate into our internally developed applications and use third-party software to support our technology infrastructure. Some of this software is proprietary and some is open source software. These technologies may not be available to us in the future on commercially reasonable terms or at all and could be difficult to replace once integrated into our own internally developed applications. Most of these licenses can be renewed only by mutual consent and may be terminated if we breach the terms of the license and fail to cure the breach within a specified period of time. Our inability to obtain, maintain or comply with any of these licenses could delay development until equivalent technology can be identified, licensed and integrated, which would harm our business, financial condition and results of operations.
Most of our third-party licenses are
non-exclusive
and our competitors may obtain the right to use any of the technology covered by these licenses to compete directly with us. Our use of third-party technologies exposes us to increased risks, including, but not limited to, risks associated with the integration of new technology into our solutions, the diversion of our resources from development of our own internally developed technology and our inability to generate revenue from licensed technology sufficient to offset associated acquisition and maintenance costs. In addition, if our data suppliers choose to discontinue support of the licensed technology in the future, we might not be able to modify or adapt our own solutions.
We depend on our senior management team and other key employees, and the loss of one or more of these employees or an inability to attract and retain other highly skilled employees could harm our business.
Our success depends largely upon the continued services of our senior management team and other key employees. We rely on our leadership team in the areas of operations, provision of medical services, information technology and security, marketing, and general and administrative functions. From time to time, there may be changes in our executive management team resulting from the hiring or departure of executives, which could disrupt our business. The loss of one or more of the members of our senior management team, or other key employees, could harm our business. In particular, the loss of the services of CareMax’s
co-founder
and Chief Executive Officer, Carlos A. de Solo, could significantly delay or prevent the achievement of our strategic objectives. Changes in our executive management team may also cause disruptions in, and harm to, our business.
Our primary care medical centers are concentrated in South and Central Florida, and we may not be able to successfully establish a presence in new geographic markets.
Our revenue is derived from our primary care medical centers in Florida, particularly in South and Central Florida. As a result, our exposure to many of the risks described herein are not mitigated by a diversification of geographic focus. Furthermore, due to the concentration of our operations in these regions, our business may be adversely affected by economic conditions that disproportionately affect this region as compared to other regions. To continue to expand our operations to other regions of the United States, we will have to devote
 
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resources to identifying and exploring such perceived opportunities. Thereafter, we will have to, among other things, recruit and retain qualified personnel, develop new primary care medical centers and establish new relationships with physicians and other healthcare providers. In addition, we would be required to comply with laws and regulations of states that may differ from the ones in which we currently operate, and could face competitors with greater knowledge of such local markets. We anticipate that further geographic expansion will require us to make a substantial investment of management time, capital and/or other resources. There can be no assurance that we will be able to continue to successfully expand our operations in any new geographic markets.
Our overall business results may suffer from an economic downturn.
During periods of high unemployment, governmental entities often experience budget deficits as a result of increased costs and lower than expected tax collections. These budget deficits at federal, state and local government entities have decreased, and may continue to decrease, spending for health and human service programs, including Medicare, Medicaid and similar programs, which represent significant payor sources for our centers. Other risks we face during periods of high unemployment include potential declines in the population covered under capitation agreements, potential increases in the uninsured and underinsured populations and further difficulties in our collecting patient
co-payment
and deductible receivables.
We lease all of our facilities and may experience risks relating to lease termination, lease expense escalators, lease extensions and special charges.
We currently lease or license all of our centers. Our leases are typically on terms ranging from 10 to 20 years. Each of our lease or license agreements provides that the lessor may terminate the lease, subject to applicable cure provisions, for a number of reasons, including the defaults in any payment of rent, taxes or other payment obligations or the breach of any other covenant or agreement in the lease. Termination of certain of our lease agreements could result in a cross-default under our debt agreements or other lease agreements. If a lease agreement is terminated, there can be no assurance that we will be able to enter into a new lease agreement on similar or better terms or at all.
Our lease obligations often include annual fixed rent escalators ranging between 2% and 3% or variable rent escalators based on a consumer price index. These escalators could impact our ability to satisfy certain obligations and financial covenants. If the results of our operations do not increase at or above the escalator rates, it would place an additional burden on our results of operations, liquidity and financial position.
As we continue to expand and have leases or licenses with different start dates, it is likely that some number of our leases and licenses will expire each year. Our lease or license agreements often provide for renewal or extension options. There can be no assurance that these rights will be exercised in the future or that we will be able to satisfy the conditions precedent to exercising any such renewal or extension. In addition, if we are unable to renew or extend any of our leases or licenses, we may lose all of the facilities subject to that master lease agreement. If we are not able to renew or extend our leases or licenses at or prior to the end of the existing lease terms, or if the terms of such options are unfavorable or unacceptable to us, our business, financial condition and results of operation could be adversely affected.
Leasing facilities pursuant to binding lease or license agreements may limit our ability to exit markets. For instance, if one facility under a lease or license becomes unprofitable, we may be required to continue operating such facility or, if allowed by the landlord to close such facility, we may remain obligated for the lease payments on such facility. We could incur special charges relating to the closing of such facility, including lease termination costs, impairment charges and other special charges that would reduce our profits and could have a material adverse effect on our business, financial condition or results of operations.
Our failure to pay the rent or otherwise comply with the provisions of any of our lease agreements could result in an “event of default” under such lease agreement and also could result in a cross default under other
 
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lease agreements and agreements for our indebtedness. Upon an event of default, remedies available to our landlords generally include, without limitation, terminating such lease agreement, repossessing and reletting the leased properties and requiring us to remain liable for all obligations under such lease agreement, including the difference between the rent under such lease agreement and the rent payable as a result of reletting the leased properties, or requiring us to pay the net present value of the rent due for the balance of the term of such lease agreement. The exercise of such remedies would have a material adverse effect on our business, financial position, results of operations and liquidity.
If certain of our suppliers do not meet our needs, if there are material price increases on supplies, if we are not reimbursed or adequately reimbursed for drugs we purchase or if we are unable to effectively access new technology or superior products, it could negatively impact our ability to effectively provide the services we offer and could have a material adverse effect on our business, results of operations, financial condition and cash flows.
We have significant suppliers that may be the sole or primary source of products critical to the services we provide, or to which we have committed obligations to make purchases, sometimes at particular prices. If any of these suppliers do not meet our needs for the products they supply, including in the event of a product recall, shortage or dispute, and we are not able to find adequate alternative sources, if we experience material price increases from these suppliers that we are unable to mitigate, or if some of the drugs that we purchase are not reimbursed or not adequately reimbursed by commercial or government payors, it could have a material adverse impact on our business, results of operations, financial condition and cash flows. In addition, the technology related to the products critical to the services we provide is subject to new developments which may result in superior products. If we are not able to access superior products on a cost-effective basis or if suppliers are not able to fulfill our requirements for such products, we could face patient attrition and other negative consequences which could have a material adverse effect on our business, results of operations, financial condition and cash flows.
Our corporate cultures have contributed to our success, and if we cannot maintain a positive corporate culture as we grow, we could lose innovation, creativity and teamwork and our business may be harmed.
We believe that corporate culture has been a critical contributor to our success, particularly regarding our ability to attract highly skilled personnel. If we do not continue to develop corporate culture or maintain and preserve core values as we grow and evolve, we may be unable to foster the innovation, curiosity, creativity, focus on execution, teamwork and the facilitation of critical knowledge transfer and knowledge sharing we believe we need to support our growth. Our anticipated headcount growth and our transition from two private companies to a single public company, along with additional acquisitions subsequent to the Business Combination, may result in a change in corporate culture, which could harm our business.
Our records and submissions to a health plan may contain inaccurate or unsupportable information regarding risk adjustment scores of members, which could cause us to overstate or understate our revenue and subject us to various penalties.
The claims and encounter records that we submit to health plans may impact data that support the Medicare Risk Adjustment Factor (“RAF”) scores attributable to members. These RAF scores determine, in part, the revenue to which the health plans and, in turn, we are entitled for the provision of medical care to such members. The data submitted to CMS by each health plan is based, in part, on medical charts and diagnosis codes that we prepare and submit to the health plans. Each health plan generally relies on us and our affiliated physicians to appropriately document and support such RAF data in our medical records. Each health plan also relies on us and our affiliated physicians to appropriately code claims for medical services provided to members. Erroneous claims and erroneous encounter records and submissions could result in inaccurate revenue and risk adjustment payments, which may be subject to correction or retroactive adjustment in later periods. This corrected or adjusted information may be reflected in financial statements for periods subsequent to the period in which the
 
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revenue was recorded. We might also need to refund a portion of the revenue that we received, which refund, depending on its magnitude, could damage our relationship with the applicable health plan and could have a material adverse effect on our business, results of operations, financial condition and cash flows.
Additionally, CMS performs Risk Adjustment Data Validation (“RADV”) audits of the diagnosis codes reported by MA plans to confirm they are supported by medical documentation and to determine if risk-adjustment calculations, are accurate. The MA plans ask providers to submit the underlying documentation for members that they serve. CMS then compares the diagnoses reflected in the risk scores with underlying medical records to identify whether there are any codes that are not supported by the medical record. If this comparison of sample enrollees yields a difference, referred to as an error rate, CMS plans to calculate a contract-level error rate (i.e., the entire error in payment if the errors found in the RADV audit were reflected in all similar cases for that contract).
It is possible that claims associated with members with higher RAF scores could be subject to more scrutiny in a CMS or plan audit. There is a possibility that a MA plan may seek repayment from us should CMS make any payment adjustments to the MA plan as a result of its audits. The plans also may hold us liable for any penalties owed to CMS for inaccurate or unsupportable RAF scores provided by us or our affiliated physicians. In addition, we could be liable for penalties to the government under the FCA that range from $5,500 to $11,000 (adjusted for inflation) for each false claim, plus up to three times the amount of damages caused by each false claim, which can be as much as the amounts received directly or indirectly from the government for each such false claim. On June 19, 2020, the DOJ issued a final rule announcing adjustments to FCA penalties, under which the per claim range increases to a range from $11,665 to $23,331 per claim, so long as the underlying conduct occurred after November 2, 2015.
CMS has indicated that payment adjustments will not be limited to RAF scores for the specific MA enrollees for which errors are found but may also be extrapolated to the entire MA plan subject to a particular CMS contract. CMS has described its audit process as plan-year specific and stated that it will not extrapolate audit results for plan years prior to 2011. Because CMS has not stated otherwise, there is a risk that payment adjustments made as a result of one plan year’s audit would be extrapolated to prior plan years after 2011.
There can be no assurance that a health plan will not be randomly selected or targeted for review by CMS or that the outcome of such a review will not result in a material adjustment in our revenue and profitability, even if the information we submitted to the plan is accurate and supportable.
A failure to accurately estimate incurred but not paid medical expense could adversely affect our results of operations.
Patient care costs include estimates of future medical claims that have been incurred by the patient but for which the provider has not yet billed. These claim estimates are made utilizing actuarial methods and are continually evaluated and adjusted by management, based upon our historical claims experience and other factors, including an independent assessment by a nationally recognized actuarial firm. Adjustments, if necessary, are made to medical claims expense and capitated revenues when the assumptions used to determine our claims liability change and when actual claim costs are ultimately determined.
Due to the inherent uncertainties associated with the factors used in these estimates and changes in the patterns and rates of medical utilization, materially different amounts could be reported in our financial statements for a particular period under different conditions or using different, but still reasonable, assumptions. It is possible that our estimates of this type of claim may be inadequate in the future.
In such event, our results of operations could be adversely impacted. Further, the inability to estimate these claims accurately may also affect our ability to take timely corrective actions, further exacerbating the extent of any adverse effect on our results of operations.
 
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Negative publicity regarding the managed healthcare industry generally could adversely affect our results of operations or business.
Negative publicity regarding the managed healthcare industry generally, or the MA program in particular, may result in increased regulation and legislative review of industry practices that further increase our costs of doing business and adversely affect our results of operations or business by:
 
  •  
requiring us to change our products and services;
 
  •  
increasing the regulatory, including compliance, burdens under which we operate, which, in turn, may negatively impact the manner in which we provide services and increase our costs of providing services;
 
  •  
adversely affecting our ability to market our products or services through the imposition of further regulatory restrictions regarding the manner in which plans and providers market to MA enrollees; or
 
  •  
adversely affecting our ability to attract and retain patients.
Our primary care medical centers may be negatively impacted by weather and other factors beyond our control.
Our results of operations may be adversely impacted by adverse conditions affecting our centers, including severe weather events such as hurricanes and flooding, public health concerns such as contagious disease outbreaks, violence or threats of violence or other factors beyond our control that cause disruption of patient scheduling, displacement of our patients, employees and care teams, or force certain of our centers to close temporarily. Given our concentration in South and Central Florida, most of our medical centers may be simultaneously affected by adverse weather conditions or other events. Our future operating results may be adversely affected by these and other factors that disrupt the operation of our centers.
Since the Business Combination, we have generated net losses, and we may not be able to achieve or maintain sustained profitability as a combined company.
As a combined entity, we incurred net losses of approximately $6.7 million for the twelve months ended December 31, 2021. We expect our aggregate costs will increase substantially in the foreseeable future and our losses will continue as we expect to invest in our de novo expansion strategy, organically increasing our member base, expanding our operations, hiring additional employees, integrating acquired businesses, pursuing additional strategic acquisitions and operating as a public company. These efforts may prove more expensive than we currently anticipate, and we may not succeed in increasing our revenue sufficiently to offset these higher expenses in the immediate future. In such a case, we may be required to seek additional financing, which may not be on terms on terms satisfactory to us, and our business and growth prospects may suffer.
To raise capital, we may sell equity securities, convertible securities or other securities in one or more transactions at prices and in a manner we determine from time to time. Our ability to sell such securities will depend on may factors, some of which are not within our control, such as market conditions, and if we sell equity securities, convertible securities or other securities, our current stockholders may be materially diluted by subsequent sales. Additionally, the Credit Agreement contains significant restrictions on our ability to issue new debt, which could further restrict our ability to raise capital. See “
The terms of certain of our agreements, including the Credit Agreement, restrict our current and future operations, particularly our ability to respond to changes or to take certain actions
” above for further discussion of the restrictions contained in the Credit Agreement. Further, we may not be able to refinance the Credit Agreement in the event we seek to incur additional debt, and our ability to refinance the Credit Agreement will depend, among other things, on the capital and credit markets and our financial condition at such time. We cannot guarantee that any such efforts to raise capital will be successful, and in the event we are unable to raise additional capital necessary to execute our business strategy, our business operations and financial condition could be materially adversely affected.
 
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Our cash flows from operating activities were negative for the year ended December 31, 2021. We may not generate positive cash flow from operating activities in any given period, and our limited operating history as a combined company with IMC and other acquisitions made subsequent to the Business Combination may make it difficult to evaluate our current business and our future prospects. In addition, we have and expect to continue expend a significant amount of cash on acquisitions and investing in de novo medical centers, which we do not expect to generate immediate net profits. There is no guarantee that any of these investments will be successful or generate a net profit. Even if these investments result in additional revenue, we may not be able to effectively manage such growth or successfully execute on our business plan and vision which could materially and adversely impact our ability to achieve profitability. If we are not able to achieve sustainable profitability as a combined company and generate sufficient cash flow to support our business operations and debt obligations, then our ability to execute our business strategy and maintain our business operations could be materially adversely affected
We may invest in or acquire other businesses, and our business may suffer if we are unable to successfully integrate acquired businesses into our company or otherwise manage the growth associated with multiple acquisitions.
As part of our business strategy, we have made, and we intend to continue to make, acquisitions as opportunities arise to add new medical practices or other complementary businesses. In some cases, the costs of such acquisitions may be substantial, including as a result of professional fees and due diligence efforts. There is no assurance that the time and resources expended on pursuing any particular acquisition will result in a completed transaction, or that any completed transaction will ultimately be successful. In addition, we may be unable to identify suitable medical practices as candidates for acquisition, or we may be unable to obtain any required financing or regulatory approvals, and therefore may be unable to complete such acquisitions on favorable terms, if at all. We may decide to pursue acquisitions with which our investors may not agree and we cannot assure investors that any acquisition or investment will be successful or otherwise provide a favorable return on investment. In addition, acquisitions of medical practices and the integration thereof require significant time and resources and place significant demands on our management, as well as on our operational and financial infrastructure. In addition, if we fail to successfully close transactions or integrate new teams, or integrate the medical practices into our business, our could be seriously harmed. Acquisitions may expose us to operational challenges and risks, including:
 
  •  
the ability to profitably manage acquired medical practices or successfully integrate the acquired medical practices into our business;
 
  •  
increased expense of integrating acquired businesses, including significant administrative, operational, economic, geographic or cultural challenges in managing and integrating the expanded or combined operations;
 
  •  
entry into jurisdictions or acquisition of products or technologies with which we have limited or no prior experience, and the potential of increased competition with new or existing competitors as a result of such acquisitions;
 
  •  
diversion of management’s attention and the over-extension of our existing operating business and our management systems, information technology systems, and internal controls and procedures, which may be inadequate to support growth;
 
  •  
the ability to fund our capital needs and any cash flow shortages that may occur if anticipated revenue is not realized or is delayed, whether by general economic or market conditions, or unforeseen internal difficulties; and
 
  •  
the ability to retain or hire qualified personnel required for expanded operations including medical practitioners and support staff.
Our acquisition strategy may not succeed if we are unable to remain attractive to target companies or expeditiously close transactions. Issuing shares of our Class A common stock, $0.0001 par value per share
 
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(“Class A Common Stock”), to fund any acquisition would cause economic dilution to existing stockholders. If we are unable to successfully integrate medical practices which we have or will acquire, or target medical practices view our Class A Common Stock unfavorably, we may be unable to consummate key acquisition transactions essential to our corporate strategy and our business may be seriously harmed.
Risks Related to Regulation
If we fail to adhere to all of the complex government laws and regulations that apply to our business, we could suffer severe consequences that could have a material adverse effect on our business, results of operations, financial condition, cash flows and reputation.
Our operations are subject to extensive federal, state and local government laws and regulations, such as:
 
  •  
Medicare and Medicaid reimbursement rules and regulations;
 
  •  
the federal physician self-referral law (42 U.S.C. § 1395nn, et seq., and its implementing regulations, 42 C.F.R. Subpart J) (the “Stark Law”) and analogous state self-referral prohibition statutes, which, subject to limited exceptions, prohibits physicians from referring Medicare patients to an entity for the provision of certain “designated health services” if the physician or a member of such physician’s immediate family has a direct or indirect financial relationship (including an ownership interest or a compensation arrangement) with an entity, and prohibit the entity from billing Medicare for such “designated health services” and state self-referral laws and laws that prohibit fee splitting and patient brokering that may implicate Medicaid, private insurance, or other payors;
 
  •  
the FCA and associated regulations, that imposes civil and criminal liability on individuals or entities that knowingly submit false or fraudulent claims for payment to the government or knowingly making, or causing to be made, a false statement in order to have a false claim paid, including
qui tam
or whistleblower suits;
 
  •  
the Civil Monetary Penalty statute and associated regulations, which authorizes the government agency to impose civil money penalties, an assessment, and program exclusion for various forms of fraud and abuse involving the Medicare and Medicaid programs including the Beneficiary Inducements Civil Monetary Penalty, which prohibits the transfer of remuneration (including the offering of free items or services and waivers of deductibles and copayments) to any Medicare or Medicaid Beneficiary that the person knows or should know is likely to induce the beneficiary’s selection of a particular provider;
 
  •  
federal and state laws regarding the collection, use and disclosure of patient health information (e.g., HIPAA) and the storage, handling, shipment, disposal and/or dispensing of pharmaceuticals and blood products and other biological materials and many other applicable state and federal laws and requirements;
 
  •  
state and federal statutes and regulations that govern workplace health and safety;
 
  •  
federal and state laws and policies that require healthcare providers to maintain licensure, certification or accreditation to enroll and participate in the Medicare and Medicaid programs, to report certain changes in their operations to the agencies that administer these programs and, in some cases, to
re-enroll
in these programs when changes in direct or indirect ownership occur; and
 
  •  
federal and state laws pertaining to the provision of services by nurse practitioners and physician assistants certain settings, physician supervision of those services, and reimbursement requirements that depend on the types of services provided and documented and relationships between physician supervisors and nurse practitioners and physician assistants.
In addition to the above laws, Medicare and Medicaid regulations, manual provisions, local coverage determinations, national coverage determinations and agency guidance also impose complex and extensive requirements upon healthcare providers. Moreover, the various laws and regulations that apply to our operations
 
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are often subject to varying interpretations and additional laws and regulations potentially affecting providers continue to be promulgated that may impact us. A violation or departure from any of the legal requirements implicated by our business may result in, among other things, government audits, lower reimbursements, significant fines and penalties, the potential loss of certification, recoupment efforts or voluntary repayments. These legal requirements are civil, criminal and administrative in nature depending on the law or requirement.
We endeavor to comply with all legal requirements. We further endeavor to structure all of our relationships with physicians and providers to comply with state and federal anti-kickback statutes, the Stark Law and other applicable healthcare laws. We dedicate compliance resources and maintain a formal compliance plan to monitor laws and regulations and implement necessary changes. However, the laws and regulations in these areas are complex, changing and often subject to varying interpretations. As a result, there is no guarantee that we will be able to adhere to all of the laws and regulations that apply to our business, and any failure to do so could have a material adverse impact on our business, results of operations, financial condition, cash flows and reputation. For example, if an enforcement agency were to challenge the level of compensation that we pay our medical directors or the number of medical directors whom we engage, or otherwise challenge these arrangements, we could be required to change our practices, face criminal or civil penalties, pay substantial fines or otherwise experience a material adverse impact on our business, results of operations, financial condition, cash flows and reputation as a result. Similarly, we may face penalties under the FCA, the federal Civil Monetary Penalty statute or otherwise related to failure to report and return overpayments within 60 days of when the overpayment is identified and quantified. These obligations to report and return overpayments could subject our procedures for identifying and processing overpayments to greater scrutiny. We have made investments in resources to decrease the time it takes to identify, quantify and process overpayments, and may be required to make additional investments in the future.
Additionally, the federal government has used the FCA to prosecute a wide variety of alleged false claims and fraud allegedly perpetrated against Medicare, Medicaid and other federally funded health care programs. Moreover, amendments to the federal Anti-Kickback Statute in the ACA make claims tainted by anti-kickback violations potentially subject to liability under the FCA, including
qui tam
or whistleblower suits. The penalties for a violation of the FCA range from $5,500 to $11,000 (adjusted for inflation) for each false claim plus three times the amount of damages caused by each such claim which generally means the amount received directly or indirectly from the government. On June 19, 2020, the DOJ issued a final rule announcing adjustments to FCA penalties, under which the per claim range increases to a range from $11,665 to $23,331 per claim, so long as the underlying conduct occurred after November 2, 2015. Given the high volume of claims processed by our various operating units, the potential is high for substantial penalties in connection with any alleged FCA violations.
In addition to the provisions of the FCA, which provide for civil enforcement, the federal government can use several criminal statutes to prosecute persons who are alleged to have submitted false or fraudulent claims for payment to the federal government.
If any of our operations are found to violate these or other government laws or regulations, we could suffer severe consequences that would have a material adverse effect on our business, results of operations, financial condition, cash flows, reputation and stock price, including:
 
  •  
exclusion from, suspension or termination of our participation in government payment programs;
 
  •  
refunds of amounts received in violation of law or applicable payment program requirements dating back to the applicable statute of limitation periods;
 
  •  
loss of our required government certifications or exclusion from government payment programs;
 
  •  
loss of our licenses required to operate healthcare facilities or administer pharmaceuticals in the states in which we operate;
 
  •  
criminal or civil liability, fines, damages or monetary penalties for violations of healthcare fraud and abuse laws, including the federal Anti-Kickback Statute, Civil Monetary Penalties Law, Stark Law and FCA, or other failures to meet regulatory requirements;
 
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  •  
enforcement actions by governmental agencies and/or state law claims for monetary damages by patients who believe their PII or PHI has been used, disclosed or not properly safeguarded in violation of federal or state patient privacy laws, including HIPAA and the Privacy Act of 1974;
 
  •  
mandated changes to our practices or procedures that significantly increase operating expenses;
 
  •  
imposition of and compliance with corporate integrity agreements that could subject us to ongoing audits and reporting requirements as well as increased scrutiny of our billing and business practices which could lead to potential fines, among other things;
 
  •  
termination of various relationships and/or contracts related to our business, including joint venture arrangements, medical director agreements, real estate leases and consulting agreements with physicians; and
 
  •  
harm to our reputation which could negatively impact our business relationships, affect our ability to attract and retain patients and physicians, affect our ability to obtain financing and decrease access to new business opportunities, among other things.
We are, and may in the future be, a party to various lawsuits, demands, claims,
qui tam
suits, governmental investigations and audits (including investigations or other actions resulting from our obligation to self-report suspected violations of law) and other legal matters, any of which could result in, among other things, substantial financial penalties or awards against us, mandated refunds, substantial payments made by us, required changes to our business practices, exclusion from future participation in Medicare, Medicaid and other healthcare programs and possible criminal penalties, any of which could have a material adverse effect on our business, results of operations, financial condition, cash flows and materially harm our reputation.
Responding to subpoenas, investigations and other lawsuits, claims and legal proceedings as well as defending ourselves in such matters will continue to require management’s attention and cause us to incur significant legal expense. Negative findings or terms and conditions that we might agree to accept as part of a negotiated resolution of pending or future legal or regulatory matters could result in, among other things, substantial financial penalties or awards against us, substantial payments made by us, harm to our reputation, required changes to our business practices, exclusion from future participation in the Medicare, Medicaid and other healthcare programs and, in certain cases, criminal penalties, any of which could have a material adverse effect on us. It is possible that criminal proceedings may be initiated against us and/or individuals in our business in connection with investigations by the federal government.
We, our affiliated physicians and the facilities in which we operate are subject to various federal, state and local licensing and certification laws and regulations and accreditation standards and other laws, relating to, among other things, the adequacy of medical care, equipment, privacy of patient information, physician relationships, personnel and operating policies and procedures. Failure to comply with these licensing, certification and accreditation laws, regulations and standards could result in our services being found
non-reimbursable
or prior payments being subject to recoupment, requirements to make significant changes to our operations and can give rise to civil or, in extreme cases, criminal penalties. We routinely take the steps we believe are necessary to retain or obtain all requisite licensure and operating authorities. While we have made reasonable efforts to substantially comply with federal, state and local licensing and certification laws and regulations and standards as we interpret them, we cannot assure you that agencies that administer these programs will not find that we have failed to comply in some material respects.
If we are unable to effectively adapt to changes in the healthcare industry, including changes to laws and regulations regarding or affecting U.S. healthcare reform, our business may be harmed.
Due to the importance of the healthcare industry in the lives of all Americans, federal, state, and local legislative bodies frequently pass legislation and promulgate regulations relating to healthcare reform or that affect the healthcare industry. The Biden Administration and Congress may consider legislation to reform the
 
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U.S. healthcare system. Some states also have pending health reform legislative initiatives. At this time, we are unable to determine the ultimate content or timing of any health reform legislation. We will not be able to determine the effect that any such legislation may have on our operations and business condition until such legislation is enacted, but such legislation may adversely affect our operations and business condition. It is reasonable to assume that there will continue to be increased government oversight and regulation of the healthcare industry in the future. We cannot assure our stockholders as to the ultimate content, timing or effect of any new healthcare legislation or regulations, nor is it possible at this time to estimate the impact of potential new legislation or regulations on our business. It is possible that future legislation enacted by Congress or state legislatures, or regulations promulgated by regulatory authorities at the federal or state level, could adversely affect our business or could change the operating environment of our primary medical care centers. It is possible that the changes to the Medicare, Medicaid or other governmental healthcare program reimbursements may serve as precedent to possible changes in other payors’ reimbursement policies in a manner adverse to us. Similarly, changes in private payor reimbursements could lead to adverse changes in Medicare, Medicaid and other governmental healthcare programs, which could have a material adverse effect on our business, financial condition and results of operations.
While we believe that we have structured our agreements and operations in material compliance with applicable healthcare laws and regulations, there can be no assurance that we will be able to successfully address changes in the current regulatory environment. We believe that our business operations materially comply with applicable healthcare laws and regulations. However, some of the healthcare laws and regulations applicable to us are subject to limited or evolving interpretations, and a review of our business or operations by a court, law enforcement or a regulatory authority might result in a determination that could have a material adverse effect on us. Furthermore, the healthcare laws and regulations applicable to us may be amended or interpreted in a manner that could have a material adverse effect on our business, prospects, results of operations and financial condition.
We are subject to complex rules and regulations that govern our licensing and certification, as well as credentialing processes with private payors before we can receive reimbursement for services. Our failure to comply with these rules and regulations or delays in the credentialing process could adversely affect our business.
We are subject to various federal, state and local licensing and certification laws and regulations and accreditation standards and other laws relating to, among other things, the adequacy of medical care, equipment, personnel and operating policies and procedures. We are also subject to periodic inspection by governmental and other authorities to assure continued compliance with the various standards necessary for licensing and accreditations.
Relevant laws and regulations may also require approvals to maintain or renew our operating authorities or require formal application and approval to continue providing services under certain government contracts. Failure to comply with these licensing, certification and accreditation laws, regulations and standards could result in our services being found
non-reimbursable
or prior payments being subject to recoupment, and can give rise to civil or, in extreme cases, criminal penalties.
Each time a new physician or other provider joins us, we must enroll such provider under our applicable group identification number for Medicare and Medicaid programs and for certain managed care and private insurance programs before we can receive reimbursement for services such provider renders to beneficiaries of those programs. The estimated time to receive approval for the enrollment is sometimes difficult to predict. These practices result in delayed reimbursement that may adversely affect our cash flows.
With respect to Medicare, providers can retrospectively bill Medicare for services provided 30 days prior to the effective date of the enrollment. In addition, the enrollment rules provide that the effective date of the enrollment will be the later of the date on which the enrollment application was filed and approved by the Medicare contractor, or the date on which the provider began providing services. If we are unable to properly
 
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enroll physicians and other applicable healthcare professionals in a timely manner, we will be precluded from billing Medicare for any services which were provided to a Medicare beneficiary more than 30 days prior to the effective date of the enrollment. With respect to Medicaid, whether a state will allow providers to retrospectively bill Medicaid for services provided prior to submitting an enrollment application varies by state. Failure to timely enroll providers could reduce our revenues and have a material adverse effect on our business, financial condition, or results of operations.
The ACA, as currently structured, added additional enrollment requirements for Medicare and Medicaid, which have been further enhanced through implementing regulations and increased enforcement scrutiny. Every enrolled provider must revalidate its enrollment at regular intervals and must update the Medicare contractors and many state Medicaid programs with significant changes on a timely basis. If we fail to provide sufficient documentation as required to maintain our enrollment, Medicare and Medicaid could deny continued future enrollment or revoke our enrollment and billing privileges.
The requirements for enrollment, licensure, certification and accreditation may include notification or approval in the event of a transfer or change of ownership or certain other changes. Other agencies or payors with which we have contracts may have similar requirements, and some of these processes may be complex. Failure to provide required notifications or obtain necessary approvals may result in the delay or inability to complete an acquisition or transfer, loss of licensure, lapses in reimbursement, or other penalties. While we make reasonable efforts to substantially comply with these requirements, we cannot assure you that the agencies that administer these programs or have awarded us contracts will not find that we have failed to comply in some material respects. A finding of
non-compliance
and any resulting payment delays, refund demands or other sanctions could have a material adverse effect on our business, financial condition, or results of operations.
Our use, disclosure, and other processing of personally identifiable information, including health information, is subject to HIPAA and other federal and state privacy and security regulations, and our failure to comply with those regulations or to adequately secure the information we hold could result in significant liability or reputational harm and, in turn, a material adverse effect on our patient base and revenue.
Numerous state and federal laws and regulations govern the collection, dissemination, use, privacy, confidentiality, security, availability, integrity, and other processing of PHI and PII. These laws and regulations include HIPAA. HIPAA establishes a set of national privacy and security standards for the protection of PHI by health plans, healthcare clearinghouses and certain healthcare providers, referred to as covered entities, and the business associates with whom such covered entities contract for services.
HIPAA requires covered entities, such as ourselves, and their business associates to develop and maintain policies and procedures with respect to PHI that is used or disclosed, including the adoption of administrative, physical and technical safeguards to protect such information. HIPAA also implemented the use of standard transaction code sets and standard identifiers that covered entities must use when submitting or receiving certain electronic healthcare transactions, including activities associated with the billing and collection of healthcare claims.
HIPAA imposes mandatory penalties for certain violations. Penalties for violations of HIPAA and its implementing regulations start at $100 per violation and are not to exceed $50,000 per violation, subject to a cap of $1.5 million for violations of the same standard in a single calendar year. However, a single breach incident or enforcement action can result in violations of multiple standards. HIPAA also authorizes state attorneys general to file suit on behalf of their residents. Courts may award damages, costs and attorneys’ fees related to violations of HIPAA in such cases. While HIPAA does not create a private right of action allowing individuals to sue us in civil court for violations of HIPAA, its standards have been used as the basis for duty of care in state civil suits such as those for negligence or recklessness in the misuse or breach of PHI.
In addition, HIPAA mandates that the Secretary of the Department of Health and Human Services (“HHS”) conduct periodic compliance audits of HIPAA covered entities and business associates for compliance with the
 
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HIPAA Privacy and Security Standards. It also tasks HHS with establishing a methodology whereby harmed individuals who were the victims of breaches of unsecured PHI may receive a percentage of the Civil Monetary Penalty fine paid by the violator.
HIPAA further requires that patients be notified of any unauthorized acquisition, access, use or disclosure of their unsecured PHI that compromises the privacy or security of such information, with certain exceptions related to unintentional or inadvertent use or disclosure by employees or authorized individuals. HIPAA specifies that such notifications must be made “without unreasonable delay and in no case later than 60 calendar days after discovery of the breach.” If a breach affects 500 patients or more, it must be reported to HHS without unreasonable delay, and HHS will post the name of the breaching entity on its public web site. Breaches affecting more than 500 patients in the same state or jurisdiction must also be reported to the media outlets serving the state or jurisdiction. If a breach involves fewer than 500 people, the covered entity must record it in a log and notify HHS at least annually.
In addition to HIPAA, numerous other federal and state laws and regulations protect the confidentiality, privacy, availability, integrity and security of PHI and other types of PII, including the Illinois Biometric Information Privacy Act. State statutes and regulations vary from state to state, and these laws and regulations in many cases are more restrictive than, and may not be preempted by, HIPAA and its implementing rules. These laws and regulations are often uncertain, contradictory, and subject to changed or differing interpretations, and we expect new laws, rules and regulations regarding privacy, data protection, and information security to be proposed and enacted in the future. In the event that new data security laws are implemented, we may not be able to timely comply with such requirements, or such requirements may not be compatible with our current processes. Changing our processes could be time consuming and expensive, and failure to timely implement required changes could subject us to liability for
non-compliance.
Some states may afford private rights of action to individuals who believe their PII has been misused. This complex, dynamic legal landscape regarding privacy, data protection, and information security creates significant compliance issues for us and potentially restricts our ability to collect, use and disclose data and exposes us to additional expense, adverse publicity and liability. While we have implemented data privacy and security measures in an effort to comply with applicable laws and regulations relating to privacy and data protection, some PHI and other PII or confidential information is transmitted to us by third parties, who may not implement adequate security and privacy measures, and it is possible that laws, rules and regulations relating to privacy, data protection, or information security may be interpreted and applied in a manner that is inconsistent with our practices or those of third parties who transmit PHI and other PII or confidential information to us. If we or these third parties are found to have violated such laws, rules or regulations, it could result in government-imposed fines, orders requiring that we or these third parties change our or their practices, or criminal charges, which could adversely affect our business. Complying with these various laws and regulations could cause us to incur substantial costs or require us to change our business practices, systems and compliance procedures in a manner adverse to our business.
We also publish statements to our patients and partners that describe how we handle and protect PHI. If federal or state regulatory authorities or private litigants consider any portion of these statements to be untrue, we may be subject to claims of deceptive practices, which could lead to significant liabilities and consequences, including, without limitation, costs of responding to investigations, defending against litigation, settling claims, and complying with regulatory or court orders. Any of the foregoing consequences could seriously harm our business and our financial results. Any of the foregoing consequences could have a material adverse impact on our business and our financial results.
Laws regulating the corporate practice of medicine could restrict the manner in which we are permitted to conduct our business, and the failure to comply with such laws could subject us to penalties or require a restructuring of our business.
Some states have laws that prohibit business entities, such as us from practicing medicine, employing physicians to practice medicine, exercising control over medical decisions by physicians or engaging in certain
 
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arrangements, such as
fee-splitting,
with physicians (such activities generally referred to as the “corporate practice of medicine”). In some states these prohibitions are expressly stated in a statute or regulation, while in other states the prohibition is a matter of judicial or regulatory interpretation. Florida law generally does not prohibit the corporate practice of medicine.
Penalties for violations of the corporate practice of medicine vary by state and may result in physicians being subject to disciplinary action, as well as to forfeiture of revenues from payors for services rendered. For lay entities, violations may also bring both civil and, in more extreme cases, criminal liability for engaging in medical practice without a license.
Some of the relevant laws, regulations and agency interpretations in states with corporate practice of medicine restrictions have been subject to limited judicial and regulatory interpretation. Moreover, state laws are subject to change. Regulatory authorities and other parties may assert that, despite the management agreements and other arrangements through which we may operate in states that prohibit the corporate practice of medicine, we are engaged in the prohibited corporate practice of medicine or that our arrangements constitute unlawful
fee-splitting.
If this were to occur, we could be subject to civil and/or criminal penalties, our agreements could be found legally invalid and unenforceable (in whole or in part) or we could be required to restructure our contractual arrangements.
We face inspections, reviews, audits and investigations under federal and state government programs and contracts. These audits could have adverse findings that may negatively affect our business, including our results of operations, liquidity, financial condition and reputation.
As a result of our participation in the Medicare and Medicaid programs, we are subject to various governmental inspections, reviews, audits and investigations to verify our compliance with these programs and applicable laws and regulations. Payors may also reserve the right to conduct audits. We also periodically conduct internal audits and reviews of our regulatory compliance. An adverse inspection, review, audit or investigation could result in:
 
  •  
refunding amounts we have been paid pursuant to the Medicare or Medicaid programs or from payors;
 
  •  
state or federal agencies imposing fines, penalties and other sanctions on us;
 
  •  
temporary suspension of payment for new patients to the facility or agency;
 
  •  
decertification or exclusion from participation in the Medicare or Medicaid programs or one or more payor networks;
 
  •  
self-disclosure of violations to applicable regulatory authorities;
 
  •  
damage to our reputation;
 
  •  
the revocation of a facility’s or agency’s license; and
 
  •  
loss of certain rights under, or termination of, our contracts with payors.
We have in the past and will likely in the future be required to refund amounts we have been paid and/or pay fines and penalties as a result of these inspections, reviews, audits and investigations. If adverse inspections, reviews, audits or investigations occur and any of the results noted above occur, it could have a material adverse effect on our business and operating results. Furthermore, the legal, document production and other costs associated with complying with these inspections, reviews, audits or investigations could be significant.
 
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Risks Related to Ownership of Our Securities and Being a Public Company
We may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and the price of our securities, which could cause you to lose some or all of your investment.
We could become subject to certain unknown liabilities of CMG, IMC and other acquisitions subsequent to the Business Combination, and we may be forced to write-down or
write-off
assets, restructure our operations, or incur impairment or other charges that could result in it reporting losses. Even though these charges may be
non-cash
items and not have an immediate impact on our liquidity, reporting charges of this nature could contribute to negative market perceptions about our securities. Our securityholders are unlikely to have a remedy for such charges unless they are able to successfully claim that the reduction was due to the breach by our officers or directors of a duty of care or other fiduciary duty owed to them, or if they are able to successfully bring a private claim under securities laws that the proxy materials, relating to the Business Combination contained an actionable material misstatement or material omission. In addition, charges of this nature may cause us to violate covenants to which we may be subject as a result of or by virtue of our outstanding credit facility, which could have a material adverse effect on our business, financial condition, or results of operations.
If the benefits of the Business Combination and subsequent investments do not meet the expectations of investors, stockholders or financial analysts, the market price of our securities may decline.
The integration of CMG and IMC, SMA, DNF Advantis and other acquisitions subsequent to the Business Combination as a combined company remains subject to numerous uncertainties, some of which are unknown or may be outside of our control. We may not achieve the benefits of the Business Combination as quickly as expected or at all. If the benefits of the Business Combination and subsequent investments do not meet the expectations of investors or securities analysts, the market price of our securities may decline. In addition, fluctuations in the price of our securities could contribute to the loss of all or part of your investment.
We will incur significantly increased costs as a result of operating as a public company, and its management will be required to devote substantial time to compliance efforts.
We will incur significant legal, accounting, insurance and other expenses as a result of being a public company. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”), and the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), as well as related rules implemented by the SEC, have required changes in corporate governance practices of public companies. We expect that compliance with these and other similar laws, rules and regulations, including compliance with Section 404 of the Sarbanes-Oxley Act, will substantially increase its expenses, including legal and accounting costs, and make some activities more time-consuming and costly. We also expect these laws, rules and regulations to make it more expensive for it to obtain director and officer liability insurance, and it may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage, which may make it more difficult for us to attract and retain qualified persons to serve on the Board or as officers. Although the JOBS Act may, for a limited period of time, somewhat lessen the cost of complying with these additional regulatory and other requirements, we nonetheless expect a substantial increase in legal, accounting, insurance and certain other expenses in the future, which could negatively impact our results of operations and financial condition.
Our management team has limited experience managing a public company, and our current resources may not be sufficient to fulfill the public company obligations.
We are subject to various regulatory requirements, including those of the SEC and Nasdaq. These requirements include record keeping, financial reporting and corporate governance rules and regulations. Most of the members of our management team have limited experience managing a publicly traded company, interacting with public company investors, and complying with the increasingly complex laws pertaining to public
 
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companies. Our management team may not successfully or efficiently manage their new roles and responsibilities, and our internal infrastructure may not be adequate to support its increased reporting obligations. We may be unable to hire, train or retain necessary staff and may be reliant on engaging outside consultants or professionals to overcome our lack of experience or employees. These new obligations will require significant attention from our senior management and could divert their attention away from the
day-to-day
management of our business, especially if our internal infrastructure is inadequate or if we are unable to engage outside consultants to support our increased public company obligations, which could adversely affect our business, financial condition, and operating results.
We may not be able to timely and effectively implement controls and procedures required by Section 404 of the Sarbanes-Oxley Act that will be applicable to us after the Business Combination and the transactions related thereto are consummated.
As a public company, we are required to comply with the SEC’s rules implementing Sections 302 and 404 of the Sarbanes-Oxley Act, which require management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of internal control over financial reporting. To comply with the requirements of being a public company, we will be required to provide attestation on internal controls, and we may need to undertake various actions, such as implementing additional internal controls and procedures and hiring additional accounting or internal audit staff. The standards required for a public company under Section 404 of the Sarbanes-Oxley Act are significantly more stringent than those previously required of privately held companies. Our management may not be able to effectively and timely implement controls and procedures that adequately respond to the increased regulatory compliance and reporting requirements applicable to us. If we are not able to implement the additional requirements of Section 404 in a timely manner or with adequate compliance, it may not be able to assess whether its internal controls over financial reporting are effective, which may subject it to adverse regulatory consequences and could harm investor confidence and the market price of our securities. Further, as an emerging growth company, our independent registered public accounting firm is not required to formally attest to the effectiveness of our internal controls over financial reporting pursuant to Section 404 until the date we are no longer an emerging growth company. At such time, our independent registered public accounting firm may issue a report that is adverse in the event that it is not satisfied with the level at which the controls of the post-combination company are documented, designed or operating effectively.
We identified a material weakness in our internal control over financial reporting related to an improper classification of the of 6,400,000 Earnout Shares. As previously disclosed in our Quarterly Reports on
Form 10-Q/A
for each of the three-month and
year-to-date
periods ended June 30, 2021 and September 30, 2021, respectively, filed with the SEC on March 16, 2022, the Earnout Shares were originally classified as equity from and after the Closing Date, and the Company subsequently determined in connection with the preparation of our Annual Report on Form
10-K
for the fiscal year ended December 31, 2021, filed with the SEC on March 16, 2022, that the Earnout Shares should have been liability classified and measured at fair value, with changes in fair value each period reported in earnings prior to July 9, 2021. This control deficiency related to the interpretation and accounting of the obligation to issue the Earnout Shares resulted in us having to restate our unaudited condensed consolidated financial statements for the three-month and
year-to-date
periods ended June 30, 2021 and September 30, 2021, and accordingly, management has determined that this control deficiency constitutes a material weakness.
Our management and other personnel will need to devote a substantial amount of time to compliance initiatives applicable to public companies, including compliance with Section 404 and the evaluation of the effectiveness of our internal controls over financial reporting within the prescribed timeframe, as well as the remediation of the material weaknesses that we have identified. We may discover additional deficiencies in existing systems and controls that it may not be able to remediate in an efficient or timely manner. In the event that we are not able to remediate our existing material weaknesses, or if we identify additional deficiencies, we may be required to further restate our financial statements and our results of operations and financial condition could be negatively affected.
 
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A market for our securities may not continue, which would adversely affect the liquidity and price of our securities.
The prices of our securities vary due to general economic conditions and forecasts, its general business condition and the release of its financial reports, and an active trading market for our securities is not guaranteed to continue to exist. If our securities become delisted from Nasdaq for any reason, and are quoted on the OTC Bulletin Board, an inter-dealer automated quotation system for equity securities that is not a national securities exchange, the liquidity and price of its securities may be more limited than if they were quoted or listed on Nasdaq or another national securities exchange. You may be unable to sell your securities unless a market for such securities can be sustained.
The future sales of shares of Class A Common Stock by existing stockholders, including the sales of shares of Class A Common Stock pursuant to this prospectus, may adversely affect the market price of the Company’s Class A Common Stock.
Sales of a substantial number of shares of our securities in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our securities. Certain of the shares of Class A Common Stock issued in connection with the Business Combination are subject to
lock-up
agreements, whereby such stockholders agreed not to transfer, assign or sell any of their shares of Class A Common Stock (except to certain permitted transferees) until the earlier of (i) six, nine or twelve months, as applicable, after the June 8, 2021 (the “Closing Date”) (December 8, 2021, March 8, 2022 and June 8, 2022).
Currently, only the Founder shares remain subject to
lock-up
provisions, and upon release from such restrictions on sale on June 8, 2022, we may see, or the market may perceive, that a substantial number of shares of Founder Shares may be sold. The Founder Shares were acquired by the Sponsor for approximately $0.009 per share. The Sponsor distributed 225,000 Founder Shares to executive officers and independent directors of DFHT in June 2020 and the Sponsor distributed 3,368,750 Founder Shares to certain members of the Sponsor. The Founder Shares represent approximately 3.9% of the total outstanding shares of the Company’s Class A Common Stock. As a result of these nominal prices (even factoring in the price paid by the Sponsor for the securities already distributed) compared with the market prices of our Class A Common Stock and Warrants, the each holder of Founder Shares is likely to earn a positive return on its investment even if other holders of shares of Class A Common Stock, including our public stockholders, experience a negative return on their investment in the Company’s securities. As a result, certain of the Selling Securityholders may be incentivized to sell its securities when others are not.
Further, the market price of our Class A Common Stock could decline as a result of the perception that such sales could occur, including in connection with the shares offered hereby that are not currently subject to
lock-up
provisions. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and price that we deem appropriate. In the future, we may also issue securities in connection with investments or acquisitions. The amount of Class A Common Stock issued in connection with an investment or acquisition could constitute a material portion of our then-outstanding Class A Common Stock. Any issuance of additional securities in connection with investments or acquisitions may result in additional dilution to our securityholders.
Our quarterly operating results may fluctuate significantly and could fall below the expectations of securities analysts and investors due to seasonality and other factors, some of which are beyond our control, resulting in a decline in our stock price.
Our quarterly operating results may fluctuate significantly because of several factors, including:
 
  •  
labor availability and costs for hourly and management personnel;
 
  •  
changes in interest rates;
 
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  •  
impairment of long-lived assets;
 
  •  
macroeconomic conditions, both nationally and locally;
 
  •  
negative publicity relating to our services;
 
  •  
changes in consumer preferences and competitive conditions;
 
  •  
expansion to new markets; and
 
  •  
fluctuations in commodity prices.
Any fluctuation in our operating results, especially if below the expectations of securities analysts may result in a decline in our stock price, whether or not due to seasonality or other factors, some of which are beyond our control, could adversely affect the market price of our securities. Any reduction in the market price of our securities could make it more difficult for us to raise additional funds through future offerings of shares of Class A Common Stock or other securities.
If securities or industry analysts do not publish or cease publishing research or reports about us, our business, or our market, or if they change their recommendations regarding our securities adversely, then the price and trading volume of our securities could decline.
The trading market for our securities will be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market, or our competitors. Securities and industry analysts do not currently, and may never, publish research on us. If no securities or industry analysts commence coverage of us, our stock price and trading volume could be negatively impacted. If any of the analysts who may cover us change their recommendation regarding our securities adversely, or provide more favorable relative recommendations about its competitors, the price of our securities would likely decline. If any analyst who may cover us were to cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause the prices or trading volume of our securities to decline.
Our Warrants are exercisable for our Class A Common Stock, which could increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders.
We issued public warrants to purchase 2,875,000 shares of Class A Common Stock as part of our Initial Public Offering (the “IPO”) and concurrently with our IPO, we issued 2,916,667 warrants in a private placement, each of which entitles the holder to purchase one share of Class A Common Stock at $11.50 per share. Additionally, 3,200,000 of the 6,400,000 Earnout Shares have been issued, and an additional 3,200,000 Earnouts Shares will become issuable if, within the second year after the Closing Date, the trading price of Class A Common Stock equals or exceeds $15.00 on any 20 trading days in any
30-day
trading period. Any Earnout Shares issued will be free from any restrictions on sale from and after March 8, 2022. There can be no assurance that all of, or any of the warrants will be exercised, or that the remainder of the Earnout Shares will be issued, but shares of Class A Common Stock, which may be issued upon exercise of our warrants and the release of the Earnout Shares, will result in dilution to the then existing holders of our Class A Common Stock and increase the number of shares eligible for resale in the public market. Sales of substantial numbers of shares in the public market could adversely affect the market price of our Class A Common Stock.
The exercise price for our Warrants is higher than in many similar blank check company offerings in the past, and, accordingly, the Warrants are more likely to expire worthless.
The exercise price of our Warrants is higher than is typical with many similar blank check companies in the past. Historically, with regard to units offered by blank check companies, the exercise price of a public warrant was generally a fraction of the purchase price of the units in the initial public offering. The exercise price for our Warrants is $11.50 per share, subject to adjustment as provided herein. As a result, the Warrants are less likely to ever be in the money and more likely to expire worthless. We do not believe it is likely that a warrant holder
 
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would elect to exercise its warrants when our Class A common stock is trading below $11.50 and any cash proceeds that would be received by the Company are dependent on the trading price of the Class A Common Stock underlying the Warrants. We do not believe that the warrant holders’ failure to exercise Warrants for cash would have a material impact on our liquidity, financial position or results of operations.
Future issuances of debt securities and equity securities may adversely affect us, including the market price of our securities and may be dilutive to existing stockholders.
We have authorized up to 1,000,000 shares of preferred stock. In the future, we may incur debt or issue equity ranking senior to the Class A Common Stock. Those securities will generally have priority upon liquidation. Such securities also may be governed by an indenture or other instrument containing covenants restricting its operating flexibility. Additionally, any convertible or exchangeable securities that we issue in the future may have rights, preferences and privileges more favorable than those of the Class A Common Stock. Because our decision to issue debt or equity in the future will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing, nature or success of our future capital raising efforts. As a result, future capital raising efforts may reduce the market price of Class A Common Stock and be dilutive to existing stockholders.
Additionally, we have 2.9 million shares of Class A Common Stock authorized for issuance pursuant to awards granted under the CareMax, Inc. 2021 Long-Term Incentive Award Plan (the “Incentive Plan”). Currently there are awards outstanding that could result in the issuance of up to 4.1 million shares of Class A Common Stock, and such awards and any other awards granted under the Incentive Plan may reduce the market price of Class A Common Stock and be dilutive to existing stockholders.
Anti-takeover provisions contained in the Amended and Restated Charter, as well as provisions of Delaware law, could impair a takeover attempt.
Our Amended and Restated Charter contains provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their best interests. For instance, the Amended and Restated Charter authorizes 1,000,000 shares of preferred stock and provides that shares of preferred stock may be issued from time to time in one or more series and the Board will be authorized to fix the voting rights, if any, designations, powers, preferences, the relative, participating, optional or other special rights and any qualifications, limitations and restrictions thereof, applicable to the shares of each series. The Board will be able to, without stockholder approval, issue shares of preferred stock with voting and other rights that could adversely affect the voting power and other rights of the holders of the common stock and could have anti-takeover effects. The ability of the Board to issue shares of preferred stock without stockholder approval could have the effect of delaying, deferring or preventing a change of control of or the removal of existing management.
We are also subject to anti-takeover provisions under Delaware law, including; Section 203 of the General Corporation Law of the State of Delaware (the “DGCL”) regulating corporate takeovers. This statute prevents certain Delaware corporations, under certain circumstances, from engaging in a “business combination” with:
 
  •  
a stockholder who owns 15% or more of our outstanding voting stock (otherwise known as an “Interested Stockholder”);
 
  •  
an affiliate of an Interested Stockholder; or
 
  •  
an associate of an Interested Stockholder, for three years following the date that the stockholder became an Interested Stockholder.
A “business combination” includes a merger or sale of more than 10% of our assets. However, the above provisions of Section 203 do not apply if:
 
  •  
the Board approves the transaction that made the stockholder an Interested Stockholder prior to the date of the transaction;
 
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  •  
after the completion of the transaction that resulted in the stockholder becoming an Interested Stockholder, that stockholder owned at least 85% of our voting stock outstanding at the time the transaction commenced, other than statutorily excluded shares of common stock; or
 
  •  
on or subsequent to the date of the transaction, the initial business combination is approved by the Board and authorized at a meeting of our stockholders, and not by written consent, by an affirmative vote of at least
two-thirds
of the outstanding voting stock not owned by the Interested Stockholder.
Together these provisions may make more difficult the removal of management and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities.
Our Amended and Restated Charter includes a forum selection clause, which could discourage claims or limit stockholders’ ability to make a claim against us, our directors, officers, other employees or stockholders.
Our Amended and Restated Charter includes a forum selection clause that provides, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for any stockholder (including a beneficial owner) to bring any: (i) derivative action or proceeding brought on behalf of us; (ii) action asserting a claim of breach of fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders; (iii) action asserting a claim against us, our directors, officers or employees arising pursuant to any provision of the DGCL, our Amended and Restated Charter or Amended and Restated Bylaws; or (iv) action asserting a claim against us, our directors, officers or employees governed by the internal affairs doctrine, and if brought outside of Delaware, the stockholder bringing the suit will be deemed to have consented to service of process on such stockholder’s counsel, except for, as to each of (i) through (iv) above, any claim (A) as to which the Court of Chancery determines that there is an indispensable party not subject to the jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten days following the determination), (B) that is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery, (C) for which the Court of Chancery does not have subject matter jurisdiction, or (D) any action arising under the Securities Act as to which the Court of Chancery and the federal district court for the District of Delaware shall have concurrent jurisdiction.
Under the Securities Act, federal and state courts have concurrent jurisdiction over all suits brought to enforce any duty or liability created by the Securities Act, and stockholders cannot waive compliance with the federal securities laws and the rules and regulations thereunder. Accordingly, there is uncertainty as to whether a court would enforce such a forum selection provision as written in connection with claims arising under the Securities Act.
This forum selection clause may also discourage claims or limit stockholders’ ability to submit claims in a judicial forum that they find favorable and may result in additional costs for a stockholder seeking to bring a claim. While we believe the risk of a court declining to enforce this forum selection clause is low, if a court were to determine the forum selection clause to be inapplicable or unenforceable in an action, we may incur additional costs in conjunction with our efforts to resolve the dispute in an alternative jurisdiction, which could have a negative impact on our results of operations and financial condition.
Notwithstanding the foregoing, the forum selection clause will not apply to suits brought to enforce any liability or duty created by the Exchange Act or any other claim for which the federal district courts of the United States of America have exclusive jurisdiction. Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder.
 
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We are an emerging growth company within the meaning of the Securities Act, and if we take advantage of certain exemptions from disclosure requirements available to emerging growth companies, this could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies.
We are an “emerging growth company” within the meaning of the Securities Act, as modified by the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. As a result, our stockholders may not have access to certain information they may deem important. We could be an emerging growth company for up to five years after our IPO, although circumstances could cause us to lose that status earlier, including if the market value of our common stock held by
non-affiliates
exceeds $700 million as of any June 30 before that time, in which case we would no longer be an emerging growth company as of the following December 31. We cannot predict whether investors will find our securities less attractive because we will rely on these exemptions. If some investors find our securities less attractive as a result of our reliance on these exemptions, the trading prices of our securities may be lower than they otherwise would be, there may be a less active trading market for our securities and the trading prices of our securities may be more volatile.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to
non-emerging
growth companies but any election to opt out is irrevocable. We have elected not to opt out of the extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accountant standards used.
The accounting treatment of our Warrants could have a material impact on, and could significantly increase the volatility of, our reported operating results, even though there is no related liquidity, cash flow or revenue impact to us.
Because our outstanding Warrants are classified as a liability, we are required to “mark to market” the Warrant liability as of the end of each reporting period and record changes in the fair value associated with the Warrant liability in our financial statements. As such, when our stock price increases, the fair value of the Warrant liability would increase, and we would be required to recognize an expense associated with this change in fair value. Similarly, when our stock price decreases, the fair value of the Warrant liability would decrease, and we would be required to recognize a gain associated with this change in fair value. This accounting treatment could have a material impact on, and could significantly increase the volatility of, our reported operating results, even though there is no related liquidity, cash flow or revenue impact to us.
 
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Unanticipated changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns could adversely affect our financial condition and results of operations.
We will be subject to income taxes in the United States, and our domestic tax liabilities will be subject to the allocation of expenses in differing jurisdictions. Our future effective tax rates could be subject to volatility or adversely affected by a number of factors, including:
 
  •  
changes in the valuation of our deferred tax assets and liabilities;
 
  •  
expected timing and amount of the release of any tax valuation allowances;
 
  •  
tax effects of stock-based compensation;
 
  •  
costs related to intercompany restructurings;
 
  •  
changes in tax laws, regulations or interpretations thereof; and
 
  •  
lower than anticipated future earnings in jurisdictions where we have lower statutory tax rates and higher than anticipated future earnings in jurisdictions where we have higher statutory tax rates.
In addition, we may be subject to audits of our income, sales and other transaction taxes by U.S. federal and state authorities. Outcomes from these audits could adversely affect our financial condition and results of operations.
The trading price of our securities could be volatile and subject to wide fluctuations in response to various factors, some of which are beyond our control. Any of the factors listed below could have a material adverse effect on any investment in our securities which may trade at prices significantly below the price you paid for them. In these circumstances, the trading price of our securities may not recover and may experience a further decline.
Factors affecting the trading price of our securities may include:
 
  •  
actual or anticipated fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us;
 
  •  
changes in the market’s expectations about its operating results;
 
  •  
the public’s reaction to its press releases, its other public announcements and its filings with the SEC;
 
  •  
speculation in the press or investment community;
 
  •  
success of competitors;
 
  •  
our operating results failing to meet the expectation of securities analysts or investors in a particular period;
 
  •  
changes in financial estimates and recommendations by securities analysts concerning us or the market in general;
 
  •  
operating and stock price performance of other companies that investors deem comparable to us;
 
  •  
our ability to market new and enhanced products and services on a timely basis;
 
  •  
changes in laws and regulations affecting our business;
 
  •  
commencement of, or involvement in, litigation;
 
  •  
changes in our capital structure, such as future issuances of securities or the incurrence of additional debt;
 
  •  
the volume of shares of our Class A Common Stock available for public sale;
 
  •  
any major change in our board of directors or management;
 
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  •  
sales of substantial amounts of common stock by its directors, officers or significant stockholders or the perception that such sales could occur; and
 
  •  
general economic and political conditions such as recessions, interest rates, fuel prices, international currency fluctuations and acts of war or terrorism.
Broad market and industry factors may materially harm the market price of our securities irrespective of our operating performance. The stock market in general and Nasdaq have experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the particular companies affected. The trading prices and valuations of these stocks, and of our securities, may not be predictable. A loss of investor confidence in the market for the stocks of other companies that investors perceive to be similar to us could depress its stock price regardless of our business, prospects, financial conditions or results of operations. A decline in the market price of our securities also could adversely affect our ability to issue additional securities and its ability to obtain additional financing in the future. In the past, securities class action litigation has often been initiated against companies following periods of volatility in their stock price. This type of litigation could result in substantial costs and divert management’s attention and resources, and could also require us to make substantial payments to satisfy judgments or to settle litigation.
We do not intend to pay dividends for the foreseeable future.
We have never declared or paid any cash dividends on our capital stock and do not intend to pay any cash dividends in the foreseeable future. We expect to retain future earnings, if any, to fund the development and growth of our business. Any future determination to pay dividends on our capital stock will be at the discretion of our Board and subject to any covenants that may apply in respect of outstanding debt, including, but not limited to, the restrictive covenants in connection with the Credit Agreement. Accordingly, investors must rely on sales of our securities after price appreciation, which may never occur, as the only way to realize any future gains on their investments.
General Risk Factors
Disruptions in our disaster recovery systems or management continuity planning could limit our ability to operate our business effectively.
Our information technology systems facilitate our ability to conduct our business. While we have disaster recovery systems and business continuity plans in place, any disruptions in our disaster recovery systems or the failure of these systems to operate as expected could, depending on the magnitude of the problem, adversely affect our operating results by limiting our capacity to effectively monitor and control our operations. Despite our implementation of a variety of security measures, our information technology systems could be subject to physical or electronic
break-ins,
and similar disruptions from unauthorized tampering or any weather-related disruptions where our headquarters is located. In addition, in the event that a significant number of our management personnel were unavailable in the event of a disaster, our ability to effectively conduct business could be adversely affected.
Our use of “open source” software could adversely affect our ability to offer our services and subject us to possible litigation.
We may use open source software in connection with our services. Companies that incorporate open source software into their technologies have, from time to time, faced claims challenging the use of open source software and/or compliance with open source license terms. As a result, we could be subject to suits by parties claiming ownership of what we believe to be open source software or claiming noncompliance with open source licensing terms. Some open source software licenses require users who distribute software containing open source software to publicly disclose all or part of the source code to such software and/or make available any derivative works of the open source code, which could include valuable proprietary code of the user, on
 
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unfavorable terms or at no cost. While we monitor the use of open source software and try to ensure that none is used in a manner that would require us to disclose our internally developed source code or that would otherwise breach the terms of an open source agreement, such use could inadvertently occur, in part because open source license terms are often ambiguous. Any requirement to disclose our internally developed source code or pay damages for breach of contract could have a material adverse effect on our business, financial condition and results of operations and could help our competitors develop services that are similar to or better than ours.
Changes in laws, regulations or rules, or a failure to comply with any laws, regulations or rules, may adversely affect our business.
We are subject to laws, regulations and rules enacted by national, regional and local governments and Nasdaq. In particular, we are required to comply with certain SEC, Nasdaq and other legal or regulatory requirements. Compliance with, and monitoring of, applicable laws, regulations and rules may be difficult, time consuming and costly. Those laws, regulations or rules and their interpretation and application may also change from time to time and those changes could adversely affect our business, investments and results of operations. In addition, a failure to comply with applicable laws, regulations or rules, as interpreted and applied, could adversely affect our business and results of operations.
 
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USE OF PROCEEDS
All of the securities offered by the Selling Securityholders pursuant to this prospectus will be sold by the Selling Securityholders for their respective accounts. We will not receive any of the proceeds from these sales.
Assuming the cash exercise of all outstanding Warrants, we will receive an aggregate of approximately $66.6 million. We expect to use the net proceeds from the exercise of the Warrants, if any, for working capital and general corporate purposes, which may include potential acquisitions. We will have broad discretion over the use of any proceeds from the exercise of the Warrants. There is no assurance that the holders of the Warrants will elect to exercise any or all of such Warrants. To the extent that any Warrants are exercised on a “cashless basis,” the amount of cash we would receive from the exercise of the Warrants will decrease.
We do not believe it is likely that a warrant holder would elect to exercise Warrants when our Class A Common Stock is trading below $11.50, and any cash proceeds that would be received by the Company is dependent on the trading price of the Class A Common Stock underlying the Warrants. We do not believe that the warrant holders’ failure to exercise warrants for cash would have a material impact on our liquidity, financial position or result of operations.
The Selling Securityholders will pay any underwriting discounts and commissions and expenses incurred by the Selling Securityholders for brokerage, accounting, tax or legal services or any other expenses incurred by the Selling Securityholders in disposing of the securities. We will bear the costs, fees and expenses incurred in effecting the registration of the securities covered by this prospectus, including all registration and filing fees, Nasdaq listing fees and fees and expenses of our counsel and our independent registered public accounting firm.
 
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DETERMINATION OF OFFERING PRICE
The offering price of the shares of Class A Common Stock underlying the Warrants offered hereby is determined by reference to the exercise price of the Warrants of $11.50 per share. The Public Warrants are listed on the Nasdaq Global Select Market under the symbol “CMAXW.”
We cannot currently determine the price or prices at which shares of our Class A Common Stock or Warrants may be resold by the Selling Securityholders under this prospectus.
 
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DIVIDEND POLICY
We have not paid any cash dividends on the Class A Common Stock to date and do not intend to pay any cash dividends in the foreseeable future. The payment of cash dividends in the future will be dependent upon the Company’s revenue and earnings, if any, capital requirements, liabilities and related reserves, and general financial condition. The payment of any cash dividends will be within the discretion of the Board from time to time and subject to applicable Delaware law. It is the present intention of the Board to retain all earnings, if any, for use in business operations and, accordingly, the Board does not anticipate declaring any dividends in the foreseeable future. Further, the Company’s ability to declare dividends is currently limited by restrictive covenants in connection with the Credit Agreement.
 
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BUSINESS
Overview
As of December 31, 2021, CareMax operated 45 multi-specialty medical centers throughout Florida, primarily serving the Medicare Advantage population. In addition, CareMax recently opened two additional medical care centers in Memphis, Tennessee and one additional medical care center in New York City, New York for a total of 48 centers.
CareMax’s medical centers offer 24/7 access to care through employed providers and provide a comprehensive suite of high-touch health care and social services to its patients, including primary care, specialty care, telemedicine, health & wellness, optometry, dental, pharmacy and transportation. CareMax’s differentiated healthcare delivery model is focused on care coordination with vertically integrated ambulatory care and community-centric services. The goal of CareMax is to intercede as early as possible to manage chronic conditions for its patient members in a proactive, holistic, and tailored manner to provide a positive influence on patient outcomes and a reduction in overall healthcare costs. CareMax specifically focuses on providing access to high quality care in underserved communities, with approximately 60% of its Medicare Advantage patients being dual-eligible (meaning eligible for both Medicare and Medicaid) and
low-income
subsidy eligible as of December 31, 2021.
While CareMax’s primary focus is providing care to Medicare-eligible seniors who are mostly over the age of 65, CareMax also provides services to children and adults through Medicaid programs as well as through commercial insurance plans. Nearly all of CareMax’s Medicare patients are enrolled in a Medicare Advantage plan run by private insurance companies on behalf of Centers for Medicare and Medicaid Services (“CMS”). With Medicare Advantage, the patient receives the same coverage as original Medicare, including emergency care, and most plans also include prescription drug coverage. In many cases, Medicare Advantage plans offer even more than original Medicare, including dental, vision, hearing and wellness programs.
CareMax’s comprehensive, high touch approach to health care delivery is powered by its CareOptimize technology platform. CareOptimize is a proprietary
end-to-end
technology platform that aggregates data and analyzes that data using proprietary algorithms and machine learning to support more informed care delivery decisions and to focus care decisions on preventative chronic disease management and the social determinants of health. CareMax believes that CareOptimize is designed to drive better outcomes and lower costs. The CareOptimize technology platform also provides CareMax with a national reach beyond Florida. As of December 31, 2021, the CareOptimize platform was used by approximately 20,000 providers in more than 30 states. CareOptimize was also used by IMC prior to the Business Combination, which has supported the integration and operation of the combined company. CareMax has shifted from selling the CareOptimize platform to new outside customers for a software subscription fee and is instead focused on providing the software to affiliated practices of its managed service organization (“MSO”) to further improve financial, clinical, and quality outcomes from the affiliated providers. As of December of 2021, this MSO serviced more than 100 independent physician associations (“IPAs”).
CareMax’s Key Differentiators
Vertically Integrated Model Provides a “One Stop Shop” Solution.
CareMax is focused on serving the Medicare Advantage population, including patients that live in medically underserved communities that face significant social barriers to accessing care. CareMax’s vertically-integrated,
one-stop-shop
solution is able to break through these barriers by focusing on whole-person health that includes primary care, specialty care, dental, optometry, pharmacy and transportation services, as well as through its wellness centers at each location that offer health educational classes, fitness programs and social services.
 
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CareOptimize Proprietary Technology Platform Enables Value Based Care.
CareMax’s proprietary
end-to-end
technology platform, CareOptimize, aggregates and analyzes data using proprietary algorithms and machine learning to support point of care guidance and automated interventions. This process is designed to improve provider efficiency by enabling providers to provide consistent and coordinated care while improving outcomes and lowering costs. We believe that the breadth of the installation base of CareOptimize provides insights into which national markets would be a strong fit for CareMax’s medical centers.
Value-Based Relationships.
CareMax’s value-based capitation contracts incentivize CareMax to provide high-quality care rather than driving a high volume of services. This has historically resulted in higher unit economics than
fee-for-services
practices. Because plan premiums are enhanced when a contracted plan achieves high quality scores (STARS program), CareMax is incentivized to deliver high quality of care to its members. In 2021, on a consolidated basis, pro forma for all closed business combinations as of December 31, 2021, CareMax achieved the highest quality rating possible, 5 STARS.
Multi-Faceted Growth Initiatives.
CareMax has a history of de novo construction of new medical centers, acquisitions of small practices which are then migrated into existing medical centers, and scaled acquisitions. We believe this history of expansion in our core markets in Florida provides a framework to implement our growth strategies as we seek to further expand our operations in new markets in Florida and other states.
MSO Services.
In addition to owned medical centers, CareMax’s MSO services supports IPAs through the CareOptimize software and services. The IPAs allow for growth in new markets that can precede CareMax de novo medical center openings with limited capital outlay. In addition, these IPAs present a pipeline of future acquisitions, with CareMax having acquired four medical practices that were previously within an IPA.
Focus on Underserved Communities.
CareMax primarily locates medical centers in underserved communities, resulting in a higher number of dual eligible patients (approximately 60% as of December 31, 2021). These markets were historically avoided by primary care providers due to the challenges of working in these communities and the historically lower fee for service rates for government payors, which has reduced competition in many expansion markets. Furthermore, dual eligible patients receive higher reimbursement due to the correlation between socioeconomic status, comorbidities and barriers to care. With CareMax’s Whole Person Health model, CareMax has shown the available economics from effectively treating this population.
Affordable Housing Locations.
CareMax has piloted a medical center inside an affordable senior housing partnership, which experienced accelerated growth. CareMax intends to continue this strategy both within its existing footprint and expansion markets
,
including through its collaboration with The Related Companies, L.P. (“Related”), one of the largest private owners of affordable housing in the United States with an affordable housing footprint spanning over 55,000 units in 24 states.
Medicaid and Commercial patients.
CareMax also services Medicaid and commercial patients. This provides an incumbent patient-provider relationship when existing Medicaid and commercial patients turn 65 and receive Medicare, which provides an
in-house
pipeline of Medicare beneficiaries not available to some peers.
 
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Home Health and Mobile Clinic.
CareMax’s employed home health providers and mobile clinic service patients in their homes and in the community. This assists with seeing patients who may be unable or unwilling to come to the medical centers, thus allowing CareMax to continue to medically care for these patients. In addition, the mobile clinic provides disaster recovery capabilities to allow patients to continue to be seen should a natural disaster render the medical centers inaccessible.
CareMax’s Growth Story
CareMax’s Growth strategy is based on seeking growth through multiple channels, including:
Growth in Existing Clinics.
CareMax’s 45 multi-specialty medical centers are located in strategically important Florida markets. According to data published by CMS and the Kaiser Family Foundation (“KFF”), Miami-Dade, Broward, Orange, Osceola, Lake, Seminole and Hillsborough counties have a population of 1.5 million Medicare eligibles, and 1.0 million in Medicare Advantage enrollment, equating to a 63% market penetration for Medicare Advantage as of December 2021. CareMax has approximately 33,500 Medicare Advantage members in its existing centers, which leaves sufficient capacity to double membership in its current centers. Growth in existing centers has historically led to increased financial performance at a center level by positively affecting center margins. For example, CareMax’s centers that opened prior to 2017 have shown an increase in Platform Contribution Margin, which is revenue less external provider costs and cost of care (excluding depreciation and amortization), divided by risk-based revenues, from breakeven at approximately 50% capacity to a 20% Platform Contribution Margin at 70% capacity. With an average capacity of 1,650 patients, our 45 centers as of December 31, 2021 can support approximately 75,000 Medicare-Equivalent Member (“MCREM”) patients. As we add patients to our existing centers, we expect these patients to contribute incremental economics to CareMax as we leverage our fixed cost base at each center. The additional de novo centers we expect to open in 2022 will also increase our capacity. We believe that we currently serve approximately 2% of the total patients in the markets where we currently have centers. As a result, there is significant opportunity to expand in our existing markets through the acquisition of new patients.
Open De Novo Clinics in New Markets by Leveraging Strategic Relationships
.
While CareMax historically operated only in Florida, we recently opened our first medical care center in New York and our first two medical care centers in Tennessee. We also plan to expand in additional markets, including Louisiana. CareMax has entered into a collaboration agreement with Anthem, Inc., a national health benefits company (“Anthem”), through which CareMax plans to open approximately 50 centers across eight priority states. Additionally, CareMax has entered into a collaboration with Related
,
pursuant to which Related will advise CareMax on opening new medical centers nationwide, including but not limited to within and proximate to affordable housing communities that may be owned by Related.
We estimate that the core addressable market for our services is approximately 1,533,000 Medicare eligible patients in our target demographic. We believe this market represents approximately $18.4 billion of annual healthcare expenditures based on multiplying an average annual revenue of $12,000 per member, which is derived from our experience and industry knowledge and which we believe represents a reasonable assumption, by the number of Medicare eligible patients in our target markets. Our existing market today represent a small fraction of this massive market opportunity. Based upon our experience to date, we believe our innovative care model can scale nationally, and we therefore expect to selectively and strategically expand into new geographies. As we continue this expansion, our success will depend on the competitive dynamics in those markets, and our ability to attract patients and deploy our care model in those markets. Through CareOptimize’s clients, which are spread across more than 30 states, we already understand the healthcare dynamics in communities where we are looking to expand. This gives management a high degree of confidence that the CareMax care model can have similar clinical and financial outcomes as we have seen historically in South Florida in other locations.
Expand MSO Network.
CareMax’s Five Star Quality Rating and payor agnosticism, coupled with the CareOptimize technology platform, has attracted assignments of additional MSO membership from health plans,
 
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health systems and physicians. CareMax expects to continue to pursue expansion of its MSO network to provide a lower cost member acquisition strategy.
Execute Opportunistic M&A
.
Since the Business Combination in June of 2021, CareMax has engaged in strategic M&A activity to expand its footprint and grow its membership base. In connection with the Business Combination, CareMax acquired IMC, which owned and operated 13 medical clinics and wellness centers. Subsequently, CareMax acquired Senior Medical Associates, LLC (“SMA”), which operated 10 medical centers across Broward County, Florida, with approximately 5,000 Medicare Advantage members, the assets of Unlimited Medical Services of Florida, LLC (“DNF”), which operated six medical centers in the Orlando, Florida, with more than 4,000 Medicare Advantage members, and the assets of Advantis Physician Alliance, LLC (“Advantis”), which operated three medical centers across Hillsborough County, Florida, with approximately 1,000 Medicare Advantage members. In addition, the Company acquired another small practice, which added two additional medical centers. CareMax intends to continue to leverage its existing relationships, including CareOptimize and its MSO, to identify practice acquisition targets that can support growth.
Engage in Direct Contracting Strategy.
CMS recently began a Direct Contracting Entity model, which is a set of voluntary payment model options that creates three payment model options for participants to take on risk and earn rewards, and provides them with choices related to cash flow, beneficiary alignment, and benefits enhancements. CareMax elected not to participate in Direct Contracting in 2021 due to the infancy of the program (with unclear returns) and over 70% of beneficiaries in Miami Dade County, Florida, are enrolled in Medicare Advantage. For 2022, CareMax contracted with Better Health d/b/a ConcertoCare to utilize its Direct Contracting Entity in exchange for a 1% share of all payments from Medicare. We believe this will allow CareMax to incrementally enter into the novel Direct Contracting program with room to grow based on CareMax’s initial results and also the results of its peers. CareMax is currently exploring whether to apply for the new ACO REACH program, which will be replacing Direct Contracting in 2023.
CareMax’s History
Co-founded
by Carlos de Solo and Alberto de Solo in 2011, CareMax evolved to serve the needs of Medicare Advantage patients by providing a comprehensive suite of high-touch health care and social services to its patients through its medical centers and technology platform, CareOptimize. Prior to the Business Combination, CareMax owned and operated 11 multi-specialty medical centers throughout Miami-Dade and Broward Counties in South Florida that provide clinical care, ancillary care services, and health and wellness services. CareMax also established a full-risk MSO. As of December of 2021, this MSO serviced more than 100 IPAs.
Prior to the Business Combination, IMC owned and operated 13 medical clinics and wellness centers strategically located in Miami-Dade, Broward and Orange Counties in Florida that provide clinical care, ancillary care services and health and wellness services to more than 48,000 members of Medicare Advantage, Medicaid and commercial insurance plans. While IMC’s primary focus was providing care to Medicare-eligible seniors who are mostly over the age of 65, IMC also provided services to children and adults through Medicaid programs as well as through commercial insurance plans.
CareOptimize was formed in 2016 as a result of the combination of CareMax with Quirk Healthcare Solutions, which was founded in 2005 by Ben Quirk, Chief Strategy Officer for CareMax and CareOptimize, to develop strategies and systems in support of government initiatives and healthcare trends.
The U.S. Healthcare System
Market Overview
The senior population of the United States is expected to grow up to five times faster than other segments of the population, with seniors expected to represent approximately 21% of the population by 2030 according to the
 
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2017 National Population Projections based on the U.S. Census. This aging population is expected to drive growth in the already large Medicare market, which was $829.5 billion in 2020, and is projected by CMS to grow at 7.6% per year through 2028. According to CMS, Medicare spending in the United States is projected to outpace overall healthcare spending in the United States, with healthcare representing the largest component of U.S. GDP at approximately 19.7% in 2020. As a result, the penetration of Medicare Advantage programs relative to all other Medicare programs is forecasted to increase to more than 30 million members through 2025, according to CMS. Value-based primary care is recognized as one of the best ways to lower healthcare spending, particularly as Medicare Advantage increases its share of the Medicare market. Value-based, patient-centered medical home models have garnered bipartisan support and are expected to continue to grow in popularity irrespective of changes in presidential administration. CareMax believes that its model of care is poised for growth in the Medicare market.
Unsustainable and rising healthcare costs
Healthcare spending in the United States reached $4.1 trillion in 2020 according to CMS, representing approximately 19.7% of U.S. GDP, an
all-time
high or $12,530 per person. National health expenditures are projected to grow at an average annual rate of 5.4% per year from 2019 to 2028 according to CMS, 1.1 percentage points faster than gross domestic product per year on average.
Healthcare expenditures are particularly concentrated in the Medicare-eligible population due to the high rate of chronic conditions. While representing only 15% of the United States population, the 65 and older age group accounted for 34% of all healthcare spending in 2014, with an average spend of $19,098 per person, three times higher than for working adults and five times higher than for children.
Healthcare expenditures are also particularly high for populations with chronic conditions, such as diabetes and obesity. According to the Centers for Disease Control and Prevention, chronic disease accounts for approximately 75% of aggregate healthcare spending in the United States.
Two-thirds
of the Medicare population lives with two or more chronic health conditions, and treatment of these conditions represents 96% of Medicare spending.
Prevalence of wasteful spending and
sub-optimal
outcomes
A 2019 study published in the Journal of the American Medical Association estimated that approximately 25% of all healthcare spending is for unnecessary services, excessive administrative costs, fraud and other problems creating waste, implying approximately $760 billion to $935 billion of annual wasteful spending at current levels.
In 2020, hospital care accounted for the largest portion of healthcare spending in the United States, representing approximately 31% of the total. Proper management of chronic conditions can significantly reduce the incidence of acute episodes, which are the main drivers of trips to the emergency room and hospitalization, particularly among the elderly. According to CMS, in 2020, approximately 38% of Medicare expenditures (including both Medicare Part A spend and Medicare Part B institutional spend), or approximately $319 billion, were dedicated to hospitalization.
Emergency department overutilization is a common symptom of patients, particularly elderly patients, who often do not understand how to navigate an overly complex healthcare system. Because elderly patients are more likely to have chronic and complex conditions, they are often admitted to the hospital for expensive treatment following these unnecessary emergency room visits.
Despite high levels of spending, the United States healthcare system struggles to produce better health outcomes and to keep doctors and patients satisfied. Life expectancy in the United States was 77.0 years in 2020, compared to 82.1 years in comparable developed countries, and patient satisfaction with the healthcare system is low.
 
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New payment structures have begun to address the problem
Policymakers and healthcare experts generally acknowledge the fundamental challenges and opportunities for improvement in the delivery of healthcare in the United States. Historically, healthcare delivery was centered around reactive care to acute events, which resulted in the development of a
fee-for-service
payment model. By linking payments to volume of encounters and pricing for higher complexity interventions, the
fee-for-service
model does not reward prevention, but rather unintentionally incentivizes the treatment of acute care episodes as they occur.
Policymakers have taken note of the negative impacts created by the
fee-for-service
model and have realized that an aging United States population with high prevalence of chronic disease requires a new payment structure. They have responded by creating programs like Medicare Advantage and pushing for transitions to value-based reimbursements.
Medicare Advantage
Medicare Advantage works as an alternative to traditional
fee-for-service
Medicare. In Medicare Advantage, CMS pays health plans a monthly sum per member to manage all health expenses of a participating member. This provides the health plans with an incentive to deliver lower-cost, high-quality care.
Value-based payments
Value-based refers to the goal of incentivizing healthcare providers to simultaneously increase quality while lowering the cost of care. In January 2015, HHS announced a goal of tying 30% and 50% of all Medicare payments to value through alternative payment models by the end of 2016 and 2018, respectively. In addition, while not a policy-setting body, the Health Care Payment Learning & Action Network, an active group of public and private healthcare leaders, indicated in October of 2019 its desire to move 100% of Medicare payments to being tied to value- based care by 2025. Additionally, CMS began using a Direct Contracting Model in 2021 for value-based payment arrangements directly with 53 provider groups for their current Medicare
fee-for-service
patients similar to the value-based contracts that we enter into with our Medicare Advantage partners. Effective January 2023, ACO REACH program is replacing the Direct Contracting Model.
The trend toward value-based payment systems has been supported at both the patient and policymaker level. Medicare Advantage has been well received since it was introduced, with penetration among Medicare beneficiaries increasing from 13% in 2004 to 42% in 2021, according to KFF. By 2030, the Congressional Budget Office projects that Medicare Advantage penetration will increase to approximately 51%.
Legacy Healthcare Delivery Infrastructure Has Been Slow to Transition from Reactive and Episodic Care to Proactive and Comprehensive Care Models
In order for shifts to value-based payment models to drive meaningful results, there must be a corresponding shift in care delivery models. To date, such care delivery models have been slow to develop. While there has been significant investment by providers, payors and technology companies in developing solutions to drive higher quality and lower cost of care, these investments have not resulted in meaningful change within a healthcare delivery infrastructure that remains optimized for the
fee-for-service
model.
In order to maintain economically viable practices in a
fee-for-service
payment model, typical primary care providers need to see an ever-increasing number of patients per day with limited support from staff, which limits the time providers are able to spend with each patient during office visits. In addition, financial constraints further limit the ability of primary care providers to invest in technology and other capabilities that would enable them to have more personalized patient engagement and prevent primary care providers from providing their patients with many of the supplemental services that they need, such as home-based primary care, medication management and behavioral health services that are often not reimbursed at a sufficient level to enable providers to offer these services.
 
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Many payors have been early adopters of value-based payment models, but their ability to influence the care delivery model is limited. Any particular payor represents a small portion of the average provider’s panel, making it difficult for the payor to gain sufficient provider mindshare to meaningfully influence the way that any one provider delivers care. Some payors attempt to solve this problem by directly investing in provider assets; however, the provider assets available for investment are primarily optimized for the legacy
fee-for-service
model.
There is demand for technology-driven disruption that would shift the healthcare system to a value-based model. However, technology-based solutions alone have been unable to drive significant change without also addressing the constraints on providers’ time and resources.
Advancements in technology have disrupted multiple industries when the technology was thoughtfully applied and integrated. These new business models, systems and approaches have replaced legacy offerings and driven significant changes in consumer behavior. We believe that an integrated, value-based care platform enabled by data and technology has the potential to similarly revolutionize the healthcare industry.
CareMax Medical centers
The foundation of CareMax’s model is its medical centers. A typical medical center ranges in size from approximately 5,250 to 15,000 feet with the capacity for three to five full clinical care teams, depending on size. Each clinical care team can provide high-touch preventive care to up to 600 Medicare Advantage members.
Once fully-staffed with four full clinical care teams, each medical center can provide care to up to 2,400 members. It typically takes about 12 to 18 months to complete the buildout of each medical center and about six more months for each medical center to gain sufficient membership to reach break-even, which typically ranges between 250 and 500 members per center, depending upon payor allocation and capacity of the center.
CareMax’s currently operational medical centers are located throughout Miami Dade, Broward, Orange, Osceola, Lake Seminole and Hillsborough counties in Florida and the Company recently opened two medical centers in Memphis, Tennessee and one medical center in New York City, New York. A fleet of approximately 150 vans provides transportation for members between their homes and the medical centers, wellness centers, and other medical appointments outside of the medical center. Medications can be delivered directly to members’ homes from CareMax’s central fill pharmacy, negating the burden of an additional trip to a retail pharmacy for members, which may otherwise provide a barrier to medication compliance. Medical personnel are available to serve members in their homes following discharge from the hospital or if travel to a medical center is burdensome for a member. Each medical center typically includes an optical shop to provide patients with frames and lenses made
in-house
at the CareMax optical lab, a pharmacy dispensary supplied by CareMax’s owned central fill pharmacy, and nonpharmacological pain management, such as massage therapy and acupuncture, through the wellness center. Almost all of CareMax’s medical centers include health and wellness centers that offer health educational classes, fitness programs, and social services intended to address the social barriers to accessing care faced by many of CareMax’s Medicare Advantage members. In Florida, each wellness center includes an ACCESS center, licensed by the Florida Department of Children and Families, that is able to connect members with additional social services, such as food and housing assistance. Each wellness center typically extends these social services to the surrounding community through community outreach personnel, who host health fairs and events open to
non-members.
As a result, each CareMax medical center is a
“one-stop-shop”
health and welfare solution for members.
CareMax’s Clinical Care Teams
CareMax utilizes a team-based approach. Each clinical care team is led by a primary care physician, who may work with a physician’s assistant or registered nurse and each of which is supported by a medical assistant to deliver value-based, coordinated care. As a medical center grows, CareMax increases the number of clinical
 
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care teams serving members. Each of CareMax’s clinical care teams is trained in preventive and comprehensive care designed to address the whole person and provide a comprehensive, high touch approach to health care delivery.
Each of CareMax’s team members has a specific role to play in delivering CareMax’s care model, as described below:
 
Primary Care Physician    Leads the clinical care team and implements CareMax’s comprehensive, high touch approach to health care
Physician’s Assistant or Registered Nurse Practitioner    Educate and manage clinical needs between visits and provide group education on chronic disease management
Medical Assistant    Manage clinical workflows and act as guides for patient visits
Supporting each clinical care team at each center are the following additional care and service providers:
 
Phlebotomist    Front Desk    Access Representative
Pharmacy Technician    Referral Coordinator    Community Sales Representative
Administrator    Transportation Dispatches    Wellness Staff & Massage Therapist
Additional care and service providers allow members to receive laboratory services, ultrasounds, electrocardiograms,
x-rays,
and limited procedures, such as joint injections, centrally at a medical center. Specialty providers, ranging from cardiology, dermatology, pulmonology, gastroenterology, podiatry, psychiatry, pain management, optometry, ophthalmology, and dental, are also available to members at each medical center.
Additionally, CareMax’s medical centers are supported by a centralized office which contains a 24/7 inbound call center, member outreach outbound call center, referrals processing, medical records and clinical documentation reviewers. Members are guided through the entirety of the healthcare system by referrals and care coordinators who handle the appointment scheduling and medical record retrieval that would otherwise be the responsibility of the member to coordinate, thereby addressing another potential barrier to care for most members.
CareOptimize
CareOptimize is CareMax’s technology platform that powers its comprehensive, high touch approach to health care delivery. CareOptimize is a proprietary
end-to-end
technology platform that does the following:
 
  •  
Aggregates Data.
CareOptimize collects health-related data from CareMax members and the patients served by healthcare organizations in the CareOptimize network from a broad set of sources, including state level health information exchanges, payor claims data, laboratory results, eligibility data and data gathered from remote monitoring, such as through CareBox. CareOptimize is designed to structure and sort these data sets to develop a comprehensive understanding of member and patient medical and social attributes.
 
  •  
Data Analytics.
CareOptimize utilizes proprietary algorithms and machine learning to support more informed care delivery decisions and to focus care decisions on preventative chronic disease management and the social determinants of health. CareMax uses these analytics and data science to generate insights that CareMax and the healthcare organizations in the CareOptimize network use in care decisions for members and patients.
 
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  •  
Informed Care Decisions.
Based on the data and analysis, CareOptimize saves time for providers and improves the consistent and coordinated application of care delivery;
 
  •  
CareOptimize offers providers curated patient data accessible by providers during office visits, which allows providers to review medical histories more easily, identify relevant data points, and reduce the administrative burden of the practice of medicine;
 
  •  
CareOptimize alerts providers to changes in conditions between visits, making interventions between visits possible without the need for a patient to contact the provider, thereby reducing another potential barrier for care;
 
  •  
CareOptimize will identify where a patient may have not yet completed preventative tests;
 
  •  
CareOptimize helps providers to identify specialists convenient to patients’ geography; and
 
  •  
CareOptimize may identify care events, such as hospitalizations, or other care provided outside the care network, to give providers a complete picture of a patients’ medical status.
As a result, CareOptimize stratifies risk for providers and helps providers build meaningful relationships with patients.
CareMax’s Impact
For CareMax’s Medicare Advantage members, many of whom suffer from one or more chronic conditions and are dual-eligible and
low-income
subsidy eligible, CareMax’s vertically integrated ambulatory care and community-centric services provides coordinated care and better health outcomes.
CareMax believes that the benefit of its vertically integrated ambulatory care and community-centric services became apparent during the outbreak of the
COVID-19
pandemic. While other healthcare organizations experienced significant loss of
fee-for-service
revenue from declines in
in-person
visits, CareMax was able to convert 90% of
in-person
visits to real-time audio/video telehealth sessions. Where members faced technological barriers to accessing telehealth, CareMax provided tablets to those members. In order to support continued
in-person
visits, all CareMax employees, staff and members were provided with personal protective equipment and other medical supplies. CareMax clinical teams were also staggered with alternating schedules and staffing redundancies to prevent disruption in member care in the event of an employee infection. Consistent with CareMax’s commitment to whole person wellness, during the peak of the
COVID-19
pandemic, CareMax coordinated a number of social supports for members, including the delivery of over 2,300 meals to members per day, weekly
check-in
calls to members that also supported
COVID-19
related education and virtual exercise and wellness classes and virtual social activities to reduce member loneliness and maintain community among members.
Capitation arrangements
From its founding, CareMax has focused its business on Medicare Advantage or similar capitation arrangements, which CareMax believes aligns provider incentives with both quality and efficiency of care. Under capitation arrangements, payors pay a fixed per patient per month (“PPPM”) amount for every plan member that selects CareMax as its primary care provider. Each member who selects CareMax as primary thus becomes a patient, giving CareMax a significant portion of the responsibility and risk for managing patient care. CareMax believes this approach to care management improves the quality of care for patients and the potential profitability for efficient care providers.
The PPPM rates for CareMax’s capitation arrangements are determined as a percent of the premium the Medicare Advantage plan receives from CMS for CareMax’s
at-risk
patients. Those premiums are determined via the Medicare Advantage plans’ competitive bidding process with CMS and are based upon the cost of care in
 
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a local market and the average utilization of services by the patients enrolled. Medicare pays capitation using a “risk adjustment model,” which compensates providers based on health status (acuity) of each individual patient. Payors with higher acuity patients receive more, and those with lower acuity patients receive less. Under the risk adjustment model, capitation is paid on an interim basis based on enrollee data submitted for the preceding year and is adjusted in subsequent periods after the final data is compiled. As premiums are adjusted via the risk adjustment model, CareMax’s PPPM payments will change in unison with how CareMax’s payors’ premiums change with CMS. In certain contracts, PPPM fees also include adjustments for items such as performance incentives or penalties based on the achievement of certain clinical quality metrics as contracted with payors.
Following the Business Combination, CareMax also serves Medicaid patients under capitation arrangements. Similar to the capitation arrangements with Medicare Advantage plans, under Medicaid plans, CareMax is allocated an agreed percentage of the premium the Medicaid plan receives from Florida’s Agency for Health Care Administration (“AHCA”). Premiums are determined by Florida’s AHCA and base rates are adjusted annually using historical utilization data projected forward by a third-party actuarial firm. The rates are established based on specific cohorts by age and sex and geographical location. AHCA uses a “zero sum” risk adjustment model that establishes acuity for certain cohorts of patients and quarterly, depending on the scoring of that acuity, may shift premiums from health plans with lower acuity members to health plans with higher acuity members.
The premiums paid under capitation are often higher than under
fee-for-service
arrangements.
Consequently, the revenue and, when costs for providing service are effectively managed, profit opportunity available under a capitation arrangement are more attractive.
CareMax believes that the advantages, savings and efficiencies made possible by the capitation model are most pronounced when the care demands of the population are the most severe and require the most coordination, such as for older patients and patients with chronic, complex and
follow-on
diseases that CareMax serves. While organized coordination of care is central to the capitation model, it is also well suited to the implementation of preventive care and disease management over the long term. The capitation model gives practitioners a financial incentive to control costs by improving the overall health of their patient population by managing chronic conditions, offering preventive care and avoiding expensive hospital stays and emergency department visits. Although capitation arrangements involve a certain degree of risk that patients’ medical expenses will exceed the capitation amount, CareMax believes that it has the scale, comprehensive medical delivery resources, infrastructure and care management knowledge to spread this risk across a large patient population. See “
Risk Factors
—
Risks Related to Our Business and Industry—
Under most of our agreements with health plans, we assume some or all of the risk that the cost of providing services will exceed our compensation
.”
Fee-for-service
arrangements
Under traditional
fee-for-service
reimbursement models, payors pay a specified amount for each service or procedure performed during a patient visit. As a result, compensation under
fee-for-service
arrangements is closely tied to the volume of patient visits and procedures performed, thus offering limited financial incentive to focus on cost containment and preventative care. As of December 31, 2021, less than 1% of CareMax’s revenue was derived from
fee-for-service
arrangements.
Payor Relationships
CareMax’s ability to consistently attract patients across multiple geographic markets depends on its ability to contract with payors in each market. By opening centers in locations where CareMax’s current payors have large numbers of insured Medicare members, CareMax believes it is creating net benefits for payors, as CareMax is able to reduce unnecessary costs and consistently raise the quality of the payors’ plans, driving Medicare quality bonuses that increase their revenue.
 
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As of December 31, 2021, CareMax had contractual relationships with 30 payors. See “Risk Factors— Risks Related to Our Business and Industry—Our revenues and operations are dependent upon a limited number of key payors, the loss of any of which could adversely affect our business.” While length of contract and economic terms are often negotiated, payors generally use form contracts that contain usual and customary terms and conditions. CareMax’s contracts with payors provide for terms of varying lengths with annual renewals following the initial term; however, certain of these payor contracts also permit the payor to terminate the contract for convenience upon 60 to 90 days’ notice to CareMax. CareMax’s agreements with each payor may also include terms and conditions to incentivize CareMax and facilitate its ability to provide quality care to that plan’s members, such as care coordination or stabilization fees, quality adjustments, marketing support and other usual and customary provisions.
The contracts governing CareMax’s relationships with payors include key terms which may include the period of performance, revenue rates, advanced billing terms, service level agreements, termination clauses and right of first refusal clauses. Typically, these contracts provide for a monthly PPPM payment to CareMax determined as a percentage of the Medicare Advantage premium received by the applicable plan. The specified percentage varies depending on the plan and the terms of the particular contract. In some cases, CareMax’s contracts also include other shared medical savings arrangements. In addition, certain of CareMax’s contracts provide that if CareMax fails to meet specified implementation targets, it may be subject to financial penalties.
Most of CareMax’s contracts include cure periods for certain breaches, during which time CareMax may attempt to resolve any issues that would trigger a payor’s ability to terminate the contract. Certain of CareMax’s contracts may be terminated immediately by the payor if CareMax loses applicable licenses, goes bankrupt, loses liability insurance, becomes insolvent, files for bankruptcy or receives an exclusion, suspension or debarment from state or federal government authorities. Additionally, if a payor were to lose applicable licenses, go bankrupt, lose liability insurance, become insolvent, file for bankruptcy or receive an exclusion, suspension or debarment from state or federal government authorities, CareMax’s contract with such payor could in effect be terminated. The loss, termination or renegotiation of any contract could negatively impact CareMax’s results. In addition, as payors’ businesses respond to market dynamics and financial pressures, and as they make strategic business decisions in respect of the lines of business they pursue and programs in which they participate, CareMax expects that certain of its payors will, from time to time, seek to restructure their agreements with CareMax. See “Risk Factors Risks Related to Our Business and Industry—The termination or
non-renewal
of the MA contracts held by the health plans with which we contract, or the termination or
non-renewal
of our contracts with those plans, could have a material adverse effect on our revenue and our results of operations.” The contracts with CareMax’s payors impose other obligations on CareMax. For example, CareMax typically agrees that all services provided under the payor contract and all employees providing such services will comply with the payor’s policies and procedures. In addition, in most instances, CareMax has agreed to indemnify CareMax’s payors against certain third-party claims, which may include claims that CareMax’s services infringe the intellectual property rights of such third parties.
Regulation
CareMax’s operations and those of its affiliated physician entities are subject to extensive federal, state and local governmental laws and regulations. These laws and regulations require CareMax to meet various standards relating to, among other things, billings and reports to government payment programs, primary care medical centers and equipment, dispensing of pharmaceuticals, management of centers, personnel qualifications, maintenance of proper records, and quality assurance programs and patient care. If any of CareMax’s operations or those of its affiliated physicians are found to violate applicable laws or regulations, CareMax could suffer severe consequences that would have a material adverse effect on CareMax’s business, results of operations, financial condition, cash flows, reputation and stock price, including:
 
  •  
suspension or termination of CareMax’s participation in government and/or private payment programs;
 
  •  
refunds of amounts received in violation of law or applicable payment program requirements dating back to the applicable statute of limitation periods;
 
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  •  
loss of CareMax’s licenses required to operate healthcare facilities or administer pharmaceuticals in the jurisdictions in which CareMax operates;
 
  •  
criminal or civil liability, fines, damages or monetary penalties for violations of healthcare fraud and abuse laws, including the federal Anti-Kickback Statute, Civil Monetary Penalties Law of the Social Security Act, Stark Law, the federal False Claims Act (the “FCA”) and/or state analogs to these federal enforcement authorities, or other regulatory requirements;
 
  •  
enforcement actions by governmental agencies and/or state law claims for monetary damages by patients who believe their health information has been used, disclosed or not properly safeguarded in violation of federal or state patient privacy laws, including with respect to violations of the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), as amended by Subtitle D of the Health Information Technology for Economic and Clinical Health Act, also known as Title XIII of Division A and Title IV of Division B of the American Recovery and Reinvestment Act of 2009, and the regulations promulgated thereunder;
 
  •  
mandated changes to CareMax’s practices or procedures that significantly increase operating expenses or decrease CareMax’s revenue;
 
  •  
imposition of and compliance with corporate integrity agreements that could subject CareMax to ongoing audits and reporting requirements as well as increased scrutiny of CareMax’s billing and business practices which could lead to potential fines, among other things;
 
  •  
termination of various relationships and/or contracts related to CareMax’s business, including joint venture arrangements, contracts with payors, real estate leases and provider employment arrangements;
 
  •  
changes in and reinterpretation of rules and laws by a regulatory agency or court, such as state corporate practice of medicine laws, that could affect the structure and management of CareMax’s business and its affiliated physician practice corporations;
 
  •  
negative adjustments to government payment models including, but not limited to, Medicare Parts A, B and C and Medicaid; and
 
  •  
harm to CareMax’s reputation, which could negatively impact CareMax’s business relationships, the terms of payor contracts, CareMax’s ability to attract and retain patients and physicians, CareMax’s ability to obtain financing and CareMax’s access to new business opportunities, among other things.
CareMax expects that CareMax’s industry will continue to be subject to substantial regulation, the scope and effect of which are difficult to predict. CareMax’s activities could be subject to investigations, audits and inquiries by various government and regulatory agencies and private payors with whom CareMax contracts at any time in the future. See “Risk Factors—Risks Related to Regulation.” Adverse findings from such investigations and audits could bring severe consequences that could have a material adverse effect on CareMax’s business, results of operations, financial condition, cash flows, reputation and stock price. In addition, private payors could require
pre-payment
audits of claims, which can negatively affect cash flow, or terminate contracts for repeated deficiencies.
There is no requirement in the jurisdictions in which CareMax currently operates for a risk-bearing provider to register as an insurance company and CareMax has not registered as such in any of the jurisdictions in which CareMax currently operates
,
however, CareMax anticipates that such registration will be required in certain of CareMax’s planned expansion markets.
Federal Anti-Kickback Statute
The federal Anti-Kickback Statute prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration, directly or indirectly, in cash or kind, to induce or reward either the referral
 
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of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under federal and state healthcare programs such as Medicare and Medicaid.
Federal civil and criminal penalties may be imposed violations of the federal Anti-Kickback Statute include imprisonment, fines and exclusion of the provider from future participation in the federal healthcare programs, including Medicare and Medicaid. Violations of the federal Anti-Kickback Statute are punishable by imprisonment for up to ten years, fines of up to $100,000 per kickback or both. Larger fines can be imposed upon corporations under the provisions of the U.S. Sentencing Guidelines and the Alternate Fines Statute. Individuals and entities convicted of violating the federal Anti-Kickback Statute are subject to mandatory exclusion from participation in Medicare, Medicaid and other federal healthcare programs for a minimum of five years. Civil penalties for violation of the Anti-Kickback Statute include up to $100,000 in monetary penalties per violation, repayments of up to three times the total payments between the parties to the arrangement and suspension from future participation in Medicare and Medicaid. Court decisions have held that the statute may be violated even if only one purpose of remuneration is to induce referrals. The Affordable Care Act (“ACA”) amended the federal Anti-Kickback Statute to clarify that a defendant does not need to have actual knowledge of the federal Anti-Kickback Statute or have the specific intent to violate it. In addition, the ACA amended the federal Anti-Kickback Statute to provide that any claims for items or services resulting from a violation of the federal Anti-Kickback Statute may be considered false or fraudulent for purposes of the FCA, as discussed below.
The federal Anti-Kickback Statute includes statutory exceptions and regulatory safe harbors that protect certain arrangements. Compliance with these exceptions and safe harbors are voluntary. Business transactions and arrangements that are structured to comply fully with an applicable safe harbor will generally be considered outside the ambit of the federal Anti-Kickback Statute. However, transactions and arrangements that do not satisfy all elements of a relevant safe harbor do not necessarily violate the law. When an arrangement does not satisfy a safe harbor, the arrangement must be evaluated on a facts and circumstances basis in light of the parties’ intent and the arrangement’s potential for abuse. Arrangements that do not satisfy a safe harbor may be subject to greater scrutiny by enforcement agencies. If any of CareMax’s business transactions or arrangements were found to violate the federal Anti-Kickback Statute, CareMax could face, among other things, criminal, civil or administrative sanctions, including possible exclusion from participation in Medicare, Medicaid and other state and federal healthcare programs. Any findings that CareMax has violated these laws, or even accusations of the same, could have a material adverse impact on CareMax’s business, results of operations, financial condition, cash flows, reputation and stock price.
As part of HHS’s Regulatory Sprint to Coordinated Care (“Regulatory Sprint”), the Office of Inspector General (the “OIG”) of HHS issued a request for information in August 2018 seeking input on regulatory provisions that may act as barriers to coordinated care or value-based care. Specifically, the OIG sought to identify ways in which it might modify or add new safe harbors to the Anti-Kickback Statute (as well as exceptions to the definition of “remuneration” in the beneficiary inducements provision of the Civil Monetary Penalty statute) to foster arrangements that promote care coordination and advance the delivery of value-based care, while also protecting against harms caused by fraud and abuse. Numerous federal agencies have requested comments and information from the public and have published proposed regulations as part of the Regulatory Sprint on areas that have historically been viewed as barriers to innovative care coordination arrangements.
On November 20, 2020, the OIG released final rules clarifying and revising the Anti-Kickback Statute safe harbors. The new rules are intended to reduce regulatory barriers, accelerate the shift in service reimbursement from volume to value-based payments, and advance coordinated care across healthcare settings. OIG’s final rule adds seven new safe harbor provisions for certain coordinated care and value- based arrangements, modifies four existing safe harbor protections, and codifies one new exception under the civil monetary penalty prohibitions against beneficiary inducements related to telehealth technologies furnished to certain
in-home
dialysis patients.
In coordination with the exceptions under the Stark Law, OIG established three “new safe harbors for remuneration exchanged between or among participants in a value-based arrangement.” OIG also finalized a new
 
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safe harbor related to patient engagement tools and supports furnished by a participant in a value-based enterprise to a patient in a target patient population, and a safe harbor for participants in
CMS-sponsored
model arrangements and model patient incentives (e.g., Medicare Shared Savings Program) to provide greater predictability and uniformity across models. The other safe harbor provisions include cybersecurity technology, tools, and related services, and electronic health records (“EHR”) items and services, along with revisions to safe harbors addressing personal services arrangements, warranties, and local transportation.
These changes in federal regulations are anticipated to make a significant impact on health care providers and other stakeholders. These and similar changes may cause OIG, CMS or other regulators to change the parameters of rules and regulations that CareMax must follow and thus impact CareMax’s business, results of operations and financial condition.
Risk Bearing Provider Regulation
Certain of the jurisdictions where CareMax currently operates or may choose to operate in the future regulate the operations and financial condition of risk bearing providers like CareMax and its affiliated providers. These regulations can include capital requirements, licensing or certification, governance controls and other similar matters. While these regulations have not had a material impact on CareMax’s business to date, as CareMax continues to expand, these rules may require additional resources and capitalization and add complexity to CareMax’s business.
Stark Law
The Stark Law prohibits a physician who has a financial relationship, or who has an immediate family member who has a financial relationship, with entities providing Designated Health Services (“DHS”) from referring Medicare patients to such entities for the furnishing of DHS, unless an exception applies.
Although uncertainty exists, federal agencies and at least two courts have taken the position that the Stark Law also applies to Medicaid. DHS is defined to include clinical laboratory services, physical therapy services, occupational therapy services, radiology services including magnetic resonance imaging, computerized axial tomography scans, and ultrasound services, radiation therapy services and supplies, durable medical equipment and supplies, parenteral and enteral nutrients, equipment, and supplies, prosthetics, orthotics and prosthetic devices and supplies, home health services, outpatient prescription drugs, inpatient and outpatient hospital services and outpatient speech-language pathology services. The types of financial arrangements between a physician and an entity providing DHS that trigger the self-referral prohibitions of the Stark Law are broad and include direct and indirect ownership and investment interests and compensation arrangements. The prohibition applies regardless of the reasons for the financial relationship and the referral. Unlike the federal Anti-Kickback Statute, the Stark Law is a strict liability violation where unlawful intent need not be demonstrated.
The Stark Law prohibits any entity providing DHS that has received a prohibited referral from presenting, or causing to be presented, a claim or billing for the services arising out of the prohibited referral. Similarly, the Stark Law prohibits an entity from “furnishing” a DHS to another entity in which it has a financial relationship when that entity bills for the service. The Stark Law also prohibits self-referrals within an organization by its own physicians, although broad exceptions exist that cover employed physicians and those referring DHS that are ancillary to the physician’s practice to the physician group.
If the Stark Law is implicated, the financial relationship must fully satisfy a Stark Law exception. There are a number of exceptions to the self-referral prohibition, including exceptions for many of the customary financial arrangements between physicians and providers, such as employment contracts, leases, professional services agreements, and risk sharing arrangements, amongst others. If an exception is not satisfied, then the parties to the arrangement could be subject to sanctions. Sanctions for violation of the Stark Law include denial of payment for claims for services provided in violation of the prohibition, refunds of amounts collected in violation of the
 
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prohibition, a civil penalty of up to $15,000 for each service arising out of the prohibited referral, a civil penalty of up to $100,000 against parties that enter into a scheme to circumvent the Stark Law prohibition, civil assessment of up to three times the amount claimed and potential exclusion from the federal healthcare programs, including Medicare and Medicaid. Amounts collected on claims related to prohibited referrals must be reported and refunded generally within 60 days after the date on which the overpayment was identified. Furthermore, Stark Law violations and failure to return overpayments in a timely manner can form the basis for FCA liability, as discussed below.
If CMS or other regulatory or enforcement authorities determine that claims have been submitted for referrals by CareMax that violate the Stark Law, CareMax would be subject to the penalties described above. In addition, it might be necessary to restructure existing compensation agreements with CareMax’s physicians. Any such penalties and restructuring or other required actions (including mere accusations) could have a material adverse effect on CareMax’s business, results of operations, financial condition and cash flows.
In 2018, CMS issued a request for information seeking input on how to address any undue regulatory impact and burden of the Stark Law. CMS placed the request for information in the context of the Regulatory Sprint and stated that it identified aspects of the Stark Law that pose potential barriers to coordinated care. CMS has since issued a sweeping set of new regulations that introduce significant new value-based terminology, safe harbors and exceptions to the Stark Law. Those or other changes implemented by CMS may change the parameters of Stark Law exceptions that CareMax relies on and thus impact CareMax’s business, results of operations and financial condition. On November 20, 2020, CMS and OIG issued new exceptions to promote coordinated services among healthcare providers and emphasize value-based payment and collaborative care. In the final rule, CMS finalized three new exceptions and definitions for certain value-based compensation arrangements between or among physicians, providers and suppliers, and amended the existing exception for EHR items. When it comes to value-based arrangements, CMS codified three “new, permanent exceptions to the physician self-referral law.” The specific activities of the parties involved in these compensation relationships will be key to determining whether the proposed value-based arrangement qualifies for an exception under the Stark Law.
CMS also added two new exceptions—one for certain arrangements under which a physician receives limited remuneration for items or services actually provided by the physician, and the other, aligned with OIG, for donations of cybersecurity technology that includes hardware, software, and related services. The final rule also includes commentary and insight into how CMS now interprets numerous defined terms and various requirements scattered throughout the Stark Law.
The definition of DHS under the Stark Law does not include physician services. Because most services furnished to Medicare beneficiaries provided in CareMax’s centers are physician services, CareMax’s services generally do not implicate the Stark Law referral prohibition. However, certain ancillary services CareMax may provide, including certain diagnostic testing, may be considered DHS. CareMax also refers Medicare beneficiaries to third parties for the provision of DHS and CareMax’s financial relationships with those third parties must satisfy a Stark Law exception.
CareMax has entered into several types of financial relationships with physicians, including compensation arrangements. If CareMax’s centers were to bill for a DHS service and the financial relationships with the physician did not satisfy an exception, CareMax could be required to change CareMax’s practices, face civil penalties, pay substantial fines, return certain payments received from Medicare and beneficiaries or otherwise experience a material adverse effect as a result of a challenge to payments made pursuant to referrals from these physicians under the Stark Law.
Fraud and Abuse under State Law
States also have laws similar to or more strict than the federal Anti-Kickback Statute and Stark Law that may affect CareMax’s ability to receive referrals from physicians with whom CareMax has financial
 
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relationships. State laws of this nature are significant, particularly if they apply to all payors and not just to government-funded healthcare programs. Some states have laws prohibiting physicians from holding financial interests in various types of medical facilities to which they refer patients. These state prohibitions may differ from the Stark Law’s prohibitions and exceptions may apply to a broader or narrower range of services and financial relationships. Some of these laws could potentially be interpreted broadly as prohibiting physicians who hold shares of CareMax’s publicly traded stock or are physician owners from referring patients to CareMax’s centers if the centers perform services for their patients or do not otherwise satisfy an exception to the law. State statutes and regulations also may require physicians or other healthcare professionals to disclose to patients any financial relationship the physicians or healthcare professionals have with a healthcare provider that is recommended to patients.
Some state anti-kickback laws include civil and criminal penalties. Some of these laws include exemptions that may be applicable to CareMax’s physician relationships or for financial interests limited to shares of publicly traded stock. Some, however, may include no explicit exemption for certain types of agreements and/or relationships entered into with physicians. These laws and regulations vary significantly from state to state, are often vague and, in many cases, have not been interpreted by courts or regulatory agencies. Exclusions and penalties, if applied to us, could result in significant loss of reimbursement to us, thereby significantly affecting CareMax’s financial condition.
If these laws are interpreted to apply to physicians who hold equity interests in CareMax’s centers or to physicians who hold CareMax’s publicly traded stock, and for which no applicable exception exists, CareMax may be required to terminate or restructure CareMax’s relationships with these physicians. Violations of these state laws may result in prohibition of payment for services rendered, loss of licenses, fines, criminal penalties, administrative sanctions, refund requirements and exclusions from government healthcare programs, including Medicare and Medicaid, which could have a material adverse effect on CareMax’s business, results of operations, financial condition, cash flows, reputation and stock price.
Similarly, states may have beneficiary inducement prohibitions and consumer protection laws that may be triggered by the offering of inducements, incentives and other forms of remuneration to patients and prospective patients. Violations range from civil to criminal and could have a material adverse effect on CareMax’s business, results of operations and financial condition.
Corporate Practice of Medicine and
Fee-Splitting
The laws and regulations relating to the practice of medicine vary from state to state and many states prohibit general business corporations, such as CareMax, from practicing medicine, employing physicians to practice medicine, controlling physicians’ medical decisions or engaging in some practices such as splitting professional fees with physicians. While CareMax believes that it is in substantial compliance with state laws prohibiting the corporate practice of medicine and
fee-splitting,
other parties may assert that CareMax is engaged in the corporate practice of medicine or unlawful
fee-splitting.
Were such allegations to be asserted successfully before the appropriate judicial or administrative forums, CareMax could be subject to adverse judicial or administrative penalties, certain contracts could be determined to be unenforceable and CareMax may be required to restructure CareMax’s contractual arrangements. The laws of other states do not prohibit
non-physician
entities from employing physicians to practice medicine but may retain a ban on some types of
fee-splitting
arrangements.
Violations of the corporate practice of medicine vary by state and may result in physicians being subject to disciplinary action, as well as to forfeiture of revenues from payors for services rendered. For lay entities, violations may also bring both civil and, in more extreme cases, criminal liability for engaging in medical practice without a license. Some of the relevant laws, regulations and agency interpretations in states with corporate practice of medicine restrictions have been subject to limited judicial and regulatory interpretation. In limited cases, courts have required management services companies to divest or reorganize structures deemed to
 
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violate corporate practice restrictions. Third-party payors may also seek to terminate their contracts with, or recoup past amounts paid from, CareMax arising out of CareMax’s alleged violation corporate practice or
fee-splitting
laws. Moreover, state laws are subject to change. Any allegations or findings that CareMax has violated these laws could have a material adverse impact on CareMax’s business, results of operations and financial condition.
The False Claims Act
The FCA is a means of policing false bills or false requests for payment in the healthcare delivery system. Among other things, the FCA authorizes the imposition of up to three times the government’s damages and significant per claim civil penalties on any “person” (including an individual, organization or company) who, among other acts:
 
  •  
knowingly presents or causes to be presented to the federal government a false or fraudulent claim for payment or approval;
 
  •  
knowingly makes, uses or causes to be made or used a false record or statement material to a false or fraudulent claim;
 
  •  
knowingly makes, uses or causes to be made or used a false record or statement material to an obligation to pay the government, or knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the federal government; or
 
  •  
conspires to commit the above acts.
The federal government has used the FCA to prosecute a wide variety of alleged false claims and fraud allegedly perpetrated against Medicare and state healthcare programs, including but not limited to coding errors, billing for services not rendered, the submission of false cost or other reports, billing for services at a higher payment rate than appropriate, billing for items or services provided by entities or individuals that are not appropriate licensed, billing for care that is not considered medically necessary and false reporting of risk-adjusted diagnostic codes to Medicare Advantage plans. The penalties for a violation of the FCA range from $5,500 to $11,000 (adjusted for inflation) for each false claim, plus up to three times the amount of damages caused by each false claim, which can be as much as the amounts received directly or indirectly from the government for each such false claim. On June 20, 2020, the Department of Justice issued a final rule announcing adjustments to FCA penalties, under which the per claim penalty range increased to a range from $11,665 to $23,331 for penalties assessed after June 19, 2020, so long as the underlying conduct occurred after November 2, 2015.
The Fraud Enforcement and Recovery Act (“FERA”), enacted on May 20, 2009, greatly expanded the reach of the FCA by eliminating the prior requirement that a false claim be presented to a federal official, or that such a claim directly involve federal funds. FERA clarifies that liability attaches whenever an individual or entity makes a false claim to obtain money or property, any part of which is provided by the government, without regard to whether the individual or entity makes such claim directly to the federal government. Consequently, under FERA, liability attaches when such false claim is submitted to an agent acting on the government’s behalf or with a third party contractor, grantee or other recipient of such federal money or property. Additionally, under FERA, individuals and entities violate the FCA by knowingly retaining historic improper payments (overpayments/overprovisions) even if the individual or entity did not make claim for such payments. The ACA requires that overpayments be reported and returned within 60 days after the overpayment is identified or the corresponding cost report was due.
An overpayment impermissibly retained could subject CareMax to liability under the FCA, exclusion from government healthcare programs and penalties under the federal Civil Monetary Penalty statute. As a result of these provisions, CareMax’s procedures for identifying and processing overpayments may be subject to greater scrutiny.
 
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In addition to actions being brought under the FCA by government officials, the FCA also allows a private individual with direct knowledge of fraud to bring a whistleblower, or qui tam, lawsuit on behalf of the government for violations of the FCA. The ACA also broadens the direct knowledge requirement so that the private individual is not required to have direct knowledge of the allegations, but must provide information to the government before it is publicly disclosed and that is independent of and materially adds to any publicly disclosed allegations. In that event, the whistleblower is responsible for initiating a lawsuit that sets in motion a chain of events that may eventually lead to the recovery of money by the government.
The ACA provides that claims tainted by a violation of the federal Anti-Kickback Statute are false for purposes of the FCA. Some courts have held that filing claims or failing to refund amounts collected in violation of the Stark Law can form the basis for liability under the FCA. In addition to the provisions of the FCA, which provide for civil enforcement, the federal government can use several criminal statutes to prosecute individuals and entities who are alleged to have submitted false or fraudulent claims for payment to the federal government. Any allegations or findings that CareMax has violated the FCA could have a material adverse impact on CareMax’s business, results of operations and financial condition.
In addition to the FCA, various states have adopted their own analogs of the FCA. States are becoming increasingly active in using their false claims laws to police the same activities listed above, particularly with regard to Medicaid
fee-for-service
and Managed Medicaid programs.
Civil Monetary Penalties Statute
The Civil Monetary Penalties Statute, 42 U.S.C. §
1320a-7a,
authorizes the imposition of civil monetary penalties, assessments and exclusion against an individual or entity based on a variety of prohibited conduct, including, but not limited to:
 
  •  
presenting, or causing to be presented, claims for payment to Medicare, Medicaid or other third-party payors that the individual or entity knows or should know are for an item or service that was not provided as claimed or is false or fraudulent;
 
  •  
offering remuneration to a federal health care program beneficiary that the individual or entity knows or should know is likely to influence the beneficiary to order or receive health care items or services from a particular provider;
 
  •  
arranging contracts with an entity or individual excluded from participation in the federal health care programs;
 
  •  
violating the federal Anti-Kickback Statute;
 
  •  
making, using or causing to be made or used a false record or statement material to a false or fraudulent claim for payment for items and services furnished under a federal health care program;
 
  •  
making, using or causing to be made any false statement, omission or misrepresentation of a material fact in any application, bid or contract to participate or enroll as a provider of services or a supplier under a federal health care program; and
 
  •  
failing to report and return an overpayment owed to the federal government.
Substantial civil monetary penalties may be imposed under the federal Civil Monetary Penalty Statute and may vary depending on the underlying violation. In addition, an assessment of not more than three times the total amount claimed for each item or service may also apply and a violator may be subject to exclusion from federal and state health care programs. In addition, exclusion from the Medicare program may be imposed for violations.
CareMax could be exposed to a wide range of allegations to which the federal Civil Monetary Penalty Statute would apply. CareMax performs monthly checks on CareMax’s employees, affiliated providers and
 
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certain affiliates and vendors using government databases to confirm that these individuals have not been excluded from federal programs. However, should an individual become excluded and CareMax fails to detect it, a federal agency could require CareMax to refund amounts attributable to all claims or services performed or sufficiently linked to an excluded individual, assess significant penalties or, worse case scenario, exclude CareMax from participating in the Medicare program. Likewise, CareMax’s patient programs, which can include enhancements, incentives, benefits and additional care coordination not otherwise covered by third-party payors (including Medicare and Medicaid), could be alleged to be intended to influence the patient’s choice in obtaining services or the amount or types of services sought. Thus, CareMax cannot foreclose the possibility that CareMax will face allegations subject to the Civil Monetary Penalty Statute with the potential for a material adverse impact on CareMax’s business, results of operations and financial condition.
HIPAA and Other Data Privacy Laws
The Health Insurance Portability and Accountability Act of 1996, as amended by as amended by Subtitle D of the Health Information Technology for Economic and Clinical Health Act, also known as Title XIII of Division A and Title IV of Division B of the American Recovery and Reinvestment Act of 2009, and the regulations promulgated thereunder, collectively “HIPAA”, as well as a number of other federal and state privacy and information security laws, extensively regulate the use and disclosure of individually identifiable health information, known as “protected health information,” or “PHI” and require covered entities, including health plans and most health care providers, to implement administrative, physical and technical safeguards to protect the security of such information. Additional security requirements apply to electronic PHI. These regulations also provide patients with substantive rights with respect to their health information. As a HIPAA covered entity, CareMax is required to enter into written agreements with certain contractors, known as business associates, to whom CareMax discloses PHI. Covered entities may be subject to penalties for, among other activities, failing to enter into a business associate agreement where required by law or as a result of a business associate violating HIPAA, if the business associate is found to be an agent of the covered entity and acting within the scope of the agency. In instances where CareMax acts as a business associate to a covered entity, there is the potential for additional liability beyond CareMax’s status as a covered entity.
Covered entities must notify affected individuals of breaches of unsecured PHI without unreasonable delay but no later than 60 days after discovery of the breach by a covered entity or its agents. Reporting must also be made to the HHS Office for Civil Rights and, for breaches of unsecured PHI involving more than 500 residents of a state or jurisdiction, to the media. All impermissible uses or disclosures of unsecured PHI are presumed to be breaches unless the covered entity or business associate establishes that there is a low probability the PHI has been compromised. Various state laws and regulations may also require CareMax to notify affected individuals in the event of a data breach involving personal information without regard to the probability of the information being compromised.
Violations of HIPAA by providers like CareMax, including, but not limited to, failing to implement appropriate administrative, physical and technical safeguards, have resulted in enforcement actions and in some cases triggered settlement payments or civil monetary penalties. Penalties for impermissible use or disclosure of PHI were increased by the HITECH Act by imposing tiered penalties of more than $50,000 per violation and up to $1.5 million per year for identical violations. In addition, HIPAA provides for criminal penalties of up to $250,000 and ten years in prison, with the severest penalties for obtaining and disclosing PHI with the intent to sell, transfer or use such information for commercial advantage, personal gain or malicious harm. Further, state attorneys general may bring civil actions seeking either injunction or damages in response to violations of the HIPAA privacy and security regulations that threaten the privacy of state residents. CareMax follows and maintains a HIPAA compliance plan, which CareMax believes complies with the HIPAA privacy and security regulations, but there can be no assurance that OCR or other regulators will agree. There can be no assurance that CareMax will not be the subject of an investigation (arising out of a reportable breach incident, audit or otherwise) alleging
non-compliance
with HIPAA regulations in CareMax’s maintenance of PHI. The HIPAA privacy and security regulations impose and will continue to impose significant costs on CareMax in order to comply with these standards.
 
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In addition, certain states have proposed or enacted legislation that will create new data privacy and security obligations for certain entities, such as the California Consumer Privacy Act that went into effect January 1, 2020.
In addition, there are numerous other laws and legislative and regulatory initiatives at the federal and state levels addressing privacy and security concerns and CareMax remains subject to federal or state privacy-related laws that are more restrictive than the privacy regulations issued under HIPAA. These laws vary and could impose additional penalties. For example, the Federal Trade Commission uses its consumer protection authority to initiate enforcement actions in response to alleged privacy and data security violations. The California Consumer Privacy Act (the “CCPA”), which came into effect January 1, 2020, was recently amended and expanded by the California Privacy Rights Act (the “CPRA”) passed on November 3, 2020. Most of the CPRA’s substantive provisions will not take effect until January 1, 2023, however, the CPRA’s expansion of the “Right to Know” impacts personal information collected on or after January 1, 2022. Companies must still comply with the CCPA during the ramp up period before the CPRA goes into effect. The CCPA and CPRA, among other things, create new data privacy obligations for covered companies and provides new privacy rights to California residents, including the right to opt out of certain disclosures of their information. The CCPA also created a private right of action with statutory damages for certain data breaches, thereby potentially increasing risks associated with a data breach. It remains unclear what, if any, additional modifications will be made to the CPRA by the California legislature or how it will be interpreted.
In addition to the laws discussed above, CareMax may see more stringent state and federal privacy legislation in 2021 and beyond, as the increased cyber-attacks during the
COVID-19
pandemic have once again put a spotlight on data privacy and security in the U.S. and other jurisdictions. CareMax cannot predict where new legislation might arise, the scope of such legislation, or the potential impact to CareMax’s business and operations.
HIPAA also created two federal crimes: healthcare fraud and false statements relating to healthcare matters. The healthcare fraud statute prohibits knowingly and willfully executing a scheme to defraud any healthcare benefit program, including private payors. A violation of this statute is a felony and may result in fines, imprisonment or exclusion from government sponsored programs. The false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services.
Healthcare reform
In March 2010, broad healthcare reform legislation was enacted in the United States through the ACA. Although many of the provisions of the ACA did not take effect immediately and continue to be implemented, and some have been and may be modified before or during their implementation, the reforms could continue to have an impact on CareMax’s business in a number of ways. CareMax cannot predict how employers, private payors or persons buying insurance might react to federal and state healthcare reform legislation, whether already enacted or enacted in the future, nor can CareMax predict what form many of these regulations will take before implementation.
Other aspects of the 2010 healthcare reform laws may also affect CareMax’s business, including provisions that impact the Medicare and Medicaid programs. These and other provisions of the ACA remain subject to ongoing uncertainty due to developing regulations and clarifications, including those described above, as well as continuing political and legal challenges at both the federal and state levels.
While there may be significant changes to the healthcare environment in the future, the specific changes and their timing are not yet apparent. As a result, there is considerable uncertainty regarding the future with respect to the exchanges and other core aspects of the current health care marketplace. Future elections may create
 
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conditions for Congress to adopt new federal coverage programs that may disrupt CareMax’s current commercial payor revenue streams. While specific changes and their timing are not yet apparent, such changes could lower CareMax’s reimbursement rates or increase CareMax’s expenses. Any failure to successfully implement strategic initiatives that respond to future legislative, regulatory, and executive changes could have a material adverse effect on CareMax’s business, results of operations and financial condition.
CMS and state Medicaid agencies also routinely adjust the risk adjustment factor which is central to payment under Medicare Advantage and Managed Medicaid programs in which CareMax participates. The monetary “coefficient” values associated with diseases that CareMax manages in its population are subject to change by CMS and state agencies. Such changes could have a material adverse effect on CareMax’s financial condition.
Other regulations
CareMax’s operations are subject to various state hazardous waste and
non-hazardous
medical waste disposal laws. Occupational Safety and Health Administration regulations require employers to provide workers who are occupationally subject to blood or other potentially infectious materials with prescribed protections. These regulatory requirements apply to all healthcare facilities, including primary care centers, and require employers to make a determination as to which employees may be exposed to blood or other potentially infectious materials and to have in effect a written exposure control plan. In addition, employers are required to provide or employ hepatitis B vaccinations, personal protective equipment and other safety devices, infection control training, post-exposure evaluation and
follow-up,
waste disposal techniques and procedures and work practice controls. Employers are also required to comply with various record-keeping requirements.
Federal and state law also governs the dispensing of controlled substances by physicians. For example, the Prescription Drug Marketing Act governs the distribution of drug samples. Physicians are required to report relationships they have with the manufacturers of drugs, medical devices and biologics through the Open Payments Program database. Any allegations or findings that CareMax or its providers have violated any of these laws or regulations could have a material adverse impact on CareMax’s business, results of operations and financial condition.
In addition, while none of the jurisdictions in which CareMax currently operates have required it, certain jurisdictions in which CareMax may desire to do business in the future have certificate of need programs regulating the establishment or expansion of healthcare facilities, including primary care centers. These regulations can be complex and time-consuming. Any failure to comply with such regulatory requirements could adversely impact CareMax’s business, results of operations and financial condition.
Intellectual Property
CareMax’s continued growth and success depend, in part, on its ability to protect its intellectual property and internally developed technology, including CareOptimize. CareMax primarily protects its intellectual property through a combination of copyrights, trademarks and trade secrets, intellectual property licenses and other contractual rights (including confidentiality,
non-disclosure
and
assignment-of-invention
agreements with CareMax’s employees, independent contractors, consultants and companies with which CareMax conducts business). CareMax does not currently hold a patent or other registered or applied for intellectual protection for the CareOptimize platform, and instead relies upon
non-registered
rights, including trade secrets, contractual provisions and restrictions on access, to protect its intellectual property rights in CareOptimize.
However, these intellectual property rights and procedures may not prevent others from competing with CareMax. CareMax may be unable to obtain, maintain and enforce CareMax’s intellectual property rights, and assertions by third parties that CareMax violates their intellectual property rights could have a material adverse effect on CareMax’s business, financial condition and results of operations. See “
Risk Factors
—
Risks Related to
 
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Our Business and Industry
—
If we are unable to obtain, maintain and enforce intellectual property protection for our technology or if the scope of our intellectual property protection is not sufficiently broad, particularly with respect to the CareOptimize platform, others may be able to develop and commercialize technology substantially similar to ours, and our ability to successfully commercialize our technology may be adversely affected
” and “
Risk Factors
—
Risks Related to Our Business and Industry
—
Third parties may initiate legal proceedings alleging that we are infringing or otherwise violating their intellectual property rights, the outcome of which would be uncertain and could have a material adverse effect on our business, financial condition and results of operations
.”
Insurance
CareMax maintains insurance and excess coverage for property and general liability, professional liability, directors’ and officers’ liability, workers’ compensation, cybersecurity and other coverage in amounts and on terms believed adequate by management, based on CareMax’s actual claims experience and expectations for future claims. CareMax also utilizes stop-loss insurance for its patients, protecting CareMax for medical claims per episode in excess of certain levels which vary depending on the applicable payor. Future claims could, however, exceed CareMax’s applicable insurance coverage. CareMax provides malpractice insurance for the physician practicing at CareMax centers.
Employees and Human Capital Resources
As of December 31, 2021, CareMax had approximately 1,270 employee team members, including approximately 100 primary care providers. CareMax’s physicians and other care providers are paid salaries or contracted flat rates in order to incentive them to provide high quality care rather than volume of care.
This base compensation for providers is then overlaid with bonuses for quality and member satisfaction. CareMax considers its relationship with its employees to be good. None of CareMax’s employees are represented by a labor union or party to a collective bargaining agreement.
Seasonality
Our ability to grow our patient population with capitation arrangements is dependent in part on our ability to successfully enroll MA patients during the annual enrollment period. During the annual enrollment period, we must convince new MA patients to select us as their primary care provider and existing patients to not select another provider. CareMax typically sees large increases in ACA patients during the first quarter as a result of the annual enrollment period. CareMax’s operational and financial results will experience some variability depending upon the time of year in which they are measured. This variability is most notable in the following areas:
Per-Patient
Revenue
CareMax’s revenue derived from
at-risk
patients is a function of the percent of premium CareMax has negotiated with its payors as well as its ability to accurately and appropriately document the acuity of a patient. CareMax experiences some seasonality with respect to its
per-patient
revenue as it will generally decline over the course of the year. In January of each year, CMS revises the risk adjustment factor for each patient based upon health conditions documented in the prior year, leading to an overall increase in
per-patient
revenue. As the year progresses, CareMax’s
per-patient
revenue declines as new patients join CareMax typically with less complete or accurate documentation (and therefore lower risk-adjustment scores) and patient mortality disproportionately impacts CareMax’s higher-risk (and therefore greater revenue) patients.
Medical costs
Medical costs vary seasonally depending on a number of factors, but most significantly the weather. Certain illnesses, such as the influenza virus, are far more prevalent during colder months of the year, which result in an
 
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increase in medical expenses during these time periods. CareMax therefore expects to see higher levels of
per-patient
medical costs in the first and fourth quarters. Medical costs also depend upon the number of business days in a period. Shorter periods will have lesser medical costs due to fewer business days. Business days can also create year-over-year comparability issues if one year has a different number of business days compared to another. CareMax also expects to experience an impact should there be a pandemic such as
COVID-19,
which may result in increased or decreased total medical costs depending upon the severity of the infection, the duration of the infection and the impact to the supply and availability of healthcare services for CareMax’s patients.
Our Competition
The U.S. healthcare industry is highly competitive. We compete with local and national providers of primary care services, including Leon Medical Centers locally in Florida and ChenMed, CanoHealth and Oak Street Health on a national level, for, among other things, recruitment of physicians and other medical and
non-medical
personnel, individual patients and IPAs. Because of the low barriers of entry into the primary care business and the ability of physicians to own primary care centers and/or also be medical directors for their own centers, competition for growth in existing and expanding markets is not limited to large competitors with substantial financial resources. There have also been increasing indications of interest from
non-traditional
providers and others to enter the primary care space and/or develop innovative technologies or business activities that could be disruptive to the industry. For example, payors have and may continue to acquire primary care and other provider assets. Our growth strategy and our business could be adversely affected if we are not able to continue to acquire or open new medical centers, expand our healthcare providers serviced by CareOptimize, recruit qualified physicians, or attract new members and retain our existing members. See “
Risk Factors
—
Risks Related to Our Business and Industry
—
We face significant competition from primary care facilities and other healthcare services providers. Our failure to adequately compete could adversely affect our business
.”
Website Access to CareMax, Inc. SEC Reports
We use our websites as channels of distribution of company information. Our Form
10-K,
Quarterly Reports on Form
10-
Q, Current Reports on Form
8-K,
Proxy Statement related to our annual shareholders meeting, and all amendments to those reports are available free of charge at www.caremax.com and on the SEC’s website at www.sec.gov as soon as reasonably practicable after we have electronically filed or furnished these reports with the SEC. In addition, you may automatically receive email alerts and other information when you enroll your email address by visiting the Investor Services section of our website. The content of any website referred to in this document is not incorporated by reference into this document.
 
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Unless the context otherwise requires, references in this section to “CareMax,” “we,” “us,” “our,” and the “Company” refers to CareMax, Inc. and its subsidiaries. The following discussion and analysis summarizes the significant factors affecting the consolidated operating results, financial condition, liquidity and cash flows of our company as of and for the periods presented below. The following discussion and analysis should be read in conjunction with our consolidated financial statements and the related notes thereto included elsewhere in this prospectus. The discussion contains forward-looking statements that are based on the beliefs of management, as well as assumptions made by, and information currently available to, our management. Actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors, including those discussed below and elsewhere in this prospectus, particularly in the sections entitled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.”
Our Business
CareMax currently operates 48 centers in Florida, Tennessee and New York and plans to open 15 de novo centers during 2022, inclusive of the three opened in the first quarter of 2022. CareMax offers a comprehensive range of medical services, including primary and preventative care, specialist services, diagnostic testing, chronic disease management and dental and optometry services under global capitation contracts.
CareMax’s comprehensive, high touch approach to health care delivery is powered by its CareOptimize technology platform. CareOptimize is a proprietary
end-to-end
technology platform that aggregates data and analyzes that data using proprietary algorithms and machine learning to support more informed care delivery decisions and to focus care decisions on preventative chronic disease management and the social determinants of health. CareMax believes that CareOptimize is designed to drive better outcomes and lower costs. The CareOptimize technology platform also provides CareMax with a national reach beyond Florida. As of December 31, 2021, the CareOptimize platform was used by approximately 20,000 providers in more than 30 states. CareMax has shifted from selling the CareOptimize platform to new outside customers for a software subscription fee and is instead focused on providing the software to affiliated practices of its managed services organization (“MSO”) to further improve financial, clinical and quality outcomes from the affiliated providers. As of December of 2021, this MSO services more than 100 independent physician associations (“IPAs”).
CarMax’s medical centers offer 24/7 access to care through employed providers and provide a comprehensive suite of high-touch health care and social services to its patients, including primary care, specialty care, telemedicine, health & wellness, optometry, dental, pharmacy and transportation. CareMax’s differentiated healthcare delivery model is focused on care coordination with vertically integrated ambulatory care and community-centric services. The goal of CareMax is to intercede as early as possible to manage chronic conditions for its patient members in a proactive, holistic, and tailored manner to provide a positive influence on patient outcomes and a reduction in overall healthcare costs. CareMax specifically focuses on providing access to high quality care in underserved communities, with approximately 60% of its Medicare Advantage patients being dual-eligible (meaning eligible for both Medicare and Medicaid) and
low-income
subsidy eligible as of December 31, 2021.
While CareMax’s primary focus is providing care to Medicare eligible seniors who are mostly 65+ (79% of revenue for the twelve months ended December 31, 2021, came from these patients), we also provide services to children and adults through Medicaid programs as well as through commercial insurance plans. Substantially all of CareMax’s Medicare patients are enrolled in MA plans which are run by private insurance companies, and are approved by and under contract with Medicare. With MA, patients get all of the same coverage as original Medicare, including emergency care, and most plans also include prescription drug coverage. In many cases, MA plans offer more benefits than original Medicare, including dental, vision, hearing and wellness programs.
 
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Year ended December 31, 2021
Comparability of Financial Results
On June 8, 2021, we consummated the transactions contemplated by that certain Business Combination Agreement, dated December 18, 2020 (the “Business Combination Agreement”), by and among Deerfield Healthcare Technology Acquisitions Corp., a Delaware corporation now known as CareMax, Inc. (“DFHT”). CareMax Medical Group, L.L.C., a Florida limited liability company (“CMG”), the entities listed in Annex I to the Business Combination Agreement (the “CMG Sellers”), IMC, IMC Holdings, LP, a Delaware limited partnership (“IMC Parent”), and Deerfield Partners, L.P pursuant to which, on June 8, 2021 (the “Closing Date”), DFHT acquired 100% of the equity interests in CMG and 100% of the equity interests in IMC, with CMG and IMC becoming wholly owned subsidiaries of DFHT. Immediately upon completion (the “Closing”) of the transactions contemplated by the Business Combination Agreement and the related financing transactions (the “Business Combination”), the name of the combined company was changed to CareMax, Inc. CMG was determined to be the accounting acquirer in the Business Combination. Accordingly, the acquisition of CMG by the Company was accounted for as a reverse recapitalization. Under this method of accounting, CMG was treated as the acquiree for financial reporting purposes. The net assets of CMG were stated at their historical cost, with no goodwill or other separately identifiable intangible assets recorded. The balance sheet, results of operations and cash flows prior to the Business Combination are those of CMG. Further, CMG was determined to be the accounting acquirer of IMC and the acquisition of IMC (the “IMC Acquisition”) was accounted for in accordance with FASB ASC Topic 805,
Business Combinations
(“ASC 805”) as a business combination. Accordingly, the IMC assets acquired, including separately identifiable intangible assets, and liabilities assumed were recorded at their fair value as of the Closing Date. The IMC Acquisition drove, among other things, increases of $6.2 million in Property and Equipment, $34.1 million in amortizable intangible assets and $302.2 million in goodwill as of December 31, 2021, as compared to our balance sheet as of December 31, 2020. The amortization of the acquired intangibles is expected to materially increase our noncash amortization expense for the foreseeable future.
In connection with the Business Combination, we (i) issued and sold in a private placement an aggregate of 41,000,000 shares of our Class A common stock, $0.0001 par value per share (“Class A Common Stock”), (ii) issued 10,796,069 shares of Class A Common Stock to the CMG Sellers, and 10,412,023 shares of Class A Common Stock to IMC Parent (See Note 1 to the Consolidated Financial Statements) and (iii) entered into a Credit Agreement (as amended, the “Credit Agreement), by and among the Company, Royal Bank of Canada, as Administrative Agent, Collateral Agent, Swing Line Lender and Issuing Bank; RBC Capital Markets, LLC and Truist Securities, Inc., as Syndication Agents, Joint Lead Arrangers and Joint Book Runners; and certain other banks and financial institutions serving as lenders. The Credit Agreement provides for credit facilities (collectively, the “Credit Facilities”), including (i) an initial term loans in the aggregate principal amount of $125.0 million, which was fully drawn on the Closing Date to finance the Business Combination, (ii) a revolving credit facility in an aggregate principal amount of $40.0 million (the “Revolving Credit Facility”) and (iii) a delayed term loan facility in an aggregate principal amount of $20.0 million (the “Delayed Draw Term Loan”) (See Note 7 to the Consolidated Financial Statements—Credit Agreement). This Delayed Draw Term Loan was not drawn upon and matured on December 8, 2021. Interest and other costs associated with the Credit Facilities are expected to materially increase our interest expense for the foreseeable future.
In connection with the closing of the Business Combination, the Company repaid all outstanding borrowings under CMG’s then existing Loan Agreement, (the “Loan Agreement”), which was terminated on the Closing Date (See Note 7 to the Consolidated Financial Statements—CMG Loan Agreement
As a result of the Business Combination, we have had to hire personnel and incur costs that are necessary and customary for our operations as a public company, which has contributed and is expected to continue contributing to higher corporate, general and administrative costs in the near term.
On June 18, 2021, we completed the acquisition of the assets of SMA (the “SMA Acquisition”) (See Note 3 to the Consolidated Financial Statements—Acquisition of SMA Entities). The SMA Acquisition was accounted
 
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for as a business combination. Accordingly, the SMA assets acquired, including separately identifiable intangible assets, and liabilities assumed were recorded at their fair value as of June 18, 2021. The SMA Acquisition drove, among other things, increases of $178,000 in property and equipment, $9.4 million in amortizable intangible assets and $45.7 million in goodwill as of December 31, 2021, compared to our balance sheet as of December 31, 2020. The amortization of the acquired intangibles is expected to materially increase our noncash amortization expense for the foreseeable future.
On September 1, 2021, we completed the acquisition of the assets of DNF (the “DNF Acquisition”) (See Note 3 to the Consolidated Financial Statements—Acquisition of DNF). The DNF Acquisition was accounted for as a business combination. Accordingly, the DNF assets acquired, including separately identifiable intangible assets, and liabilities assumed were recorded at their fair value as of September 1, 2021. The DNF Acquisition drove, among other things, increases of $3.5 million in property and equipment, $15.3 million in amortizable intangible assets and $91.5 million in goodwill as of December 31, 2021, compared to our balance sheet as of December 31, 2020. The amortization of the acquired intangibles is expected to materially increase our noncash amortization expense for the foreseeable future.
On December 22, 2021, we completed the acquisition of the assets of Advantis (the “Advantis Acquisition”) (See Note 3 to the Consolidated Financial Statements—Acquisition of Advantis). The Advantis Acquisition was accounted for as a business combination. Accordingly, the Advantis assets acquired, including separately identifiable intangible assets were recorded at their fair value as of December 22, 2021. The Advantis acquisition drove, among other things, increases of $18,000 in Property and Equipment, $1.1 million in amortizable intangible assets, and $9.6 million in goodwill as of December 31, 2021, compared to our balance sheet as of December 31, 2020. The amortization of the acquired intangibles is expected to materially increase our noncash amortization expense for the foreseeable future.
On December 22, 2021, we completed the acquisition of the assets of Business Intelligence & Analytics LLC (“BIX”) (the “BIX Acquisition”) (See Note 3 to the Consolidated Financial Statements—Acquisition of BIX). The BIX Acquisition was accounted for as a business combination. Accordingly, the BIX assets acquired, including separately identifiable intangible assets were recorded at their fair value as of December 22, 2021. The BIX acquisition drove, among other things, increases $289,000 in amortizable intangible assets, and $4.8 million in goodwill as of December 31, 2021, compared to our balance sheet as of December 31, 2020. The amortization of the acquired intangibles is expected to materially increase our noncash amortization expense for the foreseeable future.
The following discussion (except for
pro-forma
financial information) includes our results of operations for the twelve months ended December 31, 2021, our results of operations include the full period for CMG, results of operations of IMC from June 8, 2021 through December 31, 2021, results of operations from SMA from June 18, 2021 through December 31, 2021, results of operations of DNF from September 1, 2021 through December 31, 2021, and results of operations of Advantis and BIX from December 22, 2021 through December 31, 2021. Accordingly, our consolidated results of operations for prior periods are not comparable to our consolidated results of operations for prior periods and may not be comparable with our consolidated results of operations for future periods.
Key Factors Affecting Our Performance
Our Patients
As discussed above, the Company partners with MA, Medicaid, and commercial insurance plans. While CareMax currently services mostly MA patients, we also accept Medicare
Fee-for-Service
patients. The chart
 
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below shows a breakdown of our current membership on a pro forma basis. This pro forma view assumes the Business Combination with IMC occurred on January 1, 2020 and is based upon estimates which we believe are reasonable:
 
Patient Count as of*
   
Mar 31,
2020
     
Jun 30,
2020
     
Sep 30,
2020
     
Dec 31,
2020
     
Mar 31,
2021
     
Jun 30,
2021
     
Sep 30,
2021
     
Dec 31,
2021
  
Medicare
      15,500        15,500        16,500        16,500        16,500        21,500        26,500        33,500  
Medicaid
      12,500        22,500        22,500        21,000        23,000        23,500        24,500        28,000  
Commercial
      15,500        13,500        15,000        14,500        15,000        17,500        17,500        21,500  
  
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
Total Count
      43,000        51,500        54,000        52,000        54,500        62,500        68,500        83,500  
  
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
 
*
Figures may not sum due to rounding
Because CareMax accepts multiple insurance types, it uses a Medicare-Equivalent Member (“MCREM”) value in reviewing key factors of its performance. To determine the Medicare-Equivalent, CareMax calculates the amount of support typically received by one Medicare patient as equivalent to the level of support received by three Medicaid or Commercial patients. This is due to Medicare patients on average having significantly higher levels of chronic and acute conditions that need higher levels of care. Due to this dynamic, a 3:1 ratio is applied when normalizing membership statistics year over year. The breakdown of membership on a pro forma basis using MCREM is below:
 
MCREM Count as of*
   
Mar 31,
2020
     
Jun 30,
2020
     
Sep 30,
2020
     
Dec 31,
2020
     
Mar 31,
2021
     
Jun 30,
2021
     
Sep 30,
2021
     
Dec 31,
2021
  
Medicare
      15,500        15,500        16,500        16,500        16,500        21,500        26,500        33,500  
Medicaid
      4,200        7,400        7,500        7,000        7,600        7,900        8,100        9,400  
Commercial
      5,100        4,600        5,000        4,900        5,100        5,900        5,800        7,200  
  
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
Total MCREM
      24,800        27,500        29,000        28,400        29,200        35,300        40,400        50,100  
  
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
 
*
Figures may not sum due to rounding
Medicare Advantage Patients
As of December 31, 2021, CareMax had approximately 33,500 MA patients of which 86% were in value-based, or risk-based, agreements. This means CareMax has been selected as the patient’s primary care provider and is financially responsible for all of the patient’s medical costs For these patients, CareMax is attributed an agreed percentage of the premium the MA plan receives from the Centers for Medicare and Medicaid Services (“CMS”) (typically a substantial majority of such premium given the risk assumed by the Company). A reconciliation is performed periodically and if premiums exceed medical costs paid by the MA plan, CareMax receives payment from the MA plan. If medical costs paid by the MA plan exceed premiums, CareMax is responsible to reimburse the MA plan.
Medicaid Patients
As of December 31, 2021, CareMax had approximately 28,000 Medicaid patients of which approximately 93% were in value-based contracts. Using the MCREM metric, the level of support required to manage these Medicaid patients equates to that of approximately 9,400 Medicare patients. In Florida, most Medicaid recipients are enrolled in the Statewide Medicaid Managed Care program.
Similar to the risk it takes with Medicare, CareMax is attributed an agreed percentage of the premium the Medicaid plan receives from Florida’s Agency for Health Care Administration (“AHCA”) (typically a substantial majority of such premium given the risk assumed by the Company). A reconciliation is performed periodically and if premiums exceed medical costs paid by the Medicaid plan, CareMax receives payment from the Medicaid plan. If medical costs paid by the Medicaid plan exceed premiums, we are responsible to reimburse the Medicaid plan.
 
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Commercial Patients
As of December 31, 2021, CareMax managed approximately 21,500 commercial patients of which 29% were under a value-based arrangement that provided upside only financial incentives for quality and utilization performance. Using the MCREM metric, the level of support required to manage these commercial patients equates to that of approximately 7,200 Medicare patients.
CareMax cares for a number of commercial patients (approximately 15% of the Company’s total patients) for whom it is reimbursed on a
fee-for-service
basis via their health plan in situations where it does not have a capitation relationship with that particular health plan.
CareMax fee
for-service
revenue, received directly from commercial plans, on a per patient basis is lower than its per patient revenue for
at-risk
patients basis in part because its
fee-for-service
revenue covers only the primary care services that it directly provides to the patient, while the risk revenue is intended to compensate it for the services directly performed by it as well as the financial risk that it assumes related to the third-party medical expenses of
at-risk
patients.
Contracts with Payors
Our economic model relies on its capitated partnerships with payors which manage and market MA plans across the United States. CareMax has established strategic value-based relationships with twelve different payors for Medicare Advantage patients, four different payors for Medicaid patients and one payor for ACA patients. On a pro forma basis giving effect to the Business Combination with IMC as of January 1, 2020, our three largest payor relationships were Anthem, Centene, and United, which generated 43%, 17%, 15% of our revenue in the twelve months ended December 31, 2021, respectively, and 51%, 16%, and 17% of our revenue in the twelve months ended December 31, 2020, respectively. These existing contracts and relationships with our partners’ and their understanding of the value of the CareMax model reduces the risk of entering into new markets as CareMax typically seeks to have payor contracts in place before entering a new market. Maintaining, supporting, and growing these relationships, particularly as CareMax enters new markets, is critical to our long-term success. We believe CareMax’s model is well-aligned with its payor partners—to drive better health outcomes for their patients, enhancing patient satisfaction, while driving incremental patient and revenue growth. This alignment of interests helps ensures our continued success with our payor partners.
Effectively Manage the Cost of Care for Our Patients
The capitated nature of our contracting with payors requires us to prudently manage the medical expense of our patients. Our external provider costs are our largest expense category, representing 64% of our total operating expenses for the twelve months ended December 31, 2021. Our care model focuses on leveraging the primary care setting as a means of avoiding costly downstream healthcare costs, such as acute hospital admissions. Our patients retain the freedom to seek care at ERs or hospitals; we do not restrict their access to care. Therefore, we could be liable for potentially large medical claims should we not effectively manage our patients’ health. We utilize stop-loss insurance for our patients, protecting us for medical claims per episode in excess of certain levels.
Center-Level Contribution Margin
We endeavor to expand our number of centers and number of patients at each center over time. Due to the significant fixed costs associated with operating and managing our centers, we generate significantly better center-level contribution margins as the patient base within our centers increases and our costs decrease as a percentage of revenue. As a result, the value of a center to our business increases over time when the number of patients at a center expands.
 
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Seasonality to our Business
Due to the large number of dual-eligible patients (meaning eligible for both Medicare and Medicaid) we serve, the annual enrollment period does not materially affect our growth during the year. We typically see large increases in ACA patients during the first quarter as a result of the ACA annual enrollment period (October to December). However, this is not a large portion of our business.
Our operational and financial results will experience some variability depending upon the time of year in which they are measured. This variability is most notable in the following areas:
Per-Patient
Revenue
The revenue derived from our
at-risk
patients is a function of the percentage of premium we have negotiated with our payor partners, as well as our ability to accurately and appropriately document the acuity of a patient. We experience some seasonality with respect to our
per-patient
revenue, as it will generally decline over the course of the year. In January of each year, CMS revises the risk adjustment factor for each patient based upon health conditions documented in the prior year, leading to changes in
per-patient
revenue. As the year progresses, our
per-patient
revenue declines as new patients join us, typically with less complete or accurate documentation (and therefore lower risk-adjustment scores), and patient mortality disproportionately impacts our higher-risk (and therefore greater revenue) patients.
External Provider Costs
External Provider Costs will vary seasonally depending on a number of factors, but most significantly the weather. Certain illnesses, such as the influenza virus, are far more prevalent during colder months of the year, which can result in an increase in medical expenses during these time periods. We would therefore expect to see higher levels of
per-patient
medical costs in the first and fourth quarters. Medical costs also depend upon the number of business days in a period. Shorter periods will have lesser medical costs due to fewer business days. Business days can also create year-over-year comparability issues if one year has a different number of business days compared to another. We would also expect to experience an impact in the future should there be another pandemic such as
COVID-19,
which may result in increased or decreased total medical costs depending upon the severity of the infection, the duration of the infection and the impact to the supply and availability of healthcare services for our patients.
Investments in Growth
We expect to continue to focus on long-term growth through investments in our centers, platform, care model and marketing. In addition, we expect our corporate, general and administrative expenses to increase in absolute dollars for the foreseeable future to support our growth and because of additional costs as a public company, including expenses related to compliance with the rules and regulations of the SEC, Sarbanes Oxley Act compliance, the stock exchange listing standards, additional corporate and director and officer insurance expenses, greater investor relations expenses and increased legal, audit and consulting fees. As we have communicated, we plan to invest in openings of new de novo centers both within and outside of Florida over the next several years. Historically, de novo centers require upfront capital and operating expenditures, which may not be fully offset by additional revenues in the near-term, and we similarly expect a period of unprofitability in our future de novo centers before they break even. While our net income may decrease in the future because of these activities, we plan to balance these investments in future growth with a continued focus on managing our results of operations and generating positive income from our core centers and scaled acquisitions. In the longer term we anticipate that these investments will positively impact our business and results of operations.
Key Business Metrics
In addition to our financial information which conforms with generally accepted accounting principles in the United States of America (“GAAP”), management reviews a number of operating and financial metrics,
 
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including the following key metrics, to evaluate its business, measure its performance, identify trends affecting its business, formulate business plans, and make strategic decisions.
Use of
Non-GAAP
Financial Information
Certain financial information and data contained this prospectus is unaudited and does not conform to Regulation
S-X.
Accordingly, such information and data may not be included in, may be adjusted in, or may be presented differently in, any periodic filing, information or proxy statement, or prospectus or registration statement to be filed by the Company with the SEC. Some of the financial information and data contained in this prospectus, such as Adjusted EBITDA and margin thereof, Platform Contribution and margin thereof and Pro Forma Medical Expense Ratio have not been prepared in accordance with GAAP. These
non-GAAP
measures of financial results are not GAAP measures of our financial results or liquidity and should not be considered as an alternative to net income (loss) as a measure of financial results, cash flows from operating activities as a measure of liquidity, or any other performance measure derived in accordance with GAAP. The Company believes these
non-GAAP
measures of financial results provide useful information to management and investors regarding certain financial and business trends relating to the Company’s financial condition and results of operations. Management uses these
non-GAAP
measures for trend analyses and for budgeting and planning purposes.
The Company believes that the use of these
non-GAAP
financial measures provides an additional tool for investors to use in evaluating projected operating results and trends in and in comparing the Company’s financial measures with other similar companies, many of which present similar
non-GAAP
financial measures to investors. Management does not consider these
non-GAAP
measures in isolation or as an alternative to financial measures determined in accordance with GAAP. The principal limitation of these
non-GAAP
financial measures is that they exclude significant expenses and income that are required by GAAP to be recorded in the Company’s financial statements. In addition, they are subject to inherent limitations as they reflect the exercise of judgments by management about which expense and income are excluded or included in determining these
non-GAAP
financial measures. In order to compensate for these limitations, management presents
non-GAAP
financial measures in connection with GAAP results. You should review the Company’s audited financial statements, which included in this prospectus.
EBITDA and Adjusted EBITDA
Management defines “EBITDA” as net income or net loss before interest expense, income tax expense or benefit, depreciation and amortization, change in fair value of warrant liabilities, and gain or loss on extinguishment of debt. “Adjusted EBITDA” is defined as EBITDA adjusted for special items such as duplicative costs,
non-recurring
legal, consulting, and professional fees, stock based compensation, de novo costs for the first 18 months after opening, discontinued operations, acquisition costs and other costs that are considered
one-time
in nature as determined by management. Additionally, Adjusted EBITDA presented on a pro forma basis gives effect to the acquisitions of IMC and Care Holdings Group, LLC, which owned Care Optimize, as if they had occurred in historical periods, which does not necessarily reflect what the Company’s Adjusted EBITDA would have been had the acquisitions occurred on the dates indicated. Adjusted EBITDA is intended to be used as a supplemental measure of our performance that is neither required by, nor presented in accordance with, GAAP. Management believes that the use of Adjusted EBITDA provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing its financial measure with those of comparable companies, which may present similar
non-GAAP
financial measures to investors. However, we may incur future expenses similar to those excluded when calculating these measures. In addition, our presentations of these measures should not be construed as an inference that its future results will be unaffected by unusual or
non-recurring
items. Our computation of Adjusted EBITDA may not be comparable to other similarly titled measures computed by other companies, because all companies may not calculate Adjusted EBITDA in the same fashion.
 
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Due to these limitations, Adjusted EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on its GAAP results and using Adjusted EBITDA on a supplemental basis. Please review the reconciliation of net (loss) income to EBITDA and Adjusted EBITDA below and not rely on any single financial measure to evaluate the Company’s business:
Twelve months ended December 31, 2021 and 2020 Reconciliation to Adjusted EBITDA
 
    
For the Twelve Months Ended
December 31,
  
$ in thousands
   
2021
     
2020
     
Y/Y
Change
  
Net (loss) income
    $ (6,675 )     $ 7,572      $ (14,246 ) 
  
 
 
     
 
 
     
 
 
  
GAAP Pro Forma Adjustments
      (8,916 )       (1,629 )       (7,287 ) 
  
 
 
     
 
 
     
 
 
  
Pro Forma Net (loss)/income
      (15,590 )       5,943        (21,533 ) 
  
 
 
     
 
 
     
 
 
  
Interest expense
      6,263        6,630        (368 ) 
Depreciation and amortization
      17,583        13,544        4,039  
Income tax provision
      159        —          159  
Gain on remeasurement of warrant liabilities
      (20,757 )       —          (20,757 ) 
Gain on remeasurement of contingent earnout liabilities
      (5,794 )       —          (5,794 ) 
Loss on disposal of fixed assets, net
      50        —          50  
Loss on extinguishment of debt
      534        451        83  
Other expenses
      (823 )       (912 )       89  
  
 
 
     
 
 
     
 
 
  
EBITDA
      (18,376 )       25,657        (44,033 ) 
  
 
 
     
 
 
     
 
 
  
Other Adjustments
         
Non-recurring
expenses
      19,955        5,829        14,126  
Acquisition costs
      9,169        3,016        6,153  
Stock based compensation
      1,341        —          1,341  
De novo losses
      1,232        578        654  
Discontinued operations
      (1 )       (48 )       47  
  
 
 
     
 
 
     
 
 
  
Adjusted EBITDA
    $ 13,321      $ 35,033      $ (21,712 ) 
  
 
 
     
 
 
     
 
 
  
 
*
Pro Forma figures give effect to the Business Combinations of IMC and Care Holdings as if they had occurred in historical periods. Figures may not sum due to rounding.
In addition to our GAAP financial information, we review a number of operating and financial metrics, including the following key metrics, to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans and make strategic decisions. The chart below is a pro forma view of our operations. This pro forma view assumes the Business Combination occurred on January 1, 2020, and are based upon estimates which we believe are reasonable.
Non-GAAP
Operating Metrics
 
Patient & Platform Contribution
   
Mar 31,
2020
    
Jun 30,
2020
    
Sep 30,
2020
    
Dec 31,
2020
    
Mar 31,
2021
    
Jun 30,
2021
    
Sep 30,
2021
    
Dec 31,
2021
  
Centers
      21       21       22       24       24       34       40       45  
Markets
      1       1       1       1       1       2       3       4  
Patients (MCREM)
      24,800       27,500       29,000       28,400       29,200       35,300       40,400       50,100  
At-risk
      84.8 %      86.7 %      85.6 %      87.7 %      87.0 %      84.1 %      87.2 %      79.3 % 
Platform Contribution ($, Millions)
    $ 14.1     $ 18.1     $ 15.5     $ 17.9     $ 14.7     $ 8.2     $ 11.0     $ 16.0  
 
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Note: In prior filings, management had defined “markets” as states instead of Metropolitan Statistical Areas (“MSA’s”). 2021 figures have been
re-cast
to reflect this change from states to MSA’s.
Centers
We define our centers as those primary care medical centers open for business and attending to patients at the end of a particular period.
Patients (MCREM)
MCREM patients includes both
at-risk
MA patients (those patients for whom we are financially responsible for their total healthcare costs) as well as risk and
non-risk,
non-MA
patients. We define our total
at-risk
patients as
at-risk
patients who have selected us as their provider of primary care medical services as of the end of a particular period. We define our total
fee-for-service
patients as
fee-for-service
patients who come to one of our centers for medical care at least once per year. A
fee-for-service
and
at-risk
patient remains active in our system until we are informed by the health plan the patient is no longer active. As discussed above, CareMax calculates the amount of support typically received by one Medicare patient as equivalent to the level of support received by three Medicaid or Commercial patients.
Platform Contribution
We define platform contribution as revenue less the sum of (i) external provider costs and (ii) cost of care, excluding depreciation and amortization. We believe this metric best reflects the economics of our care model as it includes all medical claims expense associated with our patients’ care as well as the costs we incur to care for our patients via the CareMax System. As a center matures, we expect the platform contribution from that center to increase both in terms of absolute dollars as well as a percentage of capitated revenue. This increase will be driven by improving patient contribution economics over time, as well as our ability to generate operating leverage on the costs of our centers. Our aggregate platform contribution may not increase despite improving economics at our existing centers should we open new centers at a pace that skews our mix of centers towards newer centers. We would expect to experience minimal seasonality in platform contribution due to minimal seasonality in our patient contribution.
Impact of
COVID-19
The rapid spread of
COVID-19
around the world and throughout the United States altered the behavior of businesses and people, with significant negative effects on federal, state and local economies. The virus disproportionately impacts older adults, especially those with chronic illnesses, which describes many of our patients.
We estimate our performance for the twelve months ended December 31, 2021 was impacted by approximately $23.1 million of direct
non-recurring
COVID-19
costs, consisting of a decrease in revenues due to our inability to adequately document the acuity of our patients and an increase in costs related to
COVID-19
claims.
While we utilized telehealth to document the health conditions of our patients and increased our efforts to return our patients to our centers for
in-person
visits during the latter half of 2020 and the beginning of 2021, based on the difference between the risk adjusted PPPM revenue expected by our historical models and the actual risk adjusted PPPM rates in 2021, we believe our revenue was negatively impacted by approximately $11.5 million in 2021 due to our inability to adequately document the acuity of our patients in 2020. In the event we were unable to adequately document the acuity of our patients for 2021 and in subsequent years, our revenues and financial performance could be significantly affected.
Additionally, for the twelve months ended December 31, 2021 we experienced increased costs that we were able to document as claims directly related to
COVID-19
totaling $11.6 million.
 
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Management cannot accurately predict the future impacts of
COVID-19
due to the uncertainty surrounding future spikes in
COVID-19
cases or new variants that may emerge in the future.
Components of Results of Operations
Revenue
Medicare Risk-Based Revenue and Medicaid Risk-Based Revenue.
Our capitated revenue consists primarily of fees for medical services provided by us or managed by our MSO under a global capitation arrangement made directly with various MA payors. Capitation is a fixed amount of money per patient per month paid in advance for the delivery of health care services, whereby we are generally liable for medical costs in excess of the fixed payment and are able to retain any surplus created if medical costs are less than the fixed payment. A portion of our capitated revenues are typically prepaid monthly to us based on the number of MA patients selecting us as their primary care provider. Our capitated rates are determined as a percentage of the premium the MA plan receives from CMS for our
at-risk
members. Those premiums are determined via a competitive bidding process with CMS and are based upon the cost of care in a local market and the average utilization of services by the patients enrolled. Medicare pays capitation using a “risk adjustment model,” which compensates providers based on the health status (acuity) of each individual patient. Payors with higher acuity patients receive more in premium, and those with lower acuity patients receive less in premium. Under the risk adjustment model, capitation is paid on an interim basis based on enrollee data submitted for the preceding year and is adjusted in subsequent periods after the final data is compiled. As premiums are adjusted via this risk adjustment model, our capitation payments will change in unison with how our payor partners’ premiums change with CMS. Risk adjustment in future periods may be impacted by
COVID-19
and our inability to accurately document the health needs of our patients in a compliant manner, which may have an adverse impact on our revenue.
For Medicaid, premiums are determined by Florida’s AHCA and based rates are adjusted annually using historical utilization data projected forward by a third-party actuarial firm. The rates are established based on specific cohorts by age and sex and geographical location. AHCA uses a “zero sum” risk adjustment model that establishes acuity for certain cohorts of patients quarterly, depending on the scoring of that acuity, and may periodically shift premiums from health plans with lower acuity members to health plans with higher acuity members.
Other Revenue.
Other revenue includes professional capitation payments. These revenues are a fixed amount of money per patient per month paid in advance for the delivery of primary care services only, whereby CareMax is not liable for medical costs in excess of the fixed payment. Capitated revenues are typically prepaid monthly to CareMax based on the number of patients selecting us as their primary care provider. Our capitated rates are fixed, contractual rates. Incentive payments for Healthcare Effectiveness Data and Information Set (“HEDIS”) and any services paid on a
fee-for-service
basis by a health plan are also included in other revenue. Other revenue also includes ancillary fees earned under contracts with certain payors for the provision of certain care coordination and other care management services. These services are provided to patients covered by these payors regardless of whether those patients receive their care from our affiliated medical groups. Revenue for primary care service for patients in a partial risk or
up-side
only contracts, pharmacy revenue and revenue generated from CareOptimize are reported in other revenue.
See “
-Critical Accounting Policies and Estimates-Revenue
” for more information. We expect capitated revenue will increase as a percentage of total revenues over time because of the greater revenue economics associated with
at-risk
patients compared to
fee-for-service
patients.
Operating Expenses
Medicare and Medicaid External Provider Costs.
External provider costs include all services
at-risk
patients utilize. These include claims paid by the health plan and estimates for unpaid claims. The estimated reserve for
 
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incurred but not paid claims is included in accounts receivable as we do not pay medical claims. Actual claims expense will differ from the estimated liability due to factors in estimated and actual patient utilization of health care services, the amount of charges, and other factors. We typically reconcile our medical claims expense with our payor partners on a monthly basis and adjust our estimate of incurred but not paid claims if necessary. To the extent we revise our estimates of incurred but not paid claims for prior periods up or down, there would be a correspondingly favorable or unfavorable effect on our current period results that may or may not reflect changes in long term trends in our performance. We expect our medical claims expenses to increase in both absolute dollar terms as well as on a PPPM basis given the healthcare spending trends within the Medicare population and the increasing disease burden of patients as they age.
Cost of Care.
Cost of care includes the costs of additional medical services we provide to patients that are not paid by the plan. These services include patient transportation, medical supplies, auto insurance and other specialty costs, like dental or vision. In some instances, we have negotiated better rates than the health plans for these health plan covered services.
In addition, cost of care includes rent and facilities costs required to maintain and operate our centers.
Expenses from our physician groups that contract with our MSO are consolidated with other clinical and MSO expenses to determine profitability for our
at-risk
and
fee-for-service
arrangements. Physician group economics are not evaluated on a stand-alone basis, as certain
non-clinical
expenses need to be consolidated to consider profitability.
We measure the incremental cost of our capitation agreements by starting with our center-level expenses, which are calculated based upon actual expenses incurred at a specific center for a given period of time and expenses that are incurred centrally and allocated to centers on a ratable basis. These expenses are allocated to our
at-risk
patients based upon the number of visit slots these patients utilized compared to the total slots utilized by all of our patients. All visits, however, are not identical and do not require the same level of effort and expense on our part. Certain types of visits are more time and resource intensive and therefore result in higher expenses for services provided internally. Generally, patients who are earlier in their tenure with CareMax utilize a higher percentage of these more intensive visits, as we get to know the patient and properly assess and document such patient’s health condition.
Selling and Marketing Expenses.
Selling and marketing expenses include the cost of our sales and community relations team, including salaries and commissions, radio and television advertising, events and promotional items.
Corporate General and Administrative Expenses.
Corporate general and administrative expenses include employee-related expenses, including salaries and related costs and stock-based compensation, technology infrastructure, operations, clinical and quality support, finance, legal, human resources, and business development departments. In addition, corporate general and administrative expenses include corporate technology, third party professional services and corporate occupancy costs. We expect these expenses to increase over time due to the additional legal, accounting, insurance, investor relations and other costs that we will incur as a public company, as well as other costs associated with continuing to grow its business. We also expect our corporate, general and administrative expenses to increase in absolute dollars in the foreseeable future. However, we anticipate corporate, general and administrative expenses to decrease as a percentage of revenue over the long term, although they may fluctuate as a percentage of revenue from period to period due to the timing and amount of these expenses.
Depreciation and Amortization.
Depreciation and amortization expenses are primarily attributable to our capital investments and consist of fixed asset depreciation, amortization of intangibles considered to have definite lives, and amortization of capitalized
internal-use
software costs.
 
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Other Income (Expense)
Interest Expense.
Interest expense consists primarily of interest payments on our outstanding borrowings (see Note 7
-to
the Consolidated Financial Statements—Long Term Debt).
Results of Operations
Twelve Months Ended December 31, 2021 compared to Twelve Months Ended December 31, 2020.
The following table sets forth our consolidated statements of operations data for the periods indicated:
 
    
For the Twelve Months Ended December 31,
  
$ in thousands
   
2021
     
2020
     
$ Change
     
%
Change
  
Revenue
            
Medicare risk-based revenue
    $ 233,282      $ 103,051      $ 130,231        126.4 % 
Medicaid risk-based revenue
      46,493        —          46,493     
Other revenue
      15,987        370        15,617        4220.9 % 
  
 
 
     
 
 
     
 
 
     
 
 
  
Total revenue
      295,762        103,421        192,341        186.0 % 
  
 
 
     
 
 
     
 
 
     
 
 
  
Operating expense
            
External provider costs
      206,747        66,050        140,697        213.0 % 
Cost of care
      57,566        17,373        40,193        231.4 % 
Sales and marketing
      4,955        1,067        3,888        364.4 % 
Corporate, general and administrative
      40,579        7,748        32,831        423.7 % 
Depreciation and amortization
      13,216        1,501        11,715        780.5 % 
Acquisition related costs
      1,522        —          1,522     
  
 
 
     
 
 
     
 
 
     
 
 
  
Total costs and expenses
      324,585        93,739        230,846        246.3 % 
  
 
 
     
 
 
     
 
 
     
 
 
  
Operating (loss) income
    $ (28,822 )     $ 9,682      $ (38,504 )       (397.7 )% 
  
 
 
     
 
 
     
 
 
     
 
 
  
Interest expense, net
      (4,492 )       (1,659 )       (2,833 )       170.8 % 
Gain on remeasurement of warrant liabilities
      20,757        —          20,757     
Gain on remeasurement of contingent earnout liabilities
      5,794        —          5,794     
Loss on disposal of fixed assets, net
      (50 )       —          (50 )    
Gain (loss) on extinguishment of debt, net
      1,630        (451 )       2,081        (461.3 )% 
Other (expense), net
      (1,333 )       —          (1,333 )    
  
 
 
     
 
 
     
 
 
     
 
 
  
Income/(loss) before income taxes
    $ (6,516 )     $ 7,572      $ (14,088 )       (186.1 )% 
Income tax provision
      159        —          159     
  
 
 
     
 
 
     
 
 
     
 
 
  
Net (loss)/income
    $ (6,675 )     $ 7,572      $ (14,247 )       (188.2 )% 
  
 
 
     
 
 
     
 
 
     
 
 
  
Net loss attributable to
non-controlling
interest
    $ —        $ (29 )     $ —          0.0 % 
  
 
 
     
 
 
     
 
 
     
 
 
  
Net (loss) income attributable to controlling interest
    $ (6,675 )     $ 7,601      $ (14,276 )       (187.8 )% 
  
 
 
     
 
 
     
 
 
     
 
 
  
 
*
Figures may not sum due to rounding
Medicare Risk-Based Revenue.
Medicare risk-based revenue was $233.3 million for the twelve months ended December 31, 2021, an increase of $130.2 million, or 126.4%, compared to $103.1 million for the twelve months ended December 31, 2020. This increase was primarily driven by a 174% increase in the total number of
at-risk
patients from the acquisitions of IMC, SMA, and DNF, partially offset by a 17% reduction in PPPM rates, driven by member mix and a decrease in risk adjustment payments due to our inability to adequately document the acuity of our patients in 2020 due to
COVID-19.
 
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Medicaid Risk-Based Revenue.
Medicaid risk-based revenue was $46.5 million for the twelve months ended December 31, 2021. Medicaid risk-based revenue relates entirely to patients that were acquired in the Business Combination with IMC.
Other Revenue
. Other revenue was $16.0 million for the twelve months ended December 31, 2021, an increase of $15.6 million, or 4,221%, compared to $0.4 million for the twelve months ended December 31, 2020. The increase is almost entirely related to revenue from patients that were acquired in the Business Combination with IMC.
External Provider Costs
. External provider costs were $206.7 million for the twelve months ended December 31, 2021, an increase of $140.7 million, or 213.0%, compared to $66.1 million for the twelve months ended December 31, 2020. The increase was primarily due to a 377% increase in total
at-risk
MCREM patients that were acquired in the Business Combination with IMC and the additional costs attributable to claims with a
COVID-19
diagnosis.
Cost of Care Expenses
. Cost of care expenses were $57.6 million for the twelve months ended December 31, 2021, an increase of $40.2 million or 231.4%, compared to $17.4 million for the twelve months ended December 31, 2020. The increase was primarily due to additional membership growth from the IMC, SMA, and DNF acquisitions and the reopening of our wellness centers.
Sales and Marketing Expenses.
Sales and marketing expenses were $5.0 million for the twelve months ended December 31, 2021, an increase of $3.9 million or 364.4%, compared to $1.1 million for the twelve months ended December 31, 2020. The increase was primarily due to the increase in sales staff resulting from acquisitions and the recommencing of sales and community activities in 2021.
Corporate, general and administrative. Corporate
, general and administrative expense was $40.6 million for the twelve months ended December 31, 2021, an increase of $32.8 million, or 423.7%, compared to $7.7 million for the twelve months ended December 31, 2020. The increase was primarily from the acquired overhead related to IMC, SMA, DNF, and Advantis as well as costs associated with becoming a publicly traded company.
Depreciation and amortization.
Depreciation and amortization expense was $13.2 million for the twelve months ended December 31, 2021, an increase of $11.7 million, or 780.5%, compared to $1.5 million for the twelve months ended December 31, 2020. This was due to amortization of intangible assets purchased in the IMC, SMA, and DNF acquisitions.
Interest expense, net
. Net interest expense was $4.5 million for the twelve months ended December 31, 2021, an increase of $2.8 million, or 170.8%, compared to $1.7 million for the twelve months ended December 31, 2020. This was due to the increased borrowings under the Credit Facilities.
Acquisition related costs.
Acquisition related costs were $1.5 million for the twelve months ended December 31, 2021. This cost was driven primarily by the acquisitions of IMC, DNF, SMA, Advantis, and BIX.
Change in fair value of derivative warrant liabilities
. We recorded a gain of $20.8 million for the twelve months ended December 31, 2021 as a result of a reduction in the fair value of derivative warrant liabilities.
Change in fair value of contingent earnout liabilities.
We recorded a gain of $5.8 million for the twelve months ended December 31, 2021, as a result of a reduction in the fair value of contingent earnout liabilities.
Gain on extinguishment of debt
. We recorded a gain of $1.6 million, mostly related to the forgiveness of Paycheck Protection Program (“PPP”) loans.
 
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Other income (expense), net.
We recorded $1.3 million in other expenses, net for the twelve months ended December 31, 2021,,resulting primarily from the payment of franchise taxes, miscellaneous corporate expenses, and research and development costs associated with CareOptimize.
Liquidity and Capital Resources
Overview
As of December 31, 2021, we had cash on hand of $47.9 million. Our principal sources of liquidity have been our operating cash flows, borrowings under our Credit Facilities and proceeds from equity issuances. We have used these funds to meet our capital requirements, which consist of salaries, labor, benefits and other employee-related costs, product and supply costs, third-party customer service, billing and collections and logistics costs, capital expenditures including patient equipment, medical center and office lease expenses, insurance premiums, acquisitions and debt service. Our future capital expenditure requirements will depend on many factors, including the pace and scale of our expansion in new and existing markets, patient volume, and revenue growth rates. Many of our capital expenditures are made in advance of patients beginning service. Certain operating costs are incurred at the beginning of the equipment service period and during initial patient set up. We also expect to incur costs related to acquisitions and de novo growth through the opening of new medical centers, which we expect to require significant capital expenditures, including lease and construction expenses. We may be required to seek additional equity or debt financing, in addition to cash on hand and borrowings under our Credit Facilities in connection with our business growth, including debt financing that may be available to us from certain health plans for each new medical center that we open under the terms of our agreements with those health plans. In the event that additional financing is required from outside sources, we may not be able to raise it on acceptable terms or at all. If additional capital is unavailable when desired, our business, results of operations, and financial condition would be materially and adversely affected. We do not expect to rely materially on the cash exercise of Warrants to fund our operations. We do not believe it is likely that a warrant holder would elect to exercise their Warrants when our Class A Common Stock is trading below $11.50 and any cash proceeds that would be received by the Company is dependent on the trading price of the Class A Common Stock underlying the Warrants. We believe that our expected operating cash flows, together with our existing cash, cash equivalents, amounts available under our Credit Facilities, and amounts available to us under our agreement with Anthem, each as described below will continue to be sufficient to fund our operations and growth strategies for at least the next 12 months and remain in compliance with the covenants under the Credit Facilities and other agreements.
The Impact of
COVID-19
As further detailed above in “
Impact of
COVID-19
”, we estimate our performance during the twelve months ended December 31, 2021 has been impacted by approximately $23.1 million of direct
non-recurring
COVID-19
costs. While it is impossible to predict the scope or duration of
COVID-19
or the future impact on our liquidity and capital resources,
COVID-19
could materially affect our liquidity and operating cash flows in future periods.
Credit Facilities
On the Closing Date, we drew the full principal amount of $125.0 million of the Initial Term Loan to finance the Business Combination and related transaction costs. As of December 31, 2021, we had approximately $35.4 million available under the Credit Facilities, representing $40.0 million of total capacity under the Revolving Credit Facility, net of $4.6 million of
stand-by
Letters of Credit outstanding.
Interest is payable on the outstanding term loans under the Credit Facilities at a variable interest rate (See Note 7 to the Consolidated Financial Statements—
Long Term Debt
).
The Revolving Credit Facility allows up to $40.0 million to be drawn, less outstanding Letters of Credit, in order to finance working capital, make capital expenditures, finance permitted acquisitions and fund general corporate
 
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purposes. The Company’s previous $20.0 million Delayed Draw Loan expired undrawn on the six month anniversary of the Closing Date, or December 8, 2021.
Anthem Collaboration Agreement
In connection with our collaboration agreement with Anthem, which was announced in August of 2021, we plan to open approximately 50 centers across eight priority states as part of our de novo strategy to open new centers in additional markets. Anthem has agreed to provide debt financing of up to $1 million for each new center opened in partnership with Anthem. We intend to use such funds to partially offset the costs of opening new medical centers in connection with our de novo growth strategy.
Cash Flows
The following table summarizes our cash flows for the periods presented:
 
(in thousands)
   
Twelve Months Ended
  
    
2021
     
2020
  
Net cash (used in)/provided by operating activities
    $ (23,856 )     $ 5,316  
Net cash used in investing activities
      (316,579 )       (6,942 ) 
Net cash provided by financing activities
      383,418        2,123  
Operating Activities
. Net cash used in operating activities for the twelve months ended December 31, 2021 was $23.9 million, compared to $5.3 million provided by operating activities for the twelve months ended December 31, 2020, an increase of $29.2 million. The primary driver of the change is due to the net loss from operations of $12.2 million reported for the twelve months ended December 31, 2021, compared to the net income from operations of $7.5 million reported for the twelve months ended December 31, 2020. The primary driver of this change is related to the performance in our value-based contracts due to the impacts of
COVID-19
as described above.
Investing Activities
. Net cash used in investing activities for the twelve months ended December 31, 2021 was $316.3 million compared, to $6.9 million for the twelve months ended December 31, 2020. The use of funds in the twelve months ended December 31, 2021 consisted of $309.4 million used in acquisitions, including the IMC Acquisition, SMA Acquisition, DNF Acquisition, Advantix Acquisition, and BIX Acquisition, as well as $4.0 million for equipment and other fixed asset purchases. The use of funds in the twelve months ended December 31, 2020 consisted primarily of $2.6 million for acquisitions of businesses and $2.1 million for equipment and other fixed asset purchases.
Financing
Activities: Net cash provided by financing activities for the twelve months ended December 31, 2021 was $383.4 million compared to $2.1 million during the twelve months ended December 31, 2020. Net cash provided by financing activities for the twelve months ended December 31, 2021 was primarily related to the Business Combination, and consisted of $125.0 million of borrowings from the borrowings under the Credit Facilities, $415.0 million for the issuance and sale of Class A Common Stock, partially offset by cash used in the consummation of the reverse recapitalization of $108.4 million, repayment of borrowings, including all outstanding borrowings under the Loan Agreement, of $27.7 million, equity issuance costs of $12.5 million, payment of deferred financing costs of $7.4 million and payment of debt prepayment penalties of $487,000 related to the early repayment of borrowings under the Loan Agreement.
Net cash provided by financing activities for the twelve months ended December 31, 2020 consisted of $4.1 million of borrowings under a legacy revolving loan commitment, $2.2 million of borrowings from the PPP Loans, partially offset by member distributions and repayments of debt under the Loan Agreement.
 
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Contractual Obligations and Commitment
s
Construction in progress at December 31, 2021 is made up of various leasehold improvements at the Company’s medical centers. The Company has a contractual commitment to complete the construction of its Homestead medical center with remaining estimated capital expenditures of $500,000 and an estimated opening in 2022.
Off-Balance
Sheet Arrangements
We did not have any
off-balance
sheet arrangements as of December 31, 2021 or December 31, 2020 other than operating leases.
Three Months Ended March 31, 2022
Key Factors Affecting Our Performance
Our Patients
As discussed above, CareMax partners with MA, Medicaid, and commercial insurance plans. While CareMax currently services mostly MA patients, we also accept Medicare Fee-for-Service patients. The chart below shows a breakdown of our current membership on a pro forma basis. This pro forma view assumes the Business Combination with IMC occurred on January 1, 2020 and is based upon estimates which we believe are reasonable:
 
Patient Count as of*
   
Mar 31,
2020
    
Jun 30,
2020
     
Sep 30,
2020
    
Dec 31,
2020
    
Mar 31,
2021
    
Jun 30,
2021
    
Sep 30,
2021
     
Dec 31,
2021
     
Mar 31,
2022
  
Medicare
      15,500        15,500        16,500        16,500        16,500        21,500        26,500        33,500        34,000  
Medicaid
      12,500        22,500        22,500        21,000        23,000        23,500        24,500        28,000        28,500  
Commercial
      15,500        13,500        15,000        14,500        15,000        17,500        17,500        21,500        21,500  
  
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
Total Count
      43,000        51,500        54,000        52,000        54,500        62,500        68,500        83,500        84,000  
  
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
 
*
Figures may not sum due to rounding
Because CareMax accepts multiple insurance types, it uses a Medicare-Equivalent Member (“MCREM”) value in reviewing key factors of its performance. To determine the Medicare-Equivalent, CareMax calculates the amount of support typically received by one Medicare patient as equivalent to the level of support received by three Medicaid or Commercial patients. This is due to Medicare patients on average having significantly higher levels of chronic and acute conditions that need higher levels of care. Due to this dynamic, a 3:1 ratio is applied when normalizing membership statistics year over year. The breakdown of membership on a pro forma basis using MCREM is below:
 
MCREM Count as of*
   
Mar 31,
2020
    
Jun 30,
2020
    
Sep 30,
2020
    
Dec 31,
2020
    
Mar 31,
2021
    
Jun 30,
2021
     
Sep 30,
2021
    
Dec 31,
2021
    
Mar 31,
2022
  
Medicare
      15,500        15,500        16,500        16,500        16,500        21,500        26,500        33,500        34,000  
Medicaid
      4,200        7,400        7,500        7,000        7,600        7,900        8,100        9,400        9,400  
Commercial
      5,100        4,600        5,000        4,900        5,100        5,900        5,800        7,200        7,200  
  
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
Total MCREM
      24,800        27,500        29,000        28,400        29,200        35,300        40,400        50,100        50,600  
  
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
  
 
*
Figures may not sum due to rounding
 
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Medicare Advantage Patients
As of March 31, 2022, CareMax had approximately 34,000 MA patients of which 86% were in value-based, or risk-based, contracts. This means CareMax has been selected as the patient’s primary care provider and is financially responsible for all of the patient’s medical costs. For these patients CareMax is attributed an agreed percentage of the premium the MA plan receives from the Centers for Medicare and Medicaid Services (“CMS”) (typically a substantial majority of such premium given the risk assumed by CareMax). A reconciliation is performed periodically and if premiums exceed medical costs paid by the MA plan, CareMax receives payment from the MA plan. If medical costs paid by the MA plan exceed premiums, CareMax is responsible to reimburse the MA plan.
Medicaid Patients
As of March 31, 2022, CareMax had approximately 28,500 Medicaid patients of which approximately 92% were in value-based contracts. Using the MCREM metric, the level of support required to manage these Medicaid patients equates to that of approximately 9,400 Medicare patients. In Florida, most Medicaid recipients are enrolled in the Statewide Medicaid Managed Care program.
Similar to the risk it takes with Medicare, CareMax is attributed an agreed percentage of the premium the Medicaid plan receives (typically a substantial majority of such premium given the risk assumed by CareMax). A reconciliation is performed periodically and if premiums exceed medical costs paid by the Medicaid plan, CareMax receives payment from the Medicaid plan. If medical costs paid by the Medicaid plan exceed premiums, we are responsible to reimburse the Medicaid plan.
Commercial Patients
As of March 31, 2022, CareMax managed approximately 21,500 commercial patients of which approximately 30% were under a value-based contracts that provided upside-only financial incentives for quality and utilization performance. Using the MCREM, the level of support required to manage these commercial patients equates to that of approximately 7,200 Medicare patients.
CareMax cares for a number of commercial patients (approximately 15% of CareMax’s total patients) for whom it is reimbursed on a fee-for-service basis via their health plan in situations where it does not have a capitation relationship with that particular health plan.
CareMax fee for-service revenue, received directly from commercial plans, on a per patient basis is lower than its per patient revenue for at-risk patients basis in part because its fee-for-service revenue covers only the primary care services that it directly provides to the patient, while the risk revenue is intended to compensate it for the services directly performed by it as well as the financial risk that it assumes related to the third-party medical expenses of at-risk patients.
Contract with Payors
Our economic model relies on its capitated partnerships with payors which manage and market MA plans across the United States. CareMax has established strategic value-based relationships with eleven different payors for Medicare Advantage patients, four different payors for Medicaid patients and one payor for Affordable Care Act (“ACA”) patients. Our three largest payor relationships were Anthem, Humana and Centene, which generated 35%, 17% and 16% of our revenue during the three months ended March 31, 2022, respectively, and 49%, 4%, and 18% of our revenue on a pro forma basis, assuming the Business Combination with IMC occurred on January 1, 2020, during the three months ended March 31, 2021, respectively. These existing contracts and relationships with our partners’ understanding of the value of the CareMax model reduces the risk of entering into new markets as CareMax typically has payor contracts before entering a new market.
 
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Maintaining, supporting, and growing these relationships, particularly as CareMax enters new markets, is critical to our long-term success. We believe CareMax’s model is well-aligned with its payor partners — to drive better health outcomes for their patients, enhancing patient satisfaction, while driving incremental patient and revenue growth. This alignment of interests helps ensures our continued success with our payor partners.
Effectively Manage the Cost of Care for Our Patients
The capitated nature of our contracting with payors requires us to prudently manage the medical expense of our patients. Our external provider costs are our largest expense category, representing 63% of our total operating expenses for the three months ended March 31, 2022 and 70% of our total operating expenses for the three months ended March 31, 2021. Our care model focuses on leveraging the primary care setting as a means of avoiding costly downstream healthcare costs, such as acute hospital admissions. Our patients retain the freedom to seek care at ERs or hospitals; we do not restrict their access to care. Therefore, we could be liable for potentially large medical claims should we not effectively manage our patients’ health. We utilize stop-loss insurance for our patients, protecting us for medical claims per episode in excess of certain levels.
Center-Level Contribution Margin
We endeavor to expand our number of centers and number of patients at each center over time. Due to the significant fixed costs associated with operating and managing our centers, we generate significantly better center-level contribution margins as the patient base within our centers increases and our costs decrease as a percentage of revenue. As a result, the value of a center to our business increases over time when the number of patients at a center expands.
Seasonality to our Business
Due to the large number of dual-eligible patients (meaning eligible for both Medicare and Medicaid) we serve, the annual enrollment period does not materially affect our growth during the year. We typically see large increases in ACA patients during the first quarter as a result of the ACA annual enrollment period (October to December). However, this is not a large portion of our business.
Our operational and financial results will experience some variability depending upon the time of year in which they are measured. This variability is most notable in the following areas:
Per-Patient Revenue
The revenue derived from our at-risk patients is a function of the percentage of premium we have negotiated with our payor partners, as well as our ability to accurately and appropriately document the acuity of a patient. We experience some seasonality with respect to our per-patient revenue, as it will generally decline over the course of the year. In January of each year, CMS revises the risk adjustment factor for each patient based upon health conditions documented in the prior year, leading to changes in per-patient revenue. As the year progresses, our per-patient revenue declines as new patients join us, typically with less complete or accurate documentation (and therefore lower risk-adjustment scores), and patient mortality disproportionately impacts our higher-risk (and therefore greater revenue) patients.
External Provider Costs
External Provider Costs will vary seasonally depending on a number of factors, but most significantly the weather. Certain illnesses, such as the influenza virus, are far more prevalent during colder months of the year, which can result in an increase in medical expenses during these time periods. We would therefore expect to see higher levels of per-patient medical costs in the first and fourth quarters. Medical costs also depend upon the number of business days in a period. Shorter periods will have lesser medical costs due to fewer business days.
 
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Business days can also create year-over-year comparability issues if one year has a different number of business days compared to another. We would also expect to experience an impact in the future should there be another pandemic such as COVID-19, which may result in increased or decreased total medical costs depending upon the severity of the infection, the duration of the infection and the impact to the supply and availability of healthcare services for our patients.
Investments in Growth
We expect to continue to focus on long-term growth through investments in our centers, care model and marketing. In addition, we expect our corporate, general and administrative expenses to increase in absolute dollars for the foreseeable future to support our growth and because of additional costs as a public company, including expenses related to compliance with the rules and regulations of the SEC, Sarbanes Oxley Act compliance, the stock exchange listing standards, additional corporate and director and officer insurance expenses, greater investor relations expenses and increased legal, audit and consulting fees. As we have communicated, we plan to invest in openings of new de novo centers over the next several years. Historically, de novo centers require upfront capital and operating expenditures, which may not be fully offset by additional revenues in the near-term, and we similarly expect a period of unprofitability in our future de novo centers before they break even. While our net income may decrease in the future because of these activities, we plan to balance these investments in future growth with a continued focus on managing our results of operations and generating positive income from our core centers and scaled acquisitions. In the longer term we anticipate that these investments will positively impact our business and results of operations.
Key Business Metrics
In addition to our financial information which conforms with generally accepted accounting principles in the United States of America (“GAAP”), management reviews a number of operating and financial metrics, including the following key metrics, to evaluate its business, measure its performance, identify trends affecting its business, formulate business plans, and make strategic decisions.
Use of Non-GAAP Financial Information
Certain financial information and data contained in this Report is unaudited and does not conform to Regulation S-X. Accordingly, such information and data may not be included in, may be adjusted in, or may be presented differently in, any periodic filing, information or proxy statement, or prospectus or registration statement to be filed by the Company with the SEC. Some of the financial information and data contained in this Report, such as Adjusted EBITDA and Platform Contribution have not been prepared in accordance with GAAP. These non-GAAP measures of financial results are not GAAP measures of our financial results or liquidity and should not be considered as an alternative to net income (loss) as a measure of financial results, cash flows from operating activities as a measure of liquidity, or any other performance measure derived in accordance with GAAP. The Company believes these non-GAAP measures of financial results provide useful information to management and investors regarding certain financial and business trends relating to the Company’s financial condition and results of operations. Management uses these non-GAAP measures for trend analyses and for budgeting and planning purposes.
The Company believes that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating projected operating results and trends in and in comparing the Company’s financial measures with other similar companies, many of which present similar non-GAAP financial measures to investors. Management does not consider these non-GAAP measures in isolation or as an alternative to financial measures determined in accordance with GAAP. The principal limitation of these non-GAAP financial measures is that they exclude significant expenses and income that are required by GAAP to be recorded in the Company’s financial statements. In addition, they are subject to inherent limitations as they reflect the exercise of judgments by management about which expense and income are excluded or included in determining these non-GAAP
 
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financial measures. For this reason, these non-GAAP measures may not be comparable to other companies’ similarly labeled non-GAAP financial measures. In order to compensate for these limitations, management presents non-GAAP financial measures in connection with GAAP results. You should review the Company’s audited financial statements contained in the Annual Report.
EBITDA and Adjusted EBITDA
Management defines “EBITDA” as net income or net loss before interest expense, income tax provision, depreciation and amortization, change in fair value of warrant liabilities, and gain or loss on extinguishment of debt. “Adjusted EBITDA” is defined as EBITDA adjusted for special items such as duplicative costs, non-recurring legal, consulting, and professional fees, stock based compensation, de novo costs for the first 18 months after opening, discontinued operations, acquisition costs and other costs that are considered one-time in nature as determined by management. Additionally, Adjusted EBITDA presented on a pro forma basis gives effect to the acquisitions of IMC and Care Holdings Group, LLC (“Care Holdings”), which owned Care Optimize LLC, as if they had occurred in historical periods, which does not necessarily reflect what the Company’s Adjusted EBITDA would have been had the acquisitions occurred on the dates indicated. Adjusted EBITDA is intended to be used as a supplemental measure of our performance that is neither required by, nor presented in accordance with, GAAP. Management believes that the use of Adjusted EBITDA provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing its financial measure with those of comparable companies, which may present similar non-GAAP financial measures to investors. However, we may incur future expenses similar to those excluded when calculating these measures. In addition, our presentations of these measures should not be construed as an inference that its future results will be unaffected by unusual or non-recurring items. Our computation of Adjusted EBITDA may not be comparable to other similarly titled measures computed by other companies, because all companies may not calculate Adjusted EBITDA in the same fashion.
Due to these limitations, Adjusted EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on the GAAP results and using Adjusted EBITDA on a supplemental basis. Please review the reconciliation of net (loss) income to EBITDA and Adjusted EBITDA below and do not rely on any single financial measure to evaluate the Company’s business:
 
    
Three Months Ended March 31,
  
($ in thousands)
   
2022
     
2021
     
Y/Y Change
  
Net (loss) income
    $ (16,797 )     $ 1,302      $ (18,099 ) 
  
 
 
     
 
 
     
 
 
  
GAAP Pro Forma adjustments(1)
      —          (2,730 )       2,730  
  
 
 
     
 
 
     
 
 
  
Pro Forma net loss
      (16,797 )       (1,429 )       (15,368 ) 
  
 
 
     
 
 
     
 
 
  
Interest expense
      1,728        1,400        328  
Depreciation and amortization
      5,062        2,979        2,083  
Loss on remeasurement of warrant liabilities
      3,536        —          3,536  
Income tax provision
      181        —          181  
Other expenses
      462        212        250  
  
 
 
     
 
 
     
 
 
  
EBITDA
      (5,829 )       3,162        (8,991 ) 
  
 
 
     
 
 
     
 
 
  
Other adjustments
         
Non-recurring
expenses(2)
      6,055        2,795        3,260  
Acquisition costs(3)
      3,429        1,168        2,261  
Stock based compensation
      1,087        —          1,087  
De novo losses(4)
      1,119        184        935  
Discontinued operations
      —          (1 )       1  
  
 
 
     
 
 
     
 
 
  
Adjusted EBITDA
    $ 5,862      $ 7,308      $ (1,446 ) 
  
 
 
     
 
 
     
 
 
  
 
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Figures may not sum due to rounding.
(1)
Pro Forma figures give effect to the Business Combinations of IMC and Care Holdings as if they had occurred in historical periods.
(2)
Includes professional fees, salaries and wages, and other expenses deemed
one-time
in nature.
(3)
Includes transaction costs, integration costs, and other costs to achieve synergies.
(4)
Includes
non-buildout
related costs incurred prior to opening a de novo location and initial opening losses post-center opening up to the point of breakeven.
Platform Contribution
We define platform contribution as revenue less the sum of (i) external provider costs and (ii) cost of care. We believe this metric best reflects the economics of our care model as it includes all medical claims expense associated with our patients’ care as well as the costs we incur to care for our patients via the CareMax System. As a center matures, we expect the platform contribution from that center to increase both in terms of absolute dollars as well as a percentage of capitated revenue. This increase will be driven by improving patient contribution economics over time, as well as our ability to generate operating leverage on the costs of our centers. Our aggregate platform contribution may not increase despite improving economics at our existing centers should we open new centers at a pace that skews our mix of centers towards newer centers. We would expect to experience minimal seasonality in platform contribution due to minimal seasonality in our patient contribution.
In addition to our GAAP financial information, we review a number of operating and financial metrics, including the following key metrics, to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans and make strategic decisions. The chart below is a pro forma view of our operations. This pro forma view assumes the Business Combination occurred on January 1, 2020, and are based upon estimates which we believe are reasonable.
Non-GAAP
Operating Metrics
 
Patient & Platform
Contribution
  
Mar 31,
2020
    
Jun 30,
2020
    
Sep 30,
2020
    
Dec 31,
2020
    
Mar 31,
2021
    
Jun 30,
2021
    
Sep 30,
2021
    
Dec 31,
2021
    
Mar 31,
2022
  
Centers
     21       21       22       24       24       34       40       45       48  
Markets
     1       1       1       1       1       2       3       4       6  
Patients (MCREM)
     24,800       27,500       29,000       28,400       29,200       35,300       40,400       50,100       50,600  
At-risk
     84.8 %      86.7 %      85.6 %      87.7 %      87.0 %      84.1 %      87.2 %      79.3 %      79.8 % 
Platform Contribution ($, Millions)
   $ 14.1     $ 18.1     $ 15.5     $ 17.9     $ 14.7     $ 8.2     $ 11.0     $ 16.0     $ 17.3  
Centers
We define our centers as those primary care centers open for business and capable of attending to patients at the end of a particular period.
Patients (MCREM)
MCREM patients includes
both at-risk MA
patients (those patients for whom we are financially responsible for their total healthcare costs) as well as risk and
non-risk,
non-MA
patients. We define our
total at-risk patients
as at-risk patients
who have selected us as their provider of primary care medical services as of the end of a particular period. We define our
total fee-for-service patients
as fee-for-service patients
who come to one of our centers for medical care at least once per year.
A fee-for-service and
at-risk
patient remains active in our system until we are informed by the health plan the patient is no longer active. As discussed above, CareMax calculates the amount of support typically received by one Medicare patient as equivalent to the level of support received by three Medicaid or Commercial patients.
 
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Impact of
COVID-19
The rapid spread of
COVID-19
around the world and throughout the United States altered the behavior of businesses and people, with significant negative effects on federal, state and local economies. The virus disproportionately impacts older adults, especially those with chronic illnesses, which describes many of our patients.
We estimate our performance for the three months ended March 31, 2022 has been negatively impacted by approximately $1.0 million of direct
COVID-19
costs.
Management cannot accurately predict the future impacts of
COVID-19
due to the uncertainty surrounding future spikes in
COVID-19
cases or new variants that may emerge in the future.
Components of Results of Operations
Revenue
Medicare risk-based revenue and Medicaid risk-based revenue.
 Our capitated revenue consists primarily of fees for medical services provided by us or managed by our MSO under a global capitation arrangement made directly with various MA payors. Capitation is a fixed amount of money per patient per month paid in advance for the delivery of health care services, whereby we are generally liable for medical costs in excess of the fixed payment and are able to retain any surplus created if medical costs are less than the fixed payment. A portion of our capitated revenues are typically prepaid monthly to us based on the number of MA patients selecting us as their primary care provider. Our capitated rates are determined as a percentage of the premium the MA plan receives from CMS for
our at-risk members.
Those premiums are determined via a competitive bidding process with CMS and are based upon the cost of care in a local market and the average utilization of services by the patients enrolled. Medicare pays capitation using a “risk adjustment model,” which compensates providers based on the health status (acuity) of each individual patient. Payors with higher acuity patients receive more in premium, and those with lower acuity patients receive less in premium. Under the risk adjustment model, capitation is paid on an interim basis based on enrollee data submitted for the preceding year and is adjusted in subsequent periods after the final data is compiled. As premiums are adjusted via this risk adjustment model, our capitation payments will change in unison with how our payor partners’ premiums change with CMS. Risk adjustment in future periods may be impacted by
COVID-19
and our inability to accurately document the health needs of our patients in a compliant manner, which may have an adverse impact on our revenue.
For Medicaid, premiums are determined by Florida’s AHCA and based rates are adjusted annually using historical utilization data projected forward by a third-party actuarial firm. The rates are established based on specific cohorts by age and sex and geographical location. AHCA uses a “zero sum” risk adjustment model that establishes acuity for certain cohorts of patients quarterly, depending on the scoring of that acuity, and may periodically shift premiums from health plans with lower acuity members to health plans with higher acuity members.
Other revenue.
 
Other revenue includes professional capitation payments. These revenues are a fixed amount of money per patient per month paid in advance for the delivery of primary care services only, whereby CareMax is not liable for medical costs in excess of the fixed payment. Capitated revenues are typically prepaid monthly to CareMax based on the number of patients selecting us as their primary care provider. Our capitated rates are fixed, contractual rates. Incentive payments for Healthcare Effectiveness Data and Information Set (“HEDIS”) and any services paid on a fee for service basis by a health plan are also included in other revenue. Other revenue also includes ancillary fees earned under contracts with certain payors for the provision of certain care coordination and other care management services. These services are provided to patients covered by these payors regardless of whether those patients receive their care from our affiliated medical groups. Revenue for primary care service for patients in a partial risk or
up-side
only contracts, pharmacy revenue and revenue generated from CareOptimize are reported in other revenue.
 
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We expect capitated revenue will increase as a percentage of total revenues over time because of the greater revenue economics associated with
at-risk
patients compared
to fee-for-service patients.
Operating Expenses
 
Medicare and Medicaid external provider costs.
 
External provider costs include all services
at-risk
patients utilize. These include claims paid by the health plan and estimates for unpaid claims. The estimated reserve for incurred but not paid claims is included in accounts receivable as we do not pay medical claims. Actual claims expense will differ from the estimated liability due to factors in estimated and actual patient utilization of health care services, the amount of charges, and other factors. We typically reconcile our medical claims expense with our payor partners on a monthly basis and adjust our estimate of incurred but not paid claims if necessary. To the extent we revise our estimates of incurred but not paid claims for prior periods up or down, there would be a correspondingly favorable or unfavorable effect on our current period results that may or may not reflect changes in long term trends in our performance. We expect our medical claims expenses to increase in both absolute dollar terms as well as on a per patient per month (“PPPM”) basis given the healthcare spending trends within the Medicare population and the increasing disease burden of patients as they age.
 
Cost of care.
Cost of care includes the costs of additional medical services we provide to patients that are not paid by the plan. These services include patient transportation, medical supplies, auto insurance and other specialty costs, like dental or vision. In some instances, we have negotiated better rates than the health plans for these health plan covered services.
In addition, cost of care includes rent and facilities costs required to maintain and operate our centers.
 
Expenses from our physician groups that contract with our MSO are consolidated with other clinical and MSO expenses to determine profitability for our
at-risk
and
fee-for-service
arrangements. Physician group economics are not evaluated on a stand-alone basis, as certain
non-clinical
expenses need to be consolidated to consider profitability.
We measure the incremental cost of our capitation agreements by starting with our center-level expenses, which are calculated based upon actual expenses incurred at a specific center for a given period of time and expenses that are incurred centrally and allocated to centers on a ratable basis. These expenses are allocated to our
at-risk
patients based upon the number of visit slots these patients utilized compared to the total slots utilized by all of our patients. All visits, however, are not identical and do not require the same level of effort and expense on our part. Certain types of visits are more time and resource intensive and therefore result in higher expenses for services provided internally. Generally, patients who are earlier in their tenure with CareMax utilize a higher percentage of these more intensive visits, as we get to know the patient and properly assess and document such patient’s health condition.
Selling and marketing expenses.
 
Selling and marketing expenses include the cost of our sales and community relations team, including salaries and commissions, radio and television advertising, events and promotional items.
Corporate general and administrative expenses.
Corporate general and administrative expenses include employee-related expenses, including salaries and related costs and stock-based compensation, technology infrastructure, operations, clinical and quality support, finance, legal, human resources, and business development departments. In addition, corporate general and administrative expenses include corporate technology, third party professional services and corporate occupancy costs. We expect these expenses to increase over time due to the additional legal, accounting, insurance, investor relations and other costs that we will incur as a public company, as well as other costs associated with continuing to grow our business. We also expect our corporate, general and administrative expenses to increase in absolute dollars in the foreseeable future. However, we anticipate corporate, general and administrative expenses to decrease as a percentage of revenue over the long term, although they may fluctuate as a percentage of revenue from period to period due to the timing and amount of these expenses.
 
 
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Depreciation and amortization.
Depreciation and amortization expenses are primarily attributable to our capital investments and consist of fixed asset depreciation, amortization of intangibles considered to have definite lives, and amortization of capitalized
internal-use
software costs.
Other Income (Expenses)
Interest expense.
 Interest expense consists primarily of interest payments on our outstanding borrowings.
Other income (expense), net
. Other income (expense), net, includes research and development costs, franchise tax payments and other miscellaneous corporate expenses.
Acquisition related costs.
Acquisition related costs consist of legal and other transaction-related expenses.
Results of Operations
Three Months Ended March 31, 2022 compared to Three Months Ended March 31, 2021
The following table sets forth our condensed consolidated statements of operations data for the periods indicated:
 
    
Three Months Ended March 31,
  
($ in thousands)
   
2022
     
2021
     
$ Change
     
% Change
  
Revenue
            
Medicare risk-based revenue
    $ 107,747      $ 27,816      $ 79,931        287.4 % 
Medicaid risk-based revenue
      20,165        —          20,165        100.0 % 
Other revenue
      9,008        102        8,906        8,731.8 % 
  
 
 
     
 
 
     
 
 
     
 
 
  
Total revenue
      136,920        27,918        109,002        390.4 % 
Operating expense
            
External provider costs
      92,856        18,159        74,697        411.3 % 
Cost of care
      27,349        5,353        21,996        410.9 % 
Sales and marketing
      3,301        291        3,010        1,034.4 % 
Corporate, general and administrative
      18,978        1,795        17,183        957.3 % 
Depreciation and amortization
      5,062        514        4,548        884.7 % 
Acquisition related costs
      266        —          266        100.0 % 
  
 
 
     
 
 
     
 
 
     
 
 
  
Total costs and expenses
      147,811        26,112        121,699        466.1 % 
  
 
 
     
 
 
     
 
 
     
 
 
  
Operating (loss) income
    $ (10,890 )     $ 1,806      $ (12,696 )       (703.0 %) 
Interest expense
      (1,728 )       (504 )       (1,224 )       242.8 % 
Loss on remeasurement of warrant liabilities
      (3,536 )       —          (3,536 )       (100.0 %) 
Other expenses
      (462 )       —          (462 )       (100.0 %) 
  
 
 
     
 
 
     
 
 
     
 
 
  
(Loss) income before income taxes
    $ (16,616 )     $ 1,302      $ (17,918 )       (1,376.2 %) 
Income tax provision
      (181 )       —          (181 )       (100.0 %) 
  
 
 
     
 
 
     
 
 
     
 
 
  
Net (loss) income
    $ (16,797 )     $ 1,302      $ (18,099 )       (1,390.1 %) 
  
 
 
     
 
 
     
 
 
     
 
 
  
 
*
Figures may not sum due to rounding
Medicare risk-based revenue.
 Medicare risk-based revenue was $107.7 million for the three months ended March 31, 2022, an increase of $79.9 million compared to $27.8 million for the three months ended March 31, 2021. This increase was driven primarily by a 345% increase in the total number of
at-risk
patients from the acquisitions of IMC, SMA, and DNF, partially offset by a 13% reduction in rates, driven by member mix.
 
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Medicaid risk-based revenue.
 Medicaid risk-based revenue was $20.2 million for the three months ended March 31, 2022. Medicaid risk-based revenue relates entirely to patients that were acquired from the Business Combination with IMC.
Other revenue
. Other revenue was $9.0 million for the three months ended March 31, 2022, an increase of $8.9 million compared to $102,000 for the three months ended March 31, 2021. The increase is related to
fee-for-service
and pharmacy revenues acquired in various acquisitions.
External provider costs
. External provider costs were $92.9 million for the three months ended March 31, 2022, an increase of $74.7 million compared to $18.2 million for the three months ended March 31, 2021. The increase was primarily due to a 452% increase in
at-risk
patients from the acquisitions of IMC, SMA and DNF, partially offset by a 7% decrease in PPPM rates, driven by member mix.
Cost of care expenses
. Cost of care expenses were $27.3 million for the three months ended March 31, 2022, an increase of $22.0 million compared to $5.3 million for the three months ended March 31, 2021. The increase was due to membership growth from acquisitions of IMC, SMA, and DNF.
 
Sales and marketing expenses.
 Sales and marketing expenses were $3.3 million for the three months ended March 31, 2022, an increase of $3.0 million compared to $291,000 for the three months ended March 31, 2021. The increase was primarily due to the increase in sales staff and marketing efforts resulting from acquisitions.
Corporate, general
 & administrative.
 Corporate, general & administrative expense was $19.0 million for the three months ended March 31, 2022, an increase of $17.2 million compared to $1.8 million for the three months ended March 31, 2021. The increase was primarily from the acquired overhead related to IMC, SMA, DNF, BIX and Advantis, as well as costs associated with becoming a publicly traded company.
Depreciation and amortization.
Depreciation and amortization expense was $5.0 million for the three months ended March 31, 2022, an increase of $4.5 million compared to $514,000 for the three months ended March 31, 2021. This was due to amortization of intangible assets purchased in the IMC, SMA, and DNF acquisitions.
Acquisition related costs.
Acquisition related costs were $266,000 for the three months ended March 31, 2022. This cost relates primarily to the acquisition of DNF and Advantis.
Interest expense
. Interest expense was $1.7 million for the three months ended March 31, 2022, an increase of $1.2 million compared to $504,000 for the three months ended March 31, 2021. This was due to the increased borrowings under the Existing Credit Agreement.
Change in fair value of derivative warrant liabilities
. We have recorded a loss of $3.5 million during the three months ended March 31, 2022, as a result of an increase in the fair value of derivative warrant liabilities. There were no warrant liabilities as of March 31, 2021.
Other expenses.
Other expenses were $456,000
for the three months ended March 31, 2022 as compared to $0 for the three months ended March 31, 2021. The increase is driven by miscellaneous corporate expenses.
Liquidity and Capital Resources
Overview
As of March 31, 2022, we had cash on hand of $32.7 million. Our principal sources of liquidity have been our operating cash flows, borrowings under our Existing Credit Agreement and proceeds from equity issuances. We have used these funds to meet our capital requirements, which consist of salaries, labor, benefits and other
 
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employee-related costs, product and supply costs, third-party customer service, billing and collections and logistics costs, capital expenditures including patient equipment, center and office lease expenses, insurance premiums, acquisitions and debt service. Our future capital expenditure requirements will depend on many factors, including the pace and scale of our expansion in new and existing markets, any future acquisitions, patient volume, and revenue growth rates. Many of our capital expenditures are made in advance of patients beginning service. Certain operating costs are incurred at the beginning of the equipment service period and during initial patient set up. We also expect to incur costs related to acquisitions and de novo growth through the opening of new centers, which we expect to require significant capital expenditures, including lease and construction expenses. We may be required to seek additional equity or debt financing, in addition to cash on hand and borrowings under our Credit Facilities in connection with our business growth, including debt financing that may be available to us from certain health plans for each new center that we open under the terms of our agreements with those health plans. In the event that additional financing is required from outside sources, we may not be able to raise it on acceptable terms or at all. If additional capital is unavailable when desired, our business, results of operations, and financial condition would be materially and adversely affected. We believe that our expected operating cash flows, together with our existing cash, cash equivalents, amounts available under our Credit Facilities, and amounts available to us under our agreement with Anthem, each as described below, will continue to be sufficient to fund our operations and growth strategies for at least the next 12 months.
The Impact of
COVID-19
As further detailed above in “
Impact of
COVID-19
”, we estimate our performance during the three months ended March 31, 2022 has been impacted by approximately $1.0 million of direct
COVID-19
costs. While it is impossible to predict the scope or duration of
COVID-19
or the future impact on our liquidity and capital resources,
COVID-19
could materially affect our liquidity and operating cash flows in future periods.
Credit Facilities
On the Credit Agreement Closing Date, we entered into the Credit Agreement, which provides for an aggregate of up to $300.0 million in term loans, comprised of (i) Initial Term Loans in an aggregate principal amount of $190.0 million, which will be fully drawn on the Credit Agreement Closing Date and (ii) Delayed Term Loans in an aggregate principal amount of $110.0 million, which will be available to be drawn in up to five (5) borrowings from and after the Credit Agreement Closing Date until the eighteen (18) month anniversary of the Credit Agreement Closing Date under certain circumstances to finance permitted acquisitions and similar permitted investments, de novo center growth and optimization of de novo centers and management services organization performance, as set forth in the Credit Agreement. The Credit Agreement provides that it may be amended to provide for the $30.0 million Revolving Facility, of which up to $5.0 million may be used for revolving loans for general corporate purposes and up to $30.0 million may be used to issue letters of credit. The Credit Agreement also provides for certain uncommitted incremental facilities.
The Company is using approximately $120.3 million of the net proceeds of the Initial Term Loans to repay our outstanding obligations under the Existing Credit Agreement. We intend to use the remaining net proceeds of the Initial Term Loans and other funds available under the Credit Agreement to fund our de novo growth strategy, for working capital and for other permitted corporate purposes.
At our option, borrowings under the Credit Agreement bear interest at: (i) the Alternate Base Rate (defined as the highest of (a) the U.S. Prime Lending Rate as published in
The Wall Street Journal
, (b) the Federal Funds Rate plus 0.50% and (c) Term SOFR for an interest period of one month, subject to a floor of 1.00%, plus 1.00%), plus an applicable margin rate of 8.00%; or (ii) Term SOFR (calculated as the Secured Overnight Financing Rate published on the Federal Reserve Bank of New York’s website, plus a spread adjustment of 0.114%, 0.262% or 0.428%, depending on if we select a
one-month,
three-month or
six-month
interest period, respectively), plus an applicable margin rate of 9.00%. We may, at our option, elect to capitalize up to 4.00% of the interest as principal amount on the outstanding Term Loans, provided that in such case the applicable margin
 
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rate will be increased by 0.50%. Accrued and unpaid interest is payable (x) with respect to Alternate Base Rate loans, quarterly on the last business day of each of March, June, September and December (each, a “Quarterly Payment Date”), with any remaining accrued and unpaid interest paid upon the Maturity Date, (y) with respect to Term SOFR loans, on the last day of interest period as selected by the Company and , in the case of any Term SOFR loan with an interest period greater than three months, each day that is the three-month anniversary of such Term SOFR loan, with any remaining accrued and unpaid interest paid upon the Maturity Date, and (z) for loans under the Revolving Facility, upon the Maturity Date.
Amortization payments with respect to the Initial Term Loans will be payable in quarterly installments, commencing on March 31, 2024, in aggregate principal amounts equal to 0.25% of the original aggregate principal amount of the Initial Term Loans, and amortization with respect to any Delayed Term Loans will be payable in quarterly installments, commencing on March 31, 2024, in aggregate principal amounts equal to 0.25% of the original aggregate principal amount of each funded Delayed Term Loan. In addition, the Credit Agreement provides for certain mandatory prepayments based on our secured leverage ratio or upon any asset sale and provides for prepayment penalties of up to 3.00% in certain circumstances. All amounts owed under the Credit Facilities are due and payable on the Maturity Date, or earlier following a change in control or an event of default, unless otherwise extended in accordance with the terms of the Credit Agreement.
The Credit Agreement contains certain covenants that limit, among other things, the ability of us and our subsidiaries to incur additional indebtedness, liens or encumbrances, to make certain investments, to enter into sale-leaseback transactions or sell certain assets, to make certain restricted payments or pay dividends, to enter into consolidations, to transact with affiliates and to amend certain agreements, subject in each case to the exceptions and other qualifications as provided in the Credit Agreement. The Credit Agreement also contains covenants that require us to satisfy a minimum liquidity requirement of $50.0 million, which may be decreased to $25.0 million if we achieve a certain adjusted EBITDA, and maintain a maximum total leverage ratio based on our adjusted EBITDA, with de novo losses excluded from the calculation of such ratio for up to 36 months after the opening of a de novo center, which maximum total leverage ratio will initially be 8.5 to 1 and is subject to a series of step-downs. For the fiscal quarters ending September 30, 2026 and thereafter the Company must maintain a maximum total leverage ratio no greater than 5.50 to 1.00.
All obligations under the Credit Agreement are guaranteed by us and the Subsidiary Guarantors, and all obligations under the Credit Agreement, including the guarantees of those obligations, are secured by substantially all of the assets of the Company and the Subsidiary Guarantors subject to customary exceptions and qualifications. The Credit Agreement contains customary events of default, with default interest of 2% in excess of the
non-default
rate, and also includes cure rights for us upon certain events of default.
Anthem Collaboration Agreement
In connection with our collaboration agreement with Anthem, which was announced in August of 2021, we plan to open approximately 50 centers across eight priority states as part of our de novo strategy to open new centers in additional markets. Anthem has agreed to provide debt financing of up to $1 million for each new center opened in partnership with Anthem. We intend to use such funds to partially offset the costs of opening new centers in connection with our de novo growth strategy.
Cash Flows
The following table summarizes our cash flows for the periods presented:
 
(in thousands)
   
Three Months Ended
March 31,
  
    
2022
     
2021
  
Net cash (used in)/provided by operating activities
    $ (12,139 )     $ 3,372  
Net cash used in investing activities
    $ (1,467 )     $ (1,690 ) 
Net cash used in financing activities
    $ (1,570 )     $ (181 ) 
 
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Operating Activities
. Net cash used in operating activities for the three months ended March 31, 2022 was $12.1 million, decrease of $15.5 million as compared to $3.4 million provided by operating activities for the three months ended March 31, 2021. This decrease is partially due to net change of $(8.3) million in net loss and
non-cash
charges, primarily due to the net loss from operations of $16.8 million reported for the three months ended March 31, 2022 compared to the net income from operations of $1.3 million reported for the three months ended March 31, 2021, offset by an increase to depreciation and amortization and loss realized on remeasurement of warrant liabilities. In addition, there was a net change of $(7.1) million to the Company’s operating assets and liabilities, mostly driven by the timing of collections and payments and the growth in the number of patients.
Investing Activities
. Net cash used in investing activities for the three months ended March 31, 2022 was $1.5 million compared to $1.7 million for the three months ended March 31, 2021 and during both periods consisted of purchases of property and equipment, primarily leasehold improvements at and medical equipment for our various centers.
Financing
Activities: Net cash used in financing activities for the three months ended March 31, 2022 was $1.6 million compared to $0.2 million during the three months ended March 31, 2021 and during both periods consisted of scheduled principal payments of our debt.
Contractual Obligations and Commitments
Our principal commitments consist of obligations under our Credit Facilities and other long-term debt and operating leases for our centers.
Off-Balance Sheet
Arrangements
We did not have
any off-balance sheet
arrangements as of March 31, 2022 or December 31, 2021 other than operating leases.
JOBS Act
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to
non-emerging
growth companies, but any such election to opt out is irrevocable. We have elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, as an emerging growth company, we can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our consolidated financial statements with a public company which is neither an emerging growth company, nor an emerging growth company that has opted out of using the extended transition period, difficult or impossible because of the potential differences in accounting standards used.
Critical Accounting Policies and Estimates
The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, revenue and expenses and related disclosures of contingent assets and liabilities at the date of our financial statements. Actual results may differ from these estimates under different assumptions or conditions, impacting our reported results of operations and financial condition.
 
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Certain accounting policies involve significant judgments and assumptions by management, which have a material impact on the carrying value of assets and liabilities and the recognition of income and expenses. Management considers these accounting policies to be critical accounting policies. The estimates and assumptions used by management are based on historical experience and other factors, which are believed to be reasonable under the circumstances. The significant accounting policies which we believe are the most critical to aid in fully understanding and evaluating our reported financial results are described below. Refer to Note 2 “to the Consolidated Financial Statements—
Summary of Significant Accounting Policies
” for more detailed information regarding our critical accounting policies.
Revenue
The transaction price for our capitated payor contracts is variable as it primarily includes PPPM fees associated with unspecified membership. PPPM fees can fluctuate throughout the contract based on the health status (acuity) of each individual enrollee. In certain contracts, PPPM fees also include “risk adjustments” for items such as performance incentives, performance guarantees and risk shares. The capitated revenues are recognized based on the estimated PPPM fees earned net of projected performance incentives, performance guarantees, risk shares and rebates because we are able to reasonably estimate the ultimate PPPM payment of these contracts. We recognize revenue in the month in which eligible members are entitled to receive healthcare benefits. Subsequent changes in PPPM fees and the amount of revenue to be recognized are reflected through subsequent period adjustments to properly recognize the ultimate capitation amount.
External Provider Costs
External Provider Costs includes all costs of caring for our
at-risk
patients and for third-party healthcare service providers that provide medical care to our patients for which we are contractually obligated to pay (through our full-risk capitation arrangements). The estimated reserve for a liability for unpaid claims is included in “Accounts receivable, net” in the consolidated balance sheets. Actual claims expense will differ from the estimated liability due to factors in estimated and actual member utilization of health care services, the amount of charges and other factors. From time to time, but at least annually, we assess our estimates with an independent actuarial expert to ensure our estimates represent the best, most reasonable estimate given the data available to us at the time the estimates are made. Certain third-party payor contracts include a Medicare Part D payment related to pharmacy claims, which is subject to risk sharing through accepted risk corridor provisions. Under certain agreements the fund risk allocation is established whereby we, as the contracted provider, receive only a portion of the risk and the associated surplus or deficit. We estimate and recognize an adjustment to medical expenses for Part D claims related to these risk corridor provisions based upon pharmacy claims experience to date, as if the annual risk contract were to terminate at the end of the reporting period.
We assess the profitability of our capitation arrangements to identify contracts where current operating results or forecasts indicate probable future losses. If anticipated future variable costs exceed anticipated future revenues, a premium deficiency reserve is recognized. No premium deficiency reserves were recorded as of December 31, 2021 or December 31, 2020.
Business Combinations
We account for business acquisitions in accordance with ASC Topic 805,
Business Combinations
. We measure the cost of an acquisition as the aggregate of the acquisition date fair values of the assets transferred and liabilities assumed and equity instruments issued. Transaction costs directly attributable to the acquisition are expensed as incurred. We record goodwill for the excess of (i) the total costs of acquisition in the acquired business over (ii) the fair value of the identifiable net assets of the acquired business.
The acquisition method of accounting requires us to exercise judgment and make estimates and assumptions based on available information regarding the fair values of the elements of a business combination as of the date
 
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of acquisition, including the fair values of identifiable intangible assets, deferred tax asset valuation allowances, liabilities related to uncertain tax positions, contingent consideration and contingencies. We may refine these estimates over a
one-year
measurement period, to reflect any new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date. If we are required to retroactively adjust provisional amounts that we have recorded for the fair value of assets and liabilities in connection with an acquisition, these adjustments could materially impact our results of operations and financial position. Estimates and assumptions that we must make in estimating the fair value of risk contracts and other identifiable intangible assets include future cash flows that we expect to generate from the acquired assets. If the subsequent actual results and updated projections of the underlying business activity change compared with the assumptions and projections used to develop these values, we could record impairment charges. In addition, we have estimated the economic lives of certain acquired assets and these lives are used to calculate depreciation and amortization expenses. If our estimates of the economic lives change, depreciation or amortization expenses could be accelerated or slowed, which could materially impact our results of operations.
The Business Combination acquisition of IMC and the acquisitions of SMA, DNF, Advantis and BIX were accounted for under ASC 805. Pursuant to ASC 805, we were (and in the case of IMC, CMG was) determined to be the accounting acquirer. Refer to Note 3 to the Consolidated Financial Statements—
Acquisitions
for more information. In accordance with the acquisition method, we recorded the fair value of assets acquired and liabilities assumed from IMC, SMA, DNF, Advantis, and BIX. The allocation of the consideration to the assets acquired and liabilities assumed is based on various estimates. As of December 31, 2021, we performed our preliminary purchase price allocations. We continue to evaluate the fair value of the acquired assets, liabilities and goodwill. As such, these estimates are subject to change within the respective measurement period, which will not extend beyond one year from the acquisition date. Any adjustments will be recognized in the reporting period in which the adjustment amounts are determined.
Goodwill and Other Intangible Assets
Intangible assets consist primarily of risk-based contracts acquired through business acquisitions. Goodwill represents the excess of consideration transferred in excess of the fair value of net assets acquired through business acquisitions. Goodwill is not amortized but is tested for impairment at least annually.
We test goodwill for impairment annually or more frequently if triggering events occur or other impairment indicators arise which might impair recoverability. These events or circumstances would include a significant change in the business climate, legal factors, operating performance indicators, competition, sale, disposition of a significant portion of the business or other factors. The Company’s policy is to conduct the annual impairment testing for goodwill and indefinite-lived intangibles at the reporting unit level.
ASC 350,
Intangibles—Goodwill and Other
(“ASC 350”) allows entities to first use a qualitative approach to test goodwill for impairment. ASC 350 permits an entity to first perform a qualitative assessment to determine whether it is more likely than not (a likelihood of greater than 50%) that the fair value of a reporting unit is less than its carrying value. In performing this “Step 0”, management analyzed changes in macroeconomic conditions related to the spread of the Omicron variant of
COVID-19
and significant changes in the capital markets in fourth quarter 2021. Management concluded that it was not more likely that not that the fair value of the reporting unit was greater than its carrying value. Based on this, management engaged a 3rd party valuation specialist to provide a valuation as of as of December 31, 2021 of the reporting unit as prescribed in ASC
350-20-35-3C.
Based on these factors, the Company concluded that it was necessary to perform a quantitative assessment of the reporting unit’s goodwill. The results of the quantitative assessment noted that the fair value of the goodwill and intangible assets of the Company were in excess of the carrying value. There was no goodwill impairment recorded during the twelve months ended December 31, 2021.
Risk contracts represent the estimated values of customer relationships of acquired businesses and have definite lives. We amortize the risk contracts on an accelerated basis over their estimated useful lives ranging
 
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from four to seven years. We amortize
non-compete
agreement intangible assets over five years on a straight-line basis.
The determination of fair values and useful lives require us to make significant estimates and assumptions. These estimates include, but are not limited to, future expected cash flows from acquired capitation arrangements from a market participant perspective, patient attrition rates, discount rates, industry data and management’s prior experience. Unanticipated events or circumstances may occur that could affect the accuracy or validity of such assumptions, estimates or actual results.
Derivative Warrant Liabilities
We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. We evaluate all of our financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 “Distinguishing Liabilities from Equity,” and ASC
815-15,
“Derivatives and Hedging—Embedded Derivatives.”. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is
re-assessed
at the end of each reporting period.
DFHT issued 5,791,667 common stock warrants in connection with our initial public offering (2,875,000) and a simultaneous private placement (2,916,667), which are recognized as derivative liabilities in accordance with ASC
815-40.
Accordingly, we recognize the warrant instruments as liabilities at fair value and adjust the instruments to fair value at each reporting period. The liabilities are subject to
re-measurement
at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s statement of operations. The fair value of warrants issued has been estimated using Monte-Carlo simulations at each measurement date.
Income Taxes
The Company follows the asset and liability method of accounting for income taxes under ASC 740, “
Income Taxes
.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. There were no unrecognized tax benefits as of December 31, 2021 and December 31, 2020. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense.
 
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MANAGEMENT
Executive Officers and Directors
The following table sets forth certain information, including ages as of April 29, 2022, of our executive officers and members of the Board.
 
Name
   
Age
     
Position(s)
Carlos A. de Solo
      43      Class III Director; Chief Executive Officer
Beatriz Assapimonwait
      59      Class II Director
Dr. Jennifer Carter
      58      Class I Director
Bryan Cho
      49      Class III Director
Dr. Vincent Omachonu
      68      Class I Director
Jose R. Rodriguez
      63      Class II Director; Chairman of the Board of Directors
Hon. Dr. David J. Shulkin
      62      Class II Director
Randy Simpson
      53      Class I Director
Alberto de Solo
      44      Chief Operating Officer
Kevin Wirges
      42      Chief Financial Officer
Directors and Officers
The following is a brief biography of each of our directors and executive officers.
Carlos A. de Solo
, has served as our President and Chief Executive Officer, and as a director, since the Closing Date. Mr de Solo was a
co-founder
and the President and Chief Executive Officer of CMG and served in those capacities from May 2011 until the Closing Date. Mr. de Solo has more than 10 years of experience in the healthcare industry. Prior to
co-founding
CareMax, Mr. de Solo served as Chief Operating Officer and partner of Solera Health Systems, LLC a startup managed healthcare company. Mr. de Solo serves as a board member of the Coral Gables Hospital. Mr. de Solo received a B.B.A. in Accounting and Finance from Florida International University. We believe Mr. de Solo’s experience as
co-founder,
President and Chief Executive Officer of CMG makes him well qualified to serve as a member of the Board.
Beatriz Assapimonwait
has served as an independent director on the Board since September 2021. She has over 39 years of experience in the managed health care industry. Ms. Assapimonwait was, until August 2021, Regional President for the South Florida region at Humana Inc. (NYSE:HUM), one of the largest private insurance health insurers in the U.S. with a focus on administering Medicare Advantage plans. In her role at Humana, Inc., Ms. Assapimonwait was responsible for developing market strategies and leading all market operations for all Medicare lines of business, including HMOs and PPOs for the South Florida region. Prior to her role at Humana, she served as CEO of Family Physicians of Winter Park, Inc., until its acquisition by Humana, Inc., where from December 2016 to July 2019, she led the strategic and operational efforts of a global risk MSO with 22 primary clinics in the Central Florida Region. Additionally, she served as the Vice President of Medicare Advantage Prescription Drug Plans at Aetna, Inc. from November 2014 to November 2016; Chief Operations Officer at Innovacare Health, from January 2014 to October 2014; Founder and President of Seven Stars Quality Healthcare, from July 2013 to December 2013; and Regional President for the North Florida region at Humana, Inc., from January 2009 to June 2013. Ms. Assapimonwait earned her Bachelor of Arts degree from Florida International University in 1983, and is certified in Healthcare Compliance by the Health Care Compliance Association and in HIPAA Compliance from Kennesaw State University. She has won several awards and commendations, including being a Stevie Award Finalist of the American Business Awards for Best Customer Service Organization in 2004 and appointed Preceptor and Clinical Adjunct Faculty for the Healthcare Administration Program in 1997 at the University of Houston-Clear Lake. We believe Ms. Assapimonwait’s experience in the managed health care industry makes her well qualified to serve as a member of the Board.
 
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Dr.
 Jennifer Carter
, has served as an independent director on the Board since the Closing Date. Dr. Carter is a healthcare executive, investor, board member and entrepreneur with a track record of developing and investing in innovative strategies and solutions at the intersection of and healthcare IT and services, digital health and machine learning, precision medicine, and genomics. Dr. Carter has been a Managing Director at Sandbox Industries and Blue Venture Fund since March 2021. Sandbox provides healthcare-related investment management exclusively for the Blue Venture Fund. Previously, Dr. Carter served as Managing Director of JLC Precision Health Strategies from July 2020 to April 2021 and VP and Head of Precision Health at Integral Health (now Valo Health), a Flagship Pioneering company, from March 2019 to August 2020. In 2018, Dr. Carter founded TrialzOWN, Inc. a healthcare company that was acquired in the development stage by Integral Health in March 2019. Prior to serving as CEO of TrialzOWN, Dr. Carter founded
N-of-One,
Inc. and served as its Chief Executive Officer from 2008 to 2012, and as its Chief Medical Officer from 2012 until its acquisition by Qiagen in 2019. At
N-of-One,
Dr. Carter led the development of the platform to create of award winning novel treatment strategies for cancer patients. Prior to founding
N-of-One,
Dr. Carter spent nine years working as an Investment Consultant with Levin Capital Strategies and with other groups specializing in biotechnology and life sciences investments evaluating existing and emerging markets, new medical technologies, and early-stage companies. After obtaining her medical degree, Dr. Carter practiced internal medicine at Mount Auburn Hospital in Cambridge, MA. Dr. Carter has served on the board of directors of Oncocyte (NASDAQ: OCX) since 2020 and multiple private companies. Dr. Carter received a BS degree from Yale University, an MD from Harvard Medical School, an MPH from the Harvard School of Public Health, and an MBA from MIT. We believe Dr. Carter’s experience as a physician and in healthcare management makes her well qualified to serve as a member of the Board.
Bryan Cho
has served as an independent director of the Board since July 2021. He is Executive Vice President of The Related Companies, L.P. and a senior partner of the firm’s New York and California development divisions, as well as president of Related’s Senior Living business which currently has close to $2.5 billion in properties under development. Since joining Related in 2000, Bryan has led over $10.0 billion of development ventures creating close to 6,000 new multi-family residences (including over 1,000 units of new construction affordable housing) and over 6.0 million square feet of commercial and institutional
non-profit
space across the New York City, Los Angeles, and San Francisco metropolitan areas. He is a member of the board of trustees of The Buckley School in New York City, The Stony Brook School, in Stony Brook, New York, as well as a member of the board of directors of homeless services
non-profit
The Bowery Mission in New York City where he serves as Chair of the Mission’s Real Estate Committee. We believe Mr. Cho’s expertise in real estate, specifically the development of facilities for Medicare eligible populations, makes him well qualified to serve as a member of the Board.
Dr.
 Vincent Omachonu,
has served as an independent director on the Board since September 2021. Dr. Omachonu is the Chair of the Department of Industrial and Systems Engineering at the University of Miami College of Engineering. Dr. Omachonu is an award-winning expert and author in the field of healthcare quality management and patient experience. His most recent book is titled, Healthcare Value Proposition. He has published several peer-reviewed papers in Technical and professional journals, including Health Services Research, Journal of Population Health, and European Journal of Operational Research. Dr. Omachonu has written extensively about technology and innovation in the services sector. He is a Master Black Belt in Lean Six Sigma Quality Methodology. He earned his bachelor’s and master’s degrees in industrial engineering from the University of Miami, a master’s degree in operations research from Columbia University, and his PhD in industrial engineering from New York University, Tandon School of Engineering. We believe Dr. Omachonu’s expertise in healthcare quality management makes him well qualified to serve as a member of the Board.
Jose R. Rodriguez
, has served as an independent director on the Board since the Closing Date. Prior to his retirement from KPMG LLP (KPMG), effective March 31, 2021, Mr. Rodriguez was a senior audit partner (admitted to the partnership, July 1995). During his career at KPMG he held various leadership positions, which included serving on its board of directors and as lead director; chief operating officer of KPMG International’s global audit practice; office managing partner; leader of its Audit Committee Institute (ACI); east region professional practice partner and most recently ombudsman. As an audit partner, Mr. Rodriguez had extensive
 
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experience with large multinational companies and
mid-sized
private and publicly held companies, with primary emphasis on industrial manufacturing; consumer markets (retail, automotive, and distribution concerns); pharmaceuticals; healthcare; agribusiness; oil and gas and mergers and acquisitions. Additionally, Mr. Rodriguez is a National Association of Corporate Directors (NACD) Fellow and has been included in the NACD’s
D-100
list, which recognizes the most influential people in and around the boardroom. Mr. Rodriguez serves on the board of trustees of Marymount University; board of directors of Latin Corporate Directors Association (treasurer), SECU Family House (Chair-elect), the North Carolina Association of CPAs, the Dean’s Advisory Council at the University of Miami Herbert School of Business (Chair) and the Business School Advisory Board at Wake Forest University. He is a certified public accountant (licensed in FL, NC and NY). Mr. Rodriguez is currently on the board of directors of Primoris Services Corporation (NASDAQ: PRIM) and Popular, Inc. (NASDAQ: BPOP). Mr. Rodriguez received a B.B.A. with a major in accounting from the University of Miami. We believe that Mr. Rodriguez’s
in-depth
knowledge and understanding of generally accepted accounting principles, his experience in auditing and SEC reporting, mergers and acquisitions, understanding of the responsibilities and functions of audit committees and experience in corporate governance makes him well qualified to serve as a member of the Board.
Hon. David J. Shulkin, M.D.
, has served as an independent director on the Board since July 2020. Since 2018, Dr. Shulkin has served as the President of Shulkin Solutions, LLC, which works with healthcare organizations and companies to foster innovation and improve well-being for patients. Previously, Dr. Shulkin served as the ninth United States Secretary of Veterans Affairs from February 2017 to April 2018 and the Under Secretary of Veterans Affairs for Health from July 2015 to February 2017. Prior to coming to such appointments, Dr. Shulkin was a healthcare executive, having served as chief executive of leading hospitals and health systems including Beth Israel in New York City and Morristown Medical Center in Northern New Jersey. Dr. Shulkin has also held numerous physician leadership roles including the Chief Medical Officer of the University of Pennsylvania Health System, the Hospital of the University of Pennsylvania, Temple University Hospital, and the Medical College of Pennsylvania Hospital. Dr. Shulkin has held academic positions including the Chairman of Medicine and Vice Dean at Drexel University School of Medicine. As an entrepreneur, Dr. Shulkin founded and served as the Chairman and CEO of DoctorQuality, one of the first consumer-orientated sources of information for quality and safety in healthcare. Dr. Shulkin serves on the boards of Cactus Acquisition Corp. 1 Ltd. (Nasdaq: CCTS) and Orasure Technologies, Inc. (Nasdaq: OSUR). He has also previously served on boards of managed care companies, technology companies, and health care organizations. Dr. Shulkin was the 2018 University of Pennsylvania Leonard Davis Institute Distinguished Health Policy Fellow. He is board-certified internist. He received his medical degree from the Medical College of Pennsylvania, his internship at Yale University School of Medicine, and a residency and Fellowship in General Medicine at the University of Pittsburgh Presbyterian Medical Center. He received advanced training in outcomes research and economics as a Robert Wood Johnson Foundation Clinical Scholar at the University of Pennsylvania. We believe that Dr. Shulkin’s significant management experience in the healthcare and technology industries makes him well qualified to serve as a member of the Board.
Randy Simpson
, has served as an independent director on the Board since the Closing Date. Mr. Simson is the
co-founder
and a director of Orion Acquisition Corp. (NASDAQ: OHPA). Recently, Mr. Simpson served as a Partner and Head of the Healthcare Group at Glenview Capital Management, an investment fund with over $7 million of capital under management as of 2019, where he was a member of Glenview’s investment team and managed its healthcare investment team through December 2019. Mr. Simpson joined Glenview Capital Management in September 2005 and was named Partner in April 2011. Mr. Simpson was a senior member of Glenview Capital Management’s investment team and managed Glenview Capital Management’s healthcare investments through 2019. Prior to joining Glenview Capital Management, Mr. Simpson was an equity research analyst at Goldman Sachs from 2003 until 2005, and before that, he spent three years as a generalist in the M&A group at Credit Suisse First Boston. Mr. Simpson served on the Board of Directors of Tenet Healthcare Corporation (NYSE: THC) from January 2016 through August 2017 and Butterfly Network, Inc. (NYSE: BFLY) from May 2020 through February 2021. He received his M.B.A. in Finance and Accounting from the University of Chicago. Mr. Simpson also earned a J.D. from Georgetown University Law Center and a Bachelor of Arts in
 
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Quantitative Economics and Decision Sciences from the University of California, San Diego. We believe that Mr. Simpson’s significant investment experience makes him well qualified to serve as a member of the Board.
Alberto de Solo
, has served as our Executive Vice President and Chief Operating Officer since the Closing Date. Prior to the Closing Date, Mr. de Solo was the Chief Financial Officer of CMG and served in that capacity since May 2011. Between July 2005 and May 2011, Mr. de Solo held several executive positions at Merrill Lynch. Mr. de Solo received a B.B.A. in Accounting and Finance from Florida International University.
Kevin Wirges
, has served as our Executive Vice President, Treasurer and Chief Financial Officer since the Closing Date. Prior to the Closing Date, Mr. Wirges was the Chief Financial Officer of IMC and served in that capacity since September 2017. Between October 2015 and September 2017, Mr. Wirges was Regional Vice President, Finance, Medicare East Region at Anthem, one of the largest health benefits companies in the United States. Prior to Anthem’s acquisition of Simply Healthcare Plans in 2015, Mr. Wirges held several executive positions at Simply Healthcare Plans, which was one of the largest privately owned Health Maintenance Organizations, including Chief Financial Officer, Vice President of Finance and Controller. Mr. Wirges received a B.B.A. in Accounting from the University of Central Arkansas.
Family Relationships
Carlos A. de Solo, our President, Chief Executive Officer and a director, and Alberto de Solo, our Executive Vice President and Chief Operating Officer, are brothers. Other than the foregoing, there are no family relationships among any of our executive officers or directors.
Board Composition
The Board is comprised of eight directors and divided into three staggered classes. Each of our Class I directors have a term that expires at the first annual meeting of our stockholders, each of our Class II directors will have a term that expires at the second annual meeting of our stockholders and each of our Class III directors will have a term that expires at the third annual meeting of our stockholders, or in each case until their earlier death, resignation, or removal, or the earlier termination of their term of office.
Independence of Directors
Nasdaq listing standards require that a majority of the board of directors of a company listed on Nasdaq be composed of “independent directors,” which is defined generally as a person other than an executive officer or employee of the company or its subsidiaries or any other individual having a relationship that, in the opinion of the Board, would interfere with the director’s exercise of independent judgment in carrying out the responsibilities of a director. Based on information provided by each director concerning his or her background, employment and affiliations, including family relationships, the Board has determined that each of Drs. Carter, Omachonu and Shulkin, Ms. Assapimonwait and Messrs. Rodriguez, Cho and Simpson is an “independent director” under the Nasdaq listing standards.
Committees of the Board of Directors
The standing committees of the Board currently include an audit committee, a compensation committee and a nominating and corporate governance committee and a compliance committee. Each of the committees will report to the Board as they deem appropriate and as the Board may request. The initial composition, duties and responsibilities of these committees are set forth below.
Audit Committee
The principal functions of the audit committee include, among other things:
 
  •  
the appointment, compensation, retention, replacement and oversight of the work of the independent registered public accounting firm engaged by us;
 
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  •  
pre-approving
all audit and permitted
non-audit
services to be provided by the independent registered public accounting firm engaged by us, and establishing
pre-approval
policies and procedures;
 
  •  
reviewing and discussing with the independent auditors all relationships the auditors have with us in order to evaluate their continued independence;
 
  •  
setting clear hiring policies for employees or former employees of the independent registered public accounting firm, including but not limited to, as required by applicable laws and regulations;
 
  •  
setting clear policies for audit partner rotation in compliance with applicable laws and regulations;
 
  •  
obtaining and reviewing a report, at least annually, from the independent registered public accounting firm describing (i) the independent registered public accounting firm’s internal quality-control procedures, (ii) any material issues raised by the most recent internal quality-control review, or peer review, of the audit firm, or by any inquiry or investigation by governmental or professional authorities within the preceding five years respecting one or more independent audits carried out by the firm and any steps taken to deal with such issues and (iii) all relationships between the independent registered public accounting firm and us to assess the independent registered public accounting firm’s independence;
 
  •  
reviewing and approving any related party transaction required to be disclosed pursuant to Item 404 of
Regulation S-K
promulgated by the SEC prior to us entering into such transaction; and
 
  •  
reviewing with management, the independent registered public accounting firm, and our legal advisors, as appropriate, any legal, regulatory or compliance matters, including any correspondence with regulators or government agencies and any employee complaints or published reports that raise material issues regarding our financial statements or accounting policies and any significant changes in accounting standards or rules promulgated by the Financial Accounting Standards Board, the SEC or other regulatory authorities.
The audit committee consists of Messrs. Rodriguez and Simpson and Dr. Shulkin, with Mr. Rodriguez serving as the chair of the audit committee. The Board has determined that each of Messrs. Rodriguez and Simpson and Dr. Shulkin qualify as independent directors according to the rules and regulations of the SEC and Nasdaq with respect to audit committee membership. We also believe that each of Messrs. Rodriguez and Simpson qualify as an “audit committee financial expert,” as that term is defined in Item 401(h) of
Regulation S-K.
The Board has adopted a written charter for the audit committee, which is available free of charge on our corporate website (
www.caremax.com
). The information on our website is not part of this prospectus.
Compensation Committee
The principal functions of the compensation committee include, among other things:
 
  •  
reviewing and approving on an annual basis the corporate goals and objectives relevant to our Chief Executive Officer’s compensation, evaluating our Chief Executive Officer’s performance in light of such goals and objectives and determining and approving the remuneration of our Chief Executive Officer based on such evaluation;
 
  •  
reviewing and approving on an annual basis the compensation of all of our other executive officers;
 
  •  
reviewing on an annual basis our executive compensation policies and plans;
 
  •  
implementing and administering our incentive compensation equity-based remuneration plans; assisting management in complying with our proxy statement and annual report disclosure requirements;
 
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  •  
approving all special perquisites, special cash payments and other special compensation and benefit arrangements for our officers and employees;
 
  •  
if required, producing a report on executive compensation to be included in our annual proxy statement; and
 
  •  
reviewing, evaluating and recommending changes, if appropriate, to the remuneration for directors.
The compensation committee consists of Drs. Carter and Shulkin, Ms. Assapimonwait and Mr. Cho, with Dr. Shulkin serving as the chair of the compensation committee. The Board has determined that each of Drs. Carter and Shulkin, Ms. Assapimonwait and Mr. Cho qualify as independent directors according to the rules and regulations of the SEC and Nasdaq with respect to compensation committee membership. The Board has adopted a written charter for the compensation committee, which is available free of charge on our corporate website (
www.caremax.com
). The information on our website is not part of this prospectus.
Nominating and Corporate Governance Committee
The principal functions of the nominating and corporate governance committee include, among other things:
 
  •  
identifying and screening individuals qualified to become Board members;
 
  •  
selecting, or recommending to the Board, director nominees for each election of directors;
 
  •  
reviewing, evaluating and recommending changes, if appropriate, to the remuneration for directors;
 
  •  
developing and recommending to the Board criteria for selecting qualified director candidates;
 
  •  
considering committee member qualifications, appointment and removal;
 
  •  
overseeing our corporate governance policies and reporting;
 
  •  
making recommendations to the Board concerning governance matters; and
 
  •  
providing oversight in the evaluation of the Board and each committee.
The nominating and corporate governance committee consists of Dr. Omachonu and Messrs. Cho and Simpson, with Mr. Simpson serving as the chair of the nominating and corporate governance committee. The Board has determined that each of Dr. Omachonu and Messrs. Cho and Simpson qualify as independent directors according to the rules and regulations of Nasdaq. The Board has adopted a written charter for the nominating and corporate governance committee, which is available free of charge on our corporate website (
www. caremax.com
). The information on our website is not part of this prospectus.
Compliance Committee
The principal functions of the compliance committee include, among other things:
 
  •  
overseeing our activities in the area of compliance with applicable laws and regulations related to the provision of healthcare or healthcare-related services;
 
  •  
assessing management’s implementation of a compliance program;
 
  •  
evaluating the adequacy and effectiveness of policies and procedures to ensure our compliance with applicable laws and regulations;
 
  •  
overseeing the organization, responsibilities, plans, budget, staffing and performance of our compliance department, including its independence, authority and reporting obligations;
  •  
overseeing the appointment and review of members of our compliance department, including a review of reports and summaries related to compliance matters;
 
  •  
monitoring any significant internal and external investigations;
 
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  •  
monitoring our actions in response to applicable legislative, regulatory and legal developments;
 
  •  
determining the appropriate mechanisms for employees to seek guidance to report compliance concerns; and
 
  •  
overseeing our compliance risk assessment activities and efforts to promote an ethical culture.
The compliance committee consists of Drs. Carter and Omachonu and Mr. Rodriguez, with Dr. Carter serving as the chair of the compliance committee.
Compensation Committee Interlocks and Insider Participation
Our compensation committee consists of Drs. Shulkin and Carter, Ms. Assapimonwait and Mr. Cho. None of the members of our compensation committee has at any time been an officer or employee the Company, or of DFHT, CareMax or IMC. None of our executive officers currently serves, or in the past fiscal year has served, as a member of the board of directors or compensation committee (or other board committee performing equivalent functions or, in the absence of any such committee, the entire board of directors) of any entity that has one or more executive officers on our compensation committee or Board.
Code of Ethics
We have adopted a Code of Business Conduct and Ethics applicable to our directors, executive officers and employees that complies with the rules and regulations of the Nasdaq, which is available on our website at
www.caremax.com
. We intend to disclose any amendments to or waivers of certain provisions of our Code of Ethics by posting on our corporate website (
www.caremax.com
). The information on our website does not constitute part of this prospectus.
Board Oversight of Risk
One of the key functions of the Board is to be informed oversight of our risk management process. We do not anticipate having a standing risk management committee, but rather anticipate administering this oversight function directly through the Board as a whole, as well as through various standing committees of the Board that address risks inherent in their respective areas of oversight.
Limitation on Liability and Indemnification Matters
Our Amended and Restated Charter contains provisions that limit the liability of our directors for monetary damages to the fullest extent permitted by the laws of the State of Delaware. Consequently, our directors will not be personally liable to the combined company or our stockholders for monetary damages for any breach of fiduciary duties as directors, except liability for:
 
  •  
any breach of the director’s duty of loyalty to us or our stockholders;
 
  •  
any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;
 
  •  
unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the DGCL; or
 
  •  
any transaction from which the director derived an improper personal benefit.
Our Amended and Restated Charter and our Amended and Restated Bylaws provide that we are required to indemnify our directors and officers, in each case to the fullest extent permitted by Delaware law. Our Amended and Restated Charter and our Amended and Restated Bylaws also provide that we are obligated to advance expenses incurred by a director or officer in advance of the final disposition of any action or proceeding, and permit us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in that capacity regardless of whether we would otherwise be permitted to indemnify him or her under the laws of the State of Delaware.
 
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Additionally, we have entered into indemnification agreements with each of our directors and executive officers, which provide for indemnification and advancements of certain expenses and costs if the basis of the indemnitee’s involvement in a matter was by reason of the fact that the indemnitee is or was a director, officer, employee or agent of the Company or any of its subsidiaries or was serving at the Company’s request in an official capacity for another entity, in each case to the fullest extent permitted by the laws of the State of Delaware. The form of indemnification agreement is included as an exhibit to the registration statement of which this prospectus is a part.
The limitation of liability and indemnification provisions in our Amended and Restated Charter and our Amended and Restated Bylaws may discourage stockholders from bringing a lawsuit against our directors and officers for breach of their fiduciary duty. They may also reduce the likelihood of derivative litigation against our directors and officers, even though an action, if successful, might benefit us and our stockholders.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers, or control persons, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
 
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EXECUTIVE COMPENSATION
We are considered a smaller reporting company and an emerging growth company for purposes of the SEC’s executive compensation disclosure rules. For the fiscal year ended December 31, 2021, our named executive officers (“NEOs”) were:
 
  •  
Carlos A. de Solo, President and Chief Executive Officer;
 
  •  
Kevin Wirges, Executive Vice President, Treasurer and Chief Financial Officer; and
 
  •  
Alberto R. de Solo, Executive Vice President and Chief Operating Officer.
Our compensation policies and philosophies are designed to align compensation with business objectives, while also enabling us to attract, motivate and retain individuals who contribute to our long-term success. Following the Business Combination, the Compensation Committee has recommended the compensation to be paid to our NEOs, which has been approved by the Board. The compensation of our NEOs since the Business Combination has primarily consisted of salary, equity-based incentive awards and an annual discretionary performance bonus as described below. For a description of the compensation of our NEOs who were NEOs prior to the Business Combination, see “Narrative Disclosure to the Summary Compensation Table — Management Payments and Distributions” below.
Summary Compensation Table
The following table presents information regarding the total compensation awarded to, earned by, and paid to our NEOs for the fiscal years ended December 31, 2021 and December 31, 2020.
 
Name and
Principal Position
  
Year
    
Salary

($)
    
Bonus

($)
    
Stock

Awards

($)
    
Option

Awards

($)
    
Non-Equity

Incentive Plan

Compensation

($)
    
Nonqualified

Deferred

Compensation

Earnings

($)
    
All Other

Compensation

($)
    
Total

($)
  
Carlos A. de Solo
     2021       419,465       325,000
(1)
 		     527,456       249,678       —         —         120,000
(2)
 		     1,541,599  
President and Chief Executive Officer
     2020       111,946
(3)
 		         —         —         —         2,688,000
(2)
 		     2,799,946  
Kevin Wirges
     2021       321,538
(4)
 		     256,500
(5)
 		     163,524       77,406       —         —         —         818,968  
Executive Vice President, Treasurer and Chief Financial Officer(4)
     2020       275,000
(4)
 		     182,500
(6)
 		     —         —         —         —         —         457,500  
Alberto R. de Solo
     2021       309,465       225,000
(1)
 		     232,376       109,998       —         —         121,271
(2)
 		     998,110  
Executive Vice President and Chief Operating Officer
     2020       111,946
(3)
 		     —         —         —         —         —         1,430,000
(2)
 		     1,541,946  
 
(1)
Consists of a bonus of 100% of the target amount,
pro-rated
for the period from June 8, 2021 through December 31, 2021.
(2)
Prior to the Business Combination, each of Messrs. Carlos de Solo and Alberto de Solo, through a management company wholly-owned by such NEO, was an indirect owner of limited liability company interests of CMG, CareHoldings (which held the interests of CareOptimize) and Managed Healthcare Partners, and was entitled to receive distributions of profits and/or losses in proportion to such NEO’s limited liability company interests held respectively in, CMG, CareHoldings and Managed Healthcare Partners, or in respect of taxes, in each case, under the terms of the applicable limited liability company agreement for CMG and CareHoldings. In addition, each of the management companies for such NEOs was party to a management services agreement with CMG and was entitled to receive management payments pursuant to the terms of such management services agreements. All other compensation for each of Messrs. Carlos de Solo and Alberto de Solo for the year ended December 31, 2021 and December 31, 2020 reflects for the applicable period the
  aggregate amount of such distributions or management payments made to such NEO, and in the case of
 
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  Mr. Alberto de Solo, includes $1,271 paid to Mr. de Solo as 401(k) match. See “
Management Payments and Distributions
” and “
Additional Narrative Disclosure – Retirement Benefits”
below for further information on such distributions and payments.
(3)
Salary reflects the compensation reported on Form
W-2
that was paid to the respective NEO for the years ended December 31, 2021 and December 31, 2020, as applicable, by Managed Healthcare Partners, LLC (“Managed Healthcare Partners”).
(4)
Mr. Wirges was appointed as the Company’s Executive Vice President, Treasurer and Chief Financial Officer, effective as of the Closing. Prior to the Closing, Mr. Wirges was the Chief Financial Officer of IMC, and all amounts reported for Mr. Wirges for periods prior to June 8, 2021 reflect Mr. Wirges’ compensation as the Chief Financial Officer of IMC.
(5)
Consists of a (i) bonus of $81,500 paid in 2021 prior to the execution of Mr. Wirges’ employment agreement and (ii) a bonus of $175,000, which was 100% of the target amount under Mr. Wirges’ employment agreement, pro-rated for the period from June 8, 2021 through December 31, 2021.
(6)
Consists of (i) a retention bonus of $100,000 earned and paid in 2020 by IMC and (ii) an annual bonus of $82,500 for the 2020 fiscal year paid by IMC in 2021.
Narrative Disclosure to the Summary Compensation Table
Employment Agreements
Each of the NEOs entered into an employment agreement with Managed Healthcare Partners, which became a subsidiary of the Company in connection with the Business Combination, on December 13, 2021. (each, an “Employment Agreement,” and collectively, the “Employment Agreements”). The narrative below summarizes the payments and benefits that each NEO is currently eligible to receive on an annual basis.
Base Salary
Each NEO’s base salary is set at a level that is intended to reflect the executive’s duties, authorities, contributions, prior experience and performance. The Employment Agreements provide for annual salaries of $650,000, $350,000 and $450,000 for Messrs. Carlos de Solo, Wirges and Alberto de Solo, respectively, in each case subject to annual review by the Board.
Bonus Compensation
Each NEO is entitled to participate in our annual cash bonus plan that is applicable for the relevant fiscal year. The annual cash bonus plan provides for discretionary bonuses. Under the Employment Agreements, the annual target cash bonus opportunity for the NEOs may not be less than 100% of each Executive’s base salary, including a
pro-rated
bonus for the period from June 8, 2021 through December 31, 2021. The target cash bonus opportunities set by the Compensation Committee for 2021 were set at 100% for each of our NEOs and were based on the achievement of certain financial and operational metrics. Bonuses awarded for fiscal 2021 to Messrs. Carlos de Solo, Alberto de Solo and Wirges are included in the “Bonus” column of the Summary Compensation Table.
Other Compensation Elements
Each NEO is entitled to annual vacation and paid time off in accordance with the terms and conditions of the applicable plan or policy. Subject to the terms of any applicable plans, policies or programs, each NEO is entitled to participate in employee retirement and welfare benefit plans available to senior level executive employees generally. See “
Additional Narrative Disclosure—Retirement Benefits”
below for further information regarding the Company’s retirement benefits. Each NEO is reimbursed by for all ordinary and reasonable expenses incurred in the course of the performance of employment services.
 
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Long Term Incentive Compensation
Each NEO is eligible to participate in the Company’s 2021 Long-Term Incentive Plan (the “Incentive Plan”), which provides for the grant of awards in the form of stock options, stock appreciation rights, stock awards, stock units, performance shares, performance units, and other stock-based awards to officers and employees,
non-employee
directors, officers, and service providers. As of December 31, 2021, the maximum aggregate number of shares of Class A Common Stock that were reserved for issuance under the Incentive Plan was 5.6 million shares of Class A Common Stock, excluding outstanding awards that may become vested and/or exercisable into an aggregate of up to 1.4 million shares of Class A Common Stock. The maximum aggregate number of shares became subject to annual increases beginning on January 1, 2022 and continuing on the first day of each subsequent fiscal year through and including the tenth anniversary of the commencement of the initial annual increase, equal to the lesser of four percent of the number of shares of Class A Common Stock outstanding at the conclusion of the Company’s immediately preceding fiscal year (excluding any such outstanding shares of Class A Common Stock granted under the Incentive Plan), or an amount determined by the Company’s Board of Directors. As of December 31, 2021, the Company had only granted awards in the form of restricted stock units (“RSUs”), options to purchase shares of Class A Common Stock (“Options”) and performance stock units (“PSUs”).
In October 2021, the Compensation Committee recommended, and the Board of Directors approved, awards of 42,900, 13,300 and 18,900 RSUs, and an equal number of Options at an exercise price of $10.00 per share, to each of Messrs. Carlos de Solo, Wirges and Alberto de Solo, respectively, which vest in three equal installments on October 29, 2022, June 8, 2023 and June 8, 2024. Additionally, in October 2021, the Compensation Committee recommended, and the Board of Directors approved, awards of a base number of 21,450, 6,650 and 9,450 PSUs to Messrs. Carlos de Solo, Wirges and Alberto de Solo, respectively. The PSUs vest based on the volume weighted average price (the “VWAP”) of the Class A Common Stock during the thirty trading days prior to July 1, 2023 (the “Measurement Period”), and the actual amount of PSUs that may vest is between zero and two times the base number of PSUs depending on the VWAP of the Class A Common Stock during the Measurement Period.
The grant date fair value attributable to the awards of RSUs and PSUs granted to each NEO is reported in the “Stock Awards” column of the Summary Compensation Table, and the grant date fair value attributable to the awards of the Options is reported in the “Stock Awards” column of the Summary Compensation Table.
Management Payments and Distributions
The table below reflects payments made to Messrs. Carlos de Solo and Alberto de Solo as an indirect owner of limited liability company interests of CMG, CareHoldings (which held the interests of CareOptimize) and Managed Healthcare Partners, and as management payments pursuant to the terms of management services agreements with CMG.
 
    
Management Payments and Distributions Made to NEOs

for the Years Ended December 31, 2021 and 2020
  
    
Year
     
CareMax

Distribution
     
Management
Payment
     
Distribution
     
Managed

Healthcare

Partners

Management

Payment
     
Total

($)
  
Carlos A. de Solo
      2021      $ —        $ —        $ —        $ 120,000      $ $120,000  
     2020      $ 2,183,000      $ 220,000      $ 45,000      $ 240,000      $ 2,688,000  
Alberto R. de Solo
      2021      $ —        $ —        $ —        $ 120,000      $ 120,000  
     2020      $ 925,000      $ 220,000      $ 45,000      $ 240,000      $ 1,430,000  
Prior to the Business Combination, which was consummated on June 8, 2021, each of Messrs. Carlos de Solo and Alberto de Solo received a base salary amount as an employee of Managed Healthcare Partners.
Additionally, each of Messrs. Carlos de Solo and Alberto de Solo, through a management company wholly-owned by such NEO, was an indirect owner of limited liability company interests of each of CMG, CareHoldings
 
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and Managed Healthcare Partners and was entitled to receive distributions of profits and/or losses in proportion to such NEO’s limited liability company interests held respectively in CareMax, CareHoldings and Managed Healthcare Partners, as applicable, or in respect of taxes under the terms of the applicable limited liability company agreement for CareMax, CareHoldings or Managed Healthcare Partners. In addition, each of the management companies for Messrs. Carlos de Solo and Alberto de Solo was party to a management services agreement with CMG pursuant to which such management company agreed to dedicate an individual to provide executive management services to CMG and its subsidiaries or affiliates. In consideration for such services, CMG agreed to make management payments up to a maximum of $500,000 per year pursuant to the terms of each such management services agreements.
In connection with the Closing, each of the management services agreements were terminated and CMG, CareHoldings and Managed Healthcare Partners became wholly owned subsidiaries of the Company and the terms of the limited liability company agreements for CareMax, CareHoldings and Managed Healthcare Partners were amended. As a result, since the Closing Date, the NEOs, through their respective management companies, have not been entitled to distributions profits and/or losses or in respect of taxes under the applicable limited liability company agreements for CMG, CareHoldings or Managed Healthcare Partners.
Outstanding Equity Awards at 2021 Fiscal
Year-End
The following table reflects information regarding outstanding equity-based awards held by the NEOs as of December 31, 2021, all of which were granted under the Incentive Plan.
 
Option Awards
     
Stock Awards
  
Name
   
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
     
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
     
Option
Exercise
Price ($)
     
Option
Expiration
Date
     
Equity Incentive
Plan Awards: Number
of Unearned Shares,
Units or Other Rights
That Have Not Vested
(#)
    
Equity Incentive
Plan Awards:
Market or
Payout Value of
Unearned
Shares, Units or
Other Rights
That Have Not
Vested
($)
(1)
  
Carlos A. de Solo
      42,900        42,900        10.00        10/29/2031        —         —    
     —          —          —          —          42,900
(2)
 		     329,472  
     —        —        —        —        21,450
(3)
 		     164,736  
Kevin Wirges
      13,300        13,300        10.00        10/29/2031        —         —    
     —          —          —          —          13,300
(2)
 		     102,144  
     —          —          —          —          6,650
(3)
 		     51,072  
Alberto R. de Solo
      18,900        18,900        10.00        10/29/2031        —         —    
     —          —          —          —          18,900
(2)
 		     145,152  
     —          —          —          —          9,450
(3)
 		     72,576  
 
(1)
The market value of unvested stock awards is based on the closing market price of our Class A Common Stock on December 31, 2021 of $7.68.
(2)
Represents RSUs which vest in three equal installments on October 29, 2022, June 8, 2023 and June 8, 2024.
(3)
Represents PSUs which vest based on the VWAP of the Common Stock during the Measurement Period, and the actual amount of PSUs that may vest is between zero and two times the base number of PSUs depending on the VWAP of the Class A Common Stock during the Measurement Period.
Additional Narrative Disclosure
Retirement Benefits
The Company currently maintains a retirement plan intended to provide benefits under section 401(k) of the Code, in which employees, including the NEOs, are allowed to contribute portions of their base compensation to
 
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a
tax-qualified
retirement account. The Company matches eligible employee contributions up to 4% of eligible compensation which are subject to a vesting period over six years. CareMax may also make voluntary contributions in addition to the match above based on management discretion, which are also subject to the vesting period. Each of the NEOs is entitled to participate in the 401(k) plan; however, for the year ended December 31, 2021 Mr. Alberto de Solo was the only NEO who participated in the 401(k) plan.
Potential Payments Upon Termination or Change in Control
Each Employment Agreement provides that upon a termination of employment without “Cause” or for “Good Reason” (as such terms are defined in the Employment Agreements), the respective NEO will receive cash severance, the target bonus for the year in which such termination occurs and certain healthcare benefits, with the cash severance being equal to 24 months of base salary for Mr. Carlos de Solo and 12 months of base salary for each other NEO; provided that upon a termination of employment without “Cause” or for “Good Reason” within 12 months following a “change in control” (as defined in the Incentive Plan), each of Messrs. Alberto de Solo and Wirges will receive cash severance equal to 18 months of base salary. Severance and termination benefits payable pursuant to each Employment Agreement are subject to the respective NEO’s execution of a release of claims and compliance with restrictive covenants, including
non-competition
and
non-solicitation
and
non-disparagement
covenants.
Directors
No members of the Board of Directors received compensation for their services to DFHT prior to the Closing. The
non-employee
directors of the Company are entitled to the following compensation for their service on the Board: (i) an annual cash retainer of $70,000, paid quarterly; (ii) an equity retainer of RSUs with a grant date fair value equal to $135,000, granted annually upon election; (iii) an annual retainer of $87,500 for the Chair and $25,000 for the Lead Independent Director, in each case if elected, payable quarterly in cash, (iv) an annual retainer of $30,000 for the chair of the audit committee, payable quarterly in cash or, if elected by such director upon annual election to the Board or in advance thereof, in RSUs on the same terms as such director’s annual equity retainer; and (v) an annual retainer of $20,000 for chair of each other committee of the Board, payable quarterly in cash or, if elected by such director upon annual election to the Board or in advance thereof, in RSUs on the same terms as such director’s annual equity retainer. Each grant of RSUs described above will vest in full on the first anniversary of the grant date subject to continued service on the Board. The table below sets forth the compensation received by each of our
non-employee
directors from the Closing through December 31, 2021. Employee directors are not compensated for their additional service provided to the Board and thus are not included in the table below.
 
Name
   
Fees Earned or Paid
in Cash ($)
(1)
     
Stock Awards
($)
(2)
     
Total ($)
  
Richard Barasch
(3)
      403,686        —          403,686  
Jose R. Rodriguez
(4)
      45,481        152,955        198,436  
Beatriz Assapimonwait
      20,543        143,685        164,228  
Dr. Jennifer Carter
      39,231        143,685        182,916  
Bryan Cho
      32,527        125,145        157,672  
Dr. Vincent Omachonu
      23,016        125,145        148,161  
Hon. Dr. David J. Shulkin
      39,231        143,685        182,916  
Randy Simpson
      39,231        143,685        182,916  
 
(1)
Includes amounts paid for each director’s annual retainer amount for Board, committee and committee chair service, as applicable,
pro-rated
for each director’s service through December 31, 2021.
(2)
Represents the aggregate grant date fair value of RSUs granted to each of
non-employee
director on October 29, 2021 determined in accordance with FASB ASC Topic 718. The assumptions used in calculating the grant date fair value of such restricted stock units granted in 2021 are set forth in Note 8 to
 
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  our audited consolidated financial statements included in this Registration Statement. The RSUs granted to these
non-employee
directors will vest in full on October 29, 2022, subject to the director’s continued service on the Board of Directors. As of December 31, 2021, all outstanding RSU awards held by our
non-employee
directors had not yet vested. 
(3)
Includes amounts paid for Mr. Barasch’s annual retainer amount for Board service and for service as Executive Chair of the Board, which was
pro-rated
from the Closing Date through December 31, 2021. Prior to the Closing Date, Mr. Barasch did not receive any compensation for service on the board of directors of DFHT.
(4)
In addition to Mr. Rodriguez’s
pro-rated
annual retainer amount for service on the Board, the compliance committee and as Chair of the audit committee, includes a
pro-rated
fee for service as Lead Independent Director from October 1, 2021, through December 31, 2021.
 
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Other than compensation and indemnification arrangements for our directors and executive officers, which are described elsewhere in this prospectus, the following is a description of each transaction since January 1, 2020 and each currently proposed transaction in which:
 
  •  
the Company, DFHT, CMG or IMC have been or are to be a participant;
 
  •  
the amounts involved exceeded or exceeds the lesser of (i) $120,000 or (ii) 1% of the average of our total assets on a consolidated basis at year end for the past two fiscal years; and
 
  •  
any of our directors, executive officers or holders of more than 5% of our outstanding capital stock, or any immediate family member of, or person sharing the household with, any of these individuals or entities, had or will have a direct or indirect material interest.
DFHT’s Related Party Transactions
Founder Shares / Sponsor
On May 22, 2020, the Sponsor purchased an aggregate of 2,875,000 Founder Shares in exchange for a capital contribution of $25,000, or approximately $0.009 per share. On June 25, 2020, DFHT effected a 1:1.25 stock split of the Class B Common Stock resulting in the Sponsor holding an aggregate of 3,593,750 founder shares. In June 2020, the Sponsor transferred 50,000 Founder Shares to each of Steven Hochberg, Christopher Wolfe, and Richard Barasch, who were DFHT’s executive officers at such time, and 25,000 Founder Shares to each of Dr. Peter J. Fitzgerald, Dr. Linda Grais and Hon. Dr. David J. Shulkin, who were DFHT’s independent directors, for the same
per-share
price initially paid by the Sponsor, resulting in the Sponsor holding 3,368,750 Founder Shares. The number of Founder Shares outstanding was determined so that such Founder Shares would represent 20% of the outstanding shares after the IPO.
Such Initial Stockholders agreed, subject to limited exceptions, not to transfer, assign or sell any of their Founder Shares until the earlier to occur of: (A) one year after the completion of the initial business combination or (B) subsequent to the initial business combination, (x) if the closing price of the Class A Common Stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any
30-trading
day period commencing at least 150 days after the initial business combination, or (y) the date on which we complete a liquidation, merger, capital stock exchange or other similar transaction that results in all of our stockholders having the right to exchange their shares of Class A Common Stock for cash, securities or other property.
Business Combination
Lock-Up
Agreement
In connection with the execution of the Business Combination Agreement, DFHT entered into the Business Combination
Lock-up
Agreement with the Business Combination
Lock-Up
Holders pursuant to which, subject to certain exceptions, the Business Combination
Lock-Up
Holders agreed to not transfer specified shares of Class A Common Stock until the earlier of (i) six, nine or twelve months (as applicable to shares of Class A Common Stock of each Business Combination
Lock-Up
Holders) after the date of the Closing, (ii) only with respect to certain shares of Class A Common Stock of the Business Combination
Lock-Up
Holders, the date on which, subsequent to the Business Combination, the VWAP of Class A Common Stock equals or exceeds $12.50 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any
30-trading
day period commencing at least 150 calendar days after the Closing, and (iii) the date following the Closing Date on which we complete a Change in Control Transaction (as defined in the Business Combination Agreement).
Consent and Waiver Letter
In connection with the execution of the Business Combination Agreement, DFHT, Deerfield Partners and the Sponsor entered into Consent and Waiver Letter, pursuant to which, among other things, Deerfield Partners
 
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consented to the consummation of the Business Combination as required under that certain letter agreement, dated as of July 16, 2020 (the “July 16 Letter Agreement”), pursuant to which DFHT agreed not to consummate its initial Business Combination (as defined in the July 16 Letter Agreement) without the consent of Deerfield Partners. In the Consent and Waiver Letter, the Sponsor (the holder of a majority of the then outstanding Class B Common Stock) also waived, in accordance with the second amended and restated certificate of incorporation of DFHT applicable at the time (the “DFHT Charter”), any adjustment of the conversion provisions in Section 4.3(b)(ii) of the DFHT Charter that would, solely as a result of the consummation of the Business Combination, including the issuance of the stock portion of the Closing Consideration, the issuance, if at all, of the Escrow Shares, the IMC Earnout Shares, or CMG Earnout Shares, the Third-Party PIPE Investments or the Deerfield PIPE Investments, in each case, cause the DFHT Class B Common Stock to convert to DFHT Class A Common Stock at a ratio of greater than
one-for-one
upon consummation of the Business Combination contemplated by the Business Combination Agreement.
Private Placement Warrants
Concurrently with the closing of the IPO, the Sponsor purchased an aggregate of 2,916,667 Private Warrants at a price of $1.50 per private placement warrant, generating gross proceeds to DFHT of $4,375,000. Each private placement warrant is exercisable for one share of Class A Common Stock at a price of $11.50 per share. The proceeds from the Private Warrants were added to the proceeds from our IPO held in the Trust Account, which was released at Closing. The Private Warrants are
non-redeemable
and exercisable on a cashless basis so long as they are held by the Sponsor or its permitted transferees. Our Initial Stockholders have agreed, subject to limited exceptions, not to transfer, assign or sell any of their Private Warrants until 30 days after the completion of our initial business combination.
Transactions with Deerfield Partners
Deerfield Partners purchased 3,360,000 Units in the IPO at $10.00 per unit. The underwriting commission with respect to Units purchased by Deerfield Partners in the IPO, was $0.10 per unit upon the closing of the IPO and $0.175 per unit in the deferred underwriting commissions.
Additionally, in connection with the Business Combination, Deerfield Partners and the Sponsor purchased an aggregate of 10,000,000 shares of Class A Common Stock in the Deerfield PIPE Investments, consisting of 9,600,000 shares of Class A Common Stock purchased by Deerfield Partners and 400,000 shares of Class A Common Stock purchased by the Sponsor, for a purchase price of $10.00 per share and an aggregate purchase price of $100,000,000, pursuant to certain subscription agreements, each dated December 18, 2020, with each of Deerfield Partners and the Sponsor, the form of which is attached as an exhibit to the registration statement of which this prospectus is a part.
Related-Party Loans
The Sponsor loaned DFHT an aggregate of $200,000 pursuant to a promissory note to cover expenses related to the IPO. The loan was
non-interest
bearing and was repaid on July 21, 2020.
In addition, the Sponsor or an affiliate of the Sponsor or certain of DFHT’s officers and directors were permitted, but are not obligated to, loan DFHT funds as may be required on a
non-interest
basis (“Working Capital Loans”), which would have been repaid out of the proceeds of the Trust Account released to us and up to $1,500,000 of such loans would have been convertible into warrants at a price of $1.50 per warrant at the option of the lender. DFHT did not receive any borrowings under Working Capital Loans.
Registration Rights Agreement
DFHT entered into a registration rights agreement, dated July 16, 2020, with respect to the holders of the Founder Shares, the Private Warrants and any warrants that would have been issued upon conversion of Working
 
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Capital Loans. Assuming $1,500,000 million of Working Capital Loans were converted into warrants, DFHT would have been obligated to register up to 7,510,417 shares of Class A Common Stock and up to 3,916,667 warrants. The number of shares of Class A Common Stock included (i) up to 3,593,750 shares of Class A Common Stock to be issued upon conversion of the Founder Shares, (ii) up to 2,916,667 shares of Class A Common Stock underlying the Private Warrants and (iii) up to 1,000,000 shares of Class A Common Stock underlying the warrants issued upon conversion of Working Capital Loans. The holders of these securities were entitled to make up to three demands, excluding short form demands, that we register such securities. In addition, the holders had certain “piggy-back” registration rights with respect to registration statements filed subsequent to our completion of our initial business combination. We will bear the expenses incurred in connection with the filing of any such registration statements.
Amended and Restated Registration Rights Agreement
In connection with the execution of the Business Combination Agreement, DFHT, the CMG Sellers, IMC Parent, the Sponsor, Deerfield Partners and certain other parties thereto, including affiliates of CMGs’ owners, directors and executive officers (collectively, the “rights holders”) entered into the Amended and Restated Registration Rights Agreement, which amended and restated in its entirety the existing registration rights agreement, dated July 16, 2020, described in “
Registration Rights Agreement”
above. Pursuant to the terms of the Amended and Restated Registration Rights Agreement, we are obligated to file a registration statement to register the resale of certain shares of Class A Common Stock held by the rights holders. In addition, pursuant to the terms of the Amended and Restated Registration Rights Agreement and subject to certain requirements and customary conditions, including with regard to the number of demand rights that may be exercised, the rights holders may demand at any time or from time to time, that we file a registration statement on Form
S-1
or Form
S-3
to register certain shares of Class A Common Stock held by such rights holders. The Amended and Restated Registration Rights Agreement also provides the rights holders with “piggy-back” registration rights, subject to certain requirements and customary conditions.
CMG and IMC’s Related Party Transactions
CareSmile, LLC
CMG had a 49% ownership interest in Care Smile, LLC (“Care Smile”), a dental care organization with majority ownership by the dental provider, who is the spouse of Mr. De Vera, who was a member and executive officer of CMG and who is currently our Senior Vice President and Legal Counsel. Managed Health Care Partners paid for dental services provided to enrollees by Care Smile on a capitated basis. Total capitation payments for the years ended December 31, 2020 and 2019 were $222,160 and $471,000, respectively. The net loss of Care Smile was $96,238 and $19,926 for the years ended December 31, 2020 and 2019. Care Smile was voluntarily dissolved on November 24, 2020.
Care Optical, LLC
Prior to Closing, O.M., C.G.D. and Joseph N. De Vera, Inc., entities controlled by Carlos A. de Solo, our President and Chief Executive Officer, Alberto R. de Solo, our Executive Vice President and Chief Operating Officer, and Joseph N. De Vera, our Senior Vice President and Legal Counsel, respectively, each owned a 25% interest in Care Optical, LLC (“Care Optical”). Care Optical received a capitated payment for optometry services provided to enrollees by Care Optical on a capitated basis. Total capitation payments for years ended December 31, 2021 and 2020 were $670,828 and $273,514, respectively.
IMC Management and Consulting Services
In each of 2020 and 2019, IMC paid $432,000 for management and consulting services provided by a company owned by a former IMC member who prior to November 2020 held more than 10% of the outstanding membership interests of IMC.
 
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The Company’s Related Party Transactions
Escrow Agreements
On the Closing Date, DFHT, the Sponsor, O.M., in its capacity as representative of the members of the CMG Sellers, and Continental Stock Transfer & Trust Company, in its capacity as escrow agent (“the Escrow Agent”), entered into the CMG Escrow Agreement, and DFHT, the Sponsor, IMC Parent and the Escrow Agent entered into the IMC Escrow Agreement. The Escrow Agreements provided for the deposit of the Adjustment Escrow Amounts with the Escrow Agent for the purpose of securing certain post-closing adjustment obligations of the CMG Sellers and IMC Parent, respectively.
Advisory Agreement
On July 13, 2021, we entered into an exclusive real estate advisory agreement (the “Advisory Agreement”) with Related CM Advisor, LLC (the “Advisor”), a Delaware limited liability company and a subsidiary of Related, and, with respect to certain sections of the Advisory Agreement, Related. The Advisory Agreement provides the Advisor with the right to designate a director to serve on the Board, subject to the continuing satisfaction of certain conditions, including that the Advisor and its affiliates maintain ownership of at least 500,000 shares of Class A Common Stock, and in connection with the Advisory Agreement Bryan Cho, an Executive Vice President of Related, was appointed to serve as a Class III director of the Board.
In connection with the Advisory Agreement, the Advisor entered into a subscription agreement (the “Subscription Agreement”), whereby the Advisor purchased 500,000 shares Class A Common Stock (the “Advisor Shares”), for an aggregate purchase price of $5,000,000, and we issued to the Advisor (i) a warrant (the “Series A Warrant”) to purchase 2,000,000 shares of Class A Common Stock (the “Series A Warrant Shares”), which vested immediately upon issuance, is exercisable for a period of five years and is not redeemable by the Company and (ii) a warrant (the “Series B Warrant” and together with the Series A Warrant, the “Warrants”) to purchase up to 6,000,000 shares of Class A Common Stock (the “Series B Warrant Shares” and, together with the Series A Warrant Shares, the “Warrant Shares”), pursuant to which 500,000 Series B Warrant Shares will vest and become exercisable from time to time upon the opening of each medical center under the Advisory Agreement for which the Advisor provides services, other than two initial medical centers. As of the date of this prospectus, 500,000 Series B Warrant Shares have vested. The Series B Warrant is exercisable, to the extent vested, until the later of five years from the date of issuance or one year from vesting of the applicable Series B Warrant Shares and is redeemable with respect to vested Warrant Shares at a price of $0.01 per Warrant Share if the price of the Common Stock equals or exceeds $18.00 per share, or $0.10 per Warrant Share if the price of the Common Stock equals or exceeds $10.00 per share, in each case when such price conditions are satisfied for any 20 trading days within a
30-trading
day period and subject to certain adjustments and conditions as described in the Series B Warrant. In the event that the Series B Warrant is called for redemption by the Company, the Advisor may pay the exercise price for the Series B Warrant Shares six months following the notice of redemption by the Company. Additionally, each of the Warrants is exercisable on a cashless basis.
Indemnification Arrangements
We have entered into indemnification agreements with each of our directors and executive officers, which provide for indemnification and advancements of certain expenses and costs if the basis of the indemnitee’s involvement in a matter was by reason of the fact that the indemnitee is or was a director, officer, employee or agent of the Company or any of its subsidiaries or was serving at the Company’s request in an official capacity for another entity, in each case to the fullest extent permitted by the laws of the State of Delaware. The form of indemnification agreement is included as an exhibit to the registration statement of which this prospectus is a part.
Related Party Transactions Policy
In connection with the Closing, the Board adopted a written related party transactions policy. The policy provides that officers, directors (or nominees to become a director), holders of more than 5% of any class of the
 
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Company’s voting securities, and any member of the immediate family of, person sharing the household of and any entity affiliated with any of the foregoing persons, will not be permitted to enter into a related-party transaction with the Company (including any subsidiary or entity in which the Company or any subsidiary has a 50% or greater interest, or voting power or profits) without the prior consent of the audit committee, or other independent members of the Board in the event it is inappropriate for the audit committee to review such transaction due to a conflict of interest. Any request for the Company to enter into a transaction with an executive officer, director, principal stockholder, or any of their immediate family members or affiliates, in which the amount involved exceeds $120,000, must first be presented to the general counsel of the Company for review and, if the general counsel determines that the proposed transaction is a related person transaction and is material to the Company, they will submit the proposed transaction to the audit committee for their consideration and approval. In approving or rejecting the proposed transactions, the audit committee will take into account all of the relevant facts and circumstances available.
 
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PRINCIPAL SECURITYHOLDERS
The following table sets forth information regarding the beneficial ownership of shares of our Class A Common Stock as of April 29, 2022 by:
 
  •  
each person who is known by us to be the beneficial owner of more than five percent (5%) of the outstanding shares of Class A Common Stock;
 
  •  
each of our executive officers and directors; and
 
  •  
all executive officers and directors of the Company as a group.
The beneficial ownership percentages set forth in the table below are based on 87,367,972 shares of Class A Common Stock issued and outstanding as of April 29, 2022, plus, with respect to each beneficial owner, the number of shares of our Class A Common Stock such person had the right to acquire within 60 days of April 29, 2022. Beneficial ownership for the purposes of the following table is determined according to the rules and regulations of the SEC, which generally provide that a person has beneficial ownership of a security if he, she, or it possesses sole or shared voting or investment power over that security, including options and warrants that are currently exercisable or exercisable within 60 days. In accordance with
Rule 13d-3
under the Exchange Act, any securities which are subject to options, warrants, rights or conversion privileges exercisable or convertible into shares of Class A Common Stock within 60 days are deemed to be outstanding solely for the purpose of computing the percentage of outstanding Class A Common Stock owned by the beneficial owner of such securities but shall not be deemed to be outstanding for the purpose of computing the percentage of Class A Common Stock owned by any other person. Unless otherwise indicated, the Company believes that all persons named in the table have sole voting and investment power with respect to all shares of Class A Common Stock beneficially owned by them.
 
Name of Beneficial Owners
(1)
   
Number of

Shares of

Class A
Common

Stock

Beneficially

Owned
     
Percentage

of

Outstanding

Class A
Common

Stock
  
Directors and Executive Officers:
      
Carlos A. de Solo
(2)
      6,416,926        7.34 % 
Alberto de Solo
(3)
      2,894,429        3.31 % 
Kevin Wirges
(4)
      146,080        *  
Beatriz Assapimonwait
      —          —    
Hon. Dr. David J. Shulkin
(5)
      25,000        *  
Randy Simpson
(6)
      421,063        *  
Dr. Jennifer Carter
      —          —    
Jose R. Rodriguez
      1,500        *  
Dr. Vincent Omachonu
      —          —    
Bryan Cho
(7)
      3,000,000        3.36 % 
All directors and executive officers as a group (10 individuals)
      12,361,869        14.77 % 
Five Percent Holders:
      
Entities affiliated with Deerfield Management Company, L.P., including Deerfield Partners, L.P. and DFHTA Sponsor LLC
(8)
      18,691,423        21.39 % 
Entities affiliated with Athyrium Capital Management, LP
(9)
      4,487,219        5.14 % 
Comvest IMC Holdings, LLC
(10)
      5,290,687        6.06 % 
O.M. Investment Group, Inc.
(2)
      6,416,926        7.33 % 
Entities affiliated with Eminence Capital, LP
(11)
      7,871,691        9.01 % 
 
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*
Less than one percent
(1)
Unless otherwise indicated, the business address of each of the individuals and entities is 1000 NW 57 Court, Suite 400, Miami, FL 33126.
(2)
Represents the aggregate number of shares of Class A Common Stock held indirectly by Carlos de Solo, his spouse and family trusts through an investment vehicle, O.M. Includes 16,000 shares Class A Common Stock (the “O.M. Escrow Shares”) held in escrow immediately following the Closing, which are subject to forfeiture in connection with the post-closing adjustment obligations of the CMG Sellers in accordance with the Business Combination Agreement. O.M. and Mr. de Solo may be deemed to beneficially own the O.M. Escrow Shares, and each disclaims beneficial ownership of the O.M. Escrow Shares except to the extent of O.M. and Mr. de Solo’s pecuniary interest therein.
(3)
Represents the aggregate number of shares of Class A Common Stock held indirectly by Alberto de Solo, his spouse and a family trust through an investment vehicle, C.G.D. Investment Group, Inc. (“C.D.G.”).
(4)
Represents 146,080 shares of Class A Common Stock previously held by IMC Parent and distributed to Mr. Wirges as a partner in IMC Parent.
(5)
Represents 25,000 Founder Shares.
(6)
Represents (i) 281,309 shares of Class A Common Stock and (ii) 139,754 shares of Class A Common Stock underlying an equal number of Public Warrants, each held by Mr. Simpson prior to Closing.
(7)
Represents 500,000 Advisor Shares, 2,000,000 Series A Warrant Shares underling an equal number of Series A Warrants and 500,000 Series B Warrant Shares underling an equal number of vested Series B Warrants, in each case held by the Advisor, none of which are registered hereunder. Excludes 5,500,000 Series B Warrant Shares underlying underling an equal number of unvested Series B Warrants. As of April 29, 2022, the Advisor did not have the right to acquire such Series B Warrant Shares within 60 days of such date.
(8)
Represents 12,960,000 shares of Class A Common Stock held directly by Deerfield Partners, L.P; (ii) 672,000 shares of Class A Common Stock underlying an equal number of warrants held directly by Deerfield Partners; (iii) 2,851,090 shares of Class A Common Stock, 2,158,333 Private Warrants and an equal number shares of Class A Common Stock underlying such Private Warrants previously held by the Sponsor and distributed to Deerfield Partners as a member of the Sponsor; and (iv) 50,000 shares of Class A Common Stock held directly by Steven Hochberg, a partner in Deerfield Management, for the benefit, and at the direction, of Deerfield Management. The address of all entities affiliated with Deerfield Management is 345 Park Avenue South, 12th Floor, New York, New York 10010.
(9)
Consists of 13,194 shares of Class A Common Stock directly held by Athyrium Opportunities III Acquisition LP and 4,474,025 shares of Class A Common Stock directly held by Athyrium Opportunities III Acquisition 2 LP. Athyrium Opportunities Associates III GP LLC is the general partner of Athyrium Opportunities Associates III LP, which is the general partner of Athyrium Opportunities III Acquisition LP and Athyrium Opportunities III Acquisition 2 LP. Jeffrey A. Ferrell is President of Athyrium Opportunities Associates III GP LLC and the Managing Member of Athyrium Funds GP Holdings LLC, which is the Managing Member of Athyrium Opportunities Associates III GP LLC, and in his capacity as such may be deemed to exercise shared voting and investment power over the shares owned by Athyrium Opportunities III Acquisition LP and Athyrium Opportunities III Acquisition 2 LP. Jeffrey A. Ferrell and each of the foregoing entities disclaims beneficial ownership of such shares that he or it does not directly own except to the extent of his or its pecuniary interest therein. The business address of each of the foregoing is c/o Athyrium Capital Management, LP, 505 Fifth Avenue, Floor 18, New York, New York 10017.
(10)
Represents 5,290,687 shares of Class A Common Stock previously held by IMC Parent and distributed to Comvest IMC Holdings, LLC as a partner in IMC Parent. The address of Comvest IMC Holdings, LLC is 525 Okeechobee Boulevard, Suite 1010, West Palm Beach, Florida 33401.
(11)
Represents (a) 3,426,488 shares owned of record by Eminence Holdings LLC (“Eminence Holdings”) and (b) 573,512 shares owned of record by EC Longhorn LLC (“Longhorn”) and includes 3,871,691 shares of Class A Common Stock that are not registered hereunder. Eminence Capital, LP (“Eminence Capital”) serves as the investment adviser to each of Eminence Holdings and Longhorn. Ricky C. Sandler is the Chief Executive Officer of Eminence Capital. Mr. Sandler and Eminence Capital may be deemed to have shared
 
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  voting and dispositive power over the shares owned of record by Eminence Holdings and Longhorn. Each of Mr. Sandler and Eminence Capital expressly disclaims beneficial ownership of such securities. The principal business address of Eminence Capital, LP and its affiliates is 399 Park Avenue, 25th Floor, New York, New York 10022.
 
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SELLING SECURITYHOLDERS
The Selling Securityholders acquired the shares of Class A Common Stock and Private Warrants from us in private offerings, each pursuant to an exemption from registration under Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder as a transaction by an issuer not involving a public offering. Pursuant to the Amended and Restated Registration Rights Agreement and the Warrant Agreement, we agreed to file a registration statement with the SEC for the purposes of registering for resale the shares of our Class A Common Stock, and the Private Warrants (and shares of Class A Common Stock that may be issued upon exercise of the Private Warrants), issued to the Selling Securityholders, as further detailed in “Certain Relationships with Selling Securityholders” below.
The following table sets forth, based on written representations from the Selling Securityholders, certain information as of April 18, 2022 regarding the beneficial ownership of our Class A Common Stock and Private Warrants by the Selling Securityholders and the shares of Class A Common Stock and Private Warrants being offered by the Selling Securityholders. The applicable percentage ownership of Class A Common Stock is based on 87,367,972 shares of Class A Common Stock outstanding as of April 18, 2022. Information with respect to shares of Class A Common Stock and Private Warrants owned beneficially after the offering assumes the sale of all of the shares of Class A Common Stock and Private Warrants offered and no other purchases or sales of our Class A Common Stock or Private Warrants. The Selling Securityholders may offer and sell some, all or none of their shares of Class A Common Stock or Private Warrants, as applicable.
We have determined beneficial ownership in accordance with the rules of the SEC. Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the Selling Securityholders have sole voting and investment power with respect to all shares of Class A Common Stock that they beneficially own, subject to applicable community property laws.
Up to 2,875,000 shares of Class A Common Stock issuable upon exercise of the Public Warrants are not included in the table below, unless specifically indicated in the footnotes therein.
Unless otherwise indicated below, the address of each Selling Securityholder listed in the table below is c/o CareMax, Inc., 1000 NW 57 Court, Suite 400, Miami, FL 33126.
 
   
Shares

Common

Stock

Beneficially

Owned

Prior to

Offering
    
Private

Placement

Warrants

Beneficially

Owned

Prior to

Offering
    
Shares of

Class A

Common

Stock

Offered
    
Private

Placement

Warrants

Offered
    
Common Stock
Beneficially Owned
After the Offered
Shares of Common
Stock are Sold
    
Private

Placement

Warrants

Beneficially

Owned After the

Offered Private

Placement

Warrants are

Sold
  
Name of Selling Securityholder
  
Number
    
Percent
    
Number
    
Percent
  
Alua Master Fund LP
(1)(50)
     2,646,917       —         2,000,000       —         646,917       *       —         —    
Sellcore, Inc.
(2)(50)
     500,000       —         500,000       —         —         —         —         —    
Antipodean Domestic Partners, LP
(3)(50)
     498,292       —         498,292       —         —         —         —         —    
Avidity Capital Fund II LP
(4)(50)
     64,000       —         64,000       —         —         —         —         —    
Avidity Master Fund LP
(4)(50)
     636,000       —         636,000       —         —         —         —         —    
BlackRock, Inc.
(5)(50)
     3,000,000       —         3,000,000       —         —         —         —         —    
Guardian Small Cap Core VIP Fund
(6)(50)
     213,620       —         213,620       —         —         —         —         —    
ClearBridge Small Cap CIF
(6)(50)
     9,760       —         9,760       —         —         —         —         —    
ClearBridge Small Cap
Fund
(6)(50)
     752,440       —         752,440       —         —         —         —         —    
Affiliates of Eminence Capital, LP
(7)(50)
     7,871,691       —         4,000,000       —         3,871,691       4.43 %      —         —    
 
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Shares

Common

Stock

Beneficially

Owned

Prior to

Offering
    
Private

Placement

Warrants

Beneficially

Owned

Prior to

Offering
    
Shares of

Class A

Common

Stock

Offered
    
Private

Placement

Warrants

Offered
    
Common Stock
Beneficially Owned
After the Offered
Shares of Common
Stock are Sold
    
Private

Placement

Warrants

Beneficially

Owned After the

Offered Private

Placement

Warrants are

Sold
  
Name of Selling Securityholder
  
Number
    
Percent
    
Number
    
Percent
  
Fidelity U.S. Growth Opportunities Investment Trust by its manager Fidelity Investments Canada ULC
(8)(50)
     100,000       —         100,000       —         —         —         —         —    
Fidelity Select Portfolios: Health Care Services Portfolio
(8)(50)
     384,615       —         384,615       —         —         —         —         —    
Maverick Fund II, Ltd.
(9)(50)
     679,445       —         679,445       —         —         —         —         —    
Maverick Fund USA, Ltd
(9)(50)
     1,820,555       —         1,820,555       —         —         —         —         —    
Integrated Core Strategies (US) LLC
(10)(50)
     208,204       —         208,204       —         1,419,226       1.62 %      —         —    
Perceptive Life Sciences Master Fund, Ltd
(11)(50)
     3,000,000       —         3,000,000       —         —         —         —         —    
Hawkes Bay Master Investors (Cayman) L.P.
(12)(50)
     391,567       —         391,567       —         —         —         —         —    
North River Investors (Bermuda) L.P.
(12)(50)
     188,993       —         188,993       —         —         —         —         —    
North River Partners, L.P.
(12)(50)
     161,538       —         161,538       —         —         —         —         —    
Schroder Investment Management (Luxembourg) S.A.
(12)(50)
     26,044       —         26,044       —         —         —         —         —    
O.M. Investment Group, Inc.
(13)(51)
     6,416,926       —         7,377,743       —         —         —         —         —    
C.G.D. Investment Group, Inc.
(14)(51)
     2,894,429       —         3,328,900       —         —         —         —         —    
Joseph N. DeVera, Inc.
(15)(51)
     1,332,445       —         1,549,705       —         —         —         —         —    
Jonathan Paul De Vera
(16)(51)
     15,000       —         15,000       —         —         —         —         —    
NKP Caremax, LLC
(17)(51)
     699,506       —         804,506       —         —         —         —         —    
Mouquin Trotter, Inc.
(18)(51)
     1,203,763       —         1,251,215       —         —         —         —         —    
Athyrium Opportunities III Acquisition LP
(19)(51)
     13,194         13,194       —         —         —         —         —    
Athyrium Opportunities III Acquisition 2 LP
(20)(51)
     4,474,025         4,474,025       —         —         —         —         —    
IMC Holdings, L.P.
(21)(51)
     1,421,627       —         2,871,627       —         —         —         —         —    
Comvest IMC Holdings, LLC
(22)(51)
     5,290,687       —         5,290,687       —         —         —         —         —    
Operating Advisory Group, LLC
(23)(51)
     74,913       —         74,913       —         —         —         —         —    
Justo Pozo
(24)(51)
     67,422       —         67,422       —         —         —         —         —    
Bill Lamoreaux
(25)(51)
     397,004       —         397,004       —         —         —         —         —    
John Randazzo
(26)(51)
     50,685       —         50,685       —         —         —         —         —    
Mayda Antun, M.D.
(27)(51)
     67,422       —         67,422       —         —         —         —         —    
Tom Aponte
(28)(51)
     22,474       —         22,474       —         —         —         —         —    
Ismael Caicedo
(29)(51)
     22,474       —         22,474       —         —         —         —         —    
Pablo Alonso
(30)(51)
     3,949       —         3,949       —         —         —         —         —    
Gordon Carroll
(31)(51)
     11,147       —         11,147       —         —         —         —         —    
 
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Shares

Common

Stock

Beneficially

Owned

Prior to

Offering
    
Private

Placement

Warrants

Beneficially

Owned

Prior to

Offering
    
Shares of

Class A

Common

Stock

Offered
    
Private

Placement

Warrants

Offered
    
Common Stock
Beneficially
Owned After the
Offered Shares of
Common Stock
are Sold
    
Private

Placement

Warrants

Beneficially

Owned After the

Offered Private

Placement

Warrants are

Sold
  
Name of Selling Securityholder
  
Number
    
Percent
    
Number
    
Percent
  
Kevin Wirges
(32)(51)
     146,080       —         146,080       —         —         —         —         —    
Douglas Cowieson
(33)(51)
     67,422       —         67,422       —         —         —         —         —    
Felix German
(34)(51)
     28,091       —         28,091       —         —         —         —         —    
Cristina Pinckney
(35)(51)
     22,474       —         22,474       —         —         —         —         —    
Karen Pacheco
(36)(51)
     28,091       —         28,091       —         —         —         —         —    
Steven Hochberg
(37)
     50,000       —         50,000       —         —         —         —         —    
Deerfield Partners, L.P.
(38)
     18,641,423       2,158,333       18,641,423       2,158,333       —         —         —         —    
Tara Acquisition LLC
(39)(52)
     515,419       —         515,419       —         —         —         —         —    
Gary Davis 1995 Trust for Children Howard Sharfstein, Trustee
(40)(47)(48)
     100,567       46,667       100,567       46,667       —         —         —         —    
Jane B. Hankin
(41)(52)(53)
     43,064       17,500       43,064       17,500       —         —         —         —    
Anthony Wolk
(42)(52)(53)
     31,427       14,583       31,427       14,583       —         —         —         —    
Randy Simpson
(43)
     421,063       —         139,754       —         281,309       *       —         —    
Richard Barasch
(44)(52)(53)
     778,988       562,917       778,988       562,917       —         —         —         —    
Christopher Wolfe
(45)
     306,529       116,667       306,529       116,667       —         —         —         —    
Dr. Peter J. Fitzgerald
(46)
     25,000       —         25,000       —         —         —         —         —    
Dr. Linda Grais
(47)
     25,000       —         25,000       —         —         —         —         —    
Hon. Dr. David J. Shulkin
(48)
     25,000       —         25,000       —         —         —         —         —    
Moshin Jaffer, MD
(49)
     384,615       —         384,615       —         —         —         —         —    
 
*
Less than one percent
(1)
Includes 646,917 shares of Class A Common Stock that are not registered hereunder. Alua Capital Management LP, the investment manager of the Selling Securityholder, has voting and investment control of the shares held by the Selling Securityholder. Tom Purcell and Marco Tablada are the
Co-Presidents
of Alua Capital Management LP. and may be deemed to be the beneficial owners of such shares. Mr. Purcell and Mr. Tablada, however, disclaim any beneficial ownership of the shares held by the Selling Securityholder.
(2)
SellCore, Inc. is a wholly-owned subsidiary of Anthem, Inc.
(3)
Antipodean Advisors LLC, the investment manager of the Selling Securityholder, has voting and investment control of the shares held by the Selling Securityholder. Eric Chen is the Managing Member of Antipodean Advisors LLC. And may be deemed to be the beneficial owner of such shares. Eric Chen, however, disclaims any beneficial ownership of the shares held by the Selling Securityholder.
(4)
Avidity Capital Partners Fund (GP) LP is the general partner of Avidity Master Fund LP and Avidity Capital Fund II LP (collectively, the “Avidity Funds”). Avidity Capital Partners (GP) LLC is the general partner of Avidity Capital Partners Fund (GP) LP. David Witzke and Michael Gregory are the managing members of Avidity Capital Partners (GP) LLC and may be deemed to have voting and dispositive power over the securities held directly by the Avidity Funds. The address of the Avidity Funds is 2828 N. Harwood St., Suite 1220, Dallas, TX 75201.
(5)
The registered holders of the referenced shares to be registered are the following funds and accounts under management by subsidiaries of BlackRock, Inc.: Arch Reinsurance Ltd.; BlackRock Capital Allocation Trust; BlackRock Global Long/Short Credit Fund of BlackRock Funds IV; BlackRock Health Sciences Opportunities Portfolio, a Series of BlackRock Funds; BlackRock Health Sciences Trust; BlackRock Health Sciences Trust II; Master Total Return Portfolio of Master Bond LLC and BlackRock Strategic Income Opportunities Portfolio of BlackRock Funds V. BlackRock, Inc. is the ultimate parent holding company of
 
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  such subsidiaries. On behalf of such subsidiaries, the applicable portfolio managers, as managing directors (or in other capacities) of such entities, and/or the applicable investment committee members of such funds and accounts, have voting and investment power over the shares held by the funds and accounts which are the registered holders of the referenced shares. Such portfolio managers and/or investment committee members expressly disclaim beneficial ownership of all shares held by such funds and accounts. The addresses of such funds and accounts, such subsidiaries and such portfolio managers and/or investment committee members are 55 East 52nd Street, New York, NY 10055 and 60 State Street, 19th/20th Floor, Boston, MA 02109. Shares shown include only the securities being registered for resale and may not incorporate all shares deemed to be beneficially held by the registered holders or BlackRock, Inc.
(6)
ClearBridge Investments, LLC is the discretionary investment adviser of ClearBridge Small Cap Fund, ClearBridge Small Cap CIF and Guardian Small Cap Core VIP Fund (collectively, the “ClearBridge Funds”). Albert Grosman and Brian Lund are portfolio managers at ClearBridge Investments, LLC and have voting and investment control of the securities held by the ClearBridge Funds. Based on information provided to us by the Selling Securityholder, the Selling Securityholder may be deemed to be an affiliate of a broker-dealer. Based on such information, the Selling Securityholder acquired the securities being registered hereunder in the ordinary course of business, and at the time of the acquisition of the securities, the Selling Securityholder did not have any agreements or understandings with any person to distribute such securities.
(7)
Represents (a) 3,426,488 shares owned of record by Eminence Holdings LLC (“Eminence Holdings”) and (b) 573,512 shares owned of record by EC Longhorn LLC (“Longhorn”) and includes 3,871,691 shares of Class A Common Stock that are not registered hereunder. Eminence Capital, LP (“Eminence Capital”) serves as the investment adviser to each of Eminence Holdings and Longhorn. Ricky C. Sandler is the Chief Executive Officer of Eminence Capital. Mr. Sandler and Eminence Capital may be deemed to have shared voting and dispositive power over the shares owned of record by Eminence Holdings and Longhorn. Each of Mr. Sandler and Eminence Capital expressly disclaims beneficial ownership of such securities. The principal business address of Eminence Capital, LP and its affiliates is 399 Park Avenue, 25th Floor, New York, New York 10022.
(8)
These accounts are managed by direct or indirect subsidiaries of FMR LLC. Abigail P. Johnson is a Director, the Chairman, the Chief Executive Officer and the President of FMR LLC. Members of the Johnson family, including Abigail P. Johnson, are the predominant owners, directly or through trusts, of Series B voting common shares of FMR LLC, representing 49% of the voting power of FMR LLC. The Johnson family group and all other Series B shareholders have entered into a shareholders’ voting agreement under which all Series B voting common shares will be voted in accordance with the majority vote of Series B voting common shares. Accordingly, through their ownership of voting common shares and the execution of the shareholders’ voting agreement, members of the Johnson family may be deemed, under the Investment Company Act of 1940, to form a controlling group with respect to FMR LLC. Neither FMR LLC nor Abigail P. Johnson has the sole power to vote or direct the voting of the shares owned directly by the various investment companies registered under the Investment Company Act advised by Fidelity Management & Research Company, LLC, a wholly owned subsidiary of FMR LLC, which power resides with the Fidelity Funds’ Boards of Trustees. Fidelity Management & Research Company, LLC carries out the voting of the shares under written guidelines established by the Fidelity Funds’ Boards of Trustees. The address for the Fidelity accounts is 245 Summer Street, Boston, Massachusetts 02210.
(9)
Maverick Capital, Ltd., or Maverick Capital, is an investment adviser registered under the Investment Advisers Act of 1940, as amended, and acts as the investment adviser to each of Maverick Fund USA, Ltd. and Maverick Fund II, Ltd. Maverick Capital Management, LLC, or Maverick Management, is the general partner of Maverick Capital. Lee S. Ainslie III is the manager of Maverick Management. The address for the Maverick Fund USA, Ltd. and Maverick Fund II, Ltd. is c/o Maverick Capital, Ltd., 1900 N. Pearl Street, 20th Floor, Dallas, Texas 75201.
(10)
Includes 1,627,430 shares of the Company’s Class A Common Stock beneficially owned by Integrated Core Strategies (US) LLC, a Delaware limited liability company (“Integrated Core Strategies”) (consisting of 208,204 shares of the Company’s Class A Common Stock purchased in a private placement pursuant to a subscription agreement dated December 18, 2020 and 1,419,226 shares of the Company’s Class A Common
 
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  Stock acquired separately from the private placement). Does not include: (i) 440,892 shares of the Company’s Class A Common Stock beneficially owned by ICS Opportunities, Ltd., an exempted company organized under the laws of the Cayman Islands (“ICS Opportunities”) (consisting of 435,492 shares of the Company’s Class A Common Stock and 5,400 shares of the Company’s Class A Common Stock issuable upon exercise of certain warrants); (ii) 168,906 shares of the Company’s Class A Common Stock beneficially owned by ICS Opportunities II LLC, a Cayman Islands limited liability company (“ICS Opportunities II”); and (iii) 98,759 shares of the Company’s Class A Common Stock beneficially owned by Integrated Assets, Ltd., an exempted company organized under the laws of the Cayman Islands (“Integrated Assets”). Millennium International Management LP, a Delaware limited partnership (“Millennium International Management”), is the investment manager to ICS Opportunities, ICS Opportunities II and Integrated Assets and may be deemed to have shared voting control and investment discretion over securities owned by ICS Opportunities, ICS Opportunities II and Integrated Assets. Millennium Management LLC, a Delaware limited liability company (“Millennium Management”), is the general partner of the managing member of Integrated Core Strategies and may be deemed to have shared voting control and investment discretion over securities owned by Integrated Core Strategies. Millennium Management is also the general partner of the 100% owner of ICS Opportunities, ICS Opportunities II and Integrated Assets and may also be deemed to have shared voting control and investment discretion over securities owned by ICS Opportunities, ICS Opportunities II and Integrated Assets. Millennium Group Management LLC, a Delaware limited liability company (“Millennium Group Management”), is the managing member of Millennium Management and may also be deemed to have shared voting control and investment discretion over securities owned by Integrated Core Strategies. Millennium Group Management is also the general partner of Millennium International Management and may also be deemed to have shared voting control and investment discretion over securities owned by ICS Opportunities, ICS Opportunities II and Integrated Assets. The managing member of Millennium Group Management is a trust of which Israel A. Englander, a United States citizen (“Mr. Englander”), currently serves as the sole voting trustee. Therefore, Mr. Englander may also be deemed to have shared voting control and investment discretion over securities owned by Integrated Core Strategies, ICS Opportunities, ICS Opportunities II and Integrated Assets. The foregoing should not be construed in and of itself as an admission by Millennium International Management, Millennium Management, Millennium Group Management or Mr. Englander as to beneficial ownership of the securities owned by Integrated Core Strategies, ICS Opportunities, ICS Opportunities II or Integrated Assets, as the case may be. The address of Integrated Core Strategies is 399 Park Avenue New York, New York 10022.
(11)
Perceptive Advisors LLC (Perceptive) is the investment manager to the Master Fund and may be deemed to beneficially own the securities directly held by the Master Fund. Joseph Edelman is the managing member of Perceptive. Perceptive and Mr. Edelman may be deemed to beneficially own the shares held by the Master Fund. The address of Perceptive is 51 Astor Place, 10th Floor, New York, New York 10003.
(12)
Wellington Management Company LLP and Wellington Management Group LLP may each be deemed to share beneficial ownership (within the meaning of Rule 13d—3 promulgated under the Exchange Act) of the securities, all of which are held of record by the entity or a nominee on its behalf. Wellington Management Company LLP, the investment adviser to the securityholder, is an investment adviser registered under the Investment Advisers Act of 1940 and is an indirect subsidiary of Wellington Management Group LLP. The business address of Wellington Management Company LLP and Wellington Management Group LLP is 280 Congress Street, Boston, Massachusetts 02210.
(13)
Carlos de Solo, our Chief Executive Officer and President and a member of our Board, beneficially owns the shares of Class A Common Stock held by O.M., as the Selling Securityholder. Includes 960,818 shares of Class A Common Stock that were issued as Earnout Shares, and Solely with respect to the “Shares of Class A Common Stock Offered” includes 960,818 shares of Class A Common Stock which remain issuable as Earnout Shares pursuant to the terms of the Business Combination Agreement.
(14)
Alberto de Solo, our Executive Vice President and Chief Operating Officer, beneficially owns the shares of Class A Common Stock held by C.D.G., as the Selling Securityholder. Includes 434,471 shares of Class A Common Stock that were issued as Earnout Shares, and “Shares of Class A Common Stock Offered”
 
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  includes 434,471 shares of Class A Common Stock which remain issuable as Earnout Shares pursuant to the terms of the Business Combination Agreement.
(15)
Joseph N. De Vera, our Senior Vice President and Legal Counsel, beneficially owns the shares of Class A Common Stock held by Joseph N. De Vera, Inc., as the Selling Securityholder. Includes 202,259 shares of Class A Common Stock that were issued as Earnout Shares, and “Shares of Class A Common Stock Offered” includes 202,260 shares of Class A Common Stock which remain issuable as Earnout Shares pursuant to the terms of the Business Combination Agreement.
(16)
Consists of 15,000 shares Class A Common Stock previously held by Joseph N. De Vera, Inc. and gifted to Jonathan Paul De Vera.
(17)
Nayan K. Pathak beneficially owns the shares of Class A Common Stock held by NKP CareMax LLC, as the Selling Securityholder. Includes 105,000 shares of Class A Common Stock that were issued as Earnout Shares, and “Shares of Class A Common Stock Offered” includes 105,000 shares of Class A Common Stock which remain issuable as Earnout Shares pursuant to the terms of the Business Combination Agreement.
(18)
Benjamin Quirk, our Senior Vice President and Chief Strategy Officer, beneficially owns the shares of Class A Common Stock held by Mouquin Trotter, Inc., as the Selling Securityholder. Includes 47,452 shares of Class A Common Stock that were issued as Earnout Shares, and “Shares of Class A Common Stock Offered” includes 47,452 shares of Class A Common Stock which remain issuable as Earnout Shares pursuant to the terms of the Business Combination Agreement.
(19)
Consists of shares of Class A Common Stock previously held by IMC Holdings, LP and distributed to Athyrium Opportunities III Acquisition LP as a partner of IMC Holdings, LP. Athyrium Opportunities Associates III GP LLC is the general partner of Athyrium Opportunities Associates III LP, which is the general partner of Athyrium Opportunities III Acquisition LP. Jeffrey A. Ferrell is President of Athyrium Opportunities Associates III GP LLC and the Managing Member of Athyrium Funds GP Holdings LLC, which is the Managing Member of Athyrium Opportunities Associates III GP LLC, and in his capacity as such may be deemed to exercise shared voting and investment power over the shares owned by Athyrium Opportunities III Acquisition LP. Jeffrey A. Ferrell and each of the foregoing entities disclaims beneficial ownership of such shares that he or it does not directly own except to the extent of his or its pecuniary interest therein. The business address of each of the foregoing is c/o Athyrium Capital Management, LP, 505 Fifth Avenue, Floor 18, New York, New York 10017.
(20)
Consists of shares of Class A Common Stock previously held by IMC Holdings, LP and distributed to Athyrium Opportunities III Acquisition 2 LP as a partner of IMC Holdings, LP. Athyrium Opportunities Associates III GP LLC is the general partner of Athyrium Opportunities Associates III LP, which is the general partner of Athyrium Opportunities III Acquisition 2 LP. Jeffrey A. Ferrell is President of Athyrium Opportunities Associates III GP LLC and the Managing Member of Athyrium Funds GP Holdings LLC, which is the Managing Member of Athyrium Opportunities Associates III GP LLC, and in his capacity as such may be deemed to exercise shared voting and investment power over the shares owned by Athyrium Opportunities III Acquisition 2 LP. Jeffrey A. Ferrell and each of the foregoing entities disclaims beneficial ownership of such shares except to the extent of his or its pecuniary interest therein. The business address of each of the foregoing is c/o Athyrium Capital Management, LP, 505 Fifth Avenue, Floor 18, New York, New York 10017.
(21)
“Shares of Class A Common Stock Offered” includes 1,450,000 shares of Class A Common Stock which remain issuable as Earnout Shares pursuant to the terms of the Business Combination Agreement. All investment and voting decisions with regard to shares of Class A Common Stock are made by the board of managers of IMC Holdings, LP, which is composed of seven individuals.
(22)
Consists of shares of Class A Common Stock previously held by IMC Holdings, LP and distributed to Comvest IMC Holdings, LLC as a partner of IMC Holdings, LP.
(23)
Consists of shares of Class A Common Stock previously held by IMC Holdings, LP and distributed to Operating Advisory Group, LLC as a partner of IMC Holdings, LP.
(24)
Consists of shares of Class A Common Stock previously held by IMC Holdings, LP and distributed to Justo Pozo as a partner of IMC Holdings, LP.
 
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(25)
Bill Lamoreaux is our former Executive Vice President and the former Chief Executive Officer of IMC. Consists of shares of Class A Common Stock previously held by IMC Holdings, LP and distributed to Bill Lamoreaux as a partner of IMC Holdings, LP.
(26)
Consists of shares of Class A Common Stock previously held by IMC Holdings, LP and distributed to John Randazzo as a partner of IMC Holdings, LP.
(27)
Consists of shares of Class A Common Stock previously held by IMC Holdings, LP and distributed to Mayda Antun, M.D. as a partner of IMC Holdings, LP.
(28)
Consists of shares of Class A Common Stock previously held by IMC Holdings, LP and distributed to Tom Aponte as a partner of IMC Holdings, LP.
(29)
Consists of shares of Class A Common Stock previously held by IMC Holdings, LP and distributed to Ismael Caicedo as a partner of IMC Holdings, LP.
(30)
Consists of shares of Class A Common Stock previously held by IMC Holdings, LP and distributed to Pablo Alonso as a partner of IMC Holdings, LP.
(31)
Consists of shares of Class A Common Stock previously held by IMC Holdings, LP and distributed to Gordon Carroll as a partner of IMC Holdings, LP.
(32)
Kevin Wirges is our Executive Vice President, Chief Financial Officer and Treasurer. Consists of shares of Class A Common Stock previously held by IMC Holdings, LP and distributed to as a partner of IMC Holdings, LP.
(33)
Consists of shares of Class A Common Stock previously held by IMC Holdings, LP and distributed to Douglas Cowieson as a partner of IMC Holdings, LP.
(34)
Consists of shares of Class A Common Stock previously held by IMC Holdings, LP and distributed to Felix German as a partner of IMC Holdings, LP.
(35)
Consists of shares of Class A Common Stock previously held by IMC Holdings, LP and distributed to Cristina Pinckney as a partner of IMC Holdings, LP.
(36)
Consists of shares of Class A Common Stock previously held by IMC Holdings, LP and distributed to Karen Pacheco as a partner of IMC Holdings, LP.
(37)
Comprised of 50,000 Founder Shares held directly by Steven Hochberg, a partner in Deerfield Management, for the benefit, and at the direction, of Deerfield Management initially purchased by the Sponsor for $0.009 per share (or $0.007 on a post-split basis) and transferred to Steven Hochberg for the same
per-share
price initially paid by the Sponsor. Mr. Hochberg disclaims beneficial ownership of such shares.
(38)
Deerfield Mgmt, L.P. is the general partner of Deerfield Partners. Deerfield Management is the investment manager of Deerfield Partners. James E. Flynn is the sole member of the general partner of each of Deerfield Management and Deerfield Mgmt, L.P. Shares of Class A Common Stock Offered includes: (i) 12,960,000 shares of Class A Common Stock purchased by Deerfield Partners in the Deerfield PIPE Investments for a purchase price of $10.00 per share; (ii) 3,360,000 shares of Class A Common Stock and 672,000 shares of Class A Common Stock underlying an equal number of Public Warrants held directly by Deerfield Partners, each of which were purchased as a part of Units in the IPO at $10.00 per Unit; (iii) 2,851,090 shares of Class A Common Stock previously held by the Sponsor and distributed to Deerfield Partners as a member of the Sponsor, of which 2,492,875 are Founder Shares initially purchased by the Sponsor for $0.009 per share (or $0.007 on a post-split basis) and 358,215 are shares of Class A Common Stock initially purchased by the Sponsor in the Deerfield PIPE Investments for a purchase price of $10.00 per share; and (iv) 2,158,333 Private Warrants and an equal number shares of Class A Common Stock underlying such Private Warrants initially purchased by the Sponsor at a price of $1.50 per Private Warrant and distributed to Deerfield Partners as a member of the Sponsor. Common Stock Beneficially Owned Prior to Offering does not 50,000 shares of Class A Common Stock held by Steven Hochberg, a partner in Deerfield Management, for the benefit, and at the direction, of Deerfield Management, which is the investment manager of Deerfield Partners.
(39)
Comprised of 515,419 shares of Class A Common Stock previously held by the Sponsor, distributed to RAB Ventures (DFP) LLC (“RAB”) as a member of the Sponsor and subsequently distributed to Tara Acquisition LLC as a member of RAB.
(40)
Comprised of 53,900 shares of Class A Common Stock, 46,667 Private Warrants and an equal number shares of Class A Common Stock underlying such Private Warrants previously held by the Sponsor,
 
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  distributed to RAB as a member of the Sponsor and subsequently distributed to the Gary Davis 1995 Trust for Children Howard Sharfstein, Trustee, as a member of RAB.
(41)
Comprised of 25,564 shares of Class A Common Stock (including 5,352 shares of Class A Common Stock initially purchased by the Sponsor in the Deerfield PIPE Investments for a purchase price of $10.00 per share), 17,500 Private Warrants and an equal number shares of Class A Common Stock underlying such Private Warrants previously held by the Sponsor, distributed to RAB as a member of the Sponsor and subsequently distributed to Jane B. Hankin as a member of RAB.
(42)
Comprised of 16,844 shares of Class A Common Stock, 14,583 Private Warrants and an equal number shares of Class A Common Stock underlying such Private Warrants previously held by the Sponsor, distributed to RAB as a member of the Sponsor and subsequently distributed to Anthony Wolk as a member of RAB.
(43)
Comprised of 281,309 shares of Class A Common Stock that are not registered hereunder and 139,754 shares of Class A Common Stock underlying an equal number of Public Warrants that will become exercisable 30 days following the Closing, in each case held by Randy Simpson, our director.
(44)
Richard Barasch is the former Executive Chair of our Board. Comprised of: (i) 50,000 Founder Shares initially purchased by the Sponsor for $0.009 per share (or $0.007 on a post-split basis) and transferred to Richard Barasch for the same
per-share
price initially paid by the Sponsor; (ii) 166,071 shares of Class A Common Stock (including 31,321 shares of Class A Common Stock initially purchased by the Sponsor in the Deerfield PIPE Investments for a purchase price of $10.00 per share), 562,917 Private Warrants and an equal number shares of Class A Common Stock underlying such Private Warrants previously held by the Sponsor, distributed to RAB as a member of the Sponsor and subsequently distributed to Richard Barasch as a member of RAB.
(45)
Christopher Wolfe is the former Chief Financial Officer of DFHT. Comprised of: (i) 50,000 Founder Shares initially purchased by the Sponsor for $0.009 per share (or $0.007 on a post-split basis) and transferred to Christopher Wolfe for the same
per-share
price initially paid by the Sponsor; (ii) 134,750 Founder Shares initially purchased by the Sponsor for $0.009 per share (or $0.007 on a post-split basis) and distributed to RAB as a member of the Sponsor; (ii) 116,667 Private Warrants, and an equal number shares of Class A Common Stock underlying such Private Warrants, initially purchased by the Sponsor at a price of $1.50 per Private Warrant and distributed to Christopher Wolfe as a member of the Sponsor; and (iii) 5,112 shares of Class A Common Stock initially purchased by the Sponsor in the Deerfield PIPE Investments for a purchase price of $10.00 per share and distributed to Christopher Wolfe as a member of the Sponsor.
(46)
Dr. Peter J. Fitzgerald is a former director of DFHT. Comprised of 25,000 Founder Shares initially purchased by the Sponsor for $0.009 per share (or $0.007 on a post-split basis) and transferred to Dr. Peter J. Fitzgerald for the same
per-share
price initially paid by the Sponsor.
(47)
Dr. Linda Grais is a former director of DFHT. Comprised of 25,000 Founder Shares initially purchased by the Sponsor for $0.009 per share (or $0.007 on a post-split basis) and transferred to Dr. Linda Grais for the same
per-share
price initially paid by the Sponsor.
(48)
Hon. Dr. David J. Shulkin serves on our Board as a director. Comprised of 25,000 Founder Shares initially purchased by the Sponsor for $0.009 per share (or $0.007 on a post-split basis) and transferred to Hon. Dr. David J. Shulkin for the same
per-share
price initially paid by the Sponsor.
(49)
Represents the 384,615 shares of Class A Common Stock received as consideration for the SMA Transaction at a value of approximately $13.00 per share. See “
Certain Relationships with Selling Securityholders —SMA Transaction”
below for further description of the SMA Transaction.
(50)
The shares being registered for resale on this prospectus were acquired in connection with the Third-Party PIPE Investments for a purchase price of $10.00 per share.
(51)
The shares being registered for resale on this prospectus were issued as consideration for the Business Combination at Closing at a reference price of $10.00 per share.
(52)
Shares of Class A Common Stock distributed to RAB as a member of the Sponsor and subsequently distributed to the respective Selling Securityholder as a member of RAB includes a portion of (i) 741,125 Founder Shares initially purchased by the Sponsor for $0.009 per share (or $0.007 on a post-split basis) and (ii) 36,673 shares of Class A Common Stock initially purchased by the Sponsor in the Deerfield PIPE Investments for a purchase price of $10.00 per share.
(53)
Private Warrants distributed to RAB as a member of the Sponsor and subsequently distributed to the respective Selling Securityholder as a member of RAB includes a portion of 641,667 Private Warrants, and
 
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  an equal number shares of Class A Common Stock underlying such Private Warrants, s initially purchased by the Sponsor at a price of $1.50 per Private Warrant.
Certain Relationships with Selling Securityholders
Founder Shares / Sponsor
On May 22, 2020, the Sponsor purchased an aggregate of 2,875,000 Founder Shares in exchange for a capital contribution of $25,000, or approximately $0.009 per share. On June 25, 2020, DFHT effected a 1:1.25 stock split of the Class B Common Stock resulting in the Sponsor holding an aggregate of 3,593,750 Founder Shares. In June 2020, the Sponsor transferred 50,000 Founder Shares to each of Steven Hochberg, Christopher Wolfe, and Richard Barasch, who were DFHT’s executive officers at such time, and 25,000 Founder Shares to each of Dr. Peter J. Fitzgerald, Dr. Linda Grais and Hon. Dr. David J. Shulkin, who were DFHT’s independent directors, for the same
per-share
price initially paid by the Sponsor, resulting in the Sponsor holding 3,368,750 Founder Shares. The number of Founder Shares outstanding was determined so that such Founder Shares would represent 20% of the outstanding shares after the IPO.
Such Initial Stockholders agreed, subject to limited exceptions, not to transfer, assign or sell any of their Founder Shares until the earlier to occur of: (A) one year after the completion of the initial business combination or (B) subsequent to the initial business combination, (x) if the closing price of the Class A Common Stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any
30-trading
day period commencing at least 150 days after the initial business combination, or (y) the date on which we complete a liquidation, merger, capital stock exchange or other similar transaction that results in all of our stockholders having the right to exchange their shares of Class A Common Stock for cash, securities or other property.
Business Combination
Lock-Up
Agreement
In connection with the execution of the Business Combination Agreement, DFHT entered into the Business Combination
Lock-up
Agreement with the Business Combination
Lock-Up
Holders (as defined therein) pursuant to which, subject to certain exceptions, the Business Combination
Lock-Up
Holders agreed to not transfer specified shares of Class A Common Stock until the earlier of (i) six, nine or twelve months (as applicable to shares of Class A Common Stock of each Business Combination
Lock-Up
Holders) after the date of the Closing, (ii) only with respect to certain shares of Class A Common Stock of the Business Combination
Lock-Up
Holders, the date on which, subsequent to the Business Combination, the VWAP of Class A Common Stock equals or exceeds $12.50 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any
30-trading
day period commencing at least 150 calendar days after the Closing, and (iii) the date following the Closing Date on which we complete a Change in Control Transaction (as defined in the Business Combination Agreement). Subsequent to March 8, 2022, only the Founder Shares remained subject to restriction under the
Lock-up
Agreement.
Private Placement Warrants
Concurrently with the closing of the IPO, the Sponsor purchased an aggregate of 2,916,667 Private Warrants at a price of $1.50 per Private Warrant, generating gross proceeds to DFHT of $4,375,000. Each private placement warrant is exercisable for one share of Class A Common Stock at a price of $11.50 per share. The proceeds from the Private Warrants were added to the proceeds from our IPO held in the Trust Account, which was released at Closing. The Private Warrants are
non-redeemable
and exercisable on a cashless basis so long as they are held by the Sponsor or its permitted transferees.
Transactions with Deerfield Partners
Deerfield Partners purchased 3,360,000 Units in the IPO at $10.00 per Unit. The underwriting commission with respect to Units purchased by Deerfield Partners in our IPO, was $0.10 per Unit upon the closing of the IPO and $0.175 per Unit in the deferred underwriting commissions.
 
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Additionally, in connection with the Business Combination, Deerfield Partners and the Sponsor purchased an aggregate of 10,000,000 shares of Class A Common Stock in the Deerfield PIPE Investments, consisting of 9,600,000 shares of Class A Common Stock purchased by Deerfield Partners and 400,000 shares of Class A Common Stock purchased by the Sponsor, for a purchase price of $10.00 per share and an aggregate purchase price of $100,000,000, pursuant to certain subscription agreements, each dated December 18, 2020, with each of Deerfield Partners and the Sponsor, the form of which is attached as an exhibit to the registration statement of which this prospectus is a part.
On February 11, 2022, the Sponsor distributed all of the shares of Class A Common Stock and all of the Private Placement Warrants held by the Sponsor to its members, including 2,851,090 shares of Class A Common Stock and 2,158,333 Private Placement Warrants that were distributed to Deerfield Partners, pursuant to a liquidating distribution. Such shares of Class A Common Stock and Private Placement Warrants were distributed to the Sponsor’s members (including Deerfield Partners) on a pro rata basis for no consideration, and such distributions are reflected in “Selling Securityholders” above.
Third-Party PIPE Investments
In connection with the Business Combination, certain investors purchased an aggregate of 31,000,000 shares of Class A Common Stock, for a purchase price of $10.00 per share, for an aggregate purchase price of $310,000,000, pursuant to certain subscription agreements, each dated December 18, 2020, the form of which is included as an exhibit to the registration statement of which this prospectus is a part.
As of April 18, 2022, 18,635,073 of such shares of Class A Common Stock remain unsold, and such shares remaining unsold is reflected in in “Selling Securityholders” above.
Amended and Restated Registration Rights Agreement
In connection with the execution of the Business Combination Agreement, DFHT, the CMG Sellers, IMC Parent, the Sponsor, Deerfield Partners and certain other parties thereto (collectively, the “rights holders”) entered into the Amended and Restated Registration Rights Agreement, which amended and restated in its entirety the existing registration rights agreement, dated July 16, 2020, described in “
Certain Relationships and Related Transactions
 —Registration Rights Agreement”
above. Pursuant to the terms of the Amended and Restated Registration Rights Agreement, we are obligated to file a registration statement to register the resale of certain shares of Class A Common Stock held by the rights holders. In addition, pursuant to the terms of the Amended and Restated Registration Rights Agreement and subject to certain requirements and customary conditions, including with regard to the number of demand rights that may be exercised, the rights holders may demand at any time or from time to time, that we file a registration statement on Form
S-1
or Form
S-3
to register certain shares of Class A Common Stock held by such rights holders. The Amended and Restated Registration Rights Agreement also provides the rights holders with “piggy-back” registration rights, subject to certain requirements and customary conditions. In connection with the filing of the registration statement of which this prospectus is a part, Deerfield Partners exercised its demand rights to register the resale of 3,360,000 shares of Class A Common Stock that were part of Units purchased by Deerfield Partners in the IPO.
SMA Transaction
On June 18, 2021, Interamerican acquired of 100% of the issued and outstanding equity interests of the SMA Entities. As consideration for the acquisition of the SMA Entities, Interamerican paid an aggregate cash purchase price of $52,000,000 and we issued 384,615 SMA Shares, valued at $5,000,000 based on the closing price of the Class A Common Stock on June 17, 2021, to the SMA Seller.
In connection with the acquisition of the SMA Entities, the SMA Seller entered into a
lock-up
agreement with the Company with respect to the SMA Shares, pursuant to which the SMA Seller agreed not to transfer the
 
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Shares, except to certain permitted transferees, until six months following June 17, 2021. Additionally, the SMA Seller executed a joinder to the Amended and Restated Registration Rights Agreement, pursuant to which the Company granted registration rights to the SMA Seller on such terms as set forth in the Registration Rights Agreement.
Escrow Agreements
On the Closing Date, DFHT, the Sponsor, O.M., in its capacity as representative of the members of the CMG Sellers, and the Escrow Agent, entered into the CMG Escrow Agreement, and DFHT, the Sponsor, IMC Parent and the Escrow Agent entered into the IMC Escrow Agreement. The Escrow Agreements provided for the deposit of the Adjustment Escrow Amounts with the Escrow Agent for the purpose of securing certain post-closing adjustment obligations of the CMG Sellers and IMC Parent, respectively, under the Business Combination Agreement.
 
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DESCRIPTION OF SECURITIES
The following summary of the material terms of our securities is not intended to be a complete description of all of the rights and preferences of such securities. Because it is only a summary, it does not contain all of the information that may be important to you, and is qualified by reference to our Amended and Restated Charter, the Amended and Restated Bylaws, the Amended and Restated Registration Rights Agreement and the Warrant Agreement, which are exhibits to the registration statement of which this prospectus is a part. We urge you to read each of the Amended and Restated Charter, the Amended and Restated Bylaws, the Amended and Restated Registration Rights Agreement and the Warrant Agreement in their entirety for a complete description of the rights and preferences of our securities.
Authorized and Outstanding Stock
The Amended and Restated Charter authorizes the issuance of 261,000,000 shares, consisting of (i) 260,000,000 shares of common stock, par value $0.0001 per share, including 250,000,000 shares of Class A Common Stock and 10,000,000 shares of Class B common stock , $0.0001 par value per share (“Class B Common Stock” and together with the Class A Common Stock, “Common Stock”), and (ii) 1,000,000 shares of preferred stock, par value $0.0001 per share.
As of April 29, 2022, there were 87,367,972 shares of Class A Common Stock and 0 shares of Class B Common Stock outstanding. We have also issued 5,791,667 warrants consisting of 2,875,000 Public Warrants and 2,916,667 warrants (the “Private Warrants” and together with the Public Warrants, the “Warrants”) originally issued in a private placement to DFHTA Sponsor LLC in connection with the company’s initial public offering (the “IPO”). No shares of preferred stock are currently outstanding.
Common Stock
The Amended and Restated Charter provides the following with respect to the rights, powers, preferences and privileges of the Common Stock.
Voting Power
Holders of Common Stock are entitled to one vote for each share held on all matters to be voted on by stockholders. Unless otherwise specified in the Amended and Restated Charter, or as required by applicable provisions of the DGCL or applicable stock exchange rules, the affirmative vote of a majority of shares of Common Stock that are voted is required to approve any such matter voted on by our stockholders.
Dividends
Holders of Common Stock will be entitled to receive ratable dividends when, as and if declared by The Company’s Board of Directors (the “Board”) out of funds legally available therefor.
Liquidation, Dissolution and Winding Up
In the event of a liquidation, dissolution or winding up of the Company, the holders of Common Stock will be entitled to share ratably in all assets remaining available for distribution to them after payment of liabilities and after provision is made for each class of shares, if any, having preference over each class of Common Stock.
Preemptive or Other Rights
Our stockholders will have no preemptive or other subscription rights. There will be no sinking fund provisions applicable to the Common Stock.
 
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Preferred Stock
The Amended and Restated Charter authorizes 1,000,000 shares of preferred stock and provides that shares of preferred stock may be issued from time to time in one or more series. The Board will be authorized to fix the voting rights, if any, designations, powers, preferences, the relative, participating, optional or other special rights and any qualifications, limitations and restrictions thereof, applicable to the shares of each series. The Board will be able to, without stockholder approval, issue shares of preferred stock with voting and other rights that could adversely affect the voting power and other rights of the holders of the common stock and could have anti-takeover effects. The ability of the Board to issue shares of preferred stock without stockholder approval could have the effect of delaying, deferring or preventing a change of control of the Company or the removal of existing management.
Although we do not currently intend to issue any shares of preferred stock, we cannot assure you that we will not do so in the future.
Warrants
Public Warrants
Each whole Public Warrant entitles the registered holder to purchase one share of Class A Common Stock at a price of $11.50 per share, subject to adjustment as discussed below, at any time, provided in each case that we have an effective registration statement under the of 1933, as amended (the “Securities Act”) covering the shares of Class A Common Stock issuable upon exercise of the Public Warrants and a current prospectus relating to them is available (or we permit holders to exercise their Public Warrants on a cashless basis under the circumstances specified in the Warrant Agreement) and such shares are registered, qualified or exempt from registration under the securities, or blue sky, laws of the state of residence of the holder. Pursuant to the Warrant Agreement, a holder may exercise its Public Warrants only for a whole number of shares of Class A Common Stock. This means only a whole Public Warrant may be exercised at a given time by a holder. No fractional Public Warrants were issued and only whole Public Warrants trade. The Public Warrants will expire five years after June 8, 2021 (the “Closing Date”), at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.
We are not obligated to deliver any Class A Common Stock pursuant to the exercise of a Public Warrant and will have no obligation to settle such exercise unless a registration statement under the Securities Act with respect to the Class A Common Stock underlying the Public Warrants is effective and a prospectus relating thereto is current, subject to our satisfying our obligations described below with respect to registration. No Public Warrant is exercisable and we will not be obligated to issue a share of Class A Common Stock upon exercise of a Public Warrant unless the share of Class A Common Stock issuable upon such exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the Public Warrants. In the event that the conditions in the two immediately preceding sentences are not satisfied with respect to a Public Warrant, the holder of such Public Warrant will not be entitled to exercise such Public Warrant and such Public Warrant may have no value and expire worthless. In no event will we be required to net cash settle any Public Warrant.
We agreed that as soon as practicable, but in no event later than fifteen (15) business days after the closing of our initial business combination, to use our best efforts to file with the SEC a registration statement for the registration, under the Securities Act, of the Class A Common Stock issuable upon exercise of the Public Warrants. Our Registration Statement on Form
S-1
(File No. 333- 257574) was declared effective by the SEC on July 15, 2021, as amended and supplemented from time to time, including by the registration statement of which this prospectus is a part, is intended to register such shares of Class A Common Stock under the Securities Act. We will use our best efforts to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the Warrants in accordance with the provisions of the Warrant Agreement. Warrant holders may during any period when we will have failed to maintain an effective registration statement,
 
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exercise Warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption. Notwithstanding the above, if our Class A Common Stock is at the time of any exercise of a warrant not listed on a national securities exchange such that they satisfy the definition of a “covered security” under Section 18(b)(1) of the Securities Act, we may, at our option, require holders of Public Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event we so elect, we will not be required to file or maintain in effect a registration statement, and in the event we do not so elect, we will use our best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
Redemption of Warrants when the price per share of Class A Common Stock equals or exceeds $18.00
Once the Warrants become exercisable, we may redeem the outstanding Warrants (except as described herein with respect to the Private Warrants):
 
  •  
in whole and not in part;
 
  •  
at a price of $0.01 per Warrant;
 
  •  
upon a minimum of 30 days’ prior written notice of redemption (the
“30-day
redemption period”); and
 
  •  
if, and only if, the closing price of the Class A Common Stock equals or exceeds $18.00 per share (as adjusted for adjustments to the number of shares issuable upon exercise of the exercise price of a Warrant) for any 20 trading days within a
30-trading
day period ending three business days before we send to the notice of redemption to the Warrant holders.
If and when the Warrants become redeemable by us for cash, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws.
The last of the redemption criterion discussed above was established to prevent a redemption call unless there is at the time of the call a significant premium to the exercise price. If the foregoing conditions are satisfied and we issue a notice of redemption of warrants, each Warrant holder will be entitled to exercise his, her or its Warrant prior to the scheduled redemption date. However, the price of the Class A Common Stock may fall below the $18.00 redemption trigger price (as adjusted for stock splits, stock capitalizations, reorganizations, recapitalizations and the like) as well as the $11.50 exercise price after the redemption notice is issued.
Redemption of Warrants when the price per share of Class A Common Stock equals or exceeds $10.00
We may redeem the outstanding Warrants (except as described herein with respect to the Private Warrants):
 
  •  
in whole and not in part;
 
  •  
at $0.10 per Warrant upon a minimum of 30 days’ prior written notice of redemption provided that holders will be able to exercise their Warrants on a cashless basis prior to redemption and receive that number of shares determined by reference to the table below, based on the redemption date and the “fair market value” of the Class A Common Stock (as defined below) except as otherwise described below; and
 
  •  
if, and only if, the closing price of the Class A Common Stock equals or exceeds $10.00 per share (as adjusted for adjustments to the number of shares issuable upon exercise or the exercise price of a warrant) for any 20 trading days within the
30-trading
day period ending three trading days before we send the notice of redemption to the Warrant holders.
Beginning on the date the notice of redemption is given until the Warrants are redeemed or exercised, holders may elect to exercise their Warrants on a cashless basis. The numbers in the table below represent the number of shares of Class A Common Stock that a Warrant holder will receive upon such cashless exercise in connection with a redemption by us pursuant to this redemption feature, based on the “fair market value” of the shares of Class A Common Stock on the corresponding redemption date (assuming holders elect to exercise their
 
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Warrants and such Warrants are not redeemed for $0.10 per Warrant), determined for these purposes based on volume weighted average price of the Class A Common Stock during the 10 trading days immediately following the date on which the notice of redemption is sent to the holders of Warrants, and the number of months that the corresponding redemption date precedes the expiration date of the Warrants, each as set forth in the table below. We will provide the Warrant holders with the final fair market value no later than one business day after the
10-trading
day period described above ends.
The share prices set forth in the column headings of the table below will be adjusted as of any date on which the number of shares issuable upon exercise of a Warrant or the exercise price of a Warrant is adjusted as set forth under the heading “Anti-dilution Adjustments” below. If the number of shares issuable upon exercise of a Warrant is adjusted, the adjusted share prices in the column headings will equal the share prices immediately prior to such adjustment, multiplied by a fraction, the numerator of which is the number of shares deliverable upon exercise of a Warrant immediately prior to such adjustment and the denominator of which is the number of shares deliverable upon exercise of a Warrant as so adjusted. The number of shares in the table below shall be adjusted in the same manner and at the same time as the number of shares issuable upon exercise of a Warrant. If the exercise price of a Warrant is adjusted, (a) in the case of an adjustment pursuant to the fifth paragraph under the heading “Anti-dilution Adjustments” below, the adjusted share prices in the column headings will equal the unadjusted share price multiplied by a fraction, the numerator of which is the higher of the fair market value and the newly issued price as set forth under the heading “Anti-dilution Adjustments” and the denominator of which is $10.00 and (b) in the case of an adjustment pursuant to the second paragraph under the heading “Anti-dilution Adjustments” below, the adjusted share prices in the column headings will equal the unadjusted share price less the decrease in the exercise price of a Warrant pursuant to such exercise price adjustment.
 
Redemption Date
   
Fair Market Value of Class A Common Stock
  
(period to expiration of warrants)
    ≤
10.00
     
11.00
     
12.00
     
13.00
     
14.00
     
15.00
     
16.00
     
17.00
      ≥
18.00
  
60 months
      0.261        0.281        0.297        0.311        0.324        0.337        0.348        0.358        0.361  
57 months
      0.257        0.277        0.294        0.310        0.324        0.337        0.348        0.358        0.361  
54 months
      0.252        0.272        0.291        0.307        0.322        0.335        0.347        0.357        0.361  
51 months
      0.246        0.268        0.287        0.304        0.320        0.333        0.346        0.357        0.361  
48 months
      0.241        0.263        0.283        0.301        0.317        0.332        0.344        0.356        0.361  
45 months
      0.235        0.258        0.279        0.298        0.315        0.330        0.343        0.356        0.361  
42 months
      0.228        0.252        0.274        0.294        0.312        0.328        0.342        0.355        0.361  
39 months
      0.221        0.246        0.269        0.290        0.309        0.325        0.340        0.354        0.361  
36 months
      0.213        0.239        0.263        0.285        0.305        0.323        0.339        0.353        0.361  
33 months
      0.205        0.232        0.257        0.280        0.301        0.320        0.337        0.352        0.361  
30 months
      0.196        0.224        0.250        0.274        0.297        0.316        0.335        0.351        0.361  
27 months
      0.185        0.214        0.242        0.268        0.291        0.313        0.332        0.350        0.361  
24 months
      0.173        0.204        0.233        0.260        0.285        0.308        0.329        0.348        0.361  
21 months
      0.161        0.193        0.223        0.252        0.279        0.304        0.326        0.347        0.361  
18 months
      0.146        0.179        0.211        0.242        0.271        0.298        0.322        0.345        0.361  
15 months
      0.130        0.164        0.197        0.230        0.262        0.291        0.317        0.342        0.361  
12 months
      0.111        0.146        0.181        0.216        0.250        0.282        0.312        0.339        0.361  
9 months
      0.090        0.125        0.162        0.199        0.237        0.272        0.305        0.336        0.361  
6 months
      0.065        0.099        0.137        0.178        0.219        0.259        0.296        0.331        0.361  
3 months
      0.034        0.065        0.104        0.150        0.197        0.243        0.286        0.326        0.361  
0 months
      —          —          0.042        0.115        0.179        0.233        0.281        0.323        0.361  
The exact fair market value and redemption date may not be set forth in the table above, in which case, if the fair market value is between two values in the table or the redemption date is between two redemption dates in the table, the number of shares of Class A Common Stock to be issued for each Warrant exercised will be determined by a straight-line interpolation between the number of shares set forth for the higher and lower fair market values and the earlier and later redemption dates, as applicable, based on a 365 or
366-day
year, as
 
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applicable. For example, if the volume weighted average price of the shares of Class A Common Stock during the 10 trading days immediately following the date on which the notice of redemption is sent to the holders of the Warrants is $11.00 per share, and at such time there are 57 months until the expiration of the Warrants, holders may choose to, in connection with this redemption feature, exercise their warrants for 0.277 shares of Class A Common Stock for each whole Warrant. For an example where the exact fair market value and redemption date are not as set forth in the table above, if the volume weighted average price of Class A Common Stock during the 10 trading days immediately following the date on which the notice of redemption is sent to the holders of the Warrants is $13.50 per share, and at such time there are 38 months until the expiration of the Warrants, holders may choose to, in connection with this redemption feature, exercise their Warrants for 0.298 shares of Class A Common Stock for each whole Warrant. In no event will the Warrants be exercisable on a cashless basis in connection with this redemption feature for more than 0.361 shares of Class A Common Stock per Warrant (subject to adjustment). Finally, as reflected in the table above, if the Warrants are out of the money and about to expire, they cannot be exercised on a cashless basis in connection with a redemption by us pursuant to this redemption feature, since they will not be exercisable for any shares of Class A Common Stock.
This redemption feature differs from the typical warrant redemption features used in many other blank check offerings, which typically only provide for a redemption of warrants for cash (other than the Private Warrants) when the trading price for the common stock exceeds $18.00 per share for a specified period of time. This redemption feature is structured to allow for all of the outstanding warrants to be redeemed when the Class A Common Stock is trading at or above $10.00 per public share, which may be at a time when the trading price of the Class A Common Stock is below the exercise price of the Warrants. We have established this redemption feature to provide us with the flexibility to redeem the Warrants without the Warrants having to reach the $18.00 per share threshold set forth above under “Redemption of Warrants when the price per share of Class A Common Stock equals or exceeds $18.00.” Holders choosing to exercise their Warrants in connection with a redemption pursuant to this feature will, in effect, receive a number of shares for their Warrants based on an option pricing model with a fixed volatility input. This redemption right provides us with an additional mechanism by which to redeem all of the outstanding Warrants, and therefore have certainty as to the capital structure as the Warrants would no longer be outstanding and would have been exercised or redeemed. We will be required to pay the applicable redemption price to Warrant holders if we choose to exercise this redemption right, which will allow us to quickly proceed with a redemption of the Warrants if we determine it is in our best interest to do so. As such, we would redeem the Warrants in this manner when we believe it is in our best interest to update our capital structure to remove the Warrants and pay the redemption price to the Warrant holders.
As stated above, we can redeem the Warrants when the Class A Common Stock is trading at a price starting at $10.00, which is below the exercise price of $11.50, because it will provide certainty with respect to the capital structure and cash position while providing Warrant holders with the opportunity to exercise their Warrants on a cashless basis for the applicable number of shares. If we choose to redeem the Warrants when the Class A Common Stock is trading at a price below the exercise price of the Warrants, this could result in the Warrant holders receiving fewer shares of Class A Common Stock than they would have received if they had chosen to wait to exercise their Warrants for shares of Class A Common Stock if and when such shares of Class A Common Stock were trading at a price higher than the exercise price of $11.50.
No fractional shares of Class A Common Stock will be issued upon exercise. If, upon exercise, a holder would be entitled to receive a fractional interest in a share, we will round down to the nearest whole number of the number of shares of Class A Common Stock to be issued to the Warrant holder. We have agreed to use commercially reasonable efforts to register under the Securities Act the securities issuable upon the exercise of the Warrants.
Redemption Procedures
A Warrant holder may notify us in writing in the event it elects to be subject to a requirement that such Warrant holder will not have the right to exercise such warrant, to the extent that after giving effect to such
 
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exercise, such person (together with such person’s affiliates), to the warrant agent’s actual knowledge, would beneficially own in excess of 4.9% or 9.8% (as specified by such holder) of the Class A Common Stock outstanding immediately after giving effect to such exercise.
Anti-dilution Adjustments
If the number of outstanding shares of Class A Common Stock is increased by a share capitalization payable in shares of Class A Common Stock, or by a
split-up
of common stock or other similar event, then, on the effective date of such share capitalization,
split-up
or similar event, the number of shares of Class A Common Stock issuable on exercise of each Warrant will be increased in proportion to such increase in the outstanding shares of common stock. A rights offering made to all or substantially all holders of common stock entitling holders to purchase Class A Common Stock at a price less than the fair market value will be deemed a share capitalization of a number of shares of Class A Common Stock equal to the product of (i) the number of shares of Class A Common Stock actually sold in such rights offering (or issuable under any other equity securities sold in such rights offering that are convertible into or exercisable for Class A Common Stock) and (ii) the quotient of (x) the price per share of the Class A Common Stock paid in such rights offering and (y) the fair market value. For these purposes (i) if the rights offering is for securities convertible into or exercisable for shares of Class A Common Stock, in determining the price payable for Class A Common Stock, there will be taken into account any consideration received for such rights, as well as any additional amount payable upon exercise or conversion and (ii) fair market value means the volume weighted average price of shares of Class A Common Stock as reported during the ten (10) trading day period ending on the trading day prior to the first date on which the Class A Common Stock trades on the applicable exchange or in the applicable market, regular way, without the right to receive such rights.
In addition, if we, at any time while the Warrants are outstanding and unexpired, pay a dividend or make a distribution in cash, securities or other assets to all or substantially all the holders of Class A Common Stock on account of such Class A Common Stock (or other securities into which the warrants are convertible), other than (a) as described in the paragraph immediately above or (b) certain ordinary cash dividends or $0.50 per annum subject to adjustment, then the warrant exercise price will be decreased, effective immediately after the effective date of such event, by the amount of cash and/or the fair market value of any securities or other assets paid on each share of Class A Common Stock in respect of such event.
If the number of outstanding shares of Class A Common Stock is decreased by a consolidation, combination, reverse share split or reclassification of Class A Common Stock or other similar event, then, on the effective date of such consolidation, combination, reverse share split, reclassification or similar event, the number of shares of Class A Common Stock issuable on exercise of each Warrant will be decreased in proportion to such decrease in outstanding share of Class A Common Stock.
Whenever the number of shares of Class A Common Stock purchasable upon the exercise of the Warrants is adjusted, as described above, the exercise price will be adjusted by multiplying the exercise price immediately prior to such adjustment by a fraction (x) the numerator of which will be the number of shares of Class A Common Stock purchasable upon the exercise of the Warrants immediately prior to such adjustment, and (y) the denominator of which will be the number of shares of Class A Common Stock so purchasable immediately thereafter.
In case of any reclassification or reorganization of the outstanding—(other than those described above or that solely affects the par value of such shares), or in the case of any merger or consolidation of us with or into another corporation (other than a consolidation or merger in which we are the continuing corporation and that does not result in any reclassification or reorganization of our outstanding Class A Common Stock), or in the case of any sale or conveyance to another corporation or entity of the assets or other property of us as an entirety or substantially as an entirety in connection with which we are dissolved, the holders of the Warrants will thereafter have the right to purchase and receive, upon the basis and upon the terms and conditions specified in
 
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the Warrants and in lieu of the Class A Common Stock immediately theretofore purchasable and receivable upon the exercise of the rights represented thereby, the kind and amount of shares of Class A Common Stock or other securities or property (including cash) receivable upon such reclassification, reorganization, merger or consolidation, or upon a dissolution following any such sale or transfer, that the holder of the Warrants would have received if such holder had exercised the Warrants immediately prior to such event. If less than 70% of the consideration receivable by the holders of Class A Common Stock in such a transaction is payable in the form of Class A Common Stock in the successor entity that is listed for trading on a national securities exchange or is quoted in an established
over-the-counter
market, or is to be so listed for trading or quoted immediately following such event, and if the registered holder of the warrant properly exercises the warrant within thirty days following public disclosure of such transaction, the exercise price will be reduced as specified in the Warrant Agreement based on the Black-Scholes Warrant Value (as defined in the Warrant Agreement) of the warrant. The purpose of such exercise price reduction is to provide additional value to holders of the Warrants when an extraordinary transaction occurs during the exercise period of the Warrants pursuant to which the holders of the Warrants otherwise do not receive the full potential value of the Warrants.
The Warrants are issued in registered form under the terms of the Warrant Agreement between Continental Stock Transfer & Trust Company, as warrant agent, and us. The Warrant Agreement provides that the terms of the Warrants may be amended without the consent of any holder for (i) the purpose of curing any ambiguity or, or curing, correcting or supplementing any defective provision contained in the Warrant Agreement, (ii) to provide for the delivery of Alternative Issuance (as defined in the Warrant Agreement). or (iii) adding or changing any provisions with respect to matters or questions arising under the warrant agreement as the parties to the warrant agreement may deem necessary or desirable and that the parties deem to not adversely affect the rights of the registered holders of the warrants. The approval by the holders of at least 50% of the then-outstanding Public Warrants is required to make any change that adversely affects the interests of the registered holders of Public Warrants, and, solely with respect to any amendment to the terms of the Private Warrants, 50% of the then outstanding Private Warrants. You should review a copy of the Warrant Agreement, which will be filed as an exhibit to the registration statement of which this prospectus is a part, for a complete description of the terms and conditions applicable to the warrants.
The Warrants may be exercised upon surrender of the warrant certificate on or prior to the expiration date at the offices of the warrant agent, with the exercise form on the reverse side of the warrant certificate completed and executed as indicated, accompanied by full payment of the exercise price (or on a cashless basis, if applicable), by certified or official bank check payable to us, for the number of Warrants being exercised. The Warrant holders do not have the rights or privileges of holders of Class A Common Stock and any voting rights until they exercise their Warrants and receive Class A Common Stock. After the issuance of Class A Common Stock upon exercise of any Warrants, each Warrant holder will be entitled to one vote for each share held of record on all matters to be voted on by stockholders.
Private Placement Warrants
The Private Warrants (including the Class A Common Stock issuable upon exercise of the Private Warrants) were not be transferable, assignable or salable until 30 days after the Closing Date (except, among other limited exceptions to certain persons or entities affiliated with the initial purchasers of the Private Warrants) and they will not be redeemable by us for cash so long as they are held by the initial purchasers or their permitted transferees. The initial purchasers, or their permitted transferees, have the option to exercise the Private Warrants on a cashless basis. Except as described herein, the Private Warrants have terms and provisions that are identical to those of the Public Warrants. If the Private Warrants are held by holders other than the initial purchasers or their permitted transferees, the Private Warrants will be redeemable by us and exercisable by the holders on the same basis as the Public Warrants.
If holders of the Private Warrants elect to exercise them on a cashless basis, they would pay the exercise price by surrendering his, her or its Warrants for that number of shares of Class A Common Stock equal to the
 
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quotient obtained by dividing (x) the product of the number of shares of Class A Common Stock underlying the Warrants, multiplied by the excess of the “fair market value” of the Class A Common Stock (defined below) over the exercise price of the Warrants by (y) the fair market value. The “fair market value” will mean the average closing price of the Class A Common Stock for the 10 trading days ending on the third trading day prior to the date on which the notice of exercise is sent to the warrant agent. The agreement that the Private Warrants would be exercisable on a cashless basis so long as they were held by the initial purchasers or their permitted transferees was due to the fact that it was not known at the time of issuance whether such initial purchasers would be affiliated with us following the Closing. Because of their affiliation with us, such initial purchasers’ ability to sell our securities in the open market is significantly limited. We have policies in place that prohibit insiders from selling our securities except during specific periods of time. Even during such periods of time when insiders will be permitted to sell our securities, an insider cannot trade in the securities if he or she is in possession of material
non-public
information. Accordingly, unlike public stockholders who could exercise their warrants and sell the shares of Class A Common Stock received upon such exercise freely in the open market in order to recoup the cost of such exercise, the insiders are significantly restricted from selling such securities.
Dividends
We have not paid any cash dividends on the Class A Common Stock to date and do not intend to pay any cash dividends in the foreseeable future. The payment of cash dividends in the future will be dependent upon our revenue and earnings, if any, capital requirements, liabilities and related reserves, and general financial condition. The payment of any cash dividends will be within the discretion of the Board from time to time and subject to applicable Delaware law. It is the present intention of the Board to retain all earnings, if any, for use in business operations and, accordingly, the Board does not anticipate declaring any dividends in the foreseeable future. Further, the Company’s ability to declare dividends is currently limited by restrictive covenants in connection with the Company’s credit facility.
Transfer Agent and Warrant Agent
The transfer agent for our Class A Common Stock and warrant agent for our Warrants is Continental Stock Transfer & Trust Company. We have agreed to indemnify Continental Stock Transfer & Trust Company in its roles as transfer agent and warrant agent, its agents and each of its stockholders, directors, officers and employees against all claims and losses that may arise out of acts performed or omitted for its activities in that capacity, except for any liability due to any gross negligence or intentional misconduct of the indemnified person or entity.
Anti-Takeover Provisions
Business Combinations
We are subject to the provisions of Section 203 of the DGCL regulating corporate takeovers. This statute prevents certain Delaware corporations, under certain circumstances, from engaging in a “business combination” with:
 
  •  
a stockholder who owns 15% or more of our outstanding voting stock (otherwise known as an “interested stockholder”);
 
  •  
an affiliate of an interested stockholder; or
 
  •  
an associate of an interested stockholder, for three years following the date that the stockholder became an interested stockholder.
A “business combination” includes a merger or sale of more than 10% of our assets. However, the above provisions of Section 203 do not apply if:
 
  •  
the Board approves the transaction that made the stockholder an “interested stockholder,” prior to the date of the transaction;
 
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  •  
after the completion of the transaction that resulted in the stockholder becoming an interested stockholder, that stockholder owned at least 85% of our voting stock outstanding at the time the transaction commenced, other than statutorily excluded shares of common stock; or
 
  •  
on or subsequent to the date of the transaction, the initial business combination is approved by the Board and authorized at a meeting of our stockholders, and not by written consent, by an affirmative vote of at least
two-thirds
of the outstanding voting stock not owned by the interested stockholder.
Authorized but Unissued Shares
Our authorized but unissued Common Stock and preferred stock are available for future issuances without stockholder approval and could be utilized for a variety of corporate purposes, including future offerings to raise additional capital, acquisitions and employee benefit plans. The existence of authorized but unissued and unreserved Common Stock and preferred stock could render more difficult or discourage an attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise.
Exclusive Forum for Certain Lawsuits
The Amended and Restated Charter provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for any stockholder (including a beneficial owner) to bring any: (i) derivative action or proceeding brought on behalf of the Company; (ii) action asserting a claim of breach of fiduciary duty owed by any of the our directors, officers or other employees or our stockholders; (iii) action asserting a claim against us, our directors, officers or employees arising pursuant to any provision of the DGCL or the Amended and Restated Charter or Amended and Restated Bylaws; or (iv) action asserting a claim against us, our directors, officers or employees governed by the internal affairs doctrine, and if brought outside of Delaware, the stockholder bringing the suit will be deemed to have consented to service of process on such stockholder’s counsel, except for, as to each of (i) through (iv) above, any claim (A) as to which the Court of Chancery determines that there is an indispensable party not subject to the jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten days following the determination), (B) that is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery, (C) for which the Court of Chancery does not have subject matter jurisdiction, or (D) any action arising under the Securities Act as to which the Court of Chancery and the federal district court for the District of Delaware shall have concurrent jurisdiction.
Under the Securities Act, federal and state courts have concurrent jurisdiction over all suits brought to enforce any duty or liability created by the Securities Act, and stockholders cannot waive compliance with the federal securities laws and the rules and regulations thereunder. Accordingly, there is uncertainty as to whether a court would enforce such a forum selection provision as written in connection with claims arising under the Securities Act.
This forum selection clause may also discourage claims or limit stockholders’ ability to submit claims in a judicial forum that they find favorable and may result in additional costs for a stockholder seeking to bring a claim. While we believe the risk of a court declining to enforce this forum selection clause is low, if a court were to determine the forum selection clause to be inapplicable or unenforceable in an action, we may incur additional costs in conjunction with our efforts to resolve the dispute in an alternative jurisdiction, which could have a negative impact on our results of operations and financial condition.
Notwithstanding the foregoing, the forum selection clause will not apply to suits brought to enforce any liability or duty created by the Exchange Act or any other claim for which the federal district courts of the United States of America have exclusive jurisdiction. Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder.
 
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Special Meeting of Stockholders
Our Amended and Restated Bylaws provide that special meetings of our stockholders may be called only by a majority vote of our board of directors, by our Chief Executive Officer or by our Executive Chair or Chair of the Board.
Advance Notice Requirements for Stockholder Proposals and Director Nominations
Our Amended and Restated Bylaws provide that stockholders seeking to bring business before our annual meeting of stockholders, or to nominate candidates for election as directors at our annual meeting of stockholders, must provide timely notice of their intent in writing. To be timely, a stockholder’s notice will need to be received by the company secretary at our principal executive offices not later than the close of business on the 90th day nor earlier than the opening of business on the 120th day prior to the anniversary date of the immediately preceding annual meeting of stockholders. Pursuant to Rule
14a-8
of the Exchange Act, proposals seeking inclusion in our annual proxy statement must comply with the notice periods contained therein. Our Amended and Restated Bylaws also specify certain requirements as to the form and content of a stockholders’ meeting. These provisions may preclude our stockholders from bringing matters before our annual meeting of stockholders or from making nominations for directors at our annual meeting of stockholders.
Action by written consent
Any action required or permitted to be taken by our common stockholders must be effected by a duly called annual or special meeting of such stockholders and may not be effected by written consent of the stockholders other than with respect to any shares of Class B Common Stock that may in the future be outstanding.
Classified Board of Directors
Our board of directors will initially be divided into three classes, Class I, Class II and Class III, with members of each class serving staggered three-year terms. There is no cumulative voting with respect to the election of directors, with the result that the holders of more than 50%of the shares voted for the election of directors can elect all of the directors.
The Amended and Restated Charter provides that the authorized number of directors may be changed only by resolution of the board of directors. Subject to the terms of any preferred stock, any or all of the directors may be removed from office at any time, but only for cause and only by the affirmative vote of holders of a majority of the voting power of all then outstanding shares of our capital stock entitled to vote generally in the election of directors, voting together as a single class. Any vacancy on our board of directors, including a vacancy resulting from an enlargement of our board of directors, may be filled only by vote of a majority of our directors then in office. As a result, in most circumstances, a person can gain control of our board only by successfully engaging in a proxy contest at two or more annual meetings.
Rule 144
Pursuant to Rule 144 under the Securities Act (“Rule 144”), a person who has beneficially owned restricted securities would be entitled to sell their securities provided that (i) such person is not deemed to have been one of our affiliates at the time of, or at any time during the three months preceding, a sale and (ii) we are subject to the Exchange Act periodic reporting requirements for at least three months before the sale and have filed all required reports under Section 13 or 15(d) of the Exchange Act during the 12 months (or such shorter period as we were required to file reports) preceding the sale.
Persons who have beneficially owned restricted securities for at least six months but who are our affiliates at the time of, or at any time during the three months preceding, a sale, would be subject to additional restrictions,
 
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by which such person would be entitled to sell within any three-month period only a number of securities that does not exceed the greater of:
 
  •  
1% of the total number of shares or other units of the class of securities then outstanding; or
 
  •  
the average weekly reported trading volume of the class of securities during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale.
 
  •  
Sales by our affiliates under Rule 144 are also limited by manner of sale provisions and notice requirements and to the availability of current public information about us.
Restrictions on the Use of Rule 144 by Shell Companies or Former Shell Companies
Rule 144 is not available for the resale of securities initially issued by shell companies (other than business combination related shell companies) or issuers that have been at any time previously a shell company. However, Rule 144 also includes an important exception to this prohibition if the following conditions are met:
 
  •  
the issuer of the securities that was formerly a shell company has ceased to be a shell company;
 
  •  
the issuer of the securities is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act;
 
  •  
the issuer of the securities has filed all Exchange Act reports and material required to be filed, as applicable, during the preceding 12 months (or such shorter period that the issuer was required to file such reports and materials), other than Form
8-K
reports; and
 
  •  
at least one year has elapsed from the time that the issuer filed current Form 10 type information with the SEC reflecting its status as an entity that is not a shell company.
Following the Closing, the Company ceased to be a shell company, and so, once the conditions set forth in the exceptions listed above are satisfied, Rule 144 will become available for the resale of our securities.
Lock-Up
Agreements
Certain of our stockholders are subject to certain restrictions on transfer until the termination of applicable
lock-up
periods. See the section entitled “
Certain Relationships with Selling Securityholders” for
lock-up
restrictions on our securities under the
lock-up
agreements
.
Registration Rights
We have agreed to register certain of our securities. See the section entitled “
Certain Relationships with Selling Securityholders
—
Amended and Restated Registration Rights Agreement
” for a description of the Amended and Restated Registration Rights Agreement.
As described above under “
Warrants
,” we also agreed pursuant to the Warrant Agreement to file a registration statement covering the shares of Class A Common Stock issuable upon exercise of the Warrants.
Limitation of Liability and Indemnification
See the section entitled “
Management
—
Limitation on Liability and Indemnification Matters
” for a discussion of certain matters related to the limitation of liability and indemnification of our directors and officers.
Listing of Securities
Our Class A Common Stock and Public Warrants are listed on the Nasdaq Global Select Market under the symbols “CMAX” and “CMAXW,” respectively.
 
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PLAN OF DISTRIBUTION
We are registering the offering of up to 5,791,667 shares of our Class A Common Stock issuable upon the exercise of the Public Warrants and Private Warrants. We are also registering the resale of securities by the Selling Securityholders or their permitted transferees from time to time. The securities we are registering for resale will permit the Selling Securityholders to conduct public secondary trading of these securities from time to time after the date of this prospectus. We will not receive any of the proceeds from the sale of the securities offered by this prospectus. We will receive up to an aggregate of approximately $66.6 million from the exercise of the Warrants assuming the exercise in full of all of the Warrants for cash. The aggregate proceeds to the Selling Securityholders from the sale of the securities will be the purchase price of the securities less any discounts and commissions. We will not pay any brokers’ or underwriters’ discounts and commissions in connection with the registration and sale of the securities covered by this prospectus. The Selling Securityholders may offer and sell, from time to time, their respective shares of Class A Common Stock and Private Warrants covered by this prospectus. The Selling Securityholders will act independently of us in making decisions with respect to the timing, manner and size of each sale. Such sales may be made on one or more exchanges or in the
over-the-counter
market or otherwise, at prices and under terms then prevailing or at prices related to the then current market price or in negotiated transactions. The Selling Securityholders may sell their securities by one or more of, or a combination of, the following methods:
 
  •  
purchases by a broker-dealer as principal and resale by such broker-dealer for its own account pursuant to this prospectus;
 
  •  
ordinary brokerage transactions and transactions in which the broker solicits purchasers;
 
  •  
block trades in which the broker-dealer so engaged will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;
 
  •  
an
over-the-counter
distribution in accordance with the rules of Nasdaq;
 
  •  
through trading plans entered into by a Selling Securityholder pursuant to
Rule 10b5-1
under the Exchange Act that are in place at the time of an offering pursuant to this prospectus and any applicable prospectus supplement hereto that provide for periodic sales of their securities on the basis of parameters described in such trading plans;
 
  •  
short sales;
 
  •  
distribution to employees, members, limited partners or stockholders of the Selling Securityholders;
 
  •  
through the writing or settlement of options or other hedging transaction, whether through an options exchange or otherwise;
 
  •  
by pledge to secured debts and other obligations;
 
  •  
delayed delivery arrangements;
 
  •  
to or through underwriters or agents;
 
  •  
in “at the market” offerings, as defined in Rule 415 under the Securities Act, at negotiated prices, at prices prevailing at the time of sale or at prices related to such prevailing market prices, including sales made directly on a national securities exchange or sales made through a market maker other than on an exchange or other similar offerings through sales agents;
 
  •  
in privately negotiated transactions;
 
  •  
in options transactions; and
 
  •  
through a combination of any of the above methods of sale, as described below, or any other method permitted pursuant to applicable law.
 
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In addition, any securities that qualify for sale pursuant to Rule 144 may be sold under Rule 144 rather than pursuant to this prospectus.
To the extent required, this prospectus may be amended or supplemented from time to time to describe a specific plan of distribution. In connection with distributions of the securities or otherwise, the Selling Securityholders may enter into hedging transactions with broker-dealers or other financial institutions. In connection with such transactions, broker-dealers or other financial institutions may engage in short sales of the securities in the course of hedging the positions they assume with Selling Securityholders. The Selling Securityholders may also sell the securities short and redeliver the securities to close out such short positions. The Selling Securityholders may also enter into option or other transactions with broker-dealers or other financial institutions which require the delivery to such broker-dealer or other financial institution of securities offered by this prospectus, which securities such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction). The Selling Securityholders may also pledge securities to a broker-dealer or other financial institution, and, upon a default, such broker-dealer or other financial institution, may effect sales of the pledged securities pursuant to this prospectus (as supplemented or amended to reflect such transaction).
A Selling Securityholder may enter into derivative transactions with third parties, or sell securities not covered by this prospectus to third parties in privately negotiated transactions. If the applicable prospectus supplement indicates, in connection with those derivatives, the third parties may sell securities covered by this prospectus and the applicable prospectus supplement, including in short sale transactions. If so, the third party may use securities pledged by any Selling Securityholder or borrowed from any Selling Securityholder or others to settle those sales or to close out any related open borrowings of stock, and may use securities received from any Selling Securityholder in settlement of those derivatives to close out any related open borrowings of stock. The third party in such sale transactions will be an underwriter and will be identified in the applicable prospectus supplement (or a post-effective amendment). In addition, any Selling Securityholder may otherwise loan or pledge securities to a financial institution or other third party that in turn may sell the securities short using this prospectus. Such financial institution or other third party may transfer its economic short position to investors in our securities or in connection with a concurrent offering of other securities.
In effecting sales, broker-dealers or agents engaged by the Selling Securityholders may arrange for other broker-dealers to participate. Broker-dealers or agents may receive commissions, discounts or concessions from the Selling Securityholders in amounts to be negotiated immediately prior to the sale.
In offering the securities covered by this prospectus, the Selling Securityholders and any broker-dealers who execute sales for the Selling Securityholders may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales. Any profits realized by the Selling Securityholders and the compensation of any broker-dealer may be deemed to be underwriting discounts and commissions.
In order to comply with the securities laws of certain states, if applicable, the securities must be sold in such jurisdictions only through registered or licensed brokers or dealers. In addition, in certain states the securities may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with.
We have advised the Selling Securityholders that the anti-manipulation rules of Regulation M under the Exchange Act may apply to sales of securities in the market and to the activities of the Selling Securityholders and their affiliates. In addition, we will make copies of this prospectus available to the Selling Securityholders for the purpose of satisfying the prospectus delivery requirements of the Securities Act. The Selling Securityholders may indemnify any broker-dealer that participates in transactions involving the sale of the securities against certain liabilities, including liabilities arising under the Securities Act.
At the time a particular offer of securities is made, if required, a prospectus supplement will be distributed that will set forth the number of securities being offered and the terms of the offering, including the name of any
 
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underwriter, dealer or agent, the purchase price paid by any underwriter, any discount, commission and other item constituting compensation, any discount, commission or concession allowed or reallowed or paid to any dealer, and the proposed selling price to the public.
Certain agents, underwriters and dealers, and their associates and affiliates, may be customers of, have borrowing relationships with, engage in other transactions with, or perform services, including investment banking services, for us or one or more of our respective affiliates and/or the Selling Securityholders or one or more of its respective affiliates in the ordinary course of business for which they receive compensation.
A holder of Public Warrants or Private Warrants may exercise its Public Warrants or Private Warrants in accordance with the Warrant Agreement on or before the expiration date set forth therein by surrendering, at the office of the warrant agent, Continental Stock Transfer & Trust Company, the certificate evidencing such Public Warrants or Private Warrants, with the form of election to purchase set forth thereon, properly completed and duly executed, accompanied by full payment of the exercise price and any and all applicable taxes due in connection with the exercise of such Public Warrants or Private Warrants, subject to any applicable provisions relating to cashless exercises in accordance with the Warrant Agreement.
We have agreed to indemnify the Selling Securityholders party to the Amended and Restated Registration Rights Agreement against certain civil liabilities, including certain liabilities under the Securities Act, relating to the registration of the shares of Class A Common Stock or Private Warrants offered by them pursuant to this prospectus, and such Selling Securityholders will be entitled to contribution from us with respect to those liabilities. The Selling Securityholders party to the Amended and Restated Registration Rights Agreement will indemnify us against certain civil liabilities, including liabilities under the Securities Act, and we will be entitled to contribution from such Selling Securityholders with respect to those liabilities. In addition, we or the Selling Securityholders party to the Amended and Restated Registration Rights Agreement may provide agents and underwriters with indemnification against civil liabilities, including liabilities under the Securities Act, or contribution with respect to payments that the agents or underwriters may make with respect to those liabilities. For additional information regarding the Amended and Restated Registration Rights Agreement, see the section entitled “
Certain Relationships with Selling Securityholders
—
Amended and Restated Registration Rights Agreement
”
 
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CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of certain U.S. federal income tax considerations generally applicable to the ownership and disposition of our Class A Common Stock and Warrants, which we refer to collectively as our securities. This summary is based upon U.S. federal income tax law as of the date of this prospectus, which is subject to change or differing interpretations, possibly with retroactive effect. This summary does not discuss all aspects of U.S. federal income taxation that may be important to particular investors in light of their individual circumstances, including investors subject to special tax rules (e.g., financial institutions, insurance companies, broker-dealers, dealers or traders in securities,
tax-exempt
organizations (including private foundations), taxpayers that have elected
mark-to-market
accounting, S corporations, regulated investment companies, real estate investment trusts, passive foreign investment companies, controlled foreign corporations, U.S. Holders (as defined below) that will hold Class A Common Stock or Warrants as part of a straddle, hedge, conversion, or other integrated transaction for U.S. federal income tax purposes, expatriates or former long-term residents of the United States, or investors that have a functional currency other than the U.S. dollar), all of whom may be subject to tax rules that differ materially from those summarized below. This summary does not discuss other U.S. federal tax consequences (e.g., estate or gift tax), any state, local, or
non-U.S.
tax considerations or the Medicare tax or alternative minimum tax. In addition, this summary is limited to investors that will hold our securities as “capital assets” (generally, property held for investment) under the Internal Revenue Code of 1986, as amended (the “Code”), and that acquire our Class A Common Stock and Warrants for cash pursuant to this prospectus. No ruling from the IRS has been or will be sought regarding any matter discussed herein. No assurance can be given that the IRS would not assert, or that a court would not sustain, a position contrary to any of the tax aspects set forth below.
For purposes of this summary, a “U.S. Holder” is a beneficial holder of our securities who or that, for U.S. federal income tax purposes is:
 
  •  
an individual who is a U.S. citizen or resident of the United States, as determined for U.S. federal income tax purposes;
 
  •  
a corporation or other entity treated as a corporation for United States federal income tax purposes created in, or organized under the law of, the United States or any state or political subdivision thereof;
 
  •  
an estate the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source; or
 
  •  
a trust (A) the administration of which is subject to the primary supervision of a United States court and which has one or more United States persons (within the meaning of Section 7701(a)(30) of the Code) who have the authority to control all substantial decisions of the trust or (B) that has in effect a valid election under applicable U.S. Department of Treasury regulations (the “Treasury Regulations”) to be treated as a United States person for U.S. federal income tax purposes.
A
“non-U.S.
Holder” is a beneficial holder of our securities who or that is neither a U.S. Holder nor an entity or arrangement treated as a partnership for U.S. federal income tax purposes.
If a partnership (including an entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds our securities, the tax treatment of a partner, member or other beneficial owner in such partnership will generally depend upon the status of the partner, member or other beneficial owner, the activities of the partnership and certain determinations made at the partner, member or other beneficial owner level. If you are a partner, member or other beneficial owner of a partnership holding our securities, you are urged to consult your tax advisor regarding the tax consequences of the ownership and disposition of our securities.
THIS DISCUSSION OF U.S. FEDERAL INCOME TAX CONSIDERATIONS IS FOR GENERAL INFORMATION PURPOSES ONLY AND IS NOT TAX ADVICE. PROSPECTIVE HOLDERS SHOULD CONSULT THEIR TAX ADVISORS CONCERNING THE U.S. FEDERAL INCOME TAX
 
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CONSEQUENCES TO THEM OF OWNING AND DISPOSING OF OUR SECURITIES, AS WELL AS THE APPLICATION OF ANY, STATE, LOCAL AND
NON-U.S.
INCOME, ESTATE AND OTHER TAX CONSIDERATIONS.
U.S. Federal Income Tax Considerations For U.S. Holders
Taxation of Distributions
If we pay distributions or make constructive distributions (other than certain distributions of our capital stock or rights to acquire our capital stock) to U.S. Holders of shares of our Class A Common Stock, such distributions generally will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Distributions in excess of our current and accumulated earnings and profits will constitute a return of capital that will be applied against and reduce (but not below zero) the U.S. Holder’s adjusted tax basis in our Class A Common Stock. Any remaining excess will be treated as gain realized on the sale or other disposition of the Class A Common Stock and will be treated as described under “
U.S. Federal Income Tax Considerations For U.S. Holders
—
Gain or Loss on Sale, Taxable Exchange or Other Taxable Disposition of Class
 A Common Stock
” below.
Dividends we pay to a U.S. Holder that is a taxable corporation will generally qualify for the dividends received deduction if the requisite holding period is satisfied. With certain exceptions (including dividends treated as investment income for purposes of investment interest deduction limitations), and provided certain holding period requirements are met, dividends we pay to a
non-corporate
U.S. Holder will generally constitute “qualified dividends” that will be subject to tax at the maximum tax rate accorded to long-term capital gains. If the holding period requirements are not satisfied, a corporation may not be able to qualify for the dividends received deduction and would have taxable income equal to the entire dividend amount, and
non-corporate
U.S. holders may be subject to tax on such dividend at ordinary income tax rates instead of the preferential rates that apply to qualified dividend income.
Gain or Loss on Sale, Taxable Exchange or Other Taxable Disposition of Class A Common Stock
A U.S. Holder generally will recognize gain or loss on the sale, taxable exchange or other taxable disposition of our Class A Common Stock. Any such gain or loss will be capital gain or loss and will be long-term capital gain or loss if the U.S. Holder’s holding period for the Class A Common Stock so disposed of exceeds one year. The amount of gain or loss recognized will generally be equal to the difference between (1) the sum of the amount of cash and the fair market value of any property received in such disposition and (2) the U.S. Holder’s adjusted tax basis in its Class A Common Stock so disposed of. A U.S. Holder’s adjusted tax basis in its Class A Common Stock will generally equal the U.S. Holder’s acquisition cost for such Class A Common Stock (or, in the case of Class A Common Stock received upon exercise of a Warrant, the U.S. Holder’s initial basis for such Class A Common Stock, as discussed below), less any prior distributions treated as a return of capital. The deductibility of capital losses is subject to limitations. Long-term capital gains recognized by
non-corporate
U.S. Holders are generally eligible for reduced rates of tax. If the U.S. Holder’s holding period for the Class A Common Stock so disposed of is one year or less, any gain on a sale or other taxable disposition of the shares would be subject to short-term capital gain treatment and would be taxed at ordinary income tax rates. The deductibility of capital losses is subject to limitations.
Exercise of a Warrant
Except as discussed below with respect to the cashless exercise of a Warrant, a U.S. Holder generally will not recognize taxable gain or loss upon the exercise of a Warrant for cash. The U.S. Holder’s initial tax basis in the share of our Class A Common Stock received upon exercise of the Warrant will generally be an amount equal to the sum of the U.S. Holder’s acquisition cost of the Warrant and the exercise price of such Warrant. It is
 
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unclear whether a U.S. Holder’s holding period for the Class A Common Stock received upon exercise of the warrant would commence on the date of exercise of the Warrant or the day following the date of exercise of the Warrant; however, in either case the holding period will not include the period during which the U.S. Holder held the Warrants.
The tax consequences of a cashless exercise of a Warrant are not clear under current tax law. A cashless exercise may be nontaxable, either because the exercise is not a realization event or because the exercise is treated as a recapitalization for U.S. federal income tax purposes. In either situation, a U.S. Holder’s initial tax basis in the Class A Common Stock received generally should equal the holder’s adjusted tax basis in the Warrant. If the cashless exercise were treated as not being a realization event, it is unclear whether a U.S. Holder’s holding period for the Class A Common Stock would commence on the date of exercise of the Warrant or the day following the date of exercise of the Warrant; in either case, the holding period would not include the period during which the U.S. Holder held the Warrant. If, instead, the cashless exercise were treated as a recapitalization, the holding period of the Class A Common Stock generally would include the holding period of the Warrant.
It is also possible that a cashless exercise of a Warrant could be treated in part as a taxable exchange in which gain or loss is recognized. In such event, a U.S. Holder could be deemed to have surrendered a portion of the Warrants being exercised having a value equal to the exercise price of such Warrants in satisfaction of such exercise price. Although not free from doubt, such U.S. Holder generally should recognize capital gain or loss in an amount equal to the difference between the fair market value of the Warrants deemed surrendered to satisfy the exercise price and the U.S. Holder’s adjusted tax basis in such Warrants. In this case, a U.S. Holder’s initial tax basis in the Class A Common Stock received would equal the sum of the exercise price and the U.S. holder’s adjusted tax basis in the Warrants exercised. It is unclear whether a U.S. Holder’s holding period for the Class A Common Stock would commence on the date of exercise of the warrant or the day following the date of exercise of the Warrant; in either case, the holding period would not include the period during which the U.S. Holder held the Warrant. Due to the uncertainty and absence of authority on the U.S. federal income tax treatment of a cashless exercise, including when a U.S. Holder’s holding period would commence with respect to the Class A Common Stock received, U.S. Holders are urged to consult their tax advisors regarding the tax consequences of a cashless exercise of a Warrant.
Sale, Exchange, Redemption or Expiration of a Warrant
Upon a sale, exchange (other than by exercise), redemption (other than a redemption for Class A Common Stock), or expiration of a Warrant, a U.S. Holder will recognize taxable gain or loss in an amount equal to the difference between (1) the amount realized upon such disposition or expiration and (2) the U.S. Holder’s adjusted tax basis in the Warrant. A U.S. Holder’s adjusted tax basis in its Warrants will generally equal the U.S. Holder’s acquisition cost, increased by the amount of any constructive distributions included in income by such U.S. Holder (as described below under “
U.S. Federal Income Tax Considerations For U.S. Holders
—
Possible Constructive Distributions
”). Such gain or loss generally will be treated as long-term capital gain or loss if the Warrant is held by the U.S. Holder for more than one year at the time of such disposition or expiration. If a Warrant is allowed to lapse unexercised, a U.S. Holder will generally recognize a capital loss equal to such holder’s adjusted tax basis in the Warrant. The deductibility of capital losses is subject to certain limitations. A redemption of Warrants for Class A Common Stock described in this prospectus under “
Description of Securities
—
Warrants
—
Public Warrants
” should be treated as a “recapitalization” for U.S. federal income tax purposes. Accordingly, you should not recognize any gain or loss on the redemption of Warrants for shares of our Class A Common Stock. Your aggregate initial tax basis in the shares of Class A Common Stock received in the redemption should equal your aggregate adjusted tax basis in your Warrants redeemed and your holding period for the shares of Class A Common Stock received in redemption of your Warrants should include your holding period for your surrendered Warrants.
 
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Possible Constructive Distributions
The terms of each Warrant provide for an adjustment to the number of shares of Class A Common Stock for which the Warrant may be exercised or to the exercise price of the Warrant in certain events, as discussed in the section of this prospectus entitled “
Description of Securities
—
Warrants
—
Public Warrants
.” An adjustment which has the effect of preventing dilution generally should not be a taxable event. Nevertheless, a U.S. Holder of Warrants would be treated as receiving a constructive distribution from us if, for example, the adjustment increases the holder’s proportionate interest in our assets or earnings and profits (e.g., through an increase in the number of shares of Class A Common Stock that would be obtained upon exercise) as a result of a distribution of cash to the holders of shares of our Class A Common Stock which is taxable to such holders as a distribution. Such constructive distribution would be subject to tax as described above under “
U.S. Federal Income Tax Considerations For U.S. Holders
—
Taxation of Distributions
” in the same manner as if such U.S. Holder received a cash distribution from us on Class A Common Stock equal to the fair market value of such increased interest.
Information Reporting and Backup Withholding
In general, information reporting requirements may apply to dividends paid to a U.S. Holder and to the proceeds of the sale or other disposition of shares of Class A Common Stock and Warrants, unless the U.S. Holder is an exempt recipient. Backup withholding (currently at 24%) may apply to such payments if the U.S. Holder fails to provide a taxpayer identification number, a certification of exempt status or has been notified by the IRS that it is subject to backup withholding (and such notification has not been withdrawn).
Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules will be allowed as a credit against a U.S. Holder’s U.S. federal income tax liability and may entitle such holder to a refund, provided the required information is timely furnished to the IRS.
U.S. Federal Income Tax Considerations For
Non-U.S.
Holders
Taxation of Distributions
In general, any distributions (including constructive distributions) we make to a
non-U.S.
Holder of our Class A Common Stock, to the extent paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles), will constitute dividends for U.S. federal income tax purposes and, provided such dividends are not effectively connected with the
non-U.S.
Holder’s conduct of a trade or business within the United States, we will be required to withhold tax from the gross amount of the dividend at a rate of 30%, unless such
non-U.S.
Holder is eligible for a reduced rate of withholding tax under an applicable income tax treaty and provides proper certification of its eligibility for such reduced rate (usually on an IRS Form
W-8BEN
or
W-8BEN-E,
as applicable). In the case of any constructive dividend (as described below under “
U.S. Federal Income Tax Considerations For
Non-U.S.
Holders
—
Possible Constructive Distributions
”), it is possible that this tax would be withheld from any amount owed to a
non-U.S.
Holder by the applicable withholding agent, including cash distributions on other property or sale proceeds from Warrants or other property subsequently paid or credited to such holder. Any distribution not constituting a dividend will be treated first as reducing (but not below zero) the
non-U.S.
Holder’s adjusted tax basis in its shares of our Class A Common Stock and, to the extent such distribution exceeds the
non-U.S.
Holder’s adjusted tax basis, as gain realized from the sale or other disposition of the Class A Common Stock, which will be treated as described under “
U.S. Federal Income Tax Considerations For
Non-U.S.
Holders
—
Gain on Sale, Taxable Exchange or Other Taxable Disposition of Class
 A Common Stock and Warrants
” below. In addition, if we determine that we are likely to be classified as a “United States real property holding corporation” (see “
U.S. Federal Income Tax Considerations For
Non-U.S.
Holders
—
Gain on Sale, Exchange or Other Taxable Disposition of Class
 A Common Stock and Warrants
” below), we will withhold 15% of any distribution that exceeds our current and accumulated earnings and profits.
Dividends we pay to a
non-U.S.
Holder that are effectively connected with such
non-U.S.
Holder’s conduct of a trade or business within the United States (or if a tax treaty applies are attributable to a U.S. permanent
 
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establishment or fixed base maintained by the
non-U.S.
Holder) will generally not be subject to U.S. withholding tax, provided such
non-U.S.
Holder complies with certain certification and disclosure requirements (generally by providing an IRS Form
W-8ECI).
Instead, such dividends generally will be subject to U.S. federal income tax, net of certain deductions, at the same graduated individual or corporate rates applicable to U.S. Holders. If the
non-U.S.
Holder is a corporation, dividends that are effectively connected income may also be subject to a “branch profits tax” at a rate of 30% (or such lower rate as may be specified by an applicable income tax treaty).
Exercise of a Warrant
The U.S. federal income tax treatment of a
non-U.S.
Holder’s exercise of a Warrant will generally correspond to the U.S. federal income tax treatment of the exercise of a Warrant by a U.S. Holder, as described under “
U.S. Federal Income Tax Considerations For U.S. Holders
—
Exercise of a Warrant
” above, although to the extent a cashless exercise results in a taxable exchange, the tax consequences to the
non-U.S.
Holder would be the same as those described below in “
U.S. Federal Income Tax Considerations For
Non-U.S.
Holders
—
Gain on Sale, Exchange or Other Taxable Disposition of Class
 A Common Stock and Warrants
.”
Redemption of Warrants for Class A Common Stock
A redemption of Warrants for Class A Common Stock described in this prospectus under “
Description of Securities
—
Warrants
—
Public Warrants
” should be treated as a “recapitalization” for U.S. federal income tax purposes. Accordingly, you should not recognize any gain or loss on the redemption of Warrants for our Class A Common Stock. Your aggregate initial tax basis in the shares of Class A Common Stock received in the redemption should equal your aggregate adjusted tax basis in your warrants redeemed and your holding period for the shares of Class A Common Stock received in redemption of your Warrants should include your holding period for your surrendered Warrants.
Gain on Sale, Exchange or Other Taxable Disposition of Class A Common Stock and Warrants
A
non-U.S.
Holder generally will not be subject to U.S. federal income or withholding tax in respect of gain recognized on a sale, taxable exchange or other taxable disposition of our Class A Common Stock or Warrants or an expiration or redemption of our warrants, unless:
 
  •  
the gain is effectively connected with the conduct of a trade or business by the
non-U.S.
Holder within the United States (and, if an applicable tax treaty so requires, is attributable to a U.S. permanent establishment or fixed base maintained by the
non-U.S.
Holder);
 
  •  
the
non-U.S.
Holder is an individual who is present in the United States for 183 days or more in the taxable year of disposition and certain other conditions are met; or
 
  •  
we are or have been a “United States real property holding corporation” for U.S. federal income tax purposes at any time during the shorter of the five-year period ending on the date of disposition or the period that the
non-U.S.
Holder held our Class A Common Stock or Warrants and, in the case where shares of our Class A Common Stock are regularly traded on an established securities market, the
non-U.S.
Holder has owned, directly or constructively, more than 5% of our Class A Common Stock at any time within the shorter of the five-year period preceding the disposition or such
Non-U.S.
holder’s holding period for the shares of our Class A Common Stock. There can be no assurance that our Class A Common Stock will be treated as regularly traded on an established securities market for this purpose.
Gain described in the first bullet point above will be subject to tax at generally applicable U.S. federal income tax rates as if the
non-U.S.
Holder were a U.S. resident for U.S. federal income tax purposes. Any gain described in the first bullet point above of a
non-U.S.
Holder that is a foreign corporation may also be subject to an additional “branch profits tax” at a 30% rate (or lower applicable income tax treaty rate). Gain described in the second bullet point above will generally be subject to a flat 30% U.S. federal income tax.
Non-U.S.
Holders are urged to consult their tax advisors regarding possible eligibility for benefits under income tax treaties.
 
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If the third bullet point above applies to a
non-U.S.
Holder and applicable exceptions are not available, gain recognized by such holder on the sale, exchange or other disposition of our Class A Common Stock or Warrants will be subject to tax at generally applicable U.S. federal income tax rates. In addition, a buyer of our Class A Common Stock or Warrants from such holder may be required to withhold U.S. income tax at a rate of 15% of the amount realized upon such disposition. We will be classified as a United States real property holding corporation if the fair market value of our “United States real property interests” equals or exceeds 50% of the sum of the fair market value of our worldwide real property interests plus our other assets used or held for use in a trade or business, as determined for U.S. federal income tax purposes. We do not believe we currently are or will become a United States real property holding corporation, however there can be no assurance in this regard.
Non-U.S.
Holders are urged to consult their tax advisors regarding the application of these rules.
Possible Constructive Distributions
The terms of each Warrant provide for an adjustment to the number of shares of Class A Common Stock for which the Warrant may be exercised or to the exercise price of the Warrant in certain events, as discussed in the section of this prospectus captioned “
Description of Securities
—
Warrants
—
Public Warrants
.” An adjustment which has the effect of preventing dilution generally should not be a taxable event. Nevertheless, a
non-U.S.
Holder of Warrants would be treated as receiving a constructive distribution from us if, for example, the adjustment increases the holder’s proportionate interest in our assets or earnings and profits (e.g., through an increase in the number of shares of Class A Common Stock that would be obtained upon exercise) as a result of a distribution of cash to the holders of shares of our Class A Common Stock which is taxable to such holders as a distribution. A
non-U.S.
Holder would be subject to U.S. federal income tax withholding as described above under “
U.S. Federal Income Tax Considerations For
Non-U.S.
Holders
—
Taxation of Distributions
” under that section in the same manner as if such
non-U.S.
Holder received a cash distribution from us on Class A Common Stock equal to the fair market value of such increased interest.
Foreign Account Tax Compliance Act
Provisions of the Code and Treasury Regulations and administrative guidance promulgated thereunder commonly referred as the “Foreign Account Tax Compliance Act” (“FATCA”) generally impose withholding tax at a rate of 30% in certain circumstances on dividends (including constructive dividends) in respect of our securities which are held by or through certain foreign financial institutions (including investment funds), unless any such institution (1) enters into, and complies with, an agreement with the IRS to report, on an annual basis, information with respect to interests in, and accounts maintained by, the institution that are owned by certain U.S. persons and by certain
non-U.S.
entities that are wholly or partially owned by U.S. persons and to withhold on certain payments, or (2) if required under an intergovernmental agreement between the United States and an applicable foreign country, reports such information to its local tax authority, which will exchange such information with the U.S. authorities. An intergovernmental agreement between the United States and an applicable foreign country may modify these requirements. Accordingly, the entity through which our securities are held will affect the determination of whether such withholding is required. Similarly, dividends in respect of our securities held by an investor that is a
non-financial
non-U.S.
entity that does not qualify under certain exceptions will generally be subject to withholding tax at a rate of 30%, unless such entity either (1) certifies to us or the applicable withholding agent that such entity does not have any “substantial United States owners” or (2) provides certain information regarding the entity’s “substantial United States owners,” which will in turn be provided to the U.S. Department of Treasury. Withholding under FATCA was scheduled to apply to payments of gross proceeds from the sale or other disposition of property that produces U.S.-source interest or dividends, however, the IRS released proposed regulations that, if finalized in their proposed form, would eliminate the obligation to withhold on such gross proceeds. Although these proposed Treasury Regulations are not final, taxpayers generally may rely on them until final Treasury Regulations are issued. Prospective investors should consult their tax advisors regarding the possible implications of FATCA on their investment in our securities.
 
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Information Reporting and Backup Withholding
Information returns will be filed with the IRS in connection with payments of dividends and the proceeds from a sale or other disposition of shares of Class A Common Stock and Warrants. A
non-U.S.
Holder may have to comply with certification procedures to establish that it is not a United States person in order to avoid information reporting and backup withholding requirements. The certification procedures required to claim a reduced rate of withholding under a treaty generally will satisfy the certification requirements necessary to avoid the backup withholding as well. Backup withholding is not an additional tax. The amount of any backup withholding from a payment to a
non-U.S.
Holder will be allowed as a credit against such holder’s U.S. federal income tax liability and may entitle such holder to a refund, provided that the required information is timely furnished to the IRS.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for us by DLA Piper LLP (US). Any underwriters or agents will be advised about other issues relating to the offering by counsel to be named in the applicable prospectus supplement.
EXPERTS
The consolidated financial statements of CareMax of December 31, 2021 and 2020 and for the years ended December 31, 2021, and 2020 appearing in this prospectus have been audited by WithumSmith+Brown, PC (“Withum”), independent registered public accounting firm, as set forth in their report thereon appearing elsewhere herein and are included in reliance on such report given the authority of such firm as experts in accounting and auditing.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We file annual, quarterly and current reports, proxy statements and other information with the SEC. We have also filed a registration statement on Form
S-1,
including exhibits, under the Securities Act of 1933, as amended, with respect to the common stock offered by this prospectus. This prospectus is part of the registration statement, but does not contain all of the information included in the registration statement or the exhibits. Our SEC filings are available to the public on the internet at a website maintained by the SEC located at http://www.sec.gov.
We also maintain an Internet website at www.caremax.com. Through our website, we make available, free of charge, the following documents as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC: our Annual Reports on Form
10-K;
our proxy statements for our annual and special stockholder meetings; our Quarterly Reports on Form
10-Q;
our Current Reports on Form
8-K;
Forms 3, 4 and 5 and Schedules 13D; and amendments to those documents. The information contained on, or that may be accessed through, our website is not part of, and is not incorporated into, this prospectus.
 
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 
    
F-2
  
    
F-3
  
    
F-4
  
    
F-5
  
    
F-6
  
    
F-8
  
     F-40  
     F-41  
     F-42  
     F-43  
     F-45  
 
F-1
Table of Contents
Report of Independent Registered Public Accounting Firm
To Stockholders and the Board of Directors,
Caremax, Inc.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Caremax, Inc. (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of operations, changes in stockholders/members’ equity, and cash flows for each of the two years in the period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the Company’s auditor since 2020.
/s/ WithumSmith+Brown, PC
Red Bank, New Jersey
March 16, 2022
PCAOB ID Number 100
 
F-2
Table of Contents
CAREMAX, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
 
ITEM 1.
FINANCIAL STATEMENTS
 
    
December 31,
2021
     
December 31,
2020
  
ASSETS
                  
     
CURRENT ASSETS
                  
Cash
    $ 47,917      $ 4,934  
Accounts receivable, net
      41,998        9,395  
Inventory
      550        15  
Prepaid expenses
      17,040        183  
Risk settlements due from providers
      539        80  
Due from related parties
      —          274  
    
 
 
     
 
 
  
Total Current Assets
      108,044        14,881  
Property and equipment, net
      15,993        4,796  
Goodwill
      464,566        10,068  
Intangible assets, net
      59,811        8,575  
Deferred debt issuance costs
      1,972        —    
Other assets
      2,706        183  
    
 
 
     
 
 
  
Total Assets
    $ 653,092      $ 38,503  
 
  
 
 
 
  
 
 
 
LIABILITIES AND STOCKHOLDERS’/MEMBERS’ EQUITY
                  
 
 
 
CURRENT LIABILITIES
                  
Accounts payable
    $ 3,110      $ 1,044  
Accrued expenses
      8,686        2,572  
Accrued interest payable
      4        149  
Risk settlements due to providers
      196        643  
Current portion of long-term debt
      6,275        1,004  
Due to related parties
      —          39  
Other current liabilities
      3,687        —    
    
 
 
     
 
 
  
Total Current Liabilities
      21,959        5,451  
     
Derivative warrant liabilities
      8,375        —    
Long-term debt, less current portion
      110,960        26,325  
Other liabilities
      6,428        —    
    
 
 
     
 
 
  
Total Liabilities
      147,722        31,776  
COMMITMENTS AND CONTINGENCIES
              
STOCKHOLDERS’/MEMBER’S EQUITY
                  
Class A Common stock ($0.0001 par value; 250,000,000 shares authorized; 87,367,972 shares issued and outstanding at December 31, 2021)
      9        —    
Additional
paid-in-capital
      505,327        —    
Retained earnings
      33        —    
Member units (no par value, 200 authorized, issued and outstanding at December 31, 2020)
      —          223  
Members’ equity
      —          6,504  
    
 
 
     
 
 
  
Total Stockholders’/Members’ Equity
      505,370        6,727  
    
 
 
     
 
 
  
Total Liabilities and Stockholders’/Members’ Equity
    $ 653,092      $ 38,503  
    
 
 
     
 
 
  
The accompanying notes are an integral part of these consolidated financial statements.
 
F-3
CAREMAX, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
 
    
For the Twelve Months
Ended December 31,
    
For the Twelve Months
Ended December 31,
  
    
2021
    
2020
  
Revenue
                 
Medicare risk-based revenue
    $ 233,282     $ 103,051  
Medicaid risk-based revenue
      46,493       —    
Other revenue
      15,987       370  
    
 
 
    
 
 
  
Total revenue
      295,762       103,421  
    
 
 
    
 
 
  
Operating Expenses
                 
External provider costs
      206,747       66,050  
Cost of care
      57,566       17,373  
Sales and marketing
      4,955       1,067  
Corporate, general and administrative
      40,579       7,748  
Depreciation and amortization
      13,216       1,501  
Acquisition related costs
      1,522       —    
    
 
 
    
 
 
  
Total operating expenses
      324,585       93,739  
    
 
 
    
 
 
  
Operating (loss) income
      (28,822 )      9,682  
    
 
 
    
 
 
  
Interest (expense), net
      (4,492 )      (1,659 ) 
Gain on remeasurement of warrant liabilities
      20,757       —    
Gain on remeasurement of contingent earnout liabilities
      5,794       —    
Loss on disposal of fixed assets, net
      (50 )      —    
Gain (loss) on extinguishment of debt, net
      1,630       (451 ) 
Other expenses, net
      (1,333 )      —    
    
 
 
    
 
 
  
Income (loss) before income tax
      (6,516 )      7,572  
    
 
 
    
 
 
  
Income tax provision
      159       —    
    
 
 
    
 
 
  
Net (loss) income
    $ (6,675 )    $ 7,572  
Net (loss) income attributable to
non-controlling
interest
      —         (29 ) 
    
 
 
    
 
 
  
Net (loss) income attributable to controlling interest
    $ (6,675 )    $ 7,601  
    
 
 
    
 
 
  
Net (loss) income attributable to CareMax, Inc. Class A common stockholders
    $ (6,675 )    $ 7,601  
Weighted average basic shares outstanding
      52,620,980       10,796,069  
Weighted average diluted shares outstanding
      52,620,980       10,796,069  
Net (loss) income per share
                 
Basic
    $ (0.13 )    $ 0.70  
Diluted
    $ (0.13 )    $ 0.70  
The accompanying notes are an integral part of these consolidated financial statements.
 
F-4
CAREMAX, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’/MEMBERS’ EQUITY
(in thousands, except share data)
 
 
 
Class A
Common Stock
 
 
Additional

Paid-in-capital
 
 
Total
Controlling

Interest
 
 
Retained
Earnings /
(Accumulated

Deficit)
 
 
Noncontrolling

Interest
 
 
Total

Equity
 
 
 
Shares
 
 
Amount
 
BALANCE
—
DECEMBER 31, 2019
 
 
 —
  
 
 
$
 —
  
 
 
$
 —
  
 
 
$
 5,160
 
 
$
 —
  
 
 
$
 (214
) 
 
$
 4,946
 
Net income (loss)
 
 
—  
 
 
 
—  
 
 
 
—  
 
 
 
 7,601
 
 
 
—  
 
 
 
 (29
) 
 
 
 7,572
 
Purchase of
non-controlling
interest ownership
 
 
—  
 
 
 
—  
 
 
 
—  
 
 
 
 (2,100
) 
 
 
—  
 
 
 
—  
 
 
 
 (2,100
) 
Change in ownership due to change in
non-controlling
interest
 
 
—  
 
 
 
—  
 
 
 
—  
 
 
 
 (243
) 
 
 
—  
 
 
 
 243
 
 
 
—  
 
Distributions
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 (3,691
) 
 
 
 
 
 
 
 
 
 
 
 (3,691
) 
   
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
BALANCE
—
DECEMBER 31, 2020
     —
  
 
 
$
 —
  
 
 
$
 —
  
 
 
$
 6,727
 
 
$
 —
  
 
 
$
 (260
) 
 
$
 6,727
 
   
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
BALANCE
—
DECEMBER 31, 2020
 
 
 —
  
 
 
$
 —
  
 
 
$
 —
  
 
 
$
 6,727
 
 
$
 —
  
 
 
$
—  
 
 
$
 6,727
 
Activity prior to the business combination:
                                                        
Net loss
                             (5,185
) 
 
 
 
 
 
 
 
 
 
 
 (5,185
) 
Effects of the business combination:
                                                        
Reverse recapitalization
 
 
 28,764,819
 
 
 
 3
 
 
 
 (186,767
) 
 
 
 (1,542
) 
 
 
 1,523
 
 
 
—  
 
 
 
 (186,783
) 
Equity consideration issued to acquire IMC
 
 
 10,412,023
 
 
 
 1
 
 
 
 155,346
 
 
 
—  
 
 
 
—  
 
 
 
—  
 
 
 
 155,347
 
Shares issued for holdback
 
 
 71,000
 
 
 
—  
 
 
 
 821
 
 
 
—  
 
 
 
—  
 
 
 
—  
 
 
 
 821
 
Proceeds from the sale of Class A common stock, net
of offering costs
 
 
 41,000,000
 
 
 
 4
 
 
 
 397,525
 
 
 
—  
 
 
 
—  
 
 
 
—  
 
 
 
 397,529
 
Activity after the business combination:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity consideration issued to acquire SMA
 
 
 384,615
 
 
 
—  
 
 
 
 5,027
 
 
 
—  
 
 
 
—  
 
 
 
—  
 
 
 
 5,027
 
Equity consideration issued to acquire DNF
 
 
 2,741,528
 
 
 
—  
 
 
 
 26,072
 
 
 
—  
 
 
 
—  
 
 
 
—  
 
 
 
 26,072
 
Equity consideration issued to acquire BIX and Advantis
 
 
 293,987
 
 
 
—  
 
 
 
 2,231
 
 
 
—  
 
 
 
—  
 
 
 
—  
 
 
 
 2,231
 
Contingently issuable stock to CMG Sellers and IMC Parent
—
First Share Price Trigger on Earnout
Shares
 
 
 3,200,000
 
 
 
 1
 
 
 
 39,109
 
 
 
—  
 
 
 
—  
 
 
 
—  
 
 
 
 39,110
 
Reclassification of contingent consideration previously liability classified
 
 
—  
 
 
 
—  
 
 
 
 45,088
 
 
 
—  
 
 
 
—  
 
 
 
—  
 
 
 
 45,088
 
Proceeds from the sale of Class A common stock, net
of offering costs
 
 
 500,000
 
 
 
—  
 
 
 
 6,650
 
 
 
—  
 
 
 
—  
 
 
 
—  
 
 
 
 6,650
 
Stock compensation expense
 
 
—  
 
 
 
—  
 
 
 
 1,341
 
 
 
—  
 
 
 
—  
 
 
 
—  
 
 
 
 1,341
 
Series A Warrants issued under the Advisory
Agreement
 
 
—  
 
 
 
—  
 
 
 
 12,883
 
 
 
—  
 
 
 
—  
 
 
 
—  
 
 
 
 12,883
 
Net loss
 
 
—  
 
 
 
—  
 
 
 
—  
 
 
 
—  
 
 
 
 (1,490
) 
 
 
—  
 
 
 
 (1,490
) 
   
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
BALANCE
—
DECEMBER 31, 2021
 
 
 87,367,972
 
 
$
 9
 
 
$
 505,327
 
 
$
 —
  
 
 
$
 33
 
 
$
 —
  
 
 
$
 505,370
 
   
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
The accompanying notes are an integral part of these consolidated financial statements.
 
F-5
CAREMAX, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 
 
  
Twelve Months Ended
December 31, 2021
 
 
Twelve Months Ended
December 31, 2020
 
CASH FLOWS FROM OPERATING ACTIVITIES
  
 
Net (Loss)/Income
    $ (6,675 )    $ 7,572  
Adjustments to reconcile net (loss)/income to net cash
                
(Used in)/provided by operating activities:
 
 
 
 
 
 
 
 
Depreciation expense
      2,813       858  
Amortization expense
      10,402       643  
Amortization of debt issuance costs
      866       177  
Stock compensation expense
      1,341       —    
Change in fair value of warrant liabilities
      (20,757 )      —    
Gain on fair value change of contingent earnout shares liability
      (5,794 )      —    
(Gain) loss on extinguishment of debt
      (1,630 )      451  
Other
Non-cash,
net
      331       —    
Changes in operating assets and liabilities:
                 
Accounts receivable
      (3,836 )      (4,208 ) 
Inventory
      (85 )      (5 ) 
Prepaid expenses
      (768 )      6  
Risk settlements due from/due to providers
      (459 )      248  
Due to/from related parties
      235       (146 ) 
Other assets
      (1,501 )      12  
Accounts payable
      (984 )      (686 ) 
Accrued expenses
      1,216       394  
Other liabilities
      1,574       —    
Accrued interest
      (145 )      —    
    
 
 
    
 
 
  
Net Cash (Used In)/Provided by Operating Activities
      (23,856 )      5,316  
     
CASH FLOWS FROM INVESTING ACTIVITIES
                 
Purchase of property and equipment
      (3,990 )      (2,151 ) 
Acquisition of businesses
      (309,707 )      (2,566 ) 
Acquisition of intangible assets
      (2,882 )      —    
Asset purchase agreement holdback payment
      —         (329 ) 
Purchase of noncontrolling interest ownership
      —         (1,897 ) 
    
 
 
    
 
 
  
Net Cash Used in Investing Activities
      (316,579 )      (6,942 ) 
     
CASH FLOWS FROM FINANCING ACTIVITIES
                 
Borrowings under revolving loan commitment
      —         4,075  
Loan from Paycheck Protection Program
      —         2,164  
Proceeds from issuance of Class A common stock
      415,000       —    
Issuance costs of Class A common stock
      (12,471 )      —    
Reverse recapitalization
      (108,435 )      —    
Proceeds from borrowings on long-term debt and credit facilities
      125,000       —    
Principal payments on long-term debt
      (27,711 )      (425 ) 
Payment of deferred financing costs
      (7,478 )      —    
Payment of debt prepayment penalties
      (487 )      —    
Distributions to members
      —         (3,691 ) 
    
 
 
    
 
 
  
Net Cash Provided by Financing Activities
      383,418       2,123  
    
 
 
    
 
 
  
NET INCREASE IN CASH
      42,983       497  
Cash
—
Beginning of Period
      4,934       4,438  
    
 
 
    
 
 
  
CASH
—
END OF PERIOD
    $ 47,917     $ 4,934  
    
 
 
    
 
 
  
The accompanying notes are an integral part of these consolidated financial statements.
 
F-6
CAREMAX, INC.
CONDENSED CONSOLIATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
(in thousands)
 
 
  
Twelve Months Ended
December 31, 2021
 
  
Twelve Months Ended
December 31, 2020
 
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES:
  
  
Equity consideration issued in acquisitions
    $ 188,678      $ —    
Contingent consideration issued in business combination
      38,348        —    
Purchase of
non-controlling
interest through accounts payable
      —          203  
Payroll Protection Program loan forgiveness
      2,164        —    
Equity/Warrant consideration issued under the Advisory Agreement
      14,533        —    
SUPPLEMENTAL DISCLOSURES OF CASH ACTIVITIES:
                  
Cash paid for interest
      4,423        1,251  
Acquisition of business financed through deferred consideration
      —          450  
Purchase of property and equipment through long-term debt
      —          50  
Debt issuance and interest costs paid through long-term debt
      —          399  
Extinguishment of long-term debt through new debt proceeds
      —          2,500  
Acquisition of business financed through long-term debt
      —          6,051  
The accompanying notes are an integral part of these consolidated financial statements.
 
F-7
CAREMAX, INC.
Notes to Consolidated Financial Statements
NOTE 1. DESCRIPTION OF BUSINESS
CareMax Inc. (“CareMax” or the “Company”), f/k/a Deerfield Healthcare Technology Acquisitions Corp. (“DFHT”), a Delaware corporation, was originally formed in July 2020 as a publicly traded special purpose acquisition company for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or similar business combination involving one or more businesses. CareMax is a technology-enabled care platform providing high-quality, value-based care and chronic disease management through physicians and health care professionals committed to the overall health and wellness continuum of care for its patients. As of December 31, 2021, Company operated 45 wholly owned, multi-specialty medical centers in Florida that offer a comprehensive suite of healthcare and social services, and a proprietary software and services platform that provides data, analytics, and rules-based decision tools/workflows for physicians across the United States.
The Business Combination
On December 18, 2020, DFHT entered into a Business Combination Agreement (the “Business Combination Agreement”) with CareMax Medical Group, L.L.C., a Florida limited liability company (“CMG”), the entities listed in Annex I to the Business Combination Agreement (the “CMG Sellers”), IMC Medical Group Holdings, LLC, a Delaware limited liability company (“IMC”), IMC Holdings, LP, a Delaware limited partnership (“IMC Parent”), and Deerfield Partners, L.P. (“Deerfield Partners”). The Business Combination (as defined below) was approved by DFHT’s stockholders and closed on June 8, 2021 (the “Closing Date”), whereby DFHT acquired 100% of the equity interests inCMG and 100% of the equity interests in IMC, with CMG and IMC becoming wholly owned subsidiaries of DFHT. Immediately upon completion (the “Closing”) of the transactions contemplated by the Business Combination Agreement and the related financing transactions (the “Business Combination”), the name of the combined company was changed to CareMax, Inc.
At the Closing, the CMG Sellers and IMC Parent were paid consideration valued in the aggregate at approximately $364 million and $250 million respectively, less repayment of net debt and further subject to the purchase price adjustments set forth in the Business Combination Agreement (the “Closing Consideration”). The net Closing Consideration was comprised of 68% ($229.4 million) and 45% ($85.2 million) in cash for the CMG Sellers and IMC Parent, respectively, with the remainder of the Closing Consideration comprised of 10,796,069 and 10,412,023 shares of Class A common stock of the Company, par value $0.0001 per share (“Class A Common Stock”), issued to the CMG Sellers and IMC Parent, respectively, at a reference price of $10.00 per share. The Business Combination Agreement also provides that an additional 3,500,000 and 2,900,000 shares of Class A Common Stock (the “Earnout Shares”) are payable after the Closing to the CMG Sellers and IMC Parent, respectively, upon the satisfaction of certain conditions (see Note 8 – Stockholders’ Equity).
Also at the Closing, DFHT, DFHTA Sponsor LLC (the “Sponsor”), O.M. Investment Group, Inc. (“O.M.”), in its capacity as representative of the CMG Sellers, and Continental Stock Transfer & Trust Company, in its capacity as escrow agent ( “Continental”), entered into an escrow agreement (the “CMG Escrow Agreement”), and DFHT, the Sponsor, IMC Parent and Continental entered into an escrow agreement (the “IMC Escrow Agreement” and together with the CMG Escrow Agreement, the “Escrow Agreements”). Pursuant to the terms of the CMG Escrow Agreement and the IMC Escrow Agreement, DFHT deposited $0.5 million and $1.0 million, respectively, into adjustment escrow accounts (the “Adjustment Escrow Amounts”) for the purpose of securing certain post-closing adjustment obligations of the CMG Sellers and IMC Parent, respectively. Of such $0.5 million securing the post-closing adjustment obligations of the CMG Sellers, 68% ($340,000) was in cash and 32% was in 16,000 shares of Class A Common Stock, and of such $1.0 million securing the post-closing adjustment obligations of IMC Parent, 45% ($450,000) was in cash and 55% was in 55,000 shares of Class A Common Stock (such shares collectively, the “Adjustment Escrow Shares”). Following the date on which the
 
F-8
Notes to Consolidated Financial Statements—(Continued)
 
Closing Consideration is finally determined pursuant to the Business Combination Agreement, all or a portion of the applicable Adjustment Escrow Amounts and Adjustment Escrow Shares will either be released to the CMG Sellers or to IMC Parent, as applicable, or to the Company in accordance with certain adjustment mechanisms in the Business Combination Agreement.
Immediately following the Closing, all of the 3,593,750 issued and outstanding shares of Class B common stock of the Company, par value $0.0001 per share (“Class B Common Stock”), automatically converted, on a
one-for-one
basis, into shares of Class A Common Stock in accordance with DFHT’s second amended and restated certificate of incorporation.
Unless the context otherwise requires, “the Company,” “we,” “us,” and “our” refer, for periods prior to the completion of the Business Combination, to CMG and its subsidiaries, and, for periods upon or after the completion of the Business Combination, to CareMax, Inc. and its subsidiaries.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
The consolidated financial statements include the account of CareMax Inc. and its wholly owned subsidiaries (collectively “CareMax” or “the Company”). Intercompany accounts and transactions have been eliminated. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for annual financial information and in accordance with the instructions to Form
10-K
and Article 8 of Regulation
S-X
of the Securities and Exchange Commission (the “SEC”). In the opinion of management, the accompanying consolidated financial statements include all adjustments of a normal recurring nature, which are necessary for a fair presentation of financial position, operating results and cash flows for the periods presented.
Pursuant to the Business Combination, the acquisition of CMG by DFHT was accounted for as a reverse recapitalization in accordance with GAAP (the “Reverse Recapitalization”). Under this method of accounting, DFHT was treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the Reverse Recapitalization was treated as the equivalent of CMG issuing equity for the net assets of DFHT, accompanied by a recapitalization. The net assets of DFHT are stated at historical cost, with no goodwill or other intangible assets recorded.
The consolidated assets, liabilities and results of operations prior to the Reverse Recapitalization are those of CMG. Further, CMG was determined to be the accounting acquirer in the acquisition of IMC (the “IMC Acquisition”), as such, the acquisition is considered a business combination under Accounting Standards Codification (“ASC”) Topic 805, “
Business Combinations
,” and was accounted for using the acquisition method of accounting. CareMax recorded the fair value of assets acquired and liabilities assumed from IMC.The presented financial information for the twelve months ended December 31, 2021 includes the financial information and activities for (i) IMC for the period from June 8, 2021 to (and including) December 31, 2021 (206 days), (ii) SMA (as defined in Note 3—Acquisitions) for the period from June 18, 2021 to (and including) December 31, 2021 (196 days) and (iii) DNF (as defined in Note 3—Acquisitions) for the period from September 1, 2021 to (and including) December 31, 2021 (121 days). Unless otherwise noted, information for periods prior to the Closing of Business Combination reflects the financial information of CMG only.
The consolidated financial statements include the accounts and operations of the Company. All intercompany accounts and transactions have been eliminated.
Segment Financial Information
The Company’s chief operating decision maker regularly reviews financial operating results on a consolidated basis for purposes of allocating resources and evaluating financial performance. The Company identifies
 
F-9
Notes to Consolidated Financial Statements—(Continued)
 
operating segments based on this review by its chief operating decision maker and operates in and reports as a single operating segment, which is to care for its patients’ needs. For the periods presented, all of the Company’s long-lived assets were located in the United States, and all revenue was earned in the United States.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The areas where significant estimates are used in the accompanying financial statements include, but are not limited to, purchase price allocations, including fair value estimates of intangibles and contingent consideration; the valuation of and related impairment recognitions of long-lived assets; the valuation of the derivative warrant liabilities; the estimated useful lives of fixed assets and intangible assets, including internally developed software; settlements related to revenue and the revenue accrual and accrued expenses. Actual results could differ from those estimates.
Emerging Growth Company
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to nonemerging growth companies, but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s consolidated financial statements with another public company which is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used. Additionally, as an emerging growth company, the Company is exempt from the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002, as amended, and the Company’s independent registered public accounting firm is not required to evaluate and report on the effectiveness of internal control over financial reporting.
Acquisitions
The Company accounts for business combinations under the acquisition method of accounting, in accordance with ASC Topic 805,
Business Combinations
, which requires assets acquired and liabilities assumed to be recognized at their fair values on the acquisition date. Any excess of the fair value of purchase consideration over the fair value of the assets acquired less liabilities assumed is recorded as goodwill. The fair values of the assets acquired, and liabilities assumed are determined based upon the valuation of the acquired business and involves management making significant estimates and assumptions.
Revenue Recognition
Since capitated revenue is received regardless of whether services are performed, the performance obligation is the completion of enrollment of the patient and providing access to care.
Fee-for-service
revenue generally relates to contracts with patients in which our performance obligation is to provide healthcare services to the patients. Revenues are recorded during the period our obligations to provide healthcare services are satisfied.
 
F-10
Notes to Consolidated Financial Statements—(Continued)
 
Medicare Risk-based and Medicaid Risk-based revenue consists primarily of capitated fees for medical services provided by us under capitated arrangements directly made with various Medicare Advantage and Medicaid managed care payors. The Company receives a fixed fee per patient under what is typically known as a “risk contract.” Risk contracting, or full risk capitation, refers to a model in which the Company receives from the third-party payor a fixed payment of
At-risk
premium less an administrative charge for reporting on enrollees on a per patient per month basis (“PPPM” payment) for a defined patient population, and the Company is then responsible for providing healthcare services required by that patient population. Neither the Company nor any of its affiliates is a registered insurance company because state law in the states in which it operates does not require such registration for risk-bearing providers.
The Company’s payor contracts generally have a term of one year or longer, but the contracts between the enrolled members (our customers) and the payor are one calendar year or less. In general, the Company considers all contracts with customers (enrolled members) as a single performance obligation to stand ready to provide managed healthcare services. The Company identified that contracts with customers for capitation arrangements have similar performance obligations and therefore groups them into one portfolio. This performance obligation is satisfied as the Company stands ready to fulfill its obligation to enrolled members.
Settlements with third-party payors for retroactive adjustments due to capitation risk adjustment, or claim audits, reviews or investigations are considered variable consideration and are included in the determination of the estimated transaction price for providing patient care. These settlements are estimated based on the terms of the payment agreement with the payor, correspondence from the payor and the Company’s historical settlement activity, including an assessment to ensure that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the retroactive adjustment is subsequently resolved. Estimated settlements are adjusted in future periods as adjustments become known (that is, new information becomes available), or as years are settled or are no longer subject to such audits, reviews, and investigations.
The Company has determined that the nature, amount, timing, and uncertainty of revenue and cash flows are affected by the following factors:
 
 
•
 
Geography of the service location
 
 
•
 
Demographics of members
 
 
•
 
Health needs of members
 
 
•
 
Method of reimbursement (capitation or fee for service)
 
 
•
 
Enrollment changes
 
 
•
 
Rate changes; and
 
 
•
 
For fee for service activities, the payors (for example, Medicare, Medicaid, comm
e
rcial insurance, patient) which have different reimbursement/payment methodologies.
The Company has elected the practical
 
expedient allowed under ASC
606-10-32-18,
“Revenue from Contracts with
Customers-The
Existence of a Significant Financing Component in the Contract,”
and does not adjust the promised amount of consideration from patients and third-party payors for the effects of a significant financing component due to the Company’s expectation that the period between the time the service is provided to a patient and the time that the patient or a third-party payor pays for that service will be one year or less.
 
The Company has
applied the practical
 
expedient provided by ASC
340-40-25-4,
“Other Assets and Deferred Costs,”
and all incremental customer contract acquisition costs are expensed as they are incurred as the amortization period of the asset that the Company otherwise would have recognized is one year or less in duration.
 
F-11
Notes to Consolidated Financial Statements—(Continued)
 
For the twelve months ended December 31, 2021 and 2020, substantially all of the revenue recognized by the Company was from goods and services, namely, providing access to physicians and wellness centers.
Other Revenue
Other revenue includes professional capitation payments. These revenues are a fixed amount of money per patient per month paid in advance for the delivery of primary care services only, whereby the Company is not liable for medical costs in excess of the fixed payment. Capitated revenues are typically prepaid monthly to the Company based on the number of patients selecting us as their primary care provider. Our capitated rates are fixed, contractual rates. Incentive payments for Healthcare Effectiveness Data and Information Set (“HEDIS”) and any services paid on a fee for service basis by a health plan are also included in other revenue. Other revenue also includes ancillary fees earned under contracts with certain payors for the provision of certain care coordination and other care management services. These services are provided to patients covered by these payors regardless of whether those patients receive their care from our affiliated medical groups. Revenue for primary care service for patients in a partial risk or
up-side
only contracts are reported in other revenue.
Concentration of Credit Risk and Significant Customers
Financial instruments that potentially subject the Company to concentration of credit risk consist of cash and accounts receivable. The Company’s cash balances with individual banking institutions are in excess of federally insured limits from time to time. The Company believes it is not exposed to any significant concentrations of credit risk from these financial instruments. The Company has not experienced any losses on its deposits of cash and cash equivalents.
Anthem, Inc. (“Anthem”) represented approximately 27% and 100% of the Company’s accounts receivable balance as of December 31, 2021 and December 31, 2020, respectively. Anthem represented 35% and 93% of the Company’s revenues for the three months ended December 31, 2021 and 2020 and 48% and 96% of the Company’s revenues for the twelve months ended December 31, 2021 and 2020, respectively.
Accounts Receivable
Accounts receivable are carried at the amounts the Company deems collectible. Accordingly, an allowance is provided based on credit losses expected over the contractual term. Accounts receivable are written off when they are deemed uncollectible. As of December 31, 2021 and 2020, the Company believes no allowance is necessary.
Fair Value of Financial Instruments
Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value
 
hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
Level 1—defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets.
Level 2—defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active.
 
F-12
Notes to Consolidated Financial Statements—(Continued)
 
Level 3—defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.
Derivative Instruments
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including issued stock purchase warrants and contingent consideration, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480
“Distinguishing Liabilities from Equity,”
and ASC
815-15,
“Derivatives and Hedging
—
Embedded Derivatives.
” The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is
re-assessed
at the end of each reporting period.
The Company issued 2,875,000 common stock warrants in connection with DFHT’s initial public offering (the “IPO”) (the “Public Warrants”). Simultaneously with the closing of the IPO, DFHT consummated the private placement of 2,916,667 common stock warrants (the “Private Placement Warrants”). The Public Warrants and Private Placement Warrants are accounted for as derivative warrant liabilities in accordance with ASC
815-40,
“
Derivatives and Hedging
—
Contracts in an Entity’s Own Equity
.” Accordingly, the Company recognizes the warrant instruments as liabilities at fair value and adjusts the instruments to fair value at each reporting period. The liabilities are subject to
re-measurement
at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s consolidated statement of operations. The fair value of the Public Warrants and Private Placement Warrants was initially measured at fair value using a Monte Carlo simulation model and subsequently, the fair value of the Private Placement Warrants has been estimated using a Monte Carlo simulation model at each measurement date. The fair value of Public Warrants issued in connection with the IPO has subsequently been measured based on the listed market price of such warrants.
In connection with the Business Combination, up to 6,400,000
 
shares of Class A Common Stock become issuable under certain circumstances to IMC Parent and the CMF Sellers as contingent consideration (the “Contingent Consideration”). The Contingent Consideration was accounted for as derivative warrant liabilities in accordance with ASC
815-40,
“
Derivatives and Hedging—Contracts in an Entity’s Own Equity
.” Accordingly, the Company recognized the Contingent Consideration as liabilities at fair value in the second quarter of 2021 following a restatement of the Company’s unaudited condensed consolidated financial statements for the periods ended June 30, 2021 and September 30, 2021 (see Note – Stockholders Equity – Contingent Consideration for further information). The liabilities were subject to
re-measurement
at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s consolidated statement of operations. On July 9, 2021, the First Share Price Trigger (as defined below) was achieved, and the remaining Contingent Consideration was
re-assessed
and determined to be indexed to the Company’s own equity, resulting in equity classification under ASC
815-40
“
Derivatives and Hedging—Contracts in an Entity’s Own Equity
.” The remaining Contingent Consideration was recorded at fair value on July 9, 2021, the date of the event that caused the reclassification. Changes in the fair value upon reclassification from liability to equity were recorded in earnings. See Note 8 – Stockholders Equity – Contingent Consideration for further information.
Goodwill and Intangible Assets

Goodwill represents the excess of consideration transferred in excess of the fair value of net assets acquired through business acquisitions. Pursuant to ASC 350, “Intangibles – Goodwill and Other,” we review goodwill
 
F-13
Notes to Consolidated Financial Statements—(Continued)
 
annually in the fourth quarter or whenever significant events or changes indicate the possibility of impairment. For purposes of the annual goodwill impairment assessment, the Company has identified a single reporting unit. The most recently completed impairment test of goodwill was performed in the fourth quarter of 2021, and it was determined that the fair value of goodwill was in excess of the carrying value, therefore no impairment was necessary.
Intangible assets with a finite useful life are amortized over their useful lives.
We review the recoverability of any long-lived intangible assets whenever events or changes in circumstances indicate the carrying amount of such assets may not be recoverable.
Impairment of Long-lived Assets
Long-lived assets, such as equipment, improvements, and intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the use and eventual disposition of the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value.
 
Property and Equipment
Property and equipment is recorded at cost. Maintenance and repairs are charged to expense as incurred. Depreciation is provided over the estimated useful life of each class of depreciable asset and is computed on the straight-line method. Leasehold improvements are depreciated over the lesser of the length of the related lease plus any renewal options or the estimated life of the asset.
A summary of estimated useful lives is as follows:
 
Leasehold Improvements    15 to 39 Years
Furniture and Equipment    5 to 7 Years
Vehicles    5 Years
Software    3 Years
Income Taxes
The Company follows the asset and liability method of accounting for income taxes under ASC 740, “
Income Taxes
.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. There were no unrecognized tax benefits as of December 31, 2021 and December 31, 2020. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense.

F-14
Notes to Consolidated Financial Statements—(Continued)
 
External Provider Costs
External Provider Costs include capitation payments and fee for service claims paid, claims in process and pending, and an estimate of unreported claims and charges by physicians, hospitals, and other health care providers for services rendered to enrollees during the period. Changes to prior-period estimates of medical expenses are reflected in the current period.
Share-Based Compensation Expense
The Company periodically issues Restricted Stock Units (“RSU’s”), Performance Share Units (“PSUs”), and Stock Options (“Options”) as share-based compensation to employees and
non-employees
in
non-capital
raising transactions for services. The Company accounts for such grants issued and vesting based on FASB ASC 718,
Compensation
—
Stock Compensation
(Topic 718), whereby the value of the award is measured on the date of grant and recognized as compensation expense on the straight-line basis over the vesting period. The Company recognizes the fair value of stock-based compensation within its Statements of Operations with classification depending on the nature of the services rendered.
The Company accounts for stock-based compensation issued to
non-employees
and consultants in accordance with the provisions of ASU
2018-07,
Improvements to Nonemployee Share-Based Payment Accounting Measurement
of share-based payment transactions with
non-employees
are recognized as compensation expense in the financial statements based on their fair values at grant date. That expense is recognized over the period during which a
non-employees
or consultant is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).
The fair value of the Company’s Options, RSUs and PSUs are estimated using the Black-Scholes-Merton Option Pricing model and a Monte Carlo simulation, respectively, which use certain assumptions related to risk-free interest rates, expected volatility, expected life of the stock options or stock, and future dividends. Compensation expense for Options
, RSUs
and PSUs are recorded based upon the values derived from the Black-Scholes-Merton Option Pricing model and the Monte Carlo simulation, respectively. The assumptions used in the Black-Scholes-Merton Option Pricing model and Monte Carlo Simulation(s) could materially affect compensation expense recorded in future periods. The assumptions used in the model and related impact are discussed in Note 8
- Stockholders Equity
.
Net Income (Loss) Per Share
Net income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. The Company follows the provisions of ASC Topic 260,
Earnings Per Share
” for determining whether contingently issuable shares are included for purposes of calculating net income (loss) per share and determining whether instruments granted in equity-based compensation arrangements are participating securities for purposes of calculating net income (loss) per share. See Note 9—
Net Income (Loss) Per Share.
Recent Accounting Pronouncements Not Yet Adopted

In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU
2016-02,
“
Leases
” (“ASU
2016-02”),
which amended the accounting for leases, requiring lessees to recognize most leases on their balance sheet with a
right-of-use
asset and a lease liability. Leases will be classified as either finance or operating leases, which will impact the expense recognition of such leases over the lease term. ASU
2016-02
also modifies the lease classification criteria for lessors and eliminates some of the real estate leasing guidance previously applied for certain leasing transactions. In June 2020, the FASB issued ASU
2020-05,
“
Revenue from Contracts with

 
F-15
Notes to Consolidated Financial Statements—(Continued)

Customers and Leases
,” that deferred the required effective date for
non-issuers
to fiscal years beginning after December 15, 2021 and to interim periods within fiscal years beginning after December 15, 2022. The Company adopted ASU
2016-02
on January 1, 2022. Because of the number of leases the Company utilizes to support its operations, the adoption of ASU
2016-02
is expected to have a significant impact on the Company’s financial position and results of operations. The total future estimated gross annual lease payments are $106.7 million as of December 31, 2021. We expect this standard to increase our total assets and total liabilities by approximately 12% percent. We do not expect the standard to have a material impact on our results of operations. In preparation for the adoption of the standard, we have procured a third-party software to track and manage our leases, loaded lease data into the software, authored our accounting policy, trained our business units on the new standard and policy and the use of the software, and modified our control environment accordingly. We have not experienced significant issues in our implementation process.
In June 2016, the FASB issued ASU
2016-13,
“
Financial Instruments
—
Credit Losses (Topic 326)
:
Measurement of Credit Losses on Financial Instruments”
(“ASU
2016-13”).
ASU
2016-13
introduced a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses. The guidance became effective for us beginning January 
1
,
2022
. The new current expected credit losses model generally calls for the immediate recognition of all expected credit losses and applies to loans, accounts and trade receivables as well as other financial assets measured at amortized cost, loan commitments and
off-balance
sheet credit exposures, debt securities and other financial assets measured at fair value through other comprehensive income, and beneficial interests in securitized financial assets. The new guidance replaces the current incurred loss model for measuring expected credit losses, requires expected losses on available for sale debt securities to be recognized through an allowance for credit losses rather than as reductions in the amortized cost of the securities, and provides for additional disclosure requirements. The Company adopted this standard on January 
1
,
2022
and does not believe adoption will have a material effect on its consolidated financial statements.
In January 2020, the FASB issued ASU
2020-01,
“
Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323)
,
and Derivatives and Hedging (Topic 815)—Clarifying the Interactions between Topic 321, Topic 323, and Topic 815”
(“ASU
2020-01”).
ASU
2020-01
clarifies the interaction of the accounting for equity securities under Topic 321 and investments accounted for under the equity method of accounting in Topic 323 and the accounting for certain forward contracts and purchased options accounted for under Topic 815. The guidance is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2021. The Company is currently evaluating the impact the adoption of ASU
2020-01
will have on its consolidated financial statements.
In March 2020, the FASB issued guidance to provide temporary optional expedients and exceptions through December 31, 2022 to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from the London Interbank Offered Rate (LIBOR)
 
and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate (SOFR). The amendments are effective for all entities from the beginning of an interim period that includes the issuance date of the ASU. An entity may elect to apply the amendments prospectively through December 
31
,
2022
. The Company is currently evaluating the effect the update will have on its consolidated financial statements and related disclosures.
In October 2021, the FASB issued ASU
2021-08,
“Business Combinations (Topic 805)—Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.” The ASU improves comparability after business combinations by providing consistent recognition and measurement guidance for revenue contracts with customers acquired in a business combination and revenue contracts with customers not acquired in a business combination. ASU
2021-08
is effective for the Company on January 1, 2023, with early adoption permitted. The Company is currently evaluating the effect this ASU will have on its consolidated financial statements.
 
F-16
Notes to Consolidated Financial Statements—(Continued)
 
We do not expect that any other recently issued accounting guidance will have a significant effect on our consolidated financial statements.
NOTE 3. ACQUISITIONS
Acquisition of IMC
On June 8, 2021, the Company acquired 100% of the equity interests of IMC for total purchase consideration of $369.7 million, subject to final closing adjustments. The purchase consideration was comprised of the following (in thousands):​​​​​​​
 
Cash consideration (1)
    $ 172,302  
Share consideration (2)
    $ 155,347  
Contingent consideration (3)
    $ 40,785  
Other consideration (4)
    $ 1,271  
 
(1)
Represents cash consideration inclusive of the payment of $79.8 million of IMC debt simultaneous with the Closing and the reimbursement of IMC Parent’s transaction costs of $7.3 million.
(2)
Represent the issuance of 10,412,023 shares of Class A Common Stock, which shares were issued at a reference price of $10.00 per share, but the value of which was $14.92 per share, the closing price on the date of the IMC Acquisition.
(3)
Represents the fair value of equity-classified contingent consideration.
(4)
Represents the fair value of cash and equity purchase consideration held in escrow pending the finalization of final closing adjustments.
The IMC Acquisition was recorded as a business combination under ASC 805 with identifiable assets acquired recorded at their estimated fair values as of the acquisition date.

 
As of December 31, 2021, we have not finalized the acquisition accounting related to the IMC Acquisition and these amounts represent preliminary values. The allocation of the purchase price may be modified up to one year from the acquisition date as more information is obtained about the fair value of assets acquired and liabilities assumed. The following table summarizes the purchase consideration and the preliminary fair value of the assets acquired and liabilities assumed (
in thousands
):
 
 
  
Purchase price
allocation
 
Cash
    $ 14,842  
Accounts receivable
      21,298  
Other current assets
      1,446  
Property, plant, & equipment
      6,198  
Intangible assets
      34,121  
Other assets
      448  
Accounts payable and accrued expenses
      (8,793 ) 
Long term debt
      (197 ) 
Other long term liabilities
      (1,898 ) 
    
 
 
  
Net Assets Acquired
      67,465  
    
 
 
  
Excess of Consideration over Net Assets Acquired
      302,240  
    
 
 
  
Total Consideration
    $ 369,705  
    
 
 
  
 
F-17
Notes to Consolidated Financial Statements—(Continued)
 
Goodwill was recognized as the amount consideration transferred in excess of the fair value of net assets acquired. The goodwill generated is attributable to the assembled workforce and the expected growth and cost synergies and the expected contribution to the Company’s overall strategy. The amount allocated to goodwill and intangible assets is subject to final adjustment to reflect the final valuations. The goodwill recognized that is expected to be deductible for income tax purposes is $
80.4 
million.

The fair value associated with definite-lived intangible assets was $34.1 million, comprised of $33.9 million in risk contracts and $263,000 in trademarks. The definite-lived intangible assets will be amortized ranging from one to six years.
The Company’s net revenue and loss before income taxes for the twelve months ended December 31, 2021 includes revenues of $148.0 million and net income before taxes of $4.1 million related to IMC.
Acquisition of SMA Entities
On June 18, 2021, the Company completed the acquisition of 100% of the issued and outstanding equity interests of Senior Medical Associates, LLC, a Florida limited liability company (“SMA”), and Stallion Medical Management, LLC, a Florida limited liability company (“the SMA Acquisition”). The purchase consideration was comprised of the following (
in thousands
):
 
Cash consideration (1)
    $ 52,000  
Share consideration (2)
    $ 5,027  
 
(1)
Represents cash consideration of $52.0 million inclusive of $2.5 million held in escrow and $145,000 in SMA seller transaction cost.
(2)
Represents equity consideration of 384,615 shares of Class A Common Stock valued at $5.0 million based on the June 18, 2021 closing price of $13.07.

The SMA Acquisition was recorded as a business combination under ASC 805 with identifiable assets acquired and liabilities assumed liabilities recorded at their estimated fair values as of the acquisition date.
As of December 31, 2021, we have not finalized the acquisition accounting related to the SMA Acquisition and these amounts represent preliminary values. The allocation of the purchase price may be modified up to one year from the acquisition date as more information is obtained about the fair value of assets acquired and liabilities assumed. The following table summarizes the consideration paid and the preliminary fair value of the assets acquired and liabilities assumed (
in thousand
s):
 
 
  
Purchase price
allocation
 
Cash
    $ 73  
Accounts receivable
      1,830  
Property, plant, & equipment
      178  
Intangible assets
      9,404  
Other assets
      29  
Accounts payable and accrued expenses
      (178 ) 
    
 
 
  
Net Assets Acquired
      11,336  
    
 
 
  
Excess of Consideration over Net Assets Acquired
      45,691  
    
 
 
  
Total Consideration
    $ 57,027  
    
 
 
  
F-18
Notes to Consolidated Financial Statements—(Continued)
 
Goodwill
 was recognized as the amount consideration transferred in excess of the fair value of net assets acquired. The goodwill is primarily attributed to our assembled workforce, the expected growth and cost synergies and the expected contribution to the Company’s overall strategy. The goodwill recognized that is expected to be deductible for income tax purposes is $45.0 million.
The Company incurred and expensed acquisition-related transaction costs of $682,000 related to the SMA Acquisition that were paid by the Company.
The fair value associated with definite-lived intangible assets was $9.4 million, comprised of $8.7 million in risk contracts, $622,000 in
non-compete
agreements and $92,000 in tradenames. The definite-lived intangible assets will be amortized over periods ranging from one to six years.
The Company’s net revenue and loss before income taxes for the twelve months ended December 31, 2021 includes revenues of $12.0 million and net income before taxes of $564,000 related to SMA.
Acquisition of DNF
On September 1, 2021, the Company acquired 100% of the assets of Unlimited Medical Services of Florida, LLC, a Florida limited liability company, dba DNF Medical Centers
(“DNF”),
for total purchase consideration of $114.2 million, subject to final closing adjustments (the “DNF Acquisition”). The purchase consideration was comprised of the following (
in thousands
):
 
Cash consideration (1)
    $ 88,118  
Share consideration (2)
    $ 26,072  
 
(1)
Represents cash consideration of $88.1 million inclusive of $11.0 million held in escrow and $242,000 in DNF seller transaction costs.
(2)
Represents equity consideration of 2,741,528 shares of Class A Common Stock valued at $26.1 million based on the September 1, 2021 closing price of $9.51.
The DNF Acquisition was recorded as a business combination under ASC 805 with identifiable
assets
acquired recorded at their estimated fair values as of the acquisition date.

As of December 31, 2021, we have not finalized the acquisition accounting related to the DNF Acquisition and these amounts represent preliminary values. The allocation of the purchase price may be modified up to one year from the acquisition date as more information is obtained about the fair value of assets acquired and liabilities assumed. The following table summarizes the purchase consideration and the preliminary fair value of the assets acquired (
in thousands
):
 

 
  
Purchase price
allocation
 
Accounts receivable
    $ 3,732  
Property, plant, & equipment
      3,520  
Intangible assets
      15,329  
Other assets
      65  
    
 
 
  
Net Assets Acquired
      22,646  
    
 
 
  
Excess of Consideration over Net Assets Acquired
      91,544  
    
 
 
  
Total Consideration
    $ 114,190  
    
 
 
  
F-19
Notes to Consolidated Financial Statements—(Continued)


Goodwill was recognized as the amount consideration transferred in excess of the fair value of net assets acquired. The goodwill generated is attributable to the assembled workforce and the expected growth and cost synergies and the expected contribution to the Company’s overall strategy. The amount allocated to goodwill and intangible assets is subject to final adjustment to reflect the final valuations. The goodwill recognized that is expected to be deductible for income tax purposes is $90.0 million.
The Company incurred and expensed acquisition-related transaction costs of $1,247,000 related to the DNF Acquisition that were paid by the Company.
The fair value associated with definite-lived intangible assets was $15.3 million, comprised of $13.2 million in risk contracts, $1.5 million in
non-compete
agreements, and $638,000 in trademarks. The definite-lived intangible assets will be amortized ranging from one to six years.
The Company’s net revenues and loss before income taxes for the twelve months ended December 31, 2021 includes revenue of $19.5 million and net loss before income taxes of $687,000 related to DNF.
Acquisition of Advantis
On December 22, 2021, the Company acquired 100% of the assets of Advantis Physician Alliance, LLC, dba Advantis Medical Centers (“Advantis”) for total purchase consideration of $11.0 million, subject to final closing adjustments (the “Advantis Acquisition”). The purchase consideration was comprised of the following (
in thousands
):
 
Cash consideration (1)
    $ 9,865  
Share consideration (2)
    $ 1,107  
 
(1)
Represents cash consideration of $9.9 million inclusive of $900,000 held in escrow and $60,000 in Advantis seller transaction cost
(2)
Represents equity consideration of 145,883 shares of Class A Common Stock valued at $1.1 million based on the December 22, 2021 closing price of $7.59.

The Advantis acquisition was recorded as a business combination under ASC 805 with identifiable assets acquired recorded at their estimated fair values as of the acquisition date.
As of December 31, 2021, we have not finalized the acquisition accounting related to the Advantis Acquisition and these amounts represent preliminary values. The allocation of the purchase price may be modified up to one year from the acquisition date as more information is obtained about the fair value of assets acquired and liabilities assumed. The following table summarizes the purchase consideration and the preliminary fair value of the assets acquired (
in thousands)
:
 

 
  
Purchase price
allocation
 
Accounts receivable
    $ 242  
Property, plant, & equipment
      18  
Intangible assets
      1,064  
Other assets
      20  
    
 
 
  
Net Assets Acquired
      1,344  
    
 
 
  
Excess of Consideration over Net Assets Acquired
      9,628  
    
 
 
  
Total Consideration
    $ 10,972  
    
 
 
  

F-20
Notes to Consolidated Financial Statements—(Continued)


Goodwill was recognized as the amount consideration transferred in excess of the fair value of net assets acquired. The goodwill generated is attributable to the assembled workforce and the expected growth and cost synergies and the expected contribution to the Company’s overall strategy. The amount allocated to goodwill and intangible assets is subject to final adjustment to reflect the final valuations. The goodwill recognized that is expected to be deductible for income tax purposes is $9.6 million.
The Company incurred and expensed acquisition-related transaction costs of $671,000 related to the Advantis Acquisition that were paid by the Company.
The fair value associated with definite-lived intangible assets was $1.1 million, comprised of $345,000 in risk contracts, $544,000 in
non-compete
agreements, and $176,000 in trademarks. The definite-lived intangible assets will be amortized ranging from one to six years.
As the acquisition was consummated on December 22, 2021, Advantis did not materially contribute net revenues or net income before income taxes for the twelve months ended December 31, 2021.
Acquisition of Business Intelligence & Analytics LLC (“BIX”)
On December 22, 2021, the Company acquired 100% of the assets of Business Intelligence & Analytics LLC (“BIX”) for total purchase consideration of $5.1 million, subject to final closing adjustments (the “BIX Acquisition”). The purchase consideration was comprised of the following (
in thousands
):
 
Cash consideration (1)
    $ 4,000  
Share consideration (2)
    $ 1,124  
 
(1)
Represents cash consideration of $4.0 million.
(2)
Represents equity consideration of 148,104 shares of Class A Common Stock valued at $1.1 million based on the December 22, 2021 closing price of $7.59.
The BIX Acquisition was recorded as a business combination under ASC 805 with identifiable assets acquired recorded at their estimated fair values as of the acquisition date.


As of December 31, 2021, we have not finalized the acquisition accounting related to the BIX Acquisition and these amounts represent preliminary values. The allocation of the purchase price may be modified up to one year from the acquisition date as more information is obtained about the fair value of assets acquired and liabilities assumed. The following table summarizes the purchase consideration and the preliminary fair value of the assets acquired (
in thousands)
:
 

 
  
Purchase price
allocation
 
Intangible assets
      289  
    
 
 
  
Net Assets Acquired
      289  
    
 
 
  
Excess of Consideration over Net Assets Acquired
      4,835  
    
 
 
  
Total Consideration
    $ 5,124  
    
 
 
  
Goodwill was recognized as the amount consideration transferred in excess of the fair value of net assets acquired. The goodwill generated is attributable to the assembled workforce and the expected growth and cost synergies and the expected contribution to the Company’s overall strategy. The amount allocated to goodwill and intangible assets is subject to final adjustment to reflect the final valuations. The goodwill recognized that is expected to be deductible for income tax purposes is $4.8 million.

F-21
Notes to Consolidated Financial Statements—(Continued)


The Company did
not
incur or expense material acquisition-related transaction costs that were paid by the Company.
The fair value associated with definite-lived intangible assets was $289,000, comprised of $235,000 in patents/developed technology, $3,000 in trademarks, and $35,000 in
non-compete
agreements. The definite-lived intangible assets will be amortized ranging from one to five years. $16,000 in
In-Process
Research and Development was classified as an indefinite lived intangible asset.
As the acquisition was consummated on December 22, 2021, BIX did not materially contribute net revenues or net income before income taxes for the twelve months ended December 31, 2021.
Other Acquisitions
During the twelve months ended December 31, 2021, we acquired 100% of three additional business. The acquisitions were accounted for as business combinations and the overall impact to our consolidated financial statements was not considered to be material. The fair value associated with definite-lived intangible assets from the acquisitions was $1.4 million. On a combined basis, the Company incurred and expensed acquisition-related transaction costs of $250,000 related to the acquisitions that was paid for by the Company. The total fair value of consideration paid or payable for the three acquisitions was $3.7 million.
NOTE 4. REINSURANCE
The Company has acquired insurance on catastrophic costs to limit the exposure on patient losses. Premiums and policy recoveries are reported in external provider costs in the accompanying consolidated statements of operations.
The nature of the Company’s stop loss coverage is to limit the benefits paid under one patient. The Company’s stop loss limits are defined within each health plan contract and stop loss purchased from a third party and range from $30,000 to $200,000 per patient per year. Premium expense incurred was $10.9 million for the twelve months ended December 31, 2021 and approximately $10.3 million for the twelve months ended December 31,
 
2020
, respectively. Physicians under capitation arrangements typically have stop loss coverage so that a physician’s financial risk for any single member is limited to a maximum amount on an annual basis. The Company monitors the financial performance and solvency of its stop loss providers. However, the Company remains financially responsible for health care services to its members in the event the health plans are unable to fulfill their obligations under stop loss contractual terms.
Recoveries recognized were $14.7 million for the twelve months ended December 31, 2021 and $11.2 million the twelve months ended December 31, 2020, respectively. Estimated recoveries under stop loss policies are reported within the capitation receivable or amounts due health plans as the counterparty responsible for the payment of the claims and the stop loss is the respective health plan.
F-22
Notes to Consolidated Financial Statements—(Continued)
 
NOTE 5. GOODWILL AND INTANGIBLE ASSETS
Goodwill
The following table shows changes in the carrying amount of goodwill from December 31, 2020 to December 31, 2021 (
in thousands
):
 
 
  
Carrying
Amount
 
Balance at December 31, 2020
    $ 10,068  
Acquired goodwill during the period
      454,498  
    
 
 
  
Balance at December 31, 2021
    $ 464,566  
    
 
 
  
Intangible Assets
The following table summarizes the gross carrying amounts and accumulated amortization of intangible assets by major class (
in thousands
):
 
 
  
Gross Carrying
Amount
 
  
Accumulated
Amortization
 
  
Net Book
Value
 
  
Weighted Average
Amortization
Period (years)
 
December 31, 2021
  
      
  
      
  
      
  
      
Risk Contracts
    $ 64,822      $ (9,818 )     $ 55,004        7  
Non-compete
agreements
      4,202        (686 )       3,516        5  
Trademarks
      1,867        (827 )       1,040        2  
Patents/Developed Technology
      235        —          235        5  
In-Process
Research and Development
      16        —          16        1  
    
 
 
     
 
 
     
 
 
           
Total
    $ 71,141      $ (11,331 )     $ 59,811           
    
 
 
     
 
 
     
 
 
           
         
    
Gross Carrying
Amount
     
Accumulated
Amortization
     
Net Book
Value
     
Weighted Average
Amortization Period (years)
  
December 31, 2020
                                    
Risk Contracts
    $ 8,174      $ (682 )     $ 7,492        11  
Non-compete
agreements
      1,320        (237 )       1,083        5  
    
 
 
     
 
 
     
 
 
           
Total
    $ 9,494      $ (919 )     $ 8,575           
    
 
 
     
 
 
     
 
 
           
 


 
Amortization expense totaled $10.4 million for the twelve months ended December 31, 2021 and $645,000 for the twelve months ended December 31, 2020, respectively.
The estimated amortization expense related to the fair value of acquired intangible assets for each of the succeeding five years and thereafter is (
in thousands
):
 
2022
    $ 15,134  
2023
      12,234  
2024
      10,199  
2025
      8,547  
2026
      7,616  
Thereafter
      6,082  

F-23
Notes to Consolidated Financial Statements—(Continued)
 
NOTE 6. PROPERTY AND EQUIPMENT
A summary of property and equipment at December 31, 2021 and December 31, 2020 is as follows (
in thousands
):
 
    
December 31,

2021
     
December 31,

2020
  
Leasehold improvements
    $ 7,516      $ 2,726  
Vehicles
      3,711        2,823  
Furniture and equipment
      5,470        1,983  
Software
      2,950        —    
Construction in progress
      2,254        360  
    
 
 
     
 
 
  
Total
      21,902        7,892  
Less: Accumulated depreciation
      (5,909 )       (3,096 ) 
    
 
 
     
 
 
  
Total Property and equipment, net
    $ 15,993      $ 4,796  
    
 
 
     
 
 
  
Construction in progress at December 31, 2021 is made up of various leasehold improvements at the Company’s medical centers. The Company has a contractual commitment to complete the construction of its Homestead medical center with remaining estimated capital expenditures of $500,000 and an estimated opening in 2022.
Depreciation expense totaled $2.8 million for the twelve months ended December 31, 2021 and $858,000 for the twelve months ended December 31, 2020, respectively.
NOTE 7. LONG TERM DEBT
Long-term debt consisted of the following at December 31, 2021 and December 31, 2020 (
in thousands
):
 
    
December 31,
2021
     
December 31,
2020
  
Secured term loans
    $ 121,875      $ 24,184  
Payroll protection plan
      —          2,164  
Other
      65        1,358  
Unamortized debt issuance costs
      (4,704 )       (377 ) 
    
 
 
     
 
 
  
       117,236        27,329  
Current portion
      (6,275 )       (1,004 ) 
    
 
 
     
 
 
  
Long-term portion
    $ 110,960      $ 26,325  
    
 
 
     
 
 
  
On the Closing Date, the Company entered into a Credit Agreement (as amended, the “Credit Agreement), by and among the Company, Royal Bank of Canada, as Administrative Agent (in such capacity, the “Agent”), Collateral Agent, Swing Line Lender and Issuing Bank; RBC Capital Markets, LLC and Truist Securities, Inc., as Syndication Agents, Joint Lead Arrangers and Joint Book Runners; and certain other banks and financial institutions serving as lenders (collectively with their successors and assigns, the “Lenders”). The Credit Agreement provides for (i) initial term loans in an aggregate principal amount of $125.0 million (the “Initial Term Loans”), which were used on the Closing Date to finance the Business Combination and related transaction costs, (ii) a revolving credit facility in an aggregate principal amount of $40.0 million for working capital and other general corporate purposes, of which $0 was drawn December 31, 2021 and (iii) a delayed draw term loan facility in an aggregate principal amount of $20.0 million, which was available to be drawn from and after the Closing until the six month anniversary of the Closing Date to finance permitted acquisitions and similar permitted investments and of which $
0
was drawn as of the date of its expiration, or December 8, 2021 (collectively, the “Credit Facilities”).

 
F-24
Notes to Consolidated Financial Statements—(Continued)
Interest is payable on the outstanding loans under the Credit Facilities based on, at the option of the Company, either: (i) Eurocurrency (with a LIBOR floor of 0.75% per annum) plus variable spreads ranging from 2.75% to 3.50% per annum based on first lien net leverage ratio levels or (ii) the Alternate Base Rate (defined as the highest of (a) the Prime Rate (as defined in the Credit Agreement and established by the Agent), (b) the Federal Funds Rate (as defined in the Credit Agreement) plus 0.50% per annum, and (c) the LIBOR Quoted Rate (as defined in the Credit Agreement) plus 1.00% per annum, in each case, with a floor of 1.75% per annum), plus variable spreads ranging from 1.75% to 2.50% per annum based on first lien net leverage ratio levels. Accrued and unpaid interest is payable with respect to LIBOR loans on the last day of the interest period as selected by the Company but no later than three months, and with respect to Alternate Base Rate Loans, quarterly on the last business day of each of March, June, September and December. An unused commitment fee is also payable with respect to the revolving credit facility and the delayed draw term loan facility ranging between 0.35% and 0.50% depending on the Company’s first lien net leverage ratio, and is payable quarterly in arrears with respect to the revolving credit facility and on the earliest of the termination of the delayed draw term loan facility, the six month anniversary of the Closing Date with respect to any delayed draw term loan commitments that have expired and otherwise after the end of the first full fiscal quarter after the Closing Date.
Amortization payments with respect to the Initial Term Loans are payable in quarterly installments, commencing with the last business day of the first full fiscal quarter ending after the Closing Date, in aggregate principal amounts equal to (i) 1.25% of the aggregate principal amount of the Initial Term Loans outstanding on the Closing Date from the Closing Date until June 7, 2024, (ii) 1.875% of the aggregate principal amount of the Initial Term Loans outstanding on the Closing Date from June 8, 2024 to June 7, 2025 and (iii) 2.50% of the aggregate principal amount of the Initial Term Loans outstanding on the Closing Date from June 8, 2025 to June 7, 2026. All amounts owed under the Credit Facilities are due and payable upon the five-year anniversary of the Closing Date, unless otherwise extended in accordance with the terms of the Credit Agreement.
The Credit Agreement contains certain covenants that limit, among other things, the ability of the Company and its subsidiaries to incur additional indebtedness or liens, to make certain investments, to enter into sale-leaseback transactions, to make certain restricted payments, including dividends, to enter into consolidations, mergers or sales of material assets and other fundamental changes, or to transact with affiliates subject to exceptions, materiality and other qualifications as provided in the Credit Agreement. The Credit Agreement also contains customary events of default and also includes an equity cure right. All obligations under the Credit Agreement are guaranteed by the Company and substantially all of its subsidiaries. As of December 31, 2021, the Company was in compliance, in all material respects, with all covenants under the First Amendment of the Credit Agreement.
 

 
On December 30, 2021, the Company entered into the First Amendment to the Credit Agreement to, among other things, modify certain of the financial covenants contained in the Credit Agreement. As of December 31, 2021, the Company was in compliance, in all material respects, with all covenants under the First Amendment of the Credit Agreement.
CMG Loan Agreement
On the Closing Date, the Company repaid all outstanding term loan borrowings under CMG’s previous loan agreement (the “Loan Agreement”) and the Loan Agreement was terminated. The Company repaid $24.5 million, inclusive of $487,000 in prepayment penalties, fees and interest. The Company recorded a loss on early of extinguishment of debt of $806,000, inclusive of the
write-off
of deferred debt issuance costs and prepayment penalties related to the Loan Agreement.
F-25
Notes to Consolidated Financial Statements—(Continued
)
Earnout Consideration
Other Debt
Other long-term debt repaid on the Closing Date totaled $229,000. In addition, $2.0 million was deposited into an escrow account as security for amounts borrowed under the Paycheck Protection Program (“PPP”). In the twelve months ended December 31, 2021, the Company paid $2.0 million to the CMG Sellers for the amount owed related to a loan under the PPP. This amount was held in escrow and was reported in restricted cash in the June 30, 2021 condensed consolidated balance sheet, but was released upon forgiveness of the PPP loans. During the twelve months ended December 31, 2021, borrowings under the PPP of $2.8 million were forgiven and are included in the gain on extinguishment of debt.
Future Maturities
Future maturities of debt outstanding at December 31, 2021 are as follows (
in thousands
):
 
    
Amount
  
2022
    $ 6,275  
2023
      6,265  
2024
      8,611  
2025
      11,726  
2026
      89,063  
    
 
 
  
Total
    $ 121,940  
    
 
 
  
NOTE 8. STOCKHOLDERS’ EQUITY
The consolidated statement of changes in equity reflects the Reverse Recapitalization and the IMC Acquisition as discussed in Notes 2 and 3. As CMG was deemed the accounting acquirer in the Reverse Recapitalization with DFHT, all periods prior to the consummation of the Business Combination reflect the balances and activity of CMG.
In connection with the Business Combination, the Company adopted the third amended and restated certificate of incorporation, dated June 8
, 2021
(the “Amended and Restated Charter”) to, among other things, increase the total number of authorized shares of all classes of capital stock, par value of $0.0001 per share, to 261,000,000 shares, consisting of (i) 260,000,000 shares of common stock, including 250,000,000 shares of Class A Common Stock and 10,000,000 shares of Class B Common Stock, and (ii) 1,000,000 shares of preferred stock. In addition, 3,593,750 shares of Class B Common Stock were converted, on a
one-for-one
basis, into shares of Class A Common Stock, and as of December 31, 2021, there were no shares of Class B Common Stock issued or outstanding.​​​​​​​
Also in connection with the Business Combination, (i) Deerfield Partners and the Sponsor purchased an aggregate of 10,000,000 shares of Class A Common Stock (the “Deerfield PIPE Investments”), consisting of 9,600,000 shares of Class A Common Stock purchased by Deerfield Partners and 400,000 shares of Class A Common Stock purchased by the Sponsor, for a purchase price of $10.00 per share and an aggregate purchase price of $100.0 million and (ii) certain investors purchased an aggregate of 31,000,000 shares of Class A Common Stock (the “Third-Party PIPE Investments,” and together with the Deerfield PIPE Investments, the “PIPE Investments”), for a purchase price of $10.00 per share, for an aggregate purchase price of $310.0 million. The Company paid offering costs of $12.8 million.
In connection with the acquisition of SMA (see Note 3 – Acquisitions—Acquisition of SMA Entities), the Company issued 384,615 shares of Class A Common Stock.
 
F-26
Notes to Consolidated Financial Statements—(Continued)
 

On July 13, 2021, the Company issued 500,000 shares of Class A Common Stock in connection with the execution of the Advisory Agreement (as defined below).
In connection with the DNF Acquisition (see Note 3
—
Acquisitions
—
Acquisition of DNF), the Company issued
2,741,528
shares of Class A Common Stock to DNF. Also, during the
twelve
months ended December 
31
,
2021
, the first tranche of contingently issuable shares totaling an aggregate of
3,200,000
shares of Class A Common Stock were issued to the CMG Sellers and IMC Parent (“Earnout Shares” described in Contingent Consideration below).
On December 22, 2021, the Company issued 145,883 shares of Class A Common Stock in connection with the acquisition of Advantis (see Note 3
—
Acquisitions
—
Acquisition of Advantis).
On December 22, 2021, the Company issued 148,104 shares of Class A Common Stock in connection with the acquisition of BIX (see Note 3
—
Acquisitions
—
Acquisition of BIX).
Related Advisory Agreement
On July 13, 2021, the Company entered into an exclusive real estate advisory agreement (the “Advisory Agreement”) with Related CM Advisor, LLC (the “Advisor”), a Delaware limited liability company and a subsidiary of The Related Companies, L.P. (“Related”) (the “Advisory Agreement”), pursuant to which the Advisor has agreed provide certain real estate advisory services to the Company on an exclusive basis. The services include identifying locations for new medical centers nationwide as part of the Company’s de novo growth strategy, including, but not limited to, locations within and proximate to affordable housing communities that may be owned by Related.
In connection with the Advisory Agreement, the Company and the Advisor entered into a subscription agreement (the “Subscription Agreement”), whereby the Advisor purchased 500,000 shares (the “Initial Shares”) of the Company’s Class A Common Stock for an aggregate purchase price of $5.0 million and the Company issued to the Advisor (i) a warrant (the “Series A Warrant”) to purchase 2,000,000 shares of Class A Common Stock (the “Series A Warrant Shares”), which vested immediately upon issuance, is exercisable for a period of five years and is not redeemable by the Company and (ii) a warrant (the “Series B Warrant” and together with the Series A Warrant, the “Warrants”) to purchase up to 6,000,000 shares of Class A Common Stock (the “Series B Warrant Shares” and, together with the Series A Warrant Shares, the “Warrant Shares”), pursuant to which 500,000 Series
 B Warrant Shares will vest and become exercisable from time to time upon the opening of each medical center under the Advisory Agreement for which the Advisor provides services, other than two initial medical centers.

The Series
B Warrant is exercisable, to the extent vested, until the later of five years from the date of issuance or one year from vesting of the applicable Series B Warrant Shares and is redeemable with respect to vested Warrant Shares at a price of $0.01 per Warrant Share if the price of the Class A Common Stock equals or exceeds $18.00 per share, or $0.10 per Warrant Share if the price of the Class A Common Stock equals or exceeds $10.00 per share, in each case when such price conditions are satisfied for any 20 trading days within a
30-trading
day period and subject to certain adjustments and conditions as described in the Series B Warrant. In the event that the Series B Warrant is called for redemption by the Company, the Advisor may pay the exercise price for the Series B Warrant Shares six months following the notice of redemption by the Company.
The company assessed the substance of the Subscription Agreement and determined that all instruments referenced in the Subscription Agreement should be assessed under the guidance of ASC 718 as
non-employee
awards issued to Related in exchange for real estate advisory services to be rendered per the Advisory
 
F-27
Notes to Consolidated Financial Statements—(Continued)
 
Agreement. As a result, the Company recorded the Series A Warrants as a component of additional
paid-in-capital
using the fair value as of July 13, 2021.
Preferred Stock
The Amended and Restated Charter authorizes the Company to issue 1,000,000 shares of preferred stock, with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. As of December 31, 2021, there were no shares of preferred stock issued or outstanding.
Redeemable Warrants
—
Public Warrants
On July 16, 2020, in connection with the IPO, DFHT sold 2,875,000 Public Warrants. Each whole Public Warrant entitles the registered holder to purchase
on
e share of Class A Common Stock at a price of $11.50 per share, subject to adjustment, at any time commencing on the later of 12 months from the closing of the IPO and 30 days after the completion of the Business Combination, provided in each case that the Company has an effective registration statement under the Securities Act covering the shares of Class A Common Stock issuable upon exercise of the Public Warrants and a current prospectus relating to them is available (or the Company permits holders to exercise their Public Warrants on a cashless basis under the circumstances specified in the warrant agreement) and such shares are registered, qualified or exempt from registration under the securities, or blue sky, laws of the state of residence of the holder. Pursuant to the warrant agreements entered into at the time of the IPO, a warrant holder may exercise its Public Warrants only for a whole number of shares of Class A Common Stock. This means only a whole Public Warrant may be exercised at a given time by a warrant holder. No fractional warrants were issued upon separation of the units issued in connection with the IPO and only whole Public Warrants will trade. The Company may redeem the Public Warrants when the price per share of Class A Common Stock equals or exceeds certain threshold prices.
Redeemable Warrants
—
Private Placement Warrants
Also in connection with the IPO, DFHT issued the 2,916,667 Private Placement Warrants at a purchase price of $1.50 per warrant. The Private Placement Warrants (including the Class A Common Stock issuable upon exercise of the Private Placement Warrants) are not transferable, assignable or salable until 30 days after the completion of the Business Combination (except, among other limited exceptions to DFHT’s officers and directors and other persons or entities affiliated with the initial purchasers of the Private Placement Warrants) and they will not be redeemable by CareMax for cash so long as they are held by the initial stockholders or their permitted transferees. With some
 
exceptions, the Private Placement Warrants have terms and provisions that are identical to those of the Public Warrants. If the Private Placement Warrants are held by holders other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by the holders on the same basis as the Public Warrants.
Contingent Consideration
Pursuant to the Business Combination Agreement, the CMG Sellers and IMC Parent, who received Class A Common Stock in connection with the Business Combination, became entitled to receive Contingent Consideration to be paid out in the form of Class A Common Stock. The Business Combination Agreement provided that up to an additional 3,500,000 and 2,900,000 Earnout Shares would become payable after the Closing to the CMG sellers and IMC Parent, respectively: (i) if within the first year after the Closing, the volume weighted average trading price of Class A Common Stock equals or exceeds $12.50 on any 20 trading days in any
30-day
trading period (the “First Share Price Trigger”), then 1,750,000 and 1,450,000 Earnout Shares would become issuable to the CMG Sellers and IMC Parent, respectively, and (ii) if within the two years after the
 
F-28
Notes to Consolidated Financial Statements—(Continued)

Closing (the “Second Earnout Period”), the volume weighted average trading price of Class A Common Stock equals or exceeds $15.00 on any 20 trading days in any
30-day
trading period (the “Second Share Price Trigger” and together with the First Share Price Trigger, the “Share Price Triggers”), then 1,750,000 and 1,450,000 Earnout Shares would become issued and paid to the formers owners of CMG and IMC, respectively. If prior to (i) the satisfaction of the Share Price Triggers, and (ii) the end of the Second Earnout Period, the Company enters into a change in control transaction as described in the Business Combination Agreement, and the price per share of the Company’s Class A Common Stock payable to the stockholders of the Company in such change in control transaction is greater than the Share Price Triggers that have not been satisfied during the Earnout Period, then at closing of such change in control transaction, the Share Price Triggers would be deemed to have been satisfied and the Company shall issue, as of such closing, all of the Earnout Shares. The contingent consideration was classified as a liability for the period ended June 30, 2021. On July 9th, 2021, the volume weighted average trading price of Class A Common Stock exceeded the $12.50 on 20 or more days resulting in the satisfaction of the First Share Price Trigger. After the First Share Price Trigger was achieved on July 9, 2021, the estimated fair value of the Earnout Shares was recorded as an equity-classified instrument as a component of stockholders’ equity, with the change in fair value from the prior reporting period recorded in earnings. Accordingly, 1,750,000 and 1,450,000 Earnout Shares were issued and paid to the CMG Sellers and IMC Parent, respectively. See Item 9A. – Controls and Procedures
—
Material Weakness in Internal Control over Financial Reporting for further information on the classification of the Earnout Shares
Equity Based Compensation Expense
—
2021 Plan
On June 4, 2021, the stockholders of the Company approved the CareMax Inc. 2021 Long-term Incentive Plan (the “2021 Plan”), effective on the Closing Date. The 2021 Plan permits the grant of equity-based awards to officers, directors, employees and other service providers. The 2021 Plan permits the grant of an initial share pool of 7,000,000 shares of Class A Common Stock and will:
 
  -
be increased automatically, without further action of the Company’s board of directors, on January 1st of each calendar year commencing after the Closing Date and ending on (and including) January 1, 2031, by a number of shares of Class A Common Stock equal to the lesser of (i) four percent of the aggregate number of shares of Class A Common Stock outstanding on December 31st of the immediately preceding calendar year, excluding for this purpose any such outstanding shares of Class A Common Stock that were granted under the 2021 Plan and remain unvested and subject to forfeiture as of the relevant December 31st, or (B) a lesser number of shares of Class A Common Stock as determined by the Company’s board of directors or the Compensation Committee of the board of directors prior to the relevant January 1st.
 
Service and Performance-Based Awards
Beginning on October 29, 2021, the Board of Directors approved individual awards under the 2021 Plan. Awards consisted of RSU’s for employees, executives, and directors, PSUs for executives, and Options for Executives.
For the RSU’s granted to employees, the service-based vesting will be satisfied with respect to 33.3% of an employee’s RSU’s on October 29, 2022, the first anniversary of the vesting commencement date, and will be satisfied with respect to 33.3% of an employee’s RSU’s at the end of each twelve month period thereafter (October 29, 2023 and 2024), subject to the employee’s continued employment with the Company through the applicable vesting date.
For the RSU’s granted to executives, the service-based vesting will be satisfied with respect to 33.3% of an executive’s RSU’s on October 29, 2022, the first anniversary of the vesting commencement date, and will be

 
F-29
Notes to Consolidated Financial Statements—(Continued)
 
satisfied with respect to
33.3
% of an executive’s RSU’s on June
8
th,
2023
, and June
8
th,
2024
, subject to the executive’s continued employment with the Company through the applicable vesting date.

For the RSU’s granted to directors, the service-based vesting will be satisfied with respect to
100
% of a director’s RSU’s on October 
29
,
2022
, the first anniversary of the vesting commencement date, subject to the director’s continued employment with the Company through the applicable vesting date.

For the PSU’s issued to executives, the performance-based vesting will be satisfied with respect to a percentage of an employee’s PSU’s, as and when the price per share of Class A Common Stock specified is achieved, on a volume-adjusted weighted-average basis 30 days prior to July 1, 2023, the expiration of the awards, subject to the executives continued employment with the Company through the applicable vesting date.
The Options provide the executive the option to purchase a defined number of shares at a strike price of $10.00. The Options service-based vesting will be satisfied with respect to 33.3% of an executive’s Options on October 29, 2022, the first anniversary of the vesting commencement date, and will be satisfied with respect to 33.3% of an executive’s Options on June 8th, 2023, and June 8th, 2024, subject to the executives continued employment with the Company through the applicable vesting date.
The Company accounts for forfeitures as they occur.
RSU Valuation
The following table summarizes the activity related to the Company’s RSUs for the twelve months ended December 31, 2021 (in thousands, except for weighted average grant date fair value):
 
 
  
Number of
RSUs
 
  
Wtd. Avg.
Grant Date
Fair Value
 
Outstanding as of January 1, 2021
      —        $ —    
Granted
      975      $ 7.92  
Vested
      —        $ —    
Forfeited
      —        $ —    
             
 
 
  
Unvested and outstanding as of December 31, 2021
      975      $ 7.92  
             
 
 
  
The total fair value of RSU’s that vested during the twelve months ended December 31, 2021 was $0. As of December 31, 2021, total unrecognized compensation expense related to unvested RSU’s was $7.7 million and is expected to be recognized over a weighted-average expected performance period of 2.6 years.
 
F-30
Notes to Consolidated Financial Statements—(Continued)
 
PSU Valuation
The following table summarizes the activity related to the Company’s PSUs for the twelve months ended December 31, 2021 (in thousands, except for weighted average grant date fair value):
 
 
  
Number of
PSUs
 
  
Wtd. Avg.
Grant Date
Fair Value
 
Outstanding as of January 1, 2021
      —        $ —    
Granted
      66      $ 6.05  
Vested
      —        $ —    
Forfeited
      —        $ —    
             
 
 
  
Unvested and outstanding as of December 31, 2021
      66      $ 6.05  
             
 
 
  
The total fair value of PSU’s that vested during the twelve months ended December 31, 2021 was $0. As of December 31, 2021, total unrecognized compensation expense related to unvested PSU’s was $397,000 and is expected to be recognized over a weighted-average expected performance period of 1.7 years.
The fair-value of the PSU’s with market-based vesting conditions was determined on the date of grant using a Monte Carlo model to simulate total stockholder return for the Company and peer companies with the following assumptions:
 
Performance Period
      1.7  
Weighted-Average risk-free interest rate
      0.37 % 
Weighted-average volatility
      55.0 % 
Weighted-average dividend yield
      0.0 % 
The risk-free interest rate utilized is based on a
10-year
term-matched
zero-coupon
U.S. Treasury security yield at the time of grant. Expected volatility is based on annualized standard deviation of daily continuously compounded returns of the Company’s peer firms using the Guideline Public Companies method.
Option Valuation
The following table summarizes the activity related to the Company’s Options for the twelve months ended December 31, 2021 (in thousands, except for weighted average grant date fair value):
 
 
  
Number of
Options
 
  
Wtd. Avg.
Grant Date
Fair Value
 
Outstanding as of January 1, 2021
      —        $ —    
Granted
      131      $ 5.82  
Vested
      —        $ —    
Forfeited
      —        $ —    
             
 
 
  
Unvested and outstanding as of December 31, 2021
      131      $ 5.82  
             
 
 
  
The total fair value of Options that vested during the twelve months ended December 31, 2021 was $0. As of December 31, 2021, total unrecognized compensation expense related to unvested Options’ was $764,000 and is expected to be recognized over a weighted-average expected performance period of 2.6 years.
 
F-31
Notes to Consolidated Financial Statements—(Continued)
 
The fair-value of the Options with market-based vesting conditions was determined on the date of grant using a Black-Scholes-Merton Option Pricing model to simulate total stockholder return for the Company and peer companies with the following assumptions:
 
Performance Period
      0.8  
Weighted-Average risk-free interest rate
      1.55 % 
Weighted-average volatility
      54.7 % 
Weighted-average dividend yield
      0.0 % 
The risk-free interest rate utilized is based on an interpolated term-matched
zero-coupon
U.S. Treasury security yield at the time of grant. Expected volatility is based on annualized standard deviation of daily continuously compounded returns of the Company’s peer firms using the Guideline Public Companies method.
In accordance with ASC 718
—
Compensation
—
Stock C
ompensation, the awards were classified as equity and the Company began recognizing share based compensation expense based on the grant date fair value. Share-based compensation expense is included within Corporate, General and Administrative expenses in the consolidated statements of operations.
The company recognized share-based compensation expense as follows (in thousands):


 
  
December 31,
2021
 
  
December 31,
2020
 
RSU’s
    $ 290      $ —    
PSU’s
      41        —    
Options
      44        —    
Class A Common Stock
      966        —    
    
 
 
     
 
 
  
Total share-based compensation expense
    $ 1,341      $ —    
    
 
 
     
 
 
  
As of December 31, 2021, no awards have vested and there were no shares of Class A Common Stock issued or outstanding under the 2021 Plan.
In July 2021, the Company’s board of directors authorized an award of 100,000 shares of Class A Common Stock to an executive. The award has not been granted as of December 31, 2021. There are no additional performance or market conditions that will be required to be satisfied before the award is granted. Due to the timing of communicating the terms of the award to the executive, the Company used September 30, 2021 for the grant date fair value. The historical close price of the Class A Common Stock was $9.66 on September 30, 2021. As of December 31, 2021, the Class A Common Stock shares have not been issued for this award.
The Company has recorded Equity Based Compensation expense totaling $1.3 million for the twelve months ended December 31, 2021.
NOTE 9. NET INCOME (LOSS) PER SHARE
The Business Combination was accounted for as a reverse recapitalization by which CMG issued equity for the net assets of the Company accompanied by a recapitalization. Earnings per share has been recast for all historical periods to reflect the Company’s capital structure for all comparative periods.
The Earnout Shares are excluded from the computation of basic net income (loss) per share until the conditions to trigger the issuance of the Earnout Shares have been satisfied. During the twelve months ended December 31, 2021, the first tranche of Earnout Shares totaling 3,200,000 shares of Class A Common Stock were issued to the CMG Sellers and IMC Parent, and such shares are included in the computation of basic net income (loss) per
 
F-32
Notes to Consolidated Financial Statements—(Continued)
 
share from the date of issuance for the twelve months ended December 31, 2021. The remaining Earnout Shares
 
totaling
3,200,000
shares were excluded from the computation of basic net income (loss) per share for the twelve months ended December 
31
,
2021
as the conditions to trigger the issuance of the Earnout Shares had not been satisfied as of December 
31
,
2021
.
The Company excluded the effect of the Public Warrants and the Private Placement Warrants from the computation of diluted net income (loss) per share in the twelve months ended December 31, 2021 as their inclusion would have been anti-dilutive because the Company was in a loss position for the period.
The following table sets forth the calculation of basic and diluted earnings per share for the periods indicated based on the weighted average number of common share outstanding for the period subsequent to the transactions that occurred in connection with the Business Combination (
in thousands, except share and per share data
):
 
 
  
Twelve Months Ended
December 31,
 
 
  
2021
 
  
2020
 
Net (loss) income attributable to CareMax, Inc. Class A common stockholders
    $ (6,675 )     $ 7,601  
     
Weighted average basic shares outstanding
      52,620,980        10,796,069  
Weighted average diluted shares outstanding
      52,620,980        10,796,069  
Net (loss) income per share
                  
Basic
    $ (0.13 )     $ 0.70  
Diluted
    $ (0.13 )     $ 0.70  
NOTE 10. FAIR VALUE MEASUREMENTS
The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis and indicate the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value (
in thousands
).
 
December 31, 2021
Description
  
Quoted Prices
in Active
Markets
(Level 1)
 
  
Significant other
Observable
Units (Level 2)
 
  
Significant other
Unobservable
Units (Level 3)
 
Derivative warrant liabilities
    $ —        $ —        $ 8,375  
Liability-classified contingent consideration
      —          —          875  
The fair value of the Public Warrants issued in connection with the IPO and the Private Placement Warrants were initially measured at fair value using a Monte Carlo simulation model and subsequently, the fair value of the Private Placement Warrants has been estimated using a Monte Carlo simulation model each measurement date. The fair value of Public Warrants issued in connection with the IPO has been measured based on the listed market price of such warrants since the IPO. For the twelve months ended December 31, 2021, the Company recognized a benefit resulting from a decrease in the fair value of the derivative warrant liabilities of $20.8 million.
Transfers to/from Levels 1, 2, and 3 are recognized at the end of the reporting period. There were no transfers between levels for twelve months ended December 31, 2021.

 
F-33
Notes to Consolidated Financial Statements—(Continued)
 
The estimated fair value of the Private Placement Warrants, and the Public Warrants prior to being separately listed and traded, was determined using Level 3 inputs. Inherent in a Monte Carlo simulation are assumptions related to expected stock-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its common stock based on historical volatility of select peer companies that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury
zero-coupon
yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates remaining at zero.
The following table provides quantitative information regarding Level 3 fair value measurements inputs as of the Closing (June 8, 2021) and December 31, 2021:
 
    
December 31,
2021
    
June 8,
2021
  
Exercise price
    $ 11.50     $ 11.50  
Unit price
    $ 7.68     $ 14.92  
Volatility
      37.6 %      29.8 % 
Expected life of the options to convert
      4.44       5  
Risk-free rate
      1.17 %      0.77 % 
Dividend yield
      0.0 %      0.0 % 
The change in the fair value of the warrant liabilities for the twelve months ended December 31, 2021 is summarized as follows (
in thousands
):
 
Fair value of derivative warrant liabilities at Closing
    $ 29,132  
Change in fair value of derivative warrant liabilities
      (20,757 ) 
    
 
 
  
Derivative warrant liabilities at December 31, 2021
    $ 8,375  
    
 
 
  
The following table provides quantitative information regarding Level 3 fair value measurements of the Related Warrants as of the date of issuance:
 
    
July 13,
2021
  
Exercise price
    $ 11.50  
Unit price
    $ 13.30  
Volatility
      50.9 % 
Expected life of the options to convert
      5.00  
Risk-free rate
      0.85 % 
Dividend yield
      0.0 % 
 
F-34
Notes to Consolidated Financial Statements—(Continued)
 
The following table provides quantitative information regarding Level 3 fair value measurements of both tranches of the Contingent Consideration for the CMG Sellers and IMC Parent as of the date in which the First Share Price was triggered, causing the instruments to be
re-assessed
under ASWC
815-40
and subsequent reclassification from liabilities to equity:
 
CMG Sellers—First Share Price Trigger
  
July 9,
2021
 
Share Price Trigger
    $ 12.50  
Potential Shares
      1,750,000  
Beginning Share Price
    $ 14.09  
Volatility
      60.7 % 
Remaining Term
      0.92  
Risk-free rate
      0.22 % 
Dividend yield
      0.0 % 
 
CMG Sellers—Second Share Price Trigger
  
July 9,
2021
 
Share Price Trigger
    $ 15.00  
Potential Shares
      1,750,000  
Beginning Share Price
    $ 14.09  
Volatility
      60.7 % 
Remaining Term
      1.92  
Risk-free rate
      0.22 % 
Dividend yield
      0.0 % 
 
IMC Parent—First Share Price Trigger
  
July 9,
2021
 
Share Price Trigger
    $ 12.50  
Potential Shares
      1,450,000  
Beginning Share Price
    $ 14.09  
Volatility
      60.7 % 
Remaining Term
      0.92  
Risk-free rate
      0.22 % 
Dividend yield
      0.0 % 
 
IMC Parent—Second Share Price Trigger
  
July 9,
2021
 
Share Price Trigger
    $ 15.00  
Potential Shares
      1,450,000  
Beginning Share Price
    $ 14.09  
Volatility
      60.7 % 
Remaining Term
      1.92  
Risk-free rate
      0.22 % 
Dividend yield
      0.0 % 
NOTE 11. RELATED PARTY TRANSACTIONS

The Company
had a 49% ownership interest in Care Smile, LLC (“Care Smile”), a dental care organization with majority ownership by the dental provider, who is the spouse of a member of the Company’s senior management. The Company pays for dental services provided to enrollees by Care Smile on a capitated basis. Total capitation payments for the twelve months ended December 31, 2020 were $222,000. The
 
net loss of Care Smile for the
 
F-35
Notes to Consolidated Financial Statements—(Continued)
 
twelve months ended December 31, 2020 was
$97,000. Care Smile was voluntarily dissolved on November 24, 2020.
The Company leases certain facilities from related parties under operating leases expiring through 2036. Rent expenses totaled $21,000 for the twelve months ended December 31, 2021.
On July 13, 2021, the Company entered into the Advisory Agreement the Advisor, the substance of which is described in detail in Note 8—Stockholders Equity—Related Advisory Agreement.
The relative fair value method was used to allocate the $5.0 million purchase price between the shares of Class A Common Stock and the Series A Warrants under the Subscription Agreement. The Company recorded the excess of the grant date fair value difference between the fair value of the equity and Series A Warrants instruments at the grant date (July 13, 2021) as prepaid service contracts totaling $14.5 million, subject to amortization over the terms of the respective agreements. In the twelve months ended December 31, 2021, the Company recognized $215,000 of expense related to amortization of the prepaid service contracts.
The Series B Warrants were assigned a value of $0 as the vesting was not probable at issuance through the twelve months ended December 31, 2021. The grant date fair value of the Series B Warrants will be used to determine the cost of these awards upon the opening of the 12 future sites not yet identified.
On July 13, 2021 the Company’s board of directors appointed Mr. Bryan Cho, an Executive Vice President of Related, to serve as a Class III director of the Company. The appointment of Mr. Cho was made in connection with the Advisory Agreement, which provides the Advisor with the right to designate a director to serve on the Company’s board of directors, subject to the continuing satisfaction of certain conditions, including that the Advisor and its affiliates maintain ownership of at least 500,000 shares of Class A Common Stock.
The board of directors has determined that Mr. Cho is independent under the rules of the Nasdaq Stock Market, LLC. Mr. Cho has been appointed to serve as a member on the Compensation Committee and Nominating and Governance Committee of the Board. As a director of the Company, Mr. Cho will receive compensation in the same manner as the Company’s other
non-employee
directors and will enter into the Company’s standard indemnification agreement for directors.
NOTE 12. OPERATING LEASES AND COMMITMENTS
The Company has entered into
non-cancelable
operating lease agreements for office and clinical space expiring at various times through 2031. The operating lease agreements have renewal options ranging from one to seven years. Future minimum rental payments under these lease agreements, including renewal options which are considered reasonably certain of exercise, consisted of the following at December 31, 2021:​​​​​​​
 
    
Amount
  
2022
    $ 10,087  
2023
      10,028  
2024
      9,715  
2025
      9,374  
2026
      8,685  
Thereafter
      58,763  
Total
    $ 106,652  
Rent expense, including other related expenses for property taxes, sale taxes, and utilities, was approximately $7.2 million for the twelve months ended December 31, 2021 and $1.5 million for the twelve months ended December 31, 2020, respectively. Rent expense is included in Corporate General and Administrative Expenses in the consolidated statements of
operations.
 
F-36
Notes to Consolidated Financial Statements—(Continued)
 
NOTE 13. INCOME TAXES
Prior to the Business Combination on June 8, 2021, CMG was taxed as a partnership for income tax purposes whereby the owners were subject to and liable for the income taxes on earnings of the company. No income tax expense or deferred taxes were recorded by CMG for a prior period and as such no comparable prior year amounts are disclosed. As a result of the current year Business Combination, the tax status of CMG was changed from a partnership to a C Corporation.
The components of income tax expense (benefit) from continuing operations for the twelve months ended December 31, 2021 are as follows (in thousands):
 
 
  
December 31,
2021
 
Deferred:
  
      
Federal
    $ 126  
State
      33  
(Decrease) Increase in valuation allowance
      —    
    
 
 
  
Total income tax expense
    $ 159  
    
 
 
  
The reconciliation between the effective tax rate and the statutory tax rate is as follows:
 
 
  
December 31,
2021
 
Federal statutory rate
      21.0 % 
State statutory rate, net of federal benefit
      4.9 % 
Nondeductible Transaction Costs
      (14.2 %) 
Nondeductible/nontaxable or other items
      (0.2 %) 
PPP Loan Forgiveness
      8.1 % 
Change in valuation allowance
      (22.1 %) 
    
 
 
  
Income tax (expense)
      (2.5 %) 
    
 
 
  
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The primary temporary differences that give rise to the deferred tax assets and liabilities are depreciation and amortization, interest expense, and net operating loss carryforwards.
 
F-37
Notes to Consolidated Financial Statements—(Continued)
 
The deferred tax assets and liabilities consisted of the following at December 31, 2021 (in thousands):​​​​​​​
 
 
  
December 31,
2021
 
Deferred tax assets:
  
      
Accrued Expenses
    $ 2,257  
Warrant Liabilities
      2,219  
Loss carryforwards
      15,982  
Interest carryforward
      6,962  
Other
      —    
    
 
 
  
Total deferred tax assets
      27,420  
Valuation allowance
      (26,128 ) 
    
 
 
  
Net deferred tax assets
      1,292  
    
 
 
  
Deferred tax liabilities:
         
Intangibles
      (1,480 ) 
Property, plant and equipment
      (18 ) 
Prepaid Expenses
      (219 ) 
Other
      —    
    
 
 
  
Total deferred tax liabilities
      (1,717 ) 
    
 
 
  
Deferred tax liabilities, net
    $ (425 ) 
    
 
 
  
The deferred tax assets were fully offset by a valuation allowance at December 31, 2021, except for a portion attributable to a “naked credit” deferred tax liability. As of December 31, 2021 we had federal and state tax loss carryforwards of $60.2 million and $60.9 million, respectively. Federal net operating losses of $9.0 million generated prior to December 31, 2017 will expire in 2037 if not utilized. Federal net operating losses generated after January 1, 2018 will have an indefinite carryforward period. We anticipate approximately $43.9 million in losses and $21.9 million of business expense limitation carried over from the Business Combination with IMC on June 8, 2021 will be subject to potential Section 382 limitations.
Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended December 31, 2021. Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future growth.
We have indefinitely-lived intangible assets consisting of goodwill. Pursuant to FASB ASC
350-10,
these indefinitely-lived intangible assets are not amortized for financial reporting purposes. However, these assets are tax deductible, and therefore amortized over 15
 
years for tax purposes. As such, deferred income tax expense and a deferred tax liability arise as a result of the
tax-deductibility
of these indefinitely-lived intangible assets. The resulting deferred tax liability, which is expected to continue to increase over time, will have an indefinite life, resulting in what is referred to as a “naked credit.” This deferred tax liability could remain on our balance sheet indefinitely unless there is an impairment of the related assets (for financial reporting purposes), or the business to which those assets relate were to be disposed of. Due to the fact that the aforementioned deferred tax liability could have an indefinite life, it can only be netted against the portion of our other indefinitely lived deferred tax assets (which primarily relate to post-2018 net operating loss and business interest expense carryforwards) when determining the required valuation allowance. Doing so would result in the understatement of the valuation allowance and related deferred income tax expense. As a result, a full valuation has been recorded against the Company’s net deferred tax assets, except for this excess deferred tax liability (“naked credit”).
 
F-38
Notes to Consolidated Financial Statements—(Continued)
 
We are
subject to taxation in the United States and Florida. As of December 31, 2021, all tax years from 2017 remain open to examination by the major taxing jurisdictions to which we are subject due to our net operating loss and credit carryforwards from those years. We believe that the income tax filing positions will be sustained on audit and do not anticipate any adjustments that will result in a material change. Therefore, no reserve for uncertain income tax positions has been recorded. Interest and penalties, if any, associated with income tax examinations will be to record such items as a component of income taxes.
NOTE 14. COMMITMENTS AND CONTINGENCIES
Compliance
The health care industry is subject to numerous laws and regulations of federal, state, and local governments. These laws and regulations include, but are not limited to, matters such as licensure, accreditation, government healthcare program participation requirements, reimbursement for patient services, and Medicare and Medicaid fraud and abuse. Recently, government activity has increased with respect to investigations and allegations concerning possible violations of fraud and abuse statues and regulations by healthcare providers. Violations of these laws and regulations could result in expulsion from government healthcare programs together with imposition of significant fines and penalties, as well as significant repayments for patient services billed. Compliance with these laws and regulations, specifically those related to the Medicare and Medicaid programs, can be subject to government review and interpretation, as well as regulatory actions unknown and not yet asserted at this time. Management believes that the Company is in substantial compliance with current laws and regulations.
Malpractice Professional Liability Insurance
The Company may be a party to claims filed against it in the normal course of business, principally related to malpractice assertions. The Company has professional liability insurance coverage on a claims-made basis. Current per claim coverage is limited to $1.0 million and aggregate annual claims of $3.0 million. Should this claims-made policy not be renewed or replaced with equivalent insurance, claims based on incidents occurring during the term of the claims-made policy but reported in subsequent periods would be uninsured. The Company has determined that no accrual is necessary for incurred but not reported (“IBNR”) claims as of December 31, 2021 and 2020. The Company has secured coverage through May 2022, and intends to renew coverage beyond this date.
Litigation
The Company is involved in various legal actions arising in the normal course of business. Management has not identified any legal actions during the fiscal year ended December 31, 2021 that were deemed to be material.
NOTE 15. SUBSEQUENT EVENTS
The Company has evaluated subsequent events through the filing of this Quarterly Report on Form
10-K,
and determined that there have been no events that have occurred that would require adjustments to our disclosures in the consolidated financial statements.
 
F-39
CAREMAX, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except share and per share data)
 
    
March 31,
2022
    
December 31,
2021
  
ASSETS
     
CURRENT ASSETS
     
Cash
    $ 32,740     $ 47,917  
Accounts receivable, net
      53,581       41,998  
Inventory
      702       550  
Prepaid expenses
      20,045       17,040  
Risk settlements due from providers
      655       539  
  
 
 
    
 
 
  
Total Current Assets
      107,723       108,044  
Property and equipment, net
      16,895       15,993  
Goodwill
      464,264       464,566  
Intangible assets, net
      55,604       59,811  
Deferred debt issuance costs
      1,860       1,972  
Other assets
      2,738       2,706  
  
 
 
    
 
 
  
Total Assets
    $ 649,085     $ 653,092  
  
 
 
    
 
 
  
LIABILITIES AND STOCKHOLDERS’ EQUITY
     
CURRENT LIABILITIES
     
Accounts payable
    $ 5,165     $ 3,110  
Accrued expenses
      12,365       8,690  
Risk settlements due to providers
      228       196  
Current portion of long-term debt
      6,272       6,275  
Other current liabilities
      4,107       3,687  
  
 
 
    
 
 
  
Total Current Liabilities
      28,137       21,959  
Derivative warrant liabilities
      11,911       8,375  
Long-term debt, less current portion
      109,660       110,960  
Other liabilities
      7,186       6,428  
  
 
 
    
 
 
  
Total Liabilities
      156,895       147,722  
COMMITMENTS AND CONTINGENCIES (Note 13)
     
STOCKHOLDERS’ EQUITY
     
Preferred stock (1,000,000 authorized and zero outstanding as of March 31, 2022 and December 31, 2021)
      —         —    
Class A common stock ($0.0001 par value; 250,000,000 shares authorized; 87,367,972 shares issued and outstanding at March 31, 2022 and December 31, 2021)
      9       9  
Additional
paid-in-capital
      508,945       505,327  
Retained (deficit) earnings
      (16,763 )      33  
  
 
 
    
 
 
  
Total Stockholders’ Equity
      492,190       505,370  
  
 
 
    
 
 
  
Total Liabilities and Stockholders’ Equity
    $ 649,085     $ 653,092  
  
 
 
    
 
 
  
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 
F-40
Table of Contents
CAREMAX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except share and per share data)
 
    
Three Months
Ended
March 31,
    
Three Months
Ended
March 31,
  
    
2022
    
2021
  
Revenue
     
Medicare risk-based revenue
    $ 107,747     $ 27,816  
Medicaid risk-based revenue
      20,165       —    
Other revenue
      9,008       102  
  
 
 
    
 
 
  
Total revenue
      136,920       27,918  
Operating expenses
     
External provider costs
      92,856       18,159  
Cost of care
      27,349       5,353  
Sales and marketing
      3,301       291  
Corporate, general and administrative
      18,978       1,795  
Depreciation and amortization
      5,062       514  
Acquisition related costs
      266       —    
  
 
 
    
 
 
  
Total operating expenses
      147,811       26,112  
  
 
 
    
 
 
  
Operating (loss) income
      (10,890 )      1,806  
  
 
 
    
 
 
  
Interest expense
      (1,728 )      (504 ) 
Loss on remeasurement of warrant liabilities
      (3,536 )      —    
Other income (expense), net
      (462 )      —    
  
 
 
    
 
 
  
(Loss) income before income tax
      (16,616 )      1,302  
  
 
 
    
 
 
  
Income tax provision
      (181 )      —    
  
 
 
    
 
 
  
Net (loss) income
    $ (16,797 )    $ 1,302  
  
 
 
    
 
 
  
Weighted average basic shares outstanding
      87,367,972       10,796,069  
Weighted average diluted shares outstanding
      87,367,972       10,796,069  
Net (loss) income per share
     
Basic
    $ (0.19 )    $ 0.12  
Diluted
    $ (0.19 )    $ 0.12  
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 
F-41
Table of Contents
CAREMAX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’/MEMBERS’ EQUITY
(Unaudited)
(in thousands, except share data)
 
   
Class A Common
Stock
    
Preferred
    
Additional
    
Members’
units
    
Member’s
Equity
    
Retained
Earnings
(Deficit)
    
Total

Equity
  
   
Shares
    
Amount
    
Stock
    
Paid-in-capital
  
BALANCE - DECEMBER 31, 2020
     —       $ —       $ —       $ —       $ 223     $ 6,504     $ —       $ 6,727  
Net income
     —         —         —         —         —         1,302       —         1,302  
 
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
BALANCE - MARCH 31, 2021
     —       $ —       $ —       $ —       $ 223     $ 7,805     $ —       $ 8,028  
 
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
BALANCE - DECEMBER 31, 2021
     87,367,972     $ 9     $ —       $ 505,327     $ —       $ —       $ 33     $ 505,370  
Stock compensation expense
     —         —         —         1,087       —         —         —         1,087  
Vesting of Series B Warrants under Advisory Agreement
     —         —         —         2,530       —         —         —         2,530  
Net loss
     —         —         —         —         —         —         (16,797 )      (16,797 ) 
 
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
BALANCE- MARCH 31, 2022
     87,367,972     $ 9     $ —       $ 508,945     $ —       $ —       $ (16,763 )    $ 492,190  
 
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 
F-42
Table of Contents
CAREMAX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
 
    
Three
Months
Ended
March 31,
2022
    
Three
Months
Ended
March 31,
2021
  
CASH FLOWS FROM OPERATING ACTIVITIES
     
Net (loss)/Income
    $ (16,797 )    $ 1,302  
Adjustments to reconcile net (loss)/income to net cash
     
Depreciation and amortization expense
      5,062       514  
Amortization of debt issuance costs
      378       35  
Stock compensation expense
      1,087       —    
Loss on remeasurement of warrant liabilities
      3,536       —    
Other
non-cash,
net
      202       —    
Changes in operating assets and liabilities:
     
Accounts receivable
      (10,992 )      639  
Inventory
      (152 )      (1 ) 
Prepaid expenses
      (475 )      15  
Risk settlements due from/due to providers
      (84 )      (281 ) 
Due to/from related parties
      —         (392 ) 
Other assets
      (52 )      (205 ) 
Accounts payable
      1,470       1,160  
Accrued expenses
      3,675       (134 ) 
Other liabilities
      1,002       720  
  
 
 
    
 
 
  
Net Cash (Used In)/Provided by Operating Activities
      (12,139 )      3,372  
  
 
 
    
 
 
  
CASH FLOWS FROM INVESTING ACTIVITIES
     
Purchase of property and equipment
      (1,467 )      (1,690 ) 
  
 
 
    
 
 
  
Net Cash Used in Investing Activities
      (1,467 )      (1,690 ) 
  
 
 
    
 
 
  
CASH FLOWS FROM FINANCING ACTIVITIES
     
Principal payments on long-term debt
      (1,570 )      (181 ) 
  
 
 
    
 
 
  
Net Cash Used In Financing Activities
      (1,570 )      (181 ) 
  
 
 
    
 
 
  
NET (DECREASE)/INCREASE IN CASH
      (15,176 )      1,501  
Cash - Beginning of Period
      47,917       4,934  
  
 
 
    
 
 
  
CASH - END OF PERIOD
    $ 32,740     $ 6,435  
  
 
 
    
 
 
  
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 
F-43
Table of Contents
CAREMAX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
(in thousands)
 
    
Three
Months
Ended
March 31,
2022
     
Three
Months
Ended
March 31,
2021
  
SUPPLEMENTAL SCHEDULE OF
NON-CASH
ACTIVITIES:
      
Vesting of Series B Warrants under Advisory Agreement
      2,530        —    
Additions to construction in progress funded through accounts payable
      585        —    
SUPPLEMENTAL CASH FLOW INFORMATION:
      
Cash paid for interest
      1,353        504  
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 
F-44
Table of Contents
CAREMAX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. DESCRIPTION OF BUSINESS
CareMax Inc. (“CareMax” or the “Company”), f/k/a Deerfield Healthcare Technology Acquisitions Corp. (“DFHT”), a Delaware corporation, was originally formed in July 2020 as a publicly traded special purpose acquisition company for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or similar business combination involving one or more businesses. CareMax is a technology-enabled care platform providing high-quality, value-based care and chronic disease management through physicians and health care professionals committed to the overall health and wellness continuum of care for its patients. The Company currently operates 48 wholly owned, multi-specialty centers in Florida, Tennessee and New York, that offer a comprehensive suite of healthcare and social services, and a proprietary software and services platform that provides data, analytics, and rules-based decision tools/workflows for physicians across the United States.
The Business Combination and Acquisitions
On December 18, 2020, DFHT entered into a Business Combination Agreement (the “Business Combination Agreement”) with CareMax Medical Group, L.L.C., a Florida limited liability company (“CMG”), the entities listed in Annex I to the Business Combination Agreement (the “CMG Sellers”), IMC Medical Group Holdings, LLC, a Delaware limited liability company (“IMC”), IMC Holdings, LP, a Delaware limited partnership (“IMC Parent”) and Deerfield Partners, L.P. (“Deerfield Partners”). The Business Combination (as defined below) was approved by DFHT’s stockholders and closed on June 8, 2021 (the “Closing Date”), whereby DFHT acquired 100% of the equity interests of CMG and 100% of the equity interests in IMC, with CMG and IMC becoming wholly owned subsidiaries of DFHT. Immediately upon completion (the “Closing”) of the transactions contemplated by the Business Combination Agreement and the related financing transactions (the “Business Combination”), the name of the combined company was changed to CareMax, Inc.
Unless the context otherwise requires, “the Company,” “we,” “us,” and “our” refer, for periods prior to the completion of the Business Combination, to CMG and its subsidiaries, and, for periods upon or after the completion of the Business Combination, to CareMax, Inc. and its subsidiaries.
Subsequent to consummation of the Business Combination, the Company acquired Senior Medical Associates, LLC (“SMA”), Stallion Medical Management, LLC (“SMM), Unlimited Medical Services of Florida, LLC (“DNF”), Advantis Physician Alliance, LLC (“Advantis”), Business Intelligence & Analytics LLC (“BIX”), and three additional businesses (together with SMA, SMM, DNF, Advantis and BIX, the “Acquisitions”) which did not have a material impact on our condensed consolidated financial statements. No significant measurement period adjustments related to the Acquisitions were recognized during the three months ended March 31, 2022. As of March 31, 2022, due to the timing of these transactions, the initial accounting for acquisitions of Advantis and BIX and the three additional businesses is incomplete, pending determination of the final purchase price and any remaining working capital adjustments.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
The unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form
10-Q
and Article 8 of Regulation
S-X.
Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP has been condensed or
 
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omitted, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. The condensed consolidated balance sheet at December 31, 2021, was derived from audited annual financial statements but does not contain all of the footnote disclosures from the annual financial statements. Accordingly, the unaudited condensed consolidated financial statements should be read in connection with the Company’s audited financial statements and related notes as of and for the year ended December 31, 2021 as filed with the SEC on March 16, 2022. Certain amounts in prior period financial statements have been reclassified to conform to the current period presentation. Such reclassifications have not materially affected previously reported amounts. In the opinion of management, the accompanying unaudited and condensed consolidated financial statements include all adjustments of a normal recurring nature, which are necessary for a fair statement of financial position, operating results and cash flows for the periods presented. Operating results for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.
Pursuant to the Business Combination, the acquisition of CMG by DFHT was accounted for as a reverse recapitalization in accordance with GAAP (the “Reverse Recapitalization”). Under this method of accounting, DFHT was treated as the “acquired” company. Accordingly, for accounting purposes, the Reverse Recapitalization was treated as the equivalent of CMG issuing equity for the net assets of DFHT, accompanied by a recapitalization. The net assets of DFHT were stated at historical cost, with no goodwill or other intangible assets recorded. Further, CMG was determined to be the accounting acquirer in the acquisition of IMC (the “IMC Acquisition”), as such, the acquisition was considered a business combination under Accounting Standard Codification (“ASC”) Topic 805,
Business Combinations
, and was accounted for using the acquisition method of accounting. CareMax recorded the fair value of assets acquired and liabilities assumed from IMC.
Unless otherwise noted, information for periods prior to the Closing Date reflects the financial information of CMG only.
The condensed consolidated financial statements include the accounts and operations of the Company. All intercompany accounts and transactions have been eliminated.
Segment Financial Information
The Company’s chief operating decision maker regularly reviews financial operating results on a condensed consolidated basis for purposes of allocating resources and evaluating financial performance. The Company identifies operating segments based on this review by its chief operating decision makers and operates in and reports as a single operating segment, the objective of which is to care for its patients’ needs. For the periods presented, all of the Company’s long-lived assets were located in the United States, and all revenue was earned in the United States.
Variable Interest Entities
The Company evaluates its ownership, contractual and other interests in entities to determine if it has any variable interest in a variable interest entity (“VIE”). These evaluations are complex, involve judgment, and the use of estimates and assumptions based on available historical information, among other factors. The Company considers itself to control an entity if it is the majority owner of or has voting control over such entity. The Company also assesses control through means other than voting rights and determines which business entity is the primary beneficiary of the VIE. The Company consolidates VIEs when it is determined that the Company is the primary beneficiary of the VIE. Management performs ongoing reassessments of whether changes in the facts and circumstances regarding the Company’s involvement with a VIE will cause the consolidation conclusion to change. Changes in consolidation status are applied prospectively. Refer to Note 14 “
Variable Interest Entities
” for additional information.
 
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Significant Accounting Policies
Other than addition of the Variable Interest Entity policy, there have been no changes to our critical accounting policies and estimates as described in our Annual Report on Form
10-K
for the year ended December 31, 2021, which was filed with the SEC on March 16, 2022.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed. The Company bases its estimates on the available information, its experiences and various other assumptions believed to be reasonable under the circumstances including estimates of the impact of
COVID-19.
The areas where significant estimates are used in the accompanying financial statements include, but are not limited to, purchase price allocations, including fair value estimates of intangibles and contingent consideration; the valuation of and related impairment testing of long-lived assets, including goodwill and intangible assets; the valuation of the derivative warrant liabilities; the estimated useful lives of fixed assets and intangible assets, including internally developed software; revenue recognition and liability for unpaid claims. Actual results could differ from those estimates.
Emerging Growth Company
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to nonemerging growth companies, but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s condensed consolidated financial statements with another public company which is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used. Additionally, as an emerging growth company, the Company is exempt from the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002, as amended, and the Company’s independent registered public accounting firm is not required to evaluate and report on the effectiveness of internal control over financial reporting.
Concentration of Credit Risk and Significant Customers
Financial instruments that potentially subject the Company to concentration of credit risk consist of cash and accounts receivable. The Company’s cash balances with individual banking institutions are in excess of federally insured limits from time to time. The Company has not experienced any losses on its deposits of cash and cash equivalents.
Our three largest payor relationships were with Anthem, Humana and Centene, which as of March 31, 2022 represented 24%, 16%, and 26% of our accounts receivable balance, respectively. As of December 31, 2021, Anthem, Humana and Centene represented represented 27%, 12% and 23% of our accounts receivable balance, respectively. Anthem, Humana and Centene represented 35%, 17%, and 16% of the Company’s revenues during the three months ended March 31, 2022 (86%, 11% and 0% during the three months ended March 31, 2021).
Recent Accounting Pronouncements
The Company has elected to defer compliance with ASC 842,
Leases
, consistent with those requirements for a private company due to the Company’s status as an EGC and the provisions of the JOBS Act. Accordingly, the
 
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-Company adopted ASC 842 for the annual reporting period beginning January 1, 2022 and interim reporting periods within the annual reporting period beginning after December 15, 2022. As such, the Company has continued to present accounting for leases in its condensed consolidated financial statements in accordance with ASC 840 in this Quarterly Report on Form
10-Q.
The effect of adoption to be presented in the Company’s 2022 Form
10-K
is expected to be material, adding approximately $0.1 billion right of use assets and corresponding lease liabilities to the Company’s balance sheet as of January 1, 2022.
In June 2016, the FASB issued Accounting Standards Update (“ASU”)
2016-13,
Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments, which was subsequently amended by ASU
No. 2020-03,
“Codification Improvements to financial Instruments” (collectively referred to as “ASC 326”), which is intended to improve financial reporting by requiring earlier recognition of credit losses on certain financial assets. This standard replaces the previous incurred loss impairment model that recognizes losses when a probable threshold is met with a requirement to recognize lifetime expected credit losses immediately when a financial asset is acquired or purchased. The standard has been further refined through subsequent releases by the Financial Accounting Standards Board (“FASB”). The Company adopted ASC 326 on January 1, 2022 with no material impact to the consolidated financial statements.
In March 2020, the FASB issued temporary guidance to ease the potential burden in accounting for reference rate reform primarily resulting from the discontinuation of LIBOR. In addition, in January 2021, the FASB issued guidance which refined the scope of ASC 848, Reference Rate Reform, and clarified some of its guidance as part of FASB’s ongoing monitoring of global reference rate reform activities. This guidance permitted entities to elect certain optional expedients and exceptions when accounting for derivative contracts and certain hedging relationships affected by changes in the interest rates used for discounting cash flows, computing variation margin settlements and calculating price alignment interest in connection with reference rate reform activities under way in global financial markets. An entity may apply these amendments prospectively through December 31, 2022. The Company is currently evaluating the effect the update will have on its condensed consolidated financial statements and related disclosures.
In October 2021, the FASB issued ASU
2021-08,
“Business Combinations (Topic 805) - Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.” The ASU improves comparability after business combinations by providing consistent recognition and measurement guidance for revenue contracts with customers acquired in a business combination and revenue contracts with customers not acquired in a business combination. ASU
2021-08
is effective for the Company on January 1, 2023, with early adoption permitted. The Company is currently evaluating the effect this ASU will have on its consolidated financial statements.
We do not expect that any other recently issued accounting guidance will have a significant effect on our condensed consolidated financial statements.
NOTE 3. REINSURANCE
The Company has acquired insurance on catastrophic costs to limit the exposure on patient losses. Premiums and policy recoveries are reported in external provider costs in our condensed consolidated statements of operations.
The nature of the Company’s stop loss coverage is to limit the benefits paid under one patient. The Company’s stop loss limits are defined within each health plan contract and stop loss purchased from a third party and can range from $30,000 to $200,000 per patient per year. Premium expense incurred was $3.7 million and $412,000 for the three months ended March 31, 2022 and 2021, respectively. Physicians under capitation arrangements typically have stop loss coverage so that a physician’s financial risk for any single member is limited to a maximum amount on an annual basis. The Company monitors the financial performance and solvency of its stop loss providers. However, the Company remains financially responsible for health care services to its members in the event the health plans are unable to fulfill their obligations under stop loss contractual terms.
 
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Recoveries recognized were $6.4 million and $363,000 for the
three
months ended March 31, 2022 and 2021, respectively. Estimated recoveries under stop loss policies are reported within the capitation receivable or amounts due to health plans as the counterparty responsible for the payment of the claims and the stop loss is the respective health plan.
NOTE 4. GOODWILL AND INTANGIBLE ASSETS
Goodwill
The following table summarizes changes in the carrying amount of goodwill for the three months ended March 31, 2022 (
in thousands
):
 
    
Carrying
Amount
  
Balance at December 31, 2021
    $ 464,566  
Measurement period adjustments
      (302 ) 
  
 
 
  
Balance at March 31, 2022
    $ 464,264  
  
 
 
  
Intangible Assets
The following tables summarize gross carrying amounts and accumulated amortization of intangible assets by major class (
in thousands
):
 
    
Gross
Carrying
Amount
     
Accumulated
Amortization
     
Net Book
Value
     
Weighted
Average
Amortization
Period
(years)
  
March 31, 2022
            
Risk Contracts
    $ 64,570      $ (13,226 )     $ 51,343        7  
Non-compete
agreements
    $ 4,170      $ (892 )     $ 3,278        5  
Trademarks
      1,862        (1,114 )       748        2  
Other
      251        (16 )       235        5  
  
 
 
     
 
 
     
 
 
     
Total
    $ 70,852      $ (15,248 )     $ 55,604     
  
 
 
     
 
 
     
 
 
     
 
    
Gross
Carrying
Amount
     
Accumulated
Amortization
     
Net Book
Value
     
Weighted
Average
Amortization
Period
(years)
  
December 31, 2021
            
Risk Contracts
    $ 64,822      $ (9,818 )     $ 55,004        7  
Non-compete
agreements
    $ 4,202      $ (686 )     $ 3,516        5  
Trademarks
    $ 1,867      $ (827 )     $ 1,040        2  
Other
    $ 251      $ —        $ 251        5  
  
 
 
     
 
 
     
 
 
     
Total
    $ 71,141      $ (11,331 )     $ 59,811     
  
 
 
     
 
 
     
 
 
     
Amortization expense totaled $3.9 million and $252,000 for the three months ended March 31, 2022 and 2021, respectively.
 
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NOTE 5. PROPERTY AND EQUIPMENT
A summary of property and equipment at March 31, 2022 and December 31, 2021 is as follows (
in thousands
):
 
    
March 31,
2022
     
December 31,
2021
  
Leasehold improvements
    $ 7,648      $ 7,516  
Vehicles
      3,711        3,711  
Furniture and equipment
      5,509        5,470  
Software
      3,465        2,950  
Construction in progress
      3,523        2,254  
Total
      23,856        21,902  
Less: Accumulated depreciation
      (6,961 )       (5,909 ) 
  
 
 
     
 
 
  
Total Property and equipment, net
    $ 16,895      $ 15,993  
  
 
 
     
 
 
  
Construction in progress at March 31, 2022 consisted of various leasehold improvements at the Company’s centers.
Depreciation expense totaled $1.1 million and $211,000 for the three months ended March 31, 2022 and 2021, respectively.
NOTE 6. LONG TERM DEBT
As at March 31, 2022 and December 31, 2021, long term debt consisted of the following (
in thousands
):
 
    
March 31,
2022
     
December 31,
2021
  
Secured term loans
    $ 120,313      $ 121,875  
Other
      58        65  
Unamortized debt issuance costs
      (4,438 )       (4,704 ) 
  
 
 
     
 
 
  
     115,932        117,236  
Current portion
      (6,272 )       (6,275 ) 
  
 
 
     
 
 
  
Long-term portion
    $ 109,660      $ 110,960  
  
 
 
     
 
 
  
Future maturities of debt outstanding at March 31, 2022 were as follows (
in thousands
):
 
    
Amount
  
Remainder of 2022
      4,706  
2023
      6,265  
2024
      8,611  
2025
      11,726  
2026
      89,063  
  
 
 
  
Total
    $ 120,370  
  
 
 
  
NOTE 7. STOCKHOLDERS’ EQUITY
The condensed consolidated statement of changes in equity reflects the Reverse Recapitalization discussed in Note 2. As CMG was deemed the accounting acquirer in the Reverse Recapitalization with DFHT, all periods prior to the consummation of the Business Combination reflect the balances and activity of CMG.
 
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Related Advisory Agreement
On July 13, 2021, the Company entered into an exclusive real estate advisory agreement (the “Advisory Agreement”) with Related CM Advisor, LLC (the “Advisor”), a Delaware limited liability company and a subsidiary of The Related Companies, L.P. (“Related”) (the “Advisory Agreement”), pursuant to which the Advisor has agreed provide certain real estate advisory services to the Company on an exclusive basis. The services include identifying locations for new centers nationwide as part of the Company’s de novo growth strategy, including, but not limited to, locations within and proximate to affordable housing communities that may be owned by Related.
In connection with the Advisory Agreement, the Company and the Advisor entered into a subscription agreement (the “Subscription Agreement”), whereby the Advisor purchased 500,000 shares (the “Initial Shares”) of the Company’s Class A common stock, par value $0.0001 per share (“Class A Common Stock”) for an aggregate purchase price of $5.0 million and the Company issued to the Advisor (i) a warrant (the “Series A Warrant”) to purchase 2,000,000 shares of Class A Common Stock (the “Series A Warrant Shares”), which vested immediately upon issuance, is exercisable for a period of five years and is not redeemable by the Company and (ii) a warrant (the “Series B Warrant” and together with the Series A Warrant, the “Warrants”) to purchase up to 6,000,000 shares of Class A Common Stock (the “Series B Warrant Shares” and, together with the Series A Warrant Shares, the “Warrant Shares”), pursuant to which 500,000 Series B Warrant Shares will vest and become exercisable from time to time upon the opening of each center under the Advisory Agreement for which the Advisor provides services, other than two initial centers.
The company assessed the substance of the Subscription Agreement and determined that all instruments referenced in the Subscription Agreement should be assessed under the guidance of ASC 718,
Compensation - Stock Compensation
, as
non-employee
awards issued to Related in exchange for real estate advisory services to be rendered per the Advisory Agreement. As a result, the Company recorded the Series A Warrants as a component of additional
paid-in-capital
using the fair value as of July 13, 2021.
The Series B Warrant is exercisable, to the extent vested, until the later of five years from the date of issuance or one year from vesting of the applicable Series B Warrant Shares and is redeemable with respect to vested Warrant Shares at a price of $0.01 per Warrant Share if the price of the Class A Common Stock equals or exceeds $18.00 per share, or $0.10 per Warrant Share if the price of the Class A Common Stock equals or exceeds $10.00 per share, in each case when such price conditions are satisfied for any 20 trading days within a
30-trading
day period and subject to certain adjustments and conditions as described in the Series B Warrant. In the event that the Series B Warrant is called for redemption by the Company, the Advisor may pay the exercise price for the Series B Warrant Shares six months following the notice of redemption by the Company.
Series B Warrants are recognized at their fair value once vesting becomes probable. During the three months ended March 31, 2022, the Company recorded $2.5 million in prepaid expenses to reflect vesting of 500,000 Series B Warrant Shares using their grant date fair value. Refer to Note 10,
Related Party Transactions
, for additional information.
Preferred Stock
The Amended and Restated Charter authorizes the Company to issue 1,000,000 shares of preferred stock, with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. As of March 31, 2022, there were no shares of preferred stock issued or outstanding.
 
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Redeemable Warrants - Public Warrants
On July 16, 2020, in connection with the IPO, DFHT sold 2,875,000 Public Warrants. Each whole Public Warrant entitles the registered holder to purchase one share of Class A Common Stock at a price of $11.50 per share, subject to adjustment, at any time commencing on the later of 12 months from the closing of the IPO and 30 days after the completion of the Business Combination, provided in each case that the Company has an effective registration statement under the Securities Act covering the shares of Class A Common Stock issuable upon exercise of the Public Warrants and a current prospectus relating to them is available (or the Company permits holders to exercise their Public Warrants on a cashless basis under the circumstances specified in the warrant agreement) and such shares are registered, qualified or exempt from registration under the securities, or blue sky, laws of the state of residence of the holder. Pursuant to the warrant agreements entered into at the time of the IPO, a warrant holder may exercise its Public Warrants only for a whole number of shares of Class A Common Stock. This means only a whole Public Warrant may be exercised at a given time by a warrant holder. No fractional warrants were issued upon separation of the units issued in connection with the IPO and only whole Public Warrants will trade. The Company may redeem the Public Warrants when the price per share of Class A Common Stock equals or exceeds certain threshold prices.
Redeemable Warrants - Private Placement Warrants
Also in connection with the IPO, DFHT issued the 2,916,667 Private Placement Warrants at a purchase price of $1.50 per warrant. The Private Placement Warrants (including the Class A Common Stock issuable upon exercise of the Private Placement Warrants) are not transferable, assignable or salable until 30 days after the completion of the Business Combination (except, among other limited exceptions to DFHT’s officers and directors and other persons or entities affiliated with the initial purchasers of the Private Placement Warrants) and they will not be redeemable by CareMax for cash so long as they are held by the initial stockholders or their permitted transferees. With some exceptions, the Private Placement Warrants have terms and provisions that are identical to those of the Public Warrants. If the Private Placement Warrants are held by holders other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by the holders on the same basis as the Public Warrants.
Contingent Consideration Common Shares
Pursuant to the Business Combination Agreement, the CMG Sellers and IMC Parent, who received Class A Common Stock in connection with the Business Combination, are entitled to receive
earn-out
consideration to be paid out in the form of Class A Common Stock. The Business Combination Agreement provides that up to an additional 3,500,000 and 2,900,000 contingently issuable shares of Class A Common (the “Earnout Shares”) are payable after the Closing to the CMG Sellers and IMC Parent: (i) if within the first year after the Closing, the volume weighted average trading price of Class A Common Stock equals or exceeds $12.50 on any 20 trading days in any
30-day
trading period (the “First Share Price Trigger”), then 1,750,000 and 1,450,000 Earnout Shares are issuable to the CMG Sellers and IMC Parent, respectively, and (ii) if within the two years after the Closing (the “Second Earnout Period”), the volume weighted average trading price of Class A Common Stock equals or exceeds $15.00 on any 20 trading days in any
30-day
trading period (the “Second Share Price Trigger” and together with the First Share Price Trigger, the “Share Price Triggers”), then 1,750,000 and 1,450,000 Earnout Shares will be issued and paid to the CMG Sellers and IMC Parent, respectively. If prior to (i) the satisfaction of the Share Price Triggers, and (ii) the end of the Second Earnout Period, the Company enters into a change in control transaction as described in the Business Combination Agreement, and the price per share of the Company’s Class A Common Stock payable to the stockholders of the Company in such change in control transaction is greater than the Share Price Triggers that have not been satisfied during the Earnout Period, then at the closing of such change in control transaction, the Share Price Triggers will be deemed to have been satisfied and the Company is required to issue, as of such closing, the applicable unissued Earnout Shares. The estimated fair value of the Earnout Shares was initially accounted for as a liability-classified instrument with changes in its fair value recorded in our condensed consolidated statements of operations until July 9, 2021. On July 9, 2021,
 
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the First Share Price Trigger was achieved, resulting in issuance of 1,750,000 and 1,450,000 Earnout Shares to the CMG Sellers and IMC Parent, respectively. Subsequent to the achievement of the First Share Price Trigger, the Company determined the Earnout Shares subject to the second Share Price Trigger should be equity classified and were recorded as such on July 9, 2021, the date of the event that caused the reclassification.
Stock-based compensation
On June 4, 2021, the stockholders of the Company approved the CareMax Inc. 2021 Long-term Incentive Plan (the “2021 Plan”), effective on the Closing Date. The 2021 Plan permits the grant of equity-based awards to officers, directors, employees and other service providers. The 2021 Plan permits the grant of an initial share pool of 7,000,000 shares of Class A Common Stock and will be increased automatically, without further action of the Company’s board of directors, on January 1st of each calendar year commencing after the Closing Date and ending on (and including) January 1, 2031, by a number of shares of Class A Common Stock equal to the lesser of (i) four percent of the aggregate number of shares of Class A Common Stock outstanding on December 31st of the immediately preceding calendar year, excluding for this purpose any such outstanding shares of Class A Common Stock that were granted under the 2021 Plan and remain unvested and subject to forfeiture as of the relevant December 31st, or (B) a lesser number of shares of Class A Common Stock as determined by the Company’s board of directors or the Compensation Committee of the board of directors prior to the relevant January 1
st
.
During the three months ended March 31, 2022 we granted 77,000 restricted stock units under the 2021 Plan at a weighted-average grant date fair value of $7.41 per share (there were no grants during the three months ended March 31, 2021). In addition, during the three months ended March 31, 2022 and 2021 there was no vesting of previously granted awards. During the three months ended March 31, 2022, the Company recorded stock-based compensation expense of $1.1 million ($0 during the three months ended March 31, 2021). Stock-based compensation expense is included in the corporate, general and administrative expenses in our condensed consolidated statements of operations. As of March 31, 2022, the Company had $7.9 million of compensation expense related to all
non-vested
awards (RSU, PSU, options) that will vest over the weighted-average period of 2.5 years (there were no awards outstanding as of March 31, 2021).
NOTE 8. NET INCOME (LOSS) PER SHARE
The Business Combination was accounted for as a reverse recapitalization by which CMG issued equity for the net assets of the Company accompanied by a recapitalization. Earnings per share have been recast for all historical periods to reflect the Company’s capital structure for all comparative periods.
The following table sets forth the calculation of basic and diluted earnings per share for the periods indicated based on the weighted-average number of common share outstanding for the period subsequent to the transactions that occurred in connection with the Business Combination (
in thousands, except share and per share data
):
 
    
Three Months Ended March 31,
  
    
2022
     
2021
  
Net (loss) income attributable to CareMax, Inc. class A common stockholders
    $ (16,797 )     $ 1,302  
Weighted average basic shares outstanding
      87,367,972        10,796,069  
Weighted average diluted shares outstanding
      87,367,972        10,796,069  
Net (loss) income per share
                  
Basic
    $ (0.19 )     $ 0.12  
Diluted
    $ (0.19 )     $ 0.12  
 
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The following potentially dilutive outstanding securities were excluded from the computation of diluted net loss per share because their effect would have been anti-dilutive or because issuance of shares underlying such securities is contingent upon the satisfaction of certain conditions which were not satisfied by the end of the period:
 
    
Three Months
Ended
March 31,
  
    
2022
     
2021
  
Series A Warrants and Series B Warrants
      8,000        —    
Public and Private Warrants
      5,792        —    
Earnout Shares
      3,200        —    
Unvested restricted stock units
      1,162        —    
Unvested performance stock units
      66        —    
Unvested options
      131        —    
  
 
 
     
 
 
  
Total
      18,351        —    
  
 
 
     
 
 
  
NOTE 9. FAIR VALUE MEASUREMENTS
The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis and indicate the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value (
in thousands
):
 
March 31, 2022
   
Quoted Prices
in Active
Markets
     
Significant
other
Observable
Units
     
Significant
other
Unobservable
Units
  
Description
   
(Level 1)
     
(Level 2)
     
(Level 3)
  
Derivative warrant liabilities
    $ —      $ —      $ 11,911  
 
December 31, 2021
   
Quoted Prices
in Active
Markets
     
Significant
other
Observable
Units
     
Significant
other
Unobservable
Units
  
Description
   
(Level 1)
     
(Level 2)
     
(Level 3)
  
Derivative warrant liabilities
    $ —      $ —      $ 8,375  
Fair value of the Public Warrants issued in connection with the IPO and the Private Placement Warrants was initially measured at fair value using a Monte Carlo simulation model and subsequently, the fair value of the Private Placement Warrants has been estimated using a Monte Carlo simulation model each measurement date. The fair value of Public Warrants issued in connection with the IPO has been measured based on the listed market price of such warrants since the IPO. During the three months ended March 31, 2022, the Company recognized a loss resulting from an increase in the fair value of the derivative warrant liabilities of $3.5 million.
There were no transfers between levels during the three months ended March 31, 2022.
The following table provides quantitative information regarding Level 3 fair value measurements inputs used in measurement of fair value of Private Placement Warrants:
 
    
March 31,
2022
    
December 31,
2021
  
Exercise price
    $ 11.50     $ 11.50  
Unit price
    $ 7.47     $ 7.68  
Volatility
      50.8 %      37.6 % 
Expected life of the options to convert
      4.19      
4.44
  
Risk-free rate
      2.40 %      1.17 % 
Dividend yield
      0.0 %      0.0 % 
 
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The change in the fair value of the warrant liabilities for the three months ended March 31, 2022 is summarized as follows (
in thousands
):
 
Fair value of derivative warrant liabilities at December 31, 2021
    $ 8,375  
Change in fair value of derivative warrant liabilities
      3,536  
  
 
 
  
Fair value of derivative warrant liabilities at March 31, 2022
    $ 11,911  
  
 
 
  
NOTE 10. RELATED PARTY TRANSACTIONS
On July 13, 2021, the Company entered into the Advisory Agreement with the Advisor, which is described in Note 7,
Stockholders Equity
.
On July 13, 2021 the Company’s board of directors appointed Mr. Bryan Cho, an Executive Vice President of Related, to serve as a Class III director of the Company. The appointment of Mr. Cho was made in connection with the Advisory Agreement, which provides the Advisor with the right to designate a director to serve on the Company’s board of directors, subject to the continuing satisfaction of certain conditions, including that the Advisor and its affiliates maintain ownership of at least 500,000 shares of Class A Common Stock.
During the three months ended March 31, 2022, the Company recognized vesting of 500,000 shares of Series B Warrants related to opening of one center for which the Advisor provides services under the Advisory Agreement. Refer to Note 7,
Stockholder’s Equity
, for additional information.
NOTE 11. OPERATING LEASES AND COMMITMENTS
The Company has entered into
non-cancelable
operating lease agreements for office space and centers expiring at various times through 2033. The operating lease agreements have renewal options ranging from one to seven years. Future minimum rental payments under these lease agreements, including renewal options which are considered reasonably certain of exercise and inclusive of leases which have not yet commenced, consisted of the following at March 31, 2022 (
in thousands
):​​​​​​​
 
    
Amount
  
Remainder of 2022
    $ 8,381  
2023
      13,531  
2024
      13,440  
2025
      13,130  
2026
      12,556  
Thereafter
      139,501  
  
 
 
  
Total
    $ 200,539  
  
 
 
  
Rent expense, including related property taxes, sales taxes, and utilities, was approximately $4.3 million and $700,000 for the three months ended March 31, 2022 and 2021, respectively. Rent expense is included in general and administrative expenses in our condensed consolidated statements of operations.
NOTE 12. INCOME TAXES
Prior to the completion of the Business Combination, CMG was a limited liability company and treated as a partnership for federal and state income tax purposes. A partnership is not a
tax-paying
entity for federal and state income tax purposes, and as such, the results of operations were allocated to the members for inclusion in their income tax returns. Following the Business Combination, the income of CMG flows through to the Company and is taxed at the federal and state levels accordingly.
 
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Income tax provision for the three months ended March 31, 2022 was $181,000, compared to $0 for the three months ended March 31, 2021. The effective tax rate for the three months ended March 31, 2022 was (1.1)% based on the assessment of a full valuation allowance, excluding a portion attributable to a “naked credit” deferred tax liability.
NOTE 13. COMMITMENTS AND CONTINGENCIES
Compliance
The health care industry is subject to numerous laws and regulations of federal, state, and local governments. These laws and regulations include, but are not limited to, matters such as licensure, accreditation, government healthcare program participation requirements, reimbursement for patient services, and Medicare and Medicaid fraud and abuse. Recently, government activity has increased with respect to investigations and allegations concerning possible violations of fraud and abuse statues and regulations by healthcare providers. Violations of these laws and regulations could result in expulsion from government healthcare programs together with imposition of significant fines and penalties, as well as significant repayments for patient services billed. Compliance with these laws and regulations, specifically those related to the Medicare and Medicaid programs, can be subject to government review and interpretation, as well as regulatory actions unknown and not yet asserted at this time. Management believes that the Company is in substantial compliance with current laws and regulations.
Litigation
The Company is involved in various legal actions arising in the normal course of business. Management has not identified any legal actions during the three months ended March 31, 2022 that were deemed to be material.
NOTE 14. VARIABLE INTEREST ENTITIES
Medical Care of NY, P.C. and Medical Care of Tennessee, PLLC (together, the “PCs”) were established in 2022 to employ healthcare providers to deliver healthcare services to patients in New York and Tennessee. The Company concluded that it has variable interest in the PCs on the basis of its Administrative Service Agreements (the “ASAs”) which provide for a management fee payable to the Company from the PCs in exchange for providing management and administrative services which creates risk and a potential return to the Company. The PCs’ equity at risk, as defined by GAAP, is insufficient to finance their activities without additional support, and therefore, the PCs are considered to be VIEs.
In order to determine whether the Company has a controlling financial interest in the PCs, and, thus, is the PCs’ primary beneficiary, the Company considered whether it has i) the power to direct the activities of PCs that most significantly impacts their economic performance and ii) the obligation to absorb losses of the PCs or the right to receive benefits from the PCs that could potentially be significant to them. The Company concluded that the shareholder and employees of the PCs have no individual power to direct activities of the PCs that most significantly impact their economic performance. Under the ASAs, the Company is responsible for providing services that impact the growth of the patient population of the PCs, the management of that population’s healthcare needs, the provision of required healthcare services to those patients, and the PCs’ ability to receive revenue from health plans. In addition, the Company’s variable interest in the PCs provides the Company with the right to receive benefits that could potentially be significant to them. The single member of the PCs is an employee of the Company. Based on this analysis the Company concluded that it is the primary beneficiary of the PCs and therefore consolidates the balance sheet, results of operations and cash flow of the PCs.
 
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Assets and liabilities of the PCs were as follows (
in thousands
):
 
    
March 31,
2022
     
December 31,
2021
  
Total assets
    $ 1,500      $ —    
Total liabilities
    $ 1,500      $ —    
No revenues or expenses have been generated or incurred by the PCs during the three months ended March 31, 2022.
NOTE 15. SUBSEQUENT EVENTS
On May 10, 2022 (the “Credit Agreement Closing Date”), the Company entered into a Credit Agreement (the “Credit Agreement”), by and among the Company, certain of the Company’s subsidiaries as guarantors (the “Subsidiary Guarantors”), Jefferies Finance LLC, as Administrative Agent, Collateral Agent, Sole Lead Arranger and Bookrunner, BlackRock Financial Management (as defined in the Credit Agreement), as Lead Manager, Crestline Direct Finance, L.P., as Documentation Agent, and certain other banks and financial institutions serving as lenders (collectively with their successors and assigns, the “Lenders”). The Credit Agreement provides for an aggregate of up to $300.0 million in term loans, comprised of (i) initial term loans in an aggregate principal amount of $190.0 million (the “Initial Term Loans”), which will be fully drawn on the Credit Agreement Closing Date and (ii) a delayed draw term loan facility in an aggregate principal amount of $110.0 million (the “Delayed Draw Term Loans” and together with the Initial Term Loans, the “Term Loans”), which will be available to be drawn in up to five (5) borrowings from and after the Credit Agreement Closing Date until the eighteen (18) month anniversary of the Credit Agreement Closing Date under certain circumstances to finance permitted acquisitions and similar permitted investments, de novo center growth and optimization of de novo centers and management services organization performance, as set forth in the Credit Agreement. The Credit Agreement provides that it may be amended to provide for a $30.0 million revolving credit facility, of which up to $5.0 million may be used for revolving loans for general corporate purposes and up to $30.0 million may be used to issue letters of credit (the “Revolving Facility” and, together with the Term Loans, the “Credit Facilities”). The Credit Agreement also provides for certain uncommitted incremental facilities.
The Company is using approximately $120.3 million of the net proceeds of the Initial Term Loans to repay its outstanding obligations under that certain credit agreement, dated June 8, 2021, as amended (the “Existing Credit Agreement”). During the second quarter 2022, the Company expects to recognize estimated debt extinguishment loss of $6.3 million related to early repayment of the Existing Credit Agreement.
At the Company’s option, borrowings under the Credit Agreement bear interest at: (i) the Alternate Base Rate (defined as the highest of (a) the U.S. Prime Lending Rate as published in
The Wall Street Journal
, (b) the Federal Funds Rate plus 0.50% and (c) Term SOFR for an interest period of one month, subject to a floor of 1.00%, plus 1.00%), plus an applicable margin rate of 8.00%; or (ii) Term SOFR (calculated as the Secured Overnight Financing Rate published on the Federal Reserve Bank of New York’s website, plus a spread adjustment of 0.114%, 0.262% or 0.428%, depending on if the Company selects a
one-month,
three-month or
six-month
interest period, respectively), plus an applicable margin rate of 9.00%. The Company may, at its option, elect to capitalize up to 4.00% of the interest as principal amount on the outstanding Term Loans, provided that in such case the applicable margin rate will be increased by 0.50%. Accrued and unpaid interest is payable (x) with respect to Alternate Base Rate loans, quarterly on the last business day of each of March, June, September and December (each, a “Quarterly Payment Date”), with any remaining accrued and unpaid interest paid upon the Maturity Date (as defined below), (y) with respect to Term SOFR loans, on the last day of interest period as selected by the Company and, in the case of any Term SOFR loan with an interest period greater than three months, each day that is the three-month anniversary of such Term SOFR loan, with any remaining accrued and unpaid interest paid upon the Maturity Date and (z) for loans under the Revolving Facility, upon the Maturity Date.
Amortization payments with respect to the Initial Term Loans will be payable in quarterly installments, commencing on March 31, 2024, in aggregate principal amounts equal to 0.25% of the original aggregate
 
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principal amount of the Initial Term Loans, and amortization with respect to any Delayed Draw Term Loans will be payable in quarterly installments, commencing on March 31, 2024, in aggregate principal amounts equal to 0.25% of the original aggregate principal amount of each funded Delayed Draw Term Loan. In addition, the Credit Agreement provides for certain mandatory prepayments based on the Company’s secured leverage ratio or upon any asset sale and provides for prepayment penalties of up to 3.00% in certain circumstances. All amounts owed under the Credit Facilities are due and payable on the five-year anniversary of the Credit Agreement Closing Date (the “Maturity Date”), or earlier following a change in control or an event of default, unless otherwise extended in accordance with the terms of the Credit Agreement.
The Credit Agreement contains certain covenants that limit, among other things, the ability of the Company and its subsidiaries to incur additional indebtedness, liens or encumbrances, to make certain investments, to enter into sale-leaseback transactions or sell certain assets, to make certain restricted payments or pay dividends, to enter into consolidations, to transact with affiliates and to amend certain agreements, subject in each case to the exceptions and other qualifications as provided in the Credit Agreement. The Credit Agreement also contains covenants that require the Company to satisfy a minimum liquidity requirement of $50.0 million, which may be decreased to $25.0 million if the Company achieves a certain adjusted EBITDA, and maintain a maximum total leverage ratio based on the Company’s adjusted EBITDA, with de novo losses excluded from the calculation of such ratio for up to 36 months after the opening of a de novo center, which maximum total leverage ratio will initially be 8.5 to 1 and is subject to a series of step-downs. For the fiscal quarters ending September 30, 2026 and thereafter the Company must maintain a maximum total leverage ratio no greater than 5.50 to 1.00.
All obligations under the Credit Agreement are guaranteed by the Company and the Subsidiary Guarantors, and all obligations under the Credit Agreement, including the guarantees of those obligations, are secured by substantially all of the assets of the Company and the Subsidiary Guarantors subject to customary exceptions and qualifications. The Credit Agreement contains customary events of default, with default interest of 2% in excess of the
non-default
rate, and also includes cure rights for the Company upon certain events of default.
 
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PART II
INFORMATION NOT REQUIRED IN
PROSPECTUS
 
Item 13.
Other Expenses of Issuance and Distribution.
The estimated expenses payable by us in connection with the offering described in this registration statement (other than the underwriting discount and commissions) will be as follows:
 
SEC registration fee
    $ 109,186.97 * 
Accounting fees and expenses
                   ** 
Legal fees and expenses
                   ** 
Printing and engraving expenses
                   ** 
Miscellaneous
                   ** 
  
 
 
  
Total
                   ** 
 
*
Includes the total amount of $107,156.17 of fees previously paid under the Prior Registration Statement.
**
These fees are calculated based on the securities offered and the number of issuances and accordingly cannot be defined at this time.
 
Item 14.
Indemnification of Directors and Officers.
Our Amended and Restated Charter contains provisions that limit the liability of our directors for monetary damages to the fullest extent permitted by the laws of the State of Delaware. Consequently, our directors will not be personally liable to the combined company or our stockholders for monetary damages for any breach of fiduciary duties as directors, except liability for:
 
  •  
any breach of the director’s duty of loyalty to us or our stockholders;
 
  •  
any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;
 
  •  
unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the DGCL; or
 
  •  
any transaction from which the director derived an improper personal benefit.
Our Amended and Restated Charter and our Amended and Restated Bylaws provide that we are required to indemnify our directors and officers, in each case to the fullest extent permitted by Delaware law. Our Amended and Restated Charter and our Amended and Restated Bylaws also provide that we are obligated to advance expenses incurred by a director or officer in advance of the final disposition of any action or proceeding, and permit us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in that capacity regardless of whether we would otherwise be permitted to indemnify him or her under the laws of the State of Delaware.
Additionally, we have entered into indemnification agreements with each of our directors and executive officers, which provide for indemnification and advancements of certain expenses and costs if the basis of the indemnitee’s involvement in a matter was by reason of the fact that the indemnitee is or was a director, officer, employee or agent of the Company or any of its subsidiaries or was serving at the Company’s request in an official capacity for another entity, in each case to the fullest extent permitted by the laws of the State of Delaware. The form of indemnification agreement is included as an exhibit to this registration statement.
The limitation of liability and indemnification provisions in the Amended and Restated Charter and our Amended and Restated Bylaws may discourage stockholders from bringing a lawsuit against our directors and officers for breach of their fiduciary duty. They may also reduce the likelihood of derivative litigation against our directors and officers, even though an action, if successful, might benefit us and our stockholders.
 
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The registrant also maintains standard policies of insurance under which coverage is provided to its directors and officers against loss arising from claims made by reason of breach of duty or other wrongful act, while acting in their capacity as directors and officers of the registrant. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers, or control persons, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
 
Item 15.
Recent Sales of Unregistered Securities.
Since January 1, 2019, we have made sales of the following unregistered securities:
Transaction Consideration
On the Closing Date, the parties to the Business Combination Agreement completed the Business Combination. At the Closing, the CMG Sellers and IMC Parent were paid Closing Consideration valued in the aggregate at approximately $364 million and $250 million, respectively, less repayment of net debt and further subject to the purchase price adjustments set forth in the Business Combination Agreement. The net Closing Consideration was comprised of 68% ($229.4 million) and 45% ($85.2 million) in cash for the CMG Sellers and IMC Parent, respectively, with the remainder of the Closing Consideration comprised of 10,796,069 and 10,412,023 shares of Class A common stock, issued to the CMG Sellers and IMC Parent, respectively, at a reference price of $10.00 per share.
Deerfield PIPE Investments
In connection with the Business Combination, Deerfield Partners and the Sponsor purchased an aggregate of 10,000,000 shares of Class A Common Stock, consisting of 9,600,000 shares of Class A Common Stock purchased by Deerfield Partners and 400,000 shares of Class A Common Stock purchased by the Sponsor, for a purchase price of $10.00 per share and an aggregate purchase price of $100,000,000, pursuant to certain subscription agreements, each dated December 18, 2020, with each of Deerfield Partners and the Sponsor, the form of which is filed as an exhibit to this registration statement.
Third-Party PIPE Investments
In connection with the Business Combination, certain investors purchased an aggregate of 31,000,000 shares of Class A Common Stock, for a purchase price of $10.00 per share, for an aggregate purchase price of $310,000,000, pursuant to certain subscription agreements, each dated December 18, 2020, the form of which is filed is filed as an exhibit to this registration statement.
SMA Transaction
On June 18, 2021, Interamerican acquired of 100% of the issued and outstanding equity interests of the SMA Entities, pursuant to the SMA Purchase Agreement. As consideration for the acquisition of the SMA Entities, Interamerican paid an aggregate cash purchase price of $52,000,000 and we issued the 384,615 SMA Shares, valued at $5,000,000 based on the closing price of the Common Stock on June 17, 2021, to the SMA Seller.
DNF Transaction
On September 1, 2021, we acquired certain of the assets of Unlimited Medical Services of Florida, LLC, a Florida limited liability company, dba DNF Medical Centers (“DNF”) pursuant to an Asset Purchase Agreement dated July 5, 2021. As consideration for the acquisition of the purchased assets of DNF, our subsidiary CareMax Medical Centers of Central Florida, LLC paid an aggregate cash purchase price of $88,118,216.40, and we issued 2,741,528 shares of Class A Common Stock, valued at $21,881,783.60 based on the volume weighted average price of the Class A Common Stock for the five trading days immediately preceding September 1, 2021.
 
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Advantis Transaction
On December 22, 2021, we acquired certain of the assets of Advantis Physician Alliance, LLC, d/b/a Advantis Medical Centers (“Advantis”) pursuant to an Asset Purchase Agreement dated December 10, 2021. As consideration for the acquisition of the purchased assets of Advantis, our subsidiary CareMax Medical Centers of Central Florida, LLC paid an aggregate cash purchase price of $9.865 million, and we issued 145,883 shares of Class A Common Stock, valued at $985,000 based on the volume weighted average price of the Class A Common Stock for the five trading days immediately preceding December 22, 2021.
Business Intelligence & Analytics LLC Transaction
On December 22, 2021, we acquired certain of the assets of Business Intelligence & Analytics LLC (“BIX”) pursuant to an Asset Purchase Agreement dated December 21, 2021. As consideration for the acquisition of the purchased assets of BIX, our subsidiary Care Optimize, LLC paid an aggregate cash purchase price of $4.0 million and we issued 148,104 shares of Class A Common Stock, valued at $1.0 million based on the volume weighted average price of the Class A Common Stock for the five trading days immediately preceding December 22, 2021.
Each of the foregoing issuances were issued in reliance on the exemption from registration requirements thereof provided by Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder as a transaction by an issuer not involving a public offering.
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits. The following exhibits are being filed herewith:
EXHIBIT INDEX
 
Exhibit
No.
   
Description
  2.1†    Business Combination Agreement, dated as of December 18, 2020, by and among the Company, the entities listed in Annex I to the Business Combination Agreement, Deerfield Healthcare Technology Acquisitions Corp., IMC Holdings, LP, CareMax Medical Group, L.L.C., IMC Medical Group Holdings, LLC, and Deerfield Partners, L.P. (Incorporated by reference to the corresponding exhibit to the Company’s Current Report on Form 8-K/A (File No. 001-39391), filed with the SEC on December 21, 2020).
  3.1    Third Amended and Restated Certificate of Incorporation (Incorporated by reference to Exhibit 3.1 to the Company’s Amendment No. 1 to the Registration Statement on Form 8-A (File No. 001-39391) filed by the Company with the SEC on June 9, 2021).
  3.2    Amended and Restated Bylaws (Incorporated by reference to Exhibit 3.2 to the Company’s Amendment No. 1 to the Registration Statement on Form 8-A (File No.001-39391) filed by the Company with the SEC on June 9, 2021).
  4.1    Specimen Class A Common Stock Certificate (Incorporated by reference to Exhibit 4.1 of the Company’s Registration Statement on Form S-1 (Reg. No. 333-264654), filed with the SEC on May 4, 2022).
  4.2    Specimen Warrant Certificate (Incorporated by reference to Exhibit 4.2 to the Company’s Amendment No. 1 to the Registration Statement on Form 8-A (File No. 001-39391) filed by the Company with the SEC on June 9, 2021).
  4.3    Warrant Agreement, dated as of July 16, 2020, by and between the Company and Continental Stock Transfer & Trust Company, as warrant agent (Incorporated by reference to Exhibit 4.1 the Company’s Current Report on Form 8-K (File No. 001-39391), filed with the SEC on July 21, 2020).
  5.1    Opinion of DLA Piper LLP (US) (Incorporated by reference to Exhibit 5.1 of the Company’s Registration Statement on Form S-1 (Reg. No. 333-264654), filed with the SEC on May 4, 2022).
 
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10.1    Amended and Restated Registration Rights Agreement, dated as of December 18, 2020, by and among the Company, DFHTA Sponsor LLC, Deerfield Partners and the other parties thereto (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K/A (File No. 001-39391), filed with the SEC on December 21, 2020).
10.2    Lock-Up Agreement, dated as of December 18, 2020, by and among the Company, DFHTA Sponsor LLC, Deerfield Partners, L.P. and the other parties thereto (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K/A (File No. 001-39391), filed with the SEC on December 21, 2020).
10.3†    Escrow Agreement, dated as of June 8, 2021, by and among the Company, DFHTA Sponsor LLC, O.M. Investment Group, Inc. and Continental Stock Transfer & Trust Company (Incorporated by reference to Exhibit 10.3 to the Company’s Amendment No. 1 to the Registration Statement on Form 8-A (File No. 001-39391) filed by the Company with the SEC on June 9, 2021).
10.4†    Escrow Agreement, dated as of June 8, 2021, by and among the Company, DFHTA Sponsor LLC, IMC Holdings, LP and Continental Stock Transfer & Trust Company (Incorporated by reference to Exhibit 10.4 to the Company’s Amendment No. 1 to the Registration Statement on Form 8-A (File No. 001- 39391) filed by the Company with the SEC on June 9, 2021).
10.5    Form of Subscription Agreement (Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K/A (File No. 001-39391), filed with the SEC on December 21, 2020).
10.6    Form of Deerfield Subscription Agreement (Incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K/A (File No. 001-39391), filed with the SEC on December 21, 2020).
10.7†    Credit Agreement, dated as of June 8, 2021, by and among the Company, Royal Bank of Canada, as Administrative Agent, Collateral Agent, Swing Line Lender and Issuing Bank, RBC Capital Markets, LLC and Truist Securities, Inc., as Syndication Agents, Joint Lead Arrangers and Joint Book Runners, and certain other banks and financial institutions serving as lenders (Incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K (File No. 001-39391), filed with the SEC on June 14, 2021).
10.8†    First Amendment to Credit Agreement, dated December 30, 2021, by and among the Company, Royal Bank of Canada, as Administrative Agent, Collateral Agent, Swing Line Lender and Issuing Bank, RBC Capital Markets, LLC and Truist Securities, Inc., as Syndication Agents, Joint Lead Arrangers and Joint Book Runners, and certain other banks and financial institutions serving as lenders (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 001-39391), filed with the SEC on January 5, 2022).
10.9    Form of Indemnification Agreement (Incorporated by reference to Exhibit 10.8 to the Company’s Current Report on Form 8-K (File No. 001-39391), filed with the SEC on June 14, 2021).
10.10    CareMax, Inc. 2021 Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.9 to the Company’s Current Report on Form 8-K (File No. 001-39391), filed with the SEC on June 14, 2021).
10.11    Form of Nonstatutory Stock Option Agreement under the CareMax, Inc. 2021 Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.2 to the Company’s Registration Statement on Form S-8 (File No. 001-39391), filed with the SEC on December 17, 2021).
10.12    Form of Restricted Stock Units Agreement under the CareMax, Inc. 2021 Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.3 to the Company’s Registration Statement on Form S-8 (File No. 001-39391), filed with the SEC on December 17, 2021).
10.13    Form of Incentive Stock Option Agreement under the CareMax, Inc. 2021 Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.4 to the Company’s Registration Statement on Form S-8 (File No. 001-39391), filed with the SEC on December 17, 2021).
 
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10.14    Form of Restricted Stock Agreement under the CareMax, Inc. 2021 Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.5 to the Company’s Registration Statement on Form S-8 (File No. 001-39391), filed with the SEC on December 17, 2021).
10.15†    MSO Risk Agreement, dated as of July 1, 2009, by and among Healthsun Health Plans, Inc. and Managed Healthcare Partners, LLC (Incorporated by reference to Exhibit 10.10 to the Company’s Current Report on Form 8-K (File No. 001-39391), filed with the SEC on June 14, 2021).
10.16†+    First Amendment to MSO Risk Agreement, dated as of December 17, 2015, by and among Healthsun Health Plans, Inc. and Managed Healthcare Partners, LLC (Incorporated by reference to Exhibit 10.11 to the Company’s Current Report on Form 8-K (File No. 001-39391), filed with the SEC on June 14, 2021).
10.17    Securities Purchase Agreement, dated as of March 8, 2021, by and among Interamerican Medical Center Group, LLC, Senior Medical Associates, LLC, Stallion Medical Management, LLC and Mohsin Jaffer (Incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K (File No. 001-39391), filed with the SEC on June 21, 2021).
10.18    Asset Purchase Agreement, dated as of July 5, 2021, by and among CareMax, Inc., CareMax Medical Centers of Central Florida, LLC, Unlimited Medical Services of Florida, LLC and the other parties thereto (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 001-39391), filed with the SEC on July 7, 2021).
10.19    Exclusive Real Estate Advisory Agreement, dated as of July 13, 2021, by and between CareMax, Inc., Related CM Advisor, LLC and, with respect to certain sections thereof, The Related Companies, L.P. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 001-39391), filed with the SEC on July 13, 2021).
10.20    Separation and Release Agreement, dated September 30, 2021, by and between CareMax, Inc. and William C. Lamoreaux (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 001-39391), filed with the SEC on October 6, 2021).
10.21    Executive Employment Agreement, dated December 13, 2021, by and between Managed Healthcare Partners, L.L.C. and Carlos A. de Solo (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 001-39391), filed with the SEC on December 17, 2021).
10.22    Executive Employment Agreement, dated December 13, 2021, by and between Managed Healthcare Partners, L.L.C. and Alberto de Solo (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K (File No. 001-39391), filed with the SEC on December 17, 2021).
10.23    Executive Employment Agreement, dated December 13, 2021, by and between Managed Healthcare Partners, L.L.C. and Kevin Wirges (Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K (File No. 001-39391), filed with the SEC on December 17, 2021).
10.24+*    Credit Agreement, dated as of June 8, 2021, by and among the Company, certain of the Company’s subsidiaries as guarantors, Jefferies Finance LLC, as Administrative Agent, Collateral Agent, Sole Lead Arranger and Bookrunner, BlackRock Financial Management, as Lead Manager, Crestline Direct Finance, L.P., as Documentation Agent, and certain other banks and financial institutions serving as lenders.
21.1    List of Subsidiaries (Incorporated by reference to Exhibit 21.1 to the Company’s Annual Report on Form 10-K (File No. 001-39391), filed with the SEC on March 16, 2022).
23.1*    Consent of WithumSmith+Brown, PC.
23.2    Consent of DLA Piper LLP (US) (included in Exhibit 5.1)
 
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Table of Contents
24.1    Power of Attorney (included on signature page to the Company’s Registration Statement on Form S-1 (Reg. No. 333-264654), filed with the SEC on May 4, 2022).
101.INS*    Inline XBRL Instance Document
101.SCH*    Inline XBRL Taxonomy Extension Schema Document
101.CAL*    Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*    Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*    Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*    Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*    Cover Page Interactive Data File (formatted as Inline XBRL)
107    Filing Fee Table (incorporated by reference to Exhibit 107 to the Company’s Registration Statement on Form S-1 (Reg. No. 333-264654, filed with the SEC on May 4, 2022).
 
+
Certain portions of this exhibit have been omitted pursuant to
Regulation S-K,
Item (601)(b)(10).
†
Certain of the exhibits and schedules to this Exhibit have been omitted in accordance with
Regulation S-K
Item 601(a)(5). The Registrant agrees to furnish a copy of all omitted exhibits and schedules to the SEC upon its request.
*
Filed or furnished herewith.
(b) Financial Statements. The financial statements filed as part of this registration statement are listed in the index to the financial statements immediately preceding such financial statements, which index to the financial statements is incorporated herein by reference.
Item 17.     Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and
(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
 
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(4) That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
(b) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.
 
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Miami, Florida on the 17th day of May, 2022.
 
CareMax, Inc.
By:
/s/ Carlos A. de Solo
Name:    Carlos A. de Solo
Title:       President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints each of Carlos A. de Solo and Kevin Wirges as his or her true and lawful
attorney-in-fact,
with full power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities to sign any and all amendments including post-effective amendments to this registration statement and any and all registration statements filed pursuant to Rule 462 under the Securities Act of 1933, as amended, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the SEC, hereby ratifying and confirming all that said
attorney-in-fact
or his substitute, each acting alone, may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.
 
Signature
   
Capacity
  
Date
/s/ Carlos A. de Solo
Carlos A. de Solo
   
President, Chief Executive Officer and Director
(Principal Executive Officer)
   May 17, 2022
/s/ Kevin Wirges
Kevin Wirges
   
Executive Vice President, Treasurer and Chief Financial Officer
(Principal Financial and Accounting Officer)
   May 17, 2022
*
Jose R. Rodriguez
    Chairman of the Board of Directors   May 17, 2022
*
Beatriz Assapimonwait
    Director   May 17, 2022
*
Dr. Jennifer Carter
    Director   May 17, 2022
*
Hon. Dr. David J. Shulkin
    Director   May 17, 2022
*
Randy Simpson
    Director   May 17, 2022
 
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*
Bryan Cho
    Director   May 17, 2022
*
Dr. Vincent Omachonu
    Director   May 17, 2022
 
*By:  
/s/ Kevin Wirges
Name:   Kevin Wirges
Title:   Attorney-in-Fact
 
II-9

Exhibit 10.24

 

 

 

[***] CERTAIN INFORMATION IN THIS DOCUMENT HAS BEEN EXCLUDED PURSUANT TO REGULATION S-K, ITEM 601(B)(10). SUCH EXCLUDED INFORMATION IS BOTH NOT MATERIAL AND IS THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.

CREDIT AGREEMENT

dated as of May 10, 2022,

among

CAREMAX, INC.,

as the Borrower,

THE OTHER GUARANTORS PARTY HERETO,

as Guarantors,

THE LENDERS AND ISSUING BANKS PARTY HERETO,

and

JEFFERIES FINANCE LLC,

as Administrative Agent and Collateral Agent

 

 

JEFFERIES FINANCE LLC

as Sole Lead Arranger and Bookrunner

BLACKROCK FINANCIAL MANAGEMENT,

as Lead Manager

CRESTLINE DIRECT FINANCE, L.P.,

as Documentation Agent

 

 

 

TABLE OF CONTENTS

 

Article I DEFINITIONS

      1  

Section 1.01

   Defined Terms      1  

Section 1.02

   Classification of Loans and Borrowings      59  

Section 1.03

   Terms Generally      59  

Section 1.04

   Accounting Terms; GAAP      60  

Section 1.05

   Pro Forma Calculations      61  

Section 1.06

   Resolution of Drafting Ambiguities      61  

Section 1.07

   Rounding      61  

Section 1.08

   Currency Fluctuations      61  

Section 1.09

   Divisions      61  

Section 1.10

   Rates      61  

Article II THE CREDITS

      62  

Section 2.01

   Commitments      62  

Section 2.02

   Loans      62  

Section 2.03

   Borrowing Procedure      64  

Section 2.04

   Evidence of Debt; Repayment of Loans      65  

Section 2.05

   Fees      65  

Section 2.06

   Interest on Loans      67  

Section 2.07

   Termination and Reduction of Commitments      68  

Section 2.08

   Interest Elections      70  

Section 2.09

   Amortization of Term Borrowings      71  

Section 2.10

   Optional and Mandatory Prepayments of Loans      71  

Section 2.11

   Making or Maintaining Benchmark Rate Loans      75  

Section 2.12

   Increased Costs; Change in Legality      78  

Section 2.13

   Breakage Payments      79  

Section 2.14

   Payments Generally; Pro Rata Treatment; Sharing of Setoffs      80  

Section 2.15

   Taxes      82  

Section 2.16

   Mitigation Obligations; Replacement of Lenders      85  

Section 2.17

   Letters of Credit      86  

Section 2.18

   Defaulting Lenders      91  

Section 2.19

   Increases of the Term Loan      93  

Section 2.20

   Extensions of the Term Loan      97  

Section 2.21

   Refinancing Facilities      99  

Article III REPRESENTATIONS AND WARRANTIES

      100  

Section 3.01

   Existence, Qualification and Power      100  

Section 3.02

   Authorization; Enforceability      100  

Section 3.03

   No Conflicts      101  

Section 3.04

   Financial Statements; Projections      101  

Section 3.05

   Properties      102  

Section 3.06

   Intellectual Property      103  

Section 3.07

   Equity Interests and Subsidiaries      103  

Section 3.08

   Litigation; Compliance with Laws      104  

Section 3.09

   Healthcare Laws      104  

Section 3.10

   Federal Reserve Regulations      106  

 

- i -

Section 3.11

   Investment Company Act      105  

Section 3.12

   Use of Proceeds      105  

Section 3.13

   Taxes      105  

Section 3.14

   No Material Misstatements      106  

Section 3.15

   Labor Matters      106  

Section 3.16

   Solvency      106  

Section 3.17

   Employee Benefit Plans      106  

Section 3.18

   Environmental Matters      107  

Section 3.19

   Insurance      108  

Section 3.20

   Security Documents      108  

Section 3.21

   Sanctions      109  

Section 3.22

   Anti-Terrorism Laws      110  

Section 3.23

   Anticorruption      110  

Article IV CONDITIONS TO CREDIT EXTENSIONS

      111  

Section 4.01

   Conditions to Initial Credit Extension      111  

Section 4.02

   Conditions to Subsequent Credit Extensions      113  

Section 4.03

   Conditions to Delayed Draw Term Loan Extensions      114  

Article V AFFIRMATIVE COVENANTS

      114  

Section 5.01

   Financial Statements, Reports, etc      115  

Section 5.02

   Litigation and Other Notices      117  

Section 5.03

   Existence; Businesses and Properties      117  

Section 5.04

   Insurance      118  

Section 5.05

   Obligations and Taxes      119  

Section 5.06

   Employee Benefits      119  

Section 5.07

   Maintaining Records; Access to Properties and Inspections      119  

Section 5.08

   Use of Proceeds      120  

Section 5.09

   Compliance with Environmental Laws      120  

Section 5.10

   Additional Collateral; Additional Guarantors      121  

Section 5.11

   Security Interests; Further Assurances      123  

Section 5.12

   Information Regarding Collateral      124  

Section 5.13

   Anti-Cash Hoarding      124  

Section 5.14

   Compliance with Statutes, Regulations, Etc.      125  

Section 5.15

   Fiscal Year      125  

Section 5.16

   Sanctions; Anti-Money Laundering; Anti-Corruption Compliance      125  

Section 5.17

   Line of Business      125  

Section 5.18

   Post-Closing Obligations      125  

Section 5.19

   Beneficial Ownership Certifications      125  

Article VI NEGATIVE COVENANTS

      125  

Section 6.01

   Indebtedness      126  

Section 6.02

   Liens      129  

Section 6.03

   Sale and Leaseback Transactions      131  

Section 6.04

   Investments, Loans and Advances      131  

Section 6.05

   Mergers and Consolidations      134  

Section 6.06

   Asset Sales      135  

Section 6.07

   Dividends      136  

 

- ii -

Section 6.08

   Transactions with Affiliates      138  

Section 6.09

   Prepayments of Other Indebtedness; Modifications of Organizational Documents, Acquisition and Certain Other Documents, etc.      139  

Section 6.10

   Limitation on Certain Restrictions on Subsidiaries      139  

Section 6.11

   Business      140  

Section 6.12

   Management Services Agreements      140  

Section 6.13

   Fiscal Year      141  

Section 6.14

   No Further Negative Pledge      141  

Section 6.15

   Financial Covenants      141  

Section 6.16

   Anti-Terrorism Law; Anti-Money Laundering; Sanctions; Anti-Corruption Law      141  

Section 6.17

   Sanctioned Persons      142  

Section 6.18

   Borrower Following Post-Closing Reorganization      142  

Article VII GUARANTEE

      143  

Section 7.01

   The Guarantee      143  

Section 7.02

   Obligations Unconditional      144  

Section 7.03

   Reinstatement      145  

Section 7.04

   Subrogation; Subordination      145  

Section 7.05

   Remedies      145  

Section 7.06

   Instrument for the Payment of Money      146  

Section 7.07

   Continuing Guarantee      146  

Section 7.08

   General Limitation on Guarantee Obligations      146  

Section 7.09

   Release of Guarantors      146  

Section 7.10

   Right of Contribution      146  

Section 7.11

   Keepwell      147  

Article VIII EVENTS OF DEFAULT

      147  

Section 8.01

   Events of Default      147  

Section 8.02

   [reserved]      151  

Section 8.03

   Right to Cure      151  

Article IX APPLICATION OF COLLATERAL PROCEEDS

      152  

Section 9.01

   Collateral Account      152  

Section 9.02

   Application of Proceeds      153  

Article X THE ADMINISTRATIVE AGENT AND THE COLLATERAL AGENT

      154  

Section 10.01

   Appointment      154  

Section 10.02

   Agent in Its Individual Capacity      155  

Section 10.03

   Exculpatory Provisions; Agent Acting at Direction of Required Lenders      155  

Section 10.04

   Reliance by Agent      156  

Section 10.05

   Delegation of Duties      156  

Section 10.06

   Successor Agent      156  

Section 10.07

   Non-Reliance on Agent and Other Lenders      157  

Section 10.08

   Name Agents      157  

Section 10.09

   Indemnification      157  

Section 10.10

   Withholding Taxes      158  

 

- iii -

Section 10.11

   Lender’s Representations, Warranties and Acknowledgements      158  

Section 10.12

   Collateral Documents and Guarantee      159  

Section 10.13

   Administrative Agent May File Bankruptcy Disclosure and Proofs of Claim      161  

Section 10.14

   Erroneous Payments      161  

Article XI MISCELLANEOUS

      164  

Section 11.01

   Notices      164  

Section 11.02

   Waivers; Amendment      167  

Section 11.03

   Expenses; Indemnity      171  

Section 11.04

   Successors and Assigns      174  

Section 11.05

   Survival of Agreement      179  

Section 11.06

   Counterparts; Integration; Effectiveness      180  

Section 11.07

   Severability      180  

Section 11.08

   Right of Setoff      180  

Section 11.09

   Governing Law; Jurisdiction; Consent to Service of Process      181  

Section 11.10

   Waiver of Jury Trial      182  

Section 11.11

   Headings; No Adverse Interpretation of Other Agreements      182  

Section 11.12

   Confidentiality      182  

Section 11.13

   Interest Rate Limitation      183  

Section 11.14

   Assignment and Assumption      184  

Section 11.15

   Obligations Absolute      184  

Section 11.16

   Waiver of Defenses; Absence of Fiduciary Duties      184  

Section 11.17

   Patriot Act      185  

Section 11.18

   Judgment Currency      185  

Section 11.19

   Acknowledgement and Consent to Bail-In of EEA Financial Institutions      185  

Section 11.20

   Acknowledgement Regarding Any Supported QFCs      186  

 

- iv -

ANNEXES   
Annex I    Lenders and Commitments
SCHEDULES   
Schedule 1.01(a)    Pledgors
Schedule 1.01(c)    Subsidiary Guarantors
Schedule 3.05(b)    Real Property
Schedule 3.05(h)    Leases or Subleases of Owned Real Property
Schedule 3.07(a)    Equity Interests and Subsidiaries
Schedule 3.07(c)    Corporate Organizational Chart
Schedule 3.19(d)    UCC Filing Jurisdictions
Schedule 4.01(a)    Closing Date Security Documents
Schedule 5.18    Post-Closing Obligations
Schedule 6.01(b)    Existing Indebtedness
Schedule 6.02(c)    Existing Liens
Schedule 6.04(a)        Existing Investments
Schedule 6.08(g)            Transactions with Affiliates
Schedule 6.14    No Further Negative Pledge
EXHIBITS   
Exhibit A    Form of Assignment and Assumption
Exhibit B    Form of Borrowing Request
Exhibit C    Form of Compliance Certificate
Exhibit D    Form of Interest Election Request
Exhibit E-1    Form of Term Note
Exhibit E-2    Form of Revolving Note
Exhibit E-3    Form of Delayed Draw Term Loan Note
Exhibit F-1    Form of Perfection Certificate
Exhibit F-2    Form of Perfection Certificate Supplement
Exhibit G-1    Form of U.S. Tax Certificate (For Non-U.S. Lenders that are not Partnerships for U.S. Federal Income Tax Purposes)
Exhibit G-2    Form of U.S. Tax Certificate (For Non-U.S. Participants that are not Partnerships for U.S. Federal Tax Purposes)
Exhibit G-3    Form of U.S. Tax Certificate (For Non-U.S. Participants that are Partnerships for U.S. Federal Tax Purposes)
Exhibit G-4    Form of U.S. Tax Certificate (For Non-U.S. Lenders that are Partnerships for U.S. Federal Tax Purposes)
Exhibit H    Form of Solvency Certificate
Exhibit I    Issuance Notice

 

 

- v -

CREDIT AGREEMENT

This CREDIT AGREEMENT (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, this “Agreement”), dated as of May 10, 2022, among CareMax, Inc., a Delaware corporation (the “Borrower”), the Subsidiary Guarantors (such term and each other capitalized term used but not defined herein having the meaning given to it in Article I), the Lenders from time to time party hereto and Jefferies Finance LLC, as administrative agent for the Lenders (in such capacity, together with its successors and permitted assigns, the “Administrative Agent”) and as collateral agent for the Secured Parties (in such capacity, together with its successors and permitted assigns, the “Collateral Agent”).

WITNESSETH:

WHEREAS, on the Closing Date, the Borrower (a) has requested the Lenders to extend credit in the form of (i) term loans in an aggregate principal amount equal to $190,000,000 and (ii) delayed draw term loan commitments in an aggregate principal amount equal to $110,000,000 and (b) has requested that the Revolving Lenders extend Revolving Loans at any time and from time to time after the Closing Date and prior to the Revolving Maturity Date in an aggregate principal amount not in excess of $5,000,000 (provided that following the Closing Date, Revolving Commitments may be increased to $30,000,000; provided further, that the aggregate outstanding amount of Revolving Loans (exclusive of the Letter of Credit Sublimit) may not exceed $5,000,000). The proceeds of the term loans will be used by the Borrower on the Closing Date to (i) to refinance the existing indebtedness under that certain Credit Agreement, dated as of June 8, 2021, among the Borrower, the financial institutions party thereto as lenders and issuing banks and Royal Bank of Canada, as administrative agent and collateral agent (the “Refinancing”) and (ii) pay fees, costs (including debt breakage costs in connection with the Refinancing) and expenses related to the transaction. The proceeds of the delayed draw term loans will be available after the Closing Date for (i) Permitted Acquisitions and other similar permitted Investments, de novo center growth and optimization of de novo centers and management services organization performance and (ii) replenish cash on the balance sheet or repay Revolving Loans that, in either case, were drawn to finance such transactions within thirty (30) days prior to the date of funding of such delayed draw term loans. The proceeds of the Revolving Loans will be available after the Closing Date for general corporate purposes.

WHEREAS, the Borrower and each other Loan Party desire to secure all of the Obligations by granting to the Collateral Agent, for the benefit of the Secured Parties, a security interest in and Lien upon substantially all of the property and assets of the Borrower and the other Loan Parties, subject to the limitations described herein and in the Security Documents.

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein and in the other Loan Documents, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

Section 1.01 Defined Terms. As used in this Agreement, the following terms shall have the meanings specified below:

“ABR”, when used in reference to any Loan or Borrowing, is used when such Loan comprising such Borrowing is, or the Loans comprising such Borrowing are, bearing interest at a rate determined by reference to the Alternate Base Rate in accordance with the provisions of Article II.

 

1

“ABR Borrowing” shall mean a Borrowing comprised of ABR Loans.

“ABR Loan” shall mean any ABR Term Loan or ABR Revolving Loan.

“ABR Revolving Loan” shall mean any Revolving Loan bearing interest at a rate determined by reference to the Alternate Base Rate in accordance with the provisions of Article II.

“ABR Term Loan” shall mean any Term Loan bearing interest at a rate determined by reference to the Alternate Base Rate in accordance with the provisions of Article II.

“Acquisition Consideration” shall mean the purchase consideration for a Permitted Acquisition and all other payments (but excluding any related acquisition fees, costs and expenses incurred in connection with any Permitted Acquisition), directly or indirectly, by any Company in exchange for, or as part of, or in connection with, a Permitted Acquisition, whether paid in cash or by exchange of Equity Interests or of any Property or otherwise and whether payable at or prior to the consummation of a Permitted Acquisition or deferred for payment at any future time (including Earn-Outs); provided that any such Earn-Out or other future payment that is subject to a contingency shall be considered Acquisition Consideration only to the extent of the reserve, if any, required under GAAP at the time of such sale to be established in respect thereof by the Borrower or any of its Subsidiaries; provided, further, that Acquisition Consideration shall not include (a) the portion of consideration or payment constituting salary payments pursuant to ordinary course employment agreements and salary bonuses payable thereunder to the extent relating to the applicable Permitted Acquisition and (b) cash and Cash Equivalents acquired by the Companies as part of the applicable Permitted Acquisition (except to the extent that such cash and Cash Equivalents were (x) directly or indirectly funded or financed by any of the Companies or (y) after giving effect to any repayment of, or incurrence of, Indebtedness (and the release of any Liens in connection therewith) with respect to, or in connection with, such Permitted Acquisition on, or immediately after, the date of consummation thereof, such cash and Cash Equivalents are subject to any Lien (other than the Liens created under the Security Documents).

“Additional Lender” shall have the meaning assigned to such term in Section 2.21(a).

“Adjusted Daily Simple SOFR” means an interest rate per annum equal to (a) the Daily Simple SOFR, plus (b) 0.10%; provided that if the Adjusted Daily Simple SOFR Rate as so determined would be less than the Floor, such rate shall be deemed to be equal to the Floor for the purposes of this Agreement.

“Administrative Agent” shall have the meaning assigned to such term in the preamble hereto and includes each other person appointed as the successor administrative agent pursuant to Article X.

“Administrative Agent Fees” shall have the meaning assigned to such term in Section 2.05(c).

“Administrative Questionnaire” shall mean an administrative questionnaire in the form supplied from time to time by the Administrative Agent.

“Advisors” shall mean legal counsel (including foreign and local counsel, but excluding in-house counsel), auditors, engineers, accountants, consultants, appraisers or other advisors.

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

“Affiliate” shall mean, when used with respect to a specified person, another person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the person specified; provided, however, that, (i) for purposes of Section 6.08, the term “Affiliate” shall also include [***].

 

2

“Agent Fee Letter” shall mean that certain Agent Fee Letter, dated as of May 10, 2022, by and between the Borrower and the Administrative Agent.

“Agents” shall mean the Arranger, the Administrative Agent and the Collateral Agent; and “Agent” shall mean any of them, as the context may require.

“Agreement” shall have the meaning assigned to such term in the preamble hereto.

“Agreement Among Lenders” shall mean the Agreement Among Lenders, to be entered into among the Term Loan Lenders, the Revolving Lenders and the Administrative Agent.

“Alternate Base Rate” shall mean, for any day, a rate per annum (rounded upward, if necessary, to the next 1/100th of 1%) equal to the greatest of (a) the Base Rate in effect on such day, (b) the Federal Funds Effective Rate in effect on such day plus 0.50%, (c) the sum of (x) the Benchmark Rate calculated for each such day based on an Interest Period of one (1) month determined two (2) Business Days prior to such day (but for the avoidance of doubt, not less than the Floor), plus (y) 1.00%. Any change in the Base Rate due to a change in any of the foregoing shall be effective on the effective date of such change in the “bank prime loan” rate, the Federal Funds Rate or the Benchmark Rate for an Interest Period of one (1) month. If the Administrative Agent shall have determined in its reasonable discretion (which determination shall be conclusive absent manifest error) that it is unable to ascertain the Federal Funds Effective Rate or the Benchmark Rate for any reason, including the inability or failure of the Administrative Agent to obtain sufficient quotations in accordance with the terms of the definition thereof, the Alternate Base Rate shall be determined without regard to clause (b) or (c), as applicable, of the preceding sentence until the circumstances giving rise to such inability no longer exist. Any change in the Alternate Base Rate due to a change in any of the foregoing shall be effective on the effective date of such change in the Base Rate, the Federal Funds Rate or the Benchmark Rate for an Interest Period of one (1) month.

“Anti-Corruption Laws” shall have the meaning assigned to such term in Section 3.22(a).

“Anti-Terrorism Laws” shall have the meaning assigned to such term in Section 3.20(a).

“Applicable Margin” shall mean a percentage per annum equal to, in the case of Term Loans (A) maintained as ABR Loans, 8.00%, and (B) maintained as Benchmark Rate Loans, 9.00%; provided that with respect to any applicable interest period for which the Borrower has made a PIK Toggle Election, the Applicable Margin in the case of Term Loans (1) maintained as ABR Loans, shall be 8.50%, and (B) maintained as Benchmark Rate Loans, shall be 9.50%. The Applicable Margin in respect of any Incremental Loans, Extended Term Loans, Extended Revolving Loans, Refinancing Term Loans or Refinancing Revolving Loans shall be the applicable percentages per annum set forth in the applicable Incremental Amendment, Extension Offer or Refinancing Amendment, respectively.

“Applications and Filings” shall have the meaning assigned to such term in Section 3.08(e).

“Approved Electronic Communications” shall mean any notice, demand, communication, information, document or other material that any Loan Party provides to the Administrative Agent pursuant to any Loan Document or the transactions contemplated therein which is distributed to the Agents or the Lenders by means of electronic communications pursuant to Section 11.01(b).

 

3

“Approved Fund” shall mean any Fund or any other person (other than a natural person) that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.

“Arranger” shall mean Jefferies Finance LLC, in its capacity as sole lead arranger and sole bookrunner.

“Asset Disposition Threshold” shall have the meaning assigned to such term in Section 2.10(c)(i).

“Asset Sale” shall mean (a) any Disposition of any Property by any Company (excluding sales and dispositions permitted by Section 6.06 (other than Section 6.06(b)) and (b) any sale or other Disposition of any Equity Interests in a Subsidiary of the Borrower to any person other than a Loan Party.

“Assignment and Assumption” shall mean an assignment and assumption entered into by a Lender, as assignor, and an assignee (with the consent of any party whose consent is required pursuant to Section 11.04), and accepted by the Administrative Agent, substantially in the form of Exhibit A, or such other form as shall be approved by the Administrative Agent from time to time.

“Available Tenor” shall mean, as of any date of determination and with respect to the then-current Benchmark Rate, as applicable, any tenor for such Benchmark Rate (or component thereof) or payment period for interest calculated with reference to such Benchmark Rate (or component thereof), as applicable, that is or may be used for determining the length of an Interest Period for any term rate or otherwise, for determining any frequency of making payments of interest calculated pursuant to this Agreement as of such date and not including, for the avoidance of doubt, any tenor for such Benchmark Rate that is then-removed from the definition of “Interest Period” pursuant to Section 2.11(e).

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

“Bail-In Legislation” shall mean (a) with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law, regulation rule or requirement for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule and (b) with respect to the United Kingdom, Part I of the United Kingdom Banking Act 2009 (as amended from time to time) and any other law, regulation or rule applicable in the United Kingdom relating to the resolution of unsound or failing banks, investment firms or other financial institutions or their affiliates (other than through liquidation, administration or other insolvency proceedings).

“Bank Product” shall mean each and any of the following bank products and services provided by any Bank Product Provider: (a) credit cards for commercial customers (including, without limitation, “commercial credit cards” and purchasing cards), (b) store value cards, and (c) depository, cash management, and treasury management services (including, without limitation, controlled disbursement, automated clearinghouse transactions, return items, overdrafts and interstate depository network services).

“Bank Product Agreement” shall mean any agreement entered into by Borrower or any of its Subsidiaries in connection with Bank Products that has been designated as a “Bank Product Agreement” by Borrower in a written notice to the Administrative Agent.

“Bank Product Obligations” shall mean any and all of the obligations of the Borrower and its Subsidiaries, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor) in connection with Bank Products provided pursuant to a Bank Product Agreement.

 

4

“Bank Product Provider” shall mean any Person in its capacity as a provider of Bank Products, provided that such Person (i) is an Agent or a Lender or an Affiliate of any of the foregoing (or was an Agent or a Lender or an Affiliate of any of the foregoing at the time it provides a Bank Product) and (ii) executes and delivers to the Administrative Agent a letter agreement in form and substance reasonably acceptable to the Administrative Agent pursuant to which such counterparty (x) appoints the Administrative Agent and the Collateral Agent as its agents under the applicable Loan Documents and (y) agrees to be bound by the provisions of Section 11.03, Section 11.09 and Section 11.12 as if it were a Lender hereunder.

“Base Rate” shall mean, for any day, the “U.S. Prime Lending Rate” published in The Wall Street Journal for such day; provided that if The Wall Street Journal ceases to publish for any reason such rate of interest, “Base Rate” shall mean the highest per annum interest rate published by the Federal Reserve Board in Federal Reserve Statistical Release H.15 (519) (Selected Interest Rates) as the “bank prime loan” rate or, if such rate is no longer quoted therein, any similar rate quoted therein (as determined by the Administrative Agent) or any similar release by the Federal Reserve Board (as determined by the Administrative Agent).

“Benchmark Rate” means, initially, for any Interest Period for a Benchmark Rate Loan, Term SOFR; provided that if a Benchmark Transition Event, and the related Benchmark Replacement Date have occurred with respect to Term SOFR or the then-current Benchmark Rate, then “Benchmark Rate” means the applicable Benchmark Replacement to the extent that such Benchmark Replacement has replaced such prior benchmark rate pursuant to Section 2.11(b); provided, further, that, notwithstanding the foregoing, the Benchmark Rate shall at no time be less than the Floor.

“Benchmark Rate Borrowing” means a Borrowing comprised of Benchmark Rate Loans.

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

“Benchmark Rate Revolving Loan” shall mean any Revolving Loan bearing interest at a rate determined by reference to the Benchmark Rate in accordance with the provisions of Article II.

“Benchmark Rate Term Loan” shall mean any Term Loan bearing interest at a rate determined by reference to the Benchmark Rate in accordance with the provisions of Article II.

“Benchmark Replacement” means, for any Available Tenor, the first alternative set forth in the order below that can be determined by the Administrative Agent for the applicable Benchmark Replacement Date:

 

  1)

the Adjusted Daily Simple SOFR;

 

  2)

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

 

5

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

“Benchmark Replacement Adjustment” means, with respect to any replacement of the then-current Benchmark Rate with an Unadjusted Benchmark Replacement for any applicable Interest Period and Available Tenor for any setting of such Unadjusted Benchmark Replacement, the spread adjustment, or method for calculating or determining such spread adjustment, (which may be a positive or negative value or zero) that has been selected by the Administrative Agent and the Borrower for the applicable Corresponding Tenor giving due consideration to (i) any selection or recommendation of a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of such Benchmark with the applicable Unadjusted Benchmark Replacement by the Governmental Authority on the applicable Benchmark Replacement Date and/or (ii) any evolving or then-prevailing market convention for determining a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of such Benchmark Rate with the applicable Unadjusted Benchmark Replacement for dollar-denominated syndicated credit facilities at such time.

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

 

  1)

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

 

  2)

in the case of clause (3) of the definition of “Benchmark Transition Event,” the first date on which such Benchmark Rate (or the published component used in the calculation thereof) has been determined and announced by the regulatory supervisor for the administrator of such Benchmark Rate (or such component thereof) to be no longer representative; provided, that such non-representativeness will be determined by reference to the most recent statement or publication referenced in such clause (c) and even if any Available Tenor of such Benchmark Rate (or such component thereof) continues to be provided on such date.

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

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

 

6

  1)

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

 

  2)

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

 

  3)

a public statement or publication of information by the regulatory supervisor for the administrator of such Benchmark Rate (or the published component used in the calculation thereof) announcing that all Available Tenors of such Benchmark Rate (or such component thereof) are no longer, or as of a specified future date will no longer be, representative.

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

“Benchmark Unavailability Period” means, the period (if any) (a) beginning at the time that a Benchmark Replacement Date has occurred if, at such time, no Benchmark Replacement has replaced the then-current Benchmark Rate for all purposes hereunder and under any Loan Document in accordance with Section 2.11 and (b) ending at the time that a Benchmark Replacement has replaced the then-current Benchmark Rate for all purposes hereunder and under any Loan Document in accordance with Section 2.11.

“Beneficial Ownership Certification” shall mean a certification regarding beneficial ownership as required by the Beneficial Ownership Regulation.

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

“BlackRock Financial Management” shall mean BlackRock Financial Management, Inc. and its applicable affiliates and/or their applicable respective funds and accounts under management.

“Board” shall mean the Board of Governors of the Federal Reserve System of the United States.

 

7

“Board of Directors” shall mean, with respect to any person, (a) in the case of any corporation, the board of directors of such person, (b) in the case of any limited liability company, the board of managers or board of directors, as applicable, of such person, or if such limited liability company does not have a board of managers or board of directors, the functional equivalent of the foregoing, (c) in the case of any partnership, the board of directors or board of managers, as applicable, of the general partner of such person and (d) in any other case, the functional equivalent of the foregoing.

“Borrower” shall have the meaning assigned to such term in the preamble hereto.

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

“Borrowing Request” shall mean a request by Borrower in accordance with the terms of Section 2.03 and substantially in the form of Exhibit B, or such other form as shall be reasonably approved by the Administrative Agent from time to time.

“Business Day” shall mean any day excluding Saturday, Sunday and any day which is a legal holiday under the laws of the State of New York or is a day on which banking institutions located in such state are authorized or required by law or other governmental action to close.

“Business Combination” shall mean the combination between Deerfield Healthcare Technology Acquisitions Corp., CareMax Medical Group, LLC, IMC Medical Group Holdings, LLC, and other entities named in the Business Combination Agreement dated December 18, 2020 and completed June 8, 2021.

“Capital Expenditures” shall mean, without duplication, for any period (a) any expenditure or commitment to expend money made during such period for any purchase or other acquisition of any asset including capitalized leasehold improvements, which would be classified as a fixed or capital asset on a consolidated balance sheet of the Borrower, its Subsidiaries and the Physician-Owned Practices prepared in accordance with GAAP and (b) Capital Lease Obligations incurred by such persons during such period with respect to real or personal Property acquired during such period, or Synthetic Lease Obligations incurred by such persons during such period, but in each case, excluding (i) expenditures made in connection with the replacement, substitution or restoration of Property pursuant to Section 2.10(c), (ii) any Permitted Acquisitions, (iii) expenditures to the extent reimbursed within such period or paid for by a person who is not a Company (or any of Affiliates thereof) in the ordinary course of business (including, tenant improvements paid or reimbursed by landlords), (iv) the purchase price of equipment or other fixed assets that are purchased in the ordinary course of business substantially contemporaneously with the trade-in of existing assets in the ordinary course of business to the extent that the gross amount of such purchase price is reduced by the credit granted by the seller of such assets for the assets being traded-in at such time, (v) expenditures to the extent financed with the Net Cash Proceeds of Asset Sales that are reinvested in accordance with Section 2.10(c), and (vi) expenditures funded directly with the net cash proceeds of issuances of Equity Interests (other than Permitted Cure Securities) of the Borrower (or any direct or indirect parent thereof) to its shareholders and only to the extent that the net cash proceeds of such issuances of Equity Interests are immediately contributed to the Borrower as cash common equity, and in turn immediately contributed to the Borrower as cash common equity.

“Capital Lease Obligations” shall mean, as to any Person, the obligations of such person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal Property, or a combination thereof, which obligations are required to be classified and accounted for as financing leases on a balance sheet of such person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP; provided that, notwithstanding the foregoing, in no event will any lease that would have been categorized as an operating lease (including a Tenant Improvement Lease Transaction) as determined in accordance with GAAP as of December 31, 2017 be considered a Capitalized Lease.

 

8

“Capital Requirements” shall mean, as to any person, any matter, directly or indirectly, (a) regarding capital adequacy, capital ratios, capital requirements, the calculation of such person’s capital or similar matters, or (b) affecting the amount of capital required to be obtained or maintained by such person or any person controlling such person (including any direct or indirect holding company), or the manner in which such person or any person controlling such person (including any direct or indirect holding company), allocates capital to any of its contingent liabilities (including letters of credit), advances, acceptances, commitments, assets or liabilities.

“Cash Collateralize” means to pledge and deposit with or deliver to the Administrative Agent, for the benefit of the Administrative Agent or the Issuing Bank (as applicable) and the Lenders, as collateral for the Letter of Credit Obligations or obligations of Lenders to fund participations in respect thereof (as the context may require), cash or deposit account balances or, if the Issuing Bank benefitting from such collateral shall agree in its sole discretion, other credit support, in each case pursuant to documentation in form and substance reasonably satisfactory to (i) the Administrative Agent and (ii) the Issuing Bank. “Cash Collateral” shall have a meaning correlative to the foregoing and shall include the proceeds of such cash collateral and other credit support. “Cash Collateralization” shall have a meaning correlative to the foregoing.

“Cash Equivalents” shall mean, as to any person, (a) marketable securities issued, or directly, unconditionally and fully guaranteed or insured, by the United States or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof) having maturities of not more than one year from the date of acquisition by such person, (b) time deposits and certificates of deposit of any Lender or any commercial bank having, or which is the principal banking subsidiary of a bank holding company organized under the laws of the United States, any state thereof or the District of Columbia having, capital and surplus aggregating in excess of $250,000,000 and a rating of “A” (or such other similar equivalent rating) or higher by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act) with maturities of not more than one year from the date of acquisition by such person, (c) repurchase obligations with a term of not more than thirty (30) days for underlying securities of the types described in clause (a) above entered into with any person meeting the qualifications specified in clause (b) above, (d) commercial paper issued by any person incorporated in the United States having one of the two highest ratings obtainable from S&P or Moody’s, in each case maturing not more than one year after the date of acquisition by such person, (e) investments in money market funds substantially all of whose assets are comprised of securities of the types described in clauses (a) through (d) above and (f) demand deposit accounts maintained in the ordinary course of business with any bank meeting the qualifications specified in clause (b) above.

“Cash Interest Expense” shall mean, for any period, Consolidated Interest Expense for such period, less the sum of (a) interest on any debt paid by the permanent increase in the principal amount of such debt including by issuance of additional debt of such kind for such period, (b) items described in clause (c) or, other than to the extent paid in cash, clause (g) of the definition of “Consolidated Interest Expense” for such period and (c) cash interest income received by the Borrower and its Subsidiaries in such period.

“Casualty Event” shall mean any involuntary loss of title or any involuntary loss of or damage to or destruction of, or any condemnation or other taking (including by any Governmental Authority) of, any Property of any Company. “Casualty Event” shall include any taking of all or any part of any Real Property of any person or any part thereof, in or by condemnation or other eminent domain proceedings pursuant to any Legal Requirement, or by reason of the temporary requisition of the use or occupancy of all or any part of any Real Property of any person or any part thereof by any Governmental Authority, or any settlement in lieu thereof.

 

9

“CERCLA” shall mean the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. § 9601 et seq.

“CFC” shall mean a Foreign Subsidiary that is a controlled foreign corporation under Section 957 of the Code.

“Change in Control” shall mean (a) an event or series of events by which any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act, but excluding any employee benefit plan of such person or group or its respective subsidiaries, and any person acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan) is or becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that for purposes of this clause such person or group shall be deemed to have “beneficial ownership” of all securities that such person or group has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of Voting Stock of the Borrower representing more than [***] or (b) the occurrence of any “change of control” (or similar event, however denominated) under any other Indebtedness with an aggregate principal amount equal to, or in excess of $10,000,000. [***].

“Change in Law” shall mean (a) the adoption of, or taking effect of, any law, treaty, order, rule or regulation after the Closing Date, (b) any change in any law, treaty, order, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the Closing Date or (c) compliance by any Lender (or for purposes of Section 2.12(b), by any lending office of such Lender or by such Lender’s holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the Closing Date; provided that notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (y) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law”, regardless of the date enacted, adopted or issued.

“Charges” shall have the meaning assigned to such term in Section 11.13.

“Claims” shall have the meaning assigned to such term in Section 11.03(b).

“Class” (a) when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are Revolving Loans, Initial Term Loans, Delayed Draw Term Loans, New Term Loans of any series established as a separate “Class” pursuant to Section 2.19 or Extended Term Loans, (b) when used in reference to any Commitment, refers to whether such Commitment is a Revolving Commitment, Initial Term Loan Commitment, Delayed Draw Term Loan Commitment, New Term Loan Commitment of any series established as a separate “Class” pursuant to Section 2.19 or refers to a Commitment made pursuant to an Extension Offer, and (c) when used in reference to any Lender, whether such Lender has a Loan or Commitment of a particular Class.

“Closing Date” shall mean the date of the initial Credit Extensions hereunder, which shall have occurred on May 10, 2022.

 

10

“Code” shall mean the Internal Revenue Code of 1986, as amended.

“Collateral” shall mean, collectively, all of the Security Agreement Collateral, the Mortgaged Property and all other Property of whatever kind and nature, whether now existing or hereafter acquired, granted or purported to be granted as collateral or otherwise subject to a security interest or purported to be subject to a security interest under any Security Document, which for the avoidance of doubt, shall not include any Excluded Assets..

“Collateral Account” shall mean a collateral account or sub-account established and maintained from time to time by the Collateral Agent for the benefit of the Secured Parties, in accordance with the provisions of Section 9.01.

“Collateral Agent” shall have the meaning assigned to such term in the preamble hereto.

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

“Commitment” shall mean, with respect to any Lender, such Lender’s Revolving Commitment, Initial Term Loan Commitment, Delayed Draw Term Loan Commitment, New Term Loan Commitment or any commitment in connection with an Extended Term Loan.

“Commitment Fee” shall have the meaning assigned to such term in Section 2.05(a).

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

“Communications” shall have the meaning assigned to such term in Section 11.01(d).

“Companies” shall mean the Borrower and the Subsidiaries; and “Company” shall mean any one of them.

“Compliance Certificate” shall mean a certificate of a Financial Officer of the Borrower substantially in the form of Exhibit C.

“Conforming Changes” means, with respect to either the use or administration of Term SOFR or the use, administration, adoption or implementation of any Benchmark Replacement, any technical, administrative or operational changes (including changes to the definition of “Alternate Base Rate,” the definition of “Business Day,” the definition of “U.S. Government Securities Business Day,” the definition of “Interest Period” or any similar or analogous definition (or the addition of a concept of “interest period”), timing and frequency of determining rates and making payments of interest, timing of borrowing requests or prepayment, conversion or continuation notices, the applicability and length of lookback periods, the applicability of Section 2.11 and other technical, administrative or operational matters) that the Administrative Agent, in consultation with the Borrower, decides may be appropriate to

 

11

reflect the adoption and implementation of any such rate or to permit the use and administration thereof by the Administrative Agent in a manner substantially consistent with market practice (or, if the Administrative Agent, in consultation with the Borrower, decides that adoption of any portion of such market practice is not administratively feasible or if the Administrative Agent, in consultation with the Borrower, determines that no market practice for the administration of any such rate exists, in such other manner of administration as the Administrative Agent, in consultation with the Borrower, decides is reasonably necessary in connection with the administration of this Agreement and the other Loan Documents); provided that, notwithstanding anything herein to the contrary, no “Conforming Changes” shall result in any material effect on the timing or amount of payments or borrowings.

“Consolidated Amortization Expense” shall mean, for any period, the amortization expense of the Borrower, its Subsidiaries and the Physician-Owned Practices for such period, determined on a consolidated basis in accordance with GAAP (including accelerated amortization from the write-off or write-down of tangible or intangible assets (other than the write-down of current assets) including capitalized software and organizational costs).

“Consolidated Cash Balance” means, at any time, (a) the aggregate amount of cash and cash equivalents, marketable securities, treasury bonds and bills, certificates of deposit, investments in money market funds, and commercial paper, in each case, held or owned by (either directly or indirectly), credited to the account of or would otherwise be required to be reflected as an asset on the balance sheet of the Physician-Owned Practices less (b) Excluded Cash.

“Consolidated Current Assets” shall mean, as at any date of determination, the total assets of the Borrower, its Subsidiaries and the Physician-Owned Practices (other than cash and cash equivalents including Cash Equivalents, and excluding the effects of adjustments pursuant to GAAP resulting from the application of recapitalization accounting or purchase accounting, as the case may be, in relation to the Transactions or any consummated acquisition), which may properly be classified as current assets on a consolidated balance sheet of the Borrower and its Subsidiaries in accordance with GAAP.

“Consolidated Current Liabilities” shall mean, as at any date of determination, the total liabilities (excluding deferred taxes and taxes payable) of the Borrower, its Subsidiaries and the Physician-Owned Practices which may properly be classified as current liabilities (other than (w) the current portion of any Loans and other long-term liabilities, and liabilities in respect of Hedging Obligations, and, in each case, accrued interest thereon, (x) liabilities in respect of unpaid earnouts and accrued litigation settlement costs and (y) current liabilities consisting of deferred revenue) on a consolidated balance sheet of the Borrower, its Subsidiaries and the Physician-Owned Practices in accordance with GAAP, plus the amount of long-term deferred revenue of the Borrower, its Subsidiaries and the Physician-Owned Practices in accordance with GAAP and furthermore, excluding the effects of adjustments pursuant to GAAP resulting from the application of purchase accounting in relation to the Transactions or any consummated acquisition.

“Consolidated Depreciation Expense” shall mean, for any period, the depreciation expense of the Borrower, its Subsidiaries and the Physician-Owned Practices for such period, determined on a consolidated basis in accordance with GAAP (including accelerated depreciation from the write-off or write-down of tangible or intangible assets (other than the write-down of current assets) including capitalized software and organizational costs).

“Consolidated EBITDA” shall mean, for any period, Consolidated Net Income for such period, adjusted by (y) adding thereto, without duplication, in each case, only to the extent deducted in determining Consolidated Net Income and not added back pursuant to the definition of Consolidated Net Income, and provided that to the extent the ability to add back any item is capped or otherwise limited pursuant to one clause of this definition, no other clause herein shall operate to permit an amount in excess of such cap or limitation to be added back:

 

12

  (a)

Consolidated Interest Expense for such period;

 

  (b)

Consolidated Amortization Expense for such period;

 

  (c)

Consolidated Depreciation Expense for such period;

 

  (d)

Consolidated Tax Expense for such period;

 

  (e)

all

(i) transaction fees, costs, expenses, charges and losses related to, or incurred in connection with, (x) the Transactions and (y) any amendments, waivers or other modifications to the Loan Documents;

(ii) transaction fees, costs and expenses incurred in connection with the consummation of any transaction that is out of the ordinary course of business (or any transaction proposed but not consummated and including any such transaction consummated prior to the Closing Date) permitted under this Agreement, including equity issuances, investments, acquisitions, asset sales or other dispositions, recapitalizations, consolidations, mergers, amalgamations, option buyouts and the incurrence, modification or repayment of Indebtedness permitted to be incurred under this Agreement (including any Permitted Refinancing in respect thereof) or any amendments, waivers or other modifications under the agreements relating to such Indebtedness or similar transactions; provided that the aggregate amount added back under this clause (e)(ii) with respect to any such transaction that fails to close and is no longer being pursued shall not exceed [***] for the four fiscal quarter period ending on the last day of such period;

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

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

(v) non-recurring and non-operational (A) professional fees and (B) expenses, costs, accruals and losses that are, in good faith, one-time in nature, in each case, limited to (I) non-recurring consulting and legal fees and expenses related to the Business Combination, establishing public company processes, and mergers and acquisitions, (II) non-recurring legal fees, expenses and charges resulting from litigation arising from transactions permitted by this Agreement, securities-related matters or other non-core business activities, (III) non-recurring consulting and legal expenses related to entry into strategic relationships with Anthem and The Related Companies and (IV) without duplication, non-recurring or non-operational expenses, accruals and losses that are non-cash;

 

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

(g) all non-cash losses, charges and expenses, including, without limitation, any non-cash expense relating to the vesting of warrants and any write-offs or write-downs; provided that if any such non-cash charge represents an accrual or reserve for potential cash items in any future four-fiscal quarter period (i) the Borrower may determine not to add back such non-cash charge in the period for which Consolidated EBITDA is being calculated and (ii) to the extent the Borrower does decide to add back such non-cash charge, the cash payment in respect thereof in such future four-fiscal quarter period will be subtracted from Consolidated EBITDA for such future four-fiscal quarter period; plus

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

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

(j) costs and expenses related to, or incurred in connection with, de novo facilities start-up, opening, and pre-opening, including costs and expenses incurred in connection with entering into Management Services Agreements and other similar agreements in respect of Physician-Owned Practices and/or to ensure that such agreements comply with all applicable laws; provided that the aggregate amount added back under this clause (j) shall not exceed [***] per de novo facility (i) opened during the preceding four fiscal quarters or (ii) having a signed lease agreement and is anticipated, in good faith, to be opened during the subsequent two fiscal quarters, and for the avoidance of doubt no losses, charges, expenses, costs, accruals or reserves related to de novo facilities following the opening of such facilities shall be added back under this clause (j); plus

(k) other than for purposes of calculating the step-down to the minimum Liquidity required by Section 6.15(b), all net losses, charges, expenses, costs, accruals or reserves of any kind related to de novo facilities during the first 36 months of opening of such facility; plus

(l) add-backs subject to Schedule I provided to Lenders on May 3, 2022; plus

(m) without duplication, adjustments and add-backs (which add-backs and adjustments shall not, for the avoidance of doubt, be limited to the time periods in respect of which such add-backs and adjustments were reflected therein) that are contained in a quality of earnings report made available to the Administrative Agent prepared by financial advisors in connection with a Permitted Acquisition (which financial advisors are (A) nationally recognized or (B) reasonably acceptable to the Administrative Agent (it being understood and agreed that any of the “Big Four” accounting firms are acceptable)) and retained by a Loan Party; provided that the aggregate amount added back under this clause (m), clause (n) below, clause (o) below or clauses (2) or (3) of the definition of “Pro Forma Basis,” (with the exception of cost savings and the related severance expenses that are both (I) specifically identified in the applicable quality of earnings report and (II) for which substantial steps will be taken within the 18 months following consummation of the applicable acquisition in the good faith determination of the Borrower and are reasonably expected by the Borrower, the Subsidiaries and the Physician-Owned Practices to be realized within 18 months of the date of such calculation (without duplication of the amount of actual benefits realized during such period from such actions)), shall not exceed the Expenses and Synergies Cap for the four fiscal quarter period ending on the last day of such period (calculated on a Pro Forma Basis and before giving effect to any such add-backs); provided further that any cost savings added back pursuant to this clause (m) are factually supportable and reasonably identifiable in the good faith determination of the Borrower, as certified in writing by a Financial Officer of the Borrower; plus

 

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(n) all losses, charges, expenses, costs, accruals or reserves of any kind (i) attributable to the planning, undertaking and/or implementation of cost savings or strategic initiatives, business optimization, cost rationalization programs, operating expense reductions and/or other initiatives, actions or synergies (including, without limitation, in connection with any integration, restructuring or transition), (ii) relating to the closure or consolidation of any facility and/or discontinued operations (including but not limited to severance, rent termination costs, moving costs and legal costs), any systems implementation, any software development, any expansion and/or relocation or any entry into a new market, or (iii) relating to any severance, any signing, retention or completion bonus, or any modification to any pension and post-retirement employee benefit plan, indemnities and expenses, including, without limitation, any one time expense relating to enhanced accounting function or other transaction costs, including those associated with becoming a standalone entity or a public company (including, for the avoidance of doubt, any one time Public Company Cost and any one time cost related to any Permitted Acquisition and excluding in the case of clauses (i) through (iii) above any amounts related to business performance normalization (including any such steps undertaken in connection with COVID-19 or another epidemiological condition); provided, that, the aggregate amount added back under this clause (n), clause (m) above, clause (o) below or clauses (2) and (3) of the definition of “Pro Forma Basis” shall not exceed [***] of Consolidated EBITDA of the Borrower, the Subsidiaries and the Physician Owned Practices for the four fiscal quarter period ending on the last day of such period (the “Expenses and Synergies Cap”) (calculated on a Pro Forma Basis and before giving effect to any such add-backs); provided, further, that the aggregate amount added back under this clause (n) pertaining to severance that has actually already been actioned prior to the date that is 36 months following the Closing Date, shall (x) not be included in the Expense and Synergies Cap for any purpose under this Agreement and (y) not exceed [***] during the term of this Agreement; plus

(o) pro forma “run rate” cost savings, operating expense reductions, restructuring charges and synergies related to operational efficiencies, strategic and cost saving initiatives, purchasing improvements, acquisitions, divestitures, other specified transactions, restructurings and other initiatives and actions, in each case, for which substantial steps have been taken and are reasonably expected by the Borrower, the Subsidiaries and the Physician-Owned Practices to be realized within 18 months of the date of such calculation (without duplication of the amount of actual benefits realized during such period from such actions), which cost savings, operating expense reductions, restructuring charges and synergies are factually supportable and reasonably identifiable in the good faith determination of the Borrower, as certified in writing by a Financial Officer of the Borrower; provided that the aggregate amount added back under this clause (o), clause (m) above, clause (n) above, or clauses (2) and (3) of the definition of “Pro Forma Basis” shall not exceed the Expenses and Synergies Cap for the four fiscal quarter period ending on the last day of such period (calculated on a Pro Forma Basis and before giving effect to any such add-backs); provided, that, no amounts added back under this clause (o) shall relate to business performance normalization (including any such steps undertaken in connection with COVID-19 or another epidemiological condition);

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

 

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Notwithstanding the foregoing, that Consolidated EBITDA of the Borrower, its Subsidiaries and the Physician-Owned Practices for the fiscal quarters ended June 30, 2021, September 30, 2021, December 31, 2021, March 31, 2022 shall be deemed to be [***], [***], [***] and [***], respectively, in each case, as adjusted on a Pro Forma Basis, as applicable; it being agreed that for purposes of calculating any financial ratio or test on a Pro Forma Basis (after the end of any of the four quarterly periods set forth above) in connection with a Subject Transaction, Consolidated EBITDA shall be calculated in a manner consistent with Consolidated EBITDA for such quarterly period and the adjustments set forth above in this definition.

Other than for purposes of calculating Excess Cash Flow, Consolidated EBITDA shall be calculated on a Pro Forma Basis to give effect to any Subject Transaction, and for the purposes of calculating Excess Cash Flow, the pro forma adjustments set forth in the preceding clause (l) shall not be taken into account in the calculation of Consolidated EBITDA.

“Consolidated First Lien Indebtedness” shall mean, as of any date of determination, without duplication, the aggregate amount of Consolidated Indebtedness of the Borrower, its Subsidiaries and the Physician-Owned Practices that, as of such date, is secured by a first priority Lien on any asset or property of the Borrower, any of its Subsidiaries or any of the Physician-Owned Practices; provided, however, that, for the avoidance of doubt, Consolidated First Lien Indebtedness shall not include Indebtedness permitted by Section 6.01(q).

“Consolidated Indebtedness” shall mean, at any date, the aggregate outstanding principal amount, determined on a consolidated basis, without duplication, in accordance with GAAP, of (i) all Indebtedness of the Borrower, its Subsidiaries and the Physician-Owned Practices of the types referred to in clauses (a) (but only in respect of the principal amount thereof), (b) (but only in respect of the principal amount thereof and excluding, for the avoidance of doubt, surety bonds), (d) (provided that, in the case of purchase price adjustments or Earn-Outs, solely to the extent not overdue by five (5) or more Business Days), (f) and (i) (but only in respect of the drawn amount thereof) of the definition of “Indebtedness” in this Section 1.01 (giving effect to the proviso to such definition) and (ii) without duplication, all Indebtedness of the Borrower, its Subsidiaries and the Physician-Owned Practices of the type referred to in clause (viii) of the definition of “Indebtedness” to the extent that such Guaranteed Obligations relate to liabilities under clauses (a) (but only in respect of the principal amount thereof), (b) (but only in respect of the principal amount thereof and excluding, for the avoidance of doubt, surety bonds), (e) and (i) (but only in respect of the drawn amount thereof) of the definition of “Indebtedness” (giving effect to the proviso to such definition) but, in each case, excluding, for the avoidance of doubt, (A) any Bank Product Obligations (other than any overdrafts incurred in respect of the foregoing), (B) Swap Obligations, and (C) any Indebtedness in connection with [***].

“Consolidated Interest Expense” shall mean, for any period, the total consolidated interest expense of the Borrower, its Subsidiaries and the Physician-Owned Practices for such period determined on a consolidated basis in accordance with GAAP plus, without duplication:

(a) imputed interest on Capital Lease Obligations of the Borrower, its Subsidiaries and the Physician-Owned Practices for such period;

(b) commissions, discounts and other fees and charges owed by the Borrower, any of its Subsidiaries or any of the Physician-Owned Practices with respect to letters of credit securing financial obligations, bankers’ acceptance financing and receivables financings for such period;

(c) amortization of Debt Issuance costs, debt discount or prepayment or other premiums and other financing fees and expenses incurred by the Borrower, any of its Subsidiaries or any of the Physician-Owned Practices for such period;

 

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(d) cash contributions to any employee stock ownership plan or similar trust made by the Borrower, any of its Subsidiaries or any of the Physician-Owned Practices to the extent such contributions are used by such plan or trust to pay interest or fees to any person (other than the Borrower or a Wholly Owned Subsidiary which is a Subsidiary) in connection with Indebtedness incurred by such plan or trust for such period;

(e) all interest paid or payable with respect to discontinued operations of the Borrower, any of its Subsidiaries or any of the Physician-Owned Practices for such period;

(f) the interest portion of any deferred payment obligations of the Borrower, any of its Subsidiaries or any of the Physician-Owned Practices for such period; and

(g) all interest on any Indebtedness of the Borrower, any of its Subsidiaries or any of the Physician-Owned Practices of the type described in clause (e) or (j) of the definition of “Indebtedness” for such period;

provided that (a) to the extent directly and exclusively related to the consummation of the Transactions, Debt Issuance costs, debt discount or premium and other financing fees and expenses shall be excluded from the calculation of Consolidated Interest Expense and (b) Consolidated Interest Expense shall be calculated after giving effect to Hedging Agreements (including associated costs) intended to protect against fluctuations in interest rates, but excluding unrealized gains and losses with respect to any such Hedging Agreements. For the purposes of determining the Consolidated Interest Expense, for any period, such determination shall be made on a Pro Forma Basis to give effect to any Indebtedness (other than Indebtedness incurred for ordinary course working capital needs under ordinary course revolving credit facilities) incurred, assumed or permanently repaid or prepaid or extinguished at any time on or after the first day of the Test Period and prior to the date of determination in connection with any Permitted Acquisition, Asset Sale or other Disposition (other than any Dispositions in the ordinary course of business), and discontinued lines of business or operations as if such incurrence, assumption, repayment or extinguishing had been effected on the first day of such period.

“Consolidated Net Income” shall mean, for any period, the consolidated net income (or loss) of the Borrower, its Subsidiaries and the Physician-Owned Practices for such period determined on a consolidated basis in accordance with GAAP; provided that there shall be excluded from such net income (to the extent otherwise included therein), without duplication:

(a) all non-cash extraordinary, exceptional, nonrecurring or unusual gains, losses, income, expenses, costs, accruals, charges and reserves of any kind, and in any event including all Transaction Costs, non-cash restructuring (whether or not classified as restructuring expense on the consolidated financial statements) (other than restructuring charges and synergies related to operational efficiencies), severance, relocation, retention, consolidation or other similar charges and expenses, one-time charges (including compensation charges), contract termination costs, litigation and other legal and arbitration costs, excess pension charges, system establishment charges, expenses related to any reconstruction, decommissioning, recommissioning or reconfiguration of fixed assets for alternative uses, fees, expenses or charges relating to curtailments or modifications to pension and post-retirement employee benefit plans in connection with the Transactions or otherwise, and any non-cash fees, expenses, charges or change in control payments related to the Transactions or otherwise (including any transition-related expenses incurred before, on or after the Closing Date); provided, no amounts excluded pursuant to this clause (a) shall relate to business performance normalization (including any such steps undertaken in connection with COVID-19 or an other epidemiological condition); provided, further, that, notwithstanding anything to the contrary contained herein, with respect to any extraordinary, exceptional, nonrecurring or unusual gain, loss, income, expense, costs accrual, charge or reserve that is also described or referenced in the

 

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definition of “Consolidated EBITDA”, such extraordinary, exceptional, nonrecurring or unusual gain, loss, income, expense, costs accrual, charge or reserve shall instead be subtracted from (and/or added back to) Consolidated Net Income in the calculation of Consolidated EBITDA in accordance with the definition of such term set forth in this Agreement; provided, further, that, for the avoidance of doubt, no cash items of any kind shall be excluded pursuant to this clause (a);

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

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

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

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

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

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

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

(i) all impairment charges and asset write-ups, write-downs and write-offs or write-downs;

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

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

 

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

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

(n) any non-cash currency translation gains and losses related to changes in currency exchange rates (including remeasurements of Indebtedness and any net loss or gain resulting from Hedging Agreements for currency exchange risk);

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

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

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

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

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

“Consolidated Secured Indebtedness” shall mean, as of any date of determination, without duplication, the aggregate amount of Consolidated Indebtedness of the Borrower, its Subsidiaries and the Physician-Owned Practices that, as of such date, is secured by a Lien on any asset or property of the Borrower, any of its Subsidiaries or any of the Physician-Owned Practices; provided, however, that, for the avoidance of doubt, Consolidated Secured Indebtedness shall not include Indebtedness permitted by Section 6.01(q).

 

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“Consolidated Tax Expense” shall mean, for any period, the tax expense of the Borrower and its Subsidiaries, for such period, determined on a consolidated basis in accordance with GAAP and net of any applicable credits or reimbursements received by the Borrower or any of its Subsidiaries during such period (to the extent such credit or reimbursement (as applicable) is otherwise included in the calculation of Consolidated Net Income or Consolidated EBITDA (as applicable)).

“Consolidated Total Assets” shall mean at any date of determination, the net book value of all assets of the Borrower, its Subsidiaries and Physician-Owned Practices determined on a consolidated basis in accordance with GAAP.

“Contingent Obligation” shall mean, as to any person, any obligation, agreement, understanding or arrangement of such person guaranteeing or intended to guarantee any Indebtedness, leases, dividends or other obligations (“primary obligations”) of any other person (the “primary obligor”) in any manner, whether directly or indirectly, including any obligation, agreement, understanding or arrangement of such person, whether or not contingent: (a) to purchase any such primary obligation or any Property constituting direct or indirect security therefor; (b) to advance or supply funds (i) for the purchase or payment of any such primary obligation or (ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor; (c) to purchase or lease Property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation; (d) with respect to bankers’ acceptances, letters of credit and similar credit arrangements, until a reimbursement obligation arises (which reimbursement obligation shall constitute Indebtedness); or (e) otherwise to assure or hold harmless the holder of such primary obligation against loss (in whole or in part) in respect thereof; provided, however, that the term “Contingent Obligation” shall not include endorsements of instruments for deposit or collection in the ordinary course of business or any product warranties or other contingent obligations (other than with respect to borrowed money or capital leases) incurred in the ordinary course of business, including indemnities. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Contingent Obligation is made (or, if less, the maximum amount of such primary obligation for which such person may be liable, whether singly or jointly, pursuant to the terms of the instrument evidencing such Contingent Obligation) or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such person is required to perform thereunder) as determined by such person in good faith.

“Contribution Share” shall have the meaning assigned to such term in Section 7.10(a).

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

“Control Agreement” shall have the meaning assigned to such term in the Security Agreement.

“Convertible Indebtedness” shall mean Indebtedness of the Borrower permitted to be incurred under the terms of this Agreement that is either (a) convertible into common stock of the Borrower (and cash in lieu of fractional shares) and/or cash (in an amount determined by reference to the price of such common stock) or (b) sold as units with call options, warrants or rights to purchase (or substantially equivalent derivative transactions) that are exercisable for common stock of the Borrower and/or cash (in an amount determined by reference to the price of such common stock).

 

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

“Credit Extension” shall mean the making of a Loan by a Lender.

“Cumulative Amount” shall mean, on any date of determination (the “Reference Date”), the sum of (without duplication):

(a) $5,000,000; plus

(b) the portion of Excess Cash Flow, determined on a cumulative basis for all fiscal years of the Borrower and its Subsidiaries, commencing with the fiscal year ending on December 31, 2023, that was not required to be applied to prepay Term Loans pursuant to Section 2.10(e); minus the aggregate amount of all voluntary prepayments made during such period that reduced on a dollar-for-dollar basis the amount required to be applied to prepay Term Loans pursuant to Section 2.10(e) in respect of such period; plus

(c) an amount determined on a cumulative basis from the Closing Date equal to the net cash proceeds from the issuance of Equity Interests of, or a contribution to the capital of, the Borrower (other than (I) to the extent constituting a Cure Amount or (II) to the extent that such cash proceeds have been previously applied or used for another purpose); plus

(d) an amount determined on a cumulative basis equal to the net cash proceeds received by the Borrower from Indebtedness or Disqualified Stock issued after the Closing Date and subsequently converted or exchanged into Qualified Stock of the Borrower or any direct or indirect parent company of the Borrower (other than to the extent constituting a Cure Amount); plus

(e) to the extent not included in the calculation of Consolidated Net Income, an amount determined on a cumulative basis equal to the net cash proceeds of sales of Investments previously made pursuant to Section 6.04(q) using the Cumulative Amount, up to a maximum amount of such original Investment; plus

(f) to the extent not included in the calculation of Consolidated Net Income, the aggregate amount of Dividends, profits, returns or similar amounts received in cash or Cash Equivalents on Investments previously made pursuant to Section 6.04(q) using the Cumulative Amount, up to a maximum amount of such original Investment; plus

(g) [reserved];

(h) the aggregate amount of prepayments which are declined or waived by any Lender pursuant to Section 2.10(h) ; minus

(i) the aggregate amount of (i) Investments made pursuant to Section 6.04(q) using the Cumulative Amount, (ii) dividends made pursuant to Section 6.07(c) using the Cumulative Amount, (iii) payments in respect of Junior Indebtedness made pursuant to Section 6.09(a)(ii) using the Cumulative Amount and (iv) any other payment made hereunder using the Cumulative Amount, in each case during the period from and including the Business Day immediately following the Closing Date through and including the Reference Date (without taking account of the intended usage of the Cumulative Amount on such Reference Date).

 

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“Cure Amount” shall have the meaning assigned to such term in Section 8.03(a).

“Cure Notice” shall have the meaning assigned to such term in Section 8.03(a).

“Cure Right” shall have the meaning assigned to such term in Section 8.03(a).

“Cure Specified Date” shall mean, with respect to any of the first three fiscal quarters of the Borrower in a fiscal year, within forty five (45) days after the end of such fiscal quarter, and with respect to the fourth fiscal quarter of the Borrower in a fiscal year, within ninety (90) days after the end of such fiscal quarter, in each case, commencing with the fiscal quarter ending June 30, 2022.

“Daily Simple SOFR” means, for any day (a “SOFR Rate Day”), a rate per annum equal SOFR for the day that is five (5) U.S. Government Securities Business Days prior to (i) if such SOFR Rate Day is a U.S. Government Securities Business Day, such SOFR Rate Day or (ii) if such SOFR Rate Day is not a U.S. Government Securities Business Day, the U.S. Government Securities Business Day immediately preceding such SOFR Rate Day, in each case, as such SOFR is published by the SOFR Administrator on the SOFR Administrator’s Website. Any change in Daily Simple SOFR due to a change in SOFR shall be effective from and including the effective date of such change in SOFR without notice to the Borrower.

“Debt Issuance” shall mean the incurrence by any Company of any Indebtedness after the Closing Date (other than as permitted by Section 6.01).

“Debt Service” shall mean, for any period, Cash Interest Expense for such period plus scheduled principal amortization (and other scheduled mandatory prepayments and repayments (whether pursuant to this Agreement or otherwise)) of all Indebtedness for such period (including the implied principal component of scheduled payments made in respect of permitted Capital Lease Obligations).

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

“Default” shall mean any event, occurrence or condition which is, or upon notice, lapse of time or both would constitute, an Event of Default.

“Default Rate” shall have the meaning assigned to such term in Section 2.06(c).

“Defaulting Lender” means, subject to Section 2.18(b), any Lender that (i) has failed to (a) fund all or any portion of its Loans within two Business Days of the date such Loans were required to be funded hereunder unless such Lender notifies the Administrative Agent and the Borrower in writing that such failure is the result of such Lender’s determination that one or more conditions precedent to funding (each of which conditions precedent, together with any applicable default, shall be specifically identified in such writing) has not been satisfied or waived, or (b) pay to the Administrative Agent, the Issuing Bank or any other Lender any other amount required to be paid by it hereunder (including in respect of its participation in Letters of Credit) within two Business Days of the date when due, (ii) has notified the Borrower, the Administrative Agent or the Issuing Bank in writing that it does not intend to comply with its funding obligations hereunder, or has made a public statement to that effect (unless such writing or public statement relates to such Lender’s obligation to fund a Loan hereunder and states that such position is based on such Lender’s determination that a condition precedent to funding (which condition precedent, together with any applicable default, shall be specifically identified in such writing or public

 

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statement) cannot be satisfied), (iii) has failed, within three Business Days after written request by the Administrative Agent or the Borrower, to confirm in writing to the Administrative Agent and the Borrower that it will comply with its prospective funding obligations hereunder (provided, such Lender shall cease to be a Defaulting Lender pursuant to this clause (iii) upon receipt of such written confirmation by the Administrative Agent and the Borrower), or (iv) has, or has a direct or indirect parent company that has, (a) become the subject of a proceeding under any Debtor Relief Law, (b) had appointed for it a receiver, custodian, conservator, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or assets, including the Federal Deposit Insurance Corporation or any other state or federal regulatory authority acting in such a capacity or (c) become the subject of a Bail-in Action; provided, a Lender shall not be a Defaulting Lender solely by virtue of the ownership or acquisition of any equity interest in such Lender or any direct or indirect parent company thereof by a Governmental Authority so long as such ownership interest does not result in or provide such Lender with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Lender (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts or agreements made with such Lender. Any determination by the Administrative Agent that a Lender is a Defaulting Lender under clauses (i) through (iv) above shall be conclusive and binding absent manifest error, and such Lender shall be deemed to be a Defaulting Lender (subject to Section 2.18(b)) upon delivery of written notice of such determination to the Borrower, the Issuing Bank and each Lender.

“Delayed Draw Term Loan Commitment” shall mean, with respect to each Delayed Draw Term Loan Lender, the commitment, if any, of such Delayed Draw Term Loan Lender to make a Delayed Draw Term Loan. The aggregate principal amount of the Delayed Draw Term Loan Lenders’ Delayed Draw Term Loan Commitments on the Closing Date is 110,000,000.

“Delayed Draw Term Loan Commitment Expiration Date” shall have the meaning assigned to such term in Section 2.02(f).

“Delayed Draw Term Loan Commitment Fee Rate” shall mean, for the period from (and including) the Closing Date to (but excluding) the Delayed Draw Term Loan Commitment Expiration Date, a rate per annum equal to 1.00% of the average daily unused portion of the Delayed Draw Term Loan Commitments of non-defaulting Lenders with Delayed Draw Term Loan Commitments, payable quarterly in arrears, and calculated on the basis of a 360-day year and shall be payable for the actual days elapsed (including the first day but excluding the last day).

“Delayed Draw Term Loan Extension” shall mean the making of a Delayed Draw Term Loan.

“Delayed Draw Term Loan Facility” shall mean the Delayed Draw Term Loan Commitments and the Delayed Draw Term Loans.

“Delayed Draw Term Loan Lender” shall mean a Lender with a Delayed Draw Term Loan Commitment or an outstanding Delayed Draw Term Loan.

“Delayed Draw Term Loan Extension” shall mean the making of a Delayed Draw Term Loan.

“Delayed Draw Term Loans” shall mean the delayed draw term loans made by the Delayed Draw Term Loan Lenders to the Borrower pursuant to Section 2.01(c). From and after the date of any borrowing of any Delayed Draw Term Loans, each Delayed Draw Term Loan shall be deemed a Term Loan hereunder and part of the same Class as the Initial Term Loans for all purposes hereunder.

 

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“Delayed Draw Term Loan Repayment Date” shall have the meaning assigned to such term in Section 2.09(b).

“Delayed Draw Ticking Fee” shall have the meaning assigned to such term in Section 2.05(b).

“Discharge of the Guaranteed Obligations” shall mean and shall have occurred when (i) all Guaranteed Obligations shall have been paid in full in cash and all other obligations under the Loan Documents shall have been performed (other than (a) those expressly stated to survive termination, (b) contingent obligations as to which no claim has been asserted and (c) obligations and liabilities under Specified Hedging Agreements and Bank Product Agreements as to which arrangements satisfactory to the applicable counterparties have been made) and (ii) all Commitments shall have terminated or expired.

“Disposition” shall mean, with respect to any Property, any conveyance, sale, lease, sublease, assignment, transfer or other disposition (including by way of merger or consolidation and including any Sale and Leaseback Transaction) of such Property, and the terms “Dispose”, “Disposed” and “Disposing” shall have meanings correlative thereto.

“Disqualified Institution” shall mean any Person (or its subsidiaries and affiliates) who is an operating competitor of the Borrower or its subsidiaries and that is separately identified by the Borrower to the Administrative Agent by name in writing prior to the Closing Date (which list of operating competitors may be supplemented by the Borrower after the Closing Date by means of a written notice to the Administrative Agent; provided that (i) such supplementation shall not apply retroactively to disqualify any persons that have previously acquired an assignment or participation in the Loans or commitments hereunder and (ii) such list and any supplement thereto may be posted by the Administrative Agent for the Lenders).

“Disqualified Stock” shall mean any equity interest that, by its terms (or by the terms of any security or instrument into which it is convertible or for which it is exchangeable or exercisable), or upon the happening of any event, (a) matures (excluding any maturity as the result of an optional redemption by the issuer thereof) or is mandatorily redeemable (other than for shares of equity that are not Disqualified Stock), pursuant to a sinking fund obligation or otherwise, or is redeemable (other than for shares of equity that are not Disqualified Stock) at the option of the holder thereof, in whole or in part, or requires the payment of any cash dividend or any other scheduled payment (other than in shares of equity that are not Disqualified Stock) constituting a return of capital, in each case, on a date that is prior to 91 days after the Final Maturity Date, or (b) is convertible into or exchangeable or exercisable for (i) debt securities or other indebtedness or (ii) any equity interest referred to in clause (a) above or (c) contains any repurchase or payment obligation (other than payments or dividends solely in shares of equity that are not Disqualified Stock); provided, however, that any equity interests that would not constitute Disqualified Stock but for provisions thereof giving holders thereof (or the holders of any security into or for which such equity interests is convertible, exchangeable or exercisable) the right to require the issuer thereof to redeem such equity interests upon the occurrence of a Change in Control shall not constitute Disqualified Stock if such equity interests provide that the issuer thereof will not redeem any such equity interests pursuant to such provisions prior to the repayment in full of the Facilities (or any refinancing thereof).

“Dividend” shall mean, with respect to any person, that such person has declared or paid a dividend or returned any equity capital to the holders of its Equity Interests or authorized or made any other distribution, payment or delivery of Property (other than common equity of such person) or cash to the holders of its Equity Interests as such, or redeemed, retired, purchased or otherwise acquired, directly or indirectly, for consideration any of its Equity Interests outstanding (or any options or warrants issued by such person with respect to its Equity Interests), or set aside or otherwise reserved, directly or

 

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indirectly, any funds for any of the foregoing purposes, or shall have permitted any of its Subsidiaries to purchase or otherwise acquire for consideration any of the outstanding Equity Interests of such person (or any options or warrants issued by such person with respect to its Equity Interests). Without limiting the foregoing, “Dividends” with respect to any person shall also include all payments made or required to be made by such person with respect to any stock appreciation rights, plans, equity incentive or achievement plans or any similar plans or setting aside of or otherwise reserving any funds for the foregoing purposes.

“Dollar Equivalent” shall mean, as to any amount denominated in a Judgment Currency as of any date of determination, the amount of Dollars that would be required to purchase the amount of such Judgment Currency based upon the spot selling rate at which the Administrative Agent (or another financial institution designated by the Administrative Agent from time to time) offers to sell such Judgment Currency for Dollars in the London foreign exchange market at approximately 11:00 a.m. London time on such date for delivery two Business Days later.

“Dollars” or “$” shall mean lawful money of the United States.

“Domestic Subsidiary” shall mean any Subsidiary organized under the laws of any jurisdiction within the United States or any state thereof, other than a CFC Holdco or a Subsidiary of a CFC or a CFC Holdco.

“Earn-Outs” shall mean, with respect to a Permitted Acquisition or any other acquisition of any assets or Property by any Company, that portion of the purchase consideration therefor and that portion of all other payments and liabilities (whether payable in cash or by exchange of Equity Interests or of any Property or otherwise), directly or indirectly, payable by any Company in exchange for, or as part of, or in connection with, such Permitted Acquisition or such other acquisition, as the case may be, that is deferred for payment to a future time after the consummation of such Permitted Acquisition or such other acquisition, as the case may be, whether or not any such future payment is subject to the occurrence of any contingency, and includes any and all payments representing the purchase price and any assumptions of Indebtedness, “earn-outs” and other agreements to make any payment the amount of which is, or the terms of payment of which are, in any respect subject to or contingent upon the revenues, income, cash flow or profits (or the like) of any person or business.

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

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

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

“Employee Benefit Plan” shall mean any Pension Plan and any other “employee benefit plan” as defined in Section 3(3) of ERISA (other than a Multiemployer Plan and other than a Foreign Plan) which is or was maintained, contributed to or required to be contributed to by any Company.

 

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“Engagement Letter” shall mean the Engagement Letter, dated as of February 10, 2022 between the Borrower and Jefferies LLC (as amended, restated, amended and restated, supplemented or modified from time to time in accordance with its terms).

“Environment” shall mean any surface or subsurface physical medium or natural resource, including air, land, soil, surface waters, ground waters, sediments (including stream and river sediments), biota and any indoor surface area, surface or physical medium, and any ecological systems and living organisms supported by these media.

“Environmental Claim” shall mean any claim, notice, demand, Order, action, suit, investigation, proceeding, or other communication or legal proceeding alleging or asserting liability or obligations under Environmental Law, including liability or obligation for investigation, enforcement proceedings, governmental response, assessment, remediation, removal, cleanup, Response, corrective action, monitoring, post-remedial or post-closure studies, investigations, operations and maintenance, injury, damage, destruction or loss to natural resources, personal injury, medical monitoring, wrongful death, property damage, fines, penalties or other costs resulting from, related to or arising out of (a) the presence, Release or threatened Release of Hazardous Materials in, on, into, through or from the Environment at any location or (b) any violation of or non-compliance with Environmental Law, and shall include any claim, notice, demand, Order, action, suit or proceeding seeking damages (including the costs of remediation), contribution, indemnification, cost recovery, penalties, fines, indemnities, compensation or injunctive relief resulting from, related to or arising out of the presence, Release or threatened Release of Hazardous Material or alleged injury or threat of injury to human health and safety (as it relates to exposure to Hazardous Materials) or the Environment.

“Environmental Law” shall mean any and all applicable Legal Requirements relating to or imposing liability or standards of conduct concerning human health and safety (as it relates to exposure to Hazardous Materials) or pollution, preservation, or protection of the Environment, the Release, threatened Release, or the generation, manufacture, use, labeling, treatment, storage, handling, or transportation of Hazardous Material, natural resources or natural resource damages, or occupational safety or health (as it relates to exposure to Hazardous Materials).

“Environmental Permit” shall mean any permit, license, approval, consent, notifications, exemptions, registration or other authorization required by or from a Governmental Authority under any Environmental Law.

“Equity Interest” shall mean, with respect to any person, any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents, including membership interests (however designated, whether voting or nonvoting), of equity of such person, including, if such person is a partnership, partnership interests (whether general or limited), or if such person is a limited liability company, membership interests, and any other interest or participation that confers on a person the right to receive a share of the profits and losses of, or distributions of Property of, such partnership, whether outstanding on the Closing Date or issued on or after the Closing Date, but excluding Convertible Indebtedness.

“Equity Issuance” shall mean, without duplication, (a) any issuance or sale by the Borrower of any Equity Interests in the Borrower (including any Equity Interests issued upon exercise of any warrant or option or equity-based derivative) or any warrants or options or equity-based derivatives to purchase Equity Interests of the Borrower or (b) any contribution to the capital of the Borrower.

 

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“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder by any Governmental Authority, as from time to time in effect.

“ERISA Affiliate” shall mean, with respect to any person, any trade or business (whether or not incorporated) that, together with such person, is treated as a single employer under Section 414(b) or (c) of the Code or Section 4001 of ERISA, or solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code.

“ERISA Event” shall mean (i) a “reportable event” within the meaning of Section 4043(c) of ERISA (other than any such event with respect to which the notice requirement has been waived) with respect to any Pension Plan; (ii) the failure of any Company or any ERISA Affiliate to meet the minimum funding standard of Section 412 or 430 of the Code or Section 302 or 303 of ERISA with respect to any Pension Plan (whether or not waived in accordance with Section 412(c) of the Code) or the failure of any Company or any ERISA Affiliate to make by its due date a required installment under Section 430(j) of the Code with respect to any Pension Plan or the failure of any Company or any ERISA Affiliate to make any required contribution to a Multiemployer Plan, or the filing of any request for or receipt of a minimum funding waiver under Section 412 of the Code with respect to any Pension Plan; (iii) a determination that any Pension Plan is, or is expected to be, in “at risk” status (as defined in Section 430 of the Code or Section 303 of ERISA); (iv) the provision by the administrator of any Pension Plan pursuant to Section 4041(a)(2) of ERISA of a notice of intent to terminate such Pension Plan in a distress termination described in Section 4041(c) of ERISA, the termination of any Pension Plan under Section 4041(c) of ERISA or the provision by the administrator of any Pension Plan pursuant to Section 4041(a)(2) of ERISA of a notice of intent to terminate such Pension Plan, if such termination would require material additional contributions in order to be considered a standard termination within the meaning of Section 4041(b) of ERISA; (v) a determination that any Multiemployer Plan is, or is expected to be, in “critical” or “endangered” status under Section 432 of the Code or Section 305 of ERISA; (vi) the withdrawal by any Company or any ERISA Affiliate from any Pension Plan with two or more contributing sponsors or the termination of any such Pension Plan resulting in liability of any Company or any ERISA Affiliate pursuant to Section 4063 or 4064 of ERISA; (vii) the institution by the PBGC of proceedings to terminate any Pension Plan, or the occurrence of any event or condition which could reasonably be expected to constitute grounds under ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan; (viii) the imposition of liability on any Company or any ERISA Affiliate pursuant to Section 4062(e) or 4069 of ERISA or by reason of the application of Section 4212(c) of ERISA; (ix) the complete or partial withdrawal of any Company or any ERISA Affiliate from any Multiemployer Plan (within the meaning of Sections 4203 and 4205 of ERISA) if there is any potential liability therefor, or the receipt by any Company or any ERISA Affiliate of notice from any Multiemployer Plan that it is in reorganization or insolvency pursuant to Section 4245 of ERISA, or that it intends to terminate or has terminated under Section 4041A or 4042 of ERISA; (x) the failure of any Pension Plan (or any other Employee Benefit Plan intended to be qualified under Section 401(a) of the Code) to qualify under Section 401(a) of the Code, or the failure of any trust forming part of any Pension Plan to qualify for exemption from taxation under Section 501(a) of the Code; (xi) the imposition of a Lien pursuant to Section 430(k) of the Code or pursuant to ERISA or a violation of Section 436 of the Code with respect to any Pension Plan; or (xii) a Foreign Plan Event.

“Erroneous Payment” shall have the meaning assigned to it in Section 10.14(a).

“Erroneous Payment Deficiency Assignment” shall have the meaning assigned to it in Section 10.14(d).

 

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“Erroneous Payment Impacted Class” shall have the meaning assigned to it in Section 10.14(d).

“Erroneous Payment Return Deficiency” shall have the meaning assigned to it in Section 10.14(d).

“Erroneous Payment Subrogation Rights” shall have the meaning assigned to it in Section 10.14(d).

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

“Event of Default” shall have the meaning assigned to such term in Section 8.01.

“Excess Cash” shall mean, the amount by which the Consolidated Cash Balance exceeds $5,000,000.

“Excess Cash Flow” shall mean, for any Excess Cash Flow Period:

(a) the sum, without duplication, of

(i) Consolidated EBITDA for such Excess Cash Flow Period;

(ii) cash items of income actually received by the Borrower, any of its Subsidiaries and the Physician Owned Practices during such Excess Cash Flow Period not included (or deducted) in calculating Consolidated EBITDA; and

(iii) the decrease, if any, in Net Working Capital of the Borrower, its Subsidiaries and the Physician-Owned Practices from the start to the end of such Excess Cash Flow Period; minus

(b) the sum, in each case without duplication, of:

(i) the aggregate amount of cash Consolidated Tax Expense paid or payable by the Borrower, its Subsidiaries and the Physician-Owned Practices with respect to such Excess Cash Flow Period and, if payable, for which, to the extent required under GAAP, reserves have been established;

(ii) the aggregate amount of Debt Service for such Excess Cash Flow Period;

(iii) the aggregate amount of permanent repayments and prepayments of Indebtedness (including the Voluntary Loan Prepayment Amount made during such Excess Cash Flow Period that is applied by Borrower to Term Loans that are due and payable within the same fiscal year that such amortization payment is due pursuant to Section 2.09, as applicable, but excluding, in each case, the Voluntary Loan Prepayment Amount for such Excess Cash Flow Period that is applied by Borrower to Term Loans that are due and payable during such Excess Cash Flow Period in any fiscal quarter following the date such Voluntary Loan Prepayment Amount is made) made by the Borrower, its Subsidiaries and the Physician-Owned Practices during such Excess Cash Flow Period but only to the extent that (x) such repayments and prepayments by their terms cannot be reborrowed or redrawn, (y) such repayments and prepayments do not occur in connection with a refinancing of all or a portion of such Indebtedness, and (z) such repayments and prepayments are funded with Internally Generated Funds (other than to the extent made using the Cumulative Amount);

 

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(iv) the aggregate amount of Capital Expenditures actually paid or committed to be paid by the Borrower, its Subsidiaries and the Physician-Owned Practices in cash during such Excess Cash Flow Period and anticipated to be made prior to the date the mandatory prepayment is required by Section 2.10(e) to the extent funded from Internally Generated Funds (other than to the extent made using the Cumulative Amount); provided that any such amounts not actually used shall be added to the calculation of Excess Cash Flow in the subsequent Excess Cash Flow Period;

(v) the aggregate amount of Acquisition Consideration with respect to Permitted Acquisitions, other Investments permitted hereunder, other than Investments of a type permitted under Section 6.04(b) (other than clause (iv) therein) or (f) in each case, paid in cash during such Excess Cash Flow Period (or committed to be paid in cash during such Excess Cash Flow Period and anticipated to be made prior to the date the mandatory prepayment is required by Section 2.10(e); provided that any such amounts not actually used shall be added to the calculation of Excess Cash Flow in the subsequent Excess Cash Flow Period) to the extent funded from Internally Generated Funds (other than to the extent made using the Cumulative Amount);

(vi) the aggregate amount of expenditures, other than Capital Expenditures, made in cash during such Excess Cash Flow Period and capitalized in accordance with GAAP during such Excess Cash Flow Period to the extent such expenditures are funded from Internally Generated Funds (other than to the extent made using the Cumulative Amount);

(vii) the aggregate amount of cash items of expense (including losses) during such Excess Cash Flow Period not deducted in calculating Consolidated EBITDA;

(viii) the aggregate amount of any Dividends (other than Dividends of a type permitted under Section 6.07(a)) paid during such Excess Cash Flow Period;

(ix) the aggregate amount of any cash paid to repurchase Term Loans to the extent funded from Internally Generated Funds;

(x) the aggregate amount of cash items included in the calculation of Consolidated EBITDA for such period to the extent paid in cash by the Borrower and its Subsidiaries during such Excess Cash Flow Period;

(xi) the amount of any severance costs and expenses, restructuring expenses, charges, accruals and reserves, cost synergies and operating expense reductions, in each case, to the extent constituting adjustments included in the calculation of Consolidated EBITDA for such Excess Cash Flow Period;

(xii) the increase, if any, in Net Working Capital of the Borrower, its Subsidiaries and the Physician-Owned Practices from the start to the end of such Excess Cash Flow Period;

(xiii) the amount of any non-cash gain included in Consolidated EBITDA for such Excess Cash Flow Period recognized as a result of any Dispositions; and

 

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(xiv) cash payments by the Borrower, its Subsidiaries and the Physician-Owned Practices during such Excess Cash Flow Period in respect of long-term liabilities of the Borrower and its Subsidiaries (other than obligations described in clause (v) above or Indebtedness) to the extent such payments are not expensed during any Excess Cash Flow Period or are not deducted in calculating Consolidated EBITDA;

provided, that, for purposes of calculating Excess Cash Flow for any Excess Cash Flow Period, for each Permitted Acquisition or other Investment consummated during such Excess Cash Flow Period, the Consolidated EBITDA of a target of any Permitted Acquisition or other Investment shall be included in such calculation only from and after the date of the consummation of such Permitted Acquisition or Investment, as applicable.

“Excess Cash Flow Period” shall mean, commencing with the fiscal year ending on December 31, 2023, each fiscal year of the Borrower.

“Excess Net Cash Proceeds” shall have the meaning assigned to such term in Section 2.10(c)(i).

“Excess Payment” shall have the meaning assigned to such term in Section 7.10(a).

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

“Excluded Assets” shall have the meaning assigned to such term in the Security Agreement.

“Excluded Cash” shall mean, without duplication, (a) any restricted cash or cash equivalents to pay royalty obligations, working interest obligations, suspense payments, severance taxes, payroll, payroll taxes, other taxes, employee wage and benefit payments and trust and fiduciary obligations or other obligations of the Physician-Owned Practices to third parties and for which the Physician-Owned Practices have issued checks or has initiated wires or ACH transfers (or, in the Borrower’s discretion, will issue checks or initiate wires or ACH transfers within five (5) Business Days) in order to pay, (b) any cash or cash equivalents constituting purchase price deposits held in escrow by an unaffiliated third party pursuant to a binding and enforceable purchase and sale agreement with an unaffiliated third party containing customary provisions regarding the payment and refunding of such deposits and (c) any cash or cash equivalents that is reasonably required by applicable Legal Requirements to be held by the Physician-Owned Practices.

“Excluded Subsidiary” shall mean (i) any Subsidiary that is prohibited by applicable law at the time such Subsidiary becomes a Subsidiary from becoming a Guarantor, (ii) (A) any Subsidiary that is a CFC, to the extent making such CFC a Guarantor would result in material adverse tax consequences to the Borrower (as mutually determined by the Administrative Agent and the Borrower) and any and all direct or indirect subsidiaries of such excluded CFC or CFC Holding Company (as defined below) and (B) any Subsidiary that has no material assets other than equity (or equity and indebtedness) of excluded CFCs described in the foregoing clause (ii)(A) (a “CFC Holding Company”) and/or excluded CFC Holding Companies, (iii) any Immaterial Subsidiary and (iv) any Subsidiary acquired pursuant to a Permitted Acquisition or other similar Investment permitted by this Agreement that is an obligor in respect of secured indebtedness that is permitted pursuant to this Agreement and not incurred in contemplation of such Permitted Acquisition or other similar investment and any Subsidiary thereof that Guarantees such secured Indebtedness, in each case to the extent (and for so long as) such secured indebtedness prohibits such subsidiary from becoming a Guarantor. For the avoidance of doubt, the Borrower shall at no time constitute an Excluded Subsidiary. No Excluded Subsidiary may own any Intellectual Property that is material to the business of the Borrower and its Subsidiaries taken as a whole.

 

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“Excluded Swap Obligation” shall mean any obligation of any Guarantor to pay or perform under any agreement, contract, or transaction that constitutes a “swap” within the meaning of Section 1a(47) of the Commodity Exchange Act (a “Swap”), if, and to the extent that, all or a portion of the guarantee by such Guarantor of, or the grant by such Guarantor or the Borrower of a security interest to secure, such Swap (or any guarantee thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation, or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of such Guarantor’s failure for any reason to constitute an “eligible contract participant” as defined in the Commodity Exchange Act and the regulations thereunder.

“Excluded Taxes” shall mean, with respect to the Administrative Agent or any Lender, as applicable (each, a “Recipient”), of any payment to be made by or on account of any obligation of any Loan Party hereunder, or under any Loan Document, (a) Taxes imposed on (or measured by) its net income (however denominated), franchise Taxes, and branch profits Taxes, in each case (i) imposed by the jurisdiction under the laws of which such Recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located or (ii) that are Other Connection Taxes, (b) in the case of a Lender (other than an assignee pursuant to a request by Borrower under Section 2.16), any U.S. federal withholding Tax that is imposed on amounts payable to such Recipient at the time (i) such Recipient becomes a party to this Agreement (or designates a new lending office) or (ii) such Lender changes its lending office, in each case except to the extent that such Recipient (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts with respect to such withholding Tax pursuant to Section 2.15(a), (c) Taxes attributable to such Recipient’s failure to comply with Section 2.15(e), and (d) any United States federal withholding Taxes imposed under FATCA.

“Executive Order” shall have the meaning assigned to such term in Section 3.20(a).

“Existing Lien” shall have the meaning assigned to such term in Section 6.02(b).

“Expenses and Synergies Cap” shall have the meaning assigned to such term in clause (n) of the definition of “Consolidated EBITDA”.

“Extended Term Loans” shall have the meaning specified in Section 2.20(a).

“Extending Lender” shall have the meaning specified in Section 2.20(a).

“Extension” shall have the meaning specified in Section 2.20(a).

“Extension Offer” shall have the meaning specified in Section 2.20(a).

“Facilities” shall mean the Term Loan Facility and the Revolving Credit Facility.

“Fair Market Value” shall mean, with respect to any asset (including any Equity Interests of any person), the price at which a willing buyer (that is not an Affiliate of the seller), and a willing seller who does not have to sell, would agree to purchase and sell such asset, as determined in good faith by the Board of Directors of the Borrower or, pursuant to a specific delegation of authority by such Board of Directors or a designated senior executive officer, of the Borrower (or the Subsidiary of the Borrower selling such asset).

“FATCA” shall mean sections 1471 through 1474 of the Code, as of the Closing Date (or any amended or successor version to the extent such version is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof, and any intergovernmental agreements or agreements implementing the foregoing entered into pursuant to Section 1471(b) of the Code.

 

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“Federal Funds Effective Rate” shall mean, for any day, the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System of the United States arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, if necessary to the next 1/100th of 1%) of the quotations for the day for such transactions received by the Administrative Agent from three federal funds brokers of recognized standing selected by it.

“Fee Letter” shall mean that certain Fee Letter, dated as of May 10, 2022, by and between the Borrower and the Administrative Agent.

“Fees” shall mean the Commitment Fees, the Administrative Agent Fees and the other fees referred to in Section 2.05(d), Section 2.05(f), Section 2.05(g), Section 2.05(h) and Section 2.05(i).

“Final Maturity Date” shall mean the later of (i) the Revolving Maturity Date and (ii) the Term Loan Maturity Date.

“Financial Officer” of any person shall mean any of the president, chief operating officer, chief financial officer, principal accounting officer, treasurer, or controller of such person.

“FIRREA” shall mean the Financial Institutions Reform, Recovery and Enforcement Act of 1989, as amended.

“First Lien Leverage Ratio” shall mean, at any date of determination, the ratio of (a) the Consolidated First Lien Indebtedness outstanding on such date minus Unrestricted Cash and Cash Equivalents of the Borrower, its Subsidiaries that are Domestic Subsidiaries and the Physician-Owned Practices that are (x) held in pledged accounts subject to a Control Agreement as of the last day of such fiscal quarter or (y) held in an account governed by a Management Services Agreement, in an aggregate amount not to exceed $100,000,000 to (b) Consolidated EBITDA for the Test Period then most recently ended.

“Flood Certificate” shall mean a “Standard Flood Hazard Determination Form” of the Federal Emergency Management Agency and any successor Governmental Authority performing a similar function.

“Floor” shall mean 1.00% per annum.

“Foreign Lender” shall mean any Lender that is not a “United States person” within the meaning of Section 7701(a)(30) of the Code.

“Foreign Plan” shall mean any employee pension benefit plan, fund, program, policy, arrangement, or agreement, or other similar program established, maintained or contributed to by any Company on behalf of (or for the benefit of) its employees, officers or directors employed, or otherwise engaged, outside the United States.

 

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“Foreign Plan Event” shall mean, with respect to any Foreign Plan, (i) the existence of unfunded liabilities in excess of the amount permitted under any applicable Legal Requirement, or in excess of the amount that would be permitted absent a waiver from a Governmental Authority, (ii) the failure to make the required contributions or payments, under any applicable Legal Requirement, on or before the due date for such contributions or payments, (iii) the receipt of a notice from a Governmental Authority relating to the intention to terminate such Foreign Plan or to appoint a trustee or similar official to administer such Foreign Plan, or alleging the insolvency of such Foreign Plan, or (iv) the incurrence of any liability by any Company under applicable Legal Requirements on account of the complete or partial termination of such Foreign Plan or the complete or partial withdrawal of any participating employer therein.

“Foreign Subsidiary” shall mean a Subsidiary that is not a Domestic Subsidiary.

“Fronting Exposure” means, at any time there is a Defaulting Lender, with respect to the Issuing Bank, such Defaulting Lender’s Pro Rata Percentage of the outstanding Letter of Credit Obligations with respect to Letters of Credit issued by the Issuing Bank other than Letter of Credit Obligations as to which such Defaulting Lender’s participation obligation has been reallocated to other Lenders or Cash Collateralized in accordance with the terms hereof.

“Fund” shall mean any Person (other than a natural Person), fund, investment vehicle or managed account that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans, bonds, and similar extensions of credit in the ordinary course of its business.

“GAAP” shall mean generally accepted accounting principles in the United States applied on a consistent basis.

“Governmental Act” shall mean any act or omission, whether rightful or wrongful, of any present or future de jure or de facto government or Governmental Authority.

“Governmental Authority” shall mean any federal, state, local or foreign (whether civil, administrative, criminal, military or otherwise) court, central bank or governmental agency, tribunal, authority, instrumentality or regulatory body or any subdivision thereof or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).

“Granting Lender” shall have the meaning assigned to such term in Section 11.04(i).

“Guaranteed Obligations” shall have the meaning assigned to such term in Section 7.01.

“Guarantees” shall mean the guarantees issued pursuant to Article VII by each of the Guarantors.

“Guarantors” shall mean the Subsidiary Guarantors and, with respect to Hedging Obligations and Bank Product Obligations, the Borrower.

“Hazardous Materials” shall mean any substances, chemicals, or wastes that are listed, regulated, or otherwise defined as hazardous, toxic, radioactive, a pollutant or a contaminant (or words of similar regulatory intent or meaning), under any Environmental Laws, or which could give rise to liability under any Environmental Law, including but not limited to, polychlorinated biphenyls (“PCBs”) or any substance or compound containing PCBs, asbestos or any asbestos-containing materials in any form or condition, lead-based paint, pesticides, radon or any other radioactive materials including any source, special nuclear or by-product material, petroleum, petroleum by-products, crude oil or any fraction thereof, toxic mold, or per- or polyfluoroalkyl substances (PFAS).

 

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“Healthcare Laws” shall mean all Legal Requirements applicable to the Companies and each Physician-Owed Practice, as enacted or in effect as of the date hereof, related to: (a) the licensure, certification, qualification or authority to transact business in connection with the provision of, payment for, or arrangement of, health care services, health benefits or health insurance (“Healthcare Permits”)including Legal Requirements that regulate persons bearing the financial risk for the provision or arrangement of health care services; (b) the administration of health care claims or benefits or processing or payment for health care services, treatment, drugs or supplies furnished by healthcare providers, including third-party administrators, utilization review agents, and persons performing quality assurance, credentialing or coordination of benefits; (c) the Medicare and Medicaid programs, including the Medicare Advantage and Medicare Part D prescription drug programs, and other health care programs administered by a Governmental Authority; (d) the solicitation or acceptance of improper incentives involving persons operating in the health care industry, including Legal Requirements prohibiting or regulating fraud, waste and abuse, patient referrals or provider incentives generally, including the following statutes: the Federal Anti-Kickback Statute (42 U.S.C. § 1320a-7b), the Stark Law (42 U.S.C. § 1395nn), the Federal Civil False Claims Act (31 U.S.C. §§ 3729, et seq.), the Federal Civil Monetary Penalties Law (42 U.S.C. § 1320a-7a), the Federal Program Fraud Civil Remedies Act (31 U.S.C. § 3801 et seq.), the Federal Health Care Fraud Law (18 U.S.C. § 1347), the criminal False Claims Act 42 (U.S.C. 1320a-7b(a)); any criminal laws relating to health care fraud and abuse, including but not limited to 18 U.S.C. Sections 286, 287, 1035 and 1349 and the health care fraud criminal provisions under HIPAA (as defined below) and the Exclusion Laws (42 U.S.C. § 1320a-7); (e) the privacy, security, transmission, breach notification, storage or other protection of patient information, including but not limited to the Health Insurance Portability and Accountability Act of 1996 (Pub. L. No. 104-191), as amended by the Health Information Technology for Economic and Clinical Health Act (Pub. L. No. 111-5) (“HIPAA”); (f) corporate practice of medicine, fee-splitting, provider participation in government healthcare programs, provider networks, including any willing provider laws, referrals, billing and submission of false or fraudulent claims, claims processing, risk adjustment, including those related to risk categorization, scoring and data submission, quality, safety, medical necessity, data privacy and security, patient confidentiality and informed consent, the hiring of employees or acquisition of services or supplies from persons excluded from participation in government health care programs, standards of care, quality assurance, risk management, mandated reporting of incidents, occurrences, diseases and events and the advertising or marketing of healthcare services; and (g) other aspects of the Companies’ or Physician-Owed Practices’ respective healthcare operations.

“Healthcare Permits” shall have the meaning set forth in the definition of “Healthcare Laws.”

“Hedging Agreement” shall mean (a) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, currency swap transactions, cross-currency rate swap transactions, currency options, cap transactions, floor transactions, collar transactions, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options or warrants to enter into any of the foregoing), whether or not any such transaction is governed by, or otherwise subject to, any master agreement or any netting agreement, and (b) any and all transactions or arrangements of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement (or similar documentation) published from time to time by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement (any such agreement or documentation, together with any related schedules, a “Master Agreement”), including any such obligations or liabilities under any Master Agreement.

“Hedging Obligations” shall mean obligations under or with respect to Hedging Agreements.

 

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“HHS” means the United States Department of Health and Human Services.

“HIPAA” shall have the meaning set forth in the definition of “Healthcare Laws.”

“Historical Financial Statements” shall mean (a) the audited consolidated balance sheet of the Borrower and certain of its Affiliates (as specified therein) as at the end of the fiscal years ended December 31, 2021, 2020 and 2019, and (b) the unaudited consolidated balance sheet of the Borrower and certain of its Affiliates (as specified therein) as at the end of the fiscal quarter ended March 31, 2022, and, in each case, the related consolidated statements of income or operations, changes in stockholders’ equity and cash flows for such fiscal periods, including the notes thereto.

“Immaterial Subsidiary” shall mean, as of any date, any Subsidiary (x) whose total assets, in the aggregate with the total assets of all other Subsidiaries constituting Immaterial Subsidiaries, in each case, as measured as of the last day of the fiscal quarter of the Borrower most recently ended for which financial statements have been delivered, equal or are less than 5.00% of Consolidated Total Assets, (y) whose total revenue in the aggregate with the total revenue of all other Subsidiaries constituting Immaterial Subsidiaries, in each case, as measured as of the last day of the fiscal quarter of the Borrower most recently ended for which financial statements have been delivered, equal or are less than 5.00% of consolidated total revenues of the Borrower and its Subsidiaries and (z) whose Consolidated EBITDA, in the aggregate with Consolidated EBITDA of all other Subsidiaries constituting Immaterial Subsidiaries, in each case, as measured as of the last day of the fiscal quarter of the Borrower most recently ended for which financial statements have been delivered, equal or are less than 5.00% of Consolidated EBITDA; provided that a Subsidiary will not be considered to be an Immaterial Subsidiary if it directly or indirectly, guarantees or otherwise provides direct credit support for any Indebtedness of any Loan Party, or if it owns any Intellectual Property that is material to the business of the Borrower or any other Subsidiary.

“Increased Amount Date” shall have the meaning assigned to such term in Section 2.19(a).

“Increasing Lenders” shall have the meaning assigned to such term in Section 2.19(b).

“Incremental Excess Yield” shall have the meaning assigned to such term in Section 2.19(a).

“Incremental Facility” shall have the meaning assigned to such term in Section 2.19(a).

“Incremental Loan Amendment” shall have the meaning assigned to such term in Section 2.19(c).

“Incremental Loan Increase Request” shall have the meaning assigned to such term in Section 2.19(b).

“Incremental Loan Response Deadline” means a response by the then existing Lenders to an Incremental Loan Increase Request delivered on or prior to 8:00 p.m. New York City time on the fifth (5th) Business Day following such Lenders’ receipt of an Incremental Loan Increase Request.

“Indebtedness” of any person shall mean, without duplication, (a) all obligations of such person for borrowed money or advances (including unreimbursed amounts outstanding under letters of credit and any Convertible Indebtedness); (b) all obligations of such person evidenced by loan agreements, bonds, debentures, notes or similar instruments; (c) all obligations of such person under conditional sale or other title retention agreements relating to Property purchased by such person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or

 

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sale of such Property); (d) all obligations of such person issued or assumed as part of the deferred purchase price of Property or services (excluding (w) trade accounts payable and accrued obligations incurred in the ordinary course of business on normal trade terms, (x) deferred rent obligations, (y) customary obligations under employment arrangements and (z) purchase price adjustments or Earn-Outs that have not yet become liabilities on the balance sheet of such person in accordance with GAAP); (e) all Indebtedness of others secured by any Lien on Property owned or acquired by such person, whether or not the obligations secured thereby have been assumed, but limited to the lower of (i) the Fair Market Value of such Property and (ii) the amount of the Indebtedness secured; (f) all Capital Lease Obligations, Purchase Money Obligations and Off-Balance Sheet Obligations of such person; (g) the amount of all obligations of such person with respect to the redemption, repayment or other repurchase of Disqualified Stock; (h) all Hedging Obligations to the extent required to be reflected on a balance sheet of such person; (i) all obligations of such person for the reimbursement of any obligor in respect of letters of credit (but only to the extent of drawn but unreimbursed amounts thereunder), letters of guaranty, bankers’ acceptances and similar credit transactions; and (j) all Contingent Obligations of such person in respect of Indebtedness or obligations of others of the kinds referred to in clauses (a) through (i) above. The Indebtedness of any person shall include the Indebtedness of any other entity (including any partnership in which such person is a general partner) to the extent such person is liable therefor as a result of such person’s ownership interest in or other relationship with such entity, except (other than in the case of general partner liability) to the extent that terms of such Indebtedness expressly provide that such person is not liable therefor; provided that Indebtedness shall not include accrued expenses, deferred revenue, deferred rent, deferred taxes and deferred compensation and customary obligations under employment arrangements.

“Indemnified Taxes” shall mean (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of any Loan Party under any Loan Document and (b) to the extent not otherwise described in (a), Other Taxes.

“Indemnitee” shall have the meaning assigned to such term in Section 11.03(b).

“Information” shall have the meaning assigned to such term in Section 11.12.

“Initial Term Lender” shall mean any Lender with an Initial Term Loan Commitment or holding Initial Term Loans.

“Initial Term Loan Commitment” means, with respect to each Initial Term Lender, the commitment of such Initial Term Lender to make Initial Term Loans. The aggregate amount of the Initial Term Loan Commitments on the Closing Date is $190,000,000.

“Initial Term Loans” means the term loans made by the Initial Term Lenders to the Borrower pursuant to Section 2.01(a).

“Initial Term Loan Repayment Date” shall have the meaning assigned to such term in Section 2.09(a).

“Insolvency Law” shall mean the Bankruptcy Code of the United States, and all other insolvency, bankruptcy, receivership, liquidation, conservatorship, assignment for the benefit of creditors, moratorium, rearrangement, reorganization, or similar Legal Requirements of the United States or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.

 

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“Insurance Policies” shall mean the insurance policies and coverages required to be maintained by each Loan Party that is an owner or lessee of Mortgaged Property with respect to the applicable Mortgaged Property pursuant to Section 5.04 and all renewals and extensions thereof.

“Insurance Requirements” shall mean, collectively, all material provisions of the Insurance Policies, all material requirements of the issuer of any of the Insurance Policies and all material Orders, rules, regulations and any other requirements of the National Board of Fire Underwriters (or any other body exercising similar functions) binding upon any Loan Party that is an owner of Mortgaged Property and applicable to the Mortgaged Property or any use or condition thereof.

“Issuance Notice” shall mean an Issuance Notice substantially in the form of Exhibit I.

“Issuing Bank” shall mean (a) any Lender that becomes an Issuing Lender pursuant to Section 11.02(e), in its capacity as an issuer of standby Letters of Credit hereunder (it being understood that no Issuing Bank shall not be obligated to issue any trade or commercial letters of credit) and/or (b) any other Lender holding Revolving Commitments who is reasonably acceptable to the Borrower and agree to act as an Issuing Bank hereunder, in each case, together with their permitted successors and assigns in such capacity.

“Intellectual Property” shall have the meaning assigned to such term in Section 3.06(a).

“Interest Election Request” shall mean a request by Borrower to convert or continue a Revolving Borrowing, Term Borrowing in accordance with Section 2.08(b), substantially in the form of Exhibit D.

“Interest Payment Date” shall mean (a) with respect to any ABR Loan, the last Business Day of each fiscal quarter to occur during any period in which such Loan is outstanding, (b) with respect to any Benchmark Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Benchmark Loan with an Interest Period of more than three months’ duration, each day that would have been an Interest Payment Date had successive Interest Periods of three months’ duration been applicable to such Borrowing, (c) with respect to any Revolving Loan, the Revolving Maturity Date or such earlier date on which the Revolving Commitments are terminated and (d) with respect to any Term Loan, the applicable Term Loan Maturity Date.

“Interest Period” means, with respect to any Benchmark Rate Loan, the period commencing on the Business Day such Loan is disbursed or continued, or commencing on the date on which an ABR Loan is converted to the Benchmark Rate Loan, and in each case ending on the date one (1), three (3) or six (6) months thereafter, as selected by the Borrower in its Borrowing Request or Interest Election Request; provided that:

(a) if any Interest Period pertaining to a Benchmark Rate Loan would otherwise end on a day which is not a Business Day, that Interest Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the immediately preceding Business Day;

(b) any Interest Period pertaining to a Benchmark Rate Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period;

 

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(c) no Interest Period for the Initial Term Loan shall extend beyond the last scheduled payment date therefor and no Interest Period for any Revolving Loan shall extend beyond the Revolving Maturity Date;

(d) no Interest Period applicable to the Initial Term Loan or portion thereof shall extend beyond any date upon which is due any scheduled principal payment in respect of such Term Loan unless the aggregate principal amount of such Term Loan represented by ABR Loans or by Benchmark Rate Loans having Interest Periods that will expire on or before such date is equal to or in excess of the amount of such principal payment; and

(e) no tenor that has been removed from this definition pursuant to Section 2.11(e) shall be available for specification in such Borrowing Request or Interest Election Request.

“Interest Rate Determination Date” has the meaning set forth in the definition of “Term SOFR.”

“Intermediate Co” has the meaning set forth in the definition of Post-Closing Reorganization.

“Internally Generated Funds” shall mean funds not constituting the proceeds of any Indebtedness, Debt Issuance, Equity Issuance, Asset Sale or Casualty Event (in each case, without regard to the exclusions from the definitions thereof).

“Investments” shall have the meaning assigned to such term in Section 6.04.

“IT Systems” shall have the meaning assigned to such term in Section 3.08(c).

“Joinder Agreement” shall mean a joinder agreement substantially in the form of Exhibit 3 to the Security Agreement.

“Judgment Currency” shall have the meaning assigned to such term in Section 11.18.

“Judgment Currency Conversion Date” shall have the meaning assigned to such term in Section 11.18.

“Junior Indebtedness” shall mean any Indebtedness of any Company that is (x) secured by a Lien that is junior in priority to the Lien securing the Obligations, (y) by its terms subordinated in right of payment to all or any portion of the Obligations or (z) unsecured, in each case, other than Indebtedness among the Loan Parties.

“LCA Election” shall mean the Borrower’s election to treat a specified acquisition as a Limited Condition Acquisition.

“Lead Manager” shall mean BlackRock Financial Management, in its capacity as lead manager.

“Leases” shall mean any and all leases, subleases, tenancies, options, concession agreements, rental agreements, occupancy agreements, franchise agreements, access agreements and any other agreements (including all amendments, extensions, replacements, renewals, modifications and/or guarantees thereof), whether or not of record and whether now in existence or hereafter entered into, affecting the use or occupancy of all or any portion of any Real Property.

 

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“Legal Requirements” shall mean, as to any person, the Organizational Documents of such person, and any treaty, law (including the common law), statute, ordinance, code, rule, regulation, license, permit, guidelines, decrees, requirement, Order or determination of an arbitrator or a court or other Governmental Authority, or other legally binding requirements, in each case would reasonably be interpreted to be applicable to or binding upon such person or any of its Property or to which such person or any of its Property would reasonably be interpreted to be subject.

“Lender Presentation” shall mean that certain lender presentation furnished to the initial Lenders in connection with the syndication of the Facilities on or around the March 14, 2022.

“Lenders” shall mean (a) each financial institution and other persons party hereto as “Lenders” on the date hereof, (b) each Additional Lender and (c) each financial institution or other person that becomes a party hereto pursuant to an Assignment and Assumption (including pursuant to Section 2.19 and Section 2.20), other than, in each case, any such financial institution or person that has ceased to be a party hereto pursuant to an Assignment and Assumption.

“Letter of Credit” shall mean a commercial or standby letter of credit issued or to be issued by the Issuing Bank pursuant to this Agreement; provided that the Issuing Bank shall only be required to issue standby letters of credit hereunder.

“Letter of Credit Obligations” shall mean, as at any date of determination, the sum of (i) the maximum aggregate amount that is, or at any time thereafter may become, available for drawing under all Letters of Credit then outstanding, plus (ii) the aggregate amount of all drawings under Letters of Credit honored by the Issuing Bank and not theretofore reimbursed by or on behalf of the Borrower.

“Letter of Credit Sublimit” shall mean, as of any date of determination, the lower of (i) $0, and (ii) the aggregate amount of the Revolving Commitments as of such date minus the Revolving Exposure of Revolving Commitments as of such date.

“Licensed Provider” shall mean any licensed employee, agent or independent contractor of the Companies or Physician-Owed Practice that provides healthcare services.

“Lien” shall mean, with respect to any Property, (a) any mortgage, deed of trust, lien (statutory or otherwise), pledge, encumbrance, claim, charge, assignment, hypothecation, security interest or encumbrance of any kind, including any easement, right-of-way or other encumbrance on title to Real Property, in each of the foregoing cases whether voluntary or imposed by law, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such Property, and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities; provided, that in no event shall an operating lease (including a Tenant Improvement Lease Transaction) be deemed to constitute a Lien.

“Limited Condition Acquisition” shall mean any acquisition or investment permitted hereunder by any Borrower or one or more of its Subsidiaries whose consummation is not conditioned on the availability of, or on obtaining, third party financing; provided that solely for the purpose of (i) measuring the relevant ratios and baskets with respect to the incurrence of any Indebtedness (including any New Term Loans) or Liens or the making of any acquisitions or other Investments, Dividends, Restricted Debt Payments, Asset Sales or other sales or dispositions of assets or fundamental changes or (ii) determining compliance with representations and warranties or the occurrence of any Default or Event of Default, in each case, in connection with a Limited Condition Acquisition after giving effect thereto, if the Borrower has made an LCA Election with respect to such Limited Condition Acquisition, the date of determination

 

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of whether any such action is permitted hereunder shall be deemed to be the date the definitive agreements for such Limited Condition Acquisition are entered into (the “LCA Test Date”), and, if after giving pro forma effect to the Limited Condition Acquisition and the other transactions to be entered into in connection therewith as if they had occurred at the beginning of the most recent Test Period ending prior to the LCA Test Date, the Borrower could have taken such action on the relevant LCA Test Date in compliance with such ratio, basket, representation or warranty, such ratio, basket, representation or warranty shall be deemed to have been complied with. If the Borrower has made an LCA Election for any Limited Condition Acquisition, then in connection with any subsequent calculation of any ratio or basket on or following the relevant LCA Test Date and prior to the earliest to occur of (i) the date on which such Limited Condition Acquisition is consummated, (ii) the date that the definitive agreement for such Limited Condition Acquisition is terminated or expires without consummation of such Limited Condition Acquisition or (iii) the date that is 120 days after the relevant LCA Test Date, any such ratio or basket shall be calculated (A) on a Pro Forma Basis assuming such Limited Condition Acquisition and other transactions in connection therewith (including any incurrence of Indebtedness and the use of proceeds thereof) have been consummated until such time as the applicable Limited Condition Acquisition has actually closed, the acquisition agreement with respect thereto has been terminated or such 120-day period has expired and (B) on a standalone basis without giving effect to such Limited Condition Acquisition and the other transactions in connection therewith.

“Liquidity” means, with respect to any fiscal quarter, the sum of (i) all Unrestricted Cash and Cash Equivalents that are (x) held in pledged accounts subject to a Control Agreement as of the last day of such fiscal quarter or (y) held in an account governed by a Management Services Agreement, plus (ii) the availability of Revolving Loans under the Revolving Credit Facility (calculated as the aggregate Revolving Commitments minus the aggregate Revolving Exposure of the Revolving Lenders) as of the last day of such fiscal quarter in an aggregate amount for purposes of this clause (ii) not to exceed $5,000,000.

“Loan” or “Loans” shall mean, as the context may require, a Revolving Loan, Initial Term Loan, Extended Term Loan, New Term Loan or a Delayed Draw Term Loan.

“Loan Documents” shall mean this Agreement, the Notes (if any), the Security Documents and each Joinder Agreement, but excluding any Hedging Agreement. Any reference in this Agreement or any other Loan Document to a Loan Document shall include all appendices, exhibits or schedules thereto, and all amendments, restatements, supplements or other modifications thereto, and shall refer to this Agreement or such Loan Document as the same may be in effect at any and all times such reference becomes operative.

“Loan Parties” shall mean the Borrower and the Subsidiary Guarantors.

“Management Services Agreement” means an administrative management services agreement (x) in substantially the same form provided to the Lenders prior to the Closing Date (other than any changes to the form required by applicable law or any applicable rule, regulation or order of any Governmental Authority) or (y) in any other form reasonably acceptable to the Required Lenders, in each case, between the Borrower, any other Loan Party or any Wholly Owned Subsidiary of a Loan Party and a Physician-Owned Practice, pursuant to which the Borrower, such other Loan Party or such other Wholly Owned Subsidiary of a Loan Party shall provide administrative management services to such Physician-Owned Practice; provided that, if a Management Services Agreement is entered into with a Wholly Owned Subsidiary of a Loan Party, such Wholly Owned Subsidiary becomes a Loan Party in accordance with Section 5.10 within sixty (60) days after the date such Management Services Agreement is entered into.

 

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

“Material Adverse Effect” shall mean, any event, change or condition that, individually or in the aggregate, has had, or could reasonably be expected to have (a) a material adverse effect on the business, operations or financial condition of the Borrower and its Subsidiaries, taken as a whole, (b) a material and adverse effect on the rights and remedies of the Lenders, Administrative Agent or the Issuing Bank under this Agreement or the other Loan Documents (other than solely due to the extent of the action or inaction of the Administrative Agent, or any of the Lenders), or (c) a material and adverse effect on the ability of the Borrower and Guarantors to perform their payment obligations under this Agreement and the other Loan Documents.

“Maximum Incremental Facilities Amount” shall mean the sum of the following:

(i) $25,000,000, plus

(ii) [***]

(iii) an unlimited additional amount of New Term Loans so long as, on a Pro Forma Basis, the First Lien Leverage Ratio shall not exceed 5.00:1.00; provided that (x) for purposes of determining compliance with the foregoing First Lien Leverage Ratio, any incremental facilities in the form of delayed draw term loans shall be deemed to be drawn in full, all New Term Loans and the cash proceeds of any New Term Loans shall be excluded for cash netting purposes and (y) to the extent the proceeds of any New Term Loans are intended to be applied to finance a Limited Condition Acquisition, the First Lien Leverage Ratio shall be tested in accordance with the last sentence of the definition of “Limited Condition Acquisition”.

“Maximum Rate” shall have the meaning assigned to such term in Section 11.13.

[***]

“Minimum Collateral Amount” means, at any time, (i) with respect to Cash Collateral consisting of cash or deposit account balances, an amount equal to 103% of the Fronting Exposure and the Letter of Credit Obligations of the Issuing Bank with respect to Letters of Credit issued and outstanding at such time, and (ii) otherwise, an amount determined by the Administrative Agent and the Issuing Bank in their reasonable discretion.

“Minimum Extension Condition” shall have the meaning assigned to such term in Section 2.20(b).

“Moody’s” shall mean Moody’s Investors Service, Inc. and any successor thereto.

“Mortgage” shall mean an agreement, including a mortgage, deed of trust or any other document, creating and evidencing a first priority Lien in favor of the Collateral Agent on Mortgaged Property in a form reasonably satisfactory to the Collateral Agent (including with respect to requirements for title, flood and other insurance and surveys), with such schedules and including such provisions as shall be necessary to conform such document to applicable local or foreign law or as shall be customary under applicable local or foreign Legal Requirements.

 

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“Mortgaged Property” shall mean each Real Property that is (or shall be) subject to a Mortgage delivered on the Closing Date or after the Closing Date pursuant to Section 4.01(o), Section 5.18 or Section 5.10(d).

“Multiemployer Plan” shall mean a multiemployer plan within the meaning of Section 4001(a)(3) of ERISA to which any Company or any ERISA Affiliate has an obligation to contribute or with respect to which any Company or ERISA Affiliate has incurred any undischarged liability or could reasonably be expected to incur any liability (whether contingent or otherwise).

“Net Cash Proceeds” shall mean:

(a) with respect to any Asset Sale (other than any issuance or sale of Equity Interests), the proceeds thereof in the form of cash, cash equivalents (including Cash Equivalents) and marketable securities (including any such proceeds received by way of deferred payment of principal pursuant to a note or installment receivable or purchase price adjustment receivable, or by the sale, transfer or other Disposition of any non-cash consideration received in connection therewith or otherwise, but only as and when received) received by any Company (including cash proceeds subsequently received (as and when received by any Company) in respect of non-cash consideration initially received) net of, without duplication, (i) selling fees and expenses (including brokers’ fees or commissions, legal, accounting and other professional and transactional fees, transfer and similar taxes and the Borrower’s good faith estimate of income taxes paid or payable in connection with such sale and in connection with any repatriation of such proceeds (after taking into account any available tax credits or deductions and any tax sharing arrangements)), (ii) amounts provided as a reserve, in accordance with GAAP, against (x) any liabilities under any indemnification obligations, earn-out obligations or purchase price adjustments associated with such Asset Sale or (y) any other liabilities retained or payable by any Company associated with the Properties sold in such Asset Sale (provided that, to the extent and at the time any such amounts are released from such reserve, such amounts shall constitute Net Cash Proceeds), (iii) if applicable, the principal amount of any Indebtedness secured by a Permitted Lien on the assets subject to such Asset Sale (other than Indebtedness secured under the Security Documents or otherwise subject to an intercreditor agreement pursuant to this Agreement) that has been repaid or refinanced in accordance with its terms with the proceeds of such Asset Sale or Casualty Event and (iv) the Borrower’s good faith estimate of the amount of payments required to be made with respect to unassumed liabilities relating to the properties sold within thirty (30) days of such Asset Sale (provided that (x) the funds described in this clause (iv) are deposited into escrow with a third party escrow agent or set aside in a separate deposit account that is subject to a control agreement entered into with the Collateral Agent and (y) to the extent such cash proceeds are not used to make payments in respect of such unassumed liabilities within the earlier of thirty (30) days after such Asset Sale or at such time when such amounts are no longer required to be set aside as such a reserve, such reserved amounts shall constitute Net Cash Proceeds);

(b) with respect to any Debt Issuance or any issuance or sale of Equity Interests by the Borrower or any of its Subsidiaries that is not an Equity Issuance, the cash proceeds thereof received by, or on behalf of, any Company, net of fees, commissions, costs and other expenses incurred in connection therewith; and

(c) with respect to any Casualty Event, the cash insurance proceeds, condemnation awards and other compensation received by, or on behalf of, any Company in respect thereof, net of all costs and expenses incurred in connection with the collection of such proceeds, awards or other compensation in respect of such Casualty Event (including, in respect of any such Casualty Event, transfer and similar taxes and the Borrower’s good faith estimate of income taxes paid or payable in connection with such sale (after taking into account any available tax credits or deductions and any tax sharing arrangements) (provided that, to the extent and at the time that any such taxes are no longer required to be paid or payable, such amounts shall then constitute Net Cash Proceeds)).

 

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“Net Working Capital” shall mean, at any time, Consolidated Current Assets at such time minus Consolidated Current Liabilities at such time.

“New Lender” shall have the meaning assigned to such term in Section 2.19(b).

“New Term Loan Commitments” shall have the meaning assigned to such term in Section 2.19(a).

“New Term Loans” shall have the meaning assigned to such term in Section 2.19(a).

“Non-Defaulting Lender” means, at any time, each Lender that is not a Defaulting Lender at such time.

“Non-Guarantor Subsidiary” shall mean any Subsidiary of the Borrower that is not a Subsidiary Guarantor.

“Non-Public Information” shall mean material non-public information (within the meaning of United States federal, state or other applicable securities laws) with respect to the Borrower or its Subsidiaries or their respective securities.

“Notes” shall mean any notes evidencing the Term Loans, Delayed Draw Term Loans or Revolving Loans, in each case issued pursuant to Section 2.04(e) of this Agreement, if any, substantially in the form of Exhibit E-1, E-2 or E-3 respectively.

“Obligations” shall mean (a) all obligations and guarantees thereof of the Borrower and the other Loan Parties from time to time arising under or in respect of the due and punctual payment of (i) the principal of and premium, if any, and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Loans and reimbursement of amounts drawn under Letters of Credit, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise and (ii) all other monetary obligations, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of the Borrower and the other Loan Parties under this Agreement and the other Loan Documents and (b) the due and punctual performance of all covenants, agreements, obligations and liabilities of the Borrower and the other Loan Parties under or pursuant to this Agreement and the other Loan Documents, in each case, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising.

“OFAC” shall mean the Office of Foreign Asset Control of the Department of Treasury of the United States of America.

“Off-Balance Sheet Obligations” of a person shall mean, without duplication, (a) any repurchase obligation or liability of such person with respect to accounts or notes receivable sold by such person, (b) any Synthetic Lease Obligations of such person, or (c) any indebtedness, liability or obligation arising with respect to any other transaction which is the functional equivalent of or takes the place of borrowing but which does not constitute a liability on the balance sheets of such person (other than operating leases including a Tenant Improvement Lease Transaction).

 

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“Offer Process” shall have the meaning assigned to such term in Section 11.04(c)(ii).

“Officers’ Certificate” shall mean a certificate executed by (a) the chairman of the Board of Directors (if an officer), the chief executive officer, the president or the chief operating officer or (b) one of the Financial Officers, each in his or her official (and not individual) capacity.

“Order” shall mean any judgment, decree, verdict, order, consent order, consent decree, writ, declaration or injunction.

“Organizational Documents” shall mean, collectively, with respect to any person, (a) in the case of any corporation, the certificate of incorporation and by-laws (or similar constitutive documents) of such person, (b) in the case of any limited liability company, the certificate of formation and operating agreement (or similar constitutive documents) of such person, (c) in the case of any limited partnership, the certificate of formation and limited partnership agreement (or similar constitutive documents) of such person, (d) in the case of any general partnership, the partnership agreement (or similar constitutive document) of such person, (e) in any other case, the functional equivalent of the foregoing, and (f) any shareholder, voting trust or similar agreement between or among any holders of Equity Interests of such person.

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

“Other Taxes” shall mean any and all present or future stamp, court, intangible, recording, property, filing or documentary Taxes or any similar Taxes, charges or levies arising from any payment made or required to be made under any Loan Document or from the execution, delivery, performance, registration or enforcement of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Loan Document except any such Taxes that are Other Connection Taxes imposed with respect to an assignment (other than an assignment made pursuant to Section 2.16).

“Participant” shall have the meaning assigned to such term in Section 11.04(f).

“Participant Register” shall have the meaning assigned to such term in Section 11.04(f).

“Patriot Act” shall have the meaning assigned to such term in Section 3.21(a).

“Payment Recipient” shall have the meaning assigned to it in Section 10.14(a).

“PBGC” shall mean the Pension Benefit Guaranty Corporation referred to and defined in ERISA.

“Pension Plan” shall mean any “employee pension benefit plan” (as defined in Section 3(2) of ERISA) (other than a Multiemployer Plan and other than a Foreign Plan) subject to the provisions of Title IV of ERISA or Section 412 or 430 of the Code or Section 302 of ERISA (a) which is maintained, sponsored, contributed to or required to be contributed to by any Company or any ERISA Affiliate or (b) with respect to which any Company or ERISA Affiliate has incurred any undischarged liability or could reasonably be expected to incur any liability (whether contingent or otherwise) including under Section 4062 or Section 4069 of ERISA.

 

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“Perfection Certificate” shall mean a perfection certificate in the form of Exhibit F-1 or any other form approved by the Collateral Agent, as the same shall be supplemented from time to time by a Perfection Certificate Supplement or otherwise.

“Perfection Certificate Supplement” shall mean a perfection certificate supplement in the form of Exhibit F-2 or any other form approved by the Collateral Agent.

“Permitted Acquisition” shall mean: any consensual transaction or series of related transactions for the direct or indirect (a) acquisition of all or substantially all of the Property of any person, or all or substantially all of any business or division of any person, (b) acquisition of all or substantially all of the Equity Interests of any person, and otherwise causing such person to become a Subsidiary of such person, if each of the following conditions is met, or (c) merger or consolidation or any other combination with any person if the Required Lenders have otherwise consented in writing thereto; in the case of clauses (a) through (c), so long as each of the following conditions are satisfied:

(i) no Default or Event of Default has occurred and is continuing immediately prior to an after giving effect to the consummation of such acquisition (or in the case of a Limited Condition Acquisition, no Default or Event of Default has occurred and is continuing at the time the definitive agreement for such acquisition is executed);

(ii) the persons or business to be acquired shall be, or shall be engaged in, a business of the type that the Borrower and its Subsidiaries are then permitted to be engaged in under Section 6.11;

(iii) to the extent that any Specified Acquired Property is to be acquired (or is acquired) pursuant to such proposed transaction or series of related proposed transactions, the Acquisition Consideration paid (or payable) with respect to such Specified Acquired Property shall not exceed, together with the amount of Acquisition Consideration paid (or payable) for any other Specified Acquired Property acquired pursuant to a Permitted Acquisition after the Closing Date, $10,000,000 in the aggregate; provided that, for the avoidance of doubt, such limitation shall not apply to any Physician-Owned Practices or purchases of Specified Acquired Property that would be governed by a Management Services Agreement with the Borrower;

(iv) (a) in the case of an acquisition of all or substantially all of the Property of any person or all or substantially all of any business or division of any person (other than, in either case, Specified Acquired Property), the person making such acquisition is Borrower or a Subsidiary Guarantor, or upon consummation of the Permitted Acquisition becomes a Subsidiary Guarantor pursuant to the requirements of and only to the extent required by Section 5.10, (b) in the case of an acquisition of the Equity Interests of any person (other than Specified Acquired Property), both the person making such acquisition and the person directly so acquired is Borrower or a Subsidiary Guarantor, or upon consummation of the Permitted Acquisition becomes a Subsidiary Guarantor pursuant to the requirements of and only to the extent required by Section 5.10 and (c) in the case of a merger or consolidation or any other combination with any person (other than Specified Acquired Property), the person surviving such merger, consolidation or other combination is Borrower or a Subsidiary Guarantor, or upon consummation of the Permitted Acquisition becomes a Subsidiary Guarantor pursuant to the requirements of and only to the extent required by Section 5.10; and

(v) if the Acquisition Consideration for such acquisition is greater than $10,000,000, Administrative Agent shall have received a copy of any quality of earnings report prepared in respect of any such transaction; and

 

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(vi) after giving effect to such Permitted Acquisition, the Borrower or the applicable Subsidiary shall be in compliance on a Pro Forma Basis with the financial covenants set forth in Section 6.15 applicable for the four (4) consecutive fiscal quarters of the Borrower ended on, or most recently preceding, the date of such Permitted Acquisition for which financial statements have been (or were required to have been) delivered to the Administrative Agent pursuant to Section 5.01(a) or (b); provided, that, with respect to any Limited Condition Acquisition, the Borrower or the applicable Subsidiary shall be, as of the date of the execution and delivery of the applicable definitive purchase agreement in connection with such Limited Condition Acquisition, in compliance on a Pro Forma Basis with the financial covenants applicable for the four (4) consecutive fiscal quarters of the Borrower ended on, or most recently preceding, such date for which financial statements have been (or were required to have been) delivered to the Administrative Agent pursuant to Section 5.01(a) or (b); provided, if such Permitted Acquisition is expected to close on or prior to the last day of the first Test Period set forth in Section 6.15(a), the Total Leverage Ratio calculated on a Pro Forma Basis for the four (4) consecutive fiscal quarters of the Borrower most recently preceding such date for which financial statements have been (or were required to have been) delivered to the Administrative Agent pursuant to Section 5.019(a) or (b) shall be (x) less than the maximum Total Leverage Ratio applicable to the first Test Period set forth in Section 6.15(a) or (y) equal to or less than such Total Leverage Ratio before giving effect to the acquisition; provided, further, that [***].

“Permitted Cure Securities” shall mean Equity Interests of the Borrower issued (in the form of common equity and/or other Qualified Stock) to the extent (and only to the extent) necessary to fund the Cure Right, as the same is immediately contributed as cash common equity to the Borrower.

“Permitted Investments” shall have the meaning assigned to such term in Section 6.04.

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

“Permitted Refinancing” shall have the meaning assigned to such term in Section 6.01(k).

“Person” shall mean any natural person, corporation, business trust, joint venture, association, company, company (whether limited in liability or otherwise), partnership (whether limited in liability or otherwise) or Governmental Authority, or any other entity, in any case, whether acting in a personal, fiduciary or other capacity.

“Personal Information” shall have the same meaning as the term “personal data,” “personal information,” “protected health information” or the equivalent under applicable Legal Requirements.

“Physician-Owned Practice” shall mean with respect to any facility located in any jurisdiction in which ownership of the relevant medical practice(s) to be provided at such facility by non-licensed medical professionals is prohibited by applicable law, any entity (i) 100% of the Equity Interests of which is owned by one or more physicians or other licensed medical professionals who provide services in connection with the applicable medical practice and (ii) that has entered into and continues to be subject to a Management Services Agreement.

“PIK Toggle Election” shall have the meaning assigned to such term in Section 2.06(f).

“PIK’d Amount” shall have the meaning assigned to such term in Section 2.06(f).

“Platform” shall mean IntraLinks, SyndTrak or a substantially similar electronic transmission system.

 

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“Pledgor” shall mean each Company listed on Schedule 1.01(a), and each other Subsidiary of any Company that is or becomes a party to this Agreement (in its capacity as a Subsidiary Guarantor) and the Security Documents pursuant to Section 5.10.

“Post-Closing Reorganization” means, collectively, (a) the Borrower shall create a new intermediate company directly below the Borrower (the “Intermediate Co”), (b) the Borrower shall contribute all of its assets (including the Equity Interests of its existing Subsidiaries) to Intermediate Co, (c) Intermediate Co shall become a Loan Party in accordance with Section 5.10, (d) the Borrower shall pledge 100% of the Equity Interests of Intermediate Co in accordance with Section 5.10, and (e) the Borrower shall be subject to Section 6.18.

“Premises” shall have the meaning assigned thereto in the applicable Mortgage.

“Prepayment Premium” shall have the meaning assigned to such term in Section 2.10(i).

“Prepayment Premium Event” shall have the meaning assigned to such term in Section 2.10(i).

“Pro Forma Basis”, “Pro Forma Compliance” and “Pro Forma Effect” mean, with respect to the calculation of the First Lien Net Leverage Ratio, the Secured Leverage Ratio, Consolidated EBITDA, or any other calculation (including, without limitation, of any basket, threshold, test, financial ratio or covenant hereunder (including, for the avoidance of doubt, Section 6.15), required by the terms of this Agreement or the other Loan Documents to be made on a Pro Forma Basis, as of any date, that (1) pro forma effect will be given to Subject Transactions, in each case that have occurred during the four consecutive fiscal quarter period of the Borrower being used to calculate such financial ratio (the “Reference Period”), or, other than with respect to the calculation of any Required ECF Percentage (other than in respect of any permanent payments of Indebtedness on or prior to the date any Excess Cash Flow mandatory payment is made for which such Required ECF Percentage is being calculated (including any such Excess Cash Flow mandatory payment) not funded with long term indebtedness (other than revolving indebtedness)), Applicable Margin and actual compliance with Section 6.15, subsequent to the end of the Reference Period but prior to such date or prior to or simultaneously with the event for which a determination under this definition is made (including any such event occurring at a Person who became a Subsidiary after the commencement of the Reference Period), as if each such event occurred on the first day of the Reference Period, (2) without duplication with any addback in the definition of Consolidated EBITDA, pro forma effect will be given to factually supportable and identifiable pro forma “run rate” cost savings and operating expense reductions, and (3) restructuring charges and synergies related to operational efficiencies, strategic and cost savings initiatives, purchasing improvements, acquisitions, divestitures, other specified transactions, restructurings, Permitted Acquisitions or any other acquisition that constitutes an Permitted Investment and other initiatives and actions, in each case, for which substantial steps have been taken and are reasonably expected by the Borrower, the Subsidiaries and the Physician-Owned Practices to be realized based upon actions that have been taken as of such date of such calculation or are reasonably expected to be taken within 18 months of the date of such calculation (without duplication of the amount of actual benefit realized during such period from such actions), which cost savings, operating expense reductions, restructuring charges, improvements and synergies can be reasonably computed, as certified in writing by a Financial Officer of the Borrower; provided that the aggregate amount added back under these clauses (2) and (3) or clauses (m), (n) and (o) of the definition of “Consolidated EBITDA,” shall not exceed the Expenses and Synergies Cap for the four fiscal quarter period ending on the last day of such period (calculated on a Pro Forma Basis and before giving effect to any such add-backs).

“Pro Rata Percentage” of any (a) Revolving Lender at any time shall mean the percentage of the total Revolving Commitments of all Revolving Lenders represented by such Lender’s Revolving

 

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Commitment, (b) Initial Term Lender at any time shall mean the percentage of the total Initial Term Loan Commitments of all Initial Term Lenders represented by such Lender’s Initial Term Loan Commitment or (c) Delayed Draw Term Loan Lender at any time shall mean the percentage of the total Delayed Draw Term Loan Commitments of all Delayed Draw Term Loan Lenders represented by such Lender’s Delayed Draw Term Loan Commitment; provided that, in the case of the Revolving Credit Facility, if such Commitments have been terminated or have expired, then the Pro Rata Percentage of each Lender shall be determined based on the Pro Rata Percentage of such Lender immediately prior to such termination or expiration and after giving effect to any subsequent assignments made pursuant to the terms hereof.

“Pro Rata Share” shall have the meaning assigned to such term in Section 7.10(a).

“Projections” shall have the meaning assigned to such term in Section 3.04(b).

“Property” shall mean any right, title or interest in or to property or assets of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible and including Equity Interests of any person and whether now in existence or owned or hereafter entered into or acquired, including all Real Property, cash, securities, accounts, revenues and contract rights.

“Public Company Costs” means, as to any Person, costs associated with, or in anticipation of, or preparation for, compliance with the requirements of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated in connection therewith and costs relating to compliance with the provisions of the Securities Act and the Exchange Act or other comparable body of laws, rules or regulations, as companies with listed equity, directors’ compensation, fees and expense reimbursement, costs relating to enhanced accounting functions and investor relations, stockholder meetings and reports to stockholders, directors’ and officers’ insurance and other executive costs, legal and other professional fees, listing fees and other transaction costs, in each case to the extent arising solely by virtue of the listing of such Person’s equity securities on a national securities exchange or issuance of public debt securities.

“Public Lenders” shall mean any Lender that does not wish to receive Non-Public Information with respect to the Borrower or its Subsidiaries or their respective securities.

“Public Official” shall mean (i) any officer, employee or representative of any regional, federal, state, provincial, county or municipal government or government department, agency, or other division; (ii) any officer, employee or representative of any commercial enterprise that is owned or controlled by a government, including any state-owned or controlled veterinary or medical facility; (iii) any officer, employee or representative of any public international organization, such as the African Union, the International Monetary Fund, the United Nations or the World Bank; (iv) any person acting in an official capacity for any government or government entity, enterprise, or organization identified above; and (v) any political party, party official or candidate for political office.

“Purchase Money Obligation” shall mean, for any person, the obligations of such person in respect of Indebtedness (including Capital Lease Obligations) incurred for the purpose of financing all or any part of the purchase price of any fixed or capital assets (including Equity Interests of any person owning fixed or capital assets) or the cost of installation, construction or improvement of any fixed or capital assets (including capitalized leasehold improvements); provided, however, that (a) such Indebtedness is incurred prior to or within 90 days after such acquisition, installation, construction or improvement of such fixed or capital assets by such person and (b) the amount of such Indebtedness does not exceed 100% of the cost of such acquisition, installation, construction or improvement, as the case may be.

 

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“Qualified ECP Guarantor” shall mean, in respect of any Swap Obligations, each Loan Party that has total assets exceeding $10,000,000 at the time the relevant Guarantee or grant of the relevant security interest becomes effective with respect to such Swap Obligation or such other person as constitutes an “eligible contract participant” under the Commodity Exchange Act or any regulations promulgated thereunder and can cause another person to qualify as an “eligible contract participant” at such time by entering into a keepwell under Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

“Qualified Stock” of any person shall mean any Equity Interest of such person that does not constitute Disqualified Stock.

“Real Property” shall mean, collectively, all right, title and interest (including any leasehold estate) in and to any and all parcels of or interests in real property owned, leased or operated by any person, whether by lease, license or other means, together with, in each case, all easements, hereditaments and appurtenances relating thereto, all improvements and appurtenant fixtures and equipment, all general intangibles and contract rights and other Property and rights incidental to the ownership, lease or operation thereof.

“Reference Date” shall have the meaning assigned to such term in the definition of “Cumulative Amount”.

“Refinancing” shall have the meaning assigned to such term in the preamble hereto.

“Refinancing Amendment” shall mean an amendment to this Agreement in form and substance reasonably satisfactory to the Administrative Agent and the Borrower executed by each of (a) the Borrower, (b) the Administrative Agent and (c) each Additional Lender that agrees to provide any portion of the extending, renewing or refinancing Indebtedness being incurred pursuant thereto.

“Refinancing Revolving Loan Commitments” shall mean one or more Tranches of Revolving Loan commitments hereunder that result from a Refinancing Amendment.

“Refinancing Revolving Loans” shall mean one or more Tranches of Revolving Loans that result from a Refinancing Amendment.

“Refinancing Term Commitments” shall mean one or more Tranches of Term Loan Commitments hereunder that result from a Refinancing Amendment.

“Refinancing Term Loans” shall mean one or more Tranches of Term Loans that result from a Refinancing Amendment.

“Register” shall have the meaning assigned to such term in Section 11.04(d).

“Regulation D” shall mean Regulation D of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.

“Regulation T” shall mean Regulation T of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.

“Regulation U” shall mean Regulation U of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.

 

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“Regulation X” shall mean Regulation X of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.

“Reimbursement Date” shall have the meaning assigned to such term in Section 2.17(d).

“Reinvestment Funds” means, with respect to any Net Cash Proceeds of any Asset Sale or Casualty Event in respect of the single event or series of related events giving rise thereto, that portion of such funds as shall be reinvested (or be subject to a binding commitment for any such reinvestment) within 365 days after receipt thereof by the Borrower or any Subsidiary in assets (other than ordinary course current assets) useful in the business of the Borrower and its Subsidiaries; provided that, if any such Net Cash Proceeds are not actually so reinvested within 365 days of such receipt (or 545 days of receipt if committed to be so reinvested pursuant to a binding agreement entered into on or prior to such 365th day), such unreinvested portion shall no longer constitute Reinvestment Funds and shall be applied on the last day of such period as a mandatory prepayment as provided in Section 2.10(c).

“Related Person” shall mean, with respect to any person, (a) each Affiliate of such person and each of the officers, directors, partners, trustees, employees, affiliates, shareholders, Advisors, agents, administrators, managers, representatives, attorneys-in-fact and Controlling persons of each of the foregoing, and (b) if such person is an Agent, each other person designated, nominated or otherwise mandated by or assisting such Agent pursuant to Section 10.05 or any comparable provision of any Loan Document.

“Release” shall mean any releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, depositing, dispersing, migrating, dumping or disposing in, on, into, through or from the Environment or any Real Property (including the abandonment or disposal of any barrels, containers or other closed receptacles containing any Hazardous Material).

“Relevant Governmental Body” shall mean the Board of Governors of the Federal Reserve System or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the Board of Governors of the Federal Reserve System or the Federal Reserve Bank of New York, or any successor thereto.

“Required ECF Percentage” shall have the meaning assigned to such term in Section 2.10(e).

“Required Lenders” shall mean, at any date of determination, Lenders (other than Defaulting Lenders) having Loans and unused Revolving Commitments, outstanding Initial Term Loans and Initial Term Loan Commitments and outstanding Delayed Draw Term Loans and Delayed Draw Term Loan Commitments representing more than 50% of the sum of all Loans outstanding and unused Revolving Commitments, outstanding Initial Term Loans and Initial Term Loan Commitments, outstanding Delayed Draw Term Loans and Delayed Draw Term Loan Commitments at such time; provided that, if there are two (2) or more unaffiliated Lenders, “Required Lenders” shall also be required to include two (2) such unaffiliated Lenders.

“Required Minimum Liquidity Amount” shall mean (i) initially, $50,000,000 and (ii) upon and after Consolidated EBITDA of the Borrower, its Subsidiaries and the Physician-Owned Practices being equal to or greater than $7,500,000 as set forth in a Compliance Certificate delivered pursuant to Section 5.01(c), $25,000,000.

 

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“Required Revolving Lenders” shall mean, as of any date of determination, one or more of the Lenders having or holding Revolving Exposure and representing more than 50% of the aggregate Revolving Exposure of all of the Lenders; provided (a) the Revolving Exposure of any Defaulting Lender shall be disregarded in determining Required Revolving Lenders at any time and (b) at any time that there are two or more Revolving Lenders party to this Agreement, the term “Required Revolving Lenders” must include at least two Revolving Lenders (Lenders that are Affiliates or Approved Funds of each other shall be deemed to be a single Lender for purposes of this clause (b)).

“Required Term Loan Lenders” shall mean, at any date of determination, Lenders (other than Defaulting Lenders) having outstanding Initial Term Loans and Initial Term Loan Commitments and outstanding Delayed Draw Term Loans and Delayed Draw Term Loan Commitments representing more than 50% of the sum of all outstanding Initial Term Loans and Initial Term Loan Commitments, outstanding Delayed Draw Term Loans and Delayed Draw Term Loan Commitments at such time; provided that, if there are two (2) or more unaffiliated Term Loan Lenders, “Required Lenders” shall also be required to include two (2) such unaffiliated Term Loan Lenders.

“Resolution Authority” shall mean an EEA Resolution Authority or, with respect to any UK Financial Institution, a UK Resolution Authority.

“Response” shall mean (a) “response” as such term is defined in CERCLA, 42 U.S.C. § 9601(25) or any other applicable Environmental Law, or (b) all other actions required pursuant to Environmental Law to (i) clean up, remove, treat, abate, monitor or in any other way address any Release or presence of Hazardous Materials at, in, on, under or from any Real Property, or otherwise in the Environment, (ii) prevent the Release or threat of Release, or minimize the further Release, of any Hazardous Material, or (iii) perform studies and investigations in connection with, or as a precondition to, clause (i) or (ii) above.

“Responsible Officer” of any person shall mean any executive officer, any executive vice president or Financial Officer of such person.

“Revolving Borrowing” shall mean a Borrowing comprised of Revolving Loans.

“Revolving Commitment” shall mean, with respect to each Lender, the commitment, if any, of such Lender to make Revolving Loans and to acquire participations in Letters of Credit hereunder up to the amount set forth on Annex I or on Schedule 1 to the Assignment and Assumption pursuant to which such Lender assumed its Revolving Commitment, as applicable, as the same may be (a) increased from time to time pursuant to Section 11.02(e), (b) reduced from time to time pursuant to Section 2.07 and (c) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 11.04. The aggregate principal amount of the Lenders’ Revolving Commitments on the Closing Date is $0.

“Revolving Credit Facility” shall mean the credit facility represented by the Revolving Commitments and the Revolving Loans.

“Revolving Exposure” shall mean, with respect to any Lender as of any date of determination, (i) prior to the termination of the Revolving Commitments, such Lender’s Revolving Commitment; and (ii) after the termination of the Revolving Commitments, the sum, without duplication, of (a) the aggregate outstanding principal amount of the Revolving Loans of such Lender, (b) in the case of the Issuing Bank, the aggregate Letter of Credit Obligations in respect of all Letters of Credit issued by such Lender (net of any participations by the Lenders in such Letters of Credit) and (c) the aggregate amount of all participations by such Lender in any outstanding Letters of Credit or any unreimbursed drawing under any Letter of Credit.

“Revolving Lender” shall mean a Lender with a Revolving Commitment.

 

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“Revolving Loan” shall mean a Loan made by the Lenders to the Borrower pursuant to Section 2.01(b). Each Revolving Loan shall either be an ABR Revolving Loan or a Benchmark Rate Revolving Loan.

“Revolving Maturity Date” shall mean May 10, 2027.

“S&P” shall mean Standard & Poor’s Ratings Services, a division of the McGraw-Hill Companies, Inc., and any successor thereto.

“Sale and Leaseback Transaction” shall have the meaning assigned to such term in Section 6.03.

“Sanctioned Country” means, at any time, a country, territory or region which is itself the subject or target of comprehensive Sanctions.

“Sanctioned Person” means, at any time, (a) any Person listed in any Sanctions-related list of designated Persons maintained by OFAC, the U.S. Department of State, or by the United Nations Security Council, the European Union or any European Union member state, (b) any Person operating, organized or resident in a Sanctioned Country, (c) the government of a Sanctioned Country or the Government of Venezuela; or (d) any Person owned or controlled by any such Person or Persons or acting for or on behalf of such Person or Persons as described in the foregoing clauses (a) (b), or (c).

“Sanctions” shall mean economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by (a) the U.S. government, including those administered by OFAC or the U.S. Department of State, or (b) the United Nations Security Council, the European Union, any European Union member state or Her Majesty’s Treasury of the United Kingdom.

“Sarbanes-Oxley Act” shall mean the United States Sarbanes-Oxley Act of 2002, as amended, and all rules and regulations promulgated thereunder.

“SEC” shall mean the Securities and Exchange Commission or any Governmental Authority succeeding to any of its principal functions.

“Secured Leverage Ratio” shall mean, at any date of determination, the ratio of (a) the Consolidated Secured Indebtedness outstanding on such date minus Unrestricted Cash and Cash Equivalents of the Borrowers, its Subsidiaries that are Domestic Subsidiaries and the Physician-Owned Practices that are (x) held in pledged accounts subject to a Control Agreement as of the last day of such fiscal quarter or (y) held in an account governed by a Management Services Agreement, in an aggregate amount not to exceed $100,000,000 to (b) Consolidated EBITDA for the Test Period then most recently ended.

“Secured Obligations” shall mean (a) the Obligations, (b) the Specified Hedging Agreement Obligations, (c) the Bank Product Obligations and (d) Erroneous Payment Subrogation Rights.

“Secured Parties” shall mean, collectively, the Administrative Agent, the Collateral Agent, each other Agent, the Issuing Bank, the Lenders, each Bank Product Provider and each counterparty to a Specified Hedging Agreement and such counterparty executes and delivers to the Administrative Agent a letter agreement in form and substance reasonably acceptable to the Administrative Agent pursuant to which such counterparty (i) appoints the Administrative Agent and the Collateral Agent as its agents under the applicable Loan Documents and (ii) agrees to be bound by the provisions of Section 11.03, Section 11.09 and Section 11.12 as if it were a Lender hereunder.

 

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“Securities Act” shall mean the Securities Act of 1933, as amended.

“Securities Collateral” shall have the meaning assigned to such term in the Security Agreement.

“Security Agreement” shall mean that certain Security Agreement, dated as of the date hereof, among the Loan Parties and the Collateral Agent for the benefit of the Secured Parties, as amended, restated, amended and restated, supplemented or otherwise modified from time to time by one or more Joinder Agreements, or otherwise, in accordance with the terms hereof and thereof.

“Security Agreement Collateral” shall mean all Property pledged or granted as collateral pursuant to the Security Agreement delivered on the Closing Date or thereafter pursuant to Section 5.18 or Section 5.10.

“Security Documents” shall mean, collectively, the Security Agreement, the Mortgages (if any), each Control Agreement, and each other security document or pledge agreement delivered in accordance with applicable local or foreign Legal Requirements to grant a valid, enforceable, perfected security interest (with the priority required under the Loan Documents) in any Property as collateral for the Secured Obligations, and all UCC or other financing statements or instruments of perfection required by this Agreement, the Security Agreement, any Mortgage, any Control Agreement or any other such security document or pledge agreement to be filed with respect to the security interests in Property created pursuant to the Security Agreement, any Mortgage, any Control Agreement and any other document or instrument utilized to pledge any Property as collateral for all (or any of) the Secured Obligations.

“SOFR” means a rate equal to the secured overnight financing rate as administered by the SOFR Administrator.

“SOFR Administrator” means the Federal Reserve Bank of New York (or a successor administrator of the secured overnight financing rate).

“SOFR Administrator’s Website” means the Federal Reserve Bank of New York’s website, currently at http://www.newyorkfed.org, or any successor source for the secured overnight financing rate identified as such by the SOFR Administrator from time to time.

[***]

“SPC” shall have the meaning assigned to such term in Section 11.04(i).

“Specified Acquired Property” shall mean (a) any person that does not, upon the consummation of the Permitted Acquisition, become a Subsidiary Guarantor and (b) Property acquired in connection with any Permitted Acquisition that is not made subject to the Lien of the Security Documents in accordance with Section 5.10.

“Specified Contracted Interest Rate” shall have the meaning assigned to such term in Section 2.06(f).

“Specified Guarantor Release Provision” shall have the meaning assigned to such term in Section 10.12(c).

 

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“Specified Hedging Agreement” shall mean each Hedging Agreement (to the extent the Hedging Obligations thereunder are permitted pursuant to Section 6.01(c)) entered into with any counterparty that was an Agent, a Lender or an Affiliate of an Agent or a Lender at the time that such Hedging Agreement was entered into and that has been designated as a “Specified Hedging Agreement” by the Borrower in a written notice to the Administrative Agent.

“Specified Hedging Agreement Obligations” shall mean (a) all obligations of the Borrower and its Subsidiaries from time to time arising under or in respect of the due and punctual payment of each amount (including all liabilities) required to be paid by Borrower and its Subsidiaries under each Specified Hedging Agreement (and under each Loan Document with respect thereto), when and as due, including payments in respect of interest thereon (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) and obligations to provide cash collateral and all other monetary obligations, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of the Borrower under each Specified Hedging Agreement (and under each Loan Document with respect thereto), and (b) the due and punctual performance of all covenants, agreements, obligations and liabilities of the Borrower and its Subsidiaries under or pursuant to each Specified Hedging Agreements (and under each Loan Document with respect thereto); provided, that the Specified Hedging Agreement Obligations shall exclude any Excluded Swap Obligations.

“Specified Representations” shall mean the representations and warranties set forth in Section 3.01 (as it relates to corporate or other organizational existence, organizational power and authority), 3.02 (as it relates to the due authorization execution, delivery and performance of the Loan Documents and the enforceability thereof), 3.15, 3.03 (as it relates to no conflicts resulting from the entering into and performance of the Loan Documentation with charter documents, existing agreements and legal proceedings), 3.09, 3.10, the last sentence of 3.11(a), Section 3.19 (as it relates to the creation, validity and perfection of the security interests in the Collateral) and Section 3.21.

“Subject Transaction” shall mean, (a) any Permitted Acquisition or similar Investment that is otherwise permitted by this Agreement, (b) any disposition of all or substantially all of the assets or all the Equity Interests of any Subsidiary (or any business unit, line of business or division of any of the Subsidiaries of the Borrower for which financial statements are available) not prohibited by this Agreement, (c) discontinued divisions or lines of business or operations or (d) the proposed incurrence of Indebtedness or making of a restricted payment or payment in respect of Indebtedness in respect of which compliance with any financial ratio is by the terms of this Agreement required to be calculated on a Pro Forma Basis.

“Subsidiary” shall mean, with respect to any person (the “parent”) at any date, (a) any person the accounts of which would be consolidated with those of the parent in the parent’s consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, (b) any other corporation, limited liability company, association or other business entity of which securities or other ownership interests representing more than 50% of the voting power of all Equity Interests entitled (without regard to the occurrence of any contingency) to vote in the election of the Board of Directors (or similar governing body) thereof are, as of such date, owned, controlled or held by the parent and/or one or more subsidiaries of the parent, (c) any partnership (i) the sole general partner or the managing general partner of which is the parent and/or one or more subsidiaries of the parent or (ii) the only general partners of which are the parent and/or one or more subsidiaries of the parent and (d) any other person that is otherwise Controlled by the parent and/or one or more subsidiaries of the parent. Unless the context requires otherwise, “Subsidiary” refers to a Subsidiary of the Borrower. For the avoidance of doubt, no Physician-Owned Practice is a Subsidiary of the Borrower.

 

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“Subsidiary Guarantor” shall mean each Subsidiary of any Loan Party that (i) is a Domestic Subsidiary and (ii) is or becomes a party to this Agreement and the Security Documents pursuant to and in compliance with all the requirements set forth in Section 5.10, including the Subsidiaries listed on Schedule 1.01(c) and specified on such schedule as a Subsidiary Guarantor.

“Survey” shall mean American Land Title Association/American Congress on Surveying and Mapping form surveys, for which all necessary fees (where applicable) have been paid, reasonably acceptable to the Administrative Agent, showing all buildings and other improvements, any off-site improvements, the location of any easements, parking spaces, rights of way, building set-back lines and other dimensional regulations and the absence of encroachments, either by such improvements or on to such property, and other defects, other than encroachments and other defects reasonably acceptable to the Administrative Agent and (i) dated or redated no more than 30 days before the relevant date, certified to the Administrative Agent and the issuer of the Mortgage policies in a manner reasonably satisfactory to the Administrative Agent by a land surveyor duly registered and licensed in the States in which the property described in such surveys is located, or (ii) dated or redated no more than five (5) years before the relevant date, with an affidavit from the Borrower confirming that since the date of such survey no material exterior construction has occurred on the applicable property nor any material easement, right of way or other interest in such property has been granted or become effective through operation of law or otherwise which can be depicted on a survey which survey is sufficient for the Title Company to remove all standard survey exceptions from the Title Policy for such Property.

“Swap Agreement” means (i) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement and (ii) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement or any other master agreement (any such master agreement, together with any related schedules, a “Master Agreement”), including any such obligations or liabilities under any Master Agreement.

“Swap Obligation” shall mean, with respect to any Guarantor, any obligation to pay or perform under any agreement, contract or transaction that constitutes a “swap” within the meaning of section 1a(47) of the Commodity Exchange Act.

“Synthetic Lease” shall mean, as to any person, any lease (including leases that may be terminated by the lessee at any time) of any Property (a) that is accounted for as an operating lease under GAAP and (b) in respect of which the lessee retains or obtains ownership of the Property so leased for U.S. federal income tax purposes, other than any such lease under which such person is the lessor.

“Synthetic Lease Obligations” shall mean, as to any person, an amount equal to the capitalized amount of the remaining lease payments under any Synthetic Lease that would appear on a balance sheet of such person in accordance with GAAP if such obligations were accounted for as Capital Lease Obligations.

“Tax Returns” shall mean all returns, statements, filings, attachments and other documents or certifications required to be filed in respect of Taxes.

 

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“Taxes” shall mean any and all present or future taxes, duties, levies, imposts, assessments, fees, deductions, withholdings (including backup withholding) or other similar charges, whether computed on a separate, consolidated, unitary, combined or other basis and any and all liabilities (including interest, fines, penalties or additions to tax) with respect to the foregoing.

“Tenant Improvement Lease Transaction” means a Lease of Real Property where tenant improvements are funded by either the landlord or a third-party tenant improvement lender and secured by additional rent payable treated as an operating lease.

“Term Benchmark” when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to Term SOFR.

“Term Borrowing” shall mean a Borrowing comprised of Term Loans.

“Term Loan” shall mean an Initial Term Loan made by a Lender to the Borrower pursuant to Section 2.01(a), any term loan made by a Term Loan Lender to the Borrower pursuant to Section 2.19 or Section 2.20 or any delayed draw term loan made by a Delayed Draw Term Loan Lender to the Borrower pursuant to Section 2.01(c). Each Term Loan shall be either an ABR Term Loan or a Benchmark Rate Term Loan.

“Term Loan Commitment” shall mean, with respect to each Lender, the commitment, if any, of such Lender to make a Term Loan.

“Term Loan Facility” shall mean the credit facility represented by the Term Loans made under this Agreement.

“Term Loan Lender” shall mean a Lender with a Term Loan Commitment or an outstanding Term Loan.

“Term Loan Maturity Date” shall mean (a) with respect to (i) the Initial Term Loans advanced on the Closing Date and (ii) any Delayed Draw Term Loans, May 10, 2027, (b) with respect to any tranche of New Term Loans made pursuant to Section 2.19, the final maturity date as specified in the applicable Incremental Loan Amendment and accepted by the respective Increasing Lenders and New Lenders and (c) with respect to any tranche of Extended Term Loans made pursuant to Section 2.20, the final maturity date as specified in the applicable Extension Offer accepted by the respective Lender or Lenders.

“Term SOFR” means (a) with respect to any Benchmark Rate Borrowing and for any tenor comparable to the applicable Interest Period, the Term SOFR Reference Rate published two (2) U.S. Government Securities Business Days prior to the commencement of the applicable Interest Period (such date, the “Interest Rate Determination Date”), plus the Term SOFR Adjustment and (b) with respect to any Base Rate Borrowing, the Term SOFR Reference Rate for a tenor of one month published two (2) U.S. Government Securities Business Days prior to the commencement of the applicable Interest Period, plus the Term SOFR Adjustment.

“Term SOFR Adjustment” means a rate per annum equal to 0.11448% (11.448 basis points) for an Interest Period of one-month’s duration or less, 0.26161% (26.161 basis points) for an Interest Period of greater than one-month’s direction and up to three-month’s duration, and 0.42826% (42.826 basis points) for an Interest Period of greater than three-months’ duration and up to six-months’ duration.

 

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“Term SOFR Administrator” means CME Group Benchmark Administration Limited (CBA) (or a successor administrator of the Term SOFR Reference Rate selected by the Administrative Agent in its reasonable discretion).

“Term SOFR Reference Rate” means, for any tenor comparable to the applicable Interest Period, the rate per annum determined by the Administrative Agent as the forward-looking term rate based on SOFR; provided, however, that if as of 5:00 p.m. (New York City time) on any Interest Rate Determination Date the Term SOFR Reference Rate for the applicable tenor has not been published by the Term SOFR Administrator and a Benchmark Replacement Date with respect to the Term SOFR Reference Rate has not occurred, then the Term SOFR Reference Rate will be the Term SOFR Reference Rate for such tenor as published by the Term SOFR Administrator on the first preceding U.S. Government Securities Business Day for which such Term SOFR Reference Rate for such tenor was published by the Term SOFR Administrator so long as such first preceding U.S. Government Securities Business Day is not more than three (3) U.S. Government Securities Business Days prior to such Interest Rate Determination Date.

“Test Period” shall mean, at any time, the four consecutive fiscal quarters of the Borrower then last ended (in each case taken as one accounting period) for which financial statements have been or are required to be delivered pursuant to Section 5.01(a) or (b).

“Title Company” shall mean any title insurance company as shall be retained by Borrower and reasonably acceptable to the Collateral Agent.

“Title Policy” shall mean, with respect to each Mortgage, a policy of title insurance (or marked-up title insurance commitment having the effect of a policy of title insurance) insuring the Lien of such Mortgage as a valid first mortgage Lien on the Mortgaged Property and fixtures described therein in an amount equal to not less than 100% of the Fair Market Value of such Mortgaged Property and fixtures (or such lesser amount as may be required by the Collateral Agent), which policy (or such marked-up commitment) shall be issued by a Title Company, and contain such endorsements as shall be reasonably requested by the Collateral Agent and no exceptions to title other than Permitted Liens and additional exceptions reasonably acceptable to the Collateral Agent.

“Total Leverage Ratio” shall mean, at any date of determination, the ratio of (a) the Consolidated Indebtedness outstanding on such date minus Unrestricted Cash and Cash Equivalents of the Borrowers, its Subsidiaries that are Domestic Subsidiaries and the Physician-Owned Practices that are (x) held in pledged accounts subject to a Control Agreement as of the last day of such fiscal quarter or (y) held in an account governed by a Management Services Agreement, in an aggregate amount not to exceed $100,000,000 to (b) Consolidated EBITDA for the Test Period then most recently ended.

“Transaction Costs” shall mean any fees, premiums, expenses and other transaction costs incurred or paid by the Loan Parties in connection with the Transactions, including those amounts set forth in the Engagement Letter.

“Transactions” shall mean, collectively, (a) the transactions to occur on or prior to the Closing Date pursuant to, or contemplated by, the Loan Documents, including the execution, delivery and performance of the Loan Documents and the initial Credit Extensions hereunder, and (b) the Refinancing.

“Transferred Guarantor” shall have the meaning assigned to such term in Section 7.09.

“Treasury Regulations” shall mean the regulations promulgated by the United States Department of the Treasury under the Code, as amended from time to time.

 

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“Type” shall mean, when used in reference to any Loan or Borrowing, a reference to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Benchmark Rate or the Alternate Base Rate.

“UK Financial Institution” shall mean any BRRD Undertaking (as such term is defined under the PRA Rulebook (as amended from time to time) promulgated by the United Kingdom Prudential Regulation Authority) or any person falling within IFPRU 11.6 of the FCA Handbook (as amended from time to time) promulgated by the United Kingdom Financial Conduct Authority, which includes certain credit institutions and investment firms, and certain affiliates of such credit institutions or investment firms.

“UK Resolution Authority” shall mean the Bank of England or any other public administrative authority having responsibility for the resolution of any UK Financial Institution.

“Unfunded Pension Liability” shall mean the excess of a Pension Plan’s benefit liabilities under Section 4001(a)(16) of ERISA, over the current value of that Pension Plan’s assets, determined in accordance with the assumptions used for funding the Pension Plan pursuant to Section 412 of the Code for the applicable plan year.

“Uniform Commercial Code” or “UCC” shall mean the Uniform Commercial Code, as in effect from time to time in any applicable jurisdiction.

“United States” and “U.S.” shall mean the United States of America.

“Unrestricted Cash and Cash Equivalents” shall mean, at any time, the aggregate amount of unrestricted cash and Cash Equivalents (i) held in accounts of the Borrower, its Subsidiaries that are Domestic Subsidiaries or Physician-Owned Practices or (ii) that are free and clear of all Liens (other than Liens permitted pursuant to Section 6.02(j) or pursuant to this Agreement).

“U.S. Foreign Holdco” shall mean any Domestic Subsidiary that (i) is disregarded as an entity separate from its owner for U.S. federal income tax purposes and (ii) does not own any material assets other than Equity Interests (or any debt instrument, option, warrant or other instrument treated as equity for U.S. federal income tax purposes) that have the power to vote under Treasury Regulation Section 1.956-2(c)(2) of one or more CFCs.

“U.S. Government Securities Business Day” means any Business Day, except any Business Day on which any of the Securities Industry and Financial Markets Association, the New York Stock Exchange or the Federal Reserve Bank of New York is not open for business because such day is a legal holiday under the federal laws of the United States or the laws of the State of New York, as applicable.

“USCO” shall mean the United States Copyright Office.

“USPTO” shall mean the United States Patent and Trademark Office.

“Voluntary Loan Prepayment Amount” shall mean, with respect to any Excess Cash Flow Period, the aggregate amount of voluntary prepayments made in respect of (a) Term Loans and (b) Revolving Loans (to the extent, other than as provided in Section 2.10(e), accompanied by a concurrent and concomitant permanent reduction of the Revolving Commitment), in each case, to the extent that such voluntary prepayments are made with Internally Generated Funds (that the Borrower certifies, to the Administrative Agent and the Lender, shall not be included in the Cumulative Amount).

 

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“Voting Stock” shall mean, with respect to any person, any class or classes of Equity Interests pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the Board of Directors of such person.

“Weighted Average Life to Maturity” shall mean, when applied to any Indebtedness at any date, the number of years obtained by dividing: (i) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment by (ii) the then-outstanding principal amount of such Indebtedness.

“Weighted Average Yield” shall mean, with respect to any Loan, on any date of determination, the weighted average yield to maturity, in each case, based on the interest rate applicable to such Loan on such date and giving effect to interest rate floors, upfront fees, original issue discount or similar yield-related discounts or deductions payable with respect to such Loans (but, excluding, for the avoidance of doubt, any customary arranging, underwriting, structuring or similar fees not paid to all of the Lenders providing such Loans) based on (i) an assumed four-year average life for the applicable Loans or (ii) if the stated maturity of the applicable Loans is less than four years, the actual life of such Loans.

“Wholly Owned Subsidiary” shall mean, as to any person, (a) any corporation 100% of whose capital stock (other than directors’ qualifying shares) is at the time owned by such person and/or one or more Wholly Owned Subsidiaries of such person and (b) any partnership, association, joint venture, limited liability company or other entity in which such person and/or one or more Wholly Owned Subsidiaries of such person have a 100% equity interest (other than immaterial directors’ qualifying shares to the extent required by applicable law) at such time.

“Write-Down and Conversion Powers” means, (a) with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule, and (b) with respect to the United Kingdom, any powers of the applicable Resolution Authority under the Bail-In Legislation to cancel, reduce, modify or change the form of a liability of any UK Financial Institution or any contract or instrument under which that liability arises, to convert all or part of that liability into shares, securities or obligations of that person or any other person, to provide that any such contract or instrument is to have effect as if a right had been exercised under it or to suspend any obligation in respect of that liability or any of the powers under that Bail-In Legislation that are related to or ancillary to any of those powers.

Section 1.02 Classification of Loans and Borrowings. For purposes of this Agreement, Loans may be classified and referred to by Class (e.g., a “Revolving Loan”) or by Type (e.g., a “Benchmark Rate Loan”) or by Class and Type (e.g., a “Benchmark Rate Revolving Loan”). Borrowings also may be classified and referred to by Class (e.g., a “Revolving Borrowing,” “Borrowing of Term Loans”) or by Type (e.g., a “Benchmark Rate Borrowing”) or by Class and Type (e.g., a “Benchmark Rate Revolving Borrowing”).

Section 1.03 Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.” The phrase “Material Adverse Effect” shall be deemed to be followed by the phrase “, individually or in the aggregate.” The word “asset” shall be construed to have the same meaning and effect as the word “Property.” The word “will” shall be construed to have the same meaning and effect as the word “shall.” Unless the context

 

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requires otherwise (a) any definition of or reference to any Loan Document, agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, restated, amended and restated, refinanced, extended, supplemented or otherwise modified (subject to any restrictions on such amendments, restatements, amendments and restatements, refinancing, extensions, supplements or modifications set forth in any Loan Document), (b) any reference herein to any person shall be construed to include such person’s successors and assigns, (c) the words “herein,” “hereof” and “hereunder,” and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement, unless otherwise indicated, (e) any references to any law or regulation shall (i) include all statutory and regulatory provisions consolidating, amending, replacing or interpreting or supplementing such law or regulation, and (ii) unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time, and (f) all references to “knowledge” in this Agreement or any other Loan Document refers to the actual knowledge (after reasonable inquiry) of such Responsible Officer or other Person making such certification. This Section 1.03 shall apply, mutatis mutandis, to all Loan Documents. Any Responsible Officer executing any Loan Document or any certificate or other document made or delivered pursuant hereto or thereto, so executes or certifies in his/her capacity as a Responsible Officer on behalf of the applicable Loan Party and not in any individual capacity.    Notwithstanding anything to the contrary, (a) unless specifically stated otherwise herein, any dollar, number, percentage or other amount available under any basket set forth in any affirmative, negative or other covenant in this Agreement or the other Loan Documents may be accumulated, added, combined, aggregated or used together by any Loan Party and its Subsidiaries with any other basket in the same such covenant; provided that such accumulation, addition, combination or aggregation may only occur to the extent such Loan Party would be permitted to use each such basket for the same transaction or occurrence, and (b) any action or event permitted by this Agreement or the other Loan Documents need not be permitted solely by reference to one provision permitting such action or event but may be permitted in part by one such provision and in part by one or more other provisions of this Agreement and the other Loan Documents; provided that such action or event complies with each such provision applicable to such action or event.

Section 1.04 Accounting Terms; GAAP. Except as otherwise expressly provided herein, all financial statements to be delivered pursuant to this Agreement shall be prepared in accordance with GAAP as in effect from time to time and all terms of an accounting or financial nature shall be construed and interpreted in accordance with GAAP, as in effect on the Closing Date. If at any time any change in GAAP would affect the computation of any financial ratio set forth in any Loan Document, and the Borrower or the Administrative Agent shall so request, the Administrative Agent and the Borrower shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP (subject to approval by the Required Lenders and the Borrower); provided that, until so amended, such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein and the Borrower shall provide to the Administrative Agent and the Lenders within five days after delivery of each certificate or financial report required hereunder that is affected thereby a written statement of a Financial Officer of the Borrower setting forth in reasonable detail the differences (including any differences that would affect any calculations relating to the financial covenants as set forth in Section 6.15). For purposes of calculations made pursuant to the terms of this Agreement, GAAP will be deemed to treat operating leases and capital leases in a manner consistent with their current treatment under generally accepted accounting principles as in effect on the Closing Date, notwithstanding any modifications or interpretive changes thereto that may occur thereafter.

 

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Section 1.05 Pro Forma Calculations. Notwithstanding anything to the contrary herein, all financial ratios and tests (including the First Lien Leverage Ratio, the Secured Leverage Ratio and the amount of Consolidated Total Assets and Consolidated EBITDA) contained in this Agreement (other than for purposes of calculating Excess Cash Flow) that are calculated with respect to any Test Period during which any Subject Transaction occurs shall (x) be calculated with respect to such Test Period and such Subject Transaction on a Pro Forma Basis and (y) any incremental facilities in the form of delayed draw term loans shall be deemed to be drawn in full, all New Term Loans and the cash proceeds of any New Term Loans shall be excluded for cash netting purposes. Further, if since the beginning of any such Test Period and on or prior to the date of any required calculation of any financial ratio or test (x) any Subject Transaction shall have occurred or (y) any Person that subsequently became a Subsidiary or was merged, amalgamated or consolidated with or into the Borrower or any of its Subsidiaries since the beginning of such Test Period shall have consummated any Subject Transaction, then, in each case, any applicable financial ratio or test shall be calculated on a Pro Forma Basis for such Test Period as if such Subject Transaction had occurred at the beginning of the applicable Test Period (it being understood, for the avoidance of doubt, that solely for purposes of calculating quarterly compliance with Section 6.15, the date of the required calculation shall be the last day of the Test Period, and no Subject Transaction occurring thereafter shall be taken into account).

Section 1.06 Resolution of Drafting Ambiguities. Each Loan Party acknowledges and agrees that it was represented by counsel in connection with the execution and delivery of the Loan Documents to which it is a party, that it and its counsel reviewed and participated in the preparation and negotiation hereof or thereof and that any rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not be employed in the interpretation hereof or thereof.

Section 1.07 Rounding. Any financial ratios required to be satisfied in order for a specific action to be permitted under this Agreement shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio is expressed herein and rounding the result up or down to the nearest number (with a rounding-up if there is no nearest number).

Section 1.08 Currency Fluctuations. For purposes of determining compliance with Section 6.01, Section 6.02, Section 6.04, Section 6.06 or Section 6.09, with respect to any Indebtedness, Liens, Investments, Asset Sales or other dispositions, or prepayments of other Indebtedness in a currency other than Dollars, no Default or Event of Default shall be deemed to have occurred solely as a result of changes in rates of currency exchange occurring after the time the Borrower or one of its Subsidiaries is contractually obligated to incur, make or acquire such Indebtedness, Liens, Investments, Asset Sales or other dispositions or prepayments of other Indebtedness (so long as, at the time of entering into the contract to incur, make or acquire such Indebtedness, Liens, Investments, Asset Sales or other dispositions or prepayments of other Indebtedness, it was permitted hereunder) and once contractually obligated to be incurred, made or acquired, the amount of such Indebtedness, Liens, Investments, Asset Sales or other dispositions or prepayments of other Indebtedness, shall be always deemed to be at the Dollar amount on such date, regardless of later changes in currency exchange rates.

Section 1.09 Divisions. For all purposes under the Loan Documents, in connection with any division or plan of division under Delaware law (or any comparable event under a different jurisdiction’s laws): (a) if any asset, right, obligation or liability of any Person becomes the asset, right, obligation or liability of a different Person, then it shall be deemed to have been transferred from the original Person to the subsequent Person, and (b) if any new Person comes into existence, such new Person shall be deemed to have been organized and acquired on the first date of its existence by the holders of its Equity Interests at such time.

Section 1.10 Rates. The Administrative Agent does not warrant or accept responsibility for, and shall not have any liability with respect to (a) the continuation of, administration of, submission of, calculation of or any other matter related to Alternate Base Rate, the Benchmark Rate, Adjusted Daily

 

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Simple SOFR or Term SOFR, or any component definition thereof or rates referred to in the definition thereof, or any alternative, successor or replacement rate thereto (including any Benchmark Replacement), including whether the composition or characteristics of any such alternative, successor or replacement rate (including any Benchmark Replacement) will be similar to, or produce the same value or economic equivalence of, or have the same volume or liquidity as, Alternate Base Rate, the Benchmark Rate, Adjusted Daily Simple SOFR, Term SOFR or any other Benchmark prior to its discontinuance or unavailability, or (b) the effect, implementation or composition of any Conforming Changes. The Administrative Agent and its affiliates or other related entities may engage in transactions that affect the calculation of Alternate Base Rate, the Benchmark Rate, Term SOFR, Adjusted Daily Simple SOFR, any alternative, successor or replacement rate (including any Benchmark Replacement) or any relevant adjustments thereto, in each case, in a manner adverse to the Borrower. The Administrative Agent may select information sources or services in its reasonable discretion to ascertain Alternate Base Rate, the Benchmark Rate, Term SOFR, Adjusted Daily Simple SOFR or any other Benchmark, in each case pursuant to the terms of this Agreement, and shall have no liability to the Borrower, any Lender or any other person or entity for damages of any kind for direct or indirect, special, punitive, incidental or consequential damages, costs, losses or expenses (whether in tort, contract or otherwise and whether at law or in equity), for any error or calculation of any such rate (or component thereof) provided by any such information source or service.

ARTICLE II

THE CREDITS

Section 2.01 Commitments.

(a) Term Loan. Subject to the terms and conditions set forth herein and relying upon the representations and warranties set forth herein, the Initial Term Lenders agree, severally and not jointly, to make Initial Term Loans to the Borrower on the Closing Date in the original aggregate principal amount of $190,000,000.

(b) Revolving Loans. Subject to the terms and conditions set forth herein and relying upon the representations and warranties set forth herein, each Revolving Lender agrees, severally and not jointly, to make Revolving Loans to the Borrower, at any time and from time to time on or after the Closing Date until the earlier of the Revolving Maturity Date and the termination of the Revolving Commitment of such Lender in accordance with the terms hereof, in an aggregate principal amount at any time outstanding that will not result in such Lender’s Revolving Exposure exceeding such Lender’s Revolving Commitment; provided, however, except as provided in Section 2.17(d), the Borrower may not request Revolving Loans if the aggregate principal amount of Revolving Loans outstanding would be in excess of $5,000,000.

(c) Delayed Draw Term Loans. Subject to the terms and conditions set forth herein and relying upon the representations and warranties set forth herein, each Delayed Draw Term Loan Lender agrees, severally and not jointly, to make Delayed Draw Term Loans to the Borrower, at any time and from time to time on or after the Closing Date until the Delayed Draw Term Loan Commitment Expiration Date.

Amounts paid or prepaid in respect of Term Loans may not be reborrowed. Subject to the terms, conditions and limitations set forth herein, the Borrower may borrow, pay or prepay and reborrow Revolving Loans.

Section 2.02 Loans. (a) Each Loan shall be made as part of a Borrowing consisting of Loans made by the Lenders ratably in accordance with their applicable Commitments; provided that the failure of any Lender to make any Loan shall not in itself relieve any other Lender of its obligation to lend hereunder (it being understood, however, that no Lender shall be responsible for the failure of any other Lender to make any Loan required to be made by such other Lender).

 

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(b) Subject to Section 2.11 and Section 2.12, each Borrowing shall be comprised entirely of ABR Loans or Benchmark Rate Loans as the Borrower may request pursuant to Section 2.03. Each Lender may at its option make any Benchmark Rate Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of the Lender to make such Loan and the Borrower to repay such Loan in accordance with the terms of this Agreement. Borrowings of more than one Type may be outstanding at the same time; provided that the Borrower shall not be entitled to request any Borrowing that, if made, would result in more than ten Benchmark Rate Borrowings outstanding hereunder at any one time. For purposes of the foregoing, Borrowings having different Interest Periods, regardless of whether they commence on the same date, shall be considered separate Borrowings.

(c) Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds to such account in New York City as the Administrative Agent may designate from time to time not later than 11:00 a.m., New York City time, and the Administrative Agent shall promptly credit the amounts so received to an account as directed by the Borrower in the applicable Borrowing Request or, if a Borrowing shall not occur on such date because any condition precedent herein specified shall not have been met, return the amounts so received to the respective Lenders within two Business Days.

(d) Unless the Administrative Agent shall have received written notice from a Lender prior to the date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender’s portion of such Borrowing, the Administrative Agent may assume that such Lender has made such portion available to the Administrative Agent on the date of such Borrowing in accordance with paragraph (c) above, and the Administrative Agent may (but shall not be obligated to), in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If the Administrative Agent shall have so made funds available, then, to the extent that such Lender shall not have made such portion available to the Administrative Agent, each of such Lender and the Borrower severally agrees to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Administrative Agent at (i) in the case of such Lender, the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules or practices on interbank compensation, and (ii) in the case of the Borrower, the interest rate applicable to the Borrowing pursuant to which the Borrower received such funds. If such Lender shall repay to the Administrative Agent such corresponding amount, such amount shall constitute such Lender’s Loan as part of such Borrowing for purposes of this Agreement, and the Borrower’s obligation to repay the Administrative Agent such corresponding amount pursuant to this Section 2.02(d) shall cease.

(e) Notwithstanding any other provision of this Agreement, the Borrower shall not be entitled to request, or to elect to convert or continue, any Borrowing if the Interest Period requested with respect thereto would end after the Revolving Maturity Date or the Term Loan Maturity Date, as applicable

(f) The Delayed Draw Term Loans may be borrowed in up to five (5) borrowings commencing on the Closing Date until the date that is the earlier of (x) eighteen (18) months after the Closing Date and (y) the date on which the Delayed Draw Term Loan Commitments are reduced to zero (the “Delayed Draw Term Loan Commitment Expiration Date”) and each Borrowing in respect thereof shall comprise an aggregate principal amount that is not less than $1,000,000.

 

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(g) If the Borrower has made an LCA Election prior to the Delayed Draw Term Loan Commitment Expiration Date with respect to any Permitted Acquisition or similar Investment (and related transactions) that the Borrower in good faith believes be consummated after the Delayed Draw Term Loan Commitment Expiration Date, the associated Delayed Draw Term Loans may be funded into escrow on the Delayed Draw Term Loan Commitment Expiration Date pending the consummation of such Permitted Acquisition or similar Investment (and related transactions), subject to terms and conditions reasonably acceptable to the Administrative Agent.

(h) It is the understanding, agreement and intention of the parties hereto that each Borrowing of Delayed Draw Term Loans, once funded, shall be part of the same tranche, Type and Class of Term Loans as the Initial Term Loans made on the Closing Date and shall constitute Initial Term Loans, resulting in a single tranche of fungible Initial Term Loans for all purposes under this Agreement and each of the other Loan Documents.

Section 2.03 Borrowing Procedure. To request a Revolving Borrowing or Term Borrowing, the Borrower shall deliver, by hand delivery, email through a “pdf” copy or facsimile transmission (or transmit by other electronic transmission if arrangements for doing so have been approved in writing by the Administrative Agent), a duly completed and executed Borrowing Request to the Administrative Agent (i) in the case of a Benchmark Rate Term Borrowing, not later than 12:00 p.m., New York City time, on the fifth Business Day before the date of the proposed Borrowing (or such later time as may be reasonably acceptable to the Administrative Agent, in the case of any Borrowing with respect to the Initial Term Loans), (ii) in the case of an ABR Term Borrowing, not later than 4:00 p.m., New York City time, on the fifth Business Day prior to the proposed Borrowing (or such later time on such Business Day as may be reasonably acceptable to the Administrative Agent with respect to the Initial Term Loans) and (iii) in the case of any Revolving Borrowing, not later than 12:00 p.m., New York City time, on the fifth Business Day before the date of the proposed Borrowing (or such later time as may be reasonably acceptable to the Administrative Agent). Each Borrowing Request shall be irrevocable and shall specify the following information in compliance with Section 2.02:

(a) whether the requested Borrowing is to be a Borrowing of Revolving Loans or Term Loans;

(b) the aggregate amount of such Borrowing;

(c) the date of such Borrowing, which shall be a Business Day;

(d) whether such Borrowing is to be an ABR Borrowing or a Benchmark Rate Borrowing;

(e) in the case of a Benchmark Rate Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term “Interest Period”;

(f) the location and number of the Borrower’s account to which funds are to be disbursed; and

(g) that, in the case of a Revolving Borrowing, the conditions set forth in Section 4.02(b) and Section 4.02(c) are satisfied as of the date of the notice and, in the case of a Delayed Draw Term Loan Borrowing, the conditions set forth in Section 4.03(b) and 4.03(c) are satisfied as of the date of the notice.

 

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If no election as to the Type of Borrowing is specified, then the requested Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any requested Benchmark Rate Borrowing, then Borrower shall be deemed to have selected an Interest Period of one month’s duration. Promptly following receipt of a Borrowing Request in accordance with this Section 2.03, the Administrative Agent shall advise each Lender of the details thereof and of the amount of such Lender’s Loan to be made as part of the requested Borrowing.

Section 2.04 Evidence of Debt; Repayment of Loans. (a) Borrower hereby unconditionally promises to pay to (i) the Administrative Agent for the account of each Term Loan Lender, the principal amount of each Term Loan of such Term Loan Lender as provided in Section 2.09 and (ii) the Administrative Agent for the account of each Revolving Lender, the then unpaid principal amount of each Revolving Loan of such Revolving Lender on the Revolving Maturity Date.

(b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time under this Agreement.

(c) The Administrative Agent shall maintain the Register in which it will record (i) the amount of each Loan made hereunder, the Type and Class thereof and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder, and (iii) the amount of any sum received by the Administrative Agent hereunder for the account of the Lenders and each Lender’s share thereof.

(d) The entries made in the Register maintained pursuant to paragraph (c) above shall be conclusive evidence, absent manifest error, of the existence and amounts of the obligations therein recorded; provided that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligations of the Borrower and the other Loan Parties to pay, and perform, the Obligations in accordance with the Loan Documents. In the event of any conflict between the accounts and records maintained by any Lender and the accounts and records of the Administrative Agent in respect of such entries, the accounts and records of the Administrative Agent shall control in the absence of manifest error.

(e) Any Lender by written notice to the Borrower (with a copy to the Administrative Agent) may request that Loans of any Class made by it be evidenced by a promissory note. In such event, the Borrower shall promptly (and, in all events, within seven Business Days of receipt of such written notice), execute and deliver to such Lender a promissory note payable to such Lender (or, if requested by such Lender, to such Lender and its registered assigns) in the form of Exhibit F-1, F-2, F-3 or F-4, as the case may be. Thereafter, the Loans evidenced by such promissory note and interest thereon shall at all times (including after assignment pursuant to Section 11.04) be represented by one or more promissory notes in such form payable to the payee named therein (or to such payee and its registered assigns).

Section 2.05 Fees. (a) Commitment Fee. Borrower agrees to pay to the Administrative Agent for the account of each Revolving Lender (other than a Defaulting Lender) a commitment fee (a “Commitment Fee”) equal to 0.50% per annum of the average daily unused amount of each Revolving Commitment of such Revolving Lender during the period from and including the Closing Date to but excluding the date on which such Revolving Commitment terminates. Accrued Commitment Fees shall be payable in arrears (i) on the last Business Day of March, June, September and December of each year, commencing on the first such date to occur after the Closing Date, and (ii) on the date on which such Commitment terminates. Commitment Fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).

 

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For purposes of computing Commitment Fees, a Revolving Commitment of a Revolving Lender shall be deemed to be used to the extent of the outstanding Revolving Loans of such Lender

(b) Delayed Draw Ticking Fee The Borrower agrees to pay to the Administrative Agent for the account of each Delayed Draw Term Loan Lender of any Class (other than any Defaulting Lender) a commitment fee (the “Delayed Draw Ticking Fee”), which shall accrue at a rate per annum equal to the Delayed Draw Term Loan Commitment Fee Rate applicable to the Delayed Draw Term Loan Commitments of such Class on the actual amount of the unused Delayed Draw Term Loan Commitments of such Class of such Delayed Draw Term Loan Lender calculated based upon the actual number of days elapsed over a 360-day year for the period from and including the Closing Date to the date on which such Lender’s Delayed Draw Term Loan Commitment of such Class terminates. Accrued commitment fees shall be payable in arrears on the last Business Day of each March, June, September and December for the quarterly period then ended and on the Delayed Draw Term Loan Commitment Expiration Date. The Delayed Draw Ticking Fee shall be distributed to the Delayed Draw Term Loan Lenders pro rata in accordance with the amount of each such Delayed Draw Term Loan Lender’s Delayed Draw Term Loan Commitment.

(c) Administrative Agent Fees. Borrower agrees to pay to the Administrative Agent, for its own account, the administrative fees set forth in the Agent Fee Letter or such other fees payable in the amounts and at the times separately agreed upon between Borrower and the Administrative Agent (the “Administrative Agent Fees”).

(d) Other Fees. Borrower agrees to pay the Agents, for their own account, fees payable in the amounts and at the times separately agreed upon between Borrower and the applicable Agents.

(e) Payment of Fees. All Fees shall be paid on the dates due, in immediately available funds in Dollars, to the Administrative Agent for distribution, if and as appropriate, among the Lenders, except that the Borrower shall pay the Fees provided under (i) Section 2.05(d) directly to the Agents and (ii) Sections 2.05(g) and 2.05(h) directly to the Issuing Bank. Once paid, none of the Fees shall be refundable under any circumstances.

(f) Letter of Credit Fees. The Borrower also agrees to pay to the Revolving Lenders letter of credit fees equal to (i) the Applicable Margin for Revolving Loans that are Benchmark Rate Loans, times (ii) the average aggregate daily maximum amount available to be drawn under all such Letters of Credit (regardless of whether any conditions for drawing could then be met and determined as of the close of business on any date of determination); provided, during any period during which default rate interest is applicable under Section 2.06(c), the percentage referred to in the foregoing clause (i) shall be the Applicable Margin for Revolving Loans that are Benchmark Rate Loans plus 2.00% per annum. Accrued letter of credit shall be payable in arrears (i) on the last Business Day of March, June, September and December of each year, commencing on the first such date to occur after the Closing Date, and (ii) on the date on which the Revolving Commitment terminates. Letter of credit fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).

(g) Fronting Fees. The Borrower also agrees to pay directly to the Issuing Bank, for its own account, a fronting fee equal to (i) 0.125% per annum, times (ii) the average aggregate daily maximum amount available to be drawn under all Letters of Credit (determined as of the close of business on any date of determination). Accrued fronting fees shall be payable in arrears (i) on the last Business Day of March, June, September and December of each year, commencing on the first such date to occur after the Closing Date, and (ii) on the date on which the Revolving Commitment terminates. Fronting fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).

 

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(h) Documentary and Processing Charges. The Borrower also agrees to pay directly to the Issuing Bank, for its own account, such documentary and processing charges for any issuance, amendment, transfer or payment of a Letter of Credit as are in accordance with the Issuing Bank’s standard schedule for such charges and as in effect at the time of such issuance, amendment, transfer or payment, as the case may be.

(i) Exit Fee. Upon the occurrence of any Prepayment Premium Event, the Borrower shall pay to the Administrative Agent, for the account of each Term Loan Lender in accordance with their Pro Rata Percentage, a fee (in addition to and not a substitution for the payments of principal, interest and other fees payable hereunder), equal to 3.00% of the aggregate principal amount of Term Loans so paid or prepaid (such fee, the “Exit Fee”).

Section 2.06 Interest on Loans. (a) Subject to the provisions of Section 2.06(c), the Loans comprising each ABR Borrowing shall bear interest at a rate per annum equal to the Alternate Base Rate plus the Applicable Margin in effect from time to time.

(b) Subject to the provisions of Section 2.06(c), the Loans comprising each Benchmark Rate Borrowing shall bear interest at a rate per annum equal to the Benchmark Rate for the Interest Period in effect for such Borrowing plus the Applicable Margin in effect from time to time.

(c) Notwithstanding the foregoing, upon the occurrence and during the continuation of an Event of Default under (x) Section 8.01(a), 8.01(g) or 8.01(h), automatically, and (y) any other provision of Section 8.01, at the election of the Required Lenders, (i) the outstanding principal and, to the extent permitted under applicable law, accrued and unpaid interest in respect of the Loans shall bear interest, after as well as before judgment, at a rate per annum equal to the rate which is 2% in excess of the non-default rate applicable to the respective Loans from time to time and (y) all other overdue amounts owing under the Loan Documents shall bear interest, after as well as before judgment, at a rate per annum equal to the rate which is 2% in excess of the non-default rate then applicable to ABR Loans from time to time (the “Default Rate”).

(d) Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan; provided that (i) interest accrued pursuant to Section 2.06(c) shall be payable on demand, (ii) in the event of any repayment or prepayment of any Loan (other than a prepayment of an ABR Revolving Loan), accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (iii) in the event of any conversion of any Benchmark Rate Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion.

(e) All per annum interest hereunder shall be computed on the basis of a year of 360 days, except that interest computed by reference to the Alternate Base Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable Alternate Base Rate or Benchmark Rate shall be determined by the Administrative Agent in accordance with the provisions of this Agreement and such determination shall be conclusive absent manifest error.

 

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(f) Notwithstanding the requirements in this Agreement that interest shall be paid in cash, solely to the extent that the Borrower has delivered written notice to the Administrative Agent (such election, a “PIK Toggle Election”) not more than ten (10) Business Days prior to, but not less than three (3) Business Days prior to the first Interest Payment Date for which the Borrower wishes to make a PIK Toggle Election, the Borrower shall be permitted to pay up to 400 basis points (such percentage, the “PIK’d Amount”) of the interest owing on such Interest Payment Date pursuant to clauses (a) and (b) of this Section 2.06 (the “Specified Contractual Interest Rate”) in-kind by adding the amount of such interest to the outstanding principal amount of the outstanding Term Loans on such interest payment date (whereupon from and after any such date such capitalized amounts shall also accrue interest pursuant to the foregoing provisions of this Section 2.06 (including this clause (f))). If, after making a PIK Toggle Election, the Borrower has delivered written notice to the Administrative Agent not more than ten (10) Business Days prior to, but not less than three (3) Business Days prior to the next Interest Payment Date that it has elected to pay 100% of the interest owing on such Interest Payment Date pursuant to clauses (a) and (b) of this Section 2.06 in cash, then the Borrower shall not be permitted to make a future PIK Toggle Election without the consent of the Required Term Loan Lenders.

(g) The Borrower agrees to pay to the Issuing Bank, with respect to drawings honored under any Letter of Credit, interest on the amount paid by the Issuing Bank in respect of each such honored drawing from the date such drawing is honored to but excluding the date such amount is reimbursed by or on behalf of the Borrower at a rate equal to (i) for the period from the date such drawing is honored to but excluding the applicable Reimbursement Date, the rate of interest otherwise payable hereunder with respect to Revolving Loans that are Benchmark Rate Loans, and (ii) thereafter, a rate which is 2.00% per annum in excess of the rate of interest otherwise payable hereunder with respect to Revolving Loans that are Benchmark Rate Loans. Interest payable pursuant to this Section 2.06(g) shall be computed on the basis of a 365/366-day year for the actual number of days elapsed in the period during which it accrues, and shall be payable on demand or, if no demand is made, on the date on which the related drawing under a Letter of Credit is reimbursed in full. Promptly upon receipt by the Issuing Bank of any payment of interest pursuant to this Section 2.06(g), the Issuing Bank shall distribute to each Revolving Lender, out of the interest received by the Issuing Bank in respect of the period from the date such drawing is honored to but excluding the date on which the Issuing Bank is reimbursed for the amount of such drawing (including any such reimbursement out of the proceeds of any Revolving Loans), the amount that such Revolving Lender would have been entitled to receive in respect of the letter of credit fee that would have been payable in respect of such Letter of Credit for such period if no drawing had been honored under such Letter of Credit. In the event the Issuing Bank shall have been reimbursed by the Revolving Lenders for all or any portion of such honored drawing, the Issuing Bank shall distribute to each Revolving Lender which has paid all amounts payable by it under Section 2.17(e) with respect to such honored drawing such Revolving Lender’s Pro Rata Percentage of any interest received by the Issuing Bank in respect of that portion of such honored drawing so reimbursed by the Revolving Lenders for the period from the date on which the Issuing Bank was so reimbursed by the Revolving Lenders to but excluding the date on which such portion of such honored drawing is reimbursed by the Borrower.

(h) In connection with the use or administration of Term SOFR, the Administrative Agent, in consultation with the Borrower, will have the right to make Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Loan Document, any amendments implementing such Conforming Changes will become effective without any further action or consent of any other party to this Agreement or any other Loan Document. The Administrative Agent will promptly notify the Borrower and the Lenders of the effectiveness of any Conforming Changes in connection with the use or administration of Term SOFR.

Section 2.07 Termination and Reduction of Commitments. (a) Unless previously terminated, the Initial Term Loan Commitments in effect on the Closing Date shall automatically terminate upon the funding of the Initial Term Loans on the Closing Date and the Delayed Draw Term Loan Commitments shall automatically terminate (i) in the event a Delayed Draw Term Loan is funded, upon the making of such Delayed Draw Term Loan in a corresponding amount and (B) in any event, on the Delayed Draw Term Loan Commitment Expiration Date. Subject to the provisions of clause (b) below, the Revolving Commitments shall automatically terminate on the Revolving Maturity Date.

 

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(b) At its option, the Borrower may at any time terminate, or from time to time permanently reduce, the Commitments of any Class (other than Delayed Draw Term Loans, which may be reduced or terminated as provided in Section 2.07(d) below); provided that (i) each reduction of the Commitments of any Class (other than Delayed Draw Term Loans) shall be in an amount that is an integral multiple of $250,000 and not less than $500,000 and (ii) the Revolving Commitments shall not be terminated or reduced if, after giving effect to any concurrent prepayment of the Revolving Loans in accordance with Section 2.10, the aggregate amount of Revolving Exposures would exceed the aggregate amount of Revolving Commitments.

(c) The Borrower shall notify the Administrative Agent in writing of any election to terminate or reduce the Commitments under Section 2.07(b) at least three Business Days prior to the effective date of such termination or reduction (which effective date shall be a Business Day), specifying such election and the effective date thereof. Promptly following receipt of any such notice, the Administrative Agent shall advise the Lenders of the contents thereof. Each notice delivered by Borrower pursuant to this Section 2.07(c) shall be irrevocable; provided, that a notice of termination of the Commitments delivered by Borrower may state that such notice is conditioned upon the effectiveness of any other credit facilities, the closing of a securities offering or other refinancing of the Facilities, in which case, such notice may be revoked by Borrower (by written notice to the Administrative Agent during normal business hours on the Business Day prior to the specified effective date of such termination) if such condition is not satisfied and the Borrower shall pay any amounts due under Section 2.13, if any, in connection with any such revocation. With respect to the effectiveness of any such other credit facilities, the closing of any such securities offering, the Borrower may, subject to paying any amounts due under Section 2.13 with respect to such proposed extension, extend the date of termination to a Business Day occurring within three Business Days of the then effective termination date at any time during normal business hours prior to the then effective termination date with the consent of the Administrative Agent (such consent not to be unreasonably withheld, delayed or conditioned). Any termination or reduction of the Commitments of any Class shall be permanent. Each reduction of the Commitments of any Class shall be made ratably among the Lenders in accordance with their respective Commitments of such Class.

(d) Upon delivering the notice required by Section 2.07(e), the Borrower may at any time terminate or from time to time reduce the Delayed Draw Term Loan Commitments of any Class; provided that each reduction of the Delayed Draw Term Loan Commitments of any Class shall be in an amount that is an integral multiple of $1,000,000 or if less, the remaining amount thereof.

(e) The Borrower shall notify the Administrative Agent of any election to terminate or reduce the Delayed Draw Term Loan Commitment, as applicable, under Section 2.07(d) in writing at least three (3) Business Days prior to the effective date of such termination or reduction (or such later date to which the Administrative Agent may agree), specifying such election and the effective date thereof. Promptly following receipt of any notice, the Administrative Agent shall advise each applicable Delayed Draw Term Loan Lender of the contents thereof. Each notice delivered by the Borrower pursuant to this Section 2.07(e) shall be irrevocable; provided that any such notice may state that it is conditioned upon the effectiveness of other transactions or contingencies, in which case such notice may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. Any effective termination or reduction of any Delayed Draw Term Loan Commitment pursuant to this Section 2.07(e) shall be permanent. Upon any reduction of any Delayed Draw Term Loan Commitment, the Delayed Draw Term Loan Commitment of each Delayed Draw Term Loan Lender of the relevant Class shall be reduced by such Delayed Draw Term Loan Lender’s applicable Pro Rata Percentage of such reduction amount.

 

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Section 2.08 Interest Elections. (a) Each Revolving Borrowing and Term Borrowing initially shall be of the Type specified in the applicable Borrowing Request and, in the case of a Benchmark Rate Borrowing, shall have an initial Interest Period as specified in such Borrowing Request. Thereafter, the Borrower may elect to convert such Borrowing to a different Type or to continue such Borrowing and, in the case of a Benchmark Rate Borrowing, may elect Interest Periods therefor, all as provided in this Section 2.07(c). Borrower may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing. Notwithstanding anything to the contrary in this Agreement, the Borrower shall not be entitled to request any conversion or continuation that, if made, would result in more than ten Benchmark Rate Borrowings outstanding hereunder at any one time.

(b) To make an election pursuant to this Section 2.07(c), the Borrower shall deliver, by hand delivery, email through a “pdf” copy or facsimile transmission (or transmit by other electronic transmission if arrangements for doing so have been approved in writing by the Administrative Agent), a duly completed and executed Interest Election Request to the Administrative Agent not later than the time that a Borrowing Request would be required under Section 2.03 if the Borrower were requesting a Revolving Borrowing or Term Borrowing the Type resulting from such election to be made on the effective date of such election. Each Interest Election Request shall be irrevocable.

(c) Each Interest Election Request shall specify the following information in compliance with Section 2.02:

(i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, or if outstanding Borrowings are being combined, allocation to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing);

(ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day;

(iii) whether the resulting Borrowing is to be an ABR Borrowing or a Benchmark Rate Borrowing; and

(iv) if the resulting Borrowing is a Benchmark Rate Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term “Interest Period.”

If any such Interest Election Request requests a Benchmark Rate Borrowing but does not specify an Interest Period, then Borrower shall be deemed to have selected an Interest Period of one month’s duration.

(d) Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each Lender of the details thereof and of such Lender’s portion of each resulting Borrowing.

 

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(e) If an Interest Election Request with respect to a Benchmark Rate Borrowing is not timely delivered prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be converted to an ABR Borrowing. Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing, the Administrative Agent, at the direction of the Required Lenders, may require, by notice to the Borrower, that (i) no outstanding Borrowing may be converted to or continued, after any then-applicable Interest Period, as a Benchmark Rate Borrowing and (ii) unless repaid, each Benchmark Rate Borrowing shall be converted to an ABR Borrowing at the end of the Interest Period applicable thereto.

Section 2.09 Amortization of Term Borrowings.

(a) The Borrower shall pay to the Administrative Agent, for the account of the Initial Term Lenders, on the last calendar day of each calendar quarter, or if any such date is not a Business Day, on the immediately following Business Day (each such date, an “Initial Term Loan Repayment Date”), commencing on May 31, 2024, a principal amount of the Initial Term Loans equal to 0.25% of the original aggregate principal amount of Initial Term Loans (as adjusted from time to time pursuant to Section 2.10(g) and in connection with any additional Term Loans made pursuant to Section 2.19), together in each case with accrued and unpaid interest on the principal amount to be paid to but excluding the date of such payment.

(b) The Borrower shall pay to the Administrative Agent, for the account of the Delayed Draw Term Loan Lenders on the last day of each calendar quarter (or, if an such date is not a Business Day, on the immediately following Business Day) (each such date, a “Delayed Draw Term Loan Repayment Date”), commencing on May 31, 2024, a principal amount of the funded Delayed Draw Term Loans equal to 0.25% of the original aggregate principal amount of each funded Delayed Draw Term Loan, together in each case with accrued and unpaid interest on the principal amount to be paid to but excluding the date of such payment.

(c) To the extent not previously paid, all Term Loans shall be due and payable on the applicable Term Loan Maturity Date.

Section 2.10 Optional and Mandatory Prepayments of Loans. (a) Optional Prepayments. The Borrower shall have the right at any time and from time to time to prepay any Borrowing, in whole or in part, or to permanently reduce any portion of the Commitment, subject to any reimbursement required under Section 2.13 and the requirements of this Section 2.10; provided that each optional partial prepayment or permanent reduction in any Commitment shall be in an amount that is an integral multiple of $250,000 and not less than $500,000 or, if less, the outstanding principal amount of such Borrowing.

(b) Revolving Loan Prepayments. (i) In the event of the termination of all the Revolving Commitments, the Borrower shall, on the date of such termination, repay or prepay all its outstanding Revolving Borrowings.

(ii) In the event of any partial reduction of the unutilized portion of Revolving Commitments, then (x) at or prior to the effective date of such reduction, the Administrative Agent shall notify Borrower and the Revolving Lenders of the sum of the Revolving Exposures after giving effect thereto and (y) if the sum of the Revolving Exposures would exceed the aggregate amount of Revolving Commitments after giving effect to such reduction, then Borrower shall, on the date of such reduction, repay or prepay Revolving Borrowings in an aggregate amount sufficient to eliminate such excess.

 

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(iii) In the event that the sum of all Lenders’ Revolving Exposures exceeds the Revolving Commitments then in effect, the Borrower shall, without notice or demand, immediately repay or prepay Revolving Borrowings in an aggregate amount sufficient to eliminate such excess. If after giving effect to any prepayments required pursuant to the immediately preceding sentence, the Revolving Exposure exceeds the aggregate Revolving Commitments, the Borrower shall immediately Cash Collateralize the Letter of Credit Obligations in an amount equal to such excess.

(c) Asset Sales and Casualty Events. Not later than five (5) Business Days following the receipt by any Company of any Net Cash Proceeds of any Asset Sale or Casualty Event, the Borrower shall apply 100% of such Net Cash Proceeds to make prepayments in accordance with Sections 2.10(f) and (g); provided that:

(i) no such prepayment shall be required under this clause (c) to the extent the aggregate Net Cash Proceeds of all Casualty Events, Asset Sales or series of related Asset Sales do not result in more than $1,000,000 in any fiscal year (the “Asset Disposition Threshold” and the Net Cash Proceeds in excess of the Asset Disposition Threshold, the “Excess Net Cash Proceeds”);

(ii) such Excess Net Cash Proceeds shall not be required to be so applied on such date to the extent that the Borrower shall have delivered an Officers’ Certificate to the Administrative Agent on or prior to such date stating that such Excess Net Cash Proceeds are expected to be reinvested in assets used or useful in the business (other than ordinary course current assets) of the Borrower and the other Loan Parties within 365 days following the date of such Casualty Event or Asset Sale (which Officers’ Certificate shall set forth the estimates of the proceeds to be so expended); provided, that if the Property subject to such Casualty Event or Asset Sale constituted Collateral, then all Property purchased or otherwise acquired with the Excess Net Cash Proceeds thereof pursuant to this subsection shall be made subject to the first priority perfected Lien of the applicable Security Documents in favor of the Collateral Agent, for its benefit and for the benefit of the other Secured Parties to the extent required by Sections 5.10 and 5.11; and

(iii) if all or any portion of such Excess Net Cash Proceeds permitted to be reinvested pursuant to clause (ii) above is not contractually committed to be so reinvested within such 365-day period (and actually reinvested within 180 days after such contractual commitment was entered into), such unused portion shall be applied on the last day of such period as a mandatory prepayment as provided in this Section 2.10(c);

(d) Debt Issuance. Not later than five (5) Business Days following the receipt of any Net Cash Proceeds of any Debt Issuance by any Company (other than Indebtedness permitted by this Agreement (other than Indebtedness pursuant to Section 2.21 to refinance all or a portion of the Term Loans or New Term Loans)), the Borrower shall make prepayments in accordance with Sections 2.10(f) and (g) in an aggregate principal amount equal to 100% of such Net Cash Proceeds.

(e) Excess Cash Flow. No later than five (5) Business Days after the date on which the audited financial statements with respect to such fiscal year in which such Excess Cash Flow Period occurs are required to be delivered pursuant to Section 5.01(a) (for the avoidance of doubt, commencing with the fiscal year of the Borrower after the Closing Date), the Borrower shall make prepayments in accordance with Sections 2.10(f) and (g), in an aggregate principal amount equal to the following percentage of Excess Cash Flow (such percentage, the “Required ECF Percentage”) for the Excess Cash Flow Period then ended based on the Secured Leverage Ratio at the end of such Excess Cash Flow Period then ended:

 

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[***]

(f) Application of Prepayments.

(i) Mandatory Prepayments. Except as may be set forth in any Incremental Loan Amendment, any Extension Amendment or any Refinancing Amendment, all amounts required to be paid pursuant to Sections 2.10(c), 2.10(d) and 2.10(e) shall be applied pro rata to the outstanding Term Loans of each Class (or, in the case of the incurrence of Credit Agreement Refinancing Indebtedness, to the Term Loans of the Class or Classes to be refinanced with the proceeds of such Credit Agreement Refinancing Indebtedness), and to the remaining unpaid amortization payments required under Section 2.09 thereof as directed by the Borrower at the time of the respective prepayment (or, in the absence of such direction, in direct order of maturity to the remaining unpaid amortization payments required under Section 2.09).

(ii) Optional Prepayments. Except as may be set forth in any Incremental Loan Amendment, any Extension Amendment or any Refinancing Amendment, all amounts applied to the voluntary prepayment of any Term Loan pursuant to Section 2.10(a) shall be applied pro rata to the outstanding Term Loans of each Class, and to the remaining unpaid amortization payments required under Section 2.09 thereof as directed by the Borrower at the time of the respective prepayment (or, in the absence of such direction, in direct order of maturity to the remaining unpaid amortization payments required under Section 2.09). Within the parameters of the applications set forth above, prepayments shall be applied first to ABR Loans and then to Benchmark Rate Loans in direct order of Interest Period maturities. All prepayments of Benchmark Rate Loans under this Section 2.10(f) shall be subject to Section 2.13.

(g) Notice of Prepayment. Borrower shall notify the Administrative Agent by written notice of any prepayment hereunder (i) in the case of prepayment of a Benchmark Rate Borrowing, not later than Noon, New York City time, on the third Business Day before the date of prepayment (or such later time as may be agreed to by Administrative Agent in its sole discretion) and (ii) in the case of prepayment of an ABR Borrowing, not later than Noon, New York City time, one Business Day before the date of prepayment (or such later time as may be agreed to by Administrative Agent in its sole discretion). Each such notice shall be irrevocable, provided that, if a notice of prepayment is given in connection with a conditional notice of termination of the Commitments as contemplated by Section 2.07, then such notice of prepayment may be revoked or extended if such termination is revoked or extended in accordance with Section 2.07. Each such notice shall specify the prepayment date, the principal amount of each Borrowing or portion thereof to be prepaid and, in the case of a mandatory prepayment, a reasonably detailed calculation of the amount of such prepayment. Promptly following receipt of any such notice, the Administrative Agent shall advise the Lenders of the contents thereof. Such notice to the Lenders may be by electronic communication. Each partial

 

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prepayment of any Borrowing shall be in an amount that would be permitted in the case of a Borrowing of the same Type as provided in Section 2.02, except as necessary to apply fully the required amount of a mandatory prepayment. Each prepayment of a Borrowing shall be applied ratably to the Loans included in the prepaid Borrowing and otherwise in accordance with this Section 2.10. Prepayments shall be accompanied by accrued interest to the extent required by Section 2.06.

(h) Waiver of Mandatory Prepayments. Notwithstanding the foregoing provisions of this Section 2.10, (i) in the case of any mandatory prepayment of the Term Loans, Term Loan Lenders, as applicable, may waive by written notice to the Borrower and the Administrative Agent on or before the date on which such mandatory prepayment would otherwise be required to be made hereunder the right to receive the amount of such mandatory prepayment of the Term Loans, as applicable, (ii) any amounts not applied to the prepayment of Term Loans, as applicable, shall be applied instead to the prepayment of outstanding Revolving Loans (but without any corresponding reduction in Revolving Commitments and (iii) so long as no Default or Event of Default has occurred and is continuing, to the extent there are any prepayment amounts remaining after the foregoing application, such amounts shall be paid promptly by the Administrative Agent to the Borrower.

(i) Loan Call Protection. In the event that, prior to the second anniversary of the Closing Date, (i) the Borrower makes any prepayment or repayment of Initial Term Loans and/or Delayed Draw Term Loans pursuant to Section 2.10(a), 2.10(c) and 2.10(d), (ii) the Borrower makes any prepayment or repayment of Initial Term Loans and/or Delayed Draw Term Loans in whole or in part following a Change in Control or an acceleration of the Initial Term Loans and/or Delayed Draw Term Loans (with the date of such prepayment or repayment, for purposes of calculating the payment required pursuant to this Section 2.10(i), to be deemed to be the date on which such Change in Control or acceleration of the Initial Term Loans and/or Delayed Draw Term Loans occurs) or (iii) the Borrower replaces any Lender in accordance with Section 2.16(b) , in each case, the Borrower shall pay to the Administrative Agent, for the ratable account of each of the Lenders holding Initial Term Loans and/or Delayed Draw Term Loans (including any Lender that is replaced pursuant to Section 2.16(b)) (each such event, a “Prepayment Premium Event”), a premium equal to (w) if such event occurs prior to the first anniversary of the Closing Date, 3.00%, (x) if such event occurs after the first anniversary of the Closing Date but on or prior to the second anniversary of the Closing Date, 2.00% and (y) if such event occurs on or after the second anniversary but prior to the third anniversary of the Closing Date, 1.00% of the aggregate principal amount of the Initial Term Loans and/or Delayed Draw Term Loans being prepaid or repaid (or mandatorily assigned) (such premiums, the “Prepayment Premium”). Without limiting the generality of the foregoing, it is understood and agreed that if the Initial Term Loans and/or Delayed Draw Term Loans are accelerated or otherwise become due prior to the Maturity Date, in each case, in respect of any Event of Default (including upon the occurrence of an Event of Default under Section 8.01(g) or 8.01(h) (including the acceleration of claims by operation of law)), any Prepayment Premium or Exit Fee that would otherwise be applicable with respect to a prepayment of the Initial Term Loans and/or Delayed Draw Term Loans at such time pursuant to Section 2.10(a) will also be due and payable on the date of such acceleration or such other prior due date as though the Initial Term Loans and/or Delayed Draw Term Loans were voluntarily prepaid as of such date and shall constitute part of the Obligations, in view of the impracticability and extreme difficulty of ascertaining actual damages and by mutual agreement of the parties as to a reasonable calculation of each Lender’s loss as a result thereof. Any premium payable above or the Exit Fee shall be presumed to be the liquidated damages sustained by each Lender and the Borrower agrees that it is reasonable under the circumstances currently existing. THE BORROWER EXPRESSLY WAIVES (TO THE FULLEST EXTENT IT MAY LAWFULLY DO SO) THE PROVISIONS OF ANY PRESENT OR FUTURE STATUTE OR LAW THAT PROHIBITS OR MAY PROHIBIT THE COLLECTION OF THE PREPAYMENT PREMIUM OR THE EXIT FEE IN CONNECTION WITH ANY SUCH ACCELERATION. The Borrower expressly agrees (to the fullest extent it may lawfully do so) that: (A) each of the Prepayment Premium and the Exit Fee is reasonable

 

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and is the product of an arm’s length transaction between sophisticated business people, ably represented by counsel; (B) each of the Prepayment Premium and the Exit Fee shall be payable notwithstanding the then prevailing market rates at the time payment is made; (C) there has been a course of conduct between the Lenders and the Borrower giving specific consideration in this transaction for such agreement to pay the Prepayment Premium and the Exit Fee; and (D) the Borrower shall be estopped hereafter from claiming differently than as agreed to in this paragraph.

(j) Foreign Subsidiary Restrictions. Notwithstanding any other provisions of this Section 2.10, (A) to the extent that any or all of the Net Cash Proceeds of any Asset Sale or Casualty Event by a Foreign Subsidiary or the portion of Excess Cash Flow for any Excess Cash Flow Period attributable to a Foreign Subsidiary are prohibited, restricted or delayed from being repatriated to the United States, or such repatriation or prepayment would present a material risk of liability for the applicable Foreign Subsidiary or its directors or officers (or would give rise to a material risk of breach of fiduciary or statutory duties by any director or officer), the Borrower shall not be required to make a prepayment at the time provided in this Section 2.10 with respect to such affected amounts, and instead, such amounts may be retained by the applicable Foreign Subsidiary (the Borrower hereby agreeing to use commercially reasonable efforts to otherwise cause the applicable Foreign Subsidiary following the date on which the respective payment would otherwise have been required, promptly to take all actions reasonably required by the applicable local Law or other impediment to permit such repatriation), and if following the date on which the respective payment would otherwise have been required, such repatriation of any of such Net Cash Proceeds or Excess Cash Flow is permitted under the applicable local Law or other impediment (or is otherwise received by the Borrower or a Subsidiary Guarantor), such repatriation will be promptly effected and such repatriated Net Cash Proceeds or Excess Cash Flow will be promptly (and in any event not later than three (3) Business Days after such repatriation could be made) applied (whether or not repatriation actually occurs) to the repayment of the Term Loans pursuant to this Section 2.10 to the extent provided herein and (B) to the extent that the Borrower has determined in good faith that repatriation of any of or all Net Cash Proceeds or Excess Cash Flow could reasonably be expected to have an adverse Tax consequence that is not de minimis (taking into account any foreign tax credit or benefit actually realized in connection with such repatriation) with respect to such Net Cash Proceeds or Excess Cash Flow, the Net Cash Proceeds or Excess Cash Flow so affected may be retained by the applicable Foreign Subsidiary; provided that, in the case of this clause (B), on or before the date that is twelve months after the date on which any Net Cash Proceeds or Excess Cash Flow so retained would otherwise have been required to be applied to prepayments pursuant to this Section 2.10(e), the Borrower shall apply an amount equal to such Net Cash Proceeds or Excess Cash Flow to such prepayments as if such Net Cash Proceeds or Excess Cash Flow had been received by the Borrower rather than a Foreign Subsidiary, less the amount of additional Taxes that would have been payable or reserved against if such Net Cash Proceeds or Excess Cash Flow had been repatriated.

Section 2.11 Making or Maintaining Benchmark Rate Loans. Notwithstanding anything to the contrary herein or in any other Loan Document:

(a) Subject to clauses (b), (c), (d), (e) and (f) of this Section 2.11, if:

(i) the Administrative Agent determines (which determination shall be conclusive absent manifest error) prior to the commencement of any Interest Period for a Term Benchmark Borrowing, that adequate and reasonable means do not exist for ascertaining Term SOFR (including because the Term SOFR Reference Rate is not available or published on a current basis), for such Interest Period; or

 

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(ii) the Administrative Agent is advised by the Required Lenders that prior to the commencement of any Interest Period for a Term Benchmark Borrowing, the Adjusted Term SOFR Rate for such Interest Period will not adequately and fairly reflect the cost to such Lenders (or Lender) of making or maintaining their Loans (or its Loan) included in such Borrowing for such Interest Period;

then the Administrative Agent will promptly so notify the Borrower and each Lender. Upon notice thereof by the Administrative Agent to the Borrower, any obligation of the Lenders to make Benchmark Rate Loans, and any right of the Borrower to continue Benchmark Rate Loans or to convert ABR Loans to Benchmark Rate Loans, shall be suspended (to the extent of the affected Benchmark Rate Loans or affected Interest Periods) until the Administrative Agent (with respect to clause (ii), at the instruction of the Required Lenders) revokes such notice. Upon receipt of such notice, (i) the Borrower may revoke any pending request for a borrowing of, conversion to or continuation of Benchmark Rate Loans (to the extent of the affected Benchmark Rate Loans or affected Interest Periods) or, failing that, the Borrower will be deemed to have converted any such request into a request for a Borrowing of or conversion to ABR Loans in the amount specified therein and (ii) any outstanding affected Benchmark Rate Loans will be deemed to have been converted into ABR Loans at the end of the applicable Interest Period. Upon any such conversion, the Borrower shall also pay accrued interest on the amount so converted, together with any additional amounts required pursuant to Section 2.13. Subject to 2.11(b) if the Administrative Agent determines (which determination shall be conclusive and binding absent manifest error) that Term SOFR cannot be determined pursuant to the definition thereof on any given day, the interest rate on ABR Loans shall be determined by the Administrative Agent without reference to clause (c) of the definition of “Alternate Base Rate” until the Administrative Agent revokes such determination.

(b) Notwithstanding anything to the contrary herein or in any other Loan Document, if a Benchmark Transition Event and its related Benchmark Replacement Date have occurred prior any setting of the then-current Benchmark Rate, then (x) if a Benchmark Replacement is determined in accordance with clause (a) of the definition of “Benchmark Replacement” for such Benchmark Replacement Date, such Benchmark Replacement will replace such Benchmark Rate for all purposes hereunder and under any Loan Document in respect of such Benchmark Rate setting and subsequent Benchmark Rate settings without any amendment to, or further action or consent of any other party to, this Agreement or any other Loan Document and (y) if a Benchmark Replacement is determined in accordance with clause (b) of the definition of “Benchmark Replacement” for such Benchmark Replacement Date, such Benchmark Replacement will replace such Benchmark Rate for all purposes hereunder and under any Loan Document in respect of any Benchmark Rate setting at or after 5:00 p.m. (New York City time) on the fifth (5th) Business Day after the date notice of such Benchmark Replacement is provided to the Lenders without any amendment to, or further action or consent of any other party to, this Agreement or any other Loan Document so long as the Administrative Agent has not received, by such time, written notice of objection to such Benchmark Replacement from Lenders comprising the Required Lenders. If the Benchmark Replacement is Adjusted Daily Simple SOFR, all interest payments will be payable on a monthly basis.

(c) In connection with the use, administration, adoption or implementation of a Benchmark Replacement, the Administrative Agent will have the right to make Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Loan Document, any amendments implementing such Conforming Changes will become effective without any further action or consent of any other party to this Agreement or any other Loan Document.

 

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(d) The Administrative Agent will promptly notify the Borrower and the Lenders of (i) the implementation of any Benchmark Replacement and (ii) the effectiveness of any Conforming Changes in connection with the use, administration, adoption or implementation of a Benchmark Replacement. The Administrative Agent will notify the Borrower of (x) the removal or reinstatement of any tenor of a Benchmark Rate pursuant to Section 2.11(e) and (y) the commencement of any Benchmark Unavailability Period. Any determination, decision or election that may be made by the Administrative Agent or, if applicable, any Lender (or group of Lenders) pursuant to this Section 2.11, including any determination with respect to a tenor, rate or adjustment or of the occurrence or non-occurrence of an event, circumstance or date and any decision to take or refrain from taking any action or any selection, will be conclusive and binding absent manifest error and may be made in its or their sole discretion and without consent from any other party to this Agreement or any other Loan Document, except, in each case, as expressly required pursuant to this Section 2.11.

(e) Unavailability of Tenor of Benchmark. Notwithstanding anything to the contrary herein or in any other Loan Document, at any time (including in connection with the implementation of a Benchmark Replacement), (i) if the then-current Benchmark Rate is a term rate (including Term SOFR) and either (A) any tenor for such Benchmark Rate is not displayed on a screen or other information service that publishes such rate from time to time as selected by the Administrative Agent, in consultation with the Borrower and in its reasonable discretion or (B) the Term SOFR Administrator or the regulatory supervisor for the administrator of such Benchmark Rate has provided a public statement or publication of information announcing that any tenor for such Benchmark Rate is not or will not be representative or in compliance with or aligned with the International Organization of Securities Commissions (IOSCO) Principles for Financial Benchmarks, then the Administrative Agent may modify the definition of “Interest Period” (or any similar or analogous definition) for any Benchmark Rate settings at or after such time to remove such unavailable, non-representative, non-compliant or non-aligned tenor and (ii) if a tenor that was removed pursuant to clause (i) above either (A) is subsequently displayed on a screen or information service for a Benchmark Rate (including a Benchmark Replacement) or (B) is not, or is no longer, subject to an announcement that it is not or will not be representative or in compliance with or aligned with the International Organization of Securities Commissions (IOSCO) Principles for Financial Benchmarks for a Benchmark Rate (including a Benchmark Replacement), then the Administrative Agent may modify the definition of “Interest Period” (or any similar or analogous definition) for all Benchmark Rate settings at or after such time to reinstate such previously removed tenor.

(f) Upon the Borrower’s receipt of notice of the commencement of a Benchmark Unavailability Period, the Borrower may revoke any pending request for a Benchmark Rate Borrowing of, conversion to or continuation of Benchmark Rate Loans to be made, converted or continued during any Benchmark Unavailability Period and, failing that, the Borrower will be deemed to have converted any such request into a request for a Borrowing of or conversion to ABR Loans. During a Benchmark Unavailability Period or at any time that a tenor for the then-current Benchmark Rate is not an Available Tenor, the component of Alternate Base Rate based upon the then-current Benchmark Rate or such tenor for such Benchmark Rate, as applicable, will not be used in any determination of Alternate Base Rate.

 

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Section 2.12 Increased Costs; Change in Legality. (a) If any Change in Law shall:

(i) impose, modify or deem applicable any reserve, special deposit or similar requirement against Property of, deposits with or for the account of, or credit extended by, any Lender (except any such reserve requirement reflected in the Benchmark Rate) or the Issuing Bank;

(ii) subject the Administrative Agent, any Lender, the Issuing Bank or such other Recipient to any Taxes (other than (x) Excluded Taxes and (y) Indemnified Taxes that are covered by Section 2.15) on or with respect to its Loans, loan principal, letters of credit, commitments, or other obligations, or its deposits, reserves, other liabilities or capital attributable to any Loan or Commitment; or

(iii) impose on any Lender or the Issuing Bank or the London interbank market any other condition, cost or expense affecting this Agreement or Benchmark Rate Loans made by such Lender or any Letter of Credit or participation therein;

and the result of any of the foregoing shall be to increase the cost to the Administrative Agent, such Lender or such other Recipient of making or maintaining any Loan (or of maintaining its obligation to make any such Loan) or increase the cost to such Lender or the Issuing Bank of participating in, issuing or maintaining any Letter of Credit (or of maintaining its obligation to participate in or to issue any Letter of Credit), or to increase the cost to the Administrative Agent, such Lender or such Lender’s holding company, if any, to reduce the amount of any sum received or receivable by the Administrative Agent, such Lender, Issuing Bank or such other Recipient hereunder (whether of principal, interest or otherwise), then Borrower will pay to the Administrative Agent, such Lender, the Issuing Bank or such other Recipient, as the case may be, such additional amount or amounts as will compensate the Administrative Agent, such Lender, the Issuing Bank or such other Recipient, as the case may be, for such additional costs incurred or reduction suffered; provided that the foregoing shall not apply to any such costs incurred more than 270 days prior to the date on which Borrower receives a certificate in regard thereto (provided, further, that the foregoing limitation shall not apply to any such costs arising out of the retroactive application of any Change in Law), as provided in subsection (c) below. The protection of this Section 2.12 shall be available to each Lender regardless of any possible contention of the invalidity or inapplicability of the Change in Law that shall have occurred or been imposed.

(b) If any Lender or Issuing Bank determines (in good faith in its reasonable discretion) that any Change in Law regarding Capital Requirements or liquidity has or would have the effect of reducing the rate of return on such Lender’s or the Issuing Bank’s capital or on the capital of such Lender’s or Issuing Bank’s holding company, if any, as a consequence of this Agreement, the Commitment of such Lender or the Loans made by, or participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by the Issuing Bank to a level below that which such Lender or the Issuing Bank or such Lender’s or Issuing Bank’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s or Issuing Bank’s policies and the policies of such Lender’s or Issuing Bank’s holding company with respect to capital adequacy), then from time to time Borrower will pay to such Lender or the Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or the Issuing Bank or such Lender’s or Issuing Bank’s holding company, for any such reduction suffered; provided that the foregoing shall not apply to any such costs incurred more than 270 days prior to the date on which Borrower receives a certificate in regard thereto (provided, further, that the foregoing limitation shall not apply to any such costs arising out of the retroactive application of any Change in Law), as provided in subsection (c) below.

(c) A certificate of a Lender or the Issuing Bank setting forth in reasonable detail the amount or amounts necessary to compensate such Lender, the Issuing Bank or their respective holding company, as the case may be, as specified in paragraph (a) or (b) of this Section 2.12 shall be delivered to the Borrower (with a copy to the Administrative Agent) and shall be conclusive and binding absent manifest error. Borrower shall pay such Lender or Issuing Bank, as the case may be, the amount shown as due on any such certificate within ten (10) Business Days after receipt thereof.

 

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(d) Failure or delay on the part of any Lender or the Issuing Bank to demand compensation pursuant to this Section 2.12 shall not constitute a waiver of such Lender’s or Issuing Bank’s right to demand such compensation, except as otherwise expressly provided in subsection (a) and (b) above; provided that the Borrower shall not be required to compensate a Lender or Issuing Bank pursuant to this Section for any increased costs incurred or reductions suffered more than 180 days prior to the date that such Lender or Issuing Bank, as the case may be, notifies the Borrower of the Change in Law giving rise to such increased costs or reductions, and of such Lender’s or Issuing Bank’s intention to claim compensation therefore (except that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 180-day period referred to above shall be extended to include the period of retroactive effective thereof).

(e) If any Lender determines in good faith in its reasonable discretion that any Change in Law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for any Lender to make, maintain or fund Benchmark Rate Loans, or to determine or charge interest rates based upon the Benchmark Rate, or any Governmental Authority has imposed material restrictions (other than such restrictions which are compensated for comprehensively under Section 2.12(a)) on the authority of such Lender to purchase or sell, or to take deposits of, Dollars in the London interbank market, then, on written notice thereof by such Lender to the Borrower through the Administrative Agent, any obligation of such Lender to make or continue Benchmark Rate Loans or to convert ABR Loans to Benchmark Rate Loans or, if such notice relates to the unlawfulness or asserted unlawfulness of charging interest based on the Benchmark Rate, to make ABR Loans as to which the interest rate is determined with reference to the Benchmark Rate shall be suspended until such Lender notifies in writing the Administrative Agent and the Borrower that the circumstances giving rise to such determination no longer exist. Upon receipt of such notice, the Borrower shall, within three Business Days after demand from such Lender (with a copy to the Administrative Agent), prepay or, if applicable, convert all Benchmark Rate Loans of such Lender and ABR Loans as to which the interest rate is determined with reference to the Benchmark Rate to ABR Loans as to which the rate of interest is not determined with reference to the Benchmark Rate, either on the last day of the Interest Period therefor, if such Lender may lawfully continue to maintain such Benchmark Rate Loans to such day, or immediately, if such Lender may not lawfully continue to maintain such Benchmark Rate Loans or a ABR Loan as to which the interest rate is determined with reference to the Benchmark Rate. Notwithstanding the foregoing and despite the illegality for such a Lender to make, maintain or fund Benchmark Rate Loans or ABR Loans as to which the interest rate is determined with reference to the Benchmark Rate, that Lender shall remain committed to make ABR Loans as to which the rate of interest is not determined with reference to the Benchmark Rate and shall be entitled to recover interest at such Alternate Base Rate. Upon any such prepayment or conversion, the Borrower shall also pay accrued interest on the amount so prepaid or converted.

(f) For purposes of paragraph (e) of this Section 2.12, a written notice to the Borrower by any Lender shall be effective as to each Benchmark Rate Loan made by such Lender, if lawful, on the last day of the Interest Period then applicable to such Benchmark Rate Loan; in all other cases such notice shall be effective on the date of receipt by Borrower.

Section 2.13 Breakage Payments. In the event of (a) the payment or prepayment, whether optional or mandatory, of any principal of any Benchmark Rate Loan earlier than the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any Benchmark Rate Loan earlier than the last day of the Interest Period applicable thereto, to the extent thereof, (c) the failure to borrow, convert, continue or prepay any Revolving Loan or Term Loan on the

 

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date specified in any notice delivered pursuant hereto, to the extent thereof, or (d) the assignment of any Benchmark Rate Loan earlier than the last day of the Interest Period applicable thereto as a result of a request by Borrower pursuant to Section 2.16, to the extent thereof, then, in any such event, the Borrower shall compensate each Lender for the loss, cost and expense attributable to such event. In the case of a Benchmark Rate Loan, such loss, cost or expense to any Lender shall be deemed to include an amount reasonably determined by such Lender in good faith to be the excess, if any, of (i) the amount of interest which would have accrued on the principal amount of such Loan had such event not occurred, at the Benchmark Rate that would have been applicable to such Loan, for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or continue, for the period that would have been the Interest Period for such Loan), in excess of (ii) the amount of interest which would accrue on such principal amount for such period at the interest rate which such Lender would bid were it to bid, at the commencement of such period, for Dollar deposits of a comparable amount and period from other banks in the eurodollar market. A certificate of any Lender setting forth in reasonable detail any amount or amounts that such Lender is entitled to receive pursuant to this Section 2.13 shall be delivered to the Borrower (with a copy to the Administrative Agent) and shall be conclusive and binding absent manifest error. Borrower shall pay such Lender the amount shown as due on any such certificate within seven Business Days after receipt thereof.

Notwithstanding any of the other provisions of this Section 2.13, so long as no Event of Default shall have occurred and be continuing, if any prepayment of Benchmark Rate Loans is required to be made under Section 2.10 prior to the last day of the Interest Period therefor, in lieu of making any payment pursuant to Section 2.10 in respect of any such Benchmark Rate Loan prior to the last day of the Interest Period therefor, the Borrower may, in its sole discretion, deposit with the Administrative Agent the amount of any such prepayment otherwise required to be made hereunder until the last day of such Interest Period, at which time the Administrative Agent shall be authorized (without any further action by or notice to or from the Borrower or any other Loan Party) to apply such amount to the prepayment of such Loans in accordance with Section 2.10. Such deposit shall constitute cash collateral for the Benchmark Rate Loans to be so prepaid, provided that the Borrower may at any time direct that such deposit be applied to make the applicable payment required pursuant to Section 2.10.

Section 2.14 Payments Generally; Pro Rata Treatment; Sharing of Setoffs. (a) The Borrower shall make each payment required to be made by it hereunder or under any other Loan Document (whether of principal, interest or fees, or of amounts payable under Section 2.12, 2.13 or 2.15, or otherwise) on or before the time expressly required hereunder or under such other Loan Document for such payment (or, if no such time is expressly required, prior to 2:00 p.m., New York City time), on the date when due, in immediately available funds, without setoff, deduction or counterclaim. Any amounts received after such time on any date may, in the reasonable discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Administrative Agent at its offices at 520 Madison Avenue, New York, New York 10022 (or such other office as the Administrative Agent shall specify in writing to the Borrower), except that payments pursuant to Sections 2.12, 2.13, 2.15 and 11.03 shall be made directly to the persons entitled thereto and payments pursuant to other Loan Documents shall be made to the persons specified therein. Subject to Article X, the Administrative Agent shall distribute any such payments received by it for the account of any other persons ratably to the appropriate recipients promptly following receipt thereof. If any payment under any Loan Document shall be due on a day that is not a Business Day, unless specified otherwise, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments under each Loan Document shall be made in Dollars.

 

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(b) If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, interest and fees then due hereunder, such funds shall be applied (i) first, towards payment of interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second, towards payment of principal then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal then due to such parties.

(c) If any Lender shall, by exercising any right of setoff or counterclaim or otherwise (including by exercise of its rights under the Security Documents), obtain payment in respect of any principal of or interest on any of its Revolving Loans or Term Loans resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Revolving Loans and Term Loans and accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Revolving Loans and Term Loans of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Revolving Loans and Term Loans; provided that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed to apply to any payment made by Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Revolving Loans or Term Loans or participations in Letters of Credit to any assignee or participant, other than to any Company or any Affiliates thereof (as to which the provisions of this paragraph shall apply). Each Loan Party consents to the foregoing and agrees, to the extent it may effectively do so under applicable Legal Requirements, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against each Loan Party rights of setoff and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of such Loan Party pursuant to this Agreement in the amount of such participation. If under applicable bankruptcy, insolvency or any similar law any Secured Party receives a secured claim in lieu of a setoff or counterclaim to which this Section 2.14(c) applies, such Secured Party shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights to which the Secured Party is entitled under this Section 2.14(c) to share in the benefits of the recovery of such secured claim.

(d) Unless the Administrative Agent shall have received written notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders or the Issuing Bank hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or the Issuing Bank, as the case may be, the amount due. In such event, if the Borrower has not in fact made such payment, then each of the Lenders or the Issuing Bank, as the case may be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or the Issuing Bank, with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules or practices on interbank compensation.

(e) If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.02(c), 2.14(d) or 11.03(e), then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for the account of such Lender to satisfy such Lender’s obligations under such Sections until all such unsatisfied obligations are fully paid.

 

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Section 2.15 Taxes.

(a) Any and all payments by or on account of any obligation of any of the Loan Parties hereunder or under any other Loan Document shall be made free and clear of and without deduction or withholding for any and all Taxes; provided that if applicable Legal Requirements (as determined in the good faith discretion of an applicable withholding agent) shall require deduction or withholding of any Tax from such payments, then (i) if such Tax is an Indemnified Tax, the sum payable by the applicable Loan Party shall be increased as necessary so that after all required deductions or withholdings (including deductions or withholdings applicable to additional sums payable under this Section 2.15) the applicable Recipient receives an amount equal to the sum it would have received had no such deductions or withholdings been made, (ii) the applicable withholding agent shall be entitled to make such deductions or withholdings as required by applicable Legal Requirements and (iii) the applicable withholding agent shall timely pay, or cause to be paid, the full amount deducted or withheld to the relevant Governmental Authority in accordance with applicable Legal Requirements.

(b) In addition, but without duplication of any obligation under the immediately preceding subsection (a), the Borrower and any other Loan Party shall timely pay, or at the option of the Administrative Agent timely reimburse it for the payment of, any Other Taxes to the relevant Governmental Authority in accordance with applicable Legal Requirements.

(c) Borrower and all other Loan Parties shall jointly and severally indemnify the Administrative Agent, each Lender and each other Recipient, within ten Business Days after written demand therefor, for the full amount of any Indemnified Taxes payable or paid by such Recipient or required to be withheld or deducted from a payment to such Recipient or required to be withheld or deducted from a payment to such Recipient (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section 2.15, but, for the avoidance of doubt, without duplication of any amounts withheld or deducted by the applicable withholding agent and for which the Recipient has been paid pursuant to clause (i) of Section 2.15(a)) and any penalties, interest and expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by the Recipient (in each case, with a copy delivered concurrently to the Administrative Agent), or by the Administrative Agent on its own behalf or on behalf of a Recipient, shall be conclusive absent manifest error.

(d) As soon as practicable after any payment of Taxes pursuant to this Section 2.15 and in any event within thirty (30) days following any such payment being due by Borrower or any other Loan Party to a Governmental Authority, the Borrower or any other Loan Party, as applicable, shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent. If the Borrower or any other Loan Party fails to pay any Indemnified Taxes when due to the appropriate Governmental Authority or fails to remit to the Administrative Agent the required receipts or other documentary evidence, the Borrower or such Loan Party shall indemnify the Administrative Agent, each Lender and each other Recipient for any incremental Taxes or expenses that may become payable by the Administrative Agent, such Lender or such other Recipient, as the case may be, as a result of any such failure.

(e) Any Lender that is entitled to an exemption from or reduction of withholding tax with respect to payments under any Loan Document shall deliver to the Borrower and the Administrative Agent, at the time or times reasonably requested by the Borrower or the Administrative Agent or as prescribed by applicable law, such properly completed and executed documentation prescribed by applicable law and reasonably requested by Borrower or the Administrative Agent as will permit such

 

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payments to be made without withholding (including backup withholding) or at a reduced rate of withholding. In addition, any Lender, if reasonably requested by the Borrower or the Administrative Agent, shall deliver such other documentation prescribed by applicable law or reasonably requested by the Borrower or the Administrative Agent as will enable the Borrower or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements. Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and delivery of such documentation (other than such documentation set forth in Section 2.15(e)(i), Section 2.15(e)(ii) or Section 2.15(e)(iii) below) shall not be required if in the Lender’s reasonable judgment such completion, execution or delivery would subject such Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Lender.

(i) Without limiting the generality of the foregoing, each Foreign Lender (as well as the Administrative Agent, in the event the Administrative Agent is not a “United States person” (as defined in Section 7701(a)(30) of the Code)) shall (i) furnish to the Borrower and the Administrative Agent on or prior to the date it becomes a party hereto, either (a) two executed copies of U.S. Internal Revenue Service Forms W-8BEN, or W-8BEN-E, claiming the benefits under any applicable income tax treaty (or successor form), (b) two executed copies of U.S. Internal Revenue Service Forms W-8ECI (or successor form), (c) two executed copies of U.S. Internal Revenue Service Forms W-8IMY (or successor form) and certification documents from each beneficial owner, as applicable, or (d) two executed copies of U.S. Internal Revenue Service Forms W-8EXP (or successor form), together with any required schedules or attachments, certifying, in each case, to such Foreign Lender’s legal entitlement to an exemption or reduction from U.S. federal withholding tax with respect to all interest payments hereunder, as may be applicable, and (ii) to the extent it may lawfully do so at such times, provide Borrower and the Administrative Agent a new copy of U.S. Internal Revenue Service Form W-8BEN, W-8BEN-E, U.S. Internal Revenue Service Form W-8ECI, or U.S. Internal Revenue Service Form W-8IMY or U.S. Internal Revenue Service Form W-8EXP (in each case, together with any required schedules or attachments) upon the expiration or obsolescence of any previously delivered form, or at any other time upon the reasonable request of the Borrower or the Administrative Agent, to reconfirm any complete exemption from, or any entitlement to a reduction in, U.S. federal withholding tax with respect to any interest payment hereunder; provided that any Foreign Lender that is claiming exemption from U.S. federal withholding tax under Section 871(h) or 881(c) of the Code with respect to payments of “portfolio interest” shall furnish a “U.S. Tax Certificate” in the form of Exhibit G-1 attached to such Foreign Lender’s U.S. Internal Revenue Service Form W-8BEN or W-8BEN-E; provided, further, that if the Foreign Lender is a partnership and one or more direct or indirect partners of such Foreign Lender are claiming the portfolio interest exemption, such Foreign Lender may provide a U.S. Tax Certificate substantially in the form of Exhibit G-4 on behalf of each such direct and indirect partner.

(ii) Each Recipient that is a “United States person” (as defined in Section 7701(a)(30) of the Code) shall furnish to the Borrower and the Administrative Agent on or prior to the date it becomes a Recipient hereunder executed copy of U.S. Internal Revenue Service Form W-9 establishing that such Recipient is not subject to U.S. backup withholding or shall otherwise establish an exemption from U.S. backup withholding, and provide a new U.S. Internal Revenue Service Form W-9 upon obsolescence of any previously delivered form.

(iii) If a payment made to a Recipient under any Loan Document would be subject to U.S. federal withholding tax imposed by FATCA if such Recipient were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Recipient shall deliver to the

 

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Borrower and the Administrative Agent, at the time or times prescribed by law and at such time or times reasonably requested by Borrower or the Administrative Agent, such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by Borrower or the Administrative Agent as may be necessary for the Borrower and the Administrative Agent to comply with their obligations under FATCA, to determine that such Recipient has or has not complied with such Recipient’s obligations under FATCA and, as necessary, to determine the amount to deduct and withhold from such payment. Solely for the purposes of this Section 2.15(e), “FATCA” shall include any amendment made to FATCA after the date of this agreement.

Each Recipient agrees that if any form or certification it previously delivered expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify the Borrower and the Administrative Agent in writing of its legal inability to do so. Notwithstanding the foregoing, this Section 2.15(e) shall not require any Recipient to provide any forms or documentation that it is not legally entitled to provide.

(f) If the Administrative Agent or a Lender determines in its sole discretion, exercised in good faith, that it has received a refund of any Indemnified Taxes as to which it has been indemnified by Borrower or with respect to which Borrower has paid additional amounts pursuant to this Section 2.15, it shall pay over such refund to the Borrower (but only to the extent of indemnity payments made, or additional amounts paid, by Borrower under this Section 2.15 with respect to the Indemnified Taxes or the Other Taxes giving rise to such refund), net of all out-of-pocket expenses of the Administrative Agent or such Lender and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund); provided, however, that if the Administrative Agent or such Lender is required to repay all or a portion of such refund to the relevant Governmental Authority, the Borrower, upon the request of the Administrative Agent or such Lender, shall repay the amount paid over to the Borrower that is required to be repaid (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Administrative Agent or such Lender within three Business Days after receipt of written notice that the Administrative Agent or such Lender is required to repay such refund (or a portion thereof) to such Governmental Authority. Nothing contained in this Section 2.15(f) shall require the Administrative Agent or any Lender to make available its Tax Returns or any other information which it deems confidential to the Borrower or any other person. Notwithstanding anything to the contrary, in no event will the Administrative Agent or any Lender be required to pay any amount to the Borrower the payment of which would place the Administrative Agent or such Lender in a less favorable net after-tax position than the Administrative Agent or such Lender would have been in if the Indemnified Taxes giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with respect to such Indemnified Taxes had never been paid.

(g) Each party’s obligations under this Section 2.15 shall survive the resignation or replacement of the Administrative Agent or any assignment of rights by, or the replacement of, a Lender, the termination of the Commitments and the repayment, satisfaction or discharge of all obligations under any Loan Document.

(h) For purposes of this Section 2.15, the term “Lender” includes the Issuing Bank.

 

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Section 2.16 Mitigation Obligations; Replacement of Lenders.

(a) Mitigation of Obligations. If any Lender requests compensation under Section 2.12(a) or (b), or if Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.15, then such Lender if requested by Borrower shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the reasonable judgment of such Lender, such designation or assignment (i) would eliminate or reduce materially amounts payable pursuant to Section 2.12(a), 2.12(b), or 2.15, as the case may be, in the future, (ii) would not subject such Lender to any unreimbursed cost or expense, (iii) would not require such Lender to take any action materially inconsistent with its internal policies or legal or regulatory restrictions, and (iv) would not otherwise be materially disadvantageous to such Lender. Borrower shall pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment. A certificate setting forth such costs and expenses in reasonable detail submitted by such Lender to the Administrative Agent shall be conclusive absent manifest error.

(b) Replacement of Lenders. In the event (i) any Lender delivers a certificate requesting compensation pursuant to Section 2.12(a) or (b), (ii) any Lender delivers a notice described in Section 2.12(e), (iii) the Borrower is required to pay any additional amount to any Lender or any Governmental Authority on account of any Lender pursuant to Section 2.15, (iv) any Lender refuses to consent to any amendment, waiver or other modification of any Loan Document requested by Borrower that requires the consent of 100% of the Lenders or 100% of all affected Lenders, and which, in each case, has been consented to by Required Lenders or (v) any Lender becomes a Defaulting Lender or otherwise defaults in its obligations to make Loans or other extensions of credit hereunder, the Borrower may, at its sole expense and effort (including with respect to the processing and recordation fee referred to in Section 11.04(b)), upon notice to such Lender and the Administrative Agent, require such Lender to transfer and assign, without recourse (in accordance with and subject to the restrictions contained in Section 11.04), all of its interests, rights and obligations under this Agreement to an assignee which shall assume such assigned obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (u) in the case of any such assignment resulting from a claim for compensation under Section 2.12(a) or (b) or payments required to be made pursuant to Section 2.15, such assignment will result in a reduction in such compensation or payments thereafter, (v) in the case of any assignment resulting from the circumstances described in clause (iv) above, the applicable assignee shall have consented to the applicable amendment, waiver or other modification, (w) except in the case of clause (iv) above if the effect of such amendment, waiver or other modification of the applicable Loan Document would cure all Defaults and Events of Defaults then ongoing, no Default or Event of Default shall have occurred and be continuing, (x) such assignment shall not conflict with any applicable Legal Requirement, (y) to the extent required pursuant to Section 11.04(b)(v), the Borrower shall have received the prior written consent of the Administrative Agent, which consent shall not unreasonably be withheld or delayed, and (z) the Borrower or such assignee shall have paid to the affected Lender in immediately available funds an amount equal to the sum of the principal of and interest accrued to the date of such payment on the outstanding Loans and participations in Letters of Credit of such Lender affected by such assignment plus all Fees and other amounts owing to or accrued for the account of such Lender or Administrative Agent hereunder (including the Prepayment Premium, the Exit Fee, any amounts under Sections 2.12 and 2.13 and the assignment fee described in Section 11.04(b)(iii)); provided, further, that, if prior to any such transfer and assignment the circumstances or event that resulted in such Lender’s claim for compensation under Section 2.12(a) or (b) or notice under Section 2.12(e) or the amounts paid pursuant to Section 2.15, as the case may be, cease to cause such Lender to suffer increased costs or reductions in amounts received or receivable or reduction in return on capital, or cease to have the consequences specified in Section 2.12(e), or cease to result in amounts being payable under Section 2.15, as the case may be (including as a result of any action taken by such Lender pursuant to paragraph (a) of this Section 2.16), or if such Lender shall waive its right to claim further compensation under Section 2.12(a) or (b) in respect of such circumstances or event or shall withdraw its notice under Section 2.12(e) or shall waive its right to further payments under Section 2.15 in respect of such circumstances or event or shall consent to the proposed amendment, waiver, consent or other modification, as the case may be, then such Lender shall not thereafter be required to make any such

 

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transfer and assignment hereunder. Each Lender hereby grants to the Administrative Agent (other than any Lender upon written request at the sole discretion of the Administrative Agent) an irrevocable power of attorney (which power is coupled with an interest) to execute and deliver, on behalf of such Lender as assignor, any Assignment and Assumption necessary to effectuate any assignment of such Lender’s interests hereunder in the circumstances contemplated by this Section 2.16(b). Notwithstanding anything to the contrary herein, no Lender that acts as Issuing Bank may be replaced hereunder (other than with respect to any Term Loans) at any time that it has any Letter of Credit outstanding hereunder unless arrangements reasonably satisfactory thereto (including the furnishing of a back-up standby letter of credit in form and substance, and issued by an issuer, reasonably satisfactory thereto or Cash Collateral) have been made in respect of such outstanding Letters of Credit.

Section 2.17 Letters of Credit.

(a) Letters of Credit. At any time on or after the Closing Date and prior to the date that is 30 days prior to the Revolving Maturity Date, subject to the terms and conditions hereof, the Issuing Bank agrees to issue Letters of Credit for the account of the Borrower or any Subsidiary (provided, that in the case of any Letter of Credit issued for a Subsidiary that is not a Guarantor, the Borrower shall be the co-applicant with respect thereto) in the aggregate amount up to but not exceeding the Letter of Credit Sublimit; provided, (i) each Letter of Credit shall be denominated in Dollars; (ii) the stated amount of each Letter of Credit shall not be less than $100,000 or such lesser amount as is acceptable to the Issuing Bank; (iii) after giving effect to such issuance, in no event shall the aggregate amount of Revolving Exposures exceed the aggregate amount of Revolving Commitments then in effect; (iv) after giving effect to such issuance, in no event shall the Letter of Credit Obligations exceed the Letter of Credit Sublimit then in effect; (v) in no event shall any Letter of Credit have an expiration date later than the earlier of (A) the date that is five Business Days prior to the Revolving Maturity Date and (B) the date which is one year from the date of issuance of such Letter of Credit or such longer period of time as agreed to by the Issuing Bank; and (vi) in no event shall any commercial Letter of Credit be issued if such commercial Letter of Credit is otherwise unacceptable to the Issuing Bank in its reasonable discretion. Subject to the foregoing, the Issuing Bank may agree that a standby Letter of Credit will automatically be extended for one or more successive periods not to exceed one year each, unless the Issuing Bank elects not to extend for any such additional period; provided, the Issuing Bank shall not be required to extend any such Letter of Credit if it has received written notice that an Event of Default has occurred and is continuing at the time the Issuing Bank must elect to allow such extension.

(b) Notice of Issuance. Whenever the Borrower desires the issuance of a Letter of Credit, the Borrower shall deliver to the Administrative Agent an Issuance Notice no later than 12:00 noon (New York City time) at least two Business Days, or such shorter period as may be agreed to by the Issuing Bank in any particular instance, in advance of the proposed date of issuance. Upon satisfaction or waiver of the conditions set forth in Section 4.02, the Issuing Bank shall issue the requested Letter of Credit only in accordance with the Issuing Bank’s standard operating procedures. Upon the issuance of any Letter of Credit or amendment or modification to a Letter of Credit, the Issuing Bank shall promptly notify each Revolving Lender of such issuance, which notice shall be accompanied by a copy of such Letter of Credit or amendment or modification to a Letter of Credit and the amount of such Revolving Lender’s respective participation in such Letter of Credit pursuant to Section 2.17(e).

(c) Responsibility of the Issuing Bank With Respect to Requests for Drawings and Payments. In determining whether to honor any drawing under any Letter of Credit by the beneficiary thereof, the Issuing Bank shall be responsible only to examine the documents delivered under such Letter of Credit with reasonable care so as to ascertain whether they appear on their face to be in accordance with the terms and conditions of such Letter of Credit. As between the Borrower and the Issuing Bank, the Borrower assumes all risks of the acts and omissions of, or misuse of the Letters of Credit issued by

 

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the Issuing Bank, by the respective beneficiaries of such Letters of Credit. In furtherance and not in limitation of the foregoing, the Issuing Bank shall not be responsible for (i) the form, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connection with the application for and issuance of any such Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any such Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason; (iii) failure of the beneficiary of any such Letter of Credit to comply fully with any conditions required in order to draw upon such Letter of Credit; (iv) errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher; (v) errors in interpretation of technical terms; (vi) any loss or delay in the transmission or otherwise of any document required in order to make a drawing under any such Letter of Credit or of the proceeds thereof; (vii) the misapplication by the beneficiary of any such Letter of Credit of the proceeds of any drawing under such Letter of Credit; or (viii) any consequences arising from causes beyond the control of the Issuing Bank, including any Governmental Acts; none of the above shall affect or impair, or prevent the vesting of, any of the Issuing Bank’s rights or powers hereunder. Without limiting the foregoing and in furtherance thereof, any action taken or omitted by the Issuing Bank under or in connection with the Letters of Credit or any documents and certificates delivered thereunder, if taken or omitted in good faith, shall not give rise to any liability on the part of the Issuing Bank to the Borrower. Notwithstanding anything to the contrary contained in this Section 2.17(c), the Borrower shall retain any and all rights it may have against the Issuing Bank for any liability arising solely out of the gross negligence, bad faith or willful misconduct of the Issuing Bank as determined by a final, non-appealable judgment of a court of competent jurisdiction.

(d) Reimbursement by Borrower of Amounts Drawn or Paid Under Letters of Credit. In the event the Issuing Bank has determined to honor a drawing under a Letter of Credit, it shall immediately notify the Borrower and the Administrative Agent, and the Borrower shall reimburse the Issuing Bank on or before the Business Day immediately following the date on which such drawing is honored (the “Reimbursement Date”) in an amount in Dollars and in same day funds equal to the amount of such honored drawing; provided, anything contained herein to the contrary notwithstanding, (i) unless the Borrower shall have notified the Administrative Agent and the Issuing Bank prior to 10:00 a.m. (New York City time) on the date such drawing is honored that the Borrower intends to reimburse the Issuing Bank for the amount of such honored drawing with funds other than the proceeds of Revolving Loans, the Borrower shall be deemed to have given a timely Borrowing Request to the Administrative Agent requesting each Revolving Lender to make Revolving Loans that are ABR Loans on the Reimbursement Date in an amount in Dollars equal to the amount of such honored drawing, and (ii) regardless of whether the conditions specified in Section 4.02 are satisfied and without giving effect to the limitation set forth in the proviso to Section 2.01(b), each Revolving Lender shall, on the Reimbursement Date, make Revolving Loans that are ABR Loans in the amount of such honored drawing, the proceeds of which shall be applied directly by the Administrative Agent to reimburse the Issuing Bank for the amount of such honored drawing; and provided, further, if for any reason proceeds of Revolving Loans are not received by the Issuing Bank on the Reimbursement Date in an amount equal to the amount of such honored drawing, the Borrower shall reimburse the Issuing Bank, on demand, in an amount in same day funds equal to the excess of the amount of such honored drawing over the aggregate amount of such Revolving Loans, if any, which are so received. Nothing in this Section 2.17(d) shall be deemed to relieve any Revolving Lender from its obligation to make Revolving Loans on the terms and conditions set forth herein, and the Borrower shall retain any and all rights it may have against any Revolving Lender resulting from the failure of such Revolving Lender to make such Revolving Loans under this Section 2.17(d).

 

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(e) Revolving Lenders’ Purchase of Participations in Letters of Credit. Immediately upon the issuance of each Letter of Credit, each Revolving Lender shall be deemed to have purchased, and hereby agrees to irrevocably purchase, from the Issuing Bank a participation in such Letter of Credit and any drawings honored thereunder in an amount equal to such Lender’s Pro Rata Percentage (with respect to the Revolving Commitments) of the maximum amount which is or at any time may become available to be drawn thereunder. In the event that the Borrower shall fail for any reason to reimburse the Issuing Bank as provided in Section 2.17(d), the Issuing Bank shall promptly notify each Revolving Lender of the unreimbursed amount of such honored drawing and of such Lender’s respective participation therein based on such Lender’s Pro Rata Percentage of the Revolving Commitments. Each Revolving Lender shall make available to the Issuing Bank an amount equal to its respective participation, in Dollars and in same day funds, at the office of the Issuing Bank specified in such notice, not later than 12:00 noon (New York City time) on the first business day (under the Laws of the jurisdiction in which such office of the Issuing Bank is located) after the date notified by the Issuing Bank. In the event that any Revolving Lender fails to make available to the Issuing Bank on such business day the amount of such Lender’s participation in such Letter of Credit as provided in this Section 2.17(e), the Issuing Bank shall be entitled to recover such amount on demand from such Revolving Lender, together with interest thereon for three Business Days at the rate customarily used by the Issuing Bank for the correction of errors among banks and thereafter at the Alternate Base Rate. Nothing in this Section 2.17(e) shall be deemed to prejudice the right of any Revolving Lender to recover from the Issuing Bank any amounts made available by such Revolving Lender to the Issuing Bank pursuant to this Section 2.17 in the event that it is determined that the payment with respect to a Letter of Credit in respect of which payment was made by such Revolving Lender constituted gross negligence, bad faith or willful misconduct on the part of the Issuing Bank as determined by a final, non-appealable judgment of a court of competent jurisdiction. In the event the Issuing Bank shall have been reimbursed by other Revolving Lenders pursuant to this Section 2.17(e) for all or any portion of any drawing honored by the Issuing Bank under a Letter of Credit, the Issuing Bank shall distribute to each Revolving Lender which has paid all amounts payable by it under this Section 2.17(e) with respect to such honored drawing such Revolving Lender’s Pro Rata Percentage of all payments subsequently received by the Issuing Bank from the Borrower in reimbursement of such honored drawing when such payments are received. Any such distribution shall be made to a Revolving Lender at its primary address as such Revolving Lender may request.

(f) Obligations Absolute. The obligation of the Borrower to reimburse the Issuing Bank for drawings honored under the Letters of Credit issued by it and to repay any Revolving Loans made by the Revolving Lenders pursuant to Section 2.17(d) and the obligations of the Revolving Lenders under Section 2.17(e) shall be unconditional and irrevocable and shall be paid strictly in accordance with the terms hereof under all circumstances including any of the following circumstances: (i) any lack of validity or enforceability of any Letter of Credit; (ii) the existence of any claim, set-off, defense or other right which the Borrower or any Lender may have at any time against a beneficiary or any transferee of any Letter of Credit (or any Persons for whom any such transferee may be acting), the Issuing Bank, Lender or any other Person or, in the case of a Lender, against the Borrower, whether in connection herewith, the transactions contemplated herein or any unrelated transaction (including any underlying transaction between the Borrower or any of its Subsidiaries and the beneficiary for which any Letter of Credit was procured); (iii) any draft or other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (iv) payment by the Issuing Bank under any Letter of Credit against presentation of a draft or other document which does not substantially comply with the terms of such Letter of Credit; (v) any adverse change in the business, operations, properties, assets, condition (financial or otherwise) or prospects of the Borrower or any of its Subsidiaries; (vi) any breach hereof or any other Loan Document by any party thereto; (vii) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing; or (viii) the fact that an Event of Default or a Default shall have occurred and be continuing; provided, in each case, that payment by the Issuing Bank under the applicable Letter of Credit shall not have constituted gross negligence, bad faith or willful misconduct of the Issuing Bank under the circumstances in question as determined by a final, non-appealable judgment of a court of competent jurisdiction.

 

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(g) Indemnification. Without duplication of any obligation of the Borrower under Section 11.03, in addition to amounts payable as provided herein, the Borrower hereby agrees to protect, indemnify, pay and save harmless the Issuing Bank from and against any and all claims, demands, liabilities, damages, losses, costs, charges and expenses (including reasonable and documented fees, expenses and disbursements of outside counsel or, without duplication, allocated costs of internal counsel) which the Issuing Bank may incur or be subject to as a consequence, direct or indirect, of (i) the issuance of any Letter of Credit by the Issuing Bank, other than as a result of (A) the gross negligence, bad faith or willful misconduct of the Issuing Bank as determined by a final, non-appealable judgment of a court of competent jurisdiction or (B) the wrongful dishonor by the Issuing Bank of a proper demand for payment made under any Letter of Credit issued by it, or (ii) the failure of the Issuing Bank to honor a drawing under any such Letter of Credit as a result of any Governmental Act.

(h) Cash Collateralization—Borrower. In the event that any Letter of Credit is outstanding at the time that the Borrower prepays, or is required to repay, the Obligations (other than unasserted contingent indemnification obligations) or the Revolving Commitments are terminated, the Borrower shall (i) Cash Collateralize the Issuing Bank’s Letter of Credit Obligations in an amount not less than the Minimum Collateral Amount, to reimburse payments of drafts drawn under such Letters of Credit and pay any fees and expenses related thereto and (ii) prepay the fee payable under Section 2.05(f) with respect to such Letters of Credit for the full remaining term of such Letters of Credit. Upon termination of any such Letter of Credit and so long as no Event of Default then exists, the unearned portion of such prepaid fee attributable to such Letter of Credit shall be refunded to the Borrower, together with the deposit described in the preceding clause (i) to the extent not previously applied by the Administrative Agent in the manner described herein.

(i) Cash Collateralization—Defaulting Lenders. At any time that there shall exist a Defaulting Lender, within one Business Day following the written request of the Administrative Agent or the Issuing Bank (with a copy to the Administrative Agent) the Borrower shall Cash Collateralize the Issuing Bank’s Fronting Exposure with respect to such Defaulting Lender (determined after giving effect to Section 2.18 and any Cash Collateral provided by such Defaulting Lender) in an amount not less than the Minimum Collateral Amount.

(i) Grant of Security Interest. The Borrower, and to the extent provided by any Defaulting Lender, such Defaulting Lender, hereby grants to the Administrative Agent, for the benefit of the Issuing Bank, and agrees to maintain, a first priority security interest in all such Cash Collateral as security for the Defaulting Lenders’ obligation to fund participations in respect of Letter of Credit Obligations, to be applied pursuant to clause (ii) below. If at any time the Administrative Agent reasonably determines that Cash Collateral is subject to any right or claim of any Person other than the Administrative Agent and the Issuing Bank as herein provided, or that the total amount of such Cash Collateral is less than the Minimum Collateral Amount, the Borrower will, promptly upon demand by the Administrative Agent, pay or provide to the Administrative Agent additional Cash Collateral in an amount sufficient to eliminate such deficiency (after giving effect to any Cash Collateral provided by the Defaulting Lender).

 

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(ii) Application. Notwithstanding anything to the contrary contained in this Agreement, Cash Collateral provided under this Section 2.17(i) or Section 2.18 in respect of Letters of Credit shall be applied to the satisfaction of the Defaulting Lender’s obligation to fund participations in respect of Letter of Credit Obligations (including, as to Cash Collateral provided by a Defaulting Lender, any interest accrued on such obligation) for which the Cash Collateral was so provided, prior to any other application of such property as may otherwise be provided for herein.

(iii) Termination of Requirement. Cash Collateral (or the appropriate portion thereof) provided to reduce the Issuing Bank’s Fronting Exposure shall no longer be required to be held as Cash Collateral pursuant to this Section 2.17(i) following (A) the elimination of the applicable Fronting Exposure (including by the termination of Defaulting Lender status of the applicable Revolving Lender) or (B) the determination by the Administrative Agent and the Issuing Bank that there exists excess Cash Collateral; provided, subject to Section 2.18(a)(v), the Person providing Cash Collateral and the Issuing Bank may agree that Cash Collateral shall be held to support future anticipated Fronting Exposure or other Letter of Credit Obligations; provided, further, to the extent that such Cash Collateral was provided by the Borrower, such Cash Collateral shall remain subject to the security interest granted pursuant to the Loan Documents.

The provision of Cash Collateral by the Borrower and/or the application of Cash Collateral pursuant to this Section 2.17(i) shall be without prejudice to any claim the Borrower may have against any Defaulting Lender for failing to fund its participation in respect of any Letter of Credit Obligations. Nothing in this Section 2.17(i) shall be deemed to relieve any Defaulting Lender of its obligations hereunder.

(j) Resignation of the Issuing Bank. The Issuing Bank may resign as the Issuing Bank upon thirty days prior written notice to the Administrative Agent, Revolving Lenders and the Borrower. Upon any such notice of resignation, the Required Revolving Lenders shall have the right, upon five Business Days’ notice to the Borrower, to appoint a successor Issuing Bank with the written consent of the Borrower; provided, (x) no such consent of the Borrower shall be required while an Event of Default exists and (y) such consent shall not be unreasonably withheld, delayed or conditioned, and shall be deemed to have been given unless the Borrower shall have objected to such appointment by written notice to the Administrative Agent within five (5) Business Days after having received notice thereof; provided, failing such appointment, the retiring Issuing Bank may appoint, on behalf of the Revolving Lenders, a successor Issuing Bank from among the Revolving Lenders or any other financial institution; provided, in no event shall any such successor Issuing Bank be a Defaulting Lender or a Disqualified Institution. At the time any such resignation shall become effective, the Borrower shall pay all unpaid fees accrued for the account of the replaced the Issuing Bank. From and after the effective date of any such resignation, (i) any successor to the Issuing Bank shall have all the rights and obligations of the Issuing Bank under this Agreement with respect to Letters of Credit to be issued thereafter and (ii) references herein to the term “Issuing Bank” shall be deemed to refer to such successor or to any previous the Issuing Bank, or to such successor and all previous Issuing Banks, as the context shall require. After the resignation of the Issuing Bank hereunder, the resigning Issuing Bank shall remain a party hereto to the extent that Letters of Credit issued by it remain outstanding and shall continue to have all the rights and obligations of the Issuing Bank under this Agreement with respect to Letters of Credit issued by it prior to such resignation, but shall not be required to issue additional Letters of Credit.

(k) Extensions. If the Revolving Maturity Date in respect of any tranche of Revolving Commitments occurs prior to the expiration of any Letter of Credit, then (i) if one or more other tranches of Revolving Commitments in respect of which the Revolving Maturity Date shall not have occurred are then in effect, such Letters of Credit shall automatically be deemed to have been issued (including for purposes of the obligations of the Revolving Lenders to purchase participations therein and to make Revolving Loans and payments in respect thereof pursuant to Sections 2.17(d) and 2.17(e)) under (and ratably participated in by Revolving Lenders pursuant to) the Revolving Commitments in respect of

 

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such non-terminating tranches up to an aggregate amount not to exceed the aggregate principal amount of the unutilized Revolving Commitments thereunder at such time (it being understood that no partial face amount of any Letter of Credit may be so reallocated) and (ii) to the extent not reallocated pursuant to immediately preceding clause (i), the Borrower shall Cash Collateralize any such Letter of Credit in accordance with Section 2.17(h). Except to the extent of reallocations of participations pursuant to clause (i) of the immediately preceding sentence, the occurrence of a Revolving Maturity Date with respect to a given tranche of Revolving Commitments shall have no effect upon (and shall not diminish) the percentage participations of the Revolving Lenders in any Letter of Credit issued before such Revolving Maturity Date.

Section 2.18 Defaulting Lenders.

(a) Defaulting Lender Adjustments. Notwithstanding anything to the contrary contained in this Agreement, if any Lender becomes a Defaulting Lender, then, until such time as such Lender is no longer a Defaulting Lender, to the extent permitted by applicable law:

(i) Waivers and Amendments. Such Defaulting Lender’s right to approve or disapprove any amendment, waiver or consent with respect to this Agreement or the other Loan Documents shall be restricted as set forth in the definition of Required Lenders.

(ii) Defaulting Lender Waterfall. Any payment of principal, interest, fees or other amounts received by the Administrative Agent for the account of such Defaulting Lender (whether voluntary or mandatory, at maturity, pursuant to Article IX or otherwise) or received by the Administrative Agent from a Defaulting Lender pursuant to Section 11.08 shall be applied at such time or times as may be determined by the Administrative Agent as follows: first, to the payment of any amounts owing by such Defaulting Lender to the Administrative Agent hereunder; second, to the payment on a pro rata basis of any amounts owing by such Defaulting Lender to the Issuing Bank hereunder; third, to Cash Collateralize the Issuing Bank’s Fronting Exposure with respect to such Defaulting Lender in accordance with Section 2.17(i); fourth, as the Borrower may request (so long as no Default or Event of Default exists), to the funding of any Loan in respect of which such Defaulting Lender has failed to fund its portion thereof as required by this Agreement, as determined by the Administrative Agent; fifth, if so determined by the Administrative Agent and the Borrower, to be held in a deposit account and released pro rata in order to (x) satisfy such Defaulting Lender’s potential future funding obligations with respect to Loans under this Agreement and (y) Cash Collateralize the Issuing Bank’s future Fronting Exposure with respect to such Defaulting Lender with respect to future Letters of Credit issued under this Agreement, in accordance with Section 2.17(i); sixth, to the payment of any amounts owing to the Lenders or the Issuing Bank as a result of any judgment of a court of competent jurisdiction obtained by any Lender or the Issuing Bank against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement; seventh, so long as no Default or Event of Default exists, to the payment of any amounts owing to the Borrower as a result of any judgment of a court of competent jurisdiction obtained by the Borrower against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement; and eighth, to such Defaulting Lender or as otherwise directed by a court of competent jurisdiction; provided, if (x) such payment is a payment of the principal amount of any Loans or Letters of Credit in respect of which such Defaulting Lender has not fully funded its appropriate share, and (y) such Loans were made or the related Letters of Credit were issued at a time when the conditions set forth in Section 4.02 were satisfied or waived, such payment shall be

 

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applied solely to pay the Loans of, and Letter of Credit Obligations owed to, all Non-Defaulting Lenders on a pro rata basis prior to being applied to the payment of any Loans of, or Letter of Credit Obligations owed to, such Defaulting Lender until such time as all Loans and funded and unfunded participations in Letter of Credit Obligations are held by the Lenders in accordance with their Pro Rata Percentages of the Revolving Commitments without giving effect to Section 2.18(a)(iv). Any payments, prepayments or other amounts paid or payable to a Defaulting Lender that are applied (or held) to pay amounts owed by a Defaulting Lender or to post Cash Collateral pursuant to this Section 2.18(a)(ii) shall be deemed paid to and redirected by such Defaulting Lender, and each Lender irrevocably consents hereto.

(iii) Certain Fees.

(A) No Defaulting Lender shall be entitled to receive any commitment fees in accordance with Section 2.05(a) for any period during which such Lender is a Defaulting Lender (and the Borrower shall not be required to pay any such fee that otherwise would have been required to have been paid to that Defaulting Lender).

(B) Each Defaulting Lender shall be entitled to receive Letter of Credit fees in accordance with Section 2.05(f) for any period during which such Lender is a Defaulting Lender only to the extent allocable to its Pro Rata Percentage of the stated amount of Letters of Credit for which it has provided Cash Collateral pursuant to Section 2.17(i).

(C) With respect to any fees not required to be paid to any Defaulting Lender pursuant to clause (A) or (B) above, the Borrower shall (x) pay to each Non-Defaulting Lender that portion of any such fee otherwise payable to such Defaulting Lender with respect to such Defaulting Lender’s participation in Letter of Credit Obligations that has been reallocated to such Non-Defaulting Lender pursuant to clause (iv) below, (y) pay to the Issuing Bank the amount of any such fee otherwise payable to such Defaulting Lender to the extent allocable to the Issuing Bank’s Fronting Exposure to such Defaulting Lender, and (z) not be required to pay the remaining amount of any such fee.

(iv) Reallocation of Participations to Reduce Fronting Exposure. All or any part of such Defaulting Lender’s participation in Letter of Credit Obligations shall be reallocated among the Non-Defaulting Lenders in accordance with their respective Pro Rata Percentage (calculated without regard to such Defaulting Lender’s Commitment) but only to the extent that (x) the conditions set forth in Section 4.02 are satisfied at the time of such reallocation (and, unless the Borrower shall have otherwise notified the Administrative Agent at such time, the Borrower shall be deemed to have represented and warranted that such conditions are satisfied at such time), and (y) such reallocation does not cause the aggregate Revolving Exposure of any Non-Defaulting Lender to exceed such Non-Defaulting Lender’s Revolving Commitment. No reallocation hereunder shall constitute a waiver or release of any claim of any party hereunder against a Defaulting Lender arising from such Lender having become a Defaulting Lender, including any claim of a Non-Defaulting Lender as a result of such Non-Defaulting Lender’s increased exposure following such reallocation.

 

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(v) Cash Collateral. If the reallocation described in clause (iv) above cannot, or can only partially, be effected, the Borrower shall, without prejudice to any right or remedy available to it hereunder or under law, Cash Collateralize the Issuing Bank’s Fronting Exposure in accordance with the procedures set forth in Section 2.17(i).

(b) Defaulting Lender Cure. If the Borrower, the Administrative Agent and the Issuing Bank agree in writing that a Lender is no longer a Defaulting Lender, the Administrative Agent will so notify the parties hereto, whereupon as of the effective date specified in such notice and subject to any conditions set forth therein (which may include arrangements with respect to any Cash Collateral), such Lender will, to the extent applicable, purchase at par that portion of outstanding Loans of the other Lenders or take such other actions as the Administrative Agent may determine to be necessary to cause the Loans and funded and unfunded participations in Letters of Credit to be held by the Lenders in accordance with their Pro Rata Percentages of the Revolving Commitments without giving effect to Section 2.18(a)(iv), whereupon such Lender will cease to be a Defaulting Lender; provided, no adjustments will be made retroactively with respect to fees accrued or payments made by or on behalf of the Borrower while such Lender was a Defaulting Lender; and provided, further, except to the extent otherwise expressly agreed by the affected parties, no change hereunder from Defaulting Lender to Lender will constitute a waiver or release of any claim of any party hereunder arising from such Lender’s having been a Defaulting Lender.

(c) New Letters of Credit. So long as any Lender is a Defaulting Lender, the Issuing Bank shall not be required to issue, extend, renew or increase any Letter of Credit unless it is satisfied that it shall have no Fronting Exposure after giving effect thereto.

(d) Termination of Defaulting Lender. The Borrower may terminate the unused amount of the Revolving Commitment of any Revolving Lender that is a Defaulting Lender upon not less than five Business Days’ prior notice to the Administrative Agent (which shall promptly notify the Lenders thereof), and in such event the provisions of Section 2.18(a)(ii) will apply to all amounts thereafter paid by the Borrower for the account of such Defaulting Lender under this Agreement (whether on account of principal, interest, fees, indemnity or other amounts); provided, (i) no Event of Default shall have occurred and be continuing, and (ii) such termination shall not be deemed to be a waiver or release of any claim the Borrower, the Administrative Agent, the Issuing Bank or any Lender may have against such Defaulting Lender.

Section 2.19 Increases of the Term Loan . (a) The Borrower may by written request to the Administrative Agent prior to the Term Loan Maturity Date, establish one or more new Term Loan Commitments under a new term facility or under the existing term facility or any increase under an existing tranche of Term Loans (each, a “New Term Loan Commitment” and the Loans made thereunder, the “New Term Loans” or “Incremental Facilities” and each an “Incremental Facility”), the proceeds of which may be used for (A) de novo center growth, Permitted Acquisitions and similar permitted Investments and other ordinary course expansion projects not prohibited by this Agreement and (B) solely with respect to clause (ii) [***]; provided that:

(i) the aggregate principal amount of the New Term Loan Commitments pursuant to this Section 2.19 shall not exceed the Maximum Incremental Facilities Amount. The aggregate principal amount of any requested increase in New Term Loan Commitment shall be in a minimum amount of $5,000,000 and in integral multiples of $1,000,000 in excess thereof (or such lower amount that represents all remaining availability pursuant to this Section 2.19).

 

 

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(ii) no Default or Event of Default shall have occurred and be continuing or would immediately occur after giving effect to such increase and the application of proceeds therefrom; provided that, solely with respect to any New Term Loans incurred in connection with a Limited Condition Acquisition, the absence of a Default or Event of Default (other than an Event of Default as a result of any of the events set forth in Sections 8.01(a), 8.01(b), 8.01(g) or 8.01(h)) shall be tested only at the time the definitive documentation for such Limited Condition Acquisition is executed;

(iii) the representations and warranties of each Loan Party set forth in Article III and in each other Loan Document shall be true and correct in all material respects (without duplication of any materiality qualifiers set forth therein) immediately prior to, and immediately after giving effect to, the incurrence of such New Term Loans (although any representations and warranties which expressly relate to a given date or period shall be required to be true and correct in all material respects (without duplication of any materiality qualifiers set forth therein) as of the respective date or for the respective period, as the case may be); provided that to the extent the proceeds of any New Term Loan are being used to finance a Limited Condition Acquisition, only the Specified Representations (and not any other representations or warranties in Article III or any of the other Loan Documents or otherwise) shall be required to be true and correct in all material respects (without duplication of any materiality qualifiers set forth therein) immediately prior to, and immediately after giving effect to, the incurrence of such New Term Loans (although any Specified Representations which expressly relate to a given date or period shall be required to be true and correct in all material respects (without duplication of any materiality qualifiers set forth therein) as of the respective date or for the respective period, as the case may be;

(iv) the New Term Loans made under this Section 2.19 shall have a maturity date no earlier than the later of the then existing Term Loan Maturity Date and the maturity date of any then-outstanding New Term Loans and shall have a weighted average life to maturity no shorter than the weighted average life of the then existing Term Loans and then existing New Term Loans;

(v) [reserved];

(vi) if the Weighted Average Yield applicable to the New Term Loans made pursuant to this Section 2.19 exceeds (x) with respect to any New Term Loans incurred as an increase to an existing Class of Term Loans, the Weighted Average Yield for such existing Class of Term Loans by more than 0.50% per annum or (y) with respect to any New Term Loans not incurred as an increase to an existing Class of Term Loans, the Weighted Average Yield for all existing Classes of Term Loans (calculated on a weighted average basis) by more than 0.50% per annum (in either case, such amount in excess of 0.50%, hereinafter referred to as the “Incremental Excess Yield”), then the Weighted Average Yield with respect to the applicable existing Term Loans of such tranche shall be increased by the Incremental Excess Yield (it being understood that any increase in the Weighted Average Yield of the existing Term Loans, may (A) take the form of upfront fees, with such upfront fees being equated to interest margins based on a four-year average life to maturity or, if less, the remaining life to maturity or (B) be accomplished by a combination of an increase in the weighted average interest rates, interest rate floors and/or upfront fees) of such New Term Loans made pursuant to this Section 2.19 (for the avoidance of doubt, the Incremental Excess Yield applicable to New Term Loans made pursuant to this Section 2.19 shall only be applied to existing Term Loans); provided that, any increase in yield with respect to an existing Class of Term Loans required pursuant to this clause (vi) and resulting from the application of an Benchmark Rate or Alternate Base Rate “floor” on any New Term Loans will be effected solely through an increase in such “floor” (or an implementation thereof, as applicable) in respect of any existing Class of Term Loans;

 

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(vii) [reserved];

(viii) the New Term Loans shall not benefit from any Guarantees or Collateral that do not ratably benefit the Term Loans, and shall be secured on a pari passu basis by the Collateral securing the Term Loans (and, for the avoidance of doubt and notwithstanding anything to the contrary, such New Term Loans shall be treated as Consolidated First Lien Indebtedness for all purposes hereunder);

(ix) prior to the Delayed Draw Term Loan Commitment Expiration Date, the Borrower may not establish an Incremental Facility consisting of New Term Loans if there are undrawn Delayed Draw Term Loan Commitments under this Agreement;

(x) after giving effect to such New Term Loan Commitments and the application of the proceeds thereof, the Borrower shall be in compliance on a Pro Forma Basis with the financial covenants set forth in Section 6.15 applicable for the four (4) consecutive fiscal quarters of the Borrower ended on, or most recently preceding, such Increased Amount Date for which financial statements have been (or were required to have been) delivered to the Administrative Agent pursuant to Section 5.01(a) or (b) (but excluding, for purposes of such calculation, New Term Loan proceeds from any Unrestricted Cash and Cash Equivalents permitted to be netted in the calculation of the financial covenants); provided, that, with respect to any Incremental Loan Amendment incurred for purposes of financing a Limited Condition Acquisition, the Borrower shall be, as of the date of the execution and delivery of the applicable definitive purchase agreement in connection with such Limited Condition Acquisition, in compliance on a Pro Forma Basis with the financial covenants applicable for the four (4) consecutive fiscal quarters of the Borrower ended on, or most recently preceding, such date for which financial statements have been (or were required to have been) delivered to the Administrative Agent pursuant to Section 5.01(a) or (b);

(xi) the New Term Loans may participate on a pro rata basis or less than pro rata basis (but not on a greater than pro rata basis) in any voluntary prepayments pursuant to Section 2.10(a) or any mandatory prepayments of Term Loans under Section 2.10(c), 2.10(d) and 2.10(e), as specified in the applicable Incremental Loan Amendment;

(xii) terms and provisions of the New Term Loans (other than upfront fees and original issue discount) shall be, except as otherwise set forth herein or in the Incremental Loan Amendment, identical to the Term Loans (it being understood that New Term Loans may be a part of the Term Loans) or otherwise reasonably satisfactory to the Administrative Agent (acting at the direction of the Required Lenders); and

; provided, further, that to the extent such terms and documentation are not consistent with then existing Term Loans (except to the extent relating to pricing, optional prepayment or redemption terms, call protections and premiums), they shall be either (a) reasonably satisfactory to the Administrative Agent acting at the direction of the Required Lenders (except for covenants or other provisions applicable only to the periods after the latest maturity date of any then-existing Term Loans or New Term Loans) or (b) added for the benefit of the existing Term Loans (and, if an individual term is more beneficial to the Lenders holding existing Term Loans than the corresponding term then-applicable to the existing Term Loans, such individual beneficial term or terms may be applied to the existing Term Loans without the consent of any Lender holding existing Term Loans). Any request under this Section 2.19 shall be submitted by the Borrower in writing to the Administrative Agent (which shall promptly forward copies to all the Lenders); provided that each such notice shall specify the date (each, an “Increased Amount Date”) on which Borrower proposes that the New Term Loan Commitments shall be effective, which

 

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shall not be less than fifteen (15) Business Days after the date on which such notice is delivered to the Administrative Agent. No Lender shall have any obligation, expressed or implied, to offer to increase the aggregate principal amount of its Term Loan Commitment. Only the consent of each Increasing Lender shall be required for an increase in the aggregate principal amount of the Term Loan Commitments pursuant to this Section 2.19. No Lender which declines to increase the principal amount of its Term Loan Commitment may be replaced with respect to its existing Term Loan Commitment as a result thereof without such Lender’s consent.

(b) Each existing Lender may elect or decline, in its sole discretion, to provide an Incremental Facility; provided that any Incremental Facility shall first be offered to existing Lenders based on their Pro Rata Percentage. Borrower shall provide each then existing Lender with a request to increase the principal amount of their Term Loan Commitments no later than 12:00 p.m., New York City time five (5) Business Days prior to the Incremental Loan Response Deadline (any such request an “Incremental Loan Increase Request”). Any such Incremental Loan Increase Request received following 12:00 p.m., New York City time shall be deemed to have been delivered on the following Business Day. Each then existing Lender (collectively, the “Increasing Lenders”) that agrees to increase the principal amount of their Term Loan Commitments, or in the case of Lenders that do not have any Term Loan Commitments, that agrees to assume New Term Loans shall as soon as reasonably practicable specify in writing to the Borrower and the Administrative Agent the principal amount of the proposed New Term Loan Commitments that it is willing to assume (provided that any Lender not so responding by the Incremental Loan Response Deadline shall be deemed to have declined such Incremental Loan Increase Request). Upon expiration of the Incremental Loan Response Deadline, Borrower may then solicit and accept some or all of the rejected offered amounts from new lenders (or designate new lenders) (provided that if Administrative Agent would have consent rights with respect to such new lender under Section 11.04 herein were such new lender to take an assignment of Loans or Commitments hereunder, then such new lender shall be reasonably acceptable to the Administrative Agent (in consultation with the Borrower) (such acceptance not to be unreasonably withheld or delayed); provided, however, that, notwithstanding anything to the contrary, no new lender shall be a Loan Party or an Affiliate of a Loan Party) (each such new lender being a “New Lender”), which New Lenders may assume all or a portion of the aggregate principal amount of the applicable New Term Loan Commitments.

(c) Subject to the foregoing, any request by Borrower pursuant to Section 2.19(a) shall be effective upon (A) delivery to the Administrative Agent of each of the following documents: (i) an originally executed copy of a Joinder Agreement signed by a duly authorized officer of each New Lender; (ii) a notice to the Increasing Lenders and New Lenders, in form and substance reasonably acceptable to the Administrative Agent, signed by a Financial Officer of the Borrower; (iii) an Officers’ Certificate of the Borrower, in form and substance reasonably acceptable to the Administrative Agent, confirming compliance with all conditions precedent for any such increase, including, subject to the limitation in clauses (a)(ii) and (a)(iii) above, compliance with Sections 4.02(a), (b) and (c); (iv) to the extent requested by any New Lender or Increasing Lender, executed term notes issued by Borrower in accordance with Section 2.04(e); (v) an amendment (an “Incremental Loan Amendment”) to this Agreement and, as appropriate, the other Loan Documents, executed by Borrower, each Increasing Lender (if any), each New Lender (if any), the Administrative Agent and, if reasonably requested by the Administrative Agent, each other Loan Party; (iv) an acknowledgement to the Agreement Among Lenders executed by each New Lender, such acknowledgment to be in customary form or any other form approved by the Administrative Agent; and (vii) any other reasonable and customary documents and officer’s certificates that the Administrative Agent shall reasonably request, in form and substance reasonably satisfactory to the Administrative Agent, and (B) satisfaction on the Increased Amount Date of (x) subject to the limitations set forth in clauses (a)(ii) and (a)(iii) above, each of the conditions specified in Section 4.02 (it being understood that (1) for purposes of Section 4.02(b), all references to “the date of such Credit Extension” or similar language shall be deemed to refer to the date the definitive

 

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documentation for such Limited Condition Acquisition is executed and (2) for purposes of Section 4.02(a) and (c), all references to “the date of such Credit Extension” or similar language shall be deemed to refer to the Increased Amount Date), and (y) such other conditions as the parties thereto (including Borrower) shall agree (if any). Any such increase shall, subject to Section 2.19(a), be in an aggregate principal amount equal to (A) the principal amount that Increasing Lenders are willing to assume as increases to the principal amount of their Term Loan Commitments plus (B) the principal amount offered by New Lenders with respect to the New Term Loan Commitments as adjusted by Borrower and the Administrative Agent pursuant to this Section 2.19. Notwithstanding anything to the contrary in Section 11.02, the Administrative Agent is expressly permitted, without the consent of the other Lenders, to amend the Loan Documents (including Section 2.09) to the extent necessary or appropriate in the reasonable opinion of the Administrative Agent to give effect to any New Term Loan Commitment pursuant to this Section 2.19 (which may be in the form of an amendment and restatement).

Section 2.20 Extensions of the Term Loan.

(a) Notwithstanding anything to the contrary in this Agreement, pursuant to one or more offers (each, an “Extension Offer”) made by Borrower, from time to time on any Business Day prior to the 30th day before the applicable Term Loan Maturity Date or Revolving Maturity Date, to all Term Loan Lenders or Revolving Lenders, as applicable, on a pro rata basis (based on the aggregate outstanding principal amount of the Term Loans or Revolving Commitments then outstanding) and on the same terms to each such Term Loan Lender or Revolving Lender, as applicable, the Borrower may from time to time with the consent of any Lender that shall have accepted such offer, extend the maturity date of any Term Loans or Revolving Commitments and otherwise modify the terms of such Term Loans or Revolving Commitments of such Lender pursuant to the terms of the relevant Extension Offer (including by increasing the interest rate or fees payable in respect of such Term Loans or Revolving Commitments, modifying the amortization schedule in respect of such Term Loans or any other modification contemplated by this Section 2.20) (each, an “Extension”, and each group of Term Loans or Revolving Loans as so extended, as well as the original Term Loans and Revolving Loans not so extended, being a “tranche” and a separate “Class” hereunder; any Extended Term Loans shall constitute a separate tranche of Term Loans and a separate “Class” hereunder from the tranche of Term Loans from which they were converted) and any Extended Revolving Loans shall constitute a separate tranche of Revolving Loans and a separate “Class” hereunder from the tranche of Revolving Loans from which they were converted), so long as the following terms are satisfied: (i) no Event of Default shall exist at the time the notice in respect of an Extension Offer is delivered to the applicable Lenders, and no Event of Default shall exist immediately prior to or immediately after giving effect to the effectiveness of any Extension, (ii) except as to interest rates, fees, amortization, final maturity date, premium, required prepayment dates and participation in prepayments (which shall, subject to immediately succeeding clauses (iii), (iv), (v) and (vi), be determined by Borrower and set forth in reasonable detail in the relevant Extension Offer), the Term Loans or Revolving Loans, as applicable, of any Lender (an “Extending Lender”) extended pursuant to any Extension (“Extended Term Loans” or “Extended Revolving Loans”, as applicable) shall have the same terms as the tranche of Term Loans or Revolving Loans, as applicable, subject to such Extension Offer (except for covenants or other provisions contained therein applicable only to periods after the then latest Term Loan Maturity Date or Revolving Maturity Date, as applicable), (iii) the final maturity date of any Extended Term Loans shall be no earlier than the then latest Term Loan Maturity Date of any tranche of Term Loans then outstanding at the time of Extension and the amortization schedule of all or a portion of any principal amount of such Extended Term Loans may be delayed to later dates than the amortization schedule of the Terms Loans extended thereby (with any such delay resulting in a corresponding adjustment to the amortization schedule reflected in an Incremental Loan Amendment, as the case may be, with respect to the existing Term Loans from which such Extended Term Loans were extended), (iv) the weighted average life to maturity of any Extended Term Loans shall be no shorter than the remaining weighted average life to maturity of the Term Loans extended thereby, (v) the maturity date

 

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of any Extended Revolving Loans shall be no earlier than the latest Revolving Maturity Date of any tranche of Revolving Loans then outstanding at the time of Extension, (vi) prior to the latest Term Loan Maturity Date of any tranche of Term Loans then outstanding at the time of Extension, the amortization payments on any Extended Term Loans shall not exceed equal quarterly installments in an annual aggregate amount equal to 1% of original principal amount of such Extended Term Loans, (vii) any Extended Term Loans may participate on a pro rata basis or on a less than pro rata basis (but not on a greater than pro rata basis) in any voluntary or mandatory prepayments hereunder, as specified in the applicable Extension Offer, (viii) (A) such Extended Term Loans and Extended Revolving Loans shall not benefit from any Guarantees or Collateral that do not ratably benefit the Term Loans and Revolving Loans, respectively, (B) (x) the liens securing such Indebtedness shall not be of higher priority than the lien securing the applicable Indebtedness being extended and (y) if such Indebtedness being extended is unsecured, such Extended Term Loans and Extended Revolving Loans shall be unsecured, and (C) if such Indebtedness being extended is subordinated with respect to the Obligations, such Extended Term Loans and Extended Revolving Loans shall be subordinated at least to the same extent as such Indebtedness being extended; (ix) if the aggregate principal amount of the Term Loans (calculated on the face amount thereof) in respect of which Lenders shall have accepted the relevant Extension Offer shall exceed the maximum aggregate principal amount of Term Loans offered to be extended by Borrower pursuant to such Extension Offer, then the Term Loans of such Lenders shall be extended ratably up to such maximum amount based on the respective principal amounts (but not to exceed actual holdings of record) with respect to which such Lenders have accepted such Extension Offer, (x) if the aggregate principal amount of the Revolving Commitments in respect of which Lenders shall have accepted the relevant Extension Offer shall exceed the maximum aggregate principal amount of Revolving Commitments offered to be extended by Borrower pursuant to such Extension Offer, then the Revolving Commitments of such Lenders shall be extended ratably up to such maximum amount based on the respective commitment amounts with respect to which such Lenders have accepted such Extension Offer, (xi) all documentation in respect of such Extension shall be consistent with the foregoing, (xii) any applicable Minimum Extension Condition shall be satisfied unless waived by Borrower; (xiii) the interest rate margin applicable to any Extended Term Loans or Extended Revolving Loans will be determined by Borrower and the lenders providing such Extended Term Loans or Extended Revolving Loans; and (xiv) the Issuing Bank shall have consented to any Extension of the Revolving Commitments to the extent such Extension provides for the issuance or extension of Letters of Credit at any time during the extended period. No Lender shall have any obligation to agree to have any of its existing Term Loans or Revolving Commitments converted into Extended Term Loans or Extended Revolving Loans pursuant to any Extension.

(b) With respect to all Extensions consummated by Borrower pursuant to this Section 2.20, (i) such Extensions shall not constitute voluntary or mandatory payments or prepayments for purposes of Section 2.10 and (ii) any Extension Offer is required to be in any minimum amount of $25,000,000, provided that the Borrower may at its election specify as a condition (a “Minimum Extension Condition”) to consummating any such Extension that a minimum amount (to be determined and specified in the relevant Extension Offer in Borrower’s sole discretion and may be waived by Borrower) of Term Loans of any or all applicable tranches be tendered.

(c) The Lenders hereby irrevocably authorize the Administrative Agent and the Collateral Agent to enter into amendments (“Extension Amendments”) to this Agreement and the other Loan Documents with the Borrower as may be necessary in order to establish new tranches or sub-tranches in respect of Term Loans and Revolving Commitments so extended and such technical amendments as may be necessary or appropriate in the reasonable opinion of the Administrative Agent and the Borrower in connection with the establishment of such new tranches or sub-tranches, in each case on terms consistent with this Section 2.20.

 

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(d) In connection with any Extension, the Borrower shall provide the Administrative Agent at least five (5) Business Days’ (or such shorter period as may be agreed by the Administrative Agent) prior written notice thereof, and shall agree to such procedures, if any, as may be established by, or reasonably acceptable to, the Administrative Agent to accomplish the purposes of this Section 2.20.

(e) This Section 2.20 shall supersede any provisions in Section 2.14 or Section 11.02 to the contrary.

Section 2.21 Refinancing Facilities.

(a) At any time after the Closing Date, the Borrower may obtain, from any Lender on a pro rata basis (based on the aggregate outstanding principal amount of the Term Loans or Revolving Commitments then outstanding) or, to the extent declined by an existing Lender after having five (5) Business Days to respond after written notice from the Agent (which shall be redeemed rejected if not received at the end of such five (5) Business Days period), any new lender (provided that if Administrative Agent would have consent rights with respect to such new lender under Section 11.04 herein were such new lender to take an assignment of Loans or Commitments hereunder, then such new lender shall be reasonably acceptable to the Administrative Agent (in consultation with the Borrower) (such acceptance not to be unreasonably withheld or delayed); provided, however, that, notwithstanding anything to the contrary, no new lender shall be a Loan Party or an Affiliate of a Loan Party) (each such new lender being an “Additional Lender”) Refinancing Term Loans, Refinancing Term Loan Commitments, Refinancing Revolving Loans or Refinancing Revolving Loan Commitments in exchange for, or to extend, renew, replace or refinance, in respect of all of the Term Loans or Revolving Loans then outstanding under this Agreement (which will be deemed to include any then-outstanding New Term Loans under any New Term Loan Commitments) and any then-outstanding Refinancing Term Loans in the form of Refinancing Term Loans or Refinancing Term Commitments or any then-outstanding Refinancing Revolving Loans in the form of Refinancing Revolving Loans or Refinancing Revolving Loan Commitments in each case, pursuant to a Refinancing Amendment, together with any applicable intercreditor agreement or other customary subordination agreement (“Refinanced Debt”); provided, that (i) such extending, renewing or refinancing Indebtedness shall be unsecured or, to the extent secured, shall rank pari passu or junior in right of payment and of security with the other Loans and Commitments hereunder, (ii) such Indebtedness shall not mature or have scheduled amortization or payments of principal prior to the date that is 91 days after the Final Maturity Date at the time such Indebtedness is incurred, (iii) such Indebtedness does not have a Weighted Average Life to Maturity equal to or less than that of the Refinanced Debt and does not have mandatory prepayment or redemption provisions (other than customary asset sale, similar events and change of control offers) that would result in a mandatory prepayment or redemption of such Indebtedness prior to the date that is 91 days after the Final Maturity Date at the time such Indebtedness is incurred, (iv) such Refinanced Debt shall be repaid, defeased or satisfied and discharged, and all accrued interest, fees and premiums (if any) in connection therewith shall be paid, on the date that such Indebtedness is issued, incurred or obtained, (v) (x) such Indebtedness, to the extent secured, shall be secured only by the Collateral, or be guaranteed by any person other than the Guarantors under the outstanding Loans, (y) if such Indebtedness being refinanced is unsecured, such Refinanced Debt shall be unsecured, and (z) if such Indebtedness being refinanced is subordinated with respect to the Obligations, such Refinanced Debt shall be subordinated at least to the same extent as such Indebtedness being refinanced, (vi) the liens securing such Indebtedness shall not be of higher priority than the lien securing the applicable Refinanced Debt, (vii) the other terms of such Indebtedness (other than pricing, interest rate margins, rate floors, discounts, fees, premiums and prepayment or redemption provisions) shall be substantially similar to, or (taken as a whole) no more favorable to the lenders providing such Indebtedness than those applicable to the Loans or Revolving Commitments being refinanced or replaced (except for covenants and other provisions applicable only to the periods after the Final Maturity Date), (vii) such Indebtedness will, to the extent permitted by clauses (i) to (vi), have such

 

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pricing, interest rate margins, rate floors, discounts, fees, premiums and prepayment or redemption provisions and terms as may be agreed by the Borrower and the Lenders thereof; (viii) will, to the extent in the form of Refinancing Revolving Loans or Refinancing Revolving Loan Commitments, participate in the payment, borrowing, participation and commitment reduction provisions herein on a pro rata basis with any all then-outstanding Revolving Loans and Revolving Commitments; (ix) subject to the provisions of Section 2.17(k), all Letters of Credit shall be participated on a pro rata basis by all Lenders with Commitments in accordance with their percentage of the Revolving Commitments (and except as provided in Sections 2.17(k), without giving effect to changes thereto on an earlier maturity date with respect to Letters of Credit theretofore incurred or issued); and (x) any Additional Lender shall execute and deliver an acknowledgment to the Agreement Among Lenders, such acknowledgment to be in a customary form or any other form approved by the Administrative Agent. The effectiveness of any Refinancing Amendment shall be subject to, to the extent reasonably requested by the Administrative Agent, receipt by the Administrative Agent of board resolutions, officers’ certificates and/or reaffirmation agreements consistent with those delivered on the Closing Date. The Administrative Agent shall promptly notify each Lender as to the effectiveness of each Refinancing Amendment. Each of the parties hereto hereby agrees that, upon the effectiveness of any Refinancing Amendment, this Agreement shall be deemed amended to the extent (but only to the extent) necessary to reflect the existence and terms of the Refinanced Debt incurred pursuant thereto (including any amendments necessary to treat the Loans and Commitments subject thereto as Refinancing Term Loans or Refinancing Revolving Loans) and any Indebtedness being replaced or refinanced with such Refinanced Debt shall be deemed permanently reduced and satisfied in all respects. Any Refinancing Amendment may, without the consent of any other Lenders, effect such amendments to this Agreement and the other Loan Documents as may be necessary or appropriate, in the reasonable opinion of the Administrative Agent, to effect the provisions of this Section.

(b) This Section 2.21 shall supersede any provisions in Section 11.02 to the contrary.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

Each Loan Party represents and warrants to the Administrative Agent, the Collateral Agent, the Issuing Bank and each of the Lenders on the Closing Date and on the date of each Credit Extension (to the extent required pursuant to Article IV) that:

Section 3.01 Existence, Qualification and Power. Each Company (a) is duly incorporated or organized and validly existing under the laws of the jurisdiction of its incorporation or organization, as the case may be, (b) has all requisite power and authority and all requisite governmental licenses, authorizations, consents and approvals to carry on its business as now conducted and to own, lease and operate its Property and (c) is registered, qualified and in good standing (to the extent such concept is applicable in the applicable jurisdiction) to do business in every jurisdiction where such qualification is required, except in such jurisdictions where the failure to so register, qualify or be in good standing could not reasonably be expected to result in a Material Adverse Effect. There is no existing default under any Organizational Document of any Company or any event which, with the giving of notice or passage of time or both, would constitute a default by any party thereunder.

Section 3.02 Authorization; Enforceability. The Loan Documents to be entered into by each Loan Party are within such Loan Party’s powers and have been duly authorized by all necessary corporate or other organizational action on the part of each such Loan Party. This Agreement has been duly executed and delivered by each Loan Party and constitutes, and each other Loan Document to which any Loan Party is to be a party, when executed and delivered by such Loan Party, will constitute, a legal, valid and binding obligation of such Loan Party, enforceable against such Loan Party in accordance with its

 

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terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, good faith and fair dealing, regardless of whether considered in a proceeding in equity or at law.

Section 3.03 No Conflicts. The execution, delivery and performance by the Loan Parties of the Loan Documents to which they are a party, the initial Credit Extensions contemplated hereunder and the other Transactions (a) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority, except (i) as have been obtained or made and are in full force and effect, (ii) filings necessary to perfect or maintain the perfection or priority of the Liens created by the Security Documents and (iii) consents, approvals, registrations, filings, permits or actions the failure of which to obtain or perform would not reasonably be expected to result in a Material Adverse Effect, (b) will not violate the Organizational Documents of any Company, (c) will not violate or result in a default or require any consent or approval under (x) any indenture, agreement, or other instrument binding upon any Company or its Property or to which any Company or its Property is subject, or give rise to a right thereunder to require any payment to be made by any Company, except for violations, defaults or the creation of such rights that could not reasonably be expected to result in a Material Adverse Effect or (y) any Organizational Document of any Company, (d) will not violate any Legal Requirement in any material respect and (e) will not result in the creation or imposition of any Lien on any Property of any Company, other than the Liens created by the Security Documents.

Section 3.04 Financial Statements; Projections; No Material Adverse Effect. (a) The Borrower has heretofore delivered to the Agents and the Lenders (i) the Historical Financial Statements, in the case of the financials described in clause (a) of the definition thereof, audited by and accompanied by the unqualified opinion of PricewaterhouseCoopers LLP, independent public accountants, and (ii) the consolidated balance sheets of the Borrower and certain of its Affiliates (as specified therein) and the related consolidated statements of income or operations, changes in stockholders’ equity and cash flows as of and for the dates specified therein. Such financial statements and all financial statements delivered pursuant to Sections 5.01(a) and (b) have been prepared in accordance with GAAP consistently applied throughout the applicable period covered, thereby and present fairly and accurately, in all material respects, the financial condition and results of operations and cash flows of the entities specified therein as of the dates and for the periods to which they relate (subject to year-end audit adjustments and the absence of footnote disclosures). No Company has any material liabilities of any kind, whether accrued, contingent, absolute, determined, determinable or otherwise except as reflected in such financial statements and there is no existing condition, situation or set of circumstances which could reasonably be expected to result in such a liability.

(b) The Borrower has heretofore delivered to the Agents and the Lenders the forecasts of financial performance of the Borrower and its Subsidiaries for various periods ending December 31, 2022 through to the fiscal year ended December 31, 2027 (the “Projections”) and the assumptions upon which the Projections are based. The Projections have been prepared in good faith by the Loan Parties and based upon (i) the assumptions stated therein (which assumptions are believed by the Loan Parties to be reasonable at the time of delivery thereof and on the Closing Date), (ii) accounting principles consistent with the Historical Audited Financial Statements delivered pursuant to Section 3.04(a) and management’s historical adjustments thereto, in each case consistently applied throughout the fiscal years covered thereby, and (iii) the information reasonably available to, or in the possession or control of, the Loan Parties as of the date of delivery thereof and on the Closing Date (it being recognized by the Agents and the Lenders that (x) the Projections are not to be viewed as facts or a guarantee of performance and are subject to significant uncertainties and contingencies, many of which are beyond the control of the Borrower and its Subsidiaries and (y) no assurance can be given that any particular financial projection will be realized, and that actual results during the period or periods covered by the Projections may differ from the projected results, and such differences may be material).

 

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(c) Since December 31, 2021, there has been no event, change, circumstance, condition, development or occurrence that has had, or would reasonably be expected to result, either individually or in the aggregate, a Material Adverse Effect.

Section 3.05 Properties.

(a) Each Company has good, valid and marketable fee simple title to, or valid leasehold interests in, all its Property, free and clear of all Liens except for Permitted Liens. The Property of the Companies, individually and in the aggregate, (i) is in good operating order, condition and repair (ordinary wear and tear and Casualty Events excepted), and (ii) constitutes all of the Property which is required for the business and operations of the Companies as presently conducted.

(b) As of the Closing Date, Schedule 3.05(b) contains a true and complete list of each ownership and leasehold interest in Real Property (i) owned by any Company and describes the type of interest therein held by such Loan Party, the common street address, and the name of the Loan Party that owns such Real Property and (ii) leased, subleased, licensed or otherwise occupied or utilized by any Company, as lessee, sublessee, franchisee or licensee, the name of the Loan Party that leases such Real Property, a description of the lease, sublease, license, use or occupancy agreement pursuant to which such rights have been granted, and the parties to such agreement (collectively, the “Real Property Leases”). Each Real Property Lease is in full force and effect and constitutes a legal, valid and binding obligation on the applicable Loan Party which is a party to it, enforceable in accordance with its terms, No Loan Party, nor to the Company’s knowledge any other party, is in breach or default under such Real Property Lease and no event has occurred or circumstance exists which, with the delivery of notice, the passage of time or both, would constitute such a breach or default or permit the termination, modification or acceleration of rent under such Real Property Lease, and no Loan Party nor the Company has subleased, licensed, or otherwise granted to any Person the right to use or occupy any Real Property.

(c) No Mortgage encumbers Real Property on which a “Building” (as defined in 12 C.F.R. Chapter III, Section 339.2) is located in an area that has been identified by the Secretary of Housing and Urban Development as an area having special flood hazards within the meaning of the National Flood Insurance Act of 1968 unless flood insurance available under such Act has been obtained and is in full force and effect as required by this Agreement.

(d) Each Company owns or has rights to use all of its property and all rights with respect to any of the foregoing which are required for the business and operations of the Companies as presently conducted. The use by each Company of its property and all such rights with respect to the foregoing do not infringe on the rights or other interests of any person. No claim has been made and remains outstanding that any Company’s use of any of its property does or may violate the rights of any third party. The present uses of the Real Property and the current operations of each Company’s business do not violate in any material respect any provision of any applicable building codes, subdivision regulations, fire regulations, health regulations or building and zoning by-laws.

(e) There is no pending or threatened condemnation or eminent domain proceeding with respect to, or that could affect, any of the Real Property of any Company.

(f) Each parcel of Real Property is taxed as a separate tax lot and is currently being used in a manner that is consistent with and in compliance in all material respects with the property classification assigned to it for real estate tax assessment purposes.

 

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(g) No Company is obligated under, or a party to, any option, right of first refusal or other contractual right to sell, assign or dispose of any Real Property or any portion thereof or interest therein.

(h) Other than as set forth on Schedule 3.05(h), there are no leases, subleases, licenses or other use or occupancy agreements granting any other person the right to the possession, use or occupancy of any portion of the Real Property.

(i) All buildings, structures, improvements, fixtures, building systems and equipment, and all components thereof included in the Real Property (the “Improvements”) are in good condition and repair (reasonable wear and tear excepted) and sufficient for the operation of the Company’s business. To the knowledge of the Loan Parties, there are no material structural deficiencies or latent defects affecting any of the Improvements and there are no facts or conditions affecting any of the Improvements which would, individually or in the aggregate, interfere in any material respect with the use or occupancy of the Improvements or any portion thereof in the operation of the Company’s business.

Section 3.06 Intellectual Property. (a) Each Company owns or is licensed to use, free and clear of all Liens (other than Permitted Liens), patents, copyrights, trademarks, service marks, trade dress, trade names, domain names, trade secrets, confidential information, proprietary information, inventions, databases, software, formulae, works of authorship, know-how, processes, and other intellectual property (collectively, the “Intellectual Property”) used in the conduct of the business of such Company as currently conducted and (b) no actions, suits, claims, disputes, or proceedings are pending, or to the knowledge of such Company are threatened, (i) alleging that any Company infringes, misappropriates, dilutes or otherwise violates any Intellectual Property of any third-party, or (ii) challenging the validity, enforceability, registration, or ownership of any Intellectual Property owned by any Company, and such Company is not aware of any facts or circumstances that would reasonably be expected by such Company to form the basis of any such actions, suits, claims, disputes, or proceedings brought against any Company, except in each case as would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.

Section 3.07 Equity Interests and Subsidiaries. (a) Schedule 3.07(a) sets forth a list of (i) each Company and its jurisdiction of incorporation or organization as of the Closing Date and (ii) the number of each class of the Equity Interests of each Company authorized, and the number outstanding, on the Closing Date and the number of shares covered by all outstanding options, warrants, rights of conversion or purchase and similar rights on the Closing Date. All Equity Interests of each Company are duly and validly issued and are fully paid and non-assessable (as applicable). Each Loan Party is the record and beneficial owner of, and has good title to, the Equity Interests pledged (or purporting to be pledged) by it under the Security Documents, free of any and all Liens, rights or claims of other persons and, as of the Closing Date, there are no outstanding warrants, options or other rights to purchase, or shareholder, voting trust or similar agreements outstanding with respect to, or Property that is convertible into, or that requires the issuance or sale of, any such Equity Interests (or any economic of voting interests therein).

(b) Other than as required by foreign Legal Requirements with respect to the Equity Interests in any Foreign Subsidiary, no consent of any person including any general or limited partner, any other member or manager of a limited liability company, any shareholder or any other trust beneficiary is necessary or reasonably desirable (from the perspective of a secured party) in connection with the creation, perfection or first priority status (or the maintenance thereof) of the security interest of the Collateral Agent in any Equity Interests pledged to the Collateral Agent under the Security Documents or the exercise by the Collateral Agent or any other Secured Party of the voting or other rights provided for in the Security Documents or the exercise of remedies in respect of such Equity Interests.

 

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(c) A complete and accurate organization chart, showing the ownership structure of the Companies on the Closing Date, after giving effect to the Transactions, is set forth on Schedule 3.07(c).

Section 3.08 Litigation; Compliance with Laws. (a) There are no actions, suits, claims, disputes, proceedings or, to the knowledge of any Loan Party, investigations at law or in equity by or before any Governmental Authority now pending or, to the knowledge of any Loan Party, threatened against or affecting any Company or any business, Property or rights of any Company that purport to affect or (i) involve any Loan Document, any Specified Hedging Agreement, any Bank Product Agreement or any of the Transactions or (ii) have resulted in, or, individually or in the aggregate, would reasonably be expected to result in, a Material Adverse Effect.

(b) No Company or any of its Property is in (i) violation of, nor will the continued operation of its Property or business as currently conducted violate, any Legal Requirements (including any zoning or building ordinance, code or approval or any building permits) or any restrictions of record or agreements affecting any Company’s Real Property or (ii) default with respect to any Order, where such violation or default contemplated under subclauses (i) or (ii), would, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.

Section 3.09 Healthcare Laws.

(a) Each Company and Physician-Owned Practice is and has been during the past three (3) years, in compliance with all applicable Healthcare Laws and has not engaged in activities which are, as applicable, reasonable cause for false claims liability, civil penalties, or mandatory or permissive exclusion from Medicare, Medicaid, or any other government health care program, except as would not be reasonably expected, individually or in the aggregate, to have a Material Adverse Effect. No action, suit, proceeding, arbitration, meditation, complaint, claim, charge, litigation or investigation has been filed or, to the knowledge of any Loan Party, commenced or threatened against the Companies or Physician-Owned Practices alleging any Healthcare Law violation in any material respect. During the past three (3) years, none of the Companies or Physician-Owed Practices has received any written notice, citation or warning from any Governmental Authority or Person that alleges or asserts that any such party has materially violated any Healthcare Laws or that requires or seeks any material modification in such party’s business operations as presently conducted and presently proposed to be conducted. The information technology assets and equipment, computers, systems, networks, hardware, software, websites, applications, and databases of each of the Companies and Physician-Owned Practices (collectively, “IT Systems”) are reasonably adequate for, and operate and perform in all material respects as required in connection with the operation of the business of each of the Companies and each Physician-Owed Practice as currently conducted. For the past three (3) years, each Company and Physician-Owned Practice has implemented and maintained commercially reasonable controls, policies, procedures, and safeguards to maintain and protect their material confidential information and the integrity, continuous operation, redundancy and security of all IT Systems and data (including Personal Information) used in connection with their businesses, and to the knowledge of the Company, there have been no breaches, violations, outages or unauthorized uses of or accesses to same, except for those that have been remedied without material cost or liability or the duty to notify any other person, nor any incidents under internal review or investigations relating to the same, except as would not be reasonably expected, individually or in the aggregate, to have a Material Adverse Effect.

 

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(b) Each Company and Physician-Owned Practice and, to the knowledge of any Loan Party, Licensed Providers, is qualified, holds in full force and effect and is and has been in compliance with the terms of all Healthcare Permits and all other applicable authorizations or agreements necessary to conduct its respective businesses, including, without limitation, the maintenance of any tangible net equity or minimum surplus amounts required under applicable Healthcare Laws; (i) the Healthcare Permits are renewable by their terms or in the ordinary course of business consistent with past practice, without the need to comply with any special qualification procedures or to pay any fines or penalties other than routine filing fees; (ii) there is no action, suit, proceeding, arbitration, meditation, complaint, claim, charge, litigation or investigation pending or, to the knowledge of any Loan Party, threatened against the Companies or Physician-Owned Practices, or, to the knowledge of any Loan Party, any Licensed Provider, to revoke, suspend, or otherwise restrict any such Healthcare Permit; and (iii) none of the Companies or Physician-Owned Practices or, to the knowledge of any Loan Party, any Licensed Provider, has received any notice from any Governmental Authority regarding any actual or alleged violation of, or failure to be in compliance with any such Healthcare Permit or any revocation, withdrawal, suspension, cancellation or termination of any such Healthcare Permit, except where the matters set forth in any of the foregoing subsections (i), (ii) or (iii) would not be reasonably expected, individually or in the aggregate, to have a Material Adverse Effect.

(c) Each Company and Physician-Owned Practice, as applicable, (i) has timely filed all claims, applications, reports, schedules, statements, documents, filings, submissions, forms, registrations and other documents, including bid submissions and filings related to costs, premiums, risk adjustment factors, and benefit plans, together with any updates or amendments required to be made with respect thereto (“Applications and Filings”), that such party is required to file with any Governmental Authority in order to comply with Healthcare Laws and/or qualify for participation in any government healthcare programs; (ii) all such Applications and Filings have complied with Healthcare Laws and, to the knowledge of any Loan Party, contained information that was accurate and complete upon the filing thereof; and (iii) to the knowledge of the Loan Parties there are no pending appeals, adjustments, challenges, actions or written notices of intent to audit and no action, suit, proceeding, arbitration, meditation, complaint, claim, charge, litigation or investigation with respect to the Applications and Filings, and there are no outstanding suspensions, offsets, overpayments, recoupments or refunds due to any government healthcare program from the Companies or Physician-Owned Practices, except where the matters set forth in any of the foregoing subsections (i) or (ii) would not be reasonably expected, individually or in the aggregate, to have a Material Adverse Effect, and with respect to the matters set forth in subsection (iii) would not be reasonably expected, individually or in the aggregate, to result in liability to the Companies in excess of $250,000.

(d) None of the Companies or Physician-Owned Practices, or their respective directors, officers, employees or, to the knowledge of any Loan Party, Licensed Providers: (i) has been assessed a material civil monetary penalty under any Healthcare Laws; (ii) has been excluded from participation in Medicare, Medicaid or any other government healthcare programs; (iii) has been excluded, suspended, or debarred from any government health care program or been subject to sanction, charged or been convicted of a crime in connection with any such program or related Healthcare Law; or (iv) is or has been a party to a corporate integrity agreement with the Office of the Inspector General of the U.S. Department of Health and Human Services, a deferred or non-prosecution agreement with the U.S. Department of Justice, or otherwise has a reporting or disclosure obligation pursuant to any settlement agreement entered into with any governmental authority.

(e) Each Company and Physician-Owned Practice, to the knowledge of any Loan Party, Licensed Providers, is qualified (to the extent such qualification is required by applicable Healthcare Laws or the applicable third-party payment program) for participation in all third-party payors from which each Company or Physician-Owned Practice seeks or receives reimbursement for services applicable to such party, is in good standing with respect to each such third-party payment, and is in compliance with the conditions of participation or coverage of all such payment programs and all applicable Healthcare Laws. Without limiting the generality of the foregoing, the billing practices of each of the Companies and Physician-Owned Practices, as applicable, with respect to all patients and third- party payment programs are and have at all times during the past three (3) years been in material compliance with all applicable Healthcare Laws and third-party payment program requirements.

 

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(f) Except for routine or immaterial post-payment reviews or audits in the ordinary course of business, none of the Companies or Physician-Owned Practices has at any time during the past three (3) years received any notice from any of third-party payment programs of any action, suit, proceeding, arbitration, meditation, complaint, claim, charge, litigation, investigation, demands, hearings, audits, reviews or assessments threatened in a writing delivered to the Companies or Physician-Owned Practices or, to the knowledge of any Loan Party, pending, ongoing or scheduled, with respect to any of the claims filed by the Companies or Physician-Owned Practices for reimbursement or with respect to any compliance matters, investigations or surveys. Each Company and Physician-Owned Practice has paid, resolved or appealed (or the applicable third-party payor has recouped) all known and undisputed refunds, overpayments, discounts or adjustments that have become due with respect to such claims and reports, has not knowingly received and retained reimbursements from any such third-party payor in excess of the amounts permitted by applicable payor’s requirements and Healthcare Laws, except as would not be reasonably expected, individually or in the aggregate, to have a Material Adverse Effect. Except for routine or immaterial post-payment reviews or audits in the ordinary course of business, no third-party payor has requested or threatened in a writing delivered to the Companies or Physician-Owned Practices, to the knowledge of any Loan Party, any recoupment, refund or offset from any client of the Companies or Physician-Owned Practices that has not timely been appealed, repaid, resolved or recouped. There are no third-party payor recoupments being sought, requested or claimed, or to the knowledge of any Loan Party, threatened against the Companies or Physician-Owned Practices in excess of $250,000.

Section 3.10 Federal Reserve Regulations. (a) No Company is engaged principally, or as one of its important activities, in the business of purchasing or carrying Margin Stock or extending credit for the purpose of purchasing or carrying Margin Stock.

(b) No part of the proceeds of any Credit Extension will be used, whether directly or indirectly, and whether immediately, incidentally or ultimately, for purchasing or carrying Margin Stock or for any other purpose that entails a violation of, or that is inconsistent with, the provisions of the regulations of the Board, including Regulation T, U or X. The pledge of the Securities Collateral pursuant to the Security Agreement does not violate such regulations.

Section 3.11 Investment Company Act. No Company is an “investment company” or a Company “controlled” by an “investment company”, as defined in, or subject to regulation under, the Investment Company Act of 1940, as amended.

Section 3.12 Use of Proceeds.

(a) On the Closing Date, the Borrower will use the proceeds of the Term Loans to (i) fund all or a portion of the Refinancing, (ii) to pay all or a portion of any related fees and expenses (including any upfront fees and original issue discount) related thereto, (iii) to fund cash to the balance sheet of the Borrower and (iv) for working capital and other general corporate purposes. The Borrower will use the proceeds of the Revolving Loans after the Closing Date for working capital and general corporate purposes not prohibited by this Agreement. The use of proceeds of the Loans hereunder will not be used, directly or indirectly, in violation of Anti-Corruption Laws or applicable Sanctions.

(b) The Borrower shall use the proceeds of the Delayed Draw Term Loans to (i) finance Permitted Acquisitions and other similar permitted Investments, de novo center growth and optimization of de novo centers and management services organization performance and (ii) replenish cash on the balance sheet or repay Revolving Loans that, in either case, were drawn to finance such transactions and were drawn within thirty (30) days prior to the date of funding of such delayed draw term loans.

 

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Section 3.13 Taxes. Each Company has (a) timely filed or caused to be timely filed all U.S. federal and state income Tax Returns and all other material Tax Returns required to have been filed by it and (b) duly and timely paid or caused to be duly and timely paid all U.S. federal and state income Taxes and all other material Taxes (whether or not shown on any Tax Return) due and payable by it and all assessments received by it, except Taxes that are being contested in good faith by appropriate proceedings and for which such Company has set aside on its books adequate reserves in accordance with GAAP. Each Company has made adequate provision in accordance with GAAP for all Taxes not yet due and payable. There is no material action, suit, proceeding, investigation, audit, assessment, deficiency or other claim now pending by any taxing authority regarding any Taxes relating to any Company, except to the extent that (i) the validity or amount thereof is currently being contested in good faith by appropriate proceedings timely instituted and diligently conducted and (ii) the applicable entity has set aside on its books adequate reserves or other appropriate provisions with respect thereto in accordance with. No Loan Party is a party to any Tax sharing or similar agreement with any person that is not a Loan Party.

Section 3.14 No Material Misstatements. On the Closing Date (in the case of the Lender Presentation) or at the time furnished (in the case of all other reports, financial statements, certificates or other written information), the Lender Presentation and the other reports, financial statements, certificates or other written information furnished (other than the Projections, forecasts and other forward-looking information, budgets, estimates and information of a general economic or industry-specific nature) by or on behalf of any Company to any Agent or any Lender in connection with the transactions contemplated hereby and the negotiation of this Agreement or delivered hereunder or under any other Loan Document (as modified or supplemented by other information so furnished) are complete and correct in all material respects and do not contain any material misstatement of fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not materially misleading.

Section 3.15 Labor Matters. There are no strikes, lockouts or slowdowns against any Company pending or, to the knowledge of the Loan Parties, threatened that have resulted in, or could reasonably be expected to result in, a Material Adverse Effect. To the knowledge of the Loan Parties, the hours worked by and payments made to employees of any Company have not been in violation of the Fair Labor Standards Act of 1938, as amended, or any other applicable Legal Requirement dealing with such matters in any manner that has resulted in, or would reasonably be expected to result in, a material liability to the Company. All payments due from any Company, or for which any claim may be made against any Company, on account of wages and employee health and welfare insurance and other benefits, have been paid or accrued as a liability on the books of such Company, except to the extent that the failure to do so has not resulted in, and would not reasonably be expected to result in, a material liability to the Company. The consummation of the Transactions will not give rise to any right of termination or right of renegotiation on the part of any union under any collective bargaining agreement to which any Company is bound.

Section 3.16 Solvency. After giving effect to the Transactions, the Borrower and its Subsidiaries (on a consolidated basis) (a) have property with fair value greater than the total amount of their debts and liabilities, contingent (it being understood that the amount of contingent liabilities at any time shall be computed as the amount that, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability), subordinated or otherwise, (b) have assets with present fair salable value not less than the amount that will be required to pay their liability on their debts as they become absolute and matured, (c) will be able to pay their debts and liabilities, subordinated, contingent or otherwise, as they become absolute and

 

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matured and (d) are not engaged in business or a transaction, and are not about to engage in business or a transaction, for which their property would constitute an unreasonably small capital. For the purposes of this Section 3.15, the amount of any contingent liability at any time shall be computed as the amount that, in light of all of the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability (irrespective of whether such contingent liabilities meet the criteria for accrual under Statement of Financial Accounting Standard No. 5).

Section 3.17 Employee Benefit Plans. (a) (i) Except as would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect, each Employee Benefit Plan complies and is operated and maintained in compliance with all applicable Legal Requirements, including all applicable provisions of ERISA and the Code and the regulations and published interpretations thereunder and (ii) each Employee Benefit Plan that is intended to qualify under Section 401(a) of the Code has received a favorable determination from the Internal Revenue Service or can rely upon an advisory or opinion letter issued by the Internal Revenue Service and nothing has occurred which would prevent, or reasonably be expected to cause the loss of, such qualification.

(b) Except as could not reasonably be expected to result in a Material Adverse Effect, no ERISA Event has occurred or is reasonably expected to occur.

(c) The Companies have no knowledge of any actions, suits or claims pending or threatened with respect to, against or involving an Employee Benefit Plan (other than routine claims for benefits) which would reasonably be expected to be asserted successfully against any Employee Benefit Plan and, if so asserted successfully, would reasonably be expected either singly or in the aggregate to have a Material Adverse Effect.

(d) The Companies and, to the knowledge of the Loan Parties, each ERISA Affiliate, have made all material contributions to or under each Employee Benefit Plan and Multiemployer Plan required by law within the applicable time limits described thereby, the terms of such Employee Benefit Plan or Multiemployer Plan, respectively, or any contract or agreement requiring contributions to an Employee Benefit Plan or Multiemployer Plan save where any failure to comply, individually or in the aggregate, would not result in a material liability to the Companies.

(e) Except as would not reasonably be expected to result in a Material Adverse Effect, each Foreign Plan has been maintained in compliance with its terms and with the requirements of all Legal Requirements and has been maintained, where required, in good standing with applicable Governmental Authorities. All contributions required to be made with respect to a Foreign Plan have been timely made. None of the Companies have incurred any obligation in connection with the termination of, or withdrawal from, any Foreign Plan.

Section 3.18 Environmental Matters. Except as set forth on Schedule 3.17, or would not reasonably be expected to result in a Material Adverse Effect:

(i) the Companies and their businesses, operations and Real Property are and have at all times during the Companies’ ownership or lease thereof been in compliance with, and the Companies have no liability under, any applicable Environmental Law, and the Loan Parties reasonably believe that compliance with any Environmental Law that is or is expected to become applicable to the Companies and their businesses will be timely attained and maintained without material expense;

 

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(ii) the Companies have obtained, maintained in good standing and are in compliance with all Environmental Permits required for the conduct of their businesses and operations, and the ownership, operation and use of their Real Property. No material expenditures or operational adjustments are reasonably anticipated to be required to remain in compliance with the terms and conditions of, or to renew or modify, such Environmental Permits;

(iii) there has been no Release or threatened Release or any handling, management, generation, treatment, transport, storage or disposal of Hazardous Materials on, at, under or from any Real Property or facility presently or formerly owned, leased or operated by any of the Companies or their predecessors in interest or, to the knowledge of the Loan Parties, at, on, under or from any other location (including, without limitation, any location to which Hazardous Materials have been sent for re-use, recycling, treatment, storage, or disposal), that has resulted in, or is reasonably likely to result in, either liability or obligations of the Companies under Environmental Law, assertion of an Environmental Claim against the Companies, interfere with any of the Companies’ businesses and operations, or impair the fair saleable value of any Real Property;

(iv) there is no Environmental Claim pending or, to the knowledge of the Loan Parties, threatened in writing against any of the Companies, or relating to the Real Property currently or formerly owned, leased or operated by any of the Companies or relating to the operations of the Companies (including, for the avoidance of doubt, any request for information under CERCLA or other Environmental Laws), and, to the knowledge of the Loan Parties, there are no actions, activities, circumstances, conditions, events or incidents that are reasonably likely to form the basis of such an Environmental Claim;

(v) the Companies are not subject to any pending or outstanding Order or agreement pursuant to which any Company is subject to any material liabilities or obligations under Environmental Law;

(vi) no person with an indemnity, contribution or other obligation to any of the Companies relating to compliance with or liability under Environmental Law is in default with respect to any such indemnity, contribution or other obligation, and the Companies have not assumed or retained, by contract or operation of law, any liability arising under Environmental Law of any kind, whether fixed or contingent, known or unknown;

(vii) the Companies have made available to the Lenders all material records and files in the possession, custody or control of, or otherwise reasonably available to, the Companies concerning compliance with or liability or obligation under Environmental Law, including those concerning the environmental condition of the Real Property or the existence of Hazardous Materials at Real Property or facilities currently or formerly owned, operated, leased or used by any of the Companies.

Section 3.19 Insurance. Schedule 3.18 sets forth a description in reasonable detail of all insurance maintained by each Company as of the Closing Date. All insurance maintained by the Companies is in full force and effect, all premiums due have been duly paid, none of the Companies has received notice of violation or cancellation thereof, the Premises, and the use, occupancy and operation thereof, comply in all material respects with all Insurance Requirements, and there exists no default under any Insurance Requirement. Each of the Companies has insurance in such amounts and covering such risks and liabilities as are customary for companies of a similar size engaged in similar businesses in similar locations.

 

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Section 3.20 Security Documents. (a) The Security Agreement is effective to create in favor of the Collateral Agent, for the benefit of the Secured Parties, a legal, valid, binding and enforceable security interests in the Security Agreement Collateral described therein and the proceeds and products thereof and, when (i) financing statements in appropriate form are filed in the offices specified in the Perfection Certificate (as updated in accordance with the terms hereof) and (ii) upon the taking of possession or control by the Collateral Agent of the Security Agreement Collateral with respect to which a security interest may be perfected only by possession or control (which possession or control shall be given to the Collateral Agent to the extent possession or control by the Collateral Agent is required by each Security Document), the Liens created by the Security Agreement shall constitute fully perfected first priority Liens on, and security interests in, all right, title and interest of the grantors thereunder in the Security Agreement Collateral (other than (A) the Intellectual Property Collateral (as defined in the Security Agreement), except to the extent that the filing of a financing statement is sufficient to perfect a Lien in such Intellectual Property, and (B) such Security Agreement Collateral in which a security interest cannot be perfected under the UCC as in effect at the relevant time in the relevant jurisdiction by (x) the filing of the financing statements referred to in clause (i) of this Section 3.19(a) or (y) the taking of possession or control to the extent required by each Security Document), in each case subject to no Liens other than Permitted Liens.

(b) When (i) financing statements in appropriate form are filed in the offices specified on Schedule 9 to the Security Agreement (as updated in accordance with the terms hereof), and (ii) with respect to US registered copyrights, US patents and patent applications, and US registered trademarks and trademark applications, when the Security Agreement or one or more of the short forms thereof is filed in the USPTO or the USCO, as applicable, the Liens created by such Security Agreement shall constitute in the United States fully perfected first priority Liens on, and security interests in, all right, title and interest of the grantors thereunder in the Intellectual Property Collateral, in each case, if and to the extent a security interest in such Intellectual Property Collateral can be perfected by such filings.

(c) Each Mortgage, if any, upon the execution and delivery thereof, shall be effective to create, in favor of the Collateral Agent, for its benefit and the benefit of the Secured Parties, a legal, valid, binding and enforceable first priority Lien on, and security interests in, all of the Loan Parties’ right, title and interest in and to the Mortgaged Properties thereunder and the proceeds and products thereof (except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws generally affecting creditors’ rights and by equitable principles (regardless of whether enforcement is sought in equity or at law)), and when such Mortgage is filed or recorded in the offices specified in the local counsel opinion delivered with respect thereto in accordance with the provisions of Sections 4.01, 5.10 and 5.11, the Mortgages shall constitute fully perfected first priority Liens on, and security interests in, all right, title and interest of the Loan Parties in the Mortgaged Properties and the proceeds thereof, in each case prior and superior in right to any other person, (other than Persons holding Liens or other encumbrances or rights permitted by the relevant Mortgage) to the extent a security interest in such Mortgagee Property can be perfected by such filings or recordings.

(d) Each Security Document delivered pursuant to Sections 5.10 and 5.11 will, upon execution and delivery thereof, be effective to create in favor of the Collateral Agent, for the benefit of the Secured Parties, legal, valid and enforceable Liens on, and security interests in, each of the Loan Party’s respective right, title and interest in and to the Collateral thereunder, and in the case of (i) pledged equity interests represented by certificates (x) when such certificates are delivered to the Collateral Agent or (y) when financing statements in appropriate form are filed in the offices specified on Schedule 3.19(d) and (ii) the other Collateral described in the Security Agreement, when financing statements in appropriate form are filed in the offices specified on Schedule 3.19(d) and such other filings as are specified on Schedule 9 to the Security Agreement have been completed to the extent a security interest in such other Collateral can be perfected by such other filings, the Liens in favor of the Collateral Agent created under such Security Document will constitute valid, enforceable and fully perfected first priority Liens on, and security interests in, all right, title and interest of the grantors thereunder in such Collateral, in each case subject to no Liens other than Permitted Liens.

 

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Section 3.21 Sanctions.

(a) None of the Borrower, any Subsidiary or any of their respective directors, officers, employees, or agents that act in any capacity with the credit facility established hereby is, or has been within the past five years, (i) a Sanctioned Person. (ii) involved in any transactions or dealings with or involving a Sanctioned Country or Sanctioned Person, (iii) the subject of or otherwise involved in investigations or enforcement actions by any Governmental Authority or other legal proceedings with respect to any actual or alleged violations of Sanctions, or (iv) engaged in a transaction, dealing, or activity that might reasonably be expected to cause such Person to become a Sanctioned Person.

(b) The Borrower, its Subsidiaries, and their respective directors, officers, employees, and agents that act in any capacity in connection with the credit facility established hereby, are, and have been throughout the past five years, in compliance with applicable Sanctions.

(c) The Borrower will maintain in effect and enforce policies and procedures designed to ensure compliance by the Borrower, its Subsidiaries, and their respective directors, officers, employees and agents with applicable Sanctions.

(d) The Borrower will not request any Borrowing, and the Borrower shall not use, and shall procure that its Subsidiaries and its or their respective directors, officers, employees and agents shall not use, the proceeds of any Borrowing (a) for the purpose of funding, financing or facilitating any activities, business or transaction of or with any Sanctioned Person, or in any Sanctioned Country, or (c) in any manner that would result in the violation of any Sanctions applicable to any party hereto.

Section 3.22 Anti-Terrorism Laws.

(a) No Company and, to the knowledge of the Loan Parties, none of their respective Affiliates is in violation of any Legal Requirements relating to terrorism or money laundering (“Anti-Terrorism Laws”), including Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001 (the “Executive Order”), and the USA PATRIOT Improvement and Reauthorization Act, Public Law 109-177 (March 9, 2006), as amended (the “Patriot Act”).

(b) No Company and, to the knowledge of the Loan Parties, no broker or other agent of any Company acting in any capacity in connection with the Loans conducts any business or engages in making or receiving any contribution of funds, goods or services to or for the benefit of any Sanctioned Person or Sanctioned Country.

Section 3.23 Anticorruption.

(a) None of the Borrower or its Subsidiaries nor any Affiliate, director, officer, employee of the Borrower or its Subsidiaries or Affiliates, or any Person acting on behalf of the Borrower or its Subsidiaries or Affiliates has: (i) taken any action in violation of any Legal Requirements relating to any applicable anti-corruption law, including the U.S. Foreign Corrupt Practices Act (15 U.S.C. § 78 dd-1 et seq.), the UK Bribery Act 2010, and laws and regulations implementing the OECD Convention on Combatting Bribery of Foreign Public Officials in International Business Transactions or the UN Convention against Corruption (collectively, “Anti-Corruption Laws”); or (ii) corruptly offered, paid, given, promised to pay or give, or authorized the payment or gift of anything of value, directly or

 

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indirectly, to any Person, including any Public Official for purposes of (a) influencing any act or decision of any Person, including any Public Official in an official capacity; (b) inducing such Public Official to do or omit to do any act in violation of a lawful duty; (c) securing any improper advantage; or (d) inducing such Public Official to use his or her influence with a government, government entity, commercial enterprise owned or controlled by any government (including state-owned or controlled veterinary or medical facilities), in order to assist the business or any party related in any way to the business, in obtaining or retaining business.

(b) The Borrower, its Subsidiaries and Affiliates have implemented and maintain policies and procedures designed to ensure compliance with Anti-Corruption Laws.

(c) There have not been, and are not pending or, to the knowledge of the Loan Parties, threatened, any civil, criminal or administrative actions, suits, demands, claims, hearings, notices of violation, investigations, proceedings, demand letters, settlements or enforcement actions, involving the Loan Parties in any way relating to this Section 3.22.

ARTICLE IV

CONDITIONS TO CREDIT EXTENSIONS

Section 4.01 Conditions to Initial Credit Extension. The obligation of each Lender to fund the initial Credit Extension on the Closing Date requested to be made by Borrower shall be subject to the prior or concurrent satisfaction or waiver of the conditions precedent set forth in this Section 4.01 (the making of such initial Credit Extension by a Lender being conclusively deemed to be its satisfaction or waiver of the conditions precedent):

(a) Loan Documents. The Administrative Agent shall have received (i) this Agreement, executed and delivered by a duly authorized officer of the Borrower and each Subsidiary Guarantor, (ii) a Note, executed and delivered by the Borrower in favor of each Lender that has requested a Note, (iii) the Security Agreement, executed and delivered by a duly authorized officer of the Borrower and each Subsidiary Guarantor and (iv) the Agreement Among Lenders, executed and delivered by each Term Loan Lender, each Revolving Lender and the Administrative Agent;

(b) Perfection Certificate. Each Loan Party shall have delivered to the Collateral Agent a completed Perfection Certificate, dated as of the Closing Date, executed by a duly authorized officer of each Loan Party, together with all attachments contemplated thereby;

(c) Corporate Documents. The Administrative Agent shall have received:

(i) a certificate of the secretary or assistant secretary (or equivalent officer) on behalf of each Loan Party dated the Closing Date, certifying (A) that attached thereto is a true and complete copy of each Organizational Document of such Loan Party and, with respect to the articles or certificate of incorporation or organization (or similar document) certified (to the extent applicable) as of a recent date by the Secretary of State of the state of its organization, (B) that attached thereto is a true and complete copy of resolutions duly adopted by the Board of Directors of such Loan Party authorizing the execution, delivery and performance of the Loan Documents to which such person is a party and, in the case of the Borrower, the Borrowings hereunder, and that such resolutions have not been modified, rescinded or amended and are in full force and effect as of the date of such certificate, and (C) as to the incumbency and specimen signature of each Responsible Officer executing any Loan Document or any other document delivered in connection herewith on behalf of such Loan Party (together with a certificate of another officer or authorized person as to the incumbency and specimen signature of the officer or authorized person executing the certificate in this clause (i));

 

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(ii) to the extent applicable, a certificate as to the good standing of each Loan Party as of a recent date, from such Secretary of State (or other applicable Governmental Authority) of its jurisdiction of organization;

(iii) the results of a recent lien, tax lien, judgment and litigation search in each of the jurisdictions or offices (including, without limitation, in the United States Patent and Trademark Office and the United States Copyright Office) in which UCC financing statement or other filings or recordations should be made to evidence or perfect security interests in all assets of the Loan Parties), and such search shall reveal no Liens or judgments on any of the assets of the Loan Parties, except for (x) Liens and judgments to be terminated on the Closing Date and (y) Existing Liens; and

(iv) a certificate dated the Closing Date and signed by a Responsible Officer of the Borrower, confirming satisfaction of the conditions set forth in Sections 4.01(h) and (i) and Section 4.02(b) and (c).

(d) Refinancing. The Refinancing shall occur on the Closing Date substantially simultaneously with the Credit Extension.

(e) Historical Financial Statements. The Administrative Agent shall have received the Historical Financial Statements.

(f) Legal Opinion. The Administrative Agent shall have received the legal opinion of DLA Piper LLP, counsel for the Loan Parties, which opinion shall (A) be dated as of the Closing Date, (B) be addressed to the Agents and the Lenders and (C) cover such matters relating to the Loan Documents and the Transactions as the Administrative Agent may reasonably require. Each Loan Party hereby instructs such counsel to deliver such opinions to the Agents and the Lenders.

(g) Solvency Certificate. The Administrative Agent shall have received a solvency certificate in the form of Exhibit H dated the Closing Date and signed by a Financial Officer of the Borrower.

(h) Representations and Warranties. Each of the representations and warranties made by any Loan Party set forth in Article III or in any other Loan Document shall be true and correct in all material respects (provided that, any representation and warranty that is qualified by “materiality,” “material adverse effect” or similar language shall be true and correct in all respects (after giving effect to any such qualification therein)) on and as of the date of such Closing Date, except to the extent such representations and warranties expressly relate to an earlier date (in which case such representations and warranties shall be true and correct in all material respects (or if any such representation and warranty is qualified by “materiality,” “material adverse effect” or similar language, shall be true and correct in all respects (after giving effect to any such qualification therein)) on and as of such earlier date).

(i) No Material Adverse Effect. Since December 31, 2021, there shall have been no events or occurrences that have resulted in a Material Adverse Effect.

 

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(j) Fees and Expenses. The Arranger, the Lenders and the Administrative Agent shall have received all fees and other amounts due and payable to them on or prior to the Closing Date, including, amounts due under the Fee Letter and, to the extent invoiced at least two Business Days prior to the Closing Date (unless otherwise reasonably agreed by the Borrower), reimbursement or payment of all reasonable and documented out-of-pocket fees and expenses (including the legal fees and expenses of Paul Hastings LLP, special counsel to the Agents) and recording taxes and fees.

(k) Patriot Act. The Administrative Agent and the Lenders shall have received, at least three (3) Business Days prior to the Closing Date, all documentation and other information with respect to each Loan Party that is required by regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations, including the Patriot Act to the extent reasonably requested by any Lender in writing at least ten (10) Business Days in advance of the Closing Date.

(l) Beneficial Ownership Certification. If the Borrower qualifies as a “legal entity customer” under the Beneficial Ownership Regulation, then the Borrower shall have delivered to the Administrative Agent a Beneficial Ownership Certification in relation to the Borrower, to the extent reasonably requested by any Lender in writing at least ten (10) Business Days in advance of the Closing Date.

(m) [reserved].

(n) Letter of Direction. The Administrative Agent shall have received a funds flow memorandum and duly executed borrowing notice and letter of direction from the Borrower addressed to the Administrative Agent, on behalf of itself and Lenders, directing the disbursement on the Closing Date of the proceeds of the Loans made on such date.

(o) Creation and Perfection of Security Interests. All actions necessary to establish that the Collateral Agent will have a perfected first priority security interest (subject to Permitted Liens) in the Collateral under the Loan Documents shall have been taken (including, without limitation, the execution and delivery to the Administrative Agent of all documents and instruments (if applicable, in proper form for filing) required to establish such security interests), in each case, to the extent such Collateral (including the creation or perfection of any security interest) is required to be provided on the Closing Date.

The documents referred to in this Section 4.01 shall be delivered to the Administrative Agent no later than the Closing Date. The certificates and opinions referred to in this Section 4.01 shall be dated the Closing Date.

Without limiting the generality of the provisions of Article XI, for purposes of determining compliance with the conditions specified in this Section 4.01, each Lender that has signed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, or waived each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender unless the Administrative Agent shall have received notice from such Lender prior to the proposed Closing Date specifying its objection thereto.

Promptly after the Closing Date occurs, the Administrative Agent shall notify the Borrower and the Lenders of the Closing Date, and such notice shall be conclusive and binding on all parties hereto.

Section 4.02 Conditions to Subsequent Credit Extensions. The obligation of each Revolving Lender to make any Credit Extension or the Issuing Bank to issue and Letter of Credit (including on the Closing Date) shall be subject to, and to the satisfaction of, each of the conditions precedent set forth below.

 

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(a) Notice. The Administrative Agent shall have received (i) a Borrowing Request as required by Section 2.03 (or such notice shall have been deemed given in accordance with Section 2.03) if Loans are being requested or (ii) a Issuance Notice as required by Section 2.17(b).

(b) No Default. At the time of and immediately after giving effect to such Credit Extension and the application of the proceeds thereof, no Default or Event of Default shall have occurred and be continuing on such date.

(c) Representations and Warranties. Each of the representations and warranties made by any Loan Party set forth in Article III or in any other Loan Document shall be true and correct in all material respects (provided that, any representation and warranty that is qualified by “materiality,” “material adverse effect” or similar language shall be true and correct in all respects (after giving effect to any such qualification therein)) on and as of the date of such Credit Extension with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date (in which case such representations and warranties shall be true and correct in all material respects (or if any such representation and warranty is qualified by “materiality,” “material adverse effect” or similar language, shall be true and correct in all respects (after giving effect to any such qualification therein)) on and as of such earlier date).

The delivery of a Borrowing Request pursuant to this Section 4.02 and the acceptance by the Borrower of the proceeds of such Credit Extension shall constitute a representation and warranty by the Borrower and each other Loan Party that on the date of such Credit Extension (both immediately before and after giving effect to such Credit Extension and the application of the proceeds thereof) the conditions contained in this Section 4.02 have been satisfied.

In addition, with respect to any Letter of Credit, the Administrative Agent shall have received all other information required by the applicable Issuance Notice, and such other documents or information as the Issuing Bank may reasonably require in connection with the issuance of such Letter of Credit.

Section 4.03 Conditions to Delayed Draw Term Loan Extensions. Subject to clauses (a)(ii) and (a)(iii) of Section 2.19, the obligation of each Delayed Draw Term Loan Lender to make any Credit Extension (including on the Closing Date) shall be subject to, and to the satisfaction of, each of the conditions precedent set forth below.

(a) Notice. The Administrative Agent shall have received a Borrowing Request as required by Section 2.03 (or such notice shall have been deemed given in accordance with Section 2.03) if Loans are being requested.

(b) No Default. At the time of and immediately after giving effect to such Credit Extension and the application of the proceeds thereof, no Default or Event of Default shall have occurred and be continuing on such date.

(c) Representations and Warranties. Each of the representations and warranties made by any Loan Party set forth in Article III or in any other Loan Document shall be true and correct in all material respects (provided that, any representation and warranty that is qualified by “materiality,” “material adverse effect” or similar language shall be true and correct in all respects (after giving effect to any such qualification therein)) on and as of the date of such Credit Extension with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date (in which case such representations and warranties shall be true and correct in all material respects (or if any such representation and warranty is qualified by “materiality,” “material adverse effect” or similar language, shall be true and correct in all respects (after giving effect to any such qualification therein)) on and as of such earlier date).

 

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(d) Financial Covenants Compliance. As of the last day of the most recently ended Test Period, and after giving effect to such Credit Extension, the Borrower shall be in Pro Forma Compliance with the financial covenants set forth in Section 6.15.

The delivery of a Borrowing Request pursuant to this Section 4.03 and the acceptance by the Borrower of the proceeds of such Credit Extension shall constitute a representation and warranty by the Borrower and each other Loan Party that on the date of such Credit Extension (both immediately before and after giving effect to such Credit Extension and the application of the proceeds thereof) the conditions contained in this Section 4.03 have been satisfied.

ARTICLE V

AFFIRMATIVE COVENANTS

Each Loan Party warrants, covenants and agrees with the Administrative Agent, the Collateral Agent, the Issuing Bank and each Lender that so long as this Agreement shall remain in effect and until the Commitments have been terminated and the principal of and interest and premium (if any) on each Loan, all Fees and all other expenses or amounts payable under any Loan Document shall have been paid in full (other than unasserted contingent indemnification obligations) and cancellation or expiration of all Letters of Credit, each Loan Party will, and will cause each of its Subsidiaries to:

Section 5.01 Financial Statements, Reports, etc. Furnish to the Administrative Agent for distribution to the Lenders:

(a) Annual Reports. Within 90 days after the end of each fiscal year, (i) the audited consolidated balance sheet of the Borrower, its Subsidiaries and the Physician-Owned Practices as of the end of such fiscal year and related consolidated statements of income, cash flows and stockholders’ equity for such fiscal year, which the Borrower may file or be required to file with the SEC under Section 13 or 15(d) of the Exchange Act, in comparative form with such financial statements as of the end of, and for, the preceding fiscal year, all in reasonable detail and prepared in accordance with GAAP and (except with respect to consolidating information) accompanied by an opinion of PricewaterhouseCoopers LLP or other independent public accountants of recognized national standing reasonably satisfactory to the Administrative Agent (which opinion shall not be qualified as to scope or contain any “going concern” or like qualification or exception other than a “going concern” qualification with respect to (A) any upcoming maturity date of any Indebtedness that is scheduled to occur within one year or (B) any potential inability to satisfy the financial covenants under any Indebtedness on a future date or in a future period), stating that such financial statements fairly present, in all material respects, the consolidated financial condition, results of operations and cash flows of the Borrower, its Subsidiaries and the Physician-Owned Practices as of the dates and for the periods specified in accordance with GAAP consistently applied, and (ii) a management’s discussion and analysis of the financial condition and results of operations of the Borrower, its Subsidiaries and the Physician-Owned Practices;

(b) Quarterly Reports.

(i) Within forty five (45) days after the end of each fiscal quarter of the Borrower, commencing with the first fiscal quarter ended June 30, 2022, (i) the unaudited consolidated balance sheet of the Borrower, its Subsidiaries and the Physician-Owned Practices as of the end of such fiscal quarter and related consolidated statements of income and cash flows for such fiscal quarter and for the then elapsed portion of the fiscal year, in comparative form

 

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with the consolidated statements of income in reasonable detail and cash flows for the comparable periods in the previous fiscal year, all prepared in accordance with GAAP and accompanied by a certificate of a Financial Officer stating that such financial statements fairly present, in all material respects, the consolidated financial condition, results of operations and cash flows of the Borrower, its Subsidiaries and the Physician-Owned Practices as of the date and for the periods specified in accordance with GAAP consistently applied, and on a basis consistent with the Historical Audited Financial Statements and management’s historical adjustments thereto, subject to normal year-end adjustments, including audit adjustments, and the absence of footnotes and (ii) a management’s discussion and analysis of the financial condition and results of operations of the Borrower, its Subsidiaries and the Physician-Owned Practices;

(ii) Within forty five (45) days after the end of each fiscal quarter of the Borrower, commencing with the first fiscal quarter ended June 30, 2022, a “key performance indicator” report, segment reported in accordance with GAAP, with such content as may be reasonably agreed by the Administrative Agent and the Borrower (which, in any event, shall include (u) reporting of aggregate de novo loses, (v) Medicare Advantage and Medicaid member months, broken out by full and partial risk, (w) medical expense ratios for Medicare Advantage and Medicaid (which for the purposes of calculating such expense ratios means external provider costs divided by Medicare and Medicaid risk revenues), (x) hospitalization and emergency room visits, (y) Medicare risk adjustment scores on an annual basis and (z) Medicare Advantage risk, Medicaid risk and Other Revenue;

(c) Financial Officer’s Certificate. Concurrently with any delivery of financial statements under Section 5.01(a) or (b)(i), a Compliance Certificate certifying that no Default and no Event of Default has occurred or, if a Default or Event of Default has occurred, specifying the nature and extent thereof and any corrective action taken or proposed to be taken with respect thereto, and a Compliance Certificate setting forth (A) computations of the First Lien Leverage Ratio and the Secured Leverage Ratio in detail reasonably satisfactory to the Administrative Agent (including any Pro Forma Basis calculations and adjustments in reasonable detail) and a certification as to compliance with Section 6.15 (other than Section 6.15(b), which shall be provided on the 5th Business Day following the end of each month pursuant to Section 5.01(e) below) or non-compliance with such covenant, and (B) in the case of Section 5.01(a) above, setting forth Borrower’s calculation of Excess Cash Flow (commencing with the delivery of the financial statements for the fiscal year ending December 31, 2023) and attaching to such certificate an accurate and complete organization chart showing the ownership structure of the Companies as of the last day of the relevant fiscal year or including in such certificate a confirmation that there have been no changes to Schedule 3.07(c);

(d) Budgets. No later than 90 days after the end of each fiscal year of the Borrower, commencing with the fiscal year ending December 31, 2022, an annual budget (on a quarterly basis) in form customarily prepared by the Borrower with regard to the Borrower, its Subsidiaries and the Physician-Owned Practices;

(e) Minimum Liquidity. No later than the 5th Business Day after the end of each fiscal month (commencing with May 31, 2022), a certification as to compliance with Section 6.15(b), setting forth Borrower’s calculation of Minimum Liquidity;

(f) Other Information. From time to time, such other reasonably available information regarding the operations, business affairs and financial condition of the Borrower, its Subsidiaries or any Physician-Owned Practice, or compliance with the terms of any Loan Document, any Specified Hedging Agreement or any Bank Product Agreement or the environmental condition of any Real Property (but in any event, excluding attorney-client privileged information), as the Administrative Agent or any Lender (through the Administrative Agent) may reasonably request;

 

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(g) Certification of Public Information. Borrower and each Lender acknowledge that certain of the Lenders may be Public Lenders and, if documents or notices required to be delivered pursuant to this Section 5.01 or otherwise are being distributed through a Platform, any document or notice that the Borrower has indicated contains Non-Public Information shall not be posted on that portion of the Platform designated for Public Lenders. Borrower agrees to clearly designate all information provided to the Administrative Agent by or on behalf of the Borrower which is suitable to make available to Public Lenders. If the Borrower has not indicated whether a document or notice delivered pursuant to this Section 5.01 contains Non-Public Information, the Administrative Agent reserves the right to post such document or notice solely on that portion of the Platform designated for Lenders who wish to receive Non-Public Information with respect to the Borrower, its Subsidiaries or their respective securities; and

(h) Quarterly Lender Calls. Upon request of the Administrative Agent, after delivery of the financial statements required by Section 5.01(b), the Borrower shall hold a conference call to which the Administrative Agent, the Collateral Agent and the Lenders shall be invited to discuss such financial statements, the financial condition of the Loan Parties and the results of operations for the relevant reporting period.

Anything to the contrary notwithstanding, the obligations in clauses (a) and (b)(i) of this Section 5.01 with respect to financial information of the Borrower, the Subsidiaries and the Physician-Owned Practices may be satisfied by furnishing the applicable financial statements of the Borrower’s Form 10-K or 10-Q, as applicable, filed with the SEC.

Section 5.02 Litigation and Other Notices. Furnish to the Administrative Agent (for distribution to the Lenders) written notice of the following promptly (and, in any event, within ten (10) Business Days) following any Responsible Officer’s knowledge thereof:

(a) any Default or Event of Default specifying the nature and extent thereof and the corrective action (if any) taken or proposed to be taken with respect thereto;

(b) the filing or commencement of, or any written threat or written notice of intention of any person to file or commence, any action, suit, litigation or proceeding, whether at law or in equity or otherwise by or before any Governmental Authority, (i) against any Company or any Affiliate thereof that would reasonably be expected to result in a Material Adverse Effect, (ii) with respect to any Loan Document, any Specified Hedging Agreement or any Bank Product Agreement or (iii) with respect to any of the Transactions;

(c) any development or event that has resulted in, or would reasonably be expected to result in a Material Adverse Effect;

(d) the occurrence of a Casualty Event in excess of $1,500,000 (whether or not covered by insurance);

(e) the occurrence of any ERISA Event that, alone or together with any other ERISA Event that has occurred, would reasonably be expected to result in a Material Adverse Effect; and

 

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(f) the receipt by any Company of any notice of Environmental Claim or violation of or a potential liability under any Environmental Law, or knowledge by any Company that there exists a condition that could reasonably be expected to result in an Environmental Claim or a violation of or liability under, any Environmental Law, in each case, which would reasonably be expected to result in a Material Adverse Effect.

Section 5.03 Existence; Businesses and Properties. (a) Do or cause to be done all things necessary to preserve, renew and maintain in full force and effect its legal existence and good standing under the laws of the jurisdiction of its organization, except as otherwise permitted under Section 6.05 or Section 6.06.

(b) In each case, (x) except as would not reasonably be expected to result in a Material Adverse Effect, do or cause to be done all things necessary to obtain, preserve, renew, extend and keep in full force and effect the rights, permits, privileges, franchises and authorizations to the conduct of its business; comply with all applicable Legal Requirements (including any and all zoning, building, ordinance, code or approval or any building permits or any restrictions of record or agreements affecting the Real Property) and decrees and Orders of any Governmental Authority, whether now in effect or hereafter enacted; pay and perform its obligations under all Leases except when such payments or obligations are being contested in good faith; and at all times maintain, preserve and protect all of its Property and keep such Property in good repair, working order and condition (other than wear and tear occurring in the ordinary course of business) and from time to time make, or cause to be made, all necessary and proper repairs, renewals, additions, improvements and replacements thereto necessary in order that the business carried on in connection therewith may be properly conducted at all times in all material respects and (y) do or cause to be done all things necessary to obtain, preserve, renew, extend and keep in full force and effect all Intellectual Property and at all times maintain, preserve and protect all Intellectual Property, in each case as reasonably determined by the respective Company in the course of its business; provided that nothing in this clause (b) shall prevent (i) Dispositions of Property, consolidations or mergers by or involving any Company in accordance with Section 6.05 or Section 6.06, (ii) the withdrawal by any Company of its qualification as a foreign business organization in any jurisdiction where such withdrawal would not reasonably be expected to result in a Material Adverse Effect, (iii) the expiration of patents and registered copyrights in accordance with their statutory term, (iv) the expiration or non-renewal of any contract, contract right or other agreement in accordance with its terms or (v) the transfer, assignment, lapse, cancellation, abandonment or other disposal by any Company of any immaterial Intellectual Property, contract, contract right or other agreement that such Company reasonably determines is not sufficiently useful to its businesses and no longer commercially desirable to retain.

Section 5.04 Insurance. (a) Keep its insurable Property insured at all times by financially sound and reputable insurers and maintain such other insurance, in each case, to such extent and against such risks as is customary with companies in the same or similar businesses operating in the same or similar locations, including insurance with respect to Mortgaged Properties and other Properties material to the business of the Companies against such casualties and contingencies and of such types and in such amounts with such deductibles as is customary in the case of similar businesses operating in the same or similar locations as determined by such Company (it being agreed by the Administrative Agent that the insurance as in effect and in the amounts and manner in place on the Closing Date complies with the requirements in this Section 5.04).

(b) With respect to the Loan Parties and the property constituting Collateral, all such insurance shall (unless otherwise agreed to by the Administrative Agent) (i) provide that no cancellation, material reduction in amount or material change in coverage thereof shall be effective until at least thirty (30) days after receipt by the Collateral Agent of written notice thereof (or if such cancellation is by reason of nonpayment of premium, at least ten (10) days’ prior written notice) (unless it is such insurer’s policy not to provide such a statement) and (ii) name the Collateral Agent as mortgagee (in the case of

 

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property insurance) or additional insured on behalf of the Secured Parties (in the case of liability insurance) or loss payee (in the case of property insurance), as applicable. Borrower shall not permit, consent to or seek any amendment or change to any insurance policy that effects a material reduction in amount or a material change in coverage under such policy that would reasonably be expected to be adverse in any material respect to the interests of the Lenders without first providing the Collateral Agent with at least thirty (30) days prior written notice thereof.

(c) Notify the Administrative Agent and the Collateral Agent promptly whenever any separate insurance concurrent in form or contributing in the event of loss with that required to be maintained under this Section 5.04 is taken out by any Company; and promptly upon request of the Administrative Agent, deliver to the Administrative Agent and the Collateral Agent a duplicate original copy of such policy or policies.

(d) If any portion of any Mortgaged Property is at any time located in an area identified by the Federal Emergency Management Agency (or any successor agency) as a Special Flood Hazard Area with respect to which flood insurance has been made available under the National Flood Insurance Act of 1968 (as now or hereafter in effect) or any successor act thereto, then the Borrower shall, or shall cause the applicable Loan Party to (i) maintain, or cause to be maintained, with a financially sound and reputable insurer, flood insurance in an amount and otherwise sufficient to comply with all applicable rules and regulations promulgated pursuant to the flood insurance laws and (ii) deliver to the Administrative Agent evidence of such compliance in form and substance reasonably acceptable to the Administrative Agent.

Section 5.05 Obligations and Taxes. (a) Pay, file and discharge promptly when due (giving effect to any permitted extensions) all federal and state income Taxes and all other material Taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits or in respect of its Property, before the same shall become delinquent or in default; provided, that such payment and discharge shall not be required with respect to any such Tax, assessment, charge, levy or claim to the extent (i) the validity or amount thereof shall be contested in good faith by appropriate proceedings timely instituted and diligently conducted and the applicable entity shall have set aside on its books adequate reserves or other appropriate provisions with respect thereto in accordance with GAAP and (ii) such contest operates to suspend the collection of the contested Tax, assessment, charge and enforcement of a Lien and (b) timely and accurately file all federal and state income Tax returns and other material Tax returns required to be filed.

Section 5.06 Employee Benefits. Except as would not reasonably be expected to result in a Material Adverse Effect, comply with all applicable Legal Requirements, including the applicable provisions of ERISA and the Code with respect to all Employee Benefit Plans, Multiemployer Plans and Foreign Plans. Furnish to the Administrative Agent (a) within ten (10) Business Days (or such later time Administrative Agent may agree to in its sole discretion) after any ERISA Event has occurred that, alone or together with any other ERISA Event, would reasonably be expected to result in a Material Adverse Effect, a statement of a Financial Officer of the Borrower setting forth details as to such ERISA Event and the action, if any, that the Companies propose to take with respect thereto, (b) upon request by the Administrative Agent and to the extent such are reasonably available to such Financial Officer of the Borrower, copies of (i) the annual report (Form 5500 Series) filed by any Company with the U.S. Department of Labor or comparable foreign Governmental Authority with respect to each Pension Plan or Foreign Plan; (ii) the most recent actuarial valuation report, if any, for each Pension Plan and Foreign Plan maintained, sponsored or contributed to, or required to be maintained, sponsored or contributed to, by any Company; (iii) all notices received by any Company from a Multiemployer Plan sponsor or any Governmental Authority concerning an ERISA Event; and (iv) any documents described in Section 101(k) of ERISA that any Company may request with respect to any Multiemployer Plan to which a

 

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Company contributes or is required to contribute (provided that if the applicable Company has not requested such documents or notices from the administrator or sponsor of the applicable Multiemployer Plan, such Company shall promptly make a request for such documents or notices from such administrator or sponsor and shall provide copies of such documents or notices promptly after receipt thereof), and (c) promptly, and in any event within thirty (30) days, after becoming aware that (i) Unfunded Pension Liabilities have reached or reach the amount of $10,000,000 or more or is at a level as would be reasonably likely to have a Material Adverse Effect (taking into account only Employee Benefit Plans with positive Unfunded Pension Liabilities), (ii) potential withdrawal liability under Section 4201 of ERISA, if the Companies and the ERISA Affiliates were to withdraw completely from any and all Multiemployer Plans, has reached or reaches the amount of $10,000,000 or more or are at a level as would be reasonably likely to have a Material Adverse Effect, a detailed written description thereof from a Financial Officer of the Borrower.

Section 5.07 Maintaining Records; Access to Properties and Inspections. Keep proper books of record and account in which full, true and correct entries in conformity with GAAP and all Legal Requirements are made of all dealings and transactions in relation to its business and activities. Each Company will permit any representatives designated by the Collateral Agent, the Administrative Agent or, during the continuance of a Default or an Event of Default, a Lender as often as reasonably requested (except not more frequently than once in any 12-month period unless a Default or an Event of Default has occurred and is then continuing) upon reasonable prior written notice (except no such advance notice shall be required if an Event of Default has occurred and is then continuing), in each case, to visit and inspect the financial records and the Property of such Company at reasonable times during regular business hours and to make extracts from and copies of such financial records, and permit any representatives designated by the Administrative Agent or any Lender to discuss the affairs, finances, accounts and condition of any Company with the officers and employees thereof and Advisors thereof as long as representatives of the Borrower have been given reasonable prior written notice of and the reasonable opportunity to attend any such discussions; provided, that so long as no Default or Event of Default has occurred and is then continuing, the Borrower shall not bear the cost of more than one such inspection in any 12-month period by the Administrative Agent or the Collateral Agent; provided, further, that the Collateral Agent, the Administrative Agent or Lender, as applicable, shall make all reasonable efforts not to disrupt the business or operations of any such Company.

Section 5.08 Use of Proceeds. Use the proceeds of the Loans only for the purposes set forth in Section 3.11.

Section 5.09 Compliance with Environmental Laws. (a) Except, in each case, where the failure to do so could not reasonably be expected to have a Material Adverse Effect, comply, and shall cause each of its Subsidiaries to comply, and use commercially reasonable efforts to cause all lessees and other persons occupying Real Property owned, operated or leased by any Company or any of its Subsidiaries to comply, in all material respects, with all Environmental Laws and Environmental Permits applicable to its operations and the Real Property; obtain and maintain in full force and effect all material Environmental Permits applicable to its operations and the Real Property; and conduct all Responses required by any Governmental Authority or under any applicable Environmental Laws, including making appropriate responses to any investigation, notice, demand, claim, suit or other proceeding asserting liability under Environmental Law against the Loan Parties or any of its Subsidiaries and discharge any obligations it may have to any Person thereunder, and in accordance with, the requirements of any Governmental Authority and applicable Environmental Laws.

(b) Except as would not reasonably be expected to have a Material Adverse Effect, do or cause to be done all things necessary to prevent any Release of Hazardous Materials by the Companies in, on, under, to or from any Real Property owned, leased or operated by any of the Companies, and ensure that there shall be no Hazardous Materials present at, in, on, or under any Real Property owned, leased or operated by any of the Companies except those that are used, stored, handled and managed in full compliance with applicable Environmental Laws.

 

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(c) Except as would not reasonably be expected to result in a Material Adverse Effect, undertake all actions, including Responses, required under Environmental Law or as otherwise reasonably requested by the Administrative Agent, all at the sole cost and expense of the Companies, (i) to address any Release of Hazardous Materials at, from or onto any Real Property owned, leased or operated by any of the Companies or their predecessors in interest as required pursuant to Environmental Law or the requirements of any Governmental Authority; and (ii) to address any environmental conditions relating to any Company, any Company’s business or to any Real Property owned, leased or operated by any of the Companies pursuant to any reasonable written request of the Administrative Agent and share with the Administrative Agent all data, information and reports generated or prepared in connection therewith;.

(d) Prior to the date that is ninety (90) days after the closing date (subject to extensions by the Administrative Agent, in its sole discretion), notify the Administrative Agent in writing of: (1) any Release or threatened Release of Hazardous Materials in, on, under, at, from or migrating to any Real Property owned, leased or operated by any of the Companies, (2) any non-compliance with, or violation of, any Environmental Law applicable to any Company, any Company’s business and any Real Property owned, leased or operated by any of the Companies, (3) any Lien (other than Permitted Liens) pursuant to Environmental Law imposed on any Real Property owned by any of the Companies, (4) any investigation or remediation of any Real Property owned, leased or operated by any of the Companies required to be undertaken pursuant to Environmental Law, and (5) any written notice or other written communication received by any Company from any person or Governmental Authority relating to any material Environmental Claim or material liability or potential liability of any Company pursuant to any Environmental Law.

Section 5.10 Additional Collateral; Additional Guarantors. (a) Subject to this Section 5.10, with respect to any Property acquired after the Closing Date by any Loan Party that is intended to be subject to the Lien created by any of the Security Documents but is not so subject (but, in any event, excluding any Equity Interest of a Subsidiary not required to be pledged pursuant to the last sentence of Section 5.10(b) and any Excluded Asset), promptly (and in any event within sixty (60) days after the acquisition thereof or such longer period as may be agreed to in writing by the Administrative Agent) (i) execute and deliver to the Administrative Agent and the Collateral Agent such amendments or supplements to the relevant Security Documents or such other documents as the Administrative Agent or the Collateral Agent shall deem reasonably necessary or advisable to grant to the Collateral Agent, for its benefit and for the benefit of the other Secured Parties, a Lien on such Property under applicable U.S. state and federal law (and applicable foreign law unless the Collateral Agent shall determine in its sole discretion that the cost of complying with such applicable foreign law is excessive in relation to the value of the security to be afforded thereby) subject to no Liens other than Permitted Liens, (ii) to the extent (A) the value of such after-acquired Property would constitute a material portion of the Collateral as a whole, and (B) requested by the Administrative Agent or the Collateral Agent, deliver customary and reasonable opinions of counsel to the Borrower in form and substance, and from counsel, reasonably acceptable to the Administrative Agent, and (iii) take all actions reasonably necessary to cause such Lien to be duly perfected to the extent required by such Security Documents in accordance with all applicable Legal Requirements, including the filing of financing statements in such jurisdictions as may be reasonably requested by the Administrative Agent or the Collateral Agent and the delivery of Control Agreements (as defined in the Security Agreement) for the benefit of the Administrative Agent to the extent required pursuant to the Security Agreement. Subject to the limitations set forth herein and in the other Loan Documents, the Borrower and the other Loan Parties shall otherwise take such actions and execute and/or deliver to the Collateral Agent such documents as the Administrative Agent or the Collateral Agent shall reasonably require to confirm the validity, perfection and priority of the Lien of the Security Documents against such after-acquired Properties.

 

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(b) With respect to any person that is or becomes a Subsidiary of a Loan Party after the Closing Date (other than (x) Excluded Subsidiaries or (y) a merger subsidiary formed in connection with a Permitted Acquisition so long as such merger subsidiary is merged out of existence pursuant to such Permitted Acquisition within sixty (60) days of its formation thereof or such later date as permitted by the Administrative Agent in its sole discretion), the applicable Loan Party shall promptly (and in any event within sixty (60) days after such person becomes a Subsidiary or such longer period as may be agreed to in writing by the Administrative Agent) (i) deliver to the Collateral Agent the certificates, if any, representing all of the Equity Interests of such Subsidiary, together with undated stock powers or other appropriate instruments of transfer executed and delivered in blank by a duly authorized officer of the holder(s) of such Equity Interests (provided that if the Equity Interests of such Subsidiary is not represented by certificates, the Borrower shall not be required to cause such Equity Interests to be certificated), and all intercompany notes, if any (subject to the limitations set forth in the Security Agreement), owing from such Subsidiary to any Loan Party together with instruments of transfer executed and delivered in blank by a duly authorized officer of such Loan Party and (ii) cause such new Subsidiary (A) to execute a Joinder Agreement to cause such Subsidiary to become a Guarantor and a Pledgor, (B) deliver opinions of counsel to the Borrower in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent, and (C) to take all actions reasonably necessary or advisable in the opinion of the Administrative Agent or the Collateral Agent to cause the Lien created by the applicable Security Document to be duly perfected to the extent required by such Security Document in accordance with all applicable Legal Requirements, including the filing of financing statements (or equivalent registrations) in such jurisdictions as may be reasonably requested by the Administrative Agent or the Collateral Agent. Notwithstanding the foregoing, (1) any Equity Interests of a Subsidiary that is either a CFC or a U.S. Foreign Holdco that is required to be delivered to the Collateral Agent pursuant to clause (i) of the preceding sentence may be limited to (A) Voting Stock representing 65% of the total voting power of all outstanding Voting Stock of such Subsidiary and (B) 100% of the Equity Interests not constituting Voting Stock of any such Subsidiary (except that any such Equity Interests constituting “stock entitled to vote” within the meaning of Treasury Regulation Section 1.956-2(c)(2) shall be treated as Voting Stock for purposes of this Section 5.10(b)) if delivery in excess of such limits would result in material adverse tax consequences to the Borrower and its Subsidiaries as reasonably determined by Borrower and the Administrative Agent and (2) a Subsidiary shall not be required to take the actions specified in clause (ii) of the preceding sentence to the extent such Subsidiary (v) is prohibited from taking such actions by applicable law, rule or regulation or by any contractual obligation existing at the time of acquisition thereof after the Closing Date (to the extent such contractual obligation was not created in contemplation of such acquisition) for so long as such prohibition exists, (w) would require governmental (including regulatory) consent, approval, license or authorization to the extent such consent, approval, license or authorization has not been received upon the Loan Parties using commercially reasonable efforts to acquire the same or (x) is a CFC, a direct or indirect Domestic Subsidiary of a CFC or a U.S. Foreign Holdco if taking such actions would result in material adverse tax consequences to the Borrower and its Subsidiaries as reasonably determined by Borrower and the Administrative Agent. Notwithstanding the foregoing, no actions shall be required to be taken in any U.S. or non-U.S. jurisdiction to create or perfect any security interest with respect to any such Subsidiary, including the delivery of any security agreements or pledge agreements governed under the laws of any U.S. or non-U.S. jurisdiction.

(c) [reserved].

 

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(d) Promptly (and in any event within 90 days of the acquisition thereof or such longer period as may be agreed to in writing by the Administrative Agent) grant to the Collateral Agent a security interest in and Mortgage on each Real Property owned in fee by such Loan Party as is acquired by such Loan Party after the Closing Date and that, together with any improvements thereon, individually has a Fair Market Value of at least $2,000,000, as additional security for the Secured Obligations (unless the subject Property is already mortgaged to a third party to the extent permitted by Section 6.02). Such Mortgages shall be granted pursuant to documentation reasonably satisfactory in form and substance to the Administrative Agent and the Collateral Agent and shall constitute valid and enforceable perfected first priority Liens subject only to Permitted Liens. The Mortgages or instruments related thereto shall be duly recorded or filed in such manner and in such places as are required by applicable Legal Requirements to establish, perfect, preserve and protect the Liens in favor of the Collateral Agent required to be granted pursuant to the Mortgages and all taxes, fees and other charges payable in connection therewith shall be paid in full by each applicable Loan Party. Such Loan Party shall otherwise take such actions and execute and/or deliver to the Collateral Agent such documents as the Administrative Agent or the Collateral Agent shall reasonably require to confirm the validity, enforceability, perfection and priority of the Lien of any existing Mortgage or new Mortgage against such after-acquired Real Property (including a Title Policy, a Survey and local counsel opinion (in form and substance reasonably satisfactory to the Administrative Agent and the Collateral Agent) in respect of such Mortgage) and shall take such actions relating to insurance with respect to such after-acquired Real Property and execute and/or delivery to the Collateral Agent such environmental reports, zoning reports, insurance certificates, flood determinations and evidence of flood insurance (in form and substance reasonably acceptable to the Administrative Agent and the Collateral Agent) and other documentation (including with respect to title and flood insurance), in each case in form and substance reasonably satisfactory to the Administrative Agent and Collateral Agent, as the Collateral Agent shall reasonably request. Notwithstanding the foregoing, (i) any fee owned real property with a Fair Market Value of less than $2,000,000 (with the amount secured by such mortgage limited to the Fair Market Value of the applicable fee owned real property (to the extent that such real property is located in a jurisdiction that imposes a mortgage recording tax based on the amount of debt secured by the respective mortgage) and with any required mortgages on properties with a value greater than such amount being permitted to be delivered within 90 days after the Closing Date (as such date may be extended by the Administrative Agent in its sole discretion) and all leasehold interests in real property (other than leaseholds of manufacturing or distribution centers that secure (or were otherwise required to secure) the obligations under any of the debt to be repaid as part of the Refinancing, although the Borrower shall only be required to use its commercially reasonable efforts to obtain any third party consents that may be required to grant such leasehold mortgage) and (ii) no action will be required with respect to any fee-owned Real Property located outside the United States. With respect to any Real Property that is ground leased, the Loan Party shall use commercially reasonable efforts to obtain estoppels and consents from the applicable ground lessors in form and substance reasonably satisfactory to the Administrative Agent and the Collateral Agent. Upon receipt of any required consents, the Loan Party will deliver all other deliverables required pursuant to this Section 5.10(d).

(e) Notwithstanding the foregoing provisions of this Section 5.10 or any other provision in this Agreement or of any other Loan Document, (i) none of the Loan Parties shall be required to grant a security interest in any Excluded Assets, (ii) none of the Loan Parties shall be required to perfect any pledges, security interests and mortgages in the Collateral by any means other than (A) filings pursuant to the Uniform Commercial Code in the office of the Secretary of State of the relevant State and (2) filings in the United States Patent and Trademark Office and United States Copyright Office with respect to intellectual property as expressly required in the Security Documents, (B) Mortgages in respect of Mortgaged Properties to be filed in the applicable recording office(s) of the counties in which the Mortgaged Property is located (and, if required or customary in the jurisdiction where such Mortgaged Properties are located, fixture filings) and (C) subject to any intercreditor arrangements entered into pursuant to this Agreement, delivery to the Lender of all certificates evidencing equity interests required to be delivered in order to perfect the Lender’s security interest therein, and intercompany notes and other instruments to be held in its possession, in each case as expressly required in the Security Documents.

 

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Section 5.11 Security Interests; Further Assurances. (a) Subject to the limitations set forth in this Agreement or any other Loan Document, promptly, upon the reasonable request of the Administrative Agent, the Collateral Agent or any Lender, at the Borrower’s expense, execute, acknowledge and deliver, or cause the execution, acknowledgement and delivery of, and thereafter register, file or record, or cause to be registered, filed or recorded, in an appropriate governmental office, any document or instrument supplemental to or confirmatory of the Security Documents or otherwise deemed by the Administrative Agent or the Collateral Agent reasonably necessary or advisable for the continued validity, enforceability, perfection and priority of the Liens on the Collateral covered thereby subject to no other Liens except Permitted Liens, or obtain any consents or waivers as may be necessary or appropriate in connection therewith.

(b) Deliver or cause to be delivered to the Administrative Agent and the Collateral Agent from time to time such other documentation, consents, authorizations, approvals and Orders in form and substance reasonably satisfactory to the Administrative Agent and the Collateral Agent as the Administrative Agent and the Collateral Agent shall reasonably deem reasonably necessary or advisable to perfect or maintain the validity, enforceability, perfection and priority of the Liens on the Collateral pursuant to the Security Documents, subject to the terms, conditions and limitations of this Agreement and the Security Documents.

(c) Upon the exercise by the Administrative Agent, the Collateral Agent or any Lender of any power, right, privilege or remedy pursuant to any Loan Document which requires any consent, approval, registration, qualification or authorization of any Governmental Authority, execute and deliver all applications, certifications, instruments and other documents and papers that the Administrative Agent, the Collateral Agent or such Lender may reasonably require.

(d) If the Administrative Agent, the Collateral Agent or the Required Lenders reasonably determine that they are required by any Legal Requirements to have appraisals prepared in respect of the Real Property of any Loan Party constituting Collateral, the Borrower shall provide to the Administrative Agent appraisals that satisfy the applicable requirements of the Real Estate Appraisal Reform Amendments of FIRREA and are otherwise in form and substance satisfactory to the Administrative Agent and the Collateral Agent.

(e) In furtherance of the foregoing in this Section 5.11 and Section 5.10, to the maximum extent permitted by applicable Legal Requirements, each Loan Party (A) authorizes each of the Collateral Agent and/or the Administrative Agent to (x) if any of the Companies shall be in non-compliance with Section 5.11 or Section 5.12 or of any provision of any of the Security Agreement or if any Default or Event of Default has occurred and is then continuing, execute any such documentation, consents, authorizations, approvals, Orders, applications, certifications, instruments and other documents and papers in such Loan Party’s name to the extent necessary to satisfy such Company’s obligations under Section 5.11 or 5.12 herein or under any Security Document, and (y) to file such agreements, instruments or other documents in any appropriate filing office, and (B) authorizes each of the Collateral Agent and/or the Administrative Agent to file any financing statement (and/or equivalent foreign registration) required hereunder or under any other Loan Document, and any continuation statement or amendment (and/or equivalent foreign registration) with respect thereto, in any appropriate filing office without the signature of such Loan Party.

 

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Section 5.12 Information Regarding Collateral. Other than with respect to any Immaterial Subsidiary, (a) not effect any change (i) in any Loan Party’s legal name, (ii) in the location of any Loan Party’s chief executive office (if such Loan Party is not a registered organization), (iii) in any Loan Party’s organizational type, (iv) in any Loan Party’s federal taxpayer identification number or organizational identification number, if any (except as may be required by applicable Legal Requirements, in which case, the Borrower shall promptly notify the Administrative Agent of such change), or (v) in any Loan Party’s jurisdiction of organization (in each case, including by merging with or into any other entity, reorganizing, dissolving, liquidating, reorganizing or organizing in any other jurisdiction), unless (A) it gives the Collateral Agent and the Administrative Agent not less than thirty (30) days’ (or such shorter period as agreed to in writing by the Collateral Agent) prior written notice of such change, clearly describing such change and providing such other information in connection therewith as the Collateral Agent or the Administrative Agent may reasonably request and (B) it takes all action reasonably requested by the Collateral Agent to maintain the validity, enforceability, perfection and priority of the security interest of the Collateral Agent for the benefit of the Secured Parties in the Collateral, if applicable, subject to the terms, conditions and limitations of this Agreement and the Security Documents. Each Loan Party shall promptly provide the Collateral Agent with certified Organizational Documents reflecting any of the changes described in the preceding sentence. Each Loan Party shall promptly notify the Collateral Agent of any change in the location of any office in which it maintains books or records relating to Collateral owned by it or any office or facility at which Collateral is located (including the establishment of any such new office or facility), other than changes in location to a Mortgaged Property.

(b) Concurrently with the delivery of financial statements pursuant to Section 5.01(a), deliver to the Administrative Agent and the Collateral Agent a Perfection Certificate Supplement.

Section 5.13 Anti-Cash Hoarding. If the Physician-Owned Practices have Excess Cash as of the end of the last Business Day of any calendar month, the Borrower shall cause the Physician-Owned Practices to transfer such Excess Cash to an account of the Borrower that is subject to a Control Agreement.

Section 5.14 Compliance with Statutes, Regulations, Etc.. Comply with all laws, rules, regulations, and orders of any Governmental Authority (including all Healthcare Laws) applicable to it or its property (owned or leased), except where the failure to do so could not reasonably be expected to have a Material Adverse Effect.

Section 5.15 Fiscal Year. Maintain its fiscal year-end to the date of December 31.

Section 5.16 Sanctions; Anti-Money Laundering; Anti-Corruption Compliance.

(a) Not directly or indirectly use the proceeds of any Borrowing (i) for the purpose of funding, financing or facilitating any activities, business or transaction of or with any Sanctioned Person, or in any Sanctioned Country, or (ii) in any manner that would result in the violation of any Anti-Corruption Laws or Sanctions applicable to any party hereto (and the Loan Parties shall deliver to the Lenders confirmation requested from time to time by any Lender in its reasonable discretion, of the Loan Parties’ compliance with this Section 5.16);

(b) Not cause or permit any of the funds of such Loan Party that are used to repay the Loans to be derived from any unlawful activity with the result that the making of the Loans would be in violation of any applicable Legal Requirement.

 

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(c) Each Loan Party (i) will comply, and will ensure that its directors, officers, employees, agents and Affiliates comply, with the Anti-Corruption Laws; and (ii) will maintain in effect and enforce policies and procedures designed to ensure compliance by the Loan Parties and their respective directors, officers, employees, agents and Affiliates with Anti-Corruption Laws.

Section 5.17 Line of Business. Not engage in any material line of business substantially different from those lines of business conducted by any Loan Party on the Closing Date or any business reasonably related, similar, corollary, ancillary, complementary or incidental thereto or reasonable extensions thereof.

Section 5.18 Post-Closing Obligations. Within the time periods specified on Schedule 5.18 (or such later date to which the Administrative Agent consents in its sole discretion), comply with the provisions set forth in Schedule 5.18.

Section 5.19 Beneficial Ownership Certifications. As of the Closing Date, the information included in the Beneficial Ownership Certification is true and correct in all respects.

ARTICLE VI

NEGATIVE COVENANTS

Each Loan Party warrants, covenants and agrees with the Administrative Agent, the Collateral Agent, the Issuing Bank and each Lender that, so long as this Agreement shall remain in effect and until the Commitments have been terminated and the principal of and interest and premium (if any) on each Loan, all Fees and all other expenses or amounts payable under any Loan Document have been paid in full (other than unasserted contingent indemnification obligations) and cancellation or expiration of all Letters of Credit, no Loan Party will, nor will they cause or permit any Subsidiaries (and, solely in the case of Sections 6.01, 6.02, 6.06, 6.07, 6.09, 6.11, 6.12 and 6.15, will not permit any of the Physician-Owned Practices) to:

Section 6.01 Indebtedness. Incur, create, assume or permit to exist, directly or indirectly, any Indebtedness, except:

(a) Indebtedness incurred under this Agreement and the other Loan Documents (including Indebtedness incurred pursuant to Section 2.19 and Section 2.21 hereof);

(b) Indebtedness outstanding on the Closing Date and listed on Schedule 6.01(b);

(c) Indebtedness constituting Hedging Obligations entered into in the ordinary course of business and not for speculative purposes; provided that if such Hedging Obligations arise under Hedging Agreements that are designed to protect against fluctuations in interest rates (i) such Hedging Obligations relate to Indebtedness for borrowed money otherwise permitted to be incurred by the Loan Documents and (ii) the notional principal amount of such Hedging Obligations at the time incurred does not exceed the principal amount of the Indebtedness to which such Hedging Obligations relate;

(d) Indebtedness resulting from Investments, including guarantees, loans or advances, permitted by Section 6.04;

(e) Indebtedness of the Borrower, its Subsidiaries and the Physician-Owned Practices in respect of Purchase Money Obligations, Capital Lease Obligations and Synthetic Lease Obligations in an amount not to exceed in the aggregate, at any time outstanding, $10,000,000;

 

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(f) Indebtedness of the Borrower, its Subsidiaries and the Physician-Owned Practices in respect of (x) workers’ compensation claims and self-insurance obligations (in each case other than for or constituting an obligation for money borrowed), including guarantees or obligations of any Company with respect to letters of credit supporting such workers’ compensation claims and/or self-insurance obligations and (y) bankers’ acceptances and bid, performance, surety bonds or similar instruments issued for the account of any Company in the ordinary course of business, including guarantees or obligations of any Company with respect to bankers’ acceptances and bid, performance or surety obligations (in each case other than for or constituting an obligation for money borrowed);

(g) Contingent Obligations of the Borrower, its Subsidiaries and the Physician-Owned Practices in respect of Indebtedness as otherwise permitted under this Section 6.01;

(h) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently (except in the case of daylight overdrafts) drawn against insufficient funds in the ordinary course of business so such Indebtedness is extinguished within five (5) Business Days;

(i) Indebtedness arising in connection with endorsement of instruments for deposit in the ordinary course of business;

(j) [reserved];

(k) Indebtedness which represents a refinancing, refunding, extension or renewal of any of the Indebtedness described in clause (b), (e), (l), (o), (w) or (x) (any such refinancing, refunding, extension or renewal, a “Permitted Refinancing”); provided that (A) any such refinancing, refunded, extended or renewed Indebtedness is in an aggregate principal amount (or aggregate amount, as applicable) not greater than the aggregate principal amount (or aggregate amount, as applicable) of the Indebtedness being refinanced, refunded, extended or renewed, plus the amount of any accrued or capitalized interest, premiums required to be paid thereon and reasonable fees and expenses associated therewith, plus the amount of any existing commitments unutilized thereunder, (B) such refinancing, refunded, extended or renewed Indebtedness has a later or equal final maturity and longer or equal weighted average life to maturity than the Indebtedness being renewed or refinanced, (C) the covenants, events of default, subordination (including lien subordination) and other terms and provisions thereof (including any guarantees thereof or security documents in respect thereof) shall be, in the aggregate, no less favorable to the debtholders in respect thereof than those contained in the Indebtedness being refinanced, refunded, extended or renewed, (D) such refinanced, refunded, extended or renewed Indebtedness shall not be secured by any additional assets that do not secure such Indebtedness immediately prior to such refinancing, refunding, extension or renewal (and if so secured, such liens shall be of the same or lower priority as the liens securing such refinanced, refunded, extended or renewed Indebtedness), (E) if such Indebtedness being refinanced, refunded, extended or renewed is Guaranteed, it shall not be Guaranteed by any Person other than a Loan Party, (F) such refinanced, refunded, extended or renewed Indebtedness is incurred by the person or persons who are the obligors on the Indebtedness immediately prior to such refinancing, refunding, extension or renewal, (G) if such Indebtedness being refinanced, refunded, extended or renewed is subordinated relative to the Obligations, such Permitted Refinancing Indebtedness shall be at least as subordinated to the Obligations as such Indebtedness being refinanced, refunded, extended or renewed, and (H) no Default or Event of Default has occurred or is continuing or would immediately thereafter result therefrom;

 

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(l) intercompany Indebtedness owing (i) by and among the Loan Parties, (ii) by Subsidiaries that are not Loan Parties and the Physician-Owned Practices to Subsidiaries that are not Loan Parties, (iii) by Subsidiaries that are not Loan Parties to Loan Parties in an aggregate amount not to exceed $2,500,000 at any time, provided no Default or Event of Default has occurred or is continuing or would immediately thereafter result therefrom, and (iv) by Loan Parties to Subsidiaries that are not Loan Parties, provided that (x) Indebtedness under this clause (l)(iv) shall be subordinated to the Obligations pursuant to subordination terms reasonably acceptable to the Administrative Agent and (y) no Default or Event of Default has occurred or is continuing or would immediately thereafter result therefrom;

(m) Indebtedness arising as a direct result of judgments against the Borrower, any of its Subsidiaries or the Physician-Owned Practices, in each case to the extent not constituting an Event of Default;

(n) unsecured Indebtedness representing any Taxes to the extent such Taxes are permitted to not be paid or discharged at such time in accordance with Section 5.05 herein;

(o) Indebtedness assumed in a Permitted Acquisition; provided that (i) no Default or Event of Default has occurred and is continuing as of the date the definitive agreement for such Permitted Acquisition is executed, (ii) such Indebtedness shall not have been incurred in contemplation of such Permitted Acquisition and (iii) the aggregate principal amount of Indebtedness assumed pursuant to this clause (o) shall not exceed $9,084,000; provided, further, that the aggregate principal amount of Indebtedness assumed in a Permitted Acquisition pursuant to this clause (o) by Subsidiaries that are not Loan Parties and the Physician-Owned Practices (together with Indebtedness of Subsidiaries that are not Loan Parties incurred pursuant to Section 6.01(x)) shall not exceed $5,000,000 at any time outstanding; provided, further, that any such Indebtedness assumed in a Permitted Acquisition pursuant to this clause (o) by Subsidiaries that are not Loan Parties and the Physician-Owned Practices is not recourse to the Loan Parties;

(p) Indebtedness consisting of (i) the financing of insurance premiums or (ii) take-or-pay obligations contained in supply arrangements, in each case, in the ordinary course of business;

(q) [***];

(r) other deferred compensation to employees, former employees, officers, former officers, directors, former directors (or any spouses, ex-spouses, or estates of any of the foregoing) incurred in the ordinary course of business or in connection with Permitted Acquisitions or other Investments permitted hereunder;

(s) Indebtedness incurred by Borrower, any of its Subsidiaries and the Physician-Owned Practices arising from agreements providing for indemnification related to sales of goods or adjustment of purchase price or similar obligations in any case incurred in connection with the Disposition of any business, assets or Subsidiary;

(t) Indebtedness in respect of netting services, automatic clearinghouse arrangements and similar arrangements in each case in connection with deposit accounts incurred in the ordinary course;

(u) obligations in respect of performance, bid, customs, government, appeal and surety bonds, performance and completion guaranties and similar obligations provided by Borrower, any of its Subsidiaries or the Physician-Owned Practices, in each case in the ordinary course of business;

(v) conditional sale, title retention, consignment or similar arrangements for the sale of goods in the ordinary course of business;

 

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(w) [reserved];

(x) additional Indebtedness of the Borrower and its Subsidiaries; provided that, immediately after giving effect to any incurrence of Indebtedness under this clause (x), the sum of the aggregate principal amount of Indebtedness at any time outstanding under this clause (x) shall not exceed $15,000,000 at any time outstanding; provided, further, that the aggregate principal amount of Indebtedness incurred pursuant to this clause (x) by Subsidiaries that are not Loan Parties (together with Indebtedness of Subsidiaries that are not Loan Parties and the Physician-Owned Practices incurred pursuant to Section 6.01(o)) shall not exceed $5,000,000 at any time outstanding;

(y) unsecured, subordinated obligations incurred pursuant to the Collaboration Agreement in connection with the establishment of a de novo facility in an amount not to exceed $1,000,000 for each such de novo facility; and

(z) Swap Obligations of the Borrower, any of its Subsidiaries and the Physician-Owned Practices under Swap Agreements to the extent entered into in order to manage interest rate, foreign currency exchange rate and commodity pricing risks and not for speculative purposes.

Section 6.02 Liens. Create, incur, assume or permit to exist, directly or indirectly, any Lien on any Property now owned or hereafter acquired by it or on any income or revenues or rights in respect of any thereof, except the following (collectively, the “Permitted Liens”):

(a) Liens for Taxes, assessments or governmental charges or levies not yet due and payable and Liens for Taxes, assessments or governmental charges or levies which are being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP, which proceedings (or Orders entered in connection with such proceedings) have the effect of preventing the forfeiture or sale of the Property subject to any such Lien;

(b) Liens in respect of Property of any Company or any Physician-Owned Practice imposed by law, which were incurred in the ordinary course of business and do not secure Indebtedness for borrowed money, such as carriers’, warehousemen’s, materialmen’s, landlords’, workmen’s, suppliers’, repairmen’s and mechanics’ Liens and other similar Liens arising in the ordinary course of business, and which do not individually or in the aggregate materially impair the use, occupancy or value of the Property of the Companies, and are being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP, which proceedings (or Orders entered in connection with such proceedings) have the effect of preventing the forfeiture or sale of the Property subject to any such Lien;

(c) any Lien in existence on the Closing Date and set forth on Schedule 6.02(b) (any such Lien, an “Existing Lien”) and any Lien granted as a replacement or substitute therefor; provided that any such replacement or substitute Lien (i) except as permitted by clause (A) of the proviso to Section 6.01(k), does not secure an aggregate amount of Indebtedness or other obligations, if any, greater than that secured on the Closing Date plus any capitalized interest, fees and expenses thereon, (ii) does not encumber any Property other than the Property subject thereto on the Closing Date and any proceeds and products thereof and (iii) is of the same or lower priority than such Existing Lien;

(d) easements, rights-of-way, restrictions (including zoning restrictions), covenants, licenses, encroachments, protrusions and other similar charges or encumbrances, and minor title deficiencies on or with respect to any Real Property, in each case that do not or would not materially interfere with the present conduct, occupancy or value of the Companies at such Real Property;

 

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(e) Liens to the extent (i) arising out of judgments, attachments or awards not constituting an Event of Default at the time such Liens are created and (ii) constituting the pledge of assets for the purpose of securing an appeal, stay or discharge in the course of any Legal Proceeding;

(f) Liens (other than any Lien imposed by ERISA) (x) imposed by law or deposits made in connection therewith in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other types of social security legislation, or letters of credit or guarantees issued respect thereof, (y) incurred in the ordinary course of business to secure the performance of tenders, statutory obligations (other than excise taxes), surety, stay, customs and appeal bonds, statutory bonds, bids, leases, government contracts, trade contracts, performance and return of money bonds and other similar obligations or letters of credit or guarantees issued in respect thereof (in each case, exclusive of obligations for the payment of Indebtedness) or (z) arising by virtue of deposits made in the ordinary course of business to secure liability for premiums to insurance carriers; provided that (i) with respect to clauses (x), (y) and (z) of this clause (f), such Liens are for amounts not yet due and payable or delinquent or, to the extent such amounts are so due and payable, such amounts are being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP, which proceedings or Orders entered in connection with such proceedings have the effect of preventing the forfeiture or sale of the Property subject to any such Lien, and (ii) to the extent such Liens are not imposed by Legal Requirements, such Liens shall in no event encumber any Property other than cash and Cash Equivalents;

(g) licenses or Leases of the Properties (other than Intellectual Property) of any Company, and the rights of ordinary-course lessees described in Section 9-321 of the UCC, in each case entered into in the ordinary course of such Company’s business so long as such licenses or Leases and rights do not, individually or in the aggregate, (i) interfere in any material respect with the ordinary conduct of the business of any Company or (ii) materially impair the use (for its intended purposes) or the value of the Property subject thereto;

(h) Liens arising out of conditional sale, title retention, consignment or similar arrangements for the sale of goods entered into by any Company or Physician-Owned Practice in the ordinary course of business in accordance with the past practices of such Company and Physician-Owned Practice;

(i) Liens securing Indebtedness incurred pursuant to Section 6.01(e) (or pursuant to Section 6.01(k) to the extent relating to a refinancing or renewal of Indebtedness incurred pursuant to Section 6.01(e)); provided that (i) any such Liens attach only to the Property (including proceeds thereof) being financed pursuant to such Indebtedness and (ii) do not encumber any other Property of any Company or Physician-Owned Practice;

(j) bankers’ Liens, rights of setoff and other similar Liens existing solely with respect to cash and Cash Equivalents on deposit in one or more accounts maintained by any Company or Physician-Owned Practice, in each case granted in the ordinary course of business in favor of the bank or banks with which such accounts are maintained, including to secure amounts owing to such bank with respect to cash management and operating account arrangements, including those involving pooled accounts and netting arrangements; provided that, unless such Liens are non-consensual and arise by operation of applicable Legal Requirements, in no case shall any such Liens secure (either directly or indirectly) the repayment of any Indebtedness;

(k) Liens on Property (and the proceeds thereof) of a person existing at the time such person is acquired or merged with or into or consolidated with any Company or Physician-Owned Practice to the extent such acquisition, merger or consolidation is permitted hereunder; provided that such Liens (i) do not extend to additional Property, (ii) the amount of Indebtedness secured thereby is not increased and (iii) the Indebtedness secured thereby is permitted to be assumed under Section 6.01(o) and not increased;

 

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(l) Liens granted pursuant to the Security Documents to secure the Secured Obligations;

(m) (X) non-exclusive licenses and sublicenses of Intellectual Property granted by any Company in the ordinary course of business that, individually or in the aggregate, do not (i) interfere in any material respect with the ordinary conduct of the business of any Company or (ii) materially impair the use (for its intended purposes) or the value of the Intellectual Property subject thereto, and (Y) non-exclusive licenses and sublicenses granted to any Company in the ordinary course of business under any third party Intellectual Property, where such licenses and sublicenses individually or in the aggregate, do not interfere in any material respect with the ordinary conduct of the business of any Company when the Company operates within the scope of such licenses;

(n) the filing of UCC (or equivalent) financing statements solely as a precautionary measure in connection with operating leases, Tenant Improvement Lease Transactions or consignment of goods;

(o) Liens of a collecting bank arising in the ordinary course of business under Section 4-208 or Section 4-210 of the UCC covering only the items being collected upon;

(p) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods in the ordinary course of business;

(q) Liens on assets not otherwise constituting Collateral securing Indebtedness of the Borrower and its Subsidiaries in an aggregate amount not to exceed, at any one time outstanding, $7,500,000;

(r) Liens in favor of a seller solely on any cash earnest money deposits made by the Borrower, any of its Subsidiaries and the Physician-Owned Practices in connection with any letter of intent or purchase agreement with respect to any Permitted Acquisition;

(s) Liens on insurance policies and the proceeds thereof granted in the ordinary course of business to secure the financing of insurance premiums for such insurance policies pursuant to Section 6.01(p);

(t) the modification, replacement, renewal or extension of any Lien permitted hereunder to secure Indebtedness that is permitted to be refinanced, refunded, extended or renewed pursuant to Section 6.01(k); provided that (i) the Lien does not extend to any property other than the property (and proceeds thereof) securing such Indebtedness being so refinanced; (ii) the Liens are of the same or lower priority than such modified, replaced, renewed or extended Lien; and (iii) the renewal, refunding, extension or refinancing of the obligations secured or benefited by such Liens is permitted by Section 6.01;

(u) [reserved];

(v) [***]; and

 

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(w) Liens, if any, in favor of the Issuing Bank to Cash Collateralize or otherwise secure the obligations of a Defaulting Lender to fund risk participations hereunder.

Section 6.03 Sale and Leaseback Transactions. Other than as permitted by Section 6.01(e) or Section 6.06, sell or transfer any Property used or useful in its business, whether now owned or hereafter acquired, and thereafter rent or lease such Property (a “Sale and Leaseback Transaction”).

Section 6.04 Investments, Loans and Advances. Directly or indirectly, lend money or credit (by way of guarantee, assumption of debt or otherwise) or make advances to any person, or purchase or acquire any stock, bonds, notes, debentures or other obligations or securities of, or any other interest in, or make any capital contribution to, any other person, or purchase or own a futures contract or otherwise become liable for the purchase or sale of currency or other commodities at a future date in the nature of a futures contract (all of the foregoing, collectively, “Investments”), except that the following shall be permitted (collectively, “Permitted Investments”):

(a) Investments outstanding on the Closing Date and identified on Schedule 6.04(a);

(b) the Companies may (i) acquire, hold and Dispose of accounts receivable owing to any of them if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary terms (excluding, in all events, the Disposition of accounts receivable pursuant to any factoring or receivables securitization agreement or arrangement), (ii) invest in, acquire and hold cash and Cash Equivalents, (iii) endorse negotiable instruments held for collection in the ordinary course of business or (iv) make lease, utility and other similar deposits in the ordinary course of business;

(c) Hedging Obligations permitted pursuant to Section 6.01(c);

(d) other Investments so long as (i) no Default or Event of Default has occurred and is continuing at the time of such Investment or would result therefrom and (ii) immediately after giving effect to such Investment, on a Pro Forma Basis, the Borrower is in compliance with the financial covenants set forth in Section 6.15 and the maximum Secured Leverage Ratio for the most recent Test Period shall not be greater than 3.00:1.00;

(e) Investments (i) by any Loan Party in any other Loan Party; provided that, in each case, such Investments shall be pledged as Collateral pursuant to and to the extent required by the Security Documents, (ii) by a Non-Guarantor Subsidiary in any other Non-Guarantor Subsidiary, and (iii) constituting loans or advances by any Non-Guarantor Subsidiary to the Borrower or any Subsidiary Guarantor; provided that such Investment shall be unsecured and subordinated to the Obligations; provided that, in each case of this clause (e), any Investment by a Loan Party in the form of a loan or advance shall be evidenced by a note in form and substance reasonably satisfactory to the Administrative Agent, in each case pledged by such Loan Party as Collateral pursuant to the Security Documents;

(f) Investments in securities of trade creditors or customers in the ordinary course of business and consistent with such Company’s past practices that are received (A) in settlement of bona fide disputes or delinquent obligations or (B) pursuant to any plan of reorganization or liquidation or similar arrangement upon the bankruptcy, insolvency or other restructuring of such trade creditors or customers;

(g) non-cash Investments to the extent arising solely from mergers, consolidations and other transactions in compliance with Section 6.05;

 

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(h) Investments made by Borrower or any Subsidiary as a result of consideration received in connection with an Asset Sale made in compliance with Section 6.06;

(i) To the extent constituting Investments, Dividends in compliance with Section 6.07 (with a commensurate dollar-for-dollar reduction of their ability to make additional distributions under such Section) and Indebtedness in compliance with Section 6.01 (other than clause 6.01(l) (with a commensurate dollar-for-dollar reduction of their ability to incur additional Indebtedness under such Section));

(j) Investments of any person that becomes a Subsidiary on or after the Closing Date; provided that (i) such Investments exist at the time such person is acquired, (ii) such Investments are not made in anticipation or contemplation of such person becoming a Subsidiary, and (iii) such Investments are not directly or indirectly recourse to any of the Companies or any of their respective assets, other than to the person that becomes a Subsidiary;

(k) Guarantees by (A) the Borrower or any Subsidiary of Indebtedness of any Loan Party to the extent such Indebtedness is otherwise permitted under Section 6.01 or of any other obligation not constituting Indebtedness, (B) a Non-Guarantor Subsidiary of any Indebtedness of a Non-Guarantor Subsidiary to the extent such Indebtedness is otherwise permitted under Section 6.01 or of any other obligation not constituting Indebtedness or (C) a Loan Party of any Indebtedness of a Physician-Owned Practice to the extent such Indebtedness is otherwise permitted under Section 6.01 or of any other obligation not constituting Indebtedness; provided, that (x) the aggregate amount of all Guarantees under this clause (l)(C) shall not (together with intercompany Indebtedness outstanding under Section 6.01(l)(iii) exceed $7,500,000 at any time), and (y) no Default or Event of Default has occurred and is continuing at the time such Guarantee is entered into or would result therefrom;

(l) Investments in Physician-Owned Practices, so long as such Investments are made in accordance with the applicable Management Services Agreement; provided that (x) any Investment in the form of a loan or advance shall be evidenced by a note in form and substance reasonably satisfactory to the Administrative Agent, in each case pledged by such Loan Party as Collateral pursuant to the Security Documents and (y) except with respect to Investments funding ordinary course operations (including, without limitation, payroll and payments to vendors), no Default or Event of Default shall have occurred and be continuing at the time of such Investment or would result therefrom;

(m) the Borrower’s ownership of the Equity Interests of each of its Subsidiaries and the ownership by each Subsidiary of the Borrower of the Equity Interests of each of its Subsidiaries;

(n) non-cash Investments to the extent arising solely from a subsequent increase in the value (excluding any value for which any additional consideration of any kind whatsoever has been paid or otherwise transferred, directly or indirectly, by, or on behalf of the Borrower or any of its Subsidiaries) of an Investment otherwise permitted hereunder and made prior to such subsequent increase in value;

(o) Investments to the extent constituting the reinvestment of the Net Cash Proceeds arising from any Asset Sales or Casualty Events to repair, replace or restore any Property in respect of which such Net Cash Proceeds were paid or to reinvest in other fixed or capital assets or assets that are otherwise useful in the business of the Companies (provided that, such Investment shall not be permitted to the extent such Net Cash Proceeds shall be required to be applied to make prepayments in accordance with Section 2.10(c));

 

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(p) to the extent constituting Investments, (i) purchases and other acquisitions of inventory, materials and equipment and intangible Property in the ordinary course of business, (ii) Capital Expenditures, (iii) leases or licenses of real or personal Property in the ordinary course of business and in accordance with the applicable Security Documents so long as such leases or licenses do not, individually or in the aggregate, (x) interfere in any material respect with the ordinary conduct of the business of any Company or (y) materially impair the use (or its intended purposes) or the value of the Property subject thereto and (iv) Permitted Acquisitions;

(q) other Investments in an aggregate amount not to exceed the Cumulative Amount; provided that (i) no Default or Event of Default has occurred and is continuing at the time of such Investment or would result therefrom and (ii) immediately after giving effect to such Investment, on a Pro Forma Basis, the Borrower is in compliance with the financial covenants set forth in Section 6.15 and the maximum Secured Leverage Ratio for the most recent Test Period shall not be greater than 3.50:1.00;

(r) other Investments in an aggregate amount at any time not to exceed at any time outstanding $10,000,000; provided that (a) any such Investment made pursuant to this clause (w) that constitutes a transaction described in clause (a), (b) or (c) of the definition of “Permitted Acquisition” shall be required to comply with each of the conditions set forth in the definition thereof and (b) no Default or Event of Default has occurred and is continuing at the time of such Investment or would result therefrom;

(s) to the extent constituting Investments, advances in respect of transfer pricing and cost-sharing arrangements (i.e. “cost-plus” arrangements) that are (i) in the ordinary course of business and consistent with the historical practices of the Companies and (ii) funded not more than 120 days in advance of the applicable transfer pricing and cost-sharing payment; and

(t) Guarantees by the Borrower of operating and equipment leases (including Tenant Improvement Lease Transactions) for clinical locations, administrative offices and equipment (for the avoidance of doubt, excluding Capital Lease Obligations) or of other obligations that do not constitute Indebtedness, in each case, entered into by the Borrower or any Subsidiary in the ordinary course of business.

The amount of any Investment permitted pursuant to Sections 6.04(b), (d), and (e) shall be the initial amount of such Investment less all returns of capital, principal, dividends and other cash returns thereof and less all liabilities expressly assumed by another person in connection with the sale of such Investment.

Notwithstanding anything herein to the contrary, no Investment otherwise permitted by this Section 6.04 shall be permitted to be made by any Loan Party in any Subsidiary that is not a Loan Party.

Section 6.05 Mergers and Consolidations. Wind up, liquidate or dissolve its affairs or consummate any transaction of merger or consolidation, except that the following shall be permitted:

(a) Dispositions of Property or Asset Sales in compliance with Section 6.06 (other than clause (g) thereof);

(b) (x) any Company (other than the Borrower) may merge or consolidate with or into or dissolve or liquidate into the Borrower or any Subsidiary Guarantor (as long as Borrower or a Subsidiary Guarantor is the surviving person in such merger, consolidation, dissolution or liquidation); provided that the Lien on and security interest in such Property granted or to be granted in favor of the Collateral Agent under the Security Documents shall be maintained or created in accordance with and only to the extent required by the provisions of Sections 5.10 and 5.11, as applicable and (y) any Subsidiary that is not a Guarantor may merge, consolidate, dissolve or liquidate with or into any other Subsidiary that is not a Guarantor;

 

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(c) any Subsidiary may dissolve, liquidate or wind up its affairs at any time if such dissolution, liquidation or winding up is not disadvantageous to any Agent or Lender in any material respect;

(d) a merger or consolidation pursuant to, and in accordance with, the definition of “Permitted Acquisition” to the extent necessary to consummate such Permitted Acquisition; and

(e) to the extent necessary to consummate an Investment permitted pursuant to Section 6.04.

Subject to the Specified Guarantor Release Provision, to the extent the Requisite Lenders under Section 11.02(b) waive the provisions of this Section 6.05 with respect to the sale of any Collateral, or any Collateral is sold as permitted by this Section 6.05, such Collateral (unless sold to a Company) shall be sold free and clear of the Liens created by the Security Documents without any further action or consent of the Administrative Agent, Collateral Agent or any Lender hereunder, and, so long as Borrower shall have previously provided to the Collateral Agent and the Administrative Agent such certifications or documents as the Collateral Agent and/or the Administrative Agent shall reasonably request in order to demonstrate compliance with this Section 6.05, the Collateral Agent shall take all actions necessary or reasonably requested in order to effect the foregoing.

Section 6.06 Asset Sales. Effect any Disposition of any Property, except that the following shall be permitted:

(a) Dispositions of worn out, obsolete or surplus Property by Borrower or any of its Subsidiaries in the ordinary course of business and the abandonment, transfer, assignment, cancellation, lapse, not filing or applying for, or other Disposition of immaterial Intellectual Property that is, in the reasonable good faith judgment of the Borrower or such Subsidiary, not economically practicable or commercially desirable to maintain or sufficiently useful in the conduct of the business of the Companies;

(b) other Dispositions of Property; provided that (i) such Dispositions of Property are made for not less than Fair Market Value, (ii) no Default or Event of Default is continuing at the time of such Disposition or would result therefrom and (iii) at least 75% of the consideration payable in respect of such Disposition of Property shall be in the form of cash or Cash Equivalents (and for the purposes of making the foregoing calculation, the following shall be deemed “cash”: (1) the assumption by the transferee of Indebtedness or other liabilities (other than Indebtedness and liabilities that are by their terms subordinated to the Obligations) contingent or otherwise of the Borrower or any of its Subsidiaries in connection with such Disposition and (2) aggregate non-cash consideration received by the Borrower and its Subsidiaries for all Asset Dispositions under this Section 6.06(b) having a fair market value (as determined in good faith by the Borrower as of the closing of the applicable Disposition for which non-cash consideration is received) not to exceed $7,500,000 (net of any non-cash consideration converted into cash and Cash Equivalents received in respect of any non-cash consideration)).

(c) leases, subleases, or non-exclusive licenses or sublicenses of real or personal Property (including Intellectual Property or other general intangibles) to third parties in the ordinary course of business and in accordance with the applicable Security Documents;

(d) Permitted Liens in compliance with Section 6.02;

 

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(e) to the extent constituting a Disposition, the making of Investments in compliance with Section 6.04;

(f) Dispositions related to mergers, consolidations and other transactions in compliance with Section 6.05;

(g) Dividends and other transactions in compliance with Section 6.07;

(h) Dispositions of cash and Cash Equivalents in the ordinary course of business;

(i) any Disposition of Property that constitutes a Casualty Event;

(j) sales, transfers, leases and other Dispositions (excluding sales of Equity Interests of any Subsidiary) (i) to the Borrower or to any other Loan Party and (ii) to any Subsidiary that is not a Loan Party from another Subsidiary that is not a Loan Party;

(k) sale, forgiveness, or discount of customer delinquent notes or accounts receivable in the ordinary course of business (excluding, in all events, the Disposition of accounts receivable pursuant to any factoring or receivables securitization agreement or arrangement);

(l) sale or Disposition of immaterial Equity Interests to qualified directors where required by applicable law or to satisfy other similar requirements of applicable law with respect to the ownership of Equity Interests;

(m) any trade-in of equipment or other Property in exchange for other equipment or other replacement Property;

(n) the unwinding of any Hedging Agreement permitted hereunder pursuant to its terms;

(o) surrender or waiver of contractual rights and settlement or waiver of contractual or litigation claims in the ordinary course of business and consistent with past practice;

(p) the payment of cash interest pursuant to Section 6.09(a)(ii) and the performance by the Borrower and/or any Subsidiary thereof of such Person’s obligations thereunder; and

(q) the Post Closing Reorganization.

Subject to the Specified Guarantor Release Provision, to the extent the requisite Lenders under the applicable provisions set forth in Section 11.02(b) waive the provisions of this Section 6.06, with respect to the sale of any Collateral, or any Collateral is sold as permitted by this Section 6.06, such Collateral (unless sold to a Company) shall be sold free and clear of the Liens created by the Security Documents without any further action by or consent from Administrative Agent, Collateral Agent or any Lender, and, so long as Borrower shall have previously provided to the Collateral Agent and the Administrative Agent such certifications or documents as the Collateral Agent and/or the Administrative Agent shall reasonably request in order to demonstrate compliance with this Section 6.06, the Collateral Agent shall take all actions it deems necessary or reasonable in order to effect the foregoing.

 

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Section 6.07 Dividends. Authorize, declare or pay, directly or indirectly, any Dividends with respect to any Company or any Physician Owned Practice, except for the following:

(a) Dividends by any Company or Physician-Owned Practice (i) that is a Subsidiary of the Borrower or a Physician-Owned Practices to the Borrower or any Subsidiary Guarantor or (ii) that is a Non-Guarantor Subsidiary or a Physician-Owned Practice to any other Non-Guarantor Subsidiary or Physician-Owned Practice; provided, that if such Company is a non-wholly owned Subsidiary or is a Physician-Owned Practice, any such Dividend is paid to all shareholders on a pro rata basis;

(b) Dividends made solely in common equity or other Qualified Stock; provided, that no Default or Event of Default has occurred and is continuing prior to, or will occur immediately after, such Dividend; and

(c) any Company may make additional Dividends in an amount not to exceed the Cumulative Amount; provided that at the time of any such Dividend, (i) no Default or Event of Default shall have occurred and be continuing or would result therefrom and (ii) immediately after giving effect to such Dividend, on a Pro Forma Basis, the Borrower is in compliance with the financial covenants set forth in Section 6.15 and the maximum Secured Leverage Ratio for the most recent Test Period shall not be greater than 2.50:1.00.

Section 6.08 Transactions with Affiliates. Enter into, directly or indirectly, any transaction or series of related transactions for the payment of money, sale of goods or provision of services, whether or not in the ordinary course of business, with any Affiliate of any Company (other than between or among Borrower and one or more Subsidiary Guarantors), other than on terms and conditions at least as favorable to such Company as would reasonably be obtained by such Company at that time in a comparable arm’s-length transaction with a person other than an Affiliate, except that the following shall be permitted:

(a) (i) Dividends permitted by Section 6.07 and (ii) the Transactions, including the payment of Transaction Costs;

(b) Investments permitted under Section 6.04, including loans and advances, permitted by Section 6.04(d) and (e) and any Indebtedness permitted by Section 6.01(l), to the extent such transactions are on terms and conditions at least as favorable to such Company as would reasonably be obtained by such Company at that time in a comparable arm’s-length transaction with a person other than an Affiliate;

(c) director, officer and employee compensation (including bonuses and severance) and other benefits (including retirement, health, stock option and other benefit plans) and indemnification arrangements, in each case, approved by the Board of Directors of the applicable Company;

(d) transactions between or among (i) Loan Parties to the extent otherwise expressly permitted hereunder, (ii) Non-Guarantor Subsidiaries to the extent otherwise expressly permitted hereunder, and (iii) Loan Parties and Non-Guarantor Subsidiaries to the extent otherwise expressly permitted hereunder;

(e) transactions between or among the Loan Parties and any Physician Owned Practice so long as such transactions are made in accordance with the applicable Management Services Agreement; and

(f) any other agreement, arrangement or transaction as in effect on the Closing Date and listed on Schedule 6.08(g), and any amendment or modification thereto or restatement thereof, and the performance of obligations thereunder, so long as such amendment or modification or restatement is not materially adverse to the interests of the Lenders.

 

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Section 6.09 Prepayments of Other Indebtedness; Modifications of Organizational Documents, Acquisition and Certain Other Documents, etc. Directly or indirectly:

(a) Make or make a binding offer to make any voluntary or optional payment or prepayment on or redemption, retirement, defeasance or acquisition for value of, or any prepayment, repurchase or redemption, retirement, defeasance as a result of any asset sale, change of control or similar event of, any Junior Indebtedness of the Borrower, any of its Subsidiaries or any Physician-Owned Practice, except:

(i) (A) repayments of loans and advances made by a Non-Guarantor Subsidiary or a Physician-Owned Practice to a Loan Party pursuant to Section 6.04(e); provided that, the repayment of such loan or advance shall only be permitted to be made with the proceeds of a Dividend made by such Non-Guarantor Subsidiary or Physician-Owned Practice to such Loan Party and the repayment of such loan or advance shall be made substantially concurrently with the payment of such Dividend or (B) a Permitted Refinancing;

(ii) an aggregate amount not to exceed the Cumulative Amount then available; provided that the Cumulative Amount shall not be available unless (i) no Default or Event of Default has occurred and is continuing and (ii) immediately after giving effect to such Dividend, on a Pro Forma Basis, the Borrower is in compliance with the financial covenants set forth in Section 6.15 and the Secured Leverage Ratio for the most recent Test Period shall be no greater than 2.75:1.00; and

(iii) payments of unsecured obligations pursuant to the Collaboration Agreement.

(b) waive, amend, modify, terminate or release any of the documents governing any Junior Indebtedness (including, without limitation, any Convertible Indebtedness) with an aggregate principal amount in excess of $1,000,000 to the extent that any such waiver, amendment, modification, termination or release would taken as a whole, be adverse to the Lenders in any material respect or prohibited by any applicable intercreditor agreement or subordination agreement; or

(c) amend, restate, supplement or otherwise modify any of its Organizational Documents or any agreement to which it is a party with respect to its Equity Interests (including any stockholders’ agreement), or enter into any new agreement with respect to its Equity Interests, other than any such amendments, modifications or changes or such new agreements which are not, and could not reasonably be expected to be, adverse in any material respect to the interests of the Lenders.

Section 6.10 Limitation on Certain Restrictions on Subsidiaries. Directly or indirectly create or otherwise cause or suffer to exist or become effective any encumbrance, restriction or condition on the ability of any Subsidiary to (i) pay Dividends or make any other distributions on its Equity Interests or any other interest or participation in its profits owned by any Company or any Physician-Owned Practice, or pay any Indebtedness owed to any Company or any Physician-Owned Practice, (ii) make loans or advances to any Company or Physician-Owned Practice or (iii) transfer any of its Properties to any Company or Physician-Owned Practice, except for:

(a) such encumbrances, restrictions or conditions existing by reason of application of mandatory Legal Requirements;

 

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(b) (i) this Agreement and the other Loan Documents and (ii) loan documents governing other Indebtedness permitted to be incurred hereunder that are, taken as a whole, in the good faith judgment of the Borrower, no more restrictive with respect to the Borrower or any Subsidiary than customary market terms for Indebtedness of such type (and, in any event, are no more restrictive than the restrictions contained in this Agreement unless (x) such restrictions apply only to periods after the then latest Final Maturity Date or (y) to the extent a substantially similar change is made to this Agreement or the other Loan Documents), so long as the Borrower shall have determined in good faith that such restrictions will not affect its obligations or ability to make any payments required hereunder;

(c) in the case of clause (iii), customary provisions restricting subletting or assignment of any lease governing a leasehold interest of a Subsidiary;

(d) in the case of clause (iii), customary provisions restricting assignment of any agreement entered into by a Subsidiary in the ordinary course of business;

(e) customary restrictions and conditions contained in any agreement relating to the sale or other Disposition of any Property or Asset Sale permitted by Section 6.06 pending the consummation of such sale or other Disposition or Asset Sale; provided, that (i) such restrictions and conditions apply only to the Property to be sold or Disposed of and (ii) such sale or other Disposition or Asset Sale is permitted hereunder;

(f) any agreement in effect at the time such Subsidiary becomes a Subsidiary of the Borrower, so long as such agreement was not entered into in connection with or in contemplation of such person becoming a Subsidiary of the Borrower;

(g) any encumbrances or restrictions imposed by any amendments or refinancings that are otherwise permitted by the Loan Documents of the contracts, instruments or obligations referred to in clause (f) above; provided, that such amendments or refinancings are no more materially restrictive with respect to such encumbrances and restrictions than those prior to such amendment or refinancing; or

(h) in the cases of clauses (i) and (iii), customary restrictions in joint venture agreements or other similar agreements applicable to joint ventures permitted hereunder and applicable solely to such joint venture.

Section 6.11 Business. (a) With respect to the Borrower, engage in any business activities or have any Properties or liabilities, other than (i) its ownership of the Equity Interests of the Borrower and business activities related thereto, (ii) obligations under the Loan Documents and (iii) sales of Equity Interests to the extent not prohibited by this Agreement.

(b) With respect to the Borrower, its Subsidiaries and the Physician-Owned Practices, engage (directly or indirectly) in any businesses other than those businesses in which Borrower, its Subsidiaries and the Physician-Owned Practices are engaged on the Closing Date (or which are similar, corollary, ancillary, complementary, incidental or related business or reasonable extensions thereof).

Section 6.12 Management Services Agreements. Amend, restate, amend and restate, supplement or otherwise modify any Management Service Agreement, other than any such amendments, restatements, amendments and restatements, supplements or other modifications which would not reasonably be expected to be materially adverse to the interests of the Borrower and its Subsidiaries or the Lenders in their capacities as such; provided that, for the avoidance of doubt, it is understood and agreed that such Management Services Agreements may be amended, restated, amended and restated, supplemented or otherwise modified to the extent required by applicable law or any applicable rule, regulation or order of any Governmental Authority.

 

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Section 6.13 Fiscal Year. Change its fiscal year-end to a date other than September 30 or make any material change in its accounting treatment and financial reporting policies except as required by GAAP.

Section 6.14 No Further Negative Pledge. Enter into any agreement, instrument, deed or lease which prohibits or limits the ability of any Company to create, incur, assume or suffer to exist any Lien upon any of its Properties or revenues, whether now owned or hereafter acquired, or which requires the grant of any Lien for an obligation if a Lien is granted for another obligation, except the following: (1) this Agreement and the other Loan Documents, agreements governing any Permitted Refinancing with respect to the foregoing; (2) with respect Property not constituting Collateral, restrictions in documents creating Liens permitted by Section 6.02 prohibiting further Liens on the Properties encumbered thereby; (3) any prohibition or limitation that (a) is non-consensual and exists pursuant to applicable Legal Requirements, or (b) consists of customary restrictions and conditions contained in any agreement relating to the sale or other Disposition of any Property pending the consummation of such sale or other Disposition; provided that (i) such restrictions apply only to such Property, and (ii) such sale or other Disposition is permitted hereunder; (4) with respect to leases not constituting Collateral, restrictions prohibiting the grant or existence of liens and encumbrances, including leasehold mortgages; and (5) as set forth in Schedule 6.14.

Section 6.15 Financial Covenants.

(a) Maximum Total Leverage Ratio. Permit the Total Leverage Ratio, as of the last day of any Test Period ending on the date set forth in the table below, to exceed the ratio set forth opposite such Test Period end date in the table below:

 

Fiscal Quarter Ending    Maximum Total Leverage Ratio
September 30, 2022    8.50 to 1.00

[***]

   

[***]

September 30, 2026 and thereafter    5.50 to 1.00

(b) Minimum Liquidity. The Borrower will not permit Liquidity, as of the last day of any fiscal month (commencing May 31, 2022), to be less than Required Minimum Liquidity Amount.

Section 6.16 Anti-Terrorism Law; Anti-Money Laundering; Sanctions; Anti-Corruption Law.

 

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(a) violate any applicable Anti-Terrorism Law, Sanctions or Anti-Corruption Law (and the Loan Parties will deliver to the Administrative Agent any certification or other evidence requested from time to time by the Administrative Agent in its reasonable discretion, confirming the Borrower and its Subsidiaries’ compliance with this Section 6.16).

(b) directly or indirectly, cause or permit any of the funds of such Borrower or Subsidiary that are used to repay the Term Loans to be derived from any unlawful activity with the result that the making of the Term Loans would be in violation of applicable Law.

(c) directly or indirectly, cause, permit, or authorize any part of the proceeds or other transaction contemplated by this Agreement to be used, contributed, or otherwise made available to fund any trade, business, or other activity of or with any Sanctioned Person, or in any Sanctioned Country, or in any other manner that could reasonably be expected to result in any party to this Agreement (including any Person participating in the Transactions, whether as underwriter, agent, advisor, investor, or otherwise) being in breach of any Sanctions or becoming a Sanctioned Person.

(d) use, directly or indirectly, any part of the proceeds of the Term Loans in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any Person in violation of the FCPA or any other applicable anti-corruption law.

Section 6.17 Sanctioned Persons. cause or permit (a) any of the funds or properties of the Borrower and its Subsidiaries that are used to repay the Term Loans to constitute property of, or be beneficially owned directly or indirectly by, any Sanctioned Person, with the result that the investment in the Loan Parties (whether directly or indirectly) is prohibited by applicable requirements of Law, or the Term Loans made by the Lenders would be in violation of applicable requirements of Law, or (b) any Sanctioned Person to have any direct or indirect interest, of any nature whatsoever in the Loan Parties, with the result that the investment in the Loan Parties (whether directly or indirectly) is prohibited by applicable requirements of Law or the Term Loans are in violation of applicable requirements of Law.

Section 6.18 Borrower Following Post-Closing Reorganization. Notwithstanding anything to the contrary contained herein, except to the extent permitted pursuant to Section 6.18(g), following the Post-Closing Reorganization, the Borrower shall not:

(a) incur, directly or indirectly, any Indebtedness or any other obligation or liability whatsoever other than (i) the Obligations and (ii) other obligations under the Loan Document;

(b) create or suffer to exist any Lien upon any property or assets now owned or hereafter acquired by it other than (i) Liens pursuant to the Loan Documents and (ii) non-consensual Liens arising solely by operation of Law as permitted pursuant to Section 6.02;

(c) consolidate with or merge with or into, or convey, transfer or lease all or substantially all its assets to, any Person;

(d) sell or otherwise dispose of any Equity Interests of Intermediate Co;

(e) create or acquire any direct Subsidiary or make or own any direct Investment in any Person other than in Intermediate Co and cash and Cash Equivalents;

(f) fail to hold itself out to the public as a legal entity separate and distinct from all other Persons; or

 

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(g) engage in any business or activity or own any assets other than, in each case, (i) its ownership of the Equity Interests of Intermediate Co and activities incidental thereto, including payment of dividends and other amounts in respect of its Equity Interests, in each case, not prohibited pursuant to this Agreement, (ii) the maintenance of its legal existence (including the ability to incur fees, costs and expenses relating to such maintenance) and the performance of obligations under and in compliance with its organizational documents to the extent not prohibited hereunder, (iii) the performance of its obligations as the Borrower, (iv) any public offering of its common stock or any other issuance or sale of its Equity Interests, (v) participating in tax, accounting and other administrative matters as a member of the consolidated group of the Borrower and its Subsidiaries, (vi) making of any Restricted Payments permitted to be made by the Borrower pursuant to this Agreement, (vii) providing indemnification to officers and directors in the ordinary course of business, (viii) executing, delivering and the performance of rights and obligations under the Loan Documents and any documents and agreement to any Permitted Acquisition or other Investment permitted hereunder to which it is a party, (ix) purchasing and holding Equity Interests (to the extent not constituting Disqualified Equity Interests) of Intermediate Co, (x) making capital contributions to Intermediate Co, including from amounts contributed to Borrower and held temporarily prior to such contribution, (xi) taking actions in furtherance of and consummating an initial public offering, and fulfilling all initial and ongoing obligations related thereto, (xii) execution and delivery of, and the performance of rights and obligations under, any employment agreements and any documents related thereto, (xiii) purchasing Obligations in accordance with this Agreement, (xiv) transactions expressly described herein in which Borrower may engage, including the ownership of assets contemplated by such transactions, (xv) execution and delivery or, and the performance of rights and obligations under, any guarantees of leases or insurance obligations or other guarantees expressly permitted hereunder (including in connection with workers compensation insurance or self-insurance), (xvi) holding any Restricted Payment permitted hereunder temporarily pending further distribution, and (xvii) any activities incidental or reasonably related to the foregoing, including holding Cash and Cash Equivalents (together with any investment income thereon).

ARTICLE VII

GUARANTEE

Section 7.01 The Guarantee. The Guarantors hereby, jointly and severally, guarantee, as primary obligors and not merely as sureties to each Secured Party and their respective successors and assigns, the prompt payment and performance in full when due (whether at stated maturity, by required prepayment, declaration, demand, by acceleration or otherwise) of the principal of and interest (including any interest, fees, costs or charges that would accrue but for the provisions of the Title 11 of the United States Code after any bankruptcy or insolvency petition under Title 11 of the United States Code) on the Loans made by the Lenders and Letters of Credit issued by the Issuing Bank to, and the Notes held by each Lender of, the Borrower and all other Secured Obligations, including any Secured Obligations from time to time owing to the Secured Parties by the Borrower or any of its Subsidiaries under any Specified Hedging Agreement or Bank Product Agreement in each case strictly in accordance with the terms thereof (such obligations being herein collectively called the “Guaranteed Obligations”). The Guarantors hereby jointly and severally agree that if the Borrower or any other Guarantor(s) shall fail to pay in full when due (whether at stated maturity, by acceleration or otherwise) any of the Guaranteed Obligations, the Guarantors will promptly pay the same in cash, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the Guaranteed Obligations, the same will be promptly paid in full when due (whether at extended maturity, by acceleration or otherwise) in accordance with the terms of such extension or renewal.

 

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Section 7.02 Obligations Unconditional. The obligations of the Guarantors under Section 7.01 shall constitute a guaranty of payment and performance and not of collection and to the fullest extent permitted by applicable Legal Requirements, are absolute, irrevocable and unconditional, joint and several, irrespective of the value, genuineness, validity, regularity or enforceability of the Loan Documents or the Guaranteed Obligations under this Agreement, the Notes, if any, or any other agreement or instrument referred to herein or therein, or any substitution, release or exchange of any other guarantee of or security for any of the Guaranteed Obligations, and, irrespective of any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a surety or Guarantor (except for the Discharge of the Guaranteed Obligations). Without limiting the generality of the foregoing and subject to applicable law, it is agreed that the occurrence of any one or more of the following shall not alter or impair the liability of the Guarantors hereunder which shall remain absolute, irrevocable and unconditional under any and all circumstances as described above:

(i) at any time or from time to time, without notice to the Guarantors, the time for any performance of or compliance with any of the Guaranteed Obligations shall be extended, or such performance or compliance shall be waived;

(ii) any of the acts mentioned in any of the provisions of this Agreement or the Notes, if any, or any other agreement or instrument referred to herein or therein, including any exercise of remedies, shall be done or omitted;

(iii) the maturity of any of the Guaranteed Obligations shall be accelerated, or any of the Guaranteed Obligations shall be amended or modified in any respect, or any right under the Loan Documents, under the Specified Hedging Agreements, under the Bank Product Agreements or any other agreement or instrument referred to herein or, respectively, therein shall be amended or waived in any respect or any other guarantee of any of the Guaranteed Obligations or any security therefor shall be released or exchanged in whole or in part or otherwise dealt with;

(iv) any Lien or security interest granted to, or in favor of, any Secured Party as security for any of the Guaranteed Obligations shall fail to be valid, perfected or to have the priority required under the Loan Documents, the Specified Hedging Agreements and/or the Bank Product Agreements or is avoided or set aside as a preference, fraudulent conveyance or otherwise;

(v) the release of any other Guarantor pursuant to Section 7.09;

(vi) any renewal, extension or acceleration of, or any increase in the amount of the Guaranteed Obligations, or any amendment, supplement, modification or waiver of, or any consent to departure from, the Loan Documents, any Specified Hedging Agreement or any Bank Product Agreement; or

(vii) any failure or omission to assert or enforce or agreement or election not to assert or enforce, delay in enforcement, or the stay or enjoining, by order of court, by operation of law or otherwise, of the exercise or enforcement of, any claim or demand or any right, power or remedy (whether arising under any Loan Documents, any Specified Hedging Agreement or any Bank Product Agreement, at law, in equity or otherwise) with respect to the Guaranteed Obligations or any agreement relating thereto, or with respect to any other guaranty of or security for the payment of the Guaranteed Obligations.

The Guarantors hereby expressly waive, to the extent permitted by law, diligence, presentment, demand of payment, protest and all notices whatsoever, and any requirement that any Secured Party exhaust any right, power or remedy or proceed against Borrower or any Guarantor under this Agreement or the Notes, if any, or any other agreement or instrument referred to herein or therein, or against any other person under any other guarantee of, or security for, any of the Guaranteed Obligations. The

 

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Guarantors waive, to the extent permitted by law, any and all notice of the modifications, creation, renewal, extension, waiver, termination or accrual of any of the Guaranteed Obligations and notice of or proof of reliance by any Secured Party upon this Guarantee or acceptance of this Guarantee, and the Guaranteed Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred in reliance upon this Guarantee, and all dealings between Borrower and the Secured Parties shall likewise be conclusively presumed to have been had or consummated in reliance upon this Guarantee. This Guarantee shall be construed as a continuing, absolute, irrevocable and unconditional guarantee of payment and performance without regard to any right of offset with respect to the Guaranteed Obligations at any time or from time to time held by the Secured Parties, and the obligations and liabilities of the Guarantors hereunder shall not be conditioned or contingent upon the pursuit by the Secured Parties or any other person at any time of any right or remedy against Borrower or against any other person which may be or become liable in respect of all or any part of the Guaranteed Obligations or against any collateral security or guarantee therefor or right of offset with respect thereto. Each payment required to be made hereunder shall be made without setoff or counterclaim in immediately available funds at the office of the Administrative Agent as set forth in Section 2.14. This Guarantee shall remain in full force and effect and be binding in accordance with and to the extent of its terms upon the Guarantors and their respective successors and assigns, and shall inure to the benefit of the Secured Parties, and their respective successors and assigns, notwithstanding that from time to time during the term of this Agreement there may be no Guaranteed Obligations outstanding.

Section 7.03 Reinstatement. The obligations of the Guarantors under this Article VII shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of the Borrower or other Loan Party in respect of the Guaranteed Obligations is rescinded or must be otherwise restored by any holder of any of the Guaranteed Obligations, whether as a result of any proceedings in bankruptcy or reorganization or otherwise.

Section 7.04 Subrogation; Subordination. Each Guarantor hereby agrees that until the Discharge of the Guaranteed Obligations it shall subordinate and not exercise any claim and shall not exercise any right or remedy, direct or indirect, arising by reason of any performance by it of its guarantee in Section 7.01, whether by subrogation, continuation, indemnification or otherwise, against Borrower or any other Guarantor of any of the Guaranteed Obligations or any security for any of the Guaranteed Obligations. Any Indebtedness of any Loan Party owing to another Company shall be subordinated to such Loan Party’s Secured Obligations in the manner evidencing such Indebtedness; provided that upon the payment and satisfaction in full of all Guaranteed Obligations (other than contingent indemnity obligations) and the expiration or termination of the Commitments of the Lenders under this Agreement, without any further action by any person, the Guarantors shall be automatically subrogated to the rights of the Administrative Agent and the Lenders to the extent of any payment hereunder.

Section 7.05 Remedies. The Guarantors jointly and severally agree that, as between the Guarantors and the Lenders, the Obligations of the Borrower under this Agreement and other Loan Documents may be declared to be forthwith due and payable as provided in Article VIII (and shall be deemed to have become automatically due and payable in the circumstances provided in Article VIII) for purposes of Section 7.01, notwithstanding any stay, injunction or other prohibition preventing such declaration (or such obligations from becoming automatically due and payable) as against Borrower and that, in the event of such declaration (or such Obligations being deemed to have become automatically due and payable), such Obligations (whether or not due and payable by Borrower) shall forthwith become due and payable by the Guarantors for purposes of Section 7.01.

 

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Section 7.06 Instrument for the Payment of Money. Each Guarantor hereby acknowledges that the guarantee in this Article VII constitutes an instrument for the payment of money, and consents and agrees that any Lender or Agent, at its sole option, in the event of a dispute by such Guarantor in the payment of any moneys due hereunder, shall have the right to bring a motion-action under New York CPLR Section 3213.

Section 7.07 Continuing Guarantee. The guarantee in this Article VII is a continuing guarantee of payment and performance, and shall apply to all Guaranteed Obligations whenever arising.

Section 7.08 General Limitation on Guarantee Obligations. In any action or proceeding involving any state corporate, limited partnership or limited liability company law, or any applicable state, federal or foreign bankruptcy, insolvency, reorganization or other Legal Requirement affecting the rights of creditors generally, if the obligations of any Guarantor under Section 7.01 would otherwise be held or determined to be void, voidable, invalid or unenforceable, or subordinated to the claims of any other creditors, on account of the amount of its liability under Section 7.01, then, notwithstanding any other provision to the contrary, the amount of such liability shall, without any further action by such Guarantor, any Loan Party or any other person, be automatically limited and reduced to the highest amount (after giving effect to the rights of subrogation and contribution established in Section 7.04 and Section 7.10, respectively) that is valid and enforceable, not void or voidable and not subordinated to the claims of other creditors as determined in such action or proceeding.

Section 7.09 Release of Guarantors. Subject to the Specified Guarantor Release Provision, if, in compliance with the terms and provisions of the Loan Documents, all of the Equity Interests or all or substantially all of the Property of any Guarantor are sold or otherwise transferred (a “Transferred Guarantor”) to a person or persons (other than any Loan Party) then such Transferred Guarantor shall, upon the consummation of such sale or transfer, be immediately and automatically released from its obligations under this Agreement (including under Section 11.03) and the other Loan Documents and its obligations to pledge and grant any Collateral owned by it pursuant to any Security Document and, in the case of the sale of all of the Equity Interests of the Transferred Guarantor, the pledge of such Equity Interests to the Collateral Agent pursuant to the Security Documents shall be immediately and automatically released, and so long as Borrower shall have previously provided the Collateral Agent and the Administrative Agent such certifications or documents as the Collateral Agent and/or the Administrative Agent shall reasonably request, the Collateral Agent shall take such actions as are necessary or reasonably requested to effect each release described in this Section 7.09 in accordance with the relevant provisions of the Security Documents.

Section 7.10 Right of Contribution. (a) The Loan Parties hereby agree as among themselves that, if any Loan Party shall make an Excess Payment (as defined below), such Loan Party shall have a right of contribution from each other Loan Party in an amount equal to such other Loan Party’s Contribution Share (as defined below) of such Excess Payment. The payment obligations of any Loan Party under this Section 7.10 shall be subordinate and subject in right of payment to the Secured Obligations until such time as the Discharge of the Guaranteed Obligations, and none of the Loan Parties shall exercise any right or remedy under this Section 7.10 against any other Loan Party until such time as the Discharge of the Guaranteed Obligations. For purposes of this Section 7.10, (x) “Excess Payment” shall mean the amount paid by any Loan Party in excess of its Pro Rata Share of any Secured Obligations, (y) “Pro Rata Share” shall mean, for any Loan Party in respect of any payment of the Secured Obligations, the ratio (expressed as a percentage) as of the date of such payment of the Secured Obligations of (i) the amount by which the aggregate present fair salable value of all of its assets and Properties exceeds the amount of all debts and liabilities of such Loan Party (including contingent, subordinated, un-matured, and un-liquidated liabilities, but excluding the Secured Obligations of such Loan Party) to (ii) the amount by which the aggregate present fair salable value of its assets and other Properties of all Loan Parties exceeds the amount of all of the debts and liabilities (including contingent, subordinated, un-matured, and un-liquidated liabilities, but excluding the Secured Obligations of all Loan Parties) of the Loan Parties; and (z) “Contribution Share” shall mean, for any Loan Party in respect of

 

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any Excess Payment made by any other Loan Party, the ratio (expressed as a percentage) as of the date of such Excess Payment of (i) the amount by which the aggregate present fair salable value of all of its assets and Properties exceeds the amount of all debts and liabilities of such Loan Party (including contingent, subordinated, un-matured, and un-liquidated liabilities, but excluding the Secured Obligations of such Loan Party) to (ii) the amount by which the aggregate present fair salable value of all assets and other Properties of the Loan Parties other than the maker of such Excess Payment exceeds the amount of all of the debts and liabilities (including contingent, subordinated, un-matured, and un-liquidated liabilities, but excluding the Secured Obligations of the Loan Parties) of the Loan Parties other than the maker of such Excess Payment. Nothing in this Section 7.10 shall require any Loan Party to pay its Contribution Share of any Excess Payment in the absence of a demand therefor by the Loan Party that has made the Excess Payment. Without limiting the foregoing in any manner, it is the intent of the parties hereto that as of any date of determination, no Contribution Share of any Loan Party shall be greater than the maximum amount of the claim which could then be recovered from such Loan Party under this Section 7.10 without rendering such claim voidable or avoidable under Section 548 of Chapter 11 of the Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance Act or similar statute or common law.

(b) This Section 7.10 is intended only to define the relative rights of the Loan Parties and nothing set forth in this Section 7.10 is intended to or shall impair the Secured Obligations of the Loan Parties, jointly and severally, to pay any amounts and perform any Secured Obligations as and when the same shall become due and payable or required to be performed in accordance with the terms of this Agreement, any other Loan Document, the Specified Hedging Agreements and/or the Bank Product Agreements, as the case may be. Nothing contained in this Section 7.10 shall limit the liability of the Borrower to pay the Loans and other Credit Extensions made to the Borrower and accrued interest, Fees and expenses with respect thereto and the Specified Hedging Agreement Obligations and the Bank Product Obligations of the Borrower and its Subsidiaries, in each case, for which Borrower and its Subsidiaries, as applicable, shall be primarily liable.

(c) The parties hereto acknowledge that the rights of contribution and indemnification hereunder shall constitute assets of the Loan Parties to which such contribution and indemnification is owing.

(d) The rights of any indemnified Loan Party against the other Loan Parties under this Section 7.10 shall be exercisable upon, but shall not be exercisable prior to, the full indefeasible payment of the Secured Obligations (other than unasserted contingent indemnification obligations) and termination or expiration of the Commitments under the Loan Documents and the termination of the Specified Hedging Agreements (except as otherwise expressly set forth therein) and the Bank Product Agreements (except as otherwise expressly set forth therein).

Section 7.11 Keepwell.    Each Qualified ECP Guarantor hereby jointly and severally absolutely, unconditionally and irrevocably undertakes to provide such funds or other support as may be needed from time to time by each other Loan Party to honor all of its obligations under this Guarantee in respect of Swap Obligations (provided, however, that each Qualified ECP Guarantor shall only be liable under this Section 7.11 for the maximum amount of such liability that can be hereby incurred without rendering its obligations under this Section 7.11, or otherwise under this Guarantee, as it relates to such Loan Party, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer, and not for any greater amount). The obligations of each Qualified ECP Guarantor under this Section shall remain in full force and effect until a Discharge of the Guaranteed Obligations. Each Qualified ECP Guarantor intends that this Section 7.11 constitute, and this Section 7.11 shall be deemed to constitute, a “keepwell, support, or other agreement” for the benefit of each other Loan Party for all purposes of Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

 

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ARTICLE VIII

EVENTS OF DEFAULT

Section 8.01 Events of Default. Upon the occurrence and during the continuance of any of the following events (each, an “Event of Default”):

(a) default shall be made in the payment of any principal or premium of any Loan, reimbursement of any drawing under a Letter of Credit or Cash Collateralization of any Letter of Credit when and as the same shall become due and payable, whether at the due date thereof (including any Term Loan Repayment Date or Delayed Draw Term Loan Repayment Date) or at a date fixed for mandatory prepayment thereof or by acceleration thereof or otherwise;

(b) default shall be made in the payment of any interest or premium on any Credit Extension or any Fee or any other amount (other than an amount referred to in paragraph (a) above) due under any Loan Document, when and as the same shall become due and payable, whether at the due date thereof (including an Interest Payment Date) or at a date fixed for prepayment (whether voluntary or mandatory) or by acceleration or demand thereof or otherwise, and such default shall continue unremedied for a period of five (5) Business Days;

(c) any representation or warranty made or deemed made in or in connection with any Loan Document or the Borrowings hereunder, or any representation, warranty, statement or information contained in any written report, certificate, financial statement or other written instrument furnished by or on behalf of the Borrower or any of its Subsidiaries or any Related Persons of any of the foregoing in connection with or pursuant to any Loan Document, shall prove to have been false or misleading in any material respect when so made, deemed made or furnished;

(d) default shall be made in the due observance or performance by any Company of any covenant, condition or agreement contained in Section 5.02(a), Section 5.03(a) (only with respect to the Borrower), Section 5.08, Section 5.16 or in Article VI; provided that an Event of Default under Section 6.15 is subject to a cure pursuant to Section 8.03;

(e) (i) default shall be made in the due observance or performance by any Company of any covenant, condition or agreement contained in Section 5.01, Section 5.10, or Section 5.18 and such default shall continue unremedied or shall not be waived for a period of five (5) Business Days after receipt by Borrower of a written notice thereof from the Administrative Agent or (ii) default shall be made in the due observance or performance by any Company of any covenant, condition or agreement contained in any Loan Document (other than those specified in paragraphs (a), (b), (d) or (e)(i) immediately above) and such default shall continue unremedied or shall not be waived for a period of thirty (30) days after receipt by Borrower of a written notice thereof from the Administrative Agent;

(f) any Company shall (i) fail to pay any principal or interest, regardless of amount, due in respect of any Indebtedness, when and as the same shall become due and payable beyond any applicable grace period, or (ii) fail to observe or perform any other term, covenant, condition or agreement contained in any agreement or instrument evidencing or governing any such Indebtedness if the effect of any failure referred to in this clause (ii) is to cause, or to permit the holder or holders of such Indebtedness or a trustee or other representative on its or their behalf (with or without the giving of notice, the lapse of time or both and taking into account any applicable grace periods or waivers) to cause, such Indebtedness to become due prior to its stated maturity or become subject to a mandatory offer to purchase by the obligor; provided that this clause (ii) shall not apply to secured Indebtedness that becomes due as a result of the sale, transfer or other Disposition (including as a result of a casualty or condemnation event) of the property or assets securing such Indebtedness (to the extent such sale, transfer

 

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or other Disposition is not prohibited under this Agreement and such Indebtedness is repaid in accordance with its terms); provided further that, it shall not constitute an Event of Default pursuant to this clause (f) unless the aggregate amount of all such Indebtedness referred to in clauses (i) and (ii) individually exceeds $10,000,000 at any one time (provided that, in the case of Hedging Obligations, the notional amount thereof shall be counted for this purpose);

(g) an involuntary petition shall be filed in a court of competent jurisdiction seeking (i) relief in respect of any Company (other than any Immaterial Subsidiary) or of a substantial part of the Property of any Company (other than any Immaterial Subsidiary), under Title 11 of the United States Code, as now constituted or hereafter amended, or any other federal, state or foreign bankruptcy, insolvency, receivership or similar Legal Requirement; (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for any Company (other than any Immaterial Subsidiary) or for a substantial part of the Property of any Company (other than any Immaterial Subsidiary); or (iii) the winding-up or liquidation of any Company (other than any Immaterial Subsidiary); and such proceeding or petition shall continue undismissed for sixty (60) days or an Order approving or ordering any of the foregoing shall be entered;

(h) any Company (other than any Immaterial Subsidiary) shall (i) voluntarily commence any proceeding or file any petition seeking relief under Title 11 of the United States Code, as now constituted or hereafter amended, or any other federal, state or foreign bankruptcy, insolvency, receivership or similar Legal Requirement; (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or the filing of any petition described in clause (g) above; (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for any Company or for a substantial part of the Property of any Company; (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding; (v) make a general assignment for the benefit of creditors; (vi) become unable, admit in writing its inability or fail generally to pay its debts as they become due; (vii) except as permitted in Section 6.05, wind up or liquidate; or (viii) take any corporate (or equivalent) action for the purpose of effecting any of the foregoing;

(i) one or more Orders for the payment of money in an aggregate amount in excess of $10,000,000 (to the extent not covered by (i) insurance in respect of which a solvent and unaffiliated insurance company has not denied coverage thereof and for which the carrier has not disclaimed responsibility and for which a claim (A) has been submitted, (B) is in the process of being submitted or (C) is intended to be submitted promptly or (ii) a third-party indemnification agreement under which the indemnifying party has accepted responsibility and would reasonably be expected to remain solvent after satisfying such indemnification obligation)) shall be rendered against any Company or any combination thereof and the same shall remain undischarged, unpaid, unvacated, unstayed, or unbonded for a period of 90 consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to levy upon Properties of any Company to enforce any such Order;

(j) (i) one or more ERISA Events shall have occurred that, when taken together with all other such ERISA Events that have occurred, would reasonably be expected to result in a Material Adverse Effect with respect to the liabilities of any Company; (ii) there is or arises an Unfunded Pension Liability (taking into account only Plans with positive Unfunded Pension Liability) that would be reasonably likely to result in a Material Adverse Effect; (iii) there is or arises any potential withdrawal liability under Section 4201 of ERISA if the Companies or the ERISA Affiliates were to withdraw from any and all Multiemployer Plans that would be reasonably likely to result in a Material Adverse Effect, (iv) there is or arises any violation of the Fair Labor Standards Act of 1938, as amended, or any other applicable Legal Requirement dealing with such matters in any manner that has resulted in a liability that is material to the Companies as a whole, (v) there is or arises any claim may be made against any

 

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Company, on account of wages and employee health and welfare insurance and other benefits which results in a liability that is material to the Companies as a whole, or (vi) the failure of any Pension Plan (or any other Employee Benefit Plan intended to be qualified under Section 401(a) of the Code) to qualify under Section 401(a) of the Code, or the failure of any trust forming part of any Pension Plan to qualify for exemption from taxation under Section 501(a) of the Code.

(k) any material security interest and Lien purported to be created by any Security Document (x) shall cease to be in full force and effect, or (y) shall cease to give the Collateral Agent, for the benefit of the Secured Parties, the Liens, rights, powers and privileges purported to be created and granted under such Security Documents (including a valid, enforceable, perfected first priority (except as otherwise provided in this Agreement or any Security Document) security interest in and Lien on, all of the Collateral thereunder (except as otherwise expressly provided in this Agreement or such Security Document and except as the direct and exclusive result of an action or a failure to act, in each case in a manner otherwise specified as required to be undertaken (or not undertaken, as the case may be) by a provision of any Loan Document, on the part of any Agent, Lender or Secured Party)) in favor of the Collateral Agent, or (z) shall be asserted by or on behalf of any Company not to be, a valid, enforceable, perfected, first priority (except as otherwise expressly provided in this Agreement or such Security Document) security interest in or Lien on the Collateral covered thereby; provided that it will not be an Event of Default under this clause (k) if (i) the Collateral Agent shall not have or shall cease to have a valid, enforceable and perfected first priority Lien on any material portion of the Collateral purported to be covered by the Security Documents, individually or in the aggregate, having a Fair Market Value of less than $7,500,000 or (ii) the failure to have a valid, enforceable and perfected first priority Lien on any material portion of the Collateral resulted solely from the action or inaction of the Administrative Agent, the Collateral Agent, or any Lender (other than actions or inactions taken as a direct result of the advice of or at the direction of any Company);

(l) any Loan Document or any material provisions thereof shall at any time and for any reason be declared by a court of competent jurisdiction to be null and void, or a proceeding shall be commenced by or on behalf of the Borrower or any of its Subsidiaries or any Related Persons of any of the foregoing, or by any Governmental Authority, seeking to establish the invalidity or unenforceability thereof (exclusive of questions of interpretation of any provision thereof), or any Loan Party (or any of their respective Related Persons) (directly or indirectly) shall repudiate or deny any portion of its liability or obligation for the Obligations; or

(m) there shall have occurred a Change in Control; or

(n) any representation or warranty made, or deemed to be made, by any Loan Party herein or in any of the other Loan Documents or in any certificate or notice delivered or required to be delivered pursuant hereto or thereto shall prove false in any material respect (or, to the extent that the representation or warranty is qualified by “materiality”, “Material Adverse Effect” or similar language, in any respect) on the date as of which it was made or deemed to have been made;

then, and in every such event (other than an event described in paragraph (g) or (h) above), and at any time thereafter during the continuance of such event, the Administrative Agent may, with the prior consent of the Required Lenders, and at the request of the Required Lenders shall, by notice to the Borrower, take any or all of the following actions, at the same or different times: (i) terminate forthwith the Commitments and the obligation of the Issuing Bank to issue any Letter of Credit, (ii) declare the Loans and other Obligations then outstanding to be forthwith due and payable in whole or in part, whereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and any unpaid accrued Fees and all other liabilities of the Loan Parties accrued hereunder and under any other Loan Document, together with an amount equal to the Minimum Collateral Amount

 

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(regardless of whether any beneficiary under any such Letter of Credit shall have presented, or shall be entitled at such time to present, the drafts or other documents or certificates required to draw under such Letter of Credit) shall become forthwith due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Loan Parties, anything contained herein or in any other Loan Document or otherwise to the contrary notwithstanding, (iii) require the Borrower promptly comply with the terms of Section 2.17(h) with respect to deposits of Cash Collateral to secure the existing Letters of Credit and future payment of related fees, and (iv) exercise any and all of its other rights and remedies under applicable Legal Requirements, hereunder and under the other Loan Documents; provided that, with respect to events described in paragraph (g) or (h) above, the Commitments and the obligation of the Issuing Bank to issue any Letter of Credit shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and any unpaid accrued Fees and all other liabilities of the Loan Parties accrued hereunder and under any other Loan Document, together with an amount equal to the Minimum Collateral Amount (regardless of whether any beneficiary under any such Letter of Credit shall have presented, or shall be entitled at such time to present, the drafts or other documents or certificates required to draw under such Letter of Credit) (including any prepayment premium which shall be due and payable as a result of the acceleration of such principal amounts within the time periods specified in Section 2.10(i)), shall automatically become due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Loan Parties, anything contained herein or in any other Loan Document or otherwise to the contrary notwithstanding.

Section 8.02 [reserved].

Section 8.03 Right to Cure.

(a) Financial Covenants. Notwithstanding anything to the contrary contained in Section 8.01, in the event that the Borrower fails to comply with the requirements of the financial covenants set forth in Section 6.15 as of the last day of any fiscal quarter for which such covenant is tested, until the expiration of the 10th Business Day subsequent to the Cure Specified Date for such fiscal quarter, the Borrower shall have the right to give written notice (the “Cure Notice”), on or prior to the 10th Business Day subsequent to such Cure Specified Date, to the Administrative Agent of the intent of the Borrower to issue Permitted Cure Securities for cash or otherwise contribute cash common equity and/or other Qualified Stock to the capital of the Borrower (collectively, the “Cure Right”) and, upon contribution of the net cash proceeds (such net cash proceeds, the “Cure Amount”) to the Borrower as cash common equity and/or other Qualified Stock after the Cure Specified Date for such fiscal quarter pursuant to the exercise by the Borrower of such Cure Right, which exercise shall be made after such Cure Specified Date on or before the 10th Business Day subsequent to such Cure Specified Date, the covenant set forth in Section 6.15 shall be recalculated giving effect to the following adjustments on a Pro Forma Basis:

(i) Consolidated EBITDA shall be increased with respect to such applicable fiscal quarter and any Test Period that contains such fiscal quarter, solely for the purpose of measuring the financial covenants set forth in Section 6.15 and not for any other purpose under this Agreement, by an amount equal to the Cure Amount; and

(ii) if, after giving effect to the foregoing recalculations, the Borrower shall then be in compliance with the requirements of the financial covenants set forth in Section 6.15, the Borrower shall be deemed to have satisfied the requirements of such financial covenants as of the relevant date of determination with the same effect as though there had been no failure to comply therewith at such date, and the applicable breach or Default of such financial covenants that had occurred shall be deemed cured for purposes of this Agreement.

 

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(b) No Default. Notwithstanding anything herein to the contrary, (i) a Default or Event of Default resulting solely from a failure to be in compliance with the financial covenants set forth in Section 6.15 shall not be deemed to exist from the end of the applicable fiscal quarter until the 10th Business Day after the applicable Cure Specified Date with respect to such fiscal quarter, (ii) to the extent a Cure Notice is delivered by the Borrower within ten (10) Business Days after such Cure Specified Date, a Default or Event of Default resulting solely from a failure to be in compliance with the financial covenants set forth in Section 6.15 shall not be deemed to exist from the end of the applicable fiscal quarter until the 10th Business Day after the applicable Cure Specified Date with respect to the applicable fiscal quarter and (iii) if the Cure Amount is not made within ten (10) Business Days after the applicable Cure Specified Date with respect to the applicable fiscal quarter, each such Default or Event of Default referenced in clauses (i) and (ii) above shall be deemed reinstated as of the end of the applicable fiscal quarter, it being further agreed that the Obligations shall bear interest at the Default Rate as applied in accordance with Section 2.06(c) as of the end of such applicable fiscal quarter.

(c) Borrowing Block. If a Default or Event of Default would have occurred and be continuing had the Borrower not had the option to exercise the Cure Right as set forth above and not exercised such Cure Right pursuant to the foregoing provisions, the Borrower shall not be permitted, from the applicable Cure Specified Date with respect to the applicable fiscal quarter, until such Default or Event of Default is cured in accordance with the terms of this Section 8.03 or Section 11.02, to request any Borrowings or any Credit Extensions under this Agreement.

(d) Limitation on Exercise of Cure Right. Notwithstanding anything herein to the contrary, (i) in each four consecutive fiscal quarter period, there shall be at least two fiscal quarters during which the Cure Right is not exercised, (ii) the Cure Right may only be exercised five times during the term of this Agreement, (iii) the Cure Amount shall be no greater than the minimum amount required to cause the Borrower to be in compliance with the financial covenants set forth in Section 6.15 as at the end of the applicable fiscal quarter, (iv) all Cure Amounts shall be disregarded for purposes of determining any financial ratio based conditions or any baskets with respect to the covenants contained in this Agreement, (v) there shall be no pro forma reduction in Indebtedness with the proceeds of any Cure Amount for determining compliance with Section 6.15 in the quarter in which such Cure Right is exercised (whether directly by prepayment of Indebtedness or indirectly by way of netting); provided that Cure Amounts shall reduce debt in future Test Periods to the extent used to prepay the Loans and not otherwise applied to increase Consolidated EBITDA of the Borrower in such Test Period and (vi) there shall be no cash netting of the proceeds of any Cure Amount.

ARTICLE IX

APPLICATION OF COLLATERAL PROCEEDS

Section 9.01 Collateral Account. (a) The Collateral Agent is hereby authorized to establish and maintain at its office (or, at the Collateral Agent’s discretion, at the office of its designee from time to time) at 520 Madison Avenue, New York, New York 10022, a restricted deposit account designated by the Collateral Agent in its discretion from time to time. Each Loan Party shall deposit into the Collateral Account from time to time any cash, but only to the extent, that such Loan Party is expressly required to pledge as additional collateral security hereunder pursuant to the Loan Documents. The balance from time to time in the Collateral Account shall constitute part of the Collateral and shall not constitute payment of the Secured Obligations until applied as hereinafter provided. At any time following the occurrence and during the continuance of an Event of Default, the Collateral Agent if instructed by the Required Lenders shall apply or cause to be applied (subject to collection) the balance from time to time outstanding in such restricted deposit account to the credit of the Collateral Account to the payment of the Secured Obligations in the manner specified in Section 9.02. The Loan Parties shall have no right to withdraw, transfer or otherwise receive any funds deposited in the Collateral Account except to the extent specifically provided herein or in any other Loan Document.

 

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(b) Amounts on deposit in the Collateral Account shall be invested and reinvested from time to time in Cash Equivalents as the applicable Loan Party (or, after the occurrence and during the continuance of an Event of Default, the Collateral Agent) shall determine by written instruction to the Collateral Agent, or if no such instructions are given, then as the Collateral Agent, in its sole and reasonable discretion, shall determine, which Cash Equivalents shall be held in the name and be under the control of the Collateral Agent (or any sub-agent); provided that at any time after the occurrence and during the continuance of an Event of Default, the Collateral Agent shall if instructed by the Required Lenders at any time and from time to time elect to liquidate any such Cash Equivalents and to apply or cause to be applied the proceeds thereof to the payment of the Secured Obligations in the manner specified in Section 9.02.

Section 9.02 Application of Proceeds.

(a) The proceeds received by the Collateral Agent in respect of any sale of, collection from or other realization upon all or any part of the Collateral pursuant to the exercise by the Collateral Agent of its remedies shall, subject to the Agreement Among Lenders, be applied, together with any other sums then held by the Collateral Agent pursuant to this Agreement or any other Loan Document, promptly by the Collateral Agent as follows:

(i) First, to the payment of all reasonable and documented costs and expenses, fees, commissions and Taxes of such sale, collection or other realization including compensation to the Administrative Agent, the Collateral Agent and/or the Issuing Bank and its agents and counsel and all expenses, liabilities and advances made or incurred by the Administrative Agent, the Collateral Agent, and/or the Issuing Bank in connection therewith and all amounts for which the Administrative Agent, the Collateral Agent and/or the Issuing Bank is entitled to indemnification pursuant to the provisions of any Loan Document, together with interest on each such amount at the highest rate then in effect under this Agreement from and after the date such amount is due, owing or unpaid until paid in full;

(ii) Second, to the payment of all other reasonable and documented costs and expenses of such sale, collection or other realization including compensation to the other Secured Parties and their agents and counsel and all costs, liabilities and advances made or incurred by the other Secured Parties in connection therewith, together with interest on each such amount at the highest rate then in effect under this Agreement from and after the date such amount is due, owing or unpaid until paid in full;

(iii) Third, without duplication of amounts applied pursuant to clauses (i) and (ii) above, to the indefeasible payment in full in cash, pro rata, of interest and other amounts constituting Obligations on or in respect of Revolving Loans (other than principal, Specified Hedging Agreement Obligations and Bank Product Obligations) in each case equally and ratably in accordance with the respective amounts thereof then due and owing;

(iv) Fourth, to the indefeasible payment in full in cash, pro rata, of the principal amount of the Obligations constituting Revolving Loans, all Specified Hedging Agreement Obligations and all Bank Product Obligations and including with respect to the deposit of Cash Collateral to secure the existing Letter of Credit Obligations and future payment of related fees in compliance with Section 2.17(h);

 

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(v) Fifth, to the indefeasible payment in full in cash, pro rata, of interest and other amounts constituting Obligations on or in respect of Term Loans, in each case equally and ratably in accordance with the respective amounts thereof then due and owing; and

(vi) Sixth, the balance, if any, after all Obligations have been paid in full, to the person lawfully entitled thereto (including the applicable Loan Party or its successors or assigns) or as a court of competent jurisdiction may direct.

In the event that any such proceeds are insufficient to pay in full the items described in the preceding sentences of this Section 9.02, the Loan Parties shall remain liable, jointly and severally, for any deficiency.

ARTICLE X

THE ADMINISTRATIVE AGENT AND THE COLLATERAL AGENT

Section 10.01 Appointment. (a) Each Lender and the Issuing Bank hereby irrevocably designates and appoints each of the Administrative Agent and the Collateral Agent as an agent of such Lender and the Issuing Bank under this Agreement and the other Loan Documents. Each Lender and the Issuing Bank irrevocably authorizes each Agent, in such capacity, through its agents or employees, to take such actions on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are delegated to such Agent by the terms of this Agreement and the other Loan Documents, together with such actions and powers as are reasonably incidental thereto. The provisions of this Article X are solely for the benefit of the Agents, the Issuing Bank, the Lead Manager and the Lenders, and no Loan Party shall have rights as a third party beneficiary of any such provisions. Without limiting the generality of the foregoing, the Agents are hereby expressly authorized to execute any and all documents (including releases) with respect to the Collateral and any rights of the Secured Parties with respect thereto as contemplated by and in accordance with the provisions of this Agreement and the other Loan Documents. In performing its functions and duties hereunder, each Agent shall act solely as an agent of the Lenders and the Issuing Bank and does not assume and shall not be deemed to have assumed any obligation towards or relationship of agency or trust with or for the Borrower or any of its Subsidiaries. Without limiting the generality of the foregoing, the use of the term “agent” in this Agreement with reference to the Administrative Agent or the Collateral Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, such term is used merely as a matter of market custom and is intended to create or reflect only an administrative relationship between independent contracting parties. It being understood that the Administrative Agent may act in the capacities set forth in the Agreement Among Lenders and each of the Lenders and the Issuing Bank hereby authorizes and instructs Jefferies to act in such capacities.

(b) Each Lender irrevocably appoints each other Lender as its agent and bailee for the purpose of perfecting Liens (whether pursuant to Section 8-301(a)(2) of the UCC or otherwise), for the benefit of the Secured Parties, in assets in which, in accordance with the UCC or any other applicable Legal Requirement, a security interest can be perfected by possession or control. Should any Secured Party (other than the Collateral Agent) obtain possession or control of any such Collateral, such Person shall notify the Collateral Agent thereof, and, promptly following the Collateral Agent’s request therefor, shall deliver such Collateral to the Collateral Agent or otherwise deal with such Collateral in accordance with the Collateral Agent’s instructions.

 

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Section 10.02 Agent in Its Individual Capacity. Each person serving as an Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not an Agent, and the term “Lender” or “Lenders” shall, unless otherwise expressly indicated or unless the context otherwise requires, include the person serving as an Agent hereunder in its individual capacity. Such person and its Affiliates may accept deposits from, lend money to, act as financial advisor or in any other advisory capacity for, and generally engage in any kind of business with, any Company or Affiliate thereof as if it were not an Agent hereunder and without duty to account therefor to the Lenders.

Section 10.03 Exculpatory Provisions; Agent Acting at Direction of Required Lenders. No Agent or Lead Manager shall have any duties or obligations except those expressly set forth in the Loan Documents. Without limiting the generality of the foregoing, (a) no Agent or Lead Manager shall be subject to any fiduciary or other implied duties, regardless of whether a Default or Event of Default has occurred and is continuing, (b) no Agent or Lead Manager shall have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated by the Loan Documents that such Agent is required to exercise in writing as directed by the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 11.02); provided that no Agent or Lead Manager shall be required to take any action that, in its opinion or the opinion of its counsel, may expose such Agent or such Lead Manager to liability, if such Agent or Lead Manager, as applicable, is not indemnified to its satisfaction, or that is contrary to any Loan Document or applicable Legal Requirements including, for the avoidance of doubt, any action that may be in violation of the automatic stay under any Insolvency Law or that may effect a foreclosure, modification or termination of property of a Defaulting Lender under any Debtor Relief Law, and (c) except as expressly set forth in the Loan Documents, no Agent or Lead Manager shall have any duty to disclose or shall be liable for the failure to disclose, any information relating to any Company or any of its Affiliates that is communicated to or obtained by the person serving as such Agent or any of its Affiliates in any capacity or such Lead Manager or any of its Affiliates in any capacity. No Agent or Lead Manager shall be liable for any action taken or not taken by it (i) with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary, or as any Agent shall believe in good faith shall be necessary, under the circumstances as provided in Section 11.02) or (ii) in the absence of its own fraud, gross negligence or willful misconduct (as found by a final and non-appealable judgment of a court of competent jurisdiction). No Agent or Lead Manager shall be deemed to have knowledge of any Default or Event of Default unless and until written notice thereof describing such default is given to such Agent or Lead Manager by Borrower or a Lender and no Agent or Lead Manager shall be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with any Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth in any Loan Document, any Specified Hedging Agreement or any Bank Product Agreement or the occurrence of any Default or Event of Default, (iv) the validity, enforceability, effectiveness or genuineness of any Loan Document, any Specified Hedging Agreement or any Bank Product Agreement or any other agreement, instrument or document or (v) the satisfaction of any condition set forth in Article (a) or elsewhere in any Loan Document. Each party to this Agreement acknowledges and agrees that the Collateral Agent may from time to time use one or more outside service providers for the tracking of all UCC financing statements (and/or other collateral related filings and registrations from time to time) required to be filed or recorded pursuant to the Loan Documents and the notification to the Collateral Agent, of, among other things, the upcoming lapse or expiration thereof, and that each of such service providers will be deemed to be acting at the request and on behalf of the Borrower and the other Loan Parties. No Agent or Lead Manager shall be liable for any action taken or not taken by any such service provider. Except as set forth herein, none of any Agent, the Lead Manager or any of their officers, partners, directors, employees, agents, trustees, administrators, managers, advisors or representatives shall be liable to the Lenders or the Issuing Bank for any action taken or omitted by any of them or any other Agent under or in connection with any of the Loan Documents.

 

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Anything herein to the contrary notwithstanding, whenever reference is made in this Agreement or any other Loan Document to any action by, consent, designation, specification, requirement or approval of, notice, request or other communication from, or other direction given or action to be undertaken or to be (or not to be) suffered or omitted by any Agent or to any election, decision, opinion, acceptance, use of judgment, expression of satisfaction or other exercise of discretion, rights or remedies to be made (or not to be made) by any such Agents hereunder or thereunder, it is understood that in all cases the Agents shall solely be acting, giving, withholding, suffering, omitting, taking or otherwise undertaking and exercising the same (or shall not be undertaking and exercising the same) as directed by the Required Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein or in the other Loan Documents).

Section 10.04 Reliance by Agent. Each Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message, internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed, sent, or otherwise authenticated by a proper person. Each Agent also may rely upon any statement made to it orally and believed by it to be made by a proper person, and shall not incur any liability for relying thereon. In determining compliance with any condition hereunder to the making of a Loan, or the issuance, extension, renewal or increase of a Letter of Credit, that by its terms must be fulfilled to the satisfaction of a Lender or the Issuing Bank, each Agent may presume that such condition is satisfactory to such Lender or the Issuing Bank unless each Agent shall have received written notice to the contrary from such Lender or the Issuing Bank prior to the making of such Loan or the issuance of such Letter of Credit. Each Agent may consult with legal counsel (who may be counsel for the Borrower or any other Loan Party), independent accountants and other advisors selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or advisors.

Section 10.05 Delegation of Duties. Each Agent may perform any and all of its duties and exercise its rights and powers under this Agreement or under any other Loan Document by or through, or delegate any and all such rights and powers to, any one or more sub-agents appointed by such Agent. Each Agent and any such sub-agent may perform any and all of its duties and exercise its rights and powers by or through their respective Affiliates. The exculpatory, indemnification and other provisions of the preceding paragraphs shall apply, without limiting the foregoing, to any such sub-agent and to the Affiliates of each Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Agent. The Agents shall not be responsible for the negligence or misconduct of any sub-agent except to the extent that a court of competent jurisdiction determines in a final and non-appealable judgment that such Agent acted with gross negligence, willful misconduct, or bad faith in the selection of such sub-agent.

Section 10.06 Successor Agent. Each Agent may resign as such at any time upon at least thirty (30) days’ prior notice to the Lenders, the Issuing Bank and the Borrower. Upon any such resignation, the Required Lenders shall have the right to appoint a successor Agent from among the Lenders, with the consent of the Borrower (such consent not to be unreasonably withheld, delayed or conditioned and not required if a Default or Event of Default shall have occurred and be continuing). If no successor shall have been so appointed by the Required Lenders and no successor shall have accepted such appointment within thirty (30) days after the retiring Agent gives notice of its resignation, then the retiring Agent may, on behalf of the Lenders and the Issuing Bank, appoint a successor Agent, with the consent of the Borrower (such consent not to be unreasonably withheld, delayed or conditioned and not required if a Default or Event of Default shall have occurred and be continuing), which successor shall be a commercial banking institution organized under the laws of the United States (or any State thereof) or a United States branch or agency of a commercial banking institution, in each case, having combined capital and surplus of at least $500,000,000; provided that if such retiring Agent is unable to find a

 

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commercial banking institution that is willing to accept such appointment and which meets the qualifications set forth above, the retiring Agent’s resignation shall nevertheless thereupon become effective and the retiring (or retired) Agent shall be discharged from its duties and obligations under the Loan Documents, and the Lenders shall assume and perform all of the duties of such Agent under the Loan Documents until such time, if any, as the Required Lenders appoint a successor Agent.

Upon the acceptance of its appointment as an Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring (or retired) Agent shall be discharged from its duties and obligations under the Loan Documents (if not already discharged therefrom as provided above in this Section 10.06). The fees payable by Borrower to a successor Agent shall be the same as those payable to its predecessor unless otherwise agreed between Borrower and such successor. After an Agent’s resignation hereunder, the provisions of this Article X, Section 11.03 and Sections 11.08 to 11.10 shall continue in effect for the benefit of such retiring Agent, its sub-agents and their respective Affiliates in respect of any actions taken or omitted to be taken by any of them while it was acting as Agent.

Section 10.07 Non-Reliance on Agent and Other Lenders. Each Lender and the Issuing Bank acknowledges that it has, independently and without reliance upon any Agent, Lead Manager or any other Lender or any of their Related Persons and based on such documents and information as it has deemed appropriate, conducted its own independent investigation of the financial condition and affairs of the Loan Parties and their Subsidiaries and made its own credit analysis and decision to enter into this Agreement. Each Lender and the Issuing Bank further represents and warrants that it has reviewed the Lender Presentation and each other document made available to it on the Platform in connection with this Agreement and has acknowledged and accepted the terms and conditions applicable to the recipients thereof (including any such terms and conditions set forth, or otherwise maintained, on the Platform with respect thereto). Each Lender and the Issuing Bank also acknowledges that it will, independently and without reliance upon any Agent, the Issuing Bank, the Lead Manager or any other Lender or any of their Related Persons and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document, any Specified Hedging Agreement, any Bank Product Agreement or related agreement or any document furnished hereunder or thereunder.

Section 10.08 Name Agents. The parties hereto acknowledge that each of the Arranger and the Lead Manager holds its title in name only, and that such Arranger or Lead Manager, as applicable, shall not have any right, power, obligation, liability, responsibility or duty under this Agreement other than those applicable to any Lender or the Issuing Bank hereunder. Without limiting the foregoing, neither the Arranger nor the Lead Manager shall be deemed to have any fiduciary relationship with any Lender or the Issuing Bank. Each Lender and the Issuing Bank acknowledges that it has not relied, and will not rely, on any of the Arrangers or the Lead Manager in deciding to enter into this Agreement or in taking or not taking any action hereunder.

Section 10.09 Indemnification. The Lenders severally agree to indemnify each Agent and the Lead Manager in its capacity as such and each of its Related Persons (to the extent not reimbursed by Borrower or the other Loan Parties and without limiting the obligation of the Borrower or other Loan Parties to do so), ratably according to their respective outstanding Loans and Commitments in effect on the date on which indemnification is sought under this Section 10.09 (or, if indemnification is sought after the date upon which all Commitments shall have terminated and the Loans shall have been paid in full, ratably in accordance with such outstanding Loans and Commitments as in effect immediately prior to such date), from and against any and all liabilities, obligations, losses, damages, fines, penalties, actions, claims, suits, judgments, litigations, investigations, inquiries or proceedings, costs, expenses or disbursements of any kind whatsoever that may at any time (whether before or after the payment of the

 

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Loans) be imposed on, incurred by or asserted against such Agent, Lead Manager or Related Person in any way relating to or arising out of, the Commitments, this Agreement, any of the other Loan Documents, any Specified Hedging Agreement, any Bank Product Agreement or any documents contemplated by or referred to herein or therein, the Transactions or any of the other transactions contemplated hereby or thereby or any action taken or omitted by such Agent or Related Person under or in connection with any of the foregoing (IN ALL CASES, WHETHER OR NOT CAUSED OR ARISING, IN WHOLE OR IN PART, OUT OF THE COMPARATIVE, CONTRIBUTORY OR SOLE NEGLIGENCE OF ANY AGENT OR RELATED PERSON); provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, judgments, fines, penalties, actions, claims, suits, litigations, investigations, inquiries or proceedings, costs, expenses or disbursements that are found by a final and non-appealable judgment of a court of competent jurisdiction to have directly resulted solely and directly from such Agent’s, Lead Manager’s or Related Person’s, as the case may be, gross negligence, fraud or willful misconduct. The agreements in this Section 10.09 shall survive the payment of the Loans and all other amounts payable hereunder.

Section 10.10 Withholding Taxes. To the extent required by any Legal Requirement, the Administrative Agent may withhold from any payment to any Lender an amount equivalent to any applicable withholding Tax. If the U.S. Internal Revenue Service or any other Governmental Authority asserts a claim that the Administrative Agent did not properly withhold Tax from amounts paid to or for the account of any Lender because the appropriate form was not delivered or was not properly executed or because such Lender failed to notify the Administrative Agent of a change in circumstance which rendered the exemption from, or reduction of, withholding Tax ineffective or for any other reason, or if the Administrative Agent reasonably determines that a payment was made to a Lender pursuant to this Agreement without deduction of applicable withholding Tax from such payment, such Lender shall indemnify the Administrative Agent fully for, and shall make payable in respect thereof within ten (10) days after demand therefor, (i) any Indemnified Taxes attributable to such Lender (but only to the extent that any Loan Party has not already indemnified the Administrative Agent for such Indemnified Taxes and without limiting the obligation of the Loan Parties to do so), (ii) any Tax attributable to such Lender’s failure to comply with the provisions of Section 11.04(f) relating to the maintenance of the Participant Register and (iii) any Excluded Taxes attributable to such Lender, in each case, that are payable or paid by the Administrative Agent in connection with any Loan Document, and any reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to any Lender by the Administrative Agent shall be conclusive absent manifest error. Each Lender hereby authorizes the Administrative Agent to set off and apply any and all amounts at any time owing to such Lender under this Agreement or any other Loan Document against any amount due the Administrative Agent under this Section 10.10. The agreements in this Section 10.10 shall survive the resignation and/or replacement of the Administrative Agent, any assignment of rights by, or the replacement of, a Lender, the termination of the Commitments and the repayment, satisfaction or discharge of all other Obligations and the termination of this Agreement. For the avoidance of doubt, the term “Lender” for purposes of this Section 10.10 shall include the Issuing Bank.

Section 10.11 Lender’s Representations, Warranties and Acknowledgements. (a) Each Lender and the Issuing Bank represents and warrants that it has made its own independent investigation of the financial condition and affairs of the Borrower and its Subsidiaries in connection with Credit Extensions hereunder and that it has made and shall continue to make its own appraisal of the creditworthiness of the Borrower and its Subsidiaries. No Agent or Lead Manger shall have any duty or responsibility, either initially or on a continuing basis, to make any such investigation or any such appraisal on behalf of the Lenders or the Issuing Bank to provide any Lender or the Issuing Bank with any credit or other information with respect thereto, whether coming into its possession before the making of any Credit Extension or at any time or times thereafter, and no Agent or Lead Manager shall have any

 

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responsibility with respect to the accuracy of or the completeness of any information provided to the Lenders or the Issuing Bank. Each Lender and the Issuing Bank acknowledges that no Agent, Lead Manager or Related Person of any Agent or Lead Manager has made any representation or warranty to it. Except for documents expressly required by any Loan Document to be transmitted by an Agent to the Lenders and/or the Issuing Bank, no Agent shall have any duty or responsibility (either express or implied) to provide any Lender or the Issuing Bank with any credit or other information concerning any Loan Party or any of its Affiliates, including the business, prospects, operations, property, financial and other condition or creditworthiness of any Loan Party or any Affiliate of a Loan Party, that may come in to the possession of an Agent or any of its Related Persons. No Lead Manager shall have any duty or responsibility (either express or implied) to provide any Lender or the Issuing Bank with any credit or other information concerning any Loan Party or any of its Affiliates, including the business, prospects, operations, property, financial and other condition or creditworthiness of any Loan Party or any Affiliate of a Loan Party, that may come in to the possession of Lead Manager or any of its Related Persons.

(b) Each Lender and the Issuing Bank, by delivering its signature page to this Agreement or an Assignment and Assumption Agreement and funding its Loan of making any other Credit Extension, shall be deemed to have acknowledged receipt of, and consented to and approved, each Loan Document and each other document required to be approved by any Agent, the Required Lenders, the Issuing Bank or the Lenders, as applicable, hereunder (including each document delivered on the Closing Date).

Section 10.12 Collateral Documents and Guarantee.

(a) Agents under Collateral Documents and Guarantee. Each Secured Party (including each counterparty to a Specified Hedging Agreement and each Bank Product Provider, who by acceptance of the benefits of the Security Documents shall be deemed to have appointed the Administrative Agent and Collateral Agent as set forth herein) hereby further authorizes the Administrative Agent or the Collateral Agent, as applicable, on behalf of and for the benefit of the Secured Parties, to be the agent for and representative of the Secured Parties with respect to the Guarantee, the Collateral and the Loan Documents; provided that neither the Administrative Agent nor the Collateral Agent shall owe any fiduciary duty, duty of loyalty, duty of care, duty of disclosure or any other obligation whatsoever to any holder of Obligations with respect to any Specified Hedging Agreement or any Bank Product Agreement. Subject to Section 11.02, without further written consent or authorization from any Secured Party, the Administrative Agent or the Collateral Agent, as applicable, may execute any documents or instruments necessary to (i) in connection with a sale or disposition of assets permitted by this Agreement, release any Lien encumbering any item of Collateral that is the subject of such sale or other disposition of assets or to which the Required Lenders (or such other Lenders as may be required to give such consent under Section 11.02) have otherwise consented or (ii) release any Guarantor from the Guarantee pursuant to Section 7.09 or with respect to which the Required Lenders (or such other Lenders as may be required to give such consent under Section 11.02) have otherwise consented.

(b) Right to Realize on Collateral and Enforce Guarantee. Anything contained in any of the Loan Documents to the contrary notwithstanding, the Borrower, the Administrative Agent, the Collateral Agent and each Secured Party hereby agree that (i) no Secured Party shall have any right individually to realize upon any of the Collateral or to enforce the Guarantee, it being understood and agreed that all powers, rights and remedies hereunder and under any of the Loan Documents may be exercised solely by the Administrative Agent or the Collateral Agent, as applicable, for the benefit of the Secured Parties in accordance with the terms hereof and thereof and all powers, rights and remedies under the collateral documents may be exercised solely by the Collateral Agent for the benefit of the Secured Parties in accordance with the terms thereof, and (ii) in the event of a foreclosure or similar enforcement

 

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action by the Collateral Agent on any of the Collateral pursuant to a public or private sale or other disposition (including pursuant to Section 363(k), Section 1129(b)(2)(a)(ii) or otherwise of the Bankruptcy Code), the Collateral Agent (or any Lender, except with respect to a “credit bid” pursuant to Section 363(k), Section 1129(b)(2)(a)(ii) or otherwise of the Bankruptcy Code,) may be the purchaser or licensor of any or all of such Collateral at any such sale or other disposition and the Collateral Agent, as agent for and representative of the Secured Parties (but not any Lender or Lenders in its or their respective individual capacities) shall be entitled, upon instructions from the Required Lenders, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Collateral sold at any such sale or disposition, to use and apply any of the Obligations as a credit on account of the purchase price for any collateral payable by the Collateral Agent at such sale or other disposition.

(c) Release of Collateral and Guarantees, Termination of Loan Documents.

(i) Notwithstanding anything to the contrary contained herein or in any other Loan Document, the Administrative Agent shall (without notice to, or vote or consent of, any Lender, the Issuing Bank or any affiliate of any Lender that is a party to any Hedging Agreement) take such actions as shall be required to release its security interest in any Collateral subject to any disposition permitted by the Loan Documents, and to release any guarantee obligations under any Loan Document of any person subject to such disposition, to the extent necessary to permit consummation of such disposition in accordance with the Loan Documents; provided that, if any Guarantor ceases to constitute a Wholly-Owned Subsidiary, such Guarantor shall not be released from its Guarantee unless such Guarantor is no longer a direct or indirect Subsidiary of the Borrower and such Dispositions of capital stock is a good faith Disposition to a bona fide unaffiliated third party for fair market value and for a bona fide business purpose (the requirements in this clause (c)(i), the “Specified Guarantor Release Provision”);

(ii) Notwithstanding anything to the contrary contained herein or any other Loan Document, when all Obligations (other than obligations in respect of any Hedging Agreement and unasserted contingent indemnification obligations) and the expiration or termination of all Letters of Credit (other than Letters of Credit as to which other arrangements satisfactory to the Administrative Agent and the Issuing Bank shall have been made) have been paid in full and all Commitments have terminated or expired, upon request of the Borrower, the Administrative Agent shall (without notice to, or vote or consent of, any Lender, the Issuing Bank or any affiliate of any Lender that is a party to any Hedging Agreement) take such actions as shall be required to release its security interest in all Collateral, and to release all guarantee obligations provided for in any Loan Document, whether or not on the date of such release there may be outstanding Obligations in respect of Hedging Agreements or unasserted contingent indemnification obligations. Any such release of guarantee obligations shall be deemed subject to the provision that such guarantee obligations shall be reinstated if after such release any portion of any payment in respect of the Obligations guaranteed thereby shall be rescinded or must otherwise be restored or returned upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Borrower or any Guarantor, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Borrower or any Guarantor or any substantial part of its property, or otherwise, all as though such payment had not been made.

(d) The Collateral Agent shall not be responsible for or have a duty to ascertain or inquire into any representation or warranty regarding the existence, value or collectability of the Collateral, the existence, priority or perfection of the Collateral Agent’s Lien thereon, or any certificate prepared by any Loan Party in connection therewith, nor shall the Collateral Agent be responsible or liable to the Lenders or the Issuing Bank for any failure to monitor or maintain any portion of the Collateral.

 

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Section 10.13 Administrative Agent May File Bankruptcy Disclosure and Proofs of Claim. In case of the pendency of any proceeding under any Debtor Relief Laws relative to any Loan Party, the Administrative Agent (irrespective of whether the principal of any Loan or Letter of Credit shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on Borrower) shall be entitled and empowered (but not obligated) by intervention in such proceeding or otherwise:

(a) to file a verified statement pursuant to rule 2019 of the Federal Rules of Bankruptcy Procedure that, in its sole opinion, complies with such rule’s disclosure requirements for entities representing more than one creditor;

(b) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans, Letter of Credit Obligations and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders, the Issuing Bank and the Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its respective agents and counsel and all other amounts due the Administrative Agent under Section 2.03 and Section 11.03) allowed in such judicial proceeding; and

(c) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender and the Issuing Bank to make such payments to the Administrative Agent and, in the event that the Administrative Agent shall consent to the making of such payments directly to the Lenders and/or the Issuing Bank, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent under this Agreement. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Administrative Agent, its agents and counsel, and any other amounts due the Administrative Agent under this Agreement out of the estate in any such proceeding, shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties that the Lenders and/or the Issuing Bank may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise.

Nothing contained herein shall be deemed to authorize the Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender or the Issuing Bank any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lender or the Issuing Bank or to authorize the Administrative Agent to vote in respect of the claim of any Lender or the Issuing Bank in any such proceeding.

Section 10.14 Erroneous Payments.

(a) If the Administrative Agent notifies a Lender, Issuing Bank or Secured Party, or any Person who has received funds on behalf of a Lender, Issuing Bank or Secured Party (any such Lender, Issuing Bank, Secured Party or other recipient, a “Payment Recipient”) that the Administrative Agent has determined in its sole discretion (whether or not after receipt of any notice under immediately

 

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succeeding clause (b)) that any funds received by such Payment Recipient from the Administrative Agent or any of its Affiliates were erroneously transmitted to, or otherwise erroneously or mistakenly received by, such Payment Recipient (whether or not known to such Lender, Issuing Bank, Secured Party or other Payment Recipient on its behalf) (any such funds, whether received as a payment, prepayment or repayment of principal, interest, fees, distribution or otherwise, individually and collectively, an “Erroneous Payment”) and demands the return of such Erroneous Payment (or a portion thereof) (provided that, without limiting any other rights or remedies (whether at law or in equity), the Administrative Agent may not make any such demand under this clause (a) with respect to an Erroneous Payment unless such demand is made within thirty (30) days of the date of receipt of such Erroneous Payment by the applicable Payment Recipient), such Erroneous Payment shall at all times remain the property of the Administrative Agent and shall be segregated by the Payment Recipient and held in trust for the benefit of the Administrative Agent, and such Lender, Issuing Bank or Secured Party shall use commercially reasonable efforts to (or, with respect to any Payment Recipient who received such funds on its behalf, shall use commercially reasonable efforts to cause such Payment Recipient to) promptly return to the Administrative Agent the amount of any such Erroneous Payment (or portion thereof) as to which such a demand was made, in same day funds (in the currency so received). A notice of the Administrative Agent to any Payment Recipient under this clause (a) shall be conclusive, absent manifest error.

(b) Without limiting immediately preceding clause (a), each Lender, Issuing Bank or Secured Party, or any Person who has received funds on behalf of a Lender, Issuing Bank or Secured Party such Lender and Issuing Bank hereby further agrees that if it receives a payment, prepayment or repayment (whether received as a payment, prepayment or repayment of principal, interest, fees, distribution or otherwise) from the Administrative Agent (or any of its Affiliates) (x) that is in a different amount than, or on a different date from, that specified in a notice of payment, prepayment or repayment sent by the Administrative Agent (or any of its Affiliates) with respect to such payment, prepayment or repayment, (y) that was not preceded or accompanied by a notice of payment, prepayment or repayment sent by the Administrative Agent (or any of its Affiliates), or (z) that such Lender, Issuing Bank or Secured Party, or other such recipient, otherwise becomes aware was transmitted, or received, in error or by mistake (in whole or in part) in each case:

(i) (A) in the case of immediately preceding clauses (x) or (y), an error shall be presumed to have been made (absent written confirmation from the Administrative Agent to the contrary) or (B) an error has been made (in the case of immediately preceding clause (z)), in each case, with respect to such payment, prepayment or repayment; and

(ii) such Lender, Issuing Bank or Secured Party shall (and shall cause any other recipient that receives funds on its respective behalf to) promptly (and, in all events, within three (3) Business Days of its knowledge of such error) notify the Administrative Agent of its receipt of such payment, prepayment or repayment, the details thereof (in reasonable detail) and that it is so notifying the Administrative Agent pursuant to this Section 10.14(b).

(c) Each Lender, Issuing Bank or Secured Party hereby authorizes the Administrative Agent to set off, net and apply any and all amounts at any time owing to such Lender, Issuing Bank or Secured Party under any Loan Document, or otherwise payable or distributable by the Administrative Agent to such Lender, Issuing Bank or Secured Party from any source, against any amount due to the Administrative Agent under immediately preceding clause (a) or under the indemnification provisions of this Agreement.

 

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(d) In the event that an Erroneous Payment (or portion thereof) is not recovered by the Administrative Agent for any reason, after demand therefor by the Administrative Agent in accordance with immediately preceding clause (a), from any Lender that has received such Erroneous Payment (or portion thereof) (and/or from any Payment Recipient who received such Erroneous Payment (or portion thereof) on its respective behalf) (such unrecovered amount, an “Erroneous Payment Return Deficiency”), upon the Administrative Agent’s notice to such Lender or Issuing Bank at any time, (i) such Lender shall be deemed to have assigned its Loans (but not its Commitments) of the relevant Class with respect to which such Erroneous Payment was made (the “Erroneous Payment Impacted Class”) in an amount equal to the Erroneous Payment Return Deficiency (or such lesser amount as the Administrative Agent may specify) (such assignment of the Loans (but not Commitments) of the Erroneous Payment Impacted Class, the “Erroneous Payment Deficiency Assignment”) at par plus any accrued and unpaid interest (with the assignment fee to be waived by the Administrative Agent in such instance), and is hereby (together with the Borrower) deemed to execute and deliver an Assignment and Assumption (or, to the extent applicable, an agreement incorporating an Assignment and Assumption by reference pursuant to a Platform as to which the Administrative Agent and such parties are participants) with respect to such Erroneous Payment Deficiency Assignment, and such Lender shall deliver any Notes evidencing such Loans to the Borrower or the Administrative Agent, (ii) the Administrative Agent as the assignee Lender shall be deemed to acquire the Erroneous Payment Deficiency Assignment, (iii) upon such deemed acquisition, the Administrative Agent as the assignee Lender shall become a Lender hereunder with respect to such Erroneous Payment Deficiency Assignment and the assigning Lender shall cease to be a Lender hereunder with respect to such Erroneous Payment Deficiency Assignment, excluding, for the avoidance of doubt, its obligations under the indemnification provisions of this Agreement and its applicable Commitments which shall survive as to such assigning Lender and (iv) the Administrative Agent may reflect in the Register its ownership interest in the Loans subject to the Erroneous Payment Deficiency Assignment. The Administrative Agent may, in its discretion, sell any Loans acquired pursuant to an Erroneous Payment Deficiency Assignment and upon receipt of the proceeds of such sale, the Erroneous Payment Return Deficiency owing by the applicable Lender shall be reduced by the net proceeds of the sale of such Loan (or portion thereof), and the Administrative Agent shall retain all other rights, remedies and claims against such Lender (and/or against any recipient that receives funds on its respective behalf). For the avoidance of doubt, no Erroneous Payment Deficiency Assignment will reduce the Commitments of any Lender and such Commitments shall remain available in accordance with the terms of this Agreement. In addition, each party hereto agrees that, except to the extent that the Administrative Agent has sold a Loan (or portion thereof) acquired pursuant to an Erroneous Payment Deficiency Assignment, and irrespective of whether the Administrative Agent may be equitably subrogated, the Administrative Agent shall be contractually subrogated to all the rights and interests of the applicable Lender or Secured Party under the Loan Documents with respect to each Erroneous Payment Return Deficiency (the “Erroneous Payment Subrogation Rights”).

(e) The parties hereto agree that an Erroneous Payment shall not pay, prepay, repay, discharge or otherwise satisfy any Obligations owed by the Borrower or any other Loan Party, except, in each case, to the extent such Erroneous Payment is, and solely with respect to the amount of such Erroneous Payment that is, comprised of funds received by the Administrative Agent from the Borrower or any other Loan Party for the purpose of making such Erroneous Payment.

(f) To the extent permitted by applicable law, no Payment Recipient shall assert any right or claim to an Erroneous Payment, and hereby waives, and is deemed to waive, any claim, counterclaim, defense or right of set-off or recoupment with respect to any demand, claim or counterclaim by the Administrative Agent for the return of any Erroneous Payment received, including without limitation waiver of any defense based on “discharge for value” or any similar doctrine

 

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(g) Each party’s obligations, agreements and waivers under this Section 10.14 shall survive the resignation or replacement of the Administrative Agent, any transfer of rights or obligations by, or the replacement of, a Lender or Issuing Bank, the termination of the Commitments and/or the repayment, satisfaction or discharge of all Obligations (or any portion thereof) under any Loan Document.

ARTICLE XI

MISCELLANEOUS

Section 11.01 Notices.

(a) Notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by email or facsimile transmission, as follows:

if to any Loan Party, to the Borrower at:

CareMax, Inc.

1000 NW 57th Court,

Suite 400,

Miami, FL 33126

Attention: Kevin Wirges, Chief Financial Officer

Email:

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

DLA Piper LLP (US)

200 S. Biscayne Blvd., Suite 2500

Miami, Florida 33131-5341

Attention: Joshua Samek

Email:

if to the Administrative Agent or the Collateral Agent, to it at:

Jefferies Finance LLC

520 Madison Avenue

New York, New York 10022

Attention: Account Manager – CareMax

Email:

if to a Lender or Issuing Bank, to it at its address (or facsimile number) set forth on Annex I or in the Assignment and Assumption pursuant to which such Lender shall have become a party hereto or such other address (or facsimile number) as shall be designed by such party in a notice to the other parties hereto.

All notices and other communications given to any party hereto in accordance with the provisions of this Agreement or any other Loan Documents shall be deemed to have been given on the date of receipt if delivered by hand or overnight courier service or sent by facsimile or by certified or registered mail, in each case delivered, sent or mailed (properly addressed) to such party as provided in this Section 11.01 or in accordance with the latest unrevoked direction from such party given in accordance with this Section 11.01, and failure to deliver courtesy copies of notices and other communications shall in no event affect the validity or effectiveness of such notices and other communications.

 

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Notices delivered through electronic communications to the extent provided in Section 11.01(b) below, shall be effective as provided in Section 11.01(b).

(b) Electronic Communications. Notices and other communications to the Lenders and the Issuing Bank hereunder may (subject to Section 11.01(d)) be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved by the Administrative Agent; provided that the foregoing shall not apply to notices to any Lender or Issuing Bank pursuant to Article II if such Lender or Issuing Bank, as applicable, has notified the Administrative Agent (in a manner set forth in Section 11.01(a)) that it is incapable of receiving notices under such Article by electronic communication. The Administrative Agent, the Collateral Agent or the Borrower may, in their respective sole discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures, respectively, approved by it (including as set forth in Section 11.01(d)); provided that approval of such procedures may be limited to particular notices or communications.

Unless the Administrative Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (including by the “return receipt requested” function, as available, return e-mail or other written acknowledgement); provided that if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next Business Day for the recipient, and (ii) notices or communications posted to an internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor.

(c) Change of Address, etc. Any party hereto may change its address, facsimile number or e-mail address for notices and other communications hereunder by notice to the other parties hereto.

(d) Posting. Each Loan Party hereby agrees that it will provide to the Administrative Agent all information, documents and other materials that it is obligated to furnish to the Administrative Agent pursuant to this Agreement and any other Loan Document, including all notices, requests, financial statements, financial and other reports, certificates and other information materials, but excluding any such communication that (i) relates to a request for a new, or a conversion of an existing, Borrowing or other extension of credit (including any election of an interest rate or interest period relating thereto), (ii) relates to the payment of any principal or other amount due under this Agreement prior to the scheduled date therefor, (iii) provides notice of any Default or Event of Default under this Agreement or (iv) is required to be delivered to satisfy any condition precedent to the effectiveness of this Agreement and/or any borrowing or other extension of credit hereunder (all such non-excluded communications, collectively, the “Communications”), by transmitting the Communications in an electronic/soft medium in a format reasonably acceptable to the Administrative Agent at such e-mail address(es) provided to the Borrower by the Administrative Agent from time to time or in such other form, including hard copy delivery thereof, as the Administrative Agent shall reasonably require. In addition, each Loan Party agrees to continue to provide the Communications to the Administrative Agent in the manner specified in this Agreement or any other Loan Document or in such other form, including hard copy delivery thereof, as the Administrative Agent shall reasonably require. Nothing in this Section 11.01 shall prejudice the right of the Agents, any Lender, the Issuing Bank or any Loan Party to give any notice or other communication pursuant to this Agreement or any other Loan Document in any other manner specified in this Agreement or any other Loan Document or as any such Agent shall reasonably require. Notwithstanding anything to the contrary contained herein, the parties hereto acknowledge and agree that the failure of any Loan Party to comply with the delivery requirements set forth in this clause (d) shall not constitute a Default or Event of Default for any purpose under any Loan Document as long as such Loan Party has delivered such item in a manner otherwise permitted under this Agreement or any other Loan Document, as applicable.

 

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(e) The Administrative Agent agrees that receipt of the Communications by the Administrative Agent at its e-mail address(es) set forth above shall constitute effective delivery of the Communications to the Administrative Agent for purposes of the Loan Documents; provided that the Borrower shall also deliver to the Administrative Agent an executed original of each Compliance Certificate required to be delivered hereunder.

(f) Each Loan Party further agrees that the Administrative Agent may make the Communications available to the other Agents, the Issuing Bank or the Lenders by posting the Communications on a Platform. The Platform and any Approved Electronic Communications are provided “as is” and “as available.” The Agents and their Related Persons do not warrant the accuracy, adequacy or completeness of the Communications or the Platform and expressly disclaim liability for errors or omissions in the Platform and the Approved Electronic Communications. No warranty of any kind, express, implied or statutory, including, without limitation, any warranty of merchantability, fitness for a particular purpose, non-infringement of third party rights or freedom from viruses or other code defects, is made by any Agent or their Related Persons in connection with the Communications or the Platform. Each party hereto agrees that no Agent has any responsibility for maintaining or providing any equipment, software, services or any testing required in connection with any Approved Electronic Communications or otherwise required for the Platform. In no event shall any Agent or any of its Related Persons have any liability to any Loan Party, any Lender, the Issuing Bank or any other person for damages of any kind, whether or not based on strict liability and including, without limitation, direct or indirect, special, incidental or consequential damages, losses or expenses (whether in contract, tort or otherwise) arising out of or related to any Loan Party’s or any Agent’s transmissions of Communications through Internet (including the Platform). In no event shall any Agent or any of its Related Parties have any liability for any damages arising from the use by others of any information or other materials obtained through internet, electronic, telecommunications or other information transmission systems, except to the extent the same resulted primarily from the gross negligence or willful misconduct of such Agent or its Related Parties, in each case as determined by a court of competent jurisdiction in a final and non-appealable judgment. Notices or communications posted to an internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (a) of notification that such notice or communication is available and identifying the website address therefor. Each Loan Party understands that the distribution of material through an electronic medium is not necessarily secure and that there are confidentiality and other risks associated with such distribution and agrees and assumes the risks associated with such electronic distribution, except to the extent caused by the willful misconduct, gross negligence or bad faith of the Administrative Agent, as determined by a final, non-appealable judgment of a court of competent jurisdiction.

(g) The Administrative Agent agrees that the receipt of the Communications by the Administrative Agent at its e-mail address shall constitute effective delivery of the Communications to the Administrative Agent for purposes of the Loan Documents. Each Lender and Issuing Bank agrees that receipt of notice to it (as provided in the next sentence) specifying that the Communications have been posted to the Platform shall constitute effective delivery of the Communications to such Lender and/or Issuing Bank for purposes of the Loan Documents. Each Lender and Issuing Bank agrees to notify the Administrative Agent in writing (including by electronic communication) from time to time of such Lender’s and/or Issuing Bank’s (as applicable) e-mail address to which the foregoing notice may be sent by electronic transmission and that the foregoing notice may be sent to such e-mail address. Nothing herein shall prejudice the right of the Administrative Agent, the Issuing Bank or any Lender to give any notice or other communication pursuant to any Loan Document in any other manner specified in such Loan Document.

 

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(h) Each Loan Party, each Lender, the Issuing Bank and each Agent agrees that the Administrative Agent may, but shall not be obligated to, store any Approved Electronic Communications on the Platform in accordance with the Administrative Agent’s customary document retention procedures and policies.

(i) All uses of the Platform shall be governed by and subject to, in addition to this Section 11.01, separate terms and conditions posted or referenced in such Platform and related agreements executed by the Lenders and their Affiliates in connection with the use of such Platform.

(j) Each Public Lender agrees to cause at least one individual at or on behalf of such Public Lender to at all times have selected the “Private Side Information” or similar designation on the content declaration screen of the Platform in order to enable such Public Lender or its delegate, in accordance with such Public Lender’s compliance procedures and applicable law, including United States federal and state securities laws, to make reference to information that is not made available through the “Public Side Information” portion of the Platform and that may contain Non-Public Information with respect to the Borrower, its Subsidiaries or their securities for purposes of United States federal or state securities laws. In the event that any Public Lender has determined for itself to not access any information disclosed through the Platform or otherwise, such Public Lender acknowledges that (i) other Lenders may have availed themselves of such information and (ii) neither Borrower nor the Agents or other Lenders with access to such information shall have (x) any responsibility for such Public Lender’s decision to limit the scope of the information it has obtained in connection with this Agreement and the other Loan Documents or (y) any duty to disclose such information to such electing Lender or to use such information on behalf of such electing Lender, and shall not be liable for the failure to so disclose or use such information.

Section 11.02 Waivers; Amendment.

(a) No failure or delay by any Agent or any Lender in exercising any right or power hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of each Agent and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of any Loan Document or consent to any departure by any Loan Party therefrom shall in any event be effective unless the same shall be permitted by Section 11.02(b), and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan shall not be construed as a waiver of any Default or Event of Default, regardless of whether any Agent or any Lender may have had notice or knowledge of such Default or Event of Default at the time. No notice or demand on Borrower or any other Loan Party in any case shall entitle Borrower or any other Loan Party to any other or further notice or demand in similar or other circumstances.

(b) Subject to Section 2.19(c), Section 2.20(c) and Section 11.02(c), neither this Agreement nor any other Loan Document nor any provision hereof or thereof may be waived, amended, supplemented or modified, except (A) in the case of this Agreement, pursuant to an agreement or agreements in writing entered into by Borrower and the Required Lenders (or the Administrative Agent acting with the written consent of the Required Lenders); provided that the Administrative Agent and the Borrower may, without the consent of the other, amend, modify or supplement this Agreement and any

 

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other Loan Document to cure any ambiguity, omission, typographical error, defect or inconsistency if such amendment, modification or supplement is not objected to in writing by the Required Lenders within five (5) Business Days following receipt of notice thereof or (B) in the case of any other Loan Document, pursuant to an agreement or agreements in writing entered into by the Administrative Agent, the Collateral Agent (in the case of any Security Document) and the Loan Party or Loan Parties that are parties thereto, in each case with the written consent of the Required Lenders; provided that no such agreement shall:

(i) increase or extend the expiry date of the Commitment of any Lender without the written consent of such Lender (it being understood that no amendment, modification, termination, waiver or consent with respect to any condition precedent, covenant or Default (or any definition used, respectively, therein) shall constitute an increase in or extension of the expiry date of the Commitment of any Lender for purposes of this clause (i));

(ii) reduce or forgive the principal amount, interest, or premium, if any, of any Loan or reduce or forgive the rate of interest thereon (other than waiver of any increase in the rate of interest pursuant to Section 2.06(c)), or reduce or forgive any Fees (including any prepayment fee), or other amount payable hereunder, or change the form or currency of payment of any Obligation, without the written consent of each Lender directly affected thereby provided, that only the consent of the Required Lenders shall be necessary to amend the Default Rate in Section 2.06(c) or to waive any obligation of the Borrower to pay interest at the Default Rate;

(iii) postpone or extend the maturity of any Loan, or any scheduled date of payment of or the installment otherwise due on the principal amount of any Term Loan under Section 2.09, or any date for the payment of any interest or fees or other amounts payable hereunder, or reduce the amount of, waive or excuse any such payment (other than a waiver of any increase in the rate of interest pursuant to Section 2.06(c)) without the written consent of each Lender directly affected thereby;

(iv) change Section 11.04(b) in a manner which further restricts assignments thereunder without the written consent of each Lender of the applicable Class;

(v) change any provision altering the order of or the pro rata sharing of payments or setoffs required thereby, including, without limitation, Section 2.14(b) or (c) or Section 9.02, without the written consent of each Lender directly affected thereby;

(vi) change the percentage set forth in the definition of “Required Lenders” or any other provision of any Loan Document (including this Section 11.02) specifying the number or percentage of Lenders (or Lenders of any Class) required to waive, amend or modify any rights thereunder or make any determination or grant any consent thereunder, without the written consent of each Lender (or each Lender of such Class, as the case may be);

(vii) amend Section 9.02 in a manner that directly and adversely affects any Class without the consent of the Lenders of such Class holding more than 50% of the Loans of such Class;

(viii) release all or substantially all of the value of the Guarantees of the Guarantors (except as expressly provided in Article VII), or limit their liability in respect of such Guarantees, without the written consent of each Lender;

 

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(ix) release all or substantially all of the Collateral in any transaction or series of related transactions (it being understood that a transaction permitted under Section 6.05 or Section 6.06 shall not constitute the release of all or substantially all of the Collateral), without the written consent of each Lender;

(x) except as otherwise permitted in any Security Document, release all or substantially all of the value of the Collateral from the Liens of the Security Documents (except in connection with Asset Sales permitted hereunder) or alter the relative priorities of the Secured Obligations entitled to the Liens of the Security Documents (except in connection with securing additional Obligations equally and ratably with the other Secured Obligations to the extent permitted hereunder), in each case without the written consent of each Lender;

(xi) change any provisions of any Loan Document (including Section 9.02) in a manner that by its terms adversely affects the rights in respect of payments due to Lenders holding Loans of any Class differently than those holding Loans of any other Class, without the written consent of Lenders holding a majority in interest of the outstanding Loans and unused Commitments of each adversely affected Class;

(xii) change any provision affecting the order of application of prepayments among Term Loans and/or Revolving Loans and any other Obligations, including, without limitation, under Section 2.10(f), in each case in a manner that directly and adversely affects any Class without the consent of each Lender of such Class;

(xiii) (A) subordinate any of the Obligations under the Loan Documents to any other Indebtedness or (B) subordinate the Liens securing any of the Obligations on the Collateral to any other Lien securing any other Indebtedness, without the consent of each Lender directly affected thereby;

(xiv) adversely affect any “tranche” (as contemplated in Section 2.20(a)) in a disproportionate manner without the consent of both (x) as calculated on any date of determination, the Lenders having more than 50% of the sum of the aggregate principal amount of all outstanding Loans and Commitments under such “tranche” and (y) the Required Lenders; provided that any waiver, amendment, supplement or otherwise modification which affects solely any single “tranche” (as contemplated by Section 2.20(a)) may be effected solely with the consent of, as calculated of any date of determination, the Lenders having more than 50% of the sum of the aggregate principal amount of all outstanding Loans and Commitments under such “tranche” Lenders and without the consent of Lenders under any other “tranche” (in their capacity as Lenders under such other “tranche”);

(xv) extend the stated expiry date of any Letter of Credit beyond the Revolving Maturity Date without the consent of each Revolving Lender that is affected thereby;

(xvi) reduce any reimbursement obligations in respect of any Letter of Credit without the written consent of each Revolving Lender.

provided, further, that (1) no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent or the Collateral Agent without the prior written consent of the Administrative Agent or the Collateral Agent, as the case may be, (2) no such agreement shall amend, modify or otherwise affect the rights or duties of the Issuing Bank without the prior written consent of the Issuing Bank, (3) no such agreement shall amend, modify or otherwise affect any obligation of the Lenders relating to the purchase of participations in Letters of Credit as provided in Section 2.17(e)

 

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without the written consent of the Administrative Agent and the Issuing Bank, and (4) any waiver, amendment or modification of this Agreement that by its terms directly affects the rights or duties under this Agreement of the Revolving Lenders (but not the Term Loan Lenders) or the Term Loan Lenders (but not the Revolving Lenders) may be effected by an agreement or agreements in writing entered into by Borrower and the requisite percentage in interest of the affected Class of Lenders that would be required to consent thereto under this Section 11.02 if such Class of Lenders were the only Class of Lenders hereunder at the time. Notwithstanding the foregoing, any waiver, amendment, supplement or other modification with respect to Section 6.15. Notwithstanding the foregoing, any provision of this Agreement may be amended by an agreement in writing entered into by Borrower, the Required Lenders and the Administrative Agent if (x) by the terms of such agreement the Commitment of each Lender not consenting to the amendment provided for therein shall terminate upon the effectiveness of such amendment, (y) at the time such amendment becomes effective, each Lender not consenting thereto receives payment in full of the principal of, premium, if any, and interest accrued on each Loan made by it and all other amounts owing to it or accrued for its account under this Agreement, and (z) Section 2.16(b) is complied with.

(c) Without the consent of any other person, the (x) applicable Loan Party or Loan Parties and the Administrative Agent and/or Collateral Agent may (in its or their respective sole discretion, or shall, to the extent required by any Loan Document) enter into any amendment or waiver of any Loan Document, or enter into any new agreement or instrument, to effect the granting, perfection, protection, expansion or enhancement of any security interest in any Collateral or additional Property to become Collateral for the benefit of the Secured Parties, or as required by applicable Legal Requirements to give effect to, or protect any security interest for the benefit of the Secured Parties, in any Property or assets so that the security interests therein comply with applicable Legal Requirements and (y) the Borrower and the Administrative Agent and/or Collateral Agent may (in its or their respective sole discretion) enter into any amendment or waiver of any Loan Document, or enter into any new agreement or instrument, to give effect to Section 2.20(c).

(d) Any provision of this Agreement or any other Loan Document may be amended by an agreement in writing entered into by Borrower and the Administrative Agent to cure any ambiguity, omission, defect or inconsistency (including, without limitation, amendments, supplements or waivers to any of the Security Documents, guarantees, intercreditor agreements or related documents executed by any Loan Party or any other Subsidiary in connection with this Agreement if such amendment, supplement or waiver is delivered in order to cause such Security Documents, guarantees, intercreditor agreements or related documents to be consistent with this Agreement and the other Loan Documents) so long as, in each case, the Lenders shall have received at least five Business Days’ prior written notice thereof and the Administrative Agent shall not have received, within five Business Days of the date of such notice to the Lenders, a written notice from the Lenders constituting the Required Lenders stating that the Required Lenders object to such amendment; provided that (i) the consent of the Lenders or the Required Lenders, as the case may be, shall not be required to make any such changes necessary to be made in connection with any borrowing of New Term Loans or any Extension and otherwise to effect the provisions of Section 2.19 or 2.20, and (ii) the Borrower and the Collateral Agent may, without the input or consent of the other Lenders, effect changes to any Mortgage as may be necessary or appropriate in the opinion of the Collateral Agent.

(e) Notwithstanding the foregoing to the contrary, the Administrative Agent, the Collateral Agent and the Borrower may amend this Agreement and the other Loan Documents to (i) increase the Revolving Commitments and the Letter of Credit Sublimit in an aggregate principal amount not to exceed $30,000,000.00 and (ii) make such other changes as are necessary and appropriate in the reasonable discretion of the Administrative Agent to give effect to any such increase in the Revolving

 

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Commitments. In connection with any increase in the Revolving Commitments and Letter of Credit Sublimit pursuant to this Section 11.02(e), the Borrower may approach and accept commitments from new lenders to provide the Revolving Commitments and Letters of Credit (provided that if the Administrative Agent would have consent rights with respect to such new lender under Section 11.04 herein were such new lender to take an assignment of Loans or Commitments hereunder, such new lender shall be reasonably acceptable to the Administrative Agent). For the avoidance of doubt, upon any such increase pursuant to this Section 11.02(e), each of the Term Loan Lenders and Revolving Lenders hereby agree to execute and deliver the Agreement Among Lenders in form and substance satisfactory to the Term Loan Lenders and Revolving Lenders and irrevocably authorize and instruct the Administrative Agent and Collateral Agent to enter into the Agreement Among Lenders.

Section 11.03 Expenses; Indemnity. (a) The Loan Parties agree, jointly and severally, to pay, promptly upon demand in accordance with subclauses (d) and (g) below:

(i) all reasonable and documented out-of-pocket costs and expenses incurred by the Arranger, the Administrative Agent and the Collateral Agent, including the reasonable and documented fees, charges and disbursements of Advisors for the Arranger, the Administrative Agent and the Collateral Agent, in connection with the syndication of the Loans and Commitments, the preparation, negotiation, execution and delivery of the Loan Documents, the administration of the Credit Extensions, Letters of Credit and Commitments (including with respect to the establishment and maintenance of a Platform), the filing, perfection and maintenance of the Liens securing the Collateral and any actual or proposed amendment, supplement or waiver of any of the Loan Documents (whether or not the transactions contemplated hereby or thereby shall be consummated); provided that the fees, charges and disbursements of legal counsel shall be limited for the Arranger, Administrative Agent and the Collateral Agent, taken as a group to one primary counsel, one counsel in each relevant jurisdiction, one specialty counsel for each relevant specialty, and, in the case of one or more actual or potential conflicts of interest, one or more additional counsel for each class of similarly situated persons; provide further, that in the case of any actual or proposed amendment, supplement or waiver of any of the Loan Documents (whether or not the transactions contemplated hereby or thereby shall be consummated) the Loan Parties agree, jointly and severally to pay, promptly upon demand all reasonable and documented out-of-pocket costs and expenses incurred by the Lead Manager (and each Affiliate of the Lead Manager that is a Lender), including any fees, charges and disbursements of legal counsel to the Lead Manager;

(ii) all reasonable and documented out-of-pocket costs and expenses incurred by the Administrative Agent and the Collateral Agent, including the reasonable and documented fees, charges and disbursements of Advisors for the Administrative Agent and the Collateral Agent, in connection with any action, claim, suit, litigation, investigation, inquiry or proceeding affecting the Collateral or any part thereof, in which action, claim, suit, litigation, investigation, inquiry or proceeding the Administrative Agent or the Collateral Agent is made a party or participates or in which the right to use the Collateral or any part thereof is threatened, or in which it becomes necessary in the judgment of the Administrative Agent or the Collateral Agent to defend or uphold the Liens granted by the Security Documents (including any action, claim, suit, litigation, investigation, inquiry or proceeding to establish or uphold the compliance of the Collateral with any Legal Requirements); and

 

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(iii) all reasonable and documented out-of-pocket costs and expenses incurred by the Arranger, the Administrative Agent, the Collateral Agent, the Issuing Bank any other Agent or any Lender, including the reasonable and documented fees, charges and disbursements of Advisors for any of the foregoing, incurred in connection with the enforcement, preservation or protection of its rights under the Loan Documents or relating to any Specified Hedging Agreement or any Bank Product Agreement, including its rights under this Section 11.03(a), or in connection with the Loans made hereunder, the issuance, amendment, renewal or extension of any Letter of Credit or demand for repayment thereunder and the collection of the Secured Obligations, including all such costs and expenses incurred during any workout, restructuring or negotiations in respect of the Secured Obligations; provided that, unless a Default or Event of Default has occurred and is then continuing, such costs and expenses incurred by Advisors retained by all or any of the Lenders (but not retained by the Administrative Agent, the Collateral Agent, the Issuing Bank or any other Agent) shall be limited to such costs and expenses of such Advisors retained by Lenders constituting at least the Required Lenders (together with such additional Advisors as may be necessary or advisable to be retained by any Lender to resolve any conflicts of interest affecting such Lender or Lenders); provided that the fees, charges and disbursements of legal counsel shall be limited for the Arranger, Administrative Agent, Collateral Agent, Issuing Bank, all other Agents and all other Lenders (other than the Lead Manager) taken as a group to one primary counsel, one counsel in each relevant jurisdiction, one specialty counsel for each relevant specialty, and, in the case of one or more actual or potential conflicts of interest, one or more additional counsel for each class of similarly situated persons; provided, further, that the Loan Parties agree, jointly and severally to pay, promptly upon demand all reasonable and documented fees, charges and disbursements of the Lead Arranger (and each Affiliate of the Lead Manager that is a Lender) incurred in connection with the enforcement, preservation or protection of its rights under the Loan Documents, including any fees, charges and disbursements of legal counsel to the Lead Manager;

(b) The Loan Parties agree, jointly and severally, to indemnify the Lead Manager, Arranger, the Agents, each Lender, the Issuing Bank each affiliate of any of the foregoing persons, each of their successors and assigns and each Related Person of each of the foregoing (each such person being called an “Indemnitee”) against, and to hold each Indemnitee harmless from, all reasonable and documented out-of-pocket costs and any and all actual losses, claims, damages, liabilities, fees, fines, penalties, actions, judgments, suits and related expenses, including reasonable and documented Advisors fees, charges and disbursements (in each case, subject to the provisos in Section 11.03(a)(i), (ii) and (iii) with respect to certain Advisors) (collectively, “Claims”), incurred by or asserted against any Indemnitee, directly or indirectly, arising out of, in any way connected with, or as a result of (i) the execution, delivery, performance, administration or enforcement of the Loan Documents or any agreement or instrument contemplated thereby or the performance by the parties thereto of their respective obligations thereunder, (ii) any actual or proposed use of the proceeds of the Loans or Letters of Credit, (iii) any claim, litigation, investigation or proceeding relating to any of the foregoing, any Specified Hedging Agreement or any Bank Product Agreement or any agreement or instrument contemplated thereby or the performance by the parties thereto of their respective obligations thereunder, whether brought by a third party or by any Loan Party or otherwise, and regardless of whether any Indemnitee is a party thereto, (iv) any actual or alleged presence or Release or threatened Release of Hazardous Materials, on, at, under or from any Property owned, leased or operated by any Company at any time, or any Environmental Claim or threatened Environmental Claim related in any way to any Company, (v) any past, present or future non-compliance with, or violation of, Environmental Laws or Environmental Permits applicable to any Company, or any Company’s business, or any Property presently or formerly owned, leased, or operated by any Company or their predecessors in interest, (vi) the environmental condition of any Property owned, leased, or operated by any Company at any time, or the applicability of any Legal Requirements relating to such Property, whether or not occasioned wholly or in part by any condition, accident or event caused by any act or omission of any Company, (vii) the imposition of any Lien pursuant to Environmental Law encumbering Real Property, (viii) the consummation of the Transactions (including the syndication of the Facilities) and the other transactions contemplated hereby or (ix) any actual or prospective claim, action, suit, litigation, inquiry, investigation, or proceeding relating to any of

 

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the foregoing, whether based on contract, tort or any other theory, whether brought by a third party or by any Loan Party or otherwise, and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and non-appealable judgment to have resulted directly from (i) the gross negligence or willful misconduct of such Indemnitee, any of its Affiliates or any of their Related Persons (as determined in a final and non-appealable judgment of a court of competent jurisdiction), (ii) a material breach of any Indemnitee’s obligations or the obligations of any of its Subsidiaries or its or their Related Persons under the Loan Documents (as determined in a final and non-appealable judgment of a court of competent jurisdiction) or (iii) any dispute among Indemnitees (other than a dispute involving claims against the Administrative Agent, the Arranger or the Collateral Agent solely in connection with its activities in such capacities) not arising out of any acts or omissions of the Borrower or any of its Affiliates. Claims shall include any Taxes, losses, claims or damages arising from any non-Tax claim in respect of the Loan Documents.

(c) The Loan Parties agree, jointly and severally, that, without the prior written consent of the Administrative Agent and any affected Lender or Issuing Bank, which consent(s) will not be unreasonably withheld, delayed or conditioned the Loan Parties will not enter into any settlement of a Claim in respect of the subject matter of clauses (i) through (ix) of Section 11.03(b) unless such settlement includes an explicit and unconditional release from the party bringing such Claim of all affected Indemnitees from all liability or claims that are the subject matter of such Claim and does not include any statement as to or an admission of fault, culpability or failure to act by or on behalf of any Indemnitees.

(d) The provisions of this Section 11.03 shall remain operative and in full force and effect regardless of the expiration of the term of this Agreement, the consummation of the Transactions and the other transactions contemplated hereby, the repayment of the Loans and any other Secured Obligations, the release of any Guarantor or of all or any portion of the Collateral, the expiration of the Commitments, the expiration or termination of all Letters of Credit, the invalidity or unenforceability of any term or provision of this Agreement, any other Loan Document, any Specified Hedging Agreement or any Bank Product Agreement, or any investigation made by or on behalf of the Agents or any Lender. All amounts due under this Section 11.03 shall be payable promptly on written demand therefor in accordance with paragraph (g) below accompanied by reasonable documentation with respect to any reimbursement, indemnification or other amount requested.

(e) To the extent that the Loan Parties fail to indefeasibly pay any amount required to be paid by them to the Agents or the Issuing Bank under paragraph (a) or (b) of this Section 11.03 in accordance with paragraph (g) of this Section 11.03, each Lender severally agrees to pay to the Agents such Lender’s Pro Rata Share (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount in electronic wire (and indemnity shall be effective whether or not the related losses, claims, damages, liabilities and related expenses are incurred or asserted by any party hereto or any third party); provided that the unreimbursed Claim was incurred by or asserted against any Agent in its capacity as such.

(f) To the fullest extent permitted by applicable Legal Requirements, no party hereto shall assert, and each party hereto hereby waives, any claim against any other party hereto (or any of their respective Affiliates, Subsidiaries and their and their Affiliates and Subsidiaries’ Related Persons), on any theory of liability, for special, indirect, consequential, or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, any Loan Document, any Specified Hedging Agreement, any Bank Product Agreement or any agreement or instrument contemplated hereby or thereby, the Transactions, any Loan or the use of the proceeds thereof, except to the extent such damages result from a claim that would otherwise be subject to indemnification pursuant to the terms of

 

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Section 11.03(b); provided that nothing contained in this sentence shall limit the Borrower’s indemnification obligations. No Indemnitee shall be liable for any damages (other than those damages resulting from gross negligence or willful misconduct as determined by a court of competent jurisdiction in a final non-appealable judgment) arising from the use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems in connection with the Loan Documents or the transactions contemplated hereby or thereby.

(g) All amounts due under this Section 11.03 shall be payable not later than five Business Days after demand therefor.

Section 11.04 Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that the Loan Parties may not assign or otherwise transfer any of their respective rights or obligations hereunder without the prior written consent of the Administrative Agent, the Collateral Agent and each Lender, which respective consents may be withheld in their sole discretion (and any attempted assignment or transfer by any Loan Party without such consent shall be null and void). Nothing in this Agreement or any other Loan Document, express or implied, shall be construed to confer upon any person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent expressly provided in paragraph (f) of this Section 11.04 and, to the extent expressly contemplated hereby, the other Indemnitees) any legal or equitable right, remedy or claim under or by reason of this Agreement or any other Loan Document.

(b) Any Lender shall have the right at any time to assign to one or more assignees (other than any Company or any Affiliate thereof or a natural person) all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it); provided that:

(i) except in the case of (A) an assignment to a Lender, an Affiliate of a Lender, a joint venture partner of a Lender or an Approved Fund, (B) any assignment made in connection with the syndication of the Commitments and Loans by the Arranger or (C) an assignment of the entire remaining amount of the assigning Lender’s Commitment or Loans, (x) the amount of the Term Loan Commitment or Term Loans (including funded Delayed Draw Term Loans) of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent) shall be in an amount of an integral multiple of, and not be less than, $1,000,000 and (y) the amount of the Revolving Commitment or Revolving Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent) shall not be less than $2,500,000;

(ii) each partial assignment shall be made as an assignment of a proportionate part of all of the assigning Lender’s rights and obligations under this Agreement, except that this clause (ii) shall not be construed to prohibit the assignment of a proportionate part of all the assigning Lender’s rights and obligations in respect of one Class of Commitments or Loans;

(iii) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee of $3,500 to be paid either by the assignor or assignee (which fee may be waived or reduced by the Administrative Agent in its sole discretion); provided that such fee shall not be payable in the case of (A) an assignment by any Lender to an Affiliate, joint venture partner or Approved Fund of such Lender or (B) any assignment made in connection with the primary syndication of the Commitments and Loans by the Arranger;

 

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(iv) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire;

(v) the assignee, if it is not a Lender, shall deliver to the Administrative Agent an acknowledgment to the Agreement Among Lenders, such acknowledgment to be in customary form or any other form approved by the Administrative Agent;

(vi) except in the case of an assignment to a Lender, an Affiliate of a Lender, a joint venture partner of a Lender or an Approved Fund, the Administrative Agent must give its prior written consent to such assignment (which consent shall not be unreasonably withheld, delayed or conditioned);

(vii) except in the case of (A) an assignment to a Lender, an Affiliate of a Lender, a joint venture partner of a Lender or an Approved Fund, a Permitted Buy-back and (C) any assignment made in connection with the initial syndication of the Initial Term Loan Commitments and the Delayed Draw Term Loan Commitments in effect and the Initial Term Loans to be made on the Closing Date by the Arranger or any of their Affiliates, the Borrower must give its prior written consent to such assignment (which consent shall not be unreasonably withheld, delayed or conditioned); provided that the Borrower shall be deemed to have consented to any such assignment unless it shall object thereto by written notice to the Administrative Agent within five (5) Business Days after having received notice thereof; and

(viii) the consent of the Issuing Bank shall be required for any assignment in respect of Revolving Commitments and Revolving Loans.

Notwithstanding the foregoing, if an Event of Default has occurred and is continuing, any consent of the Borrower otherwise required under this paragraph shall not be required. Subject to acceptance and recording thereof pursuant to paragraph (d) of this Section 11.04, from and after the effective date specified in each Assignment and Assumption, the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement (provided that any liability of the Borrower to such assignee under Section 2.12, 2.13 or 2.15 shall be limited to the amount, if any, that would have been payable thereunder by Borrower in the absence of such assignment, except to the extent any such amounts are attributable to a Change in Law occurring after the date of such assignment), and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.12, 2.13, 2.15 and 11.03).

(c) Notwithstanding anything to the contrary contained in this Section 11.04(c) or any other provision of this Agreement, each Lender shall have the right at any time to sell, assign or transfer all or a portion of its Term Loans owing to it to the Borrower or any of its Subsidiaries (but not any natural person) on a non pro rata basis, subject to the following limitations:

(i) no Default or Event of Default has occurred and is then continuing, or would immediately result therefrom;

 

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(ii) the Borrower or any of its Subsidiaries shall repurchase such Term Loans through one or more modified Dutch auctions or other buy-back offer processes (each, an “Offer Process”) with a third party financial institution as auction agent to repurchase all or any portion of the applicable Class of Loans provided that (A) notice of such Offer Process shall be made to all Term Loan Lenders and (B) such Offer Process is conducted pursuant to procedures mutually established by the Administrative Agent and the Borrower which are consistent with this Section 11.04(c); provided that (i) no default or Event of Default then exists or would result therefrom, (ii) all parties to the relevant assignment shall render customary “big boy” disclaimer letters and (iii) any such Term Loans shall be automatically and permanently cancelled immediately upon purchase by the Borrower (without any increase to Consolidated EBITDA as a result of any gains associated with cancellation of debt) (any such purchase and assignment, a “Permitted Buy-Back”).

(iii) with respect to all repurchases made by the Borrower or any of its Subsidiaries pursuant to this Section 11.04(c), (u) none of the Borrower or any of its Subsidiaries shall be required to make any representations that the Borrower or such Subsidiary is not in possession of any information regarding the Borrower, its Subsidiaries or its Affiliates, or their assets, the Borrower’s ability to perform its Obligations or any other matter that may be material to a decision by any Lender to participate in any offer or enter into any Assignment and Assumption or any of the transactions contemplated thereby that has not previously been disclosed to the Administrative Agent and Private Siders, (v) the repurchases are in compliance with Sections 6.04 and 6.07 hereof, (w) no Default or Event of Default has occurred and is continuing or would result from such repurchase, (x) the Borrower or such Subsidiary shall not use the proceeds of any Revolving Loans to acquire such Term Loans, (y) the assigning Lender and the Borrower or such Subsidiary, as applicable, shall execute and deliver to the Administrative Agent an Assignment and Assumption in form and substance reasonably satisfactory to the Administrative Agent and (z) all parties to the relevant repurchases shall render customary “big-boy” disclaimer letters or any such disclaimers shall be incorporated into the terms of the Assignment and Assumption; and

(iv) following repurchase by the Borrower or such Subsidiary pursuant to this Section, the Term Loans so repurchased shall, without further action by any Person, be deemed cancelled for all purposes and no longer outstanding (and may not be resold by the Borrower or such Subsidiary), for all purposes of this Agreement and all other Loan Documents, including, but not limited to (1) the making of, or the application of, any payments to the Lenders under this Agreement or any other Loan Document, (2) the making of any request, demand, authorization, direction, notice, consent or waiver under this Agreement or any other Loan Document or (3) the determination of Required Lenders, or for any similar or related purpose, under this Agreement or any other Loan Document and the Borrower shall neither obtain nor have any rights as a Lender hereunder or under the other Loan Documents by virtue of such repurchase (without limiting the foregoing, in all events, such Term Loans may not be resold or otherwise assigned, or subject to any participation, or otherwise transferred by the Borrower or such Subsidiary). In connection with any Term Loans repurchased and cancelled pursuant to this Section 11.04(c)(iv) the Administrative Agent shall make appropriate entries in the Register to reflect any such cancellation.

(d) The Administrative Agent, acting for this purpose as a non-fiduciary agent of the Borrower, shall maintain at one of its offices a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amount and stated interest of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive in the absence of

 

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manifest error, and the Borrower, the Administrative Agent and the Lenders shall treat each person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement and the other Loan Documents, notwithstanding notice to the contrary. The Register is intended to cause each Loan and other obligation hereunder to be in registered form within the meaning of Section 5f.103-1(c) and Proposed Section 1.163-5(b) of the United States Treasury Regulations and within the meaning of Sections 163(f), 871(h)(2) and 881(c)(2) of the Code. The Register shall be available for inspection by Borrower, the Collateral Agent and any Lender (with respect to its own interest only), at any reasonable time and from time to time upon reasonable prior notice.

(e) Upon its receipt of a duly completed Assignment and Assumption executed by an assigning Lender and an assignee, the assignee’s completed Administrative Questionnaire (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) of this Section 11.04 and any written consent to such assignment required by paragraph (b) of this Section 11.04, the Administrative Agent shall reasonably promptly accept such Assignment and Assumption and record the information contained therein in the Register. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with the requirements of this Section 11.04 shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (f) of this Section 11.04.

(f) Any Lender shall have the right at any time, without the consent of, or notice to the Borrower, the Administrative Agent or any other person to sell participations to any person (other than, (x) if the list of Disqualified Institutions is posted to all Lenders (which the Administrative Agent has express authority to do), any Disqualified Institution, (y) any Company or any Affiliate thereof or (z) a natural person) (a “Participant”) in all or a portion of such Lender’s rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans owing to it); provided that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the Administrative Agent, the Collateral Agent, the Issuing Bank and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce the Loan Documents and to approve any amendment, modification or waiver of any provision of the Loan Documents; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver that (1) is described in clauses (i), (ii), (iii), (viii) or (ix) of the proviso to Section 11.02(b) and (2) directly affects such Participant. Subject to the last sentence of this Section 11.04(f), each Participant shall be entitled to the benefits of Sections 2.12, 2.13 and 2.15 to the same extent as if it were a Lender (it being understood that the documentation required under Section 2.15(e) shall be delivered to the participating Lender. To the extent permitted by Legal Requirements, each Participant also shall be entitled to the benefits of Section 11.08 as though it were a Lender; provided that such Participant agrees in writing to be subject to Section 2.14(c) as though it were a Lender. Each Lender that sells a participation shall, acting for this purpose as a non-fiduciary agent of the Borrower, maintain at one of its offices a register for the recordation of the names and addresses of its Participants, and the principal amounts and stated interest of its participations (the “Participant Register”). The entries in the Participant Register shall be conclusive absent manifest error, and such Lender (and the Borrower, to the extent that the Participant requests payment from the Borrower; provided that the Borrower has had a reasonable opportunity to review such Participant Register to confirm such Participant is a Participant in accordance with the terms hereof and other relevant information in connection with making any such payment) shall treat each person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement

 

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notwithstanding any notice to the contrary. No Lender shall have any obligation to disclose all or any portion of the Participant Register to any person (including the identity of any Participant or any information relating to a Participant’s interest in any commitments, loans, letters of credit or its other obligations under any Loan Document) except to the extent that such disclosure is necessary to establish that such commitment, loan, or other obligation is in registered form under Section 5f.103-1(c) and Proposed Section 1.163-5(b) of the United States Treasury Regulations and within the meaning of Sections 163(f), 871(h)(2) and 881(c)(2) of the Code. For the avoidance of doubt, the Administrative Agent (in its capacity as Administrative Agent) shall have no responsibility for maintaining a Participant Register.

(g) A Participant shall not be entitled to receive any greater payment under Section 2.12, 2.13 or 2.15 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of such participation to such Participant is made with the prior written consent of the Borrower (which consent shall not be unreasonably withheld, delayed or conditioned) or such greater payment is as a result of a Change in Law after the date the participation was sold to the Participant. A Participant that would be a Foreign Lender if it were a Lender shall be entitled to the benefits of Section 2.15 and such Participant agrees, for the benefit of the Borrower, to supply any forms required by Section 2.15(e) to the participating Lender (and shall not be required to supply such forms to the Borrower or the Administrative Agent).

(h) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender without restriction, including any pledge or assignment to secure obligations to a Federal Reserve Bank or any central bank, and this Section 11.04 shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto. Without limiting the foregoing, in the case of any Lender that is a fund that invests in bank loans or similar extensions of credit, such Lender may, without the consent of the Borrower, the Administrative Agent or any other person, collaterally assign or pledge all or any portion of its rights under this Agreement, including the Loans and Notes or any other instrument evidencing its rights as a Lender under this Agreement, to any holder of, trustee for, or any other representative of holders of, obligations owed or securities issued, by such fund, as security for such obligations or securities.

(i) Notwithstanding anything to the contrary contained herein, any Lender (a “Granting Lender”) may grant to a special purpose funding vehicle (an “SPC”), identified as such in writing from time to time by the Granting Lender to the Administrative Agent and the Borrower, the option to provide to the Borrower all or any part of any Loan that such Granting Lender would otherwise be obligated to make to such Borrower pursuant to this Agreement; provided that (i) nothing herein shall constitute a commitment by any SPC to make any Loan and (ii) if an SPC elects not to exercise such option or otherwise fails to provide all or any part of such Loan, the Granting Lender shall be obligated to make such Loan pursuant to the terms hereof; provided further that nothing herein shall make the SPC a “Lender” for the purposes of this Agreement, obligate Borrower or any other Loan Party or the Administrative Agent to deal with such SPC directly, obligate Borrower or any other Loan Party in any manner to any greater extent than they were obligated to the Granting Lender, or increase costs or expenses of the Borrower. The Loan Parties and the Administrative Agent shall be entitled to deal solely with, and obtain good discharge from, the Granting Lender and shall not be required to investigate or otherwise seek the consent or approval of any SPC, including for the approval of any amendment, waiver or other modification of any provision of any Loan Document. The making of a Loan by an SPC hereunder shall utilize the Commitment of the Granting Lender to the same extent, and as if, such Loan were made by such Granting Lender. Each party hereto hereby agrees that no SPC shall be liable for any indemnity or similar payment obligation under this Agreement (all liability or payment obligation for

 

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which shall remain with the Granting Lender). In furtherance of the foregoing, each party hereto hereby agrees (which agreement shall survive the termination of this Agreement) that, prior to the date that is one year and one day after the payment in full of all outstanding commercial paper or other senior indebtedness of any SPC, it will not institute against, or join any other person in instituting against, such SPC any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under the laws of the United States of America or any state thereof. In addition, notwithstanding anything to the contrary contained in this Section 11.04(i), any SPC may (i) with notice to, but without the prior written consent of, the Borrower and the Administrative Agent and without paying any processing fee therefor, assign all or a portion of its interests in any Loans to the Granting Lender or to any financial institutions (consented to by Borrower and the Administrative Agent) providing liquidity and/or credit support to or for the account of such SPC to support the funding or maintenance of Loans and (ii) disclose on a confidential basis any Non-Public Information relating to its Loans to any rating agency, commercial paper dealer or provider of any surety, guarantee or credit or liquidity enhancement to such SPC.

(j) The words “execution,” “signed,” “signature,” and words of like import in any Assignment and Assumption shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable Legal Requirement, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act.

(k) None of the Lenders, the Arranger or the Agents shall be responsible or have any liability for, or have any duty to ascertain, inquire into, monitor or enforce, compliance with the provisions hereof relating to Disqualified Institutions. Without limiting the generality of the foregoing, the Administrative Agent shall not (i)be obligated to ascertain, monitor or inquire as to whether any Lender or Participant or prospective Lender or Participant is a Disqualified Institution or (ii) have any liability with respect to or arising out of any assignment or participation of Loans or Commitments, or disclosure of confidential information, to any Disqualified Institution. Upon request by any Lender, the Administrative Agent shall be permitted to disclose to such Lender the identity of the Disqualified Institutions. Each Lender hereby acknowledges and agrees that the information disclosed to it by the Administrative Agent pursuant to the immediately preceding sentence shall be subject in all respects to the provisions set forth in Section 11.12. Notwithstanding anything to the contrary herein, each Loan Party and each Lender acknowledges and agrees that the Administrative Agent shall have no liability with respect to any assignment or participation made to any Disqualified Institution or natural person (regardless of whether the consent of the Administrative Agent is required thereto), and no Loan Party, any Lender or their respective Affiliates will bring any claim to such effect.

Section 11.05 Survival of Agreement. All covenants, agreements, representations and warranties made by the Loan Parties in the Loan Documents and in the reports, certificates or other instruments delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of the Loan Documents and the making of any Loans regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Agents or any Lender may have had notice or knowledge of any Default or Event of Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as any Loan or any Obligation hereunder shall remain unpaid or unsatisfied and so long as the Commitments have not expired or terminated. The provisions of Article X and Sections 2.12 to 2.15, 11.03, 11.09, 11.08, 11.10 and 11.18 shall survive and remain in full force and effect regardless of the consummation of the Transactions and the other transactions contemplated hereby, the repayment of the Loans, the cancellation or expiration of the Letters of Credit and the reimbursement of any amounts due thereunder, the expiration or termination of the Commitments or the termination of this Agreement or any provision hereof.

 

 

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Section 11.06 Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement, the Engagement Letter and the other Loan Documents constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Without limiting the requirements that each of the conditions precedent in Article IV with respect to each Credit Extension requested by Borrower be satisfied, to the extent set forth therein, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective permitted successors and assigns. Delivery of an executed counterpart of a signature page of this Agreement by facsimile or other electronic transmission (e.g., “pdf” or “tif” format) shall be effective as delivery of a manually executed counterpart of this Agreement. The words “execution,” “signed,” “signature,” “delivery,” and words of like import in or relating to this Agreement or any document to be signed in connection with this Agreement and the transactions contemplated hereby shall be deemed to include electronic signatures, deliveries or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature, physical delivery thereof or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other state laws based on the Uniform Electronic Transactions Act, and the parties hereto consent to conduct the transactions contemplated hereunder by electronic means.

Section 11.07 Severability. Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction. The parties hereto shall endeavor in good-faith negotiations to replace any invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

Section 11.08 Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender, the Issuing Bank and each of their respective Affiliates are hereby irrevocably authorized at any time and from time to time (without notice to the Borrower or any other Loan Party, any such notice being expressly waived by each of the Borrower and each other Loan Party), to the fullest extent permitted by applicable Legal Requirements, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) at any time held and other obligations (in whatever currency) at any time owing by such Lender, the Issuing Bank or any such Affiliate to or for the credit or the account of any Loan Party against any and all of the obligations of any Loan Party now or hereafter existing under this Agreement or any other Loan Documents held by such Lender or the Issuing Bank, irrespective of whether or not such Lender or Issuing Bank shall have made any demand under this Agreement or any other Loan Document and although such obligations may be contingent or unmatured or are owed to a branch or office of such Lender or the Issuing Bank different from the branch or office holding such deposit or obligated on such indebtedness; provided that such Lender and/or Issuing Bank complied with Section 2.14(c). The rights of each Lender and Issuing Bank under this Section 11.08 are in addition to other rights and remedies (including other rights of setoff) which such Lender or Issuing Bank may have. Each Lender and Issuing Bank agrees to notify Borrower and the Administrative Agent

 

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promptly after any such setoff and application; provided, however, that in no event shall the failure to give such notice effect the validity of enforceability of any such setoffs. No Agent, Issuing Bank or Lender shall be under any obligation to marshal any assets in favor of any Loan Party or any other Person or against or in payment of any or all of the Obligations. To the extent that any Loan Party makes a payment or payments to the Administrative Agent< Issuing Bank or Lenders (or to the Administrative Agent, on behalf of the Lenders), or any Agent, Issuing Bank or Lender enforces any security interests or exercises any right of setoff, and such payment or payments or the proceeds of such enforcement or setoff or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a trustee, receiver or any other party under any Debtor Relief Law or any equitable cause, then, to the extent of such recovery, the obligation or part thereof originally intended to be satisfied, and all Liens, rights and remedies therefor or related thereto, shall be revived and continued in full force and effect as if such payment or payments had not been made or such enforcement or setoff had not occurred.

Section 11.09 Governing Law; Jurisdiction; Consent to Service of Process. (a) This Agreement and the other Loan Documents and any claims, controversy, dispute or cause of action (whether sounding in contract, tort or otherwise) based upon, arising out of or relating to this Agreement or any other Loan Document (except, as to any other Loan Document, as expressly set forth therein) and the transactions contemplated hereby and thereby shall be governed by, and construed in accordance with, the law of the State of New York.

(b) Each party hereto hereby irrevocably and unconditionally submits, for itself and its Property, to the exclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof (except to the extent the Administrative Agent requires submission to any other jurisdiction in connection with the exercise of any rights under any security document or the enforcement of any judgment), in any action or proceeding arising out of or relating to any Loan Document, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State court or, to the extent permitted by applicable Legal Requirements, in such federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by applicable Legal Requirements. Each Loan Party agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law and that nothing in this Agreement or any other Loan Document shall affect any right that the Agents, the Issuing Bank or the Lenders may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against it or any of its assets in the courts of any jurisdiction.

(c) Each party hereto hereby irrevocably and unconditionally waives, to the fullest extent permitted by applicable Legal Requirements, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement, any other Loan Document, any Specified Hedging Agreement or any Bank Product Agreement in any court referred to in Section 11.09(b). Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by applicable Legal Requirements, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

(d) Each party to this Agreement irrevocably consents to service of process in any action or proceeding arising out of or relating to any Loan Document, in the manner provided for notices (other than facsimile or email) in Section 11.01. Nothing in this Agreement or any other Loan Document will affect the right of any party to this Agreement to serve process in any other manner permitted by applicable Legal Requirements.

 

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Section 11.10 Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LEGAL REQUIREMENTS, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENT, ANY SPECIFIED HEDGING AGREEMENT, ANY BANK PRODUCT AGREEMENT, THE TRANSACTIONS OR THE OTHER TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 11.10.

Section 11.11 Headings; No Adverse Interpretation of Other Agreements. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement.

Section 11.12 Confidentiality. Each of the Administrative Agent, Collateral Agent, the Issuing Bank and the other Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its Related Persons, (b) to its Related Persons’ directors, officers, employees, financing sources, equityholders, members, investors (including prospective investors), agents, advisors and other representatives, including independent auditors, legal counsel, other experts or agents and other advisors in connection with the Transactions (it being understood that the persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential pursuant to the terms hereof), (c) to the extent requested or required by any governmental or regulatory authority or any self-regulatory authority (such as the National Association of Insurance Commissioners and the U.S. Securities and Exchange Commission), (d) to the extent requested or required pursuant to any applicable law, rule or regulation or in any legal, judicial, governmental, administrative or regulatory order, authority or proceeding or other compulsory process, (e) to any other party to this Agreement (solely with respect to clauses (a) and (b) above, it being understood that the persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential pursuant to the terms hereof), (f) in connection with the exercise of any remedies under the Loan Documents or any suit, action or proceeding relating to this Agreement, any other Loan Document, any Specified Hedging Agreement or any Bank Product Agreement or the enforcement of rights hereunder or thereunder, but only to the extent required in connection with such exercise or enforcement, (g) subject to an agreement containing provisions substantially the same as those of this Section 11.12, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement, (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Borrower and its obligations, (iii) any rating agency for the purpose of obtaining a credit rating applicable to any Loan or Loan Party or (iv) any actual or prospective investor in an SPC, (h) with the prior written consent of the Borrower or (i) to the extent such Information (i) is publicly available at the time of disclosure or becomes publicly available other than as a result of a breach of this Section 11.12, (ii) becomes available to the Administrative Agent, Issuing Bank or any Lender on a non-confidential basis from a source other than a Company other than as a result of a breach of this

 

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Section 11.12, (iii) is received from a third party that is not known to be subject to confidentiality obligations to the Company or (iv) is independently developed without the use of any confidential information; provided, however, that with respect to clauses (c) and (d) above, if the Administrative Agent, the Collateral Agent, the Issuing Bank or any Lender receives a subpoena, interrogatory or other request (verbal or otherwise) for any Information (other than with regard to filings made with the U.S. Securities and Exchange Commission); or believes that it is legally required to disclose any of the Information to a third party, it shall (other than in connection with any routine audit or examination conducted by bank accountants or any governmental bank regulatory authority exercising examination or regulatory authority), as far in advance of such disclosure as is practicable, to the extent practicable and legally permissible, promptly provide to the Borrower notice of any such request or requirement so that the Borrower or the applicable Loan Party (or Subsidiary thereof) may seek a protective order or other remedy (it being understood and agreed that Administrative Agent, Collateral Agent, the Issuing Bank and any Lenders shall cooperate in securing a protective order or other remedy in respect thereof); provided, further, that it shall (1) exercise commercially reasonable efforts to preserve the confidentiality of such Information, (2) to the extent legally permissible, use commercially reasonable efforts to provide Borrower, as far in advance of such disclosure as is practicable, with copies of any Information it intends to disclose (and, if applicable, the text of the disclosure language itself), and (3) reasonably cooperate with the Borrower and the applicable Loan Party (or Subsidiary thereof) to the extent either of them may seek to limit such disclosure. In addition, the Agents, the Issuing Bank and the Lenders may disclose the existence of the Loan Documents and information about the Loan Documents to market data collectors, similar service providers to the financing community, and service providers to the Agents, the Issuing Bank and the Lenders and in connection with league table reporting. For the purposes of this Section 11.12, “Information” shall mean all information received from a Loan Party or any of its Related Persons relating to any Loan Party or any Company or any of its or their Subsidiaries, other than any such information that is available to the Administrative Agent, the Collateral Agent, the Issuing Bank or any Lender on a non-confidential basis prior to disclosure by a Company. Any person required to maintain the confidentiality of Information as provided in this Section 11.12 shall be considered to have complied with its obligation to do so if such person has exercised the same degree of care to maintain the confidentiality of such Information as such person accords to its own confidential information. Agents, the Issuing Bank and Lenders agree that money damages may not be a sufficient remedy for any breach of this confidentiality provision, and in addition to all other remedies, the Loan Parties will be entitled, without the need to prove irreparable injury, to seek specific performance and injunctive or other equitable relief as a remedy for any such breach, and Agents, the Issuing Bank and Lenders further waive any requirement for the securing or posting of a bond in connection with such remedy.

Section 11.13 Interest Rate Limitation. Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges and other amounts which are treated as interest on such Loan under applicable law (collectively, the “Charges”), shall exceed the maximum lawful rate (the “Maximum Rate”) which may be contracted for, charged, taken, received or reserved by the Lender holding such Loan in accordance with applicable Legal Requirements, the rate of interest payable in respect of such Loan hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan but were not payable as a result of the operation of this Section 11.13 shall be cumulated and the interest and Charges payable to such Lender in respect of other Loans or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Effective Rate to the date of repayment (or, if greater, but without duplication, the interest rate otherwise required to be paid under the Loan Documents on such cumulated amount during such period of accumulation), shall have been received by such Lender.

 

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Section 11.14 Assignment and Assumption. Each Lender and Issuing Bank to become a party to this Agreement (other than the Administrative Agent, Issuing Bank and any other Lender that is a signatory hereto) shall do so by delivering to the Administrative Agent an Assignment and Assumption duly executed by such Lender or Issuing Bank, as applicable, the Borrower (if the Borrower consent to such assignment is required hereunder) and the Administrative Agent.

Section 11.15 Obligations Absolute. To the fullest extent permitted by applicable law, all obligations of the Loan Parties hereunder shall be absolute and unconditional irrespective of:

(a) any bankruptcy, insolvency, reorganization, arrangement, readjustment, composition, liquidation or the like of any Loan Party;

(b) any lack of validity or enforceability of any Loan Document or any other agreement or instrument relating thereto against any Loan Party;

(c) any change in the time, manner or place of payment of, or in any other term of, all or any of the Secured Obligations, or any other amendment or waiver of or any consent to any departure from any Loan Document or any other agreement or instrument relating thereto;

(d) any exchange, release or non-perfection or loss of priority of any Liens on any or all of the Collateral, or any release or amendment or waiver of or consent to any departure from any guarantee, for all or any of the Secured Obligations;

(e) any exercise or non-exercise, or any waiver of any right, remedy, power or privilege under or in respect hereof or any Loan Document; or

(f) any other circumstances which might otherwise constitute a defense (other than the indefeasible payment in full of the Secured Obligations) available to, or a discharge of, the Loan Parties.

Section 11.16 Waiver of Defenses; Absence of Fiduciary Duties. (a) Each of the Loan Parties hereby waives any and all suretyship defenses available to it as a Guarantor arising out of the joint and several nature of its respective duties and obligations hereunder (including any defense contained in Article VII other than any defense of the indefeasible payment in full of the Secured Obligations).

(b) Each Lead Manager, Arranger, each Agent, each Issuing Bank, each Lender and their Affiliates (collectively, solely for purposes of this paragraph, the “Lenders”), may have economic interests that conflict with those of the Loan Parties, their stockholders and/or their affiliates. Each Loan Party agrees that nothing in the Loan Documents or otherwise will be deemed to create an advisory, fiduciary or agency relationship or fiduciary or other implied duty between any Lender, on the one hand, and such Loan Party, its stockholders or its affiliates, on the other. The Loan Parties acknowledge and agree that (i) the transactions contemplated by the Loan Documents (including the exercise of rights and remedies hereunder and thereunder) are arm’s-length commercial transactions between the Lenders, on the one hand, and the Loan Parties, on the other, and (ii) in connection therewith and with the process leading thereto, (x) no Lender has assumed an advisory or fiduciary responsibility in favor of any Loan Party, its stockholders or its affiliates with respect to the transactions contemplated hereby or the exercise of rights or remedies with respect thereto) or the process leading thereto (irrespective of whether any Lender has advised, is currently advising or will advise any Loan Party, its stockholders or its Affiliates on other matters) or any other obligation to any Loan Party except the obligations expressly set forth in the Loan Documents and (y) each Lender is acting solely as principal and not as the agent or fiduciary of any Loan Party, its management, stockholders, creditors or any other person. Each Loan Party acknowledges and agrees that it has consulted its own legal and financial advisors to the extent it deemed appropriate and that it is responsible for making its own independent judgment with respect to such transactions and the process leading thereto. Each Loan Party agrees that it will not claim that any Lender, Agent or Issuing Bank has rendered advisory services of any nature or respect, or owes a fiduciary or similar duty to such Loan Party, in connection with such transaction or the process leading thereto.

 

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Section 11.17 Patriot Act. Each Lender hereby notifies each Loan Party that pursuant to the requirements of the Patriot Act, it may be required to obtain, verify and record information that identifies the Loan Parties, which information includes the name, address, taxpayer identification number and a Beneficial Ownership Certification of each Loan Party and other information that will allow such Lender to identify such Loan Party in accordance with the Patriot Act.

Section 11.18 Judgment Currency. (a) The Loan Parties’ obligations hereunder and under the other Loan Documents to make payments in Dollars shall not be discharged or satisfied by any tender or recovery pursuant to any judgment expressed in or converted into any currency other than Dollars, except to the extent that such tender or recovery results in the effective receipt by the Administrative Agent, the Issuing Bank or the respective Lender of the full amount of Dollars expressed to be payable to the Administrative Agent, Issuing Bank or such Lender under this Agreement or the other Loan Documents. If, for the purpose of obtaining or enforcing judgment against any Loan Party in any court or in any jurisdiction, it becomes necessary to convert into or from any currency other than Dollars (such other currency being hereinafter referred to as the “Judgment Currency”) an amount due in Dollars, the conversion shall be made at the Dollar Equivalent determined as of the Business Day immediately preceding the day on which the judgment is given (such Business Day being hereinafter referred to as the “Judgment Currency Conversion Date”).

(b) If there is a change in the rate of exchange prevailing between the Judgment Currency Conversion Date and the date of actual payment of the amount due, the Loan Parties shall pay, or cause to be paid, such additional amounts, if any (but in any event not a lesser amount) as may be necessary to ensure that the amount paid in the Judgment Currency, when converted at the rate of exchange prevailing on the date of payment, will produce the amount of Dollars which could have been purchased with the amount of Judgment Currency stipulated in the judgment or judicial award at the rate of exchange prevailing on the Judgment Currency Conversion Date.

(c) For purposes of determining the Dollar Equivalent or any other rate of exchange for this Section 11.18, such amounts shall include any premium and costs payable in connection with the purchase of Dollars.

Section 11.19 Acknowledgement and Consent to Bail-In of EEA Financial Institutions. Notwithstanding anything to the contrary in any Loan Document or in any other agreement, arrangement or understanding among any such parties, each party hereto acknowledges that any liability of any EEA Financial Institution arising under any Loan Document, to the extent such liability is unsecured, may be subject to the Write-Down and Conversion Powers of an EEA Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:

(a) the application of any Write-Down and Conversion Powers by the applicable Resolution Authority to any such liabilities arising hereunder which may be payable to it by any party hereto that is an Affected Financial Institution; and

(b) the effects of any Bail-In Action on any such liability, including, if applicable:

(i) a reduction in full or in part or cancellation of any such liability;

 

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(ii) a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such Affected Financial Institution, its parent undertaking, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such liability under this Agreement or any other Loan Document; or

(iii) the variation of the terms of such liability in connection with the exercise of the write-down and conversion powers of the applicable Resolution Authority.

Section 11.20 Acknowledgement Regarding Any Supported QFCs. To the extent that the Loan Documents provide support, through a guarantee or otherwise, for Swap Obligations or any other agreement or instrument that is a QFC (such support, “QFC Credit Support” and each such QFC, a “Supported QFC”), the parties acknowledge and agree as follows with respect to the resolution power of the Federal Deposit Insurance Corporation under the Federal Deposit Insurance Act and Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act (together with the regulations promulgated thereunder, the “U.S. Special Resolution Regimes”) in respect of such Supported QFC and QFC Credit Support (with the provisions below applicable notwithstanding that the Loan Documents and any Supported QFC may in fact be stated to be governed by the laws of the State of New York and/or of the United States or any other state of the United States):

In the event a Covered Entity that is party to a Supported QFC (each, a “Covered Party”) becomes subject to a proceeding under a U.S. Special Resolution Regime, the transfer of such Supported QFC and the benefit of such QFC Credit Support (and any interest and obligation in or under such Supported QFC and such QFC Credit Support, and any rights in property securing such Supported QFC or such QFC Credit Support) from such Covered Party will be effective to the same extent as the transfer would be effective under the U.S. Special Resolution Regime if the Supported QFC and such QFC Credit Support (and any such interest, obligation and rights in property) were governed by the laws of the United States or a state of the United States. In the event a Covered Party or a BHC Act Affiliate of a Covered Party becomes subject to a proceeding under a U.S. Special Resolution Regime, Default Rights under the Loan Documents that might otherwise apply to such Supported QFC or any QFC Credit Support that may be exercised against such Covered Party are permitted to be exercised to no greater extent than such Default Rights could be exercised under the U.S. Special Resolution Regime if the Supported QFC and the Loan Documents were governed by the laws of the United States or a state of the United States. Without limitation of the foregoing, it is understood and agreed that rights and remedies of the parties with respect to a Defaulting Lender shall in no event affect the rights of any Covered Party with respect to a Supported QFC or any QFC Credit Support.

As used in this Section 11.20, the following terms have the following meanings:

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

“Covered Entity” shall mean any of the following:

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

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

 

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

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

“QFC” shall have the meaning assigned to the term “qualified financial contract” in, and shall be interpreted in accordance with, 12 U.S.C. 5390(c)(8)(D).

[Signature Pages Follow]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers or other authorized signatories as of the day and year first above written.

 

CAREMAX, INC.,

as Borrower

By:

  

/s/ Kevin Wirges

  Name:Kevin Wirges
  Title:  Chief Financial Officer

IMC MEDICAL GROUP HOLDINGS, LLC,

INTRAAMERICAN MEDICAL CENTER GROUP, LLC,

PHYSICIAN SERVICE ORGANIZATION LLC.,

SUNSET HOLDING, LLC,

SUNSET CARDIOLOGY, LLC,

PRIMARY PROVIDER, INC.,

each as a Subsidiary Guarantor

By:

  

/s/ Kevin Wirges

  Name: Kevin Wirges
  Title: Chief Financial Officer, Vice President, Treasurer and Secretary

CAREMAX MEDICAL GROUP, L.L.C.,

CAREMAX MEDICAL CENTER OF BROWARD L.L.C.,

CAREMAX MEDICAL CENTER OF HIALEAH, L.L.C.,

CAREMAX MEDICAL CENTER OF HOMESTEAD, L.L.C.,

CAREMAX OF MIAMI, L.L.C.,

CAREMAX MEDICAL CENTER OF NORTH MIAMI, L.L.C.,

CAREMAX MEDICAL CENTER OF PEBROKE PINES, L.L.C.,

CAREMAX MEDICAL CENTER OF CORAL WAY, L.L.C.,

CAREMAX MEDICAL CENTER OF TAMARAC, L.L.C.,

CAREMAX MEDICAL CENTER OF WESTCHESTER, L.L.C.,

CAREMAX MEDICAL CENTER OF LITTLE HAVANA, L.L.C.,

PINES CARE MEDICAL CENTER, LLC,

CAREMAX MEDICAL CENTER OF EAST HIALEAH, L.L.C.,

CAREMAX MEDICAL CENTER, LLC,

CARE ALLIANCE, LLC,

CARE HOLDINGS GROUP, L.L.C.,

CARE OPTIMIZE, LLC,

CARE GARAGE, LLC,

HEALTHCARE ADVISORY SOLUTIONS, L.L.C.,

MANAGED HEATHCARE PARTNERS LLC,

CLEAR SCRIPTS, L.L.C.,

ANALITICO, LLC,

STALLION MEDICAL MANAGEMENT, LLC,

SENIOR MEDICAL ASSOCIATES, LLC,

CAREMAX MEDICAL CENTERS OF CENTRAL FLORIDA, LLC,

CAREMAX MANAGEMENT, LLC,

IMC TRANSPORT FLEET, LLC,

JOSE ORCASITA-NG, LLC,

JOSE MONTESANO MD, LLC,

CAREMED PHARMACY LLC,

CAREMAX IPA, LLC,

each as a Subsidiary Guarantor

By:

  

/s/ Kevin Wirges

  Name: Kevin Wirges
  Title: Chief Financial Officer

[SIGNATURE PAGE TO CREDIT AGREEMENT]

JEFFERIES FINANCE LLC,

as Administrative Agent and Collateral Agent

By:

  

/s/ John Koehler

 

Name: John Koehler

 

Title:   Managing Director

[SIGNATURE PAGE TO CREDIT AGREEMENT]

Annex I

Initial Lenders and Commitments

On file with the Administrative Agent and the Borrower

 

Annex I-1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the use in the Prospectus constituting a part of this Registration Statement on Amendment No. 1 to Form S-1 of our report dated March 16, 2022, relating to the consolidated financial statements of Caremax, Inc. which is contained in that Prospectus. We also consent to the reference to us under the caption “Experts” in the Prospectus.

/s/ WithumSmith+Brown

Red Bank, New Jersey

May 17, 2022